<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 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): February 6, 1998
------------------------------------------------------------------
UNITED AUTO GROUP, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12297 22-3086739
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
375 Park Avenue, New York, New York 10152
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 223-3300
-----------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
On February 6, 1998, United Auto Group, Inc. ("UAG') acquired the
Young Automotive Group, which operates 18 automobile franchises at seven
locations in the Carolinas, Florida, Illinois and Indiana. On February 20,
1998, UAG filed a current report on Form 8-K (the "original 8-K") disclosing
such acquisition.
This amendment No. 1 to the original 8-K is being filed for the
purpose of filing financial statements and pro forma financial information
required to be filed under Item 7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) Financial Statements of Businesses Acquired:
-------------------------------------------
Young Automotive Group Audited Combined Financial Statements:
(1) Independent Auditors' Report.
(2) Combined Balance Sheets as of December 31, 1997 and 1996.
(3) Combined Statements of Operations for each of the years in
the three year period ended December 31, 1997.
(4) Combined Statements of Changes in Owners' Equity for each
of the years in the three year period ended
December 31, 1997.
(5) Combined Statements of Cash Flows for each of the years
in the three year period ended December 31, 1997.
(6) Notes to Combined Financial Statements.
(b) Pro Forma Financial Information:
-------------------------------
Unaudited UAG Pro Forma Condensed Financial Statements:
(1) Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1997.
(2) Footnotes to Pro Forma Condensed Consolidated Balance Sheet.
(3) Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1997.
(4) Footnotes to Pro Forma Condensed Consolidated Statement of
Operations.
(c) Exhibits:
--------
23.1 Consent of KPMG Peat Marwick LLP
<PAGE>
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.
UNITED AUTO GROUP, INC.
DATE: April 22, 1998 By: /s/ James R. Davidson
--------------------------
James R. Davidson
Executive Vice President
and Chief Accounting Officer
- more -
<PAGE>
Item 7(a) Financial Statements of business acquired
YOUNG AUTOMOTIVE GROUP
Combined Financial Statements
For the years ended December 31, 1997, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Boards of Directors
YOUNG AUTOMOTIVE GROUP:
We have audited the accompanying combined balance sheets of Young Automotive
Group as of December 31, 1997 and 1996, and the related combined statements of
operations, changes in owners' equity, and cash flows for each of the years in
the three-year period ended December 31, 1997. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Young Automotive
Group as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1997, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Indianapolis, Indiana
March 27, 1998
1
<PAGE>
YOUNG AUTOMOTIVE GROUP
Combined Balance Sheets
December 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,184 $ 3,636
Accounts receivable, net of allowance for doubtful
accounts of $297 and $343 11,647 8,652
Inventories 53,879 42,775
Prepaid expenses and other current assets 116 167
Due from related parties 293 -
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 69,119 55,230
Property and equipment, net 6,506 5,917
Due from related parties 600 700
Investment in leveraged lease 431 435
Goodwill and other intangible assets, net 7,575 3,893
Other 76 143
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 84,307 $ 66,318
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND OWNERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable - floorplan $ 46,248 $ 35,840
Accounts payable 3,752 2,704
Accrued expenses 7,485 5,877
Current portion of long-term debt 1,885 1,159
Due to related parties - current portion 5,376 8,420
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 64,746 54,000
Long-term debt, less current portion 7,165 3,606
Due to related parties - long-term 240 240
Other 631 1,014
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 72,782 58,860
- -------------------------------------------------------------------------------------------------------------------------------
Owners' equity:
Common stock and paid-in capital 8,324 6,574
Retained earnings 3,201 884
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OWNERS' EQUITY 11,525 7,458
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND OWNERS' EQUITY $ 84,307 $ 66,318
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
2
<PAGE>
YOUNG AUTOMOTIVE GROUP
Combined Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
New vehicles $ 239,999 $ 212,103 $ 181,684
Used vehicles 119,541 119,673 94,447
Service 14,779 13,531 11,401
Body shop 11,462 10,501 8,826
Parts and accessories 24,517 23,348 19,826
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 410,298 379,156 316,184
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of sales:
New vehicles 219,950 196,072 167,963
Used vehicles 108,608 110,326 87,162
Service 5,901 6,152 5,385
Body Shop 6,915 5,734 4,725
Parts and accessories 17,836 16,898 14,146
Floor plan interest, net of manufacturer interest credits 286 568 229
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL COST OF SALES, INCLUDING FLOOR PLAN INTEREST 359,496 335,750 279,610
- ---------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 50,802 43,406 36,574
Selling, general and administrative expenses 38,057 34,293 28,789
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 12,745 9,113 7,785
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income 9 101 88
Interest income - related parties 91 59 49
Interest expense (533) (423) (446)
