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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
Commission File Number 000-20841
UGLY DUCKLING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 86-0721358
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification
no.)
2525 E. Camelback Road, Suite 500,
Phoenix, Arizona 85016
(Address of principal executive (Zip Code)
offices)
(602) 852-6600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
---------------
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
At August 6, 1999, there were approximately 14,879,000 shares of Common
Stock, $0.001 par value, outstanding.
This document serves both as a resource for analysts, shareholders, and
other interested persons, and as the quarterly report on Form 10-Q of Ugly
Duckling Corporation (Ugly Duckling) to the Securities and Exchange Commission,
which has taken no action to approve or disapprove the report or pass upon its
accuracy or adequacy. Additionally, this document is to be read in conjunction
with the consolidated financial statements and notes thereto included in Ugly
Duckling's Annual Report on Form 10-K, for the year ended December 31, 1998.
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UGLY DUCKLING CORPORATION
FORM 10-Q/A
(Amendment No. 1)
TABLE OF CONTENTS
Page
Part I. -- FINANCIAL STATEMENTS
Item 1. FINANCIAL STATEMENTS...........................................................................
Condensed Consolidated Balance Sheets-- June 30, 1999 and December 31, 1998........................... 1
Condensed Consolidated Statements of Operations-- Three and Six Months Ended June 30, 1999 and June 30, 1998 2
Condensed Consolidated Statements of Cash Flows-- Six Months Ended June 30, 1999 and June 30, 1998.... 3
Notes to Condensed Consolidated Financial Statements.................................................. 4
SIGNATURES.............................................................................................. 10
TEXT OF AMENDMENT
Explanatory Note:
The above listed Item is hereby amended by deleting the Item in its entirety and
replacing it with the Item attached hereto and filed herewith.
The purpose of this amendment is to amend our 10-Q for the period ending June
30, 1999 (the "Original Filing") to reflect a correction on Page 2 Condensed
Consolidated Statement of Operations for the Three and Six Months Ended June 30,
1999 and June 30, 1998. In the column for the Six Months Ended June 30, 1999,
the line for Shares Used in Computation "Basic" is now consistent with Note 5 of
the Notes to Condensed Consolidated Financial Statements, Common Stock
Equivalents. The results for Earnings per Common Share from Continuing
Operations "Basic" and Net Earnings per Common Share "Basic" have not changed.
ITEM 1.
UGLY DUCKLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1999 1998
------------- ----------------
ASSETS
Cash and Cash Equivalents ........................ $ 1,302 $ 2,751
Finance Receivables, Net ......................... 307,199 163,209
Notes Receivable, Net ............................ 21,317 28,257
Inventory ........................................ 37,810 44,167
Property and Equipment, Net ...................... 34,750 32,970
Intangible Assets, Net ........................... 14,985 15,530
Other Assets ..................................... 22,997 20,575
Net Assets of Discontinued Operations ............ 24,817 38,516
------------- ----------------
$465,177 $ 345,975
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable ................................. $ 4,892 $ 2,479
Accrued Expenses and Other Liabilities ........... 30,992 19,694
Notes Payable .................................... 232,952 117,294
Subordinated Notes Payable ....................... 36,943 43,741
------------- ----------------
Total Liabilities: ............................... 305,779 183,208
------------- ----------------
Stockholders' Equity
Common Stock ..................................... 19 19
Additional Paid in Capital ....................... 173,864 173,809
Retained Earnings ................................ 5,339 3,449
Treasury Stock ................................... (19,824) (14,510)
------------- ----------------
Total Stockholders' Equity ....................... 159,398 162,767
------------- ----------------
$465,177 $ 345,975
============= ================
See accompanying notes to Condensed Consolidated Financial Statements.
