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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A-1
-----------------------
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 15, 1998
-------------------------------
LITHIA MOTORS, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0572810
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
360 E. JACKSON STREET, MEDFORD, OREGON 97501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 776-6899
(Former name or former address, if changed since last report): N/A
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LITHIA MOTORS, INC.
FORM 8-K
INDEX
Item Description Page
- ---- ----------- ----
Item 2. Acquisition or Disposition of Assets 2
Item 7. Financial Statements and Exhibits 2
Signatures 3
1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On October 15, 1998, Lithia Motors, Inc. (the "Company"), acquired the
inventories, operating assets and intangible assets and assumed all
liabilities of Camp Automotive, Inc. ("Camp Automotive") in Spokane,
Washington, pursuant to an Agreement for Purchase and Sale of Business
Assets (the "Agreement") dated August 1, 1998. Pursuant to the Agreement,
the total purchase price was approximately $11.0 million, consisting of
$8.0 million in cash, $4.0 million from the Company's existing cash
balances and $4.0 million from the Company's lease revolver line of credit,
and a $3.033 million note to the seller. The Company is leasing the land
and facilities from the seller.
There was no previous relationship between the Company and Camp Automotive,
nor any of the Company's and Camp Automotive's affiliates, officers or
directors.
(b) The Company acquired vehicle and parts and supplies inventories, as well as
other assets used in the business of vehicle sales, service and support.
The Company intends to utilize the purchased assets in the same capacity.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
Financial statements for Camp Automotive are included herein beginning on
page F-1.
(b) PRO FORMA FINANCIAL INFORMATION
Pro forma financial information for Camp Automotive is included herein
beginning on page PF-1.
(c) EXHIBITS
The exhibits filed as a part of this report are listed below and this list
constitutes the exhibit index.
2.1 Agreement for Purchase and Sale of Business Assets, by and between
Phil S. Camp, Jerry W. Camp, Jr., Julie A. Camp McKay, Chris E. Camp,
Travis W. Camp, Carter B. Camp and Camp Automotive, Inc. and the
Company, dated August 1, 1998, previously filed as Exhibit 2.1 to the
Company's Form 8-K dated October 15, 1998 and as filed with the
Securities and Exchange Commission on October 28, 1998.
23 Consent of Moss Adams LLP
2
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 thereunto duly authorized.
Date: December 28, 1998 LITHIA MOTORS, INC.
By /s/ SIDNEY B. DEBOER
--------------------
Sidney B. DeBoer
Chairman of the Board,
Chief Executive Officer and Secretary
(Principal Executive Officer)
By /s/ BRIAN R. NEILL
------------------
Brian R. Neill
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
3
CAMP AUTOMOTIVE, INC.
INDEPENDENT AUDITOR'S REPORT
AND
FINANCIAL STATEMENTS
DECEMBER 31, 1997
CONTENTS
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Page
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Balance sheets F-2 - F-3
Statements of income F-4
Statements of changes in stockholders' equity F-5
Statements of cash flows F-6 - F-7
Notes to financial statements F-8 - F-18
SUPPLEMENTAL INFORMATION
Schedules of selling, general and administrative expenses F-19
MOSS ADAMS LLP
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CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Camp Automotive, Inc.
We have audited the accompanying balance sheet of Camp Automotive, Inc. as of
December 31, 1997, and the related statements of income, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 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 Camp Automotive, Inc., as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of selling, general and
administrative expenses on page 19 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. The 1997
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Moss Adams LLP
September 24, 1998
Medford, Oregon
A member of
[LOGO]
An association of independent
accounting firms throughout the world.
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F-1
CAMP AUTOMOTIVE, INC.
