<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 16, 1998
GROUP 1 AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
Delaware 76-0506313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 Echo Lane, Suite 350
Houston, Texas 77024
(Address of principal executive offices) (Zip code)
(713) 467-6268
(Registrant's telephone number including area code)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS
(A) Financial statements of the business acquired.
This Form 8-K/A is being filed to include in the Current
Report on Form 8-K filed by the Registrant with the Securities
and Exchange Commission on March 31, 1998 the financial
statements and pro forma financial information required by
Item 7.
The required financial statements of the business acquired by
the Registrant begin on page F-6 of this Form 8-K/A.
(B) Pro forma financial information
The required pro forma financial information of the registrant
begins on page F-2 of this Form 8-K/A.
(C) Exhibits: None.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Group 1 Automotive, Inc.
May 28, 1998 By : /s/ Scott L. Thompson
- ------------ -------------------------------------------
Date Scott L. Thompson, Senior Vice President -
Chief Financial Officer
3
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Group 1 Automotive, Inc. Pro Forma
Introduction to Unaudited Pro Forma Statements of Operations................... F-2
Unaudited Pro Forma Statements of Operations................................... F-3
Notes to Pro Forma Statements of Operations (unaudited)........................ F-5
Carroll Automotive Group - Combined Financial Statements
Report of Independent Public Auditors.......................................... F-6
Combined Balance Sheet......................................................... F-7
Combined Statement of Income................................................... F-8
Combined Statement of Owners' Equity........................................... F-9
Combined Statement of Cash Flows............................................... F-10
Notes to Combined Financial Statements......................................... F-11
</TABLE>
F-1
<PAGE> 5
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
INTRODUCTION TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
In October 1997, Group 1 Automotive, Inc. ("Group 1") completed its
acquisition of substantially all of the net assets of four automobile dealership
groups (the "Founding Groups") simultaneous with the completion of its initial
public offering. The Founding Groups were acquired in exchange for a combination
of cash and common stock of Group 1 Automotive, Inc. On March 16, 1998, Group 1
acquired the Carroll Automotive Group. The Carroll Automotive Group consists of
three automobile dealerships and has been accounted for as a purchase.
The accompanying pro forma statements of operations, for the year ended
December 31, 1997 and the three months ended March 31, 1998, include the
combined operations of Group 1 and the Founding Groups, from January 1, 1997,
the Carroll Automotive Group from January 1, 1997 and gives effect to the
completion of Group 1's initial public offering. The results of operations of
the Carroll Automotive Group are included in the statement of operations for the
three months ended March 31, 1998, from the effective date of the closing of the
acquisition. The data may not be comparable to and may not be indicative of
Group 1's post-combination results of operations because (i) the Founding Groups
and the Carroll Automotive Group were not under common control of management and
had different tax structures (S Corporations and C Corporations) during the
periods presented and (ii) the purchase method was used to establish a new basis
of accounting to record the acquisitions.
As the balance sheet data for the Carroll Automotive Group was included
in the consolidated balance sheet of the registrant presented in its Form 10-Q
for the quarterly period ended March 31, 1998, no pro forma balance sheet is
presented herein.
Certain pro forma adjustments are based on preliminary estimates,
available information and certain assumptions that management deems appropriate.
The pro forma financial data do not purport to represent what the Company's
results of operations would actually have been if such transactions in fact had
occurred on those dates or to project the Company's results of operations for
any future period. These pro forma statements of operations should be read in
conjunction with the financial statements presented in the Company's Annual
Report on Form 10-K and Quarterly Report on Form 10-Q.
