What changed in this filing

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Item 1A. Risk Factors

2023-02-16 compared with 2022-02-23 · 91 added, 69 removed, 173 unchanged (48% of the section changed)

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Consumer spending can be materially and adversely impacted by periods of economic uncertainty or by consumer concern about manufacturer viability.

Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic.

Global trade conditions and consumer trends that originated during the pandemic continue to persist and may also have long-lasting adverse impacts on us and our industry, independently of the progress of the pandemic.

For example, pandemic-related issues have exacerbated port congestion and caused intermittent supplier shutdowns and delays.

Increased demand for personal electronics has created a shortfall of semiconductor chips, which in turn, has also adversely impacted production of new vehicles, parts and other supplies, thereby reducing new vehicle inventories, increasing new vehicle prices and limiting the availability of replacement parts.

Increased demand for personal electronics, coupled with the impact of the COVID-19 pandemic on manufacturers, created a shortfall of semiconductor chips.

This adversely impacted production of new vehicles, parts and other supplies, thereby reducing new vehicle inventories, increasing new vehicle prices and limiting the availability of replacement parts.

Under these conditions, automotive dealer profits have increased sharply as new vehicle prices and margins have more than offset the effects of lower new vehicle volume.

At such time that semi-conductor chip shortages are resolved, vehicle production may increase, and new vehicle prices could decrease thereby resulting in reduced profitability at our dealerships.

At such time that semi-conductor chip and other parts shortages are resolved, vehicle production may increase, and new vehicle prices could decrease thereby resulting in reduced profitability at our dealerships.

A significant portion of our vehicles purchased by customers are financed.

Tightening of the credit markets, increases in interest rates and credit conditions may decrease the availability or increase the costs of automotive loans and leases and adversely impact our new and used vehicle sales and margins.

In particular, if sub-prime finance companies apply higher credit standards or if there is a decline in the overall availability of credit in the sub-prime lending market, the ability of consumers to purchase vehicles could be limited, which could have a material adverse effect on our business and results of operations.

In particular, if sub-prime finance companies apply higher credit standards or if there is a decline in the overall availability of credit in the sub-prime lending market, the ability of selected consumers to purchase vehicles could be limited, which could have a material adverse effect on our business and results of operations.

In addition, local economic, competitive and other conditions affect the performance of our dealerships.

Our results of operations depend substantially on general economic conditions and spending habits in those regions of the U.S.

where we maintain most of our operations.

where we maintain our operations.

Recent economic and financial developments, including rising inflation, high energy prices, increasing interest rates and the potential recessionary environment could adversely affect our operations and financial condition.

During the Current Year, the global economy experienced rising inflation and increased volatility in gasoline and energy prices.

In response to inflationary pressures and macroeconomic conditions, the U.S.

Federal Reserve, along with other central banks, including in the U.K., continued to increase interest rates throughout 2022 and have indicated that such increases may continue into 2023, which could lower demand for new and used vehicles in future periods.

Additionally, U.S.

GDP shrank for two consecutive quarters in the first half of 2022 and increased for the third and fourth quarters of 2022, indicating there is uncertainty as to whether the U.S.

economy will experience a recession in the near-term.

In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place additional strain on our suppliers’ ability to maintain current production levels of vehicles and vehicle parts.

Across the EU, these energy constraints could result in nations or regions enacting emergency energy related policies, limiting energy availability for manufacturers.

Any such production constraints could further exacerbate an already ailing supply chain.

The impact of these macroeconomic developments on our operations cannot be predicted with certainty.

Rising inflation, increased energy costs and a prolonged recession could adversely impact our operations, the operations of our suppliers and customer demand for our vehicles and services.

Continued interest rate increases could have a material adverse impact on our interest expense and ability to obtain financing through the debt markets, as well as consumers’ ability to obtain financing for the purchase of new and used vehicles.

Refer to Item 7A.

Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.

The Russian invasion of Ukraine and the retaliatory measures imposed by the U.S., U.K., EU and other countries and the responses of Russia to such measures have caused significant disruptions to domestic and foreign economies.

The February 2022 military invasion of Ukraine by Russia (the “Russia and Ukraine Conflict”) had an immediate impact on the global economy resulting in higher prices for oil and other commodities.

