Hometown Auto Announces Third Quarter 2002 Results; Conference Call Set for Thurs., Nov. 14 at 4:00 p.m. ET
WATERTOWN, Conn.--Nov. 13, 2002--Hometown Auto Retailers (OTCBB:HCAR) today announced its financial results for the quarter ended September 30, 2002.During the quarter Hometown generated revenues of $74.3 million, a 3.9% increase versus restated quarterly revenues of $71.5 million generated during the third quarter of 2001. For the first nine months of 2002, total revenues at Hometown increased by 2.8% to $212.4 million versus restated revenues of $206.6 million during the same period in 2001.
Gross profits for the quarter totaled $10.5 million, a slight increase versus gross profits of $10.3 million in the year ago quarter. For the first nine months of the year, Hometown generated gross profits of $30.2 million, a slight decrease versus gross profits of $30.6 million for the same nine-month period in 2001.
As previously announced by the company, Hometown has adopted SFAS 142 effective January 1, 2002, a new accounting rule issued by the Financial Accounting Standards Board, a rule which (among other things) eliminates 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.
Since adopting SFAS 142, Hometown has ceased recording goodwill amortization. During the third quarter of 2002, Hometown completed its goodwill impairment testing which resulted in Hometown recording a one-time, non-cash charge of approximately $23.7 million to write-off the carrying value of its goodwill. This charge is non-operational in nature and is reflected as a cumulative effect of an accounting change in the accompanying statement of operations.
As a result, Hometown is reporting a net loss of $(23.2) million and a basic and diluted loss per share of $(3.23) for the third quarter of 2002 and a net loss of $(22.6) million and a basic and diluted loss per share of $(3.15) for the first nine months of 2002. Before the cumulative effect of the accounting change, Hometown is reporting net income of $558,000 and a basic and diluted earnings per share of $0.07 for the third quarter of 2002 versus a restated net loss of $(1.7) million and a restated basic and diluted loss per share of $(0.24) for the same period in 2001, as well as a net income of $1.1 million and a basic and diluted earnings per share of $0.15 for the nine months ended September 30, 2002 versus a restated net loss of $(940,000) and a restated basic and diluted loss per share of $(0.15) for the same period in 2001.
In accordance with SFAS 142, Hometown has ceased recording goodwill amortization effective January 1, 2002. Had SFAS 142 been adopted on January 1, 2001, Hometown's restated net loss for the third quarter of 2001 would have been $(1.6) million with a restated basic and diluted loss per share of $(0.22). Similarly, restated net loss for the nine months ended September 30, 2001 would have been $(501,000) with a restated basic and diluted loss per share of $(0.08).
As previously reported, the three and nine months ended September 30, 2001, reflect the write-off of Hometown's investment in CarDay Inc., which had the effect of reducing net income by $2.1 million in both periods and reducing earnings per share, fully diluted for the three and nine months ended September 30, 2001 by $0.29 and $0.30, respectively. Excluding the charge, and had SFAS 142 been adopted on January 1, 2001, restated net income would have been $483,000 or $0.07 per share fully diluted for the three months ended September 30, 2001 and $1.6 million or $0.22 per share fully diluted for the nine months ended September 30, 2001. The charge did not affect cash, cash flow from operations, or liquidity and capital resources.
"The new accounting rule requires companies to have an independent review of goodwill carried on their books to see if an impairment of the goodwill exists," said Corey Shaker, president and chief executive officer of Hometown Auto Retailers. "The valuation techniques used in this process differ from what had been allowed, resulting in this write-off. Fortunately, this is a non-cash write-off that is being shown as a separate line item so as not to distort the results of operations.
"It is important to note that Hometown is reporting increased gross revenues, gross profits, and even adjusted net earnings for the third quarter before this substantial one-time write-off -- and this in spite of some continued softness in the economy. We believe that these are signs that Hometown is continuing to make progress."
With regards to its results, Hometown experienced a slight decrease (one percent) in the total number of vehicles it sold in the third quarter of 2002 (3,660) versus the same period in 2001 (3,693), with an increase in the number of new vehicles sold and a decrease in the number of used vehicles sold at retail and wholesale (as shown below).
Units sold by category for Hometown
For the three For the nine
months ended months ended
September 30, September 30,
2002 2001 2002 2001
--------------------------------------------
New vehicle 1,841 1,611 5,097 4,613
Used vehicle - retail 1,038 1,262 3,237 3,701
Used vehicle - wholesale 781 820 2,205 2,448
--------------------------------------------
Total units sold 3,660 3,693 10,539 10,762
======== ======== ======== ========
"As anticipated (due to the continued use of manufacturer-driven zero percent financing programs), total revenues attributable to new vehicle sales were substantially higher during the quarter, up 15.8% versus comparable new vehicle sales in the same period in 2001," Shaker said. "This also resulted in an increase in gross profits attributable to new vehicle sales. Conversely, Hometown saw its revenues and gross profits tied to used vehicle sales drop during the quarter, a decrease that is also attributable (at least in part) by the availability of these zero percent financing offers."
