<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PEACH AUTO PAINTING AND COLLISION, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7532 58-2267932
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Identification No.)
Classification Code
Number)
</TABLE>
<TABLE>
<S> <C>
506 45TH STREET 506 45TH STREET
SUITE A-2 SUITE A-2
COLUMBUS, GEORGIA 31904 COLUMBUS, GEORGIA 31904
(706) 324-0002 (706) 324-0002
(Address and Telephone Number of Principal Executive Offices) (Address of Principal Place of Business or Intended
Principal Place of Business)
</TABLE>
LENWARD C. WILBANKS, JR.
506 45TH STREET
SUITE A-2
COLUMBUS, GEORGIA 31904
(706) 324-0002
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
BRAD S. MARKOFF, ESQ. FELICE F. MISCHEL, ESQ.
CHARLES R. MONROE, JR., ESQ. THOMAS A. ROSE, ESQ.
SMITH HELMS MULLISS & MOORE, L.L.P. SCHNECK WELTMAN HASHMALL & MISCHEL LLP
2800 TWO HANNOVER SQUARE 1285 AVENUE OF THE AMERICAS
RALEIGH, NORTH CAROLINA 27601 NEW YORK, NEW YORK 10019
(919) 755-8700 (212) 956-1500
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY (1) PRICE (1)
<S> <C> <C> <C>
Common Stock, $.01 par value per share ............. 1,725,000(2) $ 8.00 $13,800,000
Underwriter's Warrants, each to purchase one share of
Common Stock (3).................................. 150,000 .00005 7.50
Common Stock, $.01 par value per share (5).......... 150,000 9.60 1,440,000
Total...............................................
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, $.01 par value per share (2).......... $4,182
Underwriter's Warrants, each to purchase one share of
Common Stock (3).................................. (4)
Common Stock, $.01 par value per share (5).......... 436
Total............................................... 4,618
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes an aggregate of 225,000 shares of Common Stock to cover
over-allotments, if any, pursuant to an over-allotment option granted to the
Underwriter.
(3) To be issued to the Underwriter at the time of delivery and acceptance of
the securities to be sold to the public hereunder.
(4) No fee due pursuant to Rule 457(g) under the Securities Act of 1933, as
amended.
(5) Issuable upon exercise of the Underwriter's Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
(A redherring appears on the left-hand side of this page, rotated 90
degrees. Text follows:)
THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE
SUBJECT TO CHANGE, COMPLETION AND AMENDMENT WITHOUT NOTICE. THE BONDS MAY NOT
BE SOLD NOR MAY AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE OFFICIAL
STATEMENT IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE BONDS IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1996
PEACH AUTO PAINTING AND COLLISION, INC.
1,500,000 SHARES OF COMMON STOCK
This Prospectus relates to an offering (the "Offering") by Peach Auto
Painting and Collision, Inc. (the "Company") of 1,500,000 shares of common
stock, par value $.01 per share (the "Common Stock") through Rickel &
Associates, Inc. (the "Underwriter"). The Common Stock is being offered at $8.00
per share. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market ("Nasdaq") under the trading symbol "PECH."
THE COMMON STOCK OFFERED HEREBY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE
INVESTMENT SHOULD INVEST. FOR A DESCRIPTION OF CERTAIN RISKS
REGARDING AN INVESTMENT IN THE COMPANY AND IMMEDIATE SUBSTANTIAL
DILUTION, SEE "RISK FACTORS" (PAGE 5) AND
"DILUTION" (PAGE 10).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSION (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................................... $8.00 $.71 $7.29
Total (3)........................................... $12,000,000 $1,065,000 $10,935,000
</TABLE>
(1) Does not include additional compensation to the Underwriter consisting of
(i) a non-accountable expense allowance equal to 3% of the gross proceeds of
the Offering, of which $50,000 has been paid by the Company to date, (ii)
warrants (the "Underwriter's Warrants") entitling the Underwriter to
purchase up to 150,000 shares of the Common Stock, and (iii) $50,000 paid to
the Underwriter at the closing of the Offering as compensation under a
two-year financial consulting agreement between the Underwriter and the
Company. The Company has also agreed to indemnify the Underwriter against
certain civil liabilities, including those arising under the Securities Act
of 1933, as amended (the "Securities Act"). See "Underwriting."
(2) After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance
($360,000, or $414,000 if the Underwriter's Over-allotment Option (as
defined below) is exercised in full) and the other expenses of the Offering
payable by the Company (estimated at $384,182). See "Underwriting."
(3) The Company has granted the Underwriter an option, exercisable for a period
of 45 days after the closing of the Offering, to purchase up to an
additional 15% of the shares of Common Stock offered hereby, upon the same
terms and conditions solely for the purpose of covering over-allotments, if
any (the "Underwriter's Over-allotment Option"). If the Underwriter's
Over-allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$13,800,000, $1,224,750 and $12,575,250, respectively. See "Underwriting."
RICKEL & ASSOCIATES, INC.
The date of this Prospectus is , 1996.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that any such market for the Common Stock
will develop after the closing of the Offering or that, if developed, it will be
sustained. The offering price of the Common Stock was established by negotiation
between the Company and the Underwriter and does not necessarily bear any direct
relationship to the Company's assets, earnings, book value per share or other
generally accepted criteria of value. See "Underwriting."
The Common Stock is being offered by the Underwriter on a firm commitment
basis, subject to prior sale, when, as and if delivered to the Underwriter and
subject to certain conditions. Subject to the provisions of the underwriting
agreement between the Underwriter and the Company, the Underwriter reserves the
right to withdraw, cancel or modify the Offering and to reject any order in
whole or in part. It is expected that delivery of certificates will be made
against payment therefor at the office of the Underwriter, 875 Third Avenue, New
York, New York 10022, on or about , 1996.
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith, will file reports, proxy and
information statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements
and other information can be inspected and copied at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices: New York Regional
Office, Suite 1300, 7 World Trade Center, New York, New York 10048, and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and copies of such material may also be obtained from the Public
Reference Section of the Commission at prescribed rates. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file such information electronically. It is anticipated that the Company's
Common Stock will be quoted on Nasdaq and, in such case, such reports and other
information will also be available for inspection at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006. The Company intends to
furnish its stockholders with annual reports containing audited consolidated
financial statements and such other reports as the Company deems appropriate or
as may be required by law.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS
URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS (I) REFLECTS THE FORMATION OF THE COMPANY AND
CONSUMMATION OF THE FORMATION TRANSACTIONS (AS DEFINED HEREIN) AS IF SUCH
FORMATION AND CONSUMMATION HAD OCCURRED AS OF THE EARLIEST DATE PRESENTED AND
(II) ASSUMES NO EXERCISE OF (A) THE UNDERWRITER'S OVER-ALLOTMENT OPTION, (B) THE
UNDERWRITER'S WARRANTS AND (C) OUTSTANDING OPTIONS TO PURCHASE AN AGGREGATE OF
391,000 SHARES OF COMMON STOCK. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" SHALL MEAN PEACH AUTO PAINTING
AND COLLISION, INC., THE PREDECESSOR OF PEACH AUTO PAINTING AND COLLISION, INC.,
AND THE INDIVIDUAL COMPANIES THROUGH WHICH OPERATIONS WERE CONDUCTED PRIOR TO
THE FORMATION TRANSACTIONS (AS DEFINED HEREIN).
THE COMPANY
The Company is a leading regional operator of vehicle paint and collision
centers in the southeastern United States. The Company's operations have rapidly
grown from a single vehicle paint facility in Warner Robins, Georgia in June
1991 to 52 centers in 11 states. The Company's annual revenue has grown from
$9.0 million in 1993 to $22.9 million in 1995, an average net sales growth rate
of 60%.
The Company's paint and collision centers operate under the trade name
"Peach Auto Painting and Collision." The Company paints vehicles on a production
basis, offering its customers a variety of refinishing and painting options at
attractive prices that vary based on the amount of preparation of the vehicle
prior to painting, special paint additives, such as clear coats, hardeners and
sunscreens, optional services and length of warranty. The Company also performs
light and medium body repair services in connection with its refinishing and
painting operations. The goal of the Company's paint and collision centers is to
provide a quality paint job at a reasonable price. Paint-related services
account for approximately 80% of the Company's current revenues, with collision
repair services accounting for the remaining revenues.
The Company has experienced growth by opening new paint and collision
centers and acquiring existing competitors' facilities and converting them into
Company-owned centers, a strategy the Company intends to continue. The Company
believes that its rapid growth rate and success is attributable in large part to
the demographic and financial operating model that it applies when considering
whether to open a new or acquire an existing paint and collision center. In
applying this model, the Company considers (i) the lead time required to open a
new center; (ii) the square footage available in a particular facility; (iii)
the cost of renovating or building a new facility; (iv) the amount of land
required; (v) site demographics; (vi) competition; (vii) the projected break
even point; (viii) projected sales growth; and (ix) the availability of
qualified management. The Company's successful application of this strategy is
evidenced by its ability to generate its substantial growth rate with internal
funding from operating income without incurring any significant amount of debt.
As of September 30, 1996, the Company had long term debt, notes payable to
stockholders, and capital lease obligations of $1.1 million. Although the
Company had advances from stockholders of approximately $1.4 million as of
September 30, 1996, such advances were necessary primarily because the Company
distributed a substantial portion of its available cash to stockholders when its
predecessor entities were operating as S corporations.
GROWTH STRATEGY
The Company intends to pursue an aggressive growth strategy both by
expanding its existing production paint operations and entering the full service
collision market. The Company's expansion strategy with respect to its
production paint operations includes both internal revenue and profit growth
from existing centers as well as external growth through the opening or
acquisition of new centers. The Company's primary strategy for expanding its
operations into the full service collision market is to acquire existing
operations in geographic markets in which the Company conducts production paint
operations. Under the Company's current expansion plans, the Company's goal is
to open or acquire 15 to 20 production paint centers and acquire 12 to 18 full
service collision repair centers in the 12 months following completion of the
Offering. There can be no assurances, however, that the Company will be able to
meet this goal.
The Company believes that certain economic trends are favorably impacting
the production paint industry throughout the United States. The average retail
selling price of a new vehicle sold by a dealership rose from $7,619 in 1980 to
$19,806 in 1994, and the percentage of family income spent on a new car has
risen from 36% in 1980 to 51% in 1994. The increase in vehicle prices has led
consumers to drive their vehicles longer: the average age of cars and trucks in
the United States in 1994 was 8.4 years, the highest since 1948. The Company
believes that the trend of higher prices and longer life spans for vehicles is
leading consumers to seek quality vehicle paint services at reasonable prices.
The Company believes these trends present
1
<PAGE>
the Company with a strong opportunity to expand its presence in existing markets
as well as in other markets in the United States that satisfy the Company's
demographic and financial operating model.
The vehicle paint and collision repair industry in the United States is
estimated to exceed $22 billion annually, of which the production paint industry
comprises approximately 5%. A substantial portion of the remaining industry is
comprised of the heavy collision repair market. The production paint and heavy
collision repair markets complement one another because of their similarities.
The Company's current production paint centers have the capability of performing
full service vehicle collision repairs. Likewise, full service collision repair
centers generally offer vehicle painting as an incidental but necessary service
to their primary business of collision repair. The primary operational
differences in the production paint and full service collision repair markets
are their customer and marketing focus and the mix of body repair services
relative to painting services. The production paint market targets primarily
retail customers, while the collision repair market is directed primarily at
commercial customers, such as insurance companies, fleet operators, leasing
agencies and rental companies. Approximately 20% of revenues of the Company's
production paint centers are generated by collision repair services.
The Company believes that entrance into the full service collision repair
market is a logical extension of its existing business. The Company has
established a successful track record of operating a chain of production paint
centers that provide collision repair services. The Company believes that the
experience it has acquired in the production paint market and application of a
strict demographic and financial operating model will enable the Company to
pursue an aggressive strategy of acquiring established profitable full service
collision repair centers and operating them on a large-scale basis. The Company
anticipates operating its full service collision repair centers under the trade
name "Collins Collision" in a division separate from the Company's production
paint centers.
The Company believes the following factors affecting the collision repair
market present the Company with an ideal opportunity to enter the market:
(Bullet) INDUSTRY CONSOLIDATION PRESSURES. The collision repair industry is
highly fragmented, comprised of approximately 48,000 individual
paint and body repair facilities, and currently is experiencing
increased pressures, generated largely by the automobile insurance
industry, to control prices. The insurance industry's efforts to
control claim costs, insure quality repairs, increase services and
standardize claims processing with advanced electronic
communications have created consolidation pressures in the
industry. Moreover, many insurance companies encourage their
customer base to utilize only the services of collision repair
centers that are "accredited" by the insurance industry. Small
independent operators generally do not have the ability or
financial resources to respond successfully to these pressures.
The Company believes that it has the operational experience and
will have the resources to capitalize on the existing
consolidation pressures.
(Bullet) EXISTING ACQUISITION VALUES. The consolidation pressures in the
collision repair industry have led many independent operators to
search for a means of either exiting the industry or becoming part
of a larger, better capitalized operation. The Company believes
that the lack of any dominant multi-location operators in the
collision industry has significantly limited the opportunities of
independent operators to sell their businesses or to associate
with other companies. The Company believes that these factors will
provide opportunities to acquire profitable collision repair
centers generating high revenue at low multiples of the centers'
profits.
There can be no assurances that the Company will be successful in
implementing its growth strategy with respect to either its existing production
paint operations or its intended expansion into the full service collision
market.
The Company, which was organized as a Delaware corporation in connection
with this Offering, is the successor to a series of corporations through which
all of the Company's existing paint and collision operations were conducted
prior to the consummation of the Formation Transactions. The Company's principal
executive offices are located at 506 45th Street, Suite A-2, Columbus, Georgia
31904, and the telephone number is (706) 324-0002.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................................... 1,500,000 shares of Common Stock. See "Description of Securities" and
"Underwriting."
Offering Price........................................ $8.00 per share of Common Stock.
Common Stock outstanding:
Prior to the Offering................................. 6,818,812 shares of Common Stock
After the Offering (1)................................ 8,318,812 shares of Common Stock
Use of Proceeds....................................... The net proceeds to the Company, aggregating approximately
$10,140,818, will be used by the Company to repay approximately $1.9
million of debt, to pursue its business strategy of opening new and
acquiring existing production paint operations and entering the full
service collision repair market, and for working capital and general
corporate purposes. See "Use of Proceeds."
Risk Factors.......................................... The Common Stock offered hereby involves a high degree of risk and
substantial immediate dilution to new investors. Only investors who
can bear the risk of their entire investment should invest. See "Risk
Factors" and "Dilution."
Proposed Nasdaq Symbol................................ PECH
</TABLE>
(1) Includes 1,500,000 shares of Common Stock offered hereby. Excludes (i)
225,000 shares of Common Stock issuable upon exercise of the Underwriter's
Over-allotment Option; (ii) 150,000 shares of Common Stock reserved for
issuance upon exercise of the Underwriter's Warrants; and (iii) 700,000
shares of Common Stock issuable upon the exercise of stock options that may
be granted pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
391,000 of which have been granted as of the date of this Prospectus. See
"Management -- 1996 Stock Option Plan," "Certain Relationships and Related
Transactions," "Description of Securities" and "Underwriting."
3
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
The selected combined operating financial data for each of the three years
in the period ended December 31, 1995 and the selected combined balance sheet
financial data as of December 31, 1995 and 1994 presented below have been
derived from financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors. The other operating data was derived
from unaudited information maintained by the Company. The selected combined
operating financial data for the nine months ended September 30, 1995 and 1996
and the selected combined balance sheet financial data as of September 30, 1996
have been derived from unaudited interim combined financial statements of the
Company, and reflect, in management's opinion, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the financial
position and results of operations for these periods. Results of operations for
interim periods are not necessarily indicative of results to be expected for the
full year. The following data is qualified in its entirety by, and should be
read in conjunction with, the other information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
COMBINED OPERATING FINANCIAL DATA:
Net sales........................................................... $8,975 $15,555 $22,926 $17,122 $19,493
Cost of sales....................................................... 5,564 9,610 14,510 10,783 12,369
------ ------- ------- ------- --------
Gross profit........................................................ 3,411 5,945 8,416 6,339 7,124
Selling, general and administrative expenses........................ 2,887 5,337 6,864 4,982 6,438
------ ------- ------- ------- --------
Operating income.................................................... 524 608 1,552 1,357 686
Other income (expense).............................................. (42) (31) 5 (1) 27
------ ------- ------- ------- --------
Income before income taxes.......................................... 482 577 1,557 1,356 713
Income tax expense.................................................. -- 39 121 117 76
------ ------- ------- ------- --------
Net income.......................................................... $ 482 $ 538 $ 1,436 $ 1,239 $ 637
====== ======= ======= ======= ========
Supplemental pro forma net income per share (1)..................... $ 0.04 $ .05 $ 0.14 $ 0.12 $ 0.06
====== ======= ======= ======= ========
OTHER OPERATING DATA (UNAUDITED):
Number of shops at period end....................................... 21 34 44 40 52
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1996
1994 1995 (UNAUDITED)
ACTUAL ACTUAL ACTUAL AS ADJUSTED(2)
<S> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Working capital (deficit)................................................. $(1,530) $(1,716) $(1,722) $ 8,419
Total assets.............................................................. 2,437 3,105 3,663 11,482
Current liabilities....................................................... 2,259 2,722 3,162 840
Long-term debt, less current portion...................................... 312 291 260 260
Shareholders' (deficit) equity............................................ (316) (36) 91 10,232
</TABLE>
(1) The supplemental pro forma net income per share has been computed as pro
forma net income divided by the weighted average number of shares
outstanding for each period presented. Pro forma net income has been
computed as if the Company had been a C corporation, subject to federal and
state income taxes at an estimated effective rate of 40%, for all periods
presented.
(2) Adjusted to give effect to the sale of the 1,500,000 shares of Common Stock
offered hereby, and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
4
<PAGE>
RISK FACTORS
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK, INCLUDING,
BUT NOT NECESSARILY LIMITED TO, THE RISK FACTORS DESCRIBED BELOW. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION.
1. ACQUISITION STRATEGY; RISKS RELATED TO RAPID GROWTH; ABILITY TO SUSTAIN
GROWTH. A principal component of the Company's business strategy is to continue
its growth by expanding its vehicle production paint operations in geographic
markets in which the Company currently operates and to new geographic markets
and expanding into the full service collision repair industry by acquiring
existing collision repair centers. With respect to the Company's production
paint operations, the Company has opened or acquired 52 paint and collision
centers since the Company's inception in June 1991. The Company's ability to
maintain or exceed its historical rapid growth rate with respect to its
production paint operations and successfully expand into the full service
collision repair industry will depend in large part upon the Company's ability
to successfully execute its existing market growth and new market expansion
strategy. The successful execution of these strategies and the Company's
financial success will depend upon the Company's ability to (i) identify
acceptable acquisition candidates and locations to open new facilities; (ii)
consummate the acquisition and opening of such facilities on terms favorable to
the Company; (iii) retain and expand the sales and profitability of acquired
facilities and successfully initiate and expand the sales and profitability of
newly-opened facilities; and (iv) integrate acquired and newly-opened facilities
into the Company's financial reporting, data processing and control systems and
management structure. The Company's successful expansion into the full service
collision repair industry is also heavily dependent upon the Company's ability
to successfully apply to such industry the demographic and financial operating
model that the Company has successfully applied to the Company's production
paint operations. There can be no assurance that the Company will successfully
execute its growth and expansion strategy, realize anticipated growth in its
production paint operations, or successfully enter the full service vehicle
collision repair industry. See "Business -- Growth Strategy."
