-----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, T9nFHwu0JffHtZ8IHhUJsomtuidqy8s40RMfH3RHDIJ+Mi4TDGBBU5cKQi5nduFG Nt8guMw8XQ4amD4lm46tFw== 0000929624-98-002013.txt : 19981216 0000929624-98-002013.hdr.sgml : 19981216 ACCESSION NUMBER: 0000929624-98-002013 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981001 ITEM INFORMATION: FILED AS OF DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTAMERICA AUTOMOTIVE INC /DE/ CENTRAL INDEX KEY: 0000766886 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 880206732 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 002-97254-NY FILM NUMBER: 98769689 BUSINESS ADDRESS: STREET 1: 601 BRANNAN STREET STREET 2: C/O S EDMUND RESCINITI CITY: SAN FRANCISCO STATE: CA ZIP: 94107 BUSINESS PHONE: 7023294990 MAIL ADDRESS: STREET 1: 601 BRANNAN STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94107 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC NATIONAL VENTURE INC DATE OF NAME CHANGE: 19980501 8-K/A 1 FORM 8-K/A UNITED STATES 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): OCTOBER 1, 1998 ------------------ FIRSTAMERICA AUTOMOTIVE, INC. (Exact name of registrant as specified in its charter)
DELAWARE 2-297254-NY 88-0206732 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation or organization) Identification No.)
601 BRANNAN STREET SAN FRANCISCO, CA 94107 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 284-0444 (Former name, former address and former fiscal year, if changed since last report) FIRSTAMERICA AUTOMOTIVE, INC. FORM 8-K/A INDEX Item Description Page - ---- ----------- ---- Item 7. Financial Statements and Exhibits 2 Signatures 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED. This amendment to the Form 8-K filed by FirstAmerica Automotive, Inc. (the "Company") on October 16, 1998 contains the financial statements of Vacation Motors, Inc. (DBA Concord Toyota) at page F-1. (b) PRO FORMA FINANCIAL INFORMATION. This amendment to the Company's Form 8-K filed on October 16, 1998 contains the unaudited pro forma financial statements required pursuant to Article 11 of Regulation S-X at page PF-1. (c) EXHIBITS Exhibit Number Description - -------------- ----------- 2.1(1)* Stock Purchase Agreement by and between the Company, Vacation Motors, Inc. and the Graybehl Family Trust dated July 17, 1998. 2.2* First Amendment to Stock Purchase Agreement by and between the Company, Vacation Motors, Inc. and the Graybehl Family Trust dated as of October 1, 1998. 2.3* Second Amendment to Stock Purchase Agreement by and between the Company, Vacation Motors, Inc. and the Graybehl Family Trust dated as of October 13, 1998. - -------------- * Filed previously as an exhibit to the Company's Form 8-K filed with the Securities and Exchange Commission on October 16, 1998. (1) Exhibits to the Stock Purchase Agreement not filed herewith are identified in the Stock Purchase Agreement. The Company will provide any omitted Exhibits to the Commission upon request. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: December 15, 1998 FIRSTAMERICA AUTOMOTIVE, INC. By: /s/ Debra Smithart ------------------ Debra Smithart Chief Financial Officer 3 VACATION MOTORS, INC. DBA CONCORD TOYOTA INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT F-2 FINANCIAL STATEMENTS Balance sheets F-3 Statements of operations and retained earnings F-5 Statements of cash flows F-6 Notes to financial statements F-7 F-1 INDEPENDENT AUDITOR'S REPORT The Board of Directors Vacation Motors, Inc. DBA Concord Toyota And The Board of Directors FirstAmerica Automotive, Inc.: We have audited the accompanying balance sheets of Vacation Motors, Inc. (DBA Concord Toyota) as of September 30, 1998 and December 31, 1997 and the related statements of operations and retained earnings and cash flows for the nine months ended September 30, 1998 and years ended December 31, 1997 and 1996. These financial statements are the responsibility of FirstAmerica Automotive, Inc. and Vacation Motors, Inc. management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 financial statements referred to above present fairly, in all material respects, the financial position of Vacation Motors, Inc. (DBA Concord Toyota) as of September 30, 1998 and December 31, 1997, and the results of its operations and retained earnings and its cash flows for the nine months ended September 30, 1998 and each of the two year periods ended December 31, 1997 and 