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AN » Topics » 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 stoThis excerpt taken from the AN 10-K filed Feb 17, 2010. 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. Vehicle manufacturers and distributors with whom we hold franchises have significant influence over the operations of our stores. The terms and conditions of our framework, franchise, and related agreements and the manufacturers’ interests and objectives may, in certain circumstances, conflict with our interests and objectives. For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness, and customer satisfaction, and can influence our ability to acquire additional stores, the naming and marketing of our stores, the operations of our e-commerce sites, our selection of store management, product stocking and advertising spending levels, and the level at which we capitalize our stores. Manufacturers also impose minimum facility requirements that can require significant capital expenditures. Manufacturers may also have certain rights to restrict our ability to provide
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Table of Contentsguaranties of our operating companies, pledges of the capital stock of our subsidiaries, and liens on our assets, which could adversely impact our ability to obtain financing for our business and operations on favorable terms or at desired levels. From time to time, we are precluded under agreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent we are not meeting certain performance criteria at our existing stores (with respect to matters such as sales volume, sales effectiveness, and customer satisfaction) until our performance improves in accordance with the agreements, subject to applicable state franchise laws. Manufacturers also have the right to establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocation of franchises in our markets could have a material adverse effect on the financial condition, results of operations, cash flows, and prospects of our stores in the market in which the franchise action is taken. Our framework, franchise, and related agreements also grant the manufacturer the right to terminate or compel us to sell our franchise for a variety of reasons (including uncured performance deficiencies, any unapproved change of ownership or management, or any unapproved transfer of franchise rights or impairment of financial standing or failure to meet capital requirements), subject to applicable state franchise laws. From time to time, certain major manufacturers assert sales and customer satisfaction performance deficiencies under the terms of our framework and franchise agreements. Additionally, our framework agreements contain restrictions regarding a change in control, which may be outside of our control. See “Agreements with Vehicle Manufacturers” in Part I, Item 1 of this Form 10-K. While we believe that we will be able to renew all of our franchise agreements, we cannot guarantee that all of our franchise agreements will be renewed or that the terms of the renewals will be favorable to us. We cannot assure you that our stores will be able to comply with manufacturers’ sales, customer satisfaction performance, facility and other requirements in the future, which may affect our ability to acquire new stores or renew our franchise agreements, or subject us to other adverse actions, including termination or compelled sale of a franchise, any of which could have a material adverse effect on our financial condition, results of operations, cash flows, and prospects. Furthermore, we rely on the protection of state franchise laws in the states in which we operate and if those laws are repealed or weakened, our framework, franchise, and related agreements may become more susceptible to termination, non-renewal, or renegotiation. In addition, we have granted certain manufacturers the right to acquire, at fair market value, our automotive dealerships franchised by that manufacturer in specified circumstances in the event of our default under the indenture for our senior unsecured notes or the amended credit agreement for our revolving credit facility and term loan facility. This excerpt taken from the AN 10-K filed Feb 17, 2009. 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.
Vehicle manufacturers and distributors with whom we hold
franchises have significant influence over the operations of our
stores. The terms and conditions of our framework, franchise,
and related agreements and the manufacturers’ interests and
objectives may, in certain circumstances, conflict with our
interests and objectives. For example, manufacturers can set
performance standards with respect to sales volume, sales
effectiveness, and customer satisfaction, and can influence our
ability to acquire additional stores, the naming and marketing
of our stores, the operations of our
e-commerce
sites, our selection of store management, the condition of our
store facilities, product stocking and advertising spending
levels, and the level at which we capitalize our stores.
Manufacturers may also have certain rights to restrict our
ability to provide guaranties of our operating companies,
pledges of the capital stock of our subsidiaries, and liens on
our assets, which could adversely impact our ability to obtain
financing for our business and operations on favorable terms or
at desired levels. From time to time, we are precluded under
agreements with certain manufacturers from acquiring additional
franchises, or subject to other adverse actions, to the extent
we are not meeting certain performance criteria at our existing
stores (with respect to matters such as sales volume, sales
effectiveness, and customer satisfaction) until our performance
improves in accordance with the agreements, subject to
applicable state franchise laws.
Manufacturers also have the right to establish new franchises or
relocate existing franchises, subject to applicable state
franchise laws. The establishment or relocation of franchises in
our markets could have a material adverse effect on the
financial condition, results of operations, cash flows, and
prospects of our stores in the market in which the franchise
action is taken.
