AutoNation 2000 Annual Report Download - page 17

desirable automotive brands at desirable locations in our key markets, or that
any such acquisitions can be completed on favorable terms.
The Loss of Key Personnel Could Affect Our Operations. Our success depends
to a significant degree upon the continued contributions of our key corporate
officers. Additionally, our success depends on the key management personnel at
our district offices and the dealerships in our local markets. The market for
qualified employees in the industry and in the markets in which we operate,
particularly for qualified general managers and sales and service personnel, is
highly competitive and may subject us to increased labor costs during periods
of low unemployment. We also believe that many of our sales and service
personnel are pursued from time to time by our competitors. The loss of a group
of key employees in any of our markets could have a material adverse effect on
our business and results of operations in that market.
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We Are Subject to Residual Value Risk and Consumer Credit Risk in
Connection with Our Lease Portfolio; We Are Also Subject to Consumer Credit
Risk in Connection with Our Installment Receivables Portfolio. Through
AutoNation Financial Services, we provide installment loans to our customers
and, until mid-1999, we provided our customers an opportunity to finance
vehicles through leases with us. We are subject to residual value risk in
connection with our lease portfolio, particularly in the event of a decline in
the market value of our leased vehicles. We also are subject to consumer credit
risk in connection with our lease portfolio and our portfolio of installment
receivables. If an economic downturn occurs, we may face an increase in the
rate of payment defaults by our customers, which may have a material adverse
effect on our financial condition, results of operations and cash flows.
ITEM 2. PROPERTIES
During 2000, we entered into a sale-leaseback financing of our corporate
headquarters facility resulting in proceeds of approximately $52.1 million. We
also own or lease numerous facilities relating to our operations in 18 states.
These facilities consist primarily of automobile showrooms, display lots,
service facilities, collision repair centers, supply facilities, automobile
storage lots, parking lots and offices. We believe that our facilities are
sufficient for our needs and are in good repair.
In connection with the closure during December 1999 of 23 company-owned
AutoNation USA used vehicle megastores, during 2000 we sold a majority of the
excess real property held for or operated in connection with the used vehicle
megastore business. We intend to continue actively marketing the remaining
excess used vehicle megastore properties.
ITEM 3. LEGAL PROCEEDINGS
In October 2000, the California Department of Motor Vehicles filed an
administrative proceeding that, among other things, alleged that two finance
and insurance managers who had been employed for approximately one year by El
Monte Motors, Inc., a wholly-owned subsidiary of ours doing business as
Gunderson Chevrolet in El Monte, California, had defrauded customers. The
California DMV seeks to have Gunderson Chevrolet's license to do business in
California either suspended or revoked. The case is scheduled for trial before
an Administrative Law Judge beginning in April 2001. Three civil class actions
and other related lawsuits have been filed against Gunderson Chevrolet based on
the allegations underlying the California DMV case. Additionally, the Los
Angeles District Attorney's Office has been conducting an investigation into
the allegations underlying the California DMV case. The class of customers to
which these actions relate may be significant. Accordingly, a settlement or an
adverse resolution of these matters may result in the payment of significant