Hometown Auto Reports Third Quarter Financial Results
13 November 1998
Hometown Auto Reports Third Quarter Financial Results
WATERTOWN, Conn.--Nov. 12, 1998--
Receives $100 Million Credit Facility Commitment From GE Capital AFS
HOMETOWN AUTO RETAILERS, INC. (Nasdaq NM - HCAR) today announced pro forma financial results for the third quarter ended September 30, 1998. Hometown Auto also announced the entry into a commitment letter for a $100 million credit facility from GE Capital Auto Financial Services.
Revenues for the third quarter of 1998 were $56.9 million compared to $64.3 million for the third quarter of 1997. Income before taxes in the quarter was $0.95 million, or $0.09 diluted earnings per share, versus $1.8 million or $0.18 diluted earnings per share in the 1997 quarter. In the first nine months of 1998, Hometown recorded revenues of $177.8 million compared to $182.4 million in the first nine months of 1997. Income before taxes for the nine months was $3.9 million, or $0.40 diluted earnings per share versus $5.2 million, or $0.53 diluted earnings per share in the first nine months of 1997.
Results for the quarter were adversely affected by the following factors:
The Company purchased fewer used vehicles at auction due to a significant increase in auction prices. Lower purchases resulted in lower inventories and sales. As a result of the settlement of the GM strike and growing availability of current year new car models, auction prices for used vehicles have now declined significantly and Hometown has increased auction purchases in the fourth quarter. Hometown also experienced critical shortages of several key new car brands. The General Motors strike, in combination with the delay in the delivery of the new Jeep model, created a shortage of new vehicles offered for sale. Shortages of Lincoln Town cars, Lincoln Navigator and Chrysler products also contributed to lower sales. Inventories are now at normal levels and sales are expected to recover in the fourth quarter.
Joseph Shaker, President and Chief Operating Officer of Hometown Auto, said, "Although results for the quarter were not what we expected, our inventories of new and used vehicles have returned to the proper levels. Also in 60 days of combined operations during the quarter we did not have time to do more than initiate our growth programs or implement cost saving programs such as lower cost floor plan financing, and reduced cost combined insurance programs."
"However, we are very pleased about the $100 million credit facility offered by GE Capital Auto Financial Services and look forward to completing the transaction. $85 million will be to finance our `floor plan' or inventory costs, a key component of our business, and the remaining $15 million will be for acquisitions. The favorable terms of the floor plan will save significant interest expense, while the additional funds for acquisition will enable us expand our business more quickly and cost effectively. We also arranged for substantial savings in other operating costs such as healthcare and garage costs. In the first quarter of 1999 we expect to implement a new, system wide financial system that will result in further efficiencies."
"In the third quarter we completed negotiations to acquire the Lincoln Mercury dealership in Morristown, NJ to supplement our very successful Lincoln Mercury operations in Emerson, NJ. Once the acquisition is finalized and fully integrated into the Hometown Auto system, we believe the Morristown location could achieve a $15 million run rate. In addition, we are in discussions with several other dealerships for potential acquisition that will fit well with our strategy to develop dominant competitive positions in regions where we already have a foothold. As we complete each acquisition and merge its operations into the Hometown Auto system, instituting our Best In Class practices and better leveraging our assets, we come closer to attaining our goal of becoming the leading consolidator and the most profitable operator of auto dealerships in the Northeast."
Hometown Auto Retailers, Inc. is engaged in the business of selling new and used cars and light trucks, providing maintenance and repair services, selling replacement parts and providing related financing, insurance and service contracts through eight franchised dealerships located in New Jersey, Connecticut, Massachusetts and Vermont. The Company's dealerships offer 12 American and Asian automotive brands, including Chevrolet, Chrysler, Dodge, Eagle, Ford, Isuzu, Jeep, Lincoln, Mercury, Oldsmobile, Plymouth and Toyota. The Company also operates a free-standing neighborhood collision repair center and is 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 Pro Forma Statements of Operations
(in thousands, except per share information)
Third Quarter Ended Nine Months Ended
Sept. 30, Sept. 30,
1998 1997 1998 1997
---------- ----------- -------- -------
Revenues:
New vehicle
sales $ 34,616 $ 37,257 $ 102,620 $ 102,107
Used vehicle
sales 16,236 20,492 55,680 60,480
Parts and service
sales 4,578 5,016 15,022 15,424
Other dealership
revenues, net 1,443 1,485 4,494 4,386
Total revenues 56,873 64,250 177,816 182,397
Cost of sales 49,320 56,177 154,486 158,275
Gross profit 7,553 8,073 23,330 24,122
Amortization of excess
of purchase price
over net tangible
assets acquired 150 100 349 299
Selling, general and
administrative
expenses 6,361 6,259 18,477 18,439
Income (loss)
from operations 1,042 1,714 4,504 5,384
Other income (expense)
Interest expense,
net (119) (57) (566) (376)
Other income
(expense), net 29 127 (4) 144
Income (loss)
before taxes 952 1,784 3,934 5,152
Provision for income
taxes 441 714 1,634 2,061
Net income
(loss) $ 511 $ 1,070 $ 2,300 $ 3,091
Earnings per share,
basic and diluted $ 0.09 $ 0.18 $ 0.40 $ 0.53
Weighted average
shares 5,800,000 5,800,000 5,800,000 5,800,000