-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I66nUsZtUtOMEn2h6C+/CzLVyZbC+FdBBYuoWW76xbg7Lm9SC+64s9UXxF4Tunvv tiYsHRp7mmxz/S1ITiqM0g== 0000950129-98-002361.txt : 19980529 0000950129-98-002361.hdr.sgml : 19980529 ACCESSION NUMBER: 0000950129-98-002361 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980316 ITEM INFORMATION: FILED AS OF DATE: 19980528 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GROUP 1 AUTOMOTIVE INC CENTRAL INDEX KEY: 0001031203 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 760506313 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-13461 FILM NUMBER: 98633184 BUSINESS ADDRESS: STREET 1: 950 ECHO LANE STREET 2: STE 350 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7134676268 MAIL ADDRESS: STREET 1: 950 ECHO LANE STREET 2: STE 350 CITY: HOUSTON STATE: TX ZIP: 77024 8-K/A 1 GROUP 1 AUTOMOTIVE, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): March 16, 1998 GROUP 1 AUTOMOTIVE, INC. (Exact name of Registrant as specified in its charter) Delaware 76-0506313 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 950 Echo Lane, Suite 350 Houston, Texas 77024 (Address of principal executive offices) (Zip code) (713) 467-6268 (Registrant's telephone number including area code) 2 ITEM 7. FINANCIAL STATEMENTS (A) Financial statements of the business acquired. This Form 8-K/A is being filed to include in the Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on March 31, 1998 the financial statements and pro forma financial information required by Item 7. The required financial statements of the business acquired by the Registrant begin on page F-6 of this Form 8-K/A. (B) Pro forma financial information The required pro forma financial information of the registrant begins on page F-2 of this Form 8-K/A. (C) Exhibits: None. 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Group 1 Automotive, Inc. May 28, 1998 By : /s/ Scott L. Thompson - ------------ ------------------------------------------- Date Scott L. Thompson, Senior Vice President - Chief Financial Officer 3 4 INDEX TO FINANCIAL STATEMENTS
Page ---- Group 1 Automotive, Inc. Pro Forma Introduction to Unaudited Pro Forma Statements of Operations................... F-2 Unaudited Pro Forma Statements of Operations................................... F-3 Notes to Pro Forma Statements of Operations (unaudited)........................ F-5 Carroll Automotive Group - Combined Financial Statements Report of Independent Public Auditors.......................................... F-6 Combined Balance Sheet......................................................... F-7 Combined Statement of Income................................................... F-8 Combined Statement of Owners' Equity........................................... F-9 Combined Statement of Cash Flows............................................... F-10 Notes to Combined Financial Statements......................................... F-11
F-1 5 GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES INTRODUCTION TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS In October 1997, Group 1 Automotive, Inc. ("Group 1") completed its acquisition of substantially all of the net assets of four automobile dealership groups (the "Founding Groups") simultaneous with the completion of its initial public offering. The Founding Groups were acquired in exchange for a combination of cash and common stock of Group 1 Automotive, Inc. On March 16, 1998, Group 1 acquired the Carroll Automotive Group. The Carroll Automotive Group consists of three automobile dealerships and has been accounted for as a purchase. The accompanying pro forma statements of operations, for the year ended December 31, 1997 and the three months ended March 31, 1998, include the combined operations of Group 1 and the Founding Groups, from January 1, 1997, the Carroll Automotive Group from January 1, 1997 and gives effect to the completion of Group 1's initial public offering. The results of operations of the Carroll Automotive Group are included in the statement of operations for the three months ended March 31, 1998, from the effective date of the closing of the acquisition. The data may not be comparable to and may not be indicative of Group 1's post-combination results of operations because (i) the Founding Groups and the Carroll Automotive Group were not under common control of management