Total revenue by category
For the three For the nine
months ended months ended
September 30, September 30,
2002 2001 2002 2001
(Restated) (Restated)
---------------------- --------------------
(in thousands) (in thousands)
New vehicle $47,597 $41,108 $129,172 $117,119
Used vehicle - retail 14,887 18,598 45,999 54,574
Used vehicle - wholesale 3,152 3,013 12,077 9,628
Parts and service 6,354 6,526 18,384 19,116
F&I and other 2,358 2,272 6,811 6,181
---------------------- --------------------
Total Revenue $74,348 $71,517 $212,443 $206,618
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Gross profits by category
For the three months For the nine months
ended ended
September 30, September 30,
2002 2001 2002 2001
(Restated) (Restated)
-------------------- --------------------
(in thousands) (in thousands)
New vehicle $2,857 $2,435 $7,877 $7,530
Used vehicle - retail 1,887 2,016 5,498 6,186
Used vehicle - wholesale (133) (185) (138) (90)
Parts and service 3,493 3,789 10,122 10,766
F&I and other 2,358 2,272 6,811 6,181
-------------------- --------------------
Total Gross Profit $10,462 $10,327 $30,170 $30,573
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"Looking forward, we have nearly completed our brand new, state-of-the-art Lincoln Mercury facility in Framingham, Massachusetts, a part of the affluent Metro West Boston area," Shaker said. "We expect to be in this facility by the end of November, and believe it will clearly set us apart from our competition in the area, while providing an excellent purchase and service experience for our customers. With the recent lowering of interest rates, we are cautiously optimistic about the economy, and we continue to pledge our best efforts to helping make Hometown into a better company for all its shareholders."
Hometown will hold a conference call to discuss its results for the third quarter on Thursday, November 14, 2002 at 4:00 p.m. (ET). Interested parties can participate by dialing 800-450-0821 (in the U.S.) or 612-332-0342 (for international participants). A replay of the conference call will be available from 5:45 p.m. (ET) on November 14, 2002 through 11:59 p.m. (ET) on Sunday, November 17, 2002 by calling 800-475-6701 (U.S. callers) or 320-365-3844 (international callers), access code: 660854.
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 11 American and Asian automotive brands, including Chevrolet, Chrysler, 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 that 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 September 30, Ended September 30,
-----------------------------------------
2002 2001 2002 2001
(Restated) (Restated)
-----------------------------------------
Revenues
New vehicle sales $47,597 $41,108 $129,172 $117,119
Used vehicle sales 18,039 21,611 58,076 64,202
Parts and service sales 6,354 6,526 18,384 19,116
Other, net 2,358 2,272 6,811 6,181
-----------------------------------------
Total revenues 74,348 71,517 212,443 206,618
Cost of sales
New vehicle 44,740 38,673 121,295 109,589
Used vehicle 16,285 19,780 52,716 58,106
Parts and service 2,861 2,737 8,262 8,350
-----------------------------------------
Total cost of sales 63,886 61,190 182,273 176,045
-----------------------------------------
Gross profit 10,462 10,327 30,170 30,573
Amortization of goodwill - 176 - 529
Selling, general and
administrative expenses 8,748 8,635 25,899 25,079
-----------------------------------------
Income from operations 1,714 1,516 4,271 4,965
Interest income 12 45 33 75
Interest (expense) (858) (976) (2,543) (3,343)
Other income 11 - 35 254
Other (expense) - (3) (3) (5)
Valuation adjustment -
Carday, Inc. - (3,258) - (3,258)
-----------------------------------------
Income (loss) before
taxes and cumulative
effect of
accounting change 879 (2,676) 1,793 (1,312)
Provision for income
taxes 321 (930) 691 (372)
-----------------------------------------
Income (loss) before
cumulative effect of
accounting change 558 (1,746) 1,102 (940)
Cumulative effect of
accounting change (23,708) - (23,708) -
-----------------------------------------
Net income (loss) $(23,150) $(1,746) $(22,606) $(940)
====== ====== ====== ======
Earnings (loss) per
share, basic
Before cumulative effect
of accounting change $0.07 $(0.24) $0.15 $(0.15)
Cumulative effect of
accounting change (3.30) - (3.30) -
-----------------------------------------
Earnings (loss) per
share, basic $(3.23) $(0.24) $(3.15) $(0.15)
====== ====== ====== ======
Earnings (loss) per
share, diluted
Before cumulative
effect of accounting
change $0.07 $(0.24) $0.15 $(0.15)
Cumulative effect of
accounting change (3.30) - (3.30) -
-----------------------------------------
Earnings (loss) per
share, diluted $(3.23) $(0.24) $(3.15) $(0.15)
====== ====== ====== ======
Weighted average shares
outstanding, basic 7,175,105 7,175,105 7,175,105 6,396,078
Weighted average shares
outstanding, diluted 7,175,105 7,175,105 7,175,105 6,396,078
HOMETOWN AUTO RETAILERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September December
30, 2002 31, 2001
ASSETS (Unaudited)
----------------------
Current Assets:
Cash and cash equivalents $5,601 $4,446
Accounts receivable, net 5,593 5,656
Inventories, net 35,785 31,887
Prepaid expenses and other current assets 432 344
Deferred income taxes and taxes receivable 744 1,681
---------- ---------
Total current assets 48,155 44,014
Property and equipment, net 12,972 11,889
Goodwill, net - 23,708
Other assets 2,702 2,231
---------------------
Total assets $63,829 $81,842
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable $36,315 $32,463
Accounts payable and accrued expenses 6,048 6,160
Current maturities of long-term debt
and capital lease
Obligations 1,132 886
Deferred revenue 593 476
--------------------
Total current liabilities 44,088 39,985
Long-term debt and capital lease obligations 13,160 12,885
Long-term deferred income taxes 922 721
Other long-term liabilities and deferred
revenue 783 799
--------------------
Total liabilities 58,953 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 3,561,605 shares issued
and outstanding 3 3
Common stock, Class B, $.001 par value,
3,760,000 shares authorized, 3,611,500
and 3,613,500 shares
issued and outstanding 4 4
Additional paid-in capital 29,760 29,730
Accumulated deficit (24,891) (2,285)
--------------------
Total stockholders' equity 4,876 27,452
---------------------
Total liabilities and stockholders'
equity $63,829 $81,842
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