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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) December 1, 1999
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Crown Group, Inc.
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(Exact name of registrant as specified in its charter)
Texas 0-14939 63-0851141
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(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038
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(Address of principal executive offices)
Registrant's telephone number, including area code (972) 717-3423
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(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
The financial statements of Smart Choice Automotive Group,
Inc. ("Smart Choice") as included in Appendix A of Part II,
Item 8 of Smart Choice's Form 10-K for the year ended December
31, 1998 as filed with the Securities and Exchange Commission
are hereby incorporated by reference into this Form 8-K/A
Amendment No. 1.
(b) Pro-Forma financial information.
The following pro-forma financial statements of Crown Group,
Inc. are hereby filed with this report:
Introduction to Pro-Forma Financial Information
Pro-Forma Consolidated Balance Sheet (unaudited) as of
October 31, 1999
Pro-Forma Consolidated Statement of Operations (unaudited)
for the year ended April 30, 1999
Pro-Forma Consolidated Statement of Operations (unaudited)
for the six months ended October 31, 1999
Notes to Pro-Forma Consolidated Financial Statements
(c) Exhibits:
24.1 - Consent of Independent Certified Public Accountants
99 - The following financial statements of Smart Choice
are filed herewith:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1998
and 1997
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
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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 hereunto duly authorized.
CROWN GROUP, INC.
By: /s/ Mark D. Slusser
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Mark D. Slusser
Chief Financial Officer
Dated: February 11, 2000
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CROWN GROUP, INC.
INTRODUCTION TO PRO-FORMA FINANCIAL INFORMATION
PURCHASE OF 70% OF SMART CHOICE
On December 1, 1999, pursuant to a definitive stock purchase agreement
negotiated at arms length, Crown Group, Inc. ("Crown") acquired a 70% voting and
economic interest in Smart Choice Automotive Group, Inc. ("Smart Choice")
directly from Smart Choice. The purchase price ("Purchase Price") consisted of
(i) $3.0 million cash, (ii) the conversion of $4.5 million of Smart Choice debt,
which Crown had contemporaneously acquired from a third party for approximately
$2.3 million cash, and (iii) the contribution of Crown's 85% interest in Paaco
Automotive Group, Inc. and Premium Auto Acceptance Corporation (collectively,
"Paaco"). In consideration for the Purchase Price Crown received 1,371,581.47
shares of Smart Choice Series E Convertible Preferred Stock, which is
convertible into 137,158,147 shares of Smart Choice common stock representing
70% of the ownership and voting rights of Smart Choice on an "as converted"
basis. The cash consideration paid by Crown was obtained from working capital.
Contemporaneously with Crown's purchase of a 70% interest in Smart Choice,
approximately $15.0 million of Smart Choice's outstanding debt and preferred
stock was converted into shares of common stock representing a 20.7% interest in
Smart Choice, and Smart Choice issued 4,898,505 shares of its common stock to a
third party for $1.0 million cash. In addition, the Paaco minority shareholders
exchanged their 15% interest in Paaco for shares of Smart Choice Series E
Convertible Preferred Stock representing a 5% voting and economic interest in
Smart Choice. Paaco is now a wholly-owned subsidiary of Smart Choice.
Excluding Paaco, Smart Choice operates eleven "buy-here pay-here" used car
dealerships in central Florida. Smart Choice's assets consist principally of (i)
finance receivables originated in the sale of used vehicles, and (ii) inventory.
PRO-FORMA FINANCIAL STATEMENTS
The following Pro-Forma Consolidated Balance Sheet of Crown as of October 31,
1999 gives effect to the above described transactions, as if such transactions
had occurred on that date.
The following Pro-Forma Consolidated Statement of Operations of Crown for the
year ended April 30, 1999 gives effect to the above described transactions, as
if such transactions had occurred at the beginning of the period (May 1, 1998).
Smart Choice's historical accounting year ends on December 31. Smart Choice's
operating results for the year ended April 30, 1999 have been derived by adding
(i) its operating results for the four months ended April 30, 1999, and
subtracting (ii) its operating results for the four months ended April 30, 1998,
from (iii) its operating results for the year ended December 31, 1998.
