Exhibit 99.5
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations
for the year ended December 31, 1997 reflects the historical accounts of the
Company for that period, adjusted giving effect to the acquisitions of Lake
Norman Dodge, Inc. and Affiliated Companies, Ken Marks Ford, Inc., Dyer & Dyer,
Inc. and the Bowers Dealerships and Affiliated Companies in 1997 (the "1997
Acquisitions"), the acquisitions of Clearwater Dealerships and Affiliated
Companies effective January 1, 1998 (the "Clearwater Acquisition" and, together
with the 1997 Acquisitions, the "Completed Acquisitions"), and the Hatfield
Acquisition (collectively, the "Acquisitions"), as if such acquisitions had
occurred on the first day of the period presented. The following unaudited pro
forma consolidated statement of operations for the three months ended March 31,
1998 reflects the historical accounts of the Company for that period, adjusted
to give effect to the Hatfield Acquisition, as if such acquisition had occurred
on the first day of the period presented. The following unaudited pro forma
consolidated balance sheet as of March 31, 1998 reflects the historical accounts
of the Company as of that date as adjusted to give effect to the Hatfield
Acquisition as if such acquisition had occurred on March 31, 1998.
The unaudited pro forma consolidated financial data and accompanying
notes should be read in conjunction with the Consolidated Financial Statements
and related notes of the Company as included in its Annual Report on Form 10-K
dated March 31, 1998 and its Quarterly Report on Form 10-Q dated May 14, 1998,
the financial statements and related notes of the Bowers Dealerships and
Affiliated Companies, Lake Norman Dodge, Inc. and Affiliated Companies, Ken
Marks Ford, Inc. and Dyer and Dyer, Inc. as included in the Company's Prospectus
dated November 10, 1997, as well as the financial statements and related notes
of the Hatfield Automotive Group as included herein by exhibit 99.3 and as
incorporated by reference to exhibit 99.2 to the Company's Form 8-K dated July
9, 1998. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the unaudited pro
forma financial data. The unaudited pro forma consolidated financial data are
provided for informational purposes only and should not be construed to be
indicative of the Company's financial condition or results of operations had the
transactions described above been consummated on the dates assumed, and are not
intended to project the Company's financial condition on any future date or its
results of operations for any future period.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands except per share data)
Completed Acquisitions
-----------------------------------------------------------------
Pro-Forma
Adjustments Pro-Forma
1997 for the for the
Acquisitions Clearwater Completed Completed
Actual (a) (b) Acquisition Acquisitions Acquisitions
----------------- ------------------------------------------------- ---------------
Revenues:
Vehicle sales $ 467,858 $ 364,756 $ 108,812 $ - $ 941,426
Parts, service, and collision repair 57,537 42,164 10,500 110,201
Finance and insurance 10,606 7,723 2,587 346 (c) 21,262
----------------- ----------------------------------------- --------------
Total Revenues 536,001 414,643 121,899 346 1,072,889
Cost of Sales 471,253 360,794 105,786 (371) (d) 937,462
----------------- ----------------------------------------- ---------------
Gross Profit 64,748 53,849 16,113 717 135,427
Selling, general & administrative expenses 48,520 41,909 12,226 (4,093) (e) 99,745
1,183 (f)
Management bonus -
Depreciation and amortization 1,322 914 390 (179) (f) 3,725
(303) (g)
1,581 (h)
----------------- ----------------------------------------- --------------
Operating income 14,906 11,026 3,497 2,528 31,957
Interest expense, floorplan 8,007 4,722 779 (1,864) (i) 11,644
Interest expense, other 1,199 234 721 (690) (f) 5,394
3,949 (j)
267 (k)
(286) (l)
Other income 298 180 194 672
----------------- ----------------------------------------- --------------
Income (loss) before income
taxes and minority interest 5,998 6,250 2,191 1,152 15,591
Provision for income taxes 2,249 178 - 627 (m) 5,979
2,925 (n)
----------------- ----------------------------------------- --------------
Income (loss) before minority interest 3,749 6,072 2,191 (2,400) 9,612
Minority interest in
earnings of subsidiary 47 - - 47
----------------- ----------------------------------------- --------------
Net Income (Loss) $ 3,702 $ 6,072 $ 2,191 $ (2,400) $ 9,565
================= ========================================= ==============
Basic net income per share $ 0.53
=================
Weighted average shares outstanding 6,949
=================
Diluted net income per share (o) $ 0.53
=================
Weighted average shares outstanding (o) 6,949
=================
Hatfield Acquisition
--------------------------------------------
Pro-Forma
Adjustments
for the Pro-Forma
Hatfield Hatfield for the
Dealerships Acquisition Acquisitions