1996, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP December 15, 1998 F-2 VACATION MOTORS, INC. DBA CONCORD TOYOTA BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1998 1997 Assets ------------ ----------- Receivable from affiliate (note 6) $1,250 $ 297 Accounts receivable, net (note 2) 1,288 1,050 Note receivable, related party (note 6) - 515 Inventories, net (note 3) 1,709 4,415 Deposits and prepaid expenses 18 34 Prepaid costs-extended warranty service contracts 135 155 ------ ------ Total current assets 4,400 6,466 Property and equipment, net (note 4) 331 493 Other assets: Prepaid costs-extended warranty service contracts 221 321 Other noncurrent assets (note 6) - 252 ------- ------ Total assets $4,952 $7,532 ======= =======
See accompanying notes to financial statements. F-3 VACATION MOTORS, INC. DBA CONCORD TOYOTA BALANCE SHEETS (CONTINUED) (IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1998 1997 Liabilities and Stockholder's Equity ---------- --------- Current liabilities: Accounts payable $ 363 $ 262 Sales tax payable 342 267 Accrued liabilities 56 169 Note payable, related party (note 6) - 400 Floor plan notes payable (note 3) 2,226 3,990 Deferred revenue-extended warranty service contracts 270 309 ------ ------ Total current liabilities 3,257 5,397 Long-term debt 20 9 Deferred revenue--extended warranty service contracts 441 643 ------ ------ Total liabilities 3,718 6,049 Commitments (note 5) Stockholder's equity: Common stock 50 50 Retained earnings 1,184 1,433 ------ ------ Total stockholder's equity 1,234 1,483 ------ ------ $4,952 $7,532 ====== ======
See accompanying notes to financial statements. F-4 VACATION MOTORS, INC. DBA CONCORD TOYOTA STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (IN THOUSANDS)
NINE MONTHS ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30, ------------------------ 1998 1997 1996 ----------------- ----------- ----------- Sales: Vehicle $43,744 $61,017 $61,410 Service, parts and other 6,789 8,858 7,027 ------- ------- ------- Total sales 50,533 69,875 68,437 Cost of sales 44,301 61,133 60,162 ------- ------- ------- Gross profit 6,232 8,742 8,275 Operating expenses: Selling, general and administrative 5,052 6,521 5,767 Depreciation and amortization 87 96 90 ------- ------- ------- Operating income 1,093 2,125 2,418 Other income (expense): Interest expense (307) (228) (257) Other, net (35) 105 24 ------- ------- ------- Income before income taxes 751 2,002 2,185 Income tax expense 10 30 32 ------- ------- ------- Net income 741 1,972 2,153 Retained earnings, beginning of period 1,433 1,965 1,531 Distributions (990) (2,504) (1,719) ------- ------- ------- Retained earnings, end of period $ 1,184 $ 1,433 $ 1,965 ======= ======= =======
See accompanying notes to financial statements. F-5 VACATION MOTORS, INC. DBA CONCORD TOYOTA STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED --------------------------- SEPTEMBER 30, 1998 1997 1996 ------------------- ------------- ----------- Cash flows from operating activities: Net income $ 741 $ 1,972 $ 2,153 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 87 96 90 Amortization of deferred warranty revenue (121) (81) (36) LIFO adjustment (28) (183) (553) Changes in operating assets and liabilities: Receivable from affiliate (953) (305) 18 Accounts receivable (238) 149 (195) Inventories 2,924 (1,185) 25 Note receivable-related party 515 80 - Deposits and prepaid expenses 16 95 (99) Other noncurrent assets - 6 101 Flooring notes payable (1,764) 1,493 26 Accounts payable and accrued liabilities 63 89 (23) ------- ------- ------- Net cash provided by operating activities 1,242 2,226 1,507 ------- ------- ------- Cash flows from investing activities: Capital expenditures (115) (89) (88) ------- ------- ------- Net cash used in investing activities (115) (89) (88) ------- ------- ------- Cash flows from financing activities: Proceeds from long-term debt 11 100 300 Payments on note payable-related party (400) (8) - Distributions to stockholder (738) (2,229) (1,719) ------- ------- ------- Net cash used in financing activities (1,127) (2,137) (1,419) ------- ------- ------- Net increase (decrease) in cash - - - Cash at beginning of the period - - - ------- ------- ------- Cash at end of the period $ - $ - $ - ======= ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 307 $ 228 $ 257 ======= ======= ======= Cash paid during the year for taxes $ 10 $ 30 $ 32 ======= ======= =======
