<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 June 30, 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 August 11, 1998:
Class Shares Outstanding
- --------------------------------------- -----------------------------
Common Stock, $.01 par value per share 13,573,908
1
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CROSS-CONTINENT AUTO RETAILERS, INC.
INDEX
PART I
FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Statements of Operations
Three Months Ended June 30, 1998 and June 30, 1997
Six Months Ended June 30, 1998 and June 30, 1997 3
Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 4
Combined Statements of Cash Flows
Six Months Ended June 30, 1998 and June 30, 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
Consolidated Margin Statistics 12
Same Store Comparisons Margin Statistics 13
Results of Operations
Three months ended June 30, 1998 14
Results of Operations
Six months ended June 30, 1998 17
PART II
OTHER INFORMATION
Item 1 Legal Proceedings 22
Item 6 Exhibits and Reports on Form 8-K 22
2
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Vehicle sales $146,220 $ 119,411 $ 276,354 $ 196,965
Other operating revenue 21,002 15,976 40,399 27,444
-------- --------- --------- ---------
Total revenues 167,222 135,387 316,753 224,409
Cost of sales 137,357 111,856 261,402 185,695
-------- --------- --------- ---------
Gross profit 29,865 23,531 55,351 38,714
-------- --------- --------- ---------
Operating expenses
Selling, general and administrative 22,262 17,742 42,381 28,643
Depreciation and amortization 912 617 1,839 998
Employee severance charge (Note 8) - - 815 -
Loss from sale of dealerships (Note 5) - 347 - 347
-------- --------- --------- ---------
Total operating expenses 23,174 18,706 45,035 29,988
-------- --------- --------- ---------
Income before interest and taxes 6,691 4,825 10,316 8,726
Other income (expense)
Interest income 136 96 294 832
Interest expense (2,500) (1,735) (4,770) (2,946)
-------- --------- --------- ---------
Income before income taxes 4,327 3,186 5,840 6,612
Income tax provision 1,617 1,320 2,182 2,600
-------- --------- --------- ---------
Net income $ 2,710 $ 1,866 $ 3,658 $ 4,012
-------- --------- --------- ---------
-------- --------- --------- ---------
Basic and diluted net income per share $ .20 $ 0.13 $ 0.27 $ 0.29
-------- --------- --------- ---------
-------- --------- --------- ---------
Weighted average common shares outstanding:
Basic 13,574 14,049 13,567 13,925
Diluted 13,734 14,049 13,723 13,925
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
ASSETS
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents................................ $ 7,624 $ 15,173
Accounts receivable...................................... 27,698 16,884
Inventories.............................................. 76,172 55,807
Other current assets..................................... 1,558 1,792
---------- ----------
Total current assets............................. 113,052 89,656
Property and equipment, net................................ 9,064 33,165
Goodwill and other intangible assets, net.................. 84,006 67,988
Other assets............................................... 6,352 6,464
---------- ----------
Total assets..................................... $ 212,474 $ 197,273
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Floor plan notes payable................................. $ 69,930 $ 53,368
Current maturities of long-term debt..................... 863 727
Accounts payable......................................... 7,889 6,117
Due to affiliates........................................ 4,353 15,150
Accrued expenses and other liabilities................... 12,882 10,559
Deferred income taxes.................................... 1,396 647
---------- ----------
Total current liabilities........................ 97,313 86,568
Long-term debt............................................. 41,752 44,263
Other liabilities and deferred credits..................... 4,490 3,180
---------- ----------
Total long-term liabilities...................... 46,242 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........................................ 20,990 17,332
Treasury stock, 631,795 and 760,000 shares at cost
at June 30, 1998 and December 31, 1997, respectively... (7,266) (8,740)
---------- ----------
Total stockholders' equity....................... 68,919 63,262
Commitments and contingencies
Total liabilities and stockholders' equity....... $ 212,474 $ 197,273
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CROSS-CONTINENT AUTO RETAILERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
Six Months Ended
June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income ........................................... $ 3,658 $ 4,012
Adjustments to reconcile net income to net cash
used in operating activities
Depreciation and amortization ..................... 1,839 998
Amortization of deferred warranty revenue ......... (825) (1,365)
Deferred taxes and other .......................... - (748)
(Increase) decrease in
Accounts receivable ................................ (7,472) 4,722
Inventory .......................................... (6,148) (6,540)
Other assets ....................................... (239) (2,110)
Increase (decrease) in
Accounts payable - trade ........................... (2,945) (4,717)
Accrued expenses and other liabilities ............. 1,266 (1,446)
-------- --------
Net cash used in operating activities ............. (10,866) (7,194)
Cash flows from investing activities
Acquisition of property and equipment ................ (2,007) (1,941)
Construction costs ................................... (5,854) -
Acquisition of dealerships ........................... (13,964) (34,007)
Proceeds from sale/leaseback ......................... 35,450 -
-------- --------
Net cash provided by (used in) investing
activities ....................................... 13,625 (35,948)
Cash flows from financing activities
Change in floor plan notes payable ................... 6,332 8,637
Net proceeds from borrowings ......................... - 28,037
Long-term debt repayments ............................ (5,843) (17,527)
Due to affiliates .................................... 1,510 (6,280)
Proceeds from borrowings - affiliates ................ 3,008 -
Debt repayments - affiliates ......................... (15,315) -
-------- --------
Net cash provided by (used in) financing
activities ....................................... (10,308) 12,867
Decrease in cash and cash equivalents ................... (7,549) (30,275)
Cash and cash equivalents at beginning of period ........ 15,173 36,946
-------- --------
Cash and cash equivalents at end of period .............. $ 7,624 $ 6,671
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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CROSS-CONTINENT AUTO RETAILERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 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 and six
months ended June 30, 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 June 30, 1998, the Company had 1,161,541 stock options
outstanding with exercise prices ranging from $7.00 to $19.25 and at June 30,
1997 had 459,660 options outstanding with exercise prices ranging from $14.00 to
$19.25. These options have been excluded from the diluted earnings per share
calculations as the effect of such would have been anti-dilutive. The Company is
contingently committed to issue additional shares in connection with the
Chaisson acquisition (See Note 4). The Company has included 160,000 and 156,000
shares in the diluted share calculations for the three and six months ending
June 30, 1998, as if it were the end of the contingent period. The actual
contingent period ends January 5, 1999.
