IAAI Insurance Auto Auctions (MM)

Insurance Auto Auctions Announces Third Quarter Results WESTCHESTER, Ill., Oct. 22 /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 September 25, 2004. The Company recorded net earnings of $3.4 million, or $0.28 per diluted share, versus a net loss of $0.6 million, or $0.05 per diluted share, for the same quarter a year ago. The third quarter of 2004 includes a $0.3 million, or $0.03 per diluted share, gain on the sale of IAA's Boston property that occurred early in the quarter. Revenues for the quarter were $60.8 million compared with $49.1 million in the third quarter of 2003. Fee income in the third quarter increased to $53.2 million versus $40.3 million in the third quarter of last year. "We are pleased to announce quarterly financial results that were significantly better than the third quarter of last year, both from a revenue and an earnings standpoint," said Tom O'Brien, CEO. "These improved results are primarily due to the enhancements we have made to our business over the past couple years, as well as to our unwavering focus on providing the best customer service possible. Once again we saw a double-digit volume improvement over last year, reflecting market share gains that we announced earlier this year. Our customers continue to benefit from our enhanced operating model as well, as we generated higher year-over-year average returns in the most recent quarter." O'Brien also commented on the Company's improved technology platform, saying, "Our recently developed IT system continues to produce solid dividends for IAA, enhancing our operating processes and providing both management and our customers with exceptional pricing and inventory visibility. In addition, our comprehensive auction methodology, live auctions complemented with proxy and real-time bidding capabilities, continues to be well received by our buyer base. We strongly believe we have the right bidding strategy in place, and increased activity from both our suppliers and buyers over the past few quarters has reinforced that belief." O'Brien continued, "One of our major initiatives during the quarter was the rollout of our real-time bidding platform, I-bid LIVE(SM), throughout our network of branches. By further leveraging our IT platform, we have continued to enhance this product with additional value-added features such as a live voice feed, which allows Internet bidders to feel as if they're physically at the auction. We were able to roll out I-bid LIVE to an additional 15 branches during the third quarter, giving us 25 fully implemented branches in all and representing more than 50 percent of our total volume at quarter's end. We remain confident in our plan to complete the rollout of I-bid LIVE by the end of the year to the remainder of our targeted branches." 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, both of which were announced early in the quarter. "These two new branches are strategically located and were cost effective for IAA," said O'Brien. "However, consistent with our remarks from last quarter, we do not foresee making many expansion announcements the remainder of the year, as we focus instead on the rollout of our real-time bidding platform and growing organically by gaining market share." O'Brien concluded, "Although industry-wide volumes are typically lower in the fourth quarter than in the third quarter, our ability to create additional operating efficiencies and increase our market share in the past several quarters has given us confidence in our ability to carry this positive momentum through the end of the year. Given our better-than-expected third quarter results, and assuming no material changes in current volume and pricing expectations, we anticipate diluted earnings per share to be approximately 25 cents for the fourth quarter and 95 cents for the full-year, both of which would represent significant improvements over the comparable periods in 2003. While we are pleased with our recent financial and market share successes, we will continue to focus on improving our business and identifying opportunities that enhance shareholder value. We look forward to updating our shareholders on our continued progress in our fourth quarter and year-end earnings release." Investors' Conference Call The Company previously announced that it will hold its third quarter 2004 investors' conference call on Friday, October 22 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 EST on October 29, 2004. To listen to the replay, please dial 800-642-1687 and enter conference reservation code 1368926 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/ INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (dollars in thousands except per share amounts) Three Month Periods Ended Nine Month Periods Ended