---------------------------------------- ---------------
Revenues:
Vehicle sales $ 251,981 $ - $ 1,193,407
Parts, service, and collision repair 16,400 126,601
Finance and insurance 6,899 28,161
------------------------------------ ---------------
Total Revenues 275,280 - 1,348,169
Cost of Sales 243,370 1,180,832
------------------------------------ ---------------
Gross Profit 31,910 - 167,337
Selling, general & administrative expenses 21,153 104 (e) 121,002
Management bonus 7,121 (7,121) (e) -
Depreciation and amortization 221 4,865
(25) (g)
944 (h)
------------------------------------- ---------------
Operating income 3,415 6,098 41,470
Interest expense, floorplan 3,663 (414) (i) 15,523
630 (j)
Interest expense, other - 7,625
2,231 (j)
Other income 224 896
--------------------------------------- ---------------
Income (loss) before income
taxes and minority interest (24) 3,651 19,218
Provision for income taxes - 1,583 (m) 7,552
(10) (n)
--------------------------------------- ---------------
Income (loss) before minority interest (24) 2,078 11,666
Minority interest in
earnings of subsidiary - 47
--------------------------------------- ---------------
Net Income (Loss) $ (24) $ 2,078 $ 11,619
======================================= ===============
Basic net income per share $ 1.03
==============
Weighted average shares outstanding 11,250
==============
Diluted net income per share (o) $ 0.91
==============
Weighted average shares outstanding (o) 12,749
==============
(See accompanying notes to Unaudited Pro Forma Consolidated Statements of Operations)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(in thousands except per share data)
Pro Forma Pro Forma
Hatfield Adjustments for for the
Actual (a) Dealerships the Acquisition the Acquisition
---------------- ---------------------------------- ----------------
Revenues:
Vehicle sales $ 228,569 $ 57,661 $ - $ 286,230
Parts, service, and collision repair 28,965 4,255 - 33,220
Finance and insurance 6,247 1,747 - 7,994
------------ -------------------------------- ----------------
Total Revenues 263,781 63,663 - 327,444
Cost of Sales 228,600 56,297 - 284,897
------------ -------------------------------- ----------------
Gross Profit 35,181 7,366 - 42,547
Selling, general & administrative expenses 26,640 5,053 20 (e) 31,713
Management bonus - 1,700 (1,700) (e) -
Depreciation and amortization 815 67 (6) (g) 1,112
236 (h)
------------ -------------------------------- ----------------
Operating income 7,726 546 1,450 9,722
Interest expense, floorplan 3,235 556 (59) (i) 3,889
157 (j)
Interest expense, other 1,061 - 593 (j) 1,654
Other income 44 41 85
------------ -------------------------------- ----------------
Income before income taxes and minority interest 3,474 31 759 4,264
Provision for income taxes 1,338 - 335 (m) 1,699
13 (n)
------------ -------------------------------- ----------------
Income before minority interest 2,136 31 411 2,578
Minority interest in earnings of subsidiary - - - -
------------ -------------------------------- ----------------
Net Income $ 2,136 $ 31 $ 411 $ 2,578
============ ================================ ================
Basic net income per share $ 0.19 $ 0.23
============ ===============
Weighted average shares outstanding 11,250 11,250
============ ===============
Diluted net income per share (o) $ 0.19 $ 0.20
============ ===============
Weighted average shares outstanding (o) 11,374 12,843
============ ===============
(See accompanying notes to Unaudited Pro Forma Consolidated Statements of Operations)
NOTES TO UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1997 AND MARCH 31, 1998
(a) The actual consolidated statement of operations data for the Company for
the year ended December 31, 1997 includes the results of operations of the
following dealerships and dealership groups acquired during the year ended
December 31, 1997 from their respective dates of acquisition:
DEALERSHIP ACQUIRED DATE OF
ACQUISITION
- --------------------------------------- ----------------------------
Fort Mill Chrysler-Plymouth-Dodge June 3, 1997
Lake Norman Dealerships September 1, 1997
Ken Marks Ford October 1, 1997
Williams Motors October 10, 1997
Dyer Volvo November 1, 1997
Bowers Dealerships November 1, 1997
The actual consolidated statement of operations data for the Company for
the three months ended March 31, 1998 includes the results of operations of
the Clearwater Dealerships and Affiliated Companies from January 1, 1998,
the date of the Clearwater Acquisition.
(b) Reflects the results of operations of the 1997 Acquisitions for the period
from January 1, 1997 to their respective dates of acquisition. Pro forma
adjustments have not been presented to include the results of (i) Fort Mill
Chrysler-Plymouth-Dodge for the period from January 1, 1997 to June 3,
1997, the date of the acquisition or (ii) Williams Motors for the
period from January 1, 1997 to October 10, 1997, the date of
acquisition, because management believes such results are not material.