The Company believes that the financial success of individual production
paint centers and full service collision repair centers is heavily dependent
upon the management of each particular facility. The success of the Company's
growth strategy with respect to its existing production paint operations and its
intended expansion into the full service collision market is, therefore,
dependent upon the Company's ability to identify, hire, train and retain
management personnel for its individual facilities. Historically the production
paint and full service collision repair industries have experienced high
employee turnover. The Company intends to address this challenge by compensating
the management of its individual facilities at competitive rates, offering
attractive benefit packages, hiring management personnel with experience in the
Company's industry, and conducting effective and regular training of management
personnel. The Company is also exploring the possibility of hiring a specialist
to conduct training for the Company on a full-time basis and currently is
implementing an electronic management information system to connect individual
facilities to the Company's corporate offices. There can be no assurances,
however, that the Company will be successful in hiring and retaining qualified
management personnel. See "Business -- Growth Strategy" and " -- Management."
2. COMPETITION. The vehicle production paint industry in the United States
is highly fragmented and the cost of entry is relatively low. Although the
industry is characterized by a substantial number of independent operators of
vehicle repair and paint facilities, the Company's primary competitors in the
vehicle production paint industry are Fact-O-Bake, Inc., Econo Auto Painting,
Inc., Maaco Enterprises, Inc. and Earl Scheib, Inc. Existing or new competitors
may be significantly larger and have greater financial and marketing resources
than the Company and may compete with the Company in rendering production
painting services in the markets in which the Company currently operates and
also in seeking existing facilities to acquire and locations to open new
facilities in markets to which the Company desires to expand.
The full service collision repair industry is also highly fragmented and
comprised primarily of independent operators of full service collision repair
centers, against which the Company expects to compete and among which the
Company anticipates identifying attractive acquisition candidates. The Company
also expects its competitors in the full service collision industry to include
Caliber Collision Center, Inc., ABRA Automotive Systems, Inc., and CARSTAR
Automotive, Inc., all of which are franchised operators of full service
collision centers. Although the Company is not aware of any competitor that has
undertaken an effort to consolidate this highly fragmented industry by operating
company-owned full service collision centers on a large-scale basis, some of the
Company's existing competitors in the production paint industry or new
competitors, some of whom may be significantly larger and have greater financial
resources than the Company, may seek to compete with the Company in acquiring,
opening and operating full service collision repair centers on a regional or
national basis. See "Business -- Competition."
5
<PAGE>
3. DEPENDENCE UPON KEY PERSONNEL. The success of the Company will be
largely dependent upon the services of Lenward C. Wilbanks, Jr., the President
and Chief Executive Officer of the Company. The loss of the services of Mr.
Wilbanks would materially and adversely affect the Company's operations. The
Company has entered into an employment agreement with Mr. Wilbanks, which
includes non-competition provisions. The success of the Company also is
dependent upon its ability to hire and retain additional qualified executive and
marketing personnel. There can be no assurance that the Company will be able to
retain the members of its current management or that it will successfully
attract and retain other qualified personnel in the future. See "Management."
4. DEPENDENCE UPON KEY SUPPLIERS. The Company is dependent upon a small
number of key suppliers of its automotive paint and related materials. In the
United States, the five primary suppliers of automotive paint are: E. I. Dupont
de Nemours & Co., PPG Industries, Inc., BASF, Sherwin-Williams and Sikkens. The
Company purchases substantially all of its automotive paint from
Sherwin-Williams. As is common in the Company's industry, the Company does not
maintain long-term supply contracts with Sherwin-Williams. The Company believes
that the suppliers of automotive paint generally compete with each other along
product lines and that the products generally are interchangeable. Accordingly,
the Company believes that it could establish a relationship with and acquire its
automotive paint from another supplier in the event that its relationship with
Sherwin-Williams changed. Although the Company considers its relationship with
Sherwin-Williams to be excellent, the loss of, or a significant change in, the
relationship between the Company and Sherwin-Williams could cause delays or
interruptions in delivery of necessary products to the Company's facilities and
could have a materially adverse impact on the Company's business and financial
results on a short-term basis. In addition, failure or delay by the Company's
other suppliers in fulfilling anticipated needs would adversely affect the
Company's ability to deliver its services. The Company purchases substantially
all of its automotive refinishing materials and supplies from Sherwin-Williams,
3M and American Tape. As such, the loss of these suppliers could have a material
adverse effect on the Company. See "Business -- Suppliers."
5. SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS. The Company's revenues
and operating results have historically varied substantially from quarter to
quarter due to certain factors, and the Company expects certain of these
fluctuations to continue. These factors include the timing and integration of
newly-opened or newly-acquired facilities and the seasonal nature of the
Company's business. Historically, the Company's sales have slowed in the late
fall and winter of each year due largely to inclement weather and the reduced
number of business days during the holiday season. Accordingly, the Company's
financial performance is generally weaker during the third and fourth quarters
relative to the first two quarters of the fiscal year. The Company's revenues
and operating results also may vary due to the general economic conditions that
affect consumer spending and the timing of supplier price changes. The Company
expects its aggressive growth and expansion strategy to contribute to variations
in quarterly revenues and operating results. The time when newly-opened or
acquired facilities become operational may cause substantial fluctuations of
operating results from quarter to quarter and may also have an adverse financial
impact on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Seasonality."
6. COMPLIANCE WITH GOVERNMENT REGULATIONS; ENVIRONMENTAL HAZARDS. The
Company is subject to various federal, state and local laws and regulations.
Various state and federal regulatory agencies, such as the Occupational Safety
and Health Administration and the United States Environmental Protection Agency
(the "EPA"), have jurisdiction over the operations of the Company with respect
to matters including worker safety, community and employee "right-to-know" laws,
and laws regarding clean air and water. Under various federal, state and local
laws, ordinances and regulations, an owner or lessee of real estate may be
liable for the costs of removal or remediation of certain hazardous or toxic
substances located on or in, or emanating from, such property, as well as
related costs of investigation and property damage. Such laws often impose such
liability without regard to whether the owner or lessee knew of, or was
responsible for, the presence of such hazardous or toxic substances.
The Company has had Phase I environmental assessments conducted at only
three of the Company's 52 facilities. These Phase I assessments disclosed one
environmental condition that will cost approximately $10,000 to remediate. The
costs of this remediation are, however, the responsibility of the lessor of the
property. The Company is not aware and has not been notified of any
environmental conditions at its other facilities that would subject the Company
to environmental remediation liability. The lease agreements between the Company
and the lessors of all of the Company's facilities require the Company to pay
remediation costs only for those environmental conditions created at such
facilities by the Company. The lessors are responsible for remediation of all
environmental conditions existing prior to the time that the Company leased such
facilities. There can be no assurances, however, that such lessors would have
the ability to fully fund any required remediation, in which case the Company
could be subject to liability, or that the Company could prove that an
environmental condition existing at any Company-leased facility was in existance
prior to the time the Company first took possession of such facility.
6
<PAGE>
The Company intends to conduct Phase I environmental assessments in connection
with all future acquisitions of production paint centers and full service
collision repair centers.
The Company believes that it currently is in substantial compliance with
all applicable environmental laws and regulations, and is not aware of any
material environmental problems at any of its current or former facilities. No
assurance can be given, however, that the Company's prior activities, or the
activities of a prior owner or lessee, have not created a material environmental
problem or that future uses or conditions (including, without limitation,
changes in applicable laws and regulations) will not result in the imposition of
material environmental liability upon the Company. Furthermore, compliance with
legislative or regulatory changes may cause future increases in the Company's
operating costs or otherwise adversely affect operations. Imposition of material
environmental liability upon the Company would have a materially adverse impact
on the Company's business and financial results. Certain of the Company's
products, such as paints and solvents, are highly flammable. Accordingly, the
storage and transportation of these materials expose the Company to the inherent
risk of fire. See "Business -- Government Regulation."
7. NEED FOR ADDITIONAL FINANCING. To implement its growth and expansion
strategy, the Company expects to incur additional indebtedness or issue
additional equity securities in the future. There can be no assurance that such
additional capital, if and when required, will be available on terms acceptable
to the Company, or available at all. In addition, future issuances of Common
Stock, if any, may dilute the present ownership of all stockholders in the
Company, including investors purchasing Common Stock in this Offering.
Historically, stockholders of the Company have made loans and advances to the
Company from time to time to provide it with working capital. The stockholders
do not expect to continue to make such loans and advances. See "Use of
Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Growth Strategy."
8. CONTROL BY EXISTING STOCKHOLDERS. Immediately following the Offering,
Lenward C. Wilbanks, Jr. and members of his family will own 6,570,603 shares of
Common Stock, or approximately 79% of the Company's Common Stock outstanding
after the Offering (without giving effect to the possible exercise of the
Underwriter's Over-allotment Option, the Underwriter's Warrants, or options
granted under the Plan), which, among other things, will allow Mr. Wilbanks and
his family to elect the entire class of directors to be elected from time to
time. Such concentration of ownership also could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock, and could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. See "Principal Stockholders."
9. NO DIVIDENDS. Payment of dividends on the Common Stock is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition, and other relevant
factors. The Company does not currently intend to declare any dividends on its
Common Stock in the foreseeable future. Currently, the Company plans to retain
any earnings it receives for development of its business operations. See
"Description of Securities -- Dividends."
10. DILUTION. The offering price per share of the Common Stock offered
hereby is $8.00. The net tangible book value per share of Common Stock after
completion of the Offering is estimated to be $1.23. Investors purchasing shares
of Common Stock in the Offering will therefore incur immediate and substantial
dilution in the net tangible book value per share of Common Stock. Such dilution
is estimated to be $6.77 per share (or approximately 85% of the public offering
price). See "Dilution."
11. ABSENCE OF PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to
this Offering, there has been no public market for the Company's Common Stock.
The initial public offering price of the Common Stock was determined by
negotiations between the Company and the Underwriter. There can be no assurance
that an active trading market for the Common Stock will develop or be sustained
after completion of this Offering, or that the market price of the Common Stock
will not decline below the initial public offering price. The market price of
the Common Stock offered hereby could be subject to significant fluctuations in
response to the Company's operating results, the degree of success the Company
achieves in implementing its growth and expansion strategy and numerous other
factors. In addition, the market for many individual stocks has experienced
extreme price and volume fluctuations in recent periods, often as a result of
factors unrelated to a company's operations. These fluctuations, as well as
general economic, political and market conditions, may adversely affect the
market price of the Common Stock.
12. SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this Offering, the
Company will have 8,318,812 shares of Common Stock outstanding, without giving
effect to shares of Common Stock issuable upon exercise of (i) the Underwriter's
Warrants, (ii) the Underwriter's Over-allotment Option, or (iii) options granted
under the Plan. Of these 8,318,812 shares, the
7
<PAGE>
1,500,000 shares of Common Stock offered hereby (1,725,000 shares in the event
the Underwriter exercises the Over-allotment Option) will be freely tradeable
without restriction or further registration under the Securities Act. The
remaining 6,818,812 shares are deemed to be "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act ("Rule 144")
and may be publicly sold only if registered under the Securities Act or sold
pursuant to an exemption therefrom. In addition, the beneficial owners of all
shares of Common Stock outstanding immediately prior to the Offering have agreed
with the Underwriter not to offer, sell, contract to sell or otherwise dispose
of any of their shares for a period of 18 months after the date of this
Prospectus, without the prior written consent of the Underwriter. See "Shares
Eligible for Future Sale" and "Underwriting."
13. BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT; REPAYMENT OF
DEBT. The Company anticipates using approximately $8.2 million (81.0%) of the
estimated net proceeds of this Offering to open and acquire production paint
centers and acquire full service collision repair centers and for working
capital and general corporate purposes. The Company's business plan is subject
to change, however, and the Company may find it necessary or advisable to
reallocate some of the proceeds or use portions thereof for other purposes.
Accordingly, the Company will have broad discretion as to the application of
such proceeds. In addition, approximately $1.9 million (19.0%) of the estimated
net proceeds of this Offering will be used to repay debt, including the Bridge
Financing (as defined herein) and Stockholder Advances (as defined herein), and,
accordingly, such funds will not be available to fund future growth. See "Use
of Proceeds."
14. ANTI-TAKEOVER STATUTES. Delaware has enacted legislation that prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an "interested stockholder," unless
the business combination is approved in a prescribed manner. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or in the prior three years did own) 15% or
more of a corporation's voting stock. A "business combination" includes mergers,
asset sales and other transactions that result in a financial benefit to the
"interested stockholder." See "Description of Securities -- Anti-Takeover
Provisions of Delaware Law."
15. LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS. The Certificate of
Incorporation of the Company provides that (i) the Company will indemnify any
director, officer, employee or agent of the Company with respect to actions,
suits or proceedings relating to the Company and (ii) subject to certain
limitations, a director shall not be personally liable for monetary damages for
breach of his fiduciary duty. In addition, the Company's Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent
permitted by Delaware Law. These provisions may discourage stockholders from
bringing suit against a director for breach of fiduciary duty and may reduce the
likelihood of derivative litigation brought by stockholders on behalf of the
Company against a director. The Company also has entered into an indemnification
agreement with each of the directors of the Company, which provides that the
director is entitled to indemnification to the fullest extent permitted by law.
Such indemnification will cover all expenses, liabilities, judgments, penalties,
fines and amounts paid in settlement which are incurred or imposed upon the
director if the director is a party, threatened to be made a party to any
action, suit or proceeding of any kind by reason of the fact that such person
served or serves as a director of the Company or served as a director, officer,
employee or agent with any other enterprise at the request of the Company. See
"Description of Securities -- Limited Liability and Indemnification."
THE FORMATION TRANSACTIONS
Historically, the Company's production paint operations were conducted
through separate affiliated corporations and partnerships. As part of the
Offering, these separate operations are being consolidated into the Company (the
"Formation Transactions") in two stages. In the first stage, the corporations
through which all existing production paint operations have been conducted
merged into a single corporation. In those transactions (the "Merger
Transactions"), 23 corporations (collectively, the "Merging Corporations")
merged into Peach Warehouse & Distribution, Inc. ("Peach Warehouse &
Distribution"), a Georgia corporation. The Merging Corporations and Peach
Warehouse & Distribution collectively were organized in seven different states.
In connection with the Merger Transactions, the shares of common stock of each
of the Merging Corporations were converted into shares of common stock of Peach
Warehouse & Distribution in various ratios depending upon the value assigned to
each of the Merging Corporations by management. Following the Merger
Transactions, Peach Warehouse & Distribution had 6,818,812 shares of common
stock outstanding. The effective date of all of the Merger Transactions was
December , 1996. The Merger Transactions were effected for the business
purpose of consolidating all existing production paint operations into one
entity.
The second step of the Formation Transactions will occur concurrently with
the closing of this Offering. In this stage, Peach Warehouse & Distribution will
merge (the "Second Merger Transaction") into the Company, which was organized as
a
8
<PAGE>
Delaware corporation on November 13, 1996. In connection with the Second Merger
Transaction, the shares of common stock of Peach Warehouse & Distribution will
be converted into shares of Common Stock of the Company on a one-for-one basis
and the shares of Peach Warehouse & Distribution will be canceled. The Second
Merger Transaction is being effected to enable the Company to operate under
favorable corporation and business laws in the state of Delaware. Following the
Second Merger Transaction and this Offering, the Company will have a total of
8,318,812 shares of Common Stock outstanding (8,543,812 if the Underwriter
exercises the Over-allotment Option). All beneficial owners of shares of Common
Stock not issued in this Offering have agreed with the Underwriter not to sell
or dispose of their shares for a period of 18 months after the closing of this
Offering. Following that period, such owners will generally be able to sell
their shares, subject to certain volume limitations and holding period
restrictions, in accordance with Rule 144 under the Securities Act. See "Shares
Available for Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be $10,140,818 ($11,781,068 if the Underwriter's
Over-allotment Option is exercised in full), after deducting the underwriting
discount, expense allowance and compensation under the financial consulting
agreement, all of which are payable to the Underwriter, and the estimated
offering expenses payable by the Company. The Company expects to use the net
proceeds (assuming no exercise of the Underwriter's Over-allotment Option)
during the next 12 months as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
DOLLAR PERCENTAGE OF
APPLICATION OF PROCEEDS AMOUNT NET PROCEEDS
<S> <C> <C>
Repayment of Stockholder Advances (1)........................................................... $ 1,400,000 13.8%
Repayment of Bridge Financing (2)............................................................... 525,000 5.2
Expansion of existing production paint operations (3)........................................... 1,000,000 9.8
Expansion into full service collision repair market (4)......................................... 6,000,000 59.2
Working capital and general corporate purposes.................................................. 1,216,000 12.0
----------- -----
Total......................................................................................... $10,141,000 100.0%
=========== =====
</TABLE>
(1) Lenward C. Wilbanks, Jr., Lisa W. Griffin, Laura W. Rodier, Jeffrey W.
Hudson, Dallas R. Barbee and Jan Barbee, all of whom are current
stockholders of the Company, made advances to the Company (the "Stockholder
Advances"), the aggregate principal amount of which is outstanding as of the
date of this Offering is approximately $1.4 million. The Stockholder
Advances are payable on demand and do not accrue interest.
(2) Mr. Wilbanks, Sheila Wilbanks Kayler and F. Yvonne Wilbanks made loans to
the Company (the "Bridge Financing"), the aggregate principal amount of
which is outstanding as of the date of the Offering is $525,144. The Bridge
Financing accrues interest at a per annum rate of 9.5%, which is payable
monthly, and is due and payable on the earlier of (i) two years from the
date of the Bridge Financing or (ii) completion of an initial public
offering yielding net proceeds to the Company of at least $10 million. See
"Certain Relationships and Related Transactions."
(3) Amounts will be used primarily to open new and acquire existing production
paint centers.
(4) Amounts will be used primarily to acquire existing full service collision
repair centers.
If the Underwriter exercises its Over-allotment Option in full, the Company
will realize additional net proceeds of approximately $1,640,250, which amount
will be added to the Company's working capital.
The Company anticipates, based on current proposed plans and assumptions
related to its operations, that the proceeds of this Offering will be sufficient
to satisfy the Company's contemplated cash requirements for at least 12 months
following the consummation of the Offering. In the event the Company's plans
change or its assumptions change or prove to be inaccurate or the proceeds of
the Offering prove to be insufficient to fund operations (due to unanticipated
expenses, delays, problems or otherwise), the Company may find it necessary or
advisable to reallocate some of the proceeds within the above-described
categories or to use portions thereof for other purposes and could be required
to seek additional financing sooner than currently anticipated. Depending on the
Company's progress in executing its business plan and the state of the capital
markets, the Company may also determine that it is necessary to borrow
additional funds or to raise additional equity capital, possibly within the next
12 months, to fund the Company's growth. The Company has no current arrangements
with respect to, or sources of, additional financing and there can be no
assurance that additional financing will be available to the Company when needed
on commercially reasonable terms, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail its
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Proceeds not immediately required for the purposes described above will be
invested principally in U.S. government securities or short-term certificates of
deposit.
