<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
_________________
FORM 10-Q
(Mark One)
[ x ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1999
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 2-97254-NY
_________________
FIRSTAMERICA AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 88-0206732
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
601 Brannan Street,
San Francisco, California 94107
(Address of principal executive offices) (Zip code)
(415) 284-0444
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which registered
------------------- ------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
__________________
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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of April 30, 1999.
<TABLE>
<S> <C>
Class A Common Stock, $0.00001 par value 11,514,044
Class B Common Stock, $0.00001 par value 3,532,000
Class C Common Stock, $0.00001 par value 0
</TABLE>
================================================================================
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Condensed Consolidated Balance Sheets March 31, 1999 and December 31, 1998............. 3
Condensed Consolidated Statements of Operations -
Three months Ended March 31, 1999 and 1998.............................................. 5
Condensed Consolidated Statement of Stockholders' Equity -
March 31, 1999.......................................................................... 6
Condensed Consolidated Statements of Cash Flows
Three months Ended March 31, 1999 and 1998.............................................. 7
Notes to Condensed Consolidated Financial Statements................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Operating Results 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRSTAMERICA AUTOMOTIVE, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents........................ $ 3,530 $ 2,191
Contracts in transit............................. 16,625 13,567
Accounts receivable, net......................... 16,744 18,460
Inventories...................................... 108,169 90,947
Deferred income taxes............................ 853 853
Deposits, prepaid expenses and other............. 2,492 2,996
------------- --------------
Total current assets...................... 148,413 129,014
Property and equipment, net...................... 11,082 9,879
Other assets:
Loan origination and other costs, net.......... 2,955 3,107
Other noncurrent assets....................... 2,375 2,457
Goodwill, net................................. 36,722 33,995
------------- --------------
Total assets.............................. $201,547 $178,452
============= ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
Condensed Consolidated Balance Sheets (continued)
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Liabilities and Stockholders' Equity 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Floor plan................................................................ $ 96,105 $ 81,452
Secured lines of credit................................................... 16,450 17,025
Notes payable and other................................................... 5,038 5,512
Accounts payable.......................................................... 8,532 6,009
Accrued liabilities....................................................... 14,764 13,028
Deferred revenue.......................................................... 1,984 2,054
--------------- --------------
Total current liabilities............................................. 142,873 125,080
Long-term liabilities:
Capital lease obligation and other long term notes........................ 5,483 1,386
Senior notes, net of discount of $2,759 in 1999 and $2,839 in 1998........ 33,241 33,161
Deferred income taxes..................................................... 995 1,055
Deferred revenue.......................................................... 1,951 2,475
--------------- --------------
Total liabilities..................................................... 184,543 163,157
=============== ==============
Cumulative redeemable preferred stock, $.00001 par value; 3,500 shares
issued and outstanding in 1999 and 1998 (net of discount of $438 in 1999
and $456 in 1998, liquidation preference of $3,500 in 1999 and 1998)........ 3,062 3,044
Redeemable preferred stock, $.00001 par value; 500 shares issued and
outstanding in 1999 and 1998 (net of discount of $63 in 1999 and $65 in
1998, liquidation preference of $610 in 1999 and $600 in 1998)............. 547 535
Stockholders' equity:
Common stock, $0.00001 par value:
Class A, 30,000,000 shares authorized, 11,514,044 shares issued and
outstanding in 1999 and 1998............................................ -- --
Class B, 5,000,000 shares authorized, 3,532,000 shares issued and
outstanding in 1999 and 1998............................................ -- --
Class C, 30,000,000 shares authorized, 0 shares issued and outstanding... -- --
Additional paid-in capital................................................ 8,320 8,320
Retained earnings......................................................... 5,075 3,396
--------------- --------------
Total stockholders' equity............................................ 13,395 11,716
--------------- --------------
$201,547 $178,452
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ -------------------
<S> <C> <C>
Sales:
New vehicle.................................................... $ 151,274 $ 94,945
Used vehicle................................................... 51,789 41,796
Service and parts.............................................. 27,431 18,840
Other dealership revenues, net................................. 7,705 5,036
------------------ -------------------
Total sales............................................... 238,199 160,617
Cost of sales:
New vehicle.................................................... 139,696 87,775
Used vehicle................................................... 46,844 38,172
Service and parts.............................................. 14,723 10,252
------------------ -------------------
Total cost of sales....................................... 201,263 136,199
------------------ -------------------
Gross profit.............................................. 36,936 24,418
Operating expenses:
Selling, general and administrative............................ 30,739 20,658
Depreciation and amortization.................................. 1,045 399
------------------ -------------------
Operating income.......................................... 5,152 3,361
Other income/(expense):
Interest expense, floor plan................................... (1,506) (1,180)
Interest expense, other........................................ (1,778) (891)
Gain on sale of dealership..................................... 1,253 --
---------------------------------------------
Income before income taxes................................ 3,121 1,290
Income tax expense.................................................. 1,342 555
------------------ -------------------
Net income................................................ $ 1,779 $ 735
================== ===================
Net income per common share-basic.................................. $0.11 $0.04
================== ===================
Weighted average common shares outstanding-basic.................... 15,065,984 14,224,845
================== ===================
Net income per common share-diluted................................. $0.11 $0.04
================== ===================
Weighted average common shares outstanding-diluted.................. 15,783,657 14,734,763
================== ===================
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
Condensed Consolidated Statement of Stockholders' Equity
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
FirstAmerica Automotive, Inc. Common Stock
---------------------------------------------
Class A Class B
--------------------------------------------- Paid-in Retained Total
Shares Amount Shares Amount Capital Earnings Equity
------------ --------- --------- --------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998..................... 11,514 $ -- 3,532 $ -- $8,320 $3,396 $11,716
