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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date to earliest event reported): July 9, 1998
SONIC AUTOMOTIVE, INC.
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(Exact name of registrant as Specified in Charter)
Delaware 1-13395 56-2010790
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28026
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (704) 532-3320
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(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Incorporated by reference to
exhibit 99.2 to the Company's Form 8-K filed July 9, 1998 (the "July 9, 1998
Form 8-K").
(B) PRO FORMA FINANCIAL INFORMATION. Attached as an exhibit to this report on
Form 8-K are the following:
UNAUDITED PRO FORMA FINANCIAL STATEMENTS REFLECTING THE BUSINESS COMBINATION
OF SONIC AUTOMOTIVE, INC. AND HATFIELD DEALERSHIPS
Pro Forma Statement of Income for the Year Ended December 31, 1997
(Unaudited) and Notes thereto.
Pro Forma Statement of Income for the Three Months Ended March 31, 1998
(Unaudited) and Notes thereto.
Pro Forma Balance Sheet at March 31, 1998 (Unaudited) and Notes thereto.
(C) EXHIBITS
Exhibit Number Description
- -------------------- ----------------------------------------------
99.1* Asset Purchase Agreement dated as of February 4, 1998
between Sonic Automotive, Inc., as buyer, Hatfield
Jeep Eagle, Inc., Hatfield Lincoln Mercury, Inc.,
Trader Bud's Westside Dodge, Inc., Toyota West, Inc.,
and Hatfield Hyundai, Inc. as sellers, and Bud C.
Hatfield, Dan E. Hatfield and Dan E. Hatfield, as
trustee of The Bud C. Hatfield, Sr. Special
Irrevocable Trust, as shareholders of the sellers
(incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 (the "March 31, 1998 Form
10-Q")).
99.2* Amendment No. 1 and Supplement to Asset Purchase
Agreement dated as of May 28, 1998 between Sonic
Automotive, Inc., Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., Trader Bud's Westside Dodge,
Inc., Toyota West, Inc., and Hatfield Hyundai, Inc.,
Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield,
as trustee of The Bud C. Hatfield, Sr. Special
Irrevocable Trust (incorporated by reference to
Exhibit 99.6 to the July 9, 1998 Form 8-K).
99.3* Amendment No. 2 and Supplement to Asset Purchase
Agreement dated as of July 8, 1998 between Sonic
Automotive, Inc., Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., and Hatfield Hyundai, Inc., Bud
C. Hatfield, Dan E. Hatfield and Dan E. Hatfield, as
trustee of The Bud C. Hatfield, Sr. Special
Irrevocable Trust (incorporated by reference to
Exhibit 99.9 to the Company's Form 8-K filed July 24,
1998 (the "July 24, 1998 Form 8-K")).
99.4* Combined Financial Statements of the Hatfield
Automotive Group as of December 31, 1996 and 1997 and
for each of the three years in the period ending
December 31, 1997 (Audited) and as of March 31, 1998
and for the three months then ended (Unaudited)
(incorporated by reference to Exhibit 99.2 to the
July 9, 1998 Form 8-K).
2
<PAGE>
99.5 Unaudited Pro Forma Financial Statements Reflecting
the Business Combination of Sonic Automotive, Inc. and
Hatfield Dealerships for the year ended December 31,
1997 and as of March 31, 1998 and for the three months
then ended.
99.6* Press Release dated July 9, 1998 (incorporated by
reference to Exhibit 99.6 to the July 24, 1998 Form
8-K).
99.7* Strategic Alliance Agreement and Agreement for the
Mutual Referral of Acquisition Opportunities dated
July 9, 1998, between Sonic Automotive, Inc. and Mar
Mar Realty, L.P. (incorporate by reference to Exhibit
99.7 to the July 24, 1998 Form 8-K).
*Filed Previously
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SONIC AUTOMOTIVE, INC.
