Penske Automotive Group
PAG
#1858
Rank
$11.31 B
Marketcap
$171.35
Share price
-3.32%
Change (1 day)
2.19%
Change (1 year)

Penske Automotive Group - 10-Q quarterly report FY


Text size:
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

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 1-12297


UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)


DELAWARE 22-3086739
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 223-3300


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. Yes [X] No [ ]

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON
STOCK AS OF AUGUST 6, 1997:

VOTING COMMON STOCK, $0.0001 PAR VALUE 18,239,992

NON-VOTING COMMON STOCK, $0.0001 PAR VALUE 605,454
TABLE OF CONTENTS

PART I
PAGE

1. Financial Statements and Supplementary Data

Consolidated Condensed Balance Sheets as of June 30, 1997 and
December 31, 1996 1

Consolidated Condensed Statements of Income for the three months
and six months ended June 30, 1997 and 1996 3

Consolidated Condensed Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 4

Notes to Consolidated Condensed Financial Statements 6

2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10


PART II

1. Legal Proceedings 17

2. Changes in Securities 17

4. Submission of Matters to a Vote Of Security Holders 18

6. Exhibits and Reports on Form 8-K 19

Signatures 32
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS

AUTO DEALERSHIPS
Cash and cash equivalents $43,318 $66,875
Accounts receivable, net 80,883 52,018
Inventories 267,673 168,855
Other current assets 7,607 11,823
------------ ------------
Total current assets 399,481 299,571

Property and equipment, net 32,940 22,341
Intangible assets, net 288,445 177,194
Other assets 7,195 6,587
------------ ------------
TOTAL AUTO DEALERSHIP ASSETS 728,061 505,693
------------ ------------

AUTO FINANCE
Cash and cash equivalents 4,985 2,688
Finance receivables, net 20,928 9,723
Other assets 1,788 4,846
------------ ------------
TOTAL AUTO FINANCE ASSETS 27,701 17,257
------------ ------------
TOTAL ASSETS $755,762 $522,950
============ ============
</TABLE>

See Notes to Consolidated Condensed Financial Statements

1
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

AUTO DEALERSHIPS
Floor plan notes payable $268,955 $170,170
Short-term debt 6,970 6,069
Accounts payable 29,707 22,187
Accrued expenses 21,831 17,585
Current portion of long-term debt 4,217 5,444
------------ ------------
Total current liabilities 331,680 221,455

Long-term debt 93,722 11,121
Due to related party 438 1,334
Deferred income taxes 8,362 4,867
------------ ------------
TOTAL AUTO DEALERSHIP LIABILITIES 434,202 238,777
------------ ------------

AUTO FINANCE
Short-term debt 301 1,001
Accounts payable and other liabilities 3,730 1,704
------------ ------------
TOTAL AUTO FINANCE LIABILITIES 4,031 2,705
------------ ------------

Commitments and contingent liabilities

STOCKHOLDERS' EQUITY
Voting common stock 2 2
Additional paid-in capital 309,647 284,502
Retained earnings (accumulated deficit) 7,880 (3,036)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 317,529 281,468
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $755,762 $522,950
============ ============
</TABLE>

See Notes to Consolidated Condensed Financial Statements

2
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AUTO DEALERSHIPS
Vehicle sales $463,381 $302,034 $804,214 $535,173
Finance and insurance 18,029 12,397 31,512 22,339
Service and parts 45,548 21,789 79,432 40,427
-------- -------- -------- --------
Total revenues 526,958 336,220 915,158 597,939
Cost of sales, including floor plan interest 458,308 299,058 798,896 531,560
-------- -------- -------- --------
Gross profit 68,650 37,162 116,262 66,379
Selling, general and administrative expenses 53,967 29,357 95,723 56,975
-------- -------- -------- --------
Operating income 14,683 7,805 20,539 9,404
Other interest expense (1,777) (868) (2,246) (2,005)
Other income (expense), net -- 570 297 1,579
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES -
AUTO DEALERSHIPS 12,906 7,507 18,590 8,978
-------- -------- -------- --------
AUTO FINANCE
Revenues 1,100 617 2,085 1,029
Interest expense (116) (90) (260) (176)
Operating and other expenses (1,087) (612) (2,024) (1,202)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES - AUTO FINANCE (103) (85) (199) (349)
-------- -------- -------- --------
TOTAL COMPANY
Income before minority interests and
provision for income taxes 12,803 7,422 18,391 8,629
Minority interests (61) (1,234) (97) (1,734)
Provision for income taxes (5,143) (2,461) (7,378) (2,997)
-------- -------- -------- --------
Net income $7,599 $3,727 $10,916 $3,898
======== ======== ======== ========
Net income per common share $0.42 $0.42 $0.61 $0.46
======== ======== ======== ========
Shares used in computing net income
per common share 18,144 8,878 18,023 8,500
======== ======== ======== ========
</TABLE>

See Notes to Consolidated Condensed Financial Statements

3
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------------------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $11,035 ($119) $4,097 ($199)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,877 222 1,619 90
Deferred income tax expense 5,130 - - -
Related party interest income - - (1,548) -
Equity in loss of uncombined investee - - (75) -
Gain on sales of loans - (679) - (510)
Loans originated - (49,934) - (44,075)
Loans repaid or sold - 43,126 - 37,456
Minority interests portion of income 97 - 1,734 -
Changes in operating assets and liabilities:
Accounts receivable (13,803) (976) (16,091) -
Inventories (13,328) - (2,494) -
Floor plan notes payable 22,673 - 16,651 -
Accounts payable and accrued expenses 1,572 1,934 8,580 910
Other (2,270) 256 (598) 2,520
-------------------------------------------------------------
Net cash provided by (used in) operating
activities: 14,983 (6,170) 11,875 (3,808)
-------------------------------------------------------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements

4
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------------------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Purchase of equipment and improvements (5,774) (34) (1,916) (153)
Dealership acquisitions (68,338) - (20,803) -
Investment in auto finance subsidiary (9,300) 9,300 (9,400) 9,400
Funding for subsequent acquisition - - - -
Advances to related parties - - 400 -
Investment in and advances to uncombined investee - - (1,438) -
-------------------------------------------------------------
Net cash provided by (used in) investing activities (83,412) 9,266 (33,157) 9,247
-------------------------------------------------------------

FINANCING ACTIVITIES:
Proceeds from issuance of stock 4,324 - 15,986 -
Repurchase of common stock (8,821) - - -
Proceeds from borrowings of long-term debt 53,780 - 13,220 -
Deferred financing costs (2,141) - (908) -
Net borrowings (repayments) of short-term debt 500 - (1,118) -
Payments of long-term debt and capitalized lease
obligations (1,874) - (1,376) -
Advances (to) from affiliates (896) - 82 -
Borrowings from warehouse credit line - 17,965 - 30,880
Payments of warehouse credit line - (18,764) - (35,320)
-------------------------------------------------------------
Net cash provided by (used in) financing activities 44,872 (799) 25,886 (4,440)
-------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (23,557) 2,297 4,604 999
Cash and cash equivalents, beginning of year 66,875 2,688 4,697 531
=============================================================
Cash and cash equivalents, end of year $43,318 $4,985 $9,301 $1,530
=============================================================
</TABLE>

See Notes to Consolidated Condensed Financial Statements

5
UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)

1. BASIS OF PRESENTATION

The information presented as of June 30, 1997 and 1996, and for the three and
six month periods then ended, is unaudited, but includes all adjustments
(consisting only of normal recurring accruals) which the management of United
Auto Group, Inc. (the "Company" or "UAG") believes to be necessary for the fair
presentation of results for the periods presented. The results for the interim
periods are not necessarily indicative of results to be expected for the year.
These consolidated condensed financial statements should be read in conjunction
with the Company's audited financial statements for the year ended December 31,
1996, which were included as part of the Company's Annual Report on Form 10-K.

