<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the Quarterly Period Ended Commission File Number 1-12297
September 30, 1996
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934. For the transition period from ______ to ______.
UNITED AUTO GROUP, INC
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Delaware 22-3086739
- ------------------------------- ---------------------------
(State or other jurisdiction of (IRS employer incorporation
incorporation or organization) Identification No.)
375 Park Avenue, New York, N.Y. 10152
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 223-3300
- --------------------------------------------------------------------------------
(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 [ ] No [X]
The number of shares outstanding of each of the Issuer's classes of common stock
as of November 30, 1996:
Voting Common Stock, $.0001 par value 16,732,974
Non-voting Common Stock, $.0001 par value 605,454
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UNITED AUTO GROUP, INC.
Table of Contents
Page
Part I. Financial Information
- -----------------------------------
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets as of
December 31, 1995 and September 30, 1996 1
Consolidated Condensed Statements of Operations for the
three and nine months ended September 30, 1995 and 1996 2
Consolidated Condensed Statements of Cash Flows for the
nine months ended September 30, 1995 and 1996 3
Notes to Consolidated Condensed Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
- -------------------------------
Item 1 - Legal Proceedings N/A
Item 2 - Changes in Securities 16
Item 3 - Defaults Upon Senior Securities N/A
Item 4 - Submission of Matters to a Vote of Security Holders 17
Item 5 - Other Information N/A
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 25
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------- -------------
<S> <C> <C>
Auto Dealerships
Cash and cash equivalents $ 4,697 $ 6,432
Accounts receivable 27,349 43,674
Inventories 101,556 126,758
Deferred income taxes 5,153 791
Other current assets 2,894 3,389
-------------- -------------
Total current assets 141,649 181,044
Property and equipment, net 12,146 16,250
Intangible assets, net 48,774 76,408
Due from related parties 14,578 17,068
Other assets 10,128 12,785
--------------- --------------
Total Auto Dealership assets 227,275 303,555
---------------
Auto Finance
Cash and cash equivalents 531 1,522
Finance assets, net 7,555 501
Other assets 666 12,405
--------------- --------------
Total Auto Finance assets 8,752 14,428
Total assets $236,027 $317,983
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Auto Dealerships
Floor plan notes payable $ 97,823 $124,132
Short-term debt 16,187 11,069
Accounts payable 12,393 21,671
Accrued expenses 9,875 10,461
Current portion of long-term debt 3,169 2,683
--------------- -------------
Total current liabilities 139,447 170,016
Long-term debt 24,073 45,735
Due to related party 1,109 1,277
Deferred income taxes 2,279 2,279
--------------- -------------
Total Auto Dealership liabilities 166,908 219,307
--------------- -------------
Auto Finance
Short-term debt 4,661 284
Account payable and other liabilities 590 1,620
--------------- -------------
Total Auto Finance liabilities 5,251 1,904
--------------- -------------
Minority interests subject to repurchase 13,608 15,793
--------------- -------------
Stock purchase warrants 1,020 2,769
--------------- -------------
Commitments and contingent liabilities:
Stockholders' Equity
Class A Convertible Preferred Stock,
$.0001 par value; shares authorized
4,911 and 5,337, shares issued and
outstanding 3,651 and 5,227 at
December 31, 1995 and September 30,
1996, respectively 1 1
Voting Common Stock, $.0001 par value;
shares authorized 15,100 and 15,600;
shares issued and outstanding 2,583
and 3,594 at December 31, 1995 and
September 30, 1996, respectively 1 1
Non-voting Common Stock, $.0001 par
value; shares authorized - - 1,025
and 1,125; none issued and
outstanding - -
Additional paid-in-capital 54,748 77,600
Retained earnings/(deficit) (5,510) 608
------------ ---------------
Total stockholders' equity 49,240 78,210
Total liabilities, minority interests
subject to repurchase, stock purchase
warrants and stockholders' equity $236,027 $317,983
------------ ---------------
The accompanying notes are an integral part of these consolidated
condensed financial statements.
</TABLE>
1
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1995 1996 1995 1996
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
Auto Dealerships
Vehicle sales $215,157 $319,004 $525,374 $854,177
Finance and insurance 8,332 12,944 22,831 35,283
Service and parts 16,113 24,897 44,136 65,324
-------- -------- -------- --------
Total revenues 239,602 356,845 592,341 954,784
Cost of sales, including
floor plan interest 213,373 316,919 529,898 848,479
-------- -------- -------- --------
Gross profit 26,229 39,926 62,443 106,305
Selling, general and
administrative expenses 23,958 33,020 65,899 90,040
-------- -------- -------- --------
Operating income (loss) 2,271 6,906 (3,456) 16,265
Related party interest income 760 774 2,279 2,322
Other interest expense (491) (1,614) (893) (3,619)
Equity in loss of uncombined
investee (110) (102) (618) (27)
-------- -------- -------- --------
Income (loss) before income taxes -
Auto Dealerships 2,430 5,964 (2,688) 14,941
-------- -------- -------- --------
Auto Finance
Revenues 108 575 209 1,604
Interest expense (62) (100) (75) (276)
Operating and other expenses (402) (852) (1,191) (2,054)
-------- -------- -------- --------
Loss before income taxes-
Auto Finance (356) (377) (1,057) (726)
Total Company
Income (loss) before minority
interests and provision for
income taxes 2,074 5,587 (3,745) 14,215
Minority interests (870) (1,058) 47 (2,792)
Provision for income taxes (122) (2,308) (122) (5,305)
-------- -------- -------- --------
Net income (loss) $ 1,082 $ 2,221 $ (3,820) $ 6,118
======== ======== ======== ========
Net income (loss)
per common share (see note 2) $ 0.18 $ 0.22 $ (0.73) $ 0.67
======== ======== ======== ========
Shares used in computing net
income (loss) per
common share 6,156 10,283 5,213 9,087
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
</TABLE>
2
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30,
1995 1996
------------------------------ --------------------------------
Auto Auto Auto Auto
Dealerships Finance Dealerships Finance
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ (2,763) $ (1,057) $ 6,844 $ (726)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,903 98 2,410 140
Deferred income tax benefit - 4,362
Accrued interest related parties (2,279) (2,322)
Loss on sale of interest in uncombined investee 253
Equity in loss of uncombined investee 365 27
Gain on sales of loans (486)
Loans originated (7,704) (61,041)
Loans repaid or sold 589 60,237
Minority interests 47 2,792
Changes in operating assets and liabilities:
Accounts receivable (8,062) (7,114)
Inventories 34,254 662
Floor plan notes payable (29,862) 2,796
Accounts payable and accrued expenses 5,385 166 4,223 571
Other 669 86 906 (1,418)
------------ ----------- ----------- -----------
Net cash provided by (used in) operating activities (90) (7,822) 15,586 (2,723)
------------ ----------- ----------- -----------
Investing activities:
Purchase of equipment and improvements (1,227) (157) (3,360) (235)
Dealership acquisitions (19,356) (32,879)
Investment in auto finance subsidiary (4,592) 4,592 (9,750) 9,750
Funding for subsequent acquisition (2,397)
Advances to related parties (1,289) (876)
Investment and advances to uncombined investee (148) (290) (1,418)
------------ ---------- ----------- -----------
Net cash provided by (used in) investing activities (26,612) 4,435 (49,552) 8,097
------------ ---------- ----------- -----------
Financing activities:
Proceeds from issuance of stock 22,987 24,564
Proceeds from borrowings of long-term debt 16,300 18,700
Deferred financing costs (2,191) (511)
Proceeds from borrowings of short-term debt 2,700 5,000
Payments of short-term debt (10,935) (10,118)
Payments of long-term debt and capitalized
lease obligations (1,383) (1,502)
Distribution to stockholders and minority interest (600)
Advances from affiliates 2,267 168
Borrowings of warehouse credit line 4,210 44,716
Payments of warehouse credit line (49,099)
----------- ----------- ---------- -----------
Net cash provided by (used in) financing activities 29,745 4,210 35,701 (4,383)
----------- ----------- ---------- -----------
Net increase in cash and cash equivalents 3,043 823 1,735 991
Cash and cash equivalents, beginning of year 751 32 4,697 531
----------- ---------- --------- ----------
Cash and cash equivalents, end of period $ 3,794 $ 855 $ 6,432 $ 1,522
========= ======== ======= =======
The accompanying notes are an integral part of these consolidated
condensed financial statements.