The following Pro-Forma Consolidated Statement of Operations of Crown for the
six months ended October 31, 1999 gives effect to the above described
transactions, as if such transactions had occurred at the beginning of the
period (May 1, 1999). Smart Choice's operating results for the six months ended
October 31, 1999 have been derived by adding (i) its operating results for the
one month ended October 31, 1999, and subtracting (ii) its operating results for
the four months ended April 30, 1999, from (iii) its operating results for the
nine months ended September 30, 1999.
The pro-forma information is based on the historical financial statements of
Crown and Smart Choice giving effect to the transactions described above and the
adjustments described in the accompanying Notes to Pro-Forma Consolidated
Financial Statements and may not be indicative of the results that actually
would have occurred had the transactions taken place on the dates indicated or
the results which may be obtained in the future.
P-1
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CROWN GROUP, INC.
PRO-FORMA CONSOLIDATED BALANCE SHEET
UNAUDITED
OCTOBER 31, 1999
(IN THOUSANDS)
Purchase
Debt and Accounting
Historical Historical Equity and Eliminating Pro-Forma
Crown Smart Choice Transactions Entries Consolidated
------------- -------------- ------------- ----------------- --------------
Assets:
Cash and cash equivalents $ 11,542 $ 885 $ (1,272)(1) $ 11,155
Accounts and other receivables, net 3,683 1,233 4,916
Mortgage loans held for sale, net 14,068 14,068
Finance receivables, net 100,201 77,783 $ (3,314)(4) 174,670
Inventory 7,229 10,496 17,725
Prepaid and other assets 4,672 1,093 (100)(3) 5,665
Property and equipment, net 26,707 6,919 1,062(5) 34,688
Investment in subsidiary 5,272(2) (5,272)(6)
Goodwill, net 9,498 5,263 8,820(6) 23,581
--------- --------- --------- -------- --------
$ 177,600 $ 103,672 $ 3,900 $ 1,296 $286,468
========= ========= ========= ======== ========
Liabiities and stockholders' equity:
Accounts payable $ 3,378 $ 6,389 $ 9,767
Accrued liabilities 6,041 10,995 17,036
Income taxes payable 7,117 7,117
Revolving credit facilities 78,662 80,026 158,688
Other notes payable 18,726 20,459 $ (13,507) (3) 25,678
Deferred sales tax 3,482 3,482
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Total liabilities 117,406 117,869 (13,507) 221,768
--------- --------- --------- -------- ---------
Minority interests 1,200 $ 2,957 (6) 4,157
Contingent redemption of put options 1,549 1,549
Stockholders' equity:
Preferred stock 5,892 (5,892)(3)
Common stock and additional PIC 33,821 32,076 23,299(3) (55,375)(6) 33,821
Retained earnings 25,173 (53,714) 53,714(6) 25,173
---------- -------- --------- -------- --------
Total stockholders' equity 58,994 (15,746) 17,407 (1,661) 58,994
---------- -------- --------- -------- --------
$ 177,600 $103,672 $ 3,900 $ 1,296 $286,468
========== ======== ========= ======== ========
See accompanying Notes to Pro-Forma Consolidated Financial Statements.
P-2
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CROWN GROUP, INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Historical Pro-Forma
Crown Smart Choice Adjustments Consolidated
----------------- ----------------- -------------- ----------------
Revenues:
Sales $ 89,731 $ 79,851 $169,582
Rental income 2,635 2,635
Gain on sale of mortgage loans 4,407 4,407
Interest income 13,321 16,645 $ 678 (a) 30,644
Interest, fees, and rentals from CMN 694 694
Gaming and other 498 1,426 1,924
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111,286 97,922 678 209,886
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Costs and expenses:
Cost of sales 57,130 59,789 116,919
Selling, general and administrative 29,484 23,713 53,197
Provision for credit losses 15,498 14,711 30,209
Interest expense 6,766 9,856 (1,402)(b) 15,220
Depreciation and amortization 2,399 2,046 353 (c) 4,798
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111,277 110,115 (1,049) 220,343
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Other income:
Equity in earnings of unconsolidated subsidiaries 1,260 1,260
Gain on sale of securities, net 24,689 24,689
Other 433 433
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25,949 433 26,382
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Income (loss) before taxes and minority 25,958 (11,760) 1,727 15,925
interest
Provision for income taxes 9,001 9,001
Minority interests (551) (551)
(Income) loss from discontinued operations (1,220) (1,220)
Preferred stock dividends 615 (615)(d)
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Net income $ 17,508 $(11,155) $ 2,342 $ 8,695
======== ======== ========= =========
Earnings per share:
Basic - continuing $ 1.73 $ .74
Diluted - continuing $ 1.68 $ .72
Basic - discontinued $ .12
Diluted - discontinued $ .12
Weighted average number of shares outstanding:
Basic 10,096 10,096
Diluted 10,401 10,401
See accompanying Notes to Pro-Forma Consolidated Financial Statements.