2. NET INCOME PER COMMON SHARE

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 establishes standards for computing and presenting earnings per share for
periods ending after December 15, 1997. Basic and diluted earnings per share,
calculated pursuant to SFAS 128, are not expected to be materially different
from net income per common share as reflected in the accompanying Consolidated
Condensed Statements of Income.

3. INVENTORIES

Inventories consisted of the following at the balance sheet dates:

<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
--------------- -----------------
<S> <C> <C>
New vehicles $183,045 $109,414
Used vehicles 70,367 50,060
Parts, accessories and other 14,261 9,381
-------- --------
Total inventories $267,673 $168,855
======== ========
</TABLE>

4. BUSINESS COMBINATIONS

On April 22, 1997, the Company completed its acquisition of 100% of the capital
stock of Gary Hanna Nissan, Inc. for $13,740, consisting of $7,000 in cash,
$1,240 of promissory notes and $5,500 of UAG common stock. The acquisition
agreement provides for an additional contingent cash payment to the extent that
the UAG common stock has an aggregate market value of less than $6,000 on the
date it becomes freely tradable.

6
UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)


4. BUSINESS COMBINATIONS (CONTINUED)

On April 30, 1997, the Company completed its acquisition of 100% of the capital
stock of the Staluppi Automotive Group (the "Staluppi Group") for $49,614,
consisting of $25,450 in cash, $21,864 of promissory notes and $2,300 of UAG
common stock. The acquisition agreement provides for an additional contingent
cash payment to the extent that the UAG common stock has an aggregate market
value of less than $3,000 on the date it becomes freely tradable. In addition,
if the Staluppi Group achieves certain levels of annual pre-tax earnings during
any of the next three years, UAG will be required to make additional payments.

On May 30, 1997, the Company completed its acquisition of 100% of the capital
stock of the Gene Reed Automotive Group (the "Reed Group") for $34,000,
consisting of $17,000 in cash, $4,000 of promissory notes and $13,000 of UAG
common stock. The acquisition agreement provides for an additional contingent
cash payment to the extent that the UAG common stock has an aggregate market
value of less than $13,000 on the date it becomes freely tradable.

Effective June 1, 1997, the Company completed its acquisition of 100% of the
capital stock of the Lance Landers dealerships for $2,800 in cash.

These acquisitions were accounted for using the purchase method. Accordingly,
the Company's financial statements reflect the results of operations of the
acquired entities only from the effective date of acquisition.

5. PRO FORMA RESULTS OF OPERATIONS

The following unaudited pro forma summary presents the consolidated results of
operations of the Company for the six months ended June 30, 1997 and 1996 after
reflecting the pro forma adjustments that would be necessary to present those
results as if the acquisitions of Gary Hanna Nissan, Inc., the Staluppi Group,
the Reed Group and the Lance Landers dealerships had been consummated as of
January 1, 1996. The results of operations for the six months ended June 30,
1997 and 1996 also reflect acquisitions completed prior to March 31, 1997 as if
such acquisitions had been consummated as of January 1, 1996.

<TABLE>
<CAPTION>
PRO FORMA RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $1,173,236 $1,189,928
Income before minority interests and
provision for income taxes $21,340 $21,549
Net income $12,707 $12,929
Net income per common share $0.66 $0.67
</TABLE>

7
UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)


5. PRO FORMA RESULTS OF OPERATIONS (CONTINUED)

The foregoing pro forma results are not necessarily indicative of results of
operations that would have been reported had the acquisitions been completed as
of January 1, 1996. The pro forma results do not reflect a reduction of cost of
sales related to reduced interest on floor plan notes payable resulting from
the application of unused proceeds from the Company's initial public sale of
common stock (the "IPO"). If the reduction of the floor plan interest expense
were reflected, pro forma net income (and net income per common share) would
have been $14,103 ($0.73 per share) for the six months ended June 30, 1996.

6. SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,

1997 1996
---- ----
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
SUPPLEMENTAL INFORMATION:

Cash paid for interest $3,694 $124 $3,996 $153
Cash paid for income taxes 1,898 19 148 13


NON-CASH FINANCING AND INVESTING ACTIVITIES:

Dealership acquisition costs paid by issuance of stock 28,150 - - -
Dealership acquisition costs financed by long-term debt 27,104 - 2,100 -
Capitalized lease obligations 274 100 247 -
Stock issuance costs amortized against proceeds from
issuance of common stock - - 577 -
Warrants issued - - 576 -
</TABLE>

7. LEGAL PROCEEDINGS

In May and June 1997, three complaints were filed in the United States District
Court for the Southern District of New York on behalf of a purported class
consisting of all persons who purchased UAG common stock issued in connection
with and/or traceable to the Company's IPO at any time up to and including
February 26, 1997 (the "Lawsuits"). The complaints name as defendants the
Company, Carl Spielvogel, Marshall S. Cogan, J.P. Morgan Securities Inc.,
Montgomery Securities and Smith Barney, Inc. The plaintiffs in the Lawsuits
seek unspecified damages in connection with their allegations that the
Prospectus and Registration Statement disseminated in connection with the IPO
contained material misrepresentations and omissions in violation of Sections
11, 12(a)(2) and 15 of the Securities Act. They also seek to have their actions
certified as class actions under the Federal Rules of Civil Procedure. The
Company believes that the plaintiffs' claims are without merit and intends to
defend the Lawsuits vigorously.

8
UNITED AUTO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)


8. SUBSEQUENT EVENTS

On July 23, 1997, the Company completed the sale of $150,000 aggregate
principal amount of 11% Senior Subordinated Notes due 2007 in a transaction
exempt from registration under the Securities Act of 1933 pursuant to Rule 144A
thereunder. The Notes were issued at 98.529% of their principal amount.
Proceeds from the offering, after issue discount, discount to initial
purchasers and estimated transaction costs amounted to approximately
$140,793.

9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The Company retails new and used automobiles and light trucks, operates service
and parts departments and sells various aftermarket products, including finance
and insurance contracts. For the quarter ended June 30, 1997, UAG had revenues
of approximately $527.0 million and retailed 13,006 new and 7,994 used
vehicles. Vehicle sales represented 87.9% of the Company's revenues for the
quarter ended June 30, 1997; service and parts accounted for 8.7% of revenues,
with finance and insurance representing the remaining 3.4%.

