<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission File Number 333-06585
CROSS-CONTINENT AUTO RETAILERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2653095
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1201 S. Taylor
Amarillo, Texas 79101
(Address of principal executive offices) (Zip Code)
(806) 374-8653
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Number of shares outstanding of each of the issuer's classes of common stock, as
of May 14, 1998:
Class Shares Outstanding
- --------------------------------------- ----------------------------------
Common Stock, $.01 par value per share 13,573,908
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
INDEX
<TABLE>
<CAPTION>
Part I
Financial Information Page
<S> <C>
Item 1 Financial Statements
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and March 31, 1997 3
Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 4
Combined Statements of Cash Flows
Three Months Ended March 31, 1998 and March 31, 1997 5
Notes to Consolidated Financial Statements 6
Independent Accountants' Review Report 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Margin Statistics 12
Results of Operations 13
Part II
Other Information
Item 1 Legal Proceedings 19
Item 6 Exhibits and Reports on Form 8-K 19
</TABLE>
2
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands - Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues
Vehicle sales ...................... $ 130,134 $ 77,554
Other operating revenue ............ 19,397 11,468
--------- ---------
Total revenues ......... 149,531 89,022
Cost of sales .................................. 124,045 73,839
--------- ---------
Gross profit ....................... 25,486 15,183
--------- ---------
Operating expenses
Selling, general and administrative 20,119 10,901
Depreciation and amortization ...... 927 381
Employee severance charge (Note 7) . 815 --
--------- ---------
Total operating expenses 21,861 11,282
--------- ---------
Income before interest and taxes ... 3,625 3,901
Other income (expense)
Interest income .................... 158 736
Interest expense ................... (2,270) (1,211)
--------- ---------
Income before income taxes ......... 1,513 3,426
Income tax provision ............... 565 1,280
--------- ---------
Net income ............. $ 948 $ 2,146
--------- ---------
--------- ---------
Basic and diluted net income per share ......... $ .07 $ .16
--------- ---------
--------- ---------
Weighted average common shares outstanding ..... 13,560 13,800
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, 1998 December 31,1997
(Unaudited)
-------------- ----------------
<S> <C> <C>
Current assets
Cash and cash equivalents ............................. $ 11,398 $ 15,173
Accounts receivable ................................... 21,362 16,884
Inventories ........................................... 75,463 55,807
Other current assets .................................. 2,271 1,792
--------- ---------
Total current assets ...................... 110,494 89,656
Property and equipment, net ............................... 20,807 33,165
Goodwill and other intangible assets, net ................. 84,639 67,988
Other assets .............................................. 4,772 6,464
--------- ---------
Total assets .............................. $ 220,712 $ 197,273
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Floor plan notes payable .............................. $ 71,154 $ 53,368
Current maturities of long-term debt .................. 812 727
Accounts payable ...................................... 6,198 6,117
Due to affiliates ..................................... 14,659 15,150
Accrued expenses and other liabilities ................ 13,181 10,559
Deferred income taxes ................................. 1,396 647
--------- ---------
Total current liabilities ................. 107,400 86,568
Long-term debt ............................................ 42,005 44,263
Other liabilities and deferred credits .................... 5,097 3,180
--------- ---------
Total long-term liabilities ............... 47,102 47,443
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued ............................. -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 14,205,703 issued ....................... 142 142
Paid-in capital ....................................... 55,053 54,528
Retained earnings ..................................... 18,280 17,332
Treasury stock, 631,795 and 760,000 shares at cost
at March 31, 1998 and December 31, 1997, respectively (7,265) (8,740)
--------- ---------
Total stockholders' equity ................ 66,210 63,262
Commitments and contingencies
Total liabilities and stockholders' equity $ 220,712 $ 197,273
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income ............................................ $ 948 $ 2,146
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization ..................... 927 381
Amortization of deferred warranty revenue ......... (423) (472)
(Increase) decrease in
Accounts receivable ................................. (1,136) 3,507
Inventory ........................................... (5,439) 2,367
Other assets ........................................ (221) (927)
Increase (decrease) in
Accounts payable - trade ............................ (4,636) (2,002)
Accrued expenses and other liabilities .............. 1,732 829
-------- --------
Net cash provided by (used in) operating activities (8,248) 5,829
Cash flows from investing activities
Acquisition of property and equipment ................. (980) (753)
Construction costs .................................... (4,625) --
Acquisition of dealerships ............................ (13,046) --
Proceeds from sale/leaseback .......................... 21,700 --
-------- --------
Net cash provided by (used in) investing activities 3,049 (753)
Cash flows from financing activities
Change in floor plan notes payable .................... 7,556 (8,216)
Net proceeds from borrowings .......................... -- 124
Long-term debt repayments ............................. (5,641) (141)
Due to affiliates ..................................... 1,985 (73)
Proceeds from borrowings - affiliates ................. 3,008 --
Long-term debt repayments - affiliates ................ (5,484) --
Other ................................................. -- (285)
-------- --------
Net cash provided by (used in) financing activities 1,424 (8,591)
Decrease in cash and cash equivalents ..................... (3,775) (3,515)
Cash and cash equivalents at beginning of period .......... 15,173 36,946
-------- --------
Cash and cash equivalents at end of period ................ $ 11,398 $ 33,431
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
Note 1. Unaudited interim financial information
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. This interim report should be
read in conjunction with the consolidated financial statements and notes related
thereto, and management's discussion and analysis of results of operations and
financial condition included in Cross-Continent Auto Retailers, Inc.'s ("C-CAR"
or the "Company") Annual Report on Form 10-K for the year ended December 31,
1997. The accompanying unaudited consolidated financial statements have been
subject to review by the Company's independent accountants whose report is
included herein.
Note 2. Net income per common share
As of March 31, 1998, the Company had 1,125,907 stock options
outstanding with exercise prices ranging from $7.00 to $19.25 and at March 31,
1997 had 316,516 options outstanding with exercise prices ranging from $14.00 to
$19.25. These options have been excluded from the diluted EPS calculations as
the effect of such would have been anti-dilutive.
Note 3. Related party transactions
In connection with its business travel, the Company from time to time
uses an airplane that is owned and operated by Plains Air, Inc. Plains Air, Inc.
is owned by Bill A. Gilliland, Chairman. Currently, the Company pays Plains Air,
Inc. $20,000 per month for fixed costs, $800 per hour for operating expenses and
actual fuel cost when the airplane is used by the Company. During the three
months ended March 31, 1998 and 1997, the Company paid Plains Air, Inc. an
aggregate of approximately $167,000 and $113,000, respectively, for the use of
the airplane.
In general, the Company is required to pay for all vehicles purchased
from the manufacturers upon delivery of the vehicles to the Company.
Manufacturer's captive finance companies provide financing for all new vehicles
and certain used vehicles. This type of financing is known as "floor plan
financing" or "flooring." Under this arrangement with the finance companies, the
Company may deposit funds with such finance companies in an amount up to a
certain percentage of the outstanding floor plan balance. Such funds earn
interest at approximately the same rate charged on outstanding floor plan
balances. From time to time certain Company executives and other affiliates will
advance funds to the Company primarily for the purpose of investing excess cash
with the finance companies. The Company acts only as an intermediary in this
process. At March 31, 1998
6
<PAGE>
and 1997, funds advanced and outstanding from affiliates approximated $2,214,000
and $5,337,000, respectively. Aggregate amounts outstanding pursuant to these
arrangements at March 31, 1998 and 1997 are included in due to affiliates in the
accompanying balance sheet. The amount of interest accrued pursuant to these
arrangements during the three months ended March 31, 1998 and 1997 approximated
$52,000 and $113,000, respectively.
Subsequent to the acquisition of Toyota West Sales & Service, Inc. and
Douglas Toyota, Inc., the seller, R. Douglas Spedding, became an officer of the
Company. In connection with the acquisition of Toyota West Sales & Service, Inc.
and Douglas Toyota, Inc., the Company purchased two tracts of land from R.
Douglas Spedding in exchange for a total of $7.5 million in seller-financed
notes. The plots of land were used to relocate the Las Vegas, Nevada and the
Denver, Colorado dealerships to newly constructed facilities. In connection with
interim financing on construction projects at the two new locations, the Company
entered into an Interim Construction and Master Loan Agreement ("Loan
Agreement") with R. Douglas Spedding. The Loan Agreement provides interim
financing up to $7.4 million for use on construction of the new automobile
dealership facilities in Las Vegas, Nevada and Denver, Colorado. In February
1998, the Loan Agreement was amended to increase the amount available to borrow
to $7.7 million. Interest accrues at the prime rate plus 1% payable monthly, and
any outstanding balance is payable on October 31, 1998. Upon completion of the
sale/leaseback transaction for Denver Toyota (see Note 5), the Company retired
approximately $3.4 million of the outstanding Loan Agreement and $2.0 million of
the seller-financed land notes. At March 31, 1998, the amount outstanding
pursuant to the Loan Agreement approximated $4.3 million and had an interest
rate of 9.5%. The aggregate amount outstanding is included in due to affiliates
in the accompanying balance sheet. At March 31, 1998, the land purchase note was
$5.5 million and had an interest rate of 8.5%. The aggregate amount outstanding
is included in due to affiliates in the accompanying balance sheet. Interest on
the construction and land notes totaled approximately $402,000. During the three
months ended March 31, 1998, the Company capitalized approximately $488,000 in
interest costs related to the construction of such facilities, including
interest associated with the related land costs.
On January 16, 1998, the Company entered into floor planning notes
with R. Douglas Spedding, an officer of the Company, for $3,000,000. The purpose
of the arrangement is to provide financing for the Company's used vehicle
operation at its Toyota dealerships in Denver, Colorado and Las Vegas, Nevada.
The notes mature on June 1, 1998 and bear interest at 9%. The amount of the note
is settled and adjusted the tenth day of each month to be equal to 60% of the
borrowing base, defined as the aggregate value of the used vehicles at the two
dealerships as shown on the previous month financial statement less any other
used vehicle floor planning debt. Total amount outstanding at March 31, 1998 was
$2.5 million. The aggregate amount outstanding is included in due to affiliates
in the accompanying balance sheet. Interest on the floor plan notes totaled
approximately $39,000 for the quarter ended March 31, 1998.
Note 4. Acquisitions
Effective January 1, 1998 the Company acquired JRJ Investments, Inc.
("Chaisson") which owns Chaisson Motor Cars, a multi-line dealership operating
in Las Vegas, Nevada, and Chaisson BMW, in Henderson, Nevada. The purchase price
was $18.8 million, including acquisition costs. The cash portion, $14.0 million,
was funded under the Company's credit line and from available working capital.