Our framework, franchise, and related agreements also grant the
manufacturer the right to terminate or compel us to sell our
franchise for a variety of reasons (including uncured
performance deficiencies, any unapproved change of ownership or
management, or any unapproved transfer of franchise rights or
impairment of financial standing or failure to meet capital
requirements), subject to applicable state franchise laws. From
time to time, certain major manufacturers assert sales and
customer satisfaction performance deficiencies under the terms
of our framework and franchise agreements. Additionally, our
framework agreements contain restrictions regarding a change in
control, which may be outside of our control. See
“Agreements with Vehicle Manufacturers” in
Part I, Item 1 of this
Form 10-K.
While we believe that we will be able to renew all of our
franchise agreements, we cannot guarantee that all of our
franchise agreements will be renewed or that the terms of the
renewals will be favorable to us. We cannot assure you that our
stores will be able to comply with manufacturers’ sales,
customer satisfaction performance, and other requirements in the
future, which may affect our ability to acquire new stores or
renew our franchise agreements, or subject us to other adverse
actions, including termination or compelled sale of a franchise,
any of which could have a material adverse effect on our
financial condition, results of operations, cash flows, and
prospects. Furthermore, we rely on the
protection of state franchise laws in the states in which we
operate and if those laws are repealed or weakened, our
framework, franchise, and related agreements may become more
susceptible to termination, non-renewal, or renegotiation.
In addition, we have granted certain manufacturers the right to
acquire, at fair market value, our automotive dealerships
franchised by that manufacturer in specified circumstances in
the event of our default under the indenture for our senior
unsecured notes or the amended credit agreement for our
revolving credit facility and term loan facility.
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.
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.
Our operations, including, without limitation, our sales
of finance and insurance and vehicle protection products, are
subject to extensive governmental laws and regulations. If we
are found to be in violation of or subject to liabilities under
any of these laws or regulations, or if new laws or regulations
are enacted that adversely affect our operations, our business,
operating results, and prospects could suffer.
The automotive retailing industry, including our facilities and
operations, is subject to a wide range of federal, state, and
local laws and regulations, such as those relating to motor
vehicle sales, retail installment sales, leasing, sales of
finance, insurance, and vehicle protection products, licensing,
consumer protection, consumer privacy, escheatment, money
laundering, environmental, vehicle emissions and fuel economy,
health and safety,
wage-hour,
anti-discrimination, and other employment practices. With
respect to motor vehicle sales, retail installment sales,
leasing, and the sale of finance, insurance, and vehicle
protection products at our stores, we are subject to various
laws and regulations, the violation of which could subject us to
consumer class action or other lawsuits or governmental
investigations and adverse publicity, in addition to
administrative, civil, or criminal sanctions. The violation of
other laws and regulations to which we are subject also can
result in administrative, civil, or criminal sanctions against
us, which may include a cease and desist order against the
subject operations or even revocation or suspension of our
license to operate the subject business, as well as significant
fines and penalties. We currently devote significant resources
to comply with applicable federal, state, and local regulation
of health, safety, environmental, zoning, and land use
regulations, and we may need to spend additional time, effort,
and money to keep our operations and existing or acquired
facilities in compliance therewith. In addition, we may be
subject to broad liabilities arising out of contamination at our
currently and formerly owned or operated facilities, at
locations to which hazardous substances were transported from
such facilities, and at such locations related to entities
formerly affiliated with us. Although for some such liabilities
we believe we are entitled to indemnification from other
entities, we cannot assure you that such entities will view
their obligations as we do or will be able to satisfy them.
Failure to comply with applicable laws and regulations may have
an adverse effect on our business, results of operations,
financial condition, cash flows, and prospects.
The enactment of new laws and regulations that materially impair
or restrict our sales, finance and insurance, or other
operations could have a material adverse effect on our business,
results of operations, financial condition, cash flows, and
prospects. We expect that new laws and regulations, particularly
at the federal level, in the labor, employment, environmental,
and consumer protection areas will be enacted, which could
significantly increase our costs.
We are subject to interest rate risk in connection with
our floorplan payable, revolving credit facility, term loan
facility, and floating rate senior unsecured notes that could
have a material adverse effect on our profitability.
Most of our debt, including our floorplan payable, is subject to
variable interest rates. Our variable interest rate debt will
fluctuate with changing market conditions and, accordingly, our
interest expense will increase if interest rates rise. In
addition, our net inventory carrying cost (new vehicle floorplan
interest expense net of floorplan assistance that we receive
from automotive manufacturers) may increase due to changes in
interest rates, inventory levels, and manufacturer assistance.