Page 1
UGLY DUCKLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 1999 and 1998
(In thousands, except earnings per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------
1999 1998 1999 1998
------------- -------------- ------------- -----------
Sales of Used Cars .............................................. $ 97,876 $69,523 $204,319 $142,496
Less:
Cost of Used Cars Sold .......................................... 55,559 39,237 115,656 78,968
Provision for Credit Losses ..................................... 26,635 14,988 55,196 30,350
------------- -------------- ------------- -----------
................................................................ 15,682 15,298 33,467 33,178
------------- -------------- ------------- -----------
Other Income:
Interest Income ................................................. 20,186 6,024 34,236 12,230
Gain on Sale of Finance Receivables ............................. - 3,659 - 8,273
Servicing and Other Income ...................................... 7,670 9,531 17,295 13,442
------------- -------------- ------------- -----------
................................................................ 27,856 19,214 51,531 33,945
------------- -------------- ------------- -----------
Income before Operating Expenses ................................ 43,538 34,512 84,998 67,123
Operating Expenses:
Selling and Marketing ........................................... 5,887 4,274 12,495 9,195
General and Administrative ...................................... 27,022 22,567 55,381 41,353
Depreciation and Amortization ................................... 2,321 1,352 4,458 2,525
------------- -------------- ------------- -----------
................................................................ 35,230 28,193 72,334 53,073
------------- -------------- ------------- -----------
Operating Income ................................................ 8,308 6,319 12,664 14,050
Interest Expense ................................................ 5,817 1,369 9,473 2,871
------------- -------------- ------------- -----------
Earnings before Income Taxes .................................... 2,491 4,950 3,191 11,179
Income Taxes .................................................... 1,021 2,007 1,301 4,507
------------- -------------- ------------- -----------
Income from Continuing Operations ............................... 1,470 2,943 1,890 6,672
Discontinued Operations:
Loss from Operations of Discontinued Operations, net of
income tax benefit of $492 ...................................... - - - (768)
Loss on Disposal of Discontinued Operations net of income
tax benefit of $3,024 ........................................... - - - (4,827)
============= ============== ============= ===========
Net Earnings .................................................... $ 1,470 $ 2,943 $ 1,890 $ 1,077
============= ============== ============= ===========
Earnings per Common Share from Continuing Operations:
Basic ........................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.36
============= ============== ============= ===========
Diluted ......................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.35
============= ============== ============= ===========
Net Earnings per Common Share:
Basic ........................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.06
============= ============== ============= ===========
Diluted ......................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.06
============= ============== ============= ===========
Shares Used in Computation:
Basic ........................................................... 14,940 18,590 15,292 18,570
============= ============== ============= ===========
Diluted ......................................................... 15,210 18,980 15,495 18,930
============= ============== ============= ===========
See accompanying notes to Condensed Consolidated Financial Statements.
Page 2
UGLY DUCKLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
(In thousands)
1999 1998
------------- ------------
Cash Flows from Operating Activities:
Net Earnings ....................................................... $ 1,890 $ 1,077
Adjustments to Reconcile Net Earnings to Net Cash Provided
by Operating Activities:
Provision for Credit Losses ...................................... 55,196 30,350
Gain on Sale of Finance Receivables .............................. - (8,273)
Depreciation and Amortization .................................... 4,458 2,525
Loss from Discontinued Operations ................................ - 5,595
Purchase of Finance Receivables Held for Sale .................... - (161,018)
Increase in Deferred Income Taxes ................................ (5,188) (1,260)
Proceeds from Sale of Finance Receivables ........................ - 109,711
Collections of Finance Receivables ............................... - 26,026
(Increase) Decrease in Inventory ................................. 6,357 (2,370)
(Increase) Decrease in Other Assets .............................. 1,172 (3,143)
Increase in Accounts Payable, Accrued Expenses and Other
liabilities ................................................... 13,922 7,733
Increase in Income Taxes Payable ................................. 2,926 703
------------- ------------
Net Cash Provided by Operating Activities .......................... 80,733 7,656
------------- ------------
Cash Flows Used in Investing Activities:
Purchase of Finance Receivables Held for Investment .............. (256,684) -
Collections of Finance Receivables Held for Investment ........... 62,148 -
Increase in Investments Held in Trust ............................ (5,983) (7,537)
Advances under Notes Receivable .................................. (5,195) (24,312)
Repayments of Notes Receivable ................................... 12,135 26,727
Proceeds from Disposal of Property and Equipment ................. - 21,893
Purchase of Property and Equipment ............................... (5,692) (12,759)
------------- ------------
Net Cash Provided by (Used in) Investing Activities ................ (199,271) 4,012
------------- ------------
Cash Flows from Financing Activities:
Additions to Notes Payable ....................................... 199,336 30,000
