SEC Company Response from MAJOR AUTOMOTIVE COMPANIES INC (CIK 0001009779) — Oct 28, 2005
MAJOR AUTOMOTIVE COMPANIES INC (CIK 0001009779)
Date: Oct. 28, 2005 · CIK: 0001009779 · Accession: 0000950136-05-006779
AI Filing Summary & Sentiment
File numbers found in text: 000-29182
Referenced dates: August 8, 2005, October 19, 2005, October 14, 2005, September 28, 2005, September 28, 2005
Letter
Re: The Major Automotive Companies, Inc. Form 10-K for the year ended December 31, 2004 Filed July 26, 2005 File No. 000-29182
THE MAJOR AUTOMOTIVE COMPANIES, INC. 43-40 Northern Boulevard Long Island City, NY 11101 October 28, 2005
VIA EDGAR TRANSMISSION ----------------------
Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W Mail Stop 3561 Washington, D.C. 20549
Ladies and Gentlemen:
On behalf of The Major Automotive Companies, Inc. (the "Company"), set forth below is the Company's response to the Staff's comment contained in a letter dated September 28, 2005 from Michael Moran, Branch Chief, Division of Corporate Finance (the "Comment Letter of 9/28") that was addressed to our response letter dated October 14, 2005 in which we agreed to provide the requested data by October 21, 2005. This response is numbered to correspond to the comments set forth in the Comment Letter of 9/28, which for convenience, we have incorporated into the response letter.
Financial Statements --------------------
Consolidated Statements of Cash Flows, page F-9 -----------------------------------------------
2. We note your response to comment 2 in our letter dated August 8, 2005. Please address the following items:
Securities and Exchange Commission ================================== October 28, 2005 ================ Page 2 ======
o You state it would be burdensome to reconstruct actual amounts attributable to manufacturers unaffiliated with the lender and to distinguish between new and used vehicle financing obtained from the same source. We understand that GMAC, for example, directly pays the manufacturer from which you purchase your new vehicle inventory and that you do not have the discretion to receive these funds prior to disbursement to the manufacturer. We also assume that a minimal amount of your used vehicle inventories are obtained from your manufacturers and that you receive access to the cash for used vehicle financing prior to disbursement. As such, please advise us of the approximate amount of related borrowings and repayments used in the purchase of used vehicle inventory. Also, tell us the total amounts related to the commercial bank, HSBC USA and Primus. Please confirm that these assumptions are correct or advise us of the cash flows associated with the financing of your inventory.
Response:
We concur with your assumption that few, if any, used vehicles are purchased from manufacturers. In addition, with respect to the funding arrangements, all of our lenders pay the manufacturers directly for new vehicle purchases. For used vehicle purchases, only GMAC pays directly to the auction houses. All of the other lenders forward the funds to the Company.
Our floor plan borrowings for the purchase of used vehicles in the year ended December 31, 2004 aggregated approximately $111.6 million, with repayments aggregating approximately $108.5 million.
Amounts funded by and repaid to HSBC and Primus in 2004 are, as follows:
HSBC PRIMUS TOTAL ------- --------- ---------
NEW --- Borrowed $ 35,502,006 $ 1,961,612 $ 37,463,618
Repaid 35,165,880 1,641,053 36,806,933 ---------------- ----------------- ----------------
Net amount borrowed 336,126 320,559 656,685 ---------------- ----------------- ---------------- USED ---- Borrowed 6,525,485 877,027 7,402,512
Repaid 4,387,507 307,032 4,694,539 ---------------- ----------------- ----------------
Net amount borrowed 2,137,978 569,995 2,707,973 ---------------- ----------------- ---------------- TOTAL
Borrowed 42,027,491 2,838,639 44,866,130
Repaid 39,553,387 1,948,085 41,501,472 ---------------- ----------------- ----------------
NET AMOUNT BORROWED $ 2,474,104 $ 890,554 $ 3,364,658 ================ ================= ================
Securities and Exchange Commission ================================== October 28, 2005 ================ Page 3 ======
With respect to the Commission's comments given by letter dated October 19, 2005 from Michael Moran, Branch Chief, Division of Corporate Finance (the "Comment Letter of 10/19"), set forth below are the Company's responses. The responses are numbered to correspond to the comments set forth in the Comment Letter of 10/19, which for convenience, we have incorporated into the response letter.
