The following discussion should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements and notes thereto included under
Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference
should be made to our audited Consolidated Financial Statements and notes
thereto and related "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our most recent Annual Report on Form
10-K.
Overview
AutoNation, Inc., through its subsidiaries, is the largest automotive retailer
in the United States. As of March 31, 2020, we owned and operated 317 new
vehicle franchises from 231 stores located in the United States, predominantly
in major metropolitan markets in the Sunbelt region. Our stores, which we
believe include some of the most recognizable and well known in our key markets,
sell 32 different new vehicle brands. The core brands of new vehicles that we
sell, representing approximately 89% of the new vehicles that we sold during the
three months ended March 31, 2020, are manufactured by Toyota (including Lexus),
Honda, General Motors, Ford, FCA US, Mercedes-Benz, BMW, and Volkswagen
(including Audi and Porsche). As of March 31, 2020, we also owned and operated
81 AutoNation-branded collision centers, 5 AutoNation USA stores, 4 automotive
auction operations, and 16 parts distribution centers.
We offer a diversified range of automotive products and services, including new
vehicles, used vehicles, "parts and service," which includes automotive repair
and maintenance services as well as wholesale parts and collision businesses,
and automotive "finance and insurance" products, which include vehicle service
and other protection products, as well as the arranging of financing for vehicle
purchases through third-party finance sources. We believe that the significant
scale of our operations and the quality of our managerial talent allow us to
achieve efficiencies in our key markets by, among other things, leveraging the
AutoNation retail brand and advertising, implementing standardized processes,
and increasing productivity across all of our stores.
At March 31, 2020, we had three reportable segments: (1) Domestic, (2) Import,
and (3) Premium Luxury. Our Domestic segment is comprised of retail automotive
franchises that sell new vehicles manufactured by Ford, General Motors, and FCA
US. Our Import segment is comprised of retail automotive franchises that sell
new vehicles manufactured primarily by Toyota, Honda, Subaru, and Nissan. Our
Premium Luxury segment is comprised of retail automotive franchises that sell
new vehicles manufactured primarily by Mercedes-Benz, BMW, Audi, Lexus, and
Jaguar Land Rover. The franchises in each segment also sell used vehicles, parts
and automotive repair and maintenance services, and automotive finance and
insurance products.
For the three months ended March 31, 2020, new vehicle sales accounted for
approximately 49% of our total revenue and approximately 12% of our total gross
profit. Used vehicle sales accounted for approximately 27% of our total revenue
and approximately 11% of our total gross profit. Our parts and service and
finance and insurance operations, while comprising approximately 24% of our
total revenue for the three months ended March 31, 2020, contributed
approximately 77% of our total gross profit for the same period.

Impact of the COVID-19 Pandemic on Our Business
In the first quarter of 2020, U.S. industry retail new vehicle unit sales
decreased 12% as compared to the first quarter of 2019. On March 11, 2020, the
World Health Organization declared the current novel coronavirus disease 2019
("COVID-19") outbreak to be a global pandemic. The COVID-19 pandemic has
adversely impacted, and is expected to continue to adversely impact, our
operations in the near-term. By early April 2020, states from which we derive
nearly all of our total revenue were under extensive "shelter in place" or "stay
at home" orders from federal, state, and local governments, many of which are
currently still in place. These orders significantly restrict our business
operations, in particular our sales activities. As a result, we had significant
declines in new and used vehicle unit sales, including a year-over-year decline
of approximately 50% during the last two weeks of March 2020, and our parts and
service business was operating below full capacity. In addition, our stock
price, along with the U.S. stock market in general, was adversely impacted by
the COVID-19 pandemic.
We have taken various actions in an attempt to mitigate the financial impact of
the COVID-19 pandemic. Effective in April 2020, we placed approximately 7,000
employees on unpaid leave, implemented temporary base pay reductions for our
executive officers and associates, and froze corporate new hiring. We also took
actions to reduce our advertising expenses by approximately 50% for the second
quarter of 2020, significantly reduced our discretionary spending, and postponed
over $50 million of capital expenditures through the second quarter of 2020. The
majority of our corporate staff are currently under remote work arrangements,
which have not affected our ability to maintain support operations, including
financial reporting systems, internal control over financial reporting, and
disclosure controls and procedures.


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In light of the uncertainty surrounding the COVID-19 pandemic and the impact
that it had on our stock price and results of operations, we performed
quantitative goodwill and franchise rights impairment tests as of March 31,
2020. As a result of these impairment tests, during the three months ended March
31, 2020, we recorded non-cash goodwill and franchise rights impairment charges
totaling $375.8 million. See "Critical Accounting Estimates" below for more
information.
In the current environment, we have a strong focus on preserving liquidity. Our
primary liquidity sources are cash and cash equivalents, funds generated through
operations, and amounts available under our revolving credit facility,
commercial paper program, and secured used vehicle floorplan facilities. We have
senior unsecured notes totaling $1.5 billion, with $300.0 million of such notes
maturing in January 2021, and the remainder maturing between 2024 and 2027.
Although we have experienced a decrease in our cash flow from operations as a
result of the impact of the COVID-19 pandemic, as of March 31, 2020, our
available liquidity totaled approximately $1.2 billion, primarily comprised of
borrowing capacity under our revolving credit facility of $822.4 million (as
limited under the applicable maximum consolidated leverage ratio contained in
our credit agreement) and cash of $411.0 million. 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. See "Liquidity and Capital Resources - Available
Liquidity Resources" below for more information.
We are unable to predict when and how quickly we will be able to resume normal
levels of operations. While we are not able to estimate the ultimate impact of
the COVID-19 pandemic on our financial condition and future results of
operations, we expect that this situation will have a significant adverse effect
on our reported results for the second quarter of 2020 and possibly beyond, and
depending on the magnitude and duration of the COVID-19 pandemic, such impact
may be material.
Results of Operations
During the three months ended March 31, 2020, we had a net loss from continuing
operations of $232.2 million and a diluted loss per share of $2.58, as compared
to net income from continuing operations of $92.1 million and diluted earnings
per share of $1.02 during the same period in 2019.
Our total gross profit decreased 4% during the first quarter of 2020 compared to
the first quarter of 2019, primarily due to a decrease in vehicle unit volume,
which was down 9% as compared to the first quarter of 2019. Vehicle unit volume
was significantly adversely impacted the last two weeks of March 2020 due to the
impact of the COVID-19 pandemic, discussed above. The decrease in vehicle unit
volume was partially offset by increases in used vehicle and finance and
insurance gross profit per vehicle retailed ("PVR"), which were up 8% and 10%,
respectively. Additionally, SG&A expenses decreased in the first quarter of
2020, as compared to the same period in 2019, as a result of the COVID-19
pandemic impacts, including performance-driven decreases in compensation expense
resulting from lower sales volumes, and changes in expectations of pay-out
levels of performance-based compensation.
Net loss from continuing operations during the three months ended March 31,
2020, was adversely impacted by non-cash after-tax goodwill and franchise rights
impairment charges totaling $308.4 million and non-cash after-tax other asset
impairment charges of $6.2 million. Net income from continuing operations during
the three months ended March 31, 2019, benefited from net after-tax gains
related to store/property divestitures, net of asset impairments, of $6.3
million.
Chief Executive Officer and President Transition
On April 12, 2020, our Board of Directors granted the request of Cheryl Miller,
Chief Executive Officer and President of the Company, for a leave of absence for
health reasons, and appointed Mike Jackson, Executive Chairman of the Board, to
serve in the additional positions of Chief Executive Officer and President. On
April 21, 2020, our Board of Directors promoted James R. Bender from his
position as the Company's Executive Vice President and Chief Operating Officer
to the position of President and Chief Operating Officer of the Company,
effective as of April 22, 2020.
Strategic Initiatives
We continue to build upon our comprehensive, customer-focused brand extension
strategy, which includes AutoNation-branded parts and accessories,
AutoNation-branded Customer Financial Services products (including extended
service and maintenance contracts and other vehicle protection products),
AutoNation-branded collision centers, AutoNation-branded automotive auctions,
AutoNation USA stand-alone used vehicle sales and service centers, and our parts
distribution network. In March 2020, we invested $50 million in Waymo, the
self-driving technology company of Alphabet Inc., which currently represents an
equivalent ownership stake of less than 1%.


