<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment 2
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 25, 1996
THE PARTS SOURCE, INC.
d/b/a Ace Auto Parts
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 0-27864 59-3149403
-------------------------------------------------------------------------------
(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification No.)
1751 S. Missouri Avenue, Clearwater, Florida 34616
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 588-0377
----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
Amendment to File Acquisition Financial Statements
On October 30, 1996, The Parts Source, Inc. (d/b/a Ace Auto Parts) ("the
Company") filed a report on Form 8-K (the "Original Form 8-K") and on November
8, 1996 filed a report on Form 8-K/A ("Amendment No. 1"), with respect to its
acquisition of the businesses of six auto parts stores from A.P.S., Inc. At
the time of these filings, it was impracticable to provide the financial
statements and pro forma financial information required to be filed relative to
the acquired assets, and the Company stated in the Original Form 8-K that it
intended to file the required financial statements and pro forma financial
information as soon as practicable, but no later than January 8, 1997. By this
amendment No. 2, the Company is amending and restating Item 7 of the Original
Form 8-K to include such required financial statements and pro forma financial
information.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
A.P.S., Inc. ("Florida Store Group") Financial Statements and
Report of Independent Accountants as of July 25, 1996
(unaudited) and January 27, 1996 (audited) and for the six
months ended July 25, 1996 and 1995 (unaudited) and for the
years ended January 27, 1996 and January 28, 1995 (audited).
(B) PRO FORMA FINANCIAL INFORMATION.
The Parts Source, Inc. (d/b/a Ace Auto Parts) Pro Forma
Condensed Balance Sheet at September 30, 1996 (unaudited)
The Parts Source, Inc. (d/b/a Ace Auto Parts) Notes to Pro Forma
Condensed Balance Sheet at September 30, 1996 (unaudited)
The Parts Source, Inc. (d/b/a Ace Auto Parts) Pro Forma
Condensed Statement of Earnings for the year ended December 31,
1995 (unaudited)
The Parts Source, Inc. (d/b/a Ace Auto Parts) Notes to Pro Forma
Condensed Statement of Earnings for the year ended December 31,
1995 (unaudited)
The Parts Source, Inc. (d/b/a Ace Auto Parts) Pro Forma
Condensed Statement of Earnings for the nine months ended
Septemer 30, 1996 (unaudited)
The Parts Source, Inc. (d/b/a Ace Auto Parts) Notes to Pro Forma
Condensed Statement of Earnings for the nine months ended
September 30, 1996 (unaudited)
3
<PAGE> 4
THE PARTS SOURCE, INC.
(D/B/A/ ACE AUTO PARTS)
PRO FORMA CONDENSED BALANCE SHEET
September 30, 1996
(Unaudited)
The following unaudited pro forma condensed combined balance sheet is based on
the interim unaudited balance sheet of The Parts Source, Inc. (d/b/a Ace Auto
Parts) as contained in the Form 10-Q filed for the nine months ended September
30, 1996 and the unaudited balance sheet of A.P.S., Inc. ("Florida Store
Group") as of July 25, 1996, and has been prepared to reflect the acquisition
of Florida Store Group on October 25, 1996, after giving effect to the pro
forma adjustments described in Note 2 as if the acquisition had occurred on
September 30, 1996. In the opinion of management, all adjustments have been
made that are necessary to present fairly the pro forma information. This
statement should be read in conjunction with the aforementioned Form 10-Q, as
recently filed, and Florida Store Group financial statements and notes thereto,
which are included elsewhere in the Filing.
