ORLANDO, Fla. — General Automotive Co. has announced financial results for its first quarter ended March 31.
General Automotive achieved year-over-year improvements in most profitability metrics in the first quarter. Gross margin improved 5.5 percentage points to 14 percent of revenue in the first quarter from 8.5 percent of revenue in the same quarter last year due to increased efficiencies in purchasing practices and product sourcing at its OE Source business. The company also reduced its operating expenses, lowering its total expense to $501,800 from $589,600. Finally, interest expense decreased by $81,000, from $97,000 to $16,000, year-over-year due to the conversion of debt to equity at the end of the first quarter of 2008.
Based on a combination of improved gross margins and lower operating expenses, the company reported a sharply reduced net loss of $87,500, or 1 cent per basic and diluted share, versus a net loss of $503,900, or 7 cents per basic and diluted share, in the first quarter of 2008. The year-ago net loss included $119,800, or 2 cents per basic and diluted share, related to discontinued operations.
Revenue in the first quarter declined by 13.8 percent to $3.1 million from $3.6 million due to a temporary decline in orders from a major customer in the first two months of the quarter. Orders from this customer returned to historical levels in March.
"Despite the temporary decline in revenue from a major customer, we achieved solid improvement in our gross margin and bottom line through a combination of improved product sourcing and the right sizing of our expense base," said Joseph DeFrancisci, president and CEO of General Automotive. "It’s important to note that our OE Source subsidiary is nearly carrying the cost of corporate overhead, which includes the costs of maintaining the public company. As we execute our growth strategy — which calls for the selective acquisition of profitable companies and/or companies with near-term profit potential in the rapidly growing automotive aftermarket parts industry — we believe we can steadily ramp General Automotive’s bottom line and build shareholder value."
In other news, General Automotive has engaged New York-based investment banker Jesup & Lamont Securities Corp. to assist the company in raising growth capital. Jesup & Lamont is one of Wall Street’s oldest investment banks and has a solid track record of helping emerging growth companies with their capital requirements.
"We are pleased that Jesup & Lamont will be assisting us in raising the capital we need to strengthen operations and advance our acquisition strategy," said DeFrancisci. "Jesup & Lamont is one of Wall Street’s oldest investment banks and has a solid track record of helping emerging growth companies with their capital requirements. We look forward to working closely with them on our capital formation plan."
Donald Wojnowski, president and CEO of Jesup & Lamont Holdings, said, "We are attracted to General Automotive’s strong and seasoned management team and its compelling strategy in the rapidly growing automotive aftermarket parts and supplies industry. We are looking forward to helping the company raise the capital it needs to execute its business plan."
General Automotive also announced that its non-binding letter of intent to acquire privately held Europacific Parts International Inc. (EPI) has been terminated.
"While we believe EPI is an exciting company with good growth potential, we determined through the due diligence process that completing the transaction would require more resources than originally anticipated and therefore is not in the best interests of our stockholders," said DeFrancisci.
