Hometown Auto Reports 1999 Results; 1999 Revenue Increases 18.7%
13 April 2000
Hometown Auto Reports 1999 Results; 1999 Revenue Increases 18.7%
WATERTOWN, Conn.--April 12, 2000--Hometown Auto Retailers, Inc. (Nasdaq NM: HCAR) today announced financial results for the year ended December 31, 1999.Revenue for the year ended December 31, 1999, increased 18.7% to $285 million compared to $241 million in 1998, resulting in large part from the acquisition of the Morristown Lincoln Mercury and Toyota of Newburgh dealerships. Same store sales were flat when compared to 1998 levels. Hometown's concentration in Lincoln Mercury dealerships had a negative impact on sales revenue as Lincoln Mercury sales were down nationwide. Gross profit for the period increased by $5.5 million or 17.6% to $36.9 million compared to $31.4 million for the prior year. Gross profit was 12.9% of sales in 1999 compared to 13.0% of sales in 1998. Same store total gross profit declined by 3.0% compared to the prior year due primarily to lower per vehicle gross profit. Net income for 1999 was $0.8 million or $0.13 per diluted share versus $2.3 million or $0.39 per diluted share (pro forma) for 1998. Expenses relating to the development of CarDay.com totaled $0.5 million in 1999. Without such expenses net income for the year would have been $1.1 million, or $0.19 per diluted share.
Revenue for the quarter ended December 31, 1999 was $69.5 million compared to $54.7 million for the same period of 1998. In the last quarter of 1999, gross profit rose 25% to $8.9 million from $7.1 million for the same period in 1998. Hometown posted a net loss of $0.6 million or $0.09 per diluted share for the fourth quarter of 1999 versus a loss of $0.1 million or $0.02 per diluted share in the same prior year period. Excluding the impact of start up costs for the development of CarDay.com, the net loss for the quarter ended December 31, 1999 would have been $0.3 million, or $.05 per share. Due to rail transportation delays, in-transit inventory levels increased and inventory reached $51.0 million by year-end. As a result of Hometown's earnings decline from plan and its excess inventory, Hometown failed to comply with certain covenants in its loan agreement with GE Capital. Subsequent to year-end, a waiver was obtained from GE.
Corey Shaker, President and Chief Operating Officer of Hometown Auto commented, "While the 1999 financial results did not live up to our expectations, we are very optimistic about the prospects for Hometown. We view 1999 as a critical development year for Hometown. The Company moved from a group of private businesses to one operating as a single entity. During 1999, we occupied our permanent Corporate Headquarters in Watertown, Connecticut. As we enter the year 2000, we have restructured our management team to focus more attention on our core operations. We appointed two Regional Vice Presidents to focus more attention on dealership performance and year 2000 goals. We have introduced a nationally recognized 52-week sales training program to refine the performance of our sales personnel. We are installing a new computer system in our Corporate Office to further our efforts to integrate the accounting and administrative functions. We have centralized vehicle inventory control and will centralize our accounting function."
Mr. Shaker added, "While the two major acquisitions and other factors had a positive effect on Hometown's top line growth, our bottom line results were adversely impacted by development expenses for CarDay.com, increases in selling, general and administrative expenses related to setting up the corporate management infrastructure, and interest expense. Inventories of new and used vehicles rose during the third and fourth quarters to $51.0 million by year end, largely attributed to $9 million in inventory in transit, which increased due to transportation delays of Lincoln Town Cars sold to livery operators. In conjunction with Hometown's implementation of its management infrastructure, the Company centralized inventory control and established rigid ordering guidelines using sophisticated inventory matrices. Management expects new and used vehicle inventory to be within Hometown's guidelines by the end of the second quarter of 2000."
Mr. Shaker concluded, "We continue to pursue accretive acquisitions, cost-saving initiatives and diversification of our product line. We have broadened our product mix over the last few quarters to minimize the effect of any weakness in demand for any particular manufacturer. During the third quarter of 1999 we incorporated our first Daewoo franchise into the Westwood dealership and on November 4th we completed the acquisition of our first Mazda franchise which was tucked into our Lincoln/Mercury franchise in Framingham, Massachusetts. Just after the first of the year, we added a Jeep franchise to our Brattleboro Chrysler Plymouth store. We believe we are well positioned for 2000 and look forward to strong results for the year."
Hometown Auto Retailers sells new and used cars and light trucks, provides maintenance and repair services, sells replacement parts and provides related financing, insurance and service contracts through 11 franchised dealerships located in New Jersey, New York, Connecticut, Massachusetts and Vermont. The Company's dealerships offer 13 American and Asian automotive brands, including Chevrolet, Chrysler, Daewoo, Dodge, Ford, Isuzu, Jeep, Lincoln, Mazda, Mercury, Oldsmobile, Plymouth and Toyota. The Company 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 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the For the For the
Three Months Year Nine Months
Ended Ended Ended
December 31, December 31, September 30,
1999 1998 1999 1998 1999 1998
(Pro Forma) (Pro Forma)
Revenues
New vehicle
sales $43,996 $32,614 $173,481 $140,203 129485 107589
Used vehicle
sales 18,138 15,828 82,272 73,404 64134 57576
Parts and
service sales 5,522 4,878 22,823 21,147 17301 16269
Other
dealership
revenues, net 1,893 1,336 6,917 5,849 5024 4513
Total revenues 69,549 54,656 285,493 240,603 215944 185947
Cost of sales 60,675 47,531 248,615 209,246 187940 161715
Gross profit 8,874 7,125 36,878 31,357 28004 24232
Amortization
of goodwill 164 110 600 473 436 363
Selling,
general
and
administrative
expenses 8,354 6,894 32,045 26,047 23830 19153
Income
(loss) from
operations 356 121 4,233 4,837 3738 4716
Other income
(expense)
Interest income
(expense), net (639) (287) (1,988) (931) -1349 -644
Loss from
operations of
internet
startup (376) (515)
Other income
(expense), net (47) 43 (95) 39 -48 -4
Income (loss)
before taxes (706) (123) 1,635 3,945 2341 4068
Provision
(benefit) for
income taxes (145) 4 850 1,692 995 1688
Net income
(loss) $(561) $ (127) $ 785 $2,253 1346 2380
Earnings per
share, basic $(0.10) $ (0.02) $ 0.13 $0.39 0.229417 0.41
Earnings per
share,
diluted $(0.09) $ (0.02) $ 0.13 $ 0.39 0.225153 0.410345
Weighted
average
shares,
basic 5,900,000 5,800,000 5,875,342 5,800,000 5867033 5800000
Weighted
average
shares,
diluted 6,080,702 5,800,000 6,003,851 5,800,000 5978144 5800000