Attached files
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EX-32.2 - EXHIBIT 32.2 - LITHIA MOTORS INC | ex32-2.htm |
EX-32.1 - EXHIBIT 32.1 - LITHIA MOTORS INC | ex32-1.htm |
EX-31.2 - EXHIBIT 31.2 - LITHIA MOTORS INC | ex31-2.htm |
EX-31.1 - EXHIBIT 31.1 - LITHIA MOTORS INC | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q |
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-14733
LITHIA MOTORS, INC. | |||
(Exact name of registrant as specified in its charter) | |||
Oregon |
93-0572810 | ||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | ||
150 N. Bartlett Street, Medford, Oregon | 97501 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant's telephone number, including area code: 541-776-6401 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class A common stock without par value |
|
23,694,039 |
Class B common stock without par value |
2,562,231 | |
(Class) |
(Outstanding at October 30, 2015) |
LITHIA MOTORS, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION |
Page | |
Item 1. |
Financial Statements |
2 |
Consolidated Balance Sheets (Unaudited) – September 30, 2015 and December 31, 2014 |
2 | |
Consolidated Statements of Operations (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014 |
3 | |
Consolidated Statements of Comprehensive Income (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014 |
4 | |
Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2015 and 2014 |
5 | |
Condensed Notes to Consolidated Financial Statements (Unaudited) |
6 | |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
48 |
Item 4. |
Controls and Procedures |
49 |
PART II - OTHER INFORMATION |
||
Item 1A. |
Risk Factors |
49 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
50 |
Item 6. |
Exhibits |
50 |
Signatures |
51 |
LITHIA MOTORS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, |
December 31, |
|||||||
2015 |
2014 |
|||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 32,707 | $ | 29,898 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,474 and $2,191 |
285,730 | 295,379 | ||||||
Inventories, net |
1,386,960 | 1,249,659 | ||||||
Other current assets |
32,640 | 32,010 | ||||||
Assets held for sale |
- | 8,563 | ||||||
Total Current Assets |
1,738,037 | 1,615,509 | ||||||
Property and equipment, net of accumulated depreciation of $135,365 and $117,679 |
854,077 | 816,745 | ||||||
Goodwill |
210,627 | 199,375 | ||||||
Franchise value |
155,187 | 150,892 | ||||||
Other non-current assets |
101,901 | 98,411 | ||||||
Total Assets |
$ | 3,059,829 | $ | 2,880,932 | ||||
Liabilities and Stockholders' Equity |
||||||||
Current Liabilities: |
||||||||
Floor plan notes payable |
$ | 46,651 | $ | 41,047 | ||||
Floor plan notes payable: non-trade |
1,168,223 | 1,137,632 | ||||||
Current maturities of long-term debt |
38,745 | 31,912 | ||||||
Trade payables |
77,723 | 70,853 | ||||||
Accrued liabilities |
167,135 | 153,661 | ||||||
Deferred income taxes |
3,792 | 2,603 | ||||||
Liabilities related to assets held for sale |
- | 4,892 | ||||||
Total Current Liabilities |
1,502,269 | 1,442,600 | ||||||
Long-term debt, less current maturities |
591,231 | 609,066 | ||||||
Deferred revenue |
63,238 | 54,403 | ||||||
Deferred income taxes |
29,013 | 42,795 | ||||||
Other long-term liabilities |
86,365 | 58,963 | ||||||
Total Liabilities |
2,272,116 | 2,207,827 | ||||||
Stockholders' Equity: |
||||||||
Preferred stock - no par value; authorized 15,000 shares; none outstanding |
- | - | ||||||
Class A common stock - no par value; authorized 100,000 shares; issued and outstanding 23,742 and 23,671 |
263,531 | 276,058 | ||||||
Class B common stock - no par value; authorized 25,000 shares; issued and outstanding 2,562 and 2,562 |
319 | 319 | ||||||
Additional paid-in capital |
35,917 | 29,775 | ||||||
Accumulated other comprehensive loss |
(461 | ) | (926 | ) | ||||
Retained earnings |
488,407 | 367,879 | ||||||
Total Stockholders' Equity |
787,713 | 673,105 | ||||||
Total Liabilities and Stockholders' Equity |
$ | 3,059,829 | $ | 2,880,932 |
See accompanying condensed notes to consolidated financial statements.