Date: August 20, 1998 By: /s/ Theodore M. Wright
-------------------------
Theodore M. Wright
Chief Financial
Officer, Vice
President-Finance,
Treasurer, Secretary
and Director
4
Exhibit 99.5
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations for
the year ended December 31, 1997 reflects the historical accounts of the Company
for that period, adjusted giving effect to the acquisitions of Lake Norman
Dodge, Inc. and Affiliated Companies, Ken Marks Ford, Inc., Dyer & Dyer, Inc.
and the Bowers Dealerships and Affiliated Companies in 1997 (the "1997
Acquisitions"), the acquisitions of Clearwater Dealerships and Affiliated
Companies effective January 1, 1998 (the "Clearwater Acquisition" and, together
with the 1997 Acquisitions, the "Completed Acquisitions"), and the Hatfield
Acquisition (collectively, the "Acquisitions"), as if such acquisitions had
occurred on the first day of the period presented. The following unaudited pro
forma consolidated statement of operations for the three months ended March 31,
1998 reflects the historical accounts of the Company for that period, adjusted
to give effect to the Hatfield Acquisition, as if such acquisition had occurred
on the first day of the period presented. The following unaudited pro forma
consolidated balance sheet as of March 31, 1998 reflects the historical accounts
of the Company as of that date as adjusted to give effect to the Hatfield
Acquisition as if such acquisition had occurred on March 31, 1998.
The unaudited pro forma consolidated financial data and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and
related notes of the Company as included in its Annual Report on Form 10-K dated
March 31, 1998 and its Quarterly Report on Form 10-Q dated May 14, 1998, the
financial statements and related notes of the Bowers Dealerships and Affiliated
Companies, Lake Norman Dodge, Inc. and Affiliated Companies, Ken Marks Ford,
Inc. and Dyer and Dyer, Inc. as included in the Company's Prospectus dated
November 10, 1997, as well as the financial statements and related notes of the
Hatfield Automotive Group as included herein by exhibit 99.3 and as incorporated
by reference to exhibit 99.2 to the Company's Form 8-K dated July 9, 1998. The
Company believes that the assumptions used in the following statements provide a
reasonable basis on which to present the unaudited pro forma financial data. The
unaudited pro forma consolidated financial data are provided for informational
purposes only and should not be construed to be indicative of the Company's
financial condition or results of operations had the transactions described
above been consummated on the dates assumed, and are not intended to project the
Company's financial condition on any future date or its results of operations
for any future period.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
<S> <C>
COMPLETED ACQUISITIONS
------------------------------------------------------
PRO-FORMA
ADJUSTMENTS PRO-FORMA
1997 FOR THE FOR THE
ACQUISITIONS CLEARWATER COMPLETED COMPLETED
ACTUAL (A) (B) ACQUISITION ACQUISITIONS ACQUISITIONS
----------- --------------------------------------- ------------
Revenues:
Vehicle sales $ 467,858 $ 364,756 $ 108,812 $ - $ 941,426
Parts, service, and collision repair 57,537 42,164 10,500 110,201
Finance and insurance 10,606 7,723 2,587 346 (c) 21,262
----------- ------------------------------------- ------------
Total Revenues 536,001 414,643 121,899 346 1,072,889
Cost of Sales 471,253 360,794 105,786 (371) (d) 937,462
----------- ------------------------------------- -------------
Gross Profit 64,748 53,849 16,113 717 135,427
Selling, general & administrative expenses 48,520 41,909 12,226 (4,093) (e) 99,745
1,183 (f)
Management bonus -
Depreciation and amortization 1,322 914 390 (179) (f) 3,725
(303) (g)
1,581 (h)
----------- ------------------------------------- ------------
Operating income 14,906 11,026 3,497 2,528 31,957
Interest expense, floorplan 8,007 4,722 779 (1,864) (i) 11,644
Interest expense, other 1,199 234 721 (690) (f) 5,394
3,949 (j)
267 (k)
(286) (l)
Other income 298 180 194 672
----------- ------------------------------------- ------------
Income (loss) before income
taxes and minority interest 5,998 6,250 2,191 1,152 15,591
Provision for income taxes 2,249 178 - 627 (m) 5,979
2,925 (n)
----------- ------------------------------------- ------------
Income (loss) before minority interest 3,749 6,072 2,191 (2,400) 9,612
Minority interest in
earnings of subsidiary 47 - - 47
----------- ------------------------------------- ------------
Net Income (Loss) $ 3,702 $ 6,072 $ 2,191 $ (2,400) $ 9,565
=========== ===================================== ============
Basic net income per share (o) $ 0.53
===========
