Insurance Auto Auctions (NASDAQ:IAAI)
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Insurance Auto Auctions Announces Fourth Quarter Results
SCHAUMBURG, Ill., Feb. 27 /PRNewswire-FirstCall/ -- Insurance Auto Auctions,
Inc. , a leading provider of automotive salvage and claims processing services
in the United States, today reporteda net loss for the quarter ended December
28, 2003. The Company recorded a net loss of $0.3 million, or a loss of $0.03
per diluted share, versus net earnings of $0.5 million, or $0.04 per diluted
share, for the same quarter a year ago.
Revenues for the quarter were $51.1 million compared with $52.4 million in the
fourth quarter of 2002. The decline in revenues was primarily due to the
Company's shift away from vehicles sold under the purchase agreement method and
lower volumes on a same-store basis. The purchase agreement method accounted
for 4 percent of the total vehicles sold this quarter versus 8 percent for the
same quarter one year earlier. Under the purchase agreement method, the entire
purchase price of the vehicle is recorded as revenue, compared to the
lower-risk, consignment fee-based arrangements, where only the fees collected on
the sale of the vehicle are recorded as revenue. Fee income in the fourth
quarter increased to $43.5 million versus $39.4 million in the fourth quarter of
last year.
"Our fourth quarter results were in-line with our internal expectations," said
Tom O'Brien, CEO. "As the quarter progressed, we were also encouraged by signs
of a strengthening operating environment, which included higher incoming volumes
and higher proceeds for our customers, and positive market share trends.
Finally, during the quarter we completed the conversion of our eagerly
anticipated IT system throughout the organization, which we expect to drive
additional efficiencies and profits for IAA going forward."
Full-Year 2003 Results
The Company reported full-year 2003 net earnings of $2.3 million, or $0.20 per
diluted share, versus net earnings of $4.0 million, or $0.32 cents per diluted
share, for 2002. The primary reasons for the decline included
higher-than-expected business transformation costs during the year associated
with the new IT system and lower volumes, consistent with industry trends.
Revenues for the year were $209.7 million, a 10 percent decline from revenues of
$234.2 million in 2002. Similar to the fourth quarter, the decline in annual
revenues was primarily attributable to the change in revenue mix, stemming from
the move away from the purchase agreement method of sale. For the year, the
purchase agreement method accounted for 6 percent of the total vehicles sold
versus 10 percent in 2002.
"The past year, which represented a period of continued transition and overall
improvement at IAA, was extremely difficult due to challenges related to rolling
outthe new system and lower industry volumes," said O'Brien. "While our
financial results were clearly below our original expectations, we met our
revised full-year guidance estimates and remained profitable throughout a
difficult market. We also demonstrated positive market share trends that bode
well for the future. We added eight new branches during the year and continued
to invest in our existing infrastructure in order to grow the profitability of
our core business. Furthermore, we completed the Company's largest
infrastructure enhancement ever with the implementation of our new industry-wide
IT system, significantly changing the face of IAA for the better. This specific
initiative took more than two years to complete and will help drive better
products and services for our customers in the quarters ahead."
Leveraging IAA's Improved Infrastructure
"The strategic initiatives that we executed on over the past year have put IAA
in a much stronger competitive position than it was a year ago," said O'Brien.
"Our technology system is already contributing to better visibility for our
management team and employees and, as a result, we are now able to better meet
the needs of our customers. Furthermore, we continued to show our commitment to
cost effectively expanding the business through the addition of new facilities
and made the necessary investment to keep our existing operations up-to-date.
Each of these achievements makes IAA a more attractive partner for both our
insurance company suppliers and our buyers."
