SCHAUMBURG, Ill., Oct. 24 /PRNewswire/ -- Insurance Auto Auctions, Inc.
(Nasdaq: IAAI), a leading provider of automotive salvage and claims processing
services in the United States, today announced net earnings for the quarter
ended September 30, 2000 of $2.4 million, or $0.20 per diluted share, compared
with $3.2 million, or $0.27 per diluted share, for the third quarter of 1999.
For the quarter ended September 30, 2000, net revenues increased 4 percent
to $80.1 million compared with $77.0 million in the third quarter of 1999.
Gross profit for the quarter increased 5 percent to $21.6 million, up from
$20.5 million for the same quarter a year ago. The increase in gross profit
resulted from an increase of 11 percent in the number of units sold, offset by
a decrease in gross profit per unit.
Gross proceeds increased to $168.9 million for the quarter, up from
$161.9 million for the same quarter a year ago. Gross proceeds were up
slightly on a same store basis. Third quarter operating expenses included a
write-off associated with previously deferred costs of approximately 2 cents
per share related to a large potential acquisition which was not completed.
Gross Profit per Unit
The decline in gross profit per unit resulted from a combination of
factors including:
-- A temporary slow down in the processing of titles in some key areas of
the country that had resulted from a change in DMV titling procedures
in New Jersey and an internal reorganization by one of the Company's
largest customers. Substantial progress has been made in resolving
these issues.
-- A decrease in the profitability of vehicles sold under purchase
agreement contracts. This decrease was primarily caused by an
increase in Actual Cash Values ("ACVs") without a corresponding or
proportional increase in average sales prices. This problem is
continuing and is the basis of the Company's effort to reduce units
sold under purchase contracts.
-- Less than targeted levels of profitability for the Company's towing
initiative. Driver shortages, increases in fuel and labor costs and
other logistical issues have all had a negative impact on the success
of this initiative. The Company remains committed to the towing
initiative and continues to work on resolving the profitability
issues, although it has slowed implementation through 2001.
-- Increased tow charges from outside tow contractors due primarily to
higher fuel and labor costs. The Company is attempting to pass these
cost increases on in most cases to its customers, however, as of the
end of the third quarter, this had not yet been accomplished.
Renegotiation of Purchase Agreement Contracts
The Company is currently in the process of attempting to renegotiate the
majority of its purchase agreement contracts given the volatility that is
occurring with the relationship between ACVs and salvage selling prices. To
date, approximately 20 percent of the Company's purchase agreement units have
been renegotiated to other agreement forms with effective dates between now
and the end of the year. With the sell-off of inventory under the prior
agreements, the effect of this first wave of renegotiations should be
completed by the end of the first quarter of 2001. Other purchase contracts
are under renegotiation, continuing the process.
These renegotiated agreements, although less profitable in some cases than
the purchase agreement they replace, will help stabilize the Company's
revenues quarter-to-quarter. By the end of the second quarter of 2001, the
Company is targeting to have reduced the number of purchase agreement
contracts to no more than 5-10 percent of total units sold.
Nine Month Results
In the first nine months of 2000, net earnings increased 14 percent to
$11.7 million, or 99 cents per diluted share, as compared with $10.3 million,
or 89 cents per diluted share, for the same period a year ago. Net revenues
for the first nine months of 2000 were $251.4 million compared with $239.4 for
the first nine months of 1999.
Gross profit for the first nine months of 2000 was $68.9 million, up
9 percent from the same period in 1999. Gross proceeds for the nine month
period were $521.3 as compared to $491.6 for the same period a year ago.
Fourth Quarter and 2001
As previously announced, fourth quarter earnings are expected to be
25 cents to 27 cents per diluted share. 2001 earnings are now expected to be
approximately 10 percent above the current year, or $1.36 to $1.38 per diluted
share. The revised expectations for earnings for 2001 reflect the Company's
assessment of the future impact of the renegotiation of the purchase agreement
contracts and the continued challenge of improving the profitability of the
towing business. Although the Company has been successful this year in
keeping operating cost increases to a minimum, it expects to experience
significant pressures on operating expenses in the fourth quarter and 2001.