<TABLE>
<CAPTION>
ASSETS Historical Pro Forma
------------------------------- ----------------------------------
9/30/96 7/25/96 Note 2
The Parts Pro Forma Pro Forma
Source A.P.S.(*) Adjustments Combined
------------- ---------------- -------------------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 575,351 $ 2,450 $2,500,000 (a) $ 677,097
(2,400,704)(b)
Accounts receivable, net 2,212,358 739,418 (739,418)(c) 2,212,358
Inventories 9,624,492 1,614,791 - 11,239,283
Prepaid expenses and other 124,722 12,277 - 136,999
----------- ---------- ---------- -----------
Total current assets 12,536,923 2,368,936 (640,122) 14,265,737
PROPERTY AND EQUIPMENT, NET 2,066,593 130,984 - 2,197,577
OTHER ASSETS 190,545 12,614 1,163,770 (c) 1,354,315
(12,614)(c)
----------- ---------- ---------- -----------
$14,794,061 $2,512,534 $ 511,034 $17,817,629
=========== ========== ========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of long-term liabilities $ 256,699 $ - $ - $ 256,699
Accounts payable, trade 2,133,534 28,396 (28,396)(c) 2,133,534
Accrued liabilities 466,820 37,928 68,690 (b) 573,438
----------- ---------- ---------- -----------
Total current liabilities 2,857,053 66,324 40,294 2,963,671
LONG-TERM LIABILITIES 4,527,033 - 416,950 (b) 4,943,983
STOCKHOLDERS' EQUITY 7,409,975 2,446,210 2,500,000 (a) 9,909,975
(2,446,210)(c)
----------- ---------- ---------- -----------
$14,794,061 $2,512,534 $ 511,034 $17,817,629
=========== ========== ========== ===========
</TABLE>
(*) Balance Sheet as of July 25, 1996 for Florida Store Group which management
believes is reasonably representative of the September 30, 1996 balance sheet
that is not practicably available at this time.
4
<PAGE> 5
THE PARTS SOURCE, INC.
(D/B/A ACE AUTO PARTS)
PRO FORMA CONDENSED BALANCE SHEET
September 30, 1996
(Unaudited)
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
NOTE 1 - ACQUISITION
In September 1996, while negotiating with APS for new terms on its supply
agreement, the Company utilized its line of credit to pay down its trade
payables to A.P.S., Inc. by $4 million. As a condition of this payment,
Autoparts Finance Company, Inc., a subsidiary of A.P.S., Inc. agreed to
purchase 227,273 shares of Common Stock of the Company in a private transaction
at $11.00 per share.
On October 25, 1996, The Parts Source, Inc. (d/b/a Ace Auto Parts) ("the
Company") acquired certain net assets of six auto parts stores from A.P.S.,
Inc. The purchase price was approximately $2.9 million. The Company made a
cash payment of $2.4 million on the closing date from the proceeds received
from the sale of 227,273 shares of unregistered stock to A.P.S., Inc., at
$11.00 per share. The remaining purchase price was funded through the
Company's line of credit. The Company acquired at each location the automotive
inventory, machinery, equipment, furniture, fixtures, signs, vehicles and
leasehold improvements, and prepaid expenses. In addition, the Company assumed
the liability related to vacation pay for existing employees at the stores.
NOTE 2 - PRO FORMA ADJUSTMENTS
(a) The Company paid $2.4 million of the purchase price of the acquisition
from the proceeds received from the sale of 227,273 shares of unregistered
stock to A.P.S., Inc. at $11.00 per share.
(b) A summary of the purchase price for the acquisition described in Note 1
is as follows:
<TABLE>
<S> <C>
Proceeds from sale of common stock $2,400,704
Proceeds from line of credit 416,950
Direct acquisition costs 68,690
----------
$2,886,344
==========
</TABLE>
(c) The total purchase price of the acquisition was allocated in accordance
with the provisions of APB Opinion No. 16, Business Combinations, and,
accordingly, was based on the fair value of the net tangible assets
acquired, as there was no specifically identifiable intangibles associated
with this transaction, the excess purchase price was allocated to Goodwill
as follows:
<TABLE>
<S> <C>
Net tangible assets (liabilities)
Cash and cash equivalents $ 2,450
Inventories 1,614,791
Prepaid expenses and other 12,277
Property and equipment 130,984
Accrued liabilities (37,928)
---------
1,722,574
Intangible assets - goodwill 1,163,770
---------
$2,886,344
==========
</TABLE>
The book and tax basis of the acquired assets were the same. Accordingly,
no deferred taxes have been recorded.
5
<PAGE> 6
THE PARTS SOURCE, INC.