9
<PAGE>
DILUTION
As of September 30, 1996, the Company had a net tangible book value of
$91,003, or $.01 per share. After giving effect to the sale of the 1,500,000
shares of Common Stock offered by the Company pursuant to this Prospectus at an
initial public offering price of $8.00 per share and the application of the
estimated net proceeds as set forth under "Use of Proceeds," the pro forma net
tangible book value at such date would have been $10.2 million, or $1.23 per
share. This represents an immediate increase in net tangible book value of $1.22
per share to the existing stockholders and an immediate dilution of $6.77 per
share (or 85% of the public offering price) to purchasers of the Common Stock
offered hereby ("New Investors"). If the initial public offering price is higher
or lower, the dilution to New Investors will be, respectively, greater or less.
The following table illustrates the dilution per share:
<TABLE>
<S> <C> <C>
Public Offering price (1)............................................................ $8.00
Net tangible book value per share at September 30, 1996 (2)........................ $ .01
Increase per share attributable to New Investors................................... $1.22
Pro forma net tangible book value per share after Offering........................... $1.23
Dilution per share to New Investors (3).............................................. $6.77
</TABLE>
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(2) Net tangible book value per share represents the Company's total tangible
assets less its total liabilities divided by the number of shares of Common
Stock outstanding.
(3) Does not include the effect of (i) the Underwriter's Over-allotment
exercise, (ii) the Underwriter's Warrants, or (iii) the Consultant Warrants.
The dilution of net tangible book value per share to New Investors assuming
the Underwriter's Over-allotment Option is exercised in full would be $6.47
(or 81%).
The table above assumes no exercise of stock options outstanding as of
September 30, 1996. As of such date, there were options outstanding to purchase
391,000 shares of Common Stock, each at an exercise price of $8.00. If all of
such options were exercised, as adjusted net tangible book value per share after
the Offering would be $1.53 per share and, therefore, would not result in
immediate dilution to New Investors. See "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Certain Relationships and Related Transactions," "Description of Securities"
and "Underwriting."
The following table sets forth, with respect to existing stockholders and
New Investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage of ownership of such shares, the total
consideration paid and the average price paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION PAID AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing Stockholders...................................... 6,818,812 82% $ -- (1) -- (1) $-- (1)
New Investors.............................................. 1,500,000 18% $12,000,000 100% $8.00
---------- ----- ------------ ---
Total............................................... 8,318,812 100% $12,000,000 100%
========== ===== ============ ===
</TABLE>
(1) nominal amount
The table above assumes no exercise of the Underwriter's Over-allotment
Option. If such option is exercised in full, the New Investors will have paid
$13,800,000 for 1,725,000 shares of Common Stock, representing approximately
100% of the total consideration for 18% of the total number of shares of Common
Stock outstanding. The table above also gives no effect to the exercise of the
Underwriter's Warrants and stock options to be outstanding upon consummation of
the Offering. Exercise of the Underwriter's Warrants and stock options would not
result in further dilution to New Investors in this Offering.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, as adjusted to give effect to the receipt and anticipated
use of the estimated net proceeds of this Offering. This table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
PRO FORMA,
HISTORICAL AS ADJUSTED
<S> <C> <C>
Debt:
Notes payable to shareholders
and long term debt............................................................................... $ 646,081 $ 170,937(1)
Stockholders' Equity:
Common Stock, $.01 par value;
20,000,000 authorized;
8,250,000 issued and
outstanding on a pro forma basis................................................................. -- 83,188
Additional paid-in capital......................................................................... -- 10,057,630
Retained earnings.................................................................................. 91,003 91,003
--------- -----------
Total shareholders' equity.................................................................. 91,003 10,231,821
--------- -----------
Total capitalization........................................................................ $ 737,084 $10,402,758
========= ===========
</TABLE>
(1) Represents outstanding long term debt. All notes payable to stockholders are
expected to be retired with a portion of the proceeds of the Offering.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the nine months ended September 30, 1996 increased $2.4
million, or 13.9%, to $19.5 million from $17.1 million for the same period in
1995. Approximately $1.7 million of this increase was attributable to net sales
of eight new operating locations opened during the first nine months of fiscal
1996 with the remainder attributable to increased sales in existing operations.
The Company believes that its net sales growth was adversely affected in the
1996 period due to several factors. The Company believes that the harsh winter
in the first quarter of 1996 depressed revenues by approximately $1 million. In
addition, the Company currently has seven new locations in development that were
scheduled to open in the second and third quarters of 1996, but which were
delayed due to various factors, including zoning and building permit procedures,
that the Company believes will be resolved in the fourth quarter of 1996.
Accordingly, the Company believes that these locations will be opening in the
first quarter of 1997.
Cost of sales for the nine months ended September 30, 1996 increased to
$12.4 million (63% of net sales) from $10.8 million (63% of net sales) for the
nine months ended September 30, 1995. The increase in cost of sales was the
direct result of the increase in net sales for the 1996 period.
Gross profit for the nine months ended September 30, 1996 increased to $7.1
million, or 37% of net sales, as compared to $6.3 million, or 37% of net sales,
for the same period in 1995. The increase in gross profit was the direct result
of the higher net sales for the 1995 period. The Company has historically been
successful in maintaining gross profit as a percentage of net sales of
approximately 37%.
Selling, general and administrative expenses increased by $1.5 million
during the nine months ended September 30, 1996 to $6.4 million (33% of net
sales) from $5.0 million (29% of net sales) during the nine months ended
September 30, 1995. The increase in selling, general and administrative expenses
for the 1996 period reflects increases in selling, general and administrative
expenses that the Company normally experiences in connection with new start-up
shops opened for less than 12 months. This situation results from the fact that
it takes a number of months for sales to ramp-up to expected levels at new
locations while the related expenses of the shops, including rent and
advertising, are incurred at full budgeted amounts from the first month. Thus,
from the first month. Then in most cases, the Company has found it takes
an average of 12 months for selling, general and administrative expenses to
match expected loans as a percentage of sales for new shops. Management
estimates that this factor accounted for approximately $300,000 or 38% of the
4% increase in selling, general and administrative as a percentage of sales as
the Company had 13 new locations that had been in operation for less than 12
months for the nine month period ended September 30, 1996 as compared with 7
new start-up locations open for less than 12 months for the same period in
1995. In addition, the Company incurred expenses of approximately $60,000
related to the new management information system ("MIS") infrastructure
necessary for the Company to begin its expansion efforts in both its current
production paint division and its newly formed full service collision repair
division; and also incurred certain incremental charges in the approximate
amount of $175,000 related primarily to this Offering.
Due to the Company's growth strategy in its production paint division of
expanding primarily by opening new locations, the Company experiences an
increase in the amount of its selling, general and administrative expenses for
each new start-up location during each such location's first 12 months of
operation. During this start-up period, the Company estimates that
12
<PAGE>
each new location adds an average of approximately $50,000 of additional
selling, general and administrative expenses. For the period ended September 30,
1996, the Company had 13 new start-up locations that had been in operation for
less than 12 months, as compared with only seven new start-up locations open for
less than 12 months for the same period in 1995.
The Company incurred expenses related to adding new MIS infrastructure in
the nine months ended September 30, 1996, which expenses the Company did not
incur in the same period in 1995. These expenses included adding seven new
administrative personnel at a cost of approximately $50,000 for the period and
incurring certain temporary administrative services expenses at a cost of
approximately $10,000 for the period. The Company began implementing the new MIS
infrastructure to enhance its ability to effectively integrate the new locations
that the Company intends to open and acquire after the Offering.
In the nine months ended September 30, 1996, the Company incurred
approximately $175,000 of incremental professional and other expenses related to
the Offering. Selling, general and administrative expenses are expected to
increase from period to period as a result of continued growth of the Company,
including MIS infrastructure and the planned acquisition strategy that the
Company intends to pursue in its newly-formed full service collision repair
division after the closing of the Offering.
Depreciation and amortization expenses increased to $301,162 in the nine
months ended September 30, 1996 from $293,969 in the nine months ended September
30, 1995. The increase in depreciation and amortization expenses are
attributable to an increase in fixed assets related to the expanded operations
of the Company during 1996. Depreciation and amortization expenses are expected
to increase from period to period as a result of the Company's continued growth
activity, including the planned acquisition strategy that the Company intends to
pursue in its newly-formed full service collision repair division after the
closing of the Offering.
Interest expense for the nine months ended September 30, 1996 decreased to
$9,970 from $15,670 in the nine months ended September 30, 1995. The decrease
was attributable to repayment of outstanding principal debt by the Company
during the nine months ended September 30, 1995. Interest expense in future
periods will depend upon fluctuations in outstanding debt balances and
prevailing interest rates. The Company anticipates that interest expense will
increase in future periods as a result of debt that may be incurred in
connection with the Company's growth strategy, including its acquisition
strategy in its newly-formed full service collision repair division.
During the nine months ended September 30, 1996, the Company operated
through 24 corporations, of which 20 were S corporations and four were C
corporations. The Company operated through the same number of S and C
corporations in the nine months ended September 30, 1996. With respect to the S
corporations, income tax liabilities were the responsibility of the Company's
shareholders during both 1996 and 1995. With respect to the C corporations, the
Company's effective tax rate was 38% in the nine months ended September 30, 1996
and the nine months ended September 30, 1995.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
Net sales for the fiscal year ended December 31, 1995 increased $7.4
million, or 47.7%, to $22.9 million from $15.6 million for the same period in
1994. Approximately $2 million of this increase was attributable to net sales of
10 new operating locations opened during fiscal 1995 with the remainder
attributable to increased sales in existing operations.
Cost of sales for the fiscal year ended December 31, 1995 increased to
$14.5 million (63% of net sales) from $9.6 million (62% of net sales) for the
fiscal year ended December 31, 1994. The increase in cost of sales was the
direct result of the increase in net sales for fiscal 1995.
Gross profit for the fiscal year ended December 31, 1995 increased to $8.4
million, or 37% of net sales, as compared to $5.9 million, or 38% of net sales,
for the same period in fiscal 1994. The increase in gross profit was the direct
result of the increase in net sales for fiscal 1995.
Selling, general and administrative expenses increased by $1.5 million
during the fiscal year ended December 31, 1995 to $6.9 million (30% of net
sales) from $5.3 million (34% of net sales) during the fiscal year ended
December 31, 1994. The increase in selling, general and administrative expenses
reflects the increase in the costs necessary to support the Company's rapid
growth during the period and was primarily the result of the addition of 10 new
operating locations during fiscal 1995. The Company did, however, decrease
selling, general and administrative expenses as a percentage of net sales, from
34% in
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fiscal 1994 to 30% in fiscal 1995 even though the Company experienced more than
a 47% increase in net sales and a 29% increase in the number of operating
locations from fiscal 1994 to fiscal 1995. Selling, general and administrative
expenses are expected to increase from period to period as a result of continued
growth activity of the Company, including the planned acquisition strategy the
Company intends to implement in its newly-formed full service collision repair
division after the closing of the Offering.
Depreciation and amortization expenses increased to $391,959 in the fiscal
year ended December 31, 1995 from $306,398 in the fiscal year ended December 31,
1994. The increase in depreciation and amortization expenses are attributable to
an increase in fixed assets related to the expanded operations of the Company
during fiscal 1995. Depreciation and amortization expenses are expected to
increase from period to period as a result of continued growth activity of the
Company, including the planned acquisition strategy the Company intends to
implement in its newly-formed full service collision repair division after the
closing of the Offering.
Interest expense for the fiscal year ended December 31, 1995 decreased to
$29,218 from $40,759 in the fiscal year ended December 31, 1994. The decrease
was attributable to repayment of outstanding principal debt by the Company
during fiscal 1995. Interest expense in future periods will be dependent upon
fluctuations in outstanding debt balances and prevailing interest rates. The
Company anticipates that interest expense will increase in future periods as a
result of debt that may be incurred in connection with the Company's growth
strategy, including its acquisition strategy in its newly-formed full service
collision repair division.
During the fiscal year ended December 31, 1995, the Company operated
through 24 corporations, of which twenty were S corporations and four were C
corporations, as compared to the fiscal year ended December 31, 1994, in which
the Company operated through two partnerships and 21 corporations, of which 16
were S corporations and five were C corporations. With respect to the S
corporations, income tax liabilities were the responsibility of the Company's
shareholders during fiscal 1995 and fiscal 1994. With respect to the C
corporations, the Company's effective tax rate was 38% in fiscal 1995 and 30% in
fiscal 1994. The Company utilized $273,000 in tax loss carryforwards for the
fiscal year ended December 31, 1995 as compared to $137,594 in tax loss
carryforwards utilized for the fiscal year ended December 31, 1994. At December
31, 1995 the Company had net operating loss carryforwards of $40,000 for income
tax purposes, which expire at various times through 2008. The Company's S
corporation status will terminate on consummation of the Formation Transactions.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
Net sales for the fiscal year ended December 31, 1994 increased $6.6
million, or 74%, to $15.6 million from $9.0 million for the same period in 1993.
Approximately $3.8 million of this increase was attributable to net sales of 14
new operating locations opened during fiscal 1994 with the remainder
attributable to increased sales in existing operations.
Cost of sales for the fiscal year ended December 31, 1994 increased to $9.6
million (62% of net sales) from $5.6 million (62% of net sales) for the fiscal
year ended December 31, 1993. The increase in cost of sales was the direct
result of the increase in net sales for fiscal 1994.
Gross profit for the fiscal year ended December 31, 1994 increased to $5.9
million, or 38% of net sales, as compared to $3.4 million, or 38% of net sales,
for the same period in fiscal 1993. The increase in gross profit was the direct
result of the increase in net sales for fiscal 1994.
Selling, general and administrative expenses increased by $2.4 million
during the fiscal year ended December 31, 1994 to $5.3 million (34% of net
sales) from $2.9 million (32% of net sales) during the fiscal year ended
December 31, 1993. The increase in selling, general and administrative expenses
reflects the increase in costs necessary to support the Company's rapid growth
during the period and was primarily the result of the addition of 14 new
operating locations during fiscal 1994. Selling, general and administrative
expenses are expected to increase from period to period as a result of continued
growth activity of the Company, including the planned acquisition strategy the
Company intends to implement in its newly-formed full service collision repair
division after the closing of the Offering.
Depreciation and amortization expenses increased to $306,398 in the fiscal
year ended December 31, 1994 from $119,902 in the fiscal year ended December 31,
1993. The increase in depreciation and amortization expenses are attributable to
an increase in fixed assets related to the expanded operations of the Company
during fiscal 1994. Depreciation and amortization expenses are expected to
increase from period to period as a result of continued growth activity of the
Company, including the planned acquisition strategy the Company intends to
implement in its newly-formed full service collision repair division after the
closing of the Offering.
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Interest expense for the fiscal year ended December 31, 1994 decreased to
$40,759 from $41,873 in the fiscal year ended December 31, 1993. The decrease
was attributable to repayment of outstanding principal debt by the Company
during fiscal 1994. Interest expense in future periods will be dependent upon
fluctuations in outstanding debt balances and prevailing interest rates. The
Company anticipates that interest expense will increase in future periods as a
result of debt that may be incurred in connection with the Company's continued
growth strategy, including its acquisition strategy in its newly-formed full
service collision repair division.
During the fiscal year ended December 31, 1994, the Company operated
through two partnerships and 21 corporations, of which 16 were S corporations
and five were C corporations, as compared to the fiscal year ended December 31,
1993, in which the Company operated through 17 corporations, of which 13 were S
corporations and four were C corporations. With respect to the S corporations,
income tax liabilities were the responsibility of the Company's stockholders
during fiscal 1994 and fiscal 1993. With respect to the C corporations, the
Company's effective tax rate increased to 30% in fiscal 1994 from 0% in fiscal
1993 primarily due to the C corporations yielding income for the first time. The
Company utilized $137,594 in tax loss carryforwards for the fiscal year ended
December 31, 1994 as compared to $0 in tax loss carryforwards utilized for the
fiscal year ended December 31, 1993. At December 31, 1994 the Company had net
operating loss carryforwards of $313,000 for income tax purposes, which expire
at various times through 2008. The Company's S corporation status will terminate
upon consummation of the Formation Transactions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities to date through cash flows from
operations, borrowings from its majority shareholders, operating equipment
leases and seller provided financing related to certain of its acquisitions. The
Company's primary long-term capital needs are for opening and acquiring new
production paint and full service collision centers. The Company expects to fund
such needs through cash flows from operations, operating equipment leases,
seller provided financing related to its future acquisitions, the net proceeds
from this Offering and possibly borrowings under credit facilities that have not
yet been established.
Net cash provided by operating activities was $2.0 million during fiscal
1995 as compared to $1.0 million for fiscal 1994. Net cash used in investing
activities was $631,908 in fiscal 1995 compared to $810,015 for fiscal 1994,
comprised primarily of purchases of capital equipment, furniture and fixtures
required by the Company to open ten new facilities in fiscal 1995 and 14 new
facilities in fiscal 1994.
Net cash provided by operating activities was $766,094 during the nine
months ended September 30, 1996 as compared to $1.8 million for the same period
in 1995. Net cash used in investing activities was $424,465 in the nine month
period ended September 30, 1996 as compared to $452,895 for the same period in
1995, comprised primarily of purchases of capital equipment, furniture and
fixtures required by the Company to open eight new facilities in the nine months
ended September 30, 1996 and ten new facilities in the same period in 1995.
The Company's capital expenditures in 1996 will continue to focus on
opening new facilities, acquiring existing operations and implementing the
Company's new electronic management information system. The Company estimates
that the total cash required to open a new production paint facility, including
fixtures and equipment, leasehold improvements and inventory ranges between
$75,000 and $100,000 per location. The Company estimates that the total purchase
price for each full service collision center to be acquired pursuant to the
Company's acquisition strategy for its new full service collision repair
division will be between $400,000 and $600,000. The Company currently intends to
fund each purchase with a combination of cash and seller provided financing with
total cash required for each acquisition to equal 25% to 50% of the total
purchase price. The Company may, however, utilize a greater or lesser percentage
of cash for each acquisition on a case-by-case basis. The Company's MIS will be
implemented in each of the Company's current locations at an estimated aggregate
cost of approximately $250,000.
The Company receives payment for its services from its retail customers
upon delivery of their vehicles and does not extend credit to its retail
customers, which represent approximately 90% of the Company's net sales. The
Company bills its commercial customers upon delivery of their vehicles and
receives payment within 30 days, which represents approximately 15% to 25% of
the Company's net sales. The average commercial customer days' sales outstanding
for accounts receivable at September 30, 1996 of approximately 30 days did not
vary significantly from the average days' sales outstanding for commercial
customers of approximately 30 days at September 30, 1995.
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The Company maintains a small amount of inventories, comprised primarily
of supplies and materials at each of its facilities. At September 30, 1996,
inventories for 52 facilities were $147,672 compared to inventories for the
fiscal year ended December 31, 1995 for 44 facilities of $129,972.
The Company's policy has historically been to pay its suppliers upon
delivery. Accordingly, the Company maintains low levels of trade accounts
payable, with such amount being $221,178 for the fiscal year ended December 31,
1995 and $291,511 for the nine months ended September 30, 1996.
