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Long-Term Debt | 6 Months Ended
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Jun. 30, 2014
Debt Disclosure [Abstract] |
LONG-TERM DEBT | LONG-TERM DEBT The Company carries its long-term debt at face value, net of applicable discounts. Long-term debt consisted of the following:
|  | June 30, 2014 |  | December 31, 2013
|  | (dollars in thousands)
2.25% Convertible Senior Notes |  | $ | 164,556 |  |  | $ | 160,334 |
3.00% Convertible Senior Notes |  | 16,907 |  |  | 84,305 |
Real Estate Credit Facility |  | 66,316 |  |  | 67,719 |
5.00% Senior Notes |  | 344,796 |  |  | — |
Acquisition Line |  | 20,457 |  |  | 60,000 |
Other Real Estate Related and Long-Term Debt |  | 307,738 |  |  | 279,167 |
Capital lease obligations related to real estate, maturing in varying amounts through June 2034 with a weighted average interest rate of 10.6% |  | 48,321 |  |  | 47,553 |
|  | 969,091 |  |  | 699,078 |
Less current maturities of real estate credit facility and other long-term debt |  | 30,516 |  |  | 35,389 |
|  | $ | 938,575 |  |  | $ | 663,689 |
Purchase of 3.00% Convertible Senior Notes On June 25, 2014, the Company purchased $92.5 million of the $115.0 million principal outstanding of its 3.00% Convertible Senior Notes due 2020 (“3.00% Notes”) in a tender offer, leaving an outstanding balance of $22.6 million as of June 30, 2014. Consideration paid for the purchase of the 3.00% Notes was $210.4 million. In conjunction with this purchase, the Company recognized a loss of $23.6 million for the three months ended June 30, 2014. Subsequent to June 30, 2014, the Company settled the 3.00% Purchased Options and 3.00% Warrants in the same proportion as the 3.00% Notes purchased. The net cash received as a result was $26.4 million, which will be recognized as an increase to additional paid in capital. 2.25% Convertible Senior Notes As of June 30, 2014 and December 31, 2013, the carrying value of the Company's 2.25% Convertible Senior Notes due 2036 (“2.25% Notes”), related discount and equity component consisted of the following:
|  | June 30, 2014 |  | December 31, 2013
|  | (In thousands)
Carrying amount of equity component (including temporary equity) |  | $ | 65,270 |  |  | $ | 65,270 |
Allocated underwriter fees, net of taxes |  | (1,475 | ) |  | (1,475 | )
Allocated debt issuance cost, net of taxes |  | (58 | ) |  | (58 | )
Total net equity component |  | $ | 63,737 |  |  | $ | 63,737 |
Deferred income tax component |  | $ | 6,524 |  |  | $ | 8,023 |
Principal amount of 2.25% Notes |  | $ | 182,753 |  |  | $ | 182,753 |
Unamortized discount |  | (17,511 | ) |  | (21,574 | )
Unamortized underwriter fees |  | (686 | ) |  | (845 | )
Net carrying amount of liability component |  | $ | 164,556 |  |  | $ | 160,334 |
Unamortized debt issuance cost |  | $ | 27 |  |  | $ | 33 |
For the six months ended June 30, 2014 and 2013, the contractual interest expense and the discount amortization, which is recorded as other interest expense in the accompanying Consolidated Statements of Operations, were as follows:
|  | Six Months Ended June 30,
|  | 2014 |  | 2013
|  | (dollars in thousands)
Year-to-date contractual interest expense |  | $ | 2,056 |  |  | $ | 2,056 |
Year-to-date discount amortization (1) |  | $ | 3,998 |  |  | $ | 3,689 |
Effective interest rate of liability component |  | 7.7 | % |  | 7.7 | %
(1) Represents the incremental impact of the accounting for convertible debt as primarily codified in ASC 470, Debt. The Company determined the discount using the estimated effective interest rate for similar debt with no convertible features. The original effective interest rate of 7.50% was estimated by comparing debt issuances from companies with similar credit ratings during the same annual period as the Company. The effective interest rate differs from the 7.50% due to the impact of underwriter fees associated with this issuance that were capitalized as an additional discount and are being amortized to interest expense through 2016. The effective interest rate may change in the future as a result of future repurchases of the 2.25% Notes. The Company utilized a ten-year term for the assessment of the fair value of its 2.25% Notes. The 2.25% Notes are convertible into cash and, if applicable, common stock based on the then-applicable conversion rate under the following circumstances: (a) during any calendar quarter (and only during such calendar quarter), if the closing price of the Company’s common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the applicable conversion price per share (or $77.05 as of June 30, 2014)(the "2.25% Stock Price Trigger"); (b) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount for each day of the ten day trading period was less than 98% of the product of the last reported sale/bid price of the Company’s common stock and the conversion rate on that day; and (c) upon the occurrence of specified corporate transactions set forth in the indenture governing the 2.25% Notes (the "2.25% Notes Indenture"). Upon conversion, a holder will receive an amount in cash and, if applicable, shares of the Company’s common stock, determined in the manner set forth in the 2.25% Notes Indenture. The Company