Ugly Duckling Announces Record Second Quarter and Six Month Results
26 July 2000
Ugly Duckling Announces Record Second Quarter and Six Month Results
PHOENIX - Ugly Duckling Corporation , the largest used car sales company focused exclusively on the sub-prime market, today reported record second quarter and six month 2000 financial results.Strong Quarter over Quarter Results
For the three months ended June 30, 2000, Ugly Duckling achieved earnings from continuing operations of $4,348,000, or $0.31 per diluted share, compared with earnings from continuing operations of $1,792,000, or $0.12 per share, for the year-ago quarter.
The Company sold 14,369 cars in the second quarter of 2000, an increase of 26% over the 11,416 cars sold in the year-ago quarter. The increased number of cars sold, together with growth in interest income, resulted in total revenues of $151,984,000 for the second quarter of 2000, an increase of over 31% from total revenues of $115,927,000 in the second quarter of 1999.
Interest income for the second quarter of 2000 increased sequentially to $29,871,000 from $25,531,000 in the first quarter of 2000, a gain of 17%, and from $15,756,000 in the year-ago period, an increase of approximately 90%. The increase in both periods is primarily attributable to rapid growth of the Company's on-balance sheet portfolio, resulting from Ugly Duckling's change to on-balance sheet financing transactions in late 1998.
As expected due to seasonality and consistent with prior years, new loan originations for the second quarter of 2000 reached $118,778,000, representing a 7% sequential decrease from the $128,123,000 reported in the first quarter of 2000, and a 24% increase over the $96,098,000 reported in the second quarter of 1999. The quarter over quarter increase is primarily the result of an increased number of Ugly Duckling dealerships. The Company's dealerships increased in number to 77 in the second quarter of 2000 from 59 in the year-ago second quarter.
Operating expenses for the second quarter of 2000 were $35,435,000, or 23% of total revenues, compared with operating expenses of $27,708,000, or 24% of total revenues, for the year-ago quarter. The stability in operating expense is primarily the result of improved efficiencies from the Company's new computer system and dealership growth offset by additional costs associated with the continued deployment of collection staff to Company dealerships.
"We are very pleased with our second straight quarter of record earnings. Obviously the key factor has been the continued growth in our portfolio and corresponding interest income. We also achieved reasonably good sales volumes and margins this quarter and kept expenses in line while continuing the roll-out of early stage collectors to the dealerships," said Greg Sullivan, President and Chief Executive Officer of Ugly Duckling Corporation.
Loan Servicing
As expected due to seasonality and consistent with prior years, during the second quarter of 2000, 31+ day delinquencies rose to 7.2% from 5.3% at the end of 1Q00 and compares to 7.3% reported at the end of 2Q99.
Sullivan commented, "The increase in delinquencies is expected this time of year. Our collections staffing levels are excellent and we are enthused by the results from our new in-dealership collectors. The regions that have had the benefit of in-dealership collectors have been the best performing. We expect to have completed the roll-out of collectors to all of our dealerships by the end of November, and we expect this to benefit us as we move forward."
Substantial Increases in First Six Months of 2000
For the six months ended June 30, 2000, the Company reported earnings from continuing operations of $8,831,000, or $0.60 per diluted share, compared with earnings from continuing operations of $2,411,000, or $0.16 per diluted share, for the six months ended June 30, 1999.
Used car sales totaled $254,313,000 in the first six months of 2000, an increase of 24% over sales of $204,319,000 in the comparable year-ago period. The Company sold 30,171 cars for the first six months of 2000, an increase of 25% over the 24,170 sold in the comparable 1999 period. The increased number of cars sold, together with an increase in interest income, resulted in total revenues of $311,108,000 for the first six months, an increase of 32% from total revenues of $235,642,000 in the comparable year-ago period. New loan originations for the first six months of 2000 reached $246,900,000, representing a 24% gain over the $198,831,000 originated in the comparable year-ago period.
Interest income for the first six months of 2000 increased 112% to $55,402,000 from $26,129,000 in 1999, resulting from rapid growth of Ugly Duckling's on-balance sheet portfolio from a change in securitization structure. Operating expenses for the first six months of 2000 reached $72,123,000, or 23% of total revenues, compared with operating expenses of $56,677,000, or 24% of total revenues, for the prior year.
Uglyduckling.com Continues to Demonstrate Substantial Growth
Ugly Duckling's website is continuing to generate a growing stream of new leads and sales. The site provides potential customers with instant credit applications as well as maps to the Company's dealerships nationwide. From customers initially applying for credit through its website, 9,327 applications were received in the second quarter of 2000 generating $6.5 million in revenue with 763 used car sales. In the first quarter of 2000, the Company's Internet activity generated revenues of over $4.7 million with 561 cars being sold.
