<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 4, 1998
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Budget Group, Inc.
------------------
(Exact name of registrant as specified in its charter)
Delaware 0-78274 59-3227576
- ------------------------------- ------------------- ---------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
125 Basin Street, Suite 210, Daytona Beach, FL 32114
- ---------------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 238-7035
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Former name or former address, if changed since last report: N/A
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EXPLANATORY NOTE
This Report includes pro forma consolidated financial statements for
Budget Group, Inc. and Subsidiaries to reflect various transactions as further
described in the introduction to the unaudited pro forma consolidated financial
statements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Pro Forma Financial Information.
The following pro forma financial information is filed
herewith:
Pro Forma Consolidated Statement of Operations for
the six month period ended June 30, 1998 (Unaudited).
Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1997 (Unaudited).
-2-
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUDGET GROUP, INC.
(Registrant)
Date: September 4, 1998 By: /s/ THOMAS L. KRAM
-------------------------------------
Thomas L. Kram
Vice President - Controller
<PAGE> 4
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997, is based on the historical financial statements of Budget
Group, Inc. ("Budget"), after restatement for the 1998 pooling of interests with
Cruise America, Inc. ("Cruise America"), and Ryder TRS, Inc. ("Ryder TRS") for
the year ended December 31, 1997, and of Budget Rent a Car Corporation ("BRACC")
for the period from January 1, 1997, through April 29, 1997, adjusted to give
effect to the merger of Budget and Ryder (the "Ryder TRS Acquisition
Transaction" or the "Merger"), the acquisition of BRACC (the "Budget Acquisition
Transactions", collectively, the "Acquisitions") and various changes in Budget's
capital structure that occurred concurrently with the Merger (the
"Recapitalization Transactions") as if they had occurred on January 1, 1997.
The Pro Forma Consolidated Statement of Operations for the six month period
ended June 30, 1998, is based on the unaudited historical financial statements
of Budget, after restatement for the 1998 pooling of interests with Cruise
America, and Ryder TRS for the five month period ended May 31, 1998, adjusted
to give effect to the Ryder TRS Acquisition Transaction and the Recapitalization
Transactions as if they had occurred on January 1, 1997.
The Ryder TRS Acquisition Transaction consists of the purchase of the
Ryder TRS Common Stock through the issuance of 3,455,206 shares of Budget Class
A Common Stock, the payment of $125 million in cash and the issuance of warrants
to purchase Budget Class A Common Stock, the value of which is capped at $19
million. In addition, Budget may, under certain conditions, be obligated to pay
Ryder TRS stockholders a make-whole payment, the amount, if any, of which will
depend on the performance of Budget Class A Common Stock following the Merger.
The Budget Acquisition Transactions consist of the following: (i) the
BRACC acquisition, including the repayment, purchase and forgiveness of certain
indebtedness and the necessary purchase accounting and elimination entries;
(ii) the sale of 8,625,000 shares of Budget Class A Common Stock by Budget in a
public offering in April 1997 (the "Public Offering") and the application of
the net proceeds thereof; (iii) the private placement (the "Debt Placements")
of $45 million aggregate principal amount of Convertible Notes and $165
million aggregate principal amount of 9.57% Guaranteed Senior Notes due 2007
(the "Guaranteed Senior Notes") and the application of the net proceeds
thereof; and (iv) the April 1997 credit facilities for fleet financings (the
"April 1997 Fleet Financings") with an aggregate commitment of $1.4 billion
and the application of the net proceeds thereof and the repayment of certain of
BRACC's outstanding indebtedness to Ford Motor Company from the net proceeds
thereof. The BRACC acquisition has been accounted for using the purchase
method of accounting.
The Recapitalization Transactions consist of the following: (i) the
amendment and restatement of Budget's existing $300 million secured revolving
credit facility to increase such facility to $550 million; (ii) the conversion
of $80 million of convertible subordinated notes (the "Series A Convertible
Notes") into 4,305,814 shares of Budget Class A Common Stock, including 319,768
shares issued in lieu of interest payments which the holders of the convertible
subordinated notes will forego as a result of early conversion; (iii) the
redemption of the Guaranteed Senior Notes; (iv) the tender acceptance for $175
million of the Ryder TRS 10% Senior Subordinated Notes due 2006; (v) the
issuance, by a subsidiary of Budget, of 6,000,000 shares of remarketable term
income deferrable equity securities ("HIGH TIDES" or "Company-Obligated
Mandatorily Redeemable Preferred Securities") and the application of the net
proceeds thereof; (vi) the private placement of $1.1 billion of medium term
notes (the "TFFC-98 Notes") and the application of the net proceeds thereof; and
(vii) the write-off of loan costs related to converted or retired debt.