Interest expense - related parties (467) (620) (466)
Other income (expense) 88 283 26
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (812) (600) (749)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 11,933 $ 8,513 $ 7,036
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
3
<PAGE>
YOUNG AUTOMOTIVE GROUP
Combined Statements of Changes in Owners' Equity
Years ended December 31, 1997, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock Total
and paid-in Retained owners'
capital earnings equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $ 3,955 $ (2,574) $ 1,381
Redemption of common stock (968) (498) (1,466)
Capital contributions 1,321 - 1,321
Net income - 7,036 7,036
Dividends and distributions - (5,449) (5,449)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 4,308 (1,485) 2,823
Capital contributions 100 - 100
Capital contributed for dealership acquisitions 2,166 - 2,166
Net income - 8,513 8,513
Dividends and distributions - (6,144) (6,144)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,574 884 7,458
Capital contributed for dealership acquisitions 1,750 - 1,750
Net income - 11,933 11,933
Dividends and distributions - (9,616) (9,616)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $ 8,324 $ 3,201 $ 11,525
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE>
YOUNG AUTOMOTIVE GROUP
Combined Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,933 $ 8,513 $ 7,036
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 538 488 312
Amortization of goodwill and other intangible assets 245 200 201
Loss (gain) on disposal of assets 1 (4) 38
Gain on divestiture of dealerships - (227) -
Changes in operating assets and liabilities:
Accounts receivable (2,984) 97 (1,072)
Inventories (7,869) 1,604 (11,902)
Prepaid expenses and other assets 152 89 94
Accounts payable and accrued expenses 2,404 542 (627)
Other liabilities (383) 299 (33)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,037 11,601 (5,953)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments received on amounts due from related parties 100 673 115
Purchases of property and equipment (823) (836) (525)
Proceeds from sale of property and equipment 26 47 105
Dealership acquisitions (6,267) (4,802) -
Proceeds from sale of dealerships - 292 -
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,964) (4,626) (305)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in notes payable - floorplan 9,393 (4,370) 11,793
Proceeds from issuance of long-term debt 5,250 2,078 -
Payments on long-term debt (965) (1,125) (1,079)
Change in amounts due to related parties (3,337) 1,900 2,314
Capital contributions 1,750 2,266 1,321
Redemption of common stock - - (1,466)
Payment of dividends and distributions (9,616) (6,144) (5,449)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,475 (5,395) 7,434
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (452) 1,580 1,176
Cash and cash equivalents at beginning of year 3,636 2,056 880
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,184 $ 3,636 $ 2,056
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1,347 $ 1,696 $ 1,163
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
- ------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Young Automotive Group (the Company) operates vehicle dealerships in
Indianapolis and Tipton, Indiana; Bloomington, Illinois; Asheville and
Goldsboro, North Carolina; Hilton Head, South Carolina; and Kissimmee,
Florida, serving customers located principally in the areas immediately
surrounding their facilities. The Company offers a broad range of
automotive products and services including numerous makes and models of
new and used vehicles, replacement parts, maintenance and repair
services and financing, insurance, and extended service contracts on
behalf of third parties. At its seven locations, the Company offers,
collectively, ten makes of new vehicles including BMW, Buick, Cadillac,
Chevrolet, GMC, Honda, Isuzu, Oldsmobile, Pontiac, and Toyota.
PRINCIPLES OF COMBINATION
The accompanying combined financial statements reflect the financial
position, results of operations, and cash flows of the Company's
dealerships. The following dealerships, included in the combined
financial statements, are affiliated through common family ownership
and management:
Century Chevrolet Geo, Inc.
Dan Young Chevrolet, Inc.
Dan Young, Inc.
Kissimmee Motors, Inc.
Paramount Chevrolet Geo, Inc.
Parkway Chevrolet, Inc.
Young Management Group, Inc.
(d.b.a. Heritage Motor Car Company)
All significant intercompany accounts and transactions, consisting
principally of intercompany sales and short-term cash management
accounts, have been eliminated upon combination.
MAJOR SUPPLIER AND DEALER AGREEMENT
The Company purchases substantially all of its new vehicles and parts
from various manufacturers at the prevailing prices charged by the
manufacturers to all franchised dealers. The Company's overall sales
could be impacted by the manufacturers' inability or unwillingness to
supply the dealership with an adequate supply of popular models.
The Company has entered into agreements (Dealer Agreements) with the
manufacturers. The Dealer Agreements generally limit the location of
the dealership and retain approval rights over changes in dealership
management and ownership. The manufacturer is also entitled to
terminate the agreement if the dealership breaches its terms.
The Company's ability to acquire or sell dealerships depends, in part,
on obtaining consents of the manufacturers.
(Continued)
6
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
REVENUE RECOGNITION
Revenue from the sale of vehicles is generally recognized when the
sales contract is signed, down payment has been received and the
vehicle has been delivered. Revenue from the sale of parts is
recognized upon delivery. Revenue from service and body shop operations
is recognized when service is completed.