(D/B/A/ ACE AUTO PARTS)
PRO FORMA CONDENSED STATEMENT OF EARNINGS
For the year ended December 31, 1995
(Unaudited)
The following unaudited pro forma condensed combined statement of earnings is
based on the audited statement of earnings of The Parts Source, Inc. (d/b/a Ace
Auto Parts) as contained in the Prospectus Form SB-2, filed on April 8, 1996,
for the year ended December 31, 1995, and the audited statement of earnings of
A.P.S., Inc. ("Florida Store Group") for the year ended January 27, 1996, after
giving effect to the pro forma adjustments described in Note 1 as if the
acquisition had occurred on January 1, 1995. In the opinion of management, all
adjustments have been made that are necessary to present fairly the pro forma
information. This statement should be read in conjunction with the
aforementioned Prospectus Form SB-2 and Florida Store Group financial
statements and notes thereto, which are included elsewhere in this Filing.
<TABLE>
<CAPTION>
Historical Proforma
-------------------------- -------------------------------
12/31/95 1/27/96 Note 1
The Parts Pro Forma Pro Forma
Source A.P.S. Adjustments Combined
------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $22,942,783 $7,326,104 $ - $30,268,887
Cost of goods sold 14,427,871 4,433,734 130,000 (4) 18,991,605
----------- ---------- --------- -----------
Gross profit 8,514,912 2,892,370 (130,000) 11,277,282
Operating, selling, general and administrative expenses 7,730,635 2,661,563 (107,232)(3) 10,284,966
----------- ---------- --------- -----------
Earnings from operations 784,277 230,807 (22,768) 992,316
Other income (expense) (631,892) 3,299 (70,872)(1) (744,265)
(44,800)(2)
----------- ---------- --------- -----------
Net earnings before income taxes 152,385 234,106 (138,440) 248,051
Provision for income taxes * 42,800 93,219 (55,126)(5) 80,893
----------- ---------- --------- -----------
Net earnings $ 109,585 $ 140,887 $ (83,314) $ 167,158
=========== ========== ========= ===========
Net earnings per common share $ .05 $ .08
=========== ===========
Weighted average common shares outstanding 2,000,000 2,227,273(6)
=========== ===========
</TABLE>
(*) Reflects the Company's pro forma income tax expense for the year ended
December 31, 1995 as the Company was a Subchapter S Corporation for tax
purposes.
6
<PAGE> 7
THE PARTS SOURCE, INC.
(D/B/A ACE AUTO PARTS)
PRO FORMA CONDENSED STATEMENT OF EARNINGS
For the year ended December 31, 1995
(Unaudited)
NOTES TO PRO FORMA CONDENSED STATEMENT OF EARNINGS
NOTE 1
Reflects adjustments for the consummation of the acquisition as if it had
occurred on January 1, 1995:
1. Represents goodwill amortization expense (using the straight-line method
over a 15 year amortization period). The goodwill amortization period has
been determined based upon various factors including attainable sales
volumes, store locations and competition within the market.
2. Represents interest expense on the funds advanced against the Company's
credit line to fund the purchase, calculated at the Company's average rate
of interest for the period.
3. Represents a reduction of rent and related facility costs related to an
auto parts store that was not acquired, but the operations were
transferred to an existing Company store and compensation expense related
to those employees not transferred.
4. Represents a lower gross margin as a result of the higher cost of
inventory purchased by the Company as compared to that paid by Florida
Store Group.
5. Represents the income tax effect of the pro forma adjustments as set
forth above at the statuary rate.
6. The pro forma weighted average common shares outstanding includes the
effect of the sale of 227,273 shares of unregistered common stock to
A.P.S., Inc.
7
<PAGE> 8
THE PARTS SOURCE, INC.