</TABLE>
3
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In thousands except per share data)
(Unaudited)
1. Basis of Presentation
---------------------
The information presented as of September 30, 1995 and 1996, and for the
three and nine month periods then ended, is unaudited, but includes all
adjustments (consisting only of normal recurring accruals) which the
management of United Auto Group, Inc. (the "Company" or "UAG") believes to
be necessary for the fair presentation of results for the periods
presented. The results for the interim periods are not necessarily
indicative of results to be expected for the year. The year-end
consolidated condensed balance sheet data was derived from the audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. These consolidated condensed
financial statements should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1995, which
were included as part of the Company's Registration Statement (the
"Registration Statement") on Form S-1, Registration No. 333-09429.
2. Net Income (loss) per Common Share
----------------------------------
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
4-D, all stock options and warrants granted by the Company during the
twelve months preceding the Company's initial public offering have been
included in the calculation of net income (loss) per common shares
outstanding for all periods presented, using the treasury stock method at
an assumed public offering price of $29.50 per share.
Net income (loss) per common share date calculated in accordance with APB
No. 15 is as follows:
For the three months For the nine months
ended ended
September 30, September 30,
1995 1996 1995 1996
---- ---- ---- ----
Net income (loss) per
common share $ 0.19 $ 0.23 $ (0.82) $ 0.72
Weighted average
shares outstanding
(In thousands) 5,695 9,706 4,636 8,510
The computations of net income (loss) per share in accordance with APB No.
15 are based on the weighted average number of common shares, the weighted
average number of preferred shares and warrants outstanding to the extent
dilutive.
4
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONT'D)
(In thousands except per share data)
(Unaudited)
3. Inventories
-----------
Inventories consists of the following:
December 31, September 30,
1995 1996
------------ -------------
New vehicles $74,789 $88,546
Used vehicles 24,917 35,849
Parts, accessories and other 6,220 7,452
------- -------
105,926 131,847
Cumulative LIFO reserve (4,370) (5,089)
-------- --------
$101,556 $126,758
4. Acquisitions/Financings
-----------------------
Effective January 1, 1996, the Company acquired a 100% interest in Atlanta
Toyota, Inc. for a purchase price consisting of $9,100 in cash plus $2,400
in notes. In order to finance the acquisition, the Company issued
additional Class A Preferred Stock and Common Stock for an aggregate price
of $6,100 and issued a Senior Note in the principal amount of $4,400
bearing interest at a rate of 11.60% per annum.
On May 1, 1996, the Company acquired a 100% interest in Steve Rayman
Nissan, Inc. for a purchase price of $11,500 in cash. The dealership has
been renamed United Nissan, Inc. In order to finance the acquisition, the
Company issued additional Class A Preferred Stock and Common Stock in the
amount of $7,380 and issued a Senior Note in the principal amount of $4,620
bearing interest at a rate of 11.95% per annum.
Effective July 1, 1996, the Company acquired a 100% interest in Hickman
Nissan, Inc. located in Chamblee, Georgia, for a purchase price consisting
of $11,000 in cash and a $2,000 note. This dealership has been renamed
Peachtree Nissan, Inc. In order to finance the acquisition, the Company
issued additional Class A Preferred Stock and Common Stock for an aggregate
price of $10,550 and issued a Senior Note in the principal amount of $5,480
bearing interest at a rate of 12.17% per annum.
On October 28, 1996, the Company acquired substantially all of the Sun
Automotive Group (the" Sun Group"), located in Phoenix and Scottsdale,
Arizona, for approximately $30,500 in cash. The Sun Group holds franchises
for Acura, Audi, BMW, Land Rover (2), Lexus and Porsche. The acquisition
was financed out of proceeds of the Company's initial public offering.
5
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONT'D)
(In thousands except per share data)
(Unaudited)
On October 28, 1996, the Company acquired a 100% interest in the Evans
Automotive Group (the "Evans Group"), located in Duluth and Conyers,
Georgia, for a purchase price of $12,000 in cash. The Evans Group holds one
BMW and one Nissan franchise. The acquisition was financed out of proceeds
of the Company's initial public offering.
On October 28, 1996, the Company acquired a 100% interest in Standefer
Motor Sales, Inc. ("Standefer Motor") located in Chattanooga, Tennessee,
for a purchase price of $18,200 in cash. Standefer Motor holds one Nissan
franchise. The acquisition was financed out of proceeds of the Company's
initial public offering.
These acquisitions were accounted for under the purchase method and the
accompanying financial statements reflect the results of operations from
the effective date of acquisition.
On October 28, 1996, the Company completed an initial public offering of
6,250 shares of Common Stock resulting in net proceeds of approximately
$172,200. The accompanying consolidated condensed balance sheet at
September 30, 1996 does not reflect the delivery of shares or the receipt
of net proceeds by the Company. Contemporaneously with the initial public
offering, the Company consummated (i) the exchange of minority interest in
certain of the Company's subsidiaries for an aggregate of 1,114 shares of
Common Stock and (ii) the conversion of the Company's 5,227 shares of Class
A Preferred Stock into an equal number of shares of Common Stock.
The Company has received commitments from Morgan Guaranty Trust Company of
New York and The Bank of Nova Scotia for an Acquisition Facility in the
amount of $50,000. There can be no assurance that the Acquisition Facility
will be successfully consummated or that required additional capital will
be available on reasonable terms, if at all, at such times as required by
the Company.
5. Pro Forma Financial Information
-------------------------------
The following pro forma financial information gives effect
to the following events assuming they occurred on January 1, 1995: (i) the
acquisitions of 80% of Landers Auto Sales, Inc. ("Landers Auto")(acquired
August 1, 1995), 100% of each of Atlanta Toyota (acquired January 1,
1996), Steve Rayman Nissan (acquired May 1, 1996) and Hickman Nissan
(acquired July 1, 1996), substantially all of the Sun Group (acquired
October 28, 1996) and 100% of each of the Evans Group (acquired October
28, 1996) and Standefer Motor (acquired October 28, 1996); (ii) the DiFeo
Restructuring (as defined in Management Discussion and Analysis); (iii)
the acquisition of the minority interest in each of the DiFeo Group,
Landers Auto and Atlanta Toyota in exchange for Common Stock plus certain
other consideration; (iv) the October 28, 1996 initial public offering and
(v) the increase in rental expense under amended leases relating to
facilities in the DiFeo Group. For the nine-month period ended September
30, 1995, pro forma total revenue, net income and earnings per share
were $1,017,066, $7,626 and $0.43 per share, respectively. For the
nine-month period ended September 30, 1996, pro forma total revenue, net
income and earnings per share were $1,226,535, $14,433 and $0.81 per
share, respectively.
6
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONT'D)
(In thousands except per share data)
(Unaudited)
The foregoing pro forma financial information does not include a reduction of
cost of sales related to reduced interest on floor plan notes payable resulting
from the application of excess proceeds from the Company's initial public
offering in the amount of $43,200 of working capital and $15,000 designated for
the expansion of the Company's automobile finance business. If the reduction of
the floor plan from the excess proceeds were reflected, then pro forma net
income (and earnings per share) would have been $9,615 ($0.54 per share) and
$16,422 ($0.92 per share) for the nine months ended September 30, 1995 and
1996, respectively.