The Company also issued a note for $2.8 million payable to the seller bearing
interest at 8%; interest on the note is payable monthly and the principal
balance is due January 5, 2003. The Company also issued 128,205 shares of its
Common Stock to the seller. The Company has guaranteed the seller a price of the
Common Stock of $15.60 per share one year from the date of closing, January 5,
1999. To the extent the stock price is less than $15.60 the Company must make up
the difference in cash or by issuing additional shares of common stock to
provide a total value of $2.0 million as of January 5, 1999. The acquisition has
been accounted for as a purchase and the results of Chaisson's operations have
been included in the Company's consolidated statement of operations since
January 1, 1998. A summary of the purchase price allocation for Chaisson is
presented below (in thousands):
7
<PAGE>
<TABLE>
<S> <C>
Property and equipment ....... $ 1,620
Goodwill and other intangibles 17,197
-------
Total $18,817
-------
-------
</TABLE>
Effective July 1, 1997, the Company acquired Sahara Nissan, Inc.
("Nissan West") for approximately $14.3 million. Effective April 1, 1997, the
Company acquired Toyota West Sales & Service, Inc. ("Toyota West"), and Douglas
Toyota, Inc. ("Denver Toyota"), for an aggregate purchase price of approximately
$40.7 million. Each of these transactions have been accounted for as a purchase
and the results of operations from these dealerships have been included in the
Company's consolidated statement of operations since the date of acquisition.
The unaudited consolidated statement of operations data as of March
31, 1997 is presented below on a pro forma basis as though the acquisitions of
Chaisson, Nissan West, Toyota West, and Denver Toyota (collectively, the
"Acquisitions") had all occurred as of January 1, 1997 (in thousands, except per
share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
------------------
<S> <C>
Pro forma revenue ............... $175,077
Pro forma net income ............ $ 2,838
Pro forma net income per share .. $ 0.20
Pro forma weighted average shares 14,334
</TABLE>
The adjustments to arrive at pro forma revenue include the historic
revenue of the Acquisitions prior to the purchase of each. Pro forma net income
includes historic income of the Acquisitions adjusted for additional
amortization expense related to purchased goodwill and other intangibles,
increased interest expense associated with the debt incurred in the Acquisitions
and the tax effects of these adjustments.
The pro forma results of operations information is not necessarily
indicative of the operating results that would have occurred had the
Acquisitions occurred as of January 1, 1997, nor is it necessarily indicative of
future operating results.
Note 5. Sale and Leaseback Transactions
On December 31, 1997, the Company entered into a contract with a third
party to sell all of its dealership real property in Amarillo, Texas and the
dealership real property under construction in Denver, Colorado and Las Vegas,
Nevada. The Company agreed to a sales price of $36.3 million. In connection with
the sale, the Company exercised its option to purchase certain real property
under lease used by its Quality Nissan dealership in Amarillo, Texas for
$400,000, and included the property in the sale. The Company will leaseback all
the property for a term of ten years with two ten year renewal options. The
initial annual lease rate for all the property is approximately $4.1 million
triple net with annual escalation not to exceed 2.5% per year beginning the
fourth year of the initial lease term. On February 24, 1998 the Company
completed the sale of the Amarillo properties. The Company received proceeds of
$13.2 million and retired existing mortgages of approximately $5.5 million. The
Denver, Colorado transaction was completed on March 31, 1998. The Company
received $8.9 million in sales proceeds and retired approximately $3.4 million
in interim construction notes and $2.0 million in land purchase notes. A gain of
approximately $2.5 million on the Amarillo, Texas and Denver, Colorado
transactions has been deferred and is being amortized into income as a reduction
of lease costs over the lease term. The balance of the transaction for the
property in Las Vegas, Nevada is expected to be completed by the end of May,
1998 after all construction is completed. The Company will retire approximately
$4.3 million in interim construction notes and $5.5 million in land purchase
notes. The remainder of the proceeds will be used for general corporate purposes
including the reduction of other debt, acquisitions and working capital needs.
8
<PAGE>
Note 6. Pending acquisitions
The Company has entered into a contract to acquire a certain dealership
in California. The proposed purchase price is approximately $5.5 million
consisting of approximately $4.0 million in cash, $1.4 million in seller
financed notes and $100,000 in value of the Company's common stock. The Company
intends to fund the cash portion of the proposed purchase price from available
working capital and availability under its credit line. In January 1998 the
Company advanced approximately $1.7 million towards the closing of this
transaction. The transaction is subject to manufacturer's approval. The Company
expects to complete the transaction by the end of the second fiscal quarter of
1998.
The Company has entered into a contract to acquire a certain dealership
in Nevada. The proposed purchase price is approximately $12.5 million consisting
of approximately $9.0 million in cash, $3.2 million in seller financed notes and
approximately $300,000 in value of the Company's common stock. The Company
intends to fund the cash portion of the proposed purchase price from available
working capital and additional bank borrowings. The transaction is subject to
manufacturer's approval. The Company expects to complete this transaction during
1998.
These acquisitions will be accounted for under the purchase method and
their respective results of operations will be consolidated upon closing. The
Company is currently managing the dealerships discussed above under management
agreements. Under the agreements, the Company provides management of day to day
operations in exchange for non-refundable fees equal to the dealerships' pre-tax
profits above a fixed monthly amount. During the three months ended March 31,
1998, the Company recognized approximately $513,000 in management fee income,
which is reflected in other operating revenue in the accompanying consolidated
statements of operations.
Note 7. Employee Severance Charge
The Company recorded a pre-tax charge of $815,000 during the three
months ended March 31, 1998, representing employee severance incurred with the
realignment of management and certain other personnel.
9
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Cross-Continent Auto Retailers, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Cross-Continent Auto Retailers, Inc. and its subsidiaries (the "Company") as of
March 31, 1998, and the related consolidated statements of income and cash flows
for the three month period ended March 31, 1998. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet of the Company as of December 31, 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein) and in our report dated February
13, 1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1997, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
PRICE WATERHOUSE, LLP
Fort Worth, Texas
April 24, 1998
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed herein are forward-looking statements about
the business, financial condition and prospects of the Company. The actual
results could differ materially from those indicated by such forward-looking
statements because of various risks and uncertainties. Such risks and
uncertainties may include, but are not limited to, local, regional and national
economic conditions, changes in consumer demand for products offered by the
Company, manufacturer employee strikes and other matters that may adversely
affect the availability of products and pricing, state and federal regulatory
environment, availability of additional funding for acquisitions in the future,
and other risks identified in the Company's previous filings with the
Commission. The Company cannot control these risks and uncertainties and, in
many cases, cannot predict the risks and uncertainties that could cause its
actual results to differ materially from those indicated by the forward-looking
statements.
GENERAL
Cross-Continent currently owns and operates a group of automobile
dealerships in the Amarillo, Texas, Oklahoma City, Oklahoma, Denver, Colorado
and Las Vegas, Nevada markets. The financial condition and results of operations
reported herein are based upon the results of operations of the dealerships
operated by the Company for the time periods reported. The Company generates its
revenues from sales of new and used vehicles, fees for repair and maintenance
services, sale of replacement parts, and fees and commissions from arranging
financing, extended warranties, and credit insurance in connection with vehicle
sales.
In April 1997, the Company completed the purchase of Toyota West in Las
Vegas, Nevada and Denver Toyota in Denver, Colorado, from owner R. Douglas
Spedding. In July 1997, the Company acquired Nissan West in Las Vegas, Nevada.
In January, 1998, the Company acquired Chaisson, also in Las Vegas. The Company
also has two acquisitions pending in Las Vegas and California and is currently
operating those dealerships under management agreements. The acquisitions of
Toyota West, Denver Toyota, Nissan West and Chaisson are herein collectively
referred to as the "Acquisitions". The Acquisitions were accounted for as
purchases and, accordingly, the operating results of the acquired dealerships
have been included in the operating results of the Company since their
respective dates of acquisition.
The Company completed the sale of Performance Nissan, Inc. and
Performance Dodge, Inc. ("Performance") to Benji Investments, Ltd., a Texas
limited partnership controlled by Emmett M. Rice, Jr., a former Officer and
Director of the Company, effective July 1, 1997 (the "Divestiture"). Because of
the significant growth of the Company since its formation, as a result of the
aforementioned Acquisitions and the Divestiture, the Company's historical
results of operations, its period-to-period comparisons of such results and
certain financial data may not be comparable, meaningful or indicative of future
results.
11
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CROSS-CONTINENT AUTO RETAILERS, INC.
MARGIN STATISTICS
March 31,
<TABLE>
<CAPTION>
Consolidated Same Store Comparisons (1)
----------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
(thousands, except units and percentages)
<S> <C> <C> <C> <C>
New vehicle sales
Units ......................... 2,773 1,595 1,106 1,192
Revenue ....................... $ 69,565 $ 34,878 $ 25,689 $ 27,395
Average selling price ......... $ 25.1 $ 21.9 $ 23.2 $ 23.0
Used vehicle sales (2)
Units ......................... 5,988 4,618 2,956 3,484
Revenue ....................... $ 60,569 $ 42,676 $ 27,956 $ 32,742
Average selling price ......... $ 10.1 $ 9.2 $ 9.5 $ 9.4
Total vehicle sales
Units ......................... 8,761 6,213 4,062 4,676
Revenue ....................... $130,134 $ 77,554 $ 53,645 $ 60,137
Other operating revenue
Finance and insurance ......... $ 4,891 $ 3,638 $ 2,138 $ 2,814
Parts and service ............. 12,164 7,046 4,892 5,129
Other revenue ................. 2,342 784 994 591
-------- -------- -------- --------
Total other operating revenue 19,397 11,468 8,024 8,534
-------- -------- -------- --------
Total revenue .................... $149,531 $ 89,022 $ 61,669 $ 68,671
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit
New vehicles .................. $ 6,411 $ 4,040 $ 2,301 $ 3,226
Used vehicles (2) ............. 6,178 3,713 2,455 3,040
Finance and insurance ......... 4,475 3,245 1,886 2,487
Parts and service ............. 6,080 3,401 2,389 2,633
Other revenue ................. 2,342 784 994 591
-------- -------- -------- --------
Total gross profit ............... $ 25,486 $ 15,183 $ 10,025 $ 11,977
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit percent
New vehicles .................. 9.2% 11.6% 9.0% 11.8%
Used vehicles (2) ............. 10.2% 8.7% 8.8% 9.3%
Finance and insurance ......... 91.5% 89.2% 88.2% 88.4%
Parts and service ............. 50.0% 48.3% 48.8% 51.3%
Other revenue ................. 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
Total gross profit percent ....... 17.0% 17.1% 16.3% 17.4%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
- ------------------
(1) "Same Store" information relates to the dealerships for which their
results of operations are included in the Consolidated Statements of
Operations for the same periods of 1998 and 1997.
(2) Used vehicle information includes the Company's retail and wholesale
used vehicle activities.