See accompanying notes to financial statements. F-6 VACATION MOTORS, INC. DBA CONCORD TOYOTA NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) ORGANIZATION AND BUSINESS Vacation Motors, Inc. (DBA Concord Toyota) (the "Company"), an automobile dealership, offers a broad range of products and services including new Toyota vehicles as well as used vehicles, vehicle financing and insurance and replacement parts and service. (b) BASIS OF PREPARATION The accompanying financial statements reflect the historical financial position, results of operations and cash flows for Vacation Motors, Inc. The Company was subsequently sold to FirstAmerica Automotive, Inc. (note 8). (c) CASH CONCENTRATION ACCOUNT The Company's bank account is linked to an affiliate's concentration account. Cash balances (or deficits) at the end of each day are automatically transferred to (or from) the concentration account, so that at the end of any particular day, as well as at year-end, the Company's bank account has a zero balance. (d) INVENTORIES Inventories are stated at the lower of cost or market. New vehicle cost is determined by using the last-in, first-out ("LIFO") basis. Used vehicle cost is determined using the specific identification basis. Parts and accessories cost is determined using the first-in, first-out method, which approximates the lower of cost or market. (e) PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Property and equipment are being depreciated on a straight-line basis over the estimated useful life of the assets. Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset. The range of estimated useful lives are as follows: Leasehold improvements 15 years Equipment 5 to 7 years Company vehicles 5 years Furniture and fixtures 5 to 7 years The cost of maintenance and repairs is expensed as incurred, while significant renewals and betterments are capitalized. When an asset is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the account, and any gain or loss is credited or charged to income. (f) INCOME TAXES The Company elected S Corporation status for federal and state income tax reporting purposes. Federal income taxes on S Corporation income were payable by the individual stockholders rather than the corporation. California state income taxes for S Corporations are 1.5% of pretax income. (g) FINANCIAL INSTRUMENTS The carrying amount of trade receivables, trade payables, accrued liabilities and short-term borrowings approximate fair value because of the short-term nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. F-7 (h) ADVERTISING The Company expenses production and other costs of advertising as incurred. Advertising expenses were $805,000 for the nine month period ended September 30, 1998, and $782,000 and $791,000 for the years ended December 31, 1997 and 1996, respectively. Advertising expenses are included in selling, general and administrative expenses in the accompanying financial statements. (i) CONCENTRATIONS OF CREDIT RISK Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. (j) USE OF ESTIMATES These financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. (k) REVENUE RECOGNITION Vehicle sales revenue is recognized upon delivery, when the sales contract is signed and down payment has been received. Notes received from buyers are generally sold to finance companies. Finance fees are received for notes sold to finance companies and are recognized, net of anticipated charge backs, upon acceptance of the credit by the finance companies. These fees are included in service, parts, and other revenues in the statements of operations. Parts and service revenues are recognized at the time of sale or service. The Company recognizes fees from the sale of separately priced extended warranty service contracts at the time of sale. For extended warranty service contracts where the Company is the primary obligor of the contract, the costs directly related to sales of the contracts are deferred and charged to expense proportionately as the revenues are recognized. Warranty service contract revenues are included in service, parts, and other revenues in the statements of operations. (l) MAJOR SUPPLIER AND DEALER AGREEMENT The Company purchases substantially all of its new vehicles and inventory from one manufacturer at the prevailing prices charged by the manufacturer. The Company's overall sales could be impacted by the manufacturer's inability or unwillingness to supply the dealership with an adequate supply of popular models. F-8 (2) ACCOUNTS RECEIVABLE Accounts receivable consist of the following (in thousands):
