Insurance Auto Auctions Announces Third Quarter Results
WESTCHESTER, Ill., Oct. 22, 2004 -- 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 September 25, 2004. The Company recorded net earnings of $3.4 million, or $0.28 per diluted share, versus a net loss of $0.6 million, or $0.05 per diluted share, for the same quarter a year ago. The third quarter of 2004 includes a $0.3 million, or $0.03 per diluted share, gain on the sale of IAA's Boston property that occurred early in the quarter. Revenues for the quarter were $60.8 million compared with $49.1 million in the third quarter of 2003. Fee income in the third quarter increased to $53.2 million versus $40.3 million in the third quarter of last year.
"We are pleased to announce quarterly financial results that were significantly better than the third quarter of last year, both from a revenue and an earnings standpoint," said Tom O'Brien, CEO. "These improved results are primarily due to the enhancements we have made to our business over the past couple years, as well as to our unwavering focus on providing the best customer service possible. Once again we saw a double-digit volume improvement over last year, reflecting market share gains that we announced earlier this year. Our customers continue to benefit from our enhanced operating model as well, as we generated higher year-over-year average returns in the most recent quarter."
O'Brien also commented on the Company's improved technology platform, saying, "Our recently developed IT system continues to produce solid dividends for IAA, enhancing our operating processes and providing both management and our customers with exceptional pricing and inventory visibility. In addition, our comprehensive auction methodology, live auctions complemented with proxy and real-time bidding capabilities, continues to be well received by our buyer base. We strongly believe we have the right bidding strategy in place, and increased activity from both our suppliers and buyers over the past few quarters has reinforced that belief."
O'Brien continued, "One of our major initiatives during the quarter was the rollout of our real-time bidding platform, I-bid LIVE(SM), throughout our network of branches. By further leveraging our IT platform, we have continued to enhance this product with additional value-added features such as a live voice feed, which allows Internet bidders to feel as if they're physically at the auction. We were able to roll out I-bid LIVE to an additional 15 branches during the third quarter, giving us 25 fully implemented branches in all and representing more than 50 percent of our total volume at quarter's end. We remain confident in our plan to complete the rollout of I-bid LIVE by the end of the year to the remainder of our targeted branches."
The Company also continued its expansion strategy with the addition of a new greenfield facility in El Paso, Texas and a strategic acquisition in Jackson, Mississippi, both of which were announced early in the quarter. "These two new branches are strategically located and were cost effective for IAA," said O'Brien. "However, consistent with our remarks from last quarter, we do not foresee making many expansion announcements the remainder of the year, as we focus instead on the rollout of our real-time bidding platform and growing organically by gaining market share."
O'Brien concluded, "Although industry-wide volumes are typically lower in the fourth quarter than in the third quarter, our ability to create additional operating efficiencies and increase our market share in the past several quarters has given us confidence in our ability to carry this positive momentum through the end of the year. Given our better-than-expected third quarter results, and assuming no material changes in current volume and pricing expectations, we anticipate diluted earnings per share to be approximately 25 cents for the fourth quarter and 95 cents for the full-year, both of which would represent significant improvements over the comparable periods in 2003. While we are pleased with our recent financial and market share successes, we will continue to focus on improving our business and identifying opportunities that enhance shareholder value. We look forward to updating our shareholders on our continued progress in our fourth quarter and year-end earnings release."
