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Non-Tech : UGLY (Ugly Duckling Corp) used cars -- Ignore unavailable to you. Want to Upgrade?

To: ted birnbaum who wrote (80)	2/1/1998 10:55:00 PM
From: Vic	Read Replies (1) \| Respond to of 155

I got this from Yahoo chat. Here it is: *************************************************************** 1/30/98 Ugly Duckling Shares Slide Amid Sector Woes, Accounting Decision By Janet Morrisey Staff Reporter NEW YORK - (Dow Jones) - Ugly Duckling Corp. shares fell nearly 11% Friday, reaching a 52-week low, as the market appeared to react to blowouts taken by other companies in the sub-prime lending arena in recent weeks and to the company's pending decision on an accounting change, analysts said. "The whole group has been weak," said analyst William Gibson from Cruttendon Roth Inc.,who cited National Auto Credit Inc. (NAK), First Merchant Acceptance Corp., Mercury Finance Co. (MFN), and Jayhawk Acceptance Corp. (JACCQ) as examples of companies swept up in financially troubling circumstances. National Auto Credit's auditors resigned last week, saying they could no longer rely on management's representations, and a special committee is investigating concerns about potentially "improper" activities related to the company's accounting records. Adding to the company's troubles further is speculation it may be in default of loan covenants at fiscal year-end. Both First Merchant Acceptance and Jayhawk Acceptance are in the midst of reorganizations after filing for Chapter 11 bankruptcy protection. Mercury Finance has been struggling to recover from accounting irregularities uncovered in 1996, a 1997 third-quarter loss, and auditors questioning the company's ability to stay in business. It recently unveiled plans to shut down 70 of its 262 branches. It is these unsettling events that have frightened investors in the sector, said Gibson. Although these companies are all in the business of indirectly lending money to used-car buyers with poor credit, Gibson said Ugly Duckling (UGLY) stands alone in that it also owns and operates dealerships that sell the cars. "They own the paper," he said, while the other companies get the paper from other dealers. But it's the "gain on sale" accounting method that has shaken investor confidence in Ugly Duckling, said Gibson, noting that many of the troubled companies practice this controversial accounting formula. The method requires that many assumptions be made in estimating how much the company expects to make from a particular portfolio of loans. The projection is made and accounted for upfront, and if the loan defaults or prepayments exceed estimates, charges are taken in subsequent quarters. The method has left market watchers frustrated and skeptical about projected numbers. Ugly Duckling shares fell to a 52-week low of $5.625 Friday, passing the low of $6.928 set Thursday. The shares closed at $6.313, off 75 cents, or 10.6%, on Nasdaq volume of 1.3 million, compared with average daily voume of 267,000. Ugly Duckling is now considering switching its accounting method to a more conservative "on balance sheet" form of accounting, in which income is recorded when it is received. This allows the company to adjust for changes in charge-off or prepayments over the life of the portfolio, making it easier for analysts to track and project earnings estimates. Cruttenden Roth's Gibson hailed the accounting change as a move that would breathe renewed investor confidence into the company. It would boost the company's credibility, he said. On the downside, however, the change would likely result in lower earnings for 12 to 14 months while the company builds up its portfolio. But Gibson dismissed this concern as a short-term blip that will resound into gains in the long term. The Phoenix company is expected to announce its decision on whether it will proceed with this accounting change when it reports its fourth-quarter 1997 and 1997 year-end results Feb. 9. Gibson added that Ugly Duckling is also considering the sale or spinoff of its Champion Financial Services operations, which buys financial contracts from independent auto dealers. A decision is expected later in the year. Disposing of the unit would allow Ugly Duckling to focus on its core business and accelerate expansion of its car dealers. At the end of 1997, the company operated 42 lots, and anaysts expect that number to grow to at least 55 in 1998. Gibson predicted the expansion would translate into signigicant earnings growth for the company. Bullish on the company's prospects, Gibson praised Ugly Duckling for its high-profile television ads and incentive programs that encourage low-income or credit-troubled people not to default on loans. *************************************************************** My personal belief is that the low was set on Friday and that it won't even be in the 6's for long. I think this is great news and confirms everything that I have been preaching on this board. For those of you who are long, including myself, our ship has come in. For those looking to add to their position, it's now or never. For the shorts out there, you better cover. Let's here your responses everybody.