Preferred dividend and liquidation preference.. (80) (80)
Amortization of discount....................... (20) (20)
Net income..................................... 1,779 1,779
------------ --------- --------- --------- ------- --------- ----------
Balance, March 31, 1999....................... 11,514 $ -- 3,532 $ -- $8,320 $5,075 $13,395
============ ========= ========= ========= ======= ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 1,779 $ 735
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization....................................... 1,045 268
Noncash interest expense............................................ 230 113
Deferred warranty revenue, net..................................... (364) 56
Gain on sale of dealership.......................................... (1,253) --
Deferred taxes...................................................... (60) --
Changes in operating assets and liabilities:
Receivables and contracts in transit.............................. (1,341) (4,958)
Inventories....................................................... (13,425) 3,873
Other assets...................................................... 212 88
Floor plan notes payable.......................................... 11,419 (4,257)
Accounts payable and accrued liabilities.......................... 4,021 2,761
----------------------------------
Net cash provided by (used in) operating activities............... 2,263 (1,321)
---------------- ----------------
Cash flows from investing activities:
Capital expenditures................................................... (1,109) (457)
Acquisitions, net of cash acquired..................................... (1,706) --
Proceeds from sale of dealership....................................... 1,900 --
----------------------------------
Net cash used in investing activities............................. (915) (457)
---------------- ----------------
Cash flows from financing activities:
Borrowings on notes payable and other.................................. 1,009 255
Borrowings on secured lines of credit.................................. -- 600
Repayments on secured lines of credit.................................. (575) --
Repayments on notes payable and other.................................. (443) --
---------------- ----------------
Net cash (used in) provided by financing activities............... (9) 855
---------------- ----------------
Net increase (decrease) in cash and equivalents................... 1,339 (923)
Cash at beginning of period.............................................. 2,191 2,924
---------------- ----------------
Cash at end of period.................................................... $ 3,530 $ 2,001
================ ================
Cash paid during the period for:
Interest............................................................... $ 3,047 $ 1,941
Income taxes........................................................... 124 --
Non-cash activity was as follows:
Capital lease obligation............................................... 619 --
Preference dividends declared but not paid............................. 70 70
Notes payable to sellers............................................... 2,000 --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
FIRSTAMERICA AUTOMOTIVE, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Summary of Significant Accounting Policies
(a) Business
FirstAmerica Automotive, Inc. (the "Company") is a leading automotive
retailer and consolidator in the highly fragmented automotive retailing
industry. The Company currently operates in four major metropolitan markets in
California, and is focusing its consolidation strategy in the western United
States. The Company generates revenues primarily through the sale and lease of
new and used vehicles, service and parts sales, financing fees, extended
service warranty sales, after-market product sales and collision repair
services. The Company sells a variety of domestic and foreign brands, including
BMW, Chevrolet, Dodge, Honda, Isuzu, Lexus, Mitsubishi, Nissan, Toyota, and
Volkswagen.
The Company's plan is to continue making opportunistic acquisitions in the
western United States. The Company currently operates in the following four
metropolitan markets:
* San Francisco Bay Area * San Jose/Silicon Valley
* San Diego * Los Angeles
(b) Basis of Financial Statement Presentation
The financial information included herein for the three month periods ended
March 31, 1999 and 1998 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods.
The financial information as of December 31, 1998 is derived from
FirstAmerica Automotive, Inc.'s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1999. The interim condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and the notes thereto
included in the Company's Form 10-K. The results of operations for the interim
periods presented are not necessarily indicative of the results to be expected
for the full year.
All significant intercompany transactions and balances have been
eliminated in the accompanying condensed consolidated financial statements.
Certain prior period amounts have been reclassified to conform with the current
financial statement presentation.
(d) Use of Estimates
8
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts in the financial statements and accompanying
notes. Actual results could differ from those estimates.
(e) Comprehensive Income
The Company has determined that net income and comprehensive income are
the same for the periods presented.
(2) Acquisitions
Acquisition and Disposition Completed During the Quarter Ended March 31, 1999
In March 1999, the Company acquired substantially all of the operating
assets of Richey Fipp Chevrolet, a Chevrolet dealership located in Poway,
California. The acquisition was accounted for using the purchase method of
accounting and the operating results of this dealership have been included in
the Company's results of operations since the date it was acquired. The
purchase price has been allocated to assets acquired and liabilities assumed
based on the fair values on the acquisition date. Amounts recorded for this
acquisition were as follows: current assets, net of cash acquired, of $4.2
million, fixed assets of $0.2 million, goodwill and other intangibles of $3.0
million, and floor plan and other liabilities of $3.7 million.
The following unaudited pro forma financial information presents a summary
of consolidated results of operations as if the acquisitions completed during
the period from January 1, 1998 to March 31, 1999 (see list of acquisitions
below) had occurred as of January 1, 1998 after giving effect to certain
adjustments, including amortization of goodwill, interest expense on acquisition
debt, reductions in floor plan interest expense resulting from re-negotiated
floor plan financing agreements, change in accounting for inventories from last-
in, first-out method to the Company's specific identification method for
accounting for inventories, and related income tax effects. The pro forma
results have been prepared for comparative purposes only and are not necessarily
indicative of results of operations that would have occurred had the
acquisitions been completed on January 1, 1998. These results are also not
necessarily indicative of the results of future operations:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Total sales $243,978 $211,333
Income before taxes 3,212 1,171
Net income 1,831 667
Net income per common share-diluted $ 0.11 $ 0.04
</TABLE>
The acquisitions incorporated into the above unaudited pro forma financial
information include the following:
9
<PAGE>
<TABLE>
<CAPTION>
Acquisition Date
- --------------------------------- ----------------
<S> <C>
Beverly Hills BMW April 1998
Serramonte Honda June 1998
Concord Toyota October 1998
Volkswagen of Woodland Hills November 1998
Auto Town December 1998
Poway Chevrolet March 1999
</TABLE>
In March 1999, the Company sold the operating assets of Serramonte
GMC/Pontiac/Buick to General Motors, Inc and received proceeds of approximately
$1.9 million and recorded a pretax gain of $1.3 million.
