Ugly Duckling Announces Increase in Allowance for Credit Losses
PHOENIX--Sept. 8, 2000--Ugly Duckling Corporation (Nasdaq NM:
UGLY), the largest used car sales company focused exclusively on the
sub-prime market, today announced that it expects to increase its
Allowance for Credit Losses. The increase is consistent with the
Company's policy of maintaining an adequate Allowance for Credit Loss
within its targeted coverage range of 12 to 15 months. The increase in
the Allowance is to be accomplished via an increase in future
provisions for credit losses.
"Although emerging loan losses on recently originated loan pools
indicate improved loan performance over that which we have experienced
on pools originated last year, we believe it is very important to
maintain conservative reserves," said Greg Sullivan, President and
Chief Executive Officer of Ugly Duckling.
"As we review recent delinquency trends, consider current losses
and other trends on older loan pools, evaluate events in our national
economy, and project charge offs for all pools for the next 12 to 15
months, our analysis suggested an increase in the Allowance appears
necessary. To this end, beginning in the third quarter that ends
September 30, 2000, we expect to increase our Allowance via
supplemental provisions. Our estimate of these supplemental provisions
equates to approximately 2% of expected originations, which would
raise future provisions from our current level of 27% of originations
to 29%. As a result of this increase to our provision, we believe that
we are adequately addressing known factors and, therefore, will
continue to maintain Allowance for Credit Losses coverage within our
target range. We will continue to review our Allowance adequacy and
our provision policy and could reduce our provision once both our
coverage and losses stabilize within our target levels. Despite the
increase in our provisions, we believe we will still generate
excellent profits, particularly relative to the industry and to our
market price," concluded Sullivan. |