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------- Contracts in transit and vehicle receivables $ 871 $ 580 Trade 198 220 Manufacturer and other 219 284 ------ ------ Total accounts receivable 1,288 1,084 Less allowance for doubtful accounts - (34) ------ ------ Accounts receivable, net $1,288 $1,050 ====== ======
Contracts in transit receivables are due from financial institutions and regional banks for funding of customer vehicle purchases and are normally collected within 30 days. Trade receivables primarily consist of commercial receivables for parts sales and finance receivables from financial institutions for financing commissions. Manufacturer and other receivables consist of amounts due from manufacturers for rebates on vehicle purchases (holdbacks), manufacturer incentives and reimbursable warranty coverage expenses. (3) INVENTORIES AND FLOOR PLAN NOTES PAYABLE Inventories and related floor plan notes payable were as follows (in thousands):
INVENTORY COST FLOOR PLAN NOTES PAYABLE ----------------------------- ------------------------------ SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 1998 1997 1998 1997 --------------- ------------- ---------------- ------------- New vehicles $ 2,147 $ 4,039 $2,226 $3,990 Used vehicles 767 1,597 -- -- Parts and accessories 274 286 -- -- LIFO Reserve (1,479) (1,507) -- -- ------- ------- ------ ------ Inventories, net $ 1,709 $ 4,415 $2,226 $3,990 ======= ======= ====== ======
Inventory floor plan notes payable consist of notes to a financing institution that bear interest at prime plus 1.125% and are secured by new vehicles and vehicle receivables. The floor plan agreement permits the Company to borrow up to $5.5 million; borrowings are limited by new vehicle inventory levels. LIFO adjustments were $28,000 for the nine months ended September 30, 1998 and $183,000 and $553,000 for the years ended December 31, 1997 and 1996, respectively, and are included in cost of sales in the accompanying statements of operations. F-9 (4) PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
SEPTEMBER 30, DECEMBER 31, 1998 1997 -------------- -------------- Leasehold improvements $ 607 $ 607 Equipment 350 331 Company vehicles 81 271 Furniture and fixtures 253 157 ------ ------ 1,291 1,366 Less accumulated depreciation (960) (873) ------ ------ Property and equipment, net $ 331 $ 493 ====== ======
(5) COMMITMENTS The minimum rental commitments under operating leases which have terms greater than one year after December 31, 1998 are as follows (in thousands): Three months ending December 31, 1998 $ 34 Year ending December 31, 1999 137 2000 144 2001 144 2002 144 2003 144 Thereafter 96 ---- $843 ==== Amounts paid under operating leases were $101,000 for the nine months ended September 30, 1998, and $134,000 and $134,000 for the years ended December 31, 1997 and 1996, respectively. (6) RELATED PARTY TRANSACTIONS TRANSACTIONS WITH RELATED PARTIES In 1998, the Company transferred investment property with a book value of $252,000 to the sole stockholder of the Company. The transaction was treated as a non-cash distribution and is included in other noncurrent assets in the accompanying financial statements. In 1997, the Company transferred $275,000, the cash surrender value of a life insurance policy to the sole stockholder of the Company. The transaction was treated as a non-cash distribution and is included in other noncurrent assets in the accompanying financial statements. Included in vehicle sales for the year ended December 31, 1996 are sales totaling $618,000 made to a relative of the sole stockholder. The sales resulted in a gross profit of $6,000. RECEIVABLE FROM AFFILIATE Cash is managed by an affiliate of the Company. The receivable from this affiliate was $1,250,000 at September 30, 1998 and $297,000 at December 31, 1997. (See note 1.) F-10 NOTE RECEIVABLE AND NOTE PAYABLE WITH RELATED PARTIES Note receivable and note payable with related parties consisted of the following (in thousands): SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ Note receivable from stockholder $ - $515 ==== ==== Note payable to related party $ - $400 ==== ==== The note payable to related party is payable on demand, bears interest at prime plus 1.125% and