Fourth-Quarter Highlights:
-- Net earnings totaled $3.2 million, or $0.21 per diluted share
-- Earnings per diluted share from continuing operations totaled
$0.17
-- Revenues from continuing operations increased 41% to
$106.4 million from $75.6 million in year-ago quarter
-- On-balance sheet loan portfolio principal balance reached
$358.8 million, representing an 8% sequential increase over third
quarter and a near four-fold rise over year-ago quarter
-- New loan originations reached $80.9 million, a 16% increase over
year-ago quarter
-- Acquired five dealerships in the Richmond, Va., market, ending
year with 72 dealerships
Financial Highlights
(In 000s, except for per share numbers)
Three Months Ended Year Ended
12/31/99 12/31/98 12/31/99 12/31/98
Total revenues $106,447 $ 75,637 $467,275 $332,553
Operating income (loss) $ 4,643 $ (8,405) $ 14,911 $ 5,944
Earnings (loss)
- continuing operations $ 2,619 $ (5,064) $ 8,687 $ 3,455
Diluted earnings per share
- continuing operations $ 0.17 $ (0.30) $ 0.57 $ 0.19
*T
Ugly Duckling Corp. (Nasdaq:UGLY), the largest and
fastest-growing used car sales company focused exclusively on the
sub-prime market, today reported significant improvement in its
fourth-quarter and full-year 1999 financial results.
Strong Quarter-Over-Quarter Results
For the three months ended Dec. 31, 1999, Ugly Duckling achieved
earnings from continuing operations of $2,619,000, or $0.17 per
diluted share, compared with a loss from continuing operations for the
three months ended Dec. 31, 1998, of $5,064,000, or a loss of $0.30
per diluted share.
The company sold 9,731 cars in the fourth quarter of 1999, an
increase of 11% over the 8,766 cars sold in the year-ago quarter. The
increased number of cars sold, together with growth in interest
income, resulted in total revenues of $106,447,000 for the fourth
quarter of 1999, an increase of over 41% from total revenues of
$75,637,000 in the fourth quarter of 1998.
Interest income for the fourth quarter of 1999 increased
sequentially to $22,670,000 from $19,775,000 in the third quarter of
1999, a gain of 15%, and from $5,256,000 in the year-ago period, an
increase of more than 430%. The increase in both periods is primarily
attributable to rapid growth of the company's on-balance sheet
portfolio, resulting from Ugly Duckling's change to on-balance sheet
financing transactions.
New loan originations for the fourth quarter of 1999 reached
$80,900,000, representing a 21% sequential decrease from the
$102,600,000 reported in the third quarter of 1999, and a 16% increase
over the $69,500,000 reported in the fourth quarter of 1998. The
quarter-over-quarter increase is primarily the result of an increased
number of Ugly Duckling dealerships.
The company's dealerships increased in number to 72 in the fourth
quarter of 1999 from 56 in the year-ago fourth quarter. The decrease
in new loan originations in the fourth quarter of 1999 vs. the third
quarter of 1999 is a function of seasonality, as the fourth quarter is
historically the company's weakest sales quarter of the year.
Operating expenses for the fourth quarter of 1999 reached
$27,909,000, or 26% of total revenues, compared with operating
expenses of $25,941,000, or 34% of total revenues, for the year-ago
quarter.
The stability in operating expense expenditures and 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 dealership growth in existing
markets requiring little additional indirect support services.
Loan Servicing
The company made good progress in lowering delinquencies during
the fourth quarter of 1999.
"The fourth quarter is traditionally the toughest in terms of
servicing sub-prime loans," said Gregory B. Sullivan, president and
chief executive officer of Ugly Duckling Corp. "Nonetheless, we made
significant progress in lowering delinquencies from 10.3% at the end
of the third quarter of 1999 to 9.0% at the end of the fourth quarter.
"Net charge-offs were higher than we would have liked but about
where we would have thought based on the third-quarter delinquencies.
We successfully addressed the servicing issue that led to the higher
delinquencies and feel that those challenges have been overcome. As
evidence of this, at the end of the third quarter I expressed
confidence that we would have delinquencies down to 8.0% by the end of
the first quarter of 2000. I'm pleased to report that we ended January
with delinquencies at 7.6%."
Substantial Gains in 1999
For the year ended Dec. 31, 1999, the company reported earnings
from continuing operations of $8,687,000, or $0.57 per diluted share,
compared with earnings from continuing operations of $3,455,000, or
$0.19 per diluted share, for the year ended Dec. 31, 1998.
Results for 1998 included pre-tax earnings of $12,093,000
($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 in
1999 as the company restructured its financing transactions which
eliminated gain-on-sale accounting treatment beginning in the fourth
quarter of 1998.
Used car sales totaled $389,908,000 in 1999, an increase of 36%
over sales of $287,618,000 in 1998. The company sold 46,120 cars in
1999, an increase of 28% over the 35,964 sold in 1998. The increased
number of cars sold, together with an increase in interest income,
resulted in total revenues of $467,275,000 for the year, an increase
of 41% from total revenues of $332,553,000 in 1998. New loan
originations for 1999 reached $381,500,000, representing a 38% gain
over the $277,300,000 originated in 1998.
Interest income for 1999 increased four-fold to $68,574,000 from
$17,287,000 in 1998, resulting from rapid growth of Ugly Duckling's
on-balance sheet portfolio from a change in securitization structure.
Operating expenses for the year reached $112,936,000, or 24% of total
revenues, compared with operating expenses of $92,174,000, or 28% of
total revenues, for the prior year.