BALANCE SHEETS
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ASSETS
December 31, September 30,
---------------------------
1997 1998 1997
------------ ------------ ------------
Unaudited
---------------------------
CURRENT ASSETS
Cash $ 24,126 $ 1,581,791 $ 195,083
Receivables 1,997,384 2,855,785 3,185,876
Receivables from stockholders
and affiliated company 56,977 - -
Current portion of installment notes
receivable, less allowance for
doubtful accounts 1,522,280 1,668,628 1,437,830
Inventories 16,632,756 10,353,250 14,775,025
Current portion of net investment in
sales-type leases 2,959,610 2,799,644 3,196,663
Prepaid expenses 138,789 91,555 127,269
----------- ----------- -----------
23,331,922 19,350,653 22,917,746
----------- ----------- -----------
PROPERTY AND EQUIPMENT 5,218,914 4,468,632 5,373,965
----------- ----------- -----------
OTHER ASSETS
Installment notes receivable, less current
portion and allowance for
doubtful accounts 4,821,729 5,283,990 4,553,128
Net investment in sales-type leases,
less current portion 7,015,701 7,496,779 6,813,878
Other notes receivable 100,202 221,514 194,892
Other assets 750,149 778,550 676,225
----------- ----------- -----------
12,687,781 13,780,833 12,238,123
----------- ----------- -----------
$41,238,617 $37,600,118 $40,529,834
----------- ----------- -----------
----------- ----------- -----------
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F-2
CAMP AUTOMOTIVE, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
---------------------------
1997 1998 1997
------------ ------------ ------------
Unaudited
---------------------------
CURRENT LIABILITIES
Cash overdraft $ - $ - $ 211,863
Flooring notes payable 11,698,838 8,574,358 11,425,747
Special finance notes payable 5,332,833 5,973,667 4,876,705
Accounts payable 913,207 766,150 868,923
Customer deposits 737,357 137,956 304,975
Accrued expenses 707,094 904,313 888,680
Taxes, other than income taxes 362,934 404,216 469,640
Notes payable to stockholders and
related parties 841,156 479,359 755,895
Current portion of long-term debt 3,091,087 2,302,957 2,999,904
----------- ----------- -----------
23,684,506 19,542,976 22,802,332
----------- ----------- -----------
LONG-TERM DEBT,
less current portion 7,166,181 6,681,600 6,572,464
----------- ----------- -----------
ALLOWANCE FOR REPOSSESSION
LOSSES 150,000 150,000 200,000
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock:
Class A, voting; $1 par value;
authorized, 5,000 shares; issued
and outstanding, 1,899 shares 1,899 1,899 1,899
Class B, nonvoting, $1 par value;
authorized 50,000 shares; issued
and outstanding, 29,169 shares 29,169 29,169 29,169
Additional paid-in capital 161,881 161,881 161,881
Retained earnings 10,044,981 11,032,593 10,762,089
----------- ----------- -----------
10,237,930 11,225,542 10,955,038
----------- ----------- -----------
$41,238,617 $37,600,118 $40,529,834
----------- ----------- -----------
----------- ----------- -----------
See accompanying notes. F-3
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CAMP AUTOMOTIVE, INC.
STATEMENTS OF INCOME
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Nine months ended
Year ended September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
SALES $ 87,812,136 $ 74,670,206 $ 74,493,151
COST OF SALES 74,793,876 64,966,826 64,169,654
------------------- ------------------ -------------------
GROSS PROFIT 13,018,260 9,703,380 10,323,497
------------------- ------------------ -------------------
OTHER OPERATING REVENUE
Insurance commissions, other
miscellaneous sales 279,524 111,637 155,445
Rental and lease vehicle income,
net of expenses 952,821 629,512 623,185
------------------- ------------------ -------------------
1,232,345 741,149 778,630
------------------- ------------------ -------------------
GROSS OPERATING PROFIT 14,250,605 10,444,529 11,102,127
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,085,727 8,821,407 8,972,944
------------------- ------------------ -------------------
OPERATING INCOME 2,164,878 1,623,122 2,129,183
------------------- ------------------ -------------------
OTHER INCOME (EXPENSE)
Finance income 820,368 616,411 784,444
Interest expense (765,407) (574,830) (563,618)
Interest income 2,033 18 145
Loss on repossessions (154,105) (92,486) (50,754)
Loss on disposal of leaseholds
and equipment (7,399) - -
Miscellaneous 86,663 44,882 74,181
------------------- ------------------ -------------------
(17,847) (6,005) 244,398
------------------- ------------------ -------------------
NET INCOME $ 2,147,031 $ 1,617,117 $ 2,373,581
------------------- ------------------ -------------------
------------------- ------------------ -------------------
See accompanying notes. F-4
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CAMP AUTOMOTIVE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
Year ended December 31, 1997
--------------------------------------------------------------------------------------
Common stock
----------------------------------------- Additional Retained
Class A Class B paid in capital earnings
------------------- ------------------ ------------------- ------------------
Balance, January 1, 1997 $ 1,899 $ 29,169 $ 161,881 $ 9,056,227
Net income - - - 2,147,031
Dividends - - - (1,158,277)
------------------- ------------------ ------------------- ------------------
Balance, December 31, 1997 $ 1,899 $ 29,169 $ 161,881 $ 10,044,981
------------------- ------------------ ------------------- ------------------
------------------- ------------------ ------------------- ------------------
Nine months ended September 30, 1998 (unaudited)
--------------------------------------------------------------------------------------
Common stock
----------------------------------------- Additional Retained
Class A Class B paid in capital earnings
------------------- ------------------ ------------------- ------------------
Balance, January 1, 1998 $ 1,899 $ 29,169 $ 161,881 $ 10,044,981
Net income - - - 1,617,117
Dividends - - - (629,505)
------------------- ------------------ ------------------- ------------------
Balance, September 30, 1998 $ 1,899 $ 29,169 $ 161,881 $ 11,032,593
------------------- ------------------ ------------------- ------------------
------------------- ------------------ ------------------- ------------------
Nine months ended September 30, 1997 (unaudited)
--------------------------------------------------------------------------------------
Common stock
----------------------------------------- Additional Retained
Class A Class B paid in capital earnings
------------------- ------------------ ------------------- ------------------
Balance, January 1, 1997 $ 1,899 $ 29,169 $ 161,881 $ 9,056,227
Net income - - - 2,373,581
Dividends - - - (667,719)
------------------- ------------------ ------------------- ------------------
Balance, September 30, 1997 $ 1,899 $ 29,169 $ 161,881 $ 10,762,089
------------------- ------------------ ------------------- ------------------
------------------- ------------------ ------------------- ------------------
See accompanying notes. F-5
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CAMP AUTOMOTIVE, INC.