The Company intends to use part of the net proceeds of this Offering to
repay approximately $1.4 million of Shareholder Advances and $525,144 of Bridge
Financing. See "Use of Proceeds" and "Certain Relationships and Related
Transactions."
Management of the Company presently believes that cash flow from
operations, the net proceeds from this Offering and its anticipated borrowing
capacity after completion of the Offering will be sufficient to support its
operations and general business and capital liquidity requirements for the next
12 months. To finance future acquisitions, the Company expects to utilize its
net proceeds from this Offering, its cash flow from operations and its borrowing
capacity. Depending upon market conditions, the Company may also incur
additional indebtedness or issue additional equity securities. There can be no
assurance that such additional capital, if and when required, will be available
on terms acceptable to the Company, or at all. See "Risk Factors -- Need for
Additional Financing."
SEASONALITY
The Company's business is somewhat subject to seasonal influences, with a
larger portion of sales realized during the spring and summer (second and third
quarters) of each fiscal year due primarily to weather conditions being
generally more favorable in these periods. Adverse weather conditions, however,
such as snow, ice and hail, during the winter (late fourth and first quarters)
of each fiscal year can positively affect the Company's sales due to the
increased incidences of vehicular damage that occur during such adverse weather
conditions.
INFLATION
The Company believes that, to date, inflation has not had a material
adverse effect on its business. In recent years, however, automotive paint
prices have generally risen at rates in excess of the overall inflation rate
due, in part, to the changing paint formulations and related costs incurred by
the Company's paint supplier to comply with environmental regulations.
Historically, the Company has been successful in passing most, if not all, of
such increases on to the customer.
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BUSINESS
GENERAL
The Company is a leading regional operator of vehicle paint and collision
centers in the southeastern United States. The Company's operations have rapidly
grown from a single vehicle paint facility in Warner Robins, Georgia in June
1991 to 52 centers in 11 states. The Company's annual revenue has grown from
$9.0 million in 1993 to $22.9 million in 1995, an average net sales growth rate
of 60%.
The Company's paint and collision centers operate under the trade name
"Peach Auto Painting and Collision." The Company paints vehicles on a production
basis, offering its customers a variety of refinishing and painting options at
attractive prices that vary based on the amount of preparation of the vehicle
prior to painting, special paint additives, such as clear coats, hardeners and
sunscreens, optional services and length of warranty. The Company also performs
light and medium body repair services in connection with its refinishing and
painting operations. The goal of the Company's paint and collision centers is to
provide a quality paint job at a reasonable price. Paint-related services
account for approximately 80% of the Company's current revenues, with collision
repair services accounting for the remaining revenues.
The Company has experienced growth by opening new paint and collision
centers and acquiring existing competitors' facilities and converting them into
Company-owned centers, a strategy the Company intends to continue. The Company
believes that its rapid growth rate and success is attributable in large part to
the demographic and financial operating model that it applies when considering
whether to open a new or acquire an existing paint and collision center. In
applying this model, the Company considers (i) the lead time required to open a
new center; (ii) the square footage available in a particular facility; (iii)
the cost of renovating or building a new facility; (iv) the amount of land
required; (v) site demographics; (vi) competition; (vii) the projected break
even point; (viii) projected sales growth; and (ix) the availability of
qualified management. The Company's successful application of this strategy is
evidenced by its ability to generate its substantial growth rate with internal
funding from operating income without incurring any significant amount of debt.
As of September 30, 1996, the Company had long term debt, notes payable to
stockholders, and capital lease obligations of $1.1 million. Although the
Company had advances from stockholders of approximately $1.4 million as of
September 30, 1996, such advances were necessary primarily because the Company
distributed a substantial portion of its available cash to stockholders when its
predecessor entities were operating as S corporations.
The Company, which was organized as a Delaware corporation in connection
with this Offering, is the successor to a series of corporations through which
all of the Company's existing paint and collision operations were conducted
prior to the consummation of the Formation Transactions.
GROWTH STRATEGY
The Company intends to pursue an aggressive growth strategy both by
expanding its existing production paint operations and entering the full service
collision market. The Company's expansion strategy with respect to its
production paint operations includes both internal revenue and profit growth
from existing centers as well as external growth through the opening or
acquisition of new centers. The Company's primary strategy for expanding its
operations into the full service collision market is to acquire existing
operations in geographic markets in which the Company conducts production paint
operations. Under the Company's current expansion plans, the Company's goal is
to open or acquire 15 to 20 production paint centers and acquire 12 to 18 full
service collision repair centers in the 12 months following completion of the
Offering. There can be no assurances, however, that the Company will be able to
meet this goal.
EXISTING PAINT AND COLLISION OPERATIONS
The Company intends to expand its existing paint and collision operations
by pursuing both an internal and external growth strategy.
Internal Growth. The Company's internal growth strategy with respect to its
production paint operations includes:
(Bullet) INCREASING REVENUES. Revenues at the Company's paint and collision
centers tend to increase rapidly as such centers mature. Based on
the Company's historical experience, its centers typically reach
maturity in terms of sales three years after opening, at which
time revenues generally stabilize. The average annual revenues of
centers that have been in operation for more than three years are
$625,000, while the average annual revenues of centers in their
first, second and third years of operations are $500,000, $550,000
and $600,000, respectively. As of the date of this Offering, only
16 of the Company's paint and collision centers have been in
operation for more than three years. While only four of the
centers are expected to reach maturity in the next 12 months, 18
centers are expected to reach maturity in the next 24 months and
28 in the next 36 months. There can be no assurances, however,
that the Company will achieve anticipated results.
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(Bullet) INCREASING PROFIT MARGINS. In addition to increasing revenues,
management expects the Company's paint and collision centers to
experience improved profit margins as the centers reach maturity.
This increase is a result of improved operating performance and
efficiencies as a center matures, as well as the recognition of
economies of scale from fixed operating costs. The Company also
anticipates that its profit margins will improve as the
concentration of centers in certain geographic markets increases,
since certain costs, particularly advertising expenses, will be
shared by an increasing number of centers, providing the
opportunity to better leverage these expenses. The average profit
margin of centers that have been in operation for more than three
years is 14%, while the average profit margins of centers in their
first, second and third years of operations are 7%, 9% and 12%,
respectively. There can be no assurances, however, that the
Company will achieve anticipated results.
External Growth. The Company believes that certain economic trends are
favorably impacting the production paint industry throughout the United States.
The average retail selling price of a new vehicle sold by a dealership rose from
$7,619 in 1980 to $19,806 in 1994 (Source: U.S. Department of Commerce, Bureau
of Economic Analysis), and the percentage of family income spent on a new car
has risen from 36% in 1980 to 51% in 1994 (Source: U.S. Department of Commerce,
Bureau of Economic Analysis). The increase in vehicle prices has led consumers
to drive their vehicles longer: the average age of cars and trucks in the United
States in 1994 was 8.4 years, the highest since 1948 (Source: American
Automobile Manufacturers Association). The Company believes that the trend of
higher prices and longer life spans for vehicles is leading consumers to seek
quality vehicle paint services at reasonable prices. The Company believes these
trends present the Company with a strong opportunity to expand its presence in
existing markets as well as in other markets in the United States that satisfy
the Company's demographic and financial operating model. The Company's strategy
for external growth includes:
(Bullet) CONCENTRATING FACILITIES WITHIN LIMITED GEOGRAPHIC MARKETS.
Although the Company currently operates 52 paint and collision
centers located primarily in the southeastern United States, the
Company has not yet achieved the optimum scale of operations in
certain metropolitan areas to fully realize the economies of scale
generated by operating more centers in a single geographic market.
The Company, therefore, intends to increase the concentration of
its paint and collision centers in certain of the geographic
markets in which the Company now operates. As the Company
increases its concentration of facilities in these markets,
management expects the Company's profit margins in these markets
to improve as a greater number of facilities are in place to
better leverage local marketing and advertising expenses.
(Bullet) EXPANDING THROUGHOUT THE SOUTHEAST. Primarily all of the Company's
existing paint and collision centers are located in the
southeastern United States, and the Company believes that this
region continues to present attractive opportunities to expand the
Company's production paint operations. In addition to increasing
the concentration of facilities in certain markets in the
Southeast, the Company also intends to expand to certain other
markets in that region with strong economic trends, such as
Florida and Texas. The Company currently operates only five paint
and collision centers in Florida and seven centers in Texas. The
proceeds from this Offering will provide the Company with the
capital resources to expand its paint and collision operations to
attractive markets in the Southeast.
(Bullet) EXPANDING TO NEW GEOGRAPHIC REGIONS. While the Company has
historically operated primarily in the southeastern United States,
management believes that certain other geographic regions offer
attractive growth opportunities. The Company's present intention
is to establish a stronger presence in the Mid-Atlantic region and
expand into the Midwest, including Cincinnati, Indianapolis and
St. Louis, the Southwest, including New Mexico and Arizona, and
the Inner Mountain West, including Denver. Management believes
that these markets have demographic and economic characteristics
similar to those of the Company's current markets.
Competitive Advantages. The Company believes that certain competitive
factors will enhance its ability to successfully implement its growth
strategies.
(Bullet) COMPANY-OWNED CENTERS. The Company has direct ownership of its
centers. As such, the interests of the Company are directly
aligned with the local operators of the centers. Direct ownership
also enables the Company to exercise a high level of control over
the management and operation of the centers, including the hiring
of employees, the enforcement of cost controls, operational
procedures and quality assurance. Direct ownership also enables
the Company to offer competitive prices and recognize higher
margins since no licensing, franchise, administrative, purchasing
or other fees are being paid to third parties.
(Bullet) EXPERIENCED MANAGEMENT. The Company's senior management has more
than 55 years of combined experience in the production paint
industry and the acquisition and operation of multiple locations.
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(Bullet) OPERATING EFFICIENCIES. The proceeds of the Offering will enhance
the Company's ability to increase the number of its centers in
multiple locations, thereby enabling the Company to take advantage
of (i) economies of scale in the purchasing of supplies and (ii)
increasing profit margins resulting from increasing revenues
without a proportional increase in expenses due to certain fixed
costs associated with operating the centers.
(Bullet) RETENTION OF EMPLOYEES. The operation of a production paint center
requires skilled labor. Historically, production paint businesses
have had difficulty retaining qualified employees. As a public
company, the Company will be able to offer employee benefits not
traditionally found in the industry, including stock option and
ownership programs. The Company believes these competitive benefit
plans will enable it to retain a higher percentage of its
employees, thereby reducing costs associated with hiring and
training new employees.
BUSINESS LINE EXPANSION
The vehicle paint and collision repair industry in the United States is
estimated to exceed $22 billion annually, of which the production paint industry
comprises approximately 5%. A substantial portion of the remaining industry is
comprised of the heavy collision repair market. The production paint and heavy
collision repair markets complement one another because of their similarities.
The Company's current production paint centers have the capability of performing
full service vehicle collision repairs. Likewise, full service collision repair
centers generally offer vehicle painting as an incidental but necessary service
to their primary business of collision repair. The primary operational
differences in the production paint and full service collision repair markets
are their customer and marketing focus and the mix of body repair services
relative to painting services. The production paint market targets primarily
retail customers, while the collision repair market is directed primarily at
commercial customers, such as insurance companies, fleet operators, leasing
agencies and rental companies. Approximately 20% of revenues of the Company's
production paint centers are generated by collision repair services.
The Company believes that entrance into the full service collision repair
market is a logical extension of its existing business. The Company has
established a successful track record of operating a chain of production paint
centers that provide collision repair services. The Company believes that the
experience it has acquired in the production paint market and application of a
strict demographic and financial operating model will enable the Company to
pursue an aggressive strategy of acquiring established profitable full service
collision repair centers and operating them on a large-scale basis. The Company
anticipates operating its full service collision repair centers under the trade
name "Collins Collision" in a division separate from the Company's production
paint centers.
The Company believes the following factors affecting the collision repair
market present the Company with an ideal opportunity to enter the market:
(Bullet) Industry consolidation pressures. The collision repair industry is
highly fragmented, comprised of approximately 48,000 individual
paint and body repair facilities, and currently is experiencing
increased pressures, generated largely by the automobile insurance
industry, to control prices. The insurance industry's efforts to
control claim costs, insure quality repairs, increase services and
standardize claims processing with advanced electronic
communications have created consolidation pressures in the
industry. Moreover, many insurance companies encourage their
customer base to utilize only the services of collision repair
centers that are "accredited" by the insurance industry. Small
independent operators generally do not have the ability or
financial resources to respond successfully to these pressures.
The Company believes that it has the operational experience and
will have the resources to capitalize on the existing
consolidation pressures.
(Bullet) Existing acquisition values. The consolidation pressures in the
collision repair industry have led many independent operators to
search for a means of either exiting the industry or becoming part
of a larger, better capitalized operation. The Company believes
that the lack of any dominant multi-location operators in the
collision industry has significantly limited the opportunities of
independent operators to sell their businesses or to associate
with other companies. The Company believes that these factors will
provide opportunities to acquire profitable collision repair
centers generating high revenue at low multiples of the centers'
profits.
Competitive Advantages. The Company believes certain factors will give the
Company a competitive advantage over other operators in the collision repair
industry.
(Bullet) INDUSTRY EXPERIENCE. The Company has established a successful
track record of operating a chain of production paint centers that
already provide collision repair services. The Company believes
that this experience greatly enhances the Company's ability to
successfully operate a chain of full service collision repair
centers, which are operationally similar to production paint
centers.
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(Bullet) ECONOMIES OF SCALE. The Company's ability to purchase parts and
supplies for multiple locations will enable the Company to take
advantage of economies of scale, volume discounts and rebates that
generally are unavailable to independent operators. Management
believes that it will be able to purchase supplies at prices less
than those paid by independent operators.
(Bullet) INSURANCE INDUSTRY RELATIONSHIP. Many independent operators are
currently resisting the cost control pressures of the insurance
industry. The Company intends to establish a close working
relationship with the insurance industry by having all of its
collision repair facilities certified for participation in the
industry's designated repair programs, and among other things,
installing electronic estimating and insurance claim processing
systems in each of its collision repair facilities. The Company's
goal is to establish a relationship with individual insurers
whereby such insurers will choose to refer their insureds, on a
large-scale basis, to the Company's collision centers.
(Bullet) MARKETING STRATEGIES. The Company believes that it can target
insurance companies, fleet operators, leasing agencies and rental
companies more effectively than smaller operators as a result of
the Company's ability to render higher quality services at more
competitive rates than smaller operators. The Company also intends
to utilize its contacts with fleet operators, leasing agencies,
and rental companies that it has developed through its production
paint operations.
(Bullet) AUTOMOBILE DEALERSHIP RELATIONSHIPS. Automobile dealerships
typically maintain body shops for the convenience of their
customers. Management believes that these shops frequently operate
at a loss or with small profit margins and, as a result, many
dealerships may consider out-sourcing their body repair work to an
established and reputable chain of collision repair centers, such
as the Company intends to develop. The Company, therefore, intends
to pursue working relationships with selected automobile
dealerships.
Market Entry Strategy. To implement its strategy to expand into the
collision repair market, the Company intends to undertake the following steps:
(Bullet) DEVELOP OPERATING MODEL. The Company intends to apply to the
collision repair market the demographic and financial modeling
techniques that it has successfully applied to the production
paint industry. The Company will, however, incorporate into its
model several elements that are specific to the collision repair
industry, including electronic estimating and insurance claim
processing, compliance with established insurance claim payment
criteria, and member participation in automobile insurance company
preferred provider and designated repair programs.
(Bullet) ESTABLISH TEST MARKET. The Company will initially test its model
for operating full service collision centers in twelve to eighteen
facilities, which the Company anticipates will be located in
markets in which the Company has existing production paint
centers. This limited operation will enable the Company to refine
its operating model.
(Bullet) EXPAND OPERATIONS. If the Company is successful in operating full
service collision centers on a limited basis, the Company intends
to first expand its collision centers regionally in the
southeastern United States. After establishing a strong presence
in the southeastern United States, the Company intends to expand
to other geographic markets that satisfy the Company's demographic
and financial operating model. Initially, the Company intends to
establish collision centers through the acquisition of existing
operations, which will be converted to the Company's full service
collision operating model and trade name. To the extent that the
Company is unable to identify suitable acquisition candidates in
attractive markets, the Company will open new full service
collision centers.
There can be no assurances that the Company will be successful in
implementing its growth strategy with respect to either its existing production
paint operations or its intended expansion into the full service collision
market.
PRODUCTS AND SERVICES
The Company's existing centers paint vehicles on a production basis. When a
vehicle enters the paint and collision center, any required body work, including
removal of dents and rust and replacement of parts, is performed first. The
vehicle then enters the sanding area, where certain accessories are removed, and
the vehicle is sanded to remove most chips, scratches, surface rust and oxidized
paint, the extent of which depends upon the paint package selected. The sander
scuffs the entire vehicle and spot primes it if such service is necessary and
included in the package selected. Each vehicle is then air-blown using a high
pressure air hose to remove excess dust and particles, after which the exposed
chrome and glass areas are masked. Each vehicle is inspected by a manager or
assistant manager before it is turned over to a painter. The painter moves the
vehicle into an environmentally controlled paint booth, air-blows it again, hand
wipes the entire surface with a tack rag to remove all excess dust and then
applies a sealer, which serves as a bonding agent, with a high volume low
pressure paint gun.
20
<PAGE>
The painter then applies generally two or three coats of paint to the vehicle,
the last of which can be either a full clear coat or a clear coat integrated
with automotive paint, depending upon the paint package selected.
The Company's paint booths are comprised primarily of the side downdraft
variety. Side downdraft booths are pressurized, thereby limiting the amount of
dust and particles that can enter the booth and compromise the quality of the
paint finish on the vehicle. Side downdraft booths use an air make-up unit that
draws air from outside the chamber into the top of the booth before an exhaust
unit expels the air. The side downdraft booth also serves as a drying chamber.
After a vehicle is painted, the heating unit is activated, which raises the
temperature in the booth by approximately 70(degree) to a temperature ranging
from 110(degree) to 140(degree) . This curing process takes approximately 20 to
30 minutes per vehicle. The vehicle is then detailed, which involves removing
over spray, reinstalling accessories removed during the painting process and
dressing the tires.
The Company offers five separate paint packages, which generally range in
price from approximately $170 to approximately $700, excluding any body repair
work or additional preparation. The average ticket price per vehicle serviced by
the Company ranges from $400 to $450. The Company provides a limited warranty of
the workmanship and materials on all paint jobs performed by the Company for
periods ranging from three months to three years, depending upon the service
package selected by the customer. Historically, fewer than 5% of all cars
serviced by the Company require warranty reservicing. Most of the Company's
sales take place in either cash or credit cards, although the Company does
accept personal checks on a case-by-case basis. The Company does not offer
credit terms for its retail sales, but offers limited credit terms for certain
of its commercial accounts. Each of the Company's paint and collision centers
offers free estimates for paint and body repair services.
The Company constantly reviews new products and techniques developed by its
suppliers and others in the Company's and related industries for their
applicability to the Company's operations.