The pro forma financial information is not necessarily indicative of operating
results or financial position that would have been achieved had these events
been consummated on January 1, 1995 and should not be construed as
representative of future operating results. The pro forma financial
information should be read in conjunction with the historical and pro forma
financial statements and related notes thereto included in the Registration
Statement.
7
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ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
General
UAG is a leading acquirer, consolidator and operator of franchised automobile
and light truck dealerships and related businesses. The Company believes that,
after giving effect to the acquisitions of the Sun Group, the Evans Group and
Standefer Motor, it is the fourth largest retailer of new motor vehicles in the
United States, operating 37 franchises located in Arizona, Arkansas,
Connecticut, Georgia, New Jersey, New York and Tennessee and representing 22
American, Asian and European brands. As an integral part of its dealership
operations, UAG sells used vehicles. In addition, the Company operates six
stand-alone used car retail centers. All of UAG's dealerships include integrated
service and parts operations, which are an important source of recurring
revenues. The Company also owns Atlantic Auto Finance Corporation ("Atlantic
Finance"), an automobile finance company that purchases prime credit quality
automotive loans originated by both UAG and third-party dealerships.
The Company's principal source of growth has come, and is expected to continue
to come, from acquisitions of automobile dealerships. Therefore, the Company's
period to period results of operations vary depending on the dates of such
acquisitions. In addition, results of operations fluctuate due to the
cyclicality of unit sales of motor vehicles, particularly new vehicles. Such
fluctuation is generally influenced by general economic conditions.
New vehicle revenues include sales to retail customers and to leasing companies
providing consumer leasing. Used vehicle revenues include amounts received for
used vehicles sold to retail customers, leasing companies providing consumer
leasing, other dealers and wholesalers. Finance and insurance revenues come from
sales of accessories such as radios, cellular phones, alarms, custom wheels,
paint sealant and fabric protectors, as well as amounts received as fees for
placing extended service contracts, credit insurance policies, financing and
lease contracts. In the case of arranging financing, the Company receives a fee
from the lender for originating the loan but is assessed a chargeback by the
lender if the contract terminates, in certain cases before its scheduled
maturity, and in other cases within 90 days of making the loan, which in either
case can result from early repayment because of refinancing the loan, selling or
trading in the vehicle or default on the loan. The Company establishes a reserve
based on historical chargeback experience to anticipate future chargebacks.
Revenues from finance and insurance products contribute a disproportionate share
of operating profits. Service and parts revenues include fees paid by consumers
for repair and maintenance service and the sale of replacement parts. In
addition, through its automobile finance subsidiary, Atlantic Finance, the
Company derives revenues from the purchase, sale and servicing of motor vehicle
installment contracts originated by both UAG and third-party dealerships.
Generally, finance receivables are accumulated by Atlantic Finance until they
attain a value in excess of $5.0 million, at which time they are sold into a
commercial paper conduit (loan warehouse facility). An allowance for financing
losses on receivables is provided for the period from the date of purchase to
the date of sale. This allowance is shown as a reduction in receivables held for
sale. Revenue is recognized upon sale to the conduit. Interest is received and
credited to interest income based on the daily principal balance of the
receivables outstanding. Loan servicing fees on receivables sold to the conduit
are recognized as collected.
The Company's selling expenses consist of compensation for sales department
personnel, including commissions and related bonuses. General and administrative
expenses include
8
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compensation for administration, finance and general management personnel, rent,
insurance and utilities. Interest expense consists of interest charges on all of
the Company's interest-bearing debt other than floor plan inventory financing.
Interest expense on floor plan debt is included in cost of sales.
The Company has accounted for each of its acquisitions by the purchase method of
accounting and, as a result, the Company's financial statements include only the
results of operations of the acquired dealerships from the effective date of
acquisition. The financial information included in this report may not
necessarily reflect the results of operations, financial position and cash flows
of the Company in the future or what the results of operations, financial
position and cash flows would have been had the October 28, 1996 acquisitions
and the Company's initial public offering occurred during the period presented
in the financial statements.
Results of Operations
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Auto Dealerships
DiFeo Restructuring. In an effort to increase profitability of the Company's
DiFeo Group, the Company commenced a broad restructuring program in the first
quarter of 1995 (the "DiFeo Restructuring"), which was substantially completed
by the fourth quarter of 1995. First, the Company eliminated a total of 17
unprofitable franchises, or 45% of the DiFeo Group's total number of franchises,
by voluntarily terminating 12 franchises and effectively ceasing to be the
controlling or majority owner of five additional franchises. Second, the Company
eliminated a level of senior management and shifted greater authority and
responsibility to the general manager of each dealership. Third, the Company
reduced personnel by approximately 250 employees (including members of senior
management ) and implemented pay plans linked to net profits and customer
satisfaction. Fourth, the Company liquidated outdated inventory in order to
lower inventory carrying costs and improve the utilization of space. Costs
associated with the DiFeo Restructuring were approximately $0.7 million and $0.5
million for the year ended December 31, 1995 and the nine months ended September
30, 1996, respectively, primarily related to severance.
Revenues. Revenues increased by $362.5 million, or 61.2%, from $592.3 million to
$954.8 million due primarily to acquisitions, which contributed $379.0 million.
Such acquisitions were Landers Auto in August 1995, which contributed $200.3
million, Atlanta Toyota in January 1996, which contributed $134.1 million,
United Nissan in May 1996, which contributed $23.2 million, and Peachtree Nissan
in July 1996, which contributed $21.4 million. While revenues at the continuing
franchises of the DiFeo Group increased by $62.8 million, or 13.6%, from $463.3
million to $526.1 million, such increase was more than offset by a decrease of
$79.3 million in revenues due to the elimination of unprofitable franchises as
part of the DiFeo Restructuring.
Sales of new and used vehicles increased by $328.8 million, or 62.6%, from
$525.4 million to $854.2 million. The acquisition of Landers Auto contributed
$186.5 million, the acquisition of Atlanta Toyota contributed $123.1 million,
the acquisition of United Nissan contributed $20.1 million and the acquisition
of Peachtree Nissan, contributed $19.2 million. While sales at the continuing
franchises of the DiFeo Group increased by $48.7 million, or 11.9%, from $409.9
million to $458.6 million, such increase was more than offset by a decrease of
$68.8 million due to the elimination of unprofitable franchises as part of the
DiFeo Restructuring. Unit sales of new and used vehicles increased by 49.3%
9
<PAGE>
and 107.6%, respectively, due to the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan and increased sales volume at the
continuing franchises of the DiFeo Group, which increased by 4.6% and 20.2%,
respectively. During the nine months ended September 30, 1996, the Company sold
27,868 new vehicles (67.4% of total vehicle sales) and 13,459 used vehicles,
(32.6% of total vehicle sales). During the nine months ended September 30, 1995,
the Company sold 18,663 new vehicles (74.2% of total vehicles sales) and 6,484
used vehicles (25.8% of total vehicle sales). The increase in the relative
proportion of used vehicle sales to new vehicle sales was due principally to the
expansion of existing used car facilities and the establishment of two
additional stand-alone used car retail centers in response to the increased
popularity of used cars. New vehicle selling prices increased approximately 2.7%
due primarily to changes in manufacturer pricing and the mix of new vehicles
sold. Used vehicle selling prices increased approximately 15.4% due to changes
in market demand which resulted in a change in the mix of used vehicles sold.
Sales of finance and insurance products increased by $12.5 million, or 54.8%,
from $22.8 million to $35.3 million, principally as a result of the acquisitions
of Landers Auto, Atlanta Toyota, United Nissan and Peachtree Nissan. Sales of
such products at the continuing franchises of the DiFeo Group increased by $5.6
million, or 28.0%, from $20.0 million to $25.6 million.