The U.S., U.K., EU and other countries responded to Russia’s invasion of Ukraine by imposing various economic sanctions and bans.

Russia has responded with its own retaliatory measures.

These measures have impacted the availability and price of certain raw materials throughout the global economy.

The invasion and retaliatory measures have also disrupted economic markets.

The global impact of these measures is continually evolving and cannot be predicted with certainty and there is no assurance that Russia’s invasion of Ukraine and responses thereto will not further disrupt the global economy and supply chain.

In particular, the Russia and Ukraine Conflict has further impacted the ability of certain OEMs to produce new vehicles and new vehicle parts, which may result in continued disruptions to the supply of new and used vehicles.

Further, there is no assurance that when the Russia and Ukraine Conflict ends, countries will not continue to impose sanctions and bans.

While these events have not materially interrupted our operations, these or future developments resulting from the Russia and Ukraine Conflict, such as a cyberattack on the U.S.

or our suppliers, could disrupt our operations, increase the cost or decrease the availability of certain materials necessary to produce vehicles we sell or obtain parts to complete maintenance and collision repair services, or make it difficult to access debt and equity capital on attractive terms, if at all, and impact our ability to fund business activities and/or limit future acquisition activity.

Deterioration in market conditions or changes in our credit profile could adversely affect our operations and financial condition.

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Our continued access to liquidity sources on favorable terms depends on multiple factors, including our operating performance and credit ratings.

Our debt securities currently are rated just below investment-grade and a downgrade of this rating likely would negatively impact our access to the debt capital markets and increase our cost of borrowing.

As a result, disruptions in the debt markets or any downgrade of our credit ratings could adversely affect our operations and financial condition and our ability to return cash to our shareholders.

Our debt securities currently are rated just below investment-grade and a downgrade of this rating likely would negatively impact our access to the debt markets and increase our cost of borrowing.

Disruptions in the debt markets or any downgrade of our credit ratings could adversely affect our operations and financial condition and our ability to finance acquisitions or return cash to our shareholders.

We can make no assurances that our ability to obtain additional financing through the debt markets will not be adversely affected by economic conditions or that we will be able to maintain or improve our current credit ratings.

The majority of our floorplan notes payable, mortgages and other debt are benchmarked to SOFR, which can be highly volatile as a result of changing economic conditions.

Our floorplan notes payable, mortgages and other debt are benchmarked to SOFR, which can be highly volatile as a result of changing economic conditions.

Although we utilize derivative instruments to partially mitigate our exposure to interest rate fluctuations, significant increases in SOFR or other variable interest rates could have a material adverse impact on our interest expense due to the significance of our debt and floorplan balances.

In February 2022, the U.S.

Federal Reserve announced it expects to increase interest rates in 2022.

Refer to Item 7A.

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We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.

Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on us which include information about our historical financial results as well as their estimates of our future performance.

Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on the Company which include information about our historical financial results as well as their estimates of our future performance.

These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business.

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Vehicle manufacturers may be adversely impacted by economic downturns or recessions, significant declines in the sales of their new vehicles, increases in interest rates, adverse fluctuations in currency exchange rates, declines in their credit ratings, reductions in access to capital or credit, labor strikes or similar disruptions (including within their major suppliers), supply shortages, rising raw material costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products, including due to bankruptcy, product defects, litigation, ability to keep up with technology and business model changes, poor product mix or unappealing vehicle design, governmental laws and regulations, natural disasters or other adverse events.

In particular, all our OEMs are investing material amounts to develop electric and autonomous vehicles.

In particular, all of our OEMs are investing material amounts to develop electric and autonomous vehicles.

These investments could cause financial strain on our OEMs or fail to deliver attractive vehicles for customers which could lead to adverse impacts on our business.

The OEMs are also impacted by the COVID-19 pandemic’s impact on the economy, factory production, parts shortages, including semiconductor chips, and other disruptions.

The OEMs have been and could continue to be impacted by the COVID-19 pandemic’s impact on the economy, factory production, parts shortages, including semiconductor chips, and other disruptions.

