AutoNation 2001 Annual Report Download - page 20

The provisions of SFAS 142 applied immediately to all acquisitions
completed after June 30, 2001. Goodwill and intangible assets with indefinite
lives existing at June 30, 2001 were amortized until December 31, 2001.
Effective January 1, 2002 such amortization ceased, as companies were required
to adopt the new rules on that date. By the end of the first quarter of calendar
year 2002, we will, as required, begin to perform an impairment analysis of
intangible assets. SFAS 142 requires us upon adoption and at least annually to
reassess the intangible assets, including goodwill, previously recorded in
connection with earlier purchase acquisitions, as well as their useful lives.
Furthermore, we will, as required, complete the first step of the goodwill
transition impairment test by June 30, 2002 which requires determining the fair
value of the reporting unit, as defined by SFAS 142, and comparing it to the
carrying value of the net assets allocated to the reporting unit. If this fair
value exceeds the carrying value, no further analysis is required. If the fair
value of the reporting unit is less than the carrying value of the net assets,
we must perform step two of the SFAS 142 impairment test, which requires us to
allocate the implied fair value of the reporting unit to all underlying assets
and liabilities, including both recognized and unrecognized tangible and
intangible assets, based on their fair value. Any impairment noted must be
recorded at the date of adoption restating first quarter results, if necessary.
Impairment charges, if any, that result from the application of the above test
would be recorded as the cumulative effect of a change in accounting principle
in the first quarter of the year ending December 31, 2002.
We will not be able to determine the ultimate impact of SFAS 142 on our
consolidated financial statements until such time as we apply its provisions. We
include additional details about these new accounting pronouncements in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this document, as well as in the Notes to our
Consolidated Financial Statements.
ITEM 2. PROPERTIES
We lease our corporate headquarters facility pursuant to a long-term lease.
We also own or lease numerous facilities relating to our operations in 17
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 condition in all
material respects. In 2001, we entered into mortgage facilities secured by
certain of our dealerships' real property, as discussed further in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section in this document and the Notes to our Consolidated Financial
Statements presented elsewhere herein.
ITEM 3. 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.
In October 2000, the California Department of Motor Vehicles ("California
DMV") brought an action against one of our subsidiaries' dealerships for alleged
customer fraud as well as several other claims. In April 2001, we settled the
California DMV action and a related action by the State of California. We have
reached a preliminary settlement of three purported civil class actions (which
have been consolidated) relating to this
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matter, subject to certain conditions. Other lawsuits and claims have also been
filed or made against the dealership based on the allegations underlying the
California DMV case.
In an action filed in Florida state court in 1999, one of our subsidiaries
was accused of violating, among other things, the Florida Motor Vehicle Retail