Service and parts revenues increased by $21.2 million, or 48.1%, from $44.1
million to $65.3 million due principally to the acquisitions of Landers Auto,
Atlanta Toyota, United Nissan and Peachtree Nissan. While revenues at the
continuing franchises of the DiFeo Group increased by $8.3 million, or 24.8%,
from $33.5 million to $41.8 million, such increase was more than offset by the
elimination of unprofitable franchises as part of the DiFeo Restructuring.
Gross Profit. Gross profit increased $43.9 million, or 70.4%, from $62.4 million
to $106.3 million due principally to the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan. Gross profit at the continuing
franchises of the DiFeo Group increased by $11.8 million, or 22.9%, from $51.6
million to $63.4 million. Gross profit as a percentage of revenues increased
from 10.5% to 11.1% reflecting higher margins resulting from improved inventory
controls, enhanced training of sales personnel and a change in marketing
philosophy from a price strategy to a customer service strategy. Included in the
above gross profit figures is gross profit from finance and insurance
activities, which increased by $8.3 million, or 49.4%, from $16.8 million to
$25.1 million due principally to the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan. Gross profit from finance and
insurance activities at the continuing franchises of the DiFeo Group increased
by $0.6 million, or 3.8%, from $15.6 million to $16.2 million. Gross profit from
finance and insurance activities consists principally of fees for placing
financing contracts with consumer finance companies and also includes fees for
placing extended service contracts and amounts earned on the sale of accessories
such as radios, cellular phones and alarms.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $24.1 million, or 36.6%, from $65.9 million
to $90.0 million due principally to the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan. Such expenses at the continuing
franchises of the DiFeo Group increased by $6.0 million, or 11.3%, from $53.2
million to $59.2 million, and such expenses as a percentage of revenues
decreased overall by 15.3% from 11.1% to 9.4% due principally to the DiFeo
Restructuring.
Related Party Interest Income. Related party interest income remained unchanged
at $2.3 million. Such income is related to certain amounts owed the Company from
minority partners and certain of
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their related entities on which the Company is contractually permitted to charge
interest. The amounts owed arose from advances for certain business acquisitions
and working capital advances for dealerships in which the Company has no
interest. Contemporaneously with the closing of the initial public offering on
October 28, 1996, such owed amounts were settled as part of the consideration
paid to acquire the minority interest in the DiFeo Group.
Other Interest Expense. Interest expense other than floor plan increased by $2.7
million from $0.9 million to $3.6 million as a result of increased borrowings to
finance the acquisitions of Landers Auto, Atlanta Toyota, United Nissan and
Peachtree Nissan as well as the issuance of certain promissory notes as part of
the consideration paid for Landers Auto and Atlanta Toyota.
Equity in Income (Loss) of Uncombined Investee. During the nine months ended
September 30, 1995, equity in loss of uncombined investee was $0.6 million, as
compared to income of $0.0 million during the nine months ended September 30,
1996. This item represents a minority interest in a group of dealerships located
in New Jersey in which the Company exercised no operational control.
Contemporaneously with the closing of the initial public offering on October 28,
1996, the Company's interest in such dealerships was transferred as part of the
consideration paid to acquire the minority interest in the DiFeo Group.
Income (Loss) before Income Taxes. Pretax income from dealership operations
increased by $17.6 million from a loss of $2.7 million to a profit of $14.9
million as a result of the factors described above, including the DiFeo
Restructuring.
Auto Finance
Loss before Income Taxes. The pretax loss from operations at Atlantic Finance
decreased by $0.4 million from $1.1 million to $0.7 million. Atlantic Finance
was formed in the first quarter of 1994 and commenced loan operations in January
1995.
Total Company
Minority Interests. Minority interests changed by $2.9 million from a charge of
$0.1 million to a credit of $2.8 million as a result of the factors described
above. Contemporaneously with the closing of the initial public offering on
October 28, 1996, the minority interests were acquired by the Company.
Income Taxes. The Company has provided for federal and state income taxes on its
period earnings at appropriate rates. The 1996 effective tax rate exceeds the
statutory rate primarily due to the non-deductibility of the amortization of the
excess of cost over net assets acquired. No benefit was recorded for losses
through September 1995 since realization was deemed less likely than not at that
time.
Net Income (Loss). Net income increased by $9.9 million from a loss of $3.8
million to a profit of $6.1 million due to the factors described above.
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Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Auto Dealerships
Revenues. Revenues increased by $117.2 million, or 48.9%, from $239.6 million to
$356.8 million due primarily to acquisitions, which contributed $123.1 million.
Such acquisitions were Landers Auto in August 1995, which contributed $40.0
million, Atlanta Toyota in January 1996, which contributed $48.3 million, United
Nissan in May 1996, which contributed $13.4 million, and Peachtree Nissan in
July 1996, which contributed $21.4 million. While revenues at the continuing
franchises of the DiFeo Group increased by $14.7 million, or 8.7%, from $169.3
million to $184.0 million, such increase was more than offset by a decrease of
$20.6 million in revenues due to the elimination of unprofitable franchises as
part of the DiFeo Restructuring.
Sales of new and used vehicles increased by $103.9 million, or 48.3%, from
$215.1 million to $319.0 million. The acquisition of Landers Auto contributed
$36.7 million, the acquisition of Atlanta Toyota contributed $44.1 million, the
acquisition of United Nissan contributed $11.6 million and the acquisition of
Peachtree Nissan contributed $19.2 million. While sales at the continuing
franchises of the DiFeo Group increased by $10.2 million, or 6.8%, from $150.5
million to $160.7 million, such increase was more than offset by a decrease of
$17.9 million due to the elimination of unprofitable franchises as part of the
DiFeo Restructuring. Unit sales of new and used vehicles increased by 36.8 % and
76.1%, respectively, due to the acquisitions of Landers Auto, Atlanta Toyota,
United Nissan and Peachtree Nissan and changes in sales volume at the continuing
franchises of the DiFeo Group, which decreased by 1.7% and increased by 14.1%,
respectively. During the quarter ended September 30, 1996, the Company sold
10,359 new vehicles (67.7% of total vehicle sales) and 4.949 used vehicles
(32.3% of total vehicle sales). During the quarter ended September 30, 1995, the
Company sold 7,575 new vehicles (72.9% of total vehicle sales) and 2,810 used
vehicles (27.1% of total vehicle sales). The increase in the relative proportion
of used vehicle sales to new vehicle sales was due principally to the expansion
of existing used car facilities and the establishment of two additional
stand-alone used car retail centers in response to the increased popularity of
used cars. New vehicle selling prices increased approximately 1.7% due primarily
to changes in manufacturer pricing and the mix of new vehicles sold. Used
vehicle selling prices increased approximately 8.6% due to changes in market
demand which resulted in a change in the mix of used vehicles sold.
Sales of finance and insurance products increased by $4.6 million, or 55.4%,
from $8.3 million to $129 million, principally as a result of the acquisitions
of Landers Auto, Atlanta Toyota and United Nissan. Sales of such products at the
continuing franchises of the DiFeo Group increased by $1.6 million, or 22.5%,
from $7.1 million to $8.7 million.
Service and parts revenues increased by $8.8 million, or 54.7%, from $l6.1
million to $24.9 million due principally to the acquisitions of Landers Auto,
Atlanta Toyota and United Nissan. While revenues at the continuing franchises of
the DiFeo Group increased by $2.9 million, or 24.8%, from $11.7 million to $14.6
million, such increase was more than offset by the elimination of unprofitable
franchises as part of the DiFeo Restructuring.