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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.
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 March 31, 2020, or at December 31, 2019. We are
actively managing inventory levels in response to impacts from the COVID-19
pandemic.
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 $3.5 million at March 31, 2020, and $3.2 million at
December 31, 2019.
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 $15.0 million at March 31, 2020,
and $11.1 million at December 31, 2019.

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.
In light of the uncertainty surrounding the COVID-19 pandemic and the decrease
in our market capitalization as of March 31, 2020, we concluded that a
triggering event had occurred potentially indicating that the fair values of our
reporting units were less than their carrying values as of March 31, 2020.
Therefore, we performed quantitative goodwill impairment tests for each of our
reporting units as of March 31, 2020. As a result of these impairment tests,
during the three months ended March 31, 2020, we recorded non-cash goodwill
impairment charges totaling $318.3 million, of which $257.4 million related to
our Premium Luxury reporting unit, $41.6 million related to our Collision
Centers reporting unit, and $19.3 million related to our Parts Center reporting
unit. The non-cash impairment charges are reflected as Goodwill Impairment in
the accompanying Unaudited Condensed Consolidated Statements of Operations. The
quantitative goodwill impairment test is dependent on many variables used to
determine the fair value of our reporting units. See Note 11 of the Notes to
Unaudited Condensed Consolidated Financial Statements for additional information
on how the fair values and carrying values of our reporting units are derived
for the quantitative goodwill impairment test. This process also requires that
we reconcile the estimated aggregate fair values of our reporting units to our
market capitalization, including consideration of a control premium, based upon
our stock price and/or average stock price over a reasonable period as of the
measurement date.
As a result of the quantitative goodwill impairment tests, the fair values of
our Domestic and Import reporting units substantially exceeded their carrying
values, goodwill associated with our Premium Luxury reporting unit was partially
impaired, and goodwill associated with our Collision Center and Parts Center
reporting units was fully impaired. Therefore, the most significant impact of a
change in the assumptions used in determining our goodwill impairment as of
March 31, 2020, would have related to our Premium Luxury reporting unit. As
noted above, the goodwill impairment testing process requires the estimated
aggregate fair values of our reporting units to be reconciled with our market
capitalization, including consideration of a control premium, based upon our
stock price and/or average stock price over a reasonable period as of the
measurement date. The COVID-19 pandemic had a significant adverse impact on the
U.S. stock market during the first quarter of 2020, and our closing stock price
declined more than 40% to $28.06 as of March 31, 2020, compared to our closing
stock price of $48.65 as


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recently as February 21, 2020. As a result, as of March 31, 2020, our market
capitalization and, therefore, the estimated fair values of our reporting units,
significantly decreased. As a measure of sensitivity, a 50 basis point increase
in the discount rate, would have resulted in an increase to the goodwill
impairment charge of approximately $100 million. This result and discussion is
not intended to address all potential outcomes that could have resulted if
different assumptions had been used in determining our goodwill impairment given
the number of assumptions used in determining the impairment and the degree of
sensitivity to changes in such assumptions in the determination of the fair
value of the Company and its assets and liabilities. We would have been in
compliance with the financial covenants in our debt agreements even if we had
impaired all of the goodwill associated with all of our reporting units as such
charges do not factor into the calculations for those covenants.
As of March 31, 2020, we have $227.3 million of goodwill related to the Domestic
reporting unit, $498.8 million related to the Import reporting unit, and $457.5
million related to the Premium Luxury reporting unit. Goodwill for our Collision
Center and Parts Center reporting units was fully impaired as of March 31, 2020.
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 also
concluded that, as a result of the impacts from the COVID-19 pandemic, a
triggering event had occurred that indicated the fair values of our franchise
rights may have been less than their carrying values as of March 31, 2020. We
performed quantitative impairment tests as of March 31, 2020, and as a result,
we identified eight stores with franchise rights carrying values that exceeded
their fair values, and we recorded non-cash franchise rights impairment charges
of $57.5 million. The non-cash impairment charges are reflected as Franchise
Rights Impairment in the accompanying Unaudited Condensed Consolidated
Statements of Operations. We identified eight additional stores that, while they
each had franchise rights fair value in excess of carrying value, had lower
relative performance compared to our total store population. We will continue to
monitor these stores, as well as all stores, for events or changes in
circumstances that may indicate potential impairment. The remainder of our
stores had franchise rights with calculated fair values that substantially
exceeded their carrying values. As of March 31, 2020, after the impairment
charges, we had 56 stores with franchise rights totaling $509.0 million.
The quantitative franchise rights impairment test is dependent on many variables
used to determine the fair value of each store's franchise rights. See Note 11
of the Notes to Unaudited Condensed Consolidated Financial Statements for a
description of the valuation method and related estimates and assumptions used
in our quantitative impairment testing. If the fair value of each of our
franchise rights had been determined to be a hypothetical 10% lower as of the
valuation date of March 31, 2020, the resulting incremental charge would have
been less than $3 million. The effect of a hypothetical 10% decrease in fair
value estimates is not intended to provide a sensitivity analysis of every
potential outcome.
Impact of the COVID-19 Pandemic on Goodwill and Other Intangible Assets
While we cannot predict the duration or scope of the COVID-19 pandemic, the
negative financial impact on our financial results and performance could be
material in future periods. A change in the conditions, circumstances, or
strategy, which influence determinations of fair value, including negative or
declining cash flows or a decline in actual or planned revenues for our stores
for a prolonged period, and, as it relates to goodwill, a significant decrease
in our market capitalization, may result in a need to recognize additional
goodwill and/or franchise rights impairment charges in the future. We are
scheduled to complete our annual goodwill and franchise rights impairment tests
as of April 30, 2020, during the second quarter of 2020.





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Reported Operating Data
Historical operating results include the results of acquired businesses from the
date of acquisition.
                                                              Three Months Ended March 31,
                                                                                        Variance
($ in millions, except per vehicle                                                    Favorable /           %
data)                                         2020                   2019            (Unfavorable)       Variance
Revenue:
New vehicle                            $     2,281.9           $     2,496.7       $        (214.8 )        (8.6 )
Retail used vehicle                          1,162.0                 1,261.8                 (99.8 )        (7.9 )
Wholesale                                       86.7                    77.8                   8.9          11.4
Used vehicle                                 1,248.7                 1,339.6                 (90.9 )        (6.8 )
Finance and insurance, net                     235.8                   236.5                  (0.7 )        (0.3 )
Total variable operations(1)                 3,766.4                 4,072.8                (306.4 )        (7.5 )
Parts and service                              876.3                   876.7                  (0.4 )           -
Other                                           24.3                    32.3                  (8.0 )
Total revenue                          $     4,667.0           $     4,981.8       $        (314.8 )        (6.3 )
Gross profit:
New vehicle                            $        96.4           $       121.9       $         (25.5 )       (20.9 )
Retail used vehicle                             83.5                    84.3                  (0.8 )        (0.9 )
Wholesale                                        7.5                     6.2                   1.3
Used vehicle                                    91.0                    90.5                   0.5           0.6
Finance and insurance                          235.8                   236.5                  (0.7 )        (0.3 )
Total variable operations(1)                   423.2                   448.9                 (25.7 )        (5.7 )
Parts and service                              388.8                   398.9                 (10.1 )        (2.5 )
Other                                            1.2                     1.4                  (0.2 )
Total gross profit                             813.2                   849.2                 (36.0 )        (4.2 )
Selling, general, and administrative
expenses                                       600.7                   623.0                  22.3           3.6
Depreciation and amortization                   48.1                    44.1                  (4.0 )
Goodwill impairment                            318.3                       -                (318.3 )
Franchise rights impairment                     57.5                       -                 (57.5 )
Other (income) expense, net                      7.9                    (8.7 )               (16.6 )
Operating income (loss)                       (219.3 )                 190.8                (410.1 )
Non-operating income (expense) items:
Floorplan interest expense                     (25.5 )                 (39.0 )                13.5
Other interest expense                         (23.5 )                 (27.8 )                 4.3
Interest income                                  0.1                     0.2                  (0.1 )
Other income (loss), net                        (3.0 )                   1.9                  (4.9 )
Income (loss) from continuing
operations before income taxes         $      (271.2 )         $       126.1       $        (397.3 )
Retail vehicle unit sales:
New vehicle                                   56,739                  63,513                (6,774 )       (10.7 )
Used vehicle                                  56,149                  61,171                (5,022 )        (8.2 )
                                             112,888                 124,684               (11,796 )        (9.5 )
Revenue per vehicle retailed:
New vehicle                            $      40,217           $      39,310       $           907           2.3
Used vehicle                           $      20,695           $      20,627       $            68           0.3
Gross profit per vehicle retailed:
New vehicle                            $       1,699           $       1,919       $          (220 )       (11.5 )
Used vehicle                           $       1,487           $       1,378       $           109           7.9
Finance and insurance                  $       2,089           $       1,897       $           192          10.1
Total variable operations(2)           $       3,682           $       3,551       $           131           3.7