Weighted average shares outstanding (o) 6,949
===========
Diluted net income per share (o) $ 0.53
===========
Weighted average shares outstanding (o) 6,949
===========
HATFIELD ACQUISITION
------------------------
PRO-FORMA
ADJUSTMENTS
FOR THE PRO FORMA
HATFIELD HATFIELD FOR THE
DEALERSHIPS ACQUISITION ACQUISITIONS
----------- ------------- ------------
Revenues:
Vehicle sales $ 251,981 $ - $ 1,193,407
Parts, service, and collision repair 16,400 126,601
Finance and insurance 6,899 28,161
------------------------ ------------
Total Revenues 275,280 - 1,348,169
Cost of Sales 243,370 1,180,832
-------------------------- ------------
Gross Profit 31,910 - 167,337
Selling, general & administrative expenses 21,153 104 (e) 121,002
Management bonus 7,121 (7,121) (e) -
Depreciation and amortization 221 4,865
(25) (g)
944 (h)
------------------------ ------------
Operating income 3,415 6,098 41,470
Interest expense, floorplan 3,663 (414) (i) 15,523
630 (j)
Interest expense, other - 7,625
2,231 (j)
Other income 224 896
------------------------ ------------
Income (loss) before income
taxes and minority interest (24) 3,651 19,218
Provision for income taxes - 1,583 (m) 7,552
(10) (n)
------------------------ ------------
Income (loss) before minority interest (24) 2,078 11,666
Minority interest in
earnings of subsidiary - 47
------------------------ ------------
Net Income (Loss) $ (24) $ 2,078 $ 11,619
======================== ============
Basic net income per share (o) $ 1.03
============
Weighted average shares outstanding (o) 11,250
============
Diluted net income per share (o) $ 0.91
============
Weighted average shares outstanding (o) 12,749
============
</TABLE>
(See accompanying notes to Unaudited Pro Forma Consolidated Statements of
Operations)
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 1998
(in thousands except per share data)
<TABLE>
<CAPTION>
<S> <C>
PRO FORMA PRO FORMA
HATFIELD ADJUSTMENTS FOR FOR THE
ACTUAL (A) DEALERSHIPS THE ACQUISITION THE ACQUISITION
--------------- -------------------------------- -----------------
Revenues:
Vehicle sales $ 228,569 $ 57,661 $ - $ 286,230
Parts, service, and collision repair 28,965 4,255 - 33,220
Finance and insurance 6,247 1,747 - 7,994
--------------- -------------------------------- -----------------
Total Revenues 263,781 63,663 - 327,444
Cost of Sales 228,600 56,297 - 284,897
--------------- -------------------------------- -----------------
Gross Profit 35,181 7,366 - 42,547
Selling, general & administrative expenses 26,640 5,053 20 (e) 31,713
Management bonus - 1,700 (1,700) (e) -
Depreciation and amortization 815 67 (6) (g) 1,112
236 (h)
--------------- -------------------------------- -----------------
Operating income 7,726 546 1,450 9,722
Interest expense, floorplan 3,235 556 (59) (i) 3,889
157 (j)
Interest expense, other 1,061 - 593 (j) 1,654
Other income 44 41 85
--------------- -------------------------------- -----------------
Income before income taxes and minority interest 3,474 31 759 4,264
Provision for income taxes 1,338 - 335 (m) 1,686
13 (n)
--------------- -------------------------------- -----------------
Income before minority interest 2,136 31 411 2,578
Minority interest in earnings of subsidiary - - - -
--------------- -------------------------------- -----------------
Net Income $ 2,136 $ 31 $ 411 $ 2,578
=============== ================================ =================
Basic net income per share $ 0.19 $ 0.23
=============== =================
Weighted average shares outstanding 11,250 11,250
=============== =================
Diluted net income per share (o) $ 0.19 $ 0.20
=============== =================
Weighted average shares outstanding (o) 11,374 12,843
=============== =================
</TABLE>
(SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS)
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1997 AND MARCH 31, 1998
(a)The actual consolidated statement of operations data for the Company for the
year ended December 31, 1997 includes the results of operations of the
following dealerships and dealership groups acquired during the year ended
December 31, 1997 from their respective dates of acquisition:
DEALERSHIP ACQUIRED DATE OF ACQUISITION
- --------------------------- --------------------
Fort Mill
Chrysler-Plymouth-Dodge June 3, 1997
Lake Norman Dealerships September 1, 1997
Ken Marks Ford October 1, 1997
Williams Motors October 10, 1997
Dyer Volvo November 1, 1997
Bowers Dealerships November 1, 1997
The actual consolidated statement of operations data for the Company for the
three months ended March 31, 1998 includes the results of operations of the
Clearwater Dealerships and Affiliated Companies from January 1, 1998, the
date of the Clearwater Acquisition.