STATEMENTS OF CASH FLOWS
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Year ended
December 31, Nine months ended September 30,
----------------------------------
1997 1998 1997
------------- --------------- ---------------
Unaudited
----------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 2,147,031 $ 1,617,117 $ 2,373,581
Noncash items
Depreciation and amortization 1,253,297 955,660 980,287
Loss on repossessions 154,105 92,486 50,754
Gain on sale of lease vehicles (116,256) (87,203) (95,412)
Loss on retirement of assets 7,399 - 6,818
Changes in:
Trade receivables 401,487 (858,401) (787,005)
Installment notes receivable (3,039,436) (701,095) (2,533,034)
Inventories (2,878,018) 6,279,506 (1,020,287)
Prepaid expenses and other assets (57,888) (102,479) (55,515)
Net investment in sales-type leases (1,606,075) (321,112) (1,641,305)
Payables and accrued liabilities (803,368) (507,957) (934,898)
Flooring notes payable 1,590,512 (3,124,480) 1,317,421
Special finance notes payable 2,304,162 640,834 1,848,034
-------------- -------------- --------------
Net cash from operating activities (643,048) 3,882,876 (490,561)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and equipment (813,458) (160,475) (720,381)
Proceeds from sale of other assets 89,219 42,300 82,219
Principal received on stockholder
and affiliated company loans 712,431 56,977 769,408
-------------- -------------- --------------
Net cash from investing activities (11,808) (61,198) 131,246
-------------- -------------- --------------
F-6
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CAMP AUTOMOTIVE, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
Year ended
December 31, Nine months ended September 30,
----------------------------------
1997 1998 1997
------------- --------------- ---------------
Unaudited
----------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net change in cash overdraft $ - $ - $ 211,863
Proceeds of long-term debt 2,074,514 1,860,565 1,106,990
Dividends (1,158,277) (629,505) (667,719)
Principal advanced (paid) on loans from
stockholders (17,023) (361,797) 24,795
Principal payments on long-term debt (381,282) (3,133,276) (282,581)
-------------- -------------- --------------
Net cash from financing activities 517,932 (2,264,013) 393,348
-------------- -------------- --------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (136,924) 1,557,665 34,033
CASH AND CASH EQUIVALENTS
Beginning of period 161,050 24,126 161,050
-------------- -------------- --------------
End of period $ 24,126 $ 1,581,791 $ 195,083
-------------- -------------- --------------
-------------- -------------- --------------
Supplemental disclosure of cash expenditures
Interest $ 1,263,856 $ 905,667 $ 922,287
-------------- -------------- --------------
-------------- -------------- --------------
See accompanying notes. F-7
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CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS - Camp Automotive, Inc. dba Camp
Chevrolet-Subaru-BMW-Volvo (the "Company"), is a franchised automobile
dealer in Spokane, Washington that sells, leases and services new and used
vehicles.
CASH AND CASH EQUIVALENTS - The Company maintains bank accounts at several
financial institutions which are in excess of federally insured limits.
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three
months or less to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - The Company establishes an allowance for
doubtful trade and lease receivables that approximates accounts more than
90 days past due. The in house contract and special finance receivables
are established on a contract by contract basis.
INVENTORIES - Inventories of new automobiles, new trucks and parts are
stated at the lower of last-in, first-out (LIFO) cost or market. Used
trucks and automobiles are priced at the lower of actual cost or current
wholesale market. Other inventors are generally stated at the lower of
first-in, first-out (FIFO) cost or market.
PROPERTY AND EQUIPMENT AND DEPRECIATION - Property is stated at cost. The
Company depreciates all new property, except the rental and lease
equipment, by accelerated methods. Rental and lease vehicles and equipment
are depreciated by the straight-line method.
Vehicles purchased for lease are carried at cost, but not in excess of
market value. Assets repossessed from leasees are carried at the lower of
cost or fair market value at the time of repossession.
Major additions and betterments are charged to the property and equipment
accounts. Costs of maintenance and repairs which do not extend the life of
the respective assets are expended currently.
LEASED VEHICLES - The Company's leasing operations consist of the leasing
of vehicles. The bulk of the Company's leases are classified as
sales-type leases. The remaining leases are classified as operating
leases. The leases have terms of up to seven years.
INCOME TAXES - Effective January 1, 1987 the Company elected by unanimous
consent of its stockholders to be taxed under the provisions of Subchapter
S of the Internal Revenue Code. Under those provisions, the Company does
not pay Federal corporate income tax on its taxable income. Instead, the
stockholders are liable for individual Federal income tax on their
respective shares of the Company's taxable income.
F-8
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CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION - Revenues from vehicle and parts sales and from
service operations are recognized at the time the vehicle is delivered to
the customer or service is completed.