Remaining committed to its strategic expansion strategy, IAA announced eight new
facilities in 2003, bringing the Company's branch total to 74 facilities at
year-end. New greenfield facilities were announced in Dothan, Alabama, and
Little Rock, Arkansas, each of which cost effectively leverages the Company's
existing regional coverage. IAA also announced acquisitions in Buffalo and
Rochester, New York, Wilmington, North Carolina, Wichita, Kansas, Orlando,
Florida and Salt Lake City, Utah. These acquisitions represent solid businesses
that enhanced the Company's geographic coverage in a cost effective manner and
generated immediate profits and cash flow on invested capital. Most recently,
IAA announced a new greenfield facility in Tucson, Arizona, which leverages the
Company's current coverage in Phoenix.
"In the coming months we will be placing a major focus on fully leveraging the
new IT system that we have spent such a considerable amount of time and money
developing and rolling out throughout the organization," said O'Brien. "We are
already recognizing its benefits from a visibility and customer service
standpoint, and the anticipated cost savings are also beginning to present
themselves. In addition, we will continue toinvest in our existing facilities
and will attempt to identify new expansion opportunities that offer our
shareholders an acceptable return on their investment."
O'Brien concluded, "Although the past two years have been very challenging due
to the massive transformation we underwent as a company, IAA has been
strengthened considerably as a result of our efforts. Now that the Company's
foundation has been solidified, we are excited about the new opportunities that
will arise with our enhanced technology and infrastructure, combined with our
unwavering focus on providing excellent customer service. Recent customer wins
have demonstrated that our customers are accepting our improved operations and
receptive of our enhanced service offerings, and we hope to see that trend
continue as we become even stronger. In light of that, we are on track to hit
or exceed our 15 cent earnings target for the first quarter. We are very excited
about our future and believe IAA is well positioned to compete and generate
higher returns for both our customers and our shareholders over the long term."
Investors' Conference Call
The Company previously announced that it will hold its fourth quarter 2003
investors' conference call on Friday, February 27 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 at http://www.streetevents.com/ or by visiting the
Company's Web site at http://www.iaai.com/. A replay will be available until
midnight EST on March 5, 2004. To listen to the replay, please dial 800-642-1687
and enter conference reservation code 5412994 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
Certain statements in this document contain forward-looking information that is
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 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, 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 29, 2002
or subsequent quarterly reports. Among these risks are: changes in the market
value of salvage; the quality and quantity of inventory available from
suppliers; the ability to pass through increased towing costs; that vehicle
processing time will improve; legislative or regulatory acts; competition; the
availability of suitable acquisition candidates and greenfield opportunities;
the ability to bring new facilities to expected earnings targets; the dependence
on key insurance company suppliers; the ability of the Company and its outside
consultants to successfully complete the re-design of the Company's information
systems, both in a timely manner and according to costs and operational
specifications; the ability of the Company to meet its obligations under its
loan agreement and credit facility with its lenders;and the level of energy and
labor costs.
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 Period Ended Twelve Month Period Ended
December 28 December 29, December 28, December 29,
2003 2002 2003 2002
(Unaudited) (Unaudited)
Revenues:
Vehicle sales $7,620 $13,083 $39,963 $71,352
Fee income 43,525 39,358 169,687 162,845
51,145 52,441 209,650 234,197
Cost of sales:
Vehicle cost 6,806 11,935 35,301 65,463
Branch cost 35,901 30,728 135,157 125,530
42,707 42,663 170,458 190,993
