Insurance Auto Auctions Announces Fourth Quarter Results
WESTCHESTER, Ill.--March 14, 2005--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 December 26, 2004. The Company recorded net earnings of $4.0 million, or $0.33 per diluted share, versus a net loss of $0.3 million, or $0.03 per diluted share, for the same quarter a year ago. Revenues for the quarter were $62.2 million compared with $51.1 million in the fourth quarter of 2003. Fee income in the fourth quarter increased to $53.7 million versus $43.5 million in the fourth quarter of last year."In the fourth quarter we were once again able to grow sales and earnings as our products and service offerings continued to be well received in the marketplace," said Tom O'Brien, CEO. "Our customers have been pleased with the improvements we have made to the business over the past several quarters and we have been rewarded with another quarter of double-digit volume growth over the prior year, both on a same-store as well as on an overall basis. This volume growth was the result of market share gains made earlier in the year combined with our ability to generate higher net returns for our suppliers."
Full-Year 2004 Results
The Company reported full-year 2004 net earnings of $12.3 million, or $1.04 per diluted share, versus net earnings of $2.3 million, or $0.20 cents per diluted share, for 2003. Revenues for the year were $240.2 million, a 15 percent increase over revenues of $209.7 million in 2003. Fee income during the year increased to $208.7 million versus $169.7 million in 2003.
"We are pleased with our 2004 results, not only from a financial perspective, but also because of the customer relationships we were able to solidify throughout the year," said O'Brien. "The initiatives we had implemented in prior years had a direct impact on our success in generating higher volumes, increasing our market share and driving higher net returns, each of which translated into better results for IAA. We also kept our eye on growing strategically, adding four new locations during the year that all fit our acquisition and greenfield investment criteria. Furthermore, a portion of our success is attributable to a strong commitment to our comprehensive bidding philosophy in which we supplement live auctions throughout our nationwide network of branches with proxy as well as real-time, Internet bidding capabilities, which our customers continue to strongly support."
Merger Announcement
The Company previously announced that it signed a definitive merger agreement to be acquired by affiliates of Kelso & Company, a New York based private equity investment firm. The closing of the transaction is subject to certain terms and conditions customary for transactions of this type, including stockholder approval and the completion of financing. Stockholder approval will be solicited by IAA by means of a proxy statement, which will be mailed to IAA stockholders upon the completion of the required Securities and Exchange Commission filing and review process. Additional information regarding the announcement was released in a Form 8-K filed in conjunction with that announcement.
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 78 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 26, 2004 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
Financial Tables Follow...
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Income Statements
(dollars in thousands except per share amounts)
Three Month Periods Ended Twelve Month Periods Ended
-------------------------- --------------------------
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
-------------------------- --------------------------
(Unaudited) (Unaudited)
Revenues:
Vehicle sales $8,582 $7,620 $31,436 $39,963
Fee income 53,652 43,525 208,743 169,687
------------ ------------ ------------ ------------
62,234 51,145 240,179 209,650
Cost of sales:
Vehicle cost 7,294 6,806 26,694 35,301
Branch cost 39,148 35,901 157,297 135,157
------------ ------------ ------------ ------------
46,442 42,707 183,991 170,458
------------ ------------ ------------ ------------
Gross profit 15,793 8,438 56,188 39,192
Operating expense:
Selling, general
and admini-
strative 8,901 7,810 34,978 30,225
Loss/(gain) on
sale of property
& equipment 927 78 301 54
Business
transformation
costs - 1,027 - 3,902
------------ ------------ ------------ ------------
Earnings (loss)
from operations 5,964 (477) 20,909 5,011
Other (income)
expense:
Interest expense 323 426 1,572 1,505
Interest income (27) (13) (67) (130)
------------ ------------ ------------ ------------
Earnings (loss)
before income
taxes 5,668 (890) 19,404 3,636
Provision (benefit)
for income taxes 1,713 (560) 7,139 1,304
------------ ------------ ------------ ------------
Net earnings
