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NowAuto Group, Inc. Announces Fiscal Second Quarter 2011 Results


Now Auto (select to view enlarged photo)

PHOENIX-- Feb. 22, 2011: NowAuto Group, Inc. (OTC Bulletin Board: NAUG and NWAU) today announced results for its fiscal 2011 second quarter ended December 31, 2010. The Company reported revenue of $1,039,677 million and a net loss of $0.07 per diluted share versus revenue of approximately $2,141,645 million and a net loss of $0.06 per diluted share in the prior year. During the quarter ended December 31, 2010 revenue declined over the prior quarter. The Company has a new line of business made up of contract purchases and third party point-of-sale transactions. This is projected to produce $391,000 in earnings and interest revenue. In accordance with GAAP, this is reflected as Investment in Purchased Contracts on the Balance Sheet and the profits will be recognized over the life of the contracts as the revenue is earned. However, when combined with the reported revenue in the current quarter, it represents a year-over-year increase in business.

The cost of charge-offs and defaults improved by 34% over the same quarter of the prior year as a result of increased credit criteria, improved contract management and system upgrades. Nevertheless, management has chosen to increase the bad debt accrual as a hedge against future potential losses. Operating income, defined as income before charge-offs and interest expense, declined 23% year-over-year and is a reflection of the increase in bad debt accrual.

"The present condition of the sub-prime and below sub-prime auto market has continued to impact our industry and our company," said CEO Scott Miller. "While we managed to increase contract purchases and third party point-of-sale transactions in the quarter, our challenge has been, and will continue to be on, maintaining accounts and collections. Our challenge in the current environment is to aggressively work with our customers to maintain active contracts. Nevertheless, we expect a difficult environment for the foreseeable future. Our commitment to customers and shareholders alike remains; NowAuto will do whatever it can to maintain productive contracts without placing imprudent demands on our customers," Miller said.

"We have improved our system of tracking and monitoring troubled accounts and this has aided in reducing the cost of charge-offs and increasing our customer base," said Chief Financial Officer Faith Forbis. "We continue to seek other ways to improve in these areas."