and had different tax structures (S Corporations and C Corporations) during the periods presented and (ii) the purchase method was used to establish a new basis of accounting to record the acquisitions. As the balance sheet data for the Carroll Automotive Group was included in the consolidated balance sheet of the registrant presented in its Form 10-Q for the quarterly period ended March 31, 1998, no pro forma balance sheet is presented herein. Certain pro forma adjustments are based on preliminary estimates, available information and certain assumptions that management deems appropriate. The pro forma financial data do not purport to represent what the Company's results of operations would actually have been if such transactions in fact had occurred on those dates or to project the Company's results of operations for any future period. These pro forma statements of operations should be read in conjunction with the financial statements presented in the Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q. F-2 6 GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (in thousands of dollars, except per share amounts)
Three Months Ended March 31, 1998 ------------------------------------------------------------ Carroll Automotive Pro Forma Reported Group Adjustments Pro Forma -------- ---------- ----------- --------- REVENUES: New vehicle sales ..................... $138,022 $25,324 $ -- $163,346 Used vehicle sales .................... 87,119 9,029 -- 96,148 Parts and service sales ............... 21,568 4,297 -- 25,865 Other dealership revenues, net ........ 7,225 765 437 (a) 8,427 -------- ------- ------ -------- Total revenues .................... 253,934 39,415 437 293,786 COST OF SALES: New vehicle sales ..................... 127,376 23,374 -- 150,750 Used vehicle sales .................... 80,560 8,534 -- 89,094 Parts and service sales ............... 9,978 2,276 -- 12,254 -------- ------- ------ -------- Total cost of sales ............... 217,914 34,184 -- 252,098 -------- ------- ------ -------- GROSS PROFIT ............................ 36,020 5,231 437 41,688 GOODWILL AMORTIZATION ................... 243 23 113 (c) 379 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 28,312 4,576 (198)(d) 32,690 -------- ------- ------ -------- Income from operations ............ 7,465 632 522 8,619 OTHER INCOME AND EXPENSES: Interest expense, net ................. (2,136) (672) (42)(e) (2,850) Other expense, net .................... (23) -- -- (23) -------- ------- ------ -------- INCOME BEFORE INCOME TAXES .............. 5,306 (40) 480 5,746 PROVISION FOR INCOME TAXES .............. 2,192 -- 218 (f) 2,410 -------- ------- ------ -------- NET INCOME .............................. $ 3,114 $ (40) $262 $ 3,336 ======== ======= ====== ======== Earnings per share on net income: Basic ................................. $ 0.21 Diluted ............................... $ 0.20 Weighted average shares outstanding: Basic ................................. 16,087,876 Diluted ............................... 16,666,782
The accompanying notes are an integral part of these pro forma statements of operations. F-3 7 GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (in thousands of dollars, except per share amounts)
Year Ended December 31, 1997 ---------------------------------------------------------------- Carroll Pro Forma Automotive Pro Forma Reported Group Adjustments Pro Forma --------- ---------- ----------- --------- REVENUES: New vehicle sales..................... $513,864 $157,852 $ -- $ 671,716 Used vehicle sales.................... 288,010 54,939 -- 342,949 Parts and service sales............... 77,215 26,459 -- 103,674 Other dealership revenues, net........ 23,206 5,080 1,455 (a 29,741 -------- ------- ------ --------- Total revenues.................. 902,295 244,330 1,455 1,148,080 COST OF SALES: New vehicle sales..................... 471,664 145,861 (457)(b) 617,068 Used vehicle sales.................... 266,976 51,308 52 (b) 318,336 Parts and service sales............... 36,524 13,431 11 (b) 49,966 -------- ------- ------ --------- Total cost of sales............. 775,164 210,600 (394) 985,370 -------- ------- ------ --------- GROSS PROFIT............................. 127,131 33,730 1,849 162,710 GOODWILL AMORTIZATION.................... 