(D/B/A/ ACE AUTO PARTS)
PRO FORMA CONDENSED STATEMENT OF EARNINGS
For the nine months ended September 30, 1996
(unaudited)
The following unaudited pro forma condensed combined statement of earnings is
based on the statement of earnings of The Parts Source, Inc. (d/b/a Ace Auto
Parts) as contained in the Form 10-Q for the nine months ended September 30,
1996, and the unaudited statement of earnings of A.P.S., Inc. ("Florida Store
Group") for the six months ended July 25, 1996, after giving effect to the
conforming adjustments described in Note 1 and the pro forma adjustments
described in Note 2 as if the acquisition had occurred on January 1, 1996. In
the opinion of management, all adjustments have been made that are necessary to
present fairly the pro forma information. This statement should be read in
conjunction with the aforementioned Form 10-Q and Florida Store Group financial
statements and notes thereto, which are included elsewhere in this Filing.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------------ --------------------------
9/30/96 7/25/96 Note 1 9/30/96 Note 2
The Parts Conforming A.P.S. as Pro Forma Pro Forma
Source A.P.S. Adjustments Conformed Adjustments Combined
----------- ---------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $19,158,078 $3,767,576 $1,866,367 $5,633,943 $ - $24,792,021
Cost of goods sold 11,993,887 2,319,953 1,142,795 3,462,748 47,200(4) 15,503,835
----------- ---------- ---------- ---------- -------- -----------
Gross profit 7,164,191 1,447,623 723,572 2,171,195 (47,200) 9,288,186
Operating, selling, general and
administrative expenses 6,711,855 1,229,239 631,543 1,860,782 (80,424)(3) 8,492,213
----------- ---------- ---------- ---------- -------- -----------
Earnings from operations 452,336 218,384 92,029 310,413 33,224 795,973
Other income (expense) (200,322) 409 411 820 (31,300)(1) (283,956
(53,154)(2)
----------- ---------- ---------- ---------- -------- -----------
Net earnings before income taxes 252,014 218,793 92,440 311,233 (51,230) 512,017
Provision for income taxes * 94,610 79,231 34,179 113,410 (18,668)(5) 189,352
----------- ---------- ---------- ---------- -------- -----------
Net earnings $ 157,404 $ 139,562 $ 58,261 $ 197,823 $(32,562) $ 322,665
=========== ========== ========== ========== ======== ===========
Net earnings per common share $ .06 $ .11
=========== ===========
Weighted average common shares
outstanding 2,758,996 2,986,269(6)
=========== ===========
</TABLE>
(*) Reflects the Company's pro forma income tax expense for the for the nine
months ended September 30, 1996 as the Company was a Subchapter S
Corporation for tax purposes until April 8, 1996.
8
<PAGE> 9
THE PARTS SOURCE, INC.
(D/B/A ACE AUTO PARTS)
PRO FORMA CONDENSED STATEMENT OF EARNINGS
For the nine months ended September 30, 1996
(Unaudited)
NOTES TO PRO FORMA CONDENSED STATEMENT OF EARNINGS
NOTE 1
Reflects adjustments necessary to conform A.P.S., Inc., Florida Store Group
unaudited statement of earnings for the six months ended July 25, 1996 to The
Parts Source, Inc.'s accounting period (January 1, 1996 to September 30, 1996).
The conforming adjustments have been derived from the audited financial
statements for the year ended January 27, 1996 and the unaudited financial
statements for the six months ended July 25, 1996 which management believes
provides a reasonable and representative basis for determining the conforming
adjustments. Unaudited financial statements for August and September, 1996
from the Florida Store Group's accounting records is not practicably available
at this present time.
NOTE 2
Reflects adjustments for the consummation of the acquisition as if it had
occurred on January 1, 1996:
1. Represents goodwill amortization expense (using the straight-line method
over a 15 year amortization period). The goodwill amortization period has
been determined based upon various factors including attainable sales
volumes, store locations and competition within the market.
2. Represents interest expense on the funds advanced against the Company's
credit line to fund the purchase, calculated at the Company's average rate
of interest for the period.
3. Represents a reduction of rent and related facility costs related to an
auto parts store that was not acquired, but the operations were
transferred to an existing Company store and compensation expense related
to those employees not transferred.
4. Represents a lower gross margin as a result of the higher cost of
inventory purchased by the Company as compared to that paid by Florida
Store Group.
5. Represents the income tax effect of the pro forma adjustments as set
forth above at the statuary rate.