We cannot assure you that a significant increase in interest
rates would not have a material adverse effect on our business,
financial condition, results of operations, or cash flows.
Our largest stockholder, as a result of its voting
ownership, may have the ability to exert substantial influence
over actions to be taken or approved by our stockholders.
As of February 6, 2009, ESL Investments, Inc. and certain
of its investment affiliates (together, “ESL”)
beneficially owned approximately 45% of the outstanding shares
of our common stock. As a result, ESL may have the ability to
exert substantial influence over actions to be taken or approved
by our stockholders, including the election of directors and any
transactions involving a change of control. William C. Crowley,
one of our directors, is the President and Chief Operating
Officer of ESL Investments, Inc. In the future, ESL may acquire
or sell shares of common stock and thereby increase or decrease
its ownership stake in us.
In January 2009, our Board of Directors authorized and approved
letter agreements with certain automotive manufacturers in order
to, among other things, eliminate any potential adverse
consequences under our framework agreements with those
manufacturers in the event that ESL acquires 50% or more of our
common stock. Certain of those letter agreements also contain
governance-related and other provisions. In addition, our Board
authorized and approved a separate letter agreement between the
Company and ESL (the “ESL Agreement”) in which ESL has
agreed to vote shares of our common stock owned by ESL in excess
of 45% in the same proportion as all non-ESL-owned shares are
voted. The ESL Agreement expires on January 28, 2010,
unless extended by mutual agreement of the parties. For
additional information regarding these letter agreements, see
“Agreements with Vehicle Manufacturers” in
Part I, Item 1 of this
Form 10-K.
None.
We lease our current corporate headquarters facility in
Fort Lauderdale, Florida. In October 2008, we executed a
lease for 105,000 square feet at a new location in
Fort Lauderdale, Florida, for our corporate headquarters
pursuant to a lease expiring on December 31, 2020. We
expect to move to the new location in mid-2009. As of February
2009, we also own or lease numerous facilities relating to our
operations under each of our operating segments. These
facilities are located in the following 15 states: Alabama,
Arizona, California, Colorado, Florida, Georgia, Illinois,
Maryland, Minnesota, 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.
These excerpts taken from the AN 10-K filed Feb 28, 2008. 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.
Vehicle manufacturers and distributors with whom we hold
franchises have significant influence over the operations of our
stores. The terms and conditions of our framework, franchise,
and related agreements and the manufacturers’ interests and
objectives may, in certain circumstances, conflict with our
interests and objectives. For example, manufacturers can set
performance standards with respect to sales volume, sales
effectiveness, and customer satisfaction, and can influence our
ability to acquire additional stores, the naming and marketing
of our stores, the operations of our
e-commerce
sites, our selection of store management, the condition of our
store facilities, product stocking and advertising spending
levels, and the level at which we capitalize our stores.
Manufacturers may also have certain rights to restrict our
ability to provide guaranties of our operating companies,
pledges of the capital stock of our subsidiaries, and liens on
our assets, which could adversely impact our ability to obtain
financing for our business and operations on favorable terms or
at desired levels. From time to time, we are precluded under
agreements with certain manufacturers from acquiring additional
franchises, or subject to other adverse actions, to the extent
we are not meeting certain performance criteria at our existing
stores (with respect to matters such as sales volume, sales
effectiveness, and customer satisfaction) until our performance
improves in accordance with the agreements, subject to
applicable state franchise laws.
Manufacturers also have the right to establish new franchises or
relocate existing franchises, subject to applicable state
franchise laws. The establishment or relocation of franchises in
our markets could have a material adverse effect on the
financial condition, results of operations, cash flows, and
prospects of our stores in the market in which the franchise
action is taken.
Our framework, franchise, and related agreements also grant the
manufacturer the right to terminate or compel us to sell our
franchise for a variety of reasons (including uncured
performance deficiencies, any unapproved change of ownership or
management, or any unapproved transfer of franchise rights or
impairment of financial standing or failure to meet capital
requirements), subject to applicable state franchise laws. From
time to time, certain major manufacturers assert sales and
customer satisfaction performance deficiencies under the terms
of our framework and franchise agreements. Additionally, our
framework agreements contain restrictions regarding a change in
control, which may be outside of our control. While we believe
that we will be able to renew all of our franchise agreements,
we cannot guarantee that all of our franchise agreements will be
renewed or that the terms of the renewals will be favorable to
us. We cannot assure you that our stores will be able to comply
with manufacturers’ sales, customer satisfaction
performance, and other requirements in the future, which may
affect our ability to acquire new stores or renew our franchise
agreements, or subject us to other adverse actions, including
termination or compelled sale of a franchise, any of which could
have a material adverse effect on our financial condition,
results of operations, cash flows, and prospects. Furthermore,
we rely on the protection of state franchise laws in the states
in which we operate and if those laws are repealed or weakened,
our framework and related agreements may become more susceptible
to termination, non-renewal, or renegotiation.
