<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT (Amended)
Filed Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported) October 6, 1997
RUSH ENTERPRISES, INC.
----------------------------------------------------
(Exact Name of Registrant As Specified in Its Charter)
Delaware 0-20717 74-1733016
-------- ------- ----------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
8810 I.H. 10 East, San Antonio, Texas 78218
-------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (210) 661-4511
--------------
Not Applicable
- -------------------------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report)
<PAGE> 2
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
On October 6, 1997, the registrant, Rush Enterprises, Inc. ("Rush"),
caused it's wholly owned subsidiary, Rush Equipment Centers Inc., to acquire
substantially all of the assets of the John Deere Construction Equipment
Division ("the Dealership") of C. Jim Stewart & Stevenson, Inc. ("CJSS"). Rush
will account for the acquisition as a purchase.
The assets are used to conduct the acquired business (the John Deere
Construction Equipment Division (the Dealership) of C. Jim Stewart & Stevenson,
Inc.). In accordance with Rule 3-05 of Regulation S-X (17 C.F.R. 210.3-05(b)),
audited financial statements for the acquired business are filed with this
Report. With the concurrence of the Securities and Exchange Commission,
pursuant to Rule 3-13 of Regulation S-X, as expressed in a letter dated October
27, 1997, from Craig C. Olinger, Deputy Chief Accountant to the Company, the
audited financial statements of the acquired business consist of an audited
statement of the assets to be acquired and liabilities to be assumed as of
January 31, 1997, audited statement of revenues and direct operating expenses
for the year ended January 31, 1997, and accompanying notes.
(b) Pro Forma Financial Information.
In accordance with Article 11 of Regulation S-X, pro forma financial
information is filed with this Report. With the concurrence of the Securities
and Exchange Commission, pursuant to Rule 3-13 of Regulation S-X, as expressed
in a letter dated October 27, 1997, from Craig C. Olinger, Deputy Chief
Accountant, to the Company, the pro forma financial information consists of an
unaudited pro forma condensed consolidated balance sheet as of June 30, 1997,
an unaudited pro forma condensed consolidated statement of operations for the
six months ended June 30, 1997, an unaudited condensed consolidated statement
of operations for the year ended December 31, 1996, and accompanying
explanation and notes.
(c) Exhibits.
Exhibit Description
- ------- -----------
99.1 C. Jim Stewart & Stevenson Construction Equipment Division,
Financial Statements of Net Assets to be Acquired and
Liabilities to be Assumed as of January 31, 1997, and July 31,
1997, and the Statements of Revenues and Direct Operating
Expenses for the Year Ended January 31, 1997, and the
Six-Month Periods Ended July 31, 1997 and 1996
99.2 Rush Enterprises, Inc., Pro Forma Condensed Consolidated
Financial Statements
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 19, 1997
RUSH ENTERPRISES, INC.
By /s/ Martin A. Naegelin, Jr.
-------------------------------------
Martin A. Naegelin, Jr.
Vice President, Finance and
Chief Financial Officer
-3-
<PAGE> 4
\
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
99.1 C. Jim Stewart & Stevenson Construction Equipment Division,
Financial Statements of Net Assets to be Acquired and
Liabilities to be Assumed as of January 31, 1997, and July 31,
1997, and the Statements of Revenues and Direct Operating
Expenses for the Year Ended January 31, 1997, and the
Six-Month Periods Ended July 31, 1997 and 1996
99.2 Rush Enterprises, Inc., Pro Forma Condensed Consolidated Financial
Statements
</TABLE>
<PAGE> 1
Exhibit 99.1
C. JIM STEWART & STEVENSON JOHN DEERE
CONSTRUCTION EQUIPMENT DIVISION
FINANCIAL STATEMENTS OF NET ASSETS TO BE ACQUIRED AND
LIABILITIES TO BE ASSUMED AS OF JANUARY 31, 1997, AND JULY
31, 1997, AND THE STATEMENTS OF REVENUES AND DIRECT OPERATING
EXPENSES FOR THE YEAR ENDED JANUARY 31, 1997, AND THE
SIX-MONTH PERIODS ENDED JULY 31, 1997 AND 1996 TOGETHER WITH
AUDITORS' REPORT
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Rush Enterprises, Inc.:
We have audited the accompanying statement of net assets to be acquired and
liabilities to be assumed of C. Jim Stewart & Stevenson Construction Equipment
Division (the Business) as of January 31, 1997, and the related statement of
revenues and direct operating expenses for the year ended January 31, 1997.
These financial statements are the responsibility of the Business'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 that our audit provides a reasonable basis
for our opinion.