may redeem all or part of the 2.25% Notes if the last reported sale price of the Company's common stock is greater than or equal to 130% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day prior to the date on which the Company mails the redemption notice. As of June 30, 2014, the conversion rate was 16.87 shares of common stock per $1,000 principal amount of 2.25% Notes, with a conversion price of $59.27 per share, which was reduced during the second quarter of 2014 as the result of the Company’s decision to pay a cash dividend in excess of $0.14 per share. As of June 30, 2014, the exercise price of the 2.25% Warrants, which are related to the issuance of the 2.25% Notes, was reduced to $80.09 due to the Company’s decision to pay a cash dividend in excess of $0.14 per share during the second quarter of 2014. If any cash dividend or distribution is made to all, or substantially all, holders of the Company’s common stock in excess of $0.14 per share in the future, the conversion rate will be further adjusted based on the formula defined in the 2.25% Notes Indenture. Under the terms of the 2.25% Purchased Options, which become exercisable upon conversion of the 2.25% Notes, the Company has the right to receive a total of 3.1 million shares of its common stock at the conversion price then in effect. The exercise price of the 2.25% Purchased Options is subject to certain adjustments that mirror the adjustments to the conversion price of the 2.25% Notes (including payments of cash dividends in excess of $0.14 per share). As a result of the 2.25% Stock Price Trigger on June 30, 2014, the 2.25% Notes are convertible at the option of the holders during the three months ending September 30, 2014. As such, the Company reclassified the redeemable equity portion of the 2.25% Notes to temporary equity from the additional paid-in capital component of permanent equity on the Consolidated Balance Sheet as of June 30, 2014. The debt portion of the 2.25% Notes continued to be classified as a long-term liability as of June 30, 2014, since the Company has the intent and ability to refinance any conversion of the 2.25% Notes with another long-term debt instrument. The combination of the debt portion and temporary equity portion represents the aggregate principal obligation of the 2.25% Notes redeemable at the option of the holders as of June 30, 2014. The if-converted value of the 2.25% Notes exceeded the principal amount of the 2.25% Notes by $76.2 million at June 30, 2014. Subsequent to June 30, 2014, the Company gave notice to holders that the Company will redeem all of the outstanding 2.25% Notes on September 4, 2014. 3.00% Convertible Senior Notes As of June 30, 2014 and December 31, 2013, the carrying value of the 3.00% Notes, related discount and equity component consisted of the following
|  | June 30, 2014 |  | December 31, 2013
|  | (In thousands)
Carrying amount of equity component (including temporary equity) |  | $ | 4,973 |  |  | $ | 25,359 |
Allocated underwriter fees, net of taxes |  | (149 | ) |  | (760 | )
Allocated debt issuance cost, net of taxes |  | (22 | ) |  | (112 | )
Total net equity component |  | $ | 4,802 |  |  | $ | 24,487 |
Deferred income tax component |  | $ | 1,936 |  |  | $ | 10,625 |
Principal amount of 3.00% Notes |  | $ | 22,550 |  |  | $ | 115,000 |
Unamortized discount |  | (5,348 | ) |  | (29,094 | )
Unamortized underwriter fees |  | (295 | ) |  | (1,601 | )
Net carrying amount of liability component |  | $ | 16,907 |  |  | $ | 84,305 |
Unamortized debt issuance costs |  | $ | 44 |  |  | $ | 236 |
For the six months ended June 30, 2014 and 2013, the contractual interest expense and the discount amortization, which is recorded as interest expense in the accompanying Consolidated Statements of Operations, were as follows:
|  | Six Months Ended June 30,
|  | 2014 |  | 2013
|  | (dollars in thousands)
Year-to-date contractual interest expense |  | $ | 1,679 |  |  | $ | 1,725 |
Year-to-date discount amortization (1) |  | $ | 1,693 |  |  | $ | 1,588 |
Effective interest rate of liability component |  | 8.6 | % |  | 8.6 | %
(1) Represents the incremental impact of the accounting for convertible debt as primarily codified in ASC 470, Debt. The Company determined the discount using the estimated effective interest rate for similar debt with no convertible features. The original effective interest rate of 8.25% was estimated by receiving a range of quotes from the underwriters for the estimated rate that the Company could reasonably expect to issue non-convertible debt for the same tenure. The effective interest rate differs from the 8.25% due to the impact of underwriter fees associated with this issuance that were capitalized as an additional discount and are being amortized to interest expense through 2020. The effective interest rate may change in the future as a result of future repurchases of the 3.00% Notes. The Company utilized a ten-year term for the assessment of the fair value of its 3.00% Notes. The 3.00% Notes are convertible into cash and, if applicable, common stock based on the then-applicable conversion rate under the following circumstances: (a) during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the applicable conversion