12
<PAGE>
RESULTS OF OPERATIONS
Three months ended March 31, 1998
Revenues and Gross Profit
New Vehicles -
<TABLE>
<CAPTION>
Consolidated Same Store Comparisons
------------------------------ -----------------------------
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unit sales ............... 2,773 1,595 1,106 1,192
Average price per unit ... $ 25,087 $ 21,867 $ 23,227 $ 22,982
New vehicle revenue ...... $ 69,565,000 $ 34,878,000 $ 25,689,000 $ 27,395,000
New vehicle gross profit . $ 6,411,000 $ 4,040,000 $ 2,301,000 3,226,000
Gross profit percentage .. 9.2% 11.6% 9.0% 11.8%
</TABLE>
Same store unit sales (which are defined as the results of the
Company's Amarillo, Texas market plus the Oklahoma City, Oklahoma market,
exclusive of Performance) decreased 86 units or 7.2%, from the first quarter of
1997 to the first quarter of 1998. Unit sales in Oklahoma City, Oklahoma
declined 85 units for the first quarter 1998 compared to 1997. Management
believes the decline in unit sales for same store comparisons is attributable to
a higher than expected dealership management turnover and a less desirable new
vehicle inventory at the Oklahoma City location. Same store average selling
price per unit increased $245, or 1.1%, due to model mix and manufacturer cost
increases passed on in the sales price of new vehicles. As a result of these
factors from March 31, 1997 to March 31, 1998, same store sales declined by
approximately $1.7 million. The Amarillo, Texas market increased new vehicle
sales by approximately $490,000 while the Oklahoma City, Oklahoma market had a
decline of approximately $2.2 million. The Acquisitions added approximately
$43.9 million in new vehicle revenue and 1,667 new unit sales with an average
price of $26,320. The average sales price at the dealerships acquired in the
Acquisitions, excluding Chaisson which sells higher priced vehicles, was
$23,008.
Same store gross profit on new vehicle sales decreased approximately
$925,000, or 28.7%. This decline is primarily attributable to a decline in new
vehicle gross profit percentage and to a lesser extent a decrease in new vehicle
sales in Oklahoma City. The decline in new vehicle gross profit percentage is
due to more aggressive pricing in response to lower vehicle demand. The
Acquisitions added approximately $4.1 million in gross profit with a gross
profit percentage of 9.4%. The table below sets forth a reconciliation of new
vehicle units, revenues, and gross profit from first quarter 1997 to first
quarter 1998 accounting for the variance in same store results, the Acquisitions
and the Divestiture.
<TABLE>
<CAPTION>
Units Revenues Gross Profit
------------ ------------ ------------
<S> <C> <C> <C>
Quarter ended March 31, 1997 1,595 $ 34,878,000 $ 4,040,000
Same store variance ........ (86) (1,706,000) (925,000)
Acquisitions ............... 1,667 43,876,000 4,110,000
Effects of the Divestiture . (403) (7,483,000) (814,000)
------------ ------------ ------------
Quarter ended March 31, 1998 2,773 $ 69,565,000 $ 6,411,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Used Vehicles -
13
<PAGE>
<TABLE>
<CAPTION>
Consolidated Same Store Comparisons
------------------------------ -------------------------------
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unit sales ................ 5,988 4,618 2,956 3,484
Average price per unit .... $ 10,115 $ 9,241 $ 9,457 $ 9,398
Used vehicle revenue ...... $60,569,000 $42,676,000 $27,956,000 $32,742,000
Used vehicle gross profit . $ 6,178,000 $ 3,713,000 $ 2,455,000 $ 3,040,000
Gross profit percentage ... 10.2% 8.7% 8.8% 9.3%
</TABLE>
Same store unit sales decreased 528 units, or 15.2%, including retail
and wholesale sales. Unit sales in Oklahoma City, Oklahoma declined by 777
units, or 60.4%, in first quarter 1998 compared to first quarter 1997.
Management believes the decline in unit sales at the Oklahoma City dealership is
primarily attributable to a less than desirable used vehicle inventory and
higher than expected dealership management turnover. The result of these factors
from 1997 to 1998 were an approximate $4.8 million decrease in same store
revenue from used vehicle sales. The Amarillo, Texas market increased used
vehicle sales by approximately $3.1 million or 15.1% while the Oklahoma City,
Oklahoma market had a decline of approximately $7.9 million. The Acquisitions
added approximately $32.6 million used vehicle revenue and 3,032 used vehicle
unit sales at an average price of $10,756.
Same store gross profit decreased approximately $585,000, or 19.2%,
from first quarter 1997 to first quarter 1998. This decline is primarily
attributable to the decrease in used vehicle sales and to a lesser extent a
decline in the used vehicle gross profit percentage, both as a result of the
factors discussed above. The Acquisitions added approximately $3.7 million in
gross profit with a gross profit percentage of 11.4%. The table sets forth a
reconciliation of used vehicle revenue, units and gross profit from first
quarter 1997 to first quarter 1998 accounting for the variance in same store
results, the Acquisitions and excluding the Divestiture:
<TABLE>
<CAPTION>
Units Revenues Gross Profit
------------ ------------ ------------
<S> <C> <C> <C>
Quarter ended March 31, 1997... 4,618 $ 42,676,000 $ 3,713,000
Same store variance ........... (528) (4,786,000) (585,000)
Acquisitions .................. 3,032 32,613,000 3,723,000
Effects of the Divestiture .... (1,134) (9,934,000) (673,000)
------------ ------------ ------------
Quarter ended March 31, 1998 .. 5,988 $ 60,569,000 $ 6,178,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Other Operating Revenue -
<TABLE>
<CAPTION>
Same Store
Consolidated Comparisons
------------------ --------------------
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Finance and insurance ... $ 4,891 $ 3,638 $ 2,138 $ 2,814
Parts and service ....... 12,164 7,046 4,892 5,129
Other revenue ........... 2,342 784 994 591
------- ------- ------- -------
Total ................ $19,397 $11,468 $ 8,024 $ 8,534
------- ------- ------- -------
------- ------- ------- -------
Gross Profit
Finance and insurance ... $ 4,475 $ 3,245 $ 1,886 $ 2,487
Parts and service ....... 6,080 3,401 2,389 2,633
Other revenue ........... 2,342 784 994 591
------- ------- ------- -------
Total ............... $12,897 $ 7,430 $ 5,269 $ 5,711
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Finance and insurance (F&I) revenue primarily represents fees and
commissions the Company earns for selling and placing customers' retail finance
and lease contracts, credit life insurance contracts and third party extended
warranty contracts. The decrease in same-store F&I revenue of $676,000, or 24.0%
is primarily
14
<PAGE>
attributable to the reduction in retail vehicle sales in Oklahoma City,
Oklahoma. The Acquisitions added approximately $2.8 million in revenue from F&I
activities.
Parts and service revenue represents the retail and wholesale sales of
repair and replacement parts and the sale of labor for servicing customers
vehicles. Same store parts and service revenue decreased approximately $237,000,
or 4.6%, in 1998 from 1997. Parts and service revenue in the Amarillo, Texas
market increased by approximately $355,000 or 10.2%. However, the increase was
more than offset by a decrease in the Oklahoma City, Oklahoma market of
approximately $592,000 due to lower vehicle sales which contributed to decreased
parts and service revenue. The Acquisitions added approximately $7.3 million in
revenue from their parts and service activities.
Same store parts and service gross profit decreased from 1997 to 1998 by
approximately $244,000. The gross profit percentage declined from 51.3% in 1997
to 48.8% in 1998. The decrease in the gross profit percentage and gross profit
is attributed to an increase in wholesale parts sales in relation to total parts
sales. Wholesale parts sales generate lower gross profit percentage than service
and retail sales. The Acquisitions added approximately $3.7 million from parts
and service activities at a gross profit percentage of 50.8%.
Other revenue primarily consists of documentation fees charged by the
Company to its customers on vehicle sales. The amount of fees is usually
governed by state statute, regulation or regulatory agency. Also included in
other revenue is management fee income and rental income. Same store revenue and
gross profit from other revenue increased $403,000, or 68.2%, from 1997 to 1998
as a result of the management fee revenue from two dealerships the Company
currently manages under management agreements. The Acquisitions added
approximately $1.3 million in other revenue and gross profit primarily from
documentation fees. The dealerships acquired in the Acquisitions are located in
states which permit higher documentation fees compared to the Company's same
store dealerships. The Company expects this component of other revenue to
increase as the Company acquires additional dealerships.
The table below sets forth a reconciliation of other operating revenue and
gross profit by major category accounting for the variance in same store
results, the Acquisitions and excluding the Divestiture.
<TABLE>
<CAPTION>
F&I Parts & Service Other Revenue Total
--------------------- --------------------- --------------------- ---------------------
Gross Gross Gross Gross
Revenue Profit Revenue Profit Revenue Profit Revenue Profit
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter ended March 31, 1997 $ 3,638 $ 3,245 $ 7,046 $ 3,401 $ 784 $ 784 $ 11,468 $ 7,430
Same store variance ........ (676) (601) (237) (244) 403 403 (510) (442)
Acquisitions ............... 2,753 2,589 7,272 3,691 1,348 1,348 11,373 7,628
Effects of the Divestiture . (824) (758) (1,917) (768) (193) (193) (2,934) (1,719)
-------- -------- -------- -------- -------- -------- -------- --------
Quarter ended March 31, 1998 $ 4,891 $ 4,475 $ 12,164 $ 6,080 $ 2,342 $ 2,342 $ 19,397 $ 12,897
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
Selling, General and Administrative Expenses (SG&A) -
Selling, general and administrative expenses increased approximately $9.2
million from 1997 to 1998. The Acquisitions added approximately $11.5 million
while the Divestiture reduced SG&A approximately $2.5 million. SG&A expense was
13.5% of revenues in 1998 versus 12.2% in 1997. This increased percentage is
primarily due to the loss of operating leverage from a reduction in same store
revenue and the fact that the dealerships acquired in the Acquisitions have
historically had higher SG&A expense compared to their revenues than same store
operations. The Company believes that SG&A expenses will increase in the future
as the Company continues to expand. The Company also expects SG&A to increase
throughout 1998 due to a full year effect of the Acquisitions. The Company may
gain some expense leverage during the second and third quarters of 1998, due to
those quarters being historically the best seasonal selling periods for the
Company. The Company also expects additional lease expense for the remainder of
1998 as a result of the sale and leaseback transaction. The annualized rent
under the contract is $4.1 million for the properties, net of the amortization
of the deferred gain.
15
<PAGE>
Depreciation and Amortization -
Depreciation and amortization increased approximately $546,000, or
143.3%, from 1997 to 1998. The primary factor behind this increase was the
Acquisitions, which added approximately $571,000 in depreciation and
amortization of acquisition intangibles. The Company expects this expense to
increase throughout 1998 over 1997 due to a full year impact from the
Acquisitions which should exceed the reduction caused by the Divestiture. Same
store depreciation expense was reduced beginning in February due to the sale and
leaseback transaction which was completed in February, 1998.
Interest Expense -
The Company's interest expense, net of interest income, increased
approximately $1.6 million from 1997 to 1998 due to higher debt levels.