F-2
<PAGE> 6
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
------------------------------------------------------------
Carroll
Automotive Pro Forma
Reported Group Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
New vehicle sales ..................... $138,022 $25,324 $ -- $163,346
Used vehicle sales .................... 87,119 9,029 -- 96,148
Parts and service sales ............... 21,568 4,297 -- 25,865
Other dealership revenues, net ........ 7,225 765 437 (a) 8,427
-------- ------- ------ --------
Total revenues .................... 253,934 39,415 437 293,786
COST OF SALES:
New vehicle sales ..................... 127,376 23,374 -- 150,750
Used vehicle sales .................... 80,560 8,534 -- 89,094
Parts and service sales ............... 9,978 2,276 -- 12,254
-------- ------- ------ --------
Total cost of sales ............... 217,914 34,184 -- 252,098
-------- ------- ------ --------
GROSS PROFIT ............................ 36,020 5,231 437 41,688
GOODWILL AMORTIZATION ................... 243 23 113 (c) 379
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES................ 28,312 4,576 (198)(d) 32,690
-------- ------- ------ --------
Income from operations ............ 7,465 632 522 8,619
OTHER INCOME AND EXPENSES:
Interest expense, net ................. (2,136) (672) (42)(e) (2,850)
Other expense, net .................... (23) -- -- (23)
-------- ------- ------ --------
INCOME BEFORE INCOME TAXES .............. 5,306 (40) 480 5,746
PROVISION FOR INCOME TAXES .............. 2,192 -- 218 (f) 2,410
-------- ------- ------ --------
NET INCOME .............................. $ 3,114 $ (40) $262 $ 3,336
======== ======= ====== ========
Earnings per share on net income:
Basic ................................. $ 0.21
Diluted ............................... $ 0.20
Weighted average shares outstanding:
Basic ................................. 16,087,876
Diluted ............................... 16,666,782
</TABLE>
The accompanying notes are an integral part of
these pro forma statements of operations.
F-3
<PAGE> 7
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------------------------------------------
Carroll
Pro Forma Automotive Pro Forma
Reported Group Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
New vehicle sales..................... $513,864 $157,852 $ -- $ 671,716
Used vehicle sales.................... 288,010 54,939 -- 342,949
Parts and service sales............... 77,215 26,459 -- 103,674
Other dealership revenues, net........ 23,206 5,080 1,455 (a 29,741
-------- ------- ------ ---------
Total revenues.................. 902,295 244,330 1,455 1,148,080
COST OF SALES:
New vehicle sales..................... 471,664 145,861 (457)(b) 617,068
Used vehicle sales.................... 266,976 51,308 52 (b) 318,336
Parts and service sales............... 36,524 13,431 11 (b) 49,966
-------- ------- ------ ---------
Total cost of sales............. 775,164 210,600 (394) 985,370
-------- ------- ------ ---------
GROSS PROFIT............................. 127,131 33,730 1,849 162,710
GOODWILL AMORTIZATION.................... 791 69 677(c) 1,537
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES................ 100,928 28,707 (1,629)(d) 128,006
-------- ------- ------ ---------
Income from operations........ 25,412 4,954 2,801 33,167
OTHER INCOME AND EXPENSES:
Interest expense, net.................. (6,120) (3,912) (347)(e) (10,379)
Other expense, net..................... 88 -- -- 88
-------- ------- ------ ---------
INCOME BEFORE INCOME TAXES............... 19,380 1,042 2,454 22,876
PROVISION FOR INCOME TAXES............... 7,967 -- 1,648 (f) 9,615
-------- ------- ------ ---------
NET INCOME............................... $ 11,413 $ 1,042 $ 806 $ 13,261
======== ======= ====== =========
Earnings per share on net income:
Basic ................................ $0.82
Diluted................................ $0.80
Weighted average shares outstanding:
Basic 16,100,962
Diluted................................ 16,661,142
</TABLE>
The accompanying notes are an integral part of
these pro forma statements of operations.
F-4
<PAGE> 8
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
(a) Records increases in revenues related to certain third party
products sold by the dealerships. The owners of the Carroll Automotive Group had
agreements in place, which decreased the fees and commissions paid to the
dealerships for sales of certain finance and insurance products. The amounts
withheld were paid to the owners. Upon completion of the acquisition, such
agreements were terminated and the dealerships recognized an immediate increase
in revenues related to the products sold.
