U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 1-14082
SMART CHOICE AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-1469577
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5200 S. Washington Avenue, Titusville, Florida 32780
(Address of principal executive offices)
(Zip Code)
(407) 269-9680
(Registrant's telephone number, including area code)
---------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate number or shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
As of August 16, 1999, 7,782,277 shares of the Registrant's Common Stock were
issued and outstanding.
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Form 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
HEADING PAGE
<S> <C>
PART I. FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements
Balance Sheet - June 30, 1999 and December 31, 1998 ........................ 3
Statements of Operations - Three and six months ended June 30, 1999 and 1998 4
Statements of Stockholders Equity - Six months ended June 30, 1999 ......... 5
Statements of Cash Flows - Six months ended June 30, 1999 and 1998 ......... 6
Notes to Consolidated Financial Statements ................................. 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................... 9-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................................. 15
Item 2. Changes in Securities ......................................................... 16
Item 3. Defaults Upon Senior Securities ............................................... 16
Item 4. Submission of Matters to a Vote of Securities Holders ......................... 16
Item 5. Other Information ............................................................. 16
Item 6. Exhibits and Reports on Form 8-K .............................................. 16-26
SIGNATURES ............................................................................ 27
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents ........................ $ 129,347 $ 1,268,589
Accounts receivable .............................. 2,171,995 1,206,710
Finance receivables
Principal balances, net ........................ 92,949,967 79,342,835
Less: allowance for credit losses .............. (13,881,576) (12,157,569)
------------- -------------
79,068,391 67,185,266
Inventories ...................................... 13,863,969 20,004,600
Property and equipment, net ...................... 7,663,337 7,655,324
Note receivable .................................. 385 425,000
Deferred debt costs, net ......................... 208,556 226,152
Goodwill, net .................................... 23,556,150 23,871,080
Prepaid expenses ................................. 1,505,130 1,263,858
Deposits and other assets ........................ 325,200 485,454
------------- -------------
$ 128,492,460 $ 123,592,033
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Bank overdraft ................................... $ 792,538 $ 3,112,930
Accounts payable ................................. 6,373,311 4,746,157
Accrued expenses ................................. 4,503,924 3,664,651
Line of credit, net of discount .................. 71,854,684 63,612,433
Floorplan payable ................................ 8,328,090 8,701,968
Capital lease obligations ........................ 880,974 997,916
Notes payable .................................... 28,663,159 28,343,479
Deferred income .................................. 898,460 --
------------- -------------
Total liabilities ..................................... 122,295,140 113,179,543
Contingent redemption value of common stock put options 1,539,148 1,539,148
Redeemable convertible preferred ...................... 10,000 10,000
Stockholders' equity:
Preferred stock ....................................... 5,891,410 5,891,410
Common stock .......................................... 72,962 66,765
Additional paid in capital ............................ 31,177,846 30,054,488
Common stock notes receivable ......................... (115,200) (115,200)
Accumulated deficit ................................... (32,378,846) (27,034,112)
------------- -------------
Total stockholders' equity ............................ 4,648,172 8,863,351
------------- -------------
....................................................... $ 128,492,460 $ 123,592,033
============= =============
3
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Sales at used car stores ......................... $ 17,210,283 $ 18,756,972 $ 40,719,841 $ 40,602,531
Income on finance receivables .................... 5,499,025 2,636,215 10,391,386 6,782,430
Income from insurance and training ............... 147,685 245,810 322,457 426,032
------------ ------------ ------------ ------------
Total revenues ................................... 22,856,993 21,638,997 51,433,684 47,810,993
------------ ------------ ------------ ------------
Cost and expenses:
Costs of sales at used car stores ................ 14,344,391 11,764,938 31,200,894 26,853,212
Provision for credit losses ...................... 3,709,576 2,661,371 7,503,594 4,983,034
Cost of insurance and training ................... 20,074 28,838 39,113 59,595
Selling, general and administrative expenses ..... 5,249,233 4,627,310 12,537,467 10,395,936
------------ ------------ ------------ ------------
Total costs and expenses ........................ 23,323,274 19,082,457 51,281,068 42,291,777
------------ ------------ ------------ ------------
Income from operations ................................ (466,281) 2,556,540 152,616 5,519,216
Other income (expense):
Interest expense ................................. (2,359,715) (2,024,826) (4,713,594) (3,726,421)
Other income ..................................... 153,797 149,115 165,593 242,882
------------ ------------ ------------ ------------
(2,205,918) (1,875,711) (4,548,001) (3,483,539)
------------ ------------ ------------ ------------
Net income (loss) from continuing operations .......... (2,672,199) 680,829 (4,395,385) 2,035,677
Discontinued operations:
Income from discontinued operations ................... 59,072 644,558 209,517 956,302
Estimated loss on sale of discontinued operations ..... -- -- (800,000) --
------------ ------------ ------------ ------------
59,072 644,558 (590,483) 956,302
------------ ------------ ------------ ------------
Net income (loss) ..................................... (2,613,127) 1,325,387 (4,985,868) 2,991,979
Preferred Stock dividends ............................. (172,329) (85,964) (358,866) (163,838)
------------ ------------ ------------ ------------
Net income (loss) available to common stock ........... $ (2,785,456) $ 1,239,423 $ (5,344,734) $ 2,828,141
============ ============ ============ ============
Basic income (loss) per common share:
Continuing operations .............................. $ (0.39) $ 0.09 $ (0.68) $ 0.32
Discontinued operations ............................ 0.01 0.10 (0.08) 0.17
------------ ------------ ------------ ------------
$ (0.38) $ 0.19 $ (0.76) $ 0.49
============ ============ ============ ============
Diluted income (loss) per common share:
Continuing operations .............................. $ (0.39) $ 0.08 $ (0.68) $ 0.27
Discontinued operations ............................ 0.01 0.09 (0.08) 0.14
------------ ------------ ------------ ------------
$ (0.38) $ 0.17 $ (0.76) $ 0.41
============ ============ ============ ============
Weighted average number of common shares
and share equivalents outstanding:
Basic .............................................. 7,230,277 6,387,957 6,992,963 5,790,926
============ ============ ============ ============
Diluted ............................................ 7,230,277 7,496,213 6,992,963 6,840,915
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements Of Stockholders' Equity
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------------- --------------------------
NUMBER NUMBER
OF OF PAR
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 ....... 595 $ 5,891,410 6,676,545 $ 66,765
Unaudited:
Issuance of common stock for
conversion of debt .......... -- -- 619,732 6,197
Preferred stock dividends ........ -- -- -- --
Net loss ......................... -- -- -- --
------------ ------------ ------------ ------------
BALANCE, June 30, 1999 (unaudited) 595 $ 5,891,410 7,296,277 $ 72,962
============ ============ ============ ============
COMMON
ADDITIONAL STOCK
PAID-IN NOTES ACCUMULATED
CAPITAL RECEIVABLE DEFICIT TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 ....... $ 30,054,488 $ (115,200) $(27,034,112) $ 8,863,351
Unaudited:
Issuance of common stock for
conversion of debt .......... 1,123,358 -- -- 1,129,555
Preferred stock dividends ........ -- -- (358,866) (358,866)
Net loss ......................... -- -- (4,985,868) (4,985,868)
------------ ------------ ------------ ------------
BALANCE, June 30, 1999 (unaudited) $ 31,177,846 $ (115,200) $(32,378,846) $ 4,648,172
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net income/ (loss) ...................................................................... $ (4,985,868) $ 2,991,979
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Provision for credit losses .......................................................... 7,503,594 4,727,254
Depreciation and amortization ........................................................ 833,549 1,239,272
Gain on disposal of property and equipment ........................................... -- (43,381)
Deferred warranty contracts earned ................................................... (101,540) --
Provision for loss on sale of discontinued operations ................................ 800,000 --
Cash provided by (used for):
Accounts receivable ................................................................ (965,285) (2,051,408)
Inventory .......................................................................... 6,140,631 (1,905,528)
Prepaid expenses ................................................................... (91,272) (791,417)
Accounts payable ................................................................... 1,627,154 665,634
Accrued expenses and other liabilities ............................................. 58,828 (1,719,992)
------------ ------------
Net cash provided by operating activities .................................................. 10,819,791 3,112,413
------------ ------------
Cash flows from investing activities:
Increase in finance receivables ......................................................... (19,386,719) (24,686,512)