Gross Profit 8,438 9,778 39,192 43,204
Operating expense:
Selling, general and
administration 7,810 7,230 30,225 27,711
Business transformation
costs 1,027 1,813 3,902 8,067
Earnings (loss)
from operations (399) 735 5,065 7,426
Other (income) expense:
Interest expense 426 (84) 1,505 678
Interest income 65 (55) (76) (275)
Earnings (loss) before
income taxes (890) 874 3,636 7,023
Provision (benefit) for
income taxes (560) 373 1,304 3,015
Net earnings
(loss) $(330) $501 $2,332 $4,008
Earnings (loss) per share:
Basic $(.03) $.04 $.20 $.33
Diluted $(.03) $.04 $.20 $.32
Weighted average shares
outstanding:
Basic 11,518 12,271 11,652 12,235
Effect of dilutive
securities
- stock options -- 235 80 296
Diluted 11,518 12,506 11,732 12,531
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands except per share amounts)
December 28, December 29,
2003 2002
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $15,486 $10,027
Accounts receivable, net 48,375 45,594
Inventories 13,602 11,158
Other current assets 3,099 3,571
Total current assets 80,562 70,350
Property and equipment, net 60,187 49,342
Deferred income taxes 9,788 7,663
Intangible assets, net 2,101 1,710
Goodwill, net 135,062 130,474
Other assets 93 111
$287,793 $259,650
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $35,005 $28,656
Accrued liabilities 14,209 15,312
Obligations under capital leases 2,822 2,552
Current installments of long-term debt 7,547 43
Total current liabilities 59,583 46,563
Deferred income taxes 17,748 14,835
Other liabilities 2,598 2,736
Obligation under capital leases 1,891 1,355
Long-term debt, excluding current installments 16,887 59
Total liabilities 98,707 65,548
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;
12,325,482 shares issued and
11,518,273 outstanding as of
December 28, 2003; and
12,292,599 shares issued and
outstanding as of December 29, 2002 12 12
Additional paid-in capital 144,935 144,420
Treasury stock, 807,209 shares (8,012) --
Deferred compensation related to
restricted stock 29 --
Accumulated other comprehensive income (loss) (625) (745)
Retained earnings 52,747 50,415
Total shareholders' equity 189,086 194,102
$287,793 $259,650
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Year Ended
December 28, December 29,
2003 2002
(Unaudited)
Cash flows from operating activities:
Net earnings $2,332 $4,008
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 10,661 9,901
Loss (gain) on disposal of fixed assets 54 (104)
Loss (gain) on change in fair market value
of derivative financial instrument (307) 307
Deferred compensation related to
restricted stock 29 --
Changes in assets and liabilities
(excluding effects of acquired companies):
(Increase) decrease in:
Accounts receivable, net (752) 9,180
Inventories (2,442) 2,347
Other current assets 489 594
Other assets (975) (64)
Increase (decrease) in:
Accounts payable 6,349 (12,795)
Accrued liabilities (878) 2,289
Income taxes, net 788 2,827
Total adjustments 13,016 14,482
Net cash provided by operating activities 15,348 18,490
Cash flows from investing activities:
Capital expenditures (16,343) (15,241)
Investments, net -- 2,643
Proceeds from disposal of property and equipment 60 187
Payments made in connection with
acquisitions, net of cash acquired (7,872) (1,510)
Net cash used in investing activities (24,155) (13,921)
Cash flows from financing activities:
Proceeds from issuance of common stock 515 1,845
Proceeds from term loan 30,000 --
Principal payments on long-term debt (5,668) (20,041)
Purchase of treasury stock (8,012) --
Principal payments - capital leases (2,569) (813)
Net cash provided (used) by financing activities 14,266 (19,009)
Net increase (decrease) in cash and cash
equivalents 5,459 (14,440)
Cash and cash equivalents at beginning of period 10,027 24,467
Cash and cash equivalents at end of period $15,486 $10,027
Supplemental disclosures of cash flow information:
Cash paid or refunded during the period for:
Interest $1,639 $1,433
Income taxes paid $855 $2,492
Income taxes refunded $1,390 $3,860
Non-cash financing activities:
Property and equipment additions
resulting from capital leases $3,375 $4,720
DATASOURCE: Insurance Auto Auctions, Inc.
CONTACT: Scott Pettit, Chief Financial Officer of Insurance Auto
Auctions, Inc., +1-847-839-4040; or General Inquiries: Chris Kettmann of
Ashton Partners, +1-312-553-6716, for Insurance Auto Auctions, Inc.
Web site: http://www.iaai.com/