(c) Reflects finance and insurance revenues generated by the 1997 Acquisitions
and the Clearwater Acquisition in the amounts of $252,000 and $94,000,
respectively, for the year ended December 31, 1997 that were paid directly
to the dealership owners or wholly-owned management companies and excluded
from revenue in the historical financial statements of the acquired
dealerships.
(d) Adjustment reflects the conversion from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting for the 1997
Acquisitions in the amount of $371,000 for the year ended December 31, 1997
to conform to the Company's method of accounting for vehicle inventories.
(e) Reflects the net decrease in selling, general, and administrative expenses
related to the net reduction in salaries, bonuses, and fringe benefits and
related expenses of owners and officers of the acquired dealerships who
have become or will become employees, consistent with reduced salaries
pursuant to employment agreements with the Company, or whose positions have
been or will be eliminated as part of the acquisitions.
(f) Reflects the increase in rent expense related to lease agreements entered
into with the sellers of certain dealerships acquired in the 1997
Acquisitions and the Clearwater Acquisition for such dealerships' real
property that were not acquired by the Company, and the decreases in
depreciation expense and interest expense related to mortgage indebtedness
encumbering such property of approximately $1.8 million bearing interest at
9% and $5.9 million bearing interest at rates from 9% to 9.5% associated
with the 1997 Acquisitions and the Clearwater Acquisition, respectively.
(g) Reflects the elimination of amortization expense related to goodwill that
arose in previous acquisitions in certain of the acquired dealerships from
the date of the acquisitions.
(h) Reflects the amortization over an assumed useful life of 40 years of
intangible assets, consisting primarily of goodwill, resulting from the
Acquisitions which were assumed to occur on January 1, 1997. In
accordance with the purchase agreement associated with the Clearwater
Acquisition, the Company will be required to make an additional payment,
not to exceed $1.8 million, equal to 50% of the combined 1998 pre-tax
earnings of the entities acquired. Amount includes amortization of the
additional goodwill associated with this contingent purchase price, which
has been estimated at approximately $1.7 million based on the estimated
1998 pre-tax earnings of the entities acquired. The amount of the
contingent purchase price, and the corresponding goodwill, may actually
be different from the amounts estimated here depending on the actual
combined 1998 pre-tax earnings of the entities acquired.
(i) Reflects the net decrease in interest expense, floor plan, resulting from
the refinancing of the notes payable, floor plan arrangements of the
Company and the dealerships being acquired, under a standardized floor plan
credit facility with Ford Motor Credit which requires placement of acquired
dealerships floor plan financing with Ford Motor Credit (the "Floor Plan
Facility") as if such refinancing had occurred at the beginning of the
period presented. The average interest rate under the Floor Plan Facility
is approximately 7.6% compared to historical interest rates ranging from
8.1% to 9.5%.
(j) Reflects the increase in interest expense associated with borrowings made
under the Company's revolving credit facility with Ford Motor Credit
bearing interest at 8.5% of $33.4 million, $11.4 million and $26.2 million
used to finance the 1997 Acquisitions, the Clearwater Acquisition and the
Hatfield Acquisition, respectively, and borrowings made under the Company's
Floor Plan Facility bearing interest at 7.6% of approximately $8.3 million
used to finance the Hatfield Acquisition. Amount includes estimated
additional borrowings to be made under the Company's revolving facility
of approximately $1.7 million used to finance the estimated contingent
purchase price associated with the Clearwater Acquisition (see note (h)).
(k) In connection with the acquisition of the Bowers Dealerships, the Company
issued a promissory note to the former owner in the amount of $4.0 million
bearing interest at NationsBank's prime rate less 0.5%. This adjustment
reflects an increase in interest expense related to the promissory note
assuming a prime rate of 8.5% as if the note was issued at the beginning of
the period presented.
(l) Reflects the decrease in interest expense related to debt, other than
mortgage indebtedness, associated with the 1997 Acquisitions and the
Clearwater Acquisition of approximately $1.6 million bearing interest at
8.5% and $1.8 million bearing interest at rates ranging from 9% to 10%,
respectively, which has not been assumed.
(m) Reflects the net increase in provision for income taxes resulting from pro
forma adjustments above, computed using a combined statutory income tax
rate of approximately 39%.
(n) Certain of the acquired dealerships were not subject to federal and state
income taxes because they were either S corporations, partnerships, or
limited liability companies during the period indicated. Upon completion of
these acquisitions, these dealerships will be subject to federal and state
income tax as C corporations. This adjustment reflects the resulting
increase in the federal and state income tax provision as if these entities
had been taxable at the combined statutory income tax rate of approximately
39%.