FINANCE, INSURANCE, AND WARRANTY COMMISSIONS
Finance fees earned by the Company for notes placed with financial
institutions in connection with customer vehicle financing are
recognized in income upon acceptance of the credit by the financial
institution. Insurance commissions earned on credit life, accident, and
disability insurance sold in connection with vehicles on behalf of
insurance companies are recognized in income upon customer execution of
the insurance contract. Extended warranty fees earned by the Company
for placing extended warranty contracts are recognized in income upon
customer execution of the warranty contract.
The Company is charged back for a portion of these fees and commissions
if the customer terminates the contract prior to its scheduled maturity
or other agreed-upon date. An estimated allowance for these chargebacks
("chargeback allowance") based upon the Company's historical experience
for prepayments or defaults on contracts is reported as a component of
accrued expenses. Finance fees, insurance commissions, and extended
service commissions, net of related chargebacks, are included with
revenues from the corresponding vehicles.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers contracts
in transit and all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Vehicles, parts, and accessories inventories are stated at the lower of
cost or market. Cost of new vehicles, parts, and accessories is
determined using the last-in, first-out (LIFO) method. Cost of used
vehicles is determined using the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated
over their estimated useful lives principally on the straight-line
basis. The range of estimated useful lives is as follows:
Leasehold improvements 10 to 20 years
Machinery and equipment 5 to 10 years
Furniture and fixtures 5 to 10 years
Company vehicles 5 years
(Continued)
7
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
Expenditures for maintenance, repairs and minor renewals are expensed
as incurred, while significant renewals and betterments are
capitalized. When an asset is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the
accounts, and any gain or loss is credited or charged to income.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, generally forty years. The Company
assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.
The unamortized portion of goodwill at December 31, 1997 and 1996,
approximated $7,388 and $3,606, which is net of accumulated
amortization of $567 and $373, respectively.
Values assigned to intangible assets such as noncompetition and
consulting agreements and other identifiable intangible assets arising
from business combinations are also included in goodwill and other
intangible assets in the accompanying combined balance sheets. The
values assigned to such items are being amortized on a straight-line
basis over their contractual or useful lives, typically ranging from
one to five years. At December 31, 1997 and 1996, the unamortized
portion of such assets approximated $187 and $287, which is net of
accumulated amortization of $303 and $253, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.
INCOME TAXES
The Company's dealerships have elected S Corporation status for federal
and state income tax reporting purposes. Federal and state income taxes
on the income of an S Corporation are generally payable by the
individual stockholders rather than the corporation. Accordingly, such
income taxes have not been included in the accompanying financial
statements.
ADVERTISING
The Company expenses production and other costs of advertising as
incurred. Advertising expense was $3,856, $3,558, and $2,175 for the
years ended December 31, 1997, 1996 and 1995, respectively.
(Continued)
8
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of customers comprising the Company's
customer base. Financial instruments which potentially subject the
Company to concentrations of credit risk consist principally of cash
deposits.
MANAGEMENT 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 at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ
significantly from the estimates made in the preparation of the
financial statements.
RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 presentation.
(2) ACQUISITIONS
Effective June 1, 1997, Kissimmee Motors, Inc. acquired certain assets
of Kissimmee Toyota, Inc. The acquisition was accounted for as a
purchase and, accordingly, the results of operations of Kissimmee
Motors Inc. have been included in the accompanying financial statements
since the date of acquisition. The cost of the acquisition has been
allocated on the basis of the estimated fair market value of the assets
acquired and the liabilities assumed. A summary of the purchase price
allocation for Kissimmee Motors, Inc. follows:
<TABLE>
<CAPTION>
<S> <C>
Net working capital $ 3,753
Property and equipment 315
Excess of cost over fair value of net assets acquired 3,700
- -------------------------------------------------------------------------------------------------------------------------------
Total purchase price $ 7,768
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following unaudited pro forma combined results of operations for the
years ended December 31, 1997 and 1996, are presented as if the
Kissimmee Motors, Inc. acquisition had been completed at January 1,
1996:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 432,323 $ 430,521
Net income 12,348 9,307
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The pro forma results of operations information is not necessarily
indicative of the operating results that would have occurred had the
acquisition been consummated as of January 1, 1996, nor is it
necessarily indicative of future operations.
(Continued)
9
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
Effective February 13, 1996, Young Management Group, Inc., d.b.a.