(loss) $3,955 $(330) $12,265 $2,332
============ ============ ============ ============
Earnings (loss)
per share:
Basic $.34 $(.03) $1.06 $.20
============ ============ ============ ============
Diluted $.33 $(.03) $1.04 $.20
============ ============ ============ ============
Weighted average
shares outstanding:
Basic 11,511 11,518 11,526 11,652
Effect of
dilutive
securities -
stock options 488 - 288 80
------------ ------------ ------------ ------------
Diluted 11,999 11,518 11,814 11,732
============ ============ ============ ============
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands except per share amounts)
December 26, December 28,
2004 2003
------------ ------------
ASSETS
Current assets:
Cash $13,325 $15,486
Accounts receivable, net 50,443 48,375
Inventories 14,498 13,602
Deferred income taxes 4,693 4,180
Other current assets 1,613 3,099
------------ ------------
Total current assets 84,572 84,742
------------ ------------
Property and equipment, net 74,684 60,187
Deferred income taxes 6,481 5,608
Intangible assets, net 1,747 2,101
Goodwill, net 137,494 135,062
Other assets 482 93
------------ ------------
$305,460 $287,793
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $38,505 $36,658
Accrued liabilities 13,513 12,556
Obligations under capital leases 1,094 2,822
Income taxes 1,067 -
Obligation under line of credit 6,000 -
Current installments of long-term debt 7,512 7,547
------------ ------------
Total current liabilities 67,691 59,583
------------ ------------
Deferred income taxes 20,729 17,748
Other liabilities 4,353 2,598
Obligation under capital leases 661 1,891
Long-term debt, excluding current
installments 9,375 16,887
------------ ------------
Total liabilities 102,809 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;
12,709,758 shares issued and
11,569,156 outstanding as of
December 26, 2004; and 12,325,482 shares
issued and 11,518,273 outstanding as of
December 28, 2003 12 12
Additional paid-in capital 151,793 145,856
Treasury stock, 906,480 shares at
December 26, 2004 and 807,209 shares
at December 28, 2003 (9,637) (8,012)
Deferred compensation related to
restricted stock (4,343) (892)
Accumulated other comprehensive income
(loss) (186) (625)
Retained earnings 65,012 52,747
------------ ------------
Total shareholders' equity 202,651 189,086
------------ ------------
$305,460 $287,793
============ ============
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Twelve Months Ended
--------------------------
December 26, December 28,
2004 2003
------------ ------------
Cash flows from operating activities:
Net earnings $12,265 $2,332
Adjustments to reconcile net earnings to
net cash
provided by operating activities:
Depreciation and amortization 12,985 10,661
Loss (gain) on disposal of fixed
assets 301 54
Loss (gain) on change in fair market
value of derivative financial
instrument - (307)
Deferred compensation related to
restricted stock 585 29
Deferred income taxes 1,595 788
Tax benefit related to employee stock
compensation 275 15
Changes in assets and liabilities
(excluding effects of acquired
companies):
(Increase) decrease in:
Accounts receivable, net (1,536) (752)
Inventories (896) (2,442)
Other current assets 1,486 489
Other assets (1,438) (975)
Increase (decrease) in:
Accounts payable 1,612 6,349
Accrued liabilities 3,151 (878)
Income taxes 1,067 -
------------ ------------
Total adjustments 19,187 13,031
------------ ------------
Net cash provided by operating
activities 31,452 15,363
------------ ------------
Cash flows from investing activities:
Capital expenditures (28,717) (16,343)
Proceeds from disposal of property and
equipment 1,520 60
Payments made in connection with
acquisitions, net of cash acquired (1,912) (7,872)
------------ ------------
Net cash used in investing activities (29,109) (24,155)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,626 500
Proceeds from term loan 6,000 30,000
Purchase of treasury stock (1,625) (8,012)
Principal payments on long-term debt (7,547) (5,668)
Principal payments - capital leases (2,958) (2,569)
------------ ------------
Net cash provided (used) by financing
activities (4,504) 14,251
------------ ------------
Net increase (decrease) in cash and cash
equivalents (2,161) 5,459
Cash and cash equivalents at beginning of
period 15,486 10,027
------------ ------------
Cash and cash equivalents at end of
period $13,325 $15,486
============ ============
Supplemental disclosures of cash flow
information:
Cash paid or refunded during the period
for:
Interest $1,723 $1,639
============ ============
Income taxes paid $5,404 $855
============ ============
Income taxes refunded $1,011 $1,390
============ ============
Non-cash financing activities:
Property and equipment additions
resulting from capital leases $- $3,375
============ ============