(b)Reflects the results of operations of the 1997 Acquisitions for the period
from January 1, 1997 to their respective dates of acquisition. Pro forma
adjustments have not been presented to include the results of (i) Fort Mill
Chrysler-Plymouth-Dodge for the period from January 1, 1997 to June 3, 1997,
the date of the acquisition or (ii) Williams Motors for the period from
January 1, 1997 to October 10, 1997, the date of acquisition, because
management believes such results are not material.
(c)Reflects finance and insurance revenues generated by the 1997 Acquisitions
and the Clearwater Acquisition in the amounts of $252,000 and $94,000,
respectively, for the year ended December 31, 1997 that were paid directly to
the dealership owners or wholly-owned management companies and excluded from
revenue in the historical financial statements of the acquired dealerships.
(d)Adjustment reflects the conversion from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting for the 1997
Acquisitions in the amount of $371,000 for the year ended December 31, 1997
to conform to the Company's method of accounting for vehicle inventories.
(e)Reflects the net decrease in selling, general, and administrative expenses
related to the net reduction in salaries, bonuses, and fringe benefits and
related expenses of owners and officers of the acquired dealerships who have
become or will become employees, consistent with reduced salaries pursuant to
employment agreements with the Company, or whose positions have been or will
be eliminated as part of the acquisitions.
(f)Reflects the increase in rent expense related to lease agreements entered
into with the sellers of certain dealerships acquired in the 1997
Acquisitions and the Clearwater Acquisition for such dealerships' real
property that were not acquired by the Company, and the decreases in
depreciation expense and interest expense related to mortgage indebtedness
encumbering such property of approximately $1.8 million bearing interest at
9% and $5.9 million bearing interest at rates from 9% to 9.5% associated with
the 1997 Acquisitions and the Clearwater Acquisition, respectively.
(g)Reflects the elimination of amortization expense related to goodwill that
arose in previous acquisitions in certain of the acquired dealerships from
the date of the acquisitions.
(h)Reflects the amortization over an assumed useful life of 40 years of
intangible assets, consisting primarily of goodwill, resulting from the
Acquisitions which were assumed to occur on January 1, 1997. In accordance
with the purchase agreement associated with the Clearwater Acquisition, the
Company will be required to make an additional payment, not to exceed $1.8
million, equal to 50% of the combined 1998 pre-tax earnings of the entities
acquired. Amount includes amortization of the additional goodwill associated
with this contingent purchase price, which has been estimated at
approximately $1.7 million based on the estimated 1998 pre-tax earnings of
the entities acquired. The amount of the contingent purchase price, and the
corresponding goodwill, may actually be different from the amounts estimated
here depending on the actual combined 1998 pre-tax earnings of the entities
acquired.
(i)Reflects the net decrease in interest expense, floor plan, resulting from the
refinancing of the notes payable, floor plan arrangements of the Company and
the dealerships being acquired, under a standardized floor plan credit
facility with Ford Motor Credit which requires placement of acquired
dealerships floor plan financing with Ford Motor Credit (the "Floor Plan
Facility") as if such refinancing had occurred at the beginning of the period
presented. The average interest rate under the Floor Plan Facility is
approximately 7.6% compared to historical interest rates ranging from 8.1% to
9.5%.