The Company arranges financing for its customers' vehicle purchases and
arranges insurance in connection therewith. The Company receive a fee from
the financial institution for arranging the financing and receives a
commission for the sales of an insurance policy. The Company is charged
back for a portion of this fee should the customer terminate the finance or
insurance contract before its scheduled term or before specified dates
under arrangements with such institutions. Finance income represents fees
due to the Company from financial institutions for fees on contracts
arranged to finance vehicle purchases.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles 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 revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
ADVERTISING COSTS - Advertising costs are expensed as incurred and were
$697,030 for the year ended December 31, 1997. Advertising expense for the
nine months ended September 30, 1998 and 1997, were $571,348 (unaudited)
and $516,747 (unaudited), respectively.
MAJOR SUPPLIERS AND DEALERS AGREEMENTS - The Company purchases
substantially all of its new vehicles and inventory from automakers at the
prevailing prices charged by the automaker's ability or unwillingness to
supply the dealership with an adequate supply of popular models. The
Dealer Agreements generally limit the location of the dealership and retain
automaker approval rights over changes in dealership management and
ownership. The automaker is also entitled to terminate the agreement if
the dealership is in material breach of the terms.
INTERIM FINANCIAL STATEMENTS - The accompanying unaudited financial
statements for the nine ended September 30, 1998 and 1997 have been
prepared on substantially the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information
set forth therein.
CONCENTRATIONS OF CREDIT RISK - The Company grants credit to customers in
the ordinary course of business. The Company performs ongoing credit
evaluations of its customers, and credit losses, when realized, have been
within the range of management's expectations. Concentration of credit
risk with respect to trade receivables is limited due to the large number
of customers comprising the Company's customer base. Receivables arising
from vehicle sales are secured by related vehicles. Receivables arising
from all other sales are unsecured open accounts. As discussed in Note 14,
the Company is contingently liable for credit losses on certain customer
contracts placed with financial institutions on a recourse basis.
F-9
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CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES 2 - RECEIVABLES
September 30,
December 31, --------------------------
1997 1998 1997
----------- ----------- -----------
Unaudited
--------------------------
Customers, including contracts
in transit $ 1,860,716 $ 2,741,808 $ 3,039,858
Factory claims, discounts
and miscellaneous 232,120 210,064 210,983
----------- ----------- -----------
2,092,836 2,951,872 3,250,841
Less allowance for doubtful
accounts 95,452 96,087 64,965
----------- ----------- -----------
$ 1,997,384 $ 2,855,785 $ 3,185,876
----------- ----------- -----------
----------- ----------- -----------
NOTE 3 - INSTALLMENT NOTES RECEIVABLE
In house financing of used vehicle contracts bear interest of 9% to 15% and
the terms range from 6 to 72 months. All notes are collateralized by the
vehicle being financed. Installment notes receivable are presented net of
allowances for doubtful accounts of $300,000, $250,000 (unaudited), and
$86,000 (unaudited) as of December 31, 1997, September 30, 1998, and
September 30, 1997, respectively.
Interest income and expense on in house financing are as follows:
Nine months ended
Year Ended September 30,
December 31, --------------------------
1997 1998 1997
----------- ----------- -----------
Unaudited
--------------------------
In house financing interest
income $ 447,997 $ 361,035 $ 309,182
----------- ----------- -----------
----------- ----------- -----------
In house financing interest
expense, net of bank sweep $ 279,657 $ 197,723 $ 195,326
----------- ----------- -----------
----------- ----------- -----------
F-10
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CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 4 - INVENTORIES
September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
New vehicles (LIFO) $ 7,278,877 $ 4,381,232 $ 6,844,929
Used vehicles and
demonstrators 6,559,753 3,204,489 5,152,171
Parts and accessories (LIFO) 2,743,862 2,677,289 2,710,678
Work in process 50,264 90,240 67,247
------------------- ------------------ -------------------
$ 16,632,756 $ 10,353,250 $ 14,775,025
------------------- ------------------ -------------------
------------------- ------------------ -------------------
If LIFO inventories had been valued at current costs, they would have
been greater as follows:
September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
New vehicles $ 4,550,671 $ 4,550,671 $ 4,368,003
Parts and accessories 766,666 766,666 809,471
------------------- ------------------ -------------------
$ 5,317,337 $ 5,317,337 $ 5,177,474
------------------- ------------------ -------------------
------------------- ------------------ -------------------
If current costs, calculated on a FIFO basis, had been used for inventory
valuations instead of the LIFO method, cost of sales would have decreased and
net income would have increased as follows:
Nine months ended
Year ended September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Cost of sales $ (139,863) $ - $ -
------------------- ------------------ -------------------
------------------- ------------------ -------------------
$ 139,863 $ - $ -
Net income
------------------- ------------------ -------------------