OPERATIONS
The Company's prototypical production paint and collision center is a
single building with paint and repair facilities and office space plus exterior
parking and vehicle storage space. Each center has approximately nine to twelve
employees, which include a manager, an assistant manager, one painter, two
collision repair employees, one employee rendering vehicle detail services and
two or three employees to prepare vehicles for painting. Each paint and
collision center operates from 8:00 a.m. to 6:00 p.m. Monday through Friday and
9:00 a.m. to 12:00 p.m. on Saturday. On average, each of the Company's paint and
collision centers perform painting or collision repair services on 25 to 30 cars
per week. Commercial customers (for example, used car dealers) account for
approximately 15% to 25% of the Company's business, and approximately 15% to 25%
of the Company's business is provided by repeat customers. The average turn
around time for the Company to service a car is four days.
The lead time to open a new paint and collision center is typically three
to four months if the Company renovates an existing building and nine months to
two years if the Company enters into a build-to-suit lease arrangement. A new
center requires approximately three-quarters of an acre of land, and the
physical facility consists of approximately 6,000 square feet with 400 to 600
square feet of office space and the remainder comprised of work and storage
areas. In accordance with the Company's financial operating model, the Company
strives to limit renovation expenses to approximately $10,000 when the Company
leases an existing building. Renovation expenses can, however, range as high as
$25,000 to $35,000, depending upon whether or not the Company negotiates
favorable lease terms. In connection with opening new paint and collision
centers, the Company generally makes expenditures of less than $100,000, which
include paint and supply inventories, renovation expenses, fixtures, equipment,
advertising, employee training, signs and pre-opening expenses. When the Company
enters into a build-to-suit lease agreement, the Company typically guarantees
the real estate developer a certain rate of return on the costs incurred to
develop the property. Although the developer incurs the development costs, the
Company controls the amount of such costs, which vary by location. The
development costs of the Company's three most recent built-to-suit facilities
have averaged approximately $165,000 plus land cost and applicable commissions.
Land costs can range from $100,000 to $250,000 per location.
In choosing the location of a new paint and collision center, the Company
conducts a detailed demographic study. The ideal location has high traffic, good
visibility and favorable demographics located in high density commercial areas
with easy accessibility. The existence of competitors in a prospective market is
an insignificant factor in the Company's site selection process unless the site
is located near three or more competitors. Although, new paint and collision
centers opened by the Company in accordance with the Company's financial
operating model usually reach a break even point in terms of profitability
within six to nine months, variables beyond the Company's control, such as the
costs to market a new location in a
21
<PAGE>
certain geographic area, sometimes extend the time required for a new center to
reach the break even point. The Company's new paint and collision centers
usually experience sales growth for three to four years before same store sales
stabilize.
The Company currently operates 52 production paint centers in eleven states
as follows:
<TABLE>
<S> <C>
Alabama..................................................... 5
Florida..................................................... 5
Georgia..................................................... 10
Louisiana................................................... 1
Mississippi................................................. 1
North Carolina.............................................. 9
Oklahoma.................................................... 4
South Carolina.............................................. 4
Tennesee.................................................... 4
Texas....................................................... 7
Virginia.................................................... 2
</TABLE>
MANAGEMENT
Each of the Company's collision and repair centers has one manager and one
assistant manager, who are responsible for day-to-day operating activities of
their particular facility. Each individual facility manager reports to one of
five district managers assigned to the manager's geographic location. Each
district manager has supervisory responsibility for all of the Company's paint
and collision centers in a designated geographic area. Each district manager
reports to one of three Vice Presidents of Operations, who report to the
President of the Company. Currently, three of the district managers also serve
as Vice Presidents of Operations. The Company is in the process of conducting a
search for a person who will be responsible for day-to-day management of the
Company's production paint operations. The Company is taking this action to
permit Mr. Wilbanks to devote a substantial portion of his time and effort to
the Company's planned expansion into the full service collision repair market.
The Company has established an extensive management training program, which
is comprised of initial and continuing education. The Company conducts intensive
three to four day training sessions for each new manager. All aspects of paint
and collision center operations, including customer contact, sales and service,
are covered in the Company's training program. All Company managers also
participate in regional and Company-wide continuing training sessions two to
three times each year. The Company is currently exploring the possibility of
hiring a specialist to conduct in-house training for the Company on a full-time
basis.
The Company is in the process of implementing a centralized electronic
management information system that will electronically connect all of the
Company's paint and collision centers to the Company's corporate offices in
Georgia. This system is expected to further improve the Company's operating
performance by providing management with faster and more accurate information
concerning inventories, sales and other localized information.
SUPPLIERS
The Company purchases all of its paint products from The Sherwin-Williams
Company and is one of the largest independent customers of Sherwin-Williams'
automotive paint division. Most of the products and supplies used by the
Company's paint and collision centers are centrally purchased by the corporate
offices in Columbus, Georgia. The Company purchases supplies in bulk, and those
supplies, except for paint products, are shipped to the Company's central
warehouse in Georgia. The Company then ships products and supplies to each paint
and collision center on an as-needed basis. Paint products are drop-shipped from
the supplier to the paint and collision centers. Individual centers are
responsible for purchasing parts and a minimum amount of supplies locally from
established vendors. The Company has not encountered any major difficulty in
obtaining adequate supplies of products used in rendering its paint and repair
services and does not expect to encounter any such difficulty in the foreseeable
future. Although fluctuations and shortages in energy markets may require an
allocation method of distribution to purchasers, the Company believes that it
will be able to maintain adequate inventories of paint and related products for
use by its paint and collision centers. See "Risk Factors -- Dependence Upon Key
Suppliers."
COMPETITION
The vehicle painting industry in which the Company is engaged is highly
competitive due primarily to the relative ease of entry into the industry. The
Company competes not only with nationally and regionally-based companies engaged
in
22
<PAGE>
production vehicle painting, but also with thousands of individual vehicle paint
and body shops. The Company's competitors in the production vehicle paint
industry include Fact-O-Bake, Inc., Econo Auto Painting, Inc., Maaco
Enterprises, Inc. and Earl Sheib, Inc. The Company believes that the strict cost
controls that the Company applies in opening and managing its centers allow the
Company to offer comparable quality at lower prices than the Company's
competitors that operate on a franchised basis. With respect to certain other of
the Company's competitors that operate on a regional or national basis, the
Company believes that it offers higher quality paint services at comparable
prices. Although some independent paint and body shops may offer vehicle
painting of a higher quality than that offered by the Company, the prices
charged by such shops are generally substantially higher than those charged by
the Company. The Company believes that it competes effectively in all of the
markets in which it operates as a result of the state-of-the-art equipment
utilized by the Company, the products and services offered by the Company, the
Company's advertising and promotional programs, which the Company believes
generate relatively high name recognition for the Company's paint and repair
centers.
The full service collision repair industry is highly fragmented and
comprised primarily of independent operators of collision repair centers and a
few franchised operators of collision repair centers, including Caliber
Collision Center, Inc., ABRA Automotive Systems, Inc. and CARSTAR Automotive,
Inc. The Company believes that it will be able to compete effectively with both
franchised and independent operators of full service collision centers for the
reasons that the Company competes effectively in the production paint industry.
In particular, the Company believes that it will be able to offer comparable
quality at lower prices by realizing economies of scale generated by operating
on a volume basis and applying strict cost controls in acquiring and operating
its centers. See "Business -- Competition."
MARKETING
PRODUCTION PAINT OPERATIONS. The Company conducts all of its marketing
activities internally from the Company's corporate offices in Columbus, Georgia.
The Company believes that effective marketing and advertising has and will
continue to determine the degree of success the Company experiences in its
production paint operations. The Company focuses its promotional efforts on
highlighting the prices offered by the Company for its paint services, as well
as the quality of the services offered by the Company. The Company believes that
the most effective advertising medium for marketing the Company's production
paint services is television, which the Company supplements with a minimal
amount of newspaper and direct mail advertising. The Company spends an average
of 8% of gross revenues annually on its marketing efforts. The Company does not
intend to use proceeds from the Offering to increase marketing expenditures for
its production paint operations.
The Company markets its production paint services primarily through a
pattern of high frequency television advertising on network channels. The
Company utilizes an advertising cycle that includes ten and thirty second
television spots, which are run simultaneously for a four to six-week period in
all of the markets in which the Company operates. The Company's television
advertising spots highlight a series of specially-priced vehicle paint packages.
During the periods between the Company's television promotional cycles, the
Company utilizes a small amount of newspaper advertising to pre-market the next
television advertising cycle. The Company also advertises its production paint
services with a minimal amount of direct mail. The production vehicle painting
industry is price driven and seasonal in nature. Accordingly, the Company's
advertising highlights rolling season-based price offers for the Company's
services.
COLLISION REPAIR OPERATIONS. The full service collision repair market is
directed primarily at a commercial market, such as insurance companies and
automobile fleet and rental companies, unlike the production paint industry,
which is directed primarily at retail customers. Accordingly, the Company will
conduct only limited retail marketing of its full service collision division,
utilizing primarily direct marketing aimed at that division's potential
commercial customers. A portion of the net proceeds of the Offering will be used
to fund the Company's marketing efforts with respect to its entrance into the
full service collision repair market, particularly its efforts to establish
relationships with certain commercial customers.
EMPLOYEES
The Company employs approximately 500 persons, of which approximately 125
are sales, administrative, management or executive personnel and 375 are
production personnel. The Company's managers and assistant managers are paid on
a salary basis and participate in the Company's management incentive bonus
program. Collision repair employees are paid on a commission basis, and all
other employees are paid on an hourly basis ranging generally from $7.00 to
$15.00 per hour depending upon skill level and job duties. The Company recruits
management personnel for individual paint and collision centers from all of its
major competitors, retired military personnel and promotion from within the
Company. None of the Company's employees are represented by a labor union, and
management believes that its employee relations are excellent.
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<PAGE>
PROPERTIES
All of the Company's paint and collision centers are operated in leased
facilities. The Company secures sites for new paint and collision centers by
leasing either existing facilities or new facilities developed pursuant to
build-to-suit agreements. The Company leases all of its facilities on a
long-term basis. The average lease payment per facility is $3,000 per month, and
the Company generally does not pay more than $4,500 per month to lease any of
its facilities. Leases for the Company's facilities vary with respect to their
terms, rental provisions, expiration dates and the existence of renewal options.
The number of years remaining on leases for the Company's facilities (excluding
unexercised options) range from less than a year to 24 years. All of the
Company's leases have fixed rental payments with no additional rents based upon
a facility's sales, and, except those with Mr. Wilbanks (see "Certain
Relationships and Related Transactions"), do not include escalation clauses. The
leases generally require the Company to pay all or a portion of the real estate
taxes and insurance and maintenance expenses, except for major repairs, relating
to the leased premises. Most of the Company's facilities are in stand alone
sites and have adjacent parking facilities.
Nine of the Company's facilities are leased from the Company's President,
Mr. Wilbanks, at rates that the Company believes are at or below market based on
rates for comparable facilities in the vicinity of the Company's facilities and
rates paid by the Company to unrelated third parties for leasing the Company's
other facilities. See "Certain Relationships and Related Transactions."
The Company devotes a substantial amount of effort in its expansion review
process to obtaining lease terms that satisfy the Company's financial operating
model. The Company investigates many potential facilities for each new paint and
collision center that the Company opens. Locating physical facilities that
satisfy the Company's financial operating model historically has been one of the
primary obstacles to the Company's effort to enter new geographic markets with
its paint and repair centers. The Company is exploring various alternatives to
enhance its ability to obtain favorable lease sites. One such alternative would
involve an arrangement with a real estate investment trust to finance all of the
Company's future facility needs on terms that satisfy the Company's financial
operating model. Under this arrangement, the real estate investment trust would
finance and construct build-to-suit facilities for the Company to lease in
locations that satisfy the Company's financial operating model, enhancing the
Company's ability to enter new geographic markets. The Company would retain the
right to design and build its future facilities. No formal arrangement has been
reached with the real estate investment trust at this time and no assurance can
be given that the Company will be able to agree upon terms with the real estate
investment trust.
The Company leases its corporate offices, located at 506 45th Street, Suite
A-2, Columbus, Georgia 31904. The facility has approximately 6,000 square feet
of office and warehouse space. The Company warehouses paint products and other
supplies at this location, which the Company supplies to its individual paint
and collision centers on a regular basis.
The Company believes that its facilities are in good operating condition.
GOVERNMENT REGULATIONS
The Company is subject to increasing environmental regulations that affect
the Company's operations and the demand for its services. The Company generates
certain hazardous waste and substances in connection with conducting its paint
and collision repair operations and, therefore, is subject to federal, state and
local environmental regulations in many of the areas in which it operates. Of
the 52 paint and collision centers currently operated by the Company, the
Company has had Phase I environmental assessments conducted at only three of the
facilities. The assessments at two of the facilities did not disclose any
material environmental conditions that could subject the Company to liability.
With respect to the third facility, in Irving, Texas, Phase I and Phase II
assessments conducted at the Company's request disclosed an environmental
condition that the Company believes will cost approximately $10,000 to
remediate. Pursuant to the applicable lease agreement, however, the costs of
such remediation are the responsibility of Mr. Wilbanks, who owns the property
and leases it to the Company. Mr. Wilbanks intends to pay the environmental
remediation costs associated with the Irving, Texas property.
Except for the Phase I and Phase II assessments described above, the
Company has not had environmental assessments conducted on the properties on
which its facilities are situated. The Company is not, however, aware and has
not been notified of any environmental conditions at its other facilities that
would subject the Company to environmental remediation liability. In addition,
the lease agreements between the Company and the lessors of all of the Company's
facilities require the Company to pay remediation costs only for those
environmental conditions created at such facilities by the Company. The lessors
are responsible for remediation of all environmental conditions existing prior
to the time that the Company leased such facilities. There can be no assurances,
however, that such lessors would have the ability to fully fund any required
remediation, in which case the Company could be subject to liability, or that
the Company could prove that an environmental condition existing at a leased
site was in existence prior to the time that the Company leased such site.
24
<PAGE>
The Company intends to conduct Phase I environmental assessments in
connection with all future acquisitions of paint and collision and full service
collision repair centers. Each of the Company's vehicle painting centers
provides fresh air breathers in the center's paint areas, and each center
contracts with certified hazardous disposal companies for the proper disposal of
all hazardous waste materials produced by the center. Although the Company
believes that it has been and is currently in substantial compliance with the
applicable standards imposed pursuant to environmental and worker safety laws,
there can be no assurance that in the future the Company will not be adversely
affected by such requirements or incur materially increased operating costs in
complying therewith. The Company believes that, on balance, these regulations
favorably affect the Company, as it believes it is better able than its smaller
competitors to comply with such regulations.
The principal environmental legislation presently affecting the Company in
a significant manner is described below. Also see "Risk Factors -- Compliance
with Government Regulations; Environmental Hazards."
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA"). RCRA regulates the
treatment, storage and disposal of hazardous and solid wastes. Under RCRA,
liability and stringent management standards are imposed on a person who is a
generator or transporter of a hazardous waste or an owner or operator of a waste
treatment, storage or disposal facility. At some of its locations, the Company
is subject to RCRA requirements as a small quantity generator, requiring the
Company to comply with the storage and disposal requirements of RCRA.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980 ("CERCLA"). CERCLA addresses cleanup of sites at which there has been or
may be a release of hazardous substances into the environment. CERCLA assigns
liability for costs of cleanup and for damage to natural resources (i) to any
person who, currently or at the time of disposal of a hazardous substance, owned
or operated any facility at which hazardous substances were deposited; (ii) to
any person who by agreement or otherwise arranged for the disposal or treatment,
or arranged with a transporter for transport for disposal or treatment of
hazardous substances owned or possessed by such person; and (iii) to any person
who accepted hazardous substances for transport to disposal or treatment
facilities or sites selected by such person from which there is a release or
threatened release of hazardous substances. The Company is not aware of any
circumstances that could subject the Company to liability under CERCLA.
CLEAN AIR ACT AND 1990 AMENDMENTS. The Clean Air Act requires compliance
with national ambient air quality standards ("NAAQS") and empowers the EPA to
establish and enforce limits on the emission of various pollutants from specific
types of facilities. The Clean Air Act Amendments of 1990 (the "Amendments")
modify the Clean Air Act in a number of significant areas. The Amendments, among
other things, establish new programs and deadlines for achieving compliance with
the NAAQS, establish controls for hazardous air pollutants, establish a new
national permit program for all major sources of pollutants and create
significant new penalties, both civil and criminal, for violations of the Clean
Air Act. The Amendments specifically require a review of VOC emissions from
commercial products (which includes emissions relating to the application of
paint to vehicles). Pursuant to this review, the EPA has decided to develop a
regulation controlling automotive refinishing coatings; a proposed rule is
presently scheduled for 1996. The Company is subject to the Clean Air Act
because it uses paint spraying equipment at its paint and collision centers.
OTHER FEDERAL AND STATE ENVIRONMENTAL LAWS. The Company's operations are
subject to regulation under, among others, the following federal laws: the Clean
Water Act, the Safe Drinking Water Act, the Occupational Safety and Health Act
and the Hazardous Materials Transportation Act. In addition, many states have
other regulations and policies to cover more detailed aspects of hazardous
materials management. To date, the impact of these regulations on the Company
has not been material.
TRADE NAMES
The Company has trademarked and currently does business under the name
"Peach Auto Painting and Collision" and will continue to conduct its production
paint operations under that name. The Company is not aware of any rights of or
claims by third parties to its trademarked name. The Company intends to conduct
its proposed full service collision repair operations under the name "Collins
Collision."
LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is involved in legal
proceedings from time to time. As of the date of this Prospectus, there are no
material legal proceedings pending against the Company.
25
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions with the Company are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Lenward C. Wilbanks, Jr. 51 Chief Executive Officer, President
and Director
Joseph W. Walters, Jr. 48 Chief Financial Officer, Treasurer
and Secretary
Lisa W. Griffin 32 Vice President of Purchasing,
Director
Laura W. Rodier 27 Vice President of Marketing,
Director
Dallas R. Barbee 43 Vice President of Operations
Jeffrey W. Hudson 38 Vice President of Operations
Scott A. Alexander 40 Vice President of Operations
</TABLE>
LENWARD C. WILBANKS, JR. has acted as Chief Executive Officer and Chairman
of the Company and the predecessor companies through which the Company's
operations were conducted prior to the Formation Transactions. Prior to that,
Mr. Wilbanks operated multiple production paint centers as a franchisee of Maaco
Enterprises, Inc. He began operating Maaco franchises in 1977 and expanded to
become the largest single operator of Maaco franchises. Mr. Wilbanks is employed
by the Company pursuant to an employment agreement that expires December 31,
1999. Mr. Wilbanks is the father of Lisa W. Griffin and Laura W. Rodier.
JOSEPH W. WALTERS, JR. has been Chief Financial Officer, Treasurer and
Secretary of the Company since June 1996. Prior to that time, Mr. Walters served
as Controller for Tom's Foods, Inc. from 1994 to 1996. From 1991 to 1994, he
served as the Director of the Financial Services Division of Burnham Service
Corporation. From 1985 to 1991, Mr. Walters was self-employed in a family owned
retail building materials business. From 1981 to 1985, he served as Chief
Financial Officer of The Jordan Company. From 1980 to 1981, Mr. Walters served
as Director of Corporate Taxes for Pizza Hut, Inc. and, from 1974 to 1980, as
Director of Corporate Taxes for Hardee's Food Systems, Inc. Mr. Walters is a
certified public accountant. He is employed by the Company pursuant to an
employment agreement that expires December 31, 1999.