LITHIA MOTORS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Revenues: |
||||||||||||||||
New vehicle |
$ | 1,227,080 | $ | 732,121 | $ | 3,384,408 | $ | 2,006,127 | ||||||||
Used vehicle retail |
505,885 | 340,522 | 1,457,617 | 952,890 | ||||||||||||
Used vehicle wholesale |
69,472 | 48,853 | 198,476 | 135,832 | ||||||||||||
Finance and insurance |
76,633 | 46,855 | 213,700 | 130,324 | ||||||||||||
Service, body and parts |
189,796 | 120,772 | 545,966 | 339,726 | ||||||||||||
Fleet and other |
15,979 | 7,988 | 70,803 | 32,120 | ||||||||||||
Total revenues |
2,084,845 | 1,297,111 | 5,870,970 | 3,597,019 | ||||||||||||
Cost of sales: |
||||||||||||||||
New vehicle |
1,149,923 | 684,473 | 3,176,135 | 1,873,461 | ||||||||||||
Used vehicle retail |
443,598 | 296,624 | 1,273,195 | 824,129 | ||||||||||||
Used vehicle wholesale |
68,892 | 48,349 | 194,329 | 132,493 | ||||||||||||
Service, body and parts |
95,846 | 62,351 | 276,828 | 174,291 | ||||||||||||
Fleet and other |
15,399 | 7,474 | 68,272 | 30,444 | ||||||||||||
Total cost of sales |
1,773,658 | 1,099,271 | 4,988,759 | 3,034,818 | ||||||||||||
Gross profit |
311,187 | 197,840 | 882,211 | 562,201 | ||||||||||||
Asset impairments |
4,131 | - | 14,391 | - | ||||||||||||
Selling, general and administrative |
223,728 | 131,627 | 610,956 | 378,919 | ||||||||||||
Depreciation and amortization |
10,531 | 6,067 | 30,544 | 17,399 | ||||||||||||
Operating income |
72,797 | 60,146 | 226,320 | 165,883 | ||||||||||||
Floor plan interest expense |
(4,951 | ) | (3,127 | ) | (14,255 | ) | (9,326 | ) | ||||||||
Other interest expense |
(4,900 | ) | (2,051 | ) | (14,700 | ) | (5,894 | ) | ||||||||
Other (expense) income, net |
(307 | ) | 1,027 | (1,031 | ) | 3,110 | ||||||||||
Income from continuing operations before income taxes |
62,639 | 55,995 | 196,334 | 153,773 | ||||||||||||
Income tax provision |
(19,248 | ) | (21,458 | ) | (61,067 | ) | (59,372 | ) | ||||||||
Income from continuing operations, net of income tax |
43,391 | 34,537 | 135,267 | 94,401 | ||||||||||||
Income from discontinued operations, net of income tax |
- | - | - | 3,179 | ||||||||||||
Net income |
$ | 43,391 | $ | 34,537 | $ | 135,267 | $ | 97,580 | ||||||||
Basic income per share from continuing operations |
$ | 1.65 | $ | 1.32 | $ | 5.14 | $ | 3.62 | ||||||||
Basic income per share from discontinued operations |
- | - | - | 0.12 | ||||||||||||
Basic net income per share |
$ | 1.65 | $ | 1.32 | $ | 5.14 | $ | 3.74 | ||||||||
Shares used in basic per share calculations |
26,289 | 26,118 | 26,304 | 26,071 | ||||||||||||
Diluted income per share from continuing operations |
$ | 1.64 | $ | 1.31 | $ | 5.10 | $ | 3.58 | ||||||||
Diluted income per share from discontinued operations |
- | - | - | 0.13 | ||||||||||||
Diluted net income per share |
$ | 1.64 | $ | 1.31 | $ | 5.10 | $ | 3.71 | ||||||||
Shares used in diluted per share calculations |
26,480 | 26,359 | 26,500 | 26,337 |
See accompanying condensed notes to consolidated financial statements.
LITHIA MOTORS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Net income |
$ | 43,391 | $ | 34,537 | $ | 135,267 | $ | 97,580 | ||||||||
Other comprehensive income, net of tax: |
||||||||||||||||
Gain on cash flow hedges, net of tax expense of $103, $114, $283, and $288 respectively |
161 | 184 | 465 | 463 | ||||||||||||
Comprehensive income |
$ | 43,552 | $ | 34,721 | $ | 135,732 | $ | 98,043 |
See accompanying condensed notes to consolidated financial statements.
LITHIA MOTORS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2015 |
2014 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 135,267 | $ | 97,580 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Asset impairments |
14,391 | - | ||||||
Depreciation and amortization |
30,544 | 17,399 | ||||||
Stock-based compensation |
8,579 | 5,054 | ||||||
Loss on disposal of other assets |
27 | 307 | ||||||
Gain on disposal of franchise |
(5,919 | ) | (5,744 | ) | ||||
Deferred income taxes |
(7,955 | ) | 4,725 | |||||
Excess tax benefit from share-based payment arrangements |
(4,923 | ) | (6,160 | ) | ||||
(Increase) decrease (net of acquisitions and dispositions): |
||||||||
Trade receivables, net |
9,685 | (11,336 | ) | |||||
Inventories |
(132,407 | ) | (44,349 | ) | ||||
Other assets |
(5,339 | ) | (13,700 | ) | ||||
Increase (decrease) (net of acquisitions and dispositions): |
||||||||
Floor plan notes payable |
5,604 | 1,132 | ||||||
Trade payables |
7,768 | 4,246 | ||||||
Accrued liabilities |
16,949 | 21,913 | ||||||
Other long-term liabilities and deferred revenue |
34,651 | 16,635 | ||||||
Net cash provided by operating activities |
106,922 | 87,702 | ||||||
Cash flows from investing activities: |
||||||||
Principal payments received on notes receivable |
- | 2,882 | ||||||
Capital expenditures |
(62,159 | ) | (54,149 | ) | ||||
Proceeds from sales of assets |
229 | 3,243 | ||||||
Cash paid for other investments |
(20,693 | ) | (3,385 | ) | ||||
Cash paid for acquisitions, net of cash acquired |
(34,920 | ) | (81,558 | ) | ||||
Proceeds from sales of stores |
12,966 | 10,617 | ||||||
Net cash used in investing activities |
(104,577 | ) | (122,350 | ) | ||||
Cash flows from financing activities: |
||||||||
Borrowings on floor plan notes payable, net: non-trade |
36,204 | 30,375 | ||||||
Borrowings on lines of credit |
878,340 | 836,156 | ||||||
Repayments on lines of credit |
(939,817 | ) | (891,000 | ) | ||||
Principal payments on long-term debt, scheduled |
(11,048 | ) | (5,528 | ) | ||||
Principal payments on long-term debt and capital leases, other |
(9,189 | ) | - | |||||
Proceeds from issuance of long-term debt |
75,675 | 76,530 | ||||||
Proceeds from issuance of common stock |
4,313 | 3,411 | ||||||
Repurchase of common stock |
(24,198 | ) | (11,745 | ) | ||||
Excess tax benefit from share-based payment arrangements |
4,923 | 6,160 | ||||||
Dividends paid |
(14,739 | ) | (11,731 | ) | ||||
Net cash provided by financing activities |
464 | 32,628 | ||||||
Increase (decrease) in cash and cash equivalents |
2,809 | (2,020 | ) | |||||
Cash and cash equivalents at beginning of period |
29,898 | 23,686 | ||||||
Cash and cash equivalents at end of period |
$ | 32,707 | $ | 21,666 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for interest |
$ | 31,140 | $ | 15,556 | ||||
Cash paid during the period for income taxes, net |
50,917 | 44,918 | ||||||
Supplemental schedule of non-cash activities: |
||||||||
Debt issued in connection with acquisitions |
$ | 2,160 | $ | 3,161 | ||||
Floor plan debt paid in connection with store disposals |
4,400 | 3,311 |
See accompanying condensed notes to consolidated financial statements.