6. The pro forma weighted average common shares outstanding includes the
effect of the sale of 227,273 shares of unregistered common stock to
A.P.S., Inc.
9
<PAGE> 10
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.
November 26, 1996
- ------------------------------ The Parts Source, Inc.
(Date) d/b/a Ace Auto Parts
----------------------------------------
(Registrant)
/s/ Robert B. Morgan
---------------------------------------
Robert B. Morgan
Chief Financial and Accounting Officer
10
<PAGE> 11
INDEX TO FINANCIAL STATEMENTS
FLORIDA STORE GROUP
<TABLE>
<S> <C>
Report of Independent Accountants ............................. F-2
Balance Sheets at January 27, 1996
and July 25, 1996............................................. F-3
Statements of Income for the years ended January 28, 1995
and January 27, 1996 and the six months ended
July 25, 1995 and 1996........................................ F-4
Statements of Changes in Owner's Investment for the years ended
January 28, 1995 and January 27, 1996 and the six
months ended July 25, 1996.................................... F-5
Statements of Cash Flows for the years ended January 28, 1995
and January 27, 1996 and the six months ended
July 25, 1995 and 1996........................................ F-6
Notes to Financial Statements ................................. F-7
</TABLE>
F-1
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
APS Holding Corporation:
We have audited the accompanying balance sheet of the Florida Store Group (a
business division of APS Holding Corporation) as of January 27, 1996, and the
related statements of income, changes in owner's investment, and cash flows for
the years ended January 28, 1995 and January 27, 1996. These financial
statements are the responsibility of APS Holding Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As further discussed in Note 1, the financial statements have been prepared
presenting the Florida Store Group as a separate business division of APS
Holding Corporation.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Florida Store Group as of
January 27, 1996, and the results of their operations and their cash flows for
the years ended January 28, 1995 and January 27, 1996 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
Houston, Texas
November 4, 1996
F-2
<PAGE> 13
FLORIDA STORE GROUP
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 27, 1996 JULY 25, 1996
---------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash .................................................................... $ 2,400 $ 2,450
Accounts receivable, less allowance for doubtful accounts
of $47,321 and $41,471 ............................................... 778,608 739,418
Inventories ............................................................. 1,556,487 1,614,791
Prepaid expenses and other current assets ............................... 9,879 12,277
---------- ----------
Total current assets ................................................ 2,347,374 2,368,936
Property and equipment, at cost:
Data processing equipment ............................................... 47,592 59,477
Warehouse and shop equipment ............................................ 36,915 35,719
Furniture, fixtures and other equipment ................................. 97,645 106,394
Leasehold improvements .................................................. 23,804 29,703
---------- ----------
205,956 231,293
Less accumulated depreciation ........................................... (88,810) (100,309)
---------- ----------
117,146 130,984
Intangible assets, less accumulated amortization of $33,957 and $38,695 .. 13,425 8,687
Other assets ............................................................. 235 3,927
---------- ----------
$2,478,180 $2,512,534
========== ==========
LIABILITIES AND OWNER'S INVESTMENT
Current liabilities:
Accounts payable ........................................................ $ 15,479 $ 28,396
Accrued liabilities ..................................................... 37,153 37,928
---------- ----------
Total current liabilities ............................................ 52,632 66,324
Commitments and contingencies (Note 2) ................................... - -
Owner's investment ....................................................... 2,425,548 2,446,210
---------- ----------
$2,478,180 $2,512,534
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 14
FLORIDA STORE GROUP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JANUARY 28, JANUARY 27, JULY 25, JULY 25,
1995 1996 1995 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales ......................... $6,763,565 $7,326,104 $3,694,325 $3,767,576
Cost of goods sold ................ 4,058,239 4,433,734 2,313,812 2,319,953
---------- ---------- ---------- ----------
Gross profit ..................... 2,705,326 2,892,370 1,380,513 1,447,623