In addition, we have granted certain manufacturers the right to
acquire, at fair market value, our automotive dealerships
franchised by that manufacturer in specified circumstances in
the event of our default under the indenture for our senior
unsecured notes or the amended credit agreement for our
revolving credit facility and term loan facility.
Table of Contents
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. Vehicle manufacturers and distributors with whom we hold franchises have significant influence over the operations of our stores. The terms and conditions of our framework, franchise, and related agreements and the manufacturers’ interests and objectives may, in certain circumstances, conflict with our interests and objectives. For example, manufacturers can set performance standards with respect to sales volume, sales effectiveness, and customer satisfaction, and can influence our ability to acquire additional stores, the naming and marketing of our stores, the operations of our e-commerce sites, our selection of store management, the condition of our store facilities, product stocking and advertising spending levels, and the level at which we capitalize our stores. Manufacturers may also have certain rights to restrict our ability to provide guaranties of our operating companies, pledges of the capital stock of our subsidiaries, and liens on our assets, which could adversely impact our ability to obtain financing for our business and operations on favorable terms or at desired levels. From time to time, we are precluded under agreements with certain manufacturers from acquiring additional franchises, or subject to other adverse actions, to the extent we are not meeting certain performance criteria at our existing stores (with respect to matters such as sales volume, sales effectiveness, and customer satisfaction) until our performance improves in accordance with the agreements, subject to applicable state franchise laws. Manufacturers also have the right to establish new franchises or relocate existing franchises, subject to applicable state franchise laws. The establishment or relocation of franchises in our markets could have a material adverse effect on the financial condition, results of operations, cash flows, and prospects of our stores in the market in which the franchise action is taken. Our framework, franchise, and related agreements also grant the manufacturer the right to terminate or compel us to sell our franchise for a variety of reasons (including uncured performance deficiencies, any unapproved change of ownership or management, or any unapproved transfer of franchise rights or impairment of financial standing or failure to meet capital requirements), subject to applicable state franchise laws. From time to time, certain major manufacturers assert sales and customer satisfaction performance deficiencies under the terms of our framework and franchise agreements. Additionally, our framework agreements contain restrictions regarding a change in control, which may be outside of our control. While we believe that we will be able to renew all of our franchise agreements, we cannot guarantee that all of our franchise agreements will be renewed or that the terms of the renewals will be favorable to us. We cannot assure you that our stores will be able to comply with manufacturers’ sales, customer satisfaction performance, and other requirements in the future, which may affect our ability to acquire new stores or renew our franchise agreements, or subject us to other adverse actions, including termination or compelled sale of a franchise, any of which could have a material adverse effect on our financial condition, results of operations, cash flows, and prospects. Furthermore, we rely on the protection of state franchise laws in the states in which we operate and if those laws are repealed or weakened, our framework and related agreements may become more susceptible to termination, non-renewal, or renegotiation. In addition, we have granted certain manufacturers the right to acquire, at fair market value, our automotive dealerships franchised by that manufacturer in specified circumstances in the event of our default under the indenture for our senior unsecured notes or the amended credit agreement for our revolving credit facility and term loan facility.
Table of ContentsThis excerpt taken from the AN 10-K filed Feb 28, 2007. 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.
Vehicle manufacturers and distributors with whom we hold
franchises have significant influence over the operations of our
stores. The terms and conditions of our framework, franchise and
related agreements and the manufacturers’ interests and
objectives may, in certain circumstances, conflict with our
interests and objectives. For example, manufacturers can set
performance standards with respect to sales volume, sales
effectiveness and customer satisfaction, and can influence our
ability to acquire additional stores, the naming and marketing
of our stores, the operations of our
e-commerce
sites, our selection of store management, the condition of our
store facilities, product stocking and advertising spending
levels, and the level at which we capitalize our stores.
