Two months after reporting record earnings for 1998, publicly traded Smart Choice Automotive Group Inc. has reversed itself, saying it actually lost $6.9 million last year.
On Feb. 10, Smart Choice, a Titusville, Fla.-based automotive sales and financing company, reported a net income of $4.6 million for 1998. But a week later, Smart Choice withdrew the report and announced the resignation of its CFO, Joseph Mohr.
Subsequently, Smart Choice CEO Gary Smith and the company's general counsel, Robert Downing, have been unavailable for comment and have not returned several phone calls.
Smart Choice operates 21 buy-here-pay-here used-vehicle dealerships, all in Florida.
The company's updated net loss, announced April 15 in its annual report, came from its used-car sales and financing operations and includes an $8.8 million interest expense. The company blamed the interest expense, up from $5.6 million in 1997, on its need to finance a rising number of subprime vehicle purchases and its higher vehicle inventory.
In a statement, Smart Choice attributed the $11.5 million overstatement of net income in the Feb. 10 report to differences in accounting for its discontinued businesses, writedowns and adjustments.
Smart Choice's discontinued operations include two new-car dealerships - Stuart Nissan and Stuart Volvo in Stuart, Fla. - and Eckler Industries Inc., a supplier of aftermarket Corvette parts. The company is trying to sell these businesses, which recorded net income of $429,000 in 1998.
Smart Choice's primary business is its buy-here-pay-here used-car lots, of which 17 operate under the brand name 'First Choice.' The chain sold $78.2 million in used vehicles in 1998, compared with $35.3 million in 1997.
The withdrawal of its Feb. 10 report prompted lawsuits from at least two shareholders in U.S. District Court in Orlando, Fla. The plaintiffs have asked the court to certify their complaints as class-action lawsuits. In its annual report, Smart Choice said it will 'contest these claims vigorously.'
Its stock closed at $1.28 a share on April 27, far below its 52-week high of $11.94 on May 22, 1998.