Investors' Conference Call
The Company previously announced that it will hold its third quarter 2004 investors' conference call on Friday, October 22 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 http://www.iaai.com/. A replay will be available until midnight EST on October 29, 2004. To listen to the replay, please dial 800-642-1687 and enter conference reservation code 1368926 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 77 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 http://www.iaai.com/
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands except per share amounts)
Three Month Periods Ended Nine Month Periods Ended
September 26, September 28, September 26, September 28,
2004 2003 2004 2003
(Unaudited) (Unaudited)
Revenues:
Vehicle sales $7,502 $8,847 $22,853 $32,343
Fee income 53,250 40,280 155,091 126,162
60,752 49,127 177,944 158,505
Cost of sales:
Vehicle cost 6,229 7,299 19,400 28,495
Branch cost 40,157 33,447 118,150 99,256
46,386 40,746 137,550 127,751
Gross profit 14,366 8,381 40,394 30,754
Operating expense:
Selling, general and
administrative 9,239 7,738 26,076 22,415
Loss/(Gain) on sale
of property &
equipment (606) 6 (626) (116)
Business
transformation
costs - 1,157 - 2,875
Earnings (loss)
from operations 5,733 (520) 14,944 5,580
Other (income) expense:
Interest expense 362 521 1,248 1,079
Interest income (19) (25) (40) (25)
Earnings (loss) before
income taxes 5,390 (1,016) 13,736 4,526
Provision (benefit)
for income taxes 2,036 (422) 5,426 1,864
Net earnings
(loss) $3,354 $(594) $8,310 $2,662
Earnings (loss)
per share:
Basic $ .29 $(.05) $.72 $ .23
Diluted $ .28 $(.05) $.70 $ .23
Weighted average
shares outstanding:
Basic 11,513 11,516 11,532 11,694
Effect of dilutive
securities -
stock options 379 - 284 77
Diluted 11,892 11,516 11,816 11,771
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands except per share amounts)
September 26, December 28,
2004 2003
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $17,810 $15,486
Accounts receivable, net 46,832 48,375
Inventories 13,237 13,602
Other current assets 2,769 3,099
Total current assets 80,648 80,562
Property and equipment, net 67,866 60,187
Deferred income taxes 10,771 9,788
Intangible assets, net 1,910 2,101
Goodwill, net 137,494 135,062
Other assets 481 93
$299,170 $287,793
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $39,894 $36,660
Accrued liabilities 15,492 11,540
Short-term borrowings - -
Obligations under capital leases 1,541 2,822
Income taxes 2,221 -
Current installments of long-term debt 7,547 7,547
Total current liabilities 66,695 58,569
Deferred income taxes 19,974 17,748
Other liabilities 3,103 3,612
Obligation under capital leases 943 1,891
Long-term debt, excluding current
installments 11,227 16,887
Total liabilities 101,942 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; 12,447,414
shares issued and 11,544,405 outstanding
as of September 26, 2004; and 12,325,482
shares issued and 11,518,273 outstanding
as of December 28, 2003 12 12
Additional paid-in capital 146,538 145,856
Treasury stock, 903,009 shares (9,516) (8,012)
Deferred compensation related to
restricted stock (542) (892)
Accumulated other comprehensive income
(loss) (298) (625)
Retained earnings 61,034 52,747
Total shareholders' equity 197,228 189,086
$299,170 $287,793
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Nine Months Ended
September 26, September 28,
2004 2003
(Unaudited)
Cash flows from operating activities:
Net earnings $8,310 $2,662
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 9,724 7,519
Loss (gain) on disposal of fixed assets (626) (24)
Loss (gain) on change in fair market value
of derivative financial instrument - (307)
Deferred compensation related to
restricted stock 350 -
Changes in assets and liabilities
(excluding effects of acquired companies):
(Increase) decrease in:
Accounts receivable, net 2,075 5,048
Inventories 365 (235)
Other current assets 330 813
Other assets (1,437) (466)
Increase (decrease) in:
Accounts payable 2,999 3,100
Accrued liabilities 3,770 (1,254)
Income taxes, net 3,464 1,032
Total adjustments 21,014 15,226
Net cash provided by operating
activities 29,324 17,888
Cash flows from investing activities:
Capital expenditures (17,645) (11,666)
Investments, net -
Proceeds from disposal of
property and equipment 1,268 60
Payments made in connection with
acquisitions, net of cash acquired (1,912) (7,872)
Net cash used in investing activities (18,289) (19,478)
Cash flows from financing activities:
Proceeds from issuance of common stock 682 492
Proceeds from term loan - 30,000
Purchase of treasury stock (1,504) (8,012)
Principal payments on long-term debt (5,660) (3,782)
Principal payments - capital leases (2,229) (1,874)
Net cash provided (used) by financing
activities (8,711) 16,824
Net increase (decrease) in cash and
cash equivalents 2,324 15,234
Cash and cash equivalents at beginning
of period 15,486 10,027
Cash and cash equivalents at end of period $17,810 $25,261
Supplemental disclosures of cash flow
information:
Cash paid or refunded during the
period for:
Interest $1,376 $1,167
Income taxes paid $2,028 $-
Income taxes refunded $1,011 $-
Non-cash financing activities:
Property and equipment additions
resulting from capital leases $- $3,375