LITHIA MOTORS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Interim Financial Statements
Basis of Presentation
These condensed Consolidated Financial Statements contain unaudited information as of September 30, 2015 and for the three- and nine-month periods ended September 30, 2015 and 2014. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2014 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2014 is derived from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2015. The interim condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our 2014 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current presentation of our financial information. This reclassification was limited to our definition of segment income, which is currently income from continuing operations before taxes less depreciation and amortization, other interest expense and other (expense) income, net. Specifically, we defined intercompany charges and no longer include depreciation and amortization, other interest expense and other (expense) income, net as a component of segment income. These reclassifications had no effect on previously reported net income.
Note 2. Accounts Receivable
Accounts receivable consisted of the following (in thousands):
September 30, |
December 31, 2014 |
|||||||
Contracts in transit |
$ | 147,729 | $ | 162,785 | ||||
Trade receivables |
33,567 | 37,194 | ||||||
Vehicle receivables |
33,429 | 34,876 | ||||||
Manufacturer receivables |
61,144 | 56,008 | ||||||
Auto loan receivables |
34,943 | 25,424 | ||||||
Other receivables |
4,494 | 4,554 | ||||||
315,306 | 320,841 | |||||||
Less: Allowances |
(2,701 | ) | (3,130 | ) | ||||
Less: Long-term portion of accounts receivable, net |
(26,875 | ) | (22,332 | ) | ||||
Total accounts receivable, net |
$ | 285,730 | $ | 295,379 |
Accounts receivable classifications include the following:
● |
Contracts in transit are receivables from various lenders for the financing of vehicles that we have arranged on behalf of the customer and are typically received within five to ten days of selling a vehicle. |
● |
Trade receivables are comprised of amounts due from customers, lenders for the commissions earned on financing and others for commissions earned on service contracts and insurance products. |
● |
Vehicle receivables represent receivables for the portion of the vehicle sales price paid directly by the customer. |
● |
Manufacturer receivables represent amounts due from manufacturers, including holdbacks, rebates, incentives and warranty claims. |
● |
Auto loan receivables include amounts due from customers related to retail sales of vehicles and certain finance and insurance products. |
Interest income on auto loan receivables is recognized based on the contractual terms of each loan and is accrued until repayment, charge-off or repossession. Direct costs associated with loan originations are capitalized and expensed as an offset to interest income when recognized on the loans. All other receivables are recorded at invoice and do not bear interest until they are 60 days past due.
The allowance for doubtful accounts is estimated based on our historical write-off experience and is reviewed monthly. Consideration is given to recent delinquency trends and recovery rates. Account balances are charged against the allowance after all appropriate means of collection have been exhausted and the potential for recovery is considered remote. The annual activity for charges and subsequent recoveries is immaterial.
The long-term portion of accounts receivable, net, was included as a component of other non-current assets in the Consolidated Balance Sheets.
