AutoNation 2005 Annual Report Download - page 40

Table of Contents
In September 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on issue EITF 05-06, “Determining the Amortization
Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination.” EITF 05-06 requires that
leasehold improvements that are placed in service significantly after and not contemplated at or near the beginning of the lease term or that
are acquired in a business combination should be amortized over the shorter of the useful life of the assets or a term that includes the
required lease periods and renewals that are deemed to be reasonably assured as of the date the leasehold improvements are purchased or
the date of acquisition, as applicable. EITF 05-06 is effective the first reporting period beginning after June 29, 2005. The adoption of
EITF 05-06 did not have a material impact on our consolidated financial statements.
In October 2005, the FASB issued FASB Staff Position (“FSP”) No. FAS 13-1, “Accounting for Rental Costs Incurred during a
Construction Period.” FSP No. FAS 13-1 requires rental costs associated with operating leases that are incurred during a construction period
to be recognized as rental expense. FSP No. FAS 13-1 is effective for reporting periods beginning after December 15, 2005 and is not expected
to have a material impact on our consolidated financial statements.
Forward Looking Statements
Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of our
common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and
information set forth in this Annual Report on Form 10-K, as well as other written or oral statements made from time to time by us or by our
authorized executive officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement and these risk factors in order to
comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Annual Report
on Form 10-K or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result
of new information, future events or otherwise. Although we believe that the expectations, plans, intentions and projections reflected in our
forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective
investors should consider include, but are not limited to, the following:
• We are dependent upon the success and continued financial viability of the vehicle manufacturers and distributors with which we hold
franchises.
• The automotive retailing industry is sensitive to changing economic conditions and various other factors. Our business and results of
operations are substantially dependent on new vehicle sales levels in the United States and in our particular geographic markets and
the level of gross profit margins that we can achieve on our sales of new vehicles, all of which are very difficult to predict.
• Our new vehicle sales are impacted by the consumer incentive programs of vehicle manufacturers.
• Adverse weather events can disrupt our business.
• We are subject to restrictions imposed by, and significant influence from, vehicle manufacturers that may adversely impact our
business, financial condition, results of operations, cash flows and prospects, including our ability to acquire additional stores.
• 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.
• Our operations, including, without limitation, our sales of finance and insurance and vehicle protection products, are subject to
extensive governmental laws, regulation and scrutiny. If we are found to be in
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