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 June 30, 1998 and 1997, the Company paid Plains Air, Inc. an
aggregate of approximately $138,000 and $156,000, respectively, for the use of
the airplane; for the six months ended June 30, 1998 and 1997, the Company paid
approximately $305,000 and $269,000, respectively. Beginning in the third
quarter, the Company will use an airplane owned by R. Douglas Spedding, an
officer of the Company, in addition to the airplane above. The operating expense
will be at $800 per hour.
In general, the Company is required to pay for all vehicles purchased
from the manufacturers upon delivery of the vehicles to the Company. The Company
purchases new vehicles and certain used vehicles through financing obtained from
manufacturer's captive finance companies and a certain bank. This type of
financing is
6
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known as "floor plan financing" or "flooring." Under arrangements with the
manufacturer's captive 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 June
30, 1998 and 1997, funds advanced and outstanding from affiliates approximated
$1,953,000 and $900,000, respectively. Aggregate amounts outstanding pursuant
to these arrangements at June 30, 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 June 30, 1998 and
1997 approximated $46,000 and $80,000, respectively. The amount of interest
accrued during the six months ended June 30, 1998 and 1997 approximated
$98,000 and $193,000, respectively.
Subsequent to the acquisition of Toyota West Sales & Service, Inc. and
Douglas Toyota, Inc. (See Note 4), 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
provided interim financing up to $7.7 million for use on construction of the new
automobile dealership facilities in Las Vegas, Nevada and Denver, Colorado.
Interest accrued at the prime rate plus 1% payable monthly, and any outstanding
balance, if any, was to be payable on October 31, 1998. Upon completion of the
sale/leaseback transaction for Denver Toyota and Toyota West (see Note 6), the
Company retired approximately $7.7 million of the outstanding Loan Agreement and
$7.5 million of the seller-financed land notes. At June 30, 1998, the Loan
Agreement and all seller-financed land notes were paid in full. Interest on the
construction and land notes totaled approximately $112,000 and $514,000 for the
three and six month periods ended June 30, 1998, respectively.
On January 16, 1998, the Company entered into a floor plan financing
arrangement 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 December 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 dealerships less any other used vehicle floor plan debt. Total amount
outstanding at June 30, 1998 was $2.4 million. The aggregate amount outstanding
is included in due to affiliates in the accompanying balance sheet. Interest on
the floor plan notes for the three and six months ended June 30, 1998 totaled
approximately $55,000 and $94,000, respectively.
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%; principal and interest on the note are payable monthly over five
years. 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
7
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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):
<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 June 30,
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>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
<S> <C> <C>
Pro forma revenue $116,320 $291,397
Pro forma net income $ 1,633 $ 4,471
Pro forma net income per share $ .11 $ .31
Pro forma weighted average shares 14,334 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. DISPOSITION
Effective July 1, 1997, the Company sold 100% of the stock in
Performance Dodge, Inc. and Performance Nissan, Inc. ("Performance"), both in
the Oklahoma City, Oklahoma market, to Benji Investments, Ltd., a Texas limited
partnership controlled by Emmett M. Rice, Jr., the Company's former Chief
Operating Officer (also a shareholder and former Director of the Company), in
exchange for 760,000 shares of the Company's stock valued at a total of $8.7
million. During the quarter ended June 30, 1997, the Company recorded an
estimated loss on the disposition of $347,000, which included estimated selling
expenses. In conjunction with the sale, the Company repaid $4.3 million in
long-term debt associated with the acquisition of these dealerships. The Company
also retained ownership of the Performance Dodge facilities and the related
mortgage, and is leasing such facilities to Benji, Investments, LTD. The
combined revenue and operating loss from these dealerships for the three and six
month periods ended June 30, 1998 and 1997 are presented (In thousands) below:
8
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<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
------------------ ----------------
<S> <C> <C> <C> <C>
Revenue $ - $16,960 $ - $37,312
Operating loss - (861) - (561)
</TABLE>
NOTE 6. 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 recently constructed dealership properties located in Denver, Colorado and
Las Vegas, Nevada. The total sales price approximated $36 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 has
leased back 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.
The Las Vegas, Nevada transaction was completed on May 19, 1998. The Company
received approximately $13.8 million in sales proceeds and retired
approximately $4.3 million in interim construction notes and $5.5 million in
land purchase notes. The remaining proceeds will and have been used for
general corporate purposes including the reduction of other debt, acquisitions
and working capital needs. A gain of approximately $2.5 million on the
Amarillo, Texas, Denver, Colorado, and Las Vegas, Nevada transactions has been
deferred and is being amortized into income as a reduction of lease costs over
the lease term.
NOTE 7. PENDING ACQUISITIONS
The Company has entered into a contract to acquire a certain dealership
in California. The proposed purchase price is approximately $6.0 million
consisting of approximately $4.1 million in cash, $1.4 million in seller
financed notes and $500,000 in assumed debt. The Company intends to fund the
cash portion of the proposed purchase price from working capital and
availability under its credit line. During the six months ended June 30, 1998,
the Company advanced approximately $2.1 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 third 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 working
capital and additional bank borrowings. The Company is negotiating to increase
its existing credit facility and investigating other sources of financing;
however, no assurance can be given whether the line will be increased or whether
other sources of financing can be secured. During the six months ended June 30,
1998, the Company advanced approximately $1.5 million towards the closing of
this transaction. 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
9
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amount. During the three months and six months ended June 30, 1998, the
Company recognized approximately $674,000 and $1.2 million, respectively, in
management fee income, which is reflected in other operating revenue in the
accompanying consolidated statements of operations.
NOTE 8. EMPLOYEE SEVERANCE CHARGE
The Company recorded a pre-tax charge of $815,000 during the six months
ended June 30, 1998, representing employee severance incurred with the
realignment of management and certain other personnel.
10
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To: The Board of Directors and Stockholders of
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
June 30, 1998, and the related condensed statements of income for the three and
six month periods ended June 30, 1998 and 1997, and cash flows for the six month
periods ended June 30, 1998 and 1997. 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 accompanying consolidated balance sheet
information 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.