Heritage Motor Car Company acquired Heritage Motor Car Company, Inc. of
Hilton Head Island in a stock transaction. The acquisition was
accounted for as a purchase and, accordingly, the results of operations
of Heritage Motor Car Company have been included in the accompanying
financial statements since the date of acquisition. The cost of the
acquisition has been allocated on the basis of the estimated fair
market value of the assets acquired and the liabilities assumed. A
summary of the purchase price allocation for Heritage Motor Car Company
follows:
<TABLE>
<CAPTION>
<S> <C>
Net working capital $ 679
Property and equipment 1,029
Excess of cost over fair value of net assets acquired 2,459
- -------------------------------------------------------------------------------------------------------------------------------
Total purchase price $ 4,167
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following unaudited pro forma combined results of operations for
the years ended December 31, 1996 and 1995, are presented as if the
Heritage Motor Car Company acquisition had been completed at January 1,
1995:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 385,694 $ 349,656
Net income 8,591 7,365
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The pro forma results of operations information is not necessarily
indicative of the operating results that would have occurred had the
acquisition been consummated as of January 1, 1995, nor is it
necessarily indicative of future operations.
In January 1997, the Company acquired a Cadillac franchise from General
Motors for $225. The transaction also included the purchase of
approximately $14 of miscellaneous parts inventories and fixtures. The
Cadillac franchise operates out of the Company's existing Paramount
Chevrolet dealership in Goldsboro, North Carolina.
(3) INVENTORIES
Inventories consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
New vehicles $ 41,834 $ 34,145
Used vehicles 14,862 11,699
Parts and accessories 3,940 4,185
- ---------------------------------------------------------------------------------------------------------------------------------
Inventories at FIFO 60,636 50,029
Less LIFO reserve for new vehicles and parts
and accessories inventories (6,757) (7,254)
- ---------------------------------------------------------------------------------------------------------------------------------
Total inventories $ 53,879 $ 42,775
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
10
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
If the first-in, first-out (FIFO) method of valuing inventories had
been used by the Company, net income would have been higher (lower) by
$(497), $(28) and $491 for the years ended December 31, 1997, 1996 and
1995, respectively.
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 2,828 $ 2,823
Leasehold improvements 2,376 2,118
Machinery and equipment 2,303 1,742
Furniture and fixtures 1,874 1,747
Company vehicles 411 389
- ---------------------------------------------------------------------------------------------------------------------------------
9,792 8,819
Less accumulated depreciation and amortization (3,286) (2,902)
- ---------------------------------------------------------------------------------------------------------------------------------
Total property and equipment $ 6,506 $ 5,917
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(5) INVESTMENT IN LEVERAGED LEASE
The Company is the lessor in a leveraged lease agreement entered into
in 1985 under which an aircraft was leased for a term of 25 years. The
Company's equity investment represented 4% of the purchase price; the
remaining 96% was funded with third-party financing in the form of
long-term debt that provides for no recourse against the Company and is
secured by a first lien on the leased aircraft. At the end of the lease
term, the aircraft will be turned back to the Company. The residual
value at that time is estimated to be $351. For federal income tax
purposes, the shareholders of the Company receive the benefit of tax
deductions for depreciation on the entire leased asset and for interest
on the long-term debt.
The Company's net investment in the leveraged lease is composed of the
following elements:
<TABLE>
<CAPTION>
December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable (net of principal and
interest on nonrecourse debt) $ 80 $ 84
Estimated residual value of leased asset 351 351
- --------------------------------------------------------------------------------------------------------------------------------
Investment in leveraged lease $ 431 $ 435
- --------------------------------------------------------------------------------------------------------------------------------
(continued)
</TABLE>
11
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
(6) NOTES PAYABLE--FLOORPLAN
Notes payable--floorplan include the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Floorplan notes payable to a bank with interest payable at LIBOR
plus 2% through October 31, 1997, and LIBOR plus 1.75%
thereafter (effective rates of 7.44% and 7.59% at December
31, 1997 and 1996, respectively) secured by new and used
vehicles, parts, accounts receivable and equipment. $ 32,533 $ 26,192
Floorplan notes payable to GMAC with interest payable at prime
less .75% for 1997 and prime plus 1% for 1996 (effective
rates of 7.75% and 9.25% at December 31, 1997 and 1996,
respectively) secured by new and used vehicles. 13,715 9,648
- ---------------------------------------------------------------------------------------------------------------------------------
$ 46,248 $ 35,840
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The bank floorplan arrangements permit the Company to borrow up to
$44,760, subject to a formula based on new vehicle levels. The notes
are due upon demand, upon sale of the vehicle for which the advance was
made, or after the vehicle has been in inventory for one year. The loan
agreements require the maintenance of specified financial ratios.
Borrowings under the GMAC floor plan arrangements are restricted by new
vehicle levels. The notes are due upon demand or the sale of the
vehicle for which the advance was made.
