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Ugly Duckling Reports Fourth Quarter and Twelve Month Results

March 5, 2002

Ugly Duckling Corporation, a used car sales company focused

exclusively on the sub-prime market, reported Mar. 5 its fourth quarter

and twelve month financial results for 2001. The Company also reported

that Mar. 5 it completed the merger of the Company into UDC Acquisition

Corp., the final step in the going private transaction initiated last

year by its chairman, Mr. Ernest Garcia II.

The Company reported total revenues of $121,292,000 and a net loss

of $6,067,000, or ($0.49) per diluted share, for the three months

ended December 31, 2001 and total revenues of $571,378,000 and a net

loss of $9,698,000, or ($0.79) per diluted share, for the twelve

months ended December 31, 2001. This compares to total revenues of

$135,214,000 and a net loss of $2,451,000, or ($0.20) per diluted

share, for the three months ended December 31, 2000 and total revenues

of $603,001,000 and net earnings of $9,063,000, or $0.67 per diluted

share, for the twelve months ended December 31, 2000.

The fourth quarter 2001 results included $1,094,000 in

privatization expenses and $1,827,000 in restructuring charges and the

year ended December 31, 2001 included $1,577,000 in privatization

expenses and $2,451,000 in restructuring charges. The privatization

expenses relate to the tender offers made by Mr. Ernest C. Garcia II,

the Chairman of the Board and largest shareholder to purchase all of

the outstanding shares of the Company's common stock not already owned

by him. The restructuring charges relate to numerous cost savings

initiatives taken in 2001 to reduce operating expenses, including

relocation of its company headquarters in August of 2001,

consolidation of servicing operations in the first and second quarters

of 2001 and a reduction in force of primarily corporate staff in

November 2001. These cost savings initiatives are expected to decrease

annual operating expenses by approximately $5.2 million. The Company

made a further reduction in staff in January 2002 expected to result

in approximately an additional $1.7 million reduction in annual

operating expenses.

The year-end results reflect a significant increase in the

Provision for Credit Losses ("Provision") for the year to 35.4% of the

amount financed versus 30.1% in the previous year. In the fourth

quarter 2001 the Provision was 35.5% of originations. The Company's

policy is to maintain an Allowance for Credit Losses ("Allowance") for

all loans in its portfolio to cover estimated net charge offs for the

next twelve months.

According to the Company, higher credit standards were implemented in 2001. As a result, the 2001 originations are performing better

to date than prior year originations. Offsetting these improvements

are the effects of the recession and the performance of loans

originated prior to 2001 that do not have the benefit of the new

higher credit standards and are emerging at loss levels higher than

previously estimated. Based on all these factors, the Company

increased its Provision to a level sufficient to bring the Allowance

balance as of December 31, 2001 to a level adequate to cover its

estimate of net charge offs for the next twelve months.

Greg Sullivan, President and Chief Executive Officer stated, "As

expected, we needed to take an additional Provision for credit losses

in the fourth quarter above 31% of new originations related primarily

to prior year originations. We are pleased, however, that the 2001

originations are performing better to date than prior year

originations due in large part to higher credit standards implemented

this year and the improved credit mix of 2001 originations. We believe

this will have a favorable impact on future credit performance.

Nevertheless, the length and depth of the economic recession will

continue to affect the loan portfolio performance and sales volumes as

we look ahead.

"While sales are up thus far in 2002, we anticipate sales volumes

for the year will be similar to 2001 as we continue to focus on lower

credit risk customers. We will benefit in 2002 from the steps taken in

this past year to reduce corporate overhead and improve operational

efficiencies. Our liquidity position is also strong and the interest

rate environment is favorable for our cost of borrowings. As a result,

absent worsening economic circumstances, the Company believes it will

see a return to profitability in 2002."

Quarter over Quarter Results

For the three months ended December 31, 2001, the Company reported

a net loss of $6,067,000, or ($0.49) per diluted share, compared with

a net loss for the same period of 2000 of $2,451,000, or ($0.20) per

diluted share. As discussed above, the decrease in earnings in 2001 is

primarily attributable to the Company's decision to increase its

Allowance for Credit Losses through an increased Provision, decreased

sales volume, restructuring costs and expenses related to the tender

offer. The Provision was $31,086,000, an amount approximating 35.5% of

originations. While this Provision is above the 27% to 31% range of

the past several years, it is 3.3% lower than the 38.8% Provision as a

percent of originations recorded for the three months ended December

31, 2000. The effective Provision rate for all of 2000 was 30.1% of

new originations.

Total revenues for the fourth quarter of 2001 declined to

$121,292,000 from $135,214,000 for the fourth quarter of 2000, a

decrease of approximately 10.3%. The decrease in total revenue is due

to a 21.2% reduction in the number of cars sold from 11,874 in 2000 to

9,353 in 2001, partially offset by an increase in interest income. The

decrease in sales is primarily due to the Company's commitment to

originating higher quality loans as well as a general weakening in the

economy.

