AutoNation 2003 Annual Report Download - page 17

Table of Contents
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 at least an annual assessment for impairment 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.
Item 2. PROPERTIES
We lease our corporate headquarters facility pursuant to a lease expiring in 2010. As of February 2004, we also own or lease numerous
facilities relating to our operations in 19 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.
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.
Many of our Texas dealership subsidiaries have been named in three class action lawsuits brought against the TADA and approximately
700 new vehicle stores in Texas that are members of the TADA. The three actions allege that since January 1994 Texas dealers have
deceived customers with respect to a vehicle inventory tax and violated federal antitrust and other laws as well. In April 2002, in two actions
(which have been consolidated) the state court certified two classes of consumers on whose behalf the action would proceed. In October
2002, the Texas Court of Appeals affirmed the trial court’s order of class certification in the state action and the Company is appealing that
ruling to the Texas Supreme Court. In March 2003, the federal court conditionally certified a class of consumers in the federal antitrust case.
We are appealing the ruling. In August 2003, the plaintiffs and certain key defendants, including our Texas stores, reached an understanding
on proposed settlement terms for all three cases. However, certain conditions to the adoption of the proposed settlement were not satisfied,
and the settlement discussions were discontinued. We intend to vigorously assert available defenses in connection with the TADA lawsuits.
Further, we may have certain rights of indemnification with respect to certain aspects of these matters. However, an adverse resolution of the
TADA lawsuits could result in the payment of significant costs and damages and negatively impact our ability to itemize and pass through to
the customer the cost of the tax in the future, which could have a material adverse effect on our business, results of operations, financial
condition, cash flows and prospects.
In addition to the foregoing cases, we also are a party to numerous other legal proceedings that arose in the conduct of our business. 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 flows and
prospects.
Item 4. 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, 2003.
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