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These excerpts taken from the AN 10-K filed Feb 17, 2010. Restrictions and Covenants Our amended credit agreement, the indenture for our floating rate and 7% senior unsecured notes, our vehicle floorplan payable facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to declare cash dividends, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. For example, under the amended credit agreement, we are required to remain in compliance with a maximum consolidated leverage ratio (2.75:1), as defined. In March 2008, we amended our credit agreement to provide that non-cash impairment losses associated with goodwill and intangible assets as well as certain other non-cash charges would be excluded from the computation of the maximum consolidated leverage ratio. We are also required to remain in compliance with a maximum capitalization ratio (65%), as defined. In addition, the indenture for the floating rate and 7% senior unsecured notes contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2.00:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage. The indenture for our floating rate and 7% senior unsecured notes restricts our ability to make payments in connection with share repurchases, dividends, debt retirement, investments, and similar matters to a cumulative aggregate amount that is limited to $500.0 million plus 50% of our cumulative consolidated net income (as defined in the indenture) since April 1, 2006, the net proceeds of stock option exercises, and certain other items, subject to certain exceptions and conditions set forth in the indenture. Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation. As of December 31, 2009, we were in compliance with the requirements of all applicable financial covenants under our debt agreements; our consolidated leverage ratio was approximately 2.41:1 and our capitalization ratio was 52.7%, each as defined in our credit agreement. Both the consolidated leverage ratio and the capitalization ratio limit our ability to incur additional non-vehicle debt. The capitalization ratio also limits our ability to incur additional floorplan indebtedness. To the extent that in the future we believe that we will be unable to comply with the covenants in our amended credit agreement, we will seek an amendment or waiver of our amended credit agreement, which could increase the cost of our debt. We may also consider other options, such as raising capital through an equity issuance to pay down debt, which could be dilutive to stockholders. See the risk factor “Our revolving credit facility, term loan facility, mortgage facility, and the indenture relating to our senior unsecured notes contain certain financial ratios and other restrictions on our ability to conduct our business” in Part I, Item 1A, of this Form 10-K. In the event of a downgrade in our credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the indenture for the floating rate and 7% senior unsecured notes would be eliminated with an upgrade of our senior unsecured notes to investment grade by either Standard & Poor’s or Moody’s.
47
Table of ContentsRestrictions and Covenants Our amended credit agreement, the indenture for our floating rate and 7% senior unsecured notes, our vehicle floorplan payable facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to declare cash dividends, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. For example, under the amended credit agreement, we are required to remain in compliance with a maximum consolidated leverage ratio (2.75:1), as defined. In March 2008, we amended our credit agreement to provide that non-cash impairment losses associated with goodwill and intangible assets as well as certain other non-cash charges would be excluded from the computation of the maximum consolidated leverage ratio. We are also required to remain in compliance with a maximum capitalization ratio (65%), as defined. In addition, the indenture for the floating rate and 7% senior unsecured notes contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2.00:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage. Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation. In the event of a downgrade in our senior unsecured credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the indenture for the floating rate and 7% senior unsecured notes would be eliminated with an upgrade of our senior unsecured credit ratings to investment grade by either Standard & Poor’s or Moody’s. At December 31, 2009, aggregate maturities of notes payable and long-term debt, excluding vehicle floorplan payable, were as follows:
These excerpts taken from the AN 10-K filed Feb 17, 2009. Restrictions
and Covenants
Our amended credit agreement, the indenture for our floating
rate and 7% senior unsecured notes, our vehicle floorplan
payable facilities, and our mortgage facility contain numerous
customary financial and operating covenants that place
significant restrictions on us, including our ability to incur
additional indebtedness or prepay existing indebtedness, to
declare cash dividends, to create liens or other encumbrances,
to sell (or otherwise dispose of) assets, and to merge or
consolidate with other entities.
For example, under the amended credit agreement, we are required
to remain in compliance with a maximum consolidated leverage
ratio, as defined (3.0 times through September 30, 2009,
after which it will revert to 2.75 times). In March 2008,
we amended our credit agreement to provide that non-cash
impairment losses associated with goodwill and intangible assets
as well as certain other non-cash charges would be excluded from
the computation of the maximum consolidated leverage ratio. We
are also required to remain in compliance with a maximum
capitalization ratio (65%), as defined.
In addition, the indenture for the floating rate and
7% senior unsecured notes contains a debt incurrence
restriction based on a minimum fixed charge coverage ratio
(2:1), and the mortgage facility contains covenants regarding
maximum cash flow leverage and minimum interest coverage.