(b) Adjusts cost of sales to the specific identification method of
inventory accounting, from the last-in, first-out basis.
(c) Records the pro forma goodwill amortization expense over an
estimated useful life of 40 years.
(d) Adjusts compensation expense and management fees to the level that
certain management employees and owners of the Carroll Automotive Group will
contractually receive subsequent to the closing of the acquisition.
(e) Records the pro forma increase in interest expense resulting from
the payment of the cash portion of the acquisition purchase price, which totaled
approximately $17.8 million. This increase is partially offset by pro forma
decreases in interest expense resulting from floorplan interest rate reductions
received upon completion of the acquisition and the reduction of long-term debt
resulting from the sale of certain assets in conjunction with the acquisition.
(f) Records the incremental provision for federal and state income
taxes relating to the compensation differential, S corporation income and other
pro forma adjustments.
F-5
<PAGE> 9
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Carroll Automotive Group
Hollywood, Florida
We have audited the accompanying combined balance sheet of the Carroll
Automotive Group as of December 31, 1997 and the related combined statements of
income, owners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Carroll
Automotive Group as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Crowe, Chizek and Company LLP
Ft. Lauderdale, Florida
February 6, 1998, except for
Notes 8, 9 and 12 as to which
the date is March 30, 1998.
F-6
<PAGE> 10
CARROLL AUTOMOTIVE GROUP
COMBINED BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets
Cash $ 3,396,595
Receivables, net 4,737,975
Inventories 38,384,572
Prepaid expenses and other 710,077
Due from related parties 1,082,577
-----------
Total current assets 48,311,796
Property and equipment, net 9,514,401
Goodwill, net 570,052
Other assets 75,121
-----------
10,159,574
-----------
$58,471,370
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Notes payable - vehicles $42,075,389
Current maturities of long-term debt 120,134
Accounts payable and accrued expenses 5,447,374
Due to related parties 4,492,667
-----------
Total current liabilities 52,135,564
Long-term debt, net of current maturities 6,360,925
Other long-term liabilities 300,000
Owners' equity
Common stock 159,000
Additional paid-in capital 4,144,792
Accumulated deficit (3,694,634)
Treasury stock (934,277)
-----------
(325,119)
-----------
$58,471,370
===========
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE> 11
CARROLL AUTOMOTIVE GROUP
COMBINED STATEMENT OF INCOME
Year ended December 31, 1997
<TABLE>
<S> <C>
REVENUE
New vehicle sales $157,851,960
Used vehicle sales 54,939,251
Parts and service sales 26,459,528
Other dealership revenues, net 5,079,717
------------
244,330,456
COST OF SALES
New vehicle sales 145,860,816
Used vehicle sales 51,308,028
Parts and service sales 13,431,294
------------
210,600,138
------------
GROSS PROFIT 33,730,318
Goodwill amortization 68,750
Selling, general and administrative expenses 28,707,223
------------
Income from operations 4,954,345
Interest expense 3,912,385
------------
NET INCOME $ 1,041,960
============
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE> 12
CARROLL AUTOMOTIVE GROUP
COMBINED STATEMENT OF OWNERS' EQUITY
Year ended December 31, 1997
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated Treasury
Stock Capital Deficit Stock Total
----- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $ 159,000 $ 4,144,792 $ (3,429,702) $ - $ 874,090
Net income for year - - 1,041,960 - 1,041,960
Dividends - - (1,306,892) - (1,306,892)
Treasury stock purchase - - - (934,277) (934,277)
--------- ------------ ------------ ---------- ------------
BALANCE AT DECEMBER 31, 1997 $ 159,000 $ 4,144,792 $ (3,694,634) $ (934,277) $ (325,119)
========= ============ ============ ========== ============
</TABLE>
See accompanying notes to combined financial statements.