is unsecured. Interest is paid monthly. (7) EMPLOYEE BENEFITS The Company provides a 401(k) Plan and Trust Agreement (the Plan) that covers substantially all employees of the Company. The amount of the Company's annual contribution to the Plan is at the discretion of the Board of Directors. Contributions to the Plan were $21,000 for the nine month period ended September 30, 1998, and $33,000 and $28,000 for the years ended December 31, 1997 and 1996, respectively. As of September 30, 1998, approximately 35% of the Company's employees were represented by a union. (8) SUBSEQUENT EVENTS In October 1998, all of the outstanding capital stock of the Company was acquired by FirstAmerica Automotive, Inc. No adjustments related to the acquisition are reflected in the accompanying historical financial statements. F-11 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The accompanying unaudited pro forma consolidated financial data of FirstAmerica Automotive, Inc. (the "Company") and Vacation Motors, Inc. (DBA Concord Toyota) present the effect of the Company's acquisition of Vacation Motors, Inc. as if such acquisition had occurred at the beginning of the respective periods presented. The following unaudited pro forma consolidated balance sheet as of September 30, 1998 reflects the historical accounts of the Company as of that date as adjusted to give effect to the acquisition of Vacation Motors, Inc. as if such acquisition had occurred on September 30, 1998. The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 1998 consists of the Company's unaudited consolidated statement of operations and the audited Vacation Motors, Inc. statement of operations, each for the nine months ended September 30, 1998, together with unaudited pro forma adjustments that are necessary to present fairly the unaudited pro forma results of operations of both entities as if such acquisition had occurred on the first day of the period presented. The unaudited pro forma consolidated statement of operations for the year ended December 31, 1997 consists of the Company's audited consolidated statement of operations for the year ended December 31, 1997 plus the Vacation Motors, Inc. audited statement of operations for the year ended December 31, 1997, together with unaudited pro forma adjustments that are necessary to present fairly the unaudited pro forma consolidated results of operations of both entities as if the acquisition had occurred on the first day of the period presented. Such unaudited pro forma adjustments are based on the terms and structure of the transaction, and include operating adjustments such as incremental floor plan and Senior Notes payable and related interest expense, incremental intangible asset and goodwill amortization, and the net income tax effect of such adjustments. The following unaudited pro forma financial data may not be indicative of the results of operations that would have actually occurred had the transaction been in effect as of the beginning of the respective periods, nor do they purport to indicate the Company's future results of operations. This information and accompanying notes should be read in conjunction with the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 14, 1998, its Quarterly Report on Form 10-Q for the nine months ended September 30, 1998 filed on November 16, 1998 and the Vacation Motors, Inc. financial statements included elsewhere in this report on Form 8-K/A. PF-1 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (IN THOUSANDS)
VACATION FIRSTAMERICA MOTORS, PRO FORMA Assets AUTOMOTIVE, INC. INC. ADJUSTMENTS PRO FORMA ---------------- -------- ----------- --------- Cash and cash equivalents $ 598 $ - $ - $ 598 Accounts receivable, related party - 1,250 (600) (c) 650 Accounts receivable, net 29,664 1,288 - 30,952 Inventories, net 76,475 1,709 1,479 (d) 79,663 Prepaid costs-extended warranty service contracts 862 135 (135) (a) 862 Deferred income taxes 676 - - 676 Deposits, prepaid expenses and other assets 3,521 18 - 3,539 -------- ------ ------- -------- Total current assets 111,796 4,400 744 116,940 Property and equipment, net 10,531 331 - 10,862 Other assets: Prepaid costs-extended warranty service contracts 1,005 221 (221) (a) 1,005 Loan origination and other costs, net 3,152 - - 3,152 Other noncurrent assets 3,001 - 710 (b) 3,711 Goodwill, net 20,182 - 9,000 (b) 29,182 -------- ------ ------- -------- Total assets $149,667 $4,952 $10,233 $164,852 ======== ====== ======= ========