While used car sales declined during the fourth quarter of 2001

versus 2000, the loan portfolio remained relatively unchanged with a

1.2% increase in interest income to $33,274,000 in the fourth quarter

of 2001 from $32,881,000 in the fourth quarter of 2000. The Company's

loan portfolio principal balance totaled $514,699,000 at December 31,

2001 compared to $514,946,000 at December 31, 2000. New loan

originations for the quarter totaled $87,452,000 declining 13.3% from

$100,822,000 during the fourth quarter of 2000. The effect of

decreased used car sales was partially offset by an increase in the

quarter's average amount financed to $9,424 in 2001 from $8,464 in the

fourth quarter of 2000. The increase in the average amount financed is

due to an increase in the average base pretax sales price to $9,411

for the fourth quarter of 2001 versus $8,618 for the same period of

the previous year. The increase in sales price is due to the Company's

decision to purchase a larger number of higher end vehicles than have

been purchased in the past. Further, in the fourth quarter of 2001,

the Company has begun to sell a premium car to higher credit grade

scoring customers.

Operating expenses for the fourth quarter of 2001 increased 4.7%

to $35,217,000 versus $33,628,000 for the fourth quarter of 2000. As

previously discussed, this increase is partially attributable to

$1,094,000 of privatization expenses and $1,827,000 of restructuring

charges.

Twelve-Month Results

For the twelve months ended December 31, 2001, the Company

reported a net loss of $9,698,000, or ($0.79) per diluted share,

compared with net earnings for the same period of 2000 of $9,063,000,

or $0.67 per diluted share. The net loss before extraordinary item was

$10,042,000 or ($0.82) per share for the twelve months ended December

31, 2001 and the net income before extraordinary item was $9,063,000

or $0.67 per share for the twelve months ended December 31, 2000. The

Provision was $151,071,000; an amount approximating 35.4% of

originations, for the twelve months ended December 31, 2001. This

Provision as a percent of the twelve-month period's originations is

5.3% higher than the 30.1% Provision as a percent of originations

recorded for the twelve months ended December 31, 2000.

Total revenues declined to $571,378,000 from $603,001,000 for the

twelve months ended December 31, 2001 and 2000, respectively, a

decrease of approximately 5.2% due to a decline in used cars sold

partially offset by an increase in interest income. For the reasons

discussed above, the number of cars sold decreased 16.1% to 47,718

cars sold in the twelve-month period ended December 31, 2001 from

56,870 cars sold in the twelve-month period ended December 31, 2000.

Offsetting the impact of lower sales was an increase in interest

income for the twelve months ended December 31, 2001 of 14.4% to

$137,018,000 versus $119,719,000 for the comparable twelve-month

period in 2000.

New loan originations have declined 9.7% to $426,221,000 during

2001 from $472,091,000 during 2000, also a result of the decrease in

cars sold. The effect of decreased used car sales was partially offset

by an increase in the average amount financed to $8,980 in 2001 from

$8,331 in 2000. The increase in the average amount financed is due to

an increase in the overall average sales price to $9,103 for the

twelve months ended December 31, 2001 versus $8,498 for the same

period of the previous year.

Operating expenses for the twelve months ended December 31, 2001

increased 1.7% to $143,805,000 versus $141,353,000 for the same period

of the previous year. This is partially attributable to the

privatization expenses and restructuring charges. For the twelve

months ended December 31, 2001, privatization costs were approximately

$1,577,000 and restructuring charges were $2,451,000.

Loan Charge Offs

Loan charge offs for the three months ended December 31, 2001 and

2000, net of recoveries, were $43,686,000 and $39,021,000,

respectively. As a percentage of quarter's average principal balances,

net charge offs for the two quarters were 8.3% and 7.6%, respectively.

For the twelve-month periods ended December 31, 2001 and 2000, net

charge offs were $148,738,000 and $115,755,000, respectively. Net

charge offs as a percentage of average principal balances for the same

periods were 28.9% and 26.5%, respectively.

Chairman's Offer to take the Company Private and Closing of Merger

As previously announced, UDC Acquisition Corp., an entity

controlled by Ugly Duckling's Chairman, Mr. Ernest Garcia, and Ugly

Duckling's President and Chief Executive Officer, Gregory B. Sullivan, completed its amended tender offer for the common stock

of Ugly Duckling not owned by Mr. Garcia, Mr. Sullivan or their

affiliates. As of the expiration of the offer on January 16, 2002, UDC

Acquisition Corp. owned or controlled over 92% of the company's

outstanding shares when combined with the shares already owned by Mr.

Garcia, Mr. Sullivan and their affiliates. Mar. 5, UDC Acquisition

Corp. completed a short form merger with and into Ugly Duckling

Corporation. This action was taken without any further action by Ugly

Duckling shareholders. In connection with the merger, the Company's

common stock was delisted from trading on the Nasdaq National Market.

The Company also reported that it has entered into a settlement of the

Delaware litigation related, in part, to the going private

transaction. The settlement is subject to final court approval.

Headquartered in Phoenix, Arizona, Ugly Duckling Corporation is

an operator of used car dealerships focused exclusively on

the sub-prime market. The Company underwrites, finances and services

sub-prime contracts generated at its 76 Ugly Duckling dealerships,

located in 11 metropolitan areas in eight states.

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