PricewaterhouseCoopers LLP
Fort Worth, Texas
July 28, 1998
11
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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 term
"Acquisitions" refers collectively to the aforementioned dealerships but only
for the time period in which the dealership is not included in the same periods
of 1998 and 1997. 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 also has two acquisitions pending in Nevada and
California and is currently operating those dealerships under management
agreements.
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 meaningful or indicative of future results.
12
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CROSS-CONTINENT AUTO RETAILERS, INC.
CONSOLIDATED MARGIN STATISTICS
<TABLE>
Qtr. Ended Qtr. Ended YTD YTD
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
(In thousands, except units and percentages)
<S> <C> <C> <C> <C>
New vehicle sales
Units............................... 3,454 2,907 6,227 4,502
Revenue............................. $ 82,726 $ 63,412 $ 152,291 $ 98,290
Average selling price............... $ 24.0 $ 21.8 $ 24.5 $ 21.8
Used vehicle sales (1)
Units............................... 6,382 6,322 12,370 10,940
Revenue............................. $ 63,494 $ 55,999 $ 124,063 $ 98,675
Average selling price............... $ 9.9 $ 8.9 $ 10.0 $ 9.0
Total Vehicles Sales
Units............................... 9,836 9,229 18,597 15,442
Revenue............................. $ 146,220 $ 119,411 $ 276,354 $ 196,965
Other operating revenue
Finance and insurance............... $ 6,198 $ 4,910 $ 11,089 $ 8,548
Parts and service................... 12,358 9,788 24,522 16,834
Other revenue....................... 2,446 1,278 4,788 2,062
----------- ----------- ----------- -----------
Total other operating revenue..... 21,002 15,976 40,399 27,444
Total revenue......................... $ 167,222 $ 135,387 $ 316,753 $ 224,409
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Gross profit
New vehicles........................ $ 8,689 $ 6,726 $ 15,100 $ 10,766
Used vehicles(1).................... 6,044 5,778 12,222 9,491
Finance and insurance............... 5,878 4,380 10,353 7,625
Parts and service................... 6,808 5,369 12,888 8,770
Other revenue....................... 2,446 1,278 4,788 2,062
----------- ----------- ----------- -----------
Total gross profit.................... $ 29,865 $ 23,531 $ 55,351 $ 38,714
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Gross profit percent
New vehicles........................ 10.5% 10.6% 9.9% 11.0%
Used vehicles(1).................... 9.5% 10.3% 9.9% 9.6%
Finance and insurance............... 94.8% 89.2% 93.4% 89.2%
Parts and service................... 55.1% 54.9% 52.6% 52.1%
Other revenue....................... 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- -----------
Total gross profit percent............ 17.9% 17.4% 17.5% 17.3%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------
(1) Used vehicle information includes the Company's retail and wholesale used
vehicle activities.
13
<PAGE>
CROSS-CONTINENT AUTO RETAILERS, INC.
(1)SAME STORE COMPARISONS MARGIN STATISTICS
JUNE 30, 1998
<TABLE>
Qtr. Ended Qtr. Ended YTD YTD
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- -------------- ------------- -------------
(In thousands, except units and percentages)
<S> <C> <C> <C> <C>
New vehicle sales
Units............................................ 2,603 2,554 3,709 3,746
Revenue.......................................... $ 60,251 $ 56,867 $ 85,940 $ 84,262
Average selling price............................ $ 23.1 $ 22.3 $ 23.2 $ 22.5
Used vehicle sales (2)
Units............................................ 4,986 5,292 7,942 8,776
Revenue.......................................... $ 47,285 $ 48,306 $ 75,241 $ 81,048
Average selling price............................ $ 9.5 $ 9.1 $ 9.5 $ 9.2
Total Vehicles Sales
Units............................................ 7,589 7,846 11,651 12,522
Revenue.......................................... $107,536 $105,173 $161,181 $165,310
Other operating revenue
Finance and insurance............................ $ 4,916 $ 4,304 $ 7,054 $ 7,118
Parts and service................................ 8,335 7,830 13,227 12,959
Other revenue.................................... 1,651 1,119 2,645 1,710
-------- -------- -------- --------
Total other operating revenue.................. 14,902 13,253 22,926 21,787
Total revenue...................................... $122,438 $118,426 $184,107 $187,097
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit
New vehicles..................................... $ 5,849 $ 6,013 $ 8,150 $ 9,239
Used vehicles (2)................................ 4,402 5,708 6,857 8,748
Finance and insurance............................ 4,588 3,774 6,474 6,261
Parts and service................................ 4,609 4,616 6,998 7,249
Other revenue.................................... 1,651 1,119 2,645 1,710
-------- -------- -------- --------
Total gross profit................................. $ 21,099 $ 21,230 $ 31,124 $ 33,207
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit percent
New vehicles..................................... 9.7% 10.6% 9.5% 11.0%
Used vehicles (2)................................ 9.3% 11.8% 9.1% 10.8%
Finance and insurance............................ 93.3% 87.7% 91.8% 88.0%
Parts and service................................ 55.3% 59.0% 52.9% 55.9%
Other revenue.................................... 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
Total gross profit percent......................... 17.2% 17.9% 16.9% 17.7%
-------- -------- -------- --------
-------- -------- -------- --------
</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.
14
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998
REVENUES AND GROSS PROFIT
NEW VEHICLES -
Same store unit sales (which are defined as the results of the Company's
dealerships which are included in the Consolidated Statements of Operations for
the same periods of 1998 and 1997) increased 49 units, or 1.9%, from the second
quarter of 1997 to the second quarter of 1998. Same store average selling price
per unit increased $881, or 4.0%, primarily attributable to model mix and
manufacturer cost increases passed on in the sales price of new vehicles. As a
result of these factors, same store sales increased by approximately $3.4
million from the second quarter of 1997 to the second quarter of 1998. The
Acquisitions added approximately $22.5 million in new vehicle revenue and 851
new unit sales with an average price of $26,409. The average sales price at the
dealerships acquired in the Acquisitions, excluding Chaisson which sells higher
priced vehicles, was $20,298.