See accompanying notes to unaudited pro forma consolidated financial data. PF-2 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CON'T) AS OF SEPTEMBER 30, 1998 (IN THOUSANDS EXCEPT SHARE DATA)
FIRSTAMERICA VACATION PRO FORMA Liabilities and Stockholders' Equity AUTOMOTIVE, INC. MOTORS, INC. ADJUSTMENTS PRO FORMA ---------------- -------------- ----------- --------- Current liabilities: Accounts payable $ 7,521 $ 363 $ - $ 7,884 Accrued liabilities 12,486 398 - 12,884 Floor plan notes payable 66,105 2,226 - 68,331 Secured lines of credit 16,400 - - 16,400 Other notes payable 6,994 - - 6,994 Deferred revenue-extended warranty service contracts 2,080 270 (270) (a) 2,080 -------- ------- ------- -------- Total current liabilities 111,586 3,257 (270) 114,573 Long-term liabilities: Senior notes, net 22,090 - 11,000 (c) 33,090 Long-term debt - 20 - 20 Deferred income taxes 327 - - 327 Deferred revenue- extended warranty service contracts 2,451 441 (263) (a) 2,629 -------- ------- ------- -------- Total liabilities 136,454 3,718 10,467 150,639 Commitments and contingencies 8% cumulative redeemable preferred stock, $0.00001 par value; 3,500 shares issued and outstanding 3,026 - - 3,026 Redeemable preferred stock, $0.00001 par value; 500 shares issued and outstanding 522 - - 522 Stockholders' Equity Common stock - 50 (50) (a) - Common stock, $0.00001 par value: Class A, 30,000,000 shares authorized, 11,179,029 shares issued and outstanding - - - - Class B, 5,000,000 shares authorized, 3,532,000 shares issued and outstanding - - - - Class C, 30,000,000 shares authorized, 0 issued and outstanding - - - - Additional paid-in capital 6,544 - 1,000 (c) 7,544 Retained earnings 3,121 1,184 (1,184)(a) 3,121 -------- ------- ------- -------- Total stockholders' equity 9,665 1,234 (234) 10,665 -------- ------- ------- -------- $149,667 $ 4,952 $10,233 $164,852 ======== ======= ======= ========
See accompanying notes to unaudited pro forma consolidated financial data. PF-3 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS EXCEPT PER SHARE DATA)
FIRSTAMERICA VACATION PRO FORMA AUTOMOTIVE, INC. MOTORS, INC. ADJUSTMENTS PRO FORMA ---------------- ------------ ----------- ---------- Sales: Vehicle $483,586 $43,744 $ - $527,330 Service, parts and other 83,568 6,789 - 90,357 -------- ------- ------- -------- Total sales 567,154 50,533 - 617,687 Cost of sales 480,086 44,301 28 (d) 524,415 -------- ------- ------- -------- Gross profit 87,068 6,232 (28) 93,272 Operating expenses: Selling, general and administrative 71,926 5,052 - 76,978 Depreciation and amortization 1,666 87 259 (e) 2,012 -------- ------- ------- -------- Operating income 13,476 1,093 (287) 14,282 Other expense: Interest expense, floor plan (4,172) (307) 102 (f) (4,377) Interest expense, other (3,300) - (1,188) (g) (4,488) Other expense, net (35) (35) -------- ------- ------- -------- Income before income taxes 6,004 751 (1,373) 5,382 Income tax expense 2,582 10 (277) (h) 2,315 -------- ------- ------- -------- Net income $ 3,422 $ 741 $(1,096) $ 3,067 ======== ======= ======= ======== Basic earnings per share (i) $ 0.22 $ 0.19 Weighted average shares outstanding (i) 14,215 14,715 Diluted earnings per share (i) $ 0.21 $ 0.18 Weighted average shares outstanding (i) 14,683 15,213
See accompanying notes to unaudited pro forma consolidated financial data. PF-4 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS EXCEPT PER SHARE DATA)
FIRSTAMERICA VACATION PRO FORMA AUTOMOTIVE, INC. MOTORS, INC. ADJUSTMENTS PRO FORMA ----------------- ------------- --------------- ---------- Sales: Vehicle $401,896 $61,017 $ - $462,913 Service, parts and other 72,152 8,858 - 81,010 -------- ------- ------- -------- Total sales 474,048 69,875 - 543,923 Cost of sales 407,074 61,133 183 (d) 468,390 -------- ------- ------- -------- Gross profit 66,974 8,742 (183) 75,533 Operating expenses: Selling, general and administrative 58,761 6,521 - 65,282 Combination and related expenses 2,268 - - 2,268 Depreciation and amortization 873 96 345 (e) 1,314 -------- ------- ------- -------- Operating income 5,072 2,125 (528) 6,669 Other income (expense): Interest expense, floor plan (3,669) (228) 76 (f) (3,821) Interest expense, other (1,671) - (1,584)(g) (3,255) Other income, net 778 105 - 883 -------- ------- ------- -------- Income before income taxes 510 2,002 (2,036) 476 Income tax expense 446 30 (45)(h) 431 -------- ------- ------- -------- Net income $ 64 $ 1,972 $(1,991) $ 45 ======== ======= ======= ======== Basic and diluted loss per share (i) $ (0.01) $ (0.01) Weighted average shares outstanding (i) 10,915 11,415
