-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Drf3zrUy068bKi+DGJSw6OIs7OjUgwYvUlFx9NcVe7I3VqPM6YJ4ipOxNZwwj0+G hxyD4mOxlPf7gP3W5dPEWQ== 0000950137-03-003985.txt : 20030728 0000950137-03-003985.hdr.sgml : 20030728 20030728165729 ACCESSION NUMBER: 0000950137-03-003985 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030715 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE AUTO AUCTIONS INC /CA CENTRAL INDEX KEY: 0000880026 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLES & MOTOR VEHICLE PARTS & SUPPLIES [5010] IRS NUMBER: 953790111 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19594 FILM NUMBER: 03806485 BUSINESS ADDRESS: STREET 1: 850 E ALGONQUIN RD STREET 2: STE 100 CITY: SCHAUMGURG STATE: IL ZIP: 60173 BUSINESS PHONE: 8478393939 MAIL ADDRESS: STREET 1: 850 E ALGONQUIN RD STREET 2: STE 100 CITY: SCHAUMGURG STATE: IL ZIP: 60173 8-K 1 c78560e8vk.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 15, 2003 INSURANCE AUTO AUCTIONS, INC. (Exact name of registrant as specified in its charter) ILLINOIS 0-19594 95-3790111 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 850 E. ALGONQUIN RD., SUITE 100, SCHAUMBURG, IL 60173 (Address of principal executive offices) (847) 839-3939 (Registrant's telephone number, including area code) ================================================================================ ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits.
EXHIBIT NO. EXHIBIT ----------- ------------------------------------------------------------------ 99.1 Press Release dated July 15, 2003 of Insurance Auto Auctions, Inc. 99.2 Press Release dated July 25, 2003 of Insurance Auto Auctions, Inc.
ITEM 9. REGULATION FD DISCLOSURE. The following information is furnished pursuant to Item 12. "Results of Operations & Financial Condition" in accordance with SEC Release No. 33-8216. On July 15, 2003, the Company issued a press release announcing preliminary second quarter results. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1. On July 25, 2003, the Company issued a press release announcing second quarter earnings. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.2. The information in this Form 8-K and Exhibits 99.1 and 99.2 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Insurance Auto Auctions, Inc. Dated: July 28, 2003 By: /s/ Thomas C. O'Brien ---------------------- Thomas C. O'Brien Chief Executive Officer 3 INDEX OF EXHIBITS
EXHIBIT NO. EXHIBIT ----------- ------------------------------------------------------------------ 99.1 Press Release dated July 15, 2003 of Insurance Auto Auctions, Inc. 99.2 Press Release dated July 25, 2003 of Insurance Auto Auctions, Inc.
4 EX-99.1 3 c78560exv99w1.txt PRESS RELEASE Exhibit 99.1 [INSURANCE AUTO AUCTIONS LOGO] AT THE COMPANY: AT ASHTON PARTNERS: Scott Pettit Chris Kettmann Chief Financial Officer General Inquiries 847-839-4040 312-553-6716 www.iaai.com FOR IMMEDIATE RELEASE INSURANCE AUTO AUCTIONS ANNOUNCES PRELIMINARY SECOND QUARTER RESULTS SCHAUMBURG, Ill., July 15, 2003 -- Insurance Auto Auctions, Inc. (Nasdaq: IAAI), a leading provider of automotive salvage and claims processing services in the United States, today announced preliminary financial results for the second quarter of 2003. The Company expects to report net earnings of $1.3 million, or $0.11 per diluted share, versus net earnings of $1.4 million, or $0.11 per diluted share, for the same quarter a year ago. These expected results include business transformation costs, before tax, of $0.9 million, or $0.05 per diluted share. "Our second quarter revenue and volumes were similar to those in the second quarter of last year and reflect industry wide trends. However, we added a number of branches that resulted in a higher fixed cost structure and incurred greater-than-expected business transformation costs this quarter due to higher labor costs associated with the new system rollout," said Tom O'Brien, CEO of IAA. The Company also continued its expansion strategy during the quarter, acquiring new facilities in Wichita, Kansas, Salt Lake City, Utah, Wilmington, North Carolina and Orlando, Florida. The total cost of adding these four new markets was less than $6 million, and each of these new branches either leverages an existing IAA facility or penetrates a new market opportunity. IAA has added a total of eight new facilities so far this year, although it expects expansion activity to decline significantly in the back half of