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 56 auction
sites across the United States.
This press release contains 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,
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, Form 10-K for the fiscal year ended
December 31, 1999 and the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 2000. Among these risks are: conducting business
pursuant to the purchase agreement method of sale; fluctuations in the actual
cash value of salvage vehicles; the ability to successfully renegotiate
existing purchase agreement contracts; the quality and quantity of inventory
available from suppliers; the ability to pass through increased towing costs;
that vehicle processing time will improve; that the Company's towing business
will reach forecasted levels of profitability; legislative or regulatory acts,
changes in the market value of salvage; competition; the availability of
suitable acquisition candidates; the ability to bring new facilities to
expected earnings targets; dependence on key insurance company suppliers; and
the level of energy and labor costs.
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 Nine Month Periods
Ended September 30, Ended September 30,
(Unaudited) (Unaudited)
2000 1999 2000 1999
Net Sales:
Vehicle sales $47,307,000 $49,562,000 $153,116,000 $155,231,000
Fee income 32,825,000 27,452,000 98,252,000 84,192,000
80,132,000 77,014,000 251,368,000 239,423,000
Cost and expenses:
Cost of sales 58,525,000 56,465,000 182,469,000 176,242,000
Direct operating
expenses 16,587,000 14,195,000 46,014,000 42,018,000
Amortization of
acquisition costs 1,003,000 949,000 2,936,000 2,848,000
Earnings from
operations 4,017,000 5,405,000 19,949,000 18,315,000
Other (income) expense:
Interest expense 455,000 492,000 1,376,000 1,479,000
Interest (income) (436,000) (365,000) (1,317,000) (916,000)
Earnings before
income taxes 3,998,000 5,278,000 19,890,000 17,752,000
Income taxes 1,639,000 2,092,000 8,155,000 7,456,000
Net earnings $2,359,000 $3,186,000 $11,735,000 $10,296,000
Earnings per share:
Basic $.20 $.28 $1.01 $ .90
Diluted $.20 $.27 $ .99 $ .89
Weighted average
shares outstanding:
Basic 11,704,000 11,530,000 11,632,000 11,432,000
Effect of dilutive
securities -
stock options 262,000 300,000 227,000 173,000
Diluted 11,966,000 11,830,000 11,859,000 11,605,000
INSURANCE AUTO AUCTIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Sept 30, Dec 31,
2000 1999
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $31,052,000 $27,186,000
Short-term investments 5,646,000 6,845,000
Accounts receivable, net 45,384,000 40,188,000
Inventories 12,617,000 11,998,000
Other current assets 2,477,000 1,655,000
Total current assets 97,176,000 87,872,000
Property and equipment, net 31,659,000 27,458,000
Investments in marketable securities 3,160,000 3,336,000
Deferred income taxes 4,626,000 4,338,000
Other assets, principally goodwill, net 131,913,000 125,128,000
$268,534,000 $248,132,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $36,000 $135,000
Accounts payable 38,858,000 33,216,000
Accrued liabilities 6,167,000 6,306,000
Income taxes 1,416,000 1,226,000
Total current liabilities 46,477,000 40,883,000
Long-term debt, excluding
current installments 20,143,000 20,180,000
Accumulated postretirement
benefits obligation 3,044,000 3,178,000
Deferred income taxes 9,890,000 8,605,000
Total liabilities 79,554,000 72,846,000
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 11,715,936 and 11,575,010
and shares as of September 30, 2000 and
December 31, 1999, respectively 12,000 12,000
Additional paid-in capital 136,955,000 134,996,000
Retained earnings 52,013,000 40,278,000
Total shareholders' equity 188,980,000 175,286,000
$268,534,000 $248,132,000
SOURCE Insurance Auto Auctions, Inc.
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Related links:
http://www.iaai.com
CONTACT:
Steve Green, Chief Financial Officer of
Insurance Auto Auctions, Inc., 847-839-4156; or General, Jeff
Wilhoit, 312-640-6757, Media, Tim Grace, 312-274-2240, both of
The Financial Relations Board
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