Insurance Auto Auctions Reports Third Quarter Net Earnings
28 October 1998
Insurance Auto Auctions Reports Third Quarter Net Earnings Increase of 61% And Revenue Growth of 14%
-- Revenue Growth of 14%
-- Net Earnings Increased 61%
-- Earnings from Operations Increased 30%
-- EPS increased 56% to 14 cents vs. 9 cents for the Prior Year
-- Volume of Vehicles sold up 13%
SCHAUMBURG, Ill., Oct. 28 -- Insurance Auto Auctions, Inc.
, citing increased volumes and greater profitability, today
reported third quarter net earnings climbed 61 percent to $1.6 million, or
14 cents per share, from $1 million, or 9 cents per share, for the same
quarter a year ago. For the quarter ended September 30, 1998, net sales
increased 14 percent to $70.0 million compared with $61.4 million in the third
quarter of 1997.
Gross profit for the quarter increased 17 percent to $16.8 million, up
from $14.3 million for the same quarter a year ago. Gross profit per unit for
the quarter was $146 per unit compared with $140 per unit for the same quarter
a year ago. Earnings from operations for the quarter rose 30 percent to
$3.2 million from $2.5 million for the same quarter a year ago. The volume of
vehicles sold increased to 115,000 in the third quarter of 1998, up 13 percent
from the 102,000 vehicles sold in the same period a year ago.
"Our third quarter results reflect not only the continuation of our
strategy to improve the profitability of our core business, but also the
increased same store volumes resulting from the growing recognition in the
marketplace of our ability to generate higher returns with higher service
levels on our customers' salvage," said James P. Alampi, chairman, chief
executive officer and president. "We are especially pleased with the
continued improvement in our margins, despite a market where actual cash
values and selling prices are flat to down. The third quarter traditionally
reflects the seasonal change in the quality of salvage impacting margins.
Additionally, the falling price of scrap steel this quarter to a thirty year
record low level decreased the value of our older car inventory."
Direct operating expenses per unit for the third quarter increased to
$110 compared with $107 per unit a year earlier. The increase reflects the
funding commitment made for the piloting of several value-added services.
Nine Month Results Improve Sharply
In the first nine months of 1998, including special charges, net earnings
were $4.9 million, or 43 cents per diluted share, compared with $3.0 million,
or 27 cents per share, for the same period a year ago. Excluding special
charges, net earnings were $5.8 million, or 51 cents per share, compared with
$3.4 million, or 30 cents per share, for the same period in 1997. Excluding
special charges, earnings from operations increased 49 percent to
$11.7 million, up from $7.8 million for the same period a year ago.
Net sales for the period were $214.0 million compared with $195.3 million
for the same period in 1997. Gross profit for the first nine months of 1998
was $52.3 million, up 18 percent from the same period in 1997. Gross profit
per unit for first nine months of 1998 was $152 per unit compared with
$133 per unit in the prior year, an increase of 14 percent. Direct operating
expenses per unit increased to $110 for the first nine months of 1998,
compared with $101 per unit for the same period a year ago.
Vehicle Sales Volume Increases 13 Percent
The volume of vehicles sold increased to 115,000 in the third quarter of
1998, up 13 percent from the 102,000 vehicles processed in the same period for
the previous year. The increase was primarily the result of an 11 percent
increase in same store sales. The number of vehicles processed through
purchase agreements for the third quarter represented 30 percent of all
vehicles sold, consistent with the same period last year.
For the first nine months of 1998, the volume of vehicles sold was
345,000, as compared to 333,000 for the same period for the previous year.
The number of vehicles processed through purchase agreements for the nine
months ended September 30, 1998, represented 30 percent of all vehicles sold,
relatively flat to the same period in 1997 while the percent of sale
consignment contracts represented 9 percent of units sold up from 4 percent in
1997.
Strategic Transformation Continues
"We remain committed to transforming the company from principally salvage
to a broad based, growing service provider," Alampi said. "We have elected to
focus on a few key new offerings, all of which are in the pilot phase and will
begin roll out during the fourth quarter. By focusing on a few key new
services this year, we believe we can bring results faster to our customers
and for ourselves. We will continue our focus on growth by broadening our
geographical market coverage through acquisitions and new sites, as evidenced
by our recent announcement of the addition of the new Bay Point location."