September 26, September 28, September 26, September 28, 2004 2003 2004 2003 (Unaudited) (Unaudited) Revenues: Vehicle sales $7,502 $8,847 $22,853 $32,343 Fee income 53,250 40,280 155,091 126,162 60,752 49,127 177,944 158,505 Cost of sales: Vehicle cost 6,229 7,299 19,400 28,495 Branch cost 40,157 33,447 118,150 99,256 46,386 40,746 137,550 127,751 Gross profit 14,366 8,381 40,394 30,754 Operating expense: Selling, general and administrative 9,239 7,738 26,076 22,415 Loss/(Gain) on sale of property & equipment (606) 6 (626) (116) Business transformation costs - 1,157 - 2,875 Earnings (loss) from operations 5,733 (520) 14,944 5,580 Other (income) expense: Interest expense 362 521 1,248 1,079 Interest income (19) (25) (40) (25) Earnings (loss) before income taxes 5,390 (1,016) 13,736 4,526 Provision (benefit) for income taxes 2,036 (422) 5,426 1,864 Net earnings (loss) $3,354 $(594) $8,310 $2,662 Earnings (loss) per share: Basic $ .29 $(.05) $.72 $ .23 Diluted $ .28 $(.05) $.70 $ .23 Weighted average shares outstanding: Basic 11,513 11,516 11,532 11,694 Effect of dilutive securities - stock options 379 - 284 77 Diluted 11,892 11,516 11,816 11,771 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (dollars in thousands except per share amounts) September 26, December 28, 2004 2003 ASSETS (Unaudited) Current assets: Cash and cash equivalents $17,810 $15,486 Accounts receivable, net 46,832 48,375 Inventories 13,237 13,602 Other current assets 2,769 3,099 Total current assets 80,648 80,562 Property and equipment, net 67,866 60,187 Deferred income taxes 10,771 9,788 Intangible assets, net 1,910 2,101 Goodwill, net 137,494 135,062 Other assets 481 93 $299,170 $287,793 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $39,894 $36,660 Accrued liabilities 15,492 11,540 Short-term borrowings - - Obligations under capital leases 1,541 2,822 Income taxes 2,221 - Current installments of long-term debt 7,547 7,547 Total current liabilities 66,695 58,569 Deferred income taxes 19,974 17,748 Other liabilities 3,103 3,612 Obligation under capital leases 943 1,891 Long-term debt, excluding current installments 11,227 16,887 Total liabilities 101,942 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; 12,447,414 shares issued and 11,544,405 outstanding as of September 26, 2004; and 12,325,482 shares issued and 11,518,273 outstanding as of December 28, 2003 12 12 Additional paid-in capital 146,538 145,856 Treasury stock, 903,009 shares (9,516) (8,012) Deferred compensation related to restricted stock (542) (892) Accumulated other comprehensive income (loss) (298) (625) Retained earnings 61,034 52,747 Total shareholders' equity 197,228 189,086 $299,170 $287,793 INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (dollars in thousands) Nine Months Ended September 26, September 28, 2004 2003 (Unaudited) Cash flows from operating activities: Net earnings $8,310 $2,662 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 9,724 7,519 Loss (gain) on disposal of fixed assets (626) (24) Loss (gain) on change in fair market value of derivative financial instrument - (307) Deferred compensation related to restricted stock 350 - Changes in assets and liabilities (excluding effects of acquired companies): (Increase) decrease in: Accounts receivable, net 2,075 5,048 Inventories 365 (235) Other current assets 330 813 Other assets (1,437) (466) Increase (decrease) in: Accounts payable 2,999 3,100 Accrued liabilities 3,770 (1,254) Income taxes, net 3,464 1,032 Total adjustments 21,014 15,226 Net cash provided by operating activities 29,324 17,888 Cash flows from investing activities: Capital expenditures (17,645) (11,666) Investments, net - Proceeds from disposal of property and equipment 1,268 60 Payments made in connection with acquisitions, net of cash acquired (1,912) (7,872) Net cash used in investing activities (18,289) (19,478) Cash flows from financing activities: Proceeds from issuance of common stock 682 492 Proceeds from term loan - 30,000 Purchase of treasury stock (1,504) (8,012) Principal payments on long-term debt (5,660) (3,782) Principal payments - capital leases (2,229) (1,874) Net cash provided (used) by financing activities (8,711) 16,824 Net increase (decrease) in cash and cash equivalents 2,324 15,234 Cash and cash equivalents at beginning of period 15,486 10,027 Cash and cash equivalents at end of period $17,810 $25,261 Supplemental disclosures of cash flow information: Cash paid or refunded during the period for: Interest $1,376 $1,167 Income taxes paid $2,028 $- Income taxes refunded $1,011 $- 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, +1-708-492-7040, or Chris Kettmann, General Inquiries, +1-312-553-6716, both of Insurance Auto Auctions, Inc. Web site: http://www.iaai.com/

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