<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 20, 1998 (Date of earliest event reported)
UGLY DUCKLING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-20841 86-0721358
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
</TABLE>
2525 East Camelback Road, Suite 500, Phoenix, Arizona 85016
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (602)852-6600
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
Attached hereto as Exhibit 99.1 is a copy of Ugly Duckling
Corporation's press release dated October 20, 1998 titled "Ugly Duckling
Announces Successful Completion of Exchange Offer." In addition, attached
hereto as Exhibit 99.2 is a copy of Ugly Duckling Corporation's press release
dated October 21, 1998 titled "Ugly Duckling Corporation Announces Third
Quarter 1998 Results."
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
99.1 Ugly Duckling Corporation Press Release Dated October 20, 1998
Titled "Ugly Duckling Announces Successful Completion of
Exchange Offer"
99.2 Ugly Duckling Corporation Press Release Dated October 21, 1998
Titled "Ugly Duckling Corporation Announces Third Quarter 1998
Results"
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UGLY DUCKLING CORPORATION
(Registrant)
By /s/ Steven P. Johnson
__________________________
(Signature)
Steven P. Johnson
Senior Vice President
Date October 21, 1998
<PAGE> 4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
99.1 Ugly Duckling Corporation Press Release Dated October 20, 1998
Titled "Ugly Duckling Corporation Announces Successful
Completion of Exchange Offer"
99.2 Ugly Duckling Corporation Press Release Dated October 21, 1998
Titled "Ugly Duckling Corporation Announces Third Quarter 1998
Results"
<PAGE> 1
EXHIBIT 99.1
[UGLY DUCKLING LOGO]
UGLY DUCKLING CORPORATION
CONTACTS: Steven T. Darak
Senior Vice President & Chief Financial Officer
(602) 852-6600
Lori Parks/Eugene Heller
Silverman Heller Associates
(310) 208-2550
FOR IMMEDIATE RELEASE
UGLY DUCKLING CORPORATION ANNOUNCES
SUCCESSFUL COMPLETION OF EXCHANGE OFFER
PHOENIX, Arizona (October 20, 1998) - Ugly Duckling Corporation (Nasdaq
NM: UGLY) announced today the successful completion of its exchange offer, which
expired yesterday as scheduled. At the close of business on the expiration date,
the exchange agent reported that a total of 2,463,603 shares of common stock
were tendered to the Company. The final total of tendered shares is subject to
certain guaranteed delivery procedures and Ugly Duckling's review and acceptance
of all such shares validly tendered. The Company plans to deliver debentures in
exchange for shares in accordance with the exchange offer as soon as practicable
after the expiration of the guaranteed delivery period.
The exchange offer enabled stockholders to exchange up to 5,000,000 of
their shares in the Company for 12%, five-year subordinated debentures. Under
the terms of the offer, each share of common stock was exchangeable for $6.50
principal amount of debentures.
Stockholders who have questions about the exchange offer may contact
Corporate Investor Communications, Inc., the designated information agent, at
1-888-673-4478 (toll-free).
Headquartered in Phoenix, Arizona, Ugly Duckling Corporation is a used
car sales and finance company that operates the nation's largest chain of used
car dealerships focused exclusively on the sub-prime market. The Company
underwrites, finances and services sub-prime contracts generated at its 52
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<PAGE> 2
Ugly Duckling Corporation Announces Successful Completion of Exchange Offer
October 20, 1998
Page 2
Ugly Duckling dealerships. Cygnet Financial Corporation, a wholly owned
subsidiary of the Company, provides various financial services primarily to the
sub-prime segment of the automobile financing industry.
*****
This press release may include statements that constitute
forward-looking statements, usually containing the words "believe," "estimate,"
"project," "expects" or similar expressions. These statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements inherently involve risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Factors that could cause or contribute to such differences include
factors detailed in the sections entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Risks Factors," "Factors
That May Affect Future Results and Financial Condition" and "Factors That May
Affect Future Stock Performance" in Ugly Duckling Corporation's most recent
reports on Form 10-K and Form 10-Q (including Exhibit 99 to any such Form 10-Q),
factors detailed in the section "Risk Factors" in Ugly Duckling Corporation's
definitive proxy statement dated August 4, 1998, and elsewhere in Ugly Duckling
Corporation's Securities and Exchange Commission filings. By making these
forward-looking statements, the Company undertakes no obligation to update these
statements for revisions or changes after the date of this press release.