New vehicle revenues include sales to retail customers and to leasing companies
providing consumer automobile leasing. Used vehicle revenues include amounts
received for used vehicles sold to retail customers, leasing companies
providing consumer leasing, other dealers and wholesalers. Finance and
insurance revenues are generated from sales of accessories such as radios,
cellular phones, alarms, custom wheels, paint sealants and fabric protectors,
as well as amounts received as fees for placing extended service contracts,
credit insurance policies, and financing and lease contracts. UAG dealerships
market a complete line of aftermarket automotive products and services through
the Company's wholly-owned subsidiary, United AutoCare. Service and parts
revenues include amounts paid by consumers for repair and maintenance service
and the purchase of replacement parts.

Through its automobile finance subsidiary, Atlantic Auto Finance, the Company
derives revenues from the purchase, sale and servicing of motor vehicle
installment contracts originated by both UAG and third-party dealerships.

The Company's selling expenses consist of advertising and compensation for
sales department personnel, including commissions and related bonuses. General
and administrative expenses include compensation for administration, finance
and general management personnel, depreciation, amortization, rent, insurance
and utilities. Interest expense consists of interest charges on all of the
Company's interest-bearing debt other than floor plan inventory financing.
Interest expense on floor plan debt is included in cost of sales.

During the three month period ended June 30, 1997, the Company completed the
acquisition of Gary Hanna Nissan, Inc., the Staluppi Automotive Group, the Gene
Reed Automotive Group and the Lance Landers dealerships. Each of these
acquisitions has been accounted for using the purchase method and, as a result,
the Company's financial statements include the results of operations of the
acquired dealerships only from the effective date of acquisition.

10
RESULTS OF OPERATIONS

The following discussion and analysis relates to the Company's consolidated
historical results of operation for the six and three months ended June 30,
1997 and 1996.

Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996

Auto Dealerships

Revenues. Revenues increased by $317.2 million, or 53.1%, from $597.9 million
to $915.2 million due to acquisitions. Revenues at dealerships acquired
subsequent to June 30, 1996 amounted to $321.9 million, offset slightly by
a net decrease in sales at dealerships owned prior to June 30, 1996 due
primarily to (i) a reduction in revenues at Atlanta Toyota, impacted by
shortages of inventory of certain models, (ii) a reduction in sales volume at
the Company's DiFeo division resulting in part from the closure of
unprofitable dealerships and (iii) a decrease at Company Nissan dealerships in
the southeastern United States, which the Company believes mirrors an overall
decline in sales for Nissan in that region of the United States.

Sales of new and used vehicles increased by $269.0 million, or 50.3%, from
$535.2 million to $804.2 million. Revenues at dealerships acquired subsequent
to June 30, 1996 amounted to $278.9 million, offset by the net decrease in new
and used vehicle sales at dealerships owned prior to June 30, 1996 noted above.
Unit retail sales of new and used vehicles increased by 30.0% and 63.8%,
respectively, due principally to acquisitions. For the six months ended June
30, 1997, the Company sold 22,757 new vehicles (62.0% of total vehicle sales)
and 13,943 used vehicles (38.0% of total vehicle sales). For the six months
ended June 30, 1996, the Company sold 17,509 new vehicles (67.3% of total
vehicle sales) and 8,510 used vehicles (32.7% of total vehicle sales). The
increase in the relative proportion of used vehicle sales to total vehicle
sales was due principally to the expansion of used car operations in response to
the popularity of used cars. New vehicle selling prices increased by an average
of 13.3% due primarily to changes in the mix of models sold and changes in
manufacturer pricing. Used vehicle selling prices increased by an average of
11.9% due to changes in market conditions which resulted in a change in the mix
of used vehicles sold.

Finance and insurance revenues (aftermarket product sales) increased by $9.2
million, or 41.1%, from $22.3 million to $31.5 million due primarily to
acquisitions and the establishment of United AutoCare, offset to a degree by
a net decrease at dealerships owned prior to June 30, 1996 due to the
decrease in new and used vehicle sales noted above.

Service and parts revenues increased by $39.0 million, or 96.5%, from $40.4
million to $79.4 million due principally to acquisitions.

11
Gross Profit. Gross profit increased by $49.9 million, or 75.2%, from $66.4
million to $116.3 million. Gross profit as a percentage of revenues increased
from 11.1% to 12.7%. The increase in gross profit and in gross profit as a
percentage of revenues is due to (i) acquisitions, (ii) increased finance
and insurance and service and parts revenues, which yield higher margins, as
a percentage of total revenues, (iii) improved gross profit margins on vehicle
sales and service and parts revenues and (iv) the establishment of United
AutoCare.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $38.7 million, or 68.0%, from $57.0
million to $95.7 million due principally to acquisitions and an increase in the
infrastructure required to manage the substantial increase in the Company's
operations and the planned expansion of its business in the future. Such
expenses as a percentage of revenue increased from 9.5% to 10.5%.

Other Interest Expense. Other interest expense increased by $0.2 million, from
$2.0 million to $2.2 million due principally to an increase in interest expense
arising from the issuance of acquisition-related debt, offset by a reduction in
interest expense due to the retirement of the Company's Senior Notes in October
1996.

Other Income (Expense), Net. Other income (expense), net decreased by $1.3
million, from $1.6 million to $0.3 million due principally to a reduction in
related party interest income resulting from the disposition of the minority
interests in certain dealerships in October 1996.

Total Company

Provision for Income Taxes. The 1997 provision for income taxes increased $4.4
million from $3.0 million to $7.4 million. The increase is due to the increase
in taxable income and a change in the Company's estimated effective tax rate.

12
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996

Auto Dealerships

Revenues. Revenues increased by $190.7 million, or 56.7%, from $336.2 million
to $527.0 million due to acquisitions. Revenues at dealerships
acquired subsequent to June 30, 1996 amounted to $215.8 million, offset
slightly by a net decrease in sales at dealerships owned prior to June 30, 1996
due primarily to (i) a reduction in revenues at Atlanta Toyota, impacted by
shortages of inventory of certain models, (ii) a reduction in sales volume
at the Company's DiFeo division resulting in part from the closure of
unprofitable dealerships and (iii) a decrease at Company Nissan dealerships
in the southeastern United States, which the Company believes mirrors an
overall decline in sales for Nissan in that region of the United States.

Sales of new and used vehicles increased by $161.3 million, or 53.4%, from
$302.0 million to $463.4 million. Revenues at dealerships acquired subsequent
to June 30, 1996 amounted to $187.4 million, offset by the net decrease in new
and used vehicle sales at dealerships owned prior to June 30, 1996 noted above.
Unit retail sales of new and used vehicles increased by 29.8% and 78.2%,
respectively, due principally to acquisitions. For the three months ended June
30, 1997, the Company sold 13,006 new vehicles (61.9% of total vehicle sales)
and 7,994 used vehicles (38.1% of total vehicle sales). For the three months
ended June 30, 1996, the Company sold 10,019 new vehicles (69.1% of total
vehicle sales) and 4,485 used vehicles (30.9% of total vehicle sales). The
increase in the relative proportion of used vehicle sales to total vehicle
sales was due principally to the expansion of used car operations in response
to the popularity of used cars. New vehicle selling prices increased by an
average of 14.1% due primarily to changes in the mix of models sold and changes
in manufacturer pricing. Used vehicle selling prices increased by an average of
8.9% due to changes in market conditions which resulted in a change in the mix
of used vehicles sold.