Financial Statements --------------------
Consolidated Statements of Operations, page F-5 -----------------------------------------------
1. We note your response to comment 2 in our letter dated September 28, 2005. Please amend your filings to revise your statements of cash flows and balance sheets as appropriate for the classification of cash flows on your floor plan notes and to distinguish between amounts payable to trade creditors and floor plan notes that are non-trade. Further, please expand your footnote disclosure to clarify the revised balance sheet and statement of cash flows presentation.
With respect to our request that you tell us the approximate amount of borrowings and repayments from trade creditors and non-trade creditors related to the financing of your inventories, we note you will provide us a response by October 21, 2005.
Response:
We will amend our statements of cash flows and balance sheets to comply with the changes suggested in the Comment Letter of 10/19.
We will amend our footnote disclosure in the filing to comply with the changes suggested in the Comment Letter of 10/19. Specifically, the last paragraph of Note 4 to Consolidated Financial Statements will include two sentences (immediately after the first sentence), as follows:
"Of such amounts, at December 31, 2004, approximately $35.3 million was owed to lenders affiliated with manufacturers from which we purchased new vehicles and approximately $16.1 million was owed to financial institutions that were unaffiliated with manufacturers from which we purchase new vehicles. At December 31, 2003, approximately $36.9 million was owed to lenders affiliated with manufacturers from which we purchased new vehicles and approximately $12.7 million was owed to financial institutions that were unaffiliated with manufacturers from which we purchase new vehicles."
With respect to the amount of borrowings and repayments from trade creditors and non-trade creditors related to the financing of our inventories, see the table and narrative above provided in response to the Staff's prior comment contained in the Comment Letter of 9/28.
Securities and Exchange Commission ================================== October 28, 2005 ================ Page 4 ======
Note 12 Commitments and Contingencies, page F-36 ------------------------------------------------
2. Reference is made to comment 4 in our letter dated September 28, 2005. Please address expand your proposed revised disclosure to describe the substantial corporate costs not directly related to dealership operations omitted from the calculation of the dealerships' "net income" for each year presented.
Response:
We will expand our disclosure of the bonus calculation to comply with the suggested inclusion of the expanded definition of "net income." Specifically, we will replace the 4th sentence under "Officer's Compensation" in Note 12 of our Annual Report on Form 10-K for the year ended December 31, 2004 (which begins "Additional approval..."), with the following:
Additional approval was given to a bonus plan under which Mr. Bendell receives a bonus equal to 10% of the "net income" of the dealerships, as defined. Such definition includes the aggregate pre-tax income of the Company's automotive dealership operations after any other bonuses paid or accrued and excludes the Company's substantial corporate overhead costs which encompass, among others, being a public company and settlements of litigation related to the Company's former non-automotive technology operations, as well as miscellaneous operating expenses incurred in the Company's leasing operations, all of which are not directly related to dealership operations. The amounts of such bonuses earned by Mr. Bendell were $461,379, $77,386 and $386,455 in 2002, 2003 and 2004, respectively. Accordingly, Mr. Bendell's aggregate compensation pursuant to all of his employment agreements was $961,379, $577,386 and $886,455 in 2002, 2003 and 2004, respectively. In each of the years 2002, 2003 and 2004, Mr. Bendell earned an additional $450,000 in connection with a credit enhancement arrangement for the benefit of the Company. (See Note 13 Related Party Transactions.)
The Company hereby acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in the filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Securities and Exchange Commission ================================== October 28, 2005 ================ Page 5 ======
Please call the undersigned at (718) 937-3700 with any comments or questions regarding the Company's response and please send a copy of any written comments to the following parties:
MITCHELL LITTMAN, ESQ. MARK F. COLDWELL, ESQ. Littman Krooks LLP 655 Third Avenue New York, NY 10017 Phone: (212) 490-2020 Fax: (212) 490-2990
Very truly yours,
Bruce Bendell, Chief Executive Officer
Show Raw Text
CORRESP
1
filename1.htm
THE MAJOR AUTOMOTIVE COMPANIES, INC.