(3) Inventories
Inventories is comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------- ---------------------------
<S> <C> <C>
New vehicles $ 78,179 $65,152
Used vehicles 23,685 20,049
Parts and accessories 6,305 5,746
--------------------------- ---------------------------
Inventories $108,169 $90,947
=========================== ===========================
</TABLE>
(4) Earnings Per Share
The following table reconciles basic and diluted earnings per share (in
thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Net income per income statement $ 1,779 $ 735
Less:
Cumulative redeemable preference dividends 70 70
Redeemable preferred stock liquidation preference accretion 10 20
Cumulative and redeemable preferred stock discount amortization 20 20
---------------- ----------------
Net income applicable to common stockholders 1,679 625
Add:
Interest charges applicable to convertible debt 6 7
---------------- ----------------
Net income applicable to common stockholders and assumed conversions $ 1,685 $ 632
================ ================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Diluted Earnings Per Share:
Weighted average common shares outstanding-basic 15,066 14,225
Net effect of dilutive stock options 394 227
Net effect of warrants 224 183
Net effect of convertible notes 100 100
---------------- ----------------
Total weighted average common shares outstanding-diluted (b) 15,784 14,735
================ ================
Net income per common share-diluted (c) $0.11 $0.04
================ ================
</TABLE>
(5) Floor Plan Notes Payable and Secured Lines of Credit
The Company currently has a $175 million loan and security agreement with
an institutional lender. The loan agreement matures in July 2000.
The loan and security agreement permits the Company to borrow up to $115
million in floor plan notes payable, limited by new and a portion of used
vehicle inventory, and provides for revolver advances up to $35 million, secured
and restricted by the used vehicle and parts inventory borrowing base as defined
in the loan agreement. Revolver advances are classified as secured lines of
credit in the accompanying financial statements. The loan agreement also
provides for a discretionary line of credit of up to $25 million that an
institutional lender may make available at its absolute discretion. The Company
also has an over advance facility of $5.0 million in excess of the borrowing
base as defined in the loan agreement.
The Company's ability to draw on the floor plan notes payable, revolver
advances and discretionary advances for the purpose of acquiring automobile
dealerships is limited by the amount of vehicle and parts inventory of the
acquired dealership.
In April 1999, the institutional lender increased the over advance facility
to allow the Company to borrow an additional $9.3 million, resulting in an over
advance facility of $14.3 million. The Company borrowed $2.7 million under this
agreement to complete the acquisition of Marin Dodge.
As of March 31, 1999, the Company had floor plan notes payable of $96.1
million, revolver advances outstanding of $12.2 million and over advances
outstanding of $4.3 million. There were no discretionary advances outstanding as
of March 31, 1999.
Floor plan notes payables are due when vehicles are sold, leased, or
delivered. Revolver advances are due whenever the used vehicle and parts
borrowing base as defined in the loan agreement is exceeded. Interest rates on
the floor plan notes and the revolver and over advances are variable and change
based on movements in the prime rate. The interest rate on the floor plan notes
equals prime minus 75 basis points, the interest rate on the revolver advances
equals prime minus 35 basis points, and the interest rate on the over advances
equals prime plus 200 basis points.
(6) Operating Segments
The Company operates primarily in the automotive segment. The Company
sells new vehicles, used vehicles, light trucks, and replacement parts. In
addition, it provides vehicle maintenance and repair services, and arranges
related financing and warranty products for its automotive customers.
11
<PAGE>
The Company acquired on December 31, 1998 Auto Town, a software company
that provides software products and internet services to automobile dealerships.
Summarized financial information concerning the Company's two segments is
shown in the following table (in thousands):
<TABLE>
<CAPTION>
Automotive Technology Total Company
Three months ended March 31, 1998
--------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
--------------- -------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $237,926 $160,617 $ 273 $ -- $238,199 $160,617
Income (loss) before taxes 3,643 1,290 (522) -- 3,121 1,290
Total assets (period end) 199,731 124,155 1,816 -- 201,547 124,155
</TABLE>
(7) Related Party Transactions
In March 1999, the Company acquired substantially all of the operating
assets of Richey Fipp Chevrolet. The $3.7 million purchase price was partly
financed from the proceeds of a $1.0 million loan from the Chief Executive
Officer of the Company and $1.0 million in notes to each of the two selling
parties , one of whom became an employee of the Company after the acquisition.
The annual interest rate on the loan from the Chief Executive Officer is 7.4%
and there is no stated maturity date on the note. The annual interest rate on
each of the $1.0 million notes payable to the sellers is 10.5%. The principal
amount on each note is due in March 2003. The seller notes and Chief Executive
Officer's note are included in other long-term notes in the accompanying
condensed consolidated financial statements.