(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance and insurance
results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of new vehicle,
retail used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.




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                                                                 Three Months Ended
                                                                     March 31,
                                                              2020 (%)       2019 (%)
Revenue mix percentages:
New vehicle                                                         48.9           50.1
Used vehicle                                                        26.8           26.9
Parts and service                                                   18.8           17.6
Finance and insurance, net                                           5.1            4.7
Other                                                                0.4            0.7
Total                                                              100.0          100.0
Gross profit mix percentages:
New vehicle                                                         11.9           14.4
Used vehicle                                                        11.2           10.7
Parts and service                                                   47.8           47.0
Finance and insurance                                               29.0           27.8
Other                                                                0.1            0.1
Total                                                              100.0          100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle                                                          4.2            4.9
Used vehicle - retail                                                7.2            6.7
Parts and service                                                   44.4           45.5
Total                                                               17.4           17.0
Selling, general, and administrative expenses                       12.9    

12.5


Operating income (loss)                                               NM    

3.8

Other operating items as a percentage of total gross profit: Selling, general, and administrative expenses

                       73.9           73.4
Operating income (loss)                                               NM           22.5
NM - Not Meaningful
                                                                     March 31,
                                                                2020           2019
Inventory days supply:
New vehicle (industry standard of selling days)                98 days        77 days
Used vehicle (trailing calendar month days)                    48 days        30 days






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Same Store Operating Data
We have presented below our operating results on a same store basis, which
reflect the results of our stores for the identical months in each period
presented in the comparison, commencing with the first full month in which the
store was owned by us. Results from divested stores are excluded from both
current and prior periods. Therefore, the amounts presented in the 2019 columns
may differ from the same store amounts presented for 2019 in the prior year.
                                                    Three Months Ended March 31,
                                                                         Variance
($ in millions, except per                                              Favorable /          %
vehicle data)                         2020               2019          (Unfavorable)      Variance
Revenue:
New vehicle                      $     2,277.9      $     2,455.7     $      (177.8 )         (7.2 )
Retail used vehicle                    1,160.1            1,239.7             (79.6 )         (6.4 )
Wholesale                                 86.6               76.7               9.9           12.9
Used vehicle                           1,246.7            1,316.4             (69.7 )         (5.3 )
Finance and insurance, net               235.6              233.0               2.6            1.1
Total variable operations(1)           3,760.2            4,005.1            (244.9 )         (6.1 )
Parts and service                        875.3              860.6              14.7            1.7
Other                                     24.1               32.2              (8.1 )
Total revenue                    $     4,659.6      $     4,897.9     $      (238.3 )         (4.9 )
Gross profit:
New vehicle                      $        96.0      $       121.1     $       (25.1 )        (20.7 )
Retail used vehicle                       83.4               83.4                 -              -
Wholesale                                  7.6                6.4               1.2
Used vehicle                              91.0               89.8               1.2            1.3
Finance and insurance                    235.6              233.0               2.6            1.1
Total variable operations(1)             422.6              443.9             (21.3 )         (4.8 )
Parts and service                        388.9              391.8              (2.9 )         (0.7 )
Other                                      0.9                1.4              (0.5 )
Total gross profit               $       812.4      $       837.1     $       (24.7 )         (3.0 )
Retail vehicle unit sales:
New vehicle                             56,692             62,185            (5,493 )         (8.8 )
Used vehicle                            56,093             59,787            (3,694 )         (6.2 )
                                       112,785            121,972            (9,187 )         (7.5 )
Revenue per vehicle retailed:
New vehicle                      $      40,180      $      39,490     $         690            1.7
Used vehicle                     $      20,682      $      20,735     $         (53 )         (0.3 )
Gross profit per vehicle
retailed:
New vehicle                      $       1,693      $       1,947     $        (254 )        (13.0 )
Used vehicle                     $       1,487      $       1,395     $          92            6.6
Finance and insurance            $       2,089      $       1,910     $         179            9.4

Total variable operations(2) $ 3,680 $ 3,587 $

      93            2.6

(1) Total variable operations includes new vehicle, used vehicle (retail and wholesale), and finance
and insurance results.
(2) Total variable operations gross profit per vehicle retailed is calculated by dividing the sum of
new vehicle, retail used vehicle, and finance and insurance gross profit by total retail vehicle
unit sales.





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                                             Three Months Ended
                                                 March 31,
                                            2020 (%)    2019 (%)
Revenue mix percentages:
New vehicle                                      48.9       50.1
Used vehicle                                     26.8       26.9
Parts and service                                18.8       17.6
Finance and insurance, net                        5.1        4.8
Other                                             0.4        0.6
Total                                           100.0      100.0
Gross profit mix percentages:
New vehicle                                      11.8       14.5
Used vehicle                                     11.2       10.7
Parts and service                                47.9       46.8
Finance and insurance                            29.0       27.8
Other                                             0.1        0.2
Total                                           100.0      100.0
Operating items as a percentage of revenue:
Gross profit:
New vehicle                                       4.2        4.9
Used vehicle - retail                             7.2        6.7
Parts and service                                44.4       45.5
Total                                            17.4       17.1





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New Vehicle
                                                    Three Months Ended March 31,
                                                                      Variance
($ in millions, except per vehicle                                   Favorable /          %
data)                                    2020           2019        (Unfavorable)     Variance
Reported:
Revenue                              $  2,281.9     $  2,496.7     $      (214.8 )        (8.6 )
Gross profit                         $     96.4     $    121.9     $       (25.5 )       (20.9 )
Retail vehicle unit sales                56,739         63,513            (6,774 )       (10.7 )
Revenue per vehicle retailed         $   40,217     $   39,310     $         907           2.3
Gross profit per vehicle retailed    $    1,699     $    1,919     $        (220 )       (11.5 )
Gross profit as a percentage of
revenue                                     4.2 %          4.9 %
Inventory days supply (industry
standard of selling days)               98 days        77 days

                                                    Three Months Ended March 31,
                                                                      Variance
                                                                     Favorable /          %
                                         2020           2019        (Unfavorable)     Variance
Same Store:
Revenue                              $  2,277.9     $  2,455.7     $      (177.8 )        (7.2 )
Gross profit                         $     96.0     $    121.1     $       (25.1 )       (20.7 )
Retail vehicle unit sales                56,692         62,185            (5,493 )        (8.8 )
Revenue per vehicle retailed         $   40,180     $   39,490     $         690           1.7
Gross profit per vehicle retailed    $    1,693     $    1,947     $        (254 )       (13.0 )
Gross profit as a percentage of
revenue                                     4.2 %          4.9 %



