News Column

SpeedEmissions Sells Remaining Stores in Texas in Bid to Get Profitable

June 23, 2014

Growing concerns over clean air has resulted in many state governments requiring vehicle emissions testing. As with many pollution topics, California led the U.S. by becoming the first state to conduct emissions testing in 1966. Not long after, the 1970 Clean Air Act was enacted, effectively forming the backbone of regulations, which has led to 32 states now mandating some form of emissions test for vehicles to legally be on the road. Tyrone, Georgia-based Speedemissions, Inc. (OTCQB:SPMI) is looking to grow its market share in the emissions and safety inspection business in states where laws require specific standards to be met by vehicles. The company also has recently expanded its offerings with the launch of SpeedEmissions Car Care Stores and SpeedEmissions Car Care franchise units. To complement these core business components, the company developed the CARbonga line of apps for smartphone users, applications that assist average people in detecting problems with vehicles. For example, the CARbonga-SRI app provides users with updates on safety recalls and service bulletins. It's been a bumpy road for SpeedEmissions that has seen the company spit out some black smoke of its own as it looks for a road to profitability. During the first quarter of 2014, the company managed to trim its net loss by 12.5% to $241,000 from $271,000 in the year -prior quarter, but sales fell at the same time. Revenue for the quarter tallied $1.8 million, down from $1.89 million in the same quarter a year earlier. Same-store-sales, a key growth metric measuring sales at locations open more than one year, were down by 0.6%. Sales were impacted as SpeedEmissions was shifting around its portfolio of locations in a bid to find the most profitable areas. The company acquired seven stores in its hometown Atlanta market late in 2013 and closed four stores in Houston and one in St. Louis. It's also notable that the company lost a whole week of sales as the bitter cold and ice covered a large portion of the country which forced the shuttering of all corporate stores in Atlanta, St. Louis and Houston. The company is working to turn things around, launching an initiative in the first quarter to rebrand itself with the Expresso Car Care CafÉ name, logo and store design as it expands into light auto repair and vehicle registration services in addition to the emissions business. SpeedEmissions is also making more moves with regards to locations. On Friday, the company said that it sold the rest of its emissions/safety inspection stores in Houston to ZAK's & HF Enterprises LLC. Combined with the recent closing of four underperforming stores across Atlanta and St. Louis, leaves SpeedEmissions owning and operating a total of 33 stores in the Atlanta, St. Louis and Salt Lake City markets. "Over the past couple of years the Texas market has been a most challenging one for us and has contributed significantly to the Company's operating losses," said Rich Parlontieri, President and CEO of Speedemissions, in a statement today. "Eliminating those locations detrimental to our cash flow, strengthening our retail stores that are profitable, and a commitment to the development of progressive product offerings like the ADVISR, our vehicle recall and technical service bulletin report, are initiatives we believe can make Speedemissions profitable once again." It looked like investors were buying the closing of more stores with shares of SPMI trading ahead by as much as 31% in Friday action before a hit on the bid around 2:30 pm EDT took shares into the red by almost 10% at $0.0037. With a market capitalization of a meager $280,000 and a respectable share structure of only 75 million outstanding shares, the company certainly has headroom for growth. Investors will likely be watching to see if this company can get it going to emerge from sub-penny land or if it will continue to fail inspection. Proper due diligence is, as always, encouraged.

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Source: Baystreet Stocks to Watch (Canada)

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