Note 3. Inventories
The components of inventories, net, consisted of the following (in thousands):
September 30, 2015 |
December 31, 2014 |
|||||||
New vehicles |
$ | 1,036,022 | $ | 958,876 | ||||
Used vehicles |
298,954 | 240,908 | ||||||
Parts and accessories |
51,984 | 49,875 | ||||||
Total inventories |
$ | 1,386,960 | $ | 1,249,659 |
Note 4. Goodwill and Franchise Value
The changes in the carrying amounts of goodwill are as follows (in thousands):
Domestic |
Import |
Luxury |
Consolidated |
|||||||||||||
Balance as of December 31, 2013(1) |
$ | 22,548 | $ | 16,797 | $ | 10,166 | $ | 49,511 | ||||||||
Additions through acquisitions |
68,463 | 62,804 | 18,597 | 149,864 | ||||||||||||
Balance as of December 31, 2014(1) |
91,011 | 79,601 | 28,763 | 199,375 | ||||||||||||
Additions through acquisitions |
5,825 | 3,870 | 1,803 | 11,498 | ||||||||||||
Reduction related to divestiture |
- | (246 | ) | - | (246 | ) | ||||||||||
Balance as of September 30, 2015(1) |
$ | 96,836 | $ | 83,225 | $ | 30,566 | $ | 210,627 |
(1) |
Net of accumulated impairment losses of $299.3 million recorded during the year ended December 31, 2008. |
The changes in the carrying amounts of franchise value are as follows (in thousands):
Franchise Value |
||||
Balance as of December 31, 2013 |
$ | 71,199 | ||
Additions through acquisitions |
80,233 | |||
Transfers to assets held for sale |
(540 | ) | ||
Balance as of December 31, 2014 |
150,892 | |||
Additions through acquisitions |
4,331 | |||
Reduction related to divestiture |
(36 | ) | ||
Balance as of September 30, 2015 |
$ | 155,187 |
Note 5. Stockholders’ Equity
Reclassification From Accumulated Other Comprehensive Loss
The reclassification from accumulated other comprehensive loss was as follows (in thousands):
Three Months Ended |
Affected Line Item in the Consolidated Statements | |||||||||
2015 |
2014 |
of Operations | ||||||||
Loss on cash flow hedges |
$ | (104 | ) | $ | (119 | ) |
Floor plan interest expense | |||
Taxes |
40 | 46 |
Income tax provision | |||||||
Loss on cash flow hedges, net |
$ | (64 | ) | $ | (73 | ) |
Nine Months Ended |
Affected Line Item in the Consolidated Statements | |||||||||
2015 |
2014 |
of Operations | ||||||||
Loss on cash flow hedges |
$ | (336 | ) | $ | (370 | ) |
Floor plan interest expense | |||
Taxes |
131 | 141 |
Income tax provision | |||||||
Loss on cash flow hedges, net |
$ | (205 | ) | $ | (229 | ) |
See Note 8 for more details regarding our derivative contracts.
Repurchases of Class A Common Stock
In August 2011, our Board of Directors authorized the repurchase of up to 2,000,000 shares of our Class A common stock and, on July 20, 2012, our Board of Directors authorized the repurchase of 1,000,000 additional shares of our Class A common stock. Through September 30, 2015, we have repurchased 1,664,613 shares under this program at an average price of $38.51 per share. Of this amount, 164,837 shares were repurchased during the first nine months of 2015 at an average price of $105.15 per share for a total of $17.3 million. As of September 30, 2015, 1,335,387 shares remained available for repurchase pursuant to this program. The authority to repurchase does not have an expiration date.
In addition, during the first nine months of 2015, we repurchased 77,596 shares at an average price of $88.48 per share, for a total of $6.9 million, related to tax withholdings associated with the vesting of restricted stock units (“RSUs”). The repurchase of shares related to tax withholdings associated with stock awards does not reduce the number of shares available for repurchase as approved by our Board of Directors.
Dividends
Dividends paid on our Class A and Class B common stock were as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Dividend amount per share |
$ | 0.20 | $ | 0.16 | $ | 0.56 | $ | 0.45 | ||||||||
Total amount of dividend (in thousands) |
5,257 | 4,174 | 14,739 | 11,731 |
See Note 16 for a discussion of a dividend related to our third quarter 2015 financial results.
Note 6. Deferred Compensation and Long-Term Incentive Plan
We offer a deferred compensation and long-term incentive plan (the “LTIP”) to provide certain employees the ability to accumulate assets for retirement on a tax-deferred basis. We may make discretionary contributions to the LTIP. Discretionary contributions vest over one to seven years depending on the employee’s age and position. Additionally, a participant may defer a portion of his or her compensation and receive the deferred amount upon certain events, including termination or retirement. The following is a summary related to our LTIP (dollars in thousands):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Compensation expense |
$ | 450 | $ | 381 | $ | 1,369 | $ | 1,458 | ||||||||
Discretionary contribution |
- | 350 | 2,249 | 2,450 | ||||||||||||
Guaranteed annual return |
5.25 | % | 5.25 | % | 5.25 | % | 5.25 | % |
As of September 30, 2015 and December 31, 2014, the balance due to participants was $17.7 million and $14.2 million, respectively, and was included as a component of accrued liabilities and other long-term liabilities in the Consolidated Balance Sheets.
Note 7. Fair Value Measurements
Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:
● |
Level 1 – quoted prices in active markets for identical securities; |
● |
Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment spreads, credit risk; and |
● |
Level 3 – significant unobservable inputs, including our own assumptions in determining fair value. |
The inputs or methodology used for valuing financial assets and liabilities are not necessarily an indication of the risk associated with investing in them.
We use the income approach to determine the fair value of our interest rate swap using observable Level 2 market expectations at each measurement date and an income approach to convert estimated future cash flows to a single present value amount (discounted) assuming that participants are motivated, but not compelled, to transact. Level 2 inputs for the swap valuation are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for fair value measurements. Key inputs, including the cash rates for very short term borrowings, futures rates for up to two years and LIBOR swap rates beyond the derivative maturity, are used to predict future reset rates to discount those future cash flows to present value at the measurement date.