Finance and insurance revenues (aftermarket product sales) increased by $5.6
million, or 45.4%, from $12.4 million to $18.0 due primarily to acquisitions
and the establishment of United AutoCare, offset to a degree by a net decrease
at dealerships owned prior to June 30, 1996 due to the decrease in new and
used vehicle sales noted above.

Service and parts revenues increased by $23.8 million, or 109.0%, from $21.8
million to $45.5 million due principally to acquisitions.

Gross Profit. Gross profit increased by $31.5 million, or 84.7%, from $37.2
million to $68.7 million. Gross profit as a percentage of revenues increased
from 11.1 % to 13.0 %. The increase in gross profit and in gross profit as a
percentage of revenues is due to (i) acquisitions, (ii) increased finance and
insurance and service and parts revenues, which yield higher margins, as a
percentage of total revenues, (iii) improved gross profit margins on vehicle
sales and service and parts revenues and (iv) the establishment of United
AutoCare.

13
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $24.6 million, or 83.8%, from $29.4
million to $54.0 million due principally to acquisitions and an increase in the
infrastructure required to manage the substantial increase in the Company's
operations and the planned expansion of its business in the future. Such
expenses as a percentage of revenue increased from 8.7% to 10.2%.

Other Interest Expense. Other interest expense increased by $0.9 million, from
$0.9 million to $1.8 million due principally to an increase in interest expense
arising from the issuance of acquisition related debt, offset by a reduction in
interest expense due to the retirement of the Company's Senior Notes in October
1996.

Other Income (Expense), Net. Other income (expense), net decreased by $0.7
million due principally to a reduction in related party interest income
resulting from the disposition of the minority interests in certain dealerships
in October 1996.

Total Company

Provision for Income Taxes. The 1997 provision for income taxes increased $2.6
million from $2.5 million to $5.1 million. The increase is due to the increase
in taxable income and a change in the Company's estimated effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

CASH AND LIQUIDITY REQUIREMENTS

The cash requirements of the Company are primarily for acquisitions of new
dealerships, working capital and the expansion of existing facilities.
Historically, these cash requirements have been met through issuances of
equity, borrowings under various credit agreements and cash flow from
operations. At June 30, 1997, the Company's dealership operations had working
capital of $67.8 million.

During the six months ended June 30, 1997, dealership activities resulted in
net cash provided by operations of $15.0 million. Net cash used by dealerships
in investing activities during the six months ended June 30, 1997 totaled $83.4
million, relating primarily to dealership acquisitions, funding provided to
Atlantic Auto Finance and capital expenditures. Dealership financing activities
provided $44.9 million of cash during the six months ended June 30, 1997
principally from the issuance of long-term debt.

14
The Company finances substantially all of its new and used vehicle inventory
under revolving floor plan financing arrangements with various lenders. The
floor plan lenders pay the manufacturer directly with respect to new vehicles.
The Company makes monthly interest payments on the amount financed, but is not
required to make loan principal repayments prior to the sale of new and used
vehicles. Substantially all of the assets of the Company's dealerships are
subject to security interests granted to their floor plan lending sources.

At June 30, 1997, the Company had approximately $48.3 million of cash available
to fund operations and future acquisitions. In addition, the Company is party
to a $50.0 million Senior Credit Facility, dated March 20, 1997 (as amended)
(the "Senior Credit Facility"), with a group of banks, which is to be used
principally for acquisitions. At June 30, 1997 the Company was fully borrowed
under this facility. During July 1997, the Company issued $150.0 million
aggregate principal amount of its 11% Senior Subordinated Notes due 2007
(the "Notes"). Net proceeds from the sale of the Notes amounted to $140.8
million. $50.0 million of such net proceeds were used to repay amounts
outstanding under the Senior Credit Facility. The balance of such proceeds have
been deposited with the Company's floor plan lenders, which deposits are
earning interest at floor plan rates. The Company has such deposits, as well as
borrowing capacity under the Senior Credit Facility, to use for working capital
and general corporate purposes, including acquisitions. The Company's principal
source of growth has come, and is expected to continue to come, from
acquisitions of automobile dealerships. The Company believes that its existing
capital resources will be sufficient to fund its current acquisition
commitments. To the extent the Company pursues additional significant
acquisitions, it may need to raise additional capital either through the public
or private issuance of equity or debt securities or through additional bank
borrowings. A public equity offering would require the prior approval of
certain automobile manufacturers.

CYCLICALITY

Unit sales of motor vehicles, particularly new vehicles, historically have been
cyclical, fluctuating with general economic cycles. During economic downturns,
the automotive retailing industry tends to experience similar periods of
decline and recession as the general economy. The Company believes that the
industry is influenced by general economic conditions and particularly by
consumer confidence, the level of personal discretionary spending, interest
rates and credit availability.

SEASONALITY

The Company's combined business is modestly seasonal overall. The greatest
seasonalities exist with the dealerships in the New York metropolitan area, for
which the second and third quarters are the strongest with respect to vehicle
related sales. The service and parts business at all dealerships experiences
relatively modest seasonal fluctuations.

15
EFFECTS OF INFLATION

The Company believes that the relatively moderate rates of inflation over the
last few years have not had a significant impact on revenue or profitability.
The Company does not expect inflation to have any near-term material effects on
the sale of its products and services. However, there can be no assurance that
there will be no such effect in the future.

The Company finances substantially all of its inventory through various
revolving floor plan arrangements with interest rates that vary based on the
prime rate or LIBOR. Such rates have historically increased during periods of
increasing inflation. The Company does not believe that it would be placed at a
competitive disadvantage should interest rates increase due to increased
inflation since most other automobile dealers have similar floating rate
borrowing arrangements.

16
PART II

ITEM 1 - LEGAL PROCEEDINGS

In May and June, 1997, three complaints were filed in the United States
District Court for the Southern District of New York on behalf of a purported
class consisting of all persons who purchased the Company's Voting Common Stock
issued in connection with and/or traceable to the Company's initial public
offering (the "IPO") at any time up to and including February 26, 1997 (the
"Lawsuits"). The complaints name as defendants the Company, Carl Spielvogel,
Marshall S. Cogan, J.P. Morgan Securities Inc., Montgomery Securities and Smith
Barney Inc. The plaintiffs in the Lawsuits seek unspecified damages in
connection with their allegations that the prospectus and the related
registration statement disseminated in connection with the IPO contained
material misrepresentations and omissions in violation of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933, as amended (the "Securities Act"). They
also seek to have their actions certified as class actions under Federal Rules
of Civil Procedure. The Company believes that the plaintiffs' claims are
without merit and intends to defend the Lawsuits vigorously.

In addition, the Company and its subsidiaries are involved in litigation that
has arisen in the ordinary course of business. None of these matters, either
individually or in the aggregate, are expected to have a material adverse
effect on the Company's results of operations or financial condition.

ITEM 2 - CHANGES IN SECURITIES

RECENT SALES OF UNREGISTERED SECURITIES

On March 6, 1997, the Company acquired a dealership group located in Houston,
Texas for a purchase price of $7.0 million in cash and 297,872 shares of Voting
Common Stock. In connection with such transaction, the Company issued 14,894
shares of Voting Common Stock to the party that brokered the transaction. On
April 25, 1997, the Company issued an additional 37,457 shares of Voting Common
Stock to the sellers as an adjustment to the purchase price. This information
supersedes that contained in the Company's Form 10-Q for the quarter ended
March 31, 1997.

