Ugly Duckling Announces Increase in Allowance for Credit Losses
11 September 2000
Ugly Duckling Announces Increase in Allowance for Credit Losses
PHOENIX--Sept. 8, 2000--Ugly Duckling Corporation (Nasdaq NM: UGLY), the largest used car sales company focused exclusively on the sub-prime market, today announced that it expects to increase its Allowance for Credit Losses. The increase is consistent with the Company's policy of maintaining an adequate Allowance for Credit Loss within its targeted coverage range of 12 to 15 months. The increase in the Allowance is to be accomplished via an increase in future provisions for credit losses."Although emerging loan losses on recently originated loan pools indicate improved loan performance over that which we have experienced on pools originated last year, we believe it is very important to maintain conservative reserves," said Greg Sullivan, President and Chief Executive Officer of Ugly Duckling.
"As we review recent delinquency trends, consider current losses and other trends on older loan pools, evaluate events in our national economy, and project charge offs for all pools for the next 12 to 15 months, our analysis suggested an increase in the Allowance appears necessary. To this end, beginning in the third quarter that ends September 30, 2000, we expect to increase our Allowance via supplemental provisions. Our estimate of these supplemental provisions equates to approximately 2% of expected originations, which would raise future provisions from our current level of 27% of originations to 29%. As a result of this increase to our provision, we believe that we are adequately addressing known factors and, therefore, will continue to maintain Allowance for Credit Losses coverage within our target range. We will continue to review our Allowance adequacy and our provision policy and could reduce our provision once both our coverage and losses stabilize within our target levels. Despite the increase in our provisions, we believe we will still generate excellent profits, particularly relative to the industry and to our market price," concluded Sullivan.