(8) Subsequent Events
Public Offering and New Credit Facility
In April 1999, the Company filed a registration statement on Form S-1 with
the Securities and Exchange Commission proposing to sell approximately $100
million of common stock in a public offering. The Company intends to use the
proceeds from the public offering to fund pending acquisitions, repay
outstanding loans to principal stockholders including accrued interest, redeem
outstanding senior notes including accrued interest and redemption premiums, and
redeem preferred stock including accrued dividends and redemption premiums. In
addition, the Company is currently negotiating a new credit facility that will
replace the current floor plan facility, provide additional floor plan borrowing
capacity, and provide additional borrowing capacity to complete acquisitions.
This new credit facility is expected to be available upon the closing of the
Company's pending public offering.
Acquisition Completed Subsequent to March 31, 1999 and Pending Acquisitions
In April 1999, the Company acquired substantially all of the operating
assets of Marin Dodge for $4.2 million. In May 1999, the Company entered
into an agreement to acquire all of the outstanding capital stock of the Lucas
Dealership Group, Inc. which, at the time of closing, will consist of five
dealerships including six new vehicle franchises in the San Jose/Silicon Valley
area. The Company has also entered into agreements to acquire the assets of a
single franchise dealership in the San Francisco Bay area, a multiple franchise
dealership in the Los Angeles area, and a dealership in the Las Vegas area. The
estimated aggregate cash purchase price for these acquisitions is approximately
$100 million, net of cash acquired. The Company intends to fund the acquisitions
with proceeds from its common stock offering and new credit facility. The
Company also has a financing commitment letter for the Lucas Dealership Group
acquisition, which will be used in the event the Company's public offering is
not consummated before the closing of such acquisition. The back up financing
commitment was provided by investment funds managed by Trust Company of the
West, a shareholder of the Company.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements. These statements are
necessarily subject to risk and uncertainty. Actual results could differ
materially from those projected in these forward looking statements as a result
of certain risks including those set forth in the Company's 1998 Annual Report
on Form 10-K or the Company's registration statement on Form S-1 as filed with
the Securities and Exchange Commission. These risk factors include, but are not
limited to, the cyclical nature of automobile sales, the intense competition in
the automobile retail industry, and the Company's ability to obtain additional
sources of capital, negotiate profitable acquisitions, and secure manufacturer
approvals for such acquisitions.
Overview
We are a leading automotive retailer and consolidator in the highly
fragmented automotive retailing industry. We currently operate in four major
metropolitan markets in California, and are focusing our consolidation strategy
in the western United States. We generate revenues through the sale and lease
of new and used vehicles, service and parts sales, financing fees, vehicle
insurance commissions, extended service warranty sales, after-market product
sales and collision repair service revenues. We currently sell the following
domestic and foreign brands: BMW, Chevrolet, Dodge, Honda, Isuzu, Lexus,
Mitsubishi, Nissan, Toyota and Volkswagen.
New vehicle revenues include the sale and lease of new cars and light
trucks. Used vehicle revenues include retail and wholesale sales of used cars
and light trucks. Service and parts revenues include vehicle servicing
revenues, warranty repairs, collision repairs and sales of parts to retail and
wholesale customers. Other dealership revenues include financing fees, document
processing fees, vehicle insurance commissions, extended service warranty
contract sales and after-market product sales.
Our gross margin varies based on the mix between new vehicle sales, used
vehicle sales, service and parts sales and other dealership revenues. Gross
margins on new vehicle sales can be affected by the availability of popular
model types as well as manufacturer promotions. Factors such as seasonality,
weather and cyclicality may also impact our product mix and influence our gross
margins. Used vehicle gross margins are primarily impacted by supply and the
price of new vehicles. Service and parts gross margins are primarily impacted
by the productivity and wage rate of service personnel.
Sales commissions, salaries, advertising and rent constitute the largest
components of selling, general and administrative expenses. Interest expense
primarily consists of interest charges on debt incurred for floor plan financing
and interest on debt incurred for dealership acquisitions.
Vehicle sales are cyclical and can be impacted by consumer confidence,
levels of consumers' disposable income, inflation, interest rates, credit
availability and other economic conditions. A significant portion of the costs
associated with vehicle sales are variable costs and can be adjusted during
periods of depressed sales. Sales of parts and service can offset reductions in
vehicle sales to the extent customers repair and service vehicles rather than
replace them.
We have accounted for all of our acquisitions using the purchase method of
accounting and, as a result, we do not include in our financial statements the
results of operations of acquisitions prior to the date they were acquired by
us.
13
<PAGE>
Results of Operations
The following tables summarize, for the periods presented, the information
relating to specific items reflected in our statement of operations.
Percentages of total revenue:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Sales
New vehicles....................................... 63.5% 59.1%
Used vehicles...................................... 21.8% 26.0%
Service and parts.................................. 11.5% 11.8%
Other dealership revenues, net..................... 3.2% 3.1%
------------------ ------------------
Total sales...................................... 100.0% 100.0%
Cost of sales....................................... 84.5% 84.8%
------------------ ------------------
Gross profit..................................... 15.5% 15.2%
Selling, general and administrative expenses........ 12.9% 12.9%
Depreciation and amortization....................... 0.4% 0.2%
------------------ ------------------
Operating Income................................. 2.2% 2.1%
</TABLE>
New vehicle sales statistics:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Units............................................... 6,372 4,336
Sales (in thousands)................................ $151,274 $94,945
Gross profit (in thousands)......................... $ 11,578 $ 7,170
Gross margin........................................ 7.7% 7.6%
Gross profit per unit............................... $ 1,817 $ 1,654
</TABLE>
Used vehicle retail sales statistics, excluding wholesale sales and units:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Units.............................................. 2,585 2,433
Sales (in thousands)............................... $39,601 $32,791
Gross profit (in thousands)........................ $ 4,089 $ 3,091
Gross margin....................................... 10.3% 9.4%
Gross profit per unit.............................. $ 1,582 $ 1,270
</TABLE>
Service and parts statistics:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Sales (in thousands)................................ $27,431 $18,840
Gross profit (in thousands)......................... $12,708 $ 8,588
Gross margin........................................ 46.3% 45.6%
</TABLE>
14
<PAGE>
Three Months Ended March 31,1999 Compared to Three Months Ended March 31,1998
Sales. Our sales increased $77.6 million, or 48.3%, to $238.2 million for
the three months ended March 31, 1999 from $160.6 million in 1998. We acquired
four dealerships in 1998 and one dealership in 1999, which for the periods
following their acquisition accounted for $57.1 million or 74.0% of the
increase in 1999 sales.