P-3
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CROWN GROUP, INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1999
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Historical Pro-Forma
Crown Smart Choice Adjustments Consolidated
------------ ------------ ------------ ------------
Revenues:
Sales $ 78,335 $ 29,635 $ 107,970
Rental income 2,230 2,230
Gain on sale of mortgage loans 2,439 2,439
Interest income 10,050 10,865 $ 358(a) 21,273
Gaming and other 1,032 209 1,241
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94,086 40,709 358 135,153
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Costs and expenses:
Cost of sales 46,705 22,564 69,269
Selling, general and administrative 23,106 8,339 31,445
Provision for credit losses 12,719 9,490 22,209
Interest expense 5,075 4,725 (701)(b) 9,099
Depreciation and amortization 1,635 757 176 (c) 2,568
Restructuring charges 3,414 3,414
Write-off of goodwill 12,329 12,329
------------ ------------ ------------ ------------
89,240 61,618 (525) 150,333
------------ ------------ ------------ ------------
Other income:
Equity in earnings of unconsolidated subsidiaries 943 943
Gain on sale of securities, net 10,238 10,238
Other 140 140
------------ ------------ ------------ ------------
11,181 140 11,321
------------ ------------ ------------ ------------
Income (loss) before taxes and minority 16,027 (20,769) 883 (3,859)
interests
Provision for income taxes 6,010 6,010
Minority interests(168) (168) (168)
(Income) loss from discontinued operations 3,299 3,299
Preferred stock dividends 316 (316)(d)
------------ ------------ ------------ ------------
Net income (loss) $ 10,185 $ (24,384) $ 1,199 $ (13,000)
============ ============ ============ ============
Earnings (loss) per share:
Basic - continuing $ 1.03 $ (.98)
Diluted - continuing $ 0.99 $ (.98)
Basic - discontinued $ (.33)
Diluted - discontinued $ (.33)
Weighted average number of shares outstanding:
Basic 9,867 9,867
Diluted 10,278 9,867
See accompanying Notes to Pro-Forma Consolidated Financial Statements.
P-4
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CROWN GROUP, INC.
NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
BALANCE SHEET
(1) To record cash transactions as follows:
Crown's purchase of a Smart Choice note from a third party $(2,272)
Crown's purchase of Smart Choice common stock (3,000)
Smart Choice's sale of common stock to Crown 3,000
Smart Choice's sale of common stock to third party 1,000
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$(1,272)
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(2) To record Crown's initial investment in Smart Choice.
(3) To record Smart Choice's sale of common stock for cash and the
conversion of its debt and preferred stock into common stock as
follows:
Conversion of Smart Choice debt into common stock $ 13,507
Elimination of debt issuance costs associated with converted debt (100)
Conversion of Smart Choice preferred stock into common stock 5,892
Sale of common stock for cash 4,000
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$ 23,299
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(4) To adjust net finance receivables to the present value of the amount
expected to be received less collection costs as follows:
Estimated collection costs $ (2,047)
Capitalized loan origination costs (1,267)
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$ (3,314)
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(5) To adjust real property to appraised value.
(6) To record (i) the contribution of Paaco into Smart Choice, (ii)
goodwill for the excess purchase price paid over the fair value of
Smart Choice net assets, and (iii) consolidating eliminating entries.
STATEMENT OF OPERATIONS
a - To record amortization of discount on finance receivable portfolio.
b - To eliminate interest expense associated with debt that was converted
to equity.
c - To record amortization of additional goodwill created in the
transactions.
d - To eliminate preferred stock dividends as a result of such preferred
stock being converted to common stock.
P-5
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99 Financial Statements of Smart Choice Automotive Group, Inc.
24.1 Consent of Independent Certified Public Accountants.