Proceeds from disposal of property and equipment ........................................ -- 1,093,381
(Increase) / decrease in deposits ....................................................... 76,351 (14,608)
(Increase) / decrease in other assets ................................................... 70,596 (32,487)
Payment of notes receivable ............................................................. -- 46,280
Purchase of property and equipment ...................................................... (334,662) (442,094)
------------ ------------
Net cash used in investing activities ...................................................... (19,574,434) (24,036,040)
------------ ------------
Cash flows from financing activities:
Principal payments on notes payable ..................................................... (420,355) (3,205,838)
Proceeds from issuance of notes payable ................................................. 2,005,000 6,497,448
Proceeds from issuance of preferred stock ............................................... -- 5,891,411
Proceeds from issuance of common stock .................................................. -- 266,776
Proceeds from issuance of convertible debt .............................................. -- 340,000
Proceeds from exercise of common stock options and warrants ............................. -- 15,000
Proceeds from line of credit borrowings ................................................. 8,200,834 14,500,000
Decrease in bank overdraft............................................................... (2,320,392) --
Net proceeds (repayment) from floorplan notes payable ................................... (373,878) 195,400
Proceeds from warranty contracts advance ................................................ 1,000,000 --
Payments of dividends ................................................................... (358,866) (39,619)
Deferred financing costs ................................................................ -- (727,788)
Payments on capital lease obligations ................................................... (116,942) (39,472)
------------ ------------
Net cash provided by financing activities .................................................. 7,615,401 23,693,318
------------ ------------
Net increase / (decrease) in cash and cash equivalents ..................................... (1,139,242) 2,769,691
Cash and cash equivalents at beginning of period ........................................... 1,268,589 1,066,949
------------ ------------
Cash and cash equivalents at end of period ................................................. $ 129,347 $ 3,836,640
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Smart Choice
Automotive Group, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for a complete financial statement
presentation. In the opinion of management, such unaudited interim information
reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present the Company's financial position and results of operations
for the periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full fiscal year. The
consolidated balance sheet as of December 31, 1998 was derived from the audited
consolidated financial statements as of that date but does not include all the
information and notes required by generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the
company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
Note 2 - Finance Receivables
The Company's finance receivables ("Finance Receivables" or "Finance Contracts")
are automobile retail installment sale contracts originated by the Company on
sales of used cars at its automobile dealerships. The following shows the
principal balances of the Company's Finance Receivables as of June 30, 1999:
Contractually scheduled payments $ 133,494,326
Less: unearned finance charges .. (41,686,547)
-------------
Principal balances .............. 91,807,779
Add: loan origination costs ..... 1,142,188
-------------
Principal balances, net ......... 92,949,967
Less: allowance for credit losses (13,881,576)
-------------
Principal balances, net ......... $ 79,068,391
=============
Note 3 - Presentation of Revenues and Cost of Revenues
The prices at which the Company sells its used cars and the interest rate that
it charges to finance these sales take into consideration that the Company's
primary customers are high-risk borrowers. The provision for credit losses
reflects these factors and is treated by the Company as a cost of both the
future finance income derived on the finance receivables originated at Company
as well as a cost of the sales of the cars themselves. Accordingly, unlike
traditional car dealerships, the Company does not present gross profit margin in
its statement of operations calculated as sales of cars less cost of cars sold.
Note 4 - Deferred Income
Deferred income represents the net value received by the company in 1999
inconnection with a long term service protection plan agreement whereby the
Company earns a commission on warranty contracts sold in connection with used
car sales. Extended warranty coverage is provided by an independent third party.
Note 5 - Earnings (Loss) per Common Share
Net income (loss) per common share is based on the weighted average number of
common shares and potential common shares outstanding during each period.
Potential common shares for 1999 have not been included since their effect would
be antidilutive. Potential common shares of 1,108,256 and 1,049,989 for the
three and six months ended June 30, 1998, respectively include options, warrants
and shares underlying convertible debt.
7
<PAGE>
Note 6 - Supplemental Cash Flow Information
Cash paid for interest during the six months ended June 30, 1999 and 1998 was
$4,626,968 and $3,716,455 respectively.
The Company's non-cash investing and financing activities were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------
1999 1998
--------- ---------
<S> <C>
Partial settlement of note receivable and note payable ...................... 134,615 --
Common stock issued for conversion of debt and related interest ............. 1,129,555 1,336,132
Exchange of note receivable for note payable ................................ 140,000 --
Common stock issued for conversion of preferred stock and accrued dividends . -- 4,592,704
</TABLE>
Note 7 - Segment Information
The following table shows certain financial information by reportable segment as
of and for the three and six months ended June 30, 1999 and 1998 and excludes
the operations of the discontinued segments:
<TABLE>
<CAPTION>
USED CAR FINANCING CORPORATE DISCONTINUED
THREE MONTHS ENDED JUNE 30, STORES SERVICES AND OTHER OPERATIONS COMBINED
--------------------------- -------------- ----------- --------- -------------- ---------
1999
<S> <C> <C> <C> <C> <C>
Revenue from external customers $ 17,210,283 $ 5,499,025 $ 147,685 $ -- $ 22,856,993
Intercompany revenues -- 69,582 -- -- 69,582
Operating income (loss) (277,622) 1,432,905 (1,621,564) -- (466,281)
Depreciation and amortization 95,647 87,374 214,305 135,197 532,523
Interest expense 24,708 1,912,030 422,977 -- 2,359,715
Identifiable assets 13,445,108 87,367,447 6,377,091 21,302,814 128,492,460
Capital expenditures 75,612 600 -- 5,950 82,162
1998
Revenue from external customers $ 18,756,972 $ 2,636,215 $ 245,810 $ -- $ 21,638,997
Intercompany revenues -- 2,303,681 -- -- 2,303,681
Operating income (loss) 936,839 2,535,506 (915,805) - 2,556,540
Depreciation and amortization 106,667 62,462 314,954 128,465 612,548
Interest expense 76,641 1,266,936 681,249 - 2,024,826
Identifiable assets 18,468,303 61,602,837 11,314,188 23,349,723 114,735,051
Capital expenditures 223,062 12,031 7,773 57,326 300,192
USED CAR FINANCING CORPORATE DISCONTINUED
SIX MONTHS ENDED JUNE 30, STORES SERVICES AND OTHER OPERATIONS COMBINED
------------------------- -------------- ----------- --------- -------------- ---------
1999
Revenue from external customers $ 40,719,841 $ 10,391,386 $ 322,457 $ -- $ 51,433,684
Intercompany revenues -- 1,702,696 -- -- 1,702,696
Operating income (loss) 539,619 3,462,530 (3,935,500) -- 152,616
Depreciation and amortization 75,412 31,288 639,858 86,991 833,549
Interest expense 51,054 3,730,164 932,376 -- 4,713,594
Identifiable assets 13,445,108 87,367,447 6,377,091 21,302,814 128,492,460
Capital expenditures 208,697 5,215 1,667 119,083 334,662
1998
Revenue from external customers $ 40,602,531 $ 6,782,430 $ 426,032 $ -- $ 47,810,993
Intercompany revenues -- 2,704,379 -- -- 2,704,379
Operating income (loss) 3,845,537 4,084,809 (2,411,130) - 5,519,216
Depreciation and amortization 265,739 116,158 613,443 243,932 1,239,272
Interest expense 177,017 2,374,267 1,175,137 - 3,726,421
Identifiable assets 18,468,303 61,602,837 11,314,188 23,349,723 114,735,051
Capital expenditures 306,992 46,300 9,933 78,868 442,093
</TABLE>
8
<PAGE>
Note 8 - Discontinued Operations
In January 1999, management of the Company made a decision to discontinue the
operations of the new car dealerships segment and the Corvette parts and
accessories segment in order to focus the Company's continuing operations
exclusively on the retail sale of used cars through its used car stores, as well
as the financing of the used cars sold. The new car dealerships segment operates
two new car dealerships in Florida. The Corvette parts and accessories segment
sells and distributes Corvette parts and accessories throughout the United
States, primarily through its catalog. These two segments are expected to be
sold during 1999. During the first quarter of 1999, the Company adjusted the
original estimated net gain on disposal and recorded an estimated loss on
disposal of $800,000. The provision for the estimated loss was necessary due to
the lower estimated sales proceeds from the discontinued segments.
Revenues of the discontinued operations were $14,077,740 and $12,273,273 during
the three months ended June 30, 1999 and 1998, respectively and were $26,809,641
and $24,760,734 during the six months ended June 30, 1999 and 1998,
respectively. Consolidated interest that is not attributable to other operations
of the Company was allocated to discontinued operations based upon net assets of
the discontinued operations to the total net assets of the consolidated Company.
The amount of interest allocated to discontinued operations was $338,328 and
$27,841 during the three months ended June 30, 1999 and 1998, respectively and
was $560,374 and $138,747 during the six months ended June 30, 1999 and 1998,
respectively.
