-- Net Earnings Increased 64% after special charges
-- Net Earnings Increased 28% before special charges
-- EPS increased 69% to 22 cents vs. 13 cents after 1997 special charges
-- Gross Profit Per Unit increases by 15% over prior year
SCHAUMBURG, Ill., July 22 /PRNewswire/ -- Insurance Auto Auctions, Inc.
(Nasdaq: IAAI), citing continued margin improvements, today reported
second-quarter net earnings climbed 64 percent to $2.5 million, or 22 cents
per share, from $1.5 million, or 13 cents per share, including special
charges, for the same quarter a year ago. For the quarter ended June 30,
1998, net sales increased 14 percent to $75.4 million compared with
$66.0 million in the second quarter of 1997.
Excluding special charges, operating earnings for the quarter rose 28
percent to $4.9 million from $3.8 million for the same quarter a year ago.
Last year, the company had a special charge of $750 thousand or 4 cents per
share, resulting from a litigation settlement, reducing net income to
$1.5 million or 13 cents per share.
Gross profit for the quarter increased 17 percent to $19.0 million, up
from $16.3 million for the same quarter a year ago. Gross profit per unit for
the quarter was $165 per unit compared with $144 per unit for the same quarter
a year ago, an increase of 15 percent.
"Our second-quarter earnings reflect not only the historical second
quarter seasonal strength but also the confirmation of our focused strategy to
improve the profitability of our business, to re-enter a profitable growth
mode and to develop new value-added services," said James P. Alampi, chairman,
chief executive officer and president. "We are continuing to develop our new
service offerings and by the end of next quarter will have a number in the
pilot phase."
Direct operating expenses per unit for the second quarter increased to
$114 compared with $102 per unit a year earlier. The increase reflects the
funding commitment made for the development and piloting of several
value-added services.
Six-Month Results Improve Sharply
In the first six months of 1998, including special charges, net earnings
were $3.4 million or 30 cents per share, compared with $2.1 million or
18 cents per share for the same period a year ago. Excluding special charges,
net earnings were $4.2 million, or 37 cents per share, compared with
$2.5 million or 22 cents per share for the same period in 1997. Excluding
special charges, operating earnings increased 58 percent to $8.5 million, up
from $5.4 million for the same period a year ago.
Net sales for the first six months of 1998 were $144.0 million compared
with $133.9 million for the first six months of 1997. Gross profit for the
first six months of 1998 was $35.5 million, up 18 percent from the same period
in 1997. Gross profit per unit for first six months of 1998 was $154 per unit
compared with $130 per unit in the prior year, an increase of 18 percent.
Direct operating expenses per unit increased to $109 for the first six months
of 1998, compared with $99 per unit for the same period in 1997.
Strategic Initiative Under Way
As previously reported, the company has committed resources to identifying
and developing additional customer-valued services, focusing on opportunities
to add value to the insurance industry's automobile claims process and reduce
time and costs for these customers.
"We undertook these initiatives in our belief that the new services we
offer our customers are strategic to the direction of the company and critical
to our future growth," Alampi said. "We have committed significant time and
resources to the continuing effort to identify and develop new services that
would streamline the automobile claims process and greatly reduce costs for
insurance companies. This year we are piloting a number of services to
determine their applicability regionally and or nationally."
Vehicle Sales Volume Increases Slightly
The volume of vehicles sold increased to 115,000 in the second quarter of
1998, up 2 percent from the 113,000 vehicles processed in the same period for
the previous year. The number of vehicles processed through purchase
agreements for the quarter ended June 30, 1998, represented 31 percent of all
vehicles sold, compared with 30 percent for the same period in 1997. For the
first six months of 1998, the volume of vehicles sold was 230,000, as compared
to 231,000 for the same period for the previous year. The number of vehicles
processed through purchase agreements for the six months ended June 30, 1998,
represented 30 percent of all vehicles sold, down from 31 percent for the same
period in 1997.
