Hometown Auto Achieves Third Consecutive Operating Profit in Q3
WATERTOWN, Conn.--Nov. 8, 2001--Same Store Revenues at HCAR up 6.1%, While Same Store Margins Up 6.5%
Hometown Auto Retailers (OTC BB: HCAR) Thursday announced that it generated an operating profit of $828,000 for the third quarter ended Sept. 30, 2001 on revenues of $71.7 million, a 2.7% increase over the year ago quarterly revenues of $69.8 million.
This marks the third consecutive quarter of operating profits for Hometown, and its revenue increase came in spite of the sale of Morristown Lincoln Mercury in January 2001. On a same store sales basis, quarterly revenues increased 6.1%, while same store margins for the quarter were up 6.5%. Further details will be provided in its quarterly conference call.
For the first nine months of 2001, total revenues decreased 5.2% to $207.2 million from $218.6 million. Same store sales for the nine-month period decreased only 1.8% to $207.1 million from $210.9 million. However gross margins for the nine-month period increased 1.8% with same store gross margins increasing by 4.7% from $27.5 million to $28.8 million.
For the quarter, net income was $278,000 before consideration of a one-time non-cash write-off of $2.1 million or $0.29 per diluted share on 7.2 million diluted shares outstanding resulting from the closing of CarDay Inc., an Internet company. Hometown holds a minority interest in CarDay as a result of its startup investment.
That limited investment was substantially written up in the year 2000 when institutions purchased approximately 85% of CarDay for approximately $25 million. Due to the closure of CarDay and this unusual charge, Hometown experienced a net loss of $1.8 million or $0.25 per diluted share for the quarter.
Cash flow per diluted share (net income plus depreciation and amortization) after adding back the CarDay charge was $0.08 per share in the third quarter of 2001 as compared to $0.01 in the same period last year. -0
Effect of CarDay Write-off
on Hometown Results
(all figures in thousands of dollars)
Quarter Ended
Sept. 30, 2001
Net
Per CarDay Excluding
10-Q Impact CarDay
Pretax earnings (loss) (2,727) (3,258) 531
Provision (benefit) for (922) (1,175) 253
income taxes
Net income (loss) (1,805) (2,083) 278
Nine Months Ended
Sept. 30, 2001
Net
Per CarDay Excluding
10-Q Impact CarDay
Pretax earnings (loss) (1,542) (3,258) 1,716
Provision (benefit) for (437) (1,175) 738
income taxes
Net income (loss) (1,105) (2,083) 978
For the quarter, Hometown saw marked increases in its highest margin segments, both on a total sales basis and on a same store basis.
For example, used retail vehicle total and same store sales for the quarter increased 21.0% and 23.3%, respectively, during the quarter; quarterly other dealership revenues including finance and insurance sales increased 16.3% and 18.7%; and parts and service sales for the quarter increased 7.1% and 11.3%.
Hometown also saw increases in these same three segments for the nine-month period ended September 30.
Specifically, used retail vehicle total and same store sales for the nine-month period increased 10.9% and 13.7%, respectively, during the first nine months of the year; other dealership revenues increased 8.4% and 10.3% during the first nine months of the year; and parts and service sales for the nine-month period increased 7.2% and 11.7%.
(Please note that in this paragraph the first number given is the "total sales" percentage increase, while the second number is the "same store" percentage increase.)
New vehicle sales decreased during the quarter and the nine-month period, both on a total sales basis and a same store basis. Specifically, new vehicle sales decreased 6.9% and 3.5%, respectively, during the quarter, and decreased 14.4% and 11.3% during the nine-month period.
During the quarter, Hometown sold 3,064 new and used vehicles at retail (including a small amount of fleet units), a 6.3% increase over the 2,883 units sold during the same period in 2000.
"We are very happy to announce our third consecutive quarter of operating profits," said Corey Shaker, chief executive officer of Hometown Auto Retailers. "We said at the beginning of the year that we planned to continue our efforts to focus on increased margin segments of our business, streamlining operations, and looking for ways to lower costs.
"I believe it is apparent that we are achieving success in each of these areas, and we look forward to continued success as we lead Hometown through the rest of 2001 and into 2002 and beyond.
"For example, at the dealership level, to help improve departmental performance in margin levels and expense guidelines, we have looked to guidelines set by the National Automotive Dealers Association (known as NADA).
"We are focused on driving these guidelines into the heart of Hometown's dealership operations, particularly with the realization, for example, that relatively small changes in used car margins result in large increases in total gross. We believe that for the fourth quarter and into 2002, Hometown can enjoy improved bottom line profits on existing sales by targeting these benchmark standards of departmental expenses.
"Finally, although Hometown cannot control world events, we still have control over one of our most expensive carrying costs, and that is inventory floor planning expense. We have employed our technology to target this important area in the last quarter of the year to do the best we can to make sure that we do not have excess inventory during the fourth quarter.
