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Note 10 - Acquisitions
 6 Months Ended
Jun. 30, 2014
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

Note 10. Acquisitions


In the first six months of 2014, we completed the following acquisitions, which contributed revenues of $53.3 million for the six months ended June 30, 2014:


 

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On January 31, 2014, we acquired Island Honda in Kahului, Hawaii.


 

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On February 3, 2014, we acquired Stockton Volkswagen in Stockton, California.


 

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On March 5, 2014, we acquired Honolulu Buick GMC Cadillac and Honolulu Volkswagen in Honolulu, Hawaii.


 

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On April 1, 2014, we acquired Corpus Christi Ford in Corpus Christi, Texas.


 

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On June 11, 2014, we acquired Portland GMC Buick and Portland Cadillac in Portland, Oregon.


All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.


No portion of the purchase price was paid with our equity securities. The following table summarizes the consideration paid for the acquisitions and the amount of identified assets acquired and liabilities assumed as of the acquisition date (in thousands):


   

Consideration

 

Cash paid, net of cash acquired

  $ 79,482  

Debt issued

    3,161  
    $ 82,643  

   

Assets Acquired and Liabilities Assumed

 

Inventories

  $ 42,997  

Franchise value

    6,529  

Property, plant and equipment

    17,302  

Other assets

    430  

Other liabilities

    (108 )
      67,150  

Goodwill

    15,493  
    $ 82,643  

In the first quarter of 2014, we assumed a contract associated with an acquisition and determined the remaining term would not provide economic benefit. As a result, we recorded costs of $1.4 million associated with the contract. For the three and six month periods ended June 30, 2014, we recorded acquisition expense of $0.2 million. This amount is included as a component of selling, general and administrative expense in our Consolidated Statements of Operations. We did not have any material acquisition-related expenses in 2013.


We account for franchise value as an indefinite-lived intangible asset. We expect the full amount of the goodwill recognized to be deductible for tax purposes.


The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three- and six-month periods ended June 30, 2013 and 2014 had occurred on January 1, 2013 (in thousands, except for per share amounts):


Three Months Ended June 30,

 

2014

   

2013

 

Revenue

  $ 1,232,950     $ 1,113,612  

Income from continuing operations, net of tax

    35,504       26,447  

Basic income per share from continuing operations, net of tax

    1.36       1.03  

Diluted income per share from continuing operations, net of tax

    1.35       1.01  

Six Months Ended June 30,

 

2014

   

2013

 

Revenue

  $ 2,353,299     $ 2,115,438  

Income from continuing operations, net of tax

    60,732       49,405  

Basic income per share from continuing operations, net of tax

    2.33       1.92  

Diluted income per share from continuing operations, net of tax

    2.31       1.89  

These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property, plant and equipment; accounting for inventory on a specific identification method; and recognition of interest expense for real estate financing related to stores where we purchased the facility. No nonrecurring pro forma adjustments directly attributable to the acquisitions are included in the reported pro forma revenues and earnings.