------------------- ------------------ -------------------
F-11
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CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 5 - NET INVESTMENT IN SALES-TYPE LEASES
September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Minimum lease payments
receivable $ 11,860,042 $ 12,292,088 $ 11,845,861
Unearned income 1,884,731 1,995,665 1,835,320
------------------- ------------------ -------------------
9,975,311 10,296,423 10,010,541
Current portion 2,959,610 2,799,644 3,196,663
------------------- ------------------ -------------------
$ 7,015,701 $ 7,496,779 $ 6,813,878
------------------- ------------------ -------------------
------------------- ------------------ -------------------
Minimum lease payments are:
Year ending December 31,
---------------------------
1998 $ 3,808,352
1999 3,123,784
2000 2,826,229
2001 1,946,393
2002 155,284
-------------------
$ 11,860,042
-------------------
-------------------
NOTE 6 - PROPERTY AND EQUIPMENT
September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Land $ 305,044 $ 305,044 $ 305,044
Buildings and improvements 3,011,811 2,803,368 3,016,536
Service, parts and office
equipment 2,617,913 2,728,018 2,693,553
Rental and lease vehicles
and equipment 3,452,620 2,135,616 3,462,690
Leasehold improvements 432,013 724,293 433,128
------------------- ------------------ -------------------
9,819,401 8,696,339 9,910,951
Accumulated depreciation 4,600,487 4,227,707 4,536,986
------------------- ------------------ -------------------
$ 5,218,914 $ 4,468,632 $ 5,373,965
------------------- ------------------ -------------------
------------------- ------------------ -------------------
F-12
- ------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 7 - OTHER ASSETS
September 30,
December 31, -----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Cash surrender value of
stockholders' life insurance $ 659,238 $ 693,140 $ 583,481
Investments 11,465 11,465 11,465
Covenant not-to-compete, net
of accumulated amortization
of $30,554, $36,055
and $28,721 79,446 73,945 81,279
------------------- ------------------ -------------------
$ 750,149 $ 778,550 $ 676,225
------------------- ------------------ -------------------
------------------- ------------------ -------------------
NOTE 8 - FLOORING NOTES PAYABLE
The flooring notes payable bear interest at prime (8.50% at December
31, 1997), and are collateralized by substantially all of the inventory
of new vehicles, demonstrators and driver-training units.
In addition to the vehicle inventories pledged, the lender has a lien
on all parts and accessories inventories and customer receivables
resulting from sales of the above products.
NOTE 9 - SPECIAL FINANCE NOTES PAYABLE
The Company has a $6,250,000 revolving line of credit. The line of
credit is collateralized by land, buildings, inventory, lease vehicles
and accounts receivable associated with the lease vehicles and in house
contracts. This line of credit is attached to the Company's checking
account and is reduced daily by any excess cash in the account.
Interest is calculated daily at prime plus .75% (9.25% at December 31,
1997 and September 30, 1998 and 1997). Excess funds are swept to this
operating line of credit on a daily basis. This agreement is reviewed
annually.
F-13
- ------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 - ACCRUED EXPENSES
December 31, September 30,
-------------------------
1997 1998 1997
---------- ---------- ----------
Unaudited
-------------------------
Managers' and officers' bonuses $ 277,480 $ 198,182 $ 185,489
Vacation, commissions and
salaries and wages 107,361 287,582 247,990
Interest 77,167 39,558 11,506
Pension plan contribution 70,080 67,322 74,656
Other 175,006 311,669 369,039
---------- ---------- ----------
$ 707,094 $ 904,313 $ 888,680
---------- ---------- ----------
---------- ---------- ----------
NOTE 11 - RELATED PARTY TRANSACTIONS
NOTES RECEIVABLE FROM STOCKHOLDERS AND AFFILIATES - Stockholders and a
company affiliated through common ownership owed the Company $56,977 at
December 31, 1997. No amounts were owed at September 30, 1998 or 1997. The
amounts are unsecured.
NOTES PAYABLE TO STOCKHOLDERS AND AFFILIATES -
December 31, September 30,
-------------------------
1997 1998 1997
---------- ---------- ----------
Unaudited
-------------------------
Stockholder notes payable,
interest of prime less .50%
(8.00% at December 31, 1997)
unsecured, due upon demand,
interest only, paid quarterly. $ 675,103 $ 479,359 $ 593,097
Note payable to a company
affiliated through common
ownership, interest at prime
less .50% (8.00% at December
31, 1997), unsecured, due
upon demand, interest accrued
quarterly. 166,053 - 162,798
---------- ---------- ----------
$ 841,156 $ 479,359 $ 755,895
---------- ---------- ----------
---------- ---------- ----------
F-14
- --------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
Interest paid under notes due to the stockholders amounted to $172,670 for
the year ended December 31, 1997 and $145,906 (unaudited) and $134,830
(unaudited) for the nine months ended September 30, 1998 and 1997,
respectively.
OTHER TRANSACTIONS - The Company sells various insurance products to its
customers. During the year ended December 31, 1997 and the nine month
periods ended September 30, 1998 and 1997, $52,172, $20,463 (unaudited) and
$40,415 (unaudited), respectively, of the insurance premiums paid by the
Company to an unrelated insurance carrier were distributed to a Company
owned 100% by a stockholder for reinsurance participation.
The Company provides general and administrative services, leases
facilities and equipment, and sells and services vehicles of another
company affiliated through common ownership. General and administrative
services have been provided to the affiliate at no cost in 1998 and 1997.