As described in Note 2, the accompanying financial statements were prepared for
the purpose of complying with Rule 3-05 of Regulation S-X of the Securities and
Exchange Commission and are not intended to be a complete presentation of
assets and liabilities and results of operations on a stand-alone basis of the
Business.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets to be acquired and liabilities to be
assumed of the Business as of January 31, 1997, and the revenues and direct
operating expenses for the year ended January 31, 1997, as described in Note 2,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Antonio, Texas
August 22, 1997
<PAGE> 3
C. JIM STEWART & STEVENSON CONSTRUCTION EQUIPMENT DIVISION
STATEMENTS OF NET ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED
<TABLE>
<CAPTION>
January 31, July 31,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
INVENTORIES $20,406,413 $21,645,374
----------- -----------
PROPERTY AND EQUIPMENT, net 3,951,677 3,954,309
----------- -----------
VACATION AND SICK PAY ACCRUED LIABILITIES (39,178) (39,178)
----------- -----------
Total net assets to be acquired and liabilities to be assumed $24,318,912 $25,560,505
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
C. JIM STEWART & STEVENSON CONSTRUCTION EQUIPMENT DIVISION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED JANUARY 31, 1997, AND
THE SIX MONTH PERIODS ENDED JULY 31, 1996 AND 1997
<TABLE>
<CAPTION>
July 31
January 31, ---------------------------
1997 1996 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES:
New and used equipment sales $15,917,934 $ 8,323,335 $13,902,238
Parts and service 5,023,088 2,686,136 2,652,990
Rental 4,004,351 2,025,560 2,298,924
----------- ----------- -----------
Total revenues 24,945,373 13,035,031 18,854,152
DIRECT OPERATING EXPENSES:
Cost of products sold 20,365,505 10,575,275 14,883,673
Selling, general and administrative 5,155,981 2,221,702 2,955,607
Depreciation and amortization 178,953 70,622 103,990
----------- ----------- -----------
DIRECT OPERATING PROFIT (LOSS) $ (755,066) $ 167,432 $ 910,882
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
C. JIM STEWART & STEVENSON CONSTRUCTION EQUIPMENT DIVISION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
1. ORGANIZATION AND OPERATIONS:
The construction equipment division of C. Jim Stewart & Stevenson (the
Business), is a division of Stewart & Stevenson Services, Inc. (a Texas
corporation).
The Business markets, construction, utility and forestry equipment, components,
replacement parts and other material supplied by independent manufacturers in
southeast Texas, and provides in-shop and on-site repair services for such
products. The Business maintains a distribution agreement with John Deere
Industrial Equipment Company that requires the Business to purchase and stock
the products and repair parts covered by the agreement for resale to end users,
original equipment manufacturers or independent dealers. This agreement also
requires the Business to provide after-sale services.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
On October 6, 1997, Rush Enterprises, Inc. (Rush), and Rush Equipment Centers
of Texas, Inc. and C. Jim Stewart & Stevenson, Inc. and Stewart & Stevenson
Realty Corporation, defined collectively as,(CJS&S), entered into an Asset
Purchase Agreement (the Agreement) whereby Rush agreed to purchase from CJS&S
certain assets and assume certain liabilities of the Business.
The accompanying statements of net assets to be acquired and liabilities to be
assumed presents, as of January 31, 1997 and July 31, 1997, the assets and
liabilities of the Business acquired by Rush pursuant to the Agreement. The
acquired net assets consist primarily of inventory, land, buildings and the
assumption of vacation and sick pay accruals. The Business's customer accounts
and customer account contracts were also acquired by Rush. However, accounts
receivable from the customer accounts and any assets or liabilities related to
the customer account contracts as of October 6, 1997, were retained by CJS&S.
In addition, cash, prepaid assets, income tax benefits and liabilities, accrued
expenses (other than vacation and sick pay accruals) and certain other assets
and liabilities related to the Business were retained by CJS&S and are not
included herein. The statements of revenue and direct operating expenses
represent those revenues and expenses that are specifically identifiable to the
Business and do not include certain expenses as described in Note 4.
As a result, the accompanying financial statements are not intended to be a
complete presentation of the Business's assets and liabilities and results of
operations had it been operated as a stand-alone entity (see Note 4). Rather,
these financial statements were prepared for the purpose of complying with Rule
3-05 of Regulation S-X of the Securities and Exchange Commission.