The net assets of the discontinued operations included in the June 30, 1999
consolidated balance sheets consist of the following:
Cash and cash equivalents ........... $ 74,159
Accounts receivable ................. 1,768,957
Inventories ......................... 6,227,103
Prepaid expenses .................... 1,057,378
Property and equipment, net ......... 1,013,047
Goodwill, net ....................... 11,138,961
Other assets ........................ 23,209
Accounts payable .................... (2,289,711)
Accrued expenses .................... (741,250)
Notes payable ....................... (701,251)
Floor plans payable ................. (4,795,599)
Capital lease obligations ........... (129,100)
------------
Net assets of discontinued operations $ 12,645,903
============
ITEM NO. 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the Company's consolidated financial
position and consolidated results of operations should be read in conjunction
with the Company's condensed consolidated financial statements and related notes
thereto included in Item 1.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Additional written or oral
forward looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. Such forward
looking statements are within the meaning of the term in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements may include, but not be limited to,
projections of revenues, income, or loss, estimates of capital expenditures,
plans for future operations, products or services, and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify forward
looking statements, which speak only as of the date the statement was
9
<PAGE>
made. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from that set forth in, contemplated
by, or underlying the forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward looking statements, whether
as a result of new information, future events, or otherwise. The following
disclosures, as well as other statements in this Report on Form 10-Q, and in the
notes to the Company's condensed consolidated financial statements, describe
factors, among others, that could contribute to or cause such differences, or
that could affect the Company's stock price.
OVERVIEW
Smart Choice Automotive Group, Inc. operates 14 locations in Florida that sell
used cars under the "First Choice" brand name. Through Florida Finance Group,
Inc. ("FFG"), its finance company subsidiary, the Company provides financing for
its customers by originating retail automobile installment sales contracts
secured by the cars it sells. Based on the results of operations for the year
ended December 31, 1998, the Company began a significant reorganization of its
management structure and operational activities. Starting in April of 1999 the
Company reduced the number of its store locations from 24 at December 1998 to
the current 14 locations. The financial impact of these actions began to take
effect late in the Company's second quarter ended June 30, 1999.
RESULTS OF OPERATIONS FROM CONTINUING OPERATIONS
SEGMENT INFORMATION
The Company is comprised of two segments: used car stores and financing of used
car sales. The Company's results of operations are most meaningful when analyzed
and discussed by segment. The Company also has two other segments which have
been discontinued. These segments are discussed separately below under
"Discontinued Operations."
USED CAR STORES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------ ------------------------------------
(Dollars in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales at used car stores.............. $ 17,210 100.0% $ 18,757 100.0% $ 40,718 100.0% $ 40,603 100.0%
Cost of sales at used car stores(a)... 14,414 83.8% 14,069 75.0% 32,904 80.8% 29,558 72.8%
-------- ------- -------- ------- -------- ------- -------- -------
Gross profit........................ 2,796 16.2% 4,688 25.0% 7,816 19.2% 11,045 27.2%
Operating expenses.................... 3,074 17.8% 3,751 20.0% 7,277 17.8% 7,199 17.7%
-------- ------- --------- ------- -------- ------- --------- -------
Operating income..................... $ (278) (1.6)% $ 937 5.0% $ 539 1.4% $ 3,846 9.5%
========= ======== ================= ================= ========= ========
</TABLE>
(a) Includes intercompany costs from FFG of $70 and $2,304 for the quarters
ended 1999 and 1998, respectively, and $1,703 and $2,704 for the six months
ended June 30, 1999 and 1998, respectively.
Sales revenue at used car stores decreased to $17.2 million for the three months
ended June 30, 1999 compared to $18.8 million for the same period in 1998. The
lower sales revenue reflects the sale of 1,602 cars at the average of 17 used
car stores that were open during the second quarter of 1999 as compared to the
sale of 2,119 cars at the average of 21 used car stores that were open during
the second quarter of 1998.
Sales revenue at used car stores was approximately the same for the six months
ended June 30, 1999 compared to the same period in 1998. The sales revenue
reflects the sale of 3,938 cars at the average of 21 used car stores that were
open during the first six months of 1999 as compared to the sale of 4,435 cars
at the average of 22 used car stores that were open during the first six months
of 1998.
Gross profit declined to $2.8 million during the three months ended June 30,
1999 from $4.7 million during the three months ended June 30, 1998. Excluding
intercompany costs, gross profits declined by $4.1 million for the three months
ended June 30, 1999 compared to the same period in 1998. Lower gross profit
resulted from the liquidation of approximately $5 million in high cost used car
inventory at below standard margins as the Company reduced its operations.
Gross profit declined to $7.8 million during the six months ended June 30, 1999
from $11.0 million during the six months ended June 30, 1998. Excluding
intercompany costs, gross profits declined by $4.2 million for the six months
ended June 30, 1999 compared to the same period in 1998. As stated above, the
lower gross profit resulted from the liquidation of approximately $5 million in
high cost used car inventory at below standard margins as the Company reduced
its operations.
10
<PAGE>
FINANCING OF USED CAR SALES
<TABLE>
<CAPTION> THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------- ----------------------------------------
1999 1998 1999 1998
------------------ ----------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Income on finance receivables(a)..........$ 5,568 100.0% $ 4,940 100.0% $ 12,094 100.0% $ 9,487 100.0%
Provisions for credit losses..............(3,709) (66.6)% (2,661) (53.8)% (7,503) (62.0)% (4,983) (52.5)%
Operating expense........................ (426) ( 7.6)% 257 5.5% (1,129) (9.3)% (419) (4.4)%
-------- ------- -------- -------- ----------- ------- -------- --------
Operating income............................1,433 25.8% 2,536 51.3% 3,462 28.7% 4,085 43.1%
Interest expense on finance receivables.. (2,303) (41.4)% (1,224) (24.8)% (4,424) (36.6)% (2,321) (24.5)%
-------- ------- -------- ------- ------- ------- -------- -------
Net income (loss)........................$ (870) (15.6)% $ 1,312 26.5% $ (962) (7.9)% $ 1,764 18.6%
======== ======== ======= ======== ==================== ======== ========
</TABLE>
(a) Includes intercompany revenues from First Choice Auto Finance, Inc.
("FCAF") of $70 and $2,304 for the quarters ended 1999 and 1998,
respectively, and $1,703 and $2,704 for the six months ended June 30, 1999
and 1998, respectively.
Income on finance receivables increased to $5.6 million for the three months
ended June 30, 1999 from $4.9 million for the same period in 1998. The increase
reflects the increase in the average net finance receivables outstanding to
$77.4 million for the three months ended June 30, 1999 from $47.9 million for
the same period of 1998. This increase results from the continued growth in the
financed sales of used cars.
Income on finance receivables increased to $12.1 million for the six months
ended June 30, 1999 from $9.5 million for the same period in 1998. The increase
reflects the increase in the average net finance receivables outstanding to
$73.1 million for the six months ended June 30, 1999 from $43.2 million for the
same period of 1998. This increase results from the continued growth in the
financed sales of used cars.
A high percentage of the Company's customers do not make all of their
contractually scheduled payments on their finance contracts, requiring the
Company to charge off the remaining principal balance and any earned interest,
net of recoveries on repossessed cars. The Company maintains on its balance
sheet an allowance for credit losses to absorb such losses. To accrue to the
allowance, the Company records an expense (the "provision") based upon its
estimate of future credit losses on finance receivables originated. The
provision for credit losses for the three months ended June 30, 1999 was $3.7
million compared to $2.7 million for the same period in 1998. The provision for
credit losses for the six months ended June 30, 1999 was $7.5 million compared
to $4.9 million for the same six-month period in 1998. The increase reflects the
growth in the amount of finance receivables outstanding.
Interest expense increased to $2.3 million for the three months ended June 30,
1999 from $1.2 million for the same period in 1998. This increase is a result of
the higher level of finance receivables which required additional borrowing
under the line of credit. The interest rate on borrowed funds was approximately
the same for the comparable periods.
Interest expense increased to $4.4 million for the six months ended June 30,
1999 from $2.3 million for the same period in 1998. This increase is a result of
the higher level of finance receivables which required additional borrowing
under the line of credit. The interest rate on borrowed funds was approximately
the same for the comparable periods.
The net (loss) for the three months ended June 30, 1999 was approximately
$(870,000) compared to a net income of approximately $1,312,000 for the same
period in 1998. This decrease of approximately $2 million was a result of a
higher provision for credit losses as a percentage of income on finance
receivables and the additional interest expense on financed receivables.
