Ugly Duckling Reports First Quarter 2001 Results

Business Wire, April 25, 2001

Business Editors

PHOENIX--(BUSINESS WIRE)--April 25, 2001

First Quarter Highlights:

-- Total revenues were $164.0 million

-- E-Commerce generated $15.1 million in revenues and 1,725 cars sold during
the first quarter of 2001 as compared to $13.7 million in revenues and 1,553
cars sold during the fourth quarter of 2000

-- Loan portfolio principal balance reached $535.0 million, representing a 28%
increase over the year-ago quarter

-- New loan originations were $126.0 million, consistent with the year-ago
quarter

-- Entered into a $35 million Senior Secured Loan facility to replace its
previous $38 million Senior Secured facility

-- Entered into a $75-$100 million warehouse receivables line of credit with
Greenwich Capital Financial Products, Inc. (announced April 16, 2001)

-- Secured an option to extend until December 31, 2001, the Company's existing
$25 million inventory line of credit (announced April 16, 2001)

-- Closed 19th Securitization with loan principal balances of approximately
$117.7 million and Class A bonds issued of $83.6 million (announced April 16,
2001)

-- Incurred $368,000 after tax charge to earnings in connection with the
closing of Florida and Texas collection and loan administration centers

-- The Company's Chairman of the Board and largest shareholder, Ernest C.
Garcia II, made an offer to purchase all outstanding stock of the Company
(announced April 16, 2001)

Financial Highlights
(In 000's, except for per share numbers)


                                                 Three Months Ended
                                                      March 31,
                                            -------------------------
                                               2001             2000
                                             --------        --------

     Total Revenues                         $ 164,030        $158,317
     Operating Income                       $   6,179        $  9,892
     Net Earnings                           $   1,822        $  4,483
     Diluted Net Earnings per Share         $    0.15        $   0.30

Ugly Duckling Corporation (Nasdaq NM: UGLY), the largest used car sales company focused exclusively on the sub-prime market, today reported its first quarter financial results for 2001.

Quarter over Quarter Results

For the three months ended March 31, 2001, the Company reported net earnings of $1,822,000, or $0.15 per diluted share, compared with net earnings for the same period of 2000 of $4,483,000, or $0.30 per diluted share. The decrease in earnings in 2001 is attributable to an increase in the provision for loan losses charged to current earnings of 31% of originations in 2001 versus 27% in 2000. In addition, during the first quarter of 2001, the Company incurred an after tax charge of approximately $368,000 or $0.03 per diluted share to earnings in connection with the closing of its collections and loan administration operations in Florida and Texas as described below.

In the fourth quarter of 2000, the Company incurred an after tax charge of $5.9 million which increased the effective provision rate for fiscal year 2000 to approximately 30% of originations. Had a pro rata portion of this provision been reflected in the first quarter of 2000, earnings for the three months ended March 31, 2000 would have decreased by $2.3 million or $0.15 per diluted share.

During the first quarter of 2001, the Company initiated a plan to close its collections and loan administration operations in Clearwater, Florida, Plano, Texas and Dallas, Texas and move them to the Company stores or to its Gilbert, Arizona collection facility. As a result of these closings, the Company took an after tax charge of approximately $368,000 to cover payroll, severance and certain property related expenses. The Company also expects to take an additional restructuring charge in the second quarter related to costs of abandoned assets still in use with a carrying value of approximately $500,000. The estimated impact resulting from the shut down of these operations, including the impact of future charges, is estimated to be break even over the remainder of 2001 and to increase operating results by $1.5 million annually beginning in 2002.

Total revenues remained relatively constant at $164,030,000 for the first quarter of 2001 as compared to $158,317,000 for the first quarter of 2000, an increase of approximately 4%. While the Company sold less cars during the first three months of 2001 versus 2000, interest income rose 33% due to the growth of the on-balance sheet portfolio. The decrease in the number of cars sold from 15,802 in 2000 compared to 14,851 in 2001 is primarily due to a greater focus on the loan quality of the contracts originated. As a result of the development of a risk management function during the latter half of 2000, the Company has made significant adjustments in its underwriting policies toward the ultimate goal of improving loan losses.

The more restrictive underwriting guidelines have also impacted new loan originations, which have declined from $128,123,000 during the first quarter of 2000 to $126,015,000 during the first quarter of 2001. The amount financed, however, has increased on a per car sold basis from $8,150 in 2000 to $8,528 in 2001, primarily due to an increase in the overall sales price of the cars sold.