# # #
<PAGE> 1
EXHIBIT 99.2
[UGLY DUCKLING LOGO]
CONTACTS: Steven T. Darak
Senior Vice President & Chief Financial Officer
(602) 852-6600
Lori Parks/Eugene Heller
Silverman Heller Associates
(310) 208-2550
FOR IMMEDIATE RELEASE
UGLY DUCKLING CORPORATION ANNOUNCES THIRD QUARTER 1998 RESULTS
PHOENIX, Arizona (October 21, 1998) - Ugly Duckling Corporation (Nasdaq
NM: UGLY) today reported results from continuing dealership and discontinued
non-dealership operations for its third quarter and nine months ended September
30, 1998.
For the quarter, earnings from continuing dealership operations totaled
$2.2 million, or $0.12 per diluted share, compared with earnings from continuing
dealership operations of $1.4 million, or $0.08 per diluted share, for the third
quarter of 1997. Total revenues for the period increased 101% to $86.1 million
over the $42.8 million reported for the same period a year ago. Earnings for the
third quarter of 1998 (excluding special charges) from discontinued,
non-dealership operations of Cygnet Financial Corporation, a wholly owned
subsidiary, totaled $543,000 or $0.03 per diluted share. Cygnet net earnings for
the third quarter of 1997 totaled $758,000 or $0.04 per diluted share.
For the nine-month period ended September 30, 1998, earnings from
continuing operations rose to $8.6 million, or $0.46 per diluted share, compared
with $4.3 million, or $0.24 per diluted share, for the same nine-month period of
1997. Total revenues for the period increased to $252.5 million over the $101.3
million for the year-ago period. Earnings (exclusive of special charges) for the
nine months ended September 30, 1998, from discontinued, non-dealership Cygnet
operations totaled $902,000, or $0.05 per
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<PAGE> 2
Ugly Duckling Corporation Announces Third Quarter 1998 Results
October 21, 1998
Page 2
diluted share, compared with $173,000, or $0.01 per diluted share, for the nine
months ended September 30, 1997.
The Company also reconfirmed that it took two special charges to
discontinued operations in the third quarter totaling $(4.8) million (net of
income taxes) or $(0.26) per diluted share. As previously reported, $(3.6)
million of the charge is attributable to higher-than-estimated costs associated
with the Company's discontinued third-party dealer branch office network and
$(1.2) million is attributable to costs incurred for Cygnet's recently
terminated rights offering.
On a consolidated basis, the net loss for the third quarter of 1998,
including discontinued operations and special charges, was $(2.1) million, or
$(0.11) per diluted share, compared with a net loss of $(1.8) million, or
$(0.10) per diluted share, for the year-ago quarter. The net loss for the first
nine months of 1998 totaled $(1.0) million, or $(0.05) per share, versus net
earnings of $5.7 million, or $0.32 per diluted share, for the first nine months
of 1997.
"Although disappointed with the special charges, we are pleased that
dealership operations have remained consistently profitable and have continued
to expand, while we have also maintained adequate reserves. Our Ugly Duckling
Car Sales dealerships have also increased from 35 to 51 on a year-to-year basis
as of the end of the third quarter," stated Ernest C. Garcia II, chairman and
chief executive officer of Ugly Duckling Corporation. "As we previously
reported, we also believe our recently completed internal process of separating
our dealership and non-dealership operations should enhance each segment's
ability to focus on its operations and improve financial performance."
The Company also announced that based upon market conditions, it is
evaluating a potential change in the way it structures transactions under its
securitization program. The Company currently structures these transactions to
record a gain on sale for accounting purposes and is considering whether to
instead structure them for accounting purposes to recognize the income over the
life of the contracts. The Company expects to make a decision on this potential
change during the fourth quarter of 1998.