price per share (or $48.26 as of June 30, 2014) (the “3.00% Stock Price Trigger”); (b) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount for each day of the ten day trading period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the 3.00% Notes on that day; and (c) upon the occurrence of specified corporate transactions set forth in the indenture governing the 3.00% Notes (the "3.00% Notes Indenture"). Upon conversion, a holder will receive an amount in cash and, if applicable, shares of the Company’s common stock, determined in the manner set forth in the 3.00% Notes Indenture. As of June 30, 2014, the conversion rate was 26.94 shares of common stock per $1,000 principal amount of 3.00% Notes, with a conversion price of $37.13 per share, which was reduced during the second quarter of 2014 as the result of the Company’s decision to pay a cash dividend. As of June 30, 2014, the exercise price of the 3.00% Warrants, which are related to the issuance of the 3.00% Notes, was reduced to $54.55 due to the Company’s decision to pay a cash dividend during the second quarter of 2014. If any cash dividend or distribution is made to all, or substantially all, holders of the Company’s common stock in the future, the conversion rate will be further adjusted based on the formula defined in the 3.00% Notes Indenture. Under the terms of the 3.00% Purchased Options, which become exercisable upon conversion of the 3.00% Notes, the Company has the right to receive a total of 3.1 million shares of its common stock at the conversion price then in effect. Subsequent to June 30, 2014, the Company settled 2.5 million of the 3.00% Purchased Options, congruent with the purchase of the majority of the 3.00% Notes in a tender offer, leaving the Company with the right to receive a total of 0.6 million shares of its common stock at the conversion price then in effect. The exercise price of the 3.00% Purchased Options is subject to certain adjustments that mirror the adjustments to the conversion price of the 3.00% Notes (including payments of cash dividends). As a result of the 3.00% Stock Price Trigger on June 30, 2014, the 3.00% Notes are convertible at the option of the holders during the three months ending September 30, 2014. As such, the Company reclassified the redeemable equity portion of the 3.00% Notes to temporary equity from the additional paid-in capital component of permanent equity on the Consolidated Balance Sheet as of June 30, 2014. The debt portion of the 3.00% Notes continued to be classified as a long-term liability as of June 30, 2014, since the Company has the intent and ability to refinance any conversion of the 3.00% Notes with another long-term debt instrument. The combination of the debt portion and temporary equity portion represents the aggregate principal obligation of the 3.00% Notes redeemable at the option of the holders as of June 30, 2014. The if-converted value of the 3.00% Notes exceeded the principal amount of the 3.00% Notes by $28.5 million at June 30, 2014. 5.00% Senior Notes On June 2, 2014, the Company issued 5.00% senior unsecured notes with a face amount of $350.0 million due to mature on June 1, 2022 ("5.00% Notes"). The 5.00% Notes pay interest semiannually, in arrears, in cash on each June 1 and December 1, beginning December 1, 2014. Prior to June 1, 2017, the Company may redeem up to 35.0% of the 5.00% Notes using proceeds of certain equity offerings, subject to certain conditions at a redemption price equal to 105% of principal amount of the 5.00% Notes plus accrued and unpaid interest. In addition, prior to June 1, 2017, the Company may redeem some or all of the 5.00% Notes at a redemption price equal to 100% of the principal amount of the 5.00% Notes redeemed, plus an applicable make-whole premium, and plus accrued and unpaid interest. On or after June 1, 2017, the Company may redeem some or all of the 5.00% Notes at specified prices, plus accrued and unpaid interest. The Company may be required to purchase the 5.00% Notes if it sells certain assets or triggers the change in control provisions defined in the 5.00% Notes indenture. The 5.00% Notes are senior unsecured obligations and rank equal in right of payment to all of our existing and future senior unsecured debt and senior in right of payment to all of our future subordinated debt. The 5.00% Notes are guaranteed by substantially all of the Company's U.S. subsidiaries. The U.S. subsidiary guarantees rank equally in the right of payment to all of the Company's U.S. subsidiary guarantor’s existing and future subordinated debt. In addition, the 5.00% Notes are structurally subordinated to the liabilities of its non-guarantor subsidiaries. In connection with the issuance of the 5.00% Notes, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the initial purchasers. Pursuant to the Registration Rights Agreement, the Company has agreed to file a registration statement with the Securities and Exchange Commission within 365 days of issuance, so that holders of the 5.00% Notes can exchange the 5.00% Notes for registered 5.00% Notes that have substantially identical terms as the 5.00% Notes. The Company will be required to pay additional interest on the 5.00% Notes if it fails to comply