Ugly Duckling Reports Record Third Quarter and Nine-Month Financial Results
PHOENIX--(BUSINESS WIRE)--Oct. 27, 1999--
Company Announces Planned Entry into Virginia Market with
Agreement to Acquire Five Dealerships and Finance Company Portfolio
Company Expects to Open Minimum of 20 New Dealerships in 2000
Third Quarter Highlights:
-- Earnings from continuing operations increased 174% to
$4.2 million, or $0.28 per diluted share, from $1.5 million, or
$0.08 per diluted share, in year-ago quarter
-- Total revenues increased 42% to $137.5 million from $96.7 million
in year-ago quarter
-- On-balance sheet loan portfolio principal balance reaches
$332.0 million, representing a 29% sequential increase over
second quarter and ten-fold rise over year-ago quarter
-- New loan originations reached $102.6 million, representing a 7%
sequential increase over second quarter and 44% gain over
year-ago quarter
-- Operating expenses as a percent of total revenue declined to 27%
from 35% in year-ago quarter
Financial Highlights
(In 000s, except for per share numbers)
Three Months Ended Nine Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
Total revenues $137,478 $ 96,714 $393,327 $273,310
Operating income $ 13,504 $ 4,111 $ 26,168 $ 18,162
Income from
continuing operations $ 4,182 $ 1,527 $ 6,073 $ 8,198
Diluted earnings per share
- continuing operations $ 0.28 $ 0.08 $ 0.39 $ 0.44
Ugly Duckling Corporation (Nasdaq/NM:UGLY), the largest and
fastest-growing used car sales company focused exclusively on the
sub-prime market, today reported record third quarter and nine month
financial results.
Substantial Gains in Third Quarter
For the three months ended September 30, 1999, Ugly Duckling
achieved earnings from continuing operations of $4,182,000, or $0.28
per diluted share, compared with earnings from continuing operations
for the three-month period ended September 30, 1998 of $1,527,000, or
$0.08 per diluted share, an increase in diluted earnings per share of
250%.
Third quarter 1998 results included pre-tax earnings of
$3,820,000 ($2,253,800 net of income taxes), or $0.12 per diluted
share, from the gain on sale of loans. Beginning in the fourth quarter
of 1998, the Company changed the way it structures transactions under
its securitization program to eliminate gain on sale accounting.
Therefore, this quarter's results were achieved despite a lack of
gain on sale transactions. Operating results from discontinued
operations were breakeven for the three-month period ended September
30, 1999. Losses from discontinued operations for the three months
ended September 30, 1998 totaled $3,628,000, or $0.19 loss per share.
The Company sold 12,219 cars in the third quarter of 1999, an
increase of 34% over the year-ago quarter on 14 more dealerships. The
increased number of cars sold, together with the growth in interest
income, resulted in total revenues of $137,478,000 for the third
quarter, an increase of over 42% from total revenues of $96,714,000 in
the year-ago third quarter.
"Ugly Duckling's record results and substantial third quarter and
nine month gains reflect the growing strength of our unique business
model. We are beginning to realize increased operating efficiencies as
we expand our nationwide chain of 'buy here-pay here' used car
dealerships," said Gregory Sullivan, President and Chief Executive
Officer of Ugly Duckling Corporation.
"Our results also reflect a near 300% increase in interest income
resulting from our rapidly growing on-balance sheet loan portfolio.
Our new CLASS central computer system, which united the four separate
computer systems we operated a year ago into one, also contributed
substantially to our control over operations and our record earnings."
Interest income for the third quarter of 1999 increased
sequentially to $27,200,000 from $20,186,000 in the second quarter of
1999, a gain of 35%, and from $7,187,000 in the year-ago period, an
increase of over 278%. The increase is primarily attributable to the
rapid growth of the Company's on-balance sheet portfolio resulting
from the Company's change to on-balance sheet financing transactions.
New loan originations for the third quarter reached
$102.6 million, representing a 7% sequential increase over the second
quarter of 1999 and a 44% gain over the year-ago third quarter. The
increase is a result of an increased number of dealerships as well as
a higher number of average monthly sales per dealership, which
increased to 61 from 56 in the year-ago third quarter.
Operating expenses for the third quarter reached $36,886,000, or
27% of total revenues, compared with operating expenses of
$33,542,000, or 35% of total revenues, for the year-ago quarter. The
substantial decline in operating expenses, as a percentage of total
revenues, is primarily the result of improved efficiencies from the
Company's new computer system and the Company's growth.
The Company reported that delinquencies over 30 days rose to
10.2% from 7.3% in the second quarter of 1999 and from 6.9% in the
year-ago third quarter. Mr. Sullivan said, "The increase in
delinquencies was a direct result of a restructuring of the Company's
collections department in Arizona in addition to a new repossession
policy, first implemented in the second quarter.
"The increase in delinquencies in the third quarter is not
expected to result in charge offs outside of our expected range and is
not expected to impact Ugly Duckling's earnings. Further, we continue
to be conservative in our policy of providing for credit losses and
maintain reserves which we believe to be adequate.
"In fact, with the improvements already realized in our Arizona
collections department, and other initiatives we have taken, we have
targeted a delinquency rate of approximately 8.0% by the end of the
first quarter of 2000 and fully expect to reach that goal," said Mr.