Same store gross profit on new vehicle sales decreased approximately
$164,000, or 2.7%, which is primarily attributable to a decline in new vehicle
gross profit at the Company's Oklahoma City, Oklahoma dealership. The
Acquisitions added approximately $2.8 million in gross profit with a gross
profit percentage of 12.6%. The Company expects lower new vehicle sales and
gross profit margins in the third fiscal quarter of 1998 due to the General
Motors strike which will adversely affect inventory levels and the supply of new
vehicles at the Company's Chevrolet dealerships in Amarillo, Texas. The
Company's Amarillo dealerships have purchased new vehicles from other dealers in
an effort to mitigate the effects of the strike; however, those vehicles are
purchased at higher costs which will result in lower margins.
The table below sets forth a reconciliation of new vehicle units,
revenues, and gross profit from the second quarter of 1997 to the second quarter
of 1998 accounting for the variance in same store results, the Acquisitions and
Divestiture.
<TABLE>
UNITS REVENUES GROSS PROFIT
----- ------------ ------------
<S> <C> <C> <C>
Quarter ended June 30, 1997........ 2,907 $ 63,412,000 $ 6,726,000
Same store variance................ 49 3,384,000 (164,000)
Acquisitions....................... 851 22,475,000 2,840,000
Effects of the Divestiture......... (353) (6,545,000) (713,000)
------ ------------ -----------
Quarter ended March 31, 1998....... 3,454 $ 82,726,000 $ 8,689,000
------ ------------ -----------
------ ------------ -----------
</TABLE>
USED VEHICLES -
Same store unit sales decreased 306 units, or 5.8%, including retail and
wholesale sales. Unit sales in Oklahoma City, Oklahoma declined by 443 retail
units in the second quarter of 1998 compared to the second quarter of 1997.
Management believes the decline in unit sales at the Oklahoma City, Oklahoma
dealership is primarily attributable to the Company's continued efforts to
change the sales method and to eliminate low margin highly promotional volume
selling. Same store sales excluding the Oklahoma City, Oklahoma market increased
by approximately $3.6 million, or 9.2%. The Acquisitions added approximately
$16.2 million in used vehicle revenue and 1,396 used vehicle unit sales with an
average price of $11,611.
Same store gross profit decreased approximately $1.3 million, or 22.9%,
from the second quarter of 1997 to the second quarter of 1998, which is
primarily attributable to the decline in unit sales at the Oklahoma City,
Oklahoma dealership. Acquisitions added approximately $1.6 million in gross
profit with a gross profit percentage of 10.1%.
15
<PAGE>
The table below sets forth a reconciliation of used vehicle units,
revenues, and gross profit from the second quarter of 1997 to the second quarter
of 1998 accounting for the variance in same store results, the Acquisitions and
Divestiture.
<TABLE>
UNITS REVENUES GROSS PROFIT
----- ------------ ------------
<S> <C> <C> <C>
Quarter ended June 30, 1997......... 6,322 $ 55,999,000 $ 5,778,000
Same store variance................. (306) (1,021,000) (1,306,000)
Acquisitions........................ 1,396 16,209,000 1,642,000
Effects of the Divestiture.......... (1,030) (7,693,000) (70,000)
------ ------------ -----------
Quarter ended June 30, 1998......... 6,382 $ 63,494,000 $ 6,044,000
------ ------------ -----------
------ ------------ -----------
</TABLE>
OTHER OPERATING REVENUE -
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. Same store F&I revenue increased approximately $612,000, or
14.2%, primarily attributable to increased F&I penetration rates at the
Company's dealerships. The Acquisitions added approximately $1.3 million in
revenue from F&I activities.
Same store F&I gross profit increased approximately $814,000, or 21.6%,
from the second quarter of 1997 to the second quarter of 1998. Gross profit
percentage increased from 87.7% in the second quarter of 1997 to 93.3% in the
second quarter of 1998, primarily due to a decrease in the cost of extended
warranties.
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 increased approximately $505,000,
or 6.5%, primarily attributable to increased capacity at the Company's two
recently relocated dealerships. The Acquisitions added approximately $4.0
million in revenue from their parts and service activities.
Same store parts and service gross profit decreased approximately
$7,000. The gross profit percentage declined from 59.0% in the second quarter of
1997 to 55.3% in the second quarter of 1998, primarily attributable to a change
in sales mix in parts and service sales. The Acquisitions added approximately
$2.2 million from parts and service activities at a gross profit percentage of
54.7%.
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 $532,000, or 47.5%, from the second
quarter of 1997 primarily as a result of the management fee revenue from two
dealerships the Company currently manages under management agreements. The
Acquisitions added approximately $796,000 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
majority of 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.
16
<PAGE>
<TABLE>
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 June 30, 1997....... $4,910 $4,380 $ 9,788 $5,369 $1,278 $1,278 $15,976 $11,027
Same store variance............... 612 814 505 (7) 532 532 1,649 1,339
Acquisitions...................... 1,282 1,282 4,023 2,199 795 795 6,100 4,276
Effects of the Divestiture........ (606) (598) (1,958) (753) (159) (159) (2,723) (1,510)
------ ------ ------- ------ ------ ------ ------- -------
Quarter ended June 30, 1998....... $6,198 $5,878 $12,358 $6,808 $2,446 $2,446 $21,002 $15,132
------ ------ ------- ------ ------ ------ ------- -------
------ ------ ------- ------ ------ ------ ------- -------
</TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) -
Selling, general and administrative expenses increased approximately
$4.5 million for the second quarter ended June 30, 1998 compared to the second
quarter ended June 30, 1997. The Acquisitions added approximately $5.8 million
while the Divestiture reduced SG&A approximately $3.1 million. SG&A expense was
13.3% of revenues in the second quarter of 1998 versus 13.1% in the second
quarter of 1997. This increased percentage is primarily due to higher overhead
as a result of the Company's acquisition strategy and to a lesser extent the
additional lease expense resulting from the sale and leaseback transaction. The
Company believes that SG&A expenses will increase in the future due to higher
overhead as a result of the Company's acquisition strategy and the additional
lease expense as a result of the sale and leaseback transaction. The Company
further believes that SG&A may increase in the third quarter of 1998 as a
percentage of sales primarily due to the General Motors strike which could
result in lower new vehicle sales at the Company's Chevrolet dealerships.