On April 22, 1997, the Company acquired a dealership located in Las Vegas,
Nevada for a purchase price of approximately $7.0 million in cash, notes in the
aggregate principal amount of $1.2 million and 302,094 shares of Voting Common
Stock.

On April 30, 1997, the Company acquired a dealership group located in West Palm
Beach, Florida and Long Island, New York for a purchase price of approximately
$25.5 million in cash, notes in the aggregate principal amount of $21.9 million
and 127,660 shares of Voting Common Stock.

On May 30, 1997, the Company acquired a dealership group located in
Fayetteville, North Carolina and North Charleston and Summerville, South
Carolina for a purchase price of approximately $17.0 million in cash, notes in
the aggregate principal amount of $4.0 million and 717,241 shares of Voting
Common Stock.

17
All such shares were issued in reliance on Section 4(2) of the Securities Act,
as a transaction not involving any public offering.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a) The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on April 17, 1997.

b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended. There were no
solicitations in opposition to management's nominees listed in the proxy
statement. Both of the nominees listed in the proxy statement were elected.

c) The following matters were voted upon at the Annual Meeting:

1. The election of two Class I directors. The number of votes cast for
and withheld for each nominee was as set forth below:

Nominee For Withheld
------- --- --------
Marshall S. Cogan 15,171,123 11,925
John M. Sallay 15,171,123 11,925

2. Ratification of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the year ending December 31, 1997. The votes were as
follows:

For Against Abstain
--- ------- -------
15,031,344 3,800 147,904

18
ITEM 6  -  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits

*** 3.1 Third Restated Certificate of Incorporation.

* 3.2 Restated Bylaws.

* 4.1 Specimen Common Stock certificate.

* 10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993,
among the Company and the investors listed therein.

* 10.1.1.2 Amendment to Registration Rights Agreement, dated as of July
31, 1996, among the Company and the investors listed
therein.

* 10.1.2 Waiver, Consent and Modification Agreement, dated as of
September 22, 1995, among the Company and its stockholders.

* 10.1.3 Letter Agreement, dated September 22, 1996, between the
Company and J.P. Morgan Capital Corporation.

* 10.1.4 Form of Warrant.

* 10.1.5 Form of Additional Warrant.

* 10.1.6 Employment Agreement, dated as of June 21, 1996, between the
Company and Carl Spielvogel.

* 10.1.7 Severance Agreement, dated April 5, 1996, among the Company,
Trace and Ezra P. Mager.

* 10.1.8 Stock Option Plan of the Company.

* 10.1.9 Registration Rights Agreement, dated as of August 1, 1995,
among the company and the parties listed on Schedule I
thereto.

* 10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc.
and the Company.

* 10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to
the Company.

* 10.1.12 Agreement, dated July 24, 1996, between the Company and
Toyota Motor Sales U.S.A., Inc.

* 10.1.13 Non-employee Director Compensation Plan of the Company.

* 10.1.14 Form of Agreement among the Company, certain of its
affiliates and American Honda Motor Co., Inc.

* 10.1.15 Form of Option Certificate of the Company in favor of Samuel
X. DiFeo and Joseph C. DiFeo.

* 10.1.16 Form of Registration Rights Agreement among the Company and
the parties listed on Schedule U thereto.

**** 10.1.17 Registration Rights Agreement, dated March 6, 1997, between
the Company and Kevin J. Coffey.

**** 10.1.18 Consulting Agreement, dated March 3, 1997, between the
Company and Carl Spielvogel.

**** 10.1.19 Credit Agreement, dated as of March 20, 1997, among the
Company, the Guarantors party thereto, the Banks party
thereto, The Bank of Nova Scotia, as Administrative Agent,
and Morgan Guaranty Trust Company of New York, as
Documentation Agent.

19
**** 10.1.20       Pledge Agreement, dated as of March 20, 1997, among the
Company, the pledgors named therein and The Bank of Nova
Scotia, as Administrative Agent.

10.1.21 Registration Rights Agreement, dated May 31, 1997, among the
Company, Gene Reed, Jr., Michael L. Reed, Michael G.
Lallier, Deborah B. Lallier, John P. Jones, Charles J.
Bradshaw, Charles J. Bradshaw, Jr., Julia D. Bradshaw and
William B. Bradshaw.

10.1.22 Registration Rights Agreement, dated April 30, 1997, among
the Company and John A. Staluppi.

* 10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated
October 5, 1995, between American Honda Motor Co. Inc. and
Danbury Auto Partnership.

* 10.2.1.2 American Honda Motor Co. Standard Provisions.

* 10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between
Lexus, a division of Toyota Motor Sales, U.S.A., Inc, and
Somerset Motors Partnership.

* 10.2.2.2 Lexus Dealer Agreement Standard Provisions.

* 10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement, dated August 29, 1994, between Mitsubishi
Motor Sales of America, Inc. and Rockland Motors
Partnership, as amended August 20, 1996.

* 10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement Standard Provisions.

* 10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January
1, 1994, between BMW of North America, Inc. and DiFeo BMW
Partnership, as amended October 21, 1996.

* 10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions
Applicable to Dealer Agreement.

* 10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996,
between American Suzuki Motor Corporation and Fair Hyundai
Partnership, as amended September 6, 1996.

* 10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard
Provisions.

* 10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and Hudson Motors Partnership.

* 10.2.6.2 Toyota Dealer Agreement Standard Provisions.

* 10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement,
dated October 2, 1992, between General Motors Corporation,
Oldsmobile Division and J&F Oldsmobile-Isuzu Partnership, as
amended December 20, 1993 and July 23, 1996.

* 10.2.7.2 General Motors Dealer Sales and Service Agreement Standard
Provisions.

* 10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation,
Chevrolet Motor Division and Fair Chevrolet-Geo Partnership.

* 10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
DiFeo Nissan Partnership.

20
* 10.2.9.2      Nissan Dealer Sales and Service Agreement Standard
Provisions.

* 10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, dated
August 16, 1995, between Fair Chrysler Plymouth Partnership
and Chrysler Corporation.

* 10.2.10.2 Chrysler Corporation Sales and Service agreement Additional
Terms and Provisions

* 10.2.11 Chrysler Corporation Eagle Sales and Service Agreement,
dated October 8, 1992, between DiFeo Jeep-Eagle Partnership
and Chrysler Corporation.

* 10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement,
dated August 16, 1995, between DiFeo Chrysler Plymouth Jeep
Eagle Partnership and Chrysler.

* 10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement,
dated November 13, 1992, between DiFeo Chrysler Plymouth
Jeep Eagle Partnership and Chrysler Corporation.

* 10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and County Auto Group Partnership.

* 10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement,
dated October 12, 1992, between Hyundai Motor America and
Fair Hyundai Partnership as amended November 22, 1993,
October 12, 1995, March 14, 1996 and September 18, 1996.

* 10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement
Standard Provisions.