Long-term debt increased from $10.6 million at March 31, 1997 to $42.0 million
at March 31, 1998, incurred primarily to finance the Acquisitions. Floor plan
notes payable increased from $38.1 million at March 31, 1997 to $71.2 million at
March 31, 1998 also due to the Acquisitions and inventory fluctuations. The
Company expects interest expense to increase throughout 1998 due to the full
year effect of the additional long term debt and increased floor plan notes
payable due to the Acquisitions. These increases will be partially offset by
reduced interest associated with property mortgages and construction loans which
have been partially repaid with the proceeds from the sale and leaseback
transaction. The remaining construction loan will be paid during the second
quarter. Net interest expense may be further impacted by additional borrowings
to finance acquisitions and the future direction of interest rates.
Income Tax Provision -
Income taxes decreased from approximately $1.3 million in 1997 to
approximately $565,000 in 1998 because of a decrease in pretax profits. The
effective tax rate in the first quarter of 1998 and 1997 was 37.4%. The Company
expects its effective tax rate for 1998 and beyond to be in the 37% to 39%
range.
Basic and Diluted Net Income Per Share -
Basic and diluted net income per share decreased from $.16 in 1997 to
$.11 in 1998 before the employee severance charge and $.07 after the employee
severance charge. Total decrease was 31.0% and 56.3%, respectively. The weighted
average shares outstanding decreased from approximately 13.8 million in 1997 to
approximately 13.6 million in 1998 primarily due to treasury shares received in
the sale of Performance offset by shares issued in the Acquisitions.
The Company believes several factors are in place that will affect net
income throughout the remainder of 1998. The Company has opened two new
facilities with significantly increased capacity. One dealership is located in
Denver, Colorado and was opened on March 9, 1998. The other dealership was
opened on May 4, 1998 in Las Vegas, Nevada. Sales may slow in the fiscal quarter
of the actual relocations; however, the Company is receiving an additional
allocation of 1,800 new Toyota's for 1998 due to the investment made in these
two facilities. The vacated properties will be retained under lease and used for
retail vehicle operations which will increase the Company's capacity for vehicle
sales. The Company will also have the benefit of a full year impact from the
Acquisitions. The Company will also be receiving management fees from two
dealerships currently under management contract until the acquisitions are
completed or terminate. The Company does not expect volume or margin growth in
its Amarillo, Texas market and expects negative comparisons for Oklahoma City,
Oklahoma for both volume and gross profit. While the Denver, Colorado and Las
Vegas, Nevada markets continue to grow,
16
<PAGE>
national and regional sales trends indicate flat demand for new vehicles
throughout 1998. Management continues to closely monitor business and operating
conditions in Oklahoma City, Oklahoma and the financial prospects of its
remaining dealership in this market.
Liquidity and Capital Resources
The Company requires cash primarily for financing its inventory of new
and used vehicles and replacement parts, acquisitions of additional dealerships,
capital expenditures and transition expenses in connection with its
acquisitions. The Company has met these liquidity requirements primarily through
cash flow generated from operating activities, floor plan financing, borrowings
under credit agreements with manufacturer captive finance companies and
commercial banks and the proceeds from its initial public offering. Floor plan
financing from manufacturer captive finance companies and commercial banks
represents the primary source of financing for vehicle inventories.
During the first quarter of 1998, the Company used net cash of
approximately $8.2 million from operating activities, compared to $5.8 million
net cash generated for the first quarter of 1997. The decrease is primarily
attributable to a reduction in net income and increases in accounts receivables
and inventory. The increase in inventory levels is primarily due to expanded
capacity at the new Toyota dealership locations.
Cash provided from investing activities of approximately $3.0 million
during the first quarter of 1998 related primarily to the net proceeds received
on the sale/leaseback transactions offset by the acquisition of JRJ Investments
and construction costs related to the two new dealership facilities for Denver
Toyota and Toyota West. The Company completed two sale/leaseback transactions
during the quarter. The first transaction was completed on February 24, 1998 and
related to all Amarillo dealership properties. The Company received gross
proceeds of $13.2 million and retired existing mortgages of approximately $5.5
million. The Denver, Colorado transaction was completed on March 31, 1998. The
Company received gross proceeds of $8.9 million and retired approximately $3.4
million in interim construction notes and $2.0 million in land purchase notes.
The Company expects to close on a sale leaseback transaction in May, 1998 for
the new dealership in Las Vegas, Nevada. The Company expects to receive gross
proceeds of $13.8 million and retire related interim construction debt of
approximately $4.3 million and a land purchase note of $5.5 million. The Company
currently expects that any future acquisitions will be financed with a
combination of debt, stock and cash.
Cash provided from financing activities totaled approximately $1.4
million for the first quarter of 1998 compared to cash used of approximately
$8.6 million for the first quarter of 1997. The increase was mainly attributable
to an increase in floor plan notes payable due to the increase in inventory
discussed above. The increase was offset by the payment of long-term debt
associated with the properties sold in the sales/leaseback transaction.
The Company finances its purchases of new vehicle inventory with
manufacturer captive finance companies and commercial banks. The Company also
maintains a line of credit with manufacturer captive finance companies for the
financing of used vehicle inventories. The lender receives a security interest
in all inventory it finances. The Company makes monthly interest payments on the
amount financed and must repay the principal amount of the indebtedness with
respect to any vehicle within a few days of the sale of such vehicle by the
Company. The Company periodically re-negotiates the terms of its financing,
including the interest rate. At March 31, 1998, the Company had outstanding
floor plan debt of $71.2 million, incurred on an average annual interest rate of
approximately 8.8% during the first quarter of 1998.
The Company began financing its used vehicle operations at its Denver
Toyota and Toyota West dealerships on January 16, 1998. The amount of this floor
plan line is $3 million and is provided by R. Douglas Spedding, an Officer of
the Company. The Company intends to renew these notes or refinance them with
another
17
<PAGE>
floor plan provider. The notes mature on June 1, 1998 and bear an interest rate
of 9%. Total amount outstanding at March 31, 1998 was $2.5 million.
The Company has entered into a contract to acquire a certain
dealership in California. The proposed purchase price is approximately $5.5
million consisting of approximately $4.0 million in cash, $1.4 million in seller
financed notes and $100,000 in value of the Company's common stock. The Company
intends to fund the cash portion of the proposed purchase price from available
working capital and availability under its credit line. In January 1998 the
Company advanced approximately $1.7 million towards the closing of this
transaction. The transaction is subject to manufacturer's approval. The Company
expects to complete the transaction by the end of the second fiscal quarter of
1998.
The Company has entered into a contract to acquire a certain dealership
in Nevada. The proposed purchase price is approximately $12.5 million consisting
of approximately $9.0 million in cash, $3.2 million in seller financed notes and
approximately $300,000 in value of the Company's common stock. The Company
intends to fund the cash portion of the proposed purchase price from available
working capital and through additional bank borrowings. The Company is
negotiating to increase the credit facility; however, no assurance can be given
as to whether the line will be increased or whether the agent bank will be able
to syndicate future loan requests. The transaction is subject to manufacturer's
approval. The Company expects to complete this transaction during 1998.
The Company has incurred a tax liability of approximately $4 million
in connection with the change in its tax basis of accounting for inventory from
LIFO to FIFO. The Company believes that it is required to pay this liability in
six annual installments, beginning in 1997, and believes that it will be able to
pay such obligation with cash provided by operations.
The Company believes that its existing capital resources, including
cash on hand, cash from operations, funds available under the credit facility
and funds to come from the sale and leaseback transaction will be sufficient to
run the Company's operations in the ordinary course of business and fund its
debt service requirements. To the extent the Company pursues additional
acquisitions, it most likely will need to raise additional capital either
through the public or private issuance of equity or debt securities or through
additional bank borrowings.
Seasonality
The Company generally experiences a higher volume of new and used
vehicle sales in the second and third quarters of each year. If the Company
acquires dealerships in other markets, it may be affected by other seasonal or
consumer buying trends.
Year 2000 Issues
The Company uses primarily one vendor to supply its dealership and
corporate computer software. This vendor has informed the Company that all year
2000 issues have been or will be addressed and resolved in the Company's major
record keeping systems prior to the year 2000. The Company believes it will be
year 2000 ready and does not expect any major disruption in its business
activities or any significant cost or cost increases as a result of the year
2000 issues.
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a party to various legal actions arising in the ordinary
course of its business. While it is not feasible to determine the outcome of
these actions, the Company's information available at this time, including
discussions with legal counsel, does not indicate that these matters will have a
material adverse effect upon the financial condition, results of operations or
cash flows of the Company
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits
A list of exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Exhibit
Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
(1) A Form 8-K was filed on April 25, 1997 reporting the
purchase of all the outstanding capital stock of each
of Douglas Toyota, Inc., a Colorado corporation, and
Toyota West Sales & Service, Inc., a Nevada
corporation, together with certain real estate to be
used in connection with both dealerships.
(2) A Form 8-K/A No. 1 was filed on June 24, 1997
completing Item 7 Financial Statements and Pro Forma
Financial Information for the above referenced Form
8-K.
(3) A Form 8-K was filed on July 15, 1997 reporting the
purchase of all the outstanding stock of Sahara
Nissan, Inc., a Nevada corporation.
(4) A Form 8-K/A No. 1 was filed on August 13, 1997
completing Item 7 Financial Statements and Pro Forms
Financial Information for the above referenced Form
8-K.
(5) A Form 8-K was filed on September 2, 1997 reporting
the sale of all the outstanding capital stock of
Performance Dodge, Inc., an Oklahoma corporation, and
Performance Nissan, Inc., an Oklahoma corporation.
(6) A Form 8-K was filed on January 23, 1998 reporting
the purchase of all the outstanding capital stock of
JRJ Investments, Inc., a Nevada corporation.
19
<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, thereunto duly authorized.
CROSS-CONTINENT AUTO RETAILERS, INC.
