AutoNation 2006 Annual Report Download - page 17

Table of Contents
• covenants relating to our indebtedness may limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
• we may be more vulnerable to the impact of economic downturns and adverse developments in our business;
• we may be placed at a competitive disadvantage against any less leveraged competitors; and
• our variable interest rate debt will fluctuate with changing market conditions and, accordingly, our interest expense will increase
if interest rates rise.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of
operations, prospects and ability to satisfy our debt service obligations. Subject to restrictions in the indenture governing our new senior
unsecured notes and in the amended credit agreement governing our revolving credit facility and term loan facility, we may incur
additional indebtedness, which could increase the risks associated with our already substantial indebtedness.
Goodwill and other intangible assets comprise a significant portion of our total assets. We must test our intangible assets for
impairment at least annually, which may 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.
Goodwill and indefinite-lived intangibles are subject to impairment assessments at least annually (or more frequently when events or
circumstances indicate that an impairment may have occurred) by applying a fair-value based test. Our principal intangible assets are
goodwill and our rights under our franchise agreements with vehicle manufacturers. These impairment assessments may result in a
material, non-cash write-down of goodwill or franchise values. An impairment would have a material adverse impact on our results of
operations and shareholders’ equity.
UNRESOLVED STAFF COMMENTS
None.
 PROPERTIES
We lease our corporate headquarters facility in Fort Lauderdale, Florida pursuant to a lease expiring in 2010. As of February 2007,
we also own or lease numerous facilities relating to our operations in the following 17 states: Alabama; Arizona; California; Colorado;
Florida; Georgia; Idaho; Illinois; Maryland; Minnesota; North Carolina; Nevada; Ohio; Tennessee; Texas; Virginia and Washington.
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 current needs and are in good
condition in all material respects.
 LEGAL PROCEEDINGS
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.
 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our stockholders during the fourth quarter of the fiscal year ended December 31, 2006.
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