Gross Profit. Gross profit increased by $13.7 million, or 52.3%, from $26.2
million to $39.9 million due principally to the acquisitions of Landers Auto,
Atlanta Toyota and United Nissan. Gross Profit at the continuing franchises of
the DiFeo Group increased by $2.6 million, or 13.3%, from $19.6 million to $22.2
million. Gross profit as a percentage of revenues increased from 10.9% to 11.1%
reflecting
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higher margins resulting from improved inventory controls, enhanced training of
sales personnel and a change in marketing philosophy from a price strategy to a
customer service strategy. Included in the above gross profit figures is gross
profit from finance and insurance activities, which increased by $2.6 million,
or 40.0%, from $6.5 million to $9.1 million due principally to the acquisitions
of Landers Auto, Atlanta Toyota, United Nissan and Peachtree Nissan. Gross
profit from finance and insurance activities at the continuing franchises of the
DiFeo Group decreased by $0.6 million, or 10.0%, from $6.0 million to $5.4
million.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $9.1 million, or 38.1%, from $23.9 million
to $33.0 million due principally to the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan. Such expenses at the continuing
franchises of the DiFeo Group increased by $1.7 million, or 9.2%, from $18.5
million to $20.2 million, and such expenses as a percentage of revenues
decreased overall by 7.0% from 10.0% to 9.3% due principally to the DiFeo
Restructuring.
Related Party Interest Income. Related party interest income remained unchanged
at $0.8 million.
Other Interest Expense. Interest expense other than floor plan increased by $1.1
million from $0.5 million to $1.6 million. Such expenses are a result of
increased borrowings to finance the acquisitions of Landers Auto, Atlanta
Toyota, United Nissan and Peachtree Nissan as well as the issuance of certain
promissory notes as part of the consideration paid for Landers Auto and Atlanta
Toyota.
Equity in Income (Loss) of Uncombined Investee. Equity in the loss of uncombined
investee remained unchanged at ($0.1).
Income (Loss) before Income Taxes. The Company has provided for federal and
state income taxes on its period earnings at appropriate rates. The 1996
effective tax rate exceeds the statutory rate due to the non-deductibility of
the amortization of the excess of cost over net assets acquired. No benefit was
recorded for losses in 1995 since realization was deemed less likely than not at
that time.
Auto Finance
Loss before Income Taxes. The pretax loss from operations at Atlantic Finance
remained unchanged at $0.4 million. Atlantic Finance was formed in the first
quarter of 1994 and commenced loan operations in January 1995.
Total Company
Minority Interests. Minority interests changed by $0.2 million from a charge of
$0.9 million to a charge of $1.1 million as a result of the factors described
above. Contemporaneous with the closing of the initial public offering on
October 28, 1996, the minority interests were acquired by the Company.
Income Taxes. The Company has provided for federal and state income taxes on its
period earnings at appropriate rates. The 1996 effective tax rate exceeds the
statutory rate primarily due to the non-deductibility of the amortization of the
excess of cost over net assets acquired. No benefit was recorded for losses
through September 1995 since realization was deemed less likely than not at that
time.
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Net Income (Loss). Net income increased by $1.6 million from $1.1 million to
$2.7 million due to the factors described above.
Liquidity and Capital Resources
The cash requirements of the Company are primarily for acquisition of new
dealerships, working capital, including inventory, and expansion of existing
facilities. Historically, these cash requirements have been met through private
placements of equity under the Equity Facility (as described below) or
otherwise, issuances of Senior Notes (with Warrants) under the Securities
Purchase Agreements and borrowings under commercial lines of credit, floor plan
facilities and warehouse facilities at Atlantic Finance.
At September 30, 1996, the Company had working capital of $11.0 million,
including accounts receivable of $43.7 million and inventory of $126.8 million,
offset by $32.1 million in accounts payable and accrued expenses and $124.1
million in revolving floor plan financing arrangements. The Company's floor plan
lenders limit the aggregate amount of such borrowings by formulas based on the
cost of vehicles in inventory.
For the nine-month period ending September 30, 1996, operating activities
resulted in net cash provided by operations of $12.9 million, principally from
income generated by operations.
For the nine-month period ending September 30, 1996, the Company used $41.5
million in investing activities, principally for the acquisitions of Atlanta
Toyota, United Nissan and Peachtree Nissan and capital expenditures.
For the nine-month period ending September 30, 1996, net cash provided by
financing activities totaled $31.3 million, principally from the private
placement of capital stock and warrants under the Equity Facility and otherwise
for an aggregate price of $24.6 million and the issuance of additional Senior
Notes (with Warrants) in the aggregate principal amount of $18.7 million, net of
the repayment of $5.1 million of short-term debt.
At September 30, 1995, the Company had working capital of $2.2 million,
including accounts receivable of $27.3 million and inventory of $101.6 million,
offset by $22.3 million in accounts payable and accrued expenses and $97.8
million in revolving floor plan financing arrangements
For the nine-month period ending September 30, 1995, operating activities used
cash of $7.9 million. This was due principally to the origination of loans by
Atlantic Finance.
For the nine-month period ending September 30, 1995, the Company used $22.2
million in investing activities, principally for the acquisition of Landers Auto
and capital expenditures.
For the nine-month period ending September 30, 1995, net cash provided by
financing activities totaled $33.9 million resulting principally from the
private placement of capital stock under the Equity Facility for an aggregate
price of $23.0 million, the issuance of Senior Notes (with Warrants) in the
aggregate principal amount of $16.3 million and borrowings of $4.2 million on
the warehouse credit line at Atlantic Finance.
In September 1995, the Company entered into Securities Purchase Agreements
providing for the issuance and sale of up to $35 million aggregate principal
amount of Senior Notes due 2003 and Warrants to purchase Common Stock. The
permitted uses of proceeds from the sale of the Senior
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Notes are to finance acquisitions, make capital contributions to Atlantic
Finance, make capital expenditures and provide working capital. As of September
30, 1995 and September 30, 1996, $16.3 million and $35.0 million aggregate
principal amount of Senior Notes, respectively, were outstanding.
In December 1993, the Company entered into the Equity Facility providing for the
issuance and sale of Class A Preferred Stock and Common Stock for an aggregate
price of $77.8 million. The initial closing under the Equity Facility occurred
in December 1993 and provided aggregate net proceeds of $15.2 million. In
addition, in connection with the initial closing under the Equity Facility,
shares of then outstanding common stock were converted into shares of Common
Stock valued at $10.3 million. Proceeds from subsequent closings under the
Equity Facility during 1994, 1995 and 1996 equaled $5.5 million, $25.2 million
and $20.7 million, respectively. In addition, proceeds from additional offerings
of capital stock and warrants during July 1996 equaled $4.1 million.
The Company finances substantially all of its new and used vehicle inventory
under revolving floor plan financing arrangements with General Motors Acceptance
Corporation, Chrysler Credit Corporation, World Omni Financial Corp. and Nissan
Motor Acceptance Corporation. The floor plan lenders pay the automobile
manufacturers directly with respect to new vehicles. The Company makes monthly
interest payments on the amount financed but is not required to make loan
principal repayments prior to the sale of new and used vehicles. Substantially
all of the assets of the Company's dealerships are subject to security interests
granted to their floor plan lending sources.
Cyclicality
The Company's business, as well as the entire automotive retailing industry is
dependent on a number of factors relating to general economic conditions,
including price and availability of fuel, interest rate fluctuations, economic
recessions and consumer business cycles. The Company believes its geographic
diversity, expansion into automobile financial services and emphasis on service
and repair operations help to reduce the overall impact of these general
economic factors on the Company. The Company's business, however, may be
materially adversely affected by severe adverse economic conditions.
Seasonality
The Company's combined business is modestly seasonal overall. The greatest
seasonalities exist in the DiFeo Group, which operates in the New York
metropolitan area. At the DiFeo Group, the second and third quarters are the
strongest with the fourth and first quarters the weakest with respect to sales
and profits relating to vehicle sales. The service and parts business at all
dealerships experiences relatively modest seasonal fluctuations. At the
Company's other dealerships, seasonality in all business sectors is modest.
