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Note 6 - Credit Facilities and Long-term Debt
 12 Months Ended
Dec. 31, 2014
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

(6)           Credit Facilities and Long-Term Debt


Below is a summary of our outstanding balances on credit facilities and long-term debt (in thousands):


December 31,

 

2014

   

2013

 
                 

New vehicle floor plan commitment (1) (2)

  $ 1,137,632     $ 695,066  

Floor plan notes payable (2)

    41,047       18,789  

Total floor plan debt

    1,178,679       713,855  
                 

Used vehicle inventory financing facility

    134,000       85,000  

Revolving lines of credit

    134,769       -  

Real estate mortgages

    334,443       164,827  

Other debt

    37,766       2,727  

Total debt

  $ 1,819,657     $ 966,409  

 

(1)

As of December 31, 2014 and 2013, we had a new vehicle floor plan commitment of $1.25 billion and $700 million, respectively, as part of our credit facility.


 

(2)

At December 31, 2014 and 2013, we had an additional $4.9 and $4.8 million of floor plan notes payable outstanding, respectively, on our new vehicle floor plan commitment recorded as liability related to assets held for sale. Additionally, at December 31, 2013, we had $1.5 million of floor plan notes payable on vehicles designated as service loaners recorded as liabilities related to assets held for sale.


Credit Facility


On October 1, 2014, we completed a $1.7 billion revolving syndicated credit facility. This syndicated credit facility is comprised of 16 financial institutions, including seven manufacturer-affiliated finance companies. Our credit facility provides for up to $1.25 billion in new vehicle inventory floor plan financing, up to $150 million in used vehicle inventory floor plan financing and a maximum of $300 million in revolving financing for general corporate purposes, including acquisitions and working capital. This credit facility may be expanded to $1.85 billion total availability, subject to lender approval.


We may request a reallocation of any unused portion of our credit facility provided that the used vehicle inventory floor plan commitment does not exceed $250 million, the revolving financing commitment does not exceed $300 million, and the sum of those commitments plus the new vehicle inventory floor plan financing commitment does not exceed the total aggregate financing commitment. All borrowings from, and repayments to, our lending group are presented in the Consolidated Statements of Cash Flows as financing activities.


The new vehicle floor plan commitment is collateralized by our new vehicle inventory. Our used vehicle inventory financing facility is collateralized by our used vehicle inventory that has been in stock for less than 180 days. Our revolving line of credit is secured by our outstanding receivables related to vehicle sales, unencumbered vehicle inventory, other eligible receivables, parts and accessories and equipment.


We have the ability to deposit up to $50 million in cash in Principal Reduction “PR” accounts associated with our new vehicle inventory floor plan commitment. The PR accounts are recognized as offsetting credits against outstanding amounts on our new vehicle floor plan commitment and would reduce interest expense associated with the outstanding principal balance. As of December 31, 2014, we did not have any amounts deposited in our PR accounts.


If the outstanding principal balance on our new vehicle inventory floor plan commitment, plus requests on any day, exceeds 95% of the loan commitment, a portion of the revolving line of credit must be reserved. The reserve amount is equal to the lesser of $15.0 million or the maximum revolving line of credit commitment less the outstanding balance on the line less outstanding letters of credit. The reserve amount will decrease the revolving line of credit availability and may be used to repay the new vehicle floor plan commitment balance.


The interest rate on the credit facility varies based on the type of debt, with the rate of one-month LIBOR plus 1.25% for new vehicle floor plan financing, one-month LIBOR plus 1.50% for used vehicle floor plan financing; and a variable interest rate on the revolving financing ranging from the one-month LIBOR plus 1.25% to 2.50%, depending on our leverage ratio. The annual interest rate associated with our new vehicle floor plan commitment, excluding the effects of our interest rate swaps, was 1.4% at December 31, 2014. The annual interest rate associated with our used vehicle inventory financing facility and our revolving line of credit was 1.7% and 2.2%, respectively, at December 31, 2014.


Under the terms of our credit facility we are subject to financial covenants and restrictive covenants that limit or restrict our incurring additional indebtedness, making investments, selling or acquiring assets and granting security interests in our assets.


Under our credit facility, we are required to maintain the ratios detailed in the following table:


Debt Covenant Ratio

 

Requirement

 

As of December 31, 2014

 

Current ratio

 

Not less than 1.20 to 1

    1.16 to 1  

Fixed charge coverage ratio

 

Not less than 1.20 to 1

    3.30 to 1  

Leverage ratio

 

Not more than 5.00 to 1

    2.21 to 1  

Funded debt restriction (millions)

 

Not to exceed $600

 

$374.0

 

As of December 31, 2014, we were not in compliance with the current ratio covenant as required under our credit facility. In February 2015, we requested and received a waiver from our lender group for the covenant as of December 31, 2014, and amended the agreement to reduce the covenant to 1.10 to 1 for the first quarter of 2015 and beyond. We expect to remain in compliance with the financial and restrictive covenants in our credit facility and other debt agreements. However, no assurances can be provided that we will continue to remain in compliance with the financial and restrictive covenants.


If we do not meet the financial and restrictive covenants and are unable to remediate or cure the condition or obtain a waiver from our lenders, a breach would give rise to remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. A breach would also trigger cross-defaults under other debt agreements.


Floor Plan Notes Payable


We have floor plan agreements with manufacturer-affiliated finance companies for vehicles that are designated for use as service loaners. The interest rates on these floor plan notes payable commitments vary by manufacturer and are variable rates. At December 31, 2014, $41.0 million was outstanding on these agreements at interest rates rangng from 2.4% to 3.0%. Borrowings from, and repayments to, manufacturer-affiliated finance companies are classified as operating activities in the Consolidated Statements of Cash Flows.


Real Estate Mortgages and Other Debt


We have mortgages associated with our owned real estate. Interest rates related to this debt ranged from 1.7% to 5.0% at December 31, 2014. The mortgages are payable in various installments through October 2034. As of December 31, 2014, we had fixed interest rates on 66% of our outstanding mortgage debt.


Our other debt includes capital leases, sellers’ notes and our equity contribution obligations associated with the new markets tax credit equity investment. The interest rates associated with our other debt ranged from 2.0% to 9.4% at December 31, 2014. This debt, which totaled $37.8 million at December 31, 2014, is due in various installments through May 2019.


Future Principal Payments


The schedule of future principal payments on long-term debt as of December 31, 2014 was as follows (in thousands):


Year Ending December 31,

       

2015

  $ 31,912  

2016

    70,620  

2017

    11,691  

2018

    30,083  

2019

    308,636  

Thereafter

    188,036  

Total principal payments

  $ 640,978