U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report December 1, 1999
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) 269-0834
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------
(Former name, former address and former fiscal year,
if changed since last report)
SMART CHOICE AUTOMOTIVE GROUP, INC.
Form 8-K
TABLE OF CONTENTS
HEADING PAGE
------- ----
Item 1. Changes in Control of Registrant ..................................3
Item 2. Acquisition or Disposition of Assets ..............................4
Item 4. Changes in Registrant's Certifying Accountant .....................4
Item 7. Change in Fiscal Year .............................................4
Item 8. Exhibits ..........................................................4
SIGNATURES....................................................................5
2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On December 1, 1999 the Company completed a merger between a wholly-owned Smart
Choice subsidiary and Paaco Automotive Group, Inc. an 85% owned subsidiary of
Crown Group, Inc. (Nasdaq:CNGR). As a result of the merger and a $3 million cash
investment into the Company, Crown Group, Inc. acquired voting control of the
Company.
The Company and Crown Group, Inc. announced on August 27, 1999, that they had
entered into a letter of intent with respect to Crown's proposed acquisition of
a controlling interest in the Company. The terms of the transaction, as
completed, differ substantially from those outlined in the letter of intent.
Contemporaneously with Crown's equity investment and the merger of its Paaco
subsidiary with the Smart Choice subsidiary, approximately $15.0 million of
Smart Choice's outstanding debt and preferred stock was converted into shares of
Smart Choice common stock. An additional $4.5 million of Smart Choice debt,
acquired by Crown for approximately $2.3 million in cash, was converted into
shares of Series E Convertible Preferred Stock. Following this transaction, the
Company has approximately $2.6 million of subordinated debt outstanding. In
connection with the transaction, the combined company obtained a restructured
and restated $160 million senior finance receivables and inventory credit
facility, which contains more favorable terms than the facilities it replaced.
In exchange for its $3 million cash investment, its contribution of Paaco, and
the conversion of certain debt obligations, Crown received shares of Series E
Convertible Preferred Stock representing 70% of the ownership and voting rights
of the Company on an "as converted" basis. The minority shareholders of Paaco
received shares of Series E Convertible Preferred Stock representing 5% of the
Company's outstanding voting securities. The holders of certain converted Smart
Choice debt and preferred stock received shares of the Company's common stock
equivalent to approximately 20.7% of the outstanding voting securities.
Previously existing Smart Choice shareholders now own approximately 4.3% of the
outstanding Smart Choice voting securities. The holders of the shares of Smart
Choice common stock issued in connection with the transaction and Crown and
other holders of Series E Convertible Preferred Stock have certain registration
rights.
For its most recent fiscal year ended December 31, 1998, the Company reported
revenues from continuing operations of $95.4 million and a loss from continuing
operations of $7.3 million. For the nine months ended September 30, 1999, the
Company reported revenues of $71.4 million and a loss from continuing operations
of $24.2 million.
James E. Ernst has been appointed President and Chief Executive Officer of Smart
Choice. Mr. Ernst has a long association with Crown and has recently been
responsible for the restructuring of Paaco's operations. He is a Certified
Public Accountant and was formerly President and Chief Executive Officer of both
Casino Magic Corp. and Casino America, Inc.
Gary Smith will continue to manage the Florida-based operations of Smart Choice,
as President of First Choice, while Larry Lange remains responsible for the
Company's Texas-based operations, as President of Paaco. Joe Cavalier has joined
Smart Choice as its new Chief Financial Officer, and Ron Anderson will have
principal responsibility for the Company's finance receivable activities.
3
Smart Choice's board of directors includes Edward R. McMurphy as Chairman, and
T. J. Falgout, III - both senior executives of Crown. Robert Abrahams, James E.
Ernst, Gary Smith and Larry Lange comprise the remainder of the Company's board.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 1, 1999 the Company completed a merger between a wholly-owned Smart
Choice subsidiary and Paaco Automotive Group, Inc., an 85% owned subsidiary of
Crown Group, Inc. Paaco was the surviving corporation in the merger and became
the wholly-owned subsidiary of Smart Choice. As described in Item 1, Crown
acquired voting control of Smart Choice through the acquisition of Series E
Convertible Preferred Stock pursuant to the merger of Paaco, Crown's conversion
of certain debt obligations and a $3 million cash investment. Minority
shareholders in Paaco acquired approximately 5% of the Company's outstanding
voting securities.
The combined business, which employs 500 people and operated 22 used car
dealerships in Florida and Texas, will have an aggregate portfolio of finance
receivables totaling approximately $160 million. Headquartered in Dallas, Texas,
Paaco operates 11 dealerships in the Dallas-Ft.Worth Metroplex and the Houston
area. Smart Choice, headquartered in Titusville, Florida currently operates a
network of 11 dealerships in the State of Florida. Both Paaco and Smart Choice
provide installment financing for over 95% of the vehicles purchased by their
respective customers.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On December 1, 1999 the appointment of BDO Seidman, LLP as independent public
accountants for the Company was terminated.
ITEM 7. CHANGE IN FISCAL YEAR
Effective December 1, 1999 the Company elected to change its financial reporting
year end from December 31 to April 30. The Company will file a Form 10-K
covering the transition period.
ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of the business acquired will be provided within
the next sixty (60) days as an amendment to this filing.
(b) Pro Forma Financial Information. The unaudited pro forma condensed
consolidated balance sheet and income statement of the Registrant will be
provided within the next sixty (60) days as an amendment to this filing.
(c) Exhibits filed herewith.
Exhibit
NO. EXHIBIT DESCRIPTION
------- -------------------
10.94 Stock Purchase Agreement dated
December 1, 1999 by and between
Crown Group, Inc. and Smart Choice
Automotive Group, Inc.
4
Exhibit
NO. EXHIBIT DESCRIPTION
------- -------------------
16.1 Letter from BDO Seidman, LLP
dated December 1, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on December 8, 1999.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ JAMES E. ERNST
------------------
James E. Ernst, President
and Chief Executive Officer
5