Effects of Inflation
The Company believes that the relatively moderate rates of inflation over the
last few years have not had a significant impact on revenue or profitability.
The Company does not expect inflation to have any near-term material effects on
the sale of its products and services. However, there can be no assurance that
there will be no such effect in the future.
The Company finances substantially all of its inventory through various
revolving floor plan arrangements with interest rates which vary based on the
prime rate or LIBOR. Such rates have historically increased during periods of
increasing inflation. The Company does not believe that it
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<PAGE>
would be at a competitive disadvantage should interest rates increase due to
increased inflation since most other automobile dealers have similar floating
rate borrowing arrangements.
Recent Accounting Pronouncements
In October 1995, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial reporting standards
for stock based compensation plans. The Company anticipates adopting the
disclosure only provisions of this standard during 1996.
In June 1996, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" ("SFAS 125"). SFAS 125
establishes financial and reporting standards for derecognition of certain
liabilities. The Company is currently assessing the impact this standard may
have on its financial position and results of operations.
ITEM 2 - CHANGES IN SECURITIES
Recent Sales of Unregistered Securities
On July 2, 1996, the Company granted to employees options under its Stock Option
Plan to purchase up to 36,500 shares of Common Stock at an exercise price of
$10.00 per share. Such options vest in five equal installments on each of the
five anniversaries of the date of grant. The grants were effected in reliance on
Rule 701 under the Securities Act of 1933, as amended (the "Securities Act"),
for offers and sales pursuant to certain compensatory benefit plans.
On July 10, 1996, at the final closings under the Equity Facility, the Company
issued to existing stockholders 419,946 shares of Class A Preferred Stock and
293,948 shares of Common Stock for aggregate consideration of $6.6 million. On
such date, the Company also issued to existing stockholders 306,346 shares of
Class A Preferred Stock and issued to existing warrantholders warrants to
purchase up to 93,747 shares of Class A Preferred Stock at an exercise price of
$0.01 per share. The aggregate consideration for such securities was $4.0
million.
On July 11, 1996, at the final closing under the Securities Purchase Agreements,
the Company issued to J.P. Morgan Capital Corporation a Senior Note due 2003 in
the principal amount of $5.5 million and issued to existing warrantholders
warrants to purchase up to 132,006 shares of Common Stock at an exercise price
of $0.01 per share. The aggregate consideration for such securities was $5.5
million.
On July 31, 1996, the Company issued 10,000 shares of Class A Preferred Stock to
Richard Sinkfield for aggregate consideration in the amount of $100,000.
In addition to any exemptions specified above, each of the foregoing issuances
was effected in reliance on Section 4(2) of the Securities Act as a transaction
not involving any public offering. No additional sales fees were paid in
connection with such issuances.
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ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 5, 1996, the Company requested the written consent of its stockholders
holding 93.2% of its voting capital stock to amend its Certificate of
Incorporation to increase the amount of the Company's authorized capital stock
for the purpose of effecting a private placement on July 10, 1996. All such
stockholders granted their consent.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3.1 Third Restated Certificate of Incorporation.
*3.2 Third Restated Bylaws.
*4.1 Specimen Common Stock certificate.
*10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993,
among the Company and the investors listed therein.
*10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31,
1996, among the Company and the investors listed therein.
*10.1.2 Waiver, Consent and Modification Agreement, dated as of September
22, 1995, among the Company and its stockholders.
*10.1.3 Letter Agreement, dated September 22, 1996, between the Company
and J.P. Morgan Capital Corporation.
*10.1.4 Form of Warrant.
*10.1.5 Form of Additional Warrant.
*10.1.6 Employment Agreement, dated as of June 21, 1996, between the
Company and Carl Spielvogel.
*10.1.7 Severance Agreement, dated April 5, 1996, among the Company,
Trace and Ezra P. Mager.
*10.1.8 Stock Option Plan of the Company.
*10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among
the company and the parties listed on Schedule I thereto.
*10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc.
and the Company.
*10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the
Company.
*10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota
Motor Sales U.S.A., Inc.
*10.1.13 Non-employee Director Compensation Plan of the Company.
*10.1.14 Form of Agreement among the Company, certain of its affiliates
and American Honda Motor Co., Inc.
*10.1.15 Form of Option Certificate of the Company in favor of Samuel X.
DiFeo and Joseph C. DiFeo.
*10.1.16 Form of Registration Rights Agreement among the Company and the
parties listed on Schedule U thereto.
*10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated
October 5, 1995, between American Honda Motor Co.Inc.and
Danbury Auto Partnership.
*10.2.1.2 American Honda Motor Co. Standard Provisions.
*10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a
division of Toyota Motor Sales, U.S.A., Inc, and Somerset Motors
Partnership.
*10.2.2.2 Lexus Dealer Agreement Standard Provisions.
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<PAGE>
*10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service
Agreement, dated August 29, 1994, between Mitsubishi Motor Sales
of America, Inc. and Rockland Motors Partnership, as amended
August 20, 1996.
*10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service
Agreement Standard Provisions.
*10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1,
1994, between BMW of North America, Inc. and DiFeo BMW
Partnership, as amended October 21, 1996.
*10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable
to Dealer Agreement.
*10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996,
between American Suzuki Motor Corporation and Fair Hyundai
Partnership, as amended September 6, 1996.
*10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions.
*10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and Hudson Motors Partnership.
*10.2.6.2 Toyota Dealer Agreement Standard Provisions.
*10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement, dated
October 2, 1992, between General Motors Corporation, Oldsmobile
Division and J&F Oldsmobile-Isuzu Partnership, as amended
December 20, 1993 and July 23, 1996.
*10.2.7.2 General Motors Dealer Sales and Service Agreement Standard
Provisions.
*10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated November
1, 1995, between General Motors Corporation, Chevrolet Motor
Division and Fair Chevrolet-Geo Partnership.
*10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and DiFeo
Nissan Partnership.
*10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions.
*10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, dated
August 16, 1995, between Fair Chrysler Plymouth Partnership and
Chrysler Corporation.
*10.2.10.2 Chrysler Corporation Sales and Service agreement Additional
Terms and Provisions.
*10.2.11 Chrysler Corporation Eagle Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and
Chrysler Corporation.
*10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement, dated
August 16, 1995, between DiFeo Chrysler Plymouth Jeep Eagle
Partnership and Chrysler.
*10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement, dated
November 13, 1992, between DiFeo Chrysler Plymouth Jeep Eagle
Partnership and Chrysler Corporation.
*10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and County Auto Group Partnership.
*10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement, dated
October 12, 1992, between Hyundai Motor America and Fair Hyundai
Partnership as amended November 22, 1993, October 12, 1995,
March 14, 1996 and September 18, 1996.
*10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement
Standard Provisions.
*10.2.16 Hyundai Motor America Dealer Sales and Service Agreement, dated
November 22, 1993, as amended April 1, 1994, and November 3,
1995, between Hyundai Motor America and DiFeo Hyundai
Partnership.
*10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between Toyota
Motor Distributors, Inc. and OCT Partnership.
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<PAGE>
*10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service
Agreement, dated June 30, 1994, between Mitsubishi Motor Sales
of America, Inc. and OCM Partnership.
*10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and
Chrysler Corporation.
*10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated November
1, 1995 between General Motors Corporation, Chevrolet Motor
Division and DiFeo Chevrolet-Geo Partnership.
*10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of September
16, 1996 between American Isuzu Motors, Inc. and Fair Cadillac-
Oldsmobile-Isuzu Partnership.
*10.2.22 Isuzu Dealer Sales and Service Agreement Additional Provisions.
