Insurance Auto Auctions Reports Q4 Net Earnings Increase of 51%
15 February 2000
Insurance Auto Auctions Reports Fourth Quarter Net Earnings Increase of 51% Vs. Prior Year-- Fourth Quarter Net Earnings Increased 51%, EPS Up 45% -- 1999 Net Earnings Up 70%, Before Special Charges -- Sixth Consecutive Quarter of 45% Plus Earnings Growth SCHAUMBURG, Ill., Feb. 15 -- Insurance Auto Auctions, Inc. , today reported fourth quarter net earnings climbed 51 percent to $3.4 million, or 29 cents per diluted share, from $2.3 million, or 20 cents per share, for the same quarter a year ago. The fourth quarter marks the 6th consecutive quarter of 45 percent plus earnings growth for the company. For the year, earnings per diluted share increased to $1.18 versus $0.70 for the prior year, before special charges, an increase of 69 percent. For the quarter ended December 31, 1999, net sales increased 7 percent to $78.0 million compared with $73.1 million in the fourth quarter of 1998. Gross profit for the quarter increased 12 percent to $20.3 million, up from $18.0 million for the same quarter a year ago. Earnings from operations for the quarter rose 40 percent to $5.6 million from $4.0 million for the same quarter a year ago. "The Company's profitability increased significantly from the fourth quarter of the prior year as a result of the continued roll out of our gross profit enhancement initiatives," said Christopher Knowles, chief executive officer. "We also continued to focus on our strategy of providing additional value-added services to our customers, such as our new appraisal service offering, creating incremental revenues that are not directly related to the number of units processed." "In addition, we introduced our new Internet online auction in January," Knowles continued. "We have received encouraging responses from our customer base and believe it is the 'best of class' Internet auction in our industry. Our plan is to expand our Internet auction to all sites by mid-year and to continue to enhance it and add features which will benefit our supplier customers and salvage buyers. We expect to be industry leaders in e-business initiatives." Strong Earnings Growth in 1999 For the year ended December 31, 1999, net earnings increased 70 percent to $13.7 million, or $1.18 per diluted share, as compared with $8.1 million, before special charges, or $0.70 per share, for 1998. Earnings from operations increased to $23.9 million, up from $15.6 million for the prior year, before special charges. Net sales for the year were $317.4 million compared with $287.1 million in 1998, an increase of 11 percent. For the year ended December 31, 1999, purchase agreements represented 28 percent of all vehicles sold, down from 30 percent for the same period in 1998. At the same time, percent of sale units increased from 9 percent in 1998 to 16 percent in 1999. "This shift to percent of sale is consistent with our plans," commented Knowles. Gross profit for the year was $83.4 million, up 19 percent from 1998. "Our growth in gross profit reflects our efforts to offer services which are revenue-producing for IAA and which also provide enhanced salvage returns for our supplier customers (primarily automobile insurance companies). This growth was a primary focus for us in 1999 and will continue to be a focus in 2000, along with geographic expansion through acquisitions and greenfields and the expansion into new businesses such as appraisal and towing," Knowles added. 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. This is a $3 billion per year industry. The company currently has 50 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 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, 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, 1998, or subsequent quarterly reports. Among these risks are legislative acts, changes in the market value of salvage, competition, quality and quantity of inventory available from suppliers, and dependence on key insurance company suppliers. 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 Three Month Periods Year Ended Ended December 31, December 31, (Unaudited) 1999 1998 1999 1998 Net Sales: Vehicle sales $49,554,000 $46,523,000 $204,785,000 $191,312,000 Fee income 28,414,000 26,535,000 112,606,000 95,751,000 77,968,000 73,058,000 317,391,000 287,063,000 Cost and expenses: Cost of sales 57,707,000 55,023,000 233,949,000 216,754,000 Direct operating expenses 13,723,000 13,106,000 55,741,000 50,885,000 Amortization of acquisition costs 949,000 946,000 3,797,000 3,779,000 Special charges -- -- -- 1,564,000 Earnings from operations 5,589,000 3,983,000 23,904,000 14,081,000 Other (income) expense: Interest expense 491,000 495,000 1,970,000 2,055,000 Interest (income) (355,000) (208,000) (1,271,000) (797,000) Earnings before income taxes 5,453,000 3,696,000 23,205,000 12,823,000 Income taxes 2,044,000 1,444,000 9,500,000 5,642,000 Net earnings $3,409,000 $2,252,000 $13,705,000 $7,181,000 Earnings per share: Basic $.29 $.20 $1.20 $.63 Diluted $.29 $.20 $1.18 $.63 Weighted average shares outstanding: Basic 11,572,000 11,325,000 11,467,000 11,316,000 Effect of dilutive securities - stock options 184,000 95,000 156,000 121,000 Diluted 11,756,000 11,420,000 11,623,000 11,437,000 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets December 31, December 31, 1999 1998 ASSETS Current assets: Cash and cash equivalents. $18,886,000 $11,682,000 Short-term investments 18,481,000 11,138,000 Accounts receivable, net 40,188,000 37,415,000 Inventories 11,998,000 11,229,000 Other current assets 1,655,000 1,676,000 Total current assets 91,208,000 73,140,000 Property and equipment, at cost, net 27,458,000 22,312,000 Deferred income taxes 4,338,000 2,976,000 Other assets, principally goodwill, net 125,128,000 129,115,000 $248,132,000 $227,543,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $135,000 $216,000 Accounts payable 33,216,000 30,939,000 Accrued liabilities 6,306,000 6,097,000 Income taxes 1,226,000 582,000 Total current liabilities 40,883,000 37,834,000 Long-term debt, excluding current installments 20,180,000 20,315,000 Accumulated postretirement benefits obligation 3,178,000 3,485,000 Deferred income taxes 8,605,000 7,154,000 Total liabilities 72,846,000 68,788,000 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 11,575,010 and 11,327,169 shares as of December 31, 1999 and December 31, 1998, respectively 12,000 11,000 Additional paid-in capital 134,996,000 132,171,000 Retained earnings 40,278,000 26,573,000 Total shareholders' equity 175,286,000 158,755,000 $248,132,000 $227,543,000