New vehicles. We sold a variety of domestic and imported vehicle
brands ranging from economy to luxury vehicles, as well as sport utility
vehicles, minivans and light trucks. In the first three months of 1999 we
sold 6,372 new vehicles, generating revenues of $151.3 million, which
constituted 63.5% of our total sales. In the first three months of 1998 we
sold 4,336 new vehicles, generating revenues of $94.9 million, which
constituted 59.1 % of our total sales. The increase in revenues and units
was due primarily to the five dealerships acquired between January 1, 1998
and March 31, 1999. Average unit prices increased 8.4% to $23,740 from
$21,897 per vehicle due to the higher mix of luxury vehicles we sold in
1999. We anticipate an increase in the number of luxury vehicles we sell
as we acquire additional dealerships.
Used vehicles. We sold a variety of makes and models of used vehicles
and light trucks of varying model years and prices. In the first three
months of 1999, we sold 2,585 retail used vehicles and 1,960 wholesale used
vehicles. In the first three months of 1998, we sold 2,433 retail used
vehicles and 1,657 wholesale used vehicles. Total revenues from used
vehicle sales increased 23.9%, to $51.8 million in the first three months
of 1999 from $41.8 million in the first three months of 1998, primarily
due to the dealerships we acquired between January 1, 1998 and March 31,
1999. Retail and wholesale used vehicle sales comprised 21.8% of our total
sales in the first three months of 1999 compared to 26.0% of our total
sales in the first three months of 1998. Our average price per used
vehicle unit increased 11.5% to $11,395 from $10,219 per vehicle.
Service and parts. Service and parts includes revenue from the sale
of parts, accessories, maintenance and repair services. Service and parts
revenue increased 45.6% to $27.4 million in the first three months of 1999
from $18.8 million in the first three months of 1998, primarily due to
dealerships acquired between January 1, 1998 and March 31, 1999.
Other dealership revenues, net. Other dealership revenues primarily
include fees earned on the sale of vehicle financing notes and warranty
service contracts. Finance fees are received for notes sold to finance
companies for customer vehicle financing. Warranty service contract fees
are earned on extended warranty service contracts that are sold on behalf
of insurance companies. Other dealership revenues increased 53.0% to $7.7
million in the first three months of 1999 from $5.0 million in the first
three months of 1998 due primarily to dealerships acquired.
Gross profit. Gross profit increased 51.3% to $36.9 million in the first
three months of 1999 from $24.4 million in the first three months of 1998. Our
overall gross margins increased to 15.5% in the first three months of 1999, from
15.2% in the first three months of 1998, primarily due to an increase in new
vehicle margins and an increase in other dealership revenues as a percentage of
total sales. The gross margin on new vehicle sales increased to 7.7% in the
first three months of 1999, from 7.6% in the first three months of 1998. The
gross margin on used vehicle sales increased to 9.5% in the first three months
of 1999 from 8.7% in the first three months of 1998. Gross margins on service
and parts increased to 46.3% in the first three months of 1999 from 45.6% in
the first three months of 1998, primarily due to increased emphasis on service
operations and profitability.
Selling, general and administrative expense. Our selling, general and
administrative expense increased $10.1 million, or 48.8%, to $30.7 million in
the first three months of 1999 from $20.7 million in the first three months of
1998. Selling, general and administrative expense as a percentage of sales
remained constant at 12.9% in the first three months of 1999 and the first
three months of 1998. The increase was due primarily to increases in
compensation for additional personnel, management, and overhead as a result of
acquired dealerships.
15
<PAGE>
Depreciation and amortization. Depreciation and amortization expense
increased $0.6 million, or 162%, to $1.0 million in the first three months of
1999 from $0.4 million in the first three months of 1998. The increase was due
to additional depreciation and goodwill amortization from acquired dealerships.
Interest expense. Floor plan interest expense increased $0.3 million, or
27.5%, to $1.5 million in the first three months of 1999 from $1.2 million in
the first three months of 1998 primarily as a result of increased floor plan
debt in 1999 from the acquired dealerships. Interest expense other than floor
plan increased $0.9 million, or 99.5%, to $1.8 million in the first three months
of 1999 from $0.9 million in the first three months of 1998. The increase was
due to debt incurred from dealerships we acquired.
Income tax expense. Income tax expense increased to $1.3 million in the
first three months of 1999 from $0.6 million in the first three months of 1998
due to higher pretax income in 1999. Our effective income tax rate was 43% for
the first three months of 1999. Our effective tax rate in the future may be
affected by non-deductible expenses such as goodwill associated with certain
types of acquisitions.
Net income. As a result of the items discussed above, net income increased
to $1.8 million in the first three months of 1999 from $0.7 million in the
first three months of 1998.
