Hometown Auto Retailers Reports First Quarter 2002 Results
WATERTOWN, Conn.--June 3, 2002--Hometown Auto Retailers Inc. (OTC BB: HCAR)(OTC BB: HCARE) Monday announced financial results for the quarter ended March 31, 2002.Hometown reported revenues of $65.1 million in the first quarter of 2002 versus restated revenues of $60.6 million for the same period in 2001, an increase of $4.5 million or 7.4 percent. Gross profits for the first quarter of 2002 increased $417,000 or 4.5 percent to $9.6 million versus restated gross profits of $9.2 million in the same period in 2001.
Net income for the first quarter of 2002 increased $38,000 to $235,000 generating basic and diluted earnings per share of $0.03 versus restated net income of $197,000 and restated basic and diluted earnings per share of $0.03 and $0.02, respectively, for the same period in 2001.
Hometown reported total cash and cash equivalents at the end of the first quarter of 2002 of $4.4 million, the same amount as reported by the company at Dec. 31, 2001, but an increase of 41.9 percent versus the $3.1 million in cash and cash equivalents on hand at the end of the first quarter of 2001.
In June 2001, the Financial Accounting Standards Board approved SFAS 142 - "Goodwill and Other Intangible Assets." Among other things, this eliminated the need to amortize goodwill and requires companies to use a fair-value approach to determine whether there is an impairment of existing and future goodwill.
Discontinuing the recording of goodwill amortization effective Jan. 1, 2002 had the effect of increasing net income by $145,000 and basic and diluted earnings per share by $0.02 for the three months ended March 31, 2002.
Hometown is currently evaluating the impact of SFAS 142 on its consolidated financial statements and believes that, if the current market price of Hometown's common stock is indicative of fair value, the majority of its goodwill may be impaired as of the initial adoption of this statement.
"As shown by our results for the first quarter of 2002, we are making definite progress and I appreciate all the hard work put forth by the entire Hometown team," said Corey Shaker, president and chief executive officer of Hometown. "A 7.4 percent increase in top-line revenues for this quarter versus the same quarter a year ago is an improvement, but we will not rest on our laurels.
"We will not only continue to work hard but we will also strive to work smarter than we have ever worked before, including efforts to improve used car and F&I margins on existing sales. I believe that as we continue to execute our plans and deliver solid results, our shareholders will be rewarded for their continued support and confidence in Hometown Auto Retailers in the long term."
Hometown sold 3,225 vehicles during the first quarter of 2002, 38 more than sold in the same period in 2001. Total vehicles sold (by category) are shown in the table below.
For the three months ended
March 31,
2002 2001
------ ------
New vehicle 1,428 1,351
Used vehicle - retail 1,100 1,102
Used vehicle - wholesale 697 734
Total units sold 3,225 3,187
Sales of new cars increased $2.0 million or 5.8 percent to $36.7 million for the first quarter of 2002 versus $34.7 million in restated new car sales in the same period in 2001. Used vehicle sales (retail) in the first quarter of 2002 of $15.7 million were virtually identical to restated used vehicle sales (retail) for the same period in 2001.
Used vehicle sales (wholesale) in the first quarter of 2002 increased $1.8 million or 69.2 percent to $4.4 million versus $2.6 million in restated used vehicle sales (wholesale) in the same period in 2001. Parts and service revenues for the first quarter of 2002 increased 2.6 percent or $154,000 to $6.1 million versus $5.9 million for restated parts and service revenues in the same period in 2000.
Other revenues (net) increased $467,000 or 25.9 percent to $2.2 million in the first quarter of 2002 versus $1.8 million in restated other revenues (net) in the same period of 2001.
Connecticut dealerships have historically operated under state law that made dealers responsible for providing warranty service and insurance in the event of default by the insurance carriers. Accordingly, dealerships have been required to recognize commissions on insurance and service contract sales over the life of the related insurance product.
In accordance with this "dealer obligor" state law, Hometown had $1,245,000 and $1,264,000 of deferred revenue reflected on its books at March 31, 2002 and Dec. 31, 2001, respectively, relating to insurance and service contract income.
During the first quarter of 2002, however, this state law requiring such deferred revenue was changed. As a result, Hometown will now record insurance and service contract income at the time of sale of the vehicle. (Please note that the change in the law was not retroactive.)
Therefore, during the remainder of 2002 and in 2003, 2004, 2005, 2006 and 2007, Hometown will record approximately an additional $303,000, $398,000, $282,000, $170,000, $75,000 and $17,000, respectively, for insurance and service contract income due to the change in the state law.
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 12 American and Asian automotive brands, including Chevrolet, Chrysler, Daewoo, Dodge, Ford, Isuzu, Jeep, Lincoln, Mazda, Mercury, Oldsmobile, and Toyota. Hometown also has a freestanding Ford and Lincoln Mercury factory authorized service center to provide maintenance and repair services of cars and trucks.
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
Ended March 31,
2002 2001
(Restated)
------ ----------
Revenues
New vehicle sales $36,655 $34,659
Used vehicle sales 20,114 18,285
Parts and service sales 6,102 5,948
Other, net 2,222 1,755
Total revenues 65,093 60,647
Cost of sales
New vehicle 34,433 32,234
Used vehicle 18,261 16,371
Parts and service 2,792 2,852
Total cost of sales 55,486 51,457
Gross profit 9,607 9,190
Amortization of goodwill - 178
Selling, general and administrative
expenses 8,372 7,531
Income from operations 1,235 1,481
Interest income 17 1
Interest (expense) (851) (1,271)
Other income 6 254
Other (expense) (2) (1)
Income before taxes 405 464
Provision for income taxes 170 267
Net income $ 235 $ 197
Earnings per share, basic $ .03 $ 0.03
Earnings per share, diluted $ .03 $ 0.02
Weighted average shares
outstanding, basic 7,175,105 6,000,109
Weighted average shares
outstanding, diluted 7,175,105 8,032,305
HOMETOWN AUTO RETAILERS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
For the Three Months
Ended March 31,
2002 2001
(Restated)
------ ----------
Current Assets:
Cash and cash equivalents $ 4,443 $ 4,446
Accounts receivable, net 6,371 5,656
Inventories, net 35,296 31,887
Prepaid expenses and other current
assets 497 344
Deferred income taxes and taxes
receivable 1,692 1,681
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable $ 37,440 $ 32,553
Accounts payable and accrued expenses 5,593 6,160
Current maturities of long-term debt
and capital lease obligations 723 709
Deferred revenue 544 476
Total current liabilities 44,300 39,898
Long-term debt and capital lease
obligations 12,610 12,797
Long-term deferred income
taxes 775 721
Other long-term liabilities and
deferred revenue 1,023 974
Total liabilities 58,708 54,390
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, 3,563,605 and
2,301,109 shares issued and
outstanding 3 3
Common stock, Class B, $.001 par
value, 3,760,000 shares
authorized, 3,611,500 and
3,699,000 shares issued and
outstanding 4 4
Additional paid-in capital 29,730 29,730
Accumulated deficit (2,050) (2,285)
Total stockholders' 27,687 27,452
equity
Total liabilities and stockholders' $ 86,395 $ 81,842
equity