The following discussion of new vehicle results is on a same store basis. The
difference between reported amounts and same store amounts in the above tables
of $4.0 million and $41.0 million in new vehicle revenue and $0.4 million and
$0.8 million in new vehicle gross profit for the three months ended March 31,
2020 and 2019, respectively, is related to divestiture activity and the opening
of a new add-point.
First Quarter 2020 compared to First Quarter 2019
Same store new vehicle revenue decreased during the three months ended March 31,
2020, as compared to the same period in 2019, due to a decrease in same store
unit volume, partially offset by an increase in revenue PVR. The decrease in
same store unit volume was due to significant declines in new vehicle unit sales
during the last two weeks of March 2020 as a result of the COVID-19 pandemic.
Same store revenue PVR increased during the three months ended March 31, 2020,
as compared to the same period in 2019, due in part to a shift in mix toward
trucks and sport utility vehicles, which have relatively higher average selling
prices. The shift in mix toward trucks and sports utility vehicles is due to a
combination of improved vehicle fuel efficiency, relatively low average fuel
prices, and changing consumer preference. Average selling prices also increased
as a result of increases in the manufacturers' suggested retail prices.
Same store gross profit PVR decreased during the three months ended March 31,
2020, as compared to the same period in 2019, primarily due to decreases in
gross profit PVR for Premium Luxury and Domestic vehicles as we focused on
balancing gross profit PVRs and unit volume.



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New Vehicle Inventory Carrying Benefit (Cost)
The following table details net new vehicle inventory carrying benefit (cost),
consisting of new vehicle floorplan interest expense, net of floorplan
assistance earned (amounts received from manufacturers specifically to support
store financing of new vehicle inventory). Floorplan assistance is accounted for
as a component of new vehicle gross profit in accordance with GAAP.
                                                             Three Months Ended March 31,
($ in millions)                                        2020               2019           Variance
Floorplan assistance                              $       24.5       $       25.2     $       (0.7 )
New vehicle floorplan interest expense                   (23.1 )            (36.4 )           13.3

Net new vehicle inventory carrying benefit (cost) $ 1.4 $ (11.2 ) $ 12.6




First Quarter 2020 compared to First Quarter 2019
We had a net new vehicle inventory carrying benefit for the three months ended
March 31, 2020, and a net new vehicle inventory carrying cost for the three
months ended March 31, 2019. Floorplan interest expense decreased due to lower
average interest rates and lower average floorplan balances. Floorplan interest
rates are variable and therefore increase and decrease with changes in the
underlying benchmark interest rates. The Federal Reserve cut interest rate three
times over the third and fourth quarters of 2019, and in response to the
COVID-19 pandemic, the Federal Reserve cut interest rates to near 0% in March
2020. Although lower average interest rates are beneficial to interest expense,
this benefit may be partially or fully offset in stores where days supply
averages increase due to lower sales volume.





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Used Vehicle
                                                    Three Months Ended March 31,
                                                                      Variance
($ in millions, except per vehicle                                   Favorable /          %
data)                                    2020           2019        (Unfavorable)     Variance
Reported:
Retail revenue                       $  1,162.0     $  1,261.8     $       (99.8 )        (7.9 )
Wholesale revenue                          86.7           77.8               8.9          11.4
Total revenue                        $  1,248.7     $  1,339.6     $       (90.9 )        (6.8 )
Retail gross profit                  $     83.5     $     84.3     $        (0.8 )        (0.9 )
Wholesale gross profit                      7.5            6.2               1.3
Total gross profit                   $     91.0     $     90.5     $         0.5           0.6
Retail vehicle unit sales                56,149         61,171            (5,022 )        (8.2 )
Revenue per vehicle retailed         $   20,695     $   20,627     $          68           0.3

Gross profit per vehicle retailed $ 1,487 $ 1,378 $

  109           7.9
Gross profit as a percentage of
revenue                                     7.2 %          6.7 %
Inventory days supply (trailing
calendar month days)                    48 days        30 days

                                                    Three Months Ended March 31,
                                                                      Variance
                                                                     Favorable /          %
                                         2020           2019        (Unfavorable)     Variance
Same Store:
Retail revenue                       $  1,160.1     $  1,239.7     $       (79.6 )        (6.4 )
Wholesale revenue                          86.6           76.7               9.9          12.9
Total revenue                        $  1,246.7     $  1,316.4     $       (69.7 )        (5.3 )
Retail gross profit                  $     83.4     $     83.4     $           -             -
Wholesale gross profit                      7.6            6.4               1.2
Total gross profit                   $     91.0     $     89.8     $         1.2           1.3
Retail vehicle unit sales                56,093         59,787            (3,694 )        (6.2 )
Revenue per vehicle retailed         $   20,682     $   20,735     $         (53 )        (0.3 )
Gross profit per vehicle retailed    $    1,487     $    1,395     $          92           6.6
Gross profit as a percentage of
revenue                                     7.2 %          6.7 %


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 $2.0 million and $23.2 million in total used vehicle revenue for the three
months ended March 31, 2020 and 2019 and $0.7 million in total used vehicle
gross profit for the three months ended March 31, 2019, respectively, is related
to divestiture activity and the opening of a new add-point.
First Quarter 2020 compared to First Quarter 2019
Same store retail used vehicle revenue decreased during the three months ended
March 31, 2020, as compared to the same period in 2019, primarily due to a
decrease in same store unit volume. The decrease in same store unit volume was
due to significant declines in used retail vehicle unit sales during the last
two weeks of March 2020 as a result of the COVID-19 pandemic. These declines
were partially offset by an increase in relative market demand for used vehicles
as compared to new vehicles, due in part to increased affordability compared to
new vehicles and shifting dynamics in the used vehicle market. With the
continued elevated levels in off-lease supply of late-model used vehicles, the
average age and mileage of used vehicles in the market has decreased, which has
provided wider availability of in-demand technology features on used vehicles,
resulting in reduced disparity between used vehicles and new vehicles. Our
used-to-new vehicle unit sales ratio increased to 98.9% for the three months
ended March 31, 2020, as compared to 96.1% for the prior year period.
Same store revenue PVR was relatively flat during the three months ended
March 31, 2020, as compared to the same period in 2019.
Same store gross profit PVR increased during the three months ended March 31,
2020, as compared to the same period in 2019, due to increases in gross profit
PVR for Premium Luxury and Import vehicles.


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Parts and Service
                                                   Three Months Ended March 31,
                                                                   Variance
                                                                  Favorable /         %
($ in millions)                           2020        2019       (Unfavorable)    Variance
Reported:
Revenue                                 $ 876.3     $ 876.7     $        (0.4 )         -
Gross Profit                            $ 388.8     $ 398.9     $       (10.1 )      (2.5 )
Gross profit as a percentage of revenue    44.4 %      45.5 %
Same Store:
Revenue                                 $ 875.3     $ 860.6     $        14.7         1.7
Gross Profit                            $ 388.9     $ 391.8     $        (2.9 )      (0.7 )
Gross profit as a percentage of revenue    44.4 %      45.5 %



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 and collision services.
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 $1.0 million and $16.1 million in parts and service revenue and $0.1
million and $7.1 million in parts and service gross profit for the three months
ended March 31, 2020 and 2019, respectively, is related to acquisition and
divestiture activity, as well as the opening of a new add-point.
First Quarter 2020 compared to First Quarter 2019
During the three months ended March 31, 2020, same store parts and service gross
profit decreased slightly compared to the same period in 2019, primarily due to
decreases in gross profit associated with customer-pay service of $3.1 million,
warranty of $2.5 million, and wholesale parts of $2.0 million, which were
partially offset by increases in gross profit associated with the preparation of
vehicles for sale of $3.3 million and collision business of $1.8 million.
Customer-pay service gross profit and warranty gross profit were adversely
impacted by a decrease in volume during the last two weeks of March 2020 as a
result of the COVID-19 pandemic. The decrease in customer-pay volume was
partially offset by higher value repair orders and price increases. The decrease
in warranty volume was partially offset by higher value repair orders and
improved parts and labor rates negotiated with certain manufacturers. Gross
profit associated with our wholesale parts business decreased due to inventory
write-downs to net realizable value. Gross profit associated with the
preparation of vehicles for sale benefited from higher value internal repair
orders, partially offset by lower new and used vehicle unit volume. Collision
business gross profit benefited from an increase in volume, higher value repair
orders, and an increase in gross profit associated with service work outsourced
to third-parties.