These and other risks could materially adversely affect the financial condition of any manufacturer and impact its ability to profitably design, market, produce or distribute new vehicles, which in turn could have a material adverse effect on our business, results of operations and financial condition.

During the year ended December 31, 2021, vehicle manufacturers were producing and delivering fewer vehicles to our dealerships due to a global semiconductor chip shortage.

The semiconductor chip shortage is impacting the automobile industry’s new vehicle production, which, in turn, has decreased our new vehicle inventory.

Our new vehicle days’ supply of inventory was approximately 12 days for the quarter ended December 31, 2021, as compared 53 days for the quarter ended December 31, 2020.

If new vehicle days’ supply of inventory continues to decline, it will impact our ability to satisfy customer demand.

It is impossible to predict with certainty the duration of the semiconductor chip shortage or when normalized production will resume at these manufacturers.

If our manufacturers’ production remains at current reduced levels or continues to decline, diminishing our ability to meet the immediate needs of our customers, the semiconductor chip shortage could have a material and adverse impact on our financial and operating results.

During the Current Year, our manufacturers’ production continued at reduced levels as a result of global semiconductor and other parts shortages.

Despite recent improvements in production by certain manufacturers driving an improvement in vehicles days’ supply, our new vehicle inventory continues to be impacted compared to historical levels.

Our new vehicle days’ supply of inventory was approximately 24 days as of the Current Year, as compared to 12 days and 53 days for the years ended December 31, 2021 and 2020, respectively.

It is impossible to predict with certainty the duration of the production issues or when normalized production will resume at these manufacturers.

If our manufacturers’ production remains at current reduced levels or in some cases continues to decline, diminishing our ability to meet the immediate needs of our customers, the production shortage could have a material adverse impact on our financial and operating results.

Additionally, many U.S.

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Additionally, we cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements.

If such an instance occurs, although we are generally protected by automotive dealership franchise laws requiring “good cause” be shown for such termination, we cannot guarantee that the termination of the franchise will not be successful.

Although we are generally protected by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful.

A manufacturer may also limit the number of its dealerships that we may own or the number that we may own in a particular geographic area.

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The internet has become a significant part of the advertising and sales process in our industry.

Customers are using the internet to shop, and compare prices for new and used vehicles, automotive repair and maintenance services, finance and insurance products and other automotive products.

Customers are using the internet to compare prices for new and used vehicles, automotive repair and maintenance services, finance and insurance products and other automotive products.

If we are unable to effectively use the internet to attract customers to our own online channels, such as our AcceleRide® platform, and mobile applications, and, in turn, to our stores, our business, financial condition, results of operations and cash flows could be materially adversely affected.

Additionally, the growing use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about us or any of our dealerships could damage our reputation and brand names, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The growing use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about the Company or any of our dealerships could damage our reputation and brand names, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We also face competition in arranging financing for our customers’ vehicle purchases from a broad range of financial institutions.

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Business — Competition for further discussion of competition in our industry.

Changes in consumer demand towards fuel efficient vehicles and EVs, and resulting shifts by manufacturers to meet demand, could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.

Global responses to climate change and resulting changes in consumer demand towards fuel efficient vehicles and EVs, and shifts by manufacturers to meet demand, could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.

Volatile fuel prices have affected and may continue to affect consumer preferences in connection with the purchase of our vehicles.

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Further increases or sharp declines in fuel prices could have a material adverse effect on our business and results of operations.

Changes in fuel prices, government support, improvements in EVs and more EV options have increased the customer demand for more fuel efficient vehicles and EVs.

With a potential increase in demand by consumers for electric-powered vehicles, and government support such as the August 2021 executive order from the Biden Administration aiming to increase electric-powered vehicle sales by 2030, manufacturers have also announced increased production focus on the manufacture of fuel efficient vehicles and EVs.

As more EVs potentially enter the market, and internal combustion or diesel engine vehicle production is reduced, it may be necessary to adapt to such changes by selling and servicing these units effectively in order to meet consumer demands and support the profitability of our dealerships.

If maintenance costs of electric-powered vehicles were to substantially decrease, this could have a material adverse effect on our parts and service revenues.

