Ugly Duckling Reports Record Quarterly Results
21 April 2000
Ugly Duckling Reports Record Quarterly Results
PHOENIX--April 19, 2000--Ugly Duckling Corp. (NNM:UGLY):
First Quarter Highlights:
-- Net earnings totaled $4.5 million, or $0.30 per diluted share,
the highest quarterly EPS ever for the company, versus
earnings from continuing operations of $0.6 million or $0.04
per diluted share in the corresponding quarter of the prior
year.
-- Total revenues increased 33% to $159.1 million from $119.7
million in the corresponding quarter of the prior year.
-- E-Commerce provided $5.9 million in revenue and 701 cars sold
during the first quarter of 2000 versus $3.9 million in
revenue and 415 cars sold during the fourth quarter of 1999.
-- On-balance sheet loan portfolio principal balance reached
$418.9 million, representing a 17% increase over the fourth
quarter and a 130% rise over the year-ago quarter.
-- New loan originations reached $128.1 million, a 25% increase
over the same quarter of the prior year.
-- Completed the purchase of 1.1 million shares of common stock
on April 13, 2000, in exchange for $11.9 million, 11%
subordinated debentures.
Financial Highlights
(In thousands, except for percent
and per share numbers) Three Months Ended
3/31/00 3/31/99 % Increase
Total Revenues $159,124 $ 119,715 33%
Operating Income $ 9,892 $ 899 1,000%
Earnings - Continuing Operations $ 4,483 $ 619 625%
Diluted Earnings per Share -
Continuing Operations $ 0.30 $ 0.04 650%
Ugly Duckling Corp. (NNM:UGLY), the largest and fastest-growing used car sales company focused exclusively on the sub-prime market, today reported record earnings for the first quarter 2000.
Strong Quarter over Quarter Results
For the three months ended March 31, 2000, Ugly Duckling achieved earnings from continuing operations of $4,483,000, or $0.30 per diluted share versus $619,000, or $0.04 per diluted share for the three months ended March 31, 1999. The quarterly earnings and earnings per share were the highest in the Company's history.
Total revenues reached $159,124,000 for the first quarter of 2000, an increase of approximately 33% from total revenues of $119,715,000 in the first quarter of 1999. The increase is attributable to an increased number of cars sold, together with growth in interest income, offset by a decrease in servicing income.
The Company's car sales increased 24% to 15,802 cars sold in the first quarter of 2000 versus 12,754 cars sold in the same quarter of the previous year. The revenues and unit sales were also record highs for the Company.
Interest income for the first quarter of 2000 increased sequentially to $25,531,000 from $22,670,000 in the fourth quarter of 1999, a gain of 13%, and from $10,373,000 in the same period of the prior year, an increase of over 146%. The increase in both periods is primarily attributable to rapid growth of the Company's on-balance sheet portfolio.
New loan originations for the first quarter of 2000 were $128,123,000, representing a 58% increase from the $80,900,000 reported in the fourth quarter of 1999, and a 25% increase over the $102,733,000 reported in the first quarter of 1999.
The current year quarter over prior year quarter increase is primarily the result of the growth in the number of Ugly Duckling dealerships coupled with an increase in sales from E-commerce related business. The Company's dealerships increased in number to 75 in the first quarter of 2000 from 58 in the same quarter of the prior year.
The increase in new loan originations in the first quarter of 2000 over fourth quarter of 1999 is a function of seasonality, as the first quarter is historically the company's strongest sales quarter of the year.
Operating expenses for the first quarter of 2000 were $36,688,000, or 23% of total revenues, compared with operating expenses of $28,970,000, or 24% of total revenues, for the previous year first quarter. The slight decrease in operating expenses as a percentage of revenue is primarily the result of continued efficiencies from the Company's growth.
Greg Sullivan, President and Chief Executive Officer commented: "We are very pleased with the first quarter results. We had good sales volumes, excellent margins and continued to see some efficiencies resulting from our growth. Most significantly, we continued the growth in interest income that has been the primary driver of the growth in net income since we went off gain on sale in the fourth quarter of `98."
Portfolio
The Company achieved dramatic improvement in delinquency levels. At the end of the first quarter 2000, 31+ day delinquencies dropped to 5.3%, down from 8.6% and 10.3% reported at the end of the fourth and third quarter 1999, respectively.
"At the end of the third quarter, we told the investment community that we were going to focus on bringing down our delinquency levels and were confident that we would have delinquencies below 8% by the end of March 2000," continued Sullivan. "Obviously, we have bettered that goal significantly with 5.3% delinquencies at quarter end.
"We are extremely pleased by our progress in this area. And we are even more pleased that we have been able to achieve these significant improvements while keeping loan losses at acceptable levels. In fact, net charge-offs in the first quarter were not only lower on a dollar and percentage basis over the fourth quarter, they were also better on both counts over the third quarter of `99.
"We are continuing to make enhancements to our loan servicing so that we continue to see improvements in loan performance throughout 2000," Sullivan added.