* 10.2.16 Hyundai Motor America Dealer Sales and Service Agreement,
dated November 22, 1993, as amended April 1, 1994, and
November 3, 1995, between Hyundai Motor America and DiFeo
Hyundai Partnership.


* 10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between
Toyota Motor Distributors, Inc. and OCT Partnership.

* 10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service
Agreement, dated June 30, 1994, between Mitsubishi Motor
Sales of America, Inc. and OCM Partnership.

* 10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and
Chrysler Corporation.

* 10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated
November 1, 1995 between General Motors Corporation,
Chevrolet Motor Division and DiFeo Chevrolet-Geo Partnership

* 10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of
September 16, 1996 between American Isuzu Motors, Inc. and
Fair Cadillac-Oldsmobile-Isuzu Partnership.

* 10.2.22 Isuzu Dealer Sales and Service Agreement Additional
Provisions.

* 10.2.26 Settlement Agreement, dated as of October 3, 1996, among the
Company and certain of its affiliates, on the one hand, and
Samuel X. DiFeo, Joseph C. DiFeo and certain of their
affiliates, on the other hand.

* 10.2.27 Form of Agreement and Plan of Merger used in the Minority
Exchange of the DiFeo Group.

* 10.2.28 Form of Lease of certain facilities in the DiFeo Group.

21
* 10.2.29       Lease Agreement, dated September 27, 1990, between J&F
Associates and TJGHCC Associates.

* 10.2.30 Lease Agreement, dated October 1, 1992, between Manly
Chevrolet, Inc. and County Toyota, Inc.

* 10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and
DiFeo BMW Partnership.

10.2.32 Security Agreement and Master Credit Agreement, dated
November 22, 1996, between DiFeo Nissan Partnership and
Chrysler Credit Corporation (substantially similar to
exhibit 10.4.16 to the Company's Registration Statement on
Form S-1, Registration No. 333-09429) (a substantially
similar agreement exists with each dealership in the DiFeo
Group).

* 10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995,
between Atlantic Auto Funding Corporation and Atlantic Auto
Finance Corporation.

* 10.3.2 Loan and Security Agreement, dated as of June 28, 1995,
among Atlantic Auto Funding Corporation, Atlantic Auto
Finance Corporation and Citibank, N.A.

* 10.3.3 Support Agreement of the Company, dated as of June 28, 1995,
in favor of Atlantic Auto Funding Corporation.

* 10.3.4 Purchase Agreement, dated as of June 14, 1996, between
Atlantic Auto Finance Corporation and Atlantic Auto Second
Funding Corporation.

* 10.3.5 Transfer and Administration Agreement, dated as of June 14,
1996, among Atlantic Auto Second Funding Corporation,
Atlantic Auto Finance Corporation and Morgan Guaranty Trust
Company of New York.

* 10.3.6 Support Agreement of the Company, dated as of June 18, 1996,
in favor of Atlantic Auto Second Funding Corporation.

* 10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto
Grantor Trust 1996-A, dated as of June 20, 1996, among
Atlantic Auto Third Funding Corporation, Atlantic Auto
Finance Corporation and The Chase Manhattan Bank.

* 10.3.8 Insurance and Indemnity Agreement, dated as of June 20,
1996, among Financial Security Assurance Inc., Atlantic Auto
Third Funding Corporation and Atlantic Auto Finance
Corporation.

* 10.3.9 Master Spread Account Agreement, dated as of June 20, 1996,
among Atlantic Auto Third Funding Corporation, Financial
Security Assurance Inc. and The Chase Manhattan Bank.

* 10.3.10 Lease Agreement, dated as of March 18, 1994, between
Perinton Hills and the Company, including guaranty of lease
of Atlantic Auto Finance Corporation.

* 10.4.1 Amended and Restated Stock Purchase Agreement, dated as of
July 1, 1995, among the Company, Landers Auto Sales, Inc.,
Steve Landers, John Landers and Bob Landers.

* 10.4.2 Promissory Note of the Company, dated August 1, 1995, in
favor of Steve Landers and John Landers.

* 10.4.3 Promissory Note of the Company, dated August 1, 1995, in
favor of Steve Landers and John Landers.

22
* 10.4.4        Guarantee of the Company, dated as of August 1, 1995, in
favor of Steve Landers and John Landers.

* 10.4.5 Employment Agreement, dated as of August 1, 1995, between
Landers Auto Sales, Inc. and Steve Landers.

* 10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Jeep-Eagle premises.

* 10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Oldsmobile-GMC premises.

* 10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among
the Company, United Landers, Inc., Landers Auto Sales, Inc.,
Steve Landers and John Landers.

* 10.4.9 Chrysler Corporation Eagle Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.

* 10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.

* 10.4.11 Chrysler Corporation Dodge Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.

* 10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.

* 10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.

* 10.4.14 Oldsmobile Division Dealer Sales and Service Agreement,
dated November 1, 1995, between General Motors Corporation,
Oldsmobile Division and United Landers Auto Sales, Inc.

* 10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, GMC
Truck Division and United Landers Auto Sales, Inc.

* 10.4.16 Security Agreement and Master Credit Agreement, dated
October 25, 1993, between Landers Oldsmobile-GMC Inc. and
Chrysler Credit Corporation.

* 10.4.17 Security Agreement and Master Credit Agreement, dated May
17, 1989, between Landers Jeep-Eagle, Inc. and Chrysler
Credit Corporation.

* 10.4.18 Continuing Guaranty of United Landers, Inc., dated August
15, 1994, in favor of Chrysler Credit Corporation.

* 10.4.19 Commercial Loan Agreement, dated December 5, 1994, between
Landers Oldsmobile-GMC, Inc. and The Benton State Bank.

* 10.4.20 Commercial Security Agreement, dated December 5, 1994,
between Landers Oldsmobile-GMC, Inc. and The Benton State
Bank.

* 10.4.21 Agreement, dated July 31, 1995, between the Company and
General Motors Corporation, Oldsmobile Division.

* 10.5.1 Stock Purchase Agreement, dated as of November 17, 1995,
among the Company, UAG Atlanta, Inc., Atlanta Toyota, Inc,
and Carl H. Westcott.

23
* 10.5.2        Promissory Note of UAG Atlanta, Inc., dated January 16,
1996, in favor of Carl H. Westcott.

* 10.5.3 Guaranty of the Company, dated as of January 16, 1996, in
favor of Carl H. Westcott.

* 10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16,
1996, in favor of First Extended Service Corporation.

* 10.5.5 Guaranty of the Company, dated as of January 16, 1996, in
favor of Carl H. Westcott.

* 10.5.61 Lease Agreement, dated as of January 3, 1996, between Carl
Westcott and Atlanta Toyota, Inc.

* 10.5.7 Lease Guaranty of the Company, dated as of January 16, 1995,
in favor of Carl Westcott.

* 10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between
Southeast Toyota Motor Distributors, Inc. and Atlanta
Toyota, Inc.

* 10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996,
between World Omni Financial Corp. and Atlanta Toyota, Inc.

* 10.5.10 Continuing Guaranty of the Company in favor of World Omni
Financial Corp. and certain affiliates.

* 10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996,
among Atlanta Toyota, Inc., Fidelity Warranty Services, Inc.
and World Omni Financial Corp.