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Finance and Insurance
                                                    Three Months Ended March 31,
                                                                    Variance
                                                                   Favorable /         %
($ in millions, except per vehicle data)    2020        2019      (Unfavorable)    Variance
Reported:
Revenue and gross profit                 $   235.8    $ 236.5    $        (0.7 )      (0.3 )
Gross profit per vehicle retailed        $   2,089    $ 1,897    $         192        10.1
Same Store:
Revenue and gross profit                 $   235.6    $ 233.0    $         

2.6 1.1 Gross profit per vehicle retailed $ 2,089 $ 1,910 $ 179 9.4





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 is 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 $0.2 million and
$3.5 million for the three months ended March 31, 2020 and 2019, respectively,
is related to divestiture activity, as well as the opening of a new add-point.

First Quarter 2020 compared to First Quarter 2019
Same store finance and insurance revenue and gross profit increased during the
three months ended March 31, 2020, as compared to the same period in 2019,
primarily due to an increase in finance and insurance gross profit PVR,
partially offset by a decrease in vehicle unit volume. The increase in finance
and insurance gross profit PVR was primarily due to an increase in product
penetration and higher realized margins on vehicle service contracts, including
our AutoNation Vehicle Protection Plan product. Finance and insurance gross
profit PVR also benefited from higher realized margins on arranged customer
financing and amounts financed per transaction. Increases in finance and
insurance gross profit PVR were partially offset by a shift in unit volume mix
from new vehicles to used vehicles, which have lower average selling prices than
new vehicles and therefore typically generate lower gross profit per transaction
associated with arranging customer financing. Sales of used vehicles also have
lower finance and product penetration as compared to sales of new vehicles.
Finance and insurance gross profit PVR was also adversely impacted by a decrease
in retrospective commissions due in part to higher claim activity. We expect
retrospective commissions to continue to decrease as compared to recent years.



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Segment Results
In the following table, revenue and segment income of our reportable segments
are reconciled to consolidated revenue and consolidated operating income (loss),
respectively. The following discussions of segment results are on a reported
basis.
                                                             Three Months Ended March 31,
                                                                                     Variance
                                                                                   Favorable /             %
($ in millions)                            2020                 2019              (Unfavorable)        Variance
Revenue:
Domestic                             $    1,483.5         $    1,568.8         $          (85.3 )          (5.4 )
Import                                    1,362.1              1,496.1                   (134.0 )          (9.0 )
Premium Luxury                            1,616.8              1,734.1                   (117.3 )          (6.8 )
Total                                     4,462.4              4,799.0                   (336.6 )          (7.0 )
Corporate and other                         204.6                182.8                     21.8            11.9
Total consolidated revenue           $    4,667.0         $    4,981.8         $         (314.8 )          (6.3 )
Segment income(1):
Domestic                             $       54.1         $       56.2         $           (2.1 )          (3.7 )
Import                                       65.9                 72.6                     (6.7 )          (9.2 )
Premium Luxury                               80.2                 84.3                     (4.1 )          (4.9 )
Total                                       200.2                213.1                    (12.9 )          (6.1 )
Corporate and other                        (445.0 )              (61.3 )                 (383.7 )
Floorplan interest expense                   25.5                 39.0                     13.5
Operating income (loss)              $     (219.3 )       $      190.8         $         (410.1 )

(1) Segment income represents income for each of our reportable segments and is defined as operating income less floorplan interest expense.



Retail new vehicle unit sales:
Domestic                                   18,327               20,205                   (1,878 )          (9.3 )
Import                                     25,287               28,756                   (3,469 )         (12.1 )
Premium Luxury                             13,125               14,552                   (1,427 )          (9.8 )
                                           56,739               63,513                   (6,774 )         (10.7 )








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Domestic

The Domestic segment operating results included the following:



                                          Three Months Ended March 31,
                                                           Variance
                                                          Favorable /         %
($ in millions)                  2020         2019       (Unfavorable)    Variance
Revenue                       $ 1,483.5    $ 1,568.8    $       (85.3 )      (5.4 )
Segment income                $    54.1    $    56.2    $        (2.1 )      (3.7 )
Retail new vehicle unit sales    18,327       20,205           (1,878 )     

(9.3 )




First Quarter 2020 compared to First Quarter 2019
Domestic revenue decreased during the three months ended March 31, 2020, as
compared to the same period in 2019, primarily due to decreases in new and used
vehicle unit volume and parts and service volume during the last two weeks of
March 2020 as a result of the COVID-19 pandemic and the divestitures we
completed in 2019. These decreases were partially offset by an increase in new
vehicle revenue PVR due in part to a shift in mix toward trucks and sport
utility vehicles, which have relatively higher average selling prices, as a
result of a combination of improved vehicle fuel efficiency, relatively low
average fuel prices, and changing consumer preference. New vehicle average
selling prices also increased as a result of increases in the manufacturers'
suggested retail prices.
Domestic segment income decreased during the three months ended March 31, 2020,
as compared to the same period in 2019, primarily due to decreases in new and
used vehicle unit volume, parts and service volume, and new vehicle gross
profit, which were adversely impacted by the COVID-19 pandemic. Decreases in
Domestic segment income were partially offset by an increase in finance and
insurance revenue and gross profit PVR, which benefited from higher realized
margins on vehicle service contracts and an increase in product penetration, and
decreases in floorplan interest and SG&A expenses.




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Import

The Import segment operating results included the following:



                                          Three Months Ended March 31,
                                                           Variance
                                                          Favorable /         %
($ in millions)                  2020         2019       (Unfavorable)    Variance
Revenue                       $ 1,362.1    $ 1,496.1    $      (134.0 )      (9.0 )
Segment income                $    65.9    $    72.6    $        (6.7 )      (9.2 )
Retail new vehicle unit sales    25,287       28,756           (3,469 )     

(12.1 )




First Quarter 2020 compared to First Quarter 2019
Import revenue decreased during the three months ended March 31, 2020, as
compared to the same period in 2019, primarily due to decreases in new and used
vehicle unit volume and parts and service volume during the last two weeks of
March 2020 as a result of the COVID-19 pandemic and the divestitures we
completed in 2019.
Import segment income decreased during the three months ended March 31, 2020, as
compared to the same period in 2019, primarily due to decreases in parts and
service volume and new and used vehicle unit volume, which were adversely
impacted by the COVID-19 pandemic. Decreases in Import segment income were
partially offset by an increase in finance and insurance revenue and gross
profit PVR, which benefited from higher realized margins on vehicle service
contracts and an increase in product penetration, and decreases in SG&A and
floorplan interest expenses.