*10.2.23 Loan and Security Agreement, dated as of October 1, 1992,
between General Motors Acceptance Corporation and Hudson Motors
Partnership, as amended April 7, 1993.
*10.2.24 Unconditional, Continuing Guaranty of Payment of the Company and
its affilates named therein, dated as of October 1, 1992, in
favor of General Motors Acceptance Corporation, as amended April
7, 1993.
*10.2.25 Term Loan and Borrowing Base Credit Line Loan Agreement, dated
as of April 7, 1993, between General Motors Acceptance
Corporation and DiFeo-EMCO Management Partnership.
*10.2.26 Settlement Agreement, dated as of October 3, 1996, among the
Company and certain of tis affiliates, on the one hand, and
Samuel X. DiFeo, Joseph C. DiFeo and certain of their
affiliates, on the other hand.
*10.2.27 Form of Agreement and Plan of Merger used in the Minority
Exchange of the DiFeo Group.
*10.2.28 Form of Lease of certain facilities in the DiFeo Group.
*10.2.29 Lease Agreement, dated September 27, 1990, between J&F
Associates and TJGHCC Associates.
*10.2.30 Lease Agreement, dated October 1, 1992, between Manly
Chevrolet, Inc. and County Toyota, Inc.
*10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and
DiFeo BMW Partnership.
*10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995,
between Atlantic Auto Funding Corporation and Atlantic Auto
Finance Corporation.
*10.3.2 Loan and Security Agreement, dated as of June 28, 1995, among
Atlantic Auto Funding Corporation, Atlantic Auto Finance
Corporation and Citibank, N.A.
*10.3.3 Support Agreement of the Company, dated as of June 28, 1995, in
favor of Atlantic Auto Funding Corporation.
*10.3.4 Purchase Agreement, dated as of June 14, 1996, between Atlantic
Auto Finance Corporation and Atlantic Auto Second Funding
Corporation.
*10.3.5 Transfer and Administration Agreement, dated as of June 14,
1996, among Atlantic Auto Second Funding Corporation, Atlantic
Auto Finance Corporation and Morgan Guaranty Trust Company of
New York.
*10.3.6 Support Agreement of the Company, dated as of June 18, 1996, in
favor of Atlantic Auto Second Funding Corporation.
*10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto
Grantor Trust 1996-A, dated as of June 20, 1996, among Atlantic
Auto Third Funding Corporation, Atlantic Auto Finance
Corporation and The Chase Manhattan Bank.
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*10.3.8 Insurance and Indemnity Agreement, dated as of June 20, 1996,
among Financial Security Assurance Inc., Atlantic Auto Third
Funding Corporation and Atlantic Auto Finance Corporation.
*10.3.9 Master Spread Accunt Agreement, dated as of June 20, 1996,
among Atlantic Auto Third Funding Corporation, Financial
Security Assurance Inc. and The Chase Manhattan Bank.
*10.3.10 Lease Agreement, dated as of March 18, 1994, between Perinton
Hills and the Company, including guaranty of lease of Atlantic
Auto Finance Corporation.
*10.4.1 Amended and Restated Stock Purchase Agreement, dated as of July
1, 1995, among the Company, Landers Auto Sales, Inc., Steve
Landers, John Landers and Bob Landers.
*10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor
of Steve Landers and John Landers.
*10.4.3 Promissory Note of the Company, dated August 1, 1995, in favor
of Steve Landers and John Landers.
*10.4.4 Guarantee of the Company, dated as of August 1, 1995, in favor
of Steve Landers and John Landers.
*10.4.5 Employment Agreement, dated as of August 1, 1995, between
Landers Auto Sales, Inc. and Steve Landers.
*10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Jeep-Eagle premises.
*10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Oldsmobile-GMC premises.
*10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among the
Company, United Landers, Inc., Landers Auto Sales, Inc., Steve
Landers and John Landers.
*10.4.9 Chrysler Corporation Eagle Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.11 Chrysler Corporation Dodge Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales, Inc.
and Chrysler Corporation.
*10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales, Inc.
and Chrysler Corporation.
*10.4.14 Oldsmobile Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, Oldsmobile
Division and United Landers Auto Sales, Inc..
*10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, GMC Truck
Division and United Landers Auto Sales, Inc..
*10.4.16 Security Agreement and Master Credit Agreement, dated
October 25, 1993, between Landers Oldsmobile-GMC Inc. and
Chrysler Credit Corporation.
*10.4.17 Security Agreement and Master Credit Agreement, dated May 17,
1989, between Landers Jeep-Eagle, Inc. and Chrysler Credit
Corporation.
*10.4.18 Continuing Guaranty of United Landers, Inc., dated August 15,
1994, in favor of Chrysler Credit Corporation.
20
<PAGE>
*10.4.19 Commercial Loan Agreement, dated December 5, 1994, between
Landers Oldsmobile-GMC, Inc. and The Benton State Bank.
*10.4.20 Commercial Security Agreement, dated December 5, 1994, between
Landers Oldsmobile-GMC, Inc. and The Benton State Bank.
*10.4.21 Agreement, dated July 31, 1995, between the Company and General
Motors Corporation, Oldsmobile Division.
*10.5.1 Stock Purchase Agreement, dated as of November 17, 1995, among
the Company, UAG Atlanta, Inc., Atlanta Toyota, Inc, and Carl
H. Westcott.
*10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16, 1996,
in favor of Carl H. Westcott.
*10.5.3 Guaranty of the Company, dated as of January 16, 1996, in favor
of Carl H. Westcott.
*10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16,
1996, in favor of First Extended Service Corporation.
*10.5.5 Guaranty of the Company, dated as of January 16, 1996, in favor
of Carl H. Westcott.
*10.5.61 Lease Agreement, dated as of January 3, 1996, between Carl
Westcott and Atlanta Toyota, Inc.
*10.5.7 Lease Guaranty of the Company, dated as of January 16, 1995, in
favor of Carl Westcott.
*10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between
Southeast Toyota Motor Distributors, Inc. and Atlanta Toyota,
Inc.
*10.5.9 Wholesale Floor Plan Se;curity Agreement, dated May 24, 1996,
between World Omni Financial Corp. and Atlanta Toyota, Inc.
*10.5.10 Continuing Guaranty of the Company in favor of World Omni
Financial Corp. and certain affiliates.
*10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996,
among Atlanta Toyota, Inc., Fidelity Warranty Services, Inc.
and World Omni Financial Corp.
*10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among the
Company, UAG Atlanta, Inc., Atlanta Toyota and John Smith.
*10.5.13 Employment Agreement, dated a of January 16, 1996, among the
Company, UAG Atlanta, Inc. and John Smith.
*10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among the
Company, UAG Atlanta II, Inc., Steve Raymen Nissan, Inc.,
Steven L. Rayman and Richard W. Keffer, Jr.
*10.6.2 Employment Agreement, dated as of May 1, 1996, among the
Company, UAG Atlanta II, In., Steve Rayman Nissan, Inc. and
Bruce G. Dunker.
*10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L.
Rayman, Richard W. Keffer, Jr. and Steve Rayman Nissan, Inc.
*10.6.4 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
United Nissan, Inc.
*10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996,
between World Omni Financial Corp. and United Nissan, Inc.
*10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in
favor of World Omni Financial Corp. and certain affiliates.
*10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the
Company, UAG Atlanta III, Inc. Hickman Nissan, Inc., Lynda Jane
Hickman and Lynda Jane Hickman as Executrix under the will of
James Franklin Hickman, Jr., deceased.
21
<PAGE>
*10.7.2 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
Peachtree Nissan, Inc.
*10.7.3 Automotive Wholesale Financing and Security Agreement, dated
July 12, 1996, between Nissan Motor Acceptance Corporation and
Peachtree Nissan, Inc.