791 69 677(c) 1,537 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 100,928 28,707 (1,629)(d) 128,006 -------- ------- ------ --------- Income from operations........ 25,412 4,954 2,801 33,167 OTHER INCOME AND EXPENSES: Interest expense, net.................. (6,120) (3,912) (347)(e) (10,379) Other expense, net..................... 88 -- -- 88 -------- ------- ------ --------- INCOME BEFORE INCOME TAXES............... 19,380 1,042 2,454 22,876 PROVISION FOR INCOME TAXES............... 7,967 -- 1,648 (f) 9,615 -------- ------- ------ --------- NET INCOME............................... $ 11,413 $ 1,042 $ 806 $ 13,261 ======== ======= ====== ========= Earnings per share on net income: Basic ................................ $0.82 Diluted................................ $0.80 Weighted average shares outstanding: Basic 16,100,962 Diluted................................ 16,661,142
The accompanying notes are an integral part of these pro forma statements of operations. F-4 8 GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO PRO FORMA STATEMENTS OF OPERATIONS (a) Records increases in revenues related to certain third party products sold by the dealerships. The owners of the Carroll Automotive Group had agreements in place, which decreased the fees and commissions paid to the dealerships for sales of certain finance and insurance products. The amounts withheld were paid to the owners. Upon completion of the acquisition, such agreements were terminated and the dealerships recognized an immediate increase in revenues related to the products sold. (b) Adjusts cost of sales to the specific identification method of inventory accounting, from the last-in, first-out basis. (c) Records the pro forma goodwill amortization expense over an estimated useful life of 40 years. (d) Adjusts compensation expense and management fees to the level that certain management employees and owners of the Carroll Automotive Group will contractually receive subsequent to the closing of the acquisition. (e) Records the pro forma increase in interest expense resulting from the payment of the cash portion of the acquisition purchase price, which totaled approximately $17.8 million. This increase is partially offset by pro forma decreases in interest expense resulting from floorplan interest rate reductions received upon completion of the acquisition and the reduction of long-term debt resulting from the sale of certain assets in conjunction with the acquisition. (f) Records the incremental provision for federal and state income taxes relating to the compensation differential, S corporation income and other pro forma adjustments. F-5 9 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Carroll Automotive Group Hollywood, Florida We have audited the accompanying combined balance sheet of the Carroll Automotive Group as of December 31, 1997 and the related combined statements of income, owners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Carroll Automotive Group as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Crowe, Chizek and Company LLP Ft. Lauderdale, Florida February 6, 1998, except for Notes 8, 9 and 12 as to which the date is March 30, 1998. F-6 10 CARROLL AUTOMOTIVE GROUP COMBINED BALANCE SHEET December 31, 1997 ASSETS Current assets Cash $ 3,396,595 Receivables, net 4,737,975 Inventories 38,384,572 Prepaid expenses and other 710,077 Due from related parties 1,082,577 ----------- Total current assets 48,311,796 Property and equipment, net 9,514,401 Goodwill, net 570,052 Other assets 75,121 ----------- 10,159,574 ----------- $58,471,370 =========== LIABILITIES AND OWNERS' EQUITY Current liabilities Notes payable - vehicles $42,075,389 Current maturities of long-term debt 120,134 Accounts payable and accrued expenses 5,447,374 Due to related parties 4,492,667 ----------- Total current liabilities 52,135,564 Long-term debt, net of current maturities 6,360,925 Other long-term liabilities 300,000 Owners' equity Common stock 159,000 Additional paid-in capital 4,144,792 Accumulated deficit (3,694,634) Treasury stock (934,277) ----------- (325,119) ----------- $58,471,370 ===========