E-Commerce Applications and Sales Accelerate
Ugly Duckling's Web site, located at http://www.uglyduckling.com, provided significant growth in credit applications and car sales again this quarter. The Web site provides potential customers with instant credit applications as well as maps to the company's dealerships nationwide.
The Company received 6,600 applications from customers initially applying for credit through its Web site in the first quarter of 2000, generating $5.9 million in revenue with 701 used car sales. In the fourth quarter of 1999, the Company's Internet activity generated revenues of over $3.9 million with 415 cars being sold.
The Company is finding that the E-commerce customer group is out performing all other customers in terms of loan performance. The Company is excited about the potential of its Web site-based applications and plans to expand and enhance its efforts in this area.
Common Stock Exchange Offer
Just after quarter end, the Company acquired 1,085,415 of shares of its common stock in exchange for $11.9 million of its 11% seven year subordinated debt pursuant to an exchange offer commenced in February 2000.
Investor Conference Call
Ugly Duckling will be holding an investor conference call to discuss the Company's first quarter financial and operational results at 11:30 a.m. Eastern (8:30 a.m. Phoenix) on April 19, 2000. Investors will have the opportunity to listen to the conference call over the Internet through Vcall at http://www.vcall.com.
To listen to the live call, go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call at http://www.vcall.com and on the company's Web site at http://www.uglyduckling.com.
With headquarters in Phoenix, Ugly Duckling Corp. is the largest and fastest-growing operator of used car dealerships focused exclusively on the sub-prime market. The company underwrites, finances and services sub-prime contracts generated at its 75 Ugly Duckling dealerships, located in 11 metropolitan areas in eight states.
This news release includes statements that constitute forward-looking statements within the meaning of the safe harbor provisions of the Private and Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the words "believes," "estimates," "projects," "expects" or similar expressions. Forward-looking statements in this release relate, among other matters, to: anticipated financial results, such as continuing growth sales, other revenues and loan portfolios, and improvements in loan performance, including delinquencies; and growth in the company's dealerships through acquisitions and de novo dealership openings, and e-commerce related growth and loan performance. Factors that could cause or contribute to differences from these forward-looking statements include, but are not limited to: any decline in consumer acceptance of the company's car sales strategies or marketing campaigns; any inability of the company to finance its operations in light of a tight credit market for the sub-prime industry; any deterioration in the used car finance industry or increased competition in the used car sales and finance industry; any inability of the company to monitor and improve its underwriting and collection processes; any changes in estimates and assumptions in, and the ongoing adequacy of, the company's allowance for credit losses; any inability of the company to continue to reduce operating expenses as a percentage of sales; and any new or revised accounting, tax or legal guidance that adversely affect used car sales or financing. Other factors are detailed in the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors," "Factors That May Affect Future Results and Financial Condition" and "Factors That May Affect Future Stock Performance" in Ugly Duckling Corp.'s most recent reports on Form 10-K and Form 10-Q (including Exhibit 99 to any such Form 10-Q), and elsewhere in Ugly Duckling Corp.'s Securities and Exchange Commission filings. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this press release. References to Ugly Duckling Corp. as the largest and fastest growing operator of used car dealerships focused exclusively on the sub-prime market is management's belief based upon its knowledge of the industry and not on any current independent third-party study.
For more information on Ugly Duckling, dial 800/PRO-INFO and enter company ticker symbol UGLY.
UGLY DUCKLING CORPORATION
Consolidated Operating Results
(Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
2000 1999
Cars Sold 15,802 12,754
Total Revenues $ 159,124 $ 119,715
Sales of Used Cars $ 132,786 $ 106,443
Less:
Cost of Used Cars Sold 72,942 60,088
Provision for Credit Losses 34,573 27,763
25,271 18,592
Other Income (Expense):
Interest Income 25,531 10,373
Portfolio Interest Expense (5,029) (1,995)
Servicing and Other Income 807 2,899
21,309 11,277
Income before Operating Expenses 46,580 29,869
Operating Expenses:
Selling and Marketing 8,135 6,366
General and Administrative 26,345 21,009
Depreciation and Amortization 2,208 1,595
36,688 28,970
Operating Income 9,892 899
Interest Expense 2,292 --
Earnings before Income Taxes 7,600 899
Income Taxes 3,117 280
Earnings from Continuing Operations 4,483 619
Earnings (Loss) - Discontinued
Operations, net -- (196)
Net Earnings $ 4,483 $ 423
Earnings per Common Share
from Continuing Operations:
Basic $ 0.30 $ 0.04
Diluted $ 0.30 $ 0.04
Net Earnings per Common Share:
Basic $ 0.30 $ 0.03
Diluted $ 0.30 $ 0.03
Shares Used in Computation:
Basic 14,905 15,650
Diluted 15,153 15,785
UGLY DUCKLING CORPORATION
Consolidated Operating Expenses and Related Information
(Unaudited)
(In thousands, except per share data)
Three Months ended
March 31,
Segment Information: 2000 1999
Retail Operations
Selling and Marketing $ 8,135 $ 6,366
General and Administrative 14,190 11,094
Depreciation and Amortization 1,071 791
Retail Operations 23,396 18,251
Portfolio Expense:
Portfolio - General and Administrative 6,884 4,601
Portfolio - Depreciation and Amortization 300 283
Portfolio Expense 7,184 4,884
Corporate Expense:
Corporate - General and Administrative 5,271 5,314
Corporate - Depreciation and Amortization 837 521
Corporate Expense 6,108 5,835
Operating Expense $ 36,688 $ 28,970
Total Operating Exp. - % of Total Revenues 23.1% 24.2%
Other Information:
Dealerships Open - End of period 75 58
Used Cars Sold 15,802 12,754
Retail Operating Expenses - Per Car Sold:
Selling and Marketing $ 515 $ 499
General and Administrative 898 870
Depreciation and Amortization 68 62
Total Retail Operations - Per Car Sold $ 1,481 $ 1,431
Corporate Expenses:
Per Car Sold $ 387 $ 457
As % of Total Revenues 3.8% 4.9%
Loan Servicing Expenses - % of Portfolio Managed:
Managed Principal Balances:
Dealership Originations $461,824 $341,040
Serviced for Others 7,851 34,547
$469,675 $375,587
Loan Servicing Expenses (Annualized) as % of
Managed Principal Balances 6.2% 5.7%
UGLY DUCKLING CORPORATION
Consolidated Balance Sheet Information
(In thousands)
March 31, March 31, December 31,
2000 1999 1999
ASSETS (Unaudited)
Cash and Cash Equivalents $ 6,330 $ 4,387 $ 3,683
Finance Receivables, Net 407,267 190,063 365,586
Notes Receivable, Net 12,000 600 12,000
Inventory 49,058 39,878 62,865
Property and Equipment, Net 32,141 29,469 31,752
Intangible Assets, Net 14,359 14,179 14,618
Other Assets 12,636 15,714 12,327
Net Assets of Discontinued
Operations 14,162 105,957 33,880
$547,953 $400,247 $536,711
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts Payable $ 2,928 $ 5,531 $ 3,185
Accrued Expenses and
Other Liabilities 29,289 26,468 26,905
Notes Payable 282,865 171,543 275,774
Other Notes Payable 33,418 536 36,556
Subordinated Notes Payable 28,900 38,279 28,611
Total Liabilities 377,400 242,357 371,031
Stockholders' Equity
Common Stock 19 19 19
Additional Paid in Capital 173,663 173,817 173,273
Retained Earnings 17,192 3,871 12,709
Treasury Stock (20,321) (19,817) (20,321)
Total Stockholders' Equity 170,553 157,890 165,680
$547,953 $400,247 $536,711
Net Assets of Discontinued
Operations
(In Thousands)
March 31, March 31, December 31,
2000 1999 1999
Finance Receivables, net $ 9,558 $ 69,523 $ 14,837 14,837
Residuals in Finance
Receivables Sold 3,254 8,677 3,742
Investments Held in Trust 1,053 2,971 1,545
Property and Equipment 604 5,974 2,114
Notes Receivable,
net of Sub. Notes Payable 919 19,070 6,697
Servicing Receivable 6,125 -- 6,125
Other Assets, net of Accounts
Payable and Accrued Liabilities (7,351) (258) (1,180)
Net Assets of Discontinued
Operations $ 14,162 $105,957 $ 33,880
UGLY DUCKLING CORPORATION
Finance Receivables and Allowance for Credit Losses Information
(In thousands)
March 31, March 31, December 31,
2000 1999 1999
Company Dealerships:
Contractually Scheduled Payments $574,664 $272,712 $492,937
Unearned Finance Charges (155,751) (90,562) (134,119)
Principal Balances 418,913 182,150 358,818
Accrued Interest 4,101 1,798 3,741
Loan Origination Costs 6,094 3,583 5,079
Principal Balances, net 429,108 187,531 367,638
Residuals in Finance
Receivables Sold 12,543 28,480 17,382
Investments Held In Trust 53,051 22,680 56,716
Finance Receivables 494,702 238,691 441,736
Allowance for Credit Losses (87,435) (48,628) (76,150)
Finance Receivables, net $407,267 $190,063 $365,586
Allowance as % of Ending
Principal Balances 20.9% 26.7% 21.2%
March 31, March 31, December 31,
2000 1999 1999
Principal - Managed $461,824 $341,040 $424,480
Less: Principal - Securitized
and Sold 42,911 158,890 65,662
Principal - Retained
on Balance Sheet $418,913 $182,150 $358,818
March 31, March 31, December 31,
2000 1999 1999
Days Delinquent: 31-60 61-90 31-60 61-90 31-60 61-90
Retained on Balance Sheet 3.3% 1.8% 2.3% 1.1% 5.3% 2.8%
Securitized - Gain on Sale 4.8% 2.8% 4.9% 2.8% 7.6% 3.7%
Total Portfolio 3.4% 1.9% 3.5% 1.9% 5.7% 2.9%
Total Portfolio, over 30 Days 5.3% 5.4% 8.6%