The financial statements for the six months ended July 31, 1996 and 1997, have
been prepared by the Business, without audit, pursuant to Accounting Principles
Board (APB) Opinion No. 28, "Interim Financial Reporting." Certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to APB Opinion No. 28; nevertheless, management of the
Business believes that the disclosures herein are adequate to prevent the
information presented from being misleading. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the revenues and direct operating expenses for the six months
ended July 31, 1996 and 1997, have been included herein.
<PAGE> 6
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined
by specific identification for new and used equipment inventory and by
utilizing the last-in, first-out method for parts and accessories.
Accounts Receivable, Net
Even though accounts receivable were not acquired by Rush as part of the
Agreement, the Business had net accounts receivable, of $3,527,807 and
$5,342,388 at January 31, 1997, and July 31, 1997, respectively.
Property and Equipment
Property and equipment are being depreciated over their estimated useful lives.
Leasehold improvements are amortized over the useful life of the improvement,
or the term of the lease, whichever is shorter. Both the straight-line and
double declining-balance methods of depreciation are used. The cost,
accumulated depreciation and amortization and estimated useful lives are
summarized as follows:
<TABLE>
<CAPTION>
January 31, Estimated
1997 Life (Years)
----------- ------------
<S> <C> <C>
Land $ 1,632,192 --
Buildings 2,268,000 30
Leasehold improvements 93,692 10 - 15
Machinery and equipment 522,029 3 - 4
Furniture and fixtures 275,802 4
Autos and trucks 315,108 3 - 4
Intangibles, software 21,396 5
Accumulated depreciation and amortization (1,176,542)
-----------
$ 3,951,677
===========
</TABLE>
Floor Plan Liabilities
Even though not assumed by Rush as part of the Agreement, the Business had
floor plan liabilities of $3,888,414 and $6,811,746 at January 31, 1997, and
July 31, 1997, respectively.
Floor plan liabilities are financing agreements to facilitate the Business's
purchase of new and used equipment. These liabilities are collateralized by the
inventory purchased and accounts receivable arising from the sale thereof. The
Business's floor plan notes have interest rates at prime plus a percentage rate
as determined by the finance provider, as defined in the related finance
agreement. The amounts borrowed under these agreements are due when the related
inventory (collateral) is sold and the sales proceeds are collected by the
Business. These lines are discretionary and may be modified, suspended or
terminated at the election of the lender, at any time.
Revenue Recognition Policies
Income on the sale of equipment is recognized when the seller and customer
execute a purchase contract and there are no significant uncertainties related
to financing or delivery. Rental income is recognized over the period of the
related rental agreement. Parts and services revenue is earned at the time the
Company sells the parts to its customers, or at the time the Company completes
the service work order related to service provided to the customer's vehicle.
<PAGE> 7
3. INVENTORIES:
The Company's inventories consisted of the following as of January 31, 1997:
<TABLE>
<S> <C>
New equipment $ 5,667,597
Used equipment 1,272,381
Rental equipment 11,826,141
Parts and accessories 1,640,294
-----------
Total $20,406,413
===========
</TABLE>
Pursuant to the Agreement, most of the new equipment inventory, excluding all
rental equipment, as of the date of the acquisition was repurchased by John
Deere Industrial Equipment Company and resold to Rush.
4. DIRECT OPERATING EXPENSES:
The direct operating expenses of the Business include costs associated with the
sale of equipment and direct customer support to produce revenues. Certain
corporate Selling, general and administrative expenses, employee benefit costs,
interest expense and provision for income taxes incurred by CJS&S on behalf of
and to support the Business have not been included in these financial
statements since these costs have historically been included in CJS&S's
consolidated statement of operations and have not been allocated to the various
CJS&S businesses. Accordingly, as also indicated in Note 1, the accompanying
financial statements are not intended to be a complete presentation of the
Business's assets and liabilities and results of operations had it been
operated as a stand-alone entity.
5. CERTAIN CASH FLOW INFORMATION:
Certain cash flow information related to the operations of the Business is
provided below:
<TABLE>
<CAPTION>
July 31
January 31, -------------------------
1997 1996 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating activities-
Direct operating profit (loss) $ (755,066) $ 167,432 $ 910,882
Depreciation and amortization 178,953 70,622 103,990
Bad debt expense 256,001 56,336 63,000
Changes in accounts receivable (149,902) (242,350) (1,877,581)
Change in inventory (831,885) 1,670,080 (1,238,961)
Change in floor plan liabilities (668,001) (1,161,139) 2,923,332
----------- ----------- -----------
Net cash flows from operating activities $(1,969,900) $ 560,981 $ 884,662
=========== =========== ===========
Investing activities-
Purchases of property and equipment $ (296,476) $ (85,341) $ (126,280)
=========== =========== ===========
</TABLE>
<PAGE> 1
Exhibit 99.2
RUSH ENTERPRISES, INC.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma condensed consolidated financial statements
give effect to the acquisition by Rush Enterprises, Inc. (Rush), of certain
assets of the John Deere Construction Equipment Division - Houston, Texas (the
Business), of C. Jim Stewart & Stevenson, Inc. (CJS&S), using the purchase
method of accounting, and are based on estimates and assumptions set forth
below and in the notes to such statements. The Business represented an
insignificant component of CJS&S consolidated revenues and was not a separate
legal entity for which full audited financial statements were prepared. These
pro forma condensed consolidated financial statements are based upon the
historical financial statements of Rush adjusted to give effect to the
acquisition on October 6, 1997.