<PAGE>
(j)Reflects the increase in interest expense associated with borrowings made
under the Company's revolving credit facility with Ford Motor Credit bearing
interest at 8.5% of $33.4 million, $11.4 million and $26.2 million used to
finance the 1997 Acquisitions, the Clearwater Acquisition and the Hatfield
Acquisition, respectively, and borrowings made under the Company's Floor Plan
Facility bearing interest at 7.6% of approximately $8.3 million used to
finance the Hatfield Acquisition. Amount includes estimated additional
borrowings to be made under the Company's revolving facility of approximately
$1.7 million used to finance the estimated contingent purchase price
associated with the Clearwater Acquisition (see note (h)).
(k)In connection with the acquisition of the Bowers Dealerships, the Company
issued a promissory note to the former owner in the amount of $4.0 million
bearing interest at NationsBank's prime rate less 0.5%. This adjustment
reflects an increase in interest expense related to the promissory note
assuming a prime rate of 8.5% as if the note was issued at the beginning of
the period presented.
(l)Reflects the decrease in interest expense related to debt, other than
mortgage indebtedness, associated with the 1997 Acquisitions and the
Clearwater Acquisition of approximately $1.6 million bearing interest at 8.5%
and $1.8 million bearing interest at rates ranging from 9% to 10%,
respectively, which has not been assumed.
(m)Reflects the net increase in provision for income taxes resulting from pro
forma adjustments above, computed using a combined statutory income tax rate
of approximately 39%.
(n)Certain of the acquired dealerships were not subject to federal and state
income taxes because they were either S corporations, partnerships, or
limited liability companies during the period indicated. Upon completion of
these acquisitions, these dealerships will be subject to federal and state
income tax as C corporations. This adjustment reflects the resulting increase
in the federal and state income tax provision as if these entities had been
taxable at the combined statutory income tax rate of approximately 39%.
(o)Pro forma basic and diluted net income per share and the related weighted
average shares outstanding for the year ended December 31, 1997 have been
adjusted to reflect the issuance of 5 million shares of the Company's Class A
Common Stock in connection with its initial public offering ("IPO") in
November 1997 as if such shares had been issued on January 1, 1997. Pro forma
diluted net income per share and the related weighted average shares
outstanding for the year ended December 31, 1997 includes the dilutive effect
of the issuance of 3,960 and 14,025 shares of the Company's Class A Preferred
Stock in connection with the Clearwater Acquisition and the Hatfield
Acquisitions, respectively. Warrants to purchase 44,391 shares of the
Company's Class A Common Stock issued in January 1998 in connection with the
consummation of the 1997 Acquisitions were not included in the reported
amounts because they were anti-dilutive. Pro forma net income per share and
the related weighted average shares outstanding for the three months ended
March 31, 1998 includes the dilutive effect of the issuance of 3,960 and
14,025 share of the Company's Class A Preferred Stock in connection with the
Clearwater Acquisitions and the Hatfield Acquisitions, respectively. The
following is a reconciliation of the pro forma weighted average shares for
the year ended December 31, 1998 and the three months ended March 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
--------------- ---------------
Weighted Average Shares - Basic (actual) 6,949 11,250
Issuance of Common Stock in connection with IPO 4,301 -
--------------- ---------------
Weighted Average Shares - Basic (pro forma) 11,250 11,250
=============== ===============
Weighted Average Shares - Diluted (actual) 6,949 11,374
Issuance of Common Stock in connection with IPO 4,301 -
Class A Convertible Preferred Stock 1,499 1,469
Warrants - -
--------------- ---------------
Weighted Average Shares - Diluted (pro forma) 12,749 12,843
=============== ===============
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
PRO FORMA
ADJUSTMENTS FOR PRO FORMA
HATFIELD THE HATFIELD FOR THE
ACTUAL DEALERSHIPS ACQUISITION THE ACQUISITION
-------------- -------------- --------------- --------------