(Continued)
12
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
(7) DEBT
Long-term debt and amounts due to related parties consist of the
following:
<TABLE>
<CAPTION>
December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due to related parties (see note 12) $ 5,616 $ 8,660
Notes payable maturing in 2002 with monthly installments
aggregating $30 plus interest at LIBOR plus 2% with a
lump sum payment due at maturity; secured by dealership
assets and shareholder guarantees 4,072 -
Notes payable, maturing in 2000 and 2001, with
monthly installments aggregating $28 plus interest
at prime for 1997, and prime plus 1% for 1996; secured
by dealership assets and shareholder guarantees 2,256 2,589
Notes payable, maturing in 2001, with monthly installments
aggregating $12 plus interest at LIBOR plus 2% through
October 31, 1997, and LIBOR plus 1.75% thereafter, with a
lump sum payment due at maturity; secured by dealership
assets and shareholder guarantees 917 -
Mortgage payable due February 1999, with interest
payable monthly at prime; secured by land and
buildings of Heritage Motor Car Company 750 750
Mortgage payable in monthly installments of $15 through
August 1998, plus interest payable monthly at LIBOR plus 2%
through October 31, 1997, and LIBOR plus
1.75% thereafter; secured by land 116 290
Notes payable in monthly installments aggregating
$53 plus interest at LIBOR plus 2% through October 31, 1997,
and LIBOR plus 1.75% thereafter; maturing at various dates
in 1998; secured by dealership assets
and shareholder guarantees 439 1,068
Amounts outstanding under working capital line of credit 500 -
Other notes payable - 68
- -------------------------------------------------------------------------------------------------------------------------------
14,666 13,425
Less current maturities (7,261) (9,579)
- -------------------------------------------------------------------------------------------------------------------------------
$ 7,405 $ 3,846
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The prime rate was 8.5% and 8.25% at December 31, 1997 and 1996,
respectively, and LIBOR was 5.69% and 5.59% at December 31, 1997 and
1996, respectively.
The working capital line of credit permits the Company to borrow up to
$4,000, with interest payable monthly at LIBOR plus 2% through October
31, 1997 and LIBOR plus 1.75% thereafter. The line of credit agreement
requires the maintenance of specified financial ratios and expires in
1998.
(Continued)
13
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Related
Year ending December 31, Third Parties Parties
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ 1,885 $ 5,376
1999 1,581 -
2000 730 -
2001 2,198 -
2002 2,656 -
2003 and thereafter - 240
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 9,050 $ 5,616
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(8) OWNERS' EQUITY
The capital structure of the corporations included in the accompanying
combined balance sheets follows:
<TABLE>
<CAPTION>
Shares December 31, 1997 Shares December 31, 1996
Issued and Issued and
Authorized Outstanding Authorized Outstanding
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Century Chevrolet Geo, Inc. Class A
common, no par value, voting 1,000 6 1,000 6
Century Chevrolet Geo, Inc. Class B
common, no par value, non-voting 4,000 593 4,000 593
Dan Young Chevrolet, Inc. Class A
common, $.1 par value, voting 5,000 1,078 5,000 1,078
Dan Young Chevrolet, Inc. Class B
common, $.1 par value, non-voting 5,000 1,297 5,000 1,297
Dan Young, Inc. Common,
no par value, voting 1,000 799 1,000 799
Paramount Chevrolet Geo, Inc. Class A
common, no par value, voting 1,000 799 1,000 799
Paramount Chevrolet Geo, Inc. Class B
common, no par value, non-voting 1,000 - 1,000 -
Parkway Chevrolet, Inc. Common,
no par value, voting 1,000 1,000 1,000 1,000
Young Management Group, Inc. Class A
common, no par value, voting 1,000 665 1,000 665
Young Management Group, Inc. Class B
common, no par value, non-voting 1,000 1 1,000 1
Kissimmee Motors, Inc. Class A
common, no par value, voting 1,000 999 - -
Kissimmee Motors, Inc. Class B
common, no par value, non-voting 1,000 1 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total 23,000 7,238 21,000 6,238
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
14
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
Class A common stock of each corporation having multiple classes of
stock is convertible at shareholders' option to shares of Class B
common stock on a one-to-one basis. When and at such times that there
are no shares of Class A common stock of these corporations issued and
outstanding, voting rights automatically vest in the holders of Class B
common stock.
(9) ALLOWANCE FOR CHARGEBACKS
A summary of the change in the allowance for chargebacks on finance,
insurance, and extended service contract fees for the years ended
December 31, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 2,471 $ 2,072 $ 1,421
Provisions 1,260 2,117 2,014
Actual chargebacks (1,820) (1,718) (1,363)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 1,911 $ 2,471 $ 2,072
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(10) OPERATING LEASES
Substantially all of the Company's operations are conducted in leased
facilities under non-cancellable operating leases expiring at various
dates through 2017. Many of these leases are with related parties (note
12). These leases generally require the Company to pay insurance,
maintenance and property taxes for the facilities.