DEPRECIATION AND AMORTIZATION -
Depreciation and amortization increased approximately $295,000, or
47.8%, primarily due to the Acquisitions, which added approximately $290,000 in
depreciation and amortization of acquisition intangibles. The Company expects
this expense to increase throughout 1998 as compared to 1997 due to a full year
impact from the Acquisitions.
INTEREST EXPENSE -
The Company's interest expense, net of interest income, increased
approximately $725,000 from the comparable period last year primarily due to
higher debt levels and floor plan interest expense resulting from the
Acquisitions. Acquisition floor plan interest expense was $385,000 for the three
month period ended June 30, 1998. Long-term debt increased from approximately
$29.9 million at June 30, 1997 to approximately $42.6 million at June 30, 1998,
primarily due to debt incurred to finance the Company's acquisitions. 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 Company's Acquisitions. These increases will be partially
offset by reduced interest associated with property mortgages which were repaid
with the proceeds from the sale leaseback transaction. Net interest expense may
be further impacted by additional borrowings to finance acquisitions and the
future direction of interest rates.
INCOME TAX PROVISION -
The Company's effective tax rate for the quarter ended June 30, 1998
approximated 37.4%, compared to 41.4%, for the quarter ended June 30, 1997. The
actual tax rate excluding the effects of the Divestiture, for the quarter ended
June 30, 1997 was 37.4%. Management expects the effective tax rate for 1998 to
remain in the 37% to 38% range.
BASIC AND DILUTED NET INCOME PER SHARE -
17
<PAGE>
Basic and diluted net income per share was $.20 for the second quarter
of 1998 compared to $.13 for the second quarter of 1997. Before considering the
charge recorded on the Divestiture, basic and diluted earnings per share was
$.16 for the second quarter of 1997. The weighted average shares outstanding
decreased from approximately 14.0 million for the second quarter of 1997 to
approximately 13.6 million in the second quarter of 1998 primarily due to
treasury shares received in the Divestiture offset by shares issued in the
Acquisitions. Weighted average shares for diluted net income per share were 13.7
million and 14.0 million for the three months ended June 30, 1998 and 1997,
respectively.
18
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
REVENUES AND GROSS PROFIT
NEW VEHICLES -
Same store unit sales decreased 37 units, or 1.0%, from the first six
months of 1997 to the first six months of 1998. The decline in unit sales was
offset by an increase in the average selling price per unit, which increased
$677, or 3.0%, due to model sales mix and manufacturer cost increases passed on
in the sales price of new vehicles. As a result of these factors, same store
sales increased by approximately $1.7 million. The Acquisitions added
approximately $66.4 million in new vehicle revenue and 2,518 new unit sales with
an average price of $26,351. The average sales price at the dealerships acquired
in the Acquisitions, excluding Chaisson which sells higher priced vehicles, was
$22,270.
Same store gross profit on new vehicle sales decreased approximately $1.1
million, or 11.8%. This decline is primarily attributable to a decline in new
vehicle gross profit at the Company's Oklahoma City, Oklahoma dealership. The
Acquisitions added approximately $7.0 million in gross profit with a gross
profit percentage of 10.5%.
The table below sets forth a reconciliation of new vehicle units, revenues,
and gross profit from the first six months of 1997 to the first six months of
1998 accounting for the variance in same store results, the Acquisitions and
Divestiture.
<TABLE>
UNITS REVENUES GROSS PROFIT
----- ------------ ------------
<S> <C> <C> <C>
Six months ended June 30, 1997....... 4,502 $ 98,290,000 $10,766,000
Same store variance.................. (37) 1,678,000 (1,089,000)
Acquisitions......................... 2,518 66,351,000 6,950,000
Effects of the Divestiture........... (756) (14,028,000) (1,527,000)
------ ------------ -----------
Six months ended June 30, 1998....... 6,227 $152,291,000 $15,100,000
------ ------------ -----------
------ ------------ -----------
</TABLE>
USED VEHICLES -
Same store unit sales decreased 834 units, or 9.5%, including retail
and wholesale sales. Unit sales at the Oklahoma City, Oklahoma dealership
declined by 1,060 used retail units in the first six months of 1998. Management
believes the decline in unit sales at the Oklahoma City, Oklahoma dealership is
primarily attributable to a less than desirable used vehicle inventory, the
Company's continued effort to change the sales method to eliminate low margin
highly promotional volume selling and high personnel turnover. Same store sales,
excluding the Oklahoma City, Oklahoma dealership, increased by approximately
$6.7 million, or 11.3%, primarily attributable to the Company's continued focus
on improving used vehicle operations at its existing dealerships. The
Acquisitions added approximately $48.8 million used vehicle revenue and 4,428
used vehicle unit sales at an average price of $11,026.
Same store gross profit decreased approximately $1.9 million, or 21.6%,
primarily attributable to the decline in sales at the Company's Oklahoma City,
Oklahoma dealership. The Acquisitions added approximately $5.4 million in gross
profit with a gross profit percentage of 11.0%.
The table below sets forth a reconciliation of used vehicle units,
revenues, and gross profit from the first six months of 1997 to the first six
months of 1998 accounting for the variance in same store results, the
Acquisitions and Divestiture.
19
<PAGE>
<TABLE>
UNITS REVENUES GROSS PROFIT
----- ------------ ------------
<S> <C> <C> <C>
Six months ended June 30, 1997....... 10,940 $ 98,675,000 $ 9,491,000
Same store variance.................. (834) (5,807,000) (1,891,000)
Acquisitions......................... 4,428 48,822,000 5,365,000
Effects of the Divestiture........... (2,164) (17,627,000) (743,000)
------ ------------ -----------
Six months ended June 30, 1998....... 12,370 $124,063,000 $12,222,000
------ ------------ -----------
------ ------------ -----------
</TABLE>
OTHER OPERATING REVENUE -
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. Same store F&I revenue decreased by approximately $64,000
primarily attributable to lower vehicle unit sales at the Oklahoma City,
Oklahoma dealership. Same store F&I revenue, excluding the Oklahoma City,
Oklahoma market, increased approximately $841,000 or 14.7%, primarily
attributable to increased F&I penetration rates at the Company's other
dealerships. The Acquisitions added approximately $4.0 million in revenue from
F&I activities.