The relatively flat volumes are the result of fewer units being available
for sale as compared to the prior period, which was due to the company's
decision in 1997 to terminate specific, unprofitable purchase agreements and
the comparatively mild winter in many parts of the U.S., resulting in fewer
total loss accidents.
Strategic Transformation In Progress
"We identified early on that we needed to transform the company from
purely salvage to a broader service organization," Alampi said. "Meeting
customers' needs with valued-added services across a broader geographic base
is the key to being perceived as a service and solutions organization. An
important part of our strategy continues to be the expansion of our national
coverage through acquisitions and new locations."
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 48 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. 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 Six months ended
June 30, June 30,
Increase Increase
1998 1997 (Decrease) 1998 1997 (Decrease)
Total Vehicles 115,000 113,000 2% 230,000 231,000 0%
Per Unit:
Gross Profit $165 $144 15% $154 $130 18%
Direct Operating
Expenses $114 $102 12% $109 $99 10%
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
(Unaudited) (Unaudited)
1998 1997 1998 1997
Net Sales:
Vehicle sales $51,894,000 $44,990,000 $99,063,000 $90,146,000
Fee income 23,506,000 20,988,000 44,895,000 43,717,000
75,400,000 65,978,000 143,958,000 133,863,000
Cost and expenses:
Cost of sales 56,375,000 49,682,000 108,466,000 103,736,000
Direct operating
expenses 13,132,000 11,506,000 25,129,000 22,879,000
Amortization of
acquisition costs 954,000 945,000 1,898,000 1,895,000
Special charges -- 750,000 1,564,000 750,000
Earnings from
operations 4,939,000 3,095,000 6,901,000 4,603,000
Other (income) expense:
Interest expense 537,000 669,000 1,064,000 1,405,000
Interest (income) (222,000) (241,000) (396,000) (399,000)
Earnings before
income taxes 4,624,000 2,667,000 6,233,000 3,597,000
Income taxes 2,127,000 1,147,000 2,867,000 1,547,000
Net earnings $2,497,000 $1,520,000 $3,366,000 $2,050,000
Net earnings
per common and common
equivalent shares
outstanding $.22 $.13 $.30 $.18
Weighted average common
and common
equivalent shares
outstanding 11,459,000 11,299,000 11,409,000 11,306,000
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, December 31,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents
& short-term investments $12,213,000 $9,634,000
Accounts receivable, net 31,873,000 28,992,000
Inventories 13,515,000 11,762,000
Other current assets 1,455,000 1,868,000
Total current assets 59,056,000 52,256,000
Property and equipment, at cost, net 21,335,000 20,778,000
Deferred income taxes 2,603,000 2,603,000
Other assets, principally
goodwill, net 130,803,000 131,435,000
$213,797,000 $207,072,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $201,000 $2,034,000
Accounts payable 20,380,000 16,319,000
Accrued liabilities 7,479,000 7,698,000
Income taxes 1,878,000 497,000
Total current liabilities 29,938,000 26,548,000
Long-term debt, excluding current
installments 20,190,000 20,246,000
Accumulated postretirement benefit
obligation 3,656,000 3,831,000
Deferred income taxes 5,235,000 5,235,000
Total liabilities 59,019,000 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
11,314,604 and 11,299,561 shares
as of June 30, 1998 and
December 31, 1997, respectively 11,000 11,000
Additional paid-in capital 132,009,000 131,809,000
Retained earnings 22,758,000 19,392,000
Total shareholders' equity 154,778,000 151,212,000
$213,797,000 $207,072,000
SOURCE Insurance Auto Auctions, Inc.
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Related links:
http://www.iaai.com
CONTACT:
Linda C. Larrabee, Sr. VP-CFO of Insurance
Auto Auctions, 847-839-4132; or General Inquiries, Norha Lee,
312-640-6689, Analyst Inquiries, Janine Warell, 312-640-6775, or
Media Inquiries, Katy Rizzo, 312-640-6751, all of The Financial
Relations Board
NOTE TO EDITORS: 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."
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