Liquidity and Capital Resources
Our cash and liquidity requirements are primarily for acquiring new
dealerships, working capital, information systems and expanding existing
facilities. Historically, we have relied primarily upon cash flows from
operations, floor plan financing, and other borrowings under our credit facility
to finance our operations, and the proceeds from our private placements to
finance our acquisitions. At March 31,1999, we had working capital of $5.5
million.
In the first three months of 1999, operating activities resulted in net
cash provided by operations of $2.3 million compared to $1.3 million used in
operations in the first three months of 1998. The increase was attributable to
a reduction in receivables and contracts in transit and an increase in
inventories which was offset by increases in accounts payable and accrued
liabilities and floor plan notes payable compared to the prior year period.
In the first three months of 1999, the net cash used in investing
activities totaled $0.9 million, which consisted of $1.7 million used for
acquisitions and $1.1 million of capital expenditures for information systems
and improvements to existing facilities, offset by proceeds from a sale of a
dealership of $1.9 million. This compared to $0.5 million in the first three
months of 1998 which was used for capital expenditures.
In the first three months of 1999, net cash used in financing activities
totaled $9 thousand, which consisted of borrowings and repayments on secured
lines of credit and notes payable. In the first three months of 1998, net cash
provided from financing activities totaled $0.9 million which consisted of
borrowings on secured lines of credit and notes payable.
In April 1999, we filed a registration statement on Form S-1 with the
Securities and Exchange Commission proposing to sell approximately $100 million
of common stock in a public offering. We intend to use the proceeds from the
public offering to fund pending acquisitions, repay outstanding loans to
principal stockholders including accrued interest, redeem outstanding senior
notes including accrued interest and redemption premiums, and redeem preferred
stock including accrued dividends and redemption premiums. In addition, we are
currently negotiating a new credit facility that will replace the current floor
plan facility, provide additional floor plan borrowing capacity, and provide
additional borrowing capacity to complete acquisitions. This new credit facility
is expected to be available upon the closing of our pending public offering.
In May 1999, we entered into an agreement to acquire all of the outstanding
capital stock of the Lucas Dealership Group, Inc. which, at the time of closing,
will consist of five dealerships including six new vehicle franchises in the San
Jose/Silicon Valley area. We have also entered into agreements to acquire the
assets of a single franchise dealership in the San Francisco Bay area, a
multiple franchise dealership in the Los Angeles area, and a dealership in the
Las Vegas area. The estimated aggregate cash purchase price for these
acquisitions is approximately $100 million, net of cash acquired. We intend to
fund the acquisitions with proceeds from our common stock offering and new
credit facility. We have a financing commitment letter for the Lucas Dealership
Group acquisition,
16
<PAGE>
which will be used in the event that our public offering is not consummated
before the closing of such acquisition. The back up financing commitment was
provided by investment funds managed by Trust Company of the West, one of our
shareholders.
Floor Plan Notes Payable and Secured Lines of Credit
We currently have a $175 million loan and security agreement with an
institutional lender. The loan agreement matures in July 2000.
Our loan and security agreement permits us to borrow up to $115 million in
floor plan notes payable, limited by our new and a portion of our used vehicle
inventory and provides for revolver advances up to $35 million, secured and
restricted by the used vehicle and parts inventory borrowing base as defined in
the loan agreement. Revolver advances are classified as secured lines of credit
in the accompanying financial statements. The loan agreement also provides for a
discretionary line of credit of up to $25 million that an institutional lender
may make available at its absolute discretion. We also have an over advance
facility of $5.0 million in excess of the borrowing base as defined in the loan
agreement.
Our ability to draw on the floor plan notes payable, revolver advances and
discretionary advances for the purpose of acquiring automobile dealerships is
limited by the amount of vehicle and parts inventory of the acquired dealership.
In April 1999, the institutional lender increased our over advance
facility to allow us to borrow an additional $9.3 million, resulting in an over
advance facility of $14.3 million. We borrowed $2.7 million under this agreement
to complete the acquisition of Marin Dodge.
As of March 31, 1999, we had floor plan notes payable of $96.1 million,
revolver advances outstanding of $12.2 million and over advances outstanding
of $4.3 million. There were no discretionary advances outstanding as of
March 31, 1999.
Floor plan notes payables are due when vehicles are sold, leased, or
delivered. Revolver advances are due whenever the used vehicle and parts
borrowing base as defined in the loan agreement is exceeded. Interest rates on
the floor plan notes and the revolver and over advances are variable and change
based on movements in the prime rate. The interest rate on the floor plan notes
equals prime minus 75 basis points, the interest rate on the revolver advances
equals prime minus 35 basis points, and the interest rate on the over advances
equals prime plus 200 basis points. We intend to replace the floor plan
facility with a new credit facility in connection with the public offering of
common stock.
Senior Notes and Preferred Stock
Currently, we also have a securities purchase agreement with an
institutional lender which provided an aggregate funding commitment of up to $40
million. The commitment consisted of $36 million of 12.375% senior notes, $3.5
million 8% Cumulative Redeemable Preferred Stock, or CRPS, and $0.5 million
Redeemable Preferred Stock, or RPS, and up to 5 million shares of our Class B
common stock.
As of March 31, 1999, we had received $40 million of the commitment from
the institutional lender. In exchange, we issued senior notes with a principal
amount of $36 million at a discount of $3.2 million, 3,500 shares of CRPS at a
discount of $0.6 million, 500 shares of RPS at a discount of $0.1 million,
3,032,000 shares of Class B common stock at $0.92 per share and 500,000 shares
of Class B common stock at $2.00 per share. The senior notes, CRPS and RPS are
due June 30, 2005. We used these proceeds primarily to acquire dealerships.
