Ugly Duckling Reports Third Quarter and Nine Month Results
Third Quarter Highlights:
-- Earnings from continuing operations totaled $2.7 million, or
$0.21 per diluted share, compared with earnings from continuing
operations of $3.7 million, or $0.24 per share in the year-ago
quarter
-- Total revenues from continuing operations increased 27% to
$158.4 million from $124.9 million in the year-ago quarter
-- E-Commerce provided $12.0 million in revenue and 1,417 cars
sold during the third quarter of 2000 compared with $6.5
million in revenue and 763 cars sold during the second quarter
of 2000
-- On-balance sheet loan portfolio principal balances reached
$512.8 million, representing a 9% sequential increase over the
second quarter of 2000 and a 55% rise over the year-ago quarter
-- Provision for loan losses increased 2% to 29% of amount
financed (announced September 8, 2000)
-- New loan originations reached $124.4 million, a 21% increase
over the year-ago quarter
-- Chairman of the Board and the Company's largest shareholder,
Ernest C. Garcia, II, extends offer to purchase all
outstanding shares of Company stock (announced October 5, 2000)
Financial Highlights
(In 000's, except for per share numbers)
Three Months Ended Nine Months Ended
9/30/00 9/30/99 9/30/00 9/30/99
Total revenues $ 158,380 $ 124,883 $ 469,488 $360,525
Operating income 6,907 7,436 26,722 12,004
Earnings --
continuing
operations 2,683 3,657 11,514 6,068
Diluted earnings
per share --
continuing
operations $ 0.21 $ 0.24 $ 0.82 $ 0.39
PHOENIX--Oct. 25, 2000--Ugly Duckling Corporation (Nasdaq:UGLY),
the largest used car sales Company focused exclusively on the
sub-prime market, today reported third quarter and nine month 2000
financial results.
Quarter over Quarter Results
For the three months ended Sept. 30, 2000, Ugly Duckling recorded
earnings from continuing operations of $2,683,000, or $0.21 per
diluted share, compared with earnings from continuing operations of
$3,657,000, or $0.24 per share, for the year-ago quarter. The reason
for the dollar decline is primarily due to a 2% increase in the
provision for credit losses as further discussed below.
The Company sold 14,825 cars in the third quarter of 2000, an
increase of 21% over the 12,219 cars sold in the year-ago quarter.
Interest income for the third quarter of 2000 increased sequentially
to $31,436,000 from $29,871,000 in the second quarter of 2000, a 5%
gain, and from $19,775,000 in the year-ago period, an increase of
approximately 59%.
The increase in both periods is primarily attributable to the
rapid growth of the Company's on-balance sheet portfolio, resulting
from Ugly Duckling's change to on-balance sheet financing transactions
in late 1998. The increased number of cars sold and the growth in
interest income, resulted in total revenues of $158,380,000 for the
third quarter of 2000, an increase of approximately 27% from total
revenues of $124,883,000 in the third quarter of 1999.
Operating expenses for the third quarter of 2000 were $37,303,000,
or 24% of total revenues, compared with operating expenses of
$28,080,000, or 23% of total revenues, for the year-ago quarter. The
stability in operating expense is primarily the result of improved
efficiencies from the Company's new computer system and dealership
growth offset by additional costs associated with the continued
deployment of collection staff to Company dealerships.
New loan originations for the third quarter of 2000 reached
$124,367,000, representing a 5% sequential increase from the
$118,778,000 reported in the second quarter of 2000, and a 21%
increase over the $102,599,000 reported in the third quarter of 1999.
The Company's increase over the year ago quarter is primarily the
result of an increased number of Ugly Duckling dealerships. The
Company's dealerships increased in number to 77 in the third quarter
of 2000 from 67 in the year-ago third quarter.
"We are very pleased with the third quarter results. We had strong
sales, particularly in September," said Greg Sullivan, president and
CEO of Ugly Duckling.
"We also achieved better margins this quarter than the third
quarter last year and the second quarter of this year. Operating
expenses were stable as a percentage of revenues with last year, which
is good considering the higher level of resources we have been
devoting to our collection efforts this year, particularly with the
roll-out of collectors to our dealership locations. Overall we were
very pleased with our bottom line."
Loan Servicing
Due to the seasonality of our business, at the end of the third
quarter of 2000 31+ day delinquencies rose to 8.3% from 7.2% at the
end of the second quarter of 2000, but are improved from the 10.3%
reported at the end of the third quarter of 1999.