The indenture for our floating rate and 7% senior unsecured
notes restricts our ability to make payments in connection with
share repurchases, dividends, debt retirement, investments, and
similar matters to a cumulative aggregate amount that is limited
to $500.0 million plus 50% of our cumulative consolidated
net income (as defined in the indenture) since April 1,
2006, the net proceeds of stock option exercises, and certain
other items, subject to certain exceptions and conditions set
forth in the indenture.
Our failure to comply with the covenants contained in our debt
agreements could permit acceleration of all of our indebtedness.
Our debt agreements have cross-default provisions that trigger a
default in the event of an uncured default under other material
indebtedness of AutoNation.
During 2008, we recorded impairment charges of
$1.76 billion ($1.46 billion after-tax) associated
with goodwill and franchise rights. See Note 5 of the Notes
to Consolidated Financial Statements. Despite these impairment
charges, as of December 31, 2008, we were in compliance
with the requirements of all applicable financial covenants
under our debt agreements. As of December 31, 2008, under
our amended credit agreement, our consolidated leverage ratio
was approximately 2.45 to 1, as defined in our credit agreement.
Our capitalization ratio was adversely impacted by the
impairment charges, and as of December 31, 2008, this ratio
was approximately 59.7%, as defined in our credit agreement.
Both the consolidated leverage ratio and the capitalization
ratio limit our ability to incur additional non-vehicle debt.
The capitalization ratio also limits our ability to incur
additional floorplan indebtedness.
Our liquidity and capital resource strategies are currently
focused on generating cash and paying down debt to remain in
compliance with the financial covenants in our debt agreements.
To the extent that in the future we believe that we will be
unable to comply with the covenants in our amended credit
agreement, we will seek an amendment or waiver of our amended
credit agreement, which could increase the cost of our debt. We
may also consider other options, such as raising capital through
an equity issuance to pay down debt, which could be dilutive to
stockholders. See the risk factor “Our revolving credit
facility, term loan facility, mortgage facility, and the
indenture relating to our senior unsecured notes contain certain
financial ratios and other restrictions on our ability to
conduct our business” in Part I, Item 1A, of
this
Form 10-K.
In the event of a downgrade in our credit ratings, none of the
covenants described above would be impacted. In addition,
availability under the amended credit agreement described above
would not be impacted should a downgrade in the senior unsecured
debt credit ratings occur. Certain covenants in the indenture
for the floating rate and 7% senior unsecured notes would
be eliminated with an upgrade of our senior unsecured notes to
investment grade by either Standard & Poor’s or
Moody’s.
Restrictions and Covenants Our amended credit agreement, the indenture for our floating rate and 7% senior unsecured notes, our vehicle floorplan payable facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to declare cash dividends, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. For example, under the amended credit agreement, we are required to remain in compliance with a maximum consolidated leverage ratio, as defined (3.0 times through September 30, 2009, after which it will revert to 2.75 times). In March 2008, we amended our credit agreement to provide that non-cash impairment losses associated with goodwill and intangible assets as well as certain other non-cash charges would be excluded from the computation of the maximum consolidated leverage ratio. We are also required to remain in compliance with a maximum capitalization ratio (65%), as defined. In addition, the indenture for the floating rate and 7% senior unsecured notes contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage. The indenture for our floating rate and 7% senior unsecured notes restricts our ability to make payments in connection with share repurchases, dividends, debt retirement, investments, and similar matters to a cumulative aggregate amount that is limited to $500.0 million plus 50% of our cumulative consolidated net income (as defined in the indenture) since April 1, 2006, the net proceeds of stock option exercises, and certain other items, subject to certain exceptions and conditions set forth in the indenture. Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation.