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Ugly Duckling Corporation Announces Third Quarter 1998 Results
October 21, 1998
Page 3
Headquartered in Phoenix, Arizona, Ugly Duckling Corporation is a used
car sales and finance company that operates the nation's largest chain of used
car dealerships focused exclusively on the sub-prime market. The Company
underwrites, finances and services sub-prime contracts generated at its 50 plus
Ugly Duckling Car Sales dealerships. Cygnet Financial Corporation, a wholly
owned subsidiary of Ugly Duckling Corporation, provides various financial
services primarily to the sub-prime segment of the automobile financing
industry.
This press release may include statements that constitute
forward-looking statements, usually containing the words "believe," "estimate,"
"project," "expects" or similar expressions. These statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements inherently involve risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Factors that could cause or contribute to such differences include
factors detailed in the sections entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Risks Factors," "Factors
That May Affect Future Results nd Financial Condition" and "Factors That May
Affect Future Stock Performance" in Ugly Duckling Corporation's most recent
reports on Form 10-K and Form 10-Q (including Exhibit 99 to any such Form 10-Q),
factors detailed in the section "Risk Factors" in Ugly Duckling Corporation's
definitive proxy statement dated August 4, 1998, and elsewhere in Ugly Duckling
Corporation's Securities and Exchange Commission filings. By making these
forward-looking statements, the Company undertakes no obligation to update these
statements for revisions or changes after the date of this press release.
[Financial Tables Follow]
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<PAGE> 4
Ugly Duckling Corporation Announces Third Quarter 1998 Results
October 21, 1998
Page 4
FINANCIAL HIGHLIGHTS
For Quarter and Nine Month Periods Ended September 30, 1998 and 1997
Consolidated Operating Information
(In thousands, except used cars sold and per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------ ------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Used cars sold - Units 27,143 10,801 9,128 4,523
========= ========= ========= =========
Total revenues $ 252,473 101,287 86,116 42,844
========= ========= ========= =========
Used car sales $ 216,111 79,543 73,620 33,530
Cost of used cars sold 123,976 45,902 42,763 20,012
Provision for credit losses 45,053 14,193 15,746 6,084
--------- --------- --------- ---------
Net revenue from dealerships 47,082 19,448 15,111 7,434
--------- --------- --------- ---------
Interest earnings 12,031 8,511 4,592 3,820
Gain on sale of loans 12,093 6,155 3,820 2,012
Servicing and other income 12,238 7,078 4,084 3,482
Operating expenses:
Dealerships 42,023 18,496 13,958 7,890
Servicing 13,879 8,348 4,703 3,317
Administrative 11,667 6,368 4,846 2,893
--------- --------- --------- ---------
Total operating expenses 67,569 33,212 23,507 14,100
--------- --------- --------- ---------
Operating earnings 15,875 7,980 4,100 2,648
Interest expense 1,526 678 362 238
--------- --------- --------- ---------
Earnings before income taxes 14,349 7,302 3,738 2,410
--------- --------- --------- ---------
Income taxes 5,777 2,966 1,503 979
Earnings (loss):
Continuing operations 8,572 4,336 2,235 1,431
Discontinued operations - net (9,591) 1,409 (4,337) (3,259)
--------- --------- --------- ---------
Net earnings (loss) $ (1,019) 5,745 (2,102) (1,828)
========= ========= ========= =========
Earnings (loss) per share - basic:
Continuing operations $ 0.46 0.25 0.12 0.08
--------- --------- --------- ---------
Net earnings (loss) $ (0.05) 0.33 (0.11) (0.10)