"This technology has helped us achieve a 1.75-month supply of new cars and a 1.3-month supply of used cars. We believe that this is a better job than some of the larger consolidators. This leaves our total vehicle inventories at $30.3 million before the zero percent financing had a chance to kick in.
"This is a far cry from the $50.3 million in total new and used car inventories in December 1999. In addition, Ford Credit has just completed its six-month review of our credit line, and Ford has further backed us by increasing our used car credit lines to support our continued focus on these higher margin sales.
"I feel this represents a strong endorsement from Ford Credit that in uncertain economic times, our lender is giving us additional support."
About Hometown
Hometown Auto Retailers (www.htauto.com) sells new and used cars and light trucks, provides maintenance and repair services, sells replacement parts and provides related financing, insurance and service contracts through 10 franchised dealerships located in New Jersey, New York, Connecticut, Massachusetts and Vermont.
The company's dealerships offer 13 American and Asian automotive brands, including Chevrolet, Chrysler, Daewoo, Dodge, Ford, Isuzu, Jeep, Lincoln, Mazda, Mercury, Oldsmobile, Plymouth and Toyota.
Hometown is also active in two "niche" segments of the automotive market: the sale of Lincoln Town Cars and limousines to livery car and livery fleet operators and the maintenance and repair of cars and trucks at a Ford and Lincoln Mercury factory authorized free-standing service center.
This release contains "forward-looking statements" based on current expectations but involving known and unknown risks and uncertainties. Actual results or achievements may be materially different from those expressed or implied.
The company's plans and objectives are based on assumptions involving judgments with respect to future economic, competitive and market conditions, its ability to consummate, and the timing of, acquisitions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the company.
Therefore, there can be no assurance than any forward-looking statement will prove to be accurate.
HOMETOWN AUTO RETAILERS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
For the Three Months For the Nine Months
Ended Sept. 30, Ended Sept. 30,
2001 2000 2001 2000
Revenues
New vehicle sales $41,356 $ 44,422 $117,864 $137,706
Used vehicle sales 21,650 17,430 64,305 57,605
Parts and service sales 6,526 6,092 19,116 17,827
Other dealership
revenues, net 2,208 1,899 5,964 5,500
Total revenues 71,740 69,843 207,249 218,638
Cost of sales
New vehicle sales 39,359 42,102 111,752 130,512
Used vehicle sales 19,780 15,661 58,106 52,070
Parts and service
sales 2,810 2,657 8,631 7,802
Cost of sales 61,949 60,420 178,489 190,384
Gross profit 9,791 9,423 28,760 28,254
Amortization of goodwill 176 163 529 490
Selling, general and
administrative expenses 8,787 8,857 25,468 26,355
Income from
operations 828 403 2,763 1,409
Other income (expense)
Interest expense, net (392) (553) (1,623) (1,590)
Other income (expense),
net 95 3 576 (81)
Valuation adjustment for
CarDay.com (3,258) -- (3,258) --
Income (loss) before
taxes (2,727) (147) (1,542) (262)
Provision (benefit) for
income taxes (922) 37 (437) (19)
Net income (loss) $(1,805) $ (184) $ (1,105) $ (243)
Earnings (loss) per share,
basic (Note 3) $ (0.25) $ (0.03) $ (0.17) $ (0.04)
Earnings (loss) per share,
diluted (Note 3) $ (0.25) $ (0.03) $ (0.17) $ (0.04)
Weighted average shares,
basic (Note 3) 7,175,320 5,998,529 6,396,151 5,994,816
HOMETOWN AUTO RETAILERS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
Sept. 30, Dec. 31,
ASSETS 2001 2000
(Unaudited)
Current Assets
Cash and cash equivalents $ 4,055 $ 586
Accounts receivable, net 6,856 6,149
Inventories 32,107 40,964
Prepaid expenses and other current assets 1,639 1,576
Total current assets 44,657 49,275
Property and equipment, net 7,356 7,594
Investment in CarDay.com -- 3,258
Goodwill, net 23,883 24,793
Other assets 1,354 2,144
Total assets $77,250 $87,064
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Floor plan notes payable $32,516 $ 40,123
Accounts payable and accrued expenses 5,162 5,579
Current maturities of long-term debt 432 431
Total current liabilities 38,110 46,133
Long-term debt 8,527 8,785
Long-term deferred income taxes 287 1,664
Other long-term liabilities 431 457
Total liabilities 47,355 57,039
Stockholders' Equity
Preferred stock, $.001 par value, 2,000,000 shares
Authorized, no shares issued and outstanding -- --
Common stock, Class A, $.001 par value, 12,000,000
shares authorized, 3,546,605 and 2,301,109 issued
and outstanding; 3 2
Common stock, Class B, $.001 par value, 3,760,000
shares
Authorized, 3,628,500 and 3,699,000 issued
and outstanding 4 4
Additional paid-in capital 29,760 28,786
Retained earnings 128 1,233
Total stockholders' equity 29,895 30,025
Total liabilities and stockholders' equity $77,250 $87,064