What changed in this filing

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Item 1. Financial Statements

2020-07-30 compared with 2020-05-06 · 116 added, 103 removed, 362 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

March 31, 2020

June 30, 2020

December 31, 2019

25 unchanged sentences

5,000 shares authorized;

issued and outstanding as of March 31, 2020 and December 31, 2019,

issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Common Stock at par, $ 0.01 par value;

300,000 shares authorized;

and 66,764 shares issued and outstanding as of March 31, 2020 and

66,764 shares issued and outstanding as of June 30, 2020 and

December 31, 2019, respectively

8 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total revenue

8 unchanged sentences

Total operating expenses

Operating loss

Operating (loss) income

Nonoperating expense:

Interest expense, net

Other (expense) income, net

Other income (expense), net

Total nonoperating expense, net

Loss before income taxes

Income tax benefit

Income tax expense (benefit)

Weighted-average common shares outstanding:

4 unchanged sentences

(In thousands)

Three Months Ended March 31,

Other comprehensive loss, net of tax:

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive (loss) income, net of tax:

Interest rate swap

Total other comprehensive loss

Amortization of interest rate swap into Net loss

Total other comprehensive (loss) income

Comprehensive loss

12 unchanged sentences

Balance at March 31, 2020

Other comprehensive income, net of tax

Shares issued in connection with

stock-based compensation plans, net

Stock-based compensation

Balance at June 30, 2020

Preferred Stock

8 unchanged sentences

Balance at March 31, 2019

Other comprehensive loss, net of tax

Repurchases of common stock

Shares issued in connection with

stock-based compensation plans, net

Stock-based compensation

Balance at June 30, 2019

The accompanying notes are an integral part of the Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

4 unchanged sentences

Impairment of non-marketable security

Unrealized gain on interest rate swap

Amortization of accumulated other comprehensive loss on interest rate swap

Stock-based compensation

16 unchanged sentences

Proceeds from revolving loan borrowings

Payments of debt issuance costs and other fees

Payments of long-term debt

1 unchanged sentence

Repurchases of common stock

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

27 unchanged sentences

In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated.

The unaudited results of operations for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.

The unaudited results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.

Use of Estimates.

33 unchanged sentences

therefore, further disaggregation is not applicable at this time.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Sales channel

8 unchanged sentences

December 31, 2019

March 31, 2020

June 30, 2020

Indefinite-lived intangible asset

Triggering Event.

In the three months ended March 31, 2020, the Company determined there was a triggering event, caused by the economic impacts of the novel coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions.

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others.

The rapid spread of COVID-19 has resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns.

This has had, and is expected to continue to have, a negative impact on regional and national economies and the automotive industry for an uncertain duration.

The COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession.

In March 2020, the Company determined there was a triggering event, caused by the economic impacts of the novel coronavirus disease 2019 (“COVID-19”) pandemic and related restrictions.

In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it has spread throughout the United States and the rest of the world with different geographical locations impacted more than others.

COVID-19 has resulted in governmental authorities around the country implementing numerous measures to contain the virus, such as quarantines, shelter-in-place orders and business shutdowns (the “restrictions”).

Although certain jurisdictions have relaxed some of these restrictions, these restrictions have had, and the Company expects they will continue to have, a negative impact on regional and national economies and the automotive industry for an uncertain duration.

The COVID-19 pandemic and related restrictions have caused a widespread increase in unemployment and are expected to result in reduced consumer spending and an economic slowdown or recession of unknown duration.

Automobile dealers operate in a highly competitive market and are vulnerable to both decreased demand for new and used vehicles and periods of an economic slowdown or recession.

Furthermore, dealerships have temporarily or permanently closed and more may close in the near future in light of the COVID-19 pandemic and related restrictions.

As a result of negative changes in the financial condition of dealers, in the second half of March 2020, the

Furthermore, dealerships have temporarily or permanently closed and more may close in the near future as a result of the

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

Company’s customers began to adjust, reduce or suspend their operating activities.