See accompanying notes to combined financial statements. F-7 11 CARROLL AUTOMOTIVE GROUP COMBINED STATEMENT OF INCOME Year ended December 31, 1997 REVENUE New vehicle sales $157,851,960 Used vehicle sales 54,939,251 Parts and service sales 26,459,528 Other dealership revenues, net 5,079,717 ------------ 244,330,456 COST OF SALES New vehicle sales 145,860,816 Used vehicle sales 51,308,028 Parts and service sales 13,431,294 ------------ 210,600,138 ------------ GROSS PROFIT 33,730,318 Goodwill amortization 68,750 Selling, general and administrative expenses 28,707,223 ------------ Income from operations 4,954,345 Interest expense 3,912,385 ------------ NET INCOME $ 1,041,960 ============
See accompanying notes to combined financial statements. F-8 12 CARROLL AUTOMOTIVE GROUP COMBINED STATEMENT OF OWNERS' EQUITY Year ended December 31, 1997
Additional Common Paid-In Accumulated Treasury Stock Capital Deficit Stock Total ----- ------- ------- ----- ----- BALANCE AT JANUARY 1, 1997 $ 159,000 $ 4,144,792 $ (3,429,702) $ - $ 874,090 Net income for year - - 1,041,960 - 1,041,960 Dividends - - (1,306,892) - (1,306,892) Treasury stock purchase - - - (934,277) (934,277) --------- ------------ ------------ ---------- ------------ BALANCE AT DECEMBER 31, 1997 $ 159,000 $ 4,144,792 $ (3,694,634) $ (934,277) $ (325,119) ========= ============ ============ ========== ============
See accompanying notes to combined financial statements. F-9 13 CARROLL AUTOMOTIVE GROUP COMBINED STATEMENT OF CASH FLOWS Year ended December 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,041,960 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 711,202 Amortization of intangibles 68,750 Loss on disposal of property and equipment 1,019 Change in assets and liabilities Receivables (1,214,505) Inventories 2,520,006 Prepaid expenses and other (236,182) Due from related parties 84,031 Other assets (45,935) Accounts payable and accrued expenses 1,124,760 Net payments under floorplan agreements (390,057) Due to related parties (392,301) ----------- Net cash from operating activities 3,272,748 ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (848,471) Due from owners 498,384 ----------- Net cash used in investing activities (350,087) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on long-term debt 10,366 Payments on long-term debt (101,184) Purchase of treasury stock (934,277) Dividends (1,306,892) ----------- Net cash used in financing activities (2,331,987) ----------- Net change in cash 590,674 Cash at beginning of year 2,805,921 ----------- CASH AT END OF YEAR $ 3,396,595 =========== Supplemental disclosure of cash flow information Cash paid during the year for interest $ 4,329,251 Supplemental disclosure of noncash transactions Property and equipment of $1,041,156 was transferred to a related party in exchange for a related party receivable.
See accompanying notes to combined financial statements. F-10 14 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business: Carroll Automotive Group (the Company) operates in Hollywood and Miami, Florida and Atlanta, Georgia. The Company serves customers principally in the south Florida and metropolitan Atlanta areas. The Company offers a broad range of products and services including new and used car and light truck sales, vehicle financing and warranty products, and replacement parts and service. Principles of Combination: The combined financial statements of Carroll Automotive Group consist of the Koons Ford, Inc., Courtesy Ford, Inc., and Perimeter Ford, Inc. dealerships. The entities are controlled by James S. Carroll. Certain other dealership executives also have ownership interests. All significant intercompany transactions have been eliminated in the combined financial statements. Credit Risk Concentration: The Company sells new and used vehicles, service replacement parts and body shop repairs to customers in south Florida and metropolitan Atlanta. The Company's trade receivables are due primarily from retail customers. In addition, the majority of the vehicle and contracts receivables are due from the manufacturer's financing subsidiaries and financial institutions relating to sales of new and used vehicles, with the balance due from various wholesale customers. Additionally, there are receivables and payables to the manufacturer. The Company has cash deposited in various local banks. The first $100,000 of the deposits for each individual company are insured by an agency of the U.S. Government. Major Supplier and Dealer Agreements: The Company purchases substantially all of its new vehicle and replacement parts inventories from Ford Motor Company at the prevailing prices charged