See accompanying notes to unaudited pro forma consolidated financial data. PF-5 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA (a) Assets and liabilities not acquired by the Company are eliminated from the unaudited pro forma consolidated financial statements. (b) The purchase price of $12.6 million was allocated to the assets acquired net of liabilities assumed based on their relative fair values, which resulted in an allocation to goodwill of $9.0 million. Other noncurrent assets were increased to reflect the fair market value of favorable lease terms on an operating lease agreement that expires in August 2004. (c) The Company funded $12.0 million of the purchase price through cash proceeds from the issuance of $12.0 million in 12.375% Senior Notes and 500,000 shares of Class B Common Stock to Trust Company of the West, a financial company with which the Company has an existing lending agreement. The Senior Notes were issued at a discount of $1.0 million and the Common Stock was issued at $2.00 per share. The Senior Notes are due June 30, 2005. The remainder of the $0.6 million purchase price was funded by the Company's working capital. (d) Reflects the change in accounting for inventories from Vacation Motors, Inc.'s last-in, first-out method to the Company's specific identification method. The adjustment in the reserve totaled $28,000 for the nine months ended September 30, 1998 and $183,000 for the year ended December 31, 1997. (e) Reflects the incremental goodwill amortization expense using a 40-year estimated useful life, which totals $169,000 and $225,000 for the nine months ended September 30, 1998 and twelve months ended December 31, 1997, respectively. Also includes amortization of the increased fair value of the operating lease assumed as part of the acquisition, which totals $90,000 and $120,000 for the nine months ended September 30, 1998 and year ended December 31, 1997, respectively. (f) Represents the incremental decrease in floor plan interest expense from substituting Vacation Motors, Inc.'s floor plan obligation with the Company's corporate contractual master floor plan agreement with General Electric Credit Corporation. The average interest rate under the Company's master agreement is prime plus 0.75%, compared to prime plus 1.125% for Vacation Motors, Inc. (g) Reflects the incremental interest expense incurred on the Senior Notes payable issued to acquire Vacation Motors, Inc. (see note c above.) (h) Vacation Motors, Inc. was not subject to federal income taxes because of its S Corporation tax status for the periods presented. Upon completion of the acquisition, this dealership will be subject to federal and state income tax as a C Corporation. This adjustment reflects the resulting increase in the federal and state income tax provision as if this dealership had been taxable at the combined statutory income tax rate of approximately 43% in 1998 and 91% in 1997. (i) Pro forma basic and diluted net income per share and the related weighted average shares outstanding for the nine months ended September 30, 1998 have been adjusted to reflect the effect of the issuance of 500,000 shares of Class B Common Stock, 100,000 stock options, and a warrant to acquire 50,000 shares of Class A Common Stock in connection with the acquisition and financing of the acquisition of Vacation Motors, Inc. For purposes of calculating basic earnings per share for the nine months ended September 30, 1998 and the year ended December 31, 1997, net income of $3,067,000 and $45,000 is reduced by cumulative redeemable preference dividends of $210,000 and $128,000, redeemable preferred stock liquidation preference accretion of $50,000 and $40,000, and cumulative redeemable preferred stock and redeemable preferred stock discount amortization of $60,000 and $45,000, respectively. This net income available to common stockholders of $2.7 million and $(0.2) million is then divided by the weighted average shares outstanding. The diluted earnings per share for the year ended December 31, 1997 does not include dilutive securities, such as options and warrants, as their inclusion would be anti-dilutive. PF-6 -----END PRIVACY-ENHANCED MESSAGE-----