Inputs are collected from Bloomberg on the last market day of the period and used to determine the rate applied to discount the future cash flows. The valuation of the interest rate swap also takes into consideration estimates of our own, as well as the counterparty’s, risk of non-performance under the contract. See Note 8 for more details regarding our derivative contracts.
We estimate the value of our equity-method investment which is recorded at fair value on a non-recurring basis based on a market valuation approach. We use prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets. Because these valuations contain unobservable inputs, we classified the measurement of fair value of our equity-method investment as Level 3.
We estimate the value of long-lived assets that are recorded at fair value based on a market valuation approach. We use prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets, as well as our historical experience in divestitures, acquisitions and real estate transactions. Additionally, we may use a cost valuation approach to value long-lived assets when a market valuation approach is unavailable. Under this approach, we determine the cost to replace the service capacity of an asset, adjusted for physical and economic obsolescence. When available, we use valuation inputs from independent valuation experts, such as real estate appraisers and brokers, to corroborate our estimates of fair value. Real estate appraisers’ and brokers’ valuations are typically developed using one or more valuation techniques including market, income and replacement cost approaches. Because these valuations contain unobservable inputs, we classified the measurement of fair value of long-lived assets as Level 3.
There were no changes to our valuation techniques during the nine-month period ended September 30, 2015.
Assets and Liabilities Measured at Fair Value
Following are the disclosures related to our assets and (liabilities) that are measured at fair value (in thousands):
Fair Value at September 30, 2015 |
Level 1 |
Level 2 |
Level 3 |
|||||||||
Measured on a recurring basis: |
||||||||||||
Derivative contracts, net |
$ | - | $ | (877 | ) | $ | - | |||||
Measured on a non-recurring basis: |
||||||||||||
Equity-method investment |
$ | - | $ | - | $ | 28,147 | ||||||
Long-lived assets held and used: |
||||||||||||
Certain buildings and improvements |
- | - | 3,367 |
Fair Value at December 31, 2014 |
Level 1 |
Level 2 |
Level 3 |
|||||||||
Measured on a recurring basis: |
||||||||||||
Derivative contracts, net |
$ | - | $ | (1,750 | ) | $ | - | |||||
Measured on a non-recurring basis: |
||||||||||||
Equity-method investment |
$ | - | $ | - | $ | 33,282 |
See Note 8 for more details regarding our derivative contracts.
Based on operating losses recognized by the equity-method investment, we determined that an impairment of our investment had occurred. Accordingly, we performed a fair value calculation for this investment and determined that a $4.1 million and an $12.4 million impairment, respectively, was required to be recorded as asset impairments in our Consolidated Statements of Operations for the three and nine months ended September 30, 2015. See Note 12.
Long-lived assets classified as held and used are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. An estimate of future undiscounted net cash flows associated with the long-lived assets is used to determine if the carrying value of the assets is recoverable. An impairment charge is recorded if the carrying value of the asset is determined to not be recoverable and exceeds its fair value. Due to changes in the expected future use for certain properties, during the second quarter of 2015, we evaluated the future undiscounted net cash flows for each property. We determined the carrying value was not recoverable and exceeded the estimated fair value. As a result of this evaluation, we recorded $2.0 million of impairment charges associated with these properties in the second quarter of 2015.
Fair Value Disclosures for Financial Assets and Liabilities
We determined the carrying value of cash equivalents, accounts receivable, trade payables, accrued liabilities and short-term borrowings approximate their fair values because of the nature of their terms and current market rates of these instruments. We believe the carrying value of our variable rate debt approximates fair value.
We have fixed rate debt and calculate the estimated fair value of our fixed rate debt using a discounted cash flow methodology. Using estimated current interest rates based on a similar risk profile and duration (Level 2), the fixed cash flows are discounted and summed to compute the fair value of the debt. As of September 30, 2015, this debt had maturity dates between November 2016 and October 2034. A summary of the aggregate carrying values and fair values of our long-term fixed interest rate debt is as follows (in thousands):
September 30, 2015 |
December 31, 2014 |
|||||||
Carrying value |
$ | 248,557 | $ | 257,780 | ||||
Fair value |
256,881 | 270,781 |
Note 8. Derivative Financial Instrument
From time to time, we enter into interest rate swaps to fix a portion of our interest expense. We do not enter into derivative instruments for any purpose other than to manage interest rate exposure to fluctuations in the one-month LIBOR benchmark. That is, we do not engage in interest rate speculation using derivative instruments.
As of September 30, 2015, we had a $25 million interest rate swap outstanding with U.S. Bank Dealer Commercial Services. This interest rate swap matures on June 15, 2016 and has a fixed rate of 5.587% per annum. The variable rate on the interest rate swap is the one-month LIBOR rate. At September 30, 2015, the one-month LIBOR rate was 0.20% per annum, as reported in the Wall Street Journal.
Typically, we designate all interest rate swaps as cash flow hedges and, accordingly, we record the change in fair value for the effective portion of these interest rate swaps in comprehensive income rather than net income until the underlying hedged transaction affects net income. If a swap is no longer designated as a cash flow hedge and the forecasted transaction remains probable or reasonably possible of occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income as the forecasted transaction occurs. If the forecasted transaction is probable of not occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income immediately. See Note 7.
The estimated amount that we expect to reclassify from accumulated other comprehensive loss to net income within the next twelve months is $0.8 million at September 30, 2015.