The senior notes are unsecured and rank behind all debts of our operating
subsidiaries, rank equal to our other existing and future senior indebtedness,
and are senior in right of payment to any additional subordinated debt. The
CRPS and RPS shares rank behind all of our debt and the debt of our subsidiaries
and have priority over our common stock. We can redeem all the senior notes in
whole or in part, at any time, upon notice to the holders of the senior notes.
The redemption price for the period July 1, 1998 to June 30, 1999 is 108.75% of
the principal balance and decreases 1.25% on July 1 of each year thereafter.
The redemption price per share on June 30, 2005 is equal to the CRPS liquidation
preference of $1,000 and the RPS liquidation preference of $1,720. If the
aggregate outstanding principal balance of the senior notes is less than $2
million at any time, we are required to redeem all
17
<PAGE>
outstanding senior notes. We intend to redeem the senior notes and preferred
stock in connection with the public offering of common stock.
On July 1, 2003 and July 1, 2004, we must redeem senior notes in the
aggregate principal amount equal to the lesser of (a) 30% of the aggregate
principal amount of senior notes issued or (b) the aggregate amount of issued
and outstanding senior notes on such date, at the applicable redemption price
plus all accrued and unpaid interest on the senior notes to the redemption date.
On June 30, 2005, we must redeem all remaining issued and outstanding senior
notes, paying all outstanding principal and accrued and unpaid interest.
If we make a public offering of our stock, we may within 45 days of the
completion of this offering redeem all the outstanding senior notes. If this
occurs, the redemption price for the period from July 1, 1998 to June 30, 1999
will range from 104.375% to 108.75% of the principal balance, or approximately
$2.1 million.
Acquisition and Disposition Closed During the First Quarter of 1999
In March 1999, we acquired substantially all of the operating assets of
Ritchey Fipp Chevrolet, a Chevrolet dealership located in Poway, California. The
aggregate consideration paid for the acquisition completed during the first
quarter of 1999 was $3.7 million, consisting of $1.7 million in cash and $2.0
million in notes payable to the sellers.
In March 1999, we sold the operating assets of Serramonte
GMC/Pontiac/Buick to General Motors, Inc. and received proceeds of approximately
$1.9 million and recorded a pre-tax gain of $1.3 million.
Acquisition Closed After March 31, 1999 and Pending Acquisitions
In April 1999, we acquired substantially all of the operating assets of
Marin Dodge for $4.2 million. In May 1999, we entered into an agreement to
acquire all of the outstanding capital stock of the Lucas Dealership Group, Inc.
which, at the time of closing, will consist of five dealerships including six
new vehicle franchises in the San Jose/Silicon Valley area. We have also entered
into agreements to acquire the assets of a single franchise dealership in the
San Francisco Bay area, a multiple franchise dealership in the Los Angeles area,
and a dealership in the Las Vegas area. The estimated aggregate cash purchase
price for these acquisitions is approximately $100 million, net of cash
acquired. We intend to fund the acquisitions with proceeds from our common stock
offering and new credit facility. We have a financing commitment letter for the
Lucas Dealership Group acquisition, which will be used in the event that our
public offering is not consummated before the closing of such acquisition. The
back up financing commitment was provided by investment funds managed by Trust
Company of the West, one of our shareholders.
Seasonality and Quarterly Fluctuations
Our sales are usually lower in the first and fourth quarters of each year
largely due to consumer purchasing patterns during the holiday season,
inclement weather and the reduced number of business days during the holiday
season. As a result, our financial performance is generally lower during the
first and fourth quarters than during the other quarters of each fiscal year.
We believe that interest rates, levels of consumer debt, consumer buying
patterns and confidence, as well as general economic conditions also contribute
to fluctuations in sales and operating results. The timing of acquisitions of
new dealerships may also cause substantial fluctuations of operating results
from quarter to quarter.
New Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This Statement of Position
requires the capitalization of eligible costs of specialized activities related
to computer software developed or obtained for internal use. The adoption of
this Statement of Position did not have a material effect on our
18
<PAGE>
financial position or results of operations. The Statement is effective for
fiscal years beginning after December 15, 1998. We adopted this Statement of
Position on January 1, 1999.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting the Cost of Start Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The Statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. The Statement is effective for
fiscal years beginning after December 15, 1998. We adopted this Statement of
Position on January 1, 1999. The adoption of this Statement of Position did not
have a material impact on our consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instrument
and Hedging Activities." This Standard establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and hedging activities. The Statement will become effective
for us beginning on January 1, 2000. We have not assessed the impact of the
pronouncement on our consolidated financial statements.
Amortization of Goodwill
Goodwill as of March 31, 1999 was $36.7 million, or 18.2% of our total
assets. Goodwill represents the excess purchase price over the estimated fair
value of the tangible and measurable intangible assets purchased in an
acquisition. Generally accepted accounting principles require that goodwill be
amortized over the period benefited, not to exceed 40 years. We have determined
that the period benefited by most of our goodwill is over forty years and
therefore we are amortizing this goodwill over a 40-year period. Earnings
reported in periods immediately following an acquisition would be overstated if
we attributed a forty-year benefit period to intangible assets that should have
had a shorter benefit period. In later years, we would be burdened by a
continuing charge against earnings without the associated benefit to income
valued by our management in arriving at the price paid for businesses acquired.
Earnings in later years also could be significantly affected if our management
then determined that the remaining balance of goodwill was impaired. We
periodically compare the carrying value of goodwill to the anticipated
undiscounted future cash flows from operations of the businesses we have
acquired to evaluate the recoverability of goodwill.
Inflation
We believe that the relatively moderate rate of inflation over the past few
years has not had a significant impact on our revenues or profitability.
