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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
November 18, 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.)
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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)
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ITEM 5. OTHER EVENTS.
Attached hereto as Exhibit 99.1 is a copy of Ugly Duckling
Corporation's press release dated November 18, 1998 titled "Ugly Duckling
Corporation to Discontinue Gain-on-Sale Accounting."
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
99.1 Ugly Duckling Corporation Press Release Dated November 18, 1998
Titled "Ugly Duckling Corporation to Discontinue Gain-on-Sale
Accounting."
2
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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/ Ernest C. Garcia II
__________________________
(Signature)
Ernest C. Garcia II
Chief Executive Officer
Date November 17, 1998
3
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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99.1 Ugly Duckling Corporation Press Release Dated November 18, 1998
Titled "Ugly Duckling Corporation to Discontinue Gain-on-Sale
Accounting."
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[UGLY DUCKLING CORPORATION LOGO]
EXHIBIT 99.1
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 TO DISCONTINUE GAIN-ON-SALE ACCOUNTING
PHOENIX, Arizona (November 18, 1998) - Ugly Duckling Corporation (Nasdaq
NM: UGLY) today announced that it is changing the way it structures transactions
under its securitization program. Until now, the Company has structured these
transactions as sales for accounting purposes. Beginning in the fourth quarter
of 1998, however, the Company will structure securitizations for accounting
purposes to recognize the income over the life of the contracts. This change
will not affect the Company's prior securitizations.
Commenting on the announcement, Chairman and CEO Ernest C. Garcia II
stated: "The decision to structure the securitizations to eliminate sale
accounting treatment reflects the growing skepticism among securities analysts
and a lack of investor confidence in this treatment. While we believe our sale
accounting has been appropriate, it appears that the investment community is not
fully distinguishing between those companies doing it correctly and those being
overly aggressive."
Mr. Garcia continued: "The fundamentals of our business, particularly
our revenues, should be unaffected by this change. We also expect to
continue to finance our receivables through securitization.
-more-
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Ugly Duckling to Discontinue Gain On Sale Accounting
November 18, 1998
Page Two
However, there will initially be a significant adverse impact on earnings per
share for the next few periods as we build our on-balance-sheet portfolio. We
expect to incur a significant loss in the fourth quarter of 1998, and this
change should continue to have a material adverse effect on reported earnings
until the Company's net earnings from the additional contracts added to the
Company's balance sheet approximates the revenues the Company has historically
recognized on its securitization transactions. Nonetheless, we believe this
approach will enhance the long-term value of the Company through greater
earnings stability and predictability, as well as instill higher confidence in
those earnings from the investment community."
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.
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This press release may include statements that 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.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Specifically, the statements in this press release relating to the Company's
expectations and beliefs in connection with the elimination of gain-on-sale
accounting treatment and the elimination's impact on the Company over the near
and long term, including without limitation the enhanced stability and
predictability of earnings it should provide, are forward looking in nature and
involve risks and uncertainties. Factors that could cause or contribute to
differences from these forward-looking statements include, but are not limited
to: the Company's ability to maintain or increase its finance receivables; the
credit quality of the Company's finance receivables; changes in estimates and
assumptions in the Company's reserve for credit losses; profitability of the
Company's retail operations, in general; new or revised accounting, tax and
legal guidance, pronouncements, laws, rules and regulations associated with
finance receivables and securitizations; the deterioration in the used car
finance industry; the further tightening of credit to the sub-prime
-more-
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Ugly Duckling to Discontinue Gain On Sale Accounting
November 18, 1998
Page Three
industry; and the competitive nature of the Company's industries. Other 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) 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.
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