Future minimum rental commitments under non-cancellable operating
leases and future rental income receivable under non-cancellable
subleases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Rent Rent
Year ending December 31: Commitments Subleases
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ 2,434 68
1999 2,162 -
2000 2,132 -
2001 2,062 -
2002 2,022 -
2003 and thereafter 7,864 -
- --------------------------------------------------------------------------------------------------------------------------------
$ 18,676 68
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rental expense was $2,370, $1,825 and $1,604 for the years ended
December 31, 1997, 1996 and 1995, respectively. Rental income for all
non-cancelable subleases was $92, $72 and $72 for the years ended
December 31, 1997, 1996 and 1995, respectively.
(Continued)
15
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
(11) PENSION PLANS
The Company has a defined contribution plan covering substantially all
full-time employees of each of its dealerships. Participants can
contribute from 1% to 15% of their eligible compensation. The plan
permits the Company to make discretionary matching contributions and
additional discretionary contributions. Company contributions to the
plan aggregated $10 and $12 for the years ended December 31, 1997 and
1996, respectively. There were no Company contributions for the year
ended December 31, 1995.
Prior to participation in the Young Automotive Group defined
contribution plan, Dan Young Chevrolet, Inc., Century Chevrolet Geo,
Inc., Parkway Chevrolet, Inc. and Paramount Chevrolet Geo, Inc. each
had a defined contribution plan for substantially all of their
respective employees. The dealerships amended these plans to freeze
contributions and terminate the plans and plan assets were distributed
to participants or rolled over into the Young Automotive Group defined
contribution plan. No Company contributions to the plans were made
during the periods presented.
(12) RELATED PARTY TRANSACTIONS
The Company leases several of its facilities under various lease
agreements with related parties including Young Realty Company LP,
Young Brothers, LLC, and Dan E. Young (note 10). Total rental expense
under such agreements was $1,213, $1,089 and $1,002 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Included in notes payable are the following related party balances:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand notes payable to officers, directors and family members
bearing interest at rates which are generally comparable to
current floorplan interest rates. $ 5,376 $ 6,484
Notespayable to officers and directors accruing interest at 9%, due
in ten equal annual installments beginning one year and ten days
subsequent to demand by the note-holder. 240 240
Deferred compensation payable to officers and directors in 1997 for
services performed in 1987 - 1991, accruing
interest at 8%. - 1,936
- -------------------------------------------------------------------------------------------------------------------------------
$ 5,616 $ 8,660
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company purchases a portion of its parts from an affiliate which is
40% owned by certain shareholders of the Company. Total purchases of
inventory from this affiliate approximated $2,072, $2,006 and $1,019
for the years ended December 31, 1997, 1996 and 1995, respectively.
(Continued)
16
<PAGE>
YOUNG AUTOMOTIVE GROUP
Notes to Combined Financial Statements
(Dollars in thousands)
- -----------------------------------------------------------------------------
A portion of the credit life and disability and extended service
insurance sold by the Company is placed with an insurance company which
is partially owned by certain officers of the Company. Total premiums
paid to this insurance company were approximately $1,473, $1,940 and
$1,600 for the years ended December 31, 1997, 1996 and 1995,
respectively. Commission income on sales of these contracts was
approximately $843, $967 and $964 for the years ended December 31,
1997, 1996 and 1995, respectively.
(13) FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, accounts receivable, accounts
payable and short-term borrowings approximate fair value because of the
short-term nature of these instruments. The fair value of long-term
debt and amounts due to affiliates approximates amounts reflected in
the financial statements as the interest rates on substantially all of
these instruments change with market interest rates.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
(14) CONTINGENCIES
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position, results of operations or
liquidity.
(15) SUBSEQUENT EVENT
In February 1998, the stockholders of the Company sold their interests
in the Company to United Auto Group, Inc. ("UAG") pursuant to an
acquisition agreement and an agreement and plan of merger (together the
"Sale Documents"). Under the terms of the Sale Documents, ownership of
certain of the Company's dealerships has been retained by stockholders
of the Company, pending final approval of the transactions by the
related manufacturers. With respect to the dealership transactions
awaiting manufacturer approval, affiliates of UAG will manage, for a
fee, all aspects of the dealerships' operations under noncancellable
management agreements.
Consideration for the interests sold included $50,000 in cash,
1,049,039 restricted common shares of UAG common stock and a $7,000
promissory note. UAG has agreed to make a contingent payment in cash or
stock in the event the aggregate market value of the UAG common shares
received is less than $27,000 on the date the shares become freely
tradeable.
17
<PAGE>
Item 7(b) Pro forma financial statements
Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1997 gives effect to (i) the
acquisition of the Young Automotive Group (the "Young Group"), (ii) the
commitment fees under the Company's Senior Credit Agreement, dated as of March
20, 1997 (as amended, the "Senior Credit Facility") and the amortization of
financing costs related thereto, (iii) the sale of $150.0 million aggregate
principal amount of 11% Senior Subordinated Notes due 2007 (the Series A
Notes) during July 1997 and the amortization of financing costs related
thereto and (iv) the sale of $50.0 million aggregate principal amount of 11%
Senior Subordinated Notes due 2007 (the Series B Notes, and together with the
Series A Notes the "Senior Subordinated Notes due 2007") during September 1997
and the amortization of financing costs related thereto, as if such events
occurred on January 1, 1997.