(o) Pro forma diluted net income per share and weighted average shares
outstanding includes the dilutive effect of the issuance of 3,960 and
14,025 shares of the Company's Class A Preferred Stock in connection with
the Clearwater Acquisition and the Hatfield Acquisitions, respectively, and
warrants to purchase 44,391 shares of the Company's Class A Common Stock in
connection with the consummation of the 1997 Acquisitions.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(in thousands)
Pro Forma
Adjustments for Pro Forma
Hattfield the Hattfield for the
Actual Dealerships Acquisition the Acquisition
------ ----------- ------------ ---------------
Assets
Current Assets: $ 23,391 $ 14,990 $ - (a)(b) $ 26,074
Marketable equity securities 247 12,307 (c)
Receivables 22,128 3,360 25,488
Inventories 150,819 34,395 185,214
Deferred income taxes 405 405
Due from affiliates 1,014 1,014
Other current assets 1,969 6,610 8,579
---------- --------- ---------- -------------
Total current assets 199,973 59,355 (12,307) 247,021
Property and equipment, net 19,973 1,003 20,799
Goodwill, net 86,072 977 39,406 (a) 125,478
(977)(d) 651
---------- --------- ---------- -------------
Total assets $ 306,492 $ 61,335 $ 26,122 $ 393,949
========== ========= ========== ==============
Liabilities and Stockholder's Equity
Current Liabilities:
Note payable-floor plan $ 128,152 $ 33,456 $ 8,283 (b) $ 169,891
Trade accounts payable 7,554 2,660 10,214
Accrued interest 1,445 1,445
Other accrued liabilities 12,893 1,132 14,025
Payable to affiliates 445 7,196 (7,196)(c) 445
Current maturities of long-term debt 584 584
---------- --------- ---------- -------------
Total current liabilities 151,073 44,444 1,087 196,604
Long-term debt 49,982 27,901 (b) 77,883
Payable to the Company's Chairman 5,500 5,500
Payable to affiliates 4,192 10,569 (10,569)(c) 4,192
Deferred income taxes 1,079 1,079
Income tax payable 4,822 4,822
Stockholders' equity
Common stock of combined companies 2,825 (2,825)(a)
Preferred Stock 3,366 14,025 (a) 17,391
Class A Common Stock 50 50
Class B Common Stock 63 63
Paid-in-capital 68,045 1,744 (1,744)(a) 68,045
Retained earnings 18,322 1,753 (6,234)(a) 18,322
5,458 (c)
(977)(d)
Unrealized loss on marketable
equity securities (2) - (2)
---------- --------- ---------- -------------
Total stockholders' equity 89,844 6,322 7,703 103,869
---------- --------- ---------- -------------
Total liabilities and
stockholders equity $ 306,492 $ 61,335 $ 26,122 393,949
========== ========= ========== =============
(See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet)
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
(a) Reflects the preliminary allocation of the purchase price of the Hatfield
Acquisition based on the estimated fair value of net assets acquired.
Amount also reflects the allocation of the estimated contingent purchase
price associated with the Clearwater Acquisition (see note (h) to the
Notes to Unaudited Consolidated Statement of Operations). Because
the carrying amount of the net assets acquired, which primarily
consist of accounts receivable, inventory, equipment, and floor plan
indebtedness, approximates their fair value, management believes the
application of purchase accounting will not result in a significant
adjustment to the carrying amount of those net assets. The amount of
goodwill and the corresponding amortization actually recorded may
ultimately be different from amounts estimated here, depending on the
actual fair value of tangible net assets acquired, changes in the
estimated fair value of the preferred stock issued as determined by an
independent appraisal which has not yet been finalized, and the actual
contingent purchase price associated with the Clearwater Acquisition. The
estimated purchase price allocation consists of the following:
Hatfield Clearwater
Dealerships Acquisition Total
--------------- ------------ --------------
Estimated total consideration:
Cash $34,525 $1,659 $36,184
Preferred Stock 14,025 14,025
---------------- ------------ --------------
Total 48,550 1,659 50,209
Less: Estimated fair value of tangible
Net assets acquired 10,803 - 10,803
---------------- ------------ --------------
Excess of purchase price over fair value
Of net tangible assets acquired $37,747 $1,659 $39,406
================ ============ ==============
(b) Reflects borrowings made under the Company's Floor Plan Facility at 7.6%
and the Company's revolving credit facility with Ford Motor Credit at 8.5%
used to finance the Hatfield Acquisition.
(c) Reflects the elimination of certain assets and liabilities, other than
goodwill, of the Hatfield Acquisition that will not be acquired.
(d) Reflects the elimination of goodwill that arose in previous acquisitions of
the Hatfield dealerships.