"Ugly Duckling's record results and substantial gains in 1999
reflect the growing strength of our unique business model. We are
beginning to realize additional increased operating efficiencies as we
expand our nationwide chain of `buy-here-pay-here' used car
dealerships," said Sullivan.
"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,"
said Sullivan.
Ugly Duckling Continues Expansion of Dealerships
Continuing its pace to add new dealerships, Ugly Duckling closed
the acquisition of certain assets of a Virginia-based sub-prime
automobile sales and finance company in the fourth quarter of 1999.
The assets included five used car dealerships operating in the greater
Richmond market area.
These locations commenced operations as Ugly Duckling in December
1999. The acquisition represented Ugly Duckling's initial entry into
the Virginia market while further geographically diversifying its
presence across the nation.
Including acquisitions the company made in Florida in the third
quarter of 1999 and the fourth-quarter 1999 Virginia acquisitions,
Ugly Duckling has added 31 new dealerships over the past two years,
bringing the total number of dealerships operated by the company at
Dec. 31, 1999, to 72.
"We plan to continue with our aggressive, yet controlled
acquisition and de novo opening strategy. To that end, we have opened
two dealerships this year, and four more are currently under
development. We are operating in a huge and unconsolidated industry.
With more than 58,000 independent dealers in operation, our
opportunities for expansion via acquisition or development are
extensive," said Sullivan.
Company Web Site-Based Applications and Sales Accelerate
Ugly Duckling's Web site, located at uglyduckling.com,
is continuing to generate a growing stream 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 Web
site, 4,900 applications were received in the fourth quarter of 1999
generating $3.9 million in revenue with 415 used car sales. In the
third quarter of 1999, the company's Internet activity generated
revenues of more than $2.6 million with 316 cars being sold.
Common Stock Exchange Offer
Ugly Duckling today also announced that it expects to commence an
exchange offer beginning Feb. 22, 2000. The company plans to acquire
up to 2.5 million shares of its common stock in exchange for up to
$27.5 million principal amount of its 11% Subordinated Debentures due
2007. Under the exchange offer, Ugly Duckling shareholders could
exchange shares of common stock for $11 principal amount of
debentures.
The debentures would bear interest at 11% per year, payable
semi-annually each April 15 and Oct. 15 starting on April 15, 2000.
The principal amount of the debentures would be due on the seventh
anniversary of their issuance date, subject to prepayment at the
company's option without penalty or premium. Issuance of the exchange
offer is subject to certain conditions, including formal approval from
company lenders.
All investors are advised to carefully read the tender offer
statement when it becomes available because of the important
information it contains. Effective Feb. 22, 2000, the tender offer
statement and other filed reports, proxy and information statements
may be obtained for free by accessing over the Internet the Securities
and Exchange Commission's site on the World Wide Web at
sec.gov.
Investors may also contact Ugly Duckling's Information Agent,
Corporate Investor Communications Inc., at 201/896-1900 to obtain free
copies of the Offering Circular and related documents to be utilized
in the exchange offer.
Discontinued Operations
In the fourth quarter of 1999, the company had three separate
events which are reported as discontinued operations.
In December 1999, the company announced that it had sold its
Cygnet Dealer subsidiary to an affiliated entity. Cygnet Dealer
results from discontinued operations are a $449,000 net operating loss
for the fourth quarter of 1999 and net operating earnings of $415,950
for the year. The company recorded a $175,000 net gain on sale.
Effective Dec. 31, 1999, the company adopted a formal plan to
abandon any effort for Cygnet Servicing to acquire loans or servicing
rights to additional portfolios. Accordingly, the company's Cygnet
Servicing and the associated Cygnet Corporate segment also are
reported as components of Discontinued Operations. The company plans
to service to completion the portfolios currently serviced.
For 1999, the Cygnet Servicing and Cygnet Corporate segments
incurred net earnings of $2.3 million and $1.5 million for the fourth
quarter and year ended December 1999, respectively. No loss has been
recorded on the disposal of this segment as the company anticipates
that over the run-off period, expected to be approximately 30 months,
it will ultimately realize a net gain.
In February 1998, the company discontinued its Champion Financial
Services operations. Loan losses and related servicing expenses have
exceeded amounts provided for such activities and, in the fourth
quarter of 1999, the company recorded an additional charge of
$1.5 million net of tax for the additional costs and loan losses
associated with its remaining portfolio servicing activities.
Bright Growth Outlook
"Ugly Duckling's outstanding operational and financial
performance in 1999 enhances the company's position as the largest and
fastest growing `buy-here-pay-here' used car dealership chain in the
United States," said Sullivan. "For the first time since 1994, the
company is focused exclusively on its core business of the sale and
financing of used cars to sub-prime credit customers. We are excited
about our position in this $60 - $100 billion industry. We are already
the largest dealer in the country focused exclusively on this market.
"We have established a firm foundation based on our technological
systems, business practices and procedures, and most importantly, our
people. We have established that we can make money in this market,
that we can grow in this market and that we can make money as we grow.
"Our profitability for 1999 far exceeded our expectations going
into the year. Now that the company is 100% focused on this business,
we look forward more than ever to growing and making improvements that
strengthen our business and further improve our operating results."
Ugly Duckling will be holding an investor conference call to
discuss the company's financial and operational results at 10:30 a.m.
Eastern (8:30 a.m. Phoenix) on Feb. 16, 2000. 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 Web site 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 Web site at uglyduckling.com. |
