AutoNation 2007 Annual Report Download - page 64
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Table of Contents
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:
Year Ending December 31:
2008 $ 23.9
2009 22.4
2010 42.9
2011 8.0
2012 868.5
Thereafter 810.1
$ 1,775.8
Legal Proceedings
We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business, including
litigation with customers, employment related lawsuits, class actions, purported class actions, and actions brought by governmental authorities.
We are a party to numerous legal proceedings that arose in the conduct of our business. We do not believe that the ultimate resolution of these
matters will have a material adverse effect on our results of operations, financial condition, or cash flows. However, the results of these matters
cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our
financial condition, results of operations, and cash flows.
Lease Commitments
We lease real property, equipment, and software under various operating leases most of which have terms from one to twenty years. We
account for leases under SFAS No. 13, “Accounting for Leases”, and other related authoritative literature.
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