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

                                          Three Months Ended March 31,
                                                           Variance
                                                          Favorable /         %
($ in millions)                  2020         2019       (Unfavorable)    Variance
Revenue                       $ 1,616.8    $ 1,734.1    $      (117.3 )      (6.8 )
Segment income                $    80.2    $    84.3    $        (4.1 )      (4.9 )
Retail new vehicle unit sales    13,125       14,552           (1,427 )     

(9.8 )




First Quarter 2020 compared to First Quarter 2019
Premium Luxury revenue decreased during the three months ended March 31, 2020,
as compared to the same period in 2019, primarily due to decreases in new and
used vehicle unit volume and parts and service volume during the last two weeks
of March 2020 as a result of the COVID-19 pandemic.
Premium Luxury segment income decreased during the three months ended March 31,
2020, as compared to the same period in 2019, primarily due to decreases in new
vehicle gross profit PVR, new vehicle unit volume, and parts and service volume,
which were adversely impacted by the COVID-19 pandemic. Decreases in Premium
Luxury segment income were partially offset by an increase in used vehicle gross
profit PVR and finance and insurance revenue and gross profit PVR, which
benefited from higher realized margins on vehicle service contracts and an
increase in product penetration, and a decrease in floorplan interest expense.




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Corporate and other
Corporate and other results included the following:

                           Three months ending March 31,
                                            Variance
                                           Favorable /        %
($ in millions)    2020        2019       (Unfavorable)    Variance
Revenue         $  204.6     $ 182.8     $        21.8         11.9
Income (loss)   $ (445.0 )   $ (61.3 )   $      (383.7 )


"Corporate and other" is comprised of our other businesses, including collision
centers, auction operations, AutoNation USA stand-alone used vehicle sales and
service centers, and parts distribution centers, all of which generate revenues
but do not meet the quantitative thresholds for determining reportable segments,
as well as unallocated corporate overhead expenses and other income items.
As of March 31, 2020, we had 81 AutoNation-branded collision centers, 4
AutoNation-branded auction operations, and 5 AutoNation USA stand-alone used
vehicle sales and service centers. We also had 6 parts distribution centers that
service our wholesale parts sales markets for the sale of original equipment
manufacturer parts. Additionally, we directly source and distribute retail and
wholesale parts for sale to our customers and other dealerships and collision
centers through our 10 operational AutoNation aftermarket collision parts
distribution centers.
Our aftermarket collision parts business was established in 2018 and is still in
its development and expansion phase. As of March 31, 2020, our aftermarket
collision parts distribution centers as a group were not yet profitable and had
approximately $31 million of parts inventory. We have invested approximately $16
million in our aftermarket parts distribution centers for equipment, information
systems, and other intangible assets. Several of our aftermarket parts
distribution centers are operated under a multi-year logistics agreement with a
third party. This agreement is subject to a declining early termination penalty,
which is estimated to be approximately $14 million as of March 31, 2020. We also
lease facilities for certain of the aftermarket collision parts distribution
centers with right-of-use assets of approximately $6 million and remaining lease
payments through the various lease terms of approximately $8 million as of
March 31, 2020. Although we believe our aftermarket collision parts business
will be profitable over time, we can make no such assurance. We expect to
continue to focus on our parts distribution network to support our national
wholesale footprint and create more opportunities to offer both original
manufacturer and AutoNation aftermarket collision parts to our customers.
During the three months ended March 31, 2020, we recorded non-cash goodwill
impairment charges totaling $318.3 million, of which $257.4 million related to
our Premium Luxury reporting unit, $41.6 million related to our Collision
Centers reporting unit, and $19.3 million related to our Parts Center 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 three months ended March 31, 2020, we recorded non-cash
long-lived asset impairment charges associated with our aftermarket collision
parts business of $5.8 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. Our parts inventory balance for our
aftermarket collision parts business was net of cumulative write-downs of $8.2
million at March 31, 2020, and $5.2 million at December 31, 2019.





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Selling, General, and Administrative Expenses
Our Selling, General, and Administrative ("SG&A") expenses consist primarily of
compensation, including store and corporate salaries, commissions, and
incentive-based compensation, as well as advertising (net of reimbursement-based
manufacturer advertising rebates), and store and corporate overhead expenses,
which include occupancy costs, legal, accounting, and professional services, and
general corporate expenses. The following table presents the major components of
our SG&A expenses.
                                              Three Months Ended March 31,
                                                              Variance
                                                             Favorable /         %
($ in millions)                       2020        2019      (Unfavorable)    Variance
Reported:
Compensation                       $   374.1    $ 399.0    $        24.9         6.2
Advertising                             46.3       44.2             (2.1 )      (4.8 )
Store and corporate overhead           180.3      179.8             (0.5 )      (0.3 )
Total                              $   600.7    $ 623.0    $        22.3         3.6

SG&A as a % of total gross profit:
Compensation                            46.0       47.0              100     bps
Advertising                              5.7        5.2              (50 )   bps
Store and corporate overhead            22.2       21.2             (100 )   bps
Total                                   73.9       73.4              (50 )   bps


First Quarter 2020 compared to First Quarter 2019
SG&A expenses decreased during the three months ended March 31, 2020, as
compared to the same period in 2019, primarily due to a decrease in compensation
expense, which was driven in part by the impact of the COVID-19 pandemic. As a
result of "shelter in place" or "stay at home" orders from federal, state, and
local governments and other restrictive orders that were put into place in March
2020, we had significant declines in new and used vehicle unit sales, including
a year-over-year decline of approximately 50% during the last two weeks of March
2020, which negatively impacted compensation for our sales associates.
Additionally, performance-based compensation expense decreased $14.2 million, as
compared to the first quarter of 2019, primarily due to changes in expectations
of pay-out levels as a result of the COVID-19 pandemic impact. As a percentage
of total gross profit, SG&A expenses increased to 73.9% during the three months
ended March 31, 2020, from 73.4% in the same period in 2019, primarily due to
gross profit pressure as a result of the COVID-19 pandemic impact.
Effective in April 2020, we placed approximately 7,000 employees on unpaid
leave, implemented temporary base pay reductions for our executive officers and
associates, and froze corporate new hiring. We also took actions to reduce our
advertising expenses by approximately 50% for the second quarter of 2020 and
significantly reduced our discretionary spending.
Goodwill Impairment
During the three months ended March 31, 2020, we recorded $318.3 million of
non-cash goodwill impairment charges primarily due to the impacts to our
business as well as a decrease in our stock price and market capitalization as a
result of the COVID-19 pandemic. See Note 6 of the Notes to Unaudited Condensed
Consolidated Financial Statements for more information.
Franchise Rights Impairment
During the three months ended March 31, 2020, we recorded $57.5 million of
non-cash franchise right impairment charges to reduce the carrying values of
certain franchise rights to their estimated fair values. See Note 6 of the Notes
to Unaudited Condensed Consolidated Financial Statements for more information.
Other Income (Expense), Net (Operating)
During the first quarter of 2020, we recognized asset impairment charges of $8.5
million. During the first quarter of 2019, we recognized net gains of $8.5
million related to store divestitures.


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Non-Operating Income (Expense)
Floorplan Interest Expense
First Quarter 2020 compared to First Quarter 2019
Floorplan interest expense was $25.5 million for the three months ended
March 31, 2020, compared to $39.0 million for the same period in 2019. The
decrease in floorplan interest expense of $13.5 million was the result of lower
average interest rates and lower average vehicle floorplan balances. Floorplan
interest rates are variable and therefore increase and decrease with changes in
the underlying benchmark interest rates.
Other Interest Expense
First Quarter 2020 compared to First Quarter 2019
Other interest expense of $23.5 million for the three months ended March 31,
2020, decreased $4.3 million as compared to $27.8 million for the same period in
2019, driven by lower average debt balances and lower average interest rates
primarily due to the repayment of the 5.5% Senior Notes due 2020. We also
recorded a loss on debt extinguishment of $1.1 million during the three months
ended March 31, 2020, resulting from our credit facility debt refinancing in
March 2020.
Income Tax Provision (Benefit)
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 14.4% for the three months ended March 31,
2020, and 27.0% for the three months ended March 31, 2019. The tax rate for the
three months ended March 31, 2020, reflects the fact that a significant portion
of the goodwill impairment charges taken in the first quarter of 2020 was not
deductible for income tax purposes.
Discontinued Operations
Discontinued operations are related to stores that were sold or terminated prior
to January 1, 2014. Results from discontinued operations, net of income taxes,
were primarily related to carrying costs for real estate we have not yet sold
associated with stores that were closed prior to January 1, 2014, and other
adjustments related to disposed operations.