Date: May 15, 1998 By: /s/ John W. Gaines
-------------------------------
John W. Gaines,
Vice President-Finance and
Chief Financial Officer
Date: May 15, 1998 By: /s/ Charles D. Winton
-------------------------------
Charles D. Winton,
Vice President and Chief
Accounting Officer
20
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- ------------------------------------------------------------------
2.1 Asset Purchase Agreement dated as of June 17, 1996, among Lynn
Hickey Dodge, Inc., Lynn Hickey, and Cross Country Dodge, Inc. (1)
2.2 Stock Purchase Agreement, dated as of January 23, 1997, by and
between Cross-Continent Auto Retailers, Inc. and R. Douglas
Spedding (2)
2.3 Amendment to Stock Purchase Agreement dated as of April 1, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R. Douglas
Spedding (3)
2.4 Stock Purchase Agreement dated as of February 28, 1997, among
Cross-Continent Auto Retailers, Inc., Jack Biegger, Dale Edwards,
and Sahara Datsun, Inc., d/b/a Jack Biegger Nissan, as amended by
the Amendment to Stock Purchase Agreement dated as of March 17,
1997, among Cross-Continent Auto Retailers, Inc., Jack Biegger,
Dale Edwards, and Sahara Nissan, Inc., d/b/a Jack Biegger Nissan
(10)
2.5 Second Amendment to Stock Purchase Agreement dated as of April 30,
1997, by and between Cross-Continent Auto Retailers, Inc., Jack
Biegger, Dale Edwards, and Sahara Datsun, Inc., d/b/a Jack Biegger
Nissan, as amended by the Amendment to Stock Purchase Agreement
dated as of March 17, 1997, among Cross-Continent Auto Retailers,
Inc., Jack Biegger, Dale Edwards, and Sahara Nissan, Inc., d/b/a
Jack Biegger Nissan (10)
2.6 Asset Purchase Agreement dated as of April 16, 1997, by and between
JRJ Investments, Inc., a Nevada corporation, The Chaisson Family
Trust R-501, and Cross-Continent Auto Retailers, Inc. (11)
2.6.1 Consent to Termination of Agreements dated as of August 5, 1997,
among Cross- Continent Auto Retailers, Inc., JRJ Investments, Inc.
and The Chaisson Family Trust R- 501 (11)
2.7 Purchase Agreement dated as of March 1, 1997, between RDS, Inc. and
Cross-Continent Auto Retailers, Inc. (omitting exhibits thereto,
which will be furnished supplementally to the Commission upon
request) (3)
2.8 Purchase Agreement dated as of March 1, 1997, between R. Douglas
Spedding and Cross- Continent Auto Retailers, Inc. (omitting
exhibits thereto, which will be furnished supplementally to the
Commission upon request) (3)
2.9 Third Amendment to Stock Purchase Agreement, dated as of May 9,
1997, among Cross- Continent Auto Retailers, Inc., The Jack Biegger
Revocable Living Trust, The Dale M. Edwards Revocable Family Trust,
and Sahara Nissan, Inc. d/b/a Jack Biegger Nissan. (9)
2.10 Stock Purchase Agreement dated as of June 20, 1997 between
Cross-Continent Auto Retailers, Inc. and Benji Investments, Ltd.
(omitting exhibits thereto, which will be furnished supplementally
to the Commission upon request). (11)
2.11 Stock Purchase Agreement dated as of October 8, 1997, by and among
Cross-Continent Auto Retailers, Inc., The Chaisson Family Trust
R-501, and JRJ Investments, Inc. (omitting exhibits thereto, which
will be furnished supplementally to the Commission upon request)
(13)
2.12 Amendment to Stock Purchase Agreement dated as of October 14, 1997,
by and among Cross-Continent Auto Retailers, Inc., The Chaisson
Family Trust R-501, and JRJ Investments, Inc. (13)
2.13 Amended and Restated Stock Purchase Agreement dated as of November
1, 1997, by and among Cross-Continent Auto Retailers, Inc., The
Chaisson Family Trust R-501, and JRJ Investments, Inc. (omitting
exhibits thereto, which will be furnished supplementally to the
Commission upon request) (15)
21
<PAGE>
2.14 Stock Purchase Agreement dated October 16, 1997, by and among
Cross-Continent Auto Retailers, Inc., Thomas A. Randt, Ronald J.
Blomquist, and Tar-Car, Inc. (omitting exhibits thereto, which will
be furnished supplementally to the Commission upon request) (16)
2.15 Amendment to Stock Purchase Agreement dated January 14, 1998, by
and among Cross- Continent Auto Retailers, Inc., Thomas A. Randt,
Ronald J. Blomquist, and Tar-Car, Inc. (16)
2.16 Asset Purchase Agreement dated December 17, 1997, by and among
Vinci, Inc., Ronald C. Vinci, and Sahara Imports, Inc. (omitting
exhibits thereto, which will be furnished supplementally to the
Commission upon request) (16)
2.17 Amendment to Asset Purchase Agreement dated January 29, 1998, by
and among Vinci, Inc., Ronald C. Vinci, and Sahara Imports, Inc.
(16)
3.1 Amended and Restated Certificate of Incorporation of
Cross-Continent Auto Retailers, Inc. (4)
3.3 Amended and Restated Bylaws of Cross-Continent Auto Retailers, Inc.
(4)
4.1 Specimen Common Stock Certificate (4)
4.2 Rights Agreement between Cross-Continent Auto Retailers, Inc. and
The Bank of New York, as rights agent (4)
4.3 Amended and Restated 1996 Stock Option Plan of Cross-Continent Auto
Retailers, Inc. (5)
4.4 Registration Rights Agreement dated as of April 1, 1997, by and
between Cross-Continent Auto Retailers, Inc. and R. Douglas
Spedding (3)
4.5 Registration Rights Agreement dated January 5, 1998, by and between
Cross-Continent Auto Retailers, Inc. and The Chaisson Family Trust
R-501 (16)
10.1 Dealer Sales and Service Agreement dated November 1, 1995, between
the Chevrolet Division of General Motors Corporation and Plains
Chevrolet, Inc., as amended by Supplemental Agreement dated as of
July 29, 1996 (1)(6)
10.2 Sales and Service Agreement between Performance Dodge, Inc. and
Chrysler Corporation, dated as of October 1, 1996 (1)
10.3 Dealer Sales and Service Agreement dated September 23, 1996,
between the Nissan Division of Nissan Motor Corporation, U.S.A.,
Quality Nissan, Inc. and Cross-Continent Auto Retailers, Inc. (4)
10.4 Dealer Sales and Service Agreement dated September 23, 1996,
between the Nissan Division of Nissan Motor Corporation, U.S.A.,
Performance Nissan and Cross-Continent Auto Retailers, Inc. (4)
10.4(a) Dollar Volume Contract dated April 1, 1997, between Plains
Chevrolet, Inc., Westgate Chevrolet, Inc., Midway Chevrolet, Inc.,
Quality Nissan, Inc. and Amarillo Globe News (1)
10.5 Sublease Agreement dated June 1, 1995, between Gilliland Group
Family Partnership and Performance Nissan, Inc. (1)
10.6 Lease Agreement dated March 1, 1994, among John W. Adams, Eleanore
A. Braly as Trustee of the Eleanore A. Braly Trust, Romie G.
Carpenter, Melody Lynn Goff, and Selden Simpson and Quality Nissan,
Inc. (1)
10.7 Office Lease dated June 1, 1996, between Gilliland Group Family
Partnership and Cross- Country Auto Retailers, Inc. (now named
Cross-Continent Auto Retailers, Inc.) (1)
10.8 Wholesale Security Agreement, as amended, dated December 4, 1995,
between General Motors Acceptance Corporation and Performance
Dodge, Inc. (1) (7)
10.9 Corporation and Shareholders' Agreement of Xaris Management Co. (1)
10.10 Documents dated December 4, 1995, relating to $5,550,000 loan by
General Motors Acceptance Corporation to Performance Dodge, Inc.
(1)
10.10.1 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $1,850,000 (2)
22
<PAGE>
10.10.2 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $3,700,000 (fully
repaid)(2)
10.10.4 Security Agreement between General Motors Acceptance Corporation
and Performance Dodge, Inc. (2)
10.10.5 Mortgage, Assignment and Security Agreement between General Motors
Acceptance Corporation and Performance Dodge, Inc. (2)
10.11 Documents relating to loan by General Motors Acceptance Corporation
to Midway Chevrolet, Inc. (1)
10.11.1 Promissory Note dated December 15, 1989, by Midway Chevrolet, Inc.
to General Motors Acceptance Corporation, in the amount of
$977,249.74 (2)
10.11.2 Renewal, Extension and Modification Agreement dated February 20,
1995, between General Motors Acceptance Corporation and Midway
Chevrolet, Inc. (2)
10.11.3 Security Agreement dated February 20, 1995, between General Motors
Acceptance Corporation and Midway Chevrolet, Inc. (2)
10.12 Documents dated December 4, 1995, relating to $1,350,000 loan by
General Motors Acceptance Corporation to Performance Nissan, L.L.C.
(1)
10.12.1 Promissory Note by Performance Nissan, L.L.C. to General Motors
Acceptance Corporation, in the amount of $1,350,000 (2)
10.12.2 Cross-Default and Cross-Collateralization Agreement between General
Motors Acceptance Corporation and Performance Nissan, L.L.C. (2)
10.12.3 Security Agreement between General Motors Acceptance Corporation
and Performance Nissan, L.L.C. (2)
10.13 Documents relating to used vehicle inventory financing agreements
between General Motors Acceptance Corporation and Cross-Continent
Auto Retailers, Inc. dealership subsidiaries (1)
10.13.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement
dated June 7, 1996, between General Motors Acceptance Corporation
and Plains Chevrolet, Inc. (2)(7)
10.13.2 Promissory Note dated June 7, 1996, by Plains Chevrolet, Inc. to
General Motors Acceptance Corporation, in the amount of $3,000,000
(2)(8)
10.13.3 Cross-Default and Cross-Collateralization Agreements between
General Motors Acceptance Corporation and Midway Chevrolet, Inc.,
Plains Chevrolet, Inc., Quality Nissan, Inc., and Westgate
Chevrolet, Inc. (2)
10.14 Employment Contract dated February 21, 1997, by and between
Cross-Continent Auto Retailers, Inc. and James F. Purser (2)
10.15 Employment Contract dated February 18, 1997, by and between
Cross-Continent Auto Retailers, Inc. and R. Wayne Moore (11)
10.16 Employment Agreement dated as of April 1, 1997, by and between R.
Douglas Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.17 Employment Agreement dated as of April 1, 1997, by and between
Douglas J. Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.18 Promissory Note dated April 1, 1997, by Cross-Continent Auto
Retailers, Inc. to the order of R. Douglas Spedding in the
principal amount of $7,000,000 (fully repaid)(3)
10.19 Promissory Note dated April 4, 1997, by Cross-Continent Auto
Retailers, Inc. to Amarillo National Bank in the principal amount
of $8,000,000 (fully repaid)(3)
10.20 Documents dated April 10, 1997, relating to promissory note by
Cross-Continent Auto Retailers, Inc. to the order of RDS, Inc. in
the principal amount of $2,000,000 (3)
10.20.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to the
order of RDS, Inc. (3)
10.20.2 Security Agreement between Cross-Continent Auto Retailers, Inc. and
RDS, Inc. (3)
10.20.3 Deed of Trust between Cross-Continent Auto Retailers, Inc. and RDS,
Inc. (3)
23
<PAGE>
10.21 Documents dated April 10, 1997, relating to promissory note by
Cross-Continent Auto Retailers, Inc. to the order of R. Douglas
Spedding in the principal amount of $5,500,000 (3)
10.21.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to the
order of R. Douglas Spedding (3)
10.21.2 Security Agreement between Cross-Continent Auto Retailers, Inc. and
R. Douglas Spedding (3)
10.21.3 Deed of Trust between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (3)
10.22 Release and Indemnification Agreement dated as of April 10, 1997,
between Cross- Continent Auto Retailers, Inc. and R. Douglas
Spedding (3)
10.23 Unsecured Promissory Note dated July 1, 1997, by Cross-Continent
Auto Retailers, Inc. to The Jack Biegger Revocable Living Trust, in
the principal amount of $360,000.00. (9)
10.24 Unsecured Promissory Note, dated July 1, 1997, by Cross-Continent
Auto Retailers, Inc. to The Dale M. Edwards Revocable Family Trust,
in the principal amount of $240,000.00. (9)
10.25 Unsecured Promissory Note, dated July 1, 1997, by Sahara Nissan,
Inc. to The Jack Biegger Revocable Living Trust, in the principal
amount of $275,000.00. (9)
10.26 Unsecured Promissory Note, dated July 1, 1997, by Sahara Nissan,
Inc. to The Dale M. Edwards Revocable Family Trust, in the
principal amount of $125,000.00. (9)
10.27 Documents, dated as of June 26, 1997, relating to line of credit
for Cross-Continent Auto Retailers, Inc. with Texas Commerce Bank
National Association, individually and as agent. (9)
10.27.1 Revolving Credit Agreement between Cross-Continent Auto Retailers,
Inc., and Texas Commerce Bank National Association. (9)
10.27.2 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of
its subsidiaries to the order of Texas Commerce Bank National
Association. (9)
10.27.3 Pledge and Security Agreement between Cross-Continent Auto
Retailers, Inc. and Texas Commerce Bank National Association. (9)
10.28 Dealer Sales and Service Agreement dated July 1, 1997, between the
Nissan Division of Nissan Motor Corporation, U.S.A., Sahara Nissan,
Inc., Cross-Continent Auto Retailers, Inc., and Bill A. Gilliland.
