Ugly Duckling Reports Second Quarter and Six Month Results
PHOENIX--(BUSINESS WIRE)--July 25, 2001--Ugly Duckling Corporation
Second Quarter Highlights:
-- Total revenues were $140.8 million
-- E-Commerce generated $15.2 million in revenues and 1,686 cars
sold during the second quarter of 2001 as compared to $15.1
million in revenues and 1,725 cars sold during the first
quarter of 2001
-- Loan portfolio principal balance reached $534.8 million,
representing a 13% increase over the year-ago quarter
-- New loan originations were $103.6 million, a 13% decrease from
the year-ago quarter
-- Closed 20th Securitization with loan principal balances of
approximately $142.3 million and Class A bonds issued of
100.8 million
-- The Company's Chairman of the Board and largest shareholder,
Ernest C. Garcia II, made an offer to purchase all of the
outstanding stock of the Company (announced April 16, 2001)
*T Financial Highlights (In 000's, except for per share numbers)
Three Months Ended Six Months Ended
June 30, June 30,
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2001 2000 2001 2000
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Total Revenues $140,819 $151,398 $304,849 $309,715 Operating income $ 4,591 $ 9,923 $ 10,770 $ 19,815 Net Earnings $ 1,364 $ 4,348 $ 3,186 $ 8,831 Diluted net earnings per share $ 0.11 $ 0.31 $ 0.26 $ 0.60
Ugly Duckling Corporation (Nasdaq NM: UGLY), the largest used car
sales company focused exclusively on the sub-prime market, today
reported its second quarter and six month financial results for 2001.
Quarter over Quarter Results
For the three months ended June 30, 2001, the Company reported net
earnings of $1,364,000, or $0.11 per diluted share, compared with net
earnings for the same period of 2000 of $4,348,000, or $0.31 per
diluted share. The decrease in earnings in 2001 is primarily
attributable to an increase in the provision for loan losses charged
to current earnings of 31% of originations in 2001 versus 27% in 2000.
Total revenues declined to $140,819,000 for the second quarter of
2001 from $151,398,000 for the second quarter of 2000, a decrease of
approximately 7%. The decrease is due to a reduction in the number of
cars sold from 14,369 in 2000 to 11,607 in 2001, primarily due to
economic factors and the Company's focus on writing higher quality
loans. This increased focus on underwriting is a direct result of the
development of a risk management department during the latter half of
2000, which has made significant adjustments in underwriting policies,
toward the ultimate goal of improving loan losses.
While the Company sold less cars during the second quarter of 2001
versus 2000, interest income rose 17% due to the growth of the
on-balance sheet portfolio. The decline in sales has also impacted new
loan originations, which declined from $118,778,000 during the second
quarter of 2000 to $103,615,000 during the second quarter of 2001. The
amount financed, however, has increased on a per car sold basis from
$8,311 in 2000 to $8,965 in 2001, primarily due to an increase in the
overall sales price of the cars sold. The sales price per car sold
increased to $9,125 for the second quarter of 2001 versus $8,458 for
the same period of the previous year due to the Company's decision to
purchase a larger number of higher end vehicles than have been
purchased in the past.
Although revenues have decreased, operating expenses for the
second quarter of 2001 increased 2% to 25% of revenues, or $35,887,000
versus $34,849,000, or 23% of revenues, for the second quarter of
2000. The Company is in the process of implementing cost saving
initiatives to ultimately return operating expenses to targeted
levels.
During the second quarter of 2001, the Company repurchased
$3,155,000 of its net exchange offer debt for approximately
$2,584,000. The after tax impact of the transaction resulted in a gain
from extinguishment of debt of approximately $344,000, or $0.03 per
diluted share.
Year over Year Results
For the six months ended June 30, 2001, the Company reported net
earnings of $3,186,000, or $0.26 per diluted share, compared with net
earnings for the same period of 2000 of $8,831,000, or $0.60 per
diluted share. The decrease in earnings in 2001 is primarily
attributable to an increase in the provision for loan losses charged
to current earnings of 31% of originations in 2001 versus 27% in 2000.
Total revenues declined to $304,849,000 for the six months of 2001
from $309,715,000 for the six months ended June 30, 2000, a decrease
of approximately 2% due to a decline in the amount of cars sold.