The net (loss) for the six months ended June 30, 1999 was approximately
$(962,000) compared to a net income of approximately $1,764,000 for the same
period in 1998. This decrease of approximately $2.7 million was a result of a
higher provision for credit losses as a percentage of income on finance
receivables of approximately $2.5 million and the additional interest expense of
approximately $2.1 million on financed receivables offset by additional interest
earned on these receivables of approximately $2.6 million.
11
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1999 TO THE THREE MONTHS ENDED JUNE 30, 1998.
REVENUES. The Company's revenues for the three months ended June 30, 1999 were
$22.9 million representing a 5.6% increase over the revenues of $21.6 million in
the second quarter of 1998. The increase was the net result of a decline of the
Company's used car sales of approximately $1.5 million offset by an increase in
revenues of approximately $2.8 million from the Company's receivables portfolio.
That decline in used car sales is discussed in the segment information provided
above.
COSTS AND EXPENSES. The Company's cost of sales of used cars sold was $14.3
million for the three months ended June 30, 1999 compared to $11.8 million for
the same period during 1998, representing an increase of $2.5 million, or 21%.
The gross profit margins decreased to 20.9% for the three months ended June 30,
1999, compared to the gross profit margin of 33.2% for the same period in 1998.
This decrease in gross margins of approximately $2.4 million is primarily due
the increase in the cost of sales resulting from the liquidation of high cost
used car inventory during the second quarter of 1999.
The Company's selling, general and administrative expenses (including
depreciation and amortization) were $5.2 million for the three months ended June
30, 1999, compared to the selling, general and administrative expenses of $4.6
million for the three months ended June 30, 1998. Selling, general and
administrative expenses as a percentage of total revenues for 1999 was 22.9% for
the three months ended June 30, 1999 compared to 21.4% for the three months
ended June 30, 1998. The higher amount of these expenses was the result of
developing an infrastructure to support planned growth in sales revenue volume
that did not materialize. During the second quarter of 1999 the Company has
significantly reorganized its management structure and operational activities
and believes it has eliminated over $6 million annually from its overhead
structure during the second quarter of 1999.
INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense totaled $2.4
million for the three months ended June 30, 1999, compared to $2.0 million for
the three months ended June 30, 1998, an increase of approximately $400,000 or
16%. This resulted primarily from higher outstanding indebtedness needed to
finance higher levels of finance receivables as the portfolio expanded over the
prior year.
NET LOSS. The Company's net loss for the three months ended June 30, 1999 of
($2.6) million compared to a net income of approximately $680,000 for the same
period of 1998 was due to the combined effect of reduced profit margins in used
car sales, increased corporate overhead and increased interest expense discussed
above.
COMPARISON OF THE RESULTS OF CONTINUING OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1999 TO THE SIX MONTHS ENDED JUNE 30, 1998.
REVENUES. The Company's revenues for the six months ended June 30, 1999 were
$51.4 million representing a 7.6% increase over the revenues of $47.8 million in
the first quarter of 1998. The increase was the result of an increase in
interest earned on the Company's financed receivables portfolio. That growth in
the net financed receivables is discussed in the segment information provided
above.
COSTS AND EXPENSES. The Company's cost of sales of used cars sold was $31.2
million for the six months ended June 30, 1999 compared to $26.9 million for the
same period during 1998, representing an increase of $4.3 million, or 15.9%. The
gross profit margins decreased to 24.7% for the six months ended June 30, 1999,
compared to the gross profit margin of 33.3% for the same period in 1998. This
decrease in gross margins of approximately $3.2 million is primarily due the
increase in the cost of sales resulting from the liquidation of high cost used
car inventory during the first quarter of 1999.
The Company's selling, general and administrative expenses (including
depreciation and amortization) were $12.5 million for the six months ended June
30, 1999, compared to the selling, general and administrative expenses of $10.4
million for the six months ended June 30, 1998. Selling, general and
administrative expenses as a percentage of total revenues for 1999 was 24.3% for
the six months ended June 30, 1999 compared to 21.7% for the six months ended
June 30, 1998. The higher amount of these expenses was the result of developing
an infrastructure to support planned growth in sales revenue volume that did not
materialize As stated above the Company has significantly reorganized its
management structure and operational activities and believes it has eliminated
over $6 million annually from its overhead structure during the second quarter
of 1999.
12
<PAGE>
INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense totaled $4.7
million for six months ended June 30, 1999, compared to $3.7 million for the six
months ended June 30, 1998, an increase of approximately $1.0 million or 27%.
This resulted primarily from higher outstanding indebtedness needed to finance
higher levels of finance receivables as the portfolio expanded.
NET LOSS. The Company's net loss for the six months ended June 30, 1999 of
($4.4) million compared to a net income of $2.0 for the same period of 1998 was
due to the combined effect of reduced profit margins in used car sales,
increased corporate overhead and increased interest expense discussed above.
CREDIT LOSSES
GENERAL. The Company has established an allowance to cover anticipated credit
losses on the finance receivables currently in its portfolio. The allowance has
been established by the recognition in the Company's statements of operations of
the provision for credit losses attributed to finance receivables originated by
the Company.
The following table reflects activity in the allowance for the six months ended
June 30, 1999.
(Dollars in thousands)
Balance, December 31, 1998 ..................... $ 12,158
Provision for credit losses .................... 7,503
Net charge offs ................................ (5,779)
Balance, June 30, 1999 ......................... $ 13,882
Allowance as a percentage of finance receivables 15.1%
The allowance decreased to 15.1% of the outstanding balances as of June 30, 1999
from 15.5% as of December 31, 1998.
NET CHARGE OFFS. The Company's current policy is to charge off finance
receivables when they are deemed uncollectible and to fully reserve the
principal balance at such time as a finance receivable is delinquent for 180
days. The net charge off amount is the principal balance of the finance
receivable at the time of the charge off plus earned but unpaid interest, less
any recovery. The Company recognizes recoveries in the amount of the wholesale
value of repossessions. The following table sets forth information regarding
charge off activity for the Company's finance receivables for the six months
ended June 30, 1999.
(Dollars in thousands)
Principal Balances ....... $ 12,789
Collateral recoveries, net (7,010)
Net charge offs .......... $ 5,779
The Company's credit loss experience has remained relatively constant at 12.8%
of average principal balances for the last two years. The Company believes that
the consistency in its credit loss experience as a percentage of finance
receivables is attributable to (i) a consistency in the application of its
underwriting standards and servicing and collection efforts, (ii) maximization
of recoveries on repossessions and (iii) reduced defaults due to improved
operating performance of used cars sold.
DELINQUENCIES. Analysis of delinquency trends is also considered in evaluating
the adequacy of the allowance. The following table reports the balance of
delinquent finance receivables as a percentage of total outstanding balances of
the Company's finance receivables portfolio as of June 30, 1999.
Aging Percentages:
Principal balances current .......... 95.5%
Principal balances 31 days to 60 days 2.8
Principal balances over 60 days ..... 1.7
Total over 31 days .................. 4.5
The Company is experiencing consistency in its delinquency rate with an aging of
its portfolio at June 30, 1999 approximately the same as that reported for the
year ended December 31, 1998. This consistency in the aging of the finance
receivables portfolio is primarily attributable to the factors discussed in "Net
Charge Offs" above.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to support increases in finance receivables, car
inventory, parts and accessories inventory, property and equipment, and working
capital for general corporate purposes. Funding sources potentially available to
the Company include operating cash flow, third-party investors, financial
institution borrowings, borrowings against finance receivables and used car
inventory.
Net cash provided by operating activities was approximately $10.8 million and
$3.1 million for the six months ended June 30, 1999, and 1998, respectively. Net
cash provided from operating activities for the six months ended June 30, 1999
primarily reflected the loss from operations adjusted for the non-cash charges
for depreciation, amortization, provision of credit losses and the reduction in
inventory and an increase in accounts payable. The Company used approximately
$3.9 million to expand accounts receivable and inventory during the first half
of 1998. Nearly all of the $19.6 million and $24.0 million of cash used by
investing activities for the six months ended June 30, 1999 and 1998,
respectively, was invested to increase the finance receivables.
Cash provided by financing activities was approximately $7.6 million and $23.7
million during the six months ended June 30, 1999 and 1998, respectively. During
the six months ended June 30, 1999 and 1998, the Company increased its line of
credit borrowing by $8.2 million and $14.5 million, respectively. The Company
issued notes payable net of the repayment of the principal on certain notes of
approximately $1.6 million and $3.3 million during the six months ended June 30,
1999 and 1998, respectively.