to all franchised dealers. The Company's overall sales could be impacted by the manufacturer's inability or unwillingness to supply the Company with an adequate supply or mix of inventory. The Company enters into Dealer Agreements with the manufacturer. The Dealer Agreements limit the location of the dealership and give the manufacturer rights to approve changes in the dealership's ownership. The manufacturer is entitled to terminate the Dealer Agreement if the Company is in breach of its terms. Revenue Recognition: Revenue from the sale of vehicles is recognized on delivery and completing financing arrangements. Revenue from parts and service sales is recognized on delivery of service. (Continued) F-11 15 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Company has various fleet sales which generate nominal gross profit, and in management's opinion do not represent sales in the normal course of business. Accordingly, sales of approximately $26.2 million and cost of sales of approximately $25.8 million have been excluded from reported revenue and cost of goods sold in the accompanying statement of income for the year ended December 31, 1997 as management believes excluding such amounts represents a more appropriate basis of presentation. The net profit on these wholesale fleet transactions is recorded as other dealership revenues in the accompanying statement of income. The Company sells both related party and third party service contracts for which the Company receives a commission. The Company arranges financing with financial institutions for its customers' purchases of new and used vehicles for which the Company earns a fee from the respective financial institution. The fees that the Company earns for arranging financing contracts and selling service contracts are subject to chargeback if the customer terminates the respective contract for any reason. The Company records an estimate of the liability for future chargebacks based on management's estimate and historical experience. Advertising: The Company expenses advertising costs as incurred. Advertising expense was $3.1 million in 1997. Inventories: Inventories are valued at the lower of cost or market, with cost determined on a last-in first-out basis (LIFO). Property and Equipment: Property and equipment is stated at cost less accumulated depreciation. Expenditures for maintenance, repairs and minor renewals are charged to expense in the period incurred. Betterments and additions are capitalized. Depreciation is provided by the straight-line method over the estimated useful lives of the assets. Intangible Assets: The goodwill of Companies acquired is being amortized on a straight-line basis over a period of 20 years. Recoverability is reviewed annually or sooner if events or changes in circumstances indicate that the carrying amount may exceed fair value. Use of Estimates in the Preparation of Financial Statements: Preparing financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The actual outcome could differ from the estimates made in the preparation of the financial statements. Significant estimates include the liability for finance and insurance chargebacks. It is reasonably possible this estimate will change and the effect may be material. Statement of Cash Flows: For purposes of the statement of cash flows, cash includes cash, contracts in transit and short-term investments with original maturities of 90 days or less. (Continued) F-12 16 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 2 - INCOME TAXES The combining entities are S Corporations for income tax purposes. Accordingly, the accompanying financial statements reflect no provision for income taxes since the taxable income or loss of the entities is reported by the shareholders. NOTE 3 - RECEIVABLES Receivables at December 31, 1997 consist of the following: Trade receivables $ 433,658 Vehicle receivables 1,953,197 Factory receivables and others 2,405,388 ------------ 4,792,243 Less: allowance for doubtful accounts (54,268) ------------ $ 4,737,975 ============ NOTE 4 - INVENTORIES Inventories at December 31, 1997 consist of the following: New vehicles $ 32,499,222 Used vehicles 2,974,275 Revenue earning vehicles, net 1,800,553 Parts, accessories and miscellaneous 1,110,522 ------------ $ 38,384,572 ============ The LIFO reserve at December 31, 1997 was $8.35 million.
