Insurance Auto Auctions Reports Third Quarter Net Earnings Increase
28 October 1999
Insurance Auto Auctions Reports Third Quarter Net Earnings Increase of 104% Vs. Prior Year-- Third Quarter Net Earnings Increased 104%, EPS Up 93% -- Nine-Month Net Earnings Up 78%, Before Special Charges -- Internet Based On-line Auction to be Expanded in December -- Fifth Consecutive Quarter of 50% Plus Earnings Growth SCHAUMBURG, Ill., Oct. 27 -- Insurance Auto Auctions, Inc. , today reported third quarter net earnings climbed 104 percent to $3.2 million, or 27 cents per diluted share, from $1.6 million, or 14 cents per share, for the same quarter a year ago. This quarter marks the 5th consecutive quarter of 50% plus earnings growth for the company. For the nine-month period, earnings per share before special charges increased to 89 cents versus 51 cents, an increase of 75%. The company also announced the planned introduction of an Internet based on-line auction capability in December 1999. For the quarter ended September 30, 1999, net sales increased 10 percent to $77.0 million compared with $70.0 million in the third quarter of 1998. Gross profit for the quarter increased 22 percent to $20.5 million, up from $16.8 million for the same quarter a year ago. Gross profit per unit for the quarter was $173 per unit compared with $146 per unit for the same quarter a year ago, an increase of 18 percent. Direct operating expenses per unit for the third quarter were $119 per unit versus $110 for the same period a year earlier. Earnings from operations for the quarter rose 69 percent to $5.4 million from $3.2 million for the same quarter a year ago. "In the third quarter, we continued to improve the profitability of our company while providing attractive returns to our customers," said Chris Knowles, chief executive officer. "Gross profit per unit increased significantly as a result of the continued roll out of our profitability enhancement initiatives. We continue to find many profitable opportunities to provide value-added services to our customers and anticipate continued margin expansion as we implement these important initiatives." Nine-Month Results Improve Sharply In the first nine months of 1999, net earnings increased 78 percent to $10.3 million, or 89 cents per diluted share, as compared with $5.8 million, before special charges, or 51 cents per share, for the same period a year ago. Earnings from operations increased to $18.3 million, up from $11.7 million, before special charges, for the same period a year ago. Net sales for the first nine months of 1999 were $239.4 million compared with $214.0 million for the first nine months of 1998. Gross profit for the first nine months of 1999 was $63.2 million, up 21 percent from the same period in 1998. Gross profit per unit for the first nine months of 1999 was $171 per unit compared with $152 per unit in the prior year, an increase of 13 percent. Direct operating expenses per unit increased to $114 for the first nine months of 1999, compared with $110 per unit for the same period in 1998, an increase of 4%. Vehicle Sales Volume Increases The volume of vehicles sold increased to 119,000 in the third quarter of 1999, up 3 percent from the 115,000 vehicles processed in the same period for the previous year. The number of vehicles processed through purchase agreements for the quarter ended September 30, 1999, represented 28 percent of all vehicles sold, compared with 30 percent for the same period in 1998. For the first nine months of 1999, the volume of vehicles sold was 369,000, as compared to 345,000 for the same period for the previous year. On-line Internet Auctions One of the strategic initiatives the company has focused on is the development of an Internet based on-line auction capability for the auction of salvage vehicles. In December 1999, the company plans to expand its Internet based on-line auction capability in selected regions of the country. Knowles commented, "I am excited with the potential of Internet based on-line auctions. The company has employed an on-line auction in its specialty division for over a year. For the first nine months of this year, over half of the specialty units were sold via the Internet. Our expanded on-line auction includes significant new functionality specifically designed to meet the requirements of our buyers and increase returns to our insurance customers." Insurance Auto Auctions, Inc., founded in 1982, a leader in automotive total loss and specialty salvage