The financial information of Rush is based upon its audited consolidated
financial statements for the year ended December 31, 1996, and its unaudited
consolidated financial statements as of and for the six-month period ended June
30, 1997. An audited statement of assets to be acquired and liabilities to be
assumed as of January 31, 1997, and audited statements of revenues and direct
operating expenses for the year ended January 31, 1997, of the Business are
included herein (as Exhibit 99.1). The financial information of the Business is
based upon the audited statement of revenues and direct operating expenses for
the year ended January 31, 1997, described above, the unaudited statement of
revenues and direct operating expenses of the Business for the six-month period
ended July 31, 1997, and its assets acquired and liabilities assumed as of
October 6, 1997 (date of transaction).
The unaudited pro forma condensed consolidated statements of operations for the
year ended January 31, 1997, and the six-month period ended July 31, 1997, have
been prepared on the assumption that the transaction had occurred on January 1,
1996. The unaudited pro forma condensed consolidated balance sheet has been
prepared on the assumption that the transaction had occurred as of Rush's
latest interim balance sheet, June 30, 1997.
The pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deemed appropriate. Final
purchase accounting adjustments will be made on the basis of appraisals and
evaluations and, therefore, may differ from the pro forma adjustments presented
herein. The unaudited pro forma final information does not profess to represent
Rush's results of operations or financial position had the above transaction,
in fact, occurred on these dates, or project the combined Company's financial
position or results of operations for any future date or period. The pro forma
condensed consolidated financial statements should be read in conjunction with
Rush's consolidated historical financial statements and notes thereto,
contained in Rush's Annual Report on Form 10-K and Rush's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997. The Company's future historical
financial statements will reflect the acquisition of the Business as of October
6, 1997.
<PAGE> 2
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
CJS&S
Rush Construction
Enterprises, Equipment
Inc., Division,
June 30, October 6, Pro Forma Total
1997 1997 Adjustments(1) Pro Forma
------------ ------------ -------------- ---------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,142 $ -- $ (4,000)(A) $ 11,142
Accounts receivable, net 18,169 -- -- 18,169
Inventories 34,551 21,271 -- 55,822
Prepaid expenses and other 579 -- -- 579
---------- ---------- ---------- --------
Total current assets 68,441 21,271 (4,000) 85,712
PROPERTY AND EQUIPMENT, net 25,219 4,409 200 (B) 29,828
OTHER ASSETS, net 8,934 -- 4,375 (C) 13,309
---------- ---------- ---------- --------
Total assets $ 102,594 $ 25,680 $ 575 $128,849
========== ========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $ 32,809 $ -- $ 21,074 (A) $ 53,883
Current maturities of long-term debt 7,471 -- 205 (A) 7,676
Advances outstanding under lines of credit 20 -- -- 20
Trade accounts payable 6,053 -- -- 6,053
Accrued expenses 4,658 39 -- 4,697
---------- ---------- ---------- --------
Total current liabilities 51,011 39 21,279 72,329
DEFERRED INCOME TAX LIABILITY, net 1,122 -- -- 1,122
LONG-TERM DEBT, net of current maturities 11,987 -- 4,937 (A) 16,924
SHAREHOLDERS' EQUITY 38,474 -- -- 38,474
---------- ---------- ---------- --------
Total liabilities and shareholders' equity $ 102,594 $ 39 $ 26,216 $128,849
========== ========== ========== ========
</TABLE>
See accompanying notes to pro forma unaudited consolidated financial statements.