The fair value of our derivative instruments was included in our Consolidated Balance Sheets as follows (in thousands):
Balance Sheet Information |
Fair Value of Liability Derivatives |
|||||
Derivatives Designated as Hedging Instruments |
Location in Balance Sheet |
September 30, 2015 |
||||
Interest Rate Swap Contract |
Accrued liabilities |
$ | 877 | |||
Other long-term liabilities |
- | |||||
$ | 877 |
Balance Sheet Information |
Fair Value of Liability Derivatives |
|||||
Derivatives Designated as Hedging Instruments |
Location in Balance Sheet |
December 31, 2014 |
||||
Interest Rate Swap Contract |
Accrued liabilities |
$ | 1,194 | |||
Other long-term liabilities |
556 | |||||
$ | 1,750 |
The effect of derivative instruments on our Consolidated Statements of Operations was as follows (in thousands):
Derivatives in Cash Flow Hedging Relationships |
Amount of Gain Recognized in Accumulated OCI (Effective Portion) |
Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion) |
Location of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
Amount of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
|||||||||
Three Months Ended September 30, 2015 |
Floor plan |
Floor plan |
||||||||||||
Interest Rate Swap Contract |
$ | 160 |
interest expense |
$ | (104 | ) |
interest expense |
$ | (195 | ) | ||||
Three Months Ended September 30, 2014 |
Floor plan |
Floor plan |
||||||||||||
Interest Rate Swap Contract |
$ | 179 |
interest expense |
$ | (119 | ) |
interest expense |
$ | (184 | ) |
Derivatives in Cash Flow Hedging Relationships |
Amount of Gain Recognized in Accumulated OCI (Effective Portion) |
Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion) |
Location of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
Amount of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
|||||||||
Nine Months Ended September 30, 2015 |
Floor plan |
Floor plan |
||||||||||||
Interest Rate Swap Contract |
$ | 412 |
interest expense |
$ | (336 | ) |
interest expense |
$ | (563 | ) | ||||
Nine Months Ended September 30, 2014 |
Floor plan |
Floor plan |
||||||||||||
Interest Rate Swap Contract |
$ | 381 |
interest expense |
$ | (370 | ) |
interest expense |
$ | (543 | ) |
See also Note 7.
Note 9. Acquisitions
In the first nine months of 2015, we completed the following acquisitions, which contributed revenues of $10.5 million for the nine months ended September 30, 2015:
● |
On May 14, 2015, we acquired a smart franchise from Smart Center of Omaha. |
● |
On July 31, 2015, we acquired Bitterroot Ford in Missoula, Montana. |
● |
On August 20, 2015, we acquired Acura of Honolulu in Honolulu, Hawaii. |
● |
On September 28, 2015, we acquired Bennett Motors in Great Falls, Montana. |
All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.
No portion of the purchase price was paid with our equity securities. The following table summarizes the consideration paid for the acquisitions and the amount of identified assets acquired and liabilities assumed as of the acquisition date (in thousands):
Consideration |
||||
Cash paid, net of cash acquired |
$ | 34,920 | ||
Debt issued |
2,160 | |||
$ | 37,080 |
Assets Acquired and Liabilities Assumed |
||||
Inventories |
$ | 12,551 | ||
Franchise value |
4,331 | |||
Property, plant and equipment |
10,990 | |||
Other assets |
178 | |||
Other liabilities |
(2,468 | ) | ||
25,582 | ||||
Goodwill |
11,498 | |||
$ | 37,080 |
We account for franchise value as an indefinite-lived intangible asset. We expect the full amount of the goodwill recognized to be deductible for tax purposes.
The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three- and nine-month periods ended September 30, 2015 and 2014 had occurred on January 1, 2014 (in thousands, except for per share amounts):
Three Months Ended September 30, |
2015 |
2014 |
||||||
Revenue |
$ | 2,102,459 | $ | 1,424,809 | ||||
Income from continuing operations, net of tax |
43,293 | 35,672 | ||||||
Basic income per share from continuing operations, net of tax |
1.65 | 1.37 | ||||||
Diluted income per share from continuing operations, net of tax |
1.63 | 1.35 |
Nine Months Ended September 30, |
2015 |
2014 |
||||||
Revenue |
$ | 5,936,256 | $ | 3,991,066 | ||||
Income from continuing operations, net of tax |
134,738 | 97,903 | ||||||
Basic income per share from continuing operations, net of tax |
5.12 | 3.76 | ||||||
Diluted income per share from continuing operations, net of tax |
5.08 | 3.72 |
These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property, plant and equipment; accounting for inventory on a specific identification method; and recognition of interest expense for real estate financing related to stores where we purchased the facility. No nonrecurring pro forma adjustments directly attributable to the acquisitions are included in the reported pro forma revenues and earnings.
Note 10. Assets Held for Sale and Discontinued Operations
Assets Held for Sale
We classify an asset group as held for sale if we have ceased operations at that location or the store meets the criteria required by U.S. generally accepted accounting standards as follows:
● |
our management team, possessing the necessary authority, commits to a plan to sell the store; |
● |
the store is available for immediate sale in its present condition; |
● |
an active program to locate buyers and other actions that are required to sell the store are initiated; |
● |
a market for the store exists and we believe its sale is likely within one year; |
● |
active marketing of the store commences at a price that is reasonable in relation to the estimated fair market value; and |
● |
our management team believes it is unlikely changes will be made to the plan or the plan to dispose of the store will be withdrawn. |
As of December 31, 2014, we had two Import stores classified as held for sale. During the first nine months of 2015, we completed the sale of both of these Import stores, and recognized a gain of $5.9 million as a component of selling, general and administrative in our Consolidated Statements of Operations for the nine months ended September 30, 2015.