LISA W. GRIFFIN has served since December 1991 as Vice President of
Purchasing and a Director of the Company and the predecessor companies through
which the Company's operations were conducted prior to the Formation
Transactions. Ms. Griffin has also served as President of several of the
Company's predecessor companies. She is the daughter of Mr. Wilbanks and the
sister of Laura W. Rodier.
LAURA W. RODIER has served since September 1991 as Vice President of
Marketing and a Director of the Company and the predecessor companies through
which the Company's operations were conducted prior to the Formation
Transactions. Ms. Rodier has also served as Secretary of several of the
Company's predecessor companies. She is the daughter of Mr. Wilbanks and the
sister of Lisa W. Griffin.
DALLAS R. BARBEE has served since 1989 as a Regional Manager of the Company
and the predecessor companies through which the Company's operations were
conducted in the past. He was appointed Vice President of Operations in October
1996. Prior to joining the Company, Mr. Barbee served as a Regional Manager for
Earl Sheib, Inc. from 1984 to 1989.
JEFFREY W. HUDSON has served since 1991 as a Regional Manager of the
Company and the predecessor companies through which the Company's operations
were conducted in the past. He was appointed Vice President of Operations in
October 1996. Prior to joining the Company, Mr. Hudson served as a District
Manager for Econo Auto Painting from 1989 to 1991.
SCOTT A. ALEXANDER has served since 1993 in various management capacities
with the Company and the predecessor companies through which the Company's
operations were conducted in the past. He was appointed a Regional Manager of
the Company in April 1994 and was appointed Vice President of Operations in
October 1996.
Prior to completion of the Offering, the Company intends to name two
additional persons, who will be unaffiliated with the Company, to the Board of
Directors. All Directors hold office until the next annual meeting of
stockholders and the
26
<PAGE>
election and qualification of their successors. Officers are elected annually by
the Board of Directors and serve at the discretion of the Board. The Company has
agreed that it will engage a designee of the Underwriter as an advisor to the
Board of Directors for a two-year period following consummation of the Offering.
Such advisor has the right to attend meetings of the Board, receive all
communications sent by the Company to Board members and receive compensation and
expense reimbursement equal to the entitlement of other non-officer Directors.
In lieu of the Underwriter's right to designate an advisor, the Underwriter may,
in its sole discretion, designate a person for election as a Director during
such two-year period. The Company has agreed that it will use its best efforts
to cause the election of such designee as a Director of the Company. The
Underwriter has not designated any person to serve as an advisor or stand for
election as a Director.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid during the Company's
last fiscal year to the Company's Chief Executive Officer and to executive
officers whose total compensation exceeded $100,000 in any of the last three
completed fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
<S> <C> <C> <C> <C>
LENWARD C. WILBANKS, JR. 1995 $ 39,000 $ -- $448,872
(CHIEF EXECUTIVE OFFICER
AND PRESIDENT)
LISA W. GRIFFIN 1995 32,938 -- 243,102
(VICE PRESIDENT OF
PURCHASING)
LAURA W. RODIER 1995 32,938 -- 243,102
(VICE PRESIDENT OF
MARKETING)
</TABLE>
(1) Represents amounts distributed to such executives as stockholders of S
corporations that were predecessors to the Company.
The amounts received by the listed executive officers in 1995 and prior
years is not indicative of the salaries expected to be paid in the future, since
many of the predecessor entities operated as S corporations, which distributed a
substantial portion of their available cash to the stockholders of such
corporations.
COMPENSATION OF DIRECTORS
The Company intends to pay its directors who are not officers of the
Company fees for their services as directors. Each such director will receive a
fee of $1,000 plus expenses for attendance in person at each meeting of the
Board of Directors, and $500 for each telephonic meeting of the Board of
Directors. Officers of the Company who are directors will not be paid any
director fees.
EMPLOYMENT AGREEMENTS
Prior to the closing of this Offering, Messrs. Wilbanks and Walters will
enter into employment contracts with the Company, the terms of which will be
three years. The contracts provide for base annual compensation and incentive
compensation to be determined by the Board of Directors. The contracts include
provisions restricting Messrs. Wilbanks and Walters from competing with the
Company during employment and, except in certain circumstances, for a limited
period of time after termination of employment. The employment contracts provide
for certain severance payments in the event of disability or termination by the
Company without cause.
1996 STOCK OPTION PLAN
Prior to the Offering, the Board of Directors will adopt, and the
stockholders will approve, the 1996 Stock Option Plan (the "Plan"). The Plan
will be administered by the Board of Directors. Officers and certain other
employees of the Company generally will be eligible to participate in the Plan.
Non-employee directors of the Company are eligible to receive stock options
under the Plan on a limited basis. See " -- Directors' Compensation" and
" -- Executive Compensation."
27
<PAGE>
The Plan authorizes the issuance of up to 700,000 shares of Common Stock
pursuant to the grant of (i) stock options that qualify as incentive stock
options ("ISO") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) stock options that do not so qualify as ISOs
("NQSO"), (iii) phantom stock awards, (iv) stock appreciation rights and (v)
restricted Common Stock (the "Restricted Stock") contingent upon the attainment
of performance goals or subject to other restrictions.
In connection with the grant of options under the Plan, the Board of
Directors will determine the option exercise period and any vesting
requirements. It is expected that the initial options granted under the Plan
will have 10-year terms and will vest in four equal annual installments
beginning on the second anniversary of the date of grant, subject to
acceleration of vesting upon a change in control of the Company. Generally,
options will terminate three months after the optionee's termination of
employment with the Company. The Board of Directors may, however, provide that
an option may be exercised over a longer period following termination of
employment, but in no event beyond the expiration date of the option. Any shares
of Common Stock subject to options that are forfeited pursuant to the vesting
requirement established at the time of grant will again be available for grant
under the Plan. The exercise price of options granted under the Plan may not be
less than the fair market value of the Common Stock on the date of grant.
Payment for shares of Common Stock granted under the Plan may be made either in
cash, or, if permitted by the option agreement, by exchanging Common Stock
having a fair market value equal to the option exercise price.
An optionee will not be deemed to have received taxable income upon the
grant or exercise of any ISO (except that the alternative minimum tax may apply
upon exercise). Any gain realized upon a disposition of shares of Common Stock
received pursuant to the exercise of an ISO will be taxed as a long-term capital
gain, assuming the optionee holds the shares for at least two years after the
date of grant and for at least one year after the date of exercise. Upon
exercise of an NQSO, an optionee will be deemed to receive ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the underlying shares of Common Stock on the date of the exercise.
Generally, neither a gain nor a loss will be recognized by the Company upon
the grant or exercise of an ISO. Upon the exercise of an NQSO, the Company will
be entitled to a deduction for the amount recognized as ordinary income by the
optionee. If Common Stock acquired upon the exercise of an ISO is disposed of
prior to satisfaction of the holding periods described above, generally the
optionee will be deemed to have realized ordinary income, and the Company will
be allowed to deduct the excess of the market value at the date of exercise over
the option price. If an optionee pays the exercise price of any option by
delivering shares of Common Stock, the exchange of shares generally will be
treated as a non-taxable transaction (provided, in the case of an ISO, that the
shares delivered in payment are not shares acquired upon exercise of an ISO that
has not satisfied the holding period requirements discussed above).
The Board of Directors will determine the service requirements and
performance goals to which awards of restricted Common Stock will be subject. It
is expected that the initial grant of Restricted Stock will vest in three equal
annual installments beginning on the first anniversary of the date of grant if
performance goals established at the time the Restricted Stock is awarded are
satisfied and subject to acceleration of vesting upon a change of control of the
Company. Restricted Stock that has not vested at the time of an employee's
termination of employment with the Company will be forfeited, except where such
termination occurs by reason of death or disability. Any Restricted Stock
forfeited pursuant to the vesting provisions of the Plan will again be available
for award under the Plan. Restricted Stock will be awarded at no cost to the
employee, other than such minimal consideration as may be required, but the
employee will have all other rights of a shareholder, including the right to
vote and receive distributions with respect to the shares.
An award of Restricted Stock will create no immediate tax consequences for
the employee or the Company (unless the employee makes an election pursuant to
Section 83(b) of the Code). The employee will, however, realize ordinary income
when Restricted Stock becomes vested, in an amount equal to the fair market
value of the Restricted Stock on the date of vesting less any consideration paid
by the employee for such stock. If the employee makes an election pursuant to
Section 83(b) of the Code, the employee will recognize income at the time the
shares of Restricted Stock are awarded (based upon the value of such shares at
the time of award), rather than when the shares of Restricted Stock become
vested. The Company will be allowed a business expense deduction for the amount
of any taxable income recognized by the employee at the time such income is
recognized (assuming the Company complies with applicable with-holding
requirements).
Options for 391,000 shares of Common Stock will be granted to key employees
and officers in the amounts listed below as of the closing of the Offering, at
an exercise price equal to the initial public offering price.
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<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996 (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
OPTIONS GRANTED PRICE APPRECIATION
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION FOR OPTION TERM (4)
NAME GRANTED (1) IN FISCAL YEAR PER SHARE (2) DATE (3) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lenward C. Wilbanks, Jr. 60,000 15.3% $ 8.00 December 2006 $781,869 $1,244,996
Joseph W. Walters, Jr. 60,000 15.3 8.00 December 2006 781,869 1,244,996
Lisa W. Griffin 20,000 5.1 8.00 December 2006 260,623 414,999
Laura W. Rodier 20,000 5.1 8.00 December 2006 260,623 414,999
Wayne Lovering 5,000 1.3 8.00 December 2006 65,156 103,750
Scott A. Alexander 50,000 12.8 8.00 December 2006 651,558 1,037,497
Dallas R. Barbee 20,000 5.1 8.00 December 2006 260,623 414,999
Jeffrey W. Hudson 20,000 5.1 8.00 December 2006 260,623 414,999
Edward D. Griffin, Jr. 20,000 5.1 8.00 December 2006 260,623 414,999
Jim Godsted 20,000 5.1 8.00 December 2006 260,623 414,999
Wayne Bishop 10,000 2.6 8.00 December 2006 130,312 207,499
</TABLE>
(1) These options generally will vest in four equal installments on the second,
third, fourth and fifth anniversaries of the date of grant.
(2) Based on the initial public offering price of $8.00 per share.
(3) The expiration date of the options will be ten years after the date of
grant.
(4) These amounts have not been reduced by the $8.00 per share exercise price
that each optionee will be required to pay to the Company in order to
exercise the options.
Options to purchase an additional 86,000 shares of Common Stock at the initial
public offering price will be granted to other employees of the Company on the
closing of the Offering.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth information as of November 13, 1996 and, as
adjusted, assumes the sale of all of the Common Stock offered pursuant to this
Prospectus. The table also assumes, with respect to each individual stockholder,
the exercise of all warrants or options held by any other stockholder. The table
is based on information obtained from the persons named below with respect to
the beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the owner of more than 5% of the aggregate outstanding shares
of Common Stock, (ii) each director, (iii) each executive officer, and (iv) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
COMMON STOCK
NUMBER OF SHARES BENEFICIALLY OWNED
OF COMMON STOCK PRIOR TO AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OFFERING OFFERING
<S> <C> <C> <C>
FIVE PERCENT STOCKHOLDERS
Lenward C. Wilbanks, Jr. 2,881,983 42.3% 34.6%
5033 Donna Sue Drive
Columbus, Georgia 31907
F. Yvonne Wilbanks 457,411 6.7 5.5
5033 Donna Sue Drive
Columbus, Georgia 31907
Lisa W. Griffin 1,158,751 17.0 13.9
766 River Oaks Court
Columbus, Georgia 31904
Laura W. Rodier 1,158,751 17.0 13.9
675 Cedar Drive West
Hamilton, Georgia 31811
Sheila W. Kayler 344,375 5.1 4.1
3133 Genito Road
Towhaton, Virginia 23139
<CAPTION>
OTHER OFFICERS AND DIRECTORS
<S> <C> <C> <C>
Dallas R. Barbee 105,398 1.6 1.3
886 Smith Road
Lexington, North Carolina 27292
Jeffrey W. Hudson 66,897 1.0 .8
140 Wooford Road
Taylors, South Carolina 29687
All Executive Officers and Directors 5,333,915 78.8 64.6
as a group
</TABLE>
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from the date of this Prospectus upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that convertible securities, options or warrants that
are held by such person (but not those held by any other person) and which
are exercisable within 60 days of the date of this Prospectus have been
exercised.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, the Company obtained loans from Lenward C. Wilbanks, Jr., the
President and Chief Executive Officer of the Company, his wife, F. Yvonne
Wilbanks, and his sister, Sheila Wilbanks Kayler, in the aggregate principal
amount of $525,144 (the "Bridge Financing"). The Bridge Financing is evidenced
by promissory notes, the principal balances of which accrue interest at the rate
of 9.5% per annum. Interest is repayable monthly, and principal is due and
payable on the earlier of
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<PAGE>
(i) two years from the date of execution of the promissory notes, or (ii) the
first day of the first month following the successful completion of an initial
public offering of the Company's Common Stock yielding aggregate net proceeds to
the Company of at least $10 million. A portion of the net proceeds of this
Offering will be used to repay the Bridge Financing. The net cash proceeds from
the Bridge Financing were used primarily for working capital purposes.
Six of the Company's current stockholders made advances to the Company (the
"Stockholder Advances") from time to time primarily to provide the Company with
working capital. The aggregate principal amount of the Stockholder Advances
outstanding as of the date of this Offering is approximately $1.4 million, and
the stockholders who made such advances are Lenward C. Wilbanks, Jr., Lisa W.
Wilbanks, Laura W. Wilbanks, Jeffrey W. Hudson, Dallas R. Barbee and Jan Barbee.
The Stockholder Advances are payable on demand and do not accrue interest.
Nine of the Company's paint and collision facilities are leased from
Lenward C. Wilbanks, Jr. and his wife, Frances Yvonne Wilbanks. The terms of the
leases range from 23 to 26 years, and each lease has a five-year renewal option.
The current lease rates range from $2,250 per month to $4,000 per month, with
average monthly rental of approximately $3,000. The leases contain escalation
clauses, generally resulting in rental increases of approximately 7.5% after
each three-year period. The leased facilities range in size from approximately
5,800 square feet to approximately 15,500 square feet. Each lease requires the
Company to pay the real estate taxes and any other special assessments on the
properties, to maintain insurance on the properties, and to incur the costs of
routine repair and maintenance on the facilities. All facilities leased from Mr.
and Mrs. Wilbanks are in good operating condition. The Company believes that the
lease rates for the nine properties leased by the Company from Mr. and Mrs.
Wilbanks are at market based upon lease rates for comparable facilities in the
vicinity of the Company's facilities and rates paid by the Company to unrelated
third parties for leasing the Company's other facilities.
The Company believes that all related party transactions were on terms no
less favorable than those that could be obtained with unaffiliated third
parties. All future transactions will be on terms no less favorable than the
Company could obtain upon negotiations with unaffiliated third parties in
arms-length transactions.
DESCRIPTION OF SECURITIES
GENERAL
Upon completion of the Offering, the Company will be authorized to issue
20,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000
shares of preferred stock, par value $.01 per share. As of November 13, 1996,
there were 6,818,812 shares of Common Stock outstanding and no preferred stock
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors then up for election. The holders of Common Stock are
entitled to receive ratably such dividends when, as and if declared by the Board
of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining that are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are (and the shares of Common Stock offered hereby, when issued in exchange for
the consideration set forth in this Prospectus, will be) fully paid and
nonassessable.
PREFERRED STOCK
The Company may issue preferred stock from time to time, in one or more
series, as authorized by the Board of Directors. Prior to issuance of shares of
each series, the Board of Directors is required by the General Corporation Law
of Delaware and the Company's Articles of Incorporation to fix for each series
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption, as are permitted by Delaware law. Such rights, powers, restrictions
and limitations could include the right to receive specified distribution
payments and payments on liquidation prior to any such payments being made to
the holders of Common Stock. The Board
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<PAGE>
of Directors could authorize the issuance of preferred stock with terms and
conditions that could have the effect of discouraging a takeover or other
transaction that holders of shares of Common Stock might believe to be in their
best interests. As of the date hereof, no shares of preferred stock are
outstanding, and the Company has no present plans to issue any shares of
preferred stock.
WARRANTS
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase 150,000 shares of Common
Stock. The Underwriter's Warrants will be nonexercisable for one year after the
date of this Prospectus. Thereafter, for a period of four years, the
Underwriter's Warrants will be exercisable at an amount equal to 120% of the per
share offering price of the Common Stock sold in this Offering. The
Underwriter's Warrants are not transferable for a period of one year after the
date of this Prospectus, except to officers and directors of the Underwriter.
The Company has also granted certain demand and "piggyback" registration rights
to the holders of the Underwriter's Warrants. See "Underwriting."
DIVIDENDS
Although the Company has never declared or paid any dividends on its Common
Stock, the Company's predecessor entities, many of which operated as S
corporations, distributed a substantial portion of their available cash to
stockholders to enable such stockholders to pay tax on their porportionate
interests in the earnings of such entities. The future payment by the Company of
dividends, if any, is within the discretion of the Board of Directors and will
depend upon the Company's earnings, if any, its capital requirements and
financial condition, as well as other relevant factors. The Board of Directors
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain earnings for use in the Company's business operations.
TRANSFER AGENT
The transfer agent for the Common Stock is .
REPORTS TO STOCKHOLDERS
The Company intends to file an application with the Securities and Exchange
Commission to register its Common Stock under the provisions of Section 12(g) of
the Exchange Act prior to the date of this Prospectus and has agreed with the
Underwriter that it will use its best efforts to continue to maintain such
registration. Such registration will require the Company to comply with periodic
reporting, proxy solicitation and certain other requirements of the Exchange
Act.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder" unless the business
combination is approved in a prescribed manner. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within the prior three years did own) 15% or more of a
corporation's voting stock. A "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the "interested
stockholders."
LIMITED LIABILITY AND INDEMNIFICATION
The Certificate of Incorporation of the Company provides that, to the
fullest extent permitted by applicable law, as amended from time to time, the
Company will indemnify any person who was or is a party or is threatened to be
made a party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person is or
was a director or officer of the Company or serves or served in such capacity
with any other enterprise at the request of the Company. This indemnification
includes the right to advancement of expenses when allowed pursuant to
applicable law.
In addition, the Certificate of Incorporation provides that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of the director's fiduciary duty. By operation
of law, however, the Certificate of Incorporation does not eliminate or limit
the liability of a director for any of the following reasons: (i) a breach of
the director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or that
32
<PAGE>
involve intentional misconduct or a knowing violation of law; (iii) a
transaction from which the director derived an improper personal benefit, or
(iv) an act or omission occurring before the effective date of the Certificate
of Incorporation.
The Company has entered into indemnification agreements with its directors
(collectively, the "Indemnification Agreements"), which provide that the
director is entitled to indemnification to the fullest extent permitted by
applicable law. Such indemnification will cover all expenses, liabilities,
judgments (including punitive and exemplary damages), penalties, fines
(including excise taxes relating to employee benefit plans and civil penalties)
and amounts paid in settlement that are incurred by or imposed upon the director
if the director is a party or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding of any kind, whether civil,
criminal, administrative or investigative (including actions by or in the right
of the Company and any preliminary inquiry or claim by any person or authority),
by reason of the fact that the director is or was a director, officer, employee
or agent of the Company or is or was serving at the Company's request as a
director, officer, employee or agent of another corporation (including a
subsidiary), partnership, joint venture, trust or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof (collectively, the "Covered Matters").The Company's obligations under
the Indemnification Agreements will continue as long as a director is subject to
any actual or possible Covered Matter, notwithstanding termination of the
director.