If consumer demand increases for fuel efficient vehicles or EVs and our manufacturers are not able to adapt and produce vehicles that meet the customer demands or we are unable to align with the manufacturers of these vehicles, such events could adversely affect our new and used vehicle sales volumes, parts and service revenue and our results of operations.

We are subject to risks resulting from the planned divestiture of our Brazilian operations which could result in an adverse impact to our operations, financial condition and business.

We are subject to a number of risks associated with the Brazil Disposal, including risks associated with our failure to realize the full purchase price anticipated under the Brazil Agreement as a result of amounts held in escrow for potential unforeseen indemnification obligations arising under the Brazil Agreement for breach of representations, warranties and covenants.

In addition, the purchase price is denominated in BRL, which is subject to foreign currency exchange risk.

In order to partially mitigate this risk, we entered into a foreign currency derivative for the conversion of BRL to USD in the form of a costless collar which protects us from significant downside exposure for $70.0 million of the expected purchase consideration.

Should the Brazil Disposal not be successful and we are unable to divest ourselves of the Brazilian operations, we are subject to risks, including but not limited to:

• the inability to locate another buyer on the same terms;

• risks associated with the continued operation of the Brazilian business;

• impairment of relationships with employees, manufacturers and customers;

• diversion of management time and other resources from continuing operations.

For more information relating to the Brazil Disposal, please see Item 1.

Business of this Form 10-K.

Our inability to acquire and integrate successful new dealerships into our business could adversely affect the growth of our revenues and earnings.

Changes in fuel prices, changes in customer preferences, government support, improvements in EVs and more EV options have increased the customer demand for more fuel efficient vehicles and EVs.

Significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that have or may be imposed on vehicles and automobile fuels could adversely affect demand for certain vehicles, annual miles driven or the products we sell.

For example, in the U.S., President Biden issued an executive order in 2021 aiming to increase EV sales by 2030.

In 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which provided a number of incentives to install EV infrastructure, purchase certain “clean vehicles,” or otherwise encourage a shift to vehicles with lower carbon emissions.

Representatives of the U.K.

government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2030 and a ban on the sale of gasoline hybrid engines in new cars and new vans as early as 2035.

These, and similar proposals could impact demand for certain vehicles, even if not finalized by creating consumer uncertainty.

With a potential increase in demand by consumers for EVs, and government support for such actions, manufacturers have also announced increased production focus on the manufacture of fuel efficient vehicles and EVs.

As more EVs potentially enter the market, and internal combustion or diesel engine vehicle production is reduced, it will be necessary to adapt to such changes by selling and servicing these units effectively in order to meet consumer demands and support the profitability of our dealerships.

We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to EV and other technologies that minimize emissions.

If maintenance costs of EVs were to substantially decrease, this could have a material adverse effect on our parts and service revenues.

Our inability to acquire and successfully integrate new dealerships into our business could adversely affect the growth of our revenues and earnings.

Growth in our revenues and earnings partially depends on our ability to acquire new dealerships and successfully integrate those dealerships into our existing operations.

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Restrictions by our manufacturers, as well as covenants contained in our debt instruments, may directly or indirectly limit our ability to acquire additional dealerships.

In addition, increased competition for acquisitions may develop, which could result in fewer acquisition opportunities available to us and/or higher acquisition prices and, some of our competitors may have greater financial resources than us.

Increased competition for acquisitions may develop, which could result in fewer acquisition opportunities available to us and/or higher acquisition prices, and some of our competitors may have greater financial resources than us.

In addition, managing and integrating additional dealerships into our existing mix of dealerships may result in substantial costs, diversion of our management’s attention, delays or other operational or financial problems.

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• incorrectly valuing acquired entities.

In particular, as a result of the consummation of the Prime Acquisition in November 2021, we now have a significantly larger business and more assets and employees than we did prior to the transaction.

The integration process requires us to expend significant capital and significantly expand the scope of our operations and financial and other systems.

Our management will be required to devote a substantial amount of time and attention to the process of integrating the operations of Prime into our business.

If any of these factors limits our ability to integrate Prime into our operations successfully or on a timely basis, our expectations regarding future results of operations, including certain run-rate synergies expected to result from the Prime Acquisition, might not be met.