The Company has borrowed, and will continue to borrow, substantial amounts to
fund its used car sales and financing operations. The Company has a revolving
credit facility with Finova Capital Corporation to provide funding for finance
receivables from used car sales originated by the Company (the "Finova Revolving
Facility"). The Finova Revolving Facility had a maximum commitment of $35.0
million at December 31, 1997, was increased to a maximum commitment of $75.0
million, effective May 11, 1998, and was increased again to a maximum $100
million effective November 9, 1998. Under the Finova Revolving Facility, the
Company may borrow the lesser of $100 million or up to 55% of the gross balance
of eligible finance contracts. The Finova Revolving Facility expires on December
31, 2001, at which time its renewal will be subject to renegotiation. The Finova
Revolving Facility is secured by substantially all of the Company's finance
receivables. As of June 30, 1999, the principal amount outstanding under the
Finova Revolving Facility was $71.9 million up from a balance of $63.7 million
at December 31, 1998. The Finova Revolving Facility bears interest at the prime
rate plus 2.5% (10.5% as of June 30, 1999). As part of the Finova Revolving
Facility, the Company may finance up to $10 million of its used car inventory
through Finova Capital Corporation.
During 1998 and 1997, the Company financed its used car inventory through a line
of credit with Manheim Automotive Financial Services, Inc. (the "Manheim
Facility"). At June 30, 1999 there was no balance due on the Manheim Facility,
which had an outstanding balance of $3.2 million at December 31, 1998. The
maximum commitment under the Manheim Facility was $3.75 million. The Manheim
Facility was secured by the Company's used car inventory and bore interest at
1.5% over the prime rate. Amounts outstanding were payable on the earlier of the
day after a car was sold or 180 days after the floorplan advance.
In January 1999, pursuant to a Subordinated Loan Agreement dated as of January
31, 1999 ("Subordinated Loan Agreement") by and between the Company and High
Capital Funding, LLC ("High Cap"), the Company borrowed $2 million. The Company
issued 1999 Series A Subordinated Notes ("High Cap Notes") to High Cap and other
purchasers in connection with the Subordinated Loan Agreement. The Notes, which
mature on January 31, 2000, bear interest on the unpaid principal balance at the
rate of 15% per annum, payable monthly in arrears. The interest rate increased
to 18% per annum on May 1, 1999 and will increase to 22% per annum on October 1,
1999. The High Cap Notes may be prepaid at any time without permission or
penalty.
SEASONALITY
Historically, the Company's used car business has experienced higher revenues in
the first two quarters of the calendar year than in the latter half of the year.
Management believes that these results are due to seasonal buying patterns
resulting in part from the fact that many of its customers receive income tax
refunds during the first half of the year, which are a primary source of down
payments on used car purchases.
14
<PAGE>
INFLATION
Increases in inflation generally result in higher interest rates. Higher
interest rates on the Company's borrowings would increase the interest expense
related to the Company's existing debt. The Company cannot seek to limit this
risk by increasing interest rates earned on its finance contracts since the
interest charged is at or near the maximum permitted under Florida law. To date,
inflation has not had a significant impact on the Company's operations.
YEAR 2000
At the beginning of the third quarter of 1996, the Company's primary operating
system and its peripherals were made Year 2000 compliant. All new computer
systems and software installations, including the computer systems of the
Company's subsidiaries, are currently Year 2000 compliant. All other systems
including the Company's local and wide area networks, telephone systems,
uninterruptible power supply systems and historical information are or are
expected to be in compliance no later than the fourth quarter of 1999. The
Company continues to evaluate other computerized equipment to include security
systems, fire control systems and power control systems, to determine whether
they are Year 2000 compliant. The anticipated expense associated with the year
2000 compliance project will not include additional hardware cost or external
staffing. The amounts incurred to date and expected to be incurred in the
future, in connection with compliance with Year 2000 are not believed by the
Company to be material. The Company is taking into account whether third parties
with which the Company has material relationships are Year 2000 compliant. In
addition, the Company will develop contingency strategies, as appropriate, in
the event the Company encounters a Year 2000 compliance problem in its own, or
in a third party vendor's, software applications.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133) which becomes effective for us July 1,
1999. The Company believes the adoption of SFAS No. 133 will not have a material
impact on the Consolidated Financial Statements.
DISCONTINUED OPERATIONS
In January 1999, management made a decision to discontinue the operations of the
new car dealerships segment and the parts and accessories segment in order to
focus on the Company's continuing operations. These two segments are expected to
be sold at an estimated net loss of $800,000 during 1999.
Revenues of the discontinued operations were $14.1 million and $12.3 million in
the three months ended June 30, 1999 and 1998, respectively and $26.8 million
and $24.8 million in the six months ended June 30, 1999 and 1998, respectively.
The Company's discontinued operations achieved an income of approximately
$59,000 for the three months ended June 30, 1999, which was an decrease from a
net income of approximately $644,000 for the same period in 1998. The Company's
discontinued operations achieved an income of approximately $210,000 for the six
months ended June 30, 1999, which was an decrease from a net income of
approximately $956,000 for the same period in 1998.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During March 1999, certain shareholders of the Company filed two putative class
action lawsuits against the Company and certain of the Company's current and
former officers and directors in the United States District Court for the Middle
District of Florida (collectively, the "Securities Actions"). The Securities
Actions purport to be brought by plaintiffs in their individual capacity and on
behalf of the class of persons who purchased or otherwise acquired Company
publicly traded securities between April 15, 1998 and February 26, 1999. These
lawsuits were filed following the Company's announcement on February 26, 1999 a
preliminary determination had been reached that the net income announced on
February 10, 1999 for the fiscal year ended December 31, 1998 was likely
overstated in a material, undetermined amount at that time. Each of the
complaints assert claims for violations of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission as
well as a claim for the violation of Section 20(a) of the Exchange Act. The
plaintiffs allege that the defendants prepared and issued deceptive and
materially false and misleading statements to the public, which caused
plaintiffs to purchase Company securities at artificially inflated prices. The
plaintiffs seek unspecified damages. The Company intends to contest these claims
vigorously. The Company cannot predict the ultimate resolution of these actions.
The two class action lawsuits have subsequently been consolidated.
15
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Described below are the sales of securities by the Company during the first six
months of 1999 that were not registered under the Securities Act of 1933, as
amended (the "1933 Act"). On the issuance of these securities the Company relied
on the exemption from registration under the 1933 Act set forth in Section 4(2)
thereof, based on established criteria for effecting a private offering,
including the number of offerees for each transaction, access to information
regarding the Company, disclosure of information by the Company, restrictions on
resale of the securities offered, investment representations by the purchasers,
and the qualification of the offerees as "accredited investors."
On March 29, 1999, the Company issued 398,560 shares of common stock to Bankers
Life Insurance Company and 133,172 shares of common stock to Bankers Credit
Insurance Services, Inc. in consideration for the conversion of their notes and
accrued interest with the Company.
On May 14, 1999, the Company issued 88,000 shares of common stock to Mr. Albert
S. Klopf in consideration for the conversion of his note in the principal amount
of $110,000 with the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 28, 1999, the Company held its 1999 annual meeting of shareholder. At
this meeting the shareholders approved the proposal to grant specific stock
options of an aggregate 190,000 shares of common stock to certain employees of
the Company. For - 4,073,632; against - 491,558; abstain - 20,517.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION FILED HEREWITH OR INCORPORATED BY REFERENCE TO:
<S> <C>
3.1 Amended and Restated Articles Exhibit 3.1 to Form SB-2 Registration Statement, filed on
of Incorporation of Smart September 1, 1995, File No. 33-96520-A.
Choice Automotive Group, Inc.
(the "Company")
3.1.1 Articles of Amendment to Exhibit 3.2 to Form 10-Q filed on May 20, 1997.
Articles of Incorporation of
the Company
3.2 Amended and Restated By-Laws of Exhibit 3.2 to Form SB-2 Registration Statement, filed on
the Company September 1, 1995, File No. 33-96520-A.
3.2.1 Amendment No. 1 to Amended and Exhibit 3.2.1 to Amendment No. 2 to Form SB-2
Restated Bylaws Registration Statement, filed on November 6, 1995, File
No. 33-96520-A.
3.2.2 Second Articles of Amendment to Exhibit 3.1 to Form 8-K filed on October 9, 1997.
Articles of Incorporation
3.2.3 Third Articles of Amendment to Exhibit 3.1 to Form 10-Q filed on May 15, 1998.
Articles of Incorporation
3.2.4 Fourth Articles of Amendment to Exhibit 3.2.4 to Form S-1 filed on July 17, 1998.
Articles of Incorporation
3.2.5 Fifth Articles of Amendment to Exhibit 3.2.5 to Form S-1 filed on July 17, 1998.
Articles of Incorporation
16
<PAGE>
4.1 Specimen Common Stock Exhibit 4.1 to Form 8-A Registration Statement, filed on
Certificate April 16, 1997.