F-9
<PAGE> 13
CARROLL AUTOMOTIVE GROUP
COMBINED STATEMENT OF CASH FLOWS
Year ended December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,041,960
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 711,202
Amortization of intangibles 68,750
Loss on disposal of property and equipment 1,019
Change in assets and liabilities
Receivables (1,214,505)
Inventories 2,520,006
Prepaid expenses and other (236,182)
Due from related parties 84,031
Other assets (45,935)
Accounts payable and accrued expenses 1,124,760
Net payments under floorplan agreements (390,057)
Due to related parties (392,301)
-----------
Net cash from operating activities 3,272,748
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (848,471)
Due from owners 498,384
-----------
Net cash used in investing activities (350,087)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt 10,366
Payments on long-term debt (101,184)
Purchase of treasury stock (934,277)
Dividends (1,306,892)
-----------
Net cash used in financing activities (2,331,987)
-----------
Net change in cash 590,674
Cash at beginning of year 2,805,921
-----------
CASH AT END OF YEAR $ 3,396,595
===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 4,329,251
Supplemental disclosure of noncash transactions
Property and equipment of $1,041,156 was transferred to a related party in
exchange for a related party receivable.
</TABLE>
See accompanying notes to combined financial statements.
F-10
<PAGE> 14
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business: Carroll Automotive Group (the Company) operates in
Hollywood and Miami, Florida and Atlanta, Georgia. The Company serves customers
principally in the south Florida and metropolitan Atlanta areas. The Company
offers a broad range of products and services including new and used car and
light truck sales, vehicle financing and warranty products, and replacement
parts and service.
Principles of Combination: The combined financial statements of Carroll
Automotive Group consist of the Koons Ford, Inc., Courtesy Ford, Inc., and
Perimeter Ford, Inc. dealerships. The entities are controlled by James S.
Carroll. Certain other dealership executives also have ownership interests.
All significant intercompany transactions have been eliminated in the combined
financial statements.
Credit Risk Concentration: The Company sells new and used vehicles, service
replacement parts and body shop repairs to customers in south Florida and
metropolitan Atlanta. The Company's trade receivables are due primarily from
retail customers. In addition, the majority of the vehicle and contracts
receivables are due from the manufacturer's financing subsidiaries and financial
institutions relating to sales of new and used vehicles, with the balance due
from various wholesale customers. Additionally, there are receivables and
payables to the manufacturer.
The Company has cash deposited in various local banks. The first $100,000 of the
deposits for each individual company are insured by an agency of the U.S.
Government.
Major Supplier and Dealer Agreements: The Company purchases substantially all of
its new vehicle and replacement parts inventories from Ford Motor Company at the
prevailing prices charged to all franchised dealers. The Company's overall sales
could be impacted by the manufacturer's inability or unwillingness to supply the
Company with an adequate supply or mix of inventory.
The Company enters into Dealer Agreements with the manufacturer. The Dealer
Agreements limit the location of the dealership and give the manufacturer rights
to approve changes in the dealership's ownership. The manufacturer is entitled
to terminate the Dealer Agreement if the Company is in breach of its terms.
Revenue Recognition: Revenue from the sale of vehicles is recognized on delivery
and completing financing arrangements. Revenue from parts and service sales is
recognized on delivery of service.
(Continued)
F-11
<PAGE> 15
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has various fleet sales which generate nominal gross profit, and in
management's opinion do not represent sales in the normal course of business.
Accordingly, sales of approximately $26.2 million and cost of sales of
approximately $25.8 million have been excluded from reported revenue and cost of
goods sold in the accompanying statement of income for the year ended December
31, 1997 as management believes excluding such amounts represents a more
appropriate basis of presentation. The net profit on these wholesale fleet
transactions is recorded as other dealership revenues in the accompanying
statement of income.