Lease income of $11,736, $7,824 (unaudited) and $8,802 (unaudited) was
recorded during the year ended December 31, 1997 and the nine months ended
September 30, 1998 and 1997, respectively. Vehicle sales to the affiliated
company of $675,625, $615,811 (unaudited) and $529,981 (unaudited) were
recorded during the year ended December 31, 1997 and the nine months ended
September 30, 1998 and 1997. Vehicle purchases of $1,159,310, $267,369
(unaudited) and $862,973 (unaudited) from the affiliate were recorded
during the year ended December 31, 1997 and the nine month periods
ended September 30, 1998 and 1997, respectively.
NOTE 12 - LONG-TERM DEBT
December 31, September 30,
-------------------------
1997 1998 1997
---------- ---------- ----------
Unaudited
-------------------------
Notes payable to banks, interest
7.25% to 8.75%, leased
vehicles pledged as collateral,
variable maturities through
1999. $ 8,268,636 $ 8,336,845 $ 7,390,351
Real estate mortgage payable,
interest charged at T-Bill
index rate plus 3% (8.37%
at December 31, 1997),
payable in monthly
installments of $29,893,
including interest,
collateralized by building,
matures October 1998. 208,615 - 298,000
---------- ---------- ----------
Subtotal 8,477,251 8,336,845 7,688,351
---------- ---------- ----------
---------- ---------- ----------
F-15
- --------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12 - LONG-TERM DEBT (CONTINUED)
December 31, September 30,
-----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Sub-total brought forward $ 8,477,251 $ 8,336,845 $ 7,688,351
Note payable for covenant
not-to-compete, payable in
monthly installments of
$3,138, including interest at
10.25%, guaranteed by a
stockholder of the Company,
matures June 1999. 49,458 27,071 60,093
Notes payable to former stock-
holder, interest at 6.00%,
unsecured, due upon demand,
interest only paid quarterly. 1,495,262 620,641 1,588,762
Note payable, interest of prime
less .50% (8.00% at December
31, 1997), unsecured, due
upon demand, interest only
paid quarterly. 235,297 - 235,162
------------------- ------------------ -------------------
10,257,268 8,984,557 9,572,368
Current portion 3,091,087 2,302,957 2,999,904
------------------- ------------------ -------------------
$ 7,166,181 $ 6,681,600 $ 6,572,464
------------------- ------------------ -------------------
------------------- ------------------ -------------------
Long-term debt matures as follows:
Year ending December 31,
------------------------
1998 $ 3,091,087
1999 4,099,911
2000 2,025,389
2001 949,091
2002 86,803
Thereafter 4,987
------------------
$ 10,257,268
------------------
------------------
F-16
- --------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13 - COMMITMENTS
The Company maintains several real estate leases including leases with an
individual stockholder and a partnership comprised of various stockholders
and directors of the Company. Long term operating leases with those related
parties call for aggregate annual lease payments of $16,950, through
June 30, 1999. Leases on a month-to-month basis require payments of $97,848
annually.
NOTE 14 - CONTINGENT LIABILITIES
RECOURSE FINANCING - At December 31, 1997, September 30, 1998 and 1997, the
Company was contingently liable as the endorser of vehicle contracts held
by financial institutions for amounts of approximately $4,600,000 and
$4,162,000 and $5,200,000, respectively. The Company has established
repossession reserves of $150,000, $150,000 and $200,000 as of December
31, 1997, September 30, 1998 and 1997, respectively, to offset future
repossession losses.
GUARANTEES - The Company is a guarantor on a revolving line of credit for a
company affiliated through common ownership. The revolving line of credit
has a maximum not to exceed $6,000,000 at December 31, 1997 and September
30, 1997, and $6,500,000 at September 30, 1998. The outstanding balance at
December 31, 1997, September 30, 1998 and 1997 was $4,685,448, $5,649,268
and $4,751,484, respectively. The Company is a guarantor on the affiliated
company's term loan which has a balance of $451,718, $0 and $25,523 at
December 31, 1997, September 30, 1998 and 1997, respectively. The Company
also guarantees several lease agreements, a concession agreement and a
licensee's agreement for the affiliate. Future minimum payments under these
agreements are approximately $930,000 at December 31, 1997.
The Company is also guarantor of a bank note of a partnership comprised of
stockholders of the Company. The balance of this note at December 31, 1997,
September 30, 1998 and 1997 was $306,000, $277,000 and $316,000,
respectively.
F-17
- --------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15 - ACCOUNTING CHANGE
Prior to 1997, the Company had incorrectly accounted for certain vehicle
sales contracts as operating leases. The Company's financial statements as
of and for the year ended December 31, 1997 have been restated to reflect
the leases as sales-type leases. The effect of the restatement is as
follows:
As previously
stated As restated
------------------ -------------------
Balance sheet as of December 31, 1997
Net investment in sales-type leases $ - $ 9,975,311
------------------ -------------------
------------------ -------------------
Retained earnings $ 9,063,370 $ 10,044,981
------------------ -------------------
------------------ -------------------
Statement of income for 1997
Net income $ 2,011,752 $ 2,147,031
------------------ -------------------
------------------ -------------------
NOTE 16 - EMPLOYEE RETIREMENT PLAN
The Company is a participant in the National Automobile Dealers'
Association Retirement Trust Pension Plan, a defined contribution
retirement plan. Contributions are made by the Company in amounts ranging
from 2% to 4% of the eligible employees' compensation. Each eligible
employee may contribute up to an additional 18% of his/her earnings to the
plan. The Company's contributions to the plan were $225,204 for the year
ended December 31, 1997 and $159,998 (unaudited) and $152,235 (unaudited)
for the nine months ended September 30, 1998 and 1997, respectively.