Selling, general and administrative
expenses ........................ 2,269,578 2,661,563 1,358,308 1,229,239
---------- ---------- ---------- ----------
Operating income ................. 435,748 230,807 22,205 218,384
Other income (expense) ............ 635 3,299 (1,815) 409
---------- ---------- ---------- ----------
Income before income taxes ....... 436,383 234,106 20,390 218,793
Provision for income taxes ........ 163,561 93,219 10,138 79,231
---------- ---------- ---------- ----------
Net income ....................... $ 272,822 $ 140,887 $ 10,252 $ 139,562
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 15
FLORIDA STORE GROUP
STATEMENT OF CHANGES IN OWNER'S INVESTMENT
<TABLE>
<S> <C>
Balance at January 29, 1994 .................................... $1,644,955
Net income for the year ended January 28, 1995 ................. 272,822
Net transfers from parent company .............................. 23,928
----------
Balance at January 28, 1995 .................................... 1,941,705
Net income for the year ended January 27, 1996 ................. 140,887
Net transfers from parent company .............................. 342,956
----------
Balance at January 27, 1996 .................................... 2,425,548
Net income for the six months ended July 25, 1996 (unaudited) .. 139,562
Net transfers to parent company (unaudited) .................... (118,900)
----------
Balance at July 25, 1996 (unaudited) ........................... $2,446,210
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 16
FLORIDA STORE GROUP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
---------------------- ------------------------
JANUARY 28, JANUARY 27, JULY 25, JULY 25,
1995 1996 1995 1996
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 272,822 $ 140,887 $ 10,252 $139,562
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization ................ 40,916 42,465 21,529 17,767
Gain on sale of property and equipment ....... (208) (800) (1,800) (450)
Change in operating assets and liabilities:
Accounts receivable ......................... (250,924) (158,369) (59,084) 39,190
Inventories ................................. (92,643) (401,792) (36,618) (58,304)
Prepaid expenses and other current assets ... - - - (2,398)
Accounts payable ............................ 12,113 (9) (12,283) 12,917
Accrued liabilities ......................... 13,892 3,877 8,303 775
Other assets and liabilities - - (2,892) (3,692)
--------- --------- -------- --------
Net cash provided by (used in)
operating activities .................... (4,032) (373,741) (72,593) 145,367
--------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment ............. (23,924) (7,733) (54,138) (28,351)
Proceeds from sale of property and equipment .. 4,728 38,718 35,830 1,934
--------- --------- -------- --------
Net cash provided by (used in)
investing activities ................... (19,196) 30,985 (18,308) (26,417)
--------- --------- -------- --------
Cash flows from financing activities:
Transfers (to) from parent company ............. 23,928 342,956 91,101 (118,900)
--------- --------- -------- --------
Net cash provided by (used in)
financing activities .................... 23,928 342,956 91,101 (118,900)
--------- --------- -------- --------
Net increase in cash ............................ 700 200 200 50
Cash at beginning of period ..................... 1,500 2,200 2,200 2,400
--------- --------- -------- --------
Cash at end of period ........................... $ 2,200 $ 2,400 $ 2,400 $ 2,450
========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 17
FLORIDA STORE GROUP
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION - The Florida Store Group (the "Group") is a separate
division of APS Holding Corporation ("APS Holding") and its subsidiary APS, Inc.
(collectively referred to as the "Company") composed of five stores, two of
which were acquired through the acquisition of Parts, Inc. ("PI") as discussed
below, and two Installer Service Warehouses ("ISW"). All significant
intercompany transactions and balances have been eliminated. The stores and
ISWs sell automotive replacement parts and accessories to retail customers and
automotive repair businesses located in the Cape Canaveral, Ocala and Orlando
areas of Florida. The Group is not a legal entity.
On January 25, 1996, APS, Inc. ("APS"), a wholly owned subsidiary of APS
Holding, acquired all of the outstanding stock of PI from GKN Parts Industries
Corporation ("GKN") (the "Acquisition"). The Acquisition was accounted for as a
purchase and, accordingly, at the date of the Acquisition, the assets and
liabilities of PI (including those of the Group's PI stores) were recorded at
their estimated fair values. The acquisition did not affect the net assets of
the Group's PI stores.
