Exhibit 99
NEWS RELEASE Precision Auto Care, Inc.
748 Miller Drive, S.E.
Leesburg, VA 20175
Contact: Lou Brown, Chief
Executive Officer
(703) 777-9095
FOR IMMEDIATE RELEASE AUGUST 4, 2000
PRECISION AUTO CARE, INC. ANNOUNCES RECAPITALIZATION AND
RELATED MATTERS
LEESBURG, VA - Precision Auto Care, Inc. (NASDAQ: PACI) today announced that the
Company's board of directors has approved and the Company has received
commitments for a significant recapitalization of the Company. Under the terms
of a commitment letter relating to the recapitalization, a newly-formed entity
controlled by Arthur Kellar and Mauricio Zambrano, two members of the Company's
board of directors, will refinance the Company's existing credit facility with
First Union National Bank (which has a current balance of approximately $7.3
million) and provide the Company with approximately $3.95 million of additional
senior financing. The additional financing will be used for general working
capital purposes. All of the senior financing will bear interest at the rate of
12% per annum and mature in three years. The senior financing will be secured by
all of the Company's assets which secure its existing senior credit facility
with First Union National Bank. The Company will be required to prepay the
senior indebtedness, without penalty, from any proceeds the Company realizes
from the sale of assets in connection with the disposition of portions of the
Company's business and assets outside of the ordinary course of business.
As part of the transaction, the Company will grant in the aggregate to Messrs.
Kellar and Zambrano, warrants to purchase 2,000,000 shares of the Company's
stock at an exercise price of $0.2750 per share. If the Company determines that
it will be advisable to secure shareholder approval of the issuance of the
warrants in order to comply with applicable Nasdaq requirements, the Company may
do so. In that event, the warrants will be issued once their issuance has been
approved by the Company's shareholders and they will vest immediately and be
exercisable for a period of five years from the date they are issued. The terms
of the commitment letter relating to the senior debt provide that Messrs. Kellar
and Zambrano will receive alternative consideration of equal value in the event
the Company seeks shareholder approval of the issuance of the warrants and the
Company's shareholders do not approve the issuance of the Warrants.
The Company also announced that Lou Brown has been appointed to act as the
Company's Chief Executive Officer, effective immediately. Mr. Brown has also
been appointed to serve as a Class II member of the Company's board of
directors. In connection with his appointment, Mr. Brown has agreed to purchase
1,700,000 shares of the Company's common stock for an aggregate purchase price
of $750,000. The Company will use the proceeds from the sale of the shares of
common stock for general working capital purposes.
Lou Brown is the founder and chairman of Micros Systems, Inc. (NASDAQ: MCRS)
which is the premier worldwide supplier of systems and software to the
hospitality industry. Mr. Brown was also chairman of Autometric, Inc. which was
recently acquired by Boeing Corporation. Mr. Brown brings 30 years of experience
in founding, managing and growing corporations in a variety of marketplaces.
Charles L. Dunlap, the Company's former President and Chief Executive Officer,
will consult on special projects, including the Company's co-branding strategy,
and will play a key role in transitioning the Company's leadership to Mr. Brown.
In a separate transaction, the Company has concluded the sale of its car wash
business operated in the Denver, Colorado area. The net proceeds were applied to
reduce the Company's outstanding indebtedness to FFCA Acquisition Corporation
from approximately $6.8 million to approximately $2.6 million. The Company
continues to negotiate with identified purchasers for the sale of the balance of
its car wash business. The net proceeds of such additional sales will be applied
first to satisfy the Company's remaining indebtedness to FFCA with the balance
to be applied to prepay its senior financing.
Woodley A. Allen, the Company's Chairman commented, "The refinancing and
recapitalization provides the Company with significant working capital, reduces
the Company's monthly cash requirements in the near term, and extends the
maturity of the Company's senior credit facility by nearly three years. In Lou
Brown the Company obtains a highly seasoned professional and successful
businessman who brings over 30 years of executive experience to the Company. The
Company extends its heartfelt thanks to Chuck Dunlap for his wisdom and guidance
during the past 22 difficult months for the Company."
The Company also announced its preliminary results for its fourth fiscal quarter
and its fiscal year ended June 30, 2000. The Company expects that it will report
losses of approximately $6.0 million for the quarter ended June 30, 2000 and
losses of approximately $10.3 million for the fiscal year ended on that date.
These amounts compare with losses of $10.1 million for the quarter ended June
30, 1999 and losses of $21 million for the fiscal year ended on that date. The
Company's losses for the quarter ended June 30, 2000 reflect charges of
approximately $800,000 related to the refinement of estimates concerning
accounts receivable, allowances for bad debts and inventory. The quarterly
results also included the recognition of approximately $4.0 million of losses
associated with the discontinuation of the Company's car wash division.
The Company also stated that it was evaluating the book value of certain assets
(principally goodwill) associated with manufacturing operations which the
Company may divest or discontinue in connection with certain restructuring
activities the Company may undertake in the future. The Company expects that
this evaluation could result in a substantial non-cash charge to the Company's
earnings for the year ended June 30, 2000. The Company has not yet quantified
this amount and this charge will increase the losses for the quarter and year
ended June 30, 2000 discussed above.
Finally, the Company expects that as a result of the recent levels its stock has
been traded, and because the Company did not have time to seek shareholder
approval of the issuance of shares to Louis M. Brown prior to their issuance (or
to obtain an exemption from such requirements), the
Nasdaq may delist the Company's common stock from the Nasdaq Small Cap Market.
The Company intends to hold discussions with Nasdaq representatives concerning
this shortly. The Company expects that its shares would be quoted on the OTC
Bulletin Board if delisting from the Nasdaq Small Cap Market were to occur.
Cautionary Statement: The statements in this press release constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are subject to risks and uncertainties that could cause Precision
Auto Care's actual results, performance or achievements to differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such risks and uncertainties include, but are
not limited to, (i) the risks and uncertainties reflected in the text of this
press release, (ii) the fact that Precision Auto Care and the companies it
acquired on and subsequent to the date of its initial public offering have only
recently conducted operations as a combined company, (iii) the seasonal nature
of portions of the business, (iv) the highly competitive markets in which
Precision Auto Care operates, (v) difficulties in integrating all of the
businesses Precision Auto Care has acquired, (vi) risks associated with
Precision Auto Care's ability to continue its strategy of growth through
acquisitions and (vii) risks associated with the Company's ability to make or
effect acquisitions in the future and to successfully integrate newly-acquired
businesses into existing operations and the risks associated with such
newly-acquired businesses.
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