The Company sells both related party and third party service contracts for which
the Company receives a commission. The Company arranges financing with financial
institutions for its customers' purchases of new and used vehicles for which the
Company earns a fee from the respective financial institution. The fees that the
Company earns for arranging financing contracts and selling service contracts
are subject to chargeback if the customer terminates the respective contract for
any reason. The Company records an estimate of the liability for future
chargebacks based on management's estimate and historical experience.
Advertising: The Company expenses advertising costs as incurred. Advertising
expense was $3.1 million in 1997.
Inventories: Inventories are valued at the lower of cost or market, with cost
determined on a last-in first-out basis (LIFO).
Property and Equipment: Property and equipment is stated at cost less
accumulated depreciation. Expenditures for maintenance, repairs and minor
renewals are charged to expense in the period incurred. Betterments and
additions are capitalized. Depreciation is provided by the straight-line method
over the estimated useful lives of the assets.
Intangible Assets: The goodwill of Companies acquired is being amortized on a
straight-line basis over a period of 20 years. Recoverability is reviewed
annually or sooner if events or changes in circumstances indicate that the
carrying amount may exceed fair value.
Use of Estimates in the Preparation of Financial Statements: Preparing financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The actual outcome could differ from the
estimates made in the preparation of the financial statements.
Significant estimates include the liability for finance and insurance
chargebacks. It is reasonably possible this estimate will change and the effect
may be material.
Statement of Cash Flows: For purposes of the statement of cash flows, cash
includes cash, contracts in transit and short-term investments with original
maturities of 90 days or less.
(Continued)
F-12
<PAGE> 16
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 2 - INCOME TAXES
The combining entities are S Corporations for income tax purposes. Accordingly,
the accompanying financial statements reflect no provision for income taxes
since the taxable income or loss of the entities is reported by the
shareholders.
NOTE 3 - RECEIVABLES
Receivables at December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Trade receivables $ 433,658
Vehicle receivables 1,953,197
Factory receivables and others 2,405,388
------------
4,792,243
Less: allowance for doubtful accounts (54,268)
------------
$ 4,737,975
============
NOTE 4 - INVENTORIES
Inventories at December 31, 1997 consist of the following:
New vehicles $ 32,499,222
Used vehicles 2,974,275
Revenue earning vehicles, net 1,800,553
Parts, accessories and miscellaneous 1,110,522
------------
$ 38,384,572
============
The LIFO reserve at December 31, 1997 was $8.35 million.
</TABLE>
(Continued)
F-13
<PAGE> 17
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Land $ 7,030,700
Leasehold improvements 1,453,613
Equipment and vehicles 2,379,839
Furniture & fixtures 2,824,475
-------------
13,688,627
Less: accumulated depreciation and
amortization (4,174,226)
-------------
$ 9,514,401
=============
</TABLE>
NOTE 6 - INTANGIBLE ASSETS
Intangible assets at December 31, 1997 include the following:
<TABLE>
<S> <C>
Goodwill and franchise rights $ 1,375,000
Less: accumulated amortization (804,948)
-------------
$ 570,052
=============
</TABLE>
NOTE 7 - NOTES PAYABLE - VEHICLES
At December 31, 1997 the Company had floorplan financing agreements with Ford
Motor Credit Corporation bearing interest at 1% over prime, secured by new and
used vehicle inventories. Ford Motor Credit allows the Company to apply
available cash against the floorplan in a Cash Management Account (CMA). The
cash applied and the related interest savings is reflected as a reduction of the
floorplan liability and interest expense in the Company financial statements. At
December 31, 1997 the CMA amounts shown as reductions to the floorplan liability
totaled $7.4 million.
The Company has financing arrangements with Ford Motor Company relating to daily
revenue earning vehicles. The loans are secured by the revenue earning vehicles
and bear interest at 1% over prime. These loans require monthly principal
payments of 2% of the original amount.