Interest income rose 24% to $68,744,000 in 2001 versus $55,402,000 in
2000, due to the growth of the on-balance sheet portfolio. The
decrease in the number of cars sold from 30,171 in 2000 compared to
26,458 in 2001 is primarily due to economic factors and a greater
focus on the loan quality of contracts originated.
New loan originations have declined from $246,901,000 during the
first half of 2000 to $229,630,000 during the first six months of
2001, also a result of the decrease in cars sold. The amount financed,
however, has increased on a per car sold basis from $8,227 in 2000 to
$8,720 in 2001, primarily due to an increase in the overall sales
price of the cars sold.
Operating expenses for the six months ended June 30, 2001
increased slightly to 24% of revenues, or $73,358,000 versus
$70,730,000, or 23%, for the six months ended June 30, 2000. As
previously mentioned, the Company is implementing cost savings
initiatives to stabilize or reduce expenses in certain areas.
Loan Portfolio
Primarily due to seasonality and consistent with prior years,
delinquencies rose during the second quarter of 2001 versus the first
quarter of this year. However, all categories, current, 1-30, 31-60
and 61+, however, have improved over the same quarter of the prior
year. The current accounts, those not one day late, have improved to
76.4% as compared to 71.9% for the second quarter of 2000. Current
accounts as of March 31, 2001 were 78.6% and were 72.4% and 66.1% at
the end of the third and fourth quarters of 2000, respectively. This
improvement is attributable to the success of the Company's in store
collectors which service the 1-30 day accounts. During the second
quarter of 2001, the Company also inserted 31-60 day collectors into
the majority of the dealerships in order to replicate the 1-30 day
model.
Charge offs, net of recoveries, for the three months ended
June 30, 2001 and 2000 were $32,573,000 and $20,160,000, respectively.
As a percentage of average principal balances, net charge offs for the
same periods were 6.1% and 4.1%, respectively. For the six-month
periods ended June 30, 2001 and 2000, net charge offs were $69,335,000
and $43,402,000, respectively. Net charge offs as a percentage of
average principal balances for the same periods were 13.0% and 9.3%,
respectively.
Based upon its continued review of the adequacy of the Allowance
for Credit Losses, the Company continues to record a provision for
loan losses for the three months ended June 30, 2001 at approximately
31% of originations. The 31% provision is 100 basis points higher than
the effective 30% provision for 2000, and 400 basis points higher than
that recorded during the second quarter of 2000, as losses on its
existing portfolio continue to emerge at higher than expected levels.
With the provision recorded during the quarter, the Company believes
the Allowance balance as of June 30, 2001 remains at a level that it
estimates to be adequate to cover net charge offs for the next 12
months.
Uglyduckling.com Remains Steady Source of Revenue
Ugly Duckling's website, located at uglyduckling.com,
remains a consistent source of new leads and sales. The site provides
potential customers with instant credit applications as well as maps
to the Company's dealerships nationwide. From customers initially
applying for credit through its website, 14,142 applications were
received in the second quarter of 2001 generating $15.2 million in
revenue from 1,686 car sales. In the first quarter of 2001, the
Company's Internet applications generated revenues consistent with the
second quarter totaling over $15.1 million from 1,725 cars sold.
Closing of 20th Securitization
The Company announced the completion of its 20th securitization,
consisting of approximately $142.3 million in principal balances and
the issuance of approximately $100.8 million in Class A bonds,
including a pre-funded amount of approximately $25,203,000. The
Company subsequently provided an additional $35,496,000 in receivables
as collateral for the pre-funded amount. The coupon rate on the Class
A bonds is 4.74%, the initial deposit into the reserve account was 3%
and the reserve account maximum is 8%, all substantial improvements
over the Company's securitizations closed during 2000.
Receipt of Offer to Purchase Outstanding Company Stock
As previously announced, the Company confirmed the receipt of an
offer from Mr. Ernest C. Garcia II, the Company's Chairman of the
Board and largest shareholder, to the Board of Directors to purchase
all of the outstanding shares of the Company common stock. Under the
terms of the offer, shareholders would receive $7.00 per share, $2.00
in cash and $5.00 in subordinated debentures from the acquiring
company. The subordinated debentures would bear interest at 10%. The
offer also states that Greg Sullivan, the Company's Chief Executive
Officer and President, would receive an option to purchase a 20%
interest in the acquiring company. The Company's Board of Directors
has established a special transaction committee of the board to
evaluate the proposal and make a recommendation to the full board. |