Pursuant to the Indemnification Agreements, the directors are presumed to
be entitled to indemnification and will receive such indemnification
irrespective of whether the Covered Matter involves allegations of intentional
misconduct, alleged violations of Section 16(b) of the Exchange Act, alleged
violations of Section 10(b) of the Exchange Act (including Rule l0b-5
thereunder), breach of the director's fiduciary duties (including duties of
loyalty or care) or any other claim.
In addition, upon the director's request, the Company will promptly either
advance expenses directly or reimburse the director for all expenses (including
attorneys' fees, expert fees, other professional fees and court costs) incurred
by the director in connection with a Covered Matter other than judgments,
penalties, fines and settlement amounts.
The Company will purchase and maintain directors and officers insurance as
soon as the Board of Directors determines it is practicable, in amounts which
they consider appropriate, insuring the directors against any liability arising
out of a director's status as a director of the Company regardless of whether
the Company has the power to indemnify the director against such liability under
applicable law.
In addition, the Indemnification Agreements provide that no action may be
brought by or on behalf of the Company against the director or the director's
heirs or personal representatives relating to the director's service as a
director, after the expiration of one year from the date the director ceases
(for any reason) to serve as a director of the Company, and any claim or cause
of action of the Company will be extinguished and deemed released unless
asserted by the filing of a legal action before the expiration of such period.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 8,318,812 shares of
Common Stock outstanding, without giving effect to shares of Common Stock
issuable upon exercise of (i) the Underwriter's Warrants, (ii) the Underwriter's
Over-allotment Option, or (iii) options granted under the Plan. Subject to the
contractual restrictions described below, of these 8,318,812 shares, the
1,500,000 shares of Common Stock offered hereby (1,725,000 shares if the
Underwriter exercises the Over-allotment Option) will be freely tradeable
without restriction or further registration under the Securities Act. The
remaining 6,818,812 shares (the "Founders' Shares") are deemed to be "restricted
securities," as that term is defined under Rule 144, because such shares were
issued and sold by the Company in private transactions not involving a public
offering and, as such, may only be sold pursuant to an effective registration
under the Securities Act, in compliance with the exemption provisions of Rule
144, or pursuant to another exemption under the Securities Act. The Founders'
Shares will not be eligible for resale under Rule 144 until November 1998, at
which time such shares will still be subject to the resale limitations of Rule
144.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who has
owned restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that
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<PAGE>
does not exceed the greater of 1% of the total number of outstanding shares of
the same class or, if the common stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least three years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.
The beneficial owners of all shares of Common Stock outstanding immediately
prior to the Offering have agreed with the Underwriter not to offer, sell,
contract to sell or otherwise dispose of any of their shares for a period of 18
months after the date of this Prospectus, without the prior written consent of
the Underwriter.
Prior to this Offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Common Stock prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability in the future to raise additional capital
through the sale of its equity securities.
UNDERWRITING
The Company has agreed to sell, and the Underwriter has agreed to purchase
from the Company, 1,500,000 shares of Common Stock. The underwriting agreement
between the Company and the Underwriter (the "Underwriting Agreement") provides
that the obligations of the Underwriter are subject to certain conditions
precedent. The Underwriter is committed to purchase all of the securities
offered hereby if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
the 1,500,000 shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and that it may
allow to selected dealers who are members of the NASD concessions not in excess
of $ per share of Common Stock, of which not more than $ per
share of Common Stock may be re-allowed to certain other dealers.
The Underwriting Agreement provides further that the Underwriter will
receive a non-accountable expense allowance of 3% of the gross proceeds of the
Offering, of which $50,000 has been paid by the Company to date. The Company has
also agreed to pay all expenses in connection with qualifying the shares of
Common Stock offered hereby for sale under the laws of such states as the
Underwriter may designate, including expenses of counsel retained for such
purpose by the Underwriter.
Pursuant to the Underwriter's Over-allotment Option, which is exercisable
for a period of 45 days after the closing of the Offering, the Underwriter may
purchase up to an additional 15% of the total number of shares of Common Stock
offered hereby, solely to cover over-allotments.
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase 150,000 shares of Common
Stock. The Underwriter's Warrants will be nonexercisable for one year after the
date of this Prospectus. Thereafter, for a period of four years, the
Underwriter's Warrants will be exercisable at an amount 120% above the offering
price of the Common Stock sold in this Offering. The Underwriter's Warrants are
not transferable for a period of one year after the date of this Prospectus,
except to officers of the Underwriter, members of the selling group and their
officers and partners. The Company has also granted certain demand and
"piggyback" registration rights to the holders of the Underwriter's Warrants.
For the life of the Underwriter's Warrants, the holders thereof are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock with a resulting dilution in the interest of other
stockholders. Further, such holders may be expected to exercise the
Underwriter's Warrants at a time when the Company would in all likelihood be
able to obtain equity capital on terms more favorable than those provided in the
Underwriter's Warrants.
The Company has agreed, for a period of 18 months after the date of this
Prospectus, not to issue any shares of Common Stock or preferred stock, or any
warrants, options or other rights to purchase Common Stock or preferred stock,
without the prior written consent of the Underwriter, except for the issuance of
Common Stock under the Company's 1996 Stock Option Plan. Notwithstanding the
foregoing, the Company may issue shares of Common Stock upon exercise of any
warrants outstanding on the date hereof or to be outstanding upon closing of the
Offering as described herein. Subject to certain exceptions, all of the
Company's existing stockholders have agreed not to sell or otherwise dispose of
any shares of Common Stock for a period of up to 18 months following the date of
this Prospectus, without the prior written consent of the Underwriter.
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<PAGE>
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against liabilities in connection with the
Offering, including liabilities under the Securities Act.
All Directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has agreed that it will engage a designee of the Underwriter as an
advisor to the Board of Directors for a two-year period following consummation
of the Offering. Such advisor has the right to attend meetings of the Board,
receive all communications sent by the Company to Board members and receive
compensation and expense reimbursement equal to the entitlement of other
non-officer Directors. In lieu of the Underwriter's right to designate an
advisor, the Underwriter may, in its sole discretion, designate a person for
election as a Director during such two-year period. The Company has agreed that
it will use its best efforts to cause the election of such designee as a
Director of the Company. The Underwriter has not designated any person to serve
as an advisor or stand for election as a Director.
The Underwriter intends to act as a market maker for the Common Stock after
the closing of the Offering.
The Company has agreed to retain the Underwriter as a consultant at an
annual fee of $25,000 for two years commencing on the closing of the Offering.
The entire fee is payable at the closing of the Offering. Pursuant to this
agreement, the Underwriter will be obligated to provide general financial
advisory services to the Company on an as-needed basis with respect to possible
future financing or acquisitions by the Company and related matters. The
agreement does not require the Underwriter to provide any minimum number of
hours of consulting services to the Company.
The initial public offering price of the shares of Common Stock has been
determined by negotiation between the Company and the Underwriter and does not
necessarily bear any direct relationship to the Company's assets, earnings, book
value per share or other generally accepted criteria of value. Factors
considered in determining the offering price of the shares of Common Stock
included the business in which the Company is engaged, the Company's financial
condition, an assessment of the Company's management, the general condition of
the securities markets and the demand for similar securities of comparable
companies.
The Underwriter or members of the selling group may, at their option,
charge a customary "ticket charge" to purchasers in the Offering. Any such
charge will be disclosed on the customer's confirmation slip.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Smith Helms Mulliss & Moore, L.L.P., 2800 Two Hannover Square,
Raleigh, North Carolina 27601. Schneck Weltman Hashmall & Mischel LLP, 1285
Avenue of the Americas, New York, New York 10019, has acted as counsel for the
Underwriter in connection with this Offering.
EXPERTS
The combined financial statements of Peach Auto Painting & Collision at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered by
this Prospectus. This Prospectus, filed as a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this Offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may be
inspected without charge at the offices of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549; 1400 Citicorp Center, 500 West Madison, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
the Registration Statement may be obtained from the Commission at its principal
office upon payment of prescribed fees. Electronic registration statements made
through the Electronic Data Gathering, Analysis, and Retrieval system are
publicly available through the Commission's Web site at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and where the contract or other
document has been filed as an exhibit to the Registration Statement, each
statement is qualified in all respects by reference to the applicable document
filed with the Commission.
35
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PEACH AUTO PAINTING & COLLISION
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors......................................................................................... F-2
Audited Combined Financial Statements
Combined Balance Sheets................................................................................................ F-3
Combined Statements of Income.......................................................................................... F-5
Combined Statements of Shareholders' (Deficit) Equity.................................................................. F-6
Combined Statements of Cash Flows...................................................................................... F-7
Notes to Combined Financial Statements................................................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE SHAREHOLDERS
PEACH AUTO PAINTING & COLLISION
We have audited the accompanying combined balance sheets of Peach Auto
Painting & Collision as of December 31, 1995 and 1994, and the related combined
statements of income, shareholders' (deficit) equity and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 financial statements referred to above present fairly,
in all material respects, the combined financial position of Peach Auto Painting
& Collision as of December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Raleigh, North Carolina
June 4, 1996
F-2
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 229,691 $ 333,319 $ 618,564
Accounts receivable............................................................ 333,792 497,018 639,275
Inventories.................................................................... 60,722 129,972 147,672
Advances to employees.......................................................... 104,223 45,367 34,472
----------- ----------- -----------
TOTAL CURRENT ASSETS...................................................... 728,428 1,005,676 1,439,983
PROPERTY AND EQUIPMENT:
Buildings...................................................................... 233,565 233,565 233,565
Leasehold improvements......................................................... 135,585 248,683 254,090
Furniture, machinery and equipment............................................. 2,181,027 2,843,221 3,204,816
----------- ----------- -----------
2,550,177 3,325,469 3,692,471
Less accumulated depreciation and amortization................................. (867,362) (1,252,882) (1,554,044)
----------- ----------- -----------
1,682,815 2,072,587 2,138,427
OTHER ASSETS..................................................................... 25,814 26,954 84,417
----------- ----------- -----------
TOTAL ASSETS.............................................................. $ 2,437,057 $ 3,105,217 $ 3,662,827
=========== =========== ===========
</TABLE>
F-3
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Cash overdraft................................................................... $ 364,534 $ 397,278 $ 442,119
Trade accounts payable........................................................... 93,020 221,178 291,511
Advances from shareholders....................................................... 1,381,261 1,411,358 1,404,058
Accrued warranty expense......................................................... 50,000 70,000 80,000
Accrued payroll and taxes........................................................ 124,068 176,142 193,103
Taxes payable.................................................................... 39,483 167,306 54,590
Notes payable to shareholders.................................................... -- -- 475,144
Current portion of long-term debt................................................ 93,564 100,776 111,324
Current portion of capital lease obligations..................................... 112,639 177,735 109,772
--------- --------- ---------
TOTAL CURRENT LIABILITIES................................................... 2,258,569 2,721,773 3,161,621
LONG-TERM DEBT, less current portion............................................... 312,106 291,330 259,757
CAPITAL LEASE OBLIGATIONS, less current portion.................................... 182,562 128,444 150,446
COMMITMENTS (Note 7)
SHAREHOLDERS' (DEFICIT) EQUITY..................................................... (316,180) (36,330) 91,003
---------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY........................ $2,437,057 $3,105,217 $ 3,662,827
========== ========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED DECEMBER 31, PERIOD ENDED SEPTEMBER 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales......................................... $8,974,938 $15,555,156 $22,926,132 $17,121,946 $19,493,442
Cost of sales..................................... 5,564,299 9,610,302 14,510,079 10,783,123 12,368,943
---------- ----------- ----------- ----------- -----------
Gross profit...................................... 3,410,639 5,944,854 8,416,053 6,338,823 7,124,499
Selling, general and administrative expenses...... 2,887,129 5,336,804 6,863,632 4,981,730 6,438,647
---------- ----------- ----------- ----------- -----------
Operating income.................................. 523,510 608,050 1,552,421 1,357,093 685,852
Other income (expense):
Interest expense................................ (41,873) (40,759) (29,218) (15,670) (9,970)
Other income.................................... 263 9,632 34,707 15,028 37,354
---------- ----------- ----------- ----------- -----------
(41,610) (31,127) 5,489 (642) 27,384
---------- ----------- ----------- ----------- -----------
Income before income taxes........................ 481,900 576,923 1,557,910 1,356,451 713,236
Income tax expense................................ -- 39,428 121,186 116,516 76,520
---------- ----------- ----------- ----------- -----------
Net income........................................ $ 481,900 $ 537,495 $ 1,436,724 $ 1,239,935 $ 636,716
========== =========== =========== =========== ===========
Pro forma -- unaudited
Net income (Note 6)............................. $ 289,140 $ 346,154 $ 934,746 $ 813,871 $ 427,942
========== =========== =========== =========== ===========
Net income per share............................ $ 0.04 $ 0.05 $ 0.14 $ 0.12 $ 0.06
========== =========== =========== =========== ===========
Weighted average shares outstanding............. 6,818,812 6,818,812 6,818,812 6,818,812 6,818,812
========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
SHAREHOLDERS'
(DEFICIT)
EQUITY
<S> <C>
BALANCE AT DECEMBER 31, 1992................................................................................... $ (282,053)
Shareholders' distributions.................................................................................... (183,838)
Shareholders' contributions.................................................................................... 1,500
Net income for 1993............................................................................................ 481,900
----------
BALANCE AT DECEMBER 31, 1993................................................................................... 17,509
Shareholders' distributions.................................................................................... (892,984)
Shareholders' contributions.................................................................................... 21,800
Net income for 1994............................................................................................ 537,495
----------
BALANCE AT DECEMBER 31, 1994................................................................................... (316,180)
Shareholders' distributions.................................................................................... (1,158,874)
Shareholders' contributions.................................................................................... 2,000
Net income for 1995............................................................................................ 1,436,724
----------
BALANCE AT DECEMBER 31, 1995................................................................................... (36,330)
Shareholders' distributions (unaudited)........................................................................ (509,383)
Net income for the period ended September 30, 1996 (unaudited)................................................. 636,716
----------
BALANCE AT SEPTEMBER 30, 1996 (unaudited)...................................................................... $ 91,003
===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
PEACH AUTO PAINTING & COLLISION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income............................................. $ 481,900 $ 537,495 $ 1,436,724 $ 1,239,935 $ 636,716
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 119,902 306,398 391,959 293,969 301,162
Changes in operating assets and liabilities:
Accounts receivable............................... 32,107 (100,135) (163,226) (72,492) (142,257)
Inventories....................................... 5,708 (41,293) (25,749) (44,045) (17,700)
Advances to employees............................. (4,118) (35,983) 15,355 24,348 10,895
Advances from shareholders........................ 718,211 399,938 30,097 14,350 (7,300)
Accounts payable.................................. (125,387) (104,385) 128,158 254,684 70,333
Accrued expenses.................................. 95,277 78,791 72,074 17,528 26,961
Taxes payable..................................... (29,048) 39,483 127,823 109,283 (112,716)
--------- --------- --------- --------- --------
Net cash provided by operating activities......... 1,294,552 1,080,309 2,013,215 1,837,560 766,094
INVESTING ACTIVITIES
Purchases of property and equipment.................... (614,647) (801,723) (630,768) (452,823) (367,002)
Net change in other assets............................. 116,134 (8,292) (1,140) (72) (57,463)
--------- --------- --------- --------- --------
Net cash used in investing activities............. (498,513) (810,015) (631,908) (452,895) (424,465)
FINANCING ACTIVITIES
Proceeds from issuance of notes to shareholders...... -- -- -- -- 475,144
Proceeds from issuance of long-term debt............. 75,000 141,500 80,000 80,000 --
Principal payments on long-term debt................. (65,803) (90,059) (93,564) (87,218) (21,025)
Principal payments on capital lease obligations...... (74,412) (103,341) (139,985) (104,989) (45,961)
Contributions from shareholders...................... 1,500 21,800 2,000 2,000 --
Distributions to shareholders........................ (183,838) (892,984) (1,158,874) (1,102,868) (509,383)
--------- --------- --------- --------- --------
Net cash used in financing activities............. (247,553) (923,084) (1,310,423) (1,213,075) (101,225)
--------- --------- --------- --------- --------
Increase decrease in cash and cash equivalents....... 548,486 (652,790) 70,884 171,590 240,404
Cash and cash equivalents at beginning of year....... (30,539) 517,947 (134,843) (134,843) (63,959)
--------- --------- --------- --------- --------
Cash and cash equivalents at end of year............. $ 517,947 $ (134,843) $ (63,959) $ 36,747 $ 176,445
========== ========== =========== =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest............. $ 15,670 $ 40,759 $ 29,218 $ 15,670 $ 9,970
========== ========== =========== =========== =========
Cash paid during the period for income taxes......... $ -- $ 32,648 $ 52,832 $ 7,233 $ 217,670
========== ========== =========== =========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Certain capital lease obligations have been incurred by the Company in relation to agreements for equipment,
furniture and fixtures. (See Note 4)
</TABLE>
See accompanying notes.
F-7
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS
The combined financial statements consist of four C-corporations and twenty
S-corporations. The operations of these corporations are comprised of
forty-seven Peach Auto Painting and Collision shops and a single Peach Warehouse
(collectively referred to as the "Company"). These entities are related through
common ownership and management.
The Company operates a chain of Company-operated auto paint centers
throughout the southeastern United States which offer auto painting and light
body and fender repair services primarily to the general consuming public and
secondarily to commercial accounts.
In 1996, the individual corporations entered into agreements to transfer
all of their assets and liabilities to a single corporate entity, Peach Auto
Painting and Collision, Inc., in connection with Peach Auto Painting and
Collision, Inc.'s planned initial public offering of common stock. Peach Auto
Painting and Collision, Inc. plans to authorize 20,000,000 shares of common
stock, $.01 par value, in which 6,818,812 shares will be issued and outstanding
upon completion of the merger of the existing corporations ("the merger") and
prior to the planned initial public offering of common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the entities
described in Note 1, all of which are 96% beneficially owned by the same
shareholder. All significant intercompany accounts and transactions have been
eliminated in combination.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid, short-term investments with a maturity
of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories consist primarily of paint, auto parts and supplies and are
stated at the lower of cost or market, using the specific identification method.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets (7-31.5 years).
INCOME TAXES
Twenty of the existing corporations are subchapter S corporations for
income tax purposes and, accordingly, any income tax liabilities are the
responsibility of the individual shareholders of those corporations. The
subchapter S corporation status of these corporations will terminate on
consummation of the merger as described in Note 1. Four of the existing
corporations are subchapter C corporations. Taxes for these corporations were
provided in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" (See Note 7).
ADVERTISING COSTS
Statement of Position 93-7 "Reporting on Advertising Costs" was implemented
by the Company during the year ended December 31, 1995. The adoption of this
statement did not have a material impact on the financial statements. The
Company expenses advertising costs as incurred. Total advertising expense was
approximately $1,896,500, $1,220,700 and $631,100 for 1995, 1994 and 1993,
respectively.