The following unaudited pro forma condensed consolidated balance sheet as
of December 31, 1997 gives effect to the acquisition of the Young Group as if
the acquisition occurred on December 31, 1997.
These pro forma condensed consolidated financial statements should be read in
conjunction with the United Auto Group, Inc. historical financial statements.
<PAGE>
UNITED AUTO GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YOUNG PRO FORMA PRO
UAG (1) GROUP (2) ADJUSTMENTS FORMA
------------------- ----------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
AUTO DEALERSHIPS
Total revenues $2,087,148 $410,298 $22,025 (3) $2,519,471
Costs of sales, including
floor plan interest 1,830,086 359,496 18,798 (3) 2,208,877
497 (4)
------------------- ----------------- ---------------------- --------------------
Gross profit 257,062 50,802 2,730 310,594
Selling, general and
administrative expenses 255,066 38,057 2,812 (3) 298,267
1,000 (5)
1,576 (6)
(244) (7)
------------------- ----------------- ---------------------- --------------------
Operating income (loss) 1,996 12,745 (2,414) 12,327
Other Interest Expense (14,071) (900) (330) (8) (27,438)
(13,718) (9)
738 (10)
843 (11)
Other income (expense) net 297 88 385
------------------- ----------------- ---------------------- --------------------
Income (loss) before income
taxes -- Auto Dealerships (11,778) 11,933 (14,881) (14,726)
AUTO FINANCE - LOSS BEFORE
INCOME TAXES (3,735) (3,735)
------------------- ----------------- ---------------------- --------------------
TOTAL COMPANY
Income (loss) before minority
interests and income tax
provision (15,513) 11,933 (14,881) (18,461)
Minority interests (138) (138)
Income tax provision 5,511 1,209 (12) 6,720
------------------- ----------------- ---------------------- --------------------
Net income (loss) ($10,140) $11,933 ($13,672) ($11,879)
=================== ================= ====================== ====================
Diluted earnings per share ($0.54) ($0.60)
=================== ====================
Diluted weighted average
common shares outstanding 18,607 1,040 (13) 19,647
=================== ====================== ====================
</TABLE>
<PAGE>
FOOTNOTES TO THE 1997 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(1) In 1997, the Company changed its method of accounting for new vehicle
inventory from LIFO to the specific identification method. This change
in accounting principle has been applied by retroactively restating the
Company's financial statements for prior years. In addition, the Company
recorded a $31,660 pre-tax charge during the fourth quarter of 1997. The
charge included costs associated with (i) the divestiture of automotive
franchises, (ii) the closure of three stand-alone used vehicle satellite
locations in Arkansas and the disposal of related inventory, (iii) the
implementation of a new policy to more efficiently manage the Company's
working capital invested in retail inventory, (iv) excess real estate,
(v) the write-off of non-performing assets and (vi) certain corporate
consulting agreements. Costs associated with the pre-tax charge
amounting to $9,800 and $20,900 have been reflected in cost of goods
sold and selling, general and administrative expenses, respectively, in
the United Auto Group, Inc. 1997 Consolidated Statements of Operations.
The remaining $1,000 has been reflected in the Auto Finance loss before
income taxes of United Auto Group, Inc..
(2) Represents the results of operations prior to acquisition.
(3) Represents the results of operations of Kissimmee Toyota, acquired
by the Young Group effective June 1, 1997, for the period from
January 1, 1997 through May 31, 1997.
(4) Represents the reversal of the impact of LIFO.
(5) Represents increase in compensation expense to former owners and
employees to contractual amounts.
(6) Represents amortization of estimated excess of cost over net assets
acquired.
(7) Represents the reversal of amortization of intangibles.
(8) Represents interest expense for promissory notes issued in connection
with the acquisition.
(9) Represents interest on the Company's Senior Subordinated Notes due 2007
and amortization of related deferred financing costs. Deferred
financing costs are being amortized over a ten year period.
(10) Represents the reduction of interest incurred under the Company's Senior
Credit Facility, net of commitment fees related thereto and
amortization, over the three year term thereof, of related deferred
financing costs.
(11) Represents net reduction in interest expense relating to interest bearing
instruments retained by sellers.
(12) Represents the tax impact of pro forma adjustments at the statutory
rate adjusted for non-deductible items ($6,101) and the impact of the
conversion of the acquired entities from S corporations to C corporations
for tax purposes ($4,892).
(13) Represents shares issued in connection with the acquisition.