Same store F&I gross profit increased by approximately $213,000 or 3.4%,
from the first six months of 1997 to the first six months of 1998. The gross
profit percentage increased from 88.0% to 91.8% for the comparable six month
periods, primarily attributable to a reduction in extended warranty costs.
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 increased approximately $268,000,
or 2.1%, in the first six months of 1998 compared to the first six months of
1997. Same store parts and service revenue, excluding the Oklahoma City,
Oklahoma dealership, increased by approximately $1.2 million, or 12.3%,
primarily attributable to increased capacity at the Company's two recently
relocated dealerships. The Acquisitions added approximately $11.3 million in
revenue from their parts and service activities.
Same store parts and service gross profit decreased approximately
$251,000. The gross profit percentage declined from 55.9% to 52.9%, primarily
attributable to a change in sales mix in parts and service sales. The
Acquisitions added approximately $5.9 million from parts and service in gross
profit activities at a gross profit percentage of 52.1%.
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 the
other revenue is management fee income and rental income. Same store revenue and
gross profit from other revenue increased $935,000, or 54.7%, from the first six
months of 1997 to the first six months of 1998 primarily as a result of the
management fee revenue from two dealerships the Company currently manages under
management agreements. The Acquisitions added approximately $2.1 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 majority of 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.
20
<PAGE>
<TABLE>
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>
Six months ended June 30, 1997.... $ 8,548 $ 7,625 $16,834 $ 8,770 $2,062 $2,062 $27,444 $18,457
Same store variance............... (64) 213 268 (251) 935 935 1,139 897
Acquisitions...................... 4,035 3,879 11,295 5,890 2,143 2,143 17,473 11,912
Effects of the Divestiture........ (1,430) (1,364) (3,875) (1,521) (352) (352) (5,657) (3,237)
------- ------- ------- ------- ------ ------ ------- -------
Six months ended June 30, 1998.... $11,089 $10,353 $24,522 $12,888 $4,788 $4,788 $40,399 $28,029
------- ------- ------- ------- ------ ------ ------- -------
------- ------- ------- ------- ------ ------ ------- -------
</TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) -
Selling, general and administrative expenses increased approximately $13.7
million for the comparable six month periods of 1997 to 1998. The Acquisitions
added approximately $17.4 million while the Divestiture reduced SG&A
approximately $5.6 million. SG&A expense was 13.4% of revenues for the six
months ended June 30, 1998 versus 12.8% for the six months ended June 30, 1997.
This increased percentage is primarily due to higher overhead as a result of the
Company's acquisition strategy and to a lesser extent the loss of operating
leverage from a reduction in same store revenue. The Company believes that SG&A
expenses will increase in the future as the Company continues to expand. The
Company also expects additional lease expense for the remainder of 1998 as a
result of the sale and leaseback transaction. The annualized rent expense under
the contract is $4.1 million for the properties, net of the amortization of the
deferred gain.
DEPRECIATION AND AMORTIZATION -
Depreciation and amortization increased approximately $841,000, or
84.2%, primarily due to the Acquisitions, which added approximately $861,000 in
depreciation and amortization of acquisition intangibles. Same store
depreciation expense was reduced beginning in February due to the sale and
leaseback transaction which was completed in February, 1998. The Company expects
this expense to increase throughout 1998 due to a full year impact from the
Acquisitions which should exceed the reduction caused by the Divestiture.
INTEREST EXPENSE -
The Company's interest expense, net of interest income, increased
approximately $2.4 million from the comparable period last year due to higher
debt levels and floor plan interest expense resulting from the Acquisitions.
Acquisition floor plan interest expense was approximately $1.0 million for the
six month period ended June 30, 1998. Long-term debt increased from
approximately $29.9 million at June 30, 1997 to approximately $42.6 million at
June 30, 1998, primarily due to debt incurred to finance the Company's
acquisitions. 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 Company's Acquisitions. These increases will be
partially offset by reduced interest associated with property mortgages which
were repaid with the proceeds from the sale leaseback transaction. Net interest
expense may be further impacted by additional borrowings to finance acquisitions
and the future direction of interest rates.
INCOME TAX PROVISION -
The effective tax rate for the six months ended June 30, 1998 was 37.4%,
compared to the Company's effective income tax rate for the six months ended
June 30, 1997 of approximately 39.3%. The actual tax rate, excluding the effects
of the Divestiture, for the period ended June 30, 1997, was 37.4%. The Company
expects its effective tax rate for 1998 to be in the 37% to 38% range.
BASIC AND DILUTED NET INCOME PER SHARE -
21
<PAGE>
Basic and diluted net income per share remained unchanged from $.31 in
the first six months of 1997 to $.31 in the first six months of 1998 before a
charge recorded on the Divestiture in the first six months of 1997 and an
employee severance charge in the first six months of 1998. After the respective
charges, the basic and diluted net income per share decreased from $.29 per
share in 1997 to $.27 in 1998. The weighted average shares outstanding decreased
from approximately 13.9 million to approximately 13.6 million for the six month
periods of 1997 and 1998 primarily due to treasury shares received in the
Divestiture offset by shares issued in the Acquisitions. Weighted average shares
for diluted net income per share were 13.7 million and 13.9 million for the six
months ended June 30, 1998 and 1997, respectively.
The Company believes several factors are in place that will affect net
income throughout the remainder of 1998. The Company will 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, national and regional sales trends indicate flat demand for new
vehicles throughout 1998. On June 5, 1998, the United Auto Workers initiated
a strike at a General Motors' parts plant, which caused General Motors to
cease the production of most of its new vehicles. On July 29, 1998, General
Motors announced a resolution to the strike. The Company has purchased
vehicles from other dealers in an effort to mitigate the effects of the
strike; however, those vehicles are purchased at higher costs which will
result in lower margins. The effect of the strike will continue until vehicle
allocations are normalized. In the opinion of management, the strike will
have an adverse affect on sales and gross profit at its Amarillo, Texas
dealerships during the third quarter.