Repayment of Notes Payable ....................................... (84,088) (46,631)
Net Issuance (Repayment) of Subordinated Notes Payable ........... (6,798) 13,000
Proceeds from Issuance of Common Stock ........................... 55 40
Acquisition of Treasury Stock .................................... (5,314) -
Other, Net ....................................................... 199 (182)
------------- ------------
Net Cash Provided by (Used in) Financing Activities ................ 103,390 (3,773)
------------- ------------
Cash Provided by (Used in) Discontinued Operations ................. 13,699 (9,780)
------------- ------------
Net Decrease in Cash and Cash Equivalents .......................... (1,449) (1,885)
Cash and Cash Equivalents at Beginning of Period ................... 2,751 3,537
------------- ------------
Cash and Cash Equivalents at End of Period ......................... $ 1,302 $ 1,652
============= ============
Supplemental Statement of Cash Flows Information:
Interest Paid ...................................................... $ 10,180 $ 2,706
============= ============
Income Taxes Paid .................................................. $ 3,315 $ 1,106
============= ============
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
UGLY DUCKLING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
Our accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for a complete financial statement presentation. In our opinion, such unaudited
interim information reflects all adjustments, consisting only of normal
recurring adjustments, necessary to present our financial position and results
of operations for the periods presented. Our results of operations for interim
periods are not necessarily indicative of the results to be expected for a full
fiscal year. Our Condensed Consolidated Balance Sheet as of December 31, 1998
was derived from our audited consolidated financial statements as of that date
but does not include all the information and footnotes required by generally
accepted accounting principles. We suggest that these condensed consolidated
financial statements be read in conjunction with the audited consolidated
financial statements included in our Annual Report on Form 10-K, for the year
ended December 31, 1998.
Note 2. Summary of Finance Receivables
Following is a summary of our Finance Receivables, Net, as of June 30, 1999 and
December 31, 1998 (in thousands):
June 30, 1999 December 31, 1998
------------------------------------------- ----------------------------------------
Non Non
Dealership Dealership Dealership Dealership
Operations Operations Total Operations Operations Total
------------- --------------- ------------ ------------ ------------ -------------
Installment Sales Contract Principal Balances $ 256,645 $ 77,366 $ 334,011 $ 93,936 $ 51,282 $ 145,218
Add: Accrued Interest ....................... 2,755 868 3,623 877 473 1,350
Loan Origination Costs ...................... 4,450 -- 4,450 2,237 -- 2,237
------------- --------------- ------------ ------------ ------------ -------------
Principal Balances, Net ..................... 263,850 78,234 342,084 97,050 51,755 148,805
Residuals in Finance Receivables Sold ....... 22,559 2,625 25,184 33,331 2,625 35,956
Investments Held in Trust ................... 35,249 -- 35,249 20,564 -- 20,564
------------- --------------- ------------ ------------ ------------ -------------
321,658 80,859 402,517 150,945 54,380 205,325
Allowance for Credit Losses ................. (66,905) (2,990 (69,895) (24,777) (2,024) (26,801)
Discount on Acquired Loans .................. -- (25,423) (25,423) -- (15,315) (15,315)
------------- --------------- ------------ ------------ ------------ -------------
Finance Receivables, Net .................... $ 254,753 $ 52,446 $ 307,199 $ 126,168 $ 37,041 $ 163,209
============= =============== ============ ============ ============ =============
Classification of Principal Balances:
Finance Receivables Held for Investment ..... $ 99,049 $ 77,366 $ 176,415 $ 26,852 $ 51,282 $ 78,134
Finance Receivables Held as Collateral for
Securitization Notes Payable .............. 157,596 -- 157,596 67,084 -- 67,084
-------------------------------------------------------------------------------------
Installment Sales Contract Principal Balances $ 256,645 $ 77,366 $ 334,011 $ 93,936 $ 51,282 $ 145,218
============= =============== ============ ============ ============ =============
Page 4
As of June 30, 1999 and December 31, 1998, our Residuals in Finance Receivables
Sold from dealership operations were comprised of the following (in thousands):
June 30, December 31,
1999 1998
----------------- -----------------
Retained interest in subordinated securities (B
Certificates) ......................................... $ 33,080 $ 51,243
Net interest spreads, less present value discount ....... 14,596 25,838
Reduction for estimated credit losses ................... (25,117) (43,750)
----------------- -----------------
Residuals in finance receivables sold ................... $ 22,559 $33,331
================= =================
Securitized principal balances outstanding .............. $ 126,945 $ 198,747
================= =================
Estimated credit losses as a % of securitized principal
balances outstanding .................................. 19.8% 22.0%
================= =================
The following table reflects a summary of activity for our Residuals in
Finance Receivables Sold from dealership operations for the periods ended June
30, 1999 and 1998, respectively (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
Balance, Beginning of Period . $ 28,480 $ 24,741 $ 33,331 $ 13,277
Additions .................... -- 10,396 -- 24,254
Amortization ................. (5,921) (6,719) (10,772) (9,113)
------------ ------------ ----------- ------------
Balance, End of Period ....... $ 22,559 $ 28,418 $ 22,559 $ 28,418
============ ============ =========== ============
Note 3. Notes Receivable
Our Cygnet dealer program has various notes receivable from used car
dealers. Under Cygnet's asset based loan program, our commitments for revolving
notes receivable totaled $9.6 million at June 30, 1999.