Liquidity and Capital Resources
We manage our liquidity to ensure access to sufficient funding at acceptable
costs to fund our ongoing operating requirements and future capital expenditures
while continuing to meet our financial obligations. We believe that our cash and
cash equivalents, funds generated through operations, and amounts available
under our revolving credit facility, commercial paper program, and secured used
vehicle floorplan facilities will be sufficient to fund our working capital
requirements, service our debt, pay our tax obligations and commitments and
contingencies, and meet any seasonal operating requirements for the foreseeable
future.
We also believe that our liquidity resources will allow us to manage the impact
of the COVID-19 pandemic on our business operations for the foreseeable
future. The challenges posed by the COVID-19 pandemic on our business are
evolving rapidly. Consequently, we will continue to evaluate our financial and
liquidity position in light of future developments relating to the COVID-19
pandemic. 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.
Debt Refinancing Transaction
On March 26, 2020, we amended and restated our existing unsecured credit
agreement to, among other things, (1) provide for lower commitment fees and loan
margins as set forth in the amended and restated credit agreement, (2) extend
the maturity date to March 26, 2025, and (3) provide for customary LIBOR
replacement provisions.


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Available Liquidity Resources
We had the following sources of liquidity available:
                                               March 31,         December 31,
(In millions)                                     2020               2019
Cash and cash equivalents                     $     411.0       $         42.0
Revolving credit facility (1)                 $     822.4  (2)  $      

1,421.1


Secured used vehicle floorplan facilities (3) $       0.6       $          0.6


 (1)    As limited by the maximum consolidated leverage ratio contained in our

credit agreement. 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.

(2) At March 31, 2020, we had $39.7 million of letters of credit outstanding.

In addition, we use the revolving credit facility under our credit

agreement as a liquidity backstop for borrowings under our commercial


        paper program. We had $140.0 million of commercial paper notes
        outstanding at March 31, 2020. See Note 7 of the Notes to Unaudited
        Condensed Consolidated Financial Statements for more information.

(3) Based on the eligible used vehicle inventory that could have been pledged

as collateral. See Note 5 of the Notes to Unaudited Condensed

Consolidated Financial Statements for more information.




In 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 March 31, 2020, surety bonds,
letters of credit, and cash deposits totaled $107.8 million, of which $39.7
million were letters of credit. We do not currently provide cash collateral for
outstanding letters of credit.
In February 2019, we filed an automatic shelf registration statement with the
SEC that enables us to offer for sale, from time to time and as the capital
markets permit, an unspecified amount of common stock, preferred stock, debt
securities, warrants, subscription rights, depositary shares, stock purchase
contracts, units, and guarantees of debt securities.
Capital Allocation
Our capital allocation strategy is focused on growing long-term value per share.
We invest capital in our business to maintain and upgrade our existing
facilities and to build new facilities for existing franchises, as well as for
other strategic and technology initiatives, including our brand extension
strategy discussed above under "Strategic 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. 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
                                              March 31,
(In millions, except per share data)       2020           2019
Shares repurchased                          2.5             1.0
Aggregate purchase price             $     80.0         $  33.5

Average purchase price per share $ 31.95 $ 34.34




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.


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As of March 31, 2020, $139.0 million remained available under our stock
repurchase program most recently authorized by our Board of Directors. We
temporarily suspended our share repurchase program at the end of the first
quarter of 2020 in light of the COVID-19 pandemic. This suspension does not
impact our remaining Board authorization, and we may in the future resume the
program when appropriate.
Capital Expenditures
The following table sets forth information regarding our capital expenditures:
                                                                  Three Months Ended
                                                                      March 31,
(In millions)                                                   2020                 2019
Purchases of property and equipment, including
operating lease buy-outs (1)                            $        30.0

$ 40.4

(1) Includes accrued construction in progress and excludes property associated

with leases entered into during the year.




At March 31, 2020, we owned approximately 80% of our new vehicle franchise store
locations with a net book value of $2.1 billion, as well as other properties
associated with our collision centers, auction operations, AutoNation USA
stand-alone used vehicle sales and service centers, parts distribution centers,
and other excess properties with a net book value of $468.4 million. None of
these properties are mortgaged or encumbered. We have taken various actions in
an attempt to mitigate the financial impact of the COVID-19 pandemic, including
the postponement of approximately $50 million of capital expenditures through
the second quarter of 2020. Planned expenditures beyond the second quarter of
2020 will be evaluated over the next several months.
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
                                                               March 31,
(In millions)                                               2020          2019

Cash received from (used in) business acquisitions, net $ (0.4 ) $ (4.3 ) Cash received from (used in) business divestitures, net $ - $ 17.4




We did not purchase or divest stores during the three months ended March 31,
2020. We purchased two parts distribution centers and divested two Import stores
during the three months ended March 31, 2019.
Long-Term Debt and Commercial Paper
The following table sets forth our non-vehicle long-term debt, net of debt
issuance costs, as of March 31, 2020, and December 31, 2019.
                                                                             (in millions)
                                                                      March 31,      December 31,
Debt Description         Maturity Date        Interest Payable           2020            2019

5.5% Senior Notes February 1, 2020 February 1 and August 1 $

- $ 350.0 3.35% Senior Notes January 15, 2021 January 15 and July 15 300.0

             300.0

3.5% Senior Notes November 15, 2024 May 15 and November 15 450.0

             450.0

4.5% Senior Notes October 1, 2025 April 1 and October 1 450.0

             450.0

3.8% Senior Notes November 15, 2027 May 15 and November 15 300.0

             300.0
Revolving credit
facility               March 26, 2025      Monthly                        790.0                 -
Finance leases and     Various dates
other debt             through 2039        Monthly                        101.2              93.9
                                                                        2,391.2           1,943.9
Less: unamortized debt discounts and debt issuance costs                   (9.2 )            (9.8 )
Less: current maturities                                                 (305.6 )          (355.6 )
Long-term debt, net of current maturities                            $  2,076.4     $     1,578.5





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In February 2020, we repaid the outstanding $350.0 million of 5.5% Senior Notes.
Our 3.35% Senior Notes due 2021 will mature on January 15, 2021, and were
therefore reclassified to current maturities during the first quarter of 2020.
At March 31, 2020, we had $140.0 million of commercial paper notes outstanding
with a weighted-average annual interest rate of 3.30% and a weighted-average
remaining term of 1 day. At December 31, 2019, we had $170.0 million of
commercial paper notes outstanding with a weighted-average annual interest rate
of 2.13% and a weighted-average remaining term of 12 days.
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.
During the three months ended March 31, 2020, we recorded non-cash goodwill and
franchise rights impairment charges of $375.8 million. See Note 6 of the Notes
to Unaudited Condensed Consolidated Financial Statements. As of March 31, 2020,
we were in compliance with the requirements of the financial covenants under our
debt agreements as such non-cash impairment charges do not factor into the
calculations for those covenants. Under the terms of our credit agreement, at
March 31, 2020, our leverage ratio and capitalization ratio were as follows:
                        March 31, 2020
                     Requirement   Actual
Leverage ratio         ? 3.75x     2.83x
Capitalization ratio   ? 70.0%     56.7%


After considering the impacts of the COVID-19 pandemic, the actions we have
taken, and the other options available to us, we expect to remain in compliance
with the requirements of the financial covenants under our debt agreements. To
the extent that in the future we believe that we would be unable to comply with
the covenants contained in our credit agreement, we would seek an amendment or
waiver of our credit agreement, which could increase the cost of our debt.
Vehicle Floorplan Payable
The components of vehicle floorplan payable are as follows:
                                       March 31,     December 31,
(In millions)                            2020            2019