43-40 Northern Boulevard
Long Island City, NY 11101
October 28, 2005
VIA EDGAR TRANSMISSION
----------------------
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W
Mail Stop 3561
Washington, D.C. 20549
Re: The Major Automotive Companies, Inc.
Form 10-K for the year ended December 31, 2004
Filed July 26, 2005
File No. 000-29182
Ladies and Gentlemen:
On behalf of The Major Automotive Companies, Inc. (the "Company"), set
forth below is the Company's response to the Staff's comment contained in a
letter dated September 28, 2005 from Michael Moran, Branch Chief, Division of
Corporate Finance (the "Comment Letter of 9/28") that was addressed to our
response letter dated October 14, 2005 in which we agreed to provide the
requested data by October 21, 2005. This response is numbered to correspond to
the comments set forth in the Comment Letter of 9/28, which for convenience, we
have incorporated into the response letter.
Financial Statements
--------------------
Consolidated Statements of Cash Flows, page F-9
-----------------------------------------------
2. We note your response to comment 2 in our letter dated August 8, 2005.
Please address the following items:
Securities and Exchange Commission
==================================
October 28, 2005
================
Page 2
======
o You state it would be burdensome to reconstruct actual amounts
attributable to manufacturers unaffiliated with the lender and to
distinguish between new and used vehicle financing obtained from the
same source. We understand that GMAC, for example, directly pays the
manufacturer from which you purchase your new vehicle inventory and
that you do not have the discretion to receive these funds prior to
disbursement to the manufacturer. We also assume that a minimal amount
of your used vehicle inventories are obtained from your manufacturers
and that you receive access to the cash for used vehicle financing
prior to disbursement. As such, please advise us of the approximate
amount of related borrowings and repayments used in the purchase of
used vehicle inventory. Also, tell us the total amounts related to the
commercial bank, HSBC USA and Primus. Please confirm that these
assumptions are correct or advise us of the cash flows associated with
the financing of your inventory.
Response:
We concur with your assumption that few, if any, used vehicles are purchased
from manufacturers. In addition, with respect to the funding arrangements, all
of our lenders pay the manufacturers directly for new vehicle purchases. For
used vehicle purchases, only GMAC pays directly to the auction houses. All of
the other lenders forward the funds to the Company.
Our floor plan borrowings for the purchase of used vehicles in the year ended
December 31, 2004 aggregated approximately $111.6 million, with repayments
aggregating approximately $108.5 million.
Amounts funded by and repaid to HSBC and Primus in 2004 are, as follows:
HSBC PRIMUS TOTAL
------- --------- ---------
NEW
---
Borrowed $ 35,502,006 $ 1,961,612 $ 37,463,618
Repaid 35,165,880 1,641,053 36,806,933
---------------- ----------------- ----------------
Net amount borrowed 336,126 320,559 656,685
---------------- ----------------- ----------------
USED
----
Borrowed 6,525,485 877,027 7,402,512
Repaid 4,387,507 307,032 4,694,539
---------------- ----------------- ----------------
Net amount borrowed 2,137,978 569,995 2,707,973
---------------- ----------------- ----------------
TOTAL
Borrowed 42,027,491 2,838,639 44,866,130
Repaid 39,553,387 1,948,085 41,501,472
---------------- ----------------- ----------------
NET AMOUNT BORROWED $ 2,474,104 $ 890,554 $ 3,364,658
================ ================= ================
2
Securities and Exchange Commission
==================================
October 28, 2005
================
Page 3
======
With respect to the Commission's comments given by letter dated October
19, 2005 from Michael Moran, Branch Chief, Division of Corporate Finance (the
"Comment Letter of 10/19"), set forth below are the Company's responses. The
responses are numbered to correspond to the comments set forth in the Comment
Letter of 10/19, which for convenience, we have incorporated into the response
letter.
Financial Statements
--------------------
Consolidated Statements of Operations, page F-5
-----------------------------------------------
1. We note your response to comment 2 in our letter dated September 28,
2005. Please amend your filings to revise your statements of cash flows
and balance sheets as appropriate for the classification of cash flows
on your floor plan notes and to distinguish between amounts payable to
trade creditors and floor plan notes that are non-trade. Further,
please expand your footnote disclosure to clarify the revised balance
sheet and statement of cash flows presentation.