4.2 Specimen of Warrant Certificate Exhibit 4.2 to Form 8-A Registration Statement, filed on
April 16, 1997.
4.3 Warrant Agreement between the Exhibit 4.5 to Amendment No. 2 to Form SB-2 Registration
Company and American Stock Statement, filed on November 6, 1995, File No. 33-96520-A.
Transfer & Trust Company, as
Warrant Agent, dated November
9, 1995
4.3.1 Form of Amendment to Warrant Exhibit 4.4 to Form 8-A Registration Statement,
Agreement filed on April 16, 1997.
10.1 Eckler Industries, Inc. Exhibit 10.4.1 to Form SB-2 Registration Statement, filed
Retirement and Savings Plan and on September 1, 1995, File No. 33-96520-A.
Trust Agreement, as Amended and
Restated on September 14, 1992
10.1.1 1998 Executive Incentive Exhibit A to Proxy Statement filed on June 9, 1998.
Compensation Plan
10.2 Amendment No. 1 to Eckler Exhibit 10.4.2 to Form SB-2 Registration Statement filed
Industries, Inc. Retirement and on September 1, 1995, File No. 33-96520-A.
Savings Plan Trust Agreement
Dated March 28, 1994.
10.3 Eckler Industries, Inc. Exhibit 10.6 to Form SB-2 Registration Statement, filed
Non-Qualified Stock Option Plan on September 1, 1995, File No. 33-96520-A.
10.4 Eckler Industries, Inc. 1995 Exhibit 10.7 to Form SB-2 Registration Statement, filed
Combined Qualified and on September 1, 1995, File No. 33-96520-A.
Option Plan
10.5 Registration Rights Agreement by Exhibit 10.15 to Amendment No. 1 to Form SB-2
and among the Company and each Registration Statement, filed on October 13, 1995,
of the Purchasers referred to File No. 33-96520-A.
in Schedule 1 thereto, dated
September 20, 1995.
10.6 Unit Purchase Option Agreement Exhibit 1.2 to Amendment No. 2 to Form SB-2 Registration
between the Company and Argent Statement, filed on November 6, 1995, File No. 33-96520-A.
Securities, Inc. and Certificate
dated November 15, 1995.
10.7 Loan Agreement between the Exhibit 10.19 to Post-Effective Amendment No. 2 to Form
Company and Barnett Bank, N.A. SB-2 Registration Statement, filed on November 14, 1996,
dated September 30, 1996 File No. 33-96520-A.
10.8 Mortgage and Security Agreement Exhibit 10.20 to Post-Effective Amendment No. 2 to Form
between the Company and Barnett SB-2 Registration Statement, filed on November 14, 1996,
Bank, N.A. dated September 30, File No. 33-96520-A
1996
10.9 Promissory Note in the amount Exhibit 10.21 to Post-Effective Amendment No. 2 to Form
of $2,400,000 from the Company SB-2 Registration Statement, filed on November 14, 1996,
in favor of Barnett Bank, N.A. File No. 33-96520-A.
dated September 30, 1996.
10.1 Assignment of Loan Documents Exhibit 10.10 to Form 10-K filed on April 14, 1998.
dated November 4, 1997 between
Barnett Bank, N.A. and The
Huntington National Bank
("Huntington")
10.11 Modification of Mortgage Deed Exhibit 10.11 to Form 10-K filed on April 14, 1998.
and Security Agreement dated
November 3, 1997 between the
Company and Huntington
17
<PAGE>
10.12 Future Advance Promissory Note Exhibit 10.12 to Form 10-K filed on April 14, 1998.
dated December 30, 1997,
principal amount $260,000, the
Company maker, Huntington, payee
10.13 Modification of Mortgage and Exhibit 10.13 to Form 10-K filed on April 14, 1998.
Mortgage Note and Extension
Agreement dated December 30,
1997 between the Company and
Huntington.
10.13.1 Modification of Mortgage Note Exhibit 10.13.1 to From S-1 filed on August 21, 1998,
and Extension Agreement dated file no. 333-59375
July 24, 1998 between the
Company and Huntington.
10.14 Merger Agreement between Exhibit 10.1 to Form 8-K, filed on February 12, 1997
Smart Choice Holdings, Inc.
("SCHI"), the Company, Thomas
E. Conlan and Gerald C. Parker
dated December 30, 1997.
10.15 First Amended and Restated Loan Exhibit 4.1 to Form 10-Q, filed on May 20, 1997.
and Security Agreement between
Florida Finance Group, Inc.
("FFG") and Finova Capital
Corporation ("Finova"), dated
February 4, 1997.
10.16 Warrant to Purchase Common Stock Exhibit 4.2 to Form 10-Q, filed on May 20, 1997.
of the Company between the
Company and Finova, dated
January 13, 1997.
10.17 Promissory Note by Eckler Exhibit 10.1 to Form 8-K filed on March 5, 1998
Industries, Inc. in favor of
Stephens
10.17.1 Amendment to Guaranty Agreement Exhibit 10.4 to Form 8-K filed on March 5, 1998.
between Registrant and Stephens
Inc.
10.17.2 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between Registrant and
Stephens Inc.
10.17.3 Loan Extension and Modification Exhibit 10.17.3 to Form 10-K filed on April 15, 1999.
Agreement between Registrant and
Stephens Inc. dated April 15, 1999.
10.17.4 Extension of Engagement Letter Exhibit 10.17.4 to Form 10-K filed on April 15, 1999.
between Stephens Inc. and
Registrant dated March 1, 1999.
10.17.5 Warrant Agreement Issued to Exhibit 10.17.5 to Form 10-K filed on April 15, 1999.
Stephens Inc.
10.18 Promissory note dated February Exhibit 10.9 to Form 8-K filed on March 5, 1998.
24, 1998, First Choice Auto
Finance, Inc., maker, and
Manheim Automotive Financial
Services, Inc., payee.
10.18.1 Guaranty dated March 21, 1997 Exhibit 10.10 to Form 8-K filed on March 5, 1998.
from the Company in favor of
Manheim Automotive Financial
Services, Inc.
10.19 Second Amended and Restated Loan Exhibit 10.19 to Form 10-K filed on April 15, 1999.
and Security Agreement dated
November 9, 1998 between FFG,
Liberty Finance Company, Smart
Choice Receivable Holdings
Company and First Choice Auto
Finance, Inc., SC Holdings, Inc.,
the Company and Finova Capital
Corporation.
10.19.1 Guaranty to Finova from the Exhibit 4.5 to form 10-Q, filed on May 20, 1997.
Company dated January 13, 1997.
18
<PAGE>
10.19.2 Guaranty to Finova from SC Exhibit 10.19.2 to Form 10-K filed on April 15, 1999.
Holdings, Inc. dated
November 9,1998.
10.19.3 Guaranty to Finova from the Exhibit 10.19.3 to Form 10-K filed on April 15, 1999.
Company.
10.2 Eighth Amended and Restated Exhibit 10.20 to Form S-1 filed on August 21, 1998, File
Promissory Note dated March 27, No. 333-59375
1998, between FFG, maker, and
Finova
10.20.1 Ninth Amended and Restated Exhibit 10.1 to Form 10-Q, filed on May 15, 1998.
Promissory Note dated March 27,
1998, between FFG, maker and
Finova.
10.20.2 Tenth Amended and Restated Exhibit 10.20.2 to Form 10-K filed on April 15, 1999.
Promissory Note dated November
9, 1998, between FFG, Liberty
Finance Company, Smart Choice
Receivable Holdings Company and
First Choice Auto Finance, Inc.
10.21 Fourth Amended and Restated Exhibit 10.21 to Form S-1 filed on August 21, 1998,
Schedule to Amended and Restated File No. 333-59375
Loan and Security Agreement,
FFG, borrower, Finova, lender,
dated March 27, 1998.
10.21.1 Fifth Amended and Restated Exhibit 10.2 to Form 10-Q filed on May 15, 1998.
Schedule to Amended and Restated
Loan and Security Agreement,
FFG, borrower, Finova, lender.
10.21.2 Schedule to Second Amended and Exhibit 10.21.2 to Form 10-K filed on April 15, 1999.
Restated Loan and Security
Agreement, dated November 9,
1998, FFG, Liberty Finance
Company and First Choice Auto
Finance, Inc., borrower.
