Insurance Auto Auctions Announces First
Quarter Results
SCHAUMBURG, Ill., May 11 Insurance Auto Auctions, Inc.
, a leading provider of automotive salvage and claims processing
services in the United States, today reported lower net earnings for the first
quarter ended April 1, 2001. The Company recorded a net loss, including
special charges described below, of $1.6 million, or $0.14 per diluted share,
versus net income of $4.2 million, or $0.35 per share, for the same quarter a
year ago.
The net loss for the first quarter reflects special charges of
$6.0 million. The largest component of the charge, in the amount of
$2.4 million, is associated with the Company's previously announced reduction
in workforce. Approximately $1.7 million of the charges relate to the
previously announced abandonment of certain facilities by the Company,
including cancellation of a planned expansion at its headquarters building.
The restructuring charges also include amounts related to repositioning the
Company's towing operations to stem continued losses from that initiative as
well as other charges. As a result of these actions, the Company expects to
realize cost savings of approximately $3 million over the next two to three
years. Excluding the effects of the special charges, net earnings for the
first quarter would have been $1.9 million or $0.16 per diluted share.
Net revenues for the quarter decreased 10 percent to $77.8 million
compared with $87.0 million in the first quarter of 2000. The decline in net
revenues is consistent with a planned strategic shift away from vehicles sold
under the purchase agreement method. Under the purchase agreement method, the
entire purchase price of the vehicle is recorded as revenue compared to only
the fees collected on the sale of a car under lower risk consignment fee based
arrangements. This change in contract mix also contributed to the significant
increase in fee income for the quarter. Fee income in the first quarter
increased 18 percent to $37.6 million versus $32.0 million in the first
quarter of last year as a result of both increased volume and pricing changes.
Gross profit for the quarter decreased 1.2 percent to $22.8 million from
$23.1 million for the same quarter a year ago. The loss from operations for
the quarter totaled $2.7 million compared to income from operations of
$7.1 million for last year's first quarter. The decline in profitability
reflected continued poor performance of certain purchase agreement contracts
during their phase-out period as well as inventory write-downs on certain
purchase agreement cars still in inventory.
"We expect that our quarterly performance will come into clearer focus as
we execute the changes implemented after my arrival," added O'Brien. "While
there is still much work to do, we expect to see the early benefits of our
strategy in the latter half of this year."
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, 2000 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
(in thousands except per share amounts)
Three Month Periods Ended
April 1, March 31,
2001 2000
(Unaudited)
Net revenues:
Vehicle sales $40,217 $54,964
Fee income 37,627 31,996
77,844 86,960
Cost and expenses:
Cost of sales 55,025 63,855
Direct operating expenses 18,467 15,018
Amortization of acquisition costs 1,006 948
Special charge 6,047 -
Earnings (loss) from operations (2,701) 7,139
Other (income) expense:
Interest expense 456 464
Interest income (368) (411)
Earnings (loss) before income taxes (2,789) 7,086
Provision (benefit) for income taxes (1,144) 2,905
Net earnings (loss) $(1,645) $4,181
Net earnings (loss) per share:
Basic $ (.14) $.36
Diluted $ (.14) $.35
Weighted average shares outstanding:
Basic 11,730 11,586
Effect of dilutive securities -stock options 116 200
Diluted 11,846 11,786
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands of dollars)
April 1, December 31,
2001 2000
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $28,384 $30,938
Short-term investments 12,810 4,859
Accounts receivable, net 49,551 48,091
Inventories 14,274 10,588
Other current assets 5,506 3,112
Total current assets 110,525 97,588
Property and equipment, net 33,236 30,492
Investments in marketable securities 1,115 2,240
Deferred income taxes 5,206 5,123
Other assets, principally goodwill, net 129,248 130,264
$279,330 $265,707
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $37 $37
Accounts payable 47,458 38,176
Accrued liabilities 6,393 6,171
Accrued restructuring charges 4,437 -
Total current liabilities 58,325 44,384
Long-term debt, excluding current installments 20,131 20,141
Other liabilities 3,859 3,001
Deferred income taxes 10,814 10,440
Total liabilities 93,129 77,966
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 11,732,935 and 11,715,936
and shares as of April 1, 2001 and
December 31, 2000, respectively 12 12
Additional paid-in capital 137,069 136,962
Retained earnings 49,120 50,767
Total shareholders' equity 186,201 187,741
$279,330 $265,707
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