During 2008, we recorded impairment charges of $1.76 billion ($1.46 billion after-tax) associated with goodwill and franchise rights. See Note 5 of the Notes to Consolidated Financial Statements. Despite these impairment charges, as of December 31, 2008, we were in compliance with the requirements of all applicable financial covenants under our debt agreements. As of December 31, 2008, under our amended credit agreement, our consolidated leverage ratio was approximately 2.45 to 1, as defined in our credit agreement. Our capitalization ratio was adversely impacted by the impairment charges, and as of December 31, 2008, this ratio was approximately 59.7%, as defined in our credit agreement. Both the consolidated leverage ratio and the capitalization ratio limit our ability to incur additional non-vehicle debt. The capitalization ratio also limits our ability to incur additional floorplan indebtedness. Our liquidity and capital resource strategies are currently focused on generating cash and paying down debt to remain in compliance with the financial covenants in our debt agreements. To the extent that in the future we believe that we will be unable to comply with the covenants in our amended credit agreement, we will seek an amendment or waiver of our amended credit agreement, which could increase the cost of our debt. We may also consider other options, such as raising capital through an equity issuance to pay down debt, which could be dilutive to stockholders. See the risk factor “Our revolving credit facility, term loan facility, mortgage facility, and the indenture relating to our senior unsecured notes contain certain financial ratios and other restrictions on our ability to conduct our business” in Part I, Item 1A, of this Form 10-K. In the event of a downgrade in our credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the indenture for the floating rate and 7% senior unsecured notes would be eliminated with an upgrade of our senior unsecured notes to investment grade by either Standard & Poor’s or Moody’s. Restrictions
and Covenants
Our amended credit agreement, the indenture for our floating
rate and 7% senior unsecured notes, our vehicle floorplan
payable facilities, and our mortgage facility contain numerous
customary financial and operating covenants that place
significant restrictions on us, including our ability to incur
additional indebtedness or prepay existing indebtedness, to
declare cash dividends, to create liens or other encumbrances,
to sell (or otherwise dispose of) assets, and to merge or
consolidate with other entities.
For example, under the amended credit agreement, we are required
to remain in compliance with a maximum consolidated leverage
ratio, as defined (3.0 times through September 30, 2009,
after which it will revert to 2.75 times). In March 2008, we
amended our credit agreement to provide that non-cash impairment
losses associated with goodwill and intangible assets as well as
certain other non-cash charges would be excluded from the
computation of the maximum consolidated leverage ratio. We are
also required to remain in compliance with a maximum
capitalization ratio (65%), as defined.
In addition, the indenture for the floating rate and
7% senior unsecured notes contains a debt incurrence
restriction based on a minimum fixed charge coverage ratio
(2:1), and the mortgage facility contains covenants regarding
maximum cash flow leverage and minimum interest coverage.
Our failure to comply with the covenants contained in our debt
agreements could permit acceleration of all of our indebtedness.
Our debt agreements have cross-default provisions that trigger a
default in the event of an uncured default under other material
indebtedness of AutoNation.
In the event of a downgrade in our senior unsecured credit
ratings, none of the covenants described above would be
impacted. In addition, availability under the amended credit
agreement described above would not be impacted should a
downgrade in the senior unsecured debt credit ratings occur.
Certain covenants in the
AUTONATION,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
indenture for the floating rate and 7% senior unsecured
notes would be eliminated with an upgrade of our senior
unsecured credit ratings to investment grade by either
Standard & Poor’s or Moody’s.
At December 31, 2008, aggregate maturities of notes payable
and long-term debt, excluding vehicle floorplan payable, were as
follows:
Restrictions and Covenants Our amended credit agreement, the indenture for our floating rate and 7% senior unsecured notes, our vehicle floorplan payable facilities, and our mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to declare cash dividends, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. For example, under the amended credit agreement, we are required to remain in compliance with a maximum consolidated leverage ratio, as defined (3.0 times through September 30, 2009, after which it will revert to 2.75 times). In March 2008, we amended our credit agreement to provide that non-cash impairment losses associated with goodwill and intangible assets as well as certain other non-cash charges would be excluded from the computation of the maximum consolidated leverage ratio. We are also required to remain in compliance with a maximum capitalization ratio (65%), as defined. In addition, the indenture for the floating rate and 7% senior unsecured notes contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage. Our failure to comply with the covenants contained in our debt agreements could permit acceleration of all of our indebtedness. Our debt agreements have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation. In the event of a downgrade in our senior unsecured credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the
AUTONATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) indenture for the floating rate and 7% senior unsecured notes would be eliminated with an upgrade of our senior unsecured credit ratings to investment grade by either Standard & Poor’s or Moody’s. At December 31, 2008, aggregate maturities of notes payable and long-term debt, excluding vehicle floorplan payable, were as follows:
These excerpts taken from the AN 10-K filed Feb 28, 2008. Restrictions
and Covenants
Our senior unsecured notes issued in April 2006, credit
agreement, and mortgage facility contain numerous customary
financial and operating covenants that place significant
restrictions on us, including our ability to incur additional
indebtedness or prepay existing indebtedness, to create liens or
other encumbrances, to sell (or otherwise dispose of) assets,
and to merge or consolidate with other entities.
