Envirotest Announces Q3 Earnings
20 July 1998
Envirotest Achieves Record Earnings and Record Revenues For Fiscal 1998 Third Quarter
- Results Exceed Investment Community Estimates -
Announces Point of Sale Marketing Agreement With WorldCom
Expands Operations Into the $800 Million A Year Decentralized Vehicle
Emissions Testing Market With Opening Of Test-Only Emissions Stations Under
Agreement With ARCO
Company Continuing To Review A Number of Strategic Alternatives to Build
Shareholder Value Including A Sale, Merger, Recapitalization or Acquisitions
SUNNYVALE, Calif., July 20 -- Envirotest Systems Corp.
(Amex: ENR), the leader in vehicle emissions testing, announced today a
series of developments reflecting the strengths of its business and the
company's potential for future growth.
Specifically, Envirotest achieved record earnings and record revenues for
its third fiscal quarter ended June 30, 1998. Its results are substantially
ahead of investment community estimates. Fiscal 1998 third quarter earnings
reached $6.1 million, or $0.50 per share on a basic basis and $0.40 per share
on a fully diluted basis, compared to fiscal 1997 third quarter earnings of
$183,000, or $0.01 per share on a basic basis and fully diluted basis.
Including a one-time gain in the fiscal 1997 third quarter, reported earnings
for that quarter were $4.1 million or $0.25 per share on a basic basis and
$0.24 per share on a fully diluted basis. Fiscal 1998 third quarter revenues
grew to $45.1 million compared to fiscal 1997 third quarter revenues of
$36.9 million. Fiscal 1998 third quarter EBITDA increased to $20.3 million
compared to EBITDA for the year ago fiscal third quarter of $13.9 million, or
$17.9 million including the one-time gain.
Envirotest, furthermore, announced that it and WorldCom
have entered into a point of sale marketing agreement. Under the agreement,
Envirotest will provide to drivers and passengers who go to Envirotest
facilities for vehicle emissions testing WorldCom marketing materials
featuring WorldCom spokesperson Michael Jordan. Eligible drivers who
subscribe for WorldCom telecommunications services offered in the program will
receive from WorldCom a rebate of their vehicle emissions test fee.
Envirotest will receive a commission on the revenues WorldCom generates from
each Envirotest-originated customer for as long as he or she remains a
customer of WorldCom.
Envirotest also announced its initial entry into the $800 million per year
decentralized vehicle emissions testing market through the commencement of the
operation of 10 test-only emissions stations under ARCO's "SMOGPros Test-Only"
trademark. This market is over twice the size of the centralized testing
market in which Envirotest is the leader. Under its long term agreement with
ARCO , a leading petroleum company and a major presence in the
retail gasoline market, Envirotest will operate up to 80 test-only emissions
stations in the Southern California counties of Los Angeles, Orange,
Riverside, San Bernardino, San Diego, and Ventura.
Envirotest reiterated that, consistent with its commitment to enhance its
business potential and value to shareholders, it is moving forward with its
previously reported review of strategic alternatives, including a potential
sale, merger, or recapitalization of the company as well as the possibility of
strategic acquisitions.
Chester Davenport, Chairman of Envirotest, stated, "Our financial
performance reflects the growing demand for vehicle emissions testing as a
means to help achieve clean air and Envirotest's strong presence and expertise
in this industry. Envirotest's contract base is producing predictable and
solid revenue and cash streams, and our backlog of business stands at about
$920 million. We are optimistic about the potential of our entry into the
very large decentralized marketplace through initiatives such as our strategic
alliance with ARCO in Southern California and through our proprietary Remote
Sensing Technology (RST) which is capable of reading emissions levels of 4,000
vehicles per hour in a non-obtrusive fashion as vehicle owners drive by a
roadside tester. We also are focusing our sights on international markets
where combating vehicle emissions pollutants is also growing as a priority."
Envirotest Systems Corp. is the largest provider of vehicle inspection
services in the country and the only domestic company that provides vehicle
inspection services outside the United States.
This press release contains statements that are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
which represent the company's expectations or beliefs concerning future
events. The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements. A number of such factors are set
forth in the Company's filings with the Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q.
ENVIROTEST SYSTEMS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Contract revenue $45,137 $36,909 $122,706 $101,803
Costs of revenue 25,454 23,619 74,612 74,048
Gross profit 19,683 13,290 48,094 27,755
Operating costs and expenses:
Selling, general and
administrative 5,572 4,688 14,321 13,967
Amortization 583 520 1,774 1,861
Gain on Pennsylvania
settlement -- (3,950) -- (3,950)
Income from
operations 13,528 12,032 31,999 15,877
Other expense (income):
Interest expense 8,478 10,262 25,707 30,104
Interest income (1,235) (2,381) (3,776) (6,571)
Other 12 18 60 112
Income (loss) before
income taxes 6,273 4,133 10,008 (7,768)
Income tax 200 -- 200 --
Net Income (loss) 6,073 4,133 9,808 (7,768)
Net Income (loss)
per share, basic $0.50 $0.25 $0.81 ($0.47)
Net Income (loss)
per share, diluted $0.40 $0.24 $0.67 ($0.47)
Weighted average
common shares
outstanding 12,116 16,620 12,113 16,620
Weighted average common
shares outstanding
and common
equivalent shares
outstanding 15,216 17,241 14,542 16,620
EBITDA 20,305 17,875 52,001 33,514