ASSETS
Current Assets:
Cash & cash equivalents $ 23,391 $ 14,990 $ - (a)(b) $ 26,074
(12,307)(c)
Marketable equity securities 247 247
Receivables 22,128 3,360 25,488
Inventories 150,819 34,395 185,214
Deferred Income Taxes 405 405
Due from affiliates 1,014 1,014
Other current assets 1,969 6,610 8,579
-------------- -------------- --------------- --------------
Total current assets 199,973 59,355 (12,307) 247,021
Property & equipment, net 19,796 1,003 20,799
Goodwill, net 86,072 977 39,406 (a) 125,478
(977)(d)
Other assets 651 651
-------------- -------------- --------------- --------------
Total assets $ 306,492 $ 61,335 $ 26,122 $ 393,949
============== ============== =============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable-floor plan $ 128,152 $ 33,456 $ 8,283 (b) $ 169,891
Trade accounts payable 7,554 2,660 10,214
Accrued interest 1,445 1,445
Other accrued liabilities 12,893 1,132 14,025
Payable to affiliates 445 7,196 (7,196)(c) 445
Current maturities of long-term debt 584 584
-------------- -------------- --------------- --------------
Total current liabilities 151,073 44,444 1,087 196,604
Long-term debt 49,982 27,901 (b) 77,883
Payable to the Company's Chairman 5,500 5,500
Payable to affiliates 4,192 10,569 (10,569)(c) 4,192
Deferred income taxes 1,079 1,079
Income tax payable 4,822 4,822
Stockholders' equity
Common stock of combined companies 2,825 (2,825)(a) -
Preferred Stock 3,366 14,025 (a) 17,391
Class A Common Stock 50 50
Class B Common Stock 63 63
Paid-in capital 68,045 1,744 (1,744)(a) 68,045
Retained earnings 18,322 1,753 (6,234)(a) 18,322
5,458 (c)
(977)(d)
Unrealized loss on marketable
equity securities (2) (2)
-------------- -------------- --------------- --------------
Total stockholders' equity 89,844 6,322 7,703 103,869
============== ============== =============== ==============
Total liabilities & stockholders' equity $ 306,492 $ 61,335 $ 26,122 $ 393,949
============== ============== =============== ==============
</TABLE>
(SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET)
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
(a)Reflects the preliminary allocation of the purchase price of the Hatfield
Acquisition based on the estimated fair value of net assets acquired. Amount
also reflects the allocation of the estimated contingent purchase price
associated with the Clearwater Acquisition (see note (h) to the Notes to
Unaudited Consolidated Statement of Operations). Because the carrying amount
of the net assets acquired, which primarily consist of accounts receivable,
inventory, equipment, and floor plan indebtedness, approximates their fair
value, management believes the application of purchase accounting will not
result in a significant adjustment to the carrying amount of those net
assets. The amount of goodwill and the corresponding amortization actually
recorded may ultimately be different from amounts estimated here, depending
on the actual fair value of tangible net assets acquired, changes in the
estimated fair value of the preferred stock issued as determined by an
independent appraisal which has not yet been finalized, and the actual
contingent purchase price associated with the Clearwater Acquisition. The
estimated purchase price allocation consists of the following:
HATFIELD CLEARWATER
DEALERSHIPS ACQUISITION TOTAL
------------ ------------ ------------
Estimated total consideration:
Cash $34,525 $1,659 $36,184
Preferred Stock 14,025 14,025
------------ ------------ ------------
Total 48,550 1,659 50,209
Less: Estimated fair value
of tangible
Net assets acquired 10,803 - 10,803
------------ ------------ ------------
Excess of purchase price over
fair value
Of net tangible assets
acquired $37,747 $1,659 $39,406
============ ============ ============
(b)Reflects borrowings made under the Company's Floor Plan Facility at 7.6% and
the Company's revolving credit facility with Ford Motor Credit at 8.5% used
to finance the Hatfield Acquisition.
(c)Reflects the elimination of cash in the amount of $12.3 million that was not
acquired in the Hatfield Acquisition and the elimination of the current and
long term portions of payables to affiliates amounting to $7.2 million and
$10.6 million, respectively, which were not assumed in the Hatfield
Acquisition.
(d)Reflects the elimination of goodwill that arose in previous acquisitions of
the Hatfield dealerships.