In July 1997, First Merchants Acceptance Corporation (First Merchants) filed
for bankruptcy. Immediately subsequent to the bankruptcy filing, we executed a
loan agreement to provide First Merchants with debtor in possession financing
(DIP facility). The maximum commitment under the DIP facility was $11.5 million
at June 30, 1999. The outstanding balance on the DIP facility totaled $11.5
million and $12.2 million at June 30, 1999 and December 31, 1998, respectively.
Following is a summary of Notes Receivable at June 30, 1999 and December 31,
1998 (in thousands):
June 30, December 31,
1999 1998
-------------- ----------------
Notes Receivable under the asset based loan program, net of
allowance for doubtful accounts of $103, and $500, respectively .... $ 7,433 $ 8,311
First Merchants Debtor in Possession Note Receivable .................. 11,502 12,228
First Merchants Bank Group Participation .............................. 1,279 6,856
Other Notes Receivable ................................................ 1,103 862
-------------- ----------------
Notes Receivable, Net ................................................. $ 21,317 $ 28,257
============== ================
Page 5
Note 4. Notes Payable
The following is a summary of Notes Payable at June 30, 1999 and December
31, 1998 (in thousands):
June 30, December 31,
1999 1998
---------------- ---------------
Revolving Facility with GE Capital .................................................. $ 76,647 $ 51,765
Securitization Notes Payable ........................................................ 119,325 50,607
Note Payable Collateralized by the Common Stock of our Securitization Subsidiaries .. 37,500 12,234
Mortgage Loan with Finance Company .................................................. -- 3,386
Others .............................................................................. 735 967
---------------- ---------------
Subtotal ............................................................................ 234,207 118,959
Less: Unamortized Loan Fees ........................................................ 1,255 1,665
---------------- ---------------
Notes Payable ....................................................................... $ 232,952 $ 117,294
================ ===============
Note 5. Common Stock Equivalents
Net Earnings per common share amounts are based on the weighted average
number of common shares and common stock equivalents outstanding for the periods
ended June 30, 1999, and 1998 as follows (in thousands, except for per share
amounts):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ---------------------
1999 1998 1999 1998
---------- ------------- ---------- ----------
Income from Continuing Operations ...................................... $ 1,470 $ 2,943 $ 1,890 $6,672
========== ============= ========== ==========
Net Earnings ........................................................... $ 1,470 $ 2,943 $ 1,890 $1,077
========== ============= ========== ==========
Basic EPS-Weighted Average Shares Outstanding .......................... 14,940 18,590 15,292 18,570
========== ============= ========== ==========
Basic Earnings Per Share from:
Continuing Operations .................................................. $ 0.10 $ 0.16 $ 0.12 $ 0.36
========== ============= ========== ==========
Net Earnings ........................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.06
========== ============= ========== ==========
Basic EPS-Weighted Average Shares Outstanding .......................... 14,940 18,590 15,292 18,570
Effect of Diluted Securities:
Warrants ............................................................... -- 44 -- 35
Stock Options .......................................................... 270 346 203 325
---------- ------------- ---------- ----------
Dilutive EPS-Weighted Average Shares Outstanding ....................... 15,210 18,980 15,495 18,930
========== ============= ========== ==========
Diluted Earnings Per Share from:
Continuing Operations .................................................. $ 0.10 $ 0.16 $ 0.12 $ 0.35
========== ============= ========== ==========
Net Earnings ........................................................... $ 0.10 $ 0.16 $ 0.12 $ 0.06
========== ============= ========== ==========
Warrants Not Included in Diluted EPS Since Antidilutive ................ 1,439 1,214 1,510 715
========== ============= ========== ==========
Stock Options Not Included in Diluted EPS since Antidilutive ........... 905 571 1,035 96
========== ============= ========== ==========
Note 6. Business Segments
We have two divisions: dealership operations and non-dealership operations.