<PAGE> 3
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Earnings Per Share - Unaudited)
<TABLE>
<CAPTION>
CJS&S
Rush Construction
Enterprises, Equipment
Inc., Division,
Year Ended Year Ended
December 31, January 31, Pro Forma Total
1996 1997 Adjustments(1) Pro Forma
------------ ------------ -------------- ---------
(Audited)
<S> <C> <C> <C> <C>
REVENUES $343,661 $ 24,945 $ -- $368,606
COST OF PRODUCTS SOLD 289,143 20,366 -- 309,509
-------- -------- -------- --------
GROSS PROFIT 54,518 4,579 -- 59,097
SELLING, GENERAL AND ADMINISTRATIVE 40,552 5,156 -- 45,708
DEPRECIATION AND AMORTIZATION 2,416 179 146 (C) 2,741
-------- -------- -------- --------
OPERATING INCOME 11,550 (756) (146) 10,648
INTEREST EXPENSE 3,053 -- 1,922 (D) 4,975
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 8,497 (756) (2,068) 5,673
PROVISION FOR INCOME TAXES 2,295 -- (1,073) (E) 1,222
-------- -------- -------- --------
NET INCOME $ 6,202 $ (756) $ (995) $ 4,451
======== ======== ======== ========
EARNINGS PER SHARE:
Pro forma data (Note 2)-
Income from continuing operations before income taxes $ 8,497 $ 5,673
Pro forma adjustments to reflect federal and state
income taxes 3,229 2,886
-------- --------
Pro forma income from continuing operations after
provision for income taxes $ 5,268 $ 2,787
======== ========
Pro forma income from continuing operations per share $ .94 $ .50
======== ========
Weighted-average shares outstanding used in the pro
forma income from continuing operations per share
calculation 5,590 5,590
======== ========
</TABLE>
See accompanying notes to pro forma unaudited consolidated financial statements.
<PAGE> 4
RUSH ENTERPRISES, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Earnings Per Share - Unaudited)
<TABLE>
<CAPTION>
CJS&S
Rush Construction
Enterprises, Equipment
Inc., Division,
Year Ended Year Ended
June 30, July 31, Pro Forma Total
1996 1997 Adjustments(1) Pro Forma
------------ ------------ -------------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 178,684 $ 18,854 $ -- $ 197,538
COST OF PRODUCTS SOLD 151,044 14,884 -- 165,928
--------- --------- --------- ---------
GROSS PROFIT 27,640 3,970 -- 31,610
SELLING, GENERAL AND ADMINISTRATIVE 22,500 2,955 -- 25,455
DEPRECIATION AND AMORTIZATION 1,343 104 73 (C) 1,520
--------- --------- --------- ---------
OPERATING INCOME 3,797 911 (73) 4,635
INTEREST EXPENSE 923 -- 961 (D) 1,884
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 2,874 911 (1,034) 2,751
PROVISION FOR INCOME TAXES 1,092 -- (47) (E) 1,045
--------- --------- --------- ---------
NET INCOME $ 1,782 $ 911 $ (987) $ 1,706
========= ========= ========= =========
EARNINGS PER SHARE $ .27 $ .26
========= =========
WEIGHTED-AVERAGE SHARES OUTSTANDING 6,644 6,644
========= =========
</TABLE>
See accompanying notes to pro forma unaudited consolidated financial statements.
<PAGE> 5
RUSH ENTERPRISES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
1. Pro forma adjustments related to the acquisition of C. Jim Stewart &
Stevenson John Deere Construction Equipment Division (the Business):
A. These adjustments reflect the consideration paid for the business,
which consisted of approximately $4,000 in cash, $15,968 in floor plan
financing of inventory at 7.5% interest due on December 31, 1997,
$5,106 in non-interest bearing floor plan financing, $2,062 promissory
note at 7% interest due in October 2002 and $3,080 real estate note at
7.8% interest due in October 2112.
B. To increase property and equipment to an estimated fair value.
C. Record the goodwill associated with the acquisition of the Business
along with the related amortization of goodwill over its estimated
useful life of 30 years.
D. Record the interest effect of the borrowings associated with the
acquisition of the Business.
E. Provide for federal and state income tax expense at an effective tax
rate of 38 percent as if the Business had been taxed as a C
corporation for the year ended January 31, 1997, and the six-month
period ended July 31, 1997.
2. Pro forma income from continuing operations and pro forma income from
continuing operations per share have been determined assuming that the
Company had been taxed as a C corporation for federal and certain state
income tax purposes since January 1, 1996.
Pro forma income from continuing operations per share had been computed
using the weighted-average number of common shares outstanding of the
Company. Weighted-average common shares for all periods presented prior to
the Company's initial public offering have been increased by 547,400
shares to reflect the number of shares that would have to have been sold
at the offering price per share to repay an approximate $6,000,000
distribution of undistributed S corporation earnings.