(Continued) F-13 17 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment at December 31, 1997 consists of the following: Land $ 7,030,700 Leasehold improvements 1,453,613 Equipment and vehicles 2,379,839 Furniture & fixtures 2,824,475 ------------- 13,688,627 Less: accumulated depreciation and amortization (4,174,226) ------------- $ 9,514,401 =============
NOTE 6 - INTANGIBLE ASSETS Intangible assets at December 31, 1997 include the following: Goodwill and franchise rights $ 1,375,000 Less: accumulated amortization (804,948) ------------- $ 570,052 =============
NOTE 7 - NOTES PAYABLE - VEHICLES At December 31, 1997 the Company had floorplan financing agreements with Ford Motor Credit Corporation bearing interest at 1% over prime, secured by new and used vehicle inventories. Ford Motor Credit allows the Company to apply available cash against the floorplan in a Cash Management Account (CMA). The cash applied and the related interest savings is reflected as a reduction of the floorplan liability and interest expense in the Company financial statements. At December 31, 1997 the CMA amounts shown as reductions to the floorplan liability totaled $7.4 million. The Company has financing arrangements with Ford Motor Company relating to daily revenue earning vehicles. The loans are secured by the revenue earning vehicles and bear interest at 1% over prime. These loans require monthly principal payments of 2% of the original amount. (Continued) F-14 18 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 8 - NOTES PAYABLE Notes payable consist of the following at December 31, 1997: Ford Motor Credit Company at commercial paper rate plus 3.25%, interest only payments until maturity date; secured by virtually all assets of the combined Company and personally guaranteed by the shareholders; due October 1998. $ 5,199,820 Line of credit (maximum line of $950,000) to Ford Motor Credit Company at prime rate plus 1.5%, payable in July 1998; secured by virtually all assets of the combined Company and personally guaranteed by the shareholders. 950,000 Notes payable on equipment leases; payable in monthly installments; secured by various equipment. 331,239 ----------- 6,481,059 Current maturities (see below) 120,134 ----------- $ 6,360,925 ===========
In March 1998, the Company refinanced all of its existing Ford Motor Credit Company debt with new agreements with Comerica Bank. Maturities of long-term debt are shown in accordance with these new agreements. Long-term debt is scheduled to mature over the next five years as follows: 1998 $ 120,134 1999 175,336 2000 249,926 2001 179,198 2002 169,344
Interest expense on all indebtedness amounted to $4.4 million for the year ended December 31, 1997. Interest assistance credits of $3 million received from the manufacturer have been shown as a reduction of the cost of sales. (Continued) F-15 19 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 9 - RELATED PARTY TRANSACTIONS The Company has amounts due from related parties of $1,082,577 at December 31, 1997. These amounts have been subsequently satisfied with the transfer of $950,000 in long-term debt and $132,577 in subsequent collections. Due to related parties includes unsecured demand notes payable at 1% over prime. The Company receives commissions from affiliated companies for the sale of insurance and extended warranty contracts. The commission income (net of chargebacks) from the affiliated companies for 1997 was approximately $1.45 million. The Company leases its dealership facilities from related party partnerships under ten year lease agreements dated January 1, 1995. The leases call for monthly payments of $159,741 in 1997, escalating to $224,771 in 2004. The minimum rental commitments are as follows: 1998 $ 2,012,734 1999 2,113,371 2000 2,219,039 2001 2,329,991 2002 2,446,491 Thereafter 5,266,071 ------------ $ 16,387,697 ============ Total rent expense under the lease agreements was $1,998,098 in 1997. In March 1998, the Company entered into new lease arrangements with the same related parties. These agreements are for a ten year period effective April 1, 1998 and call for monthly lease payments of $186,750 with an annual adjustment equal to 1/2 the increase in the consumer price index. The lease provides for four five-year renewal options. (Continued) F-16 20 CARROLL AUTOMOTIVE GROUP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 NOTE 10 - COMMON STOCK At December 31, 1997 the common stock consisted of:
Par Value of Common Shares Shares Shares Shares Authorized Issued Outstanding Amount ------ ---------- ------ ----------- ------ Koons Ford, Inc. $ .10 5,000 1,000 1,000 $ 100 Courtesy Ford, Inc. 1.00 1,000 1,000 800 1,000 Perimeter Ford, Inc. 100.00 5,000 1,579 1,579 157,900 --------- $ 159,000 =========
NOTE 11 - PROFIT SHARING PLAN In 1995, the Company adopted a profit sharing plan with 401(k) provisions. The plan covers all employees over the age of 21 with 90 days of service. Company contributions under the plan are at the discretion of management. No contributions were made by the Company in 1997. NOTE 12 - SUBSEQUENT EVENTS In March 1998, Koons Ford, Inc. entered into a contract with a related party for the sale of land in Pembroke Pines, Florida for $7.1 million, including the transfer of $5.2 million in long-term debt to the related party. In March 1998, the Carroll Automotive Group completed a merger agreement with Group 1 Automotive, Inc. F-17 -----END PRIVACY-ENHANCED MESSAGE-----