The Pro Forma Consolidated Financial Statements do not purport to
represent what Budget's results of operations or financial condition would have
been had the Acquisitions and the Recapitalization Transactions actually
occurred on the dates indicated or to predict Budget's results of operations
or financial condition in the future. These statements are qualified in their
entirety by, and should be read in conjunction with, the historical financial
statements of Budget, after restatement for the 1998 pooling of interests with
Cruise America, and Ryder TRS and the notes thereto.
The Pro Forma Consolidated Financial Statements have been prepared
using the purchase method of accounting, whereby the total cost of the Merger
was allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their respective fair values at the effective date of the
Merger. Such allocations have been based on studies and valuations which have
not yet been completed. Accordingly, the allocations reflected in the Pro
Forma Consolidated Financial Statements are preliminary and subject to
revision. However, Budget does not expect material changes to the allocation
of the purchase price.
The Pro Forma Consolidated Financial Statements give effect only to
the adjustments set forth in the accompanying notes and do not reflect any
other benefits anticipated by management as a result of the Acquisitions, the
Recapitalization Transactions and the implementation of Budget's business
strategy.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Six-Month Period Ended June 30, 1998
(Amounts In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments For Pro Forma
Historical Ryder TRS Budget Group Adjustments For
Budget Historical Acquisition For The Ryder TRS Recapitalization Pro Forma
Group Ryder TRS Transaction Acquisition Transactions Budget Group
--------- --------- -------------- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue $ 790,096 $ 196,762 $ - $ 986,858 $ - $ 986,858
Retail vehicle sales revenue 238,037 - - 238,037 - 238,037
Royalty fees and other 42,204 - - 42,204 - 42,204
--------- --------- ----------- ---------- -------- ----------
Total operating revenue 1,070,337 196,762 - 1,267,099 - 1,267,099
--------- --------- ----------- ---------- -------- ----------
Operating costs and expenses:
Depreciation - vehicle 208,842 29,857 - 238,699 - 238,699
Costs of retail vehicle sales 211,195 - - 211,195 - 211,195
Operating expense 390,238 73,180 - 463,418 - 463,418
Selling, general and
administrative expense 145,082 92,441 (425)(a) 237,098 - 237,098
Merger expenses - pooling 1,595 - - 1,595 - 1,595
Amortization and non-vehicle
depreciation 18,356 4,979 2,856 (b)(c) 26,191 - 26,191
-------- --------- ----------- ---------- -------- ----------
Total operating costs
and expenses 975,308 200,457 2,431 1,178,196 - 1,178,196
-------- --------- ----------- ---------- -------- ----------
Operating income (loss) 95,029 (3,695) (2,431) 88,903 - 88,903
-------- --------- ----------- ---------- -------- ----------
Other expense:
Interest expense 84,041 14,450 - 98,491 (11,369)(e)(f) 87,122
Debt extinguishment costs 9,454 - - 9,454 (9,454)(g) -
--------- --------- ----------- ---------- -------- ----------
93,495 14,450 - 107,945 (20,823) 87,122
--------- --------- ----------- ---------- -------- ----------
Income (loss) before taxes 1,534 (18,145) (2,431) (19,042) 20,823 1,781
Provision (benefit) for income
taxes (447) (6,854) 325 (d) (6,976) 4,655 (d) (2,321)
Distributions on Trust preferred
securities 651 - - 651 8,733 (h) 9,384
--------- --------- ----------- ---------- -------- ----------
Net income (loss) $ 1,330 $ (11,291) $ (2,756) $ (12,717) $ 7,435 $ (5,282)
========= ========= =========== ========== ======== ==========
WASO - basic 28,134 31,589 35,992
========= ========== ==========
Basic EPS $ 0.05 $ (0.40) $ (0.15)
========= ========== ==========
WASO - diluted 28,963 31,589 35,992
========= ========== ==========
Diluted EPS $ 0.05 $ (0.40) $ (0.15)
========= ========== ==========
</TABLE>
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NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Six-Month Period Ended June 30, 1998
(Amounts In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
(a) Reflects the elimination of management fees of $425 incurred by Ryder under
an agreement terminated in connection with the Merger.
(b) Reflects a decrease in amortization expense of $500 attributable to the fair
market value adjustment to certain non-vehicle assets.
(c) Reflects the elimination of $2,734 in amortization of Ryder's existing
intangibles and records an increase in amortization of $6,090 on the net
intangibles established through purchase accounting adjustments.
(d) Reflects a tax provision attributable to the combined group on a pro forma
basis.