* 10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among
the Company, UAG Atlanta, Inc., Atlanta Toyota and John
Smith.

* 10.5.13 Employment Agreement, dated as of January 16, 1996, among
the Company, UAG Atlanta, Inc. and John Smith.

* 10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among
the Company, UAG Atlanta II, Inc., Steve Rayman Nissan,
Inc., Steven L. Rayman and Richard W. Keffer, Jr.

* 10.6.2 Employment Agreement, dated as of May 1, 1996, among the
Company, UAG Atlanta II, In., Steve Rayman Nissan, Inc. and
Bruce G. Dunker.

* 10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L.
Rayman, Richard W. Keffer, Jr. and Steve Rayman Nissan, Inc.

* 10.6.4 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
United Nissan, Inc.

* 10.6.5 Wholesale Floor Plan Security Agreement, dated April 29,
1996, between World Omni Financial Corp. and United Nissan,
Inc.

* 10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in
favor of World Omni Financial Corp. and certain affiliates.

* 10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among
the Company, UAG Atlanta III, Inc. Hickman Nissan, Inc.,
Lynda Jane Hickman and Lynda Jane Hickman as Executrix under
the will of James Franklin Hickman, Jr., deceased.

* 10.7.2 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
Peachtree Nissan, Inc.

24
* 10.7.3        Automotive Wholesale Financing and Security Agreement, dated
July 12, 1996, between Nissan Motor Acceptance Corporation
and Peachtree Nissan, Inc.

* 10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated
July 12, 1996, in favor of Nissan Motor Acceptance
Corporation.

* 10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12,
996, in favor of Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr.

* 10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12,
1996, in favor of Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr.

* 10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in
favor of Lynda Jane Hickman, as Executrix under the will of
James Franklin Hickman, Jr.

* 10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane
Hickman, as Executrix under the will of James Franklin
Hickman, Jr., and Hickman Nissan, Inc.

* 10.7.9 Lease Agreement, dated July 12, 1996, between Argonne
Enterprises, Inc. and Hickman Nissan, Inc.

* 10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in
favor of Lynda Jane Hickman, Jr.

* 10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in
favor of Argonne Enterprises, Inc.

* 10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among
the Company, UAG West, Inc., Scottsdale Jaguar, LTD., SA
Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD.,
6725 Dealership LTD., Steven Knappenberger Revocable Trust
Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29,
1992, Steven Knappenberger, Jay P. Beskind December 29,
1992, Knappenberger 6725 Trust dated and George W. Brochick,
as amended on October 21, 1996 by Amendment No. 1, Amendment
No. 2 and Amendment No. 3.

* 10.8.2 Purchase and Sale Agreement, 6905 E. McDowell Road, dated
June 6, 1996, among Steven Knappenberger, as Trustee of the
Steven Knappenberger Revocable Trust II, Bruce
Knappenberger, as Trustee of the Bruce Knappenberger Trust
and UAG West, Inc. and Steven Knappenberger.

* 10.8.3 Form of Employment Agreement between the Company, UAG West,
Inc., and Steven Knappenberger.

* 10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB,
Inc.

* 10.8.5.1 Form of Audi Dealer Agreement.

* 10.8.5.2 Audi Standard Provisions.

* 10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement.

* 10.8.6.2 Acura Standard Provisions.

* 10.8.7.1 Form of BMW of North America Dealer Agreement.

* 10.8.8.1 Form of Porsche Sales and Service Agreement.

25
* 10.8.8.2      Form of Addendum to Porsche Sales and Service Agreement.

* 10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.

* 10.8.9.2 Land Rover Standard Provisions.

* 10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and
Scottsdale Porsche & Audi, Ltd.

* 10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R.J.
Morgan Corporation of America and Scottsdale Hyundai, Ltd.

* 10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive,
Inc. and LRP Ltd.

* 10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun
BMW Ltd.

* 10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK
Motors, Ltd., and the Knappenberger Revocable Trust.

* 10.8.15 Form of Management Agreement among the Company, UAG West,
Inc. and Scottsdale Jaguar, Ltd.

* 10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale
Jaguar, Ltd.

* 10.8.17 Form of Indemnification Agreement among the Company, UAG
West, Inc., Scottsdale Jaguar, Ltd., Steven Knappenberger,
and certain other individuals and trusts.

* 10.8.18 Form of Real Estate Loan and Security Agreement, made by SA
Automotive, Ltd. for the benefit of Chrysler Financial
Corporation.

* 10.8.19 Form of Security Agreement and Master Credit Agreement of
Chrysler Credit Corporation.

* 10.8.20 Form of Continuing Guaranty of each of the Company and UAG
West, Inc. in favor of Chrysler Credit Corporation.

10.8.21 Dealer Agreement, dated as of February 28, 1997, between
Rolls-Royce Motor Cars Inc. and Scottsdale Audi, Ltd.

* 10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans BMW, Inc. and
Charles F. Evans.

* 10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans Nissan, Inc.
and Charles F. Evans.

* 10.9.3 Form of Dealer Agreement between BMW North America, Inc. and
Charles Evans BMW Inc.

* 10.9.4 Form of Nissan Dealer Term Sales and Service Agreement
between Nissan Motor Corporation in U.S.A. and Charles Evans
Nissan, Inc.

* 10.9.5 Form of Lease Agreement between Charles F. Evans and Charles
Evans BMW, Inc.

* 10.9.6 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.

* 10.9.7 Form of Lease Agreement between Charles F. Evans and Charles
Evans Nissan, Inc.

* 10.9.8 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.

* 10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW
Property between Charles F. Evans and the Company.

* 10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan
Property between Charles F. Evans and the Company.

26
* 10.9.11       Form of Inventory Financing and Security Agreement between
BMW Financial Services NA, Inc. and UAG Atlanta IV Motors
Inc.

* 10.9.12 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.

* 10.9.13 Form of Inventory Financing and Security Agreement between
BMW Financial Services NA, Inc. and Conyers Nissan, Inc.

* 10.9.14 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.

* 10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the
Company, UAG Tennessee, Inc., Standefer Motor Sales, Inc.,
Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of
Charles B. Standefer for the primary benefit of children,
dated December 21, 1992.

* 10.10.2 Form of Nissan Dealer Term Sales and Service Agreement
between Nissan Motor Corporation in U.S.A. and Conyers
Nissan, Inc.

* 10.10.3 Form of Lease Agreement between Standefer Investment Company
and Standefer Motor Sales, Inc.

* 10.10.4 Form of Lease Guaranty of the Company in favor of Standefer
Investment Company.

* 10.10.5 Form of Security Agreement and Master Credit Agreement
between Chrysler Credit Corporation and Standefer Motor
Sales, Inc.

* 10.10.6 Form of Continuing Guaranty of each of the Company and UAG
Tennessee, Inc. in favor of Chrysler Credit Corporation.

** 10.11.1 Agreement and Plan of Merger, dated December 16, 1996, among
Crown Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive,
Ltd., Kevin J. Coffey, Paul J. Rhodes, the Company, UAG
Texas, Inc. and UAG Texas II, Inc.