ALLOCATIONS - Included in the accompanying financial statements are
allocations of Company and PI corporate overhead to the stores and ISWs. Such
allocated overhead costs consist primarily of costs related to financial,
marketing, management information, risk management, legal, and human resource
services. Such costs were allocated based upon the locations's sales as a
percentage of total sales for the respective periods. Although management
believes such method of allocation is reasonable, they are not able to determine
whether the allocations of corporate overhead costs are indicative of actual
expenses that would have been incurred by the Group had they operated as an
unaffiliated entity. The amounts of such overhead costs charged were $304,576
and $357,573 in the years ended January 28, 1995 and January 27, 1996,
respectively.
Net transfers (to) from the Company are reflected as a component of
owner's investment. No interest is charged on such transfers.
FISCAL YEAR - The Group's fiscal year ends on the last Saturday in
January. The two PI stores' fiscal year ends on December 31. The one month
difference did not have a material effect on the Group's financial position or
results of operations.
INTERIM FINANCIAL STATEMENTS - The balance sheet at July 25, 1996 and the
related statements of income, changes in owner's investment, and cash flows for
the six months ended July 25, 1995 and 1996 are unaudited. In the opinion of
management, such financial statements include all normal recurring adjustments
considered necessary for the fair presentation of such financial statements.
Interim results are not necessarily indicative of results for a full year.
INVENTORIES - Inventories consist primarily of replacement automobile
parts and accessories and are stated at the lower of cost (FIFO) or market. The
Group's cost of inventory is not necessarily indicative of the cost that would
be incurred by the Group had they operated as an independent entity. The Group
purchased approximately $3,093,433 and $3,263,066 of its inventory from APS and
PI owned warehouses in the years ended January 28, 1995 and January 27, 1996,
respectively.
PROPERTY AND EQUIPMENT - Property and equipment of the Group are stated at
cost. Expenditures for major renewals and betterments, which extend the
original estimated economic useful lives of the applicable assets, are
capitalized. Expenditures for normal repairs and maintenance are charged to
expense as incurred. The cost and accumulated depreciation of assets sold or
otherwise disposed of are removed from the accounts and any gain or loss thereon
is reflected in operations currently.
F-7
<PAGE> 18
FLORIDA STORE GROUP
NOTES TO FINANCIAL STATEMENTS
Depreciation is computed on a straight-line basis over the estimated
useful lives of the assets as set forth below. Depreciation expense for property
and equipment totalled $31,482 and $33,269 for the years ended January 28, 1995
and January 27, 1996, respectively.
<TABLE>
<CAPTION>
CLASSIFICATION ESTIMATED USEFUL LIVES
-------------- ----------------------
<S> <C>
Data processing equipment ................ 3 - 5 years
Warehouse and shop equipment ............. 5 - 15 years
Furniture, fixtures and other equipment .. 10 years
Leasehold improvements ................... the lesser of useful
life or lease term
</TABLE>
INTANGIBLE ASSETS - Intangible assets consist of the excess of the
purchase price over the fair value of net assets acquired. Intangible assets
are amortized on a straight-line basis over the estimated life of 5 years.
Amortization expense for intangible assets totalled $9,476 for the years ended
January 28, 1995 and January 27, 1996.
INCOME TAXES - Deferred income tax assets and liabilities are recognized
for the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable to future years to differences between the
financial statement amounts and the tax bases of existing assets and
liabilities. The effect on deferred income taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. A
valuation allowance is recorded to reduce deferred tax assets to amounts that
are more likely than not to be realized.
Prior to the Acquisition, the two PI stores and the remainder of the Group
were included in the consolidated federal and state income tax returns of their
parent companies, PI and APS Holding, respectively. Subsequent to the
Acquisition, the Group is included in the consolidated tax returns of APS
Holding. Current and deferred taxes are calculated by the Group as if it were
a separate taxpayer. The current and deferred tax assets or liabilities are
reflected as a component of owner's
investment.
REVENUE RECOGNITION - The Group records sales when its products are
delivered.
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.
2. COMMITMENTS AND CONTINGENCIES:
Litigation
Legal actions incident to the ordinary course of business are pending
against PI and APS Holding. In the opinion of management, the eventual
disposition of these matters will have no material adverse effect on the
financial position, results of operations, or cash flows of the Group.