10.21.3 Intercreditor Agreement between Exhibit 10.21.3 to Form 10-K filed on April 15, 1999.
Manheim Automotive Financial
Services, Inc. and Finova
Capital Corporation.
10.22 Stock Purchase Agreement dated Exhibit 10.1 to Form 10-Q, filed on May 20, 1997.
January 28, 1997 between SCHI
and Gary Smith.
10.23 Promissory Note dated January Exhibit 10.2 to Form 10-Q filed on May 20, 1997.
28, 1997, First Choice
Finance, Inc. ("FCAF"), maker,
Gary Smith, payee, in the
principal amount of $1,031,008.
10.24 Lease dated April 5, 1997 Exhibit 10.24 to Form S-1 filed on August 21, 1998, File
between Gary R. Smith and Team No. 333-59375
Automobile Sales and Finance,
Inc.
10.25 Promissory Note Modification Exhibit 10.25 to Form S-1 filed on August 21, 1998, File
Agreement, dated December 15, No. 333-59375
1997 between FCAF and Gary R.
Smith.
10.26 Asset Purchase Agreement dated Exhibit 10.3 to Form 10-Q, filed on May 20, 1997.
January 28, 1997 between FCAF
and Gary Smith.
10.27 Asset Purchase Agreement among Exhibit 10.17 to Form 8-K, filed on February 26, 1997.
FCAF, Palm Beach Finance and
Mortgage Company ("PBF"), Two
Two Five North Military Corp.
("225"), and David Bumgardner,
and Amendment thereto.
19
<PAGE>
10.28 Loan and Security Agreement Exhibit 10.18 to Form 8-K, filed on February 26, 1997.
between 225 and FCAF dated
February 14, 1997.
10.29 9% Secured Convertible Note of Exhibit 10.20 to Form 8-K, filed on February 26, 1997.
FCAF to 225 and PBF.
10.3 9% Convertible Debenture of SCHI Exhibit 10.21 to Form 8-K, filed on February 26, 1997.
to PBF.
10.31 Lease between David Bumgardner Exhibit 10.22 to Form 8-K, filed on February 26, 1997.
as Lessor and FCAF, Lessee,
dated February 13, 1997.
10.32 Indemnification Agreement in Exhibit 10.23 to Form 8-K, filed on February 26, 1997.
favor of PBF and 225 by FCAF,
dated February 14, 1997.
10.33 Executive Employment Agreement Exhibit 10.15 to Form 10-Q, filed on May 20, 1997.
between the Company and Gary
Smith.
10.34 Executive Employment Agreement Exhibit 10.16 to Form 10-Q, filed May 20, 1997.
between the Company and Robert
Abrahams.
10.35 Executive Employment Agreement Exhibit 10.35 to Form 10-Q filed on August 21, 1998,
dated April 11, 1997 between the File No. 333-59375.
Company and Joseph Alvarez.
10.36 Executive Employment Agreement Exhibit 10.36 to Form S-1 filed on August 21, 1998,
between the Company and Ronald File No. 333-59375.
Anderson.
10.36.1 Executive Employment Agreement Exhibit 10.36.2 to Form S-1 filed on August 21, 1998,
dated February 9, 1998 between File No. 333-53975.
the Company and Robert J. Downing.
10.37 Non Qualified Stock Option Exhibit 10.37 to Form S-1 filed on August 21, 1998, File
Agreement dated March 5, 1997 No. 333-53975.
among the Smart Choice Holdings
Management Trusts (the
"Management Trusts"), Eckler
Industries, Inc., and Robert J.
Abrahams.
10.38 Non Qualified Stock Option Exhibit 10.38 to Form S-1 filed on August 21, 1998, File
Agreement dated March 5, 1997 No. 333-59375.
among the Management Trusts,
Eckler Industries, Inc., and
Robert J. Abrahams.
10.39 Non Qualified Stock Option Exhibit 10.39 to Form 10-K, filed on April 14, 1998.
Agreement dated April 11, 1997,
among the Management Trusts, the
Company and Joseph Alvarez.
10.4 Stock Option Agreement dated Exhibit 10.40 to Form S-1 filed on August 21, 1998, File
March 24, 1997 between the No. 333-59375.
Company and Ronald Anderson.
10.41 Non-Qualified Stock Option Exhibit 10.41 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and David
Bumgardner.
10.42 Non-Qualified Stock Option Exhibit 10.42 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and Craig
Macnab.
10.43 Stock Option Agreement dated Exhibit 10.43 to Form S-1 filed on August 21, 1998, File
March 19, 1997 between the No. 333-59375
Company and Gerald Parker.
10.44 Non-Qualified Stock Option Exhibit 10.44 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and Gerald
Parker.
10.45 Non-Qualified Stock Option Exhibit 10.45 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375.
between the Company and Donald
Wojnowski.
20
<PAGE>
10.46.1 Non-Qualified Stock Option Exhibit 10.46.1 to Form S-1 filed on August 21, 1998,
Agreement dated July 29, 1997 File No. 333-59375.
between the Company and
Joseph Alvarez.
10.46.2 Non-Qualified Stock Option Exhibit 10.46.2 to Form S-1 filed on August 21, 1998,
Agreement dated January 29, File No. 333-59375.
1997 between the Company and
Joseph Mohr.
10.46.3 Non-Qualified Stock Option Exhibit 10.46.3 to Form S-1 filed on August 21, 1998,
Agreement dated February 9, File No. 333-59375.
1998 between the Company and
Robert Downing.
10.46.4 Non-Qualified Stock Option Exhibit 10.46.4 to Form S-1 filed on August 21, 1998,
Agreement dated January 29, File No. 333-59375.
1997 between the Company and
Ron Anderson.
10.47 Convertible Senior Promissory Exhibit 10.18 to Form 10-Q, filed May 20, 1997.
Note dated March 13, 1997, the
Company, maker, Sirrom Capital
Corporation ("Sirrom"), payee.
10.48 Convertible Senior Promissory Exhibit 10.19 to Form 10-Q, filed May 20, 1997.
Note dated May 13, 1997, the
Company, maker, Sirrom, payee.
between the Company and Sirrom,
10.49 Amended and Restated Exhibit 10.20 to Form 10-Q, filed May 20, 1997.
Registration Rights Agreement
dated May 13, 1997.
10.5 Asset Purchase Agreement Exhibit 10.1 to Form 8-K filed on July 14, 1997.
dated as of June 27, 1997 among
the Company, Strata Holding, Inc.,
Ready Finance, Inc., Donald Cook,
Marilyn Cook and Madie A.
Stratemeyer.
10.51 Form of Convertible Note issued Exhibit 10.1 to Form 8-K filed on October 9, 1997.
by the Company to High Capital
Funding, LLC, and other
purchasers.
10.51.1 Form of Warrant issued by the Exhibit 10.2 to Form 8-K filed on October 9, 1997.
Company to High Capital Funding,
LLC, and other purchasers.
10.52 Subordinated Loan Agreement Exhibit 10.52.1 to Form 10-K filed on April 15, 1999.
dated January 30, 1999, between
High Capital Funding, LLC and
the Company.
10.52.1 Company Form of 1999 Series A Exhibit 10.52.1 to Form 10-K filed on April 15, 1999.
Subordinated Note.
10.52.2 Guaranty Agreement between SC Exhibit 10.52.2 to Form 10-K filed on April 15, 1999.
Holdings, Inc., First Choice
Auto Finance, Inc. and High
Capital Funding, LLC.
10.53 Promissory Note, principal Exhibit 10.3 to Form 8-K filed on October 9, 1997.
amount $1,500,000 by Eckler
Industries, Inc., maker,
Stephens Inc., payee.
10.54 Promissory Note, principal Exhibit 10.1 to Form 8-K filed on March 5, 1998.
amount $3,000,000, Eckler
Industries, Inc., maker,
Stephens Inc., payee.
10.55 Guaranty Agreement by the Exhibit 10.4 to Form 8-K filed on October 9, 1997.
Company to Stephens Inc.
21
<PAGE>
10.56 Amendment to Guaranty Agreement Exhibit 10.4 to Form 8-K filed on March 5, 1998.
between the Company and Stephens
Inc.
10.57 Pledge and Security Agreement Exhibit 10.5 to Form 8-K filed on October 9, 1997.
between the Company and Stephens
Inc.
10.58 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between the Company
and Stephens Inc.
10.59 Securities Purchase Agreement Exhibit 10.6 to Form 8-K filed on October 9, 1997.
between the Company and certain
buyers represented by Promethean
Investment Group, L.L.C.
10.6 Form of Warrant from the Company Exhibit 10.7 to Form 8-K filed on October 9, 1997.
to certain buyers represented by
Promethean Investment Group,
L.L.C.