<PAGE>
UNITED AUTO GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YOUNG PRO FORMA
UAG GROUP ADJUSTMENTS PRO FORMA
------------ ------------ -------------- ---------------
<S> <S> <C> <C> <C>
ASSETS
AUTO DEALERSHIPS
Cash and cash equivalents $94,435 $3,184 ($50,500)(1) $46,569
(550)(2)
Accounts receivable, net 92,601 11,647 104,248
Inventories 324,330 53,879 6,757 (3) 384,966
Deferred tax assets 16,039 16,039
Other current assets 4,374 409 4,783
------------ ------------ -------------- ---------------
Total current assets 531,779 69,119 (44,293) 556,605
Property and equipment, net 37,588 6,506 (2,828)(4) 41,266
Intangible assets, net 326,774 7,575 (7,575)(5) 389,818
63,044 (6)
Other assets 42,322 1,107 (600)(4) 42,829
------------ ------------ -------------- ---------------
TOTAL AUTO DEALERSHIP ASSETS 938,463 84,307 7,748 1,030,518
AUTO FINANCE
Cash and cash equivalents 1,557 1,557
Restricted cash 3,547 3,547
Finance assets, net 30,408 30,408
Other assets 1,687 1,687
------------ ------------ -------------- ---------------
TOTAL AUTO FINANCE ASSETS 37,199 0 0 37,199
------------ ------------ -------------- ---------------
===============
TOTAL ASSETS $975,662 $84,307 $7,748 $1,067,717
============ ============ ============== ===============
LIABILITIES AND
STOCKHOLDERS' EQUITY
AUTO DEALERSHIPS
Floor plan notes payable $328,203 $46,248 $374,451
Short-term debt 6,069 6,069
Accounts payable 30,199 3,752 33,951
Accrued expenses 52,180 7,485 59,665
Current portion of long-term debt 9,981 1,885 ($946)(7) 10,920
------------ ------------ -------------- ---------------
Total current liabilities 426,632 59,370 (946) 485,056
Long-term debt 238,550 7,796 6,000 (8) 245,181
(7,165)(9)
Due to related party 616 5,616 (5,616)(10) 616
Deferred income taxes 4,709 4,709
------------ ------------ -------------- ---------------
TOTAL AUTO DEALERSHIP
LIABILITIES 670,507 72,782 (7,727) 735,562
AUTO FINANCE
Short-term debt 387 387
Accounts payable and other
liabilities 4,211 4,211
------------ ------------ -------------- ---------------
TOTAL AUTO FINANCE
LIABILITIES 4,598 0 0 4,598
------------ ------------ -------------- ---------------
Commitments and contingent
liabilities
STOCKHOLDERS' EQUITY
Voting Common Stock 2 8,324 (8,324)(11) 2
Additional paid-in-capital 310,373 27,000 (12) 337,373
Retained earnings (accumulated
deficit) (9,818) 3,201 (3,201)(11) (9,818)
------------ ------------ -------------- ---------------
TOTAL STOCKHOLDERS'
EQUITY 300,557 11,525 15,475 327,557
------------ ------------ -------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $975,662 $84,307 $7,748 $1,067,717
============ ============ ============== ===============
</TABLE>
<PAGE>
FOOTNOTES TO THE 1997 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Represents the cash consideration paid at closing, including estimated
transaction costs.
(2) Represents cash distributions paid to former owners after December 31,
1997, but prior to closing.
(3) Represents the reversal of pre-acquisition LIFO reserves.
(4) Represents distributions of land and certain other assets to former owners
after December 31, 1997, but prior to closing.
(5) Represents elimination of the Young Group's historical intangible assets.
(6) Represents estimated goodwill to be recorded based on preliminary
allocation of purchase price to assets and liabilities.
(7) Represents the elimination of current portion of long-term debt retained
by former owners.
(8) Represents issuance of seller financed promissory notes.
(9) Represents the elimination of long-term debt retained by former owners.
(10) Represents the elimination of related party debt retained by former
owners.
(11) Represents the elimination of the Young Group's historical equity
accounts.
(12) Represents the guaranteed value of the Company's common stock issued in
connection with the acquisition of the Young Group.
<PAGE>
EXHIBIT INDEX
Exhibit No.
- ----------
23.1 Consent of KPMG Peat Marwick LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
The Boards of Directors
Young Automotive Group
We consent to the incorporation by reference in the registration statements
on Form S-3 (No. 333-39997) and Forms S-8 (Nos. 333-14971 and 333-26217) of
our report dated March 27, 1998, with respect to the combined balance sheets
of Young Automotive Group as of December 31, 1997 and 1996, and the related
combined statements of operations, changes in owners' equity, and cash flows
for each of the years in the three-year period ended December 31, 1997, which
report appears in the Form 8-K of United Auto Group, Inc. dated April 22, 1998.
/s/ KPMG Peat Marwick LLP
Indianapolis, Indiana
April 21, 1998