Interest rates have been relatively stable during this period.
Year 2000 Project
We are in the process of addressing the impact on our operations of
computer programs that are unable to distinguish between the year 1900 and the
year 2000.
Year 2000 Readiness Preparation
Our year 2000 program is comprised of several individual projects which
address primarily the following broad areas: data processing systems, embedded
technology in equipment and facilities, vendor and supplier risk, and
contingency planning. We have created a year 2000 task force that has assigned
a priority to all projects and broadly classified projects into critical and
non-critical categories indicating the importance of the function to our
continuing operations.
We are in the process of updating our data processing systems. We have
converted or will complete conversion of all of our noncompliant software and
computer systems for our existing operations to compliant systems by the end of
the third quarter of 1999. The most critical data processing systems are the
dealership management systems in our dealerships. As a result of an unrelated
project to integrate computing systems across the company, these dealer
management systems have been replaced or upgraded with year 2000 compliant
software and hardware platforms. This conversion project is fully complete.
19
<PAGE>
Although we are converting to year 2000 compliant systems, management
recognizes that it could potentially acquire a dealership that does not have
year 2000 compliant systems. As part of our dealership acquisition due
diligence process, acquired dealership systems are evaluated for year 2000
compliance and scheduled for upgrade or replacement as acquired dealerships are
assimilated into our company.
We are currently assessing the readiness preparations of our major
suppliers. Manufacturers of vehicles and parts have been identified as our most
critical suppliers, and inquiries are underway regarding their year 2000
readiness plans and status. Contingency plans will be developed based on
written risk assessments of major suppliers' states of readiness. In addition,
financial institutions that have been identified as critical suppliers of
inventory financing and customer financing are in the process of being evaluated
for year 2000 compliance.
We also recognize that there may be embedded technology in our equipment
and facilities that could be impacted by the year 2000 issue. We have a project
plan in place to address this issue, and are in the process of evaluating
service equipment, other equipment and telephone systems for year 2000
compliance. Service equipment that is not year 2000 compliant has been
identified and will be replaced. All other equipment identified as not being
year 2000 compliant will also be replaced.
Year 2000 Risks
The principal risk and most reasonably likely worst case scenario
associated with the year 2000 program is the risk of disrupting our operations
due to operational failure of third-party suppliers, primarily vehicle
manufacturers. Such failures could materially and adversely affect our ability
to obtain vehicles and parts for sale. Although our inquiries are underway, we
do not yet have the information to estimate the likelihood of significant
disruptions among our suppliers. We believe that, with the completion of the
year 2000 project as scheduled, the possibility of significant interruptions of
normal operations should be reduced.
Year 2000 Costs
The conversion of our data processing systems and its related costs have
been incorporated into our planned replacement or upgrade of its software and
other computer systems and therefore we have not experienced any significant
incremental costs that are specifically related to year 2000 compliance issues.
Total year 2000 project costs for replacing or upgrading our noncompliant
equipment and facilities are estimated to be approximately $1 million.
Estimated total project costs could change in the future as analysis continues.
Year 2000 Contingency Planning
We are assessing the consequences if our year 2000 initiative is not
completed on schedule. Upon completion of this assessment, we will begin
contingency planning. In addition, we are in the process of developing business
contingency plans that address the actions that would be taken if critical
business operations were disrupted due to system or supplier failure. We expect
the plan development and validation to be completed by the fourth quarter of
1999.
20
<PAGE>
Year 2000 Forward-looking Statements
This discussion of the implications of the year 2000 for us contains
numerous forward-looking statements based on inherently uncertain information.
Statements about the cost of the project and the date on which we plan to
complete the internal year 2000 modifications are based on management's best
estimates, which were derived utilizing a number of assumptions of future events
including the continued availability of internal and external resources, third
party modifications and other factors. However, we may not achieve these
estimates or there may be a delay in, or increased costs associated with, the
implementation of the year 2000 program. In addition, we place a high degree of
reliance on computer systems of third parties, such as vendors, suppliers, and
financial institutions. Although we are assessing the readiness of these third
parties and will prepare contingency plans, the failure of these third parties
to modify their systems in advance of December 31, 1999 could have a material
adverse effect on our business.
21
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Our primary market risk exposure is interest rate risk. A change in the
U.S. prime interest rate would affect the rate at which we could borrow funds
under our floor plan and secured line of credit borrowing facilities. We
estimate that a one percent increase or decrease in our variable rate debt would
result in an increase or decrease, respectively, in interest expense of $1.0
million in 1999. We estimate that a two percent increase or decrease in our
variable rate debt would result in an increase or decrease, respectively, in
interest expense of $2.0 million in 1999. Our senior notes are at fixed rates.
Our remaining financial instrument liabilities are immaterial.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports and Form 8-K
(a) Exhibits
The exhibits filed as a part of this report are listed below.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27.1 Financial Data Schedule
(b) Report on Form 8-K
On January 14, 1999, the Company filed a report on Form 8-K , dated December 31,
1998, under Item 2., Acquisition or Disposition of Assets. On March 16, 1999,
the Company filed a report on Form 8-K/A, dated December 31, 1998, relating to
its report on Form 8-K filed on January 14, 1999.
22
<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.
FIRSTAMERICA AUTOMOTIVE, INC.
Dated: May 17, 1999 By: /s/ THOMAS A. PRICE
-----------------------------------------
Thomas A. Price
President, Chief Executive Officer, and Director
(Principal Executive Officer)
By: /s/ DEBRA L. SMITHART
-----------------------------------------
Debra L. Smithart
Chief Financial and Administrative Officer
(Principal Financial and Accounting Officer)
23
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