10.61 Automotive Wholesale Financing Exhibit 10.61 to Form S-1 filed on August 21, 1998, File
and Security Agreement dated No. 333-59375
July 21, 1997 between First
Choice Stuart 1, Inc. ("FCS1")
and Nissan Motor Acceptance
Corporation ("NMAC").
10.62 Addendum to Automotive Wholesale Exhibit 10.62 to Form S-1 filed on August 21, 1998, File
Financing and Security Agreement No. 333-59375
10.63 Second Addendum to Automotive Exhibit 10.63 to Form S-1 filed on August 21, 1998, File
Wholesale Financing and Security No. 333-59375
Agreement dated August 11, 1997
between NMAC and FCSI.
10.64 Dealer Capital Loan and Security Exhibit 10.64 to Form S-1 filed on August 21, 1998, File
Agreement dated October 12, No. 333-59375
1995 between B&B Florida
Enterprises, Inc. and NMAC.
10.65 Amendment to Dealer Capital Loan Exhibit 10.65 to Form S-1 filed on August 21, 1998, File
and Security Agreement dated No. 333-59375
September 1, 1997 between NMAC
and FCS1.
10.66 Dealer Equipment Loan and Exhibit 10.66 to Form S-1 filed on August 21, 1998, File
Security Agreement dated October No. 333-59375
12, 1995 between NMAC and B&B
Florida Enterprises, Inc.
10.67 Amendment to Dealer Equipment Exhibit 10.67 to Form S-1 filed on August 21, 1998, File
Loan and Security Agreement No. 333-59375
dated September 1, 1997 between
NMAC and FCSI.
10.67.1 Second Amendment to Dealer Exhibit 10.67 to Form S-1 filed on August 21, 1998, File
Equipment Loan and Security No. 333-59375.
Agreement.
10.67.2 Second Amendment to Dealer Exhibit 10.67.2 to Form 10-K filed on April 15, 1999.
Capital Loan and Security
Agreement, dated July 29, 1998,
between Nissan Motor Acceptance
Corporation and First Choice
Stuart 1, Inc., dba Stuart
Nissan.
10.68 Nissan Dealer Term Sales and Exhibit 10.68 to Form S-1 filed on August 21, 1998, File
Service Agreement dated August No. 333-59375
29, 1997 between Nissan Motor
Corporation in U.S.A., the
Company, Smart Cars, Inc. and
FCS1.
10.69 Wholesale Financing and Security Exhibit 10.69 to Form S-1 filed on August 21, 1998, File
Agreement dated August 11, 1997 No. 333-59375
between First Choice Stuart 2,
Inc. ("FCS2") and Volvo Finance
North America, Inc.
22
<PAGE>
10.7 Authorized Retailer Agreement Exhibit 10.70 to Form S-1 filed on August 21, 1998, File
between Volvo Cars of North No. 333-59375.
America, Inc. and FCS2.
10.71 Convertible Subordinated Exhibit 10.71 to Form S-1 filed on August 21, 1998, File
Debenture dated November 3, No. 333-59375.
1997, principal amount $750,000,
the Company, maker, Bankers Life
Insurance Company, payee.
10.72 Registration Rights Agreement Exhibit 10.72 to Form S-1 filed on August 21, 1998, File
dated November 3, 1997 between No. 333-59375
the Company and Bankers Life
Insurance Company.
10.73 Settlement Agreement and Release Exhibit 10.73 to Form S-1 filed on August 21, 1998, File
dated January 30, 1998 among the No. 333-59375.
Company, FCAF, FCS2, Jack
Winters Enterprises, Inc., Jack
Winters, F. Craig Clements,
Killgore Pearlman, P.A. and Mark
L. Ornstein.
10.74 Stock Purchase Agreement dated Exhibit 10.74 to Form S-1 filed on August 21, 1998, File
May 6, 1997 between FCS1 and No. 333-59375.
Thomas DeRita, Jr.
10.75 Promissory Note dated December Exhibit 1075 to Form S-1 filed on August 21, 1998, File
19, 1997, principal amount No. 333-59375.
$2,199,000, First Choice
Melbourne 1, Inc., maker and
Raytheon Aircraft Credit
Corporation, payee.
10.76 Guaranty Agreement by the Exhibit 10.76 to Form S-1 filed on August 21, 1998, File
Company to Raytheon Aircraft No. 333-59375.
Credit Corporation.
10.77 Security Agreement dated Exhibit 10.77 to Form S-1 filed on August 21, 1998, File
December 19, 1997 between First No. 333-59375
Choice Melbourne 1, Inc. and
Raytheon Aircraft Credit
Corporation.
10.78 Registration Rights Agreement Exhibit 10.8 to Form 8-K filed on October 9, 1997.
between the Company and certain
buyers represented by Promethean
Investment Group, L.L.C.
10.79 Promissory Note dated February Exhibit 10.9 to Form 8-K filed on March 5, 1998.
24, 1998, FCAF, maker, Manheim
Automotive Financial Services,
Inc., payee,
10.8 Guaranty dated March 21, 1997 Exhibit 10.10 to Form 8-K filed on March 5, 1998.
from the Company in favor of
Manheim Automotive Financial
Services, Inc.
10.81 Intentionally Omitted.
10.82 Manheim Automotive Financial Exhibit 10.82 to Form S-1 filed on August 21, 1998, File
Services, Inc. Security No. 333-59375
Agreement dated March 21, 1997
between FCAF and Manheim
Automotive Financial Services,
Inc.
10.83 Promissory Note dated June 17, Exhibit 10.83 to Form S-1 filed on August 21, 1998, File
1997, principal amount $825,000, No. 333-59375
FCAF, maker, Carl Schmidt
Enterprises, Inc., payee.
10.84 Real Estate Mortgage dated June Exhibit 10.84 to Form S-1 filed on August 21, 1998, File
17, 1997, FCAF, mortgagor, Carl No. 333-59375
Schmidt Enterprises, Inc.,
mortgagee.
10.85 Intentionally Omitted.
23
<PAGE>
10.86 Intentionally Omitted.
10.87 Twenty-Fourth Amendment to GM Exhibit 10.87 to Form S-1 filed on August 21, 1998, File
Reproduction and Service Part No. 333-59375
Tooling License Agreement.
10.88 Twenty-Sixth Amendment to GM Exhibit 10.88 to Form S-1 filed on August 21, 1998
Reproduction and Service Part No. 333-59375
Tooling License Agreement.
10.89 Thirty-Fourth Amendment to GM Exhibit 10.89 to Form S-1 filed on August 21, 1998, File
Reproduction Service Part No. 333-593759375
Tooling License Agreement.
10.9 Lease between Florida Auto Exhibit 10.90 to Form S-1 filed on August 21, 1998, File
Auction of Orlando, Inc. and No. 333-59375
First Choice Auto Finance, Inc.
dated May 12, 1997, for
Reconditioning Facility.
10.91 Aircraft Lease between General Exhibit 10.67.2 to Form 10-K filed on April 15, 1999.
Electric Capital Corporation
and the Company, dated
December 1998.
11.1 Statement re Computation of. *
Earnings Per Share.
27.1 Financial Data Schedule. Filed herewith.
</TABLE>
* Information regarding the computation of earnings per share is set forth in
the Notes to Consolidated Financial Statements.
(b) Report on Form 8-K
None
24
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on August 16, 1999.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /S/ GARY R. SMITH
Gary R. Smith
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C>
/S/ GARY R. SMITH President and Chief Executive Officer August 16, 1999
- -----------------
Gary R. Smith
/S/ LARRY KIEM Vice President Finance and Chief Accounting Officer August 16, 1999
- --------------
Larry Kiem
25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 129
<SECURITIES> 0
<RECEIVABLES> 95,122
<ALLOWANCES> 13,882
<INVENTORY> 13,864
<CURRENT-ASSETS> 100,233
<PP&E> 7,663
<DEPRECIATION> 0
<TOTAL-ASSETS> 128,492
<CURRENT-LIABILITIES> 93,632
<BONDS> 28,663
10
5891
<COMMON> 73
<OTHER-SE> 223
<TOTAL-LIABILITY-AND-EQUITY> 128,492
<SALES> 40,720
<TOTAL-REVENUES> 51,434
<CGS> 38,744
<TOTAL-COSTS> 51,281
<OTHER-EXPENSES> (166)
<LOSS-PROVISION> 800
<INTEREST-EXPENSE> 4,714
<INCOME-PRETAX> (4,395)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,395)
<DISCONTINUED> 590
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,986)
<EPS-BASIC> (.76)
<EPS-DILUTED> (.76)
</TABLE>
