Insurance Auto Auctions Announces Fourth
Quarter Results
CEO Outlines Organizational Realignment
SCHAUMBURG, Ill., March 28 Insurance Auto Auctions, Inc.
, a leading provider of automotive salvage and claims processing
services in the United States, today reported increased revenues and lower net
earnings for the fourth quarter ended December 31, 2000. The Company recorded
a net loss, including special charges described below, of $1.2 million, or
$0.11 per diluted share, versus net income of $3.4 million, or $0.29 per
share, for the same quarter a year ago.
The net loss amount for the fourth quarter reflects special charges of
$4.8 million. The largest component of the charge, in the amount of
$3.0 million, is associated with the abandonment or disposal of computer
hardware and software. The second major component of the charge relates to the
February 2000 plane crash that damaged the Company's facility in Rancho
Cordova, California. The Company increased reserves by $1.2 million related
to costs incurred to clean up and repair the site. Excluding the effects of
the special charges, net earnings for the fourth quarter would have been
$1.6 million or $0.13 per diluted share.
Net sales for the quarter increased 4.9 percent to $81.8 million compared
with $78.0 million in the fourth quarter of 1999. Gross profit for the
quarter increased 1.2 percent to $20.5 million, up from $20.3 million for the
same quarter a year ago. The loss from operations for the quarter totaled
$2.1 million, compared to income from operations of $5.6 million for the same
quarter a year ago.
"We are encouraged by our top line performance in light of a difficult
operating environment during the fourth quarter," said Tom O'Brien, chief
executive officer. "A review of all facets of our operations has illustrated
the difficult work that lies ahead in repositioning our company for increased
profitability. Since joining the Company in November, my top priority has
been on executing that directive. I have had to make some hard choices, but
they are necessary for Insurance Auto Auctions to realize its full potential."
O'Brien Realigns Senior Management and Adopts New Organizational Structure
Along with the Company's recent announcement of Scott Pettit as the new
chief financial officer, the Company expects to elect a chief operating
officer as part of its overall realignment strategy. O'Brien expects to
charge the new COO with the tasks of standardizing operations, driving
operating efficiencies and bringing focus to the Company's growth strategy.
The Company has also eliminated a number of positions, primarily from its
headquarters staff. The reductions are expected to save the Company more than
$3.0 million per year after the payment of severance costs.
Consistent with a leaner, more focused organization, the Company cancelled
a planned expansion at its headquarters. Management is pursuing subleasing
the space and will incur a restructuring charge of $1.8 million on a pre-tax
basis in the first quarter of 2001. O'Brien added that the lease charges will
not adversely affect the operating flexibility of the Company or its growth
goals.
The total restructuring and special charges approximate $10.3 million, and
will be recorded in the fourth quarter of 2000 and first quarter of 2001.
Approximately $5.3 million of these charges will result in future cash outlays
by the Company.
"The net result of these actions will be a leaner, more efficient
organization that will be better prepared to increase earnings and cash flow,"
added O'Brien. "We remain at our core a fundamentally sound company, with
virtually no debt and a strong cash position. The changes we are instituting
within the Company are designed to leverage the operational excellence we have
throughout the organization."
Annual Earnings Comparison
For the year ended December 31, 2000, net earnings decreased 23.4 percent
to $10.5 million, or $0.89 per diluted share, as compared with $13.7 million,
or $1.18 per share, for 1999. Earnings from operations decreased to
$17.9 million, down from $23.9 million for the prior year.
Net revenues for the year were $333.2 million compared with $317.4 million
in 1999, an increase of 5.0 percent. "Gross profit for the year was
$89.4 million, up 7.1 percent from 1999."
About Insurance Auto Auctions, Inc.
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. The Company currently has 58 auction
sites across the United States.
This press release contains forward-looking information that is subject to
certain risks, trends 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,
targeting, 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, 1999 or subsequent quarterly reports. Among these risks are:
conducting business pursuant to the purchase agreement method of sale;
fluctuations in the actual cash value of salvage vehicles; the ability to
successfully renegotiate existing purchase agreement contracts; the quality
and quantity of inventory available from suppliers; the ability to pass
through increased towing costs; that vehicle processing time will improve;
that the Company's towing business will reach forecasted levels of
profitability; legislative or regulatory acts, changes in the market value of
salvage; competition; the availability of suitable acquisition candidates; the
ability to bring new facilities to expected earnings targets; dependence on
key insurance company suppliers; and the level of energy and labor costs.
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 .
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Month Periods Years Ended
Ended December 31, December 31,
2000 1999 2000 1999
Net Revenues:
Vehicle sales $47,742,000 $49,554,000 $200,858,000 $204,785,000
Fee income 34,066,000 28,414,000 132,318,000 112,606,000
81,808,000 77,968,000 333,176,000 317,391,000
Cost and expenses:
Cost of sales 61,310,000 57,707,000 243,779,000 233,949,000
Direct operating
expenses 16,775,000 13,723,000 62,789,000 55,741,000
Amortization of
acquisition costs 1,006,000 949,000 3,942,000 3,797,000
Special charges 4,772,000 -- 4,772,000 --
Earnings (loss)
from operations (2,055,000) 5,589,000 17,894,000 23,904,000
Other (income)
expense:
Interest expense 457,000 491,000 1,833,000 1,970,000
Interest income (400,000) (355,000) (1,717,000) (1,271,000)
Earnings (loss)
before income
taxes (2,112,000) 5,453,000 17,778,000 23,205,000
Income taxes (866,000) 2,044,000 7,289,000 9,500,000
Net earnings
(loss) $(1,246,000) $3,409,000 $10,489,000 $13,705,000
Earnings (loss)
per share:
Basic $(.11) $.29 $ .90 $1.20
Diluted $(.10) $.29 $ .89 $1.18
Weighted average
shares
outstanding:
Basic 11,704,000 11,572,000 11,660,000 11,467,000
Effect of dilutive
securities -
stock options 262,000 184,000 290,000 156,000
Diluted 11,966,000 11,756,000 11,950,000 11,623,000
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, December 31,
2000 1999
ASSETS
Current assets:
Cash and cash equivalents $30,938,000 $27,186,000
Short-term investments 4,859,000 6,845,000
Accounts receivable, net 48,091,000 40,188,000
Inventories 10,588,000 11,998,000
Other current assets 3,112,000 1,655,000
Total current assets 97,588,000 87,872,000
Property and equipment, net 30,492,000 27,458,000
Investments in marketable securities 2,240,000 3,336,000
Deferred income taxes 5,123,000 4,338,000
Other assets, principally goodwill, net 130,264,000 125,128,000
$265,707,000 $248,132,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $37,000 $135,000
Accounts payable 38,176,000 33,216,000
Accrued liabilities 6,171,000 6,306,000
Income taxes -- 1,226,000
Total current liabilities 44,384,000 40,883,000
Long-term debt, excluding current
installments 20,141,000 20,180,000
Accumulated postretirement benefits
obligation 3,001,000 3,178,000
Deferred income taxes 10,440,000 8,605,000
Total liabilities 77,966,000 72,846,000
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 and 11,715,936 and 11,575,010
and shares as of December 31, 2000 and
December 31, 1999, respectively 12,000 12,000
Additional paid-in capital 136,962,000 134,996,000
Retained earnings 50,767,000 40,278,000
Total shareholders' equity 187,741,000 175,286,000
$265,707,000 $248,132,000
