Precision Auto Care, Inc. Announces Second Quarter Results
16 February 1999
Precision Auto Care, Inc. Announces Second Quarter Results
LEESBURG, Va., Feb. 16 -- Precision Auto Care, Inc.
today announced that the Company reported revenues of $10.9
million and a net loss of $4.6 million, or $0.75 per share, for the quarter
ended December 31, 1998, compared to pro forma combined revenues of $11.6
million and pro forma combined net income of $966,000, or $0.18 per share, for
comparable period of the prior year. Results for the six months ended
December 31, 1998 were revenues of $22.7 million and a net loss of $5.3
million, or $0.87 per share, compared to pro forma combined revenues of $23.3
million and net income of $1.8 million, or $0.33 per share, for the comparable
period of the prior year.
The results for the three and six months ended December 31, 1998 included
special charges totaling $3.4 million. Of these charges, $1.2 million was
related to a change to more conservative assumptions used to estimate royalty
revenue generated by franchisees from which royalty reports have not been
received by the end of a period. Following a detailed periodic review of
company operations, management elected to write off or reserve $1.1 million of
selected accounts and notes receivable that were deemed to be uncollectible or
whose collection was doubtful. As part of the Company's restructuring and cash
flow improvement program, the Company expects to close on the sales of several
non-strategic assets in this current quarter. Included in these sales is a
group of retail car wash units that is anticipated to produce $2.8 million in
cash proceeds by March 31, 1999, but will result in a book loss of $710,000.
This loss was charged to results for the quarter ended December 31, 1998.
Also, as part of that restructuring and cash flow improvement program, staff
reductions were undertaken in the quarter ending December 31, 1998, for which
a severance charge of $453,000 was taken during the quarter. Approximately
$3.0 million of these charges represent non-cash charges and, accordingly, did
not impact cash during the six months ended December 31, 1998. A substantial
portion of the $453,000 charge for severance payments reflected cash payments
made in the quarter ended December 31, 1998 and the cash impact for the
remainder of the charge will be realized in subsequent quarters.
Charles L. Dunlap, President and Chief Executive Officer, stated that:
"The results for the second quarter reflect the short-term impact of the
significant actions we have undertaken to improve the Company's long-term
position. In addition, the Company's results were negatively affected by cash
constraints that resulted in reduced sales, particularly with our distribution
and manufacturing businesses, and operating profitability for the quarter.
Our cash outlook, however, is much improved with the recent placement of a $5
million subordinated debenture, and the negotiation and expected closing by
April 30, 1999 of over $14 million in real-estate refinancings and sales of
non-strategic assets," said Dunlap. "In addition, we have reached agreement in
principle with our senior lender and expect to amend our credit agreement,
which will, among other things, provide a manageable schedule for an orderly
reduction in our borrowings and give us more flexibility as we continue to
restructure and redesign our business units," he explained.
"We continue to take action to improve both our operations and our cash
flow, including additional corporate restructuring, closing non-profitable
business units and departments, and selling non-strategic business units,"
noted Dunlap. "Productive discussions are also underway with major potential
joint venture partners and new customers regarding our product offerings and
new technologies. While we believe these actions will improve the long-term
position of the Company and return us to profitability, in the short term,
they may have an adverse effect on the reported net income of the Company. We
continue to see a promising future for Precision, and are encouraged by the
support from our vendors, suppliers, customers, franchisees, and associates as
we position the Company for sustained future growth."
Precision Auto Care, Inc. is the world's largest franchisor of auto care
centers, with 646 operating centers as of January 31, 1999. 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. For a discussion of such risks and uncertainties which
could cause actual results, performance or achievements to differ from those
contained in the forward-looking statements, se "Risk Factors" in the
Company's Annual Report on Form 10-K for the most recently ended fiscal year.
Three Months Ending December 31
000s except per share amounts
1998 1997 1997
Pro Forma Actual
Revenue $10,910 $11,625 $10,378
Net income (loss) ($4,595) $966 $794
Diluted earnings (loss)
per share ($0.75) $0.18 $0.16
Shares outstanding - diluted 6,121 5,497 5,015
Six Months Ending December 31
000s except per share amounts
1998 1997 1997
Pro Forma Actual
Revenue $22,700 $23,344 $17,145
Net income (loss) ($5,312) $1,819 $1,221
Diluted earnings (loss)
per share ($0.87) $0.33 $0.27
Shares outstanding - diluted 6,121 5,497 4,532