with its obligations to register the 5.00% Notes within the specified time period. Underwriters' fees totaled $5.3 million, which were recorded as a reduction of the 5.00% Notes principal balance, are being amortized over a period of eight years. The 5.00% Notes are presented net of unamortized underwriter fee of $5.2 million as of June 30, 2014. At the time of issuance of the 5.00% Notes, the Company capitalized $1.5 million of debt issuance costs, which are included in Other Assets on the accompanying Consolidated Balance Sheet and amortized over a period of eight years. Unamortized debt issuance costs as of June 30, 2014 totaled $1.5 million. Real Estate Credit Facility Group 1 Realty, Inc., a wholly-owned subsidiary of the Company, is party to a real estate credit facility with Bank of America, N.A. and Comerica Bank (the “Real Estate Credit Facility”) providing the right for up to $99.1 million of term loans, of which $74.1 million had been used as of June 30, 2014. The term loans can be expanded provided that (a) no default or event of default exists under the Real Estate Credit Facility; (b) the Company obtains commitments from the lenders who would qualify as assignees for such increased amounts; and (c) certain other agreed upon terms and conditions have been satisfied. This facility is guaranteed by the Company and substantially all of the existing and future domestic subsidiaries of the Company and is secured by the real property owned by the Company that is mortgaged under the Real Estate Credit Facility. The Company capitalized $1.1 million debt issuance costs related to the Real Estate Credit Facility that are being amortized over the term of the facility, $0.5 million of which were still unamortized as of June 30, 2014. The interest rate is equal to (a) the per annum rate equal to one-month LIBOR plus 2.00% per annum, determined on the first day of each month; or (b) 0.95% per annum in excess of the higher of (i) the Bank of America prime rate (adjusted daily on the day specified in the public announcement of such price rate), (ii) the Federal Funds Rate adjusted daily, plus 0.5% or (iii) the per annum rate equal to the one-month LIBOR plus 1.05% per annum. The Federal Funds Rate is the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the business day succeeding such day. The Company is required to make quarterly principal payments equal to 1.25% of the principal amount outstanding and is required to repay the aggregate amount outstanding on the maturity dates of the individual property borrowings, ranging, from December 29, 2015 through February 27, 2017. During the six months ended June 30, 2014, the Company made additional borrowings of $0.2 million and made principal payments of $1.6 million on outstanding borrowings from the Real Estate Credit Facility. As of June 30, 2014, borrowings outstanding under the Real Estate Credit Facility totaled $66.3 million, with $3.5 million recorded as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets. The Real Estate Credit Facility also contains usual and customary provisions limiting the Company’s ability to engage in certain transactions, including limitations on the Company’s ability to incur additional debt, additional liens, make investments, and pay distributions to its stockholders. In addition, the Real Estate Credit Facility requires certain financial covenants that are identical to those contained in the Company’s Revolving Credit Facility. As of June 30, 2014, the Company was in compliance with all applicable covenants and ratios under the Real Estate Credit Facility. Acquisition Line See Note 8, "Credit Facilities," for further discussion on the Company's Revolving Credit Facility and Acquisition Line. Other Real Estate Related and Long-Term Debt The Company, as well as certain of its wholly-owned subsidiaries, has entered into separate term mortgage loans in the U.S. with four of its manufacturer-affiliated finance partners, Toyota Motor Credit Corporation (“TMCC”), Mercedes-Benz Financial Services USA, LLC (“MBFS”), BMW Financial Services NA, LLC (“BMWFS”) and FMCC as well as several third-party financial institutions (collectively, “Real Estate Notes”). The Real Estate Notes are on specific buildings and/or properties and are guaranteed by the Company. Each loan was made in connection with, and is secured by mortgage liens on, the real property owned by the Company that is mortgaged under the Real Estate Notes. The Real Estate Notes bear interest at fixed rates between 3.67% and 9.00%, and at variable indexed rates plus a spread between 1.90% and 3.35% per annum. The Company capitalized $1.3 million of related debt issuance costs related to the Real Estate Notes that are being amortized over the terms of the notes, $0.6 million of which were still unamortized as of June 30, 2014. The loan agreements with TMCC consist of eight term loans. As of June 30, 2014, $50.8 million was outstanding under the TMCC term loans, with $7.0 million classified as a current maturity of long-term debt. For the six months ended June 30, 2014, the Company made no additional borrowings and made principal payments of $0.8 million. These loans will mature by September 2020 and provide for monthly payments based