(9)
10.29 Environmental Agreement dated July 1, 1997 between Cross-Continent
Auto Retailers, Inc. and The Jack Biegger Revocable Living Trust.
(9)
10.30 Separation Agreement dated as of June 20, 1997 between
Cross-Continent Auto Retailers, Inc. and Emmett M. Rice, Jr. (11)
10.32 Documents, dated as of August 7, 1997, relating to the line of
credit for Cross-Continent Auto Retailers, Inc. with Texas Commerce
Bank National Association, individually and as agent (13)
10.32.1 First Amendment to Revolving Credit Agreement among Cross-Continent
Auto Retailers, Inc.; its subsidiaries; Texas Commerce Bank
National Association; Amarillo National Bank; The Bank of
Tokyo-Mitsubishi, Ltd., Houston Agency; and U.S. Bank. (13)
10.32.2 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of
its subsidiaries to the order of Texas Commerce Bank National
Association in the principal amount of $22,500,000 (13)
10.32.3 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of
its subsidiaries to the order of Amarillo National Bank in the
principal amount of $7,500,000 (13)
10.32.4 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of
its subsidiaries to the order of Bank of Tokyo-Mitsubishi, Ltd.,
Houston Agency, in the principal amount of $5,000,000 (13)
10.32.5 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of
its subsidiaries to the order of U. S. Bank in the principal amount
of $5,000,000 (13)
24
<PAGE>
10.33 Lease Agreement dated August 15, 1997 between Cross-Continent Auto
Retailers, Inc. and Performance Dodge, Inc. (12)
10.34 Joinder Agreement dated July 1, 1997 between Sahara Nissan, Inc.
and Texas Commerce Bank National Association (13)
10.35 Documents dated as of September 30, 1997 relating to the loan
agreement between Cross- Continent Auto Retailers, Inc. and R.
Douglas Spedding (omitting exhibits thereto, which will be
furnished supplementally to the Commission upon request) (13)
10.35.1 Master Construction and Master Loan Agreement among Toyota West
Sales and Service, Inc., Douglas Toyota, Inc., Sahara Imports,
Inc., and Cross-Continent Auto Retailers, Inc. as Borrowers, and R.
Douglas Spedding as Lender (13)
10.35.2 Promissory Note by Cross-Continent Auto Retailers, Inc. to the
order of R. Douglas Spedding in the principal amount of $7,400,000
(13)
10.35.3 Deed of Trust among Cross-Continent Auto Retailers, Inc. as
Borrower, the Public Trustee of Adams County, Colorado, as Trustee,
and R. Douglas Spedding as Lender (13)
10.35.4 Deed of Trust and Assignment of Rents among Cross-Continent Auto
Retailers, Inc. as Grantor, Old Republic Title Company of Nevada as
Trustee, and R. Douglas Spedding as Beneficiary (13)
10.35.5 Security Agreement between Cross-Continent Auto Retailers, Inc.,
Douglas Toyota, Inc. and Toyota West Sales and Service, Inc. as
Debtors and R. Douglas Spedding as Lender (13)
10.35.6 Guaranty by Bill A. Gilliland in favor of R. Douglas Spedding (13)
10.36 Documents dated August 22, 1997 relating to loans by General Motors
Acceptance Corporation to Cross-Continent Auto Retailers, Inc. and
certain subsidiaries (13)
10.36.1 Cross Default and Cross Collateralization Agreement among General
Motors Acceptance Corporation and Midway Chevrolet, Inc., Plains
Chevrolet, Inc., Quality Nissan, Inc., Westgate Chevrolet, Inc.,
Sahara Nissan, Inc., and Cross-Continent Auto Retailers, Inc. (13)
10.36.2 Guaranty Agreement between Cross-Continent Auto Retailers, Inc. and
General Motors Acceptance Corporation (13)
10.37 Assumption Agreement dated August 22, 1997 between General Motors
Acceptance Corporation and Cross-Continent Auto Retailers, Inc.
relating to Performance Dodge, Inc. (omitting exhibit thereto,
which will be furnished supplementally to the Commission upon
request) (13)
10.38 Amendment to Office Lease dated October 1, 1997, between Gilliland
Group Family Partnership and Cross-Country Auto Retailers, Inc.
(now named Cross-Continent Auto Retailers, Inc.) (13)
10.39 Amendment No. 1 to Nissan Dealer Term Sales and Service Agreement
dated October 13, 1997, between the Nissan Division of Nissan Motor
Corporation U.S.A. and Sahara Nissan, Inc. d/b/a Jack Biegger
Nissan (13)
10.40 Management Agreement dated as of the 16th day of October, 1997, by
and between Cross- Continent Auto Retailers, Inc. and Tar-Car, Inc.
(16)
10.41 Amendment to Management Agreement effective as of November 1, 1997,
by and between Cross-Continent Auto Retailers, Inc. and Tar-Car,
Inc. (16)
10.42 Management Agreement dated as of the 17th day of December, 1997, by
and between Sahara Imports, Inc. and Vinci, Inc. (16)
10.43 Management Agreement dated as of November 1, 1997 by and among
Cross-Continent Auto Retailers, Inc., JRJ Investments, Inc., and
the Chaisson Family Trust R-501 (15)
10.44 Triple Net Lease Agreement dated November 1, 1997 covering 2333
South Decatur Boulevard, Las Vegas, Nevada, by and between JRJ
Properties and JRJ Investments, Inc. (15)
25
<PAGE>
10.45 Triple Net Lease Agreement dated November 1, 1997 covering 261 and
251 Auto Mall Drive, Henderson, Nevada, by and between The Chaisson
Family Trust R-501 and JRJ Investments, Inc. (15)
10.46 Unsecured Promissory Note dated January 5, 1998, by Cross-Continent
Auto Retailers, Inc. to The Chaisson Family Trust R-501 (15)
10.47 Management Agreement dated January 5, 1998, by and among
Cross-Continent Auto Retailers, Inc., JRJ Investments, Inc., and
The Chaisson Family Trust R-501. (15)
10.48 Escrow Agreement dated January 5, 1998, by and among
Cross-Continent Auto Retailers, Inc., The Chaisson Family Trust
R-501, and United Title of Nevada, Inc. (15)
10.49 Agreement Regarding Stock Options dated January 5, 1998, between
James J. Chaisson, Jr. and Cross-Continent Auto Retailers, Inc.
(15)
10.50 Real Property Purchase Agreement dated as of December 31, 1997, by
and among Capital Automotive REIT, Capital Automotive, L.P., Plains
Chevrolet, Inc., Midway Chevrolet, Inc., Westgate Chevrolet, Inc.,
Quality Nissan, Inc., and Cross-Continent Auto Retailers, Inc.
(omitting exhibits thereto, which will be furnished supplementally
to the Commission upon request) (16)
10.51 Documents dated January 16, 1998 relating to financing for the
purchase of used vehicles at T-West Sales & Service, Inc. and
Douglas Motors, Inc. (16)
10.51.1 Promissory Note from T-West Sales & Service, Inc. to R. Douglas
Spedding, with Guaranty by Cross-Continent Auto Retailers, Inc.
(16)
10.51.2 Security Agreement between T-West Sales & Service, Inc. and R.
Douglas Spedding (16)
10.51.3 Promissory Note from Douglas Motors, Inc. to R. Douglas Spedding,
with Guaranty by Cross-Continent Auto Retailers, Inc. (16)
10.51.4 Security Agreement between Douglas Motors, Inc. and R. Douglas
Spedding (16)
10.52 Sublease Agreement dated February 25, 1998 by and between Allied
2000 Collision Center, Inc. and Plains Chevrolet, Inc. (16)
10.53 Sublease Agreement dated February 25, 1998 by and between Working
Man's Credit Plan, Inc. and Plains Chevrolet, Inc. (16)
10.54 Sublease Agreement dated February 25, 1998 by and between Westgate
Chevrolet, Inc. and Enterprise Rent-A-Car Company (16)
10.55 Guaranty and Subordination Agreement dated February 25, 1998 by
Cross-Continent Auto Retailers, Inc. in favor of Capital
Automotive, L.P. (16)
10.56 Lease Agreement dated February 25, 1998 by and between Capital
Automotive, L. P. and Plains Chevrolet, Inc. (14) (16)
10.57 Dealer Agreement effective as of February 1, 1998 by and between
BMW of North America, Inc. and JRJ Investments, Inc. (16)
10.58 Waiver and Second Amendment to Revolving Credit Agreement dated
March 27, 1998 by and among Cross-Continent Auto Retailers, Inc.
and 12 of its subsidiaries; Chase Bank of Texas, National
Association, formerly known as Texas Commerce Bank National
Association; Amarillo National Bank; The Bank of Tokyo-Mitsubishi;
and U.S. Bank.
10.59 Settlement Agreement and Release dated March 23, 1998 between
Cross-Continent Auto Retailers, Inc. and James F. Purser.
27.1 Financial Data Table
- ---------------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 333-0685), incorporated herein by
reference.
26
<PAGE>
(2) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, incorporated herein
by reference.
(3) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated April 10, 1997, incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended September 30, 1996,
incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement
on Form S-8, filed with the Securities and Exchange Commission on March
7, 1997, incorporated herein by reference.
(6) Substantially identical agreements exist between the Chevrolet Division
and each of Midway Chevrolet, Inc. and Westgate Chevrolet, Inc.
(7) Substantially identical Agreements exist between General Motors
Acceptance Corporation and each of Midway Chevrolet, Inc., Westgate
Chevrolet, Inc., and Quality Nissan, Inc.
(8) Substantially identical Promissory Notes have been executed by Midway
Chevrolet, Inc., Westgate Chevrolet, Inc., and Quality Nissan, Inc., in
the amounts indicated for each dealership subsidiary in the
Cross-Default and Cross-Collateralization Agreement (Exhibit 10.13.3)
(9) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated July 15, 1997, incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1997, incorporated
herein by reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997, incorporated
herein by reference.
