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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) February 6, 1998
UGLY DUCKLING CORPORATION
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(Exact Name of Registrant as Specified in Charter)
DELAWARE File No. 20841 86-0721358
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
2525 East Camelback Road, Suite 1150, Phoenix, Arizona 85016
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (602) 852-6600
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On February 6, 1998, Ugly Duckling Corporation (the "Company")
announced earnings for its year end and quarter ended December 31, 1997, as well
as the closure of its third party dealer branch network and a related
restructuring charge. The charge will be recorded in the quarter ending March
31, 1998.
For the year ended December 31, 1997, the Company recorded earnings of
$9.4 million (including $8.4 million in after-tax gains recognized from the sale
of contract receivables under its securitization program), or diluted earnings
per share of $0.52, on total revenues of $191.1 million, as compared to earnings
of $5.9 million (including $4.4 million in gains under the securitization
program), or diluted earnings per share of $0.60, on total revenues of $75.6
million in 1996. Earnings for the fourth quarter of 1997 were $3.7 million, or
diluted earnings per share of $0.20, on total revenues of $70.9 million as
compared to $1.8 million (including gains of $1.9 million under the
securitization program), or diluted earnings per share of $0.14, on total
revenues of $17.9 million for the same period of 1996. Earnings for the fourth
quarter of 1997 included an after-tax gain of $5.0 million from the sale, with
retained servicing, of certain receivables acquired from First Merchants
Acceptance Corporation, as well as an after-tax gain of $2.0 million from a
securitization transaction.
Subsequent to December 31, 1997, the Company announced that it intends
to close its Champion Financial Services branch office system (the "Branch
Offices") and exit this line of business, and record a pre-tax restructuring
charge of $6.0 million to $10.0 million in 1998. The restructuring is expected
to be complete by the end of the first quarter of 1998 and will include the
termination of approximately 450 employees, substantially all of whom are
employed at the Company's 76 Branch Offices. Approximately $1.0 million of the
restructuring charge is for termination benefits, $2.5 million for writeoff of
pre-opening and start-up costs, and the remainder for lease payments on idle
facilities and writedowns of leasehold improvements, data processing and other
equipment. The Company had utilized its Branch Office network to purchase
sub-prime automobile contracts from various third party used car dealers. In
this regard, in the fourth quarter of 1997, the Company announced a strategic
evaluation of its third party dealer operations. As a result of that evaluation,
the Company has determined to close its Branch Office network and to focus on
its remaining third party dealer operations, including its Cygnet Finance
operations, and the bulk purchase and/or servicing of contracts originated by
other sub-prime lenders. Over the past several months, the Company has entered
into several large servicing or bulk purchase transactions, and believes this
is a more efficient method of purchasing or obtaining servicing rights to
sub-prime automobile contracts. The Company will also continue expanding its
retail car sales and financing business through Ugly Duckling Car Sales.
This Form 8-K includes statements that may constitute forward-looking
statements, usually containing the words "believe," "estimate," "project,"
"expect," or similar expressions. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. By
making these forward-looking statements, the Company undertakes no obligation to
update these statements for revisions or changes after the date of this release.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
These risks and uncertainties include unanticipated changes in either the
competitive environment or the costs associated with severance payments,
premises, technology and other equipment. Investors should also consider factors
that would cause or contribute to such differences, which include, but are not
limited to, factors detailed in this Form 8-K," in the section entitled
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"Risk Factors" in the Company's Registration Statement (No. 333-42973) on Form
S-1 filed with the Securities and Exchange Commission on December 22, 1997, as
amended on February 6, 1998 and on February 9, 1998, and in the sections
entitled "Factors That May Affect Future Results and Financial Condition" and
"Factors That May Affect Future Stock Performance" and elsewhere in the
Company's most recent reports on Form 10-K/A and Form 10-Q, and in the Company's
other Securities and Exchange Commission filings.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UGLY DUCKLING CORPORATION
Date: February 9, 1998 By: /s/ Steven P. Johnson
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Steven P. Johnson
Senior Vice President and
General Counsel
