Precision Auto Care Announces Anticipated 4th Quarter and Annual Results
30 September 1999
Precision Auto Care Announces Anticipated 4th Quarter and Annual Results
LEESBURG, Va., Sept. 29 -- Precision Auto Care, Inc.
today announced that the Company is in the final stages of
completing the audit for its fiscal year ended June 30, 1999. The Company
expects that it will report losses before taxes of approximately $5.1 million
for the quarter ended June 30, 1999 and losses before taxes of approximately
$17.6 million for the fiscal year ended on that date. These amounts compare
with losses before taxes of $504,000 for the quarter ended June 30, 1998 and
income before taxes of $3.0 million for the fiscal year ended on that date.
The Company's losses for the quarter ended June 30, 1999 principally reflect
charges related to the refinement of estimates related to accounts receivable,
allowances for bad debts and inventory. The Company's annual results were
also adversely impacted by costs associated with abandoned acquisitions,
severance charges and cash constraints which negatively impacted revenues for
the Company's manufacturing and distribution operations.
The Company also stated that it was evaluating the book value of certain
assets (principally goodwill) associated with portions of the manufacturing
and distribution operations which the Company may divest or discontinue in
connection with certain restructuring activities discussed below. The Company
expects that this evaluation could result in a substantial non-cash charge to
the Company's earnings for the year ended June 30, 1999. The Company has not
yet quantified this amount and this charge will increase the losses for the
quarter and year ended June 30, 1999 as set forth above.
The Company said that it continues to experience cash flow difficulties
and that these difficulties are adversely impacting the Company's operations.
The Company's current cash flow from operations is not sufficient to enable
the Company to service current and past due operating expenses and amortize
its outstanding debt. The Company is holding discussions with its lenders for
the purpose of seeking amendments and modifications to the terms of the
Company's outstanding debt, including the terms applicable to approximately
$8.5 million in senior debt extended by the Company's principal lender. The
Company's senior debt will mature on September 30, 1999 unless the Company
successfully negotiates an extension of the September 30, 1999 maturity date.
The Company will not be able to repay its outstanding debt in a timely fashion
if its lenders do not agree to modifications acceptable to the Company.
In light of the Company's cash flow difficulties, the Company is also
pursuing recapitalization and strategic partnership opportunities which may
include entering into joint venture arrangements with respect to, or divesting
all or a portion of, the Company's manufacturing and distribution operations.
The Company expects that any transactions it consummates in connection with
these restructuring activities will improve the Company's cash flow. The
Company intends to continue to focus on its core auto care franchise and car
wash operations while it pursues these other transactions and opportunities.
Precision Auto Care, Inc. is the world's largest franchisor of auto care
centers, with 603 operating centers as of September 29, 1999. The Company
franchises and operates Precision Tune Auto Care, Precision Auto Wash, and
Precision Lube Express centers around the world, and offers a vertically
integrated organization with manufacturing and distribution subsidiaries.
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. For example, there
can be no assurance that the Company will be able to modify the terms of its
outstanding debt, obtain additional capital, or complete any divestiture,
partnership or other restructuring transactions in a timely fashion or on
terms and conditions that are acceptable to the Company. Other 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 other risks and uncertainties
which could cause actual results, performance or achievements to differ from
those contained in the forward-looking statements, see "Risk Factors" in the
Company's most recently filed Annual Report on Form 10-K.