(12) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated September 2, 1997, incorporated herein by reference.
(13) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997,
incorporated herein by reference.
(14) Substantially identical agreements exist between Capital Automotive,
L.P. and each of Midway Chevrolet, Inc., Westgate Chevrolet, Inc.,
Quality Nissan, Inc., Douglas Motors, Inc., and T-West Sales & Service,
Inc.
(15) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated January 5, 1998, incorporated herein by reference.
(16) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, incorporated herein
by reference.
27
<PAGE>
Exhibit 10.58
WAIVER AND SECOND AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS WAIVER AND SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT dated
as of March 27, 1998 (this "AMENDMENT"), by and between Cross-Continent Auto
Retailers, Inc., a Delaware corporation (the "PARENT"), the other Borrowers
identified on the signature pages hereto (together with the Parent,
collectively, the "BORROWERS"), the financial institutions listed on the
signature pages hereto (the "BANKS"), and Chase Bank of Texas, National
Association, formerly known as Texas Commerce Bank National Association, a
national banking association, in its capacity as Agent (the "AGENT") and in its
individual capacity as a Bank hereunder ("CBT").
WHEREAS, the Borrowers, the Banks and the Agent have entered into that
certain Revolving Credit Agreement dated as of June 26, 1997, as amended by that
certain First Amendment to Revolving Credit Agreement dated July 1, 1997
(together with any and all amendments and modifications thereof, the
"CREDIT AGREEMENT"; capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Credit Agreement); and
WHEREAS, the Borrowers have requested that the Banks (i) waive the
Borrowers' compliance with Section 10.1(b) and Section 10.1(c) of the Credit
Agreement for the Borrowers' fiscal quarterly period ending December 31, 1997,
and (ii) amend the Credit Agreement in several respects as provided for herein;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. WAIVER. The Banks hereby waive the Borrowers'
compliance with Section 10.1(b) of the Credit Agreement and Section 10.1(c) of
the Credit Agreement for the period ending December 31, 1997, and any rights and
remedies the Banks may have in respect of the provisions waived pursuant to this
Amendment.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) "Exhibit A" to the Credit Agreement is hereby amended by
inserting the following definitions in their proper alphabetical order:
"ADJUSTED LEVERAGE RATIO" shall mean the ratio of (i) Adjusted
Indebtedness to (ii) the difference between (a) Pro Forma Consolidated
EBITDA (calculated quarterly on a rolling four-quarter basis) MINUS
(b) Pro Forma Floor Plan Interest Expense (calculated quarterly on a
rolling four-quarter basis). For purposes of calculating Adjusted
Leverage Ratio, an amount equal to the annualized rent payments
resulting from the Sale and Leaseback Transaction shall be deducted,
<PAGE>
without duplication of other amounts included in the determination of Pro
Forma Consolidated EBITDA, from Pro Forma Consolidated EBITDA.
"FLOOR PLAN LENDERS" shall mean those manufacturer captive
finance companies, commercial banks, or other parties providing Floor
Plan Financings to the Borrowers.
"RESTRUCTURING CHARGE" shall mean the charge made by the
Borrowers in the first fiscal quarter of 1998 related to the
Borrowers' restructuring, in an amount not to exceed $2,500,000.00.
"SALE AND LEASEBACK TRANSACTION" shall mean that certain Real
Property Purchase Agreement, dated as of December 31, 1997, between
the Parent and Capital Automotive LP, a non-affiliated real estate
investment trust.
(b) The definition of "Consolidated Fixed Charges" is hereby amended
by inserting at the end thereof the following provision:
"; PROVIDED, HOWEVER, for the period ending March 31, 1998, the
calculation of Consolidated Fixed Charges shall exclude the scheduled
principal payments in respect of the Debt allowed under Section
10.3(ix) hereof."
(c) The definition of "Interest Expense" is hereby amended by
inserting after the phrase "Capital Leases," the phrase "net of all interest
income attributable to investments with Floor Plan Lenders,"
(d) The definition of "EBITDA" is hereby amended by inserting at the
end thereof the following provision:
"; PROVIDED, HOWEVER, the calculation of EBITDA shall exclude the
Restructuring Charge."
(e) The definition of "Interest Coverage Ratio" is hereby amended by
inserting at the end thereof the following provision:
"; PROVIDED, HOWEVER, for purposes of calculating Interest
Coverage Ratio for the period ending March 31, 1998, and all
subsequent applicable periods, an amount equal to the annualized rent
payments resulting from the Sale and Leaseback Transaction shall be
deducted, without duplication of other amounts included in the
determination of Consolidated EBITDA, from Consolidated EBITDA, and
for purposes of calculating Interest Coverage Ratio for the period
ending March 31, 1998, and all subsequent applicable periods, an
amount equal to the reduction in interest expense attributable to any
repayment of the Debt related to any real estate
-2-
<PAGE>
financings otherwise permitted by Section 10.3 hereof shall be deducted
from Interest Expense."
(f) Section 10.23 of the Credit Agreement is hereby amended in its
entirety to provide as follows:
ACQUISITIONS. The Parent will not, and will not permit any
Subsidiary to, acquire by purchase, merger or consolidation (a) the
power to direct or cause the direction of the management and policies
of any other Person (the "Acquisition Target"), directly or
indirectly, whether through the ownership of voting securities or by
contract or otherwise or (b) more than 20% of the Capital Stock or
other equity interest of any such other Person or all or substantially
all of the assets or Properties of any such other Person (the events
described in clauses (a) and (b) of this Section 10.23 herein referred
to as "Acquisitions").
However, the Parent or any Subsidiary may make such
Acquisitions if:
(i) prior to and immediately after making such Acquisition, no
Default or Event of Default has occurred and is continuing or would exist;
and
(ii) at least 30 days prior to the making of any such Acquisition
proposed by the Parent or any Subsidiary, Parent shall deliver to the Agent
written calculations demonstrating: (A) the Borrowers' compliance with all
financial covenants contained in Section 10.1 hereof, PROVIDED, HOWEVER,
that for the purposes of such calculations, an amount equal to the
annualized rent payments resulting from the Sale and Leaseback Transaction
shall be deducted, without duplication of other amounts included in the
determination of Consolidated EBITDA, from Consolidated EBITDA; and (B) the
Borrowers' projected compliance, subsequent to the completion of such
proposed Acquisition, with all financial covenants contained in Section
10.1 hereof, PROVIDED, HOWEVER, that for the purposes of such calculations,
an amount equal to the annualized rent payments resulting from the Sale and
Leaseback Transaction shall be deducted, without duplication of other
amounts included in the determination of Consolidated EBITDA, from
Consolidated EBITDA; and
(iii) the Adjusted Leverage Ratio shall not be less than (A)
2.75 to 1.00 for periods ending prior to or on December 31, 1998; and
(B) 2.50 to 1.00 thereafter; and
(iv) the Parent or any Subsidiary obtains the prior written consent of
the Majority Banks for any such proposed Acquisition;
PROVIDED, HOWEVER, that Sections 10.23(ii), 10.23(iii), and 10.23(iv)
shall apply only to Acquisitions to be completed or closed after March
27, 1998.
-3-
<PAGE>
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall
become effective as of March 27, 1998 upon the Agent's receipt of original
execution copies of this Amendment, executed and delivered by the parties
hereto.
SECTION 4. RATIFICATION OF LOAN DOCUMENTS. The Credit Agreement,
as amended hereby, and each other Loan Document is hereby ratified and confirmed
to be in full force and effect. Each reference in a Loan Document to the
"Credit Agreement" shall be deemed a reference to the Credit Agreement as
amended hereby.
SECTION 5. LIMITATIONS. The amendments set forth herein are
limited precisely as written and shall not be deemed to (a) be a consent to, or
waiver or modification of, any other term or condition of the Credit Agreement
or any of the Loan Documents, or (b) prejudice any right or rights which the
Agent and the Banks may now have or may have in the future under or in
connection with the Credit Agreement, the Loan Documents or any of the other
documents referred to therein. Except as expressly modified hereby, the terms
and provisions of the Credit Agreement, the Notes and any other Loan Documents
or any other documents or instruments executed in connection with any of the
foregoing are and shall remain in full force and effect. In the event of a
conflict between the Amendment and any of the foregoing documents, the terms of
this Amendment shall be controlling.
SECTION 6. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
Borrowers hereby represent and warrant that on and as of the date hereof, and
after giving effect hereto: (i) the representations and warranties of the
Borrowers made in Section 7 of the Credit Agreement (other than those
representations and warranties limited by their terms to a specific date) shall
be true and correct; and (ii) no Default or Event of Default shall have occurred
and be continuing.
SECTION 7. PAYMENT OF EXPENSES. The Borrowers jointly and
severally agree, whether or not the transactions hereby contemplated shall be
consummated, to reimburse and save the Agent and the Banks harmless from and
against liability for the payment of all reasonable out-of-pocket costs and
expenses arising in connection with the preparation, execution, delivery, waiver
and enforcement of, or the preservation of any rights under this Amendment. The
provisions of this Section 8 shall survive the termination of the Credit
Agreement and the repayment of the Loans.
SECTION 8. CHOICE OF LAW. The Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America. This Amendment is a Loan Document.
SECTION 9. DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Amendment are inserted for convenience only and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
-4-
<PAGE>
SECTION 10. ENTIRE AGREEMENT. The Amendment and the documents
referred to herein represent the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior and contemporaneous
oral and written agreements of the parties hereto with respect to the subject
matter hereof.
SECTION 11. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by parties hereto on separate counterparts, each
counterpart, when so executed and delivered, constitute an original instrument,
and all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and authorized by their respective officers as of March 27,
1998.
Borrowers: CROSS-CONTINENT AUTO
- --------- RETAILERS, INC.
By:
------------------------------------------
Name: John Gaines
Title: Vice President - Finance and
Treasurer
QUALITY NISSAN, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
MIDWAY CHEVROLET, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
-5-
<PAGE>
PLAINS CHEVROLET, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
WESTGATE CHEVROLET, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
WORKING MAN'S CREDIT PLAN, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
ALLIED 2000 COLLISION CENTER, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
CROSS-COUNTRY DODGE, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
C-CAR AUTO WHOLESALERS, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
-6-
<PAGE>
DOUGLAS MOTORS, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
T- WEST SALES & SERVICE, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
SAHARA IMPORTS, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
SAHARA NISSAN, INC.
By:
------------------------------------------
Name: John Gaines
Title: Treasurer
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as a
Bank and as Agent
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
-7-
<PAGE>
AMARILLO NATIONAL BANK
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
U.S. BANK
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
-8-
<PAGE>
Exhibit 10.59
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is entered into on this
23rd day of March, 1998. The parties to this Agreement are CROSS-CONTINENT AUTO
RETAILERS, INC., a Delaware corporation (the "Company") and JAMES F. PURSER
("Purser").