As a result, we may not be able to realize the expected benefits that we seek to achieve from the Prime Acquisition.

In particular, as a result of the consummation of the acquisition of the Prime Automotive Group (“Prime”), including 28 dealerships, certain real estate and three collision centers in the Northeastern U.S.

in November 2021 (the “Prime Acquisition”), we now have a larger business and more assets and employees than we did prior to the transaction.

The integration process required us to expand the scope of our operations and financial and other systems.

Our management devotes a substantial amount of time and attention to the process of integrating the operations of acquired dealerships into our business.

If any of these factors limits our ability to integrate acquired dealerships into our operations successfully or on a timely basis, our expectations regarding future results of operations, including certain run-rate revenue and expense synergies expected to result from acquisitions, might not be met.

As a result, we may not be able to realize the expected benefits that we seek to achieve from the acquisitions.

In addition, we may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of our business, including efforts to further expand our product portfolio.

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In December 2021, Mercedes Benz announced the transition to an agency model for distribution of vehicles in the U.K.

This transition is expected to occur beginning with 2023.

The transition began on January 1, 2023.

In addition to the announcement by Mercedes Benz in the U.K., certain of our other vehicle manufacturers serving the U.K.

markets recently announced plans to explore an agency model for selling new vehicles.

Under an agency model, our franchised dealerships would receive a fee for facilitating the sale of a new vehicle to a customer but would no longer record the vehicle in inventory or incur floorplan interest expense, as has been historical practice.

Under an agency model, our franchised dealerships would receive a fee for facilitating the sale of a new vehicle to a customer but would no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice.

The agency model, as adopted by Mercedes Benz, will result in reduced revenues, as we will act as an agent of Mercedes Benz, receiving a commission for each sale and other expense fee support.

Based on our current understanding of the proposal, we do not expect a negative impact to the U.K.

We do not expect a material negative or positive impact to the U.K.

region gross margin and consolidated results of operations from a change to the Mercedes Benz agency model.

Notwithstanding this fact, we cannot predict the actions of other manufacturers and whether the agency models proposed by them will have the same terms and conditions as those proposed by Mercedes Benz.

The agency model, if adopted by other manufacturers, would reduce revenues, although the other impacts to our U.K.

Notwithstanding this fact, we cannot predict the actions of other manufacturers and whether the agency models proposed by them will have the same terms and conditions as those contracted by Mercedes Benz.

The agency model, if adopted by other manufacturers, would reduce revenues.

The other impacts to our U.K.

regions and consolidated results of operations remain uncertain until such time as the other vehicle manufacturers provide additional details regarding their specific agency model plans.

We are uncertain if agency models will be widely adopted in the U.K.

Additionally, in 2022, Ford announced potential changes to its distribution model related to EVs.

These changes potentially include required dealership capital investment and alterations to vehicle pricing structures.

Such changes, if implemented by Ford or other manufacturers, could negatively impact our margins and capital costs.

We are uncertain of the nature of the impact of such distribution changes to EVs or if such changes will be widely adopted in the U.S.

Vehicle technology advancements and changes in consumer vehicle ownership preferences could adversely affect our new and used vehicle sales volumes, parts and service revenues and results of operations.

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Operational Risks

The COVID-19 pandemic, which has disrupted all of our dealership operations, has had, and could continue to have a material adverse effect on our business, results of operations and cash flows.

The COVID-19 pandemic has had a material adverse impact on our business, including all of our markets in the U.S.

Extraordinary and wide-ranging actions taken by governmental authorities to reduce the spread of the virus, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations, significantly reduced the operating capacity of all of our dealerships in the U.S.

beginning in mid-March 2020.

Even as the restrictions eased during the latter part of 2020 and throughout 2021, we continued to experience disruptions from reduced capacity and departmental shutdowns as a result of COVID-19 outbreaks and quarantines impacting our employees.

Depending on future developments, the COVID-19 pandemic may continue to disrupt our operations and may adversely affect our financial condition and results of operations.

A cybersecurity breach, including loss of confidential information or a breach of personally identifiable information (“PII”) about our customers or employees, could negatively affect operations and result in high costs.

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Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events.