LIQUIDITY AND CAPITAL RESOURCES -
During the first six months of 1998, the Company used net cash of
approximately $10.9 million from operating activities, compared to net cashed
used of approximately $7.2 million during the first six months of 1997. The
decrease is primarily attributable to increases in accounts receivables and
inventory.
Cash provided from investing activities of approximately $13.6 million
during the first six months 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 all of the
sale/leaseback transactions during the first six months of 1998. The first
transaction was completed on February 24, 1998 and related to all Amarillo
dealership properties. The Company received gross proceeds of $13.6 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 Las Vegas, Nevada transaction
was completed on May 19, 1998. The Company received gross proceeds of
approximately $13.8 million and retired related interim construction debt of
approximately $4.3 million and a land purchase note of $5.5 million.
Cash used in financing activities totaled approximately $10.3 million
for the first six months of 1998 compared to cash provided of approximately
$12.9 million for the first six months of 1997. The decrease was mainly
attributable to debt repayments to affiliates and others associated with the
completion of the sale/leaseback transactions. The decrease was offset by an
increase in floor plan notes payable due to increased inventory at the two new
Toyota dealership facilities and borrowings from an affiliate for used car
flooring.
The Company finances its purchases of new vehicle inventory with
manufacturer captive finance companies and commercial banks. The Company also
maintains lines of credit with manufacturer captive finance companies for the
financing of used vehicle inventories. The lenders receive 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
22
<PAGE>
the indebtedness with respect to any vehicle within a few days of the sale of
such vehicle by the Company. The Company periodically renegotiates the terms
of its financing, including the interest rate. At June 30, 1998, the Company
had outstanding floor plan debt of approximately $69.9 million which incurred
an average annual interest rate of approximately 8.8% during the first six
months 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 floor plan provider. The notes mature on December 1, 1998 and bear an
interest rate of 9%. Total amount outstanding at June 30, 1998 was approximately
$2.4 million.
The Company has entered into a contract to acquire a certain dealership
in California. The proposed purchase price is approximately $6.0 million
consisting of approximately $4.1 million in cash and $1.4 million in seller
financed notes and $500,000 in assumed debt. The Company intends to fund the
cash portion of the proposed purchase price from available working capital and
availability under its credit line. During the first six months of 1998, the
Company advanced approximately $2.1 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 third 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. During the first
six months of 1998 the Company advanced approximately $1.5 million towards the
closing of this transaction. The Company intends to secure additional bank
borrowings to fund the remaining cash portion of the purchase price. The Company
is negotiating to increase its existing credit facility and investigating other
sources of financing; however, no assurance can be given whether the line will
be increased or whether other sources of financing can be secured. The
transaction is subject to manufacturer's approval. The Company expects to
complete this transaction during 1998.
The Company has incurred a deferred tax liability of approximately $4
million in connection with the change in its tax basis of accounting for
inventory from LIFO to FIFO effective for 1996. 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, and funds available under the credit facility
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 has initiated its plan of action to address certain computer
problems relating to the turn of the century, commonly referred to as the Year
2000 (Y2K) issue. The Company's plan of action has identified all areas of
concern and has separated out the concerns between mission critical systems and
non-mission critical
23
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systems. The Company has determined definite goals and time requirements in
achieving Y2K compliance, with the mission critical systems being tested
first. The Company expects nearly all of the testing on mission critical
systems to be completed by the end of 1998, with non-mission critical systems
testing beginning in January, 1999. The Company has also initiated a plan to
send letters of compliance to major vendors used by each dealership, in order
to verify Y2K compliance by the vendor. The major vendors include, but are
not limited to, automobile manufacturers, automobile parts suppliers, banks,
finance companies and warranty companies. The Company estimates that the cost
of compliance will not be significant.
The Company uses primarily one vendor to supply its operation and
financial computer software. This vendor has informed the Company that all Y2K
issues have been or will be addressed and resolved in the Company's major record
keeping systems well before the year 2000.
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
None.
24
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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: August 11, 1998 By:
------------------------------------
John W. Gaines,
Vice President-Finance and Chief
Financial Officer
DATE: August 11, 1998 BY:
------------------------------------
Charles D. Winton,
Vice President and Chief Accounting
Officer
25
<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)
26
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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-Counrty 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)
10.10.2 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $3,700,000 (fully
repaid)(2)
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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)
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)
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<PAGE>
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)
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)
29
<PAGE>
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-Counrty 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)
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)
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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. (17)
10.59 Settlement Agreement and Release dated March 23, 1998 between
Cross-Continent Auto Retailers, Inc. and James F. Purser. (17)
10.60 Amendment to Real Property Purchase Agreement and Lease Agreement
dated May 14, 1998, by and among Capital Automotive L.P., Capital
Automotive REIT, Cross-Continent Auto Retailers, Inc., and T-West
Sales & Service, Inc.
10.61 Waiver and Third Amendment to Revolving Credit Agreement dated June
30, 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.
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.
(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.
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(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.
(17) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1998,
incorporated herein by reference.
32
<PAGE>
EXHIBIT 10.60
AMENDMENT TO
REAL PROPERTY PURCHASE AGREEMENT
AND
LEASE AGREEMENT
THIS AMENDMENT (the "Amendment") is made effective as of May 14, 1998, to
(1) the Real Property Purchase Agreement (the "Agreement") by and between
Capital Automotive L.P., a Delaware limited partnership (the "Partnership"),
Capital Automotive REIT, a Maryland real estate investment trust (the
"Company"), and among others, Cross-Continent Auto Retailers, Inc., a Delaware
corporation ("C-Car") and (2) the Lease Agreement (the "Lease") by and between
the Partnership and T-West Sales & Service, Inc., a Nevada corporation
("T-West").
RECITALS
A. The Partnership, the Company and C-Car entered into the Agreement on
December 31, 1997, by which C-Car agreed to contribute a certain Property in Las
Vegas, Nevada (as identified on Schedule 1.2 of the Agreement) (the "Property")
to the Partnership.