Vehicle floorplan payable - trade $ 2,197.2 $ 2,120.6 Vehicle floorplan payable - non-trade 1,485.3

           1,455.2
Vehicle floorplan payable             $  3,682.5    $      3,575.8




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Vehicle floorplan facilities are due on demand, but in the case of new vehicle
inventories, are generally paid within several business days after the related
vehicles are sold. Vehicle floorplan facilities are primarily collateralized by
vehicle inventories and related receivables. See Note 5 of the Notes to
Unaudited Condensed Consolidated Financial Statements for more information on
our vehicle floorplan payable.
Cash Flows
The following table summarizes the changes in our cash provided by (used in)
operating, investing, and financing activities:
                                                         Three Months Ended
                                                             March 31,
(In millions)                                            2020          2019
Net cash provided by operating activities             $   113.7     $  

259.7


Net cash used in investing activities                 $   (92.2 )   $  

(48.6 ) Net cash received from (used in) financing activities $ 347.1 $ (210.9 )




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 decreased during the three months
ended March 31, 2020, as compared to the same period in 2019, primarily due to
an increase in working capital requirements.
Cash Flows from Investing Activities
Net cash flows from investing activities consist primarily of cash used in
capital additions and activity from business acquisitions, business
divestitures, property dispositions, and other transactions.
Net cash used in investing activities increased during the three months ended
March 31, 2020, as compared to the same period in 2019, primarily due to an
investment in an equity security and a decrease in cash received from business
divestitures, net of cash relinquished, partially offset by a decrease in
purchases of property and equipment.
Cash Flows from Financing Activities
Net cash flows from financing activities primarily include repurchases of common
stock, debt activity, and changes in vehicle floorplan payable-non-trade.
During the three months ended March 31, 2020, we borrowed $790.0 million under
our revolving credit facility and had no repayments. During the three months
ended March 31, 2019, we had no borrowings or repayments under our revolving
credit facility.
Cash flows from financing activities include changes in commercial paper notes
outstanding totaling net payments of $30.0 million during the three months ended
March 31, 2020, and net payments of $160.0 million during the three months ended
March 31, 2019, as well as changes in vehicle floorplan payable-non-trade
totaling net proceeds of $30.1 million for the three months ended March 31,
2020, and net payments of $12.5 million for the three months ended March 31,
2019.
During the three months ended March 31, 2020, we repaid the outstanding $350.0
million of 5.5% Senior Notes due 2020 through the utilization of our commercial
paper program.
During the three months ended March 31, 2020, we amended and restated our
existing unsecured credit agreement. Cash flows from financing activities during
the three months ended March 31, 2020, reflect cash payments of $6.1 million for
debt issuance costs for this transaction that are being amortized to interest
expense over the term of the related debt arrangement.
During the three months ended March 31, 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), including repurchases for which settlement
occurred subsequent to March 31, 2020. During the three months ended March 31,
2019, we repurchased 1.0 million shares of


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common stock for an aggregate purchase price of $33.5 million (average purchase
price per share of $34.34), including repurchases for which settlement occurred
subsequent to March 31, 2019.
Forward-Looking Statements
Our business, financial condition, results of operations, cash flows, and
prospects, and the prevailing market price and performance of our common stock
may be adversely affected by a number of factors, including the matters
discussed below. Certain statements and information set forth in this Quarterly
Report on Form 10-Q, including, without limitation, statements regarding the
impact of the COVID-19 pandemic on our business, results of operations, and
financial condition, the actions we are taking in response to the COVID-19
pandemic, our strategic initiatives, partnerships, or investments, including our
brand extension strategies, and other statements regarding our expectations for
the future performance of our business and the automotive retail industry, as
well as other written or oral statements made from time to time by us or by our
authorized executive officers on our behalf, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical fact, including statements that
describe our objectives, plans or goals are, or may be deemed to be,
forward-looking statements. Words such as "anticipate," "expect," "intend,"
"goal," "plan," "believe," "continue," "may," "will," "could," and variations of
such words and similar expressions are intended to identify such forward-looking
statements. Our forward-looking statements reflect our current expectations
concerning future results and events, and they involve known and unknown risks,
uncertainties and other factors that are difficult to predict and may cause our
actual results, performance, or achievements to be materially different from any
future results, performance, or achievements expressed or implied by these
statements. These forward-looking statements speak only as of the date of this
report, and we undertake no obligation to revise or update these statements to
reflect subsequent events or circumstances. The risks, uncertainties, and other
factors that our stockholders and prospective investors should consider include,
but are not limited to, the following:
•      The COVID-19 pandemic has had a significant adverse impact, and could

continue to have a significant adverse impact, on our business, results of

operations, and financial condition going forward. Future epidemics,

pandemics, and other outbreaks could also have a significant adverse

impact on our business, results of operations, and financial condition.




•      The automotive retail industry is sensitive to changing economic
       conditions and various other factors, including, but not limited to, fuel
       prices, interest rates, and tariffs. 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.

• Our new vehicle sales are impacted by the incentive, marketing, and other

programs of vehicle manufacturers.

• We are dependent upon the success and continued financial viability of the

vehicle manufacturers and distributors with which we hold franchises.

• We are investing significantly in our brand extension strategy, and if our

strategic initiatives are not successful, we will have incurred

significant expenses without the benefit of improved financial results.




•      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.

• New laws, regulations, or governmental policies regarding fuel economy and

greenhouse gas emission standards, or changes to existing standards, may

affect vehicle manufacturers' ability to produce cost-effective vehicles


       or vehicles that consumers demand, which could adversely impact our
       business, results of operations, financial condition, cash flow, and
       prospects.

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

• We are subject to 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 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.




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• Our operations are subject to extensive governmental laws and regulations.

If we are found to be in purported violation of or subject to liabilities

under any of these laws or regulations, or if new laws or regulations are

enacted that adversely affect our operations, our business, operating


       results, and prospects could suffer.


•      A failure of our information systems or any security breach or

unauthorized disclosure of confidential information could have a material


       adverse effect on our business.


•      Our debt agreements contain certain financial ratios and other

restrictions on our ability to conduct our business, and our substantial

indebtedness could adversely affect our financial condition and operations

and prevent us from fulfilling our debt service obligations.

• We are subject to interest rate risk in connection with our vehicle

floorplan payables, revolving credit facility, and commercial paper

program that could have a material adverse effect on our profitability.

• Goodwill and other intangible assets comprise a significant portion of our

total assets. We must test our goodwill and other intangible assets for

impairment at least annually, which could result in a material, non-cash

write-down of goodwill or franchise rights and could have a material


       adverse impact on our results of operations and shareholders' equity.


•      Our minority equity investments do not have readily determinable fair
       values and their fair values are subject to fluctuations based on

observable price changes. These fluctuations could result in downward


       adjustments or require us to record impairments, both of which could
       adversely impact our results of operations and financial condition.

• Our largest stockholders, as a result of their ownership stakes in us, may

have the ability to exert substantial influence over actions to be taken

or approved by our stockholders. In addition, future share repurchases and

fluctuations in the levels of ownership of our largest stockholders could

impact the volume of trading, liquidity, and market price of our common

stock.




Please refer to our most recent Annual Report on Form 10-K for additional
discussion of the foregoing risks. These forward-looking statements speak only
as of the date of this report, and we undertake no obligation to update any
forward-looking statements to reflect subsequent events or circumstances.
Additional Information
Investors and others should note that we announce material financial information
using our company website (www.autonation.com), our investor relations website
(investors.autonation.com), SEC filings, press releases, public conference
calls, and webcasts. Information about AutoNation, its business, and its results
of operations may also be announced by posts on the following social media
channels:
• AutoNation's Twitter feed (www.twitter.com/autonation)


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




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


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