"Although delinquencies were slightly higher than we would have
liked, they are much improved from the year ago quarter," said
Sullivan.
"As of last week, we have completed the roll-out of collectors to
all 77 of our dealerships. We think this improves our relationships
with our customers and leads to better loan performance. As an
indication, our current accounts, that is accounts not one day
delinquent, improved to 72.4% of our portfolio, almost 11% better than
the 61.5% reported as of the year ago quarter."
As previously announced, after extensive review of delinquency
trends, current and historical loan losses and projected charge offs,
the Company increased its provision for credit losses. Beginning in
the third quarter of 2000, the additional provision equates to
approximately 2% of loan originations, which raised the provision to
29% from 27% of the amount financed.
The increase provides an allowance for credit loss at quarter end
within the targeted coverage range which is estimated to be adequate
to cover net charge offs for the next 12 to 15 months.
"Net charge-offs on our managed portfolio were $34.8 million this
quarter, which is about what we expected when we announced our
increase in the provision last month. Our Allowance for Loan Losses as
of the end of the quarter was over $100 million or 19.5% of principal
balances, with which we are comfortable. We expect that the measures
we have put in place on the collections front as well as enhancements
we are planning in loan originations are, on a percentage basis, going
to lead to lower losses over future periods."
Substantial Increases in First Nine Months of 2000
For the nine months ended Sept. 30, 2000, the Company reported
earnings from continuing operations of $11,514,000, or $0.82 per
diluted share, compared with earnings from continuing operations of
$6,068,000, or $0.39 per diluted share, for the nine months ended
Sept. 30, 1999.
Used car sales totaled $380,949,000 in the first nine months of
2000, an increase of 24% over sales of $307,633,000 in the comparable
year-ago period. The Company sold 44,996 cars for the first nine
months of 2000, an increase of 24% over the 36,389 sold in the
comparable 1999 period.
Interest income for the first nine months of 2000 increased 89% to
$86,838,000 from $45,904,000 in 1999, resulting from rapid growth of
Ugly Duckling's on-balance sheet portfolio from a change in
securitization structure. The increased number of cars sold, and the
increase in interest income, resulted in total revenues of
$469,488,000 for the first nine months, an increase of 30% from total
revenues of $360,525,000 in the comparable year-ago period.
Operating expenses for the first nine months of 2000 were
$109,426,000, or 23% of total revenues, compared with operating
expenses of $84,758,000, or 24% of total revenues, for the prior year.
New loan originations for the first nine months of 2000 reached
$371,268,000, representing a 23% gain over the $301,430,000 originated
in the comparable year-ago period.
Uglyduckling.com Continues to Demonstrate Substantial Growth
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, 15,841
applications were received in the third quarter of 2000 generating
$12.0 million in sales with 1,417 used cars sold. In the second
quarter of 2000, the Company's Internet activity generated sales
revenues of over $6.5 million with 763 cars being sold.
Purchase offer from Company Chairman
On Oct. 5, 2000, the Company confirmed receipt of an offer from
the Company's chairman and largest shareholder, Ernest C. Garcia, II,
to purchase all of the outstanding shares of common stock of the
Company for $8.50 per share, $2.50 in cash and $6.00 in subordinated
indebtedness of the acquiring company. Other terms of the offer
include an option for the Company's CEO and president, Greg Sullivan,
to purchase a 20% interest in the acquiring company. The Company's
board of directors has established a special transaction committee to
evaluate and make a recommendation to the full board on the proposal.
Stock Buyback Program
In July 2000 the Company acquired with cash, 1,523,100 shares of
its stock as part of its previously announced stock buyback program.
These purchases are in addition to 1,085,415 shares of its stock
purchased in the 2nd quarter of 2000 via an Exchange Offer. The
Company has suspended stock repurchases during the period in which
Garcia's offer is outstanding.
Ugly Duckling will be holding an investor conference call to
discuss the Company's financial and operational results at 11:30 a.m.
eastern (8:30 a.m. Phoenix) on Oct. 25, 2000. Investors will have the
opportunity to listen to the conference call over the Internet through
Vcall at vcall.com. To listen to the 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 after the call at
vcall.com and on the Company's Web site at
uglyduckling.com.
With headquarters in Phoenix, Ugly Duckling Corp. is the largest
operator of used car dealerships focused exclusively on the sub-prime
market. The Company underwrites, finances and services sub-prime
contracts generated at its 77 Ugly Duckling dealerships, located in 11
metropolitan areas in eight states. |