Founded in 1982, Insurance Auto Auctions, Inc. is the largest provider of
automotive and specialty salvage services in the United States, providing
insurance companies with cost-effective, turnkey solutions to process and sell
total-loss and recovered-theft vehicles, a $3 billion per year industry. The
company currently has 49 auction sites across the United States.
This press release contains forward-looking information that is subject to
certain risks and uncertainties that could cause actual results to differ
materially form those projected, expressed or implied by such forward-looking
information. 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, 1997, or
subsequent quarterly reports. Among these risks are legislative acts, weather
conditions, changes in the market value of salvage, outcome of litigation,
competition, quality and quantity of inventory available from suppliers and
dependence on key insurance company suppliers.
Additional information about Insurance Auto Auctions, Inc. is available on
the World Wide Web at http://www.iaai.com
Comparative Statistics
(rounded from actuals)
Three months ended Nine months ended
September 30, September 30,
Increase Increase
1998 1997 (Decrease) 1998 1997 (Decrease)
Total Vehicles 115,000 102,000 13% 345,000 333,000 4%
Per Unit:
Gross Profit $146 $140 4% $152 $133 14%
Direct Operating
Expenses $110 $107 3% $110 $101 9%
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
(Unaudited) (Unaudited)
1998 1997 1998 1997
Net Sales:
Vehicle sales $45,726,000 $42,095,000 $144,789,000 $132,241,000
Fee income 24,321,000 19,308,000 69,216,000 63,025,000
70,047,000 61,403,000 214,005,000 195,266,000
Cost and expenses:
Cost of sales 53,265,000 47,114,000 161,731,000 150,850,000
Direct operating
expenses 12,650,000 10,887,000 37,779,000 33,766,000
Amortization of
acquisition costs 935,000 945,000 2,833,000 2,840,000
Special charges -- -- 1,564,000 750,000
Earnings from
operations 3,197,000 2,457,000 10,098,000 7,060,000
Other (income) expense:
Interest expense 496,000 668,000 1,560,000 2,073,000
Interest (income) (193,000) (210,000) (589,000) (609,000)
Earnings before
income taxes 2,894,000 1,999,000 9,127,000 5,596,000
Income taxes 1,331,000 1,028,000 4,198,000 2,575,000
Net earnings $1,563,000 971,000 4,929,000 3,021,000
Earnings per share:
Basic $.14 $.09 $.44 $.27
Diluted $.14 $.09 $.43 $.27
Weighted average
shares outstanding:
Basic 11,320,000 11,298,000 11,313,000 11,293,000
Diluted 11,474,000 11,373,000 11,432,000 11,318,000
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, December 31,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents &
short-term investments $10,407,000 $9,634,000
Accounts receivable, net 34,472,000 28,992,000
Inventories 10,156,000 11,762,000
Other current assets 1,762,000 1,868,000
Total current assets 56,797,000 52,256,000
Property and equipment, at cost, net 21,510,000 20,778,000
Deferred income taxes 2,603,000 2,603,000
Other assets, principally
goodwill, net 129,866,000 131,435,000
$210,776,000 $207,072,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $200,000 $2,034,000
Accounts payable 17,981,000 16,319,000
Accrued liabilities 5,998,000 7,698,000
Income taxes 1,208,000 497,000
Total current liabilities 25,387,000 26,548,000
Long-term debt, excluding current
installments 20,161,000 20,246,000
Accumulated postretirement benefit
obligation 3,570,000 3,831,000
Deferred income taxes 5,235,000 5,235,000
Total liabilities 54,353,000 55,860,000
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
11,320,419 and 11,299,561 shares
as of September 30, 1998 and
December 31, 1997, respectively 11,000 11,000
Additional paid-in capital 132,091,000 131,809,000
Retained earnings 24,321,000 19,392,000
Total shareholders' equity 156,423,000 151,212,000
$210,776,000 $207,072,000