AutoNation 2015 Annual Report Download - page 10

Table of Contents
programs, we retain various levels of aggregate loss limits, per claim deductibles, and claims-handling expenses as part of our various insurance programs,
including property and casualty, workers’ compensation, and employee medical benefits. Costs in excess of this retained risk per claim may be insured under
various contracts with third-party insurance carriers. We estimate the ultimate costs of these retained insurance risks based on actuarial evaluation and
historical claims experience, adjusted for current trends and changes in claims-handling procedures. The level of risk we retain may change in the future as
insurance market conditions or other factors affecting the economics of our insurance purchasing change. Although we have, subject to certain limitations
and exclusions, substantial insurance, we cannot assure you that we will not be exposed to uninsured or underinsured losses that could have a material
adverse effect on our business, financial condition, results of operations, or cash flows.
Provisions for retained losses and deductibles are made by charges to expense based upon periodic evaluations of the estimated ultimate liabilities on
reported and unreported claims. The insurance companies that underwrite our insurance require that we secure certain of our obligations for deductible
reimbursements with collateral. Our collateral requirements are set by the insurance companies and, to date, have been satisfied by posting surety bonds,
letters of credit, and/or cash deposits. Our collateral requirements may change from time to time based on, among other things, our claims experience.
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As of December 31, 2015, we employed approximately 26,000 full-time and part-time employees, approximately 250 of whom were covered by collective
bargaining agreements. We believe that we have good relations with our employees.
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In a stable environment, our operations generally experience higher volumes of vehicle unit sales in the second and third quarters of each year due in part
to consumer buying trends and the introduction of new vehicle models. Also, demand for vehicles and light trucks is generally lower during the winter
months than in other seasons, particularly in regions of the United States where stores may be subject to adverse winter conditions. However, we typically
experience higher sales of Premium Luxury vehicles, which have higher average selling prices and gross profit per vehicle retailed, in the fourth quarter.
Revenue and operating results may be impacted significantly from quarter to quarter by changing economic conditions, vehicle manufacturer incentive
programs, and actual or threatened severe weather events.
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We own a number of registered service marks and trademarks, including, among other marks, AutoNation®. Pursuant to agreements with vehicle
manufacturers, we have the right to use and display manufacturers’ trademarks, logos, and designs at our stores and in our advertising and promotional
materials, subject to certain restrictions. We also have licenses pursuant to various agreements with third parties authorizing the use and display of the marks
and/or logos of such third parties, subject to certain restrictions. The current registrations of our service marks and trademarks are effective for varying periods
of time, which we may renew periodically, provided that we comply with all applicable laws.
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