(e) Reflects the decrease in interest expense attributable to:
Elimination of interest on Series A Convertible Notes due to conversion $ 2,608
Elimination of interest on the Guaranteed Senior Notes 7,354
Elimination of interest on Ryder TRS's 10% Senior Subordinated Notes due 2006 8,678
Interest savings on Budget's commercial paper facility partially refinanced through
the issuance of the TFFC-98 Notes 18,539
Interest savings on Ryder TRS's commercial paper facility refinanced through the
issuance of the TFFC-98 Notes 7,618
Elimination of amortization of loan costs on retired debt 1,855
--------
Decrease in interest expense $ 46,652
========
(f) Reflects the increase in interest expense attributable to:
Interest expense related to the TFFC-98 Notes $ 31,589
Amortization of costs incurred in connection with the TFFC-98 Notes and
the increase in the secured revolving credit facility 1,192
Amortization of costs incurred in connection with the issuance of the High Tides 698
Reduction in interest income due to increased utilization of existing medium term notes 1,804
--------
Increase in interest expense $ 35,283
========
(g) Reflects the elimination of debt extinguishment costs incurred related to
the conversion of the Series A Convertible Notes.
(h) Reflects the accrual of distributions on the High Tides.
</TABLE>
<PAGE> 6
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Adjustments Adjustments for
Historical Historical BRACC for Budget Ryder TRS
Budget through Budget Acquisition Historical Acquisition
Group Acquisition (a) Transactions Ryder TRS Transaction
---------- --------------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Operating revenue:
Vehicle rental revenue $1,070,436 $ 311,945 $ -- $ 545,720 $ --
Retail vehicle sales revenue 289,111 29,146 -- -- --
Royalty fees and other 51,889 23,132 (3,656)(b) -- --
---------- ------------ -------- --------- --------
Total operating revenue 1,411,436 364,223 (3,656) 545,720 --
---------- ------------ -------- --------- --------
Operating costs and expenses:
Depreciation - vehicle 292,112 89,019 -- 99,361 --
Costs of retail vehicle sales 251,068 25,691 -- -- --
Operating expense 500,297 168,965 (2,439)(b) 191,537 --
Selling, general and administrative expense 173,433 58,556 (1,217)(b) 225,850 (850)(j)
Amortization and non-vehicle depreciation 23,530 14,416 (1,578)(c) 12,810 6,856(k)(l)
---------- ------------ -------- --------- --------
Total operating costs and expenses 1,240,440 356,647 (5,234) 529,558 6,006
---------- ------------ -------- --------- --------
Operating income 170,996 7,576 1,578 16,162 (6,006)
---------- ------------ -------- --------- --------
Interest expense 115,397 40,922 (5,348)(d)(e)(f) 39,178 --
---------- ------------ -------- (g)(h) --------- --------
Income (loss) before taxes 55,599 (33,346) 6,926 (23,016) (6,006)
Provision (benefit) for income taxes 25,825 (6,669) (5,514)(i) (8,861) 715(i)
Distributions on Trust preferred securities -- -- -- -- --
---------- ------------ -------- --------- --------
Net income (loss) $ 29,774 $ (26,677) $ 12,440 $ (14,155) $ (6,721)
========== ============ ======== ========= ========
WASO - basic 20,112
==========
Basic EPS $ 1.48
==========
WASO - diluted 27,863
==========
Diluted EPS $ 1.25
==========
<CAPTION>
Pro Forma
Budget Group Adjustments for
for the Recapitalization Pro Forma
Acquisitions Transactions Budget Group
------------ ---------------- ------------
<S> <C> <C> <C>
Operating revenue:
Vehicle rental revenue $ 1,928,101 $ -- $ 1,928,101
Retail vehicle sales revenue 318,257 -- 318,257
Royalty fees and other 71,365 -- 71,365
----------- ------- -----------
Total operating revenue 2,317,723 -- 2,317,723
----------- ------- -----------
Operating costs and expenses:
Depreciation - vehicle 480,492 -- 480,492
Costs of retail vehicle sales 276,759 -- 276,759
Operating expense 858,360 -- 858,360
Selling, general and administrative expense 455,772 -- 455,772
Amortization and non-vehicle depreciation 56,034 -- 56,034
----------- ------- -----------
Total operating costs and expenses 2,127,417 -- 2,127,417
----------- ------- -----------
Operating income 190,306 -- 190,306
----------- ------- -----------
Interest expense 190,149 (21,106)(m)(n) 169,043
----------- ------- -----------
Income (loss) before taxes 157 21,106 21,263
Provision (benefit) for income taxes 5,496 907(i) 6,403
Distributions on Trust preferred securities -- 18,750(o) 18,750
----------- ------- -----------
Net income (loss) $ (5,339) $ 1,449 $ (3,890)
=========== ======= ===========
WASO - basic 26,379 30,944
=========== ===========
Basic EPS $ (0.20) $ (0.13)
=========== ===========
WASO - diluted 26,379 30,944
=========== ===========
Diluted EPS $ (0.20) $ (0.13)
=========== ===========
</TABLE>
<PAGE> 7
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For The Year Ended December 31, 1997
(Amounts In Thousand)
(Unaudited)
<TABLE>
<S> <C>
(a) Reflects the inclusion of the operations of BRACC from January 1, 1997 to April 29, 1997, the date
of the Budget Acquisition.
