Cragar Industries, Inc. Posts Earnings For Year End
5 April 2000
Cragar Industries, Inc. Posts Earnings For Year End
PHOENIX, April 5 Cragar Industries, Inc.
(OTC Bulletin Board: CRGR) today reported earnings for the year ended December
31, 1999 of $54,678 compared to a loss for the year ended December 31, 1998 of
$3,971,442.
"By focusing our efforts on replacing lost sales from Super Shops, our
then largest customer that went bankrupt in late 1997, and by reducing
operating costs, the Company improved its bottom line by over $4.0 million
during 1999," commented Michael L. Hartzmark, Chairman and CEO of Cragar.
"More importantly for our long term success, we transformed the Company's
business strategy by consummating two licensing transactions during the fourth
quarter of 1999."
"In October 1999, we granted an exclusive worldwide license to Weld
Racing, Inc. to manufacture, sell, and distribute our line of wheels
manufactured with non-cast wrought aluminum alloy outer rims and related
accessories. In December 1999, we granted an exclusive worldwide license to
Carlisle Tire & Wheel Co., Inc. to manufacture, sell, and distribute our line
of wheels manufactured with steel outer rims and related accessories."
"These transactions have dramatically changed the nature of our business.
As a result of these transactions, Cragar will no longer engage in the
manufacture, marketing, sale or distribution of the specified licensed
products. The outsourcing of the manufacturing, marketing, sales and
distribution operations with respect to the licensed products, together with
the sale of the related assets, will result in a substantial decrease in
Cragar's revenues and related operating, overhead, sales and marketing costs.
We expect the decrease in revenues to be replaced by a stream of royalty
payments generated by net sales of the licensed products by Cragar's licensing
partners. In addition, Cragar is entitled to royalties based on net sales of
certain new CRAGAR brand name products developed by Carlisle and Weld."
"As part of Cragar's new business strategy, Cragar also intends to pursue
licensing opportunities for Cragar's remaining line of one-piece aluminum cast
wheels and other aftermarket performance automotive products through the
utilization of the CRAGAR brand name. Toward that end, Cragar is evaluating
various professional licensing companies to possibly engage one of them to
develop and/or implement a full-blown licensing strategy."
"Finally, in November 1999, Cragar purchased an equity stake in
Wrenchead.com (http://www.wrenchead.com), a start-up e-commerce company.
Cragar also negotiated an option to increase its stake in Wrenchead.com in the
near term. Wrenchead.com is a provider of e-commerce tools for both business-
to-consumer and business-to-business for the automotive aftermarket.
Wrenchead.com offers for sale more than 1.5 million brand name auto and truck
parts, accessories, performance products, and consumer merchandise.
Wrenchead.com services 'do it yourselfers' and professional mechanics with
installation, maintenance and repair expertise. Lead investors in
Wrenchead.com include Polaris Venture Partners, SFX Entertainment and CBS.
Wrenchead.com is headquartered in White Plains, New York."
Cragar Industries, Inc. is an international licensor of custom wheels and
wheel accessories for cars, trucks, vans, sport utility vehicles, racing
vehicles, and motorcycles.
This release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 including, among others, statements
regarding the anticipated stream of royalties resulting from the transactions
with Carlisle Tire & Wheel Co., Inc. and Weld Racing, Inc., Cragar's intent to
implement a new business strategy regarding the CRAGAR brand name, and
Cragar's ownership interest in Wrenchead.com. Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified. Future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Please refer to the Risk Factors in the Company's
filings with the Securities and Exchange Commission, which identify certain
important factors that could cause the actual results to differ materially
from those contained in our forward-looking statements. These factors
include, but are not limited to, the bankruptcy of the company's primary
customer, dependence on external financing, product availability, market
conditions, and general economic conditions. In addition, there is no
assurance that Carlisle Tire & Wheel Co., Inc. and Weld Racing, Inc. will be
able to successfully sell the licensed products, which would have a material
adverse effect on the royalties CRAGAR anticipates from the licensing
arrangements, or that Carlisle Tire & Wheel Co., Inc. or Weld Racing, Inc.
will take any actions that would be in the best interest of Cragar's
shareholders rather than their own shareholders. There is no assurance that
the Company's brand extension strategy will be implemented, and if so, whether
it will be successful. There is also no assurance that the Company will
realize any proceeds from its equity stake in Wrenchead.com.