Company Accelerates Stock Buyback Program
As previously announced, during the second quarter, the Company purchased 1,085,415 shares of its stock via an Exchange Offer. In addition, since the end of the second quarter, the Company has acquired with cash, an additional 1,273,100 shares of its stock as part of its previously announced stock buyback program. The Company currently has authority to repurchase an additional 250,000 shares of stock, which it expects to use should the stock continue to trade at levels that the Company considers appropriate for repurchase.
"We believe that based on the value accorded our stock on the market, our stock is a better investment for our capital than new stores and, as a result, we have accelerated our stock buyback program and have acquired over 1.3 million shares since the end of the second quarter. We continue to focus on lowering loan losses and operating costs to maximize our bottom line and preserve capital as well. As additional capital is secured, we will consider whether to resume or possibly accelerate our expansion plans or to continue repurchasing our stock. Further, we will consider any acquisition that would require little or no capital to complete. Nonetheless, even with a more conservative capital policy, we still expect to achieve outstanding returns, particularly relative to our current stock price. It is important to note that even as we slow the number of new dealerships, growth in the portfolio and interest income will occur from dealerships whose portfolios will continue to grow," concluded Sullivan.
Ugly Duckling will be holding an investor conference call to discuss the Company's financial and operational results at 11:30 am eastern (8:30 am Phoenix) on July 26, 2000. Investors will have the opportunity to listen to the conference call over the Internet.
Headquartered in Phoenix, Ugly Duckling Corporation is the largest operator of used car dealerships focused exclusively on the sub-prime market. The Company underwrites, finances and services sub-prime contracts generated at its 77 Ugly Duckling dealerships, located in 11 metropolitan areas in eight states.
UGLY DUCKLING CORPORATION
Consolidated Operating Results
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Cars Sold 14,369 11,416 30,171 24,170
Total Revenues $ 151,984 $ 115,927 $ 311,108 $ 235,642
Sales of Used Cars $ 121,527 $ 97,876 $ 254,313 $ 204,319
Less:
Cost of Used Cars Sold 68,417 55,543 141,359 115,631
Provision for Credit
Losses 32,212 25,789 66,785 53,552
20,898 16,544 46,169 35,136
Other Income (Expense):
Interest Income 29,871 15,756 55,402 26,129
Portfolio Interest
Expense (5,997) (3,218) (11,026) (5,213)
Servicing and Other
Income 586 2,295 1,393 5,194
24,460 14,833 45,769 26,110
Income before Operating
Expenses 45,358 31,377 91,938 61,246
Operating Expenses:
Selling and Marketing 7,426 5,570 15,561 11,936
General and
Administrative 25,778 20,460 52,123 41,469
Depreciation and
Amortization 2,231 1,678 4,439 3,273
35,435 27,708 72,123 56,678
Operating Income 9,923 3,669 19,815 4,568
Interest Expense 2,585 859 4,877 859
Earnings before
Income Taxes 7,338 2,810 14,938 3,709
Income Taxes 2,990 1,018 6,107 1,298
Income from Continuing
Operations 4,348 1,792 8,831 2,411
Loss from Discontinued
Operations, net -- (324) -- (520)
Net Earnings $ 4,348 $ 1,468 $ 8,831 $ 1,891
Earnings per Common Share
from Continuing Operations:
Basic $ 0.31 $ 0.12 $ 0.61 $ 0.16
Diluted $ 0.31 $ 0.12 $ 0.60 $ 0.16
Net Earnings per
Common Share:
Basic $ 0.31 $ 0.10 $ 0.61 $ 0.12
Diluted $ 0.31 $ 0.10 $ 0.60 $ 0.12
Shares Used in Computation:
Basic 14,052 14,940 14,479 15,292
Diluted 14,248 15,210 14,700 15,495
UGLY DUCKLING CORPORATION
Consolidated Operating Expenses and Related Information
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Segment Information:
Retail Operations
Selling and
Marketing $ 7,426 $ 5,570 $ 15,561 $ 11,936
General and
Administrative 14,593 11,404 28,783 22,498
Depreciation and
Amortization 1,133 861 2,204 1,652
Retail Operations 23,152 17,835 46,548 36,086
Portfolio Expense:
Portfolio - General and
Administrative 6,002 4,566 12,886 9,167
Portfolio - Depreciation
and Amortization 280 280 580 563
Portfolio Expense 6,282 4,846 13,466 9,730
Corporate Expense:
Corporate - General and
Administrative 5,183 4,490 10,454 9,804
Corporate - Depreciation
and Amortization 818 537 1,655 1,058
Corporate Expense 6,001 5,027 12,109 10,862
Operating Expense $ 35,435 $ 27,708 $ 72,123 $ 56,678
Total Operating Exp. -
% of Total Revenues 23.3% 23.9% 23.2% 24.1%
Other Information:
Dealerships Open -
End of period 77 59 77 59
Used Cars Sold 14,369 11,416 30,171 24,170
Retail Operating Expenses -
Per Car Sold:
Selling and
Marketing $ 517 $ 488 $ 516 $ 494
General and
Administrative 1,016 999 954 931
Depreciation and
Amortization 79 75 73 68
Total Retail Operations -
Per Car Sold $ 1,611 $ 1,562 $ 1,543 $ 1,493
Corporate Expenses:
Per Car Sold $ 418 $ 440 $ 401 $ 449
As % of Total
Revenues 4.0% 4.3% 3.9% 4.6%
Loan Servicing Expenses -
% of Portfolio Managed:
Managed Principal Balances:
Dealership
Originations $ 500,032 $ 383,587 $ 500,032 $ 383,587
Serviced for Others 4,747 27,195 4,747 27,195
Total Managed
Principal Balances $ 504,779 $ 410,782 $ 504,779 $ 410,782
Loan Servicing Expenses
(Annualized) as % of
Managed Principal
Balances 5.0% 4.7% 5.3% 4.7%
UGLY DUCKLING CORPORATION
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
June 30, June 30, Dec. 31,
2000 1999 1999
ASSETS
Cash and Cash Equivalents $ 4,127 $ 5,705 $ 3,683
Finance Receivables, net 451,238 254,753 365,586
Notes Receivable from Related Party 12,000 688 12,000
Inventory 45,865 37,737 62,865
Property and Equipment, net 33,870 30,272 31,752
Intangible Assets, Net 13,671 13,928 14,618
Other Assets 12,011 16,112 12,327
Net Assets of Discontinued
Operations 4,702 107,853 33,880
$577,484 $467,048 $536,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 772 $ 4,776 $ 3,185
Accrued Expenses and Other
Liabilities 28,910 33,187 26,905
Notes Payable - Portfolio 315,952 195,244 275,774
Other Notes Payable 27,759 37,500 36,556
Subordinated Notes Payable 37,260 36,943 28,611
Total Liabilities: 410,653 307,650 371,031
Stockholders' Equity
Common Stock 19 19 19
Additional Paid in Capital 173,712 173,864 173,273
Retained Earnings 21,540 5,339 12,709
Treasury Stock (28,440) (19,824) (20,321)
Total Stockholders' Equity 166,831 159,398 165,680
$577,484 $467,048 $536,711
Net Assets of Discontinued Operations
(In Thousands)
June 30, June 30, Dec. 31,
2000 1999 1999
Finance Receivables, net $ 11,103 $ 69,017 $ 14,837
Residuals in Finance
Receivables Sold 2,467 7,128 3,742
Investments Held in Trust -- 2,638 1,545
Property and Equipment 570 4,478 2,114
Notes Receivable, net of Sub.
Notes Payable -- 20,629 6,697
Servicing Receivable 5,795 6,125 6,125
Other Assets, net of Accounts
Payable and Accrued Liabilities (15,233) (2,162) (1,180)
Net Assets of Discontinued
Operations $ 4,702 $107,853 $ 33,880
UGLY DUCKLING CORPORATION
Finance Receivables and Allowance for Credit Losses Information
(Unaudited)
(In thousands, except per share data)
June 30, June 30, Dec. 31,
2000 1999 1999
Contractually Scheduled Payments $645,485 $368,125 $492,937
Unearned Finance Charges (173,174) (111,480) (134,119)
Principal Balances, net 472,311 256,645 358,818
Accrued Interest 4,952 2,755 3,741
Loan Origination Costs 6,925 4,450 5,079
Principal Balances, net 484,188 263,850 367,638
Residuals in Finance Receivables Sold 7,944 22,559 17,382
Investments Held in Trust 57,639 35,249 56,716
Finance Receivables 549,771 321,658 441,736
Allowance for Credit Losses (98,533) (66,905) (76,150)
Finance Receivables, net $451,238 $254,753 $365,586
Allowance as % of Ending
Principal Balances 20.9% 26.1% 21.2%
June 30, June 30, Dec. 31,
2000 1999 1999
Principal - Managed 500,032 383,587 424,480
Less: Principal - Securitized
and Sold 27,721 126,942 65,662
Principal - Retained on
Balance Sheet $472,311 $256,645 $358,818
June 30, June 30, Dec. 31,
2000 1999 1999
Days Delinquent:
Current 71.9% 63.6% 63.2%
1-30 Days 20.9% 29.1% 27.8%
31-60 Days 4.5% 4.7% 5.9%
61-90 Days 2.7% 2.6% 3.1%
Total Portfolio 100.0% 100.0% 100.0%