Hometown Auto Reports Second Quarter 2000 Results
14 August 2000
Hometown Auto Reports Second Quarter 2000 Results
WATERTOWN, Conn. - Hometown Auto Retailers, Inc. today announced financial results for the period ended June 30, 2000.Revenue for the six months ended June 30, 2000, increased $13.0 million, or 9.6 percent, to $148.8 million compared to $135.8 million in the first six months of 1999, resulting in large part from the acquisition of Toyota of Newburgh. Same store sales increased by $3.2 million, or 2.6 percent, when compared to 1999 levels. Gross profit for the period increased by $1.0 million, or 5.6 percent, to $18.8 million compared to $17.8 million for the prior year. Same store total gross profit increased by 0.3 percent compared to the prior year.
Revenue for the quarter ended June 30, 2000 totaled $74.8 million, a decrease of $2.4 million, or 3.1 percent, compared to $77.2 million for the second quarter of 1999. Gross profit declined by $0.6 million, or 6.0 percent, to $9.6 million for the second quarter of 2000.
The increases in sales revenue and gross profit year to date were due primarily to increased unit sales. Specifically, the company sold 3,643 new vehicles and 2,413 used vehicles at retail during the first six months of 2000, compared to 3,249 and 2,387, respectively, for the same period in 1999. Same store unit sales increased by 160 new vehicles, but decreased by 147 used vehicles at retail for the six months ended June 30, 2000, compared to the prior year.
Hometown recorded a net loss for the six months ended June 30, 2000 of $59,000, or $0.01 per diluted share, versus net income of $839,000, or $0.14 per diluted share, for the same period in 1999. Current year operating results include a $345,000 provision for potentially uncollectable receivables. Year to date 2000 results also include a $100,000 fee assessed by its floor plan lender, an $87,000 increase in investor relations costs, and a $60,000 accrual for the company's 401K plan, which was adopted in October 1999. Interest expense increased $262,000, mostly due to the purchase of real estate at two of its store locations. Hometown recorded a net loss of $97,000 for the second quarter of 2000 compared to net income of $688,000 for the same quarter in 1999.
According to Corey Shaker, president of Hometown, company management is taking strong steps to move the company forward.
"The earnings so far this year at Hometown have been disappointing, particularly in a year of good car sales," Shaker said. "Rectifying this situation is the number one priority of the entire management team. Several factors have negatively impacted Hometown's results thus far, not the least of which was the $51 million in vehicle inventory at year-end 1999.
"This inventory was roughly $15 million over our target of approximately $36 million. It has taken us some time to sell down this inventory, but we have accomplished this goal through constant monitoring utilizing new inventory matrices developed by us. As a result, as of August 4, we now stand at just over $36 million in inventory. At current interest rates, this could save Hometown more than $1.2 million annually.
"Additionally, defaults by one financing source necessitated a $345,000 loss provision that negatively affected our earnings. However, simply stated, several of our dealerships underperformed versus the minimum 1.6 percent to 1.8 percent return on sales that Hometown expects and demands of its stores.
"We have, therefore, begun taking several bold steps to turn this situation around, including but not limited to
| -- | diversifying our products lines away from a dependence on Lincoln Mercury products, |
| -- | replacing dealership managers that are underperforming, |
| -- | continuing to support our training efforts which have produced favorable results in several of our stores, |
| -- | improving our existing Web presence with the objective of creating one of the most effective sites in the Automotive sector, and |
| -- | supporting dealerships with more aggressive and effective advertising campaigns. |
"We are also very focused on building our cash reserves to solidify our financial position and provide for future expansion."
"In conclusion," Shaker continued, "the technological changes that we made utilizing Reynolds and Reynolds to link our dealerships through a state-of-the-art computer network was completed in mid-July. We now have access to up-to-the-minute information regarding dealership performance and as a result, we are now in a position where we can provide timely support to underperforming dealerships. We have also reduced corporate and dealership overhead by more than $800,000 on an annualized basis various through cost-cutting steps we have taken. We are very committed to turning around the poor performance of several of our dealerships and look forward to a profitable Hometown Auto Retailers."
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 Connecticut, Massachusetts, New Jersey, New York 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. Hometown is also 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.
HOMETOWN AUTO RETAILERS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------ ---------------------
2000 1999 2000 1999
-------- ------- -------- -------
Revenues
New vehicle sales $47,134 $45,702 $93,284 $81,301
Used vehicle sales 19,817 23,530 40,175 40,306
Parts and service
sales 6,033 6,126 11,735 11,034
Other dealership
revenues, net 1,785 1,802 3,601 3,149
------ --------- ------- -------
Total revenues 74,769 77,160 148,795 135,790
Cost of sales
New vehicle sales 44,664 43,005 88,410 76,668
Used vehicle
sales 17,805 21,338 36,409 36,608
Parts and service
sales 2,682 2,593 5,145 4,684
------ ----------- -------- -------
Cost of sales 65,151 66,936 129,964 117,960
------ ----------- -------- --------
Gross profit 9,618 10,224 18,831 17,830
Amortization of
goodwill 164 150 327 286
Selling, general
and administrative
expenses 8,963 8,343 17,498 15,268
----------- --------- --------- --------
Income from
operations 491 1,731 1,006 2,276
Other income
(expense)
Interest expense,
net (562) (482) (1,037) (775)
Other income
(expense), net (112) (42) (84) (43)
----------- ---------- --------- ------
Income (loss)
before taxes (183) 1,207 (115) 1,458
Provision (benefit)
for income taxes (86) 519 (56) 619
----------- ---------- ---------- -----
Net income (loss) $ (97) $ 688 $ (59) $ 839
=========== ========== ========= ======
Earnings (loss)
per share, basic $ (0.02) $ 0.12 $ (0.01) $ 0.14
Earnings (loss)
per share, diluted $ (0.02) $ 0.11 $ (0.01) $ 0.14
Weighted average
shares, basic 5,997,016 5,900,000 5,992,939 5,850,000
Weighted average
shares, diluted 6,236,799 6,052,000 6,129,486 5,927,000