(Continued)
F-14
<PAGE> 18
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 8 - NOTES PAYABLE
<TABLE>
<S> <C>
Notes payable consist of the following at December 31, 1997:
Ford Motor Credit Company at commercial paper rate plus 3.25%, interest
only payments until maturity date; secured by virtually all assets of the
combined Company and personally guaranteed by the shareholders; due October
1998. $ 5,199,820
Line of credit (maximum line of $950,000) to Ford Motor Credit Company at
prime rate plus 1.5%, payable in July 1998; secured by virtually all assets
of the combined Company and personally guaranteed by the shareholders. 950,000
Notes payable on equipment leases; payable in monthly installments; secured
by various equipment. 331,239
-----------
6,481,059
Current maturities (see below) 120,134
-----------
$ 6,360,925
===========
</TABLE>
In March 1998, the Company refinanced all of its existing Ford Motor Credit
Company debt with new agreements with Comerica Bank. Maturities of long-term
debt are shown in accordance with these new agreements.
Long-term debt is scheduled to mature over the next five years as follows:
<TABLE>
<S> <C>
1998 $ 120,134
1999 175,336
2000 249,926
2001 179,198
2002 169,344
</TABLE>
Interest expense on all indebtedness amounted to $4.4 million for the year ended
December 31, 1997.
Interest assistance credits of $3 million received from the manufacturer have
been shown as a reduction of the cost of sales.
(Continued)
F-15
<PAGE> 19
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has amounts due from related parties of $1,082,577 at December 31,
1997. These amounts have been subsequently satisfied with the transfer of
$950,000 in long-term debt and $132,577 in subsequent collections.
Due to related parties includes unsecured demand notes payable at 1% over prime.
The Company receives commissions from affiliated companies for the sale of
insurance and extended warranty contracts. The commission income (net of
chargebacks) from the affiliated companies for 1997 was approximately $1.45
million.
The Company leases its dealership facilities from related party partnerships
under ten year lease agreements dated January 1, 1995. The leases call for
monthly payments of $159,741 in 1997, escalating to $224,771 in 2004.
The minimum rental commitments are as follows:
1998 $ 2,012,734
1999 2,113,371
2000 2,219,039
2001 2,329,991
2002 2,446,491
Thereafter 5,266,071
------------
$ 16,387,697
============
Total rent expense under the lease agreements was $1,998,098 in 1997.
In March 1998, the Company entered into new lease arrangements with the same
related parties. These agreements are for a ten year period effective April 1,
1998 and call for monthly lease payments of $186,750 with an annual adjustment
equal to 1/2 the increase in the consumer price index. The lease provides for
four five-year renewal options.
(Continued)
F-16
<PAGE> 20
CARROLL AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997
NOTE 10 - COMMON STOCK
At December 31, 1997 the common stock consisted of:
<TABLE>
<CAPTION>
Par Value
of Common Shares Shares Shares
Shares Authorized Issued Outstanding Amount
------ ---------- ------ ----------- ------
<S> <C> <C> <C> <C> <C>
Koons Ford, Inc. $ .10 5,000 1,000 1,000 $ 100
Courtesy Ford, Inc. 1.00 1,000 1,000 800 1,000
Perimeter Ford, Inc. 100.00 5,000 1,579 1,579 157,900
---------
$ 159,000
=========
</TABLE>
NOTE 11 - PROFIT SHARING PLAN
In 1995, the Company adopted a profit sharing plan with 401(k) provisions. The
plan covers all employees over the age of 21 with 90 days of service. Company
contributions under the plan are at the discretion of management. No
contributions were made by the Company in 1997.
NOTE 12 - SUBSEQUENT EVENTS
In March 1998, Koons Ford, Inc. entered into a contract with a related party for
the sale of land in Pembroke Pines, Florida for $7.1 million, including the
transfer of $5.2 million in long-term debt to the related party.
In March 1998, the Carroll Automotive Group completed a merger agreement with
Group 1 Automotive, Inc.
F-17