Manufacturers may also have certain rights to restrict our
ability to provide guaranties of our operating companies,
pledges of the capital stock of our subsidiaries and liens on
our assets, which could adversely impact our ability to obtain
financing for our business and operations on favorable terms or
at desired levels. From time to time, we are precluded under
agreements with certain manufacturers from acquiring additional
franchises, or subject to other adverse actions, to the extent
we are not meeting certain performance criteria at our existing
stores (with respect to matters such as sales volume, sales
effectiveness and customer satisfaction) until our performance
improves in accordance with the agreements, subject to
applicable state franchise laws.
Manufacturers also have the right to establish new franchises or
relocate existing franchises, subject to applicable state
franchise laws. The establishment or relocation of franchises in
our markets could have a material adverse effect on the
financial condition, results of operations, cash flows and
prospects of our stores in the market in which the franchise
action is taken.
Our framework, franchise and related agreements also grant the
manufacturer the right to terminate or compel us to sell our
franchise for a variety of reasons (including uncured
performance deficiencies, any unapproved change of ownership or
management or any unapproved transfer of franchise rights or
impairment of financial standing or failure to meet capital
requirements), subject to state laws. From time to time, certain
major manufacturers assert sales and customer satisfaction
performance deficiencies under the terms of our framework and
franchise agreements at a limited number of our stores. While we
believe that we will be able to renew all of our franchise
agreements, we cannot guarantee that all of our franchise
agreements will be renewed or that the terms of the renewals
will be favorable to us. We cannot assure you that our stores
will be able to comply with manufacturers’ sales, customer
satisfaction and other performance requirements in the future,
which may affect our ability to acquire new stores or renew our
franchise agreements, or subject us to other adverse actions,
including termination or compelled sale of a franchise, any of
which could have a material adverse effect on our financial
condition, results of operations, cash flows and prospects.
In addition, we have granted certain manufacturers the right to
acquire, at fair market value, our automotive dealerships
franchised by that manufacturer in specified circumstances in
the event of our default under the indenture for our new senior
unsecured notes or the amended credit agreement for our
revolving credit facility and term loan facility.
Table of Contents
This excerpt taken from the AN 10-K filed Feb 24, 2005. 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.
The major vehicle manufacturers have significant influence over the operations of our stores. The terms and conditions of our framework, franchise and related agreements and the manufacturers’ interests and 11
Table of Contents
objectives may, in certain circumstances,
conflict with our interests and objectives. For example,
manufacturers can set performance standards with respect to
sales volume, sales effectiveness and customer satisfaction, and
can influence our ability to acquire additional stores, the
naming and marketing of our stores, the operations of our
e-commerce sites, our selection of store management, the
condition of our store facilities, product stocking and
advertising spending levels, and the level at which we
capitalize our stores. From time to time, we are precluded under
agreements with certain manufacturers from acquiring additional
franchises, or subject to other adverse actions, to the extent
we are not meeting certain performance criteria at our existing
stores (with respect to matters such as sales volume, sales
effectiveness and customer satisfaction) until our performance
improves in accordance with the agreements, subject to
applicable state franchise laws. Manufacturers also have the
right to establish new franchises or relocate existing
franchises, subject to applicable state franchise laws. The
establishment or relocation of franchises in our markets could
have a material adverse effect on the financial condition,
results of operations, cash flows and prospects of our stores in
the market in which the franchise action is taken. The
framework, franchise and related agreements also grant the
manufacturer the right to terminate or compel us to sell our
franchise for a variety of reasons (including uncured
performance deficiencies, any unapproved change of ownership or
management or any unapproved transfer of franchise rights)
subject to state laws. From time to time, certain major
manufacturers assert sales and customer satisfaction performance
deficiencies under the terms of our framework and franchise
agreements at a limited number of our stores. While we believe
that we will be able to renew all of our franchise agreements,
we cannot guarantee that all of our franchise agreements will be
renewed or that the terms of the renewals will be favorable to
us. We cannot assure you that our stores will be able to comply
with manufacturers’ sales, customer satisfaction and other
performance requirements in the future, which may affect our
ability to acquire new stores or renew our franchise agreements,
or subject us to other adverse actions, including termination or
compelled sale of a franchise, any of which could have a
material adverse effect on our financial condition, results of
operations, cash flows and prospects.
In addition, some of our framework agreements give the manufacturer or distributor the right to acquire, at fair market value, our automotive stores franchised by that manufacturer in specified circumstances in the event of our default under the indenture for our senior unsecured notes due August 2008 and the credit agreements for our two revolving credit facilities.
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