Precision Auto Care, Inc. Announces First Quarter Results
17 November 1998
Precision Auto Care, Inc. Announces First Quarter Results
LEESBURG, Va., Nov. 17 -- Precision Auto Care, Inc.
today announced that the Company reported revenues of
$11.8 million and a net loss of $717,000, or $0.12 per share, for the quarter
ended September 30, 1998, compared to proforma combined revenues of
$11.7 million and pro forma combined net income of $884,000, or $0.16 per
share, for the prior year. The results for the quarter ended September 30,
1998 included a charge of $200,000 for professional fees, deposits and other
costs relating to a terminated program of proposed acquisitions and related
high-yield financing.
Based on the results of the first quarter, the Company stated that it is
not in compliance with the revised financial covenants contained in its
recently amended bank credit agreement and that it is in the process of
seeking waivers or modifications of these covenants from its bank lender. The
Company utilized substantially all of its credit facility in August 1998, and
from that time the Company's liquidity has been constrained. As previously
announced, the Company requires additional working capital financing and
expects to generate approximately $15 million from real estate financings
which the Company has been pursuing. Following the application of the
$15 million in real estate proceeds to permanently reduce portions of its
working capital facility, the Company would have the ability to borrow up to
$5 million from time to time under that facility. While the Company believes
that it will be successful in obtaining waivers or modifications of its bank
covenants and in closing such real-estate based financing, there can be no
assurance that it will be able to do so. In the event that the Company is
unable to obtain covenant waivers or modifications from its lender or to
complete the real estate financings on a timely basis, the Company's financial
condition, results of operations and liquidity will be adversely and
materially affected. The Company's liquidity position and existing credit
arrangements are more fully discussed in the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1998.
Charles L. Dunlap, President and Chief Executive Officer, stated that:
"Since my arrival three weeks ago, we have taken prompt actions to improve
Precision's cash flow, operating results and ability to meet bank covenants.
Staffing levels have been reduced by 10% overall and 15% at headquarters, we
have started to reduce operating expenses, improve inventory management and
accelerate receivables collection. The management team is reviewing the
strategic and financial performance of all aspects of the Company's operations
and, based on this review, we will take appropriate actions to improve
revenues, reduce expenses and improve cash flow. These actions will include
sales of selected assets and the restructuring of those operations of the
Company that are not meeting their strategic and financial objectives. The
implementation of these actions is expected to be mostly accomplished in the
quarters ending December 31, 1998 and March 31, 1999. While I firmly believe
that these actions will result in long-term value for our shareholders, these
actions may have an adverse effect on the reported net income of the Company
for these periods. I see a strong future for Precision once we work through
these actions and I ask our vendors, customers, franchisees, shareholders and
associates to continue their support and patience as we reposition the Company
for sustained future growth."
Precision Auto Care, Inc. is the world's largest franchisor of auto care
centers, with 617 operating centers as of September 30, 1998. The Company
franchises and operates Precision Tune Auto Care, Precision Auto Wash, and
Precision Lube Express centers around the world.
Cautionary Statement: The statements in this press release constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements are subject to risks and uncertainties that could cause
Precision Auto Care Inc.'s actual results, performance or achievements to
differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks and
uncertainties include, but are not limited to, (i) the risks and uncertainties
reflected and set forth in the text of this press release, (ii) the fact that
Precision Auto Care Inc. and the companies it acquired on and subsequent to
the date of its initial public offering have only recently conducted
operations as a combined company, (iii) the seasonal nature of portions of the
business, (iv) the highly competitive markets in which Precision Auto Care
Inc. operations, (v) difficulties in integrating all of the businesses
Precision Auto Care Inc. has acquired, (vi) risks associated with Precision
Auto Care Inc.'s ability to continue its strategy of growth through
acquisitions and (vii) risks associated with Company's ability to make or
effect acquisitions in the future and to successfully integrate newly-acquired
businesses into existing operations and the risks associated with such newly-
acquired businesses.
Three Months Ending September 30
Thousands except per
share amounts
Actual Pro Forma
1998 1997 1998 1997
Revenue $11,790 $6,767 $11,790 $11,719
Net income (loss) (717) 428 (717) 884
Diluted earnings (loss)
per share ($0.12) $0.32 ($0.12) $0.16
Shares outstanding 6,121 1,352 6,121 5,497