This has resulted and may continue to result in decreased subscription revenue and reduced demand for the Company’s services.

In an effort to assist its dealer customers impacted by the COVID-19 pandemic and related restrictions, the Company has announced, among other measures, financial relief in the form of certain invoice credits of 50 % for April 2020 and 30 % for May and June 2020.

With respect to managing its expenses, the Company has multiple initiatives underway to adjust its expenses with changes in revenue.

The effects of the COVID-19 pandemic and the related restrictions, particularly reduced consumer spending and in light of the discounts that the Company has provided its dealer customers for the second quarter of 2020, will negatively impact the Company’s results of operations, cash flows and financial position.

COVID-19 pandemic and related restrictions.

Due to negative changes in the financial condition of dealers, in the second half of March 2020, the Company’s customers began to adjust, reduce or suspend their operating activities.

This resulted and may continue to result in decreased subscription revenue and reduced demand for the Company’s services.

In an effort to assist its dealer customers impacted by the COVID-19 pandemic and related restrictions, the Company provided, among other measures, financial relief in the form of certain invoice credits of 50 % for April 2020 and 30 % for May and June 2020.

With respect to managing its expenses, the Company implemented multiple initiatives to adjust its expenses to mitigate these changes in revenue.

The effects of the COVID-19 pandemic and the related restrictions, particularly reduced consumer spending and the discounts that the Company has provided its dealer customers for the second quarter of 2020, have negatively impacted the Company’s results of operations, cash flows and financial position.

In addition, the extent of the impact will vary depending on the duration and severity of the economic and operational impacts of the COVID-19 pandemic and related restrictions.

Thus, the amount and timing of future cash flows, used in the valuation models to estimate the current fair value of the Company’s assets, has been significantly and negativity impacted by the COVID-19 pandemic and related restrictions.

Thus, the amount and timing of future cash flows, used in the valuation models to estimate the fair value of the Company’s assets, has been significantly and negatively impacted by the COVID-19 pandemic and related restrictions.

Impairment Assessment.

7 unchanged sentences

The process of estimating the fair value of goodwill is subjective and requires us to make estimates that may significantly impact the outcome of the analysis.

A qualitative assessment is performed at least annually and considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications.

A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications.

If after performing this assessment, the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company performs the quantitative test.

13 unchanged sentences

The Company’s indefinite-lived intangible asset relates to the Cars.com trade name and resulted from TEGNA’s 2014 acquisition of Cars.com.

Intangible assets with indefinite lives are tested annually, or more often if circumstances dictate, such as in the quarter ended March 31, 2020, for impairment and written down to fair value as required.

Intangible assets with indefinite lives are tested for impairment annually, or more often if circumstances dictate, such as in the quarter ended March 31, 2020, and written down to fair value as required.

The estimates of fair value are determined using the “relief from royalty” methodology, which is a variation of the income approach.

The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset.

As of March 31, 2020, the Company was in compliance with the covenants under its Credit Agreement.

As of March 31, 2020, the outstanding principal amount under the Term Loan was $ 379.7 million and the interest rate in effect was 4.3 %, including the impact of the interest rate swap discussed below.

During the three months ended March 31, 2020, the Company made $ 8.4 million in mandatory quarterly Term Loan payments.

As of June 30, 2020, the Company was in compliance with the covenants under its Credit Agreement.

As of June 30, 2020, the outstanding principal amount under the Term Loan was $ 371.3 million and the interest rate in effect was 5.5 %, including the impact of the interest rate swap discussed below.

During the six months ended June 30, 2020, the Company made $ 16.9 million in mandatory quarterly Term Loan payments.

Revolving Loan.

As of March 31, 2020, the outstanding borrowings under the Revolving Loan were $ 420.0 million and the interest rate in effect was 2.7 %.

During the three months ended March 31, 2020, the Company borrowed $ 165.0 million.

