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.
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