on a 20-year amortization schedule. These eight loans are cross-collateralized and cross-defaulted with each other and are cross-defaulted with the Revolving Credit Facility. The loan agreements with MBFS consist of three term loans. As of June 30, 2014, $44.7 million was outstanding under the MBFS term loans, with $1.7 million classified as a current maturity of long-term debt. For the six months ended June 30, 2014, the Company made no additional borrowings and made principal payments of $0.8 million. The agreements provide for monthly payments based on a 20-year amortization schedule and will mature by December 2030. These three loans are cross-collateralized and cross-defaulted with each other and are also cross-defaulted with the Revolving Credit Facility. The loan agreements with BMWFS consist of 14 term loans. As of June 30, 2014, $68.1 million was outstanding under the BMWFS term loans, with $4.2 million classified as a current maturity of long-term debt. For the six months ended June 30, 2014, the Company made no additional borrowings and made principal payments of $2.0 million. The agreements provide for monthly payments based on a 15-year amortization schedule and will mature September 2019. In the case of three properties owned by subsidiaries, the applicable loan is also guaranteed by the subsidiary real property owner. These 14 loans are cross-collateralized with each other. In addition, they are cross-defaulted with each other, the Revolving Credit Facility, and certain dealership franchising agreements with BMW of North America, LLC. The loan agreements with FMCC consist of 2 term loans. As of June 30, 2014, $18.9 million was outstanding under the FMCC term loans, with $0.8 million classified as a current maturity of long-term debt. For the six months ended June 30, 2014, the Company made additional borrowings and principal payments of $13.8 million and $0.3 million, respectively. The agreements provide for monthly payments based on an 11-year amortization schedule that will mature by January 2024. These 2 loans are cross-defaulted with the Revolving Credit Facility. In addition, agreements with third-party financial institutions consist of 14 term loans for an aggregate principal amount of $90.6 million, to finance real estate associated with the Company’s dealerships. The loans are being repaid in monthly installments that will mature by November 2022. As of June 30, 2014, borrowings under these notes totaled $81.2 million, with $4.6 million classified as a current maturity of long-term debt. For the six months ended June 30, 2014, the Company made additional borrowings and principal payments of $18.7 million and $1.8 million, respectively. These 14 loans are cross-defaulted with the Revolving Credit Facility. The Company has also entered into separate term mortgage loans in the U.K. with other third-party financial institutions which are secured by the Company’s U.K. properties. These mortgage loans (collectively, “Foreign Notes”) are being repaid in monthly installments that mature August 2027. As of June 30, 2014, borrowings under the Foreign Notes totaled $30.2 million, with $4.0 million classified as a current maturity of long-term debt in the accompanying Consolidated Balance Sheets. For the six months ended June 30, 2014, the Company made no additional borrowings and made principal payments of $8.5 million. During the six months ended June 30, 2014, the Company entered into working capital loan agreements with a third-party financial institution in Brazil for R$22.0 million. The proceeds were used to partially pay off manufacturer-affiliated floorplan borrowings. This loan is to be repaid in full by February 2017. Fair Value of Long-Term Debt The Company’s outstanding 2.25% Notes had a fair value of $261.2 million and $231.6 million as of June 30, 2014 and December 31, 2013, respectively. The Company’s outstanding 3.00% Notes had a fair value of $52.9 million and $231.2 million as of June 30, 2014 and December 31, 2013, respectively. The Company's outstanding 5.00% Notes had a fair value of $351.8 million as of June 30, 2014. Of the $307.7 million and $279.2 million other real estate related and long-term debt as of June 30, 2014 and December 31, 2013, respectively, $160.2 million and $164.1 million represented fixed interest rate borrowings. The fair value of such fixed interest rate borrowings was $185.8 million and $190.0 million as of June 30, 2014 and December 31, 2013, respectively. The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of June 30, 2014 and December 31, 2013. The Company determined the estimated fair value of its long-term debt using available market information and commonly accepted valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Company, or holders of the instruments, could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a material effect on estimated fair values. The carrying value of the Company’s variable rate debt approximates fair value due to the short-term nature of the interest rates.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References No definition available. + Details
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- Details
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