Additionally, the Company made $ 5.0 million in voluntary Revolving Loan payments.

The Company drew down $165.0 million on the Company’s Revolving Loan for additional liquidity and flexibility, ending the quarter with $ 187.3 million in available cash.

As of March 31, 2020, $ 30.0 million was available to borrow under the Revolving Loan.

The Company’s borrowings are limited by its total net leverage ratio, which is calculated in accordance with the Credit Agreement and was 4.1 to 1.0 as of March 31, 2020.

As of June 30, 2020, the outstanding borrowings under the Revolving Loan were $ 275.0 million and the interest rate in effect was 3.3 %.

During the six months ended June 30, 2020, the Company borrowed $ 165.0 million and made $ 150.0 million in Revolving Loan payments.

As of June 30, 2020, $ 175.0 million was available to borrow under the Revolving Loan.

The Company's debt is classified as Level 2 in the fair value hierarchy and the fair value is measured based on comparable trading prices, ratings, sectors, coupons and maturities of similar instruments.

As of March 31, 2020, the fair value of the outstanding indebtedness was approximately $ 658.7 million, compared to the carrying value of $ 799.7 million.

As of June 30, 2020, the fair value of the outstanding indebtedness was approximately $ 627.8 million, compared to the carrying value of $ 646.3 million.

As of December 31, 2019, the fair value approximated the carrying value.

2 unchanged sentences

The amendment increased the Company’s maximum total net leverage ratio from 3.75 x to 4.50 x with incremental step downs through the maturities of the Term Loan and the Revolving Loan on May 31, 2022 .

In June 2020, the Company entered into the second amendment to its Credit Agreement (the “Second Amendment”) that provides for a waiver with respect to the Total Net Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Credit Agreement) financial covenants for the covenant testing periods through December 31, 2020 (the “Covenant Adjustment Period”).

The Second Amendment also includes the following:

A revised maximum permitted “Total Net Leverage Ratio” beginning March 31, 2021 (after the Covenant Adjustment Period) of 6.50 x, with step downs thereafter.

A revised minimum permitted “Consolidated Interest Coverage Ratio” beginning March 31, 2021 (after the Covenant Adjustment Period) of 2.75 x and 3.00 x beginning June 30, 2020.

Includes a minimum liquidity requirement of $ 75 .0 million;

and adds an anti-cash hoarding covenant, which requires, during the Covenant Adjustment Period, mandatory prepayments of the revolving credit loans with the amount of any unrestricted cash located in the Company’s deposit accounts in excess of $ 75.0 million .

Interest Rate Swap

3 unchanged sentences

The Swap is designated as a cash flow hedge of interest rate risk.

As of March 31, 2020, the fair value of the Swap was an unrealized loss of $ 17.0 million, of which $ 7.8 million and $ 9.2 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets.

During the three months ended March 31, 2020 and March 31, 2019, $ 1.0 million and $ 0.3 million was reclassified from Accumulated other comprehensive loss into Interest expense, net, respectively.

The Second Amendment triggered a quantitative hedge effectiveness test, which resulted in the loss of hedge accounting.

As a result, as of the date of the Second Amendment, the unrealized loss included within Accumulated other comprehensive loss will be ratably reclassified into Net loss over the remaining term of the Swap.

A portion of the unrealized loss will be recorded to Interest expense, net and Income tax expense (benefit) within the Consolidated Statements of Loss.

Subsequent to the Second Amendment, any changes in the fair value of the Swap are recorded within Other income (expense), net on the Consolidated Statements of Loss.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

As of June 30, 2020, the fair value of the Swap was an unrealized loss of $ 16.1 million, of which $ 8.4 million and $ 7.7 million is recorded in Other accrued liabilities and Other noncurrent liabilities, respectively, on the Consolidated Balance Sheets.

During the six months ended June 30, 2020 and June 30, 2019, $ 3.1 million and $ 0.7 million was recorded in Interest expense, net, of which $ 0.3 million and zero was reclassified from Accumulated other comprehensive loss, respectively.