Some of our third-party service providers have experienced security breaches.

If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships or our customers or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase costs of doing business, negatively affect customer satisfaction and loyalty, and expose us to negative publicity.

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Some of our dealerships are concentrated in states and regions in the U.S.

and U.K., in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, snowstorms, flooding and hail storms) have in the past, and may in the future, disrupt our dealership operations.

and U.K., in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, snowstorms, flooding, tornados, and hail storms) have in the past, and may in the future, disrupt our dealership operations.

A disruption in our operations may adversely impact our business, results of operations, financial condition and cash flows.

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Although we have, subject to certain limitations and exclusions, substantial insurance, including business interruption insurance, we may be exposed to uninsured losses that could have a material adverse effect on our business, results of operations and financial condition.

For example, during the year ended December 31, 2021, we incurred $2.8 million in disaster pay and insurance deductible expense associated with the February winter storm in Texas and Hurricane Ida.

Additionally, should we suffer significant losses in a short period of time, we run the risk that our premiums and/or deductibles could increase, which could adversely affect our business.

Risks associated with our international operations could have a material adverse effect on our business, results of operations and financial condition.

We have continuing operations outside the U.S.

and discontinued operations in Brazil.

As a result, we face political and economic risks and uncertainties with respect to our international operations.

We have operations in the U.K.

and as a result, we face political and economic risks and uncertainties with respect to our international operations.

These risks may include, but are not limited to:

• wage inflation in emerging markets;

• legal uncertainties, timing delays and expenses associated with tariffs, labor matters, import or export licenses and other trade barriers;

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Legal, Regulatory and Compliance Risks

Changes to laws and regulations could adversely impact our operations and financial condition.

New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business.

For example, in 2022, the FTC proposed new regulations for automotive dealers that would prohibit a wide range of current industry-accepted sales practices with regard to sales and advertising of our vehicles and products, require an extensive series of both oral and written disclosures to be made at the initial contact in regard to the sale price of vehicles, financial terms and voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements.

Failure to adhere to these new policies could subject the Company to significant monetary and other penalties or require us to make adjustments to our products and services, any or all of which could result in lost revenues, increased expenses and substantial adverse publicity.

These changes, if adopted as proposed, may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and impose recordkeeping burdens on our employees, among other effects.

If these regulations were to be enacted, it could have an adverse effect on our business and profitability.

Future legislation and regulations and changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, tax liabilities, restrictions and delays in connection with our current business as well as future projects, the extent of which cannot be predicted.

We are subject to automotive and other laws and regulations, which, if we are found to have violated, may adversely affect our business and results of operations.

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Our compliance with these regulations may expose us to significant costs and liabilities.

With a potential increase in demand by consumers for EVs, and government support for such actions, we will incur costs and liabilities to sell and service EVs, including, but not limited to, personal protective equipment for employees, capital expenditures for specialized tools and equipment, service shop space and battery storage costs.

Additionally, vehicle manufacturers in the U.S.

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No goodwill impairments were recorded during the years ended December 31, 2022, 2021 and 2020.

During the year ended December 31, 2021, no impairments of intangible franchise rights were recorded.

During the years ended December 31, 2020 and 2019, we recorded $20.7 million and $19.0 million of impairment of intangible franchise rights, respectively.

During the year ended December 31, 2022, we recorded $1.3 million of impairment of intangible franchise rights.

During the year ended 2021, no impairments of intangible franchise rights were recorded.

During the year ended December 31, 2020, we recorded $20.7 million of impairment of intangible franchise rights.

We may be required to record impairment charges if market and industry conditions deteriorate to such a level whereby the fair value of our reporting units, individually, is less than the carrying value of the corresponding reporting unit.

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The implementation of new SEC rules and regulations and accounting standards could require certain systems, internal process and controls and other changes that could increase our operating costs, and result in changes to our financial statements.

In 2019, for example, the implementation of accounting standards related to leases, as issued by the FASB, required us to make significant changes to our lease management and other accounting systems, and resulted in a material impact to our consolidated financial statements.

GAAP and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business involve many subjective assumptions, estimates and judgments by our management.

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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-K

Item 1A. Risk Factors