The indenture for our senior unsecured notes issued in April
2006 restricts our ability to make payments in connection with
share repurchases, dividends, debt retirement, investments, and
similar matters to a cumulative aggregate amount that is limited
to $500.0 million plus 50% of our cumulative consolidated
net income (as defined in the indenture) since April 1,
2006, the net proceeds of stock option exercises, and certain
other items, subject to certain exceptions and conditions set
forth in the indenture. As of December 31, 2007, the
amended credit agreement requires us to meet certain financial
covenants, as defined, requiring the
Table of Contents
AUTONATION,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —
(Continued)
maintenance of a maximum consolidated leverage ratio, as defined
(3.0 times through September 30, 2009, after which it will
revert to 2.75 times), and a maximum capitalization ratio (65%),
as defined. In addition, the indenture for the senior unsecured
notes issued in April 2006 contains a debt incurrence
restriction based on a minimum fixed charge coverage ratio
(2:1), and the mortgage facility contains covenants regarding
maximum cash flow leverage and minimum interest coverage.
In the event that we were to default in the observance or
performance of any of the financial covenants in the amended
credit agreement or mortgage facility and such default were to
continue beyond any cure period or waiver, the lender under the
respective facility could elect to terminate the facilities and
declare all outstanding obligations under such facilities
immediately payable. Our amended credit agreement, the indenture
for our senior unsecured notes issued in April 2006, our vehicle
floorplan payable facilities, and our mortgage facility have
cross-default provisions that trigger a default in the event of
an uncured default under other material indebtedness of
AutoNation. As of December 31, 2007, we were in compliance
with the requirements of all applicable financial and operating
covenants.
In the event of a downgrade in our credit ratings, none of the
covenants described above would be impacted. In addition,
availability under the amended credit agreement described above
would not be impacted should a downgrade in the senior unsecured
debt credit ratings occur. Certain covenants in the indenture
for the senior unsecured notes issued in April 2006 would be
eliminated with an upgrade of our senior unsecured notes to
investment grade by either Standard & Poor’s or
Moody’s Investors Services.
At December 31, 2007, aggregate maturities of notes payable
and long-term debt, excluding vehicle floorplan payable, were as
follows:
Restrictions and Covenants Our senior unsecured notes issued in April 2006, credit agreement, and mortgage facility contain numerous customary financial and operating covenants that place significant restrictions on us, including our ability to incur additional indebtedness or prepay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets, and to merge or consolidate with other entities. The indenture for our senior unsecured notes issued in April 2006 restricts our ability to make payments in connection with share repurchases, dividends, debt retirement, investments, and similar matters to a cumulative aggregate amount that is limited to $500.0 million plus 50% of our cumulative consolidated net income (as defined in the indenture) since April 1, 2006, the net proceeds of stock option exercises, and certain other items, subject to certain exceptions and conditions set forth in the indenture. As of December 31, 2007, the amended credit agreement requires us to meet certain financial covenants, as defined, requiring the
Table of ContentsAUTONATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) maintenance of a maximum consolidated leverage ratio, as defined (3.0 times through September 30, 2009, after which it will revert to 2.75 times), and a maximum capitalization ratio (65%), as defined. In addition, the indenture for the senior unsecured notes issued in April 2006 contains a debt incurrence restriction based on a minimum fixed charge coverage ratio (2:1), and the mortgage facility contains covenants regarding maximum cash flow leverage and minimum interest coverage. In the event that we were to default in the observance or performance of any of the financial covenants in the amended credit agreement or mortgage facility and such default were to continue beyond any cure period or waiver, the lender under the respective facility could elect to terminate the facilities and declare all outstanding obligations under such facilities immediately payable. Our amended credit agreement, the indenture for our senior unsecured notes issued in April 2006, our vehicle floorplan payable facilities, and our mortgage facility have cross-default provisions that trigger a default in the event of an uncured default under other material indebtedness of AutoNation. As of December 31, 2007, we were in compliance with the requirements of all applicable financial and operating covenants. In the event of a downgrade in our credit ratings, none of the covenants described above would be impacted. In addition, availability under the amended credit agreement described above would not be impacted should a downgrade in the senior unsecured debt credit ratings occur. Certain covenants in the indenture for the senior unsecured notes issued in April 2006 would be eliminated with an upgrade of our senior unsecured notes to investment grade by either Standard & Poor’s or Moody’s Investors Services. At December 31, 2007, aggregate maturities of notes payable and long-term debt, excluding vehicle floorplan payable, were as follows:
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