With respect to our request that you tell us the approximate amount of
borrowings and repayments from trade creditors and non-trade creditors
related to the financing of your inventories, we note you will provide
us a response by October 21, 2005.
Response:
We will amend our statements of cash flows and balance sheets to comply with the
changes suggested in the Comment Letter of 10/19.
We will amend our footnote disclosure in the filing to comply with the changes
suggested in the Comment Letter of 10/19. Specifically, the last paragraph of
Note 4 to Consolidated Financial Statements will include two sentences
(immediately after the first sentence), as follows:
"Of such amounts, at December 31, 2004, approximately $35.3 million
was owed to lenders affiliated with manufacturers from which we
purchased new vehicles and approximately $16.1 million was owed to
financial institutions that were unaffiliated with manufacturers from
which we purchase new vehicles. At December 31, 2003, approximately
$36.9 million was owed to lenders affiliated with manufacturers from
which we purchased new vehicles and approximately $12.7 million was
owed to financial institutions that were unaffiliated with
manufacturers from which we purchase new vehicles."
With respect to the amount of borrowings and repayments from trade creditors and
non-trade creditors related to the financing of our inventories, see the table
and narrative above provided in response to the Staff's prior comment contained
in the Comment Letter of 9/28.
3
Securities and Exchange Commission
==================================
October 28, 2005
================
Page 4
======
Note 12 Commitments and Contingencies, page F-36
------------------------------------------------
2. Reference is made to comment 4 in our letter dated September 28, 2005.
Please address expand your proposed revised disclosure to describe the
substantial corporate costs not directly related to dealership
operations omitted from the calculation of the dealerships' "net
income" for each year presented.
Response:
We will expand our disclosure of the bonus calculation to comply with the
suggested inclusion of the expanded definition of "net income." Specifically, we
will replace the 4th sentence under "Officer's Compensation" in Note 12 of our
Annual Report on Form 10-K for the year ended December 31, 2004 (which begins
"Additional approval..."), with the following:
Additional approval was given to a bonus plan under which Mr. Bendell
receives a bonus equal to 10% of the "net income" of the dealerships,
as defined. Such definition includes the aggregate pre-tax income of
the Company's automotive dealership operations after any other
bonuses paid or accrued and excludes the Company's substantial
corporate overhead costs which encompass, among others, being a
public company and settlements of litigation related to the Company's
former non-automotive technology operations, as well as miscellaneous
operating expenses incurred in the Company's leasing operations, all
of which are not directly related to dealership operations. The
amounts of such bonuses earned by Mr. Bendell were $461,379, $77,386
and $386,455 in 2002, 2003 and 2004, respectively. Accordingly, Mr.
Bendell's aggregate compensation pursuant to all of his employment
agreements was $961,379, $577,386 and $886,455 in 2002, 2003 and
2004, respectively. In each of the years 2002, 2003 and 2004, Mr.
Bendell earned an additional $450,000 in connection with a credit
enhancement arrangement for the benefit of the Company. (See Note 13
Related Party Transactions.)
The Company hereby acknowledges that (i) it is responsible for the adequacy and
accuracy of the disclosure in the filing; (ii) staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and (iii) the Company may not
assert staff comments as a defense in any proceeding initiated by the Commission
or any person under the federal securities laws of the United States.
4
Securities and Exchange Commission
==================================
October 28, 2005
================
Page 5
======
Please call the undersigned at (718) 937-3700 with any comments or questions
regarding the Company's response and please send a copy of any written comments
to the following parties:
MITCHELL LITTMAN, ESQ.
MARK F. COLDWELL, ESQ.
Littman Krooks LLP
655 Third Avenue
New York, NY 10017
Phone: (212) 490-2020
Fax: (212) 490-2990
Very truly yours,
Bruce Bendell, Chief Executive Officer
cc: Securities and Exchange Commission
----------------------------------
Donna Di Silvio, Esq.
The Major Automotive Companies, Inc.
------------------------------------
Alan Pearson
Eric Keltz, Esq.
Richard L. Feinstein
Littman Krooks LLP
------------------
Mitchell Littman, Esq.
BDO Seidman
-----------
Adam Roth
5