IAAI Insurance Auto Auctions (MM)

Insurance Auto Auctions Announces Second Quarter Results SCHAUMBURG, Ill., July 23 /PRNewswire-FirstCall/ -- Insurance Auto Auctions, Inc. (NASDAQ:IAAI), a leading provider of automotive salvage and claims processing services in the United States, today reported higher net earnings for the quarter ended June 27, 2004. The Company recorded net earnings of $2.6 million, or $0.22 per diluted share, versus net earnings of $1.3 million, or $0.11 per diluted share, for the same quarter a year ago. Revenues for the quarter were $60.0 million compared with $53.3 million in the second quarter of 2003. Fee income in the second quarter increased to $51.8 million versus $43.1 million in the second quarter of last year. "For the second consecutive quarter we are pleased to announce financial results that exceeded our expectations," said Tom O'Brien, CEO. "Our overall goal has been to drive customer service and continued improvements in our operating model, and we were able to accomplish that goal during the quarter. We continued to increase our market share for the second quarter, demonstrated by a double-digit growth in volumes sold. We also continue to generate higher average returns for our customers compared to the prior year. Our business model focuses on providing our customers with live auctions complemented with an Internet bidding capability, which we believe offers the optimal solution for both our insurance company suppliers and our buyers." Providing an update on the Company's technology platform, O'Brien said, "Following the completion of our system development last year, we remain focused on using our new IT system to create further efficiencies and drive additional visibility for both the management team and our customers. One particular area of focus was the rollout of our recently developed real-time bidding platform, I-bid LIVE(SM), to a number of our major branches. Following a successful testing period in the early part of the quarter, we were able to fully roll it out into ten branches by the end of the second quarter. We plan to complete the rollout of I-bid LIVE by the end of the year." The Company also continued its expansion strategy with the addition of a new greenfield facility in El Paso, Texas and a strategic acquisition in Jackson, Mississippi. "The two new branches are both strategically located and cost effective for IAA, meeting our stringent expansion requirements," said O'Brien. "However, we do not foresee making many expansion announcements in the third and fourth quarters, focusing instead on the rollout of our real-time bidding platform throughout our network of branches and continuing to focus on our customers." O'Brien concluded, "In our industry, the volumes in the third and fourth quarters are typically lower than those in the first half of the year. That said, our improved cost structure combined with recent market share gains give us reason to anticipate improved year-over-year earnings results. Assuming no material changes in current volume and pricing expectations, we anticipate earnings per share to be approximately 75 to 80 cents for the full year, representing a significant improvement over the prior year. As this expected year-over-year improvement indicates, we are pleased with the progress we have made in making IAA a stronger company overall, both operationally and competitively, and look forward to updating our shareholders on our continued progress in the quarters ahead." Investors' Conference Call The Company previously announced that it will hold its second quarter 2004 investors' conference call on Friday, July 23 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 by visiting the Company's Web site at http://www.iaai.com/ . A replay will be available until midnight EDT on July 30, 2004. To listen to the replay, please dial 800-642-1687 and enter conference reservation code 8739045 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 77 sites across the United States. Safe Harbor Statement This Report contains forward-looking statements that are 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 statements. In some cases, you can identify forward-looking statements by 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 28, 2003 and subsequent quarterly reports. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, the Company undertakes no obligation to publish, update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Additional information about Insurance Auto Auctions, Inc. is available on the World Wide Web at http://www.iaai.com/ . Financial Tables Follow ... INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (dollars in thousands except per share amounts) Three Month Periods Ended Six Month Periods Ended June 27, June 29, June 27, June 29, 2004 2003 2004 2003 (Unaudited) (Unaudited) Revenues: Vehicle sales $8,225 $10,192 $15,352 $23,496 Fee income 51,777 43,146 101,841 85,882 60,002 53,338 117,193 109,378 Cost of sales: Vehicle cost 7,187 9,425 13,171 21,196 Branch cost 39,598 32,845 77,993 65,809 46,785 42,270 91,164 87,005 Gross profit 13,217 11,068 26,029 22,373 Operating expense: Selling, general and administrative 8,357 7,509 16,837 14,677 Business transformation costs - 921 - 1,718 Earnings from operations 4,860 2,638 9,192 5,978 Other (income) expense: Interest expense 410 503 887 558 Other income (29) (43) (41) (122) Earnings before income taxes 4,479 2,178 8,346 5,542 Provision for income taxes 1,824 898 3,390 2,286 Net earnings $2,655 $1,280 $4,956 $3,256 Earnings per share: Basic $.23 $.11 $.43 $.28 Diluted $.22 $.11 $.42 $.27 Weighted average shares outstanding: Basic 11,545 11,517 11,541 11,784 Effect of dilutive securities - stock options 286 60 243 77 Diluted 11,831 11,577 11,784 11,861 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (dollars in thousands except per share amounts) June 27, December 28, 2004 2003 ASSETS (Unaudited) Current assets: Cash and cash equivalents $17,628 $15,486 Accounts receivable, net 45,440 48,375 Inventories 13,393 13,602 Other current assets 2,961 3,099 Total current assets 79,422 80,562 Property and equipment, net 64,838 60,187 Deferred income taxes 10,205 9,788 Intangible assets, net 1,837 2,101 Goodwill, net 135,812 135,062 Other assets 477 93 $292,591 $287,793 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $36,288 $35,005 Accrued liabilities 13,794 13,195 Short-term borrowings - - Obligations under capital leases 2,205 2,822 Income taxes 1,410 - Current installments of long-term debt 7,547 7,547 Total current liabilities 61,244 58,569 Deferred income taxes 19,227 17,748 Other liabilities 3,130 3,612 Obligation under capital leases 1,069 1,891 Long-term debt, excluding current installments 13,114 16,887 Total liabilities 97,784 98,707 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; 12,425,708 shares issued and 11,618,499 outstanding as of June 27, 2004; and 12,325,482 shares issued and 11,518,273 outstanding as of December 28, 2003 12 12 Additional paid-in capital 146,217 145,856 Treasury stock, 807,209 shares (8,012) (8,012) Deferred compensation related to restricted stock (777) (892) Accumulated other comprehensive income (loss) (335) (625) Retained earnings 57,702 52,747 Total shareholders' equity 194,807 189,086 $292,591 $287,793 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (dollars in thousands) Six Months Ended June 27, June 29, 2004 2003 (unaudited) Cash flows from operating activities: Net earnings $4,956 $3,256 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,522 4,870 Loss (Gain) on disposal of fixed assets (19) (31) Loss on change in fair market value of derivative unhedged portion - (307) Deferred compensation related to restricted stock 114 - Changes in assets and liabilities (excluding effects of acquired companies): (Increase) decrease in: Accounts receivable, net 2,935 7,370 Inventories 209 985 Other current assets 137 917 Other assets (1,117) (754) Increase (decrease) in: Accounts payable 1,282 (3,336) Accrued liabilities 407 (684) Income taxes, net 2,470 1,383 Total adjustments 12,940 10,412 Net cash provided by operating activities 17,896 13,669 Cash flows from investing activities: Capital expenditures (11,105) (6,498) Proceeds from disposal of property and equipment 200 44 Payments made in connection with acquisitions, net of cash acquired - (7,863) Net cash used in investing activities (10,905) (14,317) Cash flows from financing activities: Proceeds from issuance of common stock 361 227 Proceeds from term loan - 30,000 Principal payments on long-term debt (3,772) (1,896) Purchase of treasury stock - (8,012) Principal payments - capital leases (1,438) (1,191) Net cash provided (used) by financing activities (4,849) 19,128 Net increase (decrease) in cash and cash equivalents 2,142 18,480 Cash and cash equivalents at beginning of period 15,486 10,027 Cash and cash equivalents at end of period $17,628 $28,507 Supplemental disclosures of cash flow information: Cash paid or refunded during the period for: Interest $1,025 $647 Income taxes paid $2,026 $797 Income taxes refunded $1,011 $1,250 Non-cash financing activities: Property and equipment additions resulting from capital leases $- $3,375 DATASOURCE: Insurance Auto Auctions, Inc. CONTACT: Scott Pettit, Chief Financial Officer of Insurance Auto Auctions, Inc., +1-847-839-4040; or Chris Kettmann, General Inquiries, +1-312-553-6716, for Insurance Auto Auctions, Inc. Web site: http://www.iaai.com/

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