As of September 30, 2015, we no longer had any stores classified as held for sale. Assets held for sale included the following (in thousands):
September 30, 2015 |
December 31, 2014 |
|||||||
Inventories |
$ | - | $ | 6,284 | ||||
Property, plant and equipment |
- | 1,739 | ||||||
Intangible assets |
- | 540 | ||||||
$ | - | $ | 8,563 |
Liabilities related to assets held for sale included the following (in thousands):
September 30, 2015 |
December 31, 2014 |
|||||||
Floor plan notes payable |
$ | - | $ | 4,892 |
Discontinued Operations and the Sales of Stores
In the third quarter of 2014, we early-adopted guidance that redefined discontinued operations. As a result, we determined that individual stores which met the criteria for held for sale after our adoption date would no longer qualify for classification as discontinued operations. We had previously reclassified a store’s operations to discontinued operations in our Consolidated Statements of Operations, on a comparable basis for all periods presented, provided we did not expect to have any significant continuing involvement in the store’s operations after its disposal.
Certain financial information related to discontinued operations and sales of stores was as follows (in thousands):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Revenue |
$ | - | $ | - | $ | - | $ | 12,569 | ||||||||
Pre-tax loss from discontinued operations |
$ | - | $ | - | $ | - | $ | (467 | ) | |||||||
Net gain on disposal activities |
- | - | - | 5,744 | ||||||||||||
- | - | - | 5,277 | |||||||||||||
Income tax expense |
- | - | - | (2,098 | ) | |||||||||||
Income from discontinued operations, net of income tax expense |
$ | - | $ | - | $ | - | $ | 3,179 | ||||||||
Goodwill and other intangible assets disposed of |
$ | - | $ | - | $ | 282 | $ | 221 | ||||||||
Cash generated from disposal activities |
- | - | 12,966 | 10,617 | ||||||||||||
Floor plan debt paid in connection with disposal activities |
- | - | 4,400 | 3,311 |
Note 11. Net Income Per Share of Class A and Class B Common Stock
We compute net income per share of Class A and Class B common stock using the two-class method. Under this method, basic net income per share is computed using the weighted average number of common shares outstanding during the period excluding unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the common shares issuable upon the net exercise of stock options and unvested restricted stock units and is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.
Except with respect to voting and transfer rights, the rights of the holders of our Class A and Class B common stock are identical. Under our Articles of Incorporation, the Class A and Class B common stock share equally in any dividends, liquidation proceeds or other distribution with respect to our common stock and the Articles of Incorporation can only be amended by a vote of the shareholders. Additionally, Oregon law provides that amendments to our Articles of Incorporation that would adversely alter the rights, powers or preferences of a given class of stock, must be approved by the class of stock adversely affected by the proposed amendment. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares as if the earnings for the year had been distributed. Because the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.
Following is a reconciliation of the income from continuing operations and weighted average shares used for our basic earnings per share (“EPS”) and diluted EPS (in thousands, except per share amounts):
Three Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Basic EPS from Continuing Operations |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Numerator: |
||||||||||||||||
Income from continuing operations applicable to common stockholders |
$ | 39,162 | $ | 4,229 | $ | 31,149 | $ | 3,388 | ||||||||
Distributed income applicable to common stockholders |
(4,745 | ) | (512 | ) | (3,765 | ) | (409 | ) | ||||||||
Basic undistributed income from continuing operations applicable to common stockholders |
$ | 34,417 | $ | 3,717 | $ | 27,384 | $ | 2,979 | ||||||||
Denominator: |
||||||||||||||||
Weighted average number of shares outstanding used to calculate basic income per share |
23,727 | 2,562 | 23,556 | 2,562 | ||||||||||||
Basic income per share from continuing operations applicable to common stockholders |
$ | 1.65 | $ | 1.65 | $ | 1.32 | $ | 1.32 | ||||||||
Basic distributed income per share from continuing operations applicable to common stockholders |
(0.20 | ) | (0.20 | ) | (0.16 | ) | (0.16 | ) | ||||||||
Basic undistributed income per share from continuing operations applicable to common stockholders |
$ | 1.45 | $ | 1.45 | $ | 1.16 | $ | 1.16 |
Three Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Diluted EPS from Continuing Operations |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Numerator: |
||||||||||||||||
Distributed income applicable to common stockholders |
$ | 4,745 | $ | 512 | $ | 3,765 | $ | 409 | ||||||||
Reallocation of distributed income as a result of conversion of dilutive stock options |
3 | (3 | ) | 3 | (3 | ) | ||||||||||
Reallocation of distributed income due to conversion of Class B to Class A common shares outstanding |
509 | - | 406 | - | ||||||||||||
Diluted distributed income applicable to common stockholders |
$ | 5,257 | $ | 509 | $ | 4,174 | $ | 406 | ||||||||
Undistributed income from continuing operations applicable to common stockholders |