During the six months ended June 30, 2020, $ 0.1 million was reclassified from Accumulated other comprehensive loss into Income tax expense (benefit) on the Consolidated Statements of Loss.

Additionally, $ 0.6 million was included within Other income (expense), net on the Consolidated Statements of Loss related to the change in the fair value of the Interest rate swap from the date of the Second Amendment to June 30, 2020.

Unfavorable Contracts Liability

6 unchanged sentences

Prior to the affiliate conversions discussed below, the Company recognized $ 25.2 million of Wholesale revenue with a corresponding reduction of the Unfavorable contracts liability on an annual basis.

After the affiliate conversions, the amortization of the Unfavorable

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

contracts liability was recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated Statements of Loss Income.

After the affiliate conversions, the amortization of the Unfavorable contracts liability was recorded as a reduction of Affiliate revenue share within Operating expenses in the Consolidated Statements of Loss.

As of September 30, 2019, the Unfavorable contracts liability was fully amortized.

1 unchanged sentence

On October 1, 2019, the Belo affiliate agreement expired and the Company now directly serves all dealer customers.

As part of the amendments to the affiliate agreements, Gannett, McClatchy, TEGNA, tronc, and the Washington Post have agreed to perform certain marketing support and transition services through varying dates, the latest of which is June 29, 2020.

The fees the Company pays associated with the amended affiliate agreements are recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of Loss.

Therefore, during the three months ended March 31, 2020 and March 31, 2019, the Company recorded zero and $ 5.8 million of unfavorable contracts liability amortization as a reduction to Affiliate revenue share expense, rather than Wholesale revenue, in the Consolidated Statements of Loss, respective ly.

As part of the amendments to the affiliate agreements, Gannett, McClatchy, TEGNA, tronc, and the Washington Post agreed to perform certain marketing support and transition services through varying dates, the latest of which was June 29, 2020.

The fees the Company incurred associated with the amended affiliate agreements were recorded as Affiliate revenue share expense within Operating expenses in the Consolidated Statements of Loss.

Therefore, during the six months ended June 30, 2020 and June 30, 2019, the Company recorded zero and $ 11.7 million of unfavorable contracts liability amortization as a reduction to Affiliate revenue share expense, rather than Wholesale revenue, in the Consolidated Statements of Loss, respective ly.

Commitments and Contingencies

10 unchanged sentences

The Company funded the share repurchase program principally with cash from operations.

As of March 31, 2020, the repurchase program is expired.

The Company repurchased and subsequently retired zero shares during the three months ended March 31, 2020 and 0.9 million shares for $ 20.0 million during the three months ended March 31, 2019.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

2020, the repurchase program expired and there were no share repurchases during 2020 .

The Company repurchased and subsequently retired 1.7 million shares for $ 40.0 million during the six months ended June 30, 2019.

Stock-Based Compensation

Restricted Stock Units (“RSUs”).

Restricted Stock Units (“RSUs”) and Restricted Stock.

RSUs represent the right to receive unrestricted shares of the Company’s common stock at the time of vesting, subject to any restrictions as specified in the individual holder’s award agreement.

RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of the RSUs is equal to the Company’s common stock price on the date of grant .

RSU activity for the three months ended March 31, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

RSUs are subject to graded vesting, generally ranging between one and four years and the fair value of RSUs is equal to the Company’s common stock price on the date of grant .

Restricted Stock represents RSUs that have been delivered to certain non-employee directors who have elected to receive shares underlying RSUs before they vest.

Restricted Stock is subject to vesting over one year and the fair value of the Restricted Stock is equal to the Company’s common stock price on the date of grant.

RSU and Restricted Stock activity for the six months ended June 30, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

of RSUs and Restricted Stock

Weighted-Average

1 unchanged sentence

Vested and delivered

Outstanding as of March 31, 2020 (1)

The outstanding balance as of March 31, 2020 includes 80 RSUs that were vested, but not yet delivered.