F-8
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
STOCK BASED COMPENSATION
Prior to the planned initial public offering, the Board of Directors of
Peach Auto Painting and Collision, Inc. plans to adopt the 1996 Stock Option
Plan whereby up to 700,000 shares of Common Stock will be authorized for
issuance under the plan. In the case of initial grants of non-qualified options,
the exercise price will be fixed by the Board of Directors. The exercise price
per share for all other grants will not be less than the fair market value of
one share of Common Stock on the date of grant.
The Company will account for stock options in accordance with APB Option
No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25, no
compensation expense is recognized for stock or stock options issued at fair
market value. For stock options granted at exercise prices below the deemed fair
market value, APB No. 25 provides for recording deferred compensation expense
for the difference between the exercise price of the shares and the deemed fair
market value. The resulting deferred compensation expense is amortized ratably
over the vesting period of the individual options.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), which
provides an alternative to APB No. 25 in accounting for stock based compensation
issued to employees. SFAS 123 provides for a fair value based method of
accounting for employee stock options and similar equity instruments. However,
for companies that account for stock based compensation arrangements under APB
No. 25, SFAS 123 requires disclosure of the pro forma effect on net income and
earnings per share as if the fair value based method prescribed by SFAS 123 had
been applied. The disclosure requirements are effective for fiscal years
beginning after December 31, 1995, or upon initial adoption of the statement, if
earlier. The Company plans to continue to account for stock based compensation
arrangements under APB No. 25 and plans to adopt the pro forma disclosure
requirements of SFAS 123 for the year ending December 31, 1996.
ADVANCES FROM SHAREHOLDERS
Advances from shareholders represent amounts advanced to the Company for
working capital purposes. These advances are non-interest bearing; however, had
interest been accrued at 9.5% (interest rate on shareholder bridge loan),
interest expense on these advances would have been approximately $133,000,
$112,000 and $70,000 for the years ended December 31, 1995, 1994 and 1993,
respectively and $134,000 and $132,000 for the nine month periods ended
September 30, 1996 and 1995, respectively.
ACCRUED WARRANTY
The Company provides an accrual for estimated future warranty costs. The
estimate is derived based upon the relationship of actual historical warranty
costs to historical sales.
SALES AND ACCOUNTS RECEIVABLE
The Company's primary source of revenue is the provision of auto painting
and collision services for the consuming general public. The Company receives
payment for these services in cash or by credit card. A secondary source of
resources is provision of these same services to certain commercial accounts
such as auto fleets and insurance companies. These sales are often made on
account. Based on historical collection experience, the Company does not provide
an allowance for doubtful accounts since bad debt expense has historically been
immaterial.
Due to its geographic diversity and lack of large credit customers, the
Company had no significant concentrations of credit risk with individual
customers at December 31, 1995.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-9
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
EARNINGS PER SHARE
Historical net income per share has not been presented as it is not deemed
a meaningful presentation as a result of the capital structures of the various
individual corporations prior to the merger. Pro forma unaudited earnings per
share data and weighted average shares outstanding set forth in the statement of
operations is presented as if the capital structure that will exist upon
completion of the merger described in Note 1 (i.e. 6,818,812 shares of common
stock issued and outstanding) had existed for all periods presented.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB issued Statement No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
during the fiscal year ending December 31, 1996, and based on current
circumstances, does not believe the effect of adoption will be material.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements include all adjustments
(consisting of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position of the
Peach Auto Painting and Collision as of September 30, 1996 and the results of
operations and cash flows for the nine month periods ended September 30, 1995
and 1996. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the entire year ending
December 31, 1996. All interim financial data presented is unaudited.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Note payable to bank, collateralized by deed of trust on real property with interest at 9%, due in
monthly installments of $2,252 through September 2007............................................. $ 195,536 $204,514
Unsecured note payable to a corporation bearing interest at 8%, due in monthly installments of
$1,622 through April 2000......................................................................... 68,780 --
Note payable to a corporation collateralized by equipment and a personal guarantee by a shareholder
of the Company with interest at 8%, due in monthly installments of $1,315 through October 1999.... 51,947 63,083
Note payable to a corporation collateralized by equipment and a personal guarantee by a shareholder
of the Company with interest at 7%, due in monthly installments of $3,088 through March 1997...... 41,394 74,288
Other notes payable................................................................................. 34,449 63,785
--------- --------
392,106 405,670
Less current portion................................................................................ 100,776 93,564
--------- --------
$ 291,330 $312,106
========= ========
</TABLE>
The approximate carrying value of assets pledged as collateral for notes
payable was $395,000 and $537,000 at December 31, 1995 and 1994, respectively.
F-10
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
3. LONG-TERM DEBT -- CONTINUED
The following represents maturities of long-term debt by year:
<TABLE>
<S> <C> <C>
1996................................................................................................ $ 100,776
1997................................................................................................ 49,569
1998................................................................................................ 42,772
1999................................................................................................ 43,814
2000................................................................................................ 18,859
Thereafter.......................................................................................... 136,316
---------
$ 392,106
=========
</TABLE>
The Company estimates that the fair value of notes payable approximates the
carrying value based upon its effective current borrowing rate for debt for
similar terms and remaining maturities. Disclosure about fair value of financial
instruments is based upon information available to management as of December 31,
1995. Although management is not aware of any factors that would significantly
affect the fair value of amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date.
4. LEASES
The Company primarily leases its shop facilities under cancelable and
noncancelable operating leases expiring at various times through August 2020.
Rent expense charged to operations during the years ended December 31, 1995,
1994 and 1993 was $1,340,426, $969,319 and $576,181, respectively. Nine of the
Company's paint and collision facilities are leased from the majority
shareholder. The terms of the leases range from 23 to 26 years, and each lease
has a five year renewal option. The leases contain escalation clauses and
require the Company to pay the real estate taxes, insurance and any other
special assessments on the properties. The Company believes that the lease rates
for these nine properties are at market rates based upon lease rates for
comparable facilities in the vicinity of the Company's facilities and rates paid
by the Company to unrelated third parties for leasing the Company's other
facilities. The Company paid $150,449, $71,579 and $9,235 to the majority
shareholder for rent expense for the years ended December 31, 1995, 1994 and
1993, respectively.
The Company leases certain machinery and equipment under capitalized lease
agreements that expire at various times through November 1998. Furniture,
machinery and equipment includes the following amounts for capital leases:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Furniture, machinery and equipment......................................... $ 807,995 $604,731
Less accumulated amortization.............................................. (268,092) (172,023)
---------- ---------
$ 539,903 $432,708
========== =========
</TABLE>
Capital lease obligations of $150,963, $289,211 and $69,064 were incurred
when the Company entered into leases for new machinery and equipment in 1995,
1994 and 1993, respectively.
Amortization of capital leases is included in depreciation and amortization
expense.
F-11
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
4. LEASES -- CONTINUED
Future minimum lease payments, by year and in the aggregate, under capital
leases and operating leases with remaining terms of one year or more consisted
of the following at December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1996....................................................................... $177,735 $ 1,426,344
1997....................................................................... 116,251 1,351,859
1998....................................................................... 12,193 1,274,240
1999....................................................................... -- 1,301,121
2000....................................................................... -- 1,274,969
Thereafter................................................................. -- 10,370,992
--------- -----------
Total minimum lease payments............................................... $306,179 $16,999,525
========= ===========
</TABLE>
5. RELATED PARTY TRANSACTIONS
As of December 31, 1995 advances from shareholders was $1,411,358, of which
$786,747 was due to the majority shareholder of the Company. These advances
represent verbal agreements with the Company and are payable on demand.
The Company obtained bridge loan financing from shareholders totaling
$475,144 in August 1996. Interest is payable monthly at 9.5%. The outstanding
principle balance plus accrued unpaid interest is due the earlier of twenty-four
months from the date of the note or one month following the successful
completion of the Company's initial public offering. As of September 30, 1996,
the unpaid balance on these notes was $475,144.
6. INCOME TAXES
The components of income tax expense consist of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
(UNAUDITED)
Federal........................................ $ -- $ 30,630 $ 93,623 $59,303
State.......................................... -- 8,798 27,563 17,217
-------- -------- -------- --------
Income tax expense............................. $ -- $ 39,428 $121,186 $76,520
======== ======== ======== ========
</TABLE>
At December 31, 1995, the Company had remaining unused net operating loss
carryforwards of approximately $40,000 for income tax purposes that expire at
various times through 2008. The Company has no material book/tax differences and
thus no deferred tax assets/liabilities are recorded.
The following table provides a reconciliation of income tax expense between
the statutory U.S. federal income tax rate and the actual effective rate of the
income tax expense.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
(UNAUDITED)
Income tax expense at statutory rate.................................. 34.0% 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefits................ -- 4.7 4.7 4.7
Utilization of net operating loss carryforward........................ -- (9.5) (16.6) (6.6)
Effect of exclusion of S-Corporation's income tax expense............. (34.0) (22.4) (14.3) (21.4)
----- ----- ----- ------
0% 6.8% 7.8% 10.7%
===== ===== ===== ======
</TABLE>
F-12
<PAGE>
PEACH AUTO PAINTING & COLLISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
6. INCOME TAXES -- CONTINUED
The following unaudited pro forma income tax information is presented in
accordance with Statement of Financial Accounting Standard No. 109 (SFAS 109) as
if the Company had been a C Corporation subject to federal and state income
taxes throughout all periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Earnings before pro forma adjustments, per statement of income...... $481,900 $576,923 $1,557,910 $ 713,236
Pro forma statement:
Provision for income taxes to increase tax expense to estimated
effective rate of 40%.......................................... 192,760 230,769 623,164 285,294
-------- -------- ---------- ---------
Pro forma net income................................................ $289,140 $346,154 $ 934,746 $ 427,942
======== ======== ========== =========
</TABLE>
7. COMMITMENTS
Prior to the closing of the Offering, Peach Auto Painting and Collision,
Inc. will enter into employment contracts with two executive employees. The
contracts provide for base annual compensation and incentive compensation to be
determined by the Board of Directors.
F-13
<PAGE>
NO UNDERWRITER, DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, OR AN OFFER TO SELL OR SOLICITATION OF
AN OFFER TO BUY ANY SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 1
Risk Factors......................................... 5
The Formation Transactions.......................... 8
Use of Proceeds...................................... 9
Dilution............................................. 10
Capitalization....................................... 11
Management's Discussion and
Analysis of Financial Condition and
Results of Operations.............................. 12
Business............................................. 17
Management........................................... 26
Principal Stockholders............................... 30
Certain Relationships and Related Transactions....... 30
Description of Securities............................ 31
Shares Eligible for Future Sale...................... 33
Underwriting......................................... 34
Legal Matters........................................ 35
Experts.............................................. 35
Available Information................................ 35
Index to Consolidated Financial Statements........... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR SOLICITATIONS TO PURCHASE THE SECURITIES OFFERED HEREBY.
PEACH AUTO
PAINTING AND
COLLISION, INC.
1,500,000 SHARES OF
COMMON STOCK
PROSPECTUS
RICKEL & ASSOCIATES, INC.
, 1996
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the state of Delaware
("Delaware Law"), a corporation may indemnify its directors, officers, employees
and agents and its former directors, officers, employees and agents and those
who serve, at the corporation's request, in such capacities with another
enterprise, against expenses (including attorneys' fees), as well as judgments,
fines and settlements in nonderivative lawsuits, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. Delaware
Law provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful. In
addition, Delaware Law does not permit indemnification of any action or suit by
or in the right of the corporation, where such person has been adjudged liable
to the corporation, unless, and only to the extent that, a court determines that
such person fairly and reasonably is entitled to indemnity for costs the court
deems proper in light of liability adjudication. Indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.
The Company's Certificate of Incorporation and Bylaws provide, under
certain circumstances, for the indemnification of the Company's present or
former directors, officers, employees, agents and persons who, at the request of
the Company, are or were serving in a similar capacity for another corporation
or entity. The Articles also allow the Board of Directors to purchase and
maintain insurance on behalf of the Company's present or former directors,
officers or persons who are or were serving at the request of the Company as a
director or officer of another corporation or entity.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following statement sets forth the expenses payable in connection with
this registration statement (estimated except for the registration fee), all of
which will be borne by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............................................. $ 4,182
Legal fees and expenses................................................................... $135,000
Accountant's fees and expenses............................................................ $125,000
Printing expenses......................................................................... $ 70,000
Miscellaneous............................................................................. $ 50,000
--------
Total.............................................................................. $384,182
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the period commencing three years prior to the filing of this
Registration Statement, three predecessor companies of the Company issued shares
of common stock when they were incorporated. Such share issuances were made in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended. Giving effect to the conversion of shares in
the Merger Transactions, these predecessor companies issued a total of 1,056,077
shares of common stock for total consideration of $183,219. No underwriters were
used to place these shares. The following table sets forth details of the sales:
<TABLE>
<CAPTION>
SECURITIES SOLD
NUMBER OF SELLING
SHARES PRICE
PREDECESSOR COMPANY NAME DATE TITLE (1) PERSONS TO WHOM ISSUED CASH
<S> <C> <C> <C> <C> <C>
Griffin Holding Company, Inc. 11/16/95 Common stock, $1.00 par value 1,000 Edward D. Griffin, Jr. $1,000
Peach Auto Painting & Collision of
Durham, Inc. 2/20/95 Common stock, no par value 400 Lenward C. Wilbanks, Jr. 200
2/20/95 Common stock, no par value 400 F. Yvonne Wilbanks 200
2/20/95 Common stock, no par value 200 Dallas R. Barbee 100
Peach Auto Painting & Collision of
Texas, Inc. 3/31/95 Common stock, no par 60 Lenward C. Wilbanks, Jr. 600
3/31/95 Common stock, no par 20 Laura W. Rodier 200
3/31/95 Common stock, no par 20 Lisa W. Griffin 200
<CAPTION>
PREDECESSOR COMPANY NAME NON-CASH ASSETS
<S> <C>
Griffin Holding Company, Inc. --
Peach Auto Painting & Collision of
Durham, Inc. --
--
--
Peach Auto Painting & Collision of
Texas, Inc. $ 108,431
36,144
36,144
</TABLE>
II-1
<PAGE>
(1) Does not reflect conversion of shares in connection with the Merger
Transactions. Giving effect to the Merger Transactions, the share issuances
were as follows:
<TABLE>
<CAPTION>
COMPANY SHARES
<S> <C>
Griffin Holding Company, Inc........................................................... 345,923
Peach Auto Painting & Collision of Durham, Inc......................................... 193,145
Peach Auto Painting & Collision of Texas, Inc.......................................... 517,009
</TABLE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement by and between the Company and Rickel & Associates, Inc.
3.1* Certificate of Incorporation of the Company
3.2* Bylaws of the Company
4.1* Form of Underwriter's Warrant to Purchase Common Stock by and between the Company and Rickel & Associates, Inc.
relating to warrants to purchase in the aggregate shares of Common Stock.
4.2* Form of Warrant Certificate by and between the Company and John Goodhue relating to warrants to purchase in
the aggregate shares of Common Stock.
5.1* Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding the legality of the Common Stock offered hereby.
10.1* Agreement among stockholders dated , indemnifying and holding the Company harmless against and from
any and all claims relating to the allocation of Shares resulting from the Merger Transactions.
10.2* Form of Indemnification Agreement by and between the Company and each member of the Board of Directors of the
Company.
10.3* Employment Agreement by and between the Company and Mr. Lenward C. Wilbanks, Jr. dated as of .
10.4* Employment Agreement by and between the Company and Mr. Joseph W. Walters, Jr. dated as of .
11.1* Explanation of the computation of per share earnings.
15.1* Letter from Ernst & Young, L.L.P. acknowledging the use of a report on unaudited interim financial information.
23.1* Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1 hereof).
23.2 Consent of Ernst & Young, L.L.P.
24.1 Power of Attorney (included on the signature page of this registration statement).
</TABLE>
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(A) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
(B) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(C) (1) That it will, for determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or (4),
or 497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) That it will, for determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Columbus, State of Georgia, on November 13, 1996.
PEACH AUTO PAINTING AND COLLISION, INC.
By: /s/ Lenward C. Wilbanks, Jr.
LENWARD C. WILBANKS, JR., PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Peach Auto Painting and Collision, Inc. hereby severally constitute
Lenward C. Wilbanks, Jr., as our true and lawful attorney with full power to
sign for us and in our names in the capacities indicated below, the Registration
Statement filed herewith and any and all amendments to said Registration
Statement, and generally to do all such things in our names and in our
capacities as officers and directors to enable Peach Auto Painting and
Collision, Inc. to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney to said
Registration Statement and any and all amendments thereto.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
(SIGNATURE) (TITLE) (DATE)
<C> <S> <C>
President, Chief Executive Officer, November 13, 1996
/s/ Lenward C. Wilbanks Director
-----------------------
LENWARD C. WILBANKS, JR.
/s/ Joseph W. Walters, Jr. Chief Financial Officer, Treasurer, November 13, 1996
----------------------- Secretary (Principal Accounting Officer)
JOSEPH W. WALTERS, JR.
/s/ Lisa W. Griffin
-----------------------
LISA W. GRIFFIN Vice President of Purchasing, Director November 13, 1996
/s/ Laura W. Rodier Vice President of Marketing, Director November 13, 1996
-----------------------
LAURA W. RODIER
</TABLE>
II-3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement by and between the Company and Rickel & Associates, Inc.
3.1* Certificate of Incorporation of the Company
3.2* Bylaws of the Company
4.1* Form of Underwriter's Warrant to Purchase Common Stock by and between the Company and Rickel & Associates, Inc.
relating to warrants to purchase in the aggregate shares of Common Stock.
4.2* Form of Warrant Certificate by and between the Company and John Goodhue relating to warrants to purchase in
the aggregate shares of Common Stock.
5.1* Opinion of Smith Helms Mulliss & Moore, L.L.P. regarding the legality of the Common Stock offered hereby.
10.1* Agreement among stockholders dated , indemnifying and holding the Company harmless against and from
any and all claims relating to the allocation of Shares resulting from the Merger Transactions.
10.2* Form of Indemnification Agreement by and between the Company and each member of the Board of Directors of the
Company.
10.3* Employment Agreement by and between the Company and Mr. Lenward C. Wilbanks, Jr. dated as of .
10.4* Employment Agreement by and between the Company and Mr. Joseph W. Walters, Jr. dated as of .
11.1* Explanation of the computation of per share earnings.
15.1* Letter from Ernst & Young, L.L.P. acknowledging the use of a report on unaudited interim financial information.
23.1* Consent of Smith Helms Mulliss & Moore, L.L.P. (included in Exhibit 5.1 hereof).
23.2 Consent of Ernst & Young, L.L.P.
24.1 Power of Attorney (included on the signature page of this registration statement).
</TABLE>
* To be filed by amendment.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Summary Combined Financial Information" and to the use of our report dated June
4, 1996, in the Registration Statement (Form SB-2 No. ) and related
Prospectus of Peach Auto Painting and Collision, Inc. for the registration of
1,500,000 shares of its common stock.
ERNST & YOUNG LLP
Raleigh, North Carolina
November 13, 1996