$ | 34,417 | $ | 3,717 | $ | 27,384 | $ | 2,979 | ||||||||
Reallocation of undistributed income as a result of conversion of dilutive stock options |
27 | (27 | ) | 28 | (28 | ) | ||||||||||
Reallocation of undistributed income due to conversion of Class B to Class A |
3,690 | - | 2,951 | - | ||||||||||||
Diluted undistributed income from continuing operations applicable to common stockholders |
$ | 38,134 | $ | 3,690 | $ | 30,363 | $ | 2,951 |
Denominator: |
||||||||||||
Weighted average number of shares outstanding used to calculate basic income per share from continuing operations |
23,727 | 2,562 | 23,556 | 2,562 | ||||||||
Weighted average number of shares from stock options |
191 | - | 241 | - | ||||||||
Conversion of Class B to Class A common shares outstanding |
2,562 | - | 2,562 | - | ||||||||
Weighted average number of shares outstanding used to calculate diluted income per share from continuing operations |
26,480 | 2,562 | 26,359 | 2,562 | ||||||||
Diluted income per share from continuing operations applicable to common stockholders |
$ | 1.64 | $ | 1.64 | $ | 1.31 | $ | 1.31 | ||||
Diluted distributed income per share from continuing operations applicable to common stockholders |
(0.20 | ) | (0.20 | ) | (0.16 | ) | (0.16 | ) | ||||
Diluted undistributed income per share from continuing operations applicable to common stockholders |
$ | 1.44 | $ | 1.44 | $ | 1.15 | $ | 1.15 |
Three Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Diluted EPS |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Antidilutive Securities |
||||||||||||||||
Shares issuable pursuant to stock options not included since they were antidilutive |
18 | - | 13 | - |
Nine Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Basic EPS from Continuing Operations |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Numerator: |
||||||||||||||||
Income from continuing operations applicable to common stockholders |
$ | 122,092 | $ | 13,175 | $ | 85,124 | $ | 9,277 | ||||||||
Distributed income applicable to common stockholders |
(13,303 | ) | (1,436 | ) | (10,578 | ) | (1,153 | ) | ||||||||
Basic undistributed income from continuing operations applicable to common stockholders |
$ | 108,789 | $ | 11,739 | $ | 74,546 | $ | 8,124 | ||||||||
Denominator: |
||||||||||||||||
Weighted average number of shares outstanding used to calculate basic income per share |
23,742 | 2,562 | 23,509 | 2,562 | ||||||||||||
Basic income per share from continuing operations applicable to common stockholders |
$ | 5.14 | $ | 5.14 | $ | 3.62 | $ | 3.62 | ||||||||
Basic distributed income per share from continuing operations applicable to common stockholders |
(0.56 | ) | (0.56 | ) | (0.45 | ) | (0.45 | ) | ||||||||
Basic undistributed income per share from continuing operations applicable to common stockholders |
$ | 4.58 | $ | 4.58 | $ | 3.17 | $ | 3.17 |
Nine Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Diluted EPS from Continuing Operations |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Numerator: |
||||||||||||||||
Distributed income applicable to common stockholders |
$ | 13,303 | $ | 1,436 | $ | 10,578 | $ | 1,153 | ||||||||
Reallocation of distributed income as a result of conversion of dilutive stock options |
11 | (11 | ) | 12 | (12 | ) | ||||||||||
Reallocation of distributed income due to conversion of Class B to Class A common shares outstanding |
1,425 | - | 1,141 | - | ||||||||||||
Diluted distributed income applicable to common stockholders |
$ | 14,739 | $ | 1,425 | $ | 11,731 | $ | 1,141 | ||||||||
Undistributed income from continuing operations applicable to common stockholders |
$ | 108,789 | $ | 11,739 | $ | 74,546 | $ | 8,124 | ||||||||
Reallocation of undistributed income as a result of conversion of dilutive stock options |
86 | (86 | ) | 82 | (82 | ) | ||||||||||
Reallocation of undistributed income due to conversion of Class B to Class A |
11,653 | - | 8,042 | - | ||||||||||||
Diluted undistributed income from continuing operations applicable to common stockholders |
$ | 120,528 | $ | 11,653 | $ | 82,670 | $ | 8,042 | ||||||||
Denominator: |
||||||||||||||||
Weighted average number of shares outstanding used to calculate basic income per share from continuing operations |
23,742 | 2,562 | 23,509 | 2,562 | ||||||||||||
Weighted average number of shares from stock options |
196 | - | 266 | - | ||||||||||||
Conversion of Class B to Class A common shares outstanding |
2,562 | - | 2,562 | - | ||||||||||||
Weighted average number of shares outstanding used to calculate diluted income per share from continuing operations |
26,500 | 2,562 | 26,337 | 2,562 | ||||||||||||
Diluted income per share from continuing operations applicable to common stockholders |
$ | 5.10 | $ | 5.10 | $ | 3.58 | $ | 3.58 | ||||||||
Diluted distributed income per share from continuing operations applicable to common stockholders |
(0.56 | ) | (0.56 | ) | (0.45 | ) | (0.45 | ) | ||||||||
Diluted undistributed income per share from continuing operations applicable to common stockholders |
$ | 4.54 | $ | 4.54 | $ | 3.13 | $ | 3.13 |
Nine Months Ended September 30, |
2015 |
2014 |
||||||||||||||
Diluted EPS |
Class A |
Class B |
Class A |
Class B |
||||||||||||
Antidilutive Securities |
||||||||||||||||
Shares issuable pursuant to stock options not included since they were antidilutive |
17 | - | 13 | - |
Note 12. Equity-Method Investment