-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HWNcLWPXExP+mDkvbK1Dz+BHmBRaU4dttX0GQtya5U4PNI3paG417eHo4n3nvjws DRnHlGufJn8XljAKCGrXJA== 0000949091-99-000005.txt : 19990521 0000949091-99-000005.hdr.sgml : 19990521 ACCESSION NUMBER: 0000949091-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMART CHOICE AUTOMOTIVE GROUP INC CENTRAL INDEX KEY: 0000949091 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 591469577 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14082 FILM NUMBER: 99631453 BUSINESS ADDRESS: STREET 1: 5200 S WASHINGTON AVE CITY: TITUSVILLE STATE: FL ZIP: 32780 BUSINESS PHONE: 4072690834 MAIL ADDRESS: STREET 1: 5200 S WASHINGTON AVE CITY: TITUSVILLE STATE: FL ZIP: 32780 FORMER COMPANY: FORMER CONFORMED NAME: ECKLER INDUSTRIES INC DATE OF NAME CHANGE: 19950912 10-Q 1 SMART CHOICE AUTOMOTIVE GROUP, INC. 3/31/99 10-Q 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. SMART CHOICE AUTOMOTIVE GROUP, INC. Form 10-Q TABLE OF CONTENTS
HEADING PAGE ------- ---- 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
PART I ITEM 1. FINANCIAL STATEMENTS. Smart Choice Automotive Group, Inc. and Subsidiaries Consolidated Balance Sheets
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (Unaudited) 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 ============= ============
See accompanying notes to consolidated financial statements Smart Choice Automotive Group, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ---- ---- 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 ========== ===========
See accompanying notes to consolidated financial statements Smart Choice Automotive Group, Inc. and Subsidiaries Consolidated Statements Of Stockholders' Equity
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 ------ ----- ------ ----- ------- ---------- ------- ----- 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 === ========== ========= ======== ============ ========== ============ ===========
See accompanying notes to consolidated financial statements Smart Choice Automotive Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ---- ---- 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 ============ =============
See accompanying notes to consolidated financial statements 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: MARCH 31, 1998 -------------- 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 ==============
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. 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: THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ---- ---- 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
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:
USED CAR FINANCING CORPORATE DISCONTINUED STORES SERVICES AND OTHER OPERATIONS COMBINED ------ -------- --------- ---------- -------- 1999 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
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. 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
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ---- ---- (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% ========= ======== ========= ========
(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
THREE MONTHS ENDED MARCH 31, ---------------------------- 1999 1998 ---- ---- (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% ========== ======== ======= ========
(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. 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.
THREE MONTHS ENDED ------------------ MARCH 31,1999 ------------- (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%
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.
THREE MONTHS ENDED ------------------ MARCH 31,1999 ------------- (Dollars in thousands) Principal Balances.......................................................... $ 5,092 Collateral recoveries, net.................................................. (2,796) Net charge offs............................................................. $ 2,296
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.
THREE MONTHS ENDED ------------------ MARCH 31,1999 ------------- (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
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. 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 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits
Exhibit NO. EXHIBIT DESCRIPTION FILED HEREWITH OR INCORPORATED BY REFERENCE TO: --- ------------------- ----------------------------------------------- 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. 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. 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. 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. 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. 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.
* 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 EX-27 2 FDS -- SMART CHOICE AUTOMOTIVE GROUP, INC.
5 Form 10-Q For The Quarterly Period Ending March 31, 1999 0000949091 Smart Choice Automotive Grp Inc 1,000 3-MOS DEC-31-1998 JAN-01-1999 MAR-31-1999 2,424 0 91,216 13,656 19,294 0 7,682 226 133,152 0 0 0 5,891 72 1,360 133,152 28,577 28,577 16,813 27,172 2,354 3,837 2,354 (1,723) 0 (1,723) (649) 0 0 (2,373) (0.38) (0.38)
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