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

Outstanding as of June 30, 2020 (1)(2)

Included in “Granted” and “Outstanding as of June 30, 2020” are 108 shares of Restricted Stock that were delivered, but not yet vested.

Included in “Outstanding as of June 30, 2020” are 91 RSUs that were vested, but not yet delivered.

Performance Stock Units (“PSUs”).

1 unchanged sentence

The fair value of the PSUs is equal to the Company’s common stock price on the date of grant.

T he percentage of PSUs that shall vest will range from 0 % to 200 % of the number of PSUs granted based on the Company’s future performance related to certain revenue targets ;

The percentage of PSUs that may vest ranges from 0 % to 200 % of the number of PSUs granted based on the Company’s future performance related to certain revenue targets;

adjusted earnings before interest, income taxes, depreciation and amortization targets;

2 unchanged sentences

These PSUs are subject to cliff vesting at the end of the respective performance period.

PSU activity for the three months ended March 31, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

PSU activity for the six months ended June 30, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

Weighted-Average

2 unchanged sentences

Forfeited or cancelled (1)

Outstanding as of March 31, 2020

Included in "Forfeited or cancelled" are 558 shares that were cancelled and replaced by new grants during the three months ended March 31, 2020.

Outstanding as of June 30, 2020

Included in "Forfeited or cancelled" are 558 PSUs that were cancelled and replaced by new grants during the six months ended June 30, 2020.

Stock Options.

1 unchanged sentence

Stock options are subject to three-year cliff vesting and expire 10 years from the grant date.

Stock option activity for the three months ended March 31, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

Stock option activity for the six months ended June 30, 2020 is as follows (in thousands, except for weighted-average grant date fair value):

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

Number of Options

2 unchanged sentences

Vested and delivered

Outstanding as of March 31, 2020

The fair value of the stock options granted during the three months ended March 31, 2020 are estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions:

Outstanding as of June 30, 2020

The fair value of the stock options granted during the six months ended June 30, 2020 are estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions:

Risk-free interest rate

6 unchanged sentences

The computation of Loss per share is as follows (in thousands, except per share data):

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Basic weighted-average common shares outstanding

3 unchanged sentences

Loss per share, diluted

There were 4,516 and 266 potential common shares excluded from diluted weighted-average shares outstanding for the three months ended March 31, 2020 and March 31, 2019, respectively, as their inclusion would have had an anti-dilutive effect.

The Company is obligated as a lessee under certain non-cancelable operating leases for office space, and is also obligated to pay insurance, maintenance and other executory costs associated with the leases.

As of March 31, 2020, the Company’s operating lease assets, included in Investments and other assets, were $ 16.5 million and operating lease liabilities were $ 32.9 million, the current maturities of which is included in Other accrued liabilities and the long-term portion of which is included in Other noncurrent liabilities.

The difference between the operating lease assets and the operating lease liabilities is primarily due to a lease incentive received in 2017 related to the 300 South Riverside Lease in Chicago, Illinois.

Other information related to the Company’s operating leases for the three months ended March 31, 2020 is as follows (in thousands, except percentage):

Income statement information:

Three Months Ended March 31,

Operating lease cost

Short-term lease cost

Variable lease cost

Total lease cost

Other information:

Three Months Ended March 31,

Cash paid for operating leases

Weighted-average remaining lease term (in months)

Weighted-average discount rate

There were 1,829 and 845 potential common shares excluded from diluted weighted-average shares outstanding for the three months ended June 30, 2020 and June 30, 2019, respectively, and 4,885 and 755 potential common shares for the six months ended June 30, 2020 and June 30, 2019, respectively, as their inclusion would have had an anti-dilutive effect.

Other (Expense) Income, net

Included in Other (expense) income, net in the three months ended March 31, 2020 was a full impairment of $ 9.4 million of a non-marketable investment, triggered by the COVID-19 pandemic and the related restrictions.