B. The Partnership and T-West entered into the Lease on February 24,
1998, by which the Landlord agreed to let and the T-West agreed to lease certain
Leased Properties identified on Exhibit A to the Lease.
C. The parties hereto have agreed to adjust the purchase price of the
Property in exchange for an increase in the Base Annual Rent to be paid by
T-West under the Lease, as provided in Section 2.11.4 of the Agreement.
D. The parties desire to amend the Agreement and the Lease and to
undertake certain other obligations as provided in this Amendment.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. PURCHASE PRICE ADJUSTMENT. The Purchase Price for the Property
shall be THIRTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($13,750,000).
2. ADJUSTMENT TO LEASE TERMS. The Initial Base Annual Rent under
the Lease shall be ONE MILLION FIVE HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS
($1,512,500).
<PAGE>
3. REAFFIRMATION; INTENTION TO BE BOUND. The parties hereto
reaffirm that the representations and warranties made by each of the parties in
the Agreement and the Lease are true and accurate as of the date hereof. The
parties executing this Amendment, on behalf of themselves, their assigns and
successors, hereby acknowledge and reaffirm their intention to be bound by the
terms and conditions of the Agreement and the Lease.
4. COUNTERPARTS. This Amendment may be executed in any number of
identical counterparts, any or all of which may contain the signatures of fewer
than all of the parties but all of which shall be taken together as a single
instrument.
[SIGNATURES ON FOLLOWING PAGE]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the date first above
written.
CAPITAL AUTOMOTIVE L.P., CAPITAL AUTOMOTIVE REIT,
a Delaware limited partnership a Maryland real estate investment trust
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
CROSS-CONTINENT AUTO RETAILERS, INC. T-WEST SALES & SERVICE, INC.
a Delaware corporation a Nevada corporation
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
3
<PAGE>
EXHIBIT 10.61
WAIVER AND THIRD AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS WAIVER AND THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT dated as
of June 30, 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, and as
further amended by that certain Second Amendment to Revolving Credit Agreement
dated March 27, 1998 (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(d) of the Credit
Agreement for the Borrowers' fiscal quarterly period ending March 31, 1998, 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) (relating to Leverage Ratio) of the Credit
Agreement and Section 10.1(d) (relating to Interest Coverage Ratio) of the
Credit Agreement for the period ending March 31, 1998, 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 definition in its proper alphabetical order:
"HICKEY DODGE NOTE" shall mean that certain promissory note,
executed by the Parent, payable to Chrysler Financial Corporation.
<PAGE>
(b) The definition of "Leverage Ratio" is hereby amended by inserting
at the end thereof the following provision:
"; PROVIDED, HOWEVER, for purposes of calculating Leverage Ratio
for the period ending June 30, 1998, an amount equal to $2,000,000
payable under the Hickey Dodge Note shall be allocated, without
duplication of other amounts included in the determination of
indebtedness outstanding under Floor Plan Financings, to indebtedness
outstanding under Floor Plan Financings."
(c) The definition of "Interest Coverage Ratio" is hereby amended by
deleting the language following the phrase "PROVIDED, HOWEVER," and by inserting
in lieu thereof the following language:
"for purposes of calculating Interest Coverage Ratio for the
period ending March 31, 1998, and all subsequent applicable periods,
(i) 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 (ii) an amount equal to the sum of (x)
the reduction in interest expense attributable to any repayment of the
Debt related to any real estate financings otherwise permitted by
Section 10.3 hereof, plus (y) pro forma interest income (calculated at
8.8% per annum) attributable to the net proceeds, following repayment
of the Debt referred to in subparagraph (x) above, from the Sale and
Leaseback Transaction, as if such proceeds had been received on April
1, 1997, shall be deducted from Interest Expense."
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall
become effective as of May 15, 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, the Notes 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
-2-
<PAGE>
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; ACKNOWLEDGEMENTS; 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. The Borrowers hereby acknowledge and reaffirm
that there are no claims, counterclaims, defenses, concessions, offsets,
abatements or deductions regarding the obligation of any Borrower under the
Note or any other Loan Document. The Borrowers further acknowledge that the
Agent and the Banks are not in default of any of their obligations and as of
the date hereof have fully performed all their obligations under the Loan
Documents. No event has occurred that would in any way render the Agent or
any of the Banks liable to the Borrowers under the Loan Documents
SECTION 7. PAYMENT OF EXPENSES; RELEASE. 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 Borrowers release and discharge the Agent and the Banks, their
employees, officers and attorneys from all damage, loss, claims, liabilities,
actions and causes of action whatsoever that the Borrowers may now have or
claim to have against the Agent and the Banks, whether presently known or
unknown, on account of, relating to or arising out of the Loan Documents or
that may arise as a consequence of the dealings between the parties up to and
including the date hereof. The provisions of this Section 7 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.
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
-3-
<PAGE>
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 June 30, 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
PLAINS CHEVROLET, INC.
By:
---------------------------------
Name: John Gaines
Title: Treasurer
-4-
<PAGE>
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
DOUGLAS MOTORS, INC.
By:
---------------------------------
Name: John Gaines
Title: Treasurer
-5-
<PAGE>
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
BANKS: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as a
Bank and as Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
AMARILLO NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-6-
<PAGE>
U.S. BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,624
<SECURITIES> 0
<RECEIVABLES> 27,698
<ALLOWANCES> 0
<INVENTORY> 76,172
<CURRENT-ASSETS> 113,052
<PP&E> 13,925
<DEPRECIATION> 4,861
<TOTAL-ASSETS> 212,474
<CURRENT-LIABILITIES> 97,313
<BONDS> 41,752
0
0
<COMMON> 142
<OTHER-SE> 68,777
<TOTAL-LIABILITY-AND-EQUITY> 212,474
<SALES> 316,753
<TOTAL-REVENUES> 316,753
<CGS> 261,402
<TOTAL-COSTS> 261,402
<OTHER-EXPENSES> 45,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,476
<INCOME-PRETAX> 5,840
<INCOME-TAX> 2,182
<INCOME-CONTINUING> 3,658
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,658
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
