AutoNation 2000 Annual Report Download - page 16

permits us to operate profitably.
We Need Substantial Capital. We need substantial capital to operate our
business and to execute our long-term strategy effectively. As of December 31,
2000, we had two unsecured revolving credit facilities in place in the
aggregate principal amount of $1.5 billion. One facility provides $1.0 billion
of financing under a multi-year structure and matures in April 2002. The other
facility, a $500.0 million 364-day facility that was scheduled to mature in
March 2001, was amended to provide $250.0 million of borrowing capacity until
the earlier of September 30, 2001 or the early renewal of the multi-year
facility. Additionally, as of December 31, 2000, we had approximately $2.4
billion of floor plan indebtedness outstanding under credit facilities with
various financing sources, primarily the vehicle manufacturers'
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captive finance subsidiaries. Our floor plan indebtedness, which we use to
finance our vehicle inventory, is secured by our vehicle inventory. This may
limit our ability to borrow from other sources or for other uses. We also have
been negotiating with several of the vehicle manufacturers' captive finance
subsidiaries to provide mortgage-backed credit facilities with respect to
certain of our dealership properties. We cannot assure you that we will be able
to execute definitive loan agreements with the captives or enter into new
unsecured revolving credit facilities with sufficient capacity, or otherwise
obtain sufficient financing for our business and operations, on a timely basis
or on terms acceptable to us.
A substantial portion of our outstanding indebtedness is at floating
interest rates. At times, we have used interest rate swaps, caps and floors to
manage the risk of interest rate fluctuations, but a substantial increase in
interest rates could adversely affect our cost of indebtedness for borrowed
money.
We May Not Be Able to Successfully Execute Our Strategy. The success of
our business model depends in large part on our ability to implement and
execute the strategic initiatives that we describe under the "Business
Strategy" heading above across all of our dealerships, and thereby obtain
business efficiencies, economies of scale and related cost savings and margin
performance improvements. These tasks are made more difficult by the fact that
the dealerships within each of our key markets were acquired from independent
organizations and historically have operated independently, with unique
business, sales and marketing practices. Accordingly, the implementation of our
strategy across each of our markets will require significant managerial focus
and time, and we cannot assure you that it will result in improved operating
performance or increased cost savings in a timely manner or at all.
We May Have Difficulty Expanding Through Acquisitions of Franchised
Automotive Dealerships in Our Key Markets. The growth of our automotive retail
business since our inception has been primarily attributable to acquisitions of
franchised automotive dealership groups. However, the significant consolidation
in the industry in our key markets over the last several years has resulted in
fewer desirable dealerships or dealership groups being available for purchase
on reasonable terms. Although we have negotiated with the major manufacturers
limits on the number of dealerships that we may acquire nationally, regionally
or within any given market, each particular acquisition remains subject to
specific approval from the applicable vehicle manufacturer. We have approached
certain acquisition limits set forth in certain of our framework agreements,
particularly certain market limits, and may approach them in other markets in
the future as we continue to expand, although we do not believe that such
limits will materially adversely impact our ability to execute our acquisition
strategy in the foreseeable future. We cannot assure you that we will be able
to execute our growth strategy in the future by acquiring dealerships selling