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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Facility and Equipment Leases For 2018, we recognized approximately $1.7 million of lease exit expense, which consists of $0.5 million of interest expense and $1.2 million related to adjustments to lease exit accruals recorded in previous years for the present value of the lease payments, net of estimated sublease rentals, for the remaining life of the operating leases and other accruals necessary to satisfy the lease commitment to the landlord. A summary of the activity of these operating lease accruals consists of the following:
| (In thousands)
Balance at December 31, 2017 | $ | 6,478
Lease exit expense (1) | 1,709
Payments (2) | (2,973)
Lease buyout/other (3) | (580)
Balance at December 31, 2018 | $ | 4,634
(1) Expense of approximately $0.1 million is recorded in interest expense, other, net and expense of approximately $1.2 million is recorded in selling, general and administrative expenses in the accompanying consolidated statements of income. In addition, expense of approximately $0.4 million is recorded in income (loss) from discontinued operations in the accompanying consolidated statements of income. (2) Amount is recorded as an offset to rent expense in selling, general and administrative expenses, with approximately $1.0 million recorded in continuing operations and approximately $2.0 million recorded in income (loss) from discontinued operations in the accompanying consolidated statements of income. (3) Amount represents cash paid to settle deferred maintenance costs related to terminating and exiting leased properties. The majority of our dealership facilities are subject to long-term operating lease arrangements. These facility lease arrangements normally have 15- to 20-year terms with one or two five- to 10-year renewal options and do not contain provisions for contingent rent related to the dealership’s operations. Many of the leases are subject to the provisions of a guaranty and subordination agreement that contains financial and affirmative covenants. We were in compliance with these covenants at December 31, 2018. Approximately 10% of these facility leases have payments that may vary based on interest rates. Future minimum lease payments for facility leases and future receipts from subleases as required under non-cancelable operating leases for both continuing and discontinued operations based on current interest rates in effect are as follows:
| Future Minimum Lease Payments, Net |  | Future Receipts from Subleases
Year Ending December 31, | (In thousands) |  |
2019 | $ | 89,162 |  | $ | (13,430)
2020 | $ | 73,188 |  | $ | (10,508)
2021 | $ | 58,858 |  | $ | (8,534)
2022 | $ | 44,526 |  | $ | (7,232)
2023 | $ | 41,095 |  | $ | (7,013)
Thereafter | $ | 175,265 |  | $ | (13,116)
Total lease expense for continuing operations for 2018, 2017 and 2016 was approximately $89.2 million, $100.6 million and $94.6 million, respectively. Total lease expense, net of lease exit accrual adjustments for discontinued operations for 2018, 2017 and 2016 was approximately $0.6 million, $1.3 million and $0.9 million, respectively. The total net contingent rent benefit related to a decrease in interest rates since the underlying leases commenced was approximately $1.6 million, $1.7 million and $1.8 million for continuing operations for 2018, 2017 and 2016, respectively, and was approximately $0.1 million for discontinued operations for each of 2018, 2017 and 2016. Many of our facility operating leases are subject to affirmative and financial covenant provisions related to a subordination and guaranty agreement executed with the landlord of many of our facility properties. The required financial covenants related to certain lease agreements are as follows:
| Covenant |  |  |  |  |  |
| Minimum Consolidated Liquidity Ratio |  | Minimum Consolidated Fixed Charge Coverage Ratio |  | Maximum Consolidated Total Lease Adjusted Leverage Ratio |  | Minimum EBTDAR to Rent Ratio
Required ratio | 1.05 |  | 1.20 |  | 5.75 |  | 1.50
December 31, 2018 actual | 1.10 |  | 1.43 |  | 5.25 |  | 3.36
Guarantees and Indemnifications In accordance with the terms of our operating lease agreements, our dealership subsidiaries, acting as lessees, generally agree to indemnify the lessor from certain exposure arising as a result of the use of the leased premises, including environmental exposure and repairs to leased property upon termination of the lease. In addition, we have generally agreed to indemnify the lessor in the event of a breach of the lease by the lessee. In connection with dealership dispositions and facility relocations, certain of our subsidiaries have assigned or sublet to the buyer their interests in real property leases associated with such dealerships. In general, the subsidiaries retain responsibility for the performance of certain obligations under such leases, including rent payments and repairs to leased property upon termination of the lease, to the extent that the assignee or sublessee does not perform. These obligations are included within the “Future Minimum Lease Payments, Net” column in the table above. In the event the assignees or sublessees do not perform their obligations, we remain liable for the lease payments. As of December 31, 2018, the total amount relating to this risk was approximately $59.8 million, which is the total of the “Future Receipts from Subleases” column in the table above. However, there are situations in which we have assigned a lease to the buyer and we were not able to obtain a release from the landlord. In these situations, although we are no longer the primary obligor, we are contingently liable if the buyer does not perform under the lease terms. However, in accordance with the terms of the assignment and sublease agreements, the assignees and sublessees have generally agreed to indemnify us and our subsidiaries in the event of non-performance. Additionally, in connection with certain dispositions, we have obtained indemnifications from the parent company or owners of these assignees and sublessees in the event of non-performance. In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreement. While our exposure with respect to environmental remediation and repairs is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $13.2 million at December 31, 2018. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at December 31, 2018. We also guarantee the floor plan commitments of our 50%-owned joint venture, the amount of which was approximately $4.3 million at December 31, 2018. Legal Matters We are involved, and expect to continue to be involved, in numerous legal and administrative proceedings arising out of the conduct of our business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although we vigorously defends ourselves in all legal and administrative proceedings, the outcomes of pending and future proceedings arising out of the conduct of our business, including litigation with customers, employment-related lawsuits, contractual disputes, class actions, purported class actions and actions brought by governmental authorities, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects. Included in other accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet at December 31, 2018 were approximately $2.4 million in reserves that we were holding for pending proceedings. Included in other accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheet at December 31, 2017 were approximately $3.2 million for such reserves. Except as reflected in such reserves, we are currently unable to estimate a range of reasonably possible loss, or a range of reasonably possible loss in excess of the amount accrued, for pending proceedings. Earnout Consideration In association with the acquisition of a business in 2017, we entered into an earnout agreement whereby the seller may be entitled to certain variable earnout payments, subject to certain restrictions, based on the acquired business achieving specified earnings targets over a 10-year period, not to exceed a maximum aggregate earnout payment of $80.0 million. We will recognize the accrual of any such variable earnout payments as compensation expense as earned. We have recorded approximately $23.3 million in earnout accruals as of December 31, 2018, with approximately $7.7 million and $15.6 million recorded in other accrued liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheets.

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