--------- --------- --------- ---------
Earnings (loss) per share - diluted:
Continued operations $ 0.46 0.24 0.12 0.08
--------- --------- --------- ---------
Net earnings (loss) $ (0.05) 0.32 (0.11) (0.10)
--------- --------- --------- ---------
Shares used in:
Basic computation 18,600 17,620 18,560 18,460
--------- --------- --------- ---------
Diluted computation 18,800 18,200 18,800 19,000
--------- --------- --------- ---------
</TABLE>
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<PAGE> 5
Ugly Duckling Corporation Announces Third Quarter 1998 Results
October 21, 1998
Page 5
Consolidated Balance Sheet Information
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
--------------------- --------
Assets: 1998 1997 1997
-------- -------- --------
<S> <C> <C> <C>
Cash $ 955 4,401 3,537
Finance receivables, net 25,526 13,897 47,501
Residual in finance receivables sold 36,308 16,022 13,277
Investments held in trust 20,076 10,421 11,637
Used car inventory 36,184 19,467 32,372
Property & equipment, net 26,225 35,833 39,182
Intangible assets, net 14,571 15,983 16,366
Other assets 13,929 15,394 9,350
Discontinued operations, net 105,014 86,576 102,411
-------- -------- --------
$278,788 217,994 275,633
======== ======== ========
Total Liabilities and Stockholders Equity:
Accounts payable & accrued expenses $ 23,503 19,349 16,688
Notes payable 48,867 9,250 65,171
Subordinated debt 25,000 12,000 12,000
-------- -------- --------
Total liabilities 97,370 40,599 93,859
-------- -------- --------
Total stockholders' equity 181,418 177,395 181,774
-------- -------- --------
$278,788 217,994 275,633
======== ======== ========
</TABLE>
Discontinued Operations - Assets, net
(In thousands)
<TABLE>
<CAPTION>
September 30, June 30, December 31,
1998 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Champion Portfolio - Retained $ 42,105 53,626 42,879
Investments held in trust 4,640 5,500 7,277
Assets arising from FMAC transactions 19,105 18,135 25,686
Cygnet Finance Portfolio 37,629 32,974 19,438
Other, net 1,535 4,532 7,131
-------- -------- --------
$105,014 114,767 102,411
======== ======== ========
</TABLE>
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<PAGE> 6
Ugly Duckling Corporation Announces Third Quarter 1998 Results
October 21, 1998
Page 6
Finance Receivables and Allowance for Credit Losses Information
(In thousands)
<TABLE>
<CAPTION>
Principal Balances Attributable
----------------------------------------------
Continuing Operations: Retained Securitized Managed
-------- ----------- -------
<S> <C> <C> <C>
Dealership Portfolio - September 1998 $30,089 246,734 276,823
Dealership Portfolio - December 1997 $55,965 127,356 183,321
Dealership Portfolio - September 1997 $16,545 155,407 171,952
</TABLE>
<TABLE>
<CAPTION>
Delinquencies
----------------------------------------------------------------
Continuing Operations: Retained Securitized Managed
-------- ----------- -------
<S> <C> <C> <C>
September 30, 1998, Over 60 Days 2.5% 2.4% 2.4%
September 30, 1998, 30 - 60 Days 0.8% 5.0% 4.5%
---- ---- ----
September 30, 1998, Over 30 Days 3.3% 7.4% 6.9%
December 31, 1997, Over 60 Days 0.6% 2.2% 1.5%
December 31, 1997, 31 - 60 Days 2.2% 4.5% 3.6%
---- ---- ----
December 31, 1997, Over 30 Days 2.8% 6.7% 5.1%
September 30, 1997, Over 60 Days 2.8% 1.4% 1.6%
September 30, 1997, 30 - 60 Days 1.5% 3.9% 3.6%
---- ---- ----
September 30, 1997, Over 30 Days 4.3% 5.3% 5.2%
</TABLE>
<TABLE>
<CAPTION>
Allowance as % of Remaining Principal
--------------------------------------------
Continuing Operations: Retained Securitized Managed
-------- ----------- -------------
<S> <C> <C> <C>
Dealership Portfolio - September 1998 18.5% 24.3% 23.7%
Dealership Portfolio - December 1997 18.5% 18.4% 18.4%
Dealership Portfolio - September 1997 23.6% 16.9% 19.5%
</TABLE>
###