services in the United States, provides insurance companies with cost-effective, turnkey solutions to process and sell total-loss and recovered-theft vehicles. This is a $3 billion per year industry. The company currently has 50 auction sites across the United States. This press release contains forward-looking information that is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking information. In some cases, you can identify forward looking statements by our use of words such as "may, will, should, anticipates, believes, expects, plans, future, intends, could, estimate, predict, potential or contingent," the negative of these terms or other similar expressions. The company's actual results could differ materially from those discussed or implied herein. Factors that could cause or contribute to such differences include but are not limited to those discussed in the company's annual report, Form 10-K for the fiscal year ended December 31, 1998, or subsequent quarterly reports. Among these risks are legislative acts, changes in the market value of salvage, competition, quality and quantity of inventory available from suppliers, and dependence on key insurance company suppliers. For additional information regarding Insurance Auto Auctions free of charge via fax, dial 1-800-PRO-INFO and use the company's stock symbol, "IAAI." Additional information about Insurance Auto Auctions, Inc. is available on the World Wide Web at http://www.iaai.com Comparative Statistics (rounded from actuals) Three months ended Nine months ended September 30, September 30, Increase Increase 1999 1998 (Decrease) 1999 1998 (Decrease) Total Vehicles Sold 119,000 115,000 3% 369,000 345,000 7% Per Unit: Gross Profit $173 $146 18% $171 $152 13% Direct Operating Expenses $119 $110 8% $114 $110 4% INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations Three Month Periods Nine Month Periods Ended September 30, Ended September 30, (Unaudited) (Unaudited) 1999 1998 1999 1998 Net Sales: Vehicle sales $49,562,000 $45,726,000 $155,231,000 $144,789,000 Fee income 27,452,000 24,321,000 84,192,000 69,216,000 77,014,000 70,047,000 239,423,000 214,005,000 Cost and expenses: Cost of sales 56,465,000 53,265,000 176,242,000 161,731,000 Direct operating expenses 14,195,000 12,650,000 42,018,000 37,779,000 Amortization of acquisition costs 949,000 935,000 2,848,000 2,833,000 Special charges -- -- -- 1,564,000 Earnings from operations 5,405,000 3,197,000 18,315,000 10,098,000 Other (income) expense: Interest expense 492,000 496,000 1,479,000 1,560,000 Interest (income) (365,000) (193,000) (916,000) (589,000) Earnings before income taxes 5,278,000 2,894,000 17,752,000 9,127,000 Income taxes 2,092,000 1,331,000 7,456,000 4,198,000 Net earnings $3,186,000 $1,563,000 $10,296,000 $4,929,000 Earnings per share: Basic $.28 $.14 $.90 $.44 Diluted $.27 $.14 $.89 $.43 Weighted average shares outstanding: Basic 11,530,000 11,320,000 11,432,000 11,313,000 Diluted 11,830,000 11,474,000 11,605,000 11,432,000 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets September 30, December 31, 1999 1998 (Unaudited) ASSETS Current assets: Cash and cash equivalents. $13,777,000 $11,682,000 Short-term investments 19,718,000 11,138,000 Accounts receivable, net 35,619,000 37,415,000 Inventories 12,263,000 11,229,000 Other current assets 2,263,000 1,676,000 Total current assets 83,640,000 73,140,000 Property and equipment, at cost, net 24,292,000 22,312,000 Deferred income taxes 3,637,000 2,976,000 Other assets, principally goodwill, net 126,074,000 128,916,000 $237,643,000 $227,344,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $216,000 $216,000 Accounts payable 27,756,000 30,939,000 Accrued liabilities 6,118,000 6,097,000 Income taxes 692,000 582,000 Total current liabilities 34,782,000 37,834,000 Long-term debt, excluding current installments 20,020,000 20,116,000 Accumulated postretirement benefits obligation 3,261,000 3,485,000 Deferred income taxes 8,260,000 7,154,000 Total liabilities 66,323,000 68,589,000 Shareholders' equity: Preferred stock, par value of $.001 per share Authorized 5,000,000 shares; none issued. -- -- Common stock, par value of $.001 per share Authorized 20,000,000 shares; issued and outstanding 11,568,300 and 11,320,419 shares as of September 30,1999 and December 31, 1998, respectively 12,000 11,000 Additional paid-in capital 134,439,000 132,171,000 Retained earnings 36,869,000 26,573,000 Total shareholders' equity 171,320,000 158,755,000 $237,643,000 $227,344,000