Within our divisions, we have six distinct business segments. Within the
dealership operations division, the segments consist of retail car sales
operations (company dealerships), the income generated from the finance
receivables generated at the Ugly Duckling dealerships and corporate and other
operations. Under the non-dealership operations division, the segments consist
of the Cygnet dealer program, bulk purchasing and loan servicing, and corporate
and other operations.
Page 6
A summary of operating activity by business segment for the periods ended
June 30, 1999 and 1998 follows (in thousands):
Dealership Operations Non Dealership Operations
-------------------------------------- -------------------------------------
Company
Company Dealership Corporate Cygnet Cygnet Loan Corporate
Dealerships Receivables and Other Dealer Servicing and Other Total
----------- ------------ ------------- ------------- ------------ ---------- ----------
Three months ended June 30, 1999:
Sales of Used Cars ................. $ 97,876 $ -- $ -- $ -- $ -- $ -- $ 97,876
Less: Cost of Used Cars Sold ...... 55,559 -- -- -- -- -- 55,559
Provision for Credit Losses ...... 20,131 5,658 -- 846 -- -- 26,635
----------- ------------ ------------- ------------- ------------ --------- ----------
22,186 (5,658) -- (846) -- -- 15,682
----------- ------------ ------------- ------------- ------------ --------- ----------
Interest Income .................... -- 15,647 109 4,114 315 1 20,186
Servicing and Other Income ......... 6 2,296 133 -- 5,235 -- 7,670
----------- ------------ ------------- ------------- ------------ --------- ----------
Income before Operating Expenses ... 22,192 12,285 242 3,268 5,550 1 43,538
----------- ------------ ------------- ------------- ------------ --------- ----------
Operating Expenses:
Selling and Marketing .............. 5,864 -- -- 23 -- -- 5,887
General and Administrative ......... 11,101 4,567 4,621 974 4,196 773 27,022
Depreciation and Amortization ...... 859 280 537 107 370 168 2,321
----------- ------------ ------------- ------------- ------------ --------- ----------
17,824 4,847 5,158 1,104 5,356 941 35,230
----------- ------------ ------------- ------------- ------------ --------- ----------
Operating Income (Loss) ............ $ 4,368 $ 7,438 $ (4,916) $ 2,164 194 (940) $ 8,308
=========== ============ ============= ============= ============ ========= ==========
Three months ended June 30, 1998:
Sales of Used Cars ................. $ 69,523 $ -- $ -- $ -- $ -- $ -- $ 69,523
Less: Cost of Used Cars Sold ...... 39,237 -- -- -- -- -- 39,237
Provision for Credit Losses ...... 14,263 10 -- 715 -- -- 14,988
----------- ------------ ------------- ------------- ------------ ---------- ----------
16,023 (10) -- (715) -- -- 15,298
----------- ------------ ------------- ------------- ------------ ---------- ----------
Interest Income .................... -- 3,506 54 2,012 452 -- 6,024
Gain on Sale of Loans .............. -- 3,659 -- -- -- -- 3,659
Servicing and Other Income ......... 17 4,015 56 -- 5,443 -- 9,531
----------- ------------ ------------- ------------- ------------ ---------- ----------
Income before Operating Expenses ... 16,040 11,170 110 1,297 5,895 -- 34,512
----------- ------------ ------------- ------------- ------------ ---------- ----------
Operating Expenses:
Selling and Marketing .............. 4,218 -- -- 44 12 -- 4,274
General and Administrative ......... 9,329 4,279 3,456 593 4,203 707 22,567
Depreciation and Amortization ...... 615 311 249 23 154 -- 1,352
----------- ------------ ------------- ------------- ------------ ---------- ----------
14,162 4,590 3,705 660 4,369 707 28,193
----------- ------------ ------------- ------------- ------------ ---------- ----------
Operating Income (Loss) ............ $ 1,878 $ 6,580 $ (3,595) $ 637 $ 1,526 $ (707) $ 6,319
=========== ============ ============= ============= ============ ========== ==========
Page 7
Dealership Operations Non Dealership Operations
------------------------------------ ----------------------------------
Company
Company Dealership Corporate Cygnet Cygnet Loan Corporate
Dealerships Receivables and Other Dealer Servicing and Other Total
---------- ---------- ----------- ---------- --------- --------- ---------