Sullivan.
Strong Nine-Month Results
For the nine-month period ended September 30, 1999, the Company
reported earnings from continuing operations of $6,073,000, or $0.39
per diluted share, compared with earnings from continuing operations
for the nine-month period ended September 30, 1998 of $8,198,000, or
$0.44 per diluted share.
Nine-month 1998 results included pre-tax earnings of $12,094,000
($7,135,460 net of income taxes), or $0.39 per diluted share, from the
gain on sale of loans. No gains on the sale of loans were recorded for
the nine months ended September 30, 1999 as the Company restructured
its financing transactions to eliminate gain on sale accounting
treatment in the fourth quarter of 1998.
Operating results from discontinued operations were breakeven for
the nine-month period ended September 30, 1999. Losses from
discontinued operations for the nine months ended September 30, 1998
totaled $9,223,000, or $0.49 loss per share.
The Company sold 36,389 cars in the nine-month period, an
increase of 34% over the year-ago period on 14 more dealerships. The
increased number of cars sold, together with an increase in interest
income, resulted in total revenues of $307,633,000 for the nine-month
period, an increase of 43% from total revenues of $216,075,000 in the
comparable period a year-ago.
New loan originations for the nine-month period reached
$301.4 million, representing a 45% gain over the year-ago nine-month
period.
Interest income for the nine-month period increased over 216% to
$61,435,000 from $19,415,000 in the year-ago period, resulting from
the rapid growth of the Company's on-balance sheet portfolio.
Operating expenses for the nine-month period reached
$109,220,000, or 28% of total revenues, compared with operating
expenses of $83,415,000, or 31% of total revenues, for the year-ago
nine-month period.
Ugly Duckling Continues Expansion of Dealerships:
Enters into an agreement to enter Virginia Market with Planned
Acquisition of Five and Finance Company Portfolio
Continuing its pace of new dealership acquisitions, Ugly Duckling
today announced it has entered into a definitive agreement to acquire
certain assets of a Virginia-based sub-prime automobile sales and
finance company. The assets include five used car dealerships
operating in the greater Richmond market area, vehicle inventory and a
loan portfolio of approximately $8.0 million.
The consummation of the transaction is subject to the Company
obtaining financing but the Company expects the transaction to close
in November and to commence operations as Ugly Duckling in December
1999. The acquisition represents Ugly Duckling's initial entry into
the Virginia market while further geographically diversifying its
presence across the nation.
During the quarter, the Company also announced that it has
completed its acquisition of certain assets of a Florida-based
sub-prime automobile sales and finance company. The assets included
four used car dealerships operating in the greater Orlando market
area, vehicle inventory and a loan portfolio of approximately
$15.0 million.
Including the Florida and Virginia acquisitions, Ugly Duckling
will have added 30 new dealerships over the past two years, bringing
the total number of dealerships operated by the Company to 72.
Minimum of 20 New Dealerships Expected in 2000
"We expect to accelerate the pace of new dealership openings
through an aggressive, yet controlled acquisition and de novo opening
strategy," continued Mr. Sullivan. "We are actively investigating
suitable sites for development and possible appropriate dealer groups
that we can acquire in markets either within or contiguous to our
current markets. We are operating in a huge and unconsolidated
industry and are seeking to capitalize on the outstanding expansion
opportunities before us.
"However, our expansion must be controlled to fit within strict
criteria that enable both revenue growth and profitability. Within
these criteria, we expect to add a minimum of 20 dealerships, both
newly developed and through acquisitions, in the year 2000. Moreover,
we could exceed this minimum target depending primarily on the size
and number of acquisition targets that fit within our business model,"
said Mr. Sullivan.
Company Begins to Realize Initial Contributions from Website
Mr. Sullivan noted that Ugly Duckling's Website, located at
uglyduckling.com, is generating a growing stream of new
sales leads. The site provides potential customers with instant credit
applications as well as maps to the Company's dealerships nationwide.
For the three months ended September 30, 1999, the Company received
over 6,200 credit applications through its Website.
From these customers initially applying through its Website the
Company generated revenues of over $2.6 million with 316 cars being
sold. The Company is seeking to expand its presence on the Internet
and generate additional traffic on its site by developing links to
related sites as well as major search engines.
Bright Growth Outlook
"Ugly Duckling's outstanding operational and financial
performance in the third quarter enhances the company's position as
the largest and fastest growing 'buy-here-pay-here' used car
dealership chain in the United States," concluded Mr. Sullivan.
"We expect to expand on this position as we continue to open new
dealerships in key markets across the country. We believe that the
expansion of our stores, supplemented by our rapidly growing portfolio
and increasing operating efficiencies, will enable us to achieve
significant financial gains in both our top and bottom line through
the remainder of 1999 and 2000."
Ugly Duckling will be holding an investor conference call to
discuss the Company's financial and operational results at 11:00 a.m.
ET on October 27, 1999. Investors will have the opportunity to listen
to the conference call over the Internet through Vcall at
vcall.com.
To listen to the live call, go to the Website at least 15 minutes
early to register, download and install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will be
available shortly after the call at vcall.com and on the
Company's Website at uglyduckling.com. |