Included in Other (expense) income, net in the six months ended June 30, 2020 was a full impairment of $ 9.4 million of a non-marketable investment, triggered by the COVID-19 pandemic and the related restrictions.

This investment had been recorded within Investments and other assets on the Consolidated Balance Sheets.

Deferred Tax Asset and Valuation Allowance.

As a result of the goodwill and indefinite-lived intangible asset impairments recorded during the three months ended March 31, 2020, the Company had a $ 96.5 million deferred tax asset position.

As a result of the goodwill and indefinite-lived intangible asset impairments recorded during the six months ended June 30, 2020, the Company had a $ 94.3 million deferred tax asset position.

The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is required to reduce the net deferred tax assets to the amount that is more likely than not to be realized in future periods.

Based on future taxable income projections, the Company believes it is more likely than not that the net deferred tax assets will not be realized.

Therefore, the Company has recorded a full valuation allowance during the three months ended March 31, 2020.

Therefore, the Company has recorded a full valuation allowance as of June 30, 2020.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

Effective Tax Rate.

The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income tax, was 14 % for the six months ended June 30, 2020 and differed from the statutory federal income tax rate of 21 %, primarily due to the tax impact of the goodwill and intangible asset impairments and the full valuation allowance on the U.S.

company’s net

Cars.com Inc.

Notes to the Consolidated Financial Statements (continued)

Effective Tax Rate.

The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income tax, was 15 % for the three months ended March 31, 2020.

The effective tax rate differed from the statutory federal income tax rate of 21 %, primarily due to the tax impact of the goodwill and intangible asset impairments and the full valuation allowance recorded during the three months ended March 31, 2020.

Subsequent Events

Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic and related restrictions, the U.S.

government enacted into law the CARES Act, which is a sweeping stimulus bill intended to bolster the U.S.

economy, among other things, and provide emergency assistance and tax credits or benefits to qualifying businesses and individuals.

The Company is currently evaluating this new law and its impact on its Consolidated Financial Statements and related disclosures.

Reduction in Force.

On April 29, 2020, the Company announced the permanent reduction in force of approximately 170 people, the majority of whom had been placed on furlough in early April 2020.

The Company estimates the pre-tax costs for this action to be in the range of approximately $ 4.0 to 4.75 million, substantially all of which are related to employee severance and are expected to be recorded during the three months ending June 30, 2020.

deferred tax asset position recorded during the six months ended June 30, 2020.

The effective income tax rate was 0 % for the three months ended June 30, 2020 and differed from the statutory federal income tax rate of 21 %, primarily due to a full valuation allowance on the U.S.

company’s net deferred tax asset position .

New Tax Law .

On July 2, 2020, the Department of the Treasury issued temporary and proposed regulations addressing the carryback of net operating losses generated in 2019 and 2020 to prior years under the Coronavirus Aid, Relief, and Economic Security Act.

The Company is reviewing these rules and any impact will be reported during the nine months ending September 30, 2020.

Note About Forward-Looking Information

13 unchanged sentences

Important factors that could cause actual results or events to differ materially from those anticipated include, among others:

The COVID-19 pandemic and related restrictions have adversely affected, and could continue to adversely affect, our business, financial condition, liquidity and results of operations.

The COVID-19 pandemic and related restrictions have materially and adversely affected, and could continue to materially and adversely affect, our business, financial condition, liquidity and results of operations.

Our business is subject to risks related to the larger automotive ecosystem, including consumer demand and other macroeconomic issues.

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Our amended and restated certificate of incorporation designates the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors and officers.

For a detailed discussion of many of these risks and uncertainties, see “Part I, Item 1A., Risk Factors” and “Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020 and our

Current Reports on Form 8-K filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov.

subsequent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K filed with the SEC and available on our website at investor.cars.com or via EDGAR at www.sec.gov.

All forward-looking statements contained in this report are qualified by these cautionary statements.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements