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 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 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 May 20, 1999, 7,393,458 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 - March 31,1999 and December 31, 1998......................................3
Statements of Operations Three months ended March 31, 1999 and 1998......................4
Statements of Stockholders Equity- Three months ended March 31, 1999.....................5
Statements of Cash Flows - Three months ended March 31, 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................................................9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................14
Item 2. Changes in Securities...................................................................14
Item 3. Upon Senior Securities..................................................................14
Item 4. Submission of Matters to a Vote of Securities Holders...................................14
Item 5. Other Information.......................................................................14
Item 6. Exhibits and Reports on Form 8-K......................................................15-25
SIGNATURES.........................................................................................25
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents ...............................................$ 2,423,657 $ 1,268,589
Accounts receivable...................................................... 1,757,787 1,206,710
Finance receivables
Principal balances, net................................................. 89,458,504 79,342,835
Less: allowance for credit losses......................................... (13,656,155) (12,157,569)
------------- -------------
75,802,349 67,185,266
Inventories................................................................ 19,294,328 20,004,600
Property and equipment, net............................................... 7,681,849 7,655,324
Note receivable.......................................................... 140,385 425,000
Deferred debt costs, net................................................ 220,473 226,152
Goodwill, net............................................................. 23,713,581 23,871,080
Prepaid expenses ........................................................ 1,763,039 1,263,858
Deposits and other assets............................................... 355,044 485,454
-------------- -------------
$ 133,152,492 $ 123,592,033
============= ============
Liabilities and Stockholders' Equity
Liabilities:
Bank overdraft........................................................... $ 1,083,967 $ 3,112,930
Accounts payable......................................................... 7,524,081 4,746,157
Accrued expenses ........................................................ 4,665,631 3,664,651
Line of credit, net of discount.......................................... 72,733,142 63,612,433
Floorplan payable ....................................................... 7,357,542 8,701,968
Capital lease obligations ............................................... 951,854 997,916
Notes payable............................................................ 28,977,359 28,343,479
Deferred income ......................................................... 986,140 --
-------------- -------------
Total liabilities ............................................................ 124,279,716 113,179,543
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.................................................................. 72,082 66,765
Additional paid in capital ................................................... 31,068,726 30,054,488
Common stock notes receivable................................................. (115,200) (115,200)
Accumulated deficit .......................................................... (29,593,390) (27,034,112)
------------- -------------
Total stockholders' equity ................................................... 7,323,628 8,863,351
------------- -------------
.............................................................................. $ 133,152,492 $ 123,592,033
============= ============
</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 MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Sales at used car stores................................................. $ 23,509,558 $ 21,845,559
Income on finance receivables ........................................... 4,892,361 4,146,215
Income from insurance and training ...................................... 174,772 180,222
----------- -----------
Total revenues 28,576,691 26,171,996
----------- -----------
Cost and expenses:
Costs of sales at used car stores........................................ 16,856,503 15,088,274
Provision for credit losses ............................................. 3,794,018 2,321,663
Cost of insurance and training .......................................... 19,039 30,757
Selling, general and administrative expenses ............................ 7,288,234 5,768,626
------------ -----------
Total costs and expenses................................................ 27,957,794 23,209,320
----------- -----------
Income from operations ....................................................... 618,897 2,962,676
Other income (expense):
Interest expense ........................................................ (2,353,879) (1,701,595)
Other income ............................................................ 11,796 93,767
----------- -----------
(2,342,083) (1,607,828)
----------- -----------
Net income (loss) from continuing operations ................................. (1,723,186) 1,354,848
Discontinued operations:
Income from discontinued operations........................................... 150,445 311,744
Estimated loss on sale of discontinued operations............................. (800,000) --
----------- -----------
(649,555) 311,744
----------- -----------
Net income (loss)............................................................. (2,372,741) 1,666,592
Preferred Stock dividends .................................................... (186,537) --
----------- -----------
Net income (loss) available to common stock................................... $(2,559,278) $ 1,666,592
=========== ===========
Basic income (loss) per common share:
Continuing operations...................................................... $ (0.28) $ 0.26
Discontinued operations.................................................... (0.10) 0.06
----------- -----------
$ (0.38) $ 0.32
=========== ===========
Diluted income (loss) per common share:
Continuing operations...................................................... $ (0.28) $ 0.25
Discontinued operations.................................................... (0.10) 0.06
----------- -----------
$ (0.38) $ 0.31
=========== ===========
Weighted average number of common shares outstanding:
Continuing operations....................................................... 6,809,478 5,190,130
========== ===========
Discontinued operations..................................................... 6,809,478 6,240,119
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements Of Stockholders' Equity
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK Common
--------------- ------------ ------
Number Number Additional Stock
Of Par Of Par Paid-In Notes Accumulated
Shares Value Shares Value Capital Receivable Deficit Total
------ ----- ------ ----- ------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 595 $5,891,410 6,676,545 $ 66,765 $ 30,054,488 $(115,200) $(27,034,112) $ 8,863,351
Unaudited:
Issuance of common stock for
conversion of debt -- -- 531,732 5,317 1,014,238 -- -- 1,019,555
Preferred stock dividends -- -- -- -- -- -- (186,537) (186,537)
Net loss -- -- -- -- -- -- (2,372,741) (2,372,741)
--- ---------- --------- -------- ------------ ---------- ------------ -----------
BALANCE, March 31, 1999
(unaudited) 595 $5,891,410 7,208,277 $ 72,082 $ 31,068,726 $(115,200) $(29,593,390) $ 7,323,628
=== ========== ========= ======== ============ ========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income/ (loss).......................................................... $ (2,372,741) $ 1,666,592
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Provision for credit losses.............................................. 3,837,046 2,321,663
Depreciation and amortization............................................ 532,523 581,657
Deferred warranty contracts earned....................................... (13,860) --
Provision for loss on sale of discontinued operations.................... 800,000 --
Cash provided by (used for):
Accounts receivable.................................................... (551,077) (2,285,611)
Inventory.............................................................. 710,272 (1,913,325)
Prepaid expenses....................................................... (349,181) (523,242)
Accounts payable....................................................... 2,777,924 1,533,531
Accrued expenses and other liabilities................................. 220,535 (577,792)
------------ -------------
Net cash provided by operating activities 5,591,441 803,473
------------ -------------
Cash flows from investing activities:
Increase in finance receivables............................................. (12,454,129) (11,747,229)
(Increase) / decrease in deposits........................................... 67,963 (7,932)
(Increase) / decrease in other assets....................................... 59,435 (39,765)
Payment of notes receivable................................................. -- 23,140
Purchase of property and equipment.......................................... (252,499) (141,901)
------------ ------------
Net cash used in investing activities (12,579,230) (11,913,687)
------------ ------------
Cash flows from financing activities:
Principal payments on notes payable......................................... (356,155) (398,244)
Proceeds from issuance of notes payable..................................... 2,005,000 2,497,448
Proceeds from issuance of convertible debt.................................. -- 340,000
Proceeds from line of credit borrowings..................................... 9,100,000 9,670,400
Decrease in bank overdraft.................................................. (2,028,963) --
Net proceeds (repayment) from floorplan notes payable....................... (1,344,426) 1,126,852
Proceeds from warranty contracts advance.................................... 1,000,000 --
Payments of dividends....................................................... (186,537) --
Deferred financing costs.................................................... -- (727,788)
Payments on capital lease obligations....................................... (46,062) (71,012)
------------ -----------
Net cash provided by financing activities...................................... 8,142,857 12,437,656
------------ -----------
Net increase / (decrease) in cash and cash equivalents......................... 1,155,068 1,327,442
Cash and cash equivalents at beginning of period............................... 1,268,589 1,066,949
------------ -----------
Cash and cash equivalents at end of period..................................... $ 2,423,657 $ 2,394,391
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
<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 March 31, 1999:
<TABLE>
MARCH 31, 1998
--------------
<S> <C>
Contractually scheduled payments............................ $ 130,165,641
Less: unearned finance charges.............................. (41,563,035)
--------------
Principal balances.......................................... 88,602,606
Add: loan origination costs................................. 855,898
--------------
Principal balances, net..................................... 89,458,504
Less: allowance for credit losses........................... (13,656,155)
--------------
Principal balances, net..................................... $ 75,802,349
==============
</TABLE>
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 in
connection 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 for 1998 of 1,049,989 include options,
warrants and shares underlying convertible debt.
<PAGE>
Note 6 - Supplemental Cash Flow Information
Cash paid for interest during the three months ended March 31, 1999 and 1998 was
$2,408,464 and $1,516,267 respectively.
The Company's non-cash investing and financing activities were as follows:
<TABLE>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Partial settlement of note receivable and note payable............................ 134,615 --
Common stock issued for conversion of debt and related interest................... 1,019,555 475,998
Common stock issued for conversion of preferred stock and accrued dividends....... -- 3,353,850
</TABLE>
Note 7 - Segment Information
The following table shows certain financial information by reportable segment as
of and for the three months ended March 31, 1999 and 1998 and excludes the
operations of the discontinued segments:
<TABLE>
<CAPTION>
USED CAR FINANCING CORPORATE DISCONTINUED
STORES SERVICES AND OTHER OPERATIONS COMBINED
------ -------- --------- ---------- --------
1999
<S> <C> <C> <C> <C> <C>
Revenue from external customers $ 23,509,558 $ 4,892,361 $ 174,772 $ -- $ 28,576,691
Intercompany revenues -- 1,633,114 -- -- 1,633,114
Operating income (loss) 817,241 2,029,625 (2,227,969) -- 618,897
Depreciation and amortization 95,647 87,374 214,305 135,197 532,523
Interest expense 26,346 1,818,134 509,399 -- 2,353,879
Identifiable assets 18,228,657 85,621,901 5,016,269 24,285,665 133,152,492
Capital expenditures 100,258 4,615 34,493 113,133 252,499
1998
Revenue from external customers $ 21,845,559 $ 4,146,215 $ 180,222 $ -- $ 26,171,996
Intercompany revenues -- 400,698 -- -- 400,698
Operating income (loss) 2,908,698 1,549,303 (1,494,325) -- 2,962,676
Depreciation and amortization 159,072 53,696 253,422 115,467 581,657
Interest expense 100,376 1,107,331 493,888 -- 1,701,595
Identifiable assets 18,143,123 51,928,594 13,106,084 21,564,966 83,177,801
Capital expenditures 83,930 34,269 2,160 21,542 141,901
</TABLE>
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 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 parts and accessories segment sells and distributes
Corvette parts and accessories throughout the United States, primarily through
its extensive 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 $12,731,901 and $12,487,461 during
the three months ended March 31, 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 $222,046 and $110,906 during
the three months ended March 31, 1999 and 1998, respectively.
<PAGE>
The net assets of the discontinued operations included in the March 31, 1999
consolidated balance sheets consist of the following:
MARCH 31, 1999
--------------
Cash and cash equivalents............................. $ 1,066,658
Accounts receivable................................... 1,096,923
Inventories........................................... 8,401,684
Prepaid expenses...................................... 1,345,026
Property and equipment, net........................... 1,110,219
Goodwill, net......................................... 11,212,518
Other assets.......................................... 52,637
Accounts payable...................................... (2,905,668)
Accrued expenses...................................... (1,559,257)
Notes payable......................................... (709,206)
Floor plans payable................................... (6,929,412)
Capital lease obligations............................. (138,570)
------------
Net assets of discontinued operations................. $ 12,043,532
============
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 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. currently operates 13 locations in Florida
that sell used cars under the "First Choice" brand name. The Company also sells
used cars that may not meet the First Choice criteria through one additional
store in Florida that operates under the "Team" 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.
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 MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C> <C> <C>
(Dollars in thousands)
Sales at used car stores......................................... $ 23,510 100.0% $ 21,845 100.0%
Cost of sales at used car stores(a)............................. 18,490 78.7% 15,489 70.9%
--------- ------- -------- -------
Gross profit.................................................. 5,020 21.3% 6,356 29.1%
Operating expenses............................................... 4,203 17.8% 3,447 15.8%
-------- ------- --------- -------
Operating income................................................ $ 817 3.5% $ 2,909 13.3%
========= ======== ========= ========
</TABLE>
(a) Includes intercompany costs from FFG of $1,633 and $401 for the quarters
ended 1998 and 1997, respectively.
Sales at used car stores increased to $23.5 million for the three months ended
March 31, 1999 compared to $21.8 million for the same period in 1998. The
increase in sales reflect the sale of 2,336 cars at the 26 used car stores that
were open during the first quarter of 1999 as compared to the sale of 2,280 cars
at the 22 used car stores that were open during the first quarter of 1998.
Gross profit declined to $5.0 million during the three months ended March 31,
1999 from $6.3 million during the three months ended March 31, 1998. Excluding
intercompany costs, gross profits were $6.7 million for both quarters ended
March 31.
FINANCING OF USED CAR SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C> <C> <C>
(Dollars in thousands)
Income on finance receivables(a) $ 6,525 100.0% $ 4,547 100.0%
Provisions for credit losses (3,794) (58.1)% (2,322) (51.1)%
Operating expense (702) (10.8)% (676) (14.9)%
-------- ------- -------- -------
Operating income 2,029 31.1% 1,549 34.0%
Interest expense on finance receivables (1,818) (27.9)% (1,107) (24.3)%
--------- ------- -------- -------
Net income (loss) $ 211 3.2% $ 442 9.7%
========== ======== ======= ========
</TABLE>
(a) Includes intercompany revenues from First Choice Auto Finance, Inc.
("FCAF") of $1,633 and $401 for the three months ended 1999 and 1998,
respectively.
Income on finance receivables increased to $6.5 million for the three months
ended March 31, 1999 from $4.5 million for the same period in 1998. The increase
reflects the increase in the average net finance receivables outstanding to
$71.5 million for the three months ended March 31, 1999 from $37.9 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 March 31, 1999 was $3.8
million compared to $2.3 million for the same period in 1998. The increase
reflects the growth in the amount of finance receivables outstanding.
Interest expense increased to $1.8 million for the three months ended March 31,
1999 from $1.1 million for the same period in 1998 as 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 income for the three months ended March 31, 1999 was approximately
$211,000 compared to 442,000 for the same period in 1998 as a result of a higher
provision for credit losses as a percentage of income on finance receivables.
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Following is a comparison of the results of continuing operations for the three
months ended March 31, 1999 to the three months ended March 31, 1998.
REVENUES. The Company's revenues for the three months ended March 31, 1999 were
$28.6 million representing a 9.1% increase over the revenues of $26.2 million in
the first quarter of 1998. The increase was the result of growth of the
Company's used car sales of approximately $1.7 million coupled with an increase
in revenues of approximately $700,000 from the Company's receivables portfolio.
That growth 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 $18.5
million for the three months ended March 31, 1999 compared to $15.5 million for
the same period during 1998, representing an increase of $3.0 million, or 19.3%.
The gross profit margins decreased significantly to 21.3% for the three months
ended March 31, 1999, compared to the gross profit margin of 29.1% for the same
period in 1998.
The Company's selling, general and administrative expenses (including
depreciation and amortization) were $7.3 million for the three months ended
March 31, 1999, compared to the selling, general and administrative expenses of
$5.7 million for the three months ended March 31, 1998. Selling, general and
administrative expenses as a percentage of total revenues for 1999 was 25.6% for
the three months ended March 31, 1999 compared to 22.0% for the three months
ended March 31, 1998. The higher amount of these expenses was the result of an
increased in the number of used car stores, discussed in segment information
above. The Company has significantly reorganized its management structure and
operational activities and eliminated over $2 million annually from its overhead
structure starting in the second quarter of 1999.
INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense totaled $2.4
million for the three months ended March 31, 1999, compared to $1.7 million for
the three months ended March 31, 1998, an increase of approximately $700,000 or
41%. This resulted primarily from higher outstanding indebtedness needed to
finance higher levels of finance receivables as the portfolio expanded over the
prior year of used car sales growth.
NET LOSS. The Company's net loss for the three months ended March 31, 1999 of
($1.7) million compared to a net income of $1.4 for the same period of 1998 was
due to the combined effect of reduced profit margins in used car sales,
increased corporate overhead and 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 three months
ended March 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1999
-------------
<S> <C>
(Dollars in thousands)
Balance, beginning of period.................................................... $ 12,158
Provision for credit losses..................................................... 3,794
Net charge offs................................................................. (2,296)
Balance, end of period.......................................................... $ 13,656
Allowance as a percentage of finance receivables................................ 15.3%
</TABLE>
The allowance decreased to 15.3% of the outstanding balances as of March 31,
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 three months
ended March 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1999
-------------
<S> <C>
(Dollars in thousands)
Principal Balances.......................................................... $ 5,092
Collateral recoveries, net.................................................. (2,796)
Net charge offs............................................................. $ 2,296
</TABLE>
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 March 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1999
-------------
<S> <C>
(Dollars in thousands)
Aging Percentages:
Principal balances current..............................................93.6%
Principal balances 31 days to 60 days....................................2.3
Principal balances over 60 days..........................................4.1
Total over 31 days.......................................................6.4
</TABLE>
The Company is experiencing consistency in its delinquency experience with an
aging of its portfolio at March 31, 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
above.
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 car
inventory.
Net cash provided by operating activities was approximately $5.6 million and
$0.8 million for the three months ended March 31, 1999, and 1998, respectively.
Net cash provided from operating activities for the three months ended March 31,
1999 primarily reflected the loss from operations adjusted for the non-cash
charges for depreciation, amortization, provision of credit losses and the
increase in accounts payable. The Company used approximately $4.2 million to
expand accounts receivable and inventory during the first quarter of 1998.
Nearly all of the $12.6 million and $11.9 million of cash used by investing
activities for the three months ended March 31, 1999 and 1998, respectively was
invested to increase the finance receivables.
Cash provided by financing activities was approximately $8.1 million, and $12.4
million during the three months ended March 31, 1999, 1998, respectively. During
the three months ended March 31, 1999 and 1998 the Company increased its line of
credit borrowing by $9.1 million and $9.7 million, respectively. The Company
issued notes payable totaling $2.0 million and $2.5 million during the three
months ended March 31, 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 $100,000 or up to 55% of the gross balance of
eligible finance contracts. The Finova Revolving Facility expires in 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 March 31, 1999, the principal amount outstanding under the
Finova Revolving Facility was $72.8 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 March 31, 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") which had an outstanding balance of approximately $400,000 at March
31, 1999 down from the $3.2 million at December 31, 1998. The maximum commitment
under the Manheim Facility is $3.75 million. The Manheim Facility is secured by
the Company's used car inventory and bears interest at 1.5% over the prime rate
(9.5% as of March 31, 1999). Amounts outstanding are payable on the earlier of
the day after a car is sold or 180 days after the floorplan advance. The Company
is in the process of liquidating the Manheim Facility. As of April 1999, the
outstanding balance was approximately $160,000.
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 increases
to 18% per annum on May 1, 1999 and to 22% per annum on October 1, 1999. The
High Cap Notes may be prepaid to 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.
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 1998. 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.
<PAGE>
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 $46.5 million and $25.2 million in
1998 and 1997, respectively. The Company's discontinued operations achieved an
income of $0.4 million for the year ending December 31, 1998, which is an
increase over a net loss of $1.4 million for the same period in 1996. The
improved performance is primarily due to a significant increase in profitability
for the Corvette parts and accessories segment. The profitability increase is
due to an increasing volume of sales for the year ended December 31, 1998
compared to the same period in 1997.
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
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Described below are the sales of securities by the Company during the first
quarter 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 398,560shares 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
<PAGE>
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> <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
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.
<PAGE>
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.
10.10 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
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.
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.
10.20 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.
<PAGE>
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.
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.
10.30 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.
<PAGE>
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.
10.40 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 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.
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.
10.50 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.
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.
10.60 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.
10.70 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.
<PAGE>
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,
10.80 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.
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.
10.90 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.
<PAGE>
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
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 May 20, 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.
SIGNATURES TITLE DATE
---------- ----- ----
/S/ GARY R. SMITH President and Chief executive Officer May 20, 1999
- -----------------
Gary R. Smith
/S/ RICHARD M. TODD Chief Accounting Officer May 20, 1999
- -------------------
Richard M. Todd
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Form 10-Q For The Quarterly Period Ending March 31, 1999
</LEGEND>
<CIK> 0000949091
<NAME> Smart Choice Automotive Grp Inc
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,424
<SECURITIES> 0
<RECEIVABLES> 91,216
<ALLOWANCES> 13,656
<INVENTORY> 19,294
<CURRENT-ASSETS> 0
<PP&E> 7,682
<DEPRECIATION> 226
<TOTAL-ASSETS> 133,152
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
5,891
<COMMON> 72
<OTHER-SE> 1,360
<TOTAL-LIABILITY-AND-EQUITY> 133,152
<SALES> 28,577
<TOTAL-REVENUES> 28,577
<CGS> 16,813
<TOTAL-COSTS> 27,172
<OTHER-EXPENSES> 2,354
<LOSS-PROVISION> 3,837
<INTEREST-EXPENSE> 2,354
<INCOME-PRETAX> (1,723)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,723)
<DISCONTINUED> (649)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,373)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