F-8
<PAGE> 19
FLORIDA STORE GROUP
NOTES TO FINANCIAL STATEMENTS
Leases
Certain stores and equipment are leased under non-cancelable operating
lease agreements which expire at various dates through 1999. The leases
generally provide for the payment of taxes, insurance and maintenance expenses
related to the leased assets. In many cases, the leases provide for renewal
options of 5 to 10 years. Rental expense for the years ended January 28, 1995
and January 27, 1996 was $152,181 and $174,106, respectively. Future minimum
operating lease payments for years ending on the last Saturday in January are
as follows:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1997 ....................... $140,833
1998 ....................... 89,911
1999 ....................... 33,791
2000 ....................... 1,779
--------
Total minimum obligations .. $266,314
========
</TABLE>
3. EMPLOYEE BENEFIT PLANS:
Certain employees of the Group are eligible to participate in defined
contribution savings plans sponsored by PI and APS. An employee becomes
eligible to participate in and contribute to the plans after one year of
service and the attainment of age twenty-one. Contribution expense related to
the plans totalled $15,568 and $20,486 during the years ended January 28, 1995
and January 27, 1996, respectively. In connection with the Acquisition, the PI
savings plan was merged with the APS plan effective May 1, 1996.
PI offers a Medicare supplement plan to substantially all retirees,
including those of the Group, after the age of 65 if they are active full-time
employees on the day they retire (and have 10 years of service for employees
hired after January 1, 1993) and also offers a post-retirement life insurance
plan to all retirees on the Medicare plan after the age of 65. The amount of
expense related to such plan was insignificant to the Group for all periods
presented. On December 5, 1995 PI terminated the Medicare supplement plan.
Certain employees of the Group participate in the A.P.S., Inc. Employees'
Retirement Plan (the "Plan"). This defined benefit pension plan covers
substantially all full-time employees who have completed one year of service
and reached the age of 21. Generally, benefits are based on years of service
and the employees' average final compensation integrated with Social Security
Benefits as defined in the Plan's agreements. The Company's funding policy is
to contribute to the Plan such amount that is actuarially required to fund the
benefits of the Plan. In September 1992, A.P.S., Inc's Board of Directors
authorized a freeze of pension benefits offered under the Plan and participants
in the Plan became fully vested. The Group's share of expense related to the
Plan is included in the overhead allocation from the Company.
F-9
<PAGE> 20
FLORIDA STORE GROUP
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES:
The provision for income taxes for the years ended January 28, 1995 and
January 27, 1996, is composed of the following:
<TABLE>
<CAPTION>
JANUARY 28,1995 JANUARY 27, 1996
--------------- ----------------
<S> <C> <C>
State income tax provision .................... $ 23,016 $ 20,640
Current federal income tax provision .......... 134,455 120,578
Deferred federal income tax provision (benefit) 6,090 (47,999)
-------- --------
Total income tax provision .................... $163,561 $ 93,219
======== ========
</TABLE>
Differences between the provision for income taxes and the amount
calculated by applying the federal statutory income tax rate to pre-tax income
for the years ended January 28, 1995 and January 27, 1996 are as follows:
<TABLE>
<CAPTION>
JANUARY 28, 1995 JANUARY 27, 1996
---------------- ----------------
<S> <C> <C>
Income tax at federal statutory rate of 34% ............ $148,370 $79,596
State income taxes, net of federal income tax benefit .. 15,191 13,623
-------- -------
Provision for income taxes ............................. $163,561 $93,219
======== =======
</TABLE>
The tax effects of the temporary differences giving rise to the Group's
net deferred tax assets at January 27, 1996 are as follows:
<TABLE>
<S> <C>
Property and equipment ................. $(12,530)
Inventory reserves and capitalization .. 31,068
Allowance for doubtful accounts ........ 16,089
--------
Net deferred tax asset ................. $ 34,627
========
</TABLE>
5. SUBSEQUENT EVENT:
On October 25, 1996, APS sold the Group to Ace Auto Parts, Inc.
F-10