**** 10.11.2 Chrysler Corporation Dodge Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

**** 10.11.3 Chrysler Corporation Jeep Sales and Service Agreement, dated
April 2, 1997, between Shannon Automotive, Ltd. and Chrysler
Corporation (substantially similar to exhibit 10.2.10.1 to
the Company's Registration Statement on Form S-1,
Registration No. 333-09429).

**** 10.11.4 Chrysler Corporation Eagle Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

**** 10.11.5 Chrysler Corporation Chrysler Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

27
**** 10.11.6       Chrysler Corporation Plymouth Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

10.12.1 Stock Purchase Agreement, dated February 7, 1997, among the
Company, UAG Nevada, Inc., Gary Hanna Nissan, Inc., The Gary
W. Hanna Family Trust Restated December 18, 1990 and Gary W.
Hanna, as amended April 22, 1997.

10.12.2 Nissan Dealer Term Sales and Service Agreement, dated April,
22 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Gary Hanna Nissan, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.12.3 Security Agreement and Master Credit Agreement, dated April
22, 1997, between Gary Hanna Nissan, Inc. and Chrysler
Credit Corporation (substantially similar to exhibit 10.4.16
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).

10.13.1 Stock Purchase Agreement, dated February 19, 1997, among the
Company, UAG East, Inc., Amity Auto Plaza Ltd., Massapequa
Imports Ltd., Westbury Nissan Ltd., Westbury Superstore
Ltd., J&S Auto Refinishing Ltd., Florida Chrysler Plymouth
Jeep Eagle Inc., Palm Auto Plaza Inc., West Palm Infiniti
Inc., West Palm Nissan Inc., Northlake Auto Finish Inc.,
John A. Staluppi and John A. Staluppi, Jr., as amended April
7, 1997 and April 30, 1997

10.13.2 Chrysler Corporation Eagle Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

10.13.3 Chrysler Corporation Chrysler Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

10.13.4 Chrysler Corporation Jeep Sales and Service Agreement, dated
May 2, 1997, between Florida Chrysler Plymouth, Inc. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

10.13.5 Chrysler Corporation Plymouth Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).

10.13.6 Toyota Dealer Agreement, dated June 16, 1997, between
Southeast Toyota Distributors, Inc. and Palm Auto Plaza,
Inc. (substantially similar to exhibit 10.2.10.1 to the
Company's Registration Statement on Form S-1, Registration
No. 333-09429).

28
10.13.7       Toyota Dealer Agreement, dated June 18, 1997, between Toyota
Motor Sales, U.S.A., Inc. and Westbury Superstore, Ltd.
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.8 Toyota Dealer Agreement, dated June 18, 1997, between Toyota
Motor Sales, U.S.A., Inc. and Amity Auto Plaza, Ltd.
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.9 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Amity Nissan of Massapequa, Ltd.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.10 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and West Palm Nissan, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.11 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Westbury Nissan, Ltd.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.12 Infiniti Dealer Term Sales and Service Agreement, dated
April 30, 1997, between the Infiniti Division of Nissan
Motor Corporation in U.S.A. and West Palm Infiniti, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.13.13 Wholesale Floor Plan Security Agreement, dated April 30,
1997, between World Omni Financial Corp. and Florida
Chrysler Plymouth, Inc. (substantially similar to exhibit
10.5.9 to the Company's Registration Statement on Form S-1,
Registration No. 333-09429)(a substantially similar
agreement exists with each dealership in the Staluppi
Group).

**** 10.14.1 Stock Purchase Agreement, dated March 5, 1997, among the
Company, Marshal Mize Ford, Inc., Wade Ford, Inc., Wade Ford
Buford, Inc., Marshal D. Mize, Alan K. Arnold, Lewis J. Dyer
and Gary R. Billings.

10.15.1 Stock Purchase Agreement, dated April 12, 1997, among the
Company, Gene Reed Chevrolet, Inc., Michael
Chevrolet-Oldsmobile, Inc., Reed-Lallier Chevrolet, Inc.,
Gene Reed, Jr., Michael L. Reed, Michael G. Lallier, Deborah
B. Lallier, John P. Jones, Charles J. Bradshaw, Charles J.
Bradshaw, Jr., Julia D. Bradshaw and William B. Bradshaw, as
amended May 31, 1997.

29
10.15.2       Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Gene Reed Chevrolet, Inc. (substantially
similar to exhibit 10.2.8.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).

10.15.3 Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Reed-Lallier Chevrolet, Inc. (substantially
similar to exhibit 10.2.8.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).

10.15.4 Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Michael Chevrolet-Oldsmobile, Inc.
(substantially similar to exhibit 10.2.8.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).

10.15.5 Wholesale Security Agreement, dated April 1, 1981, between
General Motors Acceptance Corporation and Gene Reed
Chevrolet, Inc., as amended September 3, 1992, April 3, 1995
and September 27, 1996 (a substantially similar agreement
exists with each dealership in the Reed Group).

10.16.1 Stock Purchase Agreement, dated January 8, 1997, by and
among the Company, Landers Auto Sales, Inc., Landers United
Auto Group No. 4, Inc., Landers Buick Pontiac, Inc. and
Lance Landers, as amended January 8, 1997.

10.16.2 Isuzu Dealer Sales and Service Agreement, dated as of June
6, 1997, between American Isuzu Motors, Inc. and Landers
Auto Sales, Inc. (substantially similar to exhibit 10.2.2.1
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).

10.16.3 Pontiac-GMC Division Dealer Sales and Service Agreement,
dated June 6, 1997, between General Motors Corporation,
Pontiac and Landers Buick-Pontiac, Inc. (substantially
similar to exhibit 10.2.7.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).

10.16.4 Security Agreement and Master Credit Agreement, dated June
13, 1997, between Landers Buick-Pontiac, Inc. and Chrysler
Credit Corporation (substantially similar to exhibit 10.4.16
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).

27.1 Financial Data Schedule.

- -------------------
* Incorporated herein by reference to the identically numbered exhibit to
the Company's Registration Statement on Form S-1, Registration No.
333-09429.
** Incorporated herein by reference to the identically numbered exhibit to
the Company's Current Report on Form 8-K filed on December 24, 1996,
File No. 1-12297.
*** Incorporated herein by reference to the identically numbered exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 1996, File No. 1-12297.
**** Incorporated herein by reference to the identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, File No. 1-12297.

30
(b)  Reports on Form 8-K.

The Company filed the following Current Reports on Form 8-K during the quarter
ended June 30, 1997:

1. April 21, 1997, reporting under Items 5 and 7 (announcement of Reed
Group acquisition).

2. April 30, 1997, reporting under Item 7 (Crown Automotive financial
information).

3. May 9, 1997, reporting under Item 5 (consummation of Hanna Nissan
acquisition).

4. May 15, 1997, reporting under Items 2 and 7 (consummation of Staluppi
Group acquisition).

31
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 thereunto duly authorized.


UNITED AUTO GROUP, INC.

By: /s/ Marshall S. Cogan
---------------------------------
Marshall S. Cogan
Chairman of the Board,
Chief Executive Officer and
President
Date: August 14, 1997

By: /s/ James R. Davidson
---------------------------------
James R. Davidson
Senior Vice President-Finance and
Treasurer
(Chief Accounting Officer)
Date: August 14, 1997

32