Six months ended June 30, 1999:
Sales of Used Cars ............. $ 204,319 $ -- $ -- $ -- $ -- $ -- $ 204,319
Less: Cost of Used Cars Sold ... 115,656 -- -- -- -- -- 115,656
Provision for Credit Losses .... 42,024 11,529 -- 1,643 -- -- 55,196
46,639 (11,529) -- (1,643) -- -- 33,467
Interest Income ................ -- 25,959 170 7,478 627 2 34,236
Servicing and Other Income ..... 13 5,178 178 -- 11,926 -- 17,295
Income before Operating Expenses 46,652 19,608 348 5,835 12,553 2 84,998
Operating Expenses:
Selling and Marketing ........ 12,433 -- -- 59 3 -- 12,495
General and Administrative ... 22,010 9,150 9,959 1,937 10,807 1,518 55,381
Depreciation and Amortization 1,653 562 1,058 185 692 308 4,458
36,096 9,712 11,017 2,181 11,502 1,826 72,334
Operating Income (Loss) ........ $ 10,556 $ 9,896 $ (10,669) $ 3,654 $ 1,051 $ (1,824) $ 12,664
========= ========== =========== ========== ========== ======== =========
Six months ended June 30, 1998:
Sales of Used Cars ............. $ 142,496 $ -- $ -- $ -- $ -- $ -- $ 142,49
Less: Cost of Used Cars Sold ... 78,968 -- -- -- -- -- 78,968
Provision for Credit Losses .... 29,297 10 -- 1,043 -- -- 30,350
34,231 (10) -- (1,043) -- -- 33,178
Interest Income ................ -- 7,323 118 3,610 1,179 -- 12,230
Gain on Sale of Loans .......... -- 8,273 -- -- -- -- 8,273
Servicing and Other Income ..... 58 7,839 102 5,443 -- 13,442
Income before Operating Expenses 34,289 23,425 220 2,567 6,622 -- 67,123
Operating Expenses:
Selling and Marketing ........ 9,096 -- -- 87 12 -- 9,195
General and Administrative ... 19,835 8,834 6,075 1,108 4,203 1,298 41,353
Depreciation and Amortization 1,228 648 450 45 154 -- 2,525
30,159 9,482 6,525 1,240 4,369 1,298 53,073
Operating Income (Loss) ........ $ 4,130 $ 13,943 $ (6,305) $ 1,327 $ 2,253 $ (1,298) $ 14,050
========== =========== ============ =========== ========== ========= ==========
Note 7. Discontinued Operations
In February 1998, we announced our intention to close our branch office
network, through which we purchased retail installment contracts from third
party dealers, and exit this line of business. We completed the branch office
closure as of March 31, 1998. As a result of the branch office network closure,
we reclassified the results of operations of the branch office network in the
accompanying condensed consolidated balance sheets and condensed consolidated
statements of operations to discontinued operations.
Page 8
The components of Net Assets of Discontinued Operations as of June 30, 1999
and December 31, 1998 follow (in thousands):
June 30, December 31,
1999 1998
---------------- ---------------
Finance Receivables, net ................... $ 19,195 $ 30,649
Residuals in Finance Receivables Sold ...... 4,503 7,875
Investments Held in Trust .................. 2,638 3,665
Other Assets, net of Accounts Payable and
Accrued Liabilities ................... 1,569 2,351
Disposal Liability ......................... (3,088) (6,024)
================ ===============
Net Assets of Discontinued Operations ...... $ 24,817 $ 38,516
================ ===============
Note 8. Use of Estimates
The preparation of our consolidated financial statements requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
Actual results could differ from our estimates.
Note 9. Certain Bankruptcy Remote Entities
Ugly Duckling Receivables Corporation (UDRC) and Ugly Duckling Receivables
Corporation II (UDRC II) (collectively referred to as Securitization
Subsidiaries), are our wholly-owned special purpose "bankruptcy remote
entities." Their assets, including assets classified as Discontinued Operations,
include Residuals in Finance Receivables Sold and Investments Held In Trust.
Total assets for UDRC and UDRC II are approximately $183.4 million and $5.3
million, respectively, at June 30, 1999. These amounts would not be available to
satisfy claims of our creditors on a consolidated basis.
Note 10. Reclassifications
We have made certain reclassifications to previously reported information to
conform to the current presentation.
Page 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UGLY DUCKLING CORPORATION
/s/ STEVEN T. DARAK
Steven T. Darak
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: October 25, 1999