(b) Reflects the elimination of the following transactions between TEAM and BRACC:
Advertising fees paid by TEAM which were recognized as other revenue
by BRACC.................................................................... $ 1,217
Royalty expenses paid by TEAM which were recognized as royalty fees
by BRACC.................................................................... 1,700
Also reflects the elimination of the current period effect of $739 royalty fees recognized by BRACC
and $739 royalty expense recognized by TEAM related to the Warrant to purchase shares of Class A
Common Stock of TEAM held by BRACC ("the BRACC Warrant").
(c) Reflects the elimination of $5,824 of amortization of BRACC's existing goodwill and records an
increase of $4,246 amortization on the net goodwill and other intangible assets recorded through
purchase accounting adjustments.
(d) Reflects the increase in vehicle interest expense attributable to:
Interest expense related to the April 1997 Fleet Financings........................... $17,899
Amortization of costs incurred in connection with certain of the April 1997 Fleet
Financings....................................................................... 384
-------
Increase in vehicle interest expense........................................ $18,283
=======
(e) Reflects the decrease in vehicle interest expense attributable to:
Interest savings on vehicle debt refinanced through the April 1997 Fleet
Financings....................................................................... $17,696
Interest savings on vehicle debt to Ford paid down by BRACC in connection with
the Budget Acquisition........................................................... 1,832
-------
Decrease in vehicle interest expense........................................ $19,528
=======
(f) Reflects the decrease in non-vehicle interest expense attributable to:
Interest expense related to the Debt Placements....................................... $ 6,205
Amortization of costs incurred in connection with certain of the April 1997 Fleet
Financings and the Debt Placements............................................... 487
-------
Increase in non-vehicle interest expense................................... $ 6,692
=======
</TABLE>
<PAGE> 8
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - (Continued)
For The Year Ended December 31, 1997
(Amounts In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
(g) Reflects the decrease in non-vehicle interest expense attributable to:
Elimination of interest on BRACC indebtedness to Ford purchased by TEAM
through the issuance of Series A Convertible Preferred Stock of TEAM ................................ $ 2,478
Elimination of interest on working capital debt of $134,136 forgiven by Ford........................... 3,353
Elimination of interest on BRACC indebtedness to Ford paid down by BRACC
using the proceeds from BRACC's sale of newly-issued common stock to
TEAM................................................................................................. 4,928
---------
Decrease in non-vehicle interest expense........................................................... $ 10,759
=========
(h) Reflects $36 of interest income -- restricted cash on the $2,400 increase in restricted cash resulting
from the receipt of Ford's funding of the special bonus program implemented in connection with the
Budget Acquisition.
(i) Reflects a tax provision attributable to the combined group on a pro forma basis.
(j) Reflects the elimination of management fees of $850 incurred by Ryder under an agreement
terminated in connection with the Merger.
(k) Reflects a decrease in amortization expense of $1,200 attributable to the fair market value adjustment
to certain non-vehicle assets.
(l) Reflects the elimination of $4,023 in amortization of Ryder's existing intangibles and records an
increase in amortization of $12,079 on the net intangibles established through purchase accounting
adjustments.
(m) Reflects the decrease in interest expense attributable to:
Elimination of interest on Series A Convertible Notes due to conversion $ 5,600
Elimination of interest on the Guaranteed Senior Notes 15,791
Elimination of interest on Ryder TRS's 10 % Senior Subordinated Notes due 2006 17,500
Interest savings on Budget's commercial paper facility partially refinanced through the
issuance of the TFFC-98 Notes 30,819
Interest savings on Ryder TRS's commercial paper facility refinanced through the
issuance of the TFFC-98 Notes 7,244
Elimination of amortization of loan costs on retired debt 2,486
Reflects interest income on average restricted cash balance generated through the
issuance of the TFFC-98 Notes 12,374
---------
Decrease in interest expense $ 91,814
=========
(n) Reflects the increase in interest expense attributable to:
Interest expense related to the TFFC-98 Notes $ 67,823
Amortization of costs incurred in connection with the TFFC-98 Notes and
the increase in the secured revolving credit facility 2,560
Amortization of costs incurred in connection with the issuance of the High Tides 325
---------
Increase in interest expense $ 70,708
=========
(o) Reflects the accrual of distributions on the High Tides
</TABLE>