*10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July
12, 1996, in favor of Nissan Motor Acceptance Corporation.
*10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 996, in
favor of Lynda Jane Hickman, as Executrix under the will of
James Franklin Hickman, Jr.
*10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996,
in favor of Lynda Jane Hickman, as Executrix under the will of
James Franklin Hickman, Jr.
*10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor
of Lynda Jane Hickman, as Executrix under the will of James
Franklin Hickman, Jr.
*10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman,
Jr., and Hickman Nissan, Inc.
*10.7.9 Lease Agreement, dated July 12, 1996, between Argonne
Enterprises, Inc. and Hickman Nissan, Inc.
*10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor
of Lynda Jane Hickman, Jr.
*10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor
of Argonne Enterprises, Inc.
*10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the
Company, UAG West, Inc., Scottsdale Jaguar, LTD., SA
Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD.,
6725 Dealership LTD., Steven Knappenberger Revocable Trust
Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29, 1992,
Steven Knappenberger, Jay P. Beskind December 29, 1992,
Knappenberger 6725 Trust dated and George W. Brochick, as
amended on October 21, 1996 by Amendment No. 1, Amendment No. 2
and Amendment No. 3.
*10.8.2 Purchase and Sale Agreement, 6905 E. McDowell Road, dated
June 6, 1996, among Steven Knappenberger, as Trustee of the
Steven Knappenberger Revocable Trust II, Bruce Knappenberger, as
Trustee of the Bruck Knappenberger Trust and UAG West, Inc. and
Steven Knappenberger.
*10.8.3 Form of Employment Agreement between the Company, UAG West,
Inc., and Steven Knappenberger.
*10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB, Inc.
*10.8.5.1 Form of Audi Dealer Agreement.
*10.8.5.2 Audi Standard Provisions.
*10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement.
*10.8.6.2 Acura Standard Provisions.
*10.8.7.1 Form of BMW of North America Dealer Agreement.
*10.8.8.1 Form of Porsche Sales and Service Agreement.
*10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement.
*10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.
*10.8.9.2 Land Rover Standard Provisions.
*10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and
Scottsdale Porsche & Audi, Ltd.
22
<PAGE>
*10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R.J.
Morgan Corporation of America and Scottsdale Hyundai, Ltd.
*10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive, Inc.
and LRP Ltd.
*10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun BMW
Ltd.
*10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK Motors,
Ltd., and the Knappenberger Revocable Trust.
*10.8.15 Form of Management Agreement among the Company, UAG West, Inc.
and Scottsdale Jaguar, Ltd.
*10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale
Jaguar, Ltd.
*10.8.17 Form of Indemnification Agreement among the Company, UAG West,
Inc., Scottsdale Jaguar, Ltd., Steven Knappenberger, and certain
other individuals and trusts.
*10.8.18 Form of Real Estate Loan and Security Agreement, made by SA
Automotive, Ltd. for the benefit of Chrysler Financial
Corporation.
*10.8.19 Form of Security Agreement and Master Credit Agreement of
Chrysler Credit Corporation.
*10.8.20 Form of Continuing Guaranty of each of the Company and UAG West,
Inc. in favor of Chrysler Credit Corporation.
*10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans BMW, Inc. and
Charles F. Evans.
*10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans Nissan, Inc. and
Charles F. Evans.
*10.9.3 Form of Dealer Agreement between BMW North America, Inc. and
Charles Evans BMW Inc.
*10.9.4 Form of Nissan Dealer Term Sales and Service Agreement between
Nissan Motor Corporation in U.S.A. and Charles Evans Nissan, Inc.
*10.9.5 Form of Lease Agreement between Charles F. Evans and Charles
Evans BMW, Inc.
*10.9.6 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.
*10.9.7 Form of Lease Agreement between Charles F. Evans and Charles
Evans Nissan, Inc.
*10.9.8 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.
*10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW
Property between Charles F. Evans and the Company.
*10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan
Property between Charles F. Evans and the Company.
*10.9.11 Form of Inventory Financing and Security Agreement between BMW
Financial Services NA, Inc. and UAG Atlanta IV Motors Inc.
*10.9.12 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.
*10.9.13 Form of Inventory Financing and Security Agreement between BMW
Financial Services NA, Inc. and Conyers Nissan, Inc.
*10.9.14 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.
*10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the
Company, UAC Tennessee, Inc., Standefer MotorSales, Inc., Charles
A. Standefer and Charles A. Standefer and Karen S. Nicely,
trustees uner the Irrevocable Trust Agreement of Charles B.
Standefer for the primary benefit of children, dated December 21,
1992.
*10.10.2 Form of Nissan Dealer Term Sales and Service Agreement between
Nissan Motor Corporation in U.S.A. and Conyers Nissan, Inc.
*10.10.3 Form of Lease Agreement between Standefer Investment Company and
Standefer Motor Sales, Inc.
23
<PAGE>
*10.10.4 Form of Lease Guaranty of the Company in favor of Standefer
Investment Company.
*10.10.5 Form of Security Agreement and Master Credit Agreement between
Chrysler Credit Corporation and Standefer Morot Sales, Inc.
*10.10.6 Form of Continuing Guaranty of each of the Company and UAG
Tennessee, Inc. in favor of Chrysler Credit Corporation.
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule.
- ------------------------
* Incorporated herein by reference to the identically numbered exhibit to
the Company's Registration Statement on Form S-1, Registration Number
333-09429.
(b) Reports of Form 8-K.
None.
24
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED AUTO GROUP, INC.
DATE: December 5, 1996
By:/s/ Carl Spielvogel
-------------------
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
DATE: December 5, 1996
By:/s/ Robert W. Thompson
----------------------
Robert W. Thompson
Vice President - Finance
(Chief Accounting Officer)
25
<PAGE>
<PAGE>
Exhibit 11
United Auto Group
Computation of per share earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Net income (loss)........................... $1,082,000 $2,221,000 ($3,820,000) $6,118,000
Weighted Average shares outstanding......... 5,695,000 9,706,000 4,636,000 8,510,000
Effect of options issued within one year of
the IPO date not included in the above
share amount based on the treasury stock
method at the assumed IPO price............. 567,000 567,000 567,000 567,000
Shares used in computing pro forma net
income (loss) per common shares............. 6,262,000 10,273,000 5,203,000 9,077,000
Pro forma net income (loss per
common share................................ $0.17 $0.22 $(0.73) $0.67
===================================================================================================================
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> Year 9-Mos
<FISCAL-YEAR-END> Dec-31-1995 Dec-31-1996
<PERIOD-START> Jan-1-1995 Jan-1-1996
<PERIOD-END> Dec-31-1995 Sep-30-1996
<CASH> 4,697 6,432
<SECURITIES> 0 0
<RECEIVABLES> 27,349 43,674
<ALLOWANCES> 0 0
<INVENTORY> 101,556 126,758
<CURRENT-ASSETS> 141,649 181,044
<PP&E> 15,924 20,480
<DEPRECIATION> 3,778 4,230
<TOTAL-ASSETS> 236,027 317,983
<CURRENT-LIABILITIES> 139,447 170,016
<BONDS> 24,073 45,735
0 0
1 1
<COMMON> 1 1
<OTHER-SE> 49,240 78,210
<TOTAL-LIABILITY-AND-EQUITY> 236,027 317,983
<SALES> 805,521 954,784
<TOTAL-REVENUES> 806,151 956,388
<CGS> 720,344 848,479
<TOTAL-COSTS> 720,344 848,479
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,612 3,895
<INCOME-PRETAX> (5,921) 11,423
<INCOME-TAX> 2,089 5,305
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,446) 6,118
<EPS-PRIMARY> (.70) .67
<EPS-DILUTED> 0 0
</TABLE>
