Insurance Auto Auctions Announces First Quarter Results
SCHAUMBURG, Ill., April 23 -- Insurance Auto Auctions, Inc. , a leading provider of automotive salvage and claims processing services in the United States, today reported higher net earnings for the quarter ended March 28, 2004. The Company recorded net earnings of $2.3 million, or $0.20 per diluted share, versus net earnings of $2.0 million, or $0.16 per diluted share, for the same quarter a year ago. Revenues for the quarter were $57.2 million compared with $56.0 million in the first quarter of 2003. Fee income in the first quarter increased to $50.1 million versus $42.7 million in the first quarter of last year.
"We are pleased to announce first quarter financial results that exceeded our expectations," said Tom O'Brien, CEO. "As the quarter progressed, we continued to see a positive trend in volumes sold and significantly higher returns for our customers. We believe our live auctions, complemented with an internet bidding capability, offer the optimal solution for both our insurance company suppliers and our buyers. Increased buyer participation and an increase in scrap prices during the quarter both contributed positively to the average selling price of our vehicles."
O'Brien added, "Another positive takeaway from the first quarter was the fact that we gained some market share, which contributed to our current inventory levels and higher incoming volumes and has positioned us better for the future. We believe these customer wins validate the industry's recognition of our improved suite of value-added services. The market share gains are especially important given the recent decline in frequency of collision claims which could worsen as a result of rising fuel costs."
Touching on the new, company-wide IT system that was rolled out to all of IAA's branches during 2003, O'Brien said, "We are happy to have the rollout of the IT system and the related business transformation costs behind us. We remain focused on using our new system to create further efficiencies and drive additional visibility for both the management team and our customers. We have, and will continue to, leverage our technology to generate further market share gains, create cost effective expansion opportunities and drive a consistently improving cost structure. As a strong by-product of our new system, we have developed a real-time bidding platform that is currently being tested in four markets. We plan to continue rolling it out to many other major branches during the second quarter."
The Company also continued its expansion strategy during the first quarter with the addition of a new greenfield facility in Tucson, Arizona. This new 16-acre facility will provide needed coverage in the southern part of the state and will leverage IAA's existing location in Phoenix. The new facility will also improve IAA's regional coverage, complementing other existing locations in southern California and New Mexico. "We do not foresee making many expansion announcements in the second quarter and will likely fall at the low end of our expansion target for 2004," said O'Brien. "Instead, we will focus on leveraging our new system and generating additional market share gains. We will also continue to support our customers through additional investments in our existing facilities in order to add capacity as well as to improve yard and office functionality."
O'Brien concluded, "In terms of guidance, due to strong current inventory levels combined with recent market share wins and their related volumes, we anticipate a solid second quarter that should produce financial results similar to those we just saw in the first quarter. However, we are cautious given the recent decline in collision claims and will provide further guidance with our second quarter results."
Investors' Conference Call
The Company previously announced that it will hold its first quarter 2004 investors' conference call on Friday, April 23 at 11:00 a.m. Eastern Time. To participate by phone, please dial 877-307-4802 and ask to be connected to the Insurance Auto Auctions earnings conference call. Investors may also access the call over the Internet by visiting the Company's Web site at www.iaai.com . A replay will be available until midnight EDT on April 30, 2004. To listen to the replay, please dial 800-642-1687 and enter conference reservation code 6508088 when prompted.
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 75 sites across the United States.
Safe Harbor Statement
This Report contains forward-looking statements that are 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 statements. In some cases, you can identify forward looking statements by use of words such as "may, will, should, anticipates, believes, expects, plans, future, intends, could, estimate, predict, projects, 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 on Form 10-K for the fiscal year ended December 28, 2003 and subsequent quarterly reports. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, the Company undertakes no obligation to publish, update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Additional information about Insurance Auto Auctions, Inc. is available on the World Wide Web at www.iaai.com .
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands except per share amounts)
Three Months Ended
March 28, March 30,
2004 2003
(Unaudited)
Revenues:
Vehicle sales $7,127 $13,304
Fee income 50,064 42,736
57,191 56,040
Cost of sales:
Vehicle cost 5,984 11,771
Branch cost 38,395 32,964
44,379 44,735
Gross profit 12,812 11,305
Operating expense:
Selling, general and administrative 8,480 7,168
Business transformation costs - 797
Earnings from operations 4,332 3,340
Other (income) expense:
Interest expense 477 55
Other income (12) (79)
Earnings before income taxes 3,867 3,364
Provision for income taxes 1,566 1,388
Net earnings $2,301 $1,976
Net earnings per share:
Basic $.20 $.16
Diluted $.20 $.16
Weighted average shares outstanding:
Basic 11,537 12,045
Effect of dilutive securities -stock options 132 96
Diluted 11,669 12,141
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands except per share amounts)
March 28, December 28,
2004 2003
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $23,655 $15,486
Accounts receivable, net 50,420 48,375
Inventories 14,887 13,602
Other current assets 2,746 3,099
Total current assets 91,708 80,562
Property and equipment, net 62,402 60,187
Deferred income taxes 10,170 9,788
Intangible assets, net 1,969 2,101
Goodwill, net 135,062 135,062
Other assets 228 93
$301,539 $287,793
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $40,074 $35,005
Accrued liabilities 11,985 13,195
Short-term borrowings 7,000 -
Obligations under capital leases 2,605 2,822
Income taxes 2,117 -
Current installments of long-term debt 7,547 7,547
Total current liabilities 71,328 58,569
Deferred income taxes 18,522 17,748
Other liabilities 3,562 3,612
Obligation under capital leases 1,396 1,891
Long-term debt, excluding current installments 15,001 16,887
Total liabilities 109,809 98,707
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; 12,345,508
shares issued and 11,538,299 outstanding
as of March 28, 2004; and 12,325,482 shares
issued and 11,518,273 outstanding as of
December 28, 2003 12 12
Additional paid-in capital 146,115 145,856
Treasury stock, 807,209 shares (8,012) (8,012)
Deferred compensation related to
restricted stock (835) (892)
Accumulated other comprehensive income (loss) (598) (625)
Retained earnings 55,048 52,747
Total shareholders' equity 191,730 189,086
$301,539 $287,793
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Three Months Ended
March 28, March 30,
2004 2003
(unaudited)
Cash flows from operating activities:
Net earnings $2,301 $1,976
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 3,243 2,352
Gain on disposal of fixed assets (2) (42)
Loss on change in fair market value of
derivative unhedged portion - (307)
Deferred compensation related to restricted stock 57 -
Changes in assets and liabilities (excluding
effects of acquired companies):
(Increase) decrease in:
Accounts receivable, net (2,045) (1,259)
Inventories (1,285) 546
Other current assets 353 1,263
Other assets (117) (379)
Increase (decrease) in:
Accounts payable 5,069 (268)
Accrued liabilities (1,338) (1,843)
Income taxes, net 2,509 1,272
Total adjustments 6,444 1,335
Net cash provided by operating activities 8,745 3,311
Cash flows from investing activities:
Capital expenditures (5,417) (2,769)
Proceeds from disposal of property and
equipment 180 44
Payments made in connection with acquisitions,
net of cash acquired - (2,360)
Net cash used in investing activities (5,237) (5,085)
Cash flows from financing activities:
Proceeds from issuance of common stock 259 215
Proceeds from term loan - 30,000
Proceeds from short-term borrowings 7,000 -
Principal payments on long-term debt (1,886) (10)
Purchase of treasury stock - (7,401)
Principal payments - capital leases (712) (573)
Net cash provided (used) by financing activities 4,661 22,231
Net increase (decrease) in cash and
cash equivalents 8,169 20,457
Cash and cash equivalents at beginning of period 15,486 10,027
Cash and cash equivalents at end of period $23,655 $30,484
Supplemental disclosures of cash flow information:
Cash paid or refunded during the period for:
Interest $656 $317
Income taxes paid $2 $20
Income taxes refunded $1,011 $1,250
Non-cash financing activities:
Property and equipment additions resulting
from capital leases $- $2,250