PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tables in millions, except per share data)


8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

    In October 2000, the California Department of Motor Vehicles ("California DMV") brought action against one of the Company's California dealerships for alleged customer fraud as well as several other claims. The California DMV seeks to have the dealership's license to do business in California suspended or revoked. The case is scheduled for trial beginning in April 2001. Three civil class actions and other related lawsuits have been filed against the dealership based on the allegations underlying the California DMV case. In addition, the Los Angeles District Attorney's Office has been conducting an investigation into the allegations underlying the California DMV case. The Company intends to vigorously defend itself in these matters.

    In an action filed in Florida state court in 1999, a wholly-owned subsidiary of the Company was accused of violating the Florida Motor Vehicle Retail Sales Finance Act and the Florida Deceptive and Unfair Trade Practices Act by allegedly failing to deliver executed copies of retail installment contracts to customers of the Company's used vehicle megastores. In October 2000, the court certified the class of customers on whose behalf the action would proceed. The Company has appealed this decision and intends to vigorously defend itself in this matter.

    Several of the Company's Texas dealerships have been named in three class actions brought against the Texas Automobile Dealer's Association ("TADA") and new vehicle dealerships in Texas that are members of the TADA. The actions allege, among other things, that since January 1994 Texas dealers have deceived customers with respect to a vehicle inventory tax and violated federal antitrust and other laws as well. These cases are currently pending in Texas State courts and federal district court. The Company intends to vigorously defend itself in these matters.

    In addition to the above, the Company is a party to numerous other legal proceedings that arose in the ordinary course of business.

    The Company has certain insurance coverage and rights of indemnification. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's business, consolidated 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 the Company's business, consolidated results of operations, financial condition and/or cash flows.

Lease Commitments

    The Company leases real property, equipment and software under various operating leases most of which have terms from 1 to 25 years.

    Expenses under real property, equipment and software leases were $82.7 million, $86.2 million and $45.0 million for the years ended December 31 2000, 1999 and 1998, respectively.

    Future minimum lease obligations under noncancelable real property, equipment and software leases with initial terms in excess of one year at December 31, 2000 are as follows:

                                                                
   Year Ending December 31:
   2001 ....................................................    $  71.9
   2002 ....................................................       63.6
   2003 ....................................................       53.9
   2004 ....................................................       40.5
   2005 ....................................................       32.5
   Thereafter ..............................................      158.0
                                                                 -------
                                                                $ 420.4
                                                                 =======