NOTE 17 - SUBSEQUENT EVENT
On October 15, 1998 all of the Company's stock was purchased by Lithia
Motors, Inc., a publicly traded company.
Effective on the same date, the Company's election under Subchapter S
of the Internal Revenue Code was terminated.
F-18
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
CAMP AUTOMOTIVE, INC.
SCHEDULES OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------------------------------------------
Year ended Nine months ended
December 31, September 30,
-----------------------------------------
1997 1998 1997
------------------- ------------------ -------------------
Unaudited
-----------------------------------------
Other salaries and wages $ 2,925,325 $ 2,122,813 $ 2,188,520
Supervisors' salaries and bonuses 1,731,032 1,213,426 1,290,849
Salesmen salaries and commissions 1,699,824 1,167,966 1,239,318
Employee benefits and payroll taxes 1,326,395 1,012,468 1,021,056
Advertising 697,030 571,348 516,747
Taxes and licenses, excluding payroll 486,593 363,477 413,331
Professional and outside services 457,880 330,642 336,198
Other 431,588 392,634 299,970
Policy and warranty adjustments 367,369 225,541 268,944
Supplies 312,134 177,201 228,562
Depreciation and amortization 269,911 170,698 194,906
Company car and used vehicle maintenance 235,820 169,261 161,493
Rent 227,834 229,446 169,190
Telephone 159,880 115,246 115,516
Utilities 134,823 113,770 102,872
Insurance 119,443 87,346 121,171
Building and equipment repairs 110,866 65,381 78,794
Uncollectible accounts 108,200 77,683 26,414
Delivery expenses of new vehicles 95,166 64,523 67,624
Data processing 70,614 47,653 50,018
Training 64,818 37,761 48,009
Travel and entertainment 32,245 18,216 18,788
Lease sales department expense 20,937 46,907 14,654
------------------- ------------------ -------------------
$ 12,085,727 $ 8,821,407 $ 8,972,944
------------------- ------------------ -------------------
------------------- ------------------ -------------------
F-19
- --------------------------------------------------------------------------------
LITHIA MOTORS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1998
(in thousands)
Lithia Motors,
Lithia Motors, Camp Inc.
Inc. Automotive Adjustments Pro Forma
-------------- -------------- -------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 17,655 $ 1,582 $ (4,000) (a) $ 15,237
Trade receivables 14,468 2,856 - 17,324
Notes receivable, current portion 704 - - 704
Sales type lease receivable, current portion - 2,800 2,800
Inventories, net 117,093 15,270 - 132,363
Vehicles leased to others, current portion 705 - - 705
Prepaid expenses and other 776 80 - 856
Deferred income taxes 2,062 - - 2,062
-------------- -------------- -------------- --------------
Total Current Assets 153,463 22,588 (4,000) 172,051
Property and Equipment, net of accumulated
depreciation 29,203 3,330 - 32,533
Vehicles Leased to Others, less current portion 5,057 - - 5,057
Sales type lease receivable, less current portion - 9,183 9,183
Notes Receivable, less current portion 351 221 - 572
Goodwill, net of accumulated amortization 35,531 2,590 38,121
Other Non-Current Assets 1,279 727 - 2,006
-------------- -------------- -------------- --------------
Total Assets $ 224,884 $ 38,639 $ (4,000) $ 259,523
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Flooring notes payable $ 88,185 $ 8,574 $ $ 96,759
Current maturities of long-term debt 2,973 2,840 - 5,813
Current portion of capital leases 105 - 105
Trade payables 4,952 1,915 - 6,867
Accrued liabilities 11,395 1,489 - 12,884
-------------- -------------- -------------- --------------
Total Current Liabilities 107,610 14,818 - 122,428
Long-Term Debt, less current maturities 20,773 8,612 7,033 (b) 36,418
Long-Term Capital Lease Obligation, less current -
portion 2,236 - 2,236
Deferred Revenue 1,984 1,979 - 3,963
Other Long-Term Liabilities 1,328 150 - 1,478
Deferred Income Taxes 3,044 2,047 5,091
-------------- -------------- -------------- --------------
Total Liabilities 136,975 27,606 7,033 171,614
-------------- -------------- -------------- --------------
Shareholders' Equity
Preferred stock - no par value; authorized
15,000 shares; issued and outstanding; none - - - -
Class A common stock - no par value;
authorized 100,000 shares; issued and
outstanding 6,082 70,633 - - 70,633
Class B common stock
authorized 25,000 shares; issued and
outstanding 4,110 511 - - 511
Additional paid-in-capital 175 175
Retained earnings 16,590 - 16,590
-------------- -------------- -------------- --------------
Total Shareholders' Equity 87,909 - - 87,909
-------------- -------------- -------------- --------------
Total Liabilities and Shareholders' Equity $ 224,884 $ 27,606 $ 7,033 $ 259,523
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
PF-1
LITHIA MOTORS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(In thousands, except per share amounts)
Lithia Motors,
Lithia Motors, Camp Inc.