RECITALS
A. Purser has been employed by the Company as the Chief Financial Officer
of the Company under that certain Employment Contract (the "Contract") dated
February 21, 1997, by and between the Company and Purser.
B. As part of the restructuring of the Company, Purser's employment
with the Company has been terminated.
C. The Company and Purser do not anticipate that there will be any
dispute between them or legal claims arising out of Purser's termination from
the Company, but nevertheless desire to (1) set forth the terms upon which
Purser's employment with the Company has been terminated, and (2) settle fully
and finally any and all differences, causes of action, claims, or disputes that
might otherwise arise out of Purser's employment with the Company.
AGREEMENT
IN CONSIDERATION OF THE MUTUAL AGREEMENTS CONTAINED HEREIN, THE COMPANY AND
PURSER AGREE AS FOLLOWS:
1. TERMINATION OF EMPLOYMENT. The Contract and Purser's employment with
the Company shall be terminated effective as of March 31, 1998.
2. SETTLEMENT PAYMENT. If Purser does not revoke this Agreement in
accordance with the provisions of paragraph thirteen (13) hereof, the Company
shall pay Purser a cash settlement in the amount of $606,550 on March 31, 1998.
3. CANCELLATION OF PAR VALUE STOCK OPTION. If Purser does not revoke
this Agreement in accordance with the provisions of paragraph thirteen (13)
hereof, the Par Value Stock Option (as defined in the Contract) shall be
cancelled effective March 31, 1998.
4. VESTING OF FAIR MARKET VALUE STOCK OPTION AND AUGUST 1, 1997 OPTION.
If Purser does not revoke this Agreement in accordance with the provisions of
paragraph thirteen (13) hereof, the Fair Market Value Stock Option (as defined
in the Contract) and the option to acquire 21,860 shares of common stock of the
Company that was granted to Purser on August 1, 1997, shall each continue in
accordance with the terms and provisions of the respective stock option
agreements, as amended, except that the options shall be 100% vested effective
as of March 31, 1998.
Page 1 of 5
<PAGE>
5. CONFIDENTIALITY. Each party to this Agreement agrees to keep the
facts and terms of this Agreement in strict confidence, unless disclosure is
required by law or court order.
6. RELEASES. (a) In consideration of the promises contained herein, and
as a material inducement to the Company to enter into this Agreement, Purser
hereby irrevocably and unconditionally releases, acquits, and forever discharges
the Company and its agents, assigns, directors, officers, employees,
representatives, attorneys, subsidiaries, affiliates and all persons acting by,
through, under, or in concert with any of them (hereinafter "the releasees"),
from any and all claims, causes of action, demands or liabilities whatsoever,
whether known or unknown or suspected to exist by Purser which he ever had or
may now have against the releasees, or any of them, including, without
limitation, any claims, causes of action, demands, or liabilities in connection
with the termination of Purser's employment with the Company. This Agreement
expressly covers, but is not limited to, any claims that Purser may have raised
under any state or federal law prohibiting discrimination in employment on the
basis of age, gender, disability, race, national origin or on any other basis
prohibited by law, including claims arising under Title VII of the Civil Rights
Act of 1964, Section 21.051 of the Texas Labor Code and the Americans With
Disabilities Act.
In addition and in consideration of the agreements contained in this
Agreement, Purser hereby waives, releases and forever discharges, and agrees
that he will not in any manner institute, prosecute or pursue, any complaint,
claim, charge, demand, suit, whether in law or in equity, which asserts or could
assert under common law or any statute, rule or otherwise any claim or claims
under the Federal Age Discrimination in Employment Act against any one or all of
the releasees with respect to any event, matter, claim, damage, or injury,
whether known or unknown, arising out of his employment and termination of
employment with the Company or the execution of this Agreement.
(b) In consideration of the promises contained herein, and as a material
inducement to Purser to enter into this Agreement, the Company hereby
irrevocably and unconditionally releases, acquits, and forever discharges
Purser and his heirs, executors, and administrators (hereinafter the "released
parties") from any and all claims, causes of action, demands, or liabilities
whatsoever, whether known or unknown, or suspected to exist by the Company,
which it ever had or may have against the released parties, or any of them.
7. COBRA NOTICE. Purser hereby acknowledges that the Company has advised
him that pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (COBRA) he and/or his qualified beneficiaries have the right to
elect continued coverage under the Company's group health plan at their own
expense. Such election must be made no later than sixty (60) days after the
effective date of his termination, which is the "qualifying event" for purposes
of the COBRA coverage, or the date they received notice of their COBRA rights
whichever is later.
8. MEDICAL INSURANCE. If Purser does not revoke this Agreement in
accordance with the provisions of paragraph thirteen (13) hereof, the Company
shall continue to cover those members of his immediate family (other than
Purser) who are his qualified beneficiaries for purposes of COBRA continuation
coverage under the Company's group health plan through April, 1998. Purser
shall reimburse the Company for the premiums for such coverage. No coverage
shall be provided by the Company thereafter unless they elect and are qualified
to purchase the COBRA continuation
Page 2 of 5
<PAGE>
coverage referenced in paragraph seven (7) above. For purposes of this
paragraph, "qualified beneficiary" means Purser's spouse and his dependent
children, as defined by the Company's group health plan, on the date of his
termination.
Further, if Purser has not revoked this Agreement in accordance with the
provisions of paragraph thirteen (13) hereof and does not elect COBRA coverage
for himself, the Company shall continue to cover Purser under the Company's
group health plan from April 1, 1998 until the earlier of (a) the date Purser is
employed by another employer and covered by its group health plan or medical
insurance or (b) March 31, 2000. The Company shall pay the premiums for such
coverage.
9. NO ADMISSION OF FAULT ON BEHALF OF THE COMPANY. This Agreement shall
not in any way be construed as an admission by the Company, its subsidiaries,
agents, employees, directors, officers, representatives, or assigns of any act
of wrong doing whatsoever against Purser or any other person.
10. COMPLETE AGREEMENT. This Agreement sets forth the entire agreement
between the parties hereto and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof.
11. ACKNOWLEDGMENT OF RIGHT TO SEEK COUNSEL. Purser acknowledges that he
has a complete and unequivocal right to seek legal advice and/or representation
from an attorney of his choice regarding the matter set forth in this Agreement.
Purser acknowledges that he has either consulted with counsel and is satisfied
with the representation he received with respect to this Agreement, or he
acknowledges that he has knowingly and voluntarily waived his right to seek
legal representation. The Company agrees to pay the reasonable legal fees (not
to exceed $300.00) incurred by Purser to have this Agreement reviewed by an
attorney.
12. CHOICE OF FORUM AND VENUE. The terms of this Agreement shall be
construed in accordance with the laws of the State of Texas. Any proceeding
brought to enforce or interpret this Agreement shall be brought in a court of
competent jurisdiction for Potter County, Texas.
13. TIME TO SIGN AND REVOKE AGREEMENT. In accordance with the Older
Workers Benefit Protection Act (29 U.S.C. Section 626(f)(1)), Purser
acknowledges and agrees that he has had twenty-one (21) calendar days from the
date he first received this Agreement to obtain the counsel and advice from his
legal representative with respect to this Agreement.
Purser understands that for a period of seven (7) calendar days after he
executes this Agreement he has the right to revoke it and this Agreement shall
not become effective and enforceable until after the passage of this seven day
period without Purser having revoked it. This Agreement may not be revoked
after the seven day period. PURSER UNDERSTANDS AND AGREES THAT HE WILL BE
ENTITLED TO THE CONSIDERATION PROVIDED IN THIS AGREEMENT ONLY IF HE SIGNS AND
RETURNS AN EXECUTED ORIGINAL COPY OF THE STATEMENT OF NON-REVOCATION ATTACHED
HERETO CONFIRMING IN WRITING THAT HE DID NOT REVOKE THIS AGREEMENT.
Page 3 of 5
<PAGE>
14. CONSULTING AGREEMENT. Purser agrees to provide such consulting
services as the Company may reasonably request after receipt of reasonable
notice from the Company, provided that Purser shall not be obligated to provide
more than 400 hours during the period from April 1, 1998, to March 31, 1999, or
more than 400 hours during the period from April 1, 1999, to March 31, 2000. If
Purser fails or refuses to provide any consulting services reasonably requested
by the Company within a reasonable time period after such consulting services
are requested for any reason other than death, disability or mental
incompetence, Purser shall pay the Company $540 for each consulting hour Purser
fails or refuses to provide. If the Company does not request more than 400
hours of consulting services during either of the above described twelve month
periods, Purser shall not be obligated to pay the Company for the hours not
requested. The Company shall reimburse Purser for all reasonable expenses
incurred by Purser in providing the consulting services that are reasonably
requested.
15. ACKNOWLEDGMENT BY PURSER. BY SIGNING BELOW, PURSER ACKNOWLEDGES THAT
HE HAS READ AND CAREFULLY CONSIDERED THIS AGREEMENT AND UNDERSTANDS THAT IT IS A
FULL RELEASE OF ALL CLAIMS KNOWN OR UNKNOWN. PURSER ACKNOWLEDGES AND AFFIRMS
THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS CONCERNING THIS AGREEMENT AND
HE HAS HAD HIS QUESTIONS ANSWERED TO HIS COMPLETE SATISFACTION. PURSER
ACKNOWLEDGES THAT HE IS SIGNING THIS AGREEMENT FREELY AND VOLUNTARILY.
THE COMPANY: CROSS-CONTINENT AUTO RETAILERS, INC.
By:_________________________________________
BILL GILLILAND, Chairman and Chief Executive Officer
PURSER: ________________________________________________
JAMES F. PURSER
THE STATE OF TEXAS Section
Section
COUNTY OF POTTER Section
This instrument was acknowledged before me on this ______ day of March,
1998, by JAMES F. PURSER.
________________________________________________
Notary Public, State of Texas
THE STATE OF TEXAS Section
Section
Page 4 of 5
<PAGE>
COUNTY OF POTTER Section
This instrument was acknowledged before me on this ______ day of March,
1998, by BILL GILLILAND, Chairman and Chief Executive Officer of CROSS-CONTINENT
AUTO RETAILERS, INC., a Delaware corporation, on behalf of said corporation.
________________________________________________
Notary Public, State of Texas
Page 5 of 5
<PAGE>
STATEMENT OF NON-REVOCATION
By signing below, I hereby verify that I have chosen not to revoke my
agreement to or execution of the "Settlement Agreement and Release" dated the
23rd day of March, 1998, between myself and Cross-Continent Auto Retailers, Inc.
My signature below confirms my continued agreement to the terms of that
Agreement in all its particulars including my release and waiver of any and all
claims relating to my employment and termination of employment with
Cross-Continent Auto Retailers, Inc.
______________________________________ ____________________
James F. Purser Date
ACCEPTED BY:_____________________________ ____________________
Date
Print Name & Title:______________________
NOTICE: DO NOT SIGN, DATE OR RETURN THIS DOCUMENT UNTIL EIGHT (8) DAYS AFTER
YOU SIGN THE "SETTLEMENT AGREEMENT AND RELEASE".
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