AutoNation 2006 Annual Report Download - page 15

Table of Contents
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.
We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business,
including litigation with customers, employment-related lawsuits, class actions, purported class actions and actions brought by
governmental authorities. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business,
results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an
unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations,
financial condition, cash flow and prospects.
Our operations, including, without limitation, our sales of finance, insurance and vehicle protection products, are subject to
extensive governmental laws, regulation and scrutiny. If we are found to be in 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.
The automotive retailing industry, including our facilities and operations, is subject to a wide range of federal, state and local laws
and regulations, such as those relating to motor vehicle sales, retail installment sales, leasing, sales of finance, insurance and vehicle
protection products, licensing, consumer protection, consumer privacy, escheatment, money laundering, environmental, health and
safety, wage-hour, anti-discrimination and other employment practices. Specifically with respect to motor vehicle sales, retail installment
sales, leasing, and the sale of finance, insurance and vehicle protection products at our stores, we are subject to various laws and
regulations, the violation of which could subject us to consumer class action or other lawsuits or governmental investigations and adverse
publicity, in addition to administrative, civil or criminal sanctions. The violation of other laws and regulations to which we are subject
also can result in administrative, civil or criminal sanctions against us, which may include a cease and desist order against the subject
operations or even revocation or suspension of our license to operate the subject business, as well as significant fines and penalties. We
currently devote significant resources to comply with applicable federal, state and local regulation of health, safety, environmental, zoning
and land use regulations, and we may need to spend additional time, effort and money to keep our existing or acquired facilities in
compliance therewith. In addition, we may be subject to broad liabilities arising out of contamination at our currently and formerly owned
or operated facilities, at locations to which hazardous substances were transported from such facilities and at such locations related to
entities formerly affiliated with us. Although for some such liabilities we believe we are entitled to indemnification from other entities, we
cannot assure you that such entities will view their obligations as we do, or will be able to satisfy them.
Legislative or similar measures have recently been enacted or pursued in certain states in which we operate to limit the fees that
dealerships may earn in connection with arranging financing for vehicle purchasers, to require disclosure to consumers of the fees that
stores earn to arrange financing and to enact other additional regulations with respect to various aspects of our business, including with
respect to the sale of used vehicles and finance and insurance products. Recent litigation against certain vehicle manufacturers’ captive
finance subsidiaries alleging discriminatory lending practices has resulted in settlements, and may result in future settlements, that could
reduce the fees earned by our stores in connection with the origination of consumer loans. The enactment of laws and regulations that
materially impair or restrict our finance and insurance or other operations could have a material adverse effect on our business, results of
operations, financial condition, cash flows and prospects.
Our ability to grow our business may be limited by our ability to acquire automotive stores on favorable terms or at all.
The automotive retail industry is a mature industry. Accordingly, the growth of our automotive retail business since our inception
has been primarily attributable to acquisitions of franchised automotive dealership groups. As described above, manufacturer approval of
our proposed acquisitions generally is subject to our compliance with applicable performance standards (including with respect to matters
such as sales volume, sales effectiveness and customer satisfaction) or established acquisition limits, particularly regional and local
market limits. In addition, in the current environment, it has been difficult to identify dealership acquisitions in our core markets that
meet our
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