Inc. Automotive Adjustments Pro Forma
-------------- -------------- -------------- --------------
Sales:
Vehicles $ 274,393 $ 87,812 $ - $ 362,205
Service, body, parts and other 45,402 1,233 - 46,635
-------------- -------------- -------------- --------------
Net Sales 319,795 89,045 - 408,840
Cost of sales
Vehicles 245,812 74,794 320,606
Service, body, parts and other 20,551 - - 20,551
-------------- -------------- -------------- --------------
Cost of Sales 266,363 74,794 - 341,157
-------------- -------------- -------------- --------------
Gross profit 53,432 14,251 - 67,683
Selling, general and administrative 40,625 12,086 - 52,711
Depreciation and amortization 1,169 - 65 (c) 1,234
-------------- -------------- -------------- --------------
Operating income 11,638 2,165 (65) 13,738
Other income (expense)
Equity in income of affiliate 102 - - 102
Interest income 138 2 - 140
Interest expense (3,004) (765) (532) (d) (4,301)
Other, net 623 745 - 1,368
-------------- -------------- -------------- --------------
(2,141) (18) (532) (2,691)
-------------- -------------- -------------- --------------
Income before income taxes 9,497 2,147 (597) 11,047
Income tax expense 3,538 - (213) (e) 3,325
-------------- -------------- -------------- --------------
Net income $ 5,959 $ 2,147 $ (384) $ 7,722
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Basic net income per share $ 0.85 $ - $ - $ 1.11
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Diluted net income per share $ 0.82 $ - $ - $ 1.06
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
PF-2
LITHIA MOTORS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1998
(In thousands, except per share amounts)
Lithia Motors,
Lithia Motors, Camp Inc.
Inc. Automotive Adjustments Pro Forma
-------------- -------------- -------------- --------------
Sales:
Vehicles $ 442,409 $ 74,670 $ - $ 517,079
Service, body, parts and other 73,245 741 - 73,986
-------------- --------------- -------------- --------------
Net Sales 515,654 75,411 - 591,065
Cost of sales
Vehicles 400,938 64,967 465,905
Service, body, parts and other 33,625 - - 33,625
-------------- --------------- -------------- --------------
Cost of Sales 434,563 64,967 - 499,530
-------------- --------------- -------------- --------------
Gross profit 81,091 10,444 - 91,535
Selling, general and administrative 61,352 8,821 - 70,173
Depreciation and amortization 1,742 - 49 (c) 1,791
-------------- --------------- -------------- --------------
Operating income 17,997 1,623 (49) 19,571
Other income (expense)
Equity in income of affiliate 35 - - 35
Interest income 115 - - 115
Interest expense (7,099) (575) (399) (d) (8,073)
Other, net 1,013 569 - 1,582
-------------- --------------- -------------- --------------
(5,936) (6) (399) (6,341)
-------------- --------------- -------------- --------------
Income before income taxes 12,061 1,617 (448) 13,230
Income tax expense 4,661 - (160) (e) 4,501
-------------- --------------- -------------- --------------
Net income $ 7,400 $ 1,617 $ (288) $ 8,729
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
Basic net income per share $ 0.84 $ - $ - $ 0.99
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
Diluted net income per share $ 0.81 $ - $ - $ 0.96
-------------- --------------- -------------- --------------
-------------- --------------- -------------- --------------
PF-3
Lithia Motors, Inc. and Subsidiaries
Footnotes to Pro Forma Consolidated Financial Statements
(Unaudited)
(in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma financial statements have been prepared to
present the effect of the acquisition by the Company of Camp Automotive. The pro
forma financial statements have been prepared based upon the historical
financial statements of the Company and Camp Automotive as if the acquisition
had occurred at September 30, 1998 and at the beginning of the respective
periods.
The Pro Forma Consolidated Balance Sheet was prepared using only those assets
and liabilities of Camp Automotive that were purchased by the Company.
The Pro Forma Consolidated Statements of Operations may not be indicative of the
results of operations that actually would have occurred if the transactions had
been in effect as of the beginning of the respective periods nor do they purport
to indicate the results of future operations of the Company. The pro forma
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's 1997 Annual Report on Form 10-K and
the audited financial statements and notes thereto for Camp Automotive included
elsewhere in this report of Form 8-K/A-1. Management believes that all
adjustments necessary to present fairly such pro forma financial statements have
been made based on the terms and structure of the transaction.
PF-4
2. PRO FORMA ADJUSTMENTS
(a) To record cash paid for Camp Automotive.
(b) To record $3.033 million note payable to sellers of Camp Automotive and
$4.0 million drawn on the Company's lease revolver line of credit.
(c) To record amortization of additional goodwill over a 40 year period.
(d) To record interest expense related to note payable to seller of Camp
Automotive at 7 percent and to record additional interest on the Company's
revolver line of credit at 8 percent.
(e) To record additional tax benefit related to increased interest expense.
PF-5