the year. O'Brien continued, "We have remained focused on implementing the new system in a manner that does not negatively impact our customers in the process, and we are confident the system will be successfully rolled out to the remaining branches without impacting our normal business and customer relationships. We have, however, decided to shift our immediate focus to the conversion of the expansion markets, including the previously acquired facilities in Buffalo and Rochester, before we conclude our final two major markets. The result of this cautious strategy is that the system will take longer and will require more labor to implement than originally anticipated." "We will continue to implement the new system without interrupting business with our customers. Furthermore, both our employees and our customers remain excited about the positive impact this new system will have on our business," said O'Brien. Commenting on full-year expectations, O'Brien said, "Due in part to the additional business transformation costs incurred this quarter as well as the costs associated with opening our recently acquired facilities, our internal forecast now calls for net earnings of $0.50 per diluted share, after business transformation costs, for the full-year 2003. Furthermore, we continue to believe that the strategic initiatives we have implemented over the past 18 months have put us in a position to generate higher returns at IAA over the long term." O'Brien concluded, "Nothing has changed regarding our overall outlook for the future. We remain confident in our long-term plan of making IAA a more efficient organization throughout and deploying capital in ways that provide the best return for our shareholders. As such, our Board previously authorized us to buy back up to 1.5 million shares of Company stock, which we believe offers a good investment opportunity for IAA. In the second quarter we purchased a small number of IAA shares and will continue to evaluate doing so subject to market considerations. We have also continued to recognize cost effective opportunities to expand the company and believe our business is much better positioned for the future than it was a year ago. While we are disappointed that the new system integration has had a negative short-term impact on earnings and that its implementation has taken longer than expected, we are encouraged by the positive impact it has had in the branches in which it has been fully operational. We look forward to providing our shareholders with additional details on our second quarter earnings call scheduled for later this month." 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 74 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; and the level of energy and labor costs. ADDITIONAL INFORMATION ABOUT INSURANCE AUTO AUCTIONS, INC. IS AVAILABLE ON THE WORLD WIDE WEB AT WWW.IAAI.COM EX-99.2 4 c78560exv99w2.txt PRESS RELEASE EXHIBIT 99.2 [AA(R) INSURANCE AUTO AUCTIONS LOGO] AT THE COMPANY: AT ASHTON PARTNERS: Scott Pettit Chris Kettmann Chief Financial Officer General Inquiries 847-839-4040 312-553-6716 www.iaai.com FOR IMMEDIATE RELEASE FRIDAY, JULY 25, 2003 INSURANCE AUTO AUCTIONS ANNOUNCES SECOND QUARTER RESULTS SCHAUMBURG, ILL., JULY 25, 2003--INSURANCE AUTO AUCTIONS, INC. (NASDAQ: IAAI), a leading provider of automotive salvage and claims processing services in the United States, today reported lower net earnings for the quarter ended June 29, 2003. The Company recorded net earnings of $1.3 million, or $0.11 per diluted share, versus net earnings of $1.4 million, or $0.11 per diluted share, for the same quarter a year ago. Revenues for the quarter were $53.3 million compared with $59.8 million in the second quarter of 2002. The decline in revenues was primarily due to the Company's continued shift away from vehicles sold under the purchase agreement method. The purchase agreement method accounted for 6 percent of the total vehicles sold this quarter versus 9 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 second quarter increased to $43.1 million versus $42.7 million in the second quarter of last year. Tom O'Brien, Chief Executive Officer, said, "As we discussed in our July 15th press release, our second quarter revenue and volumes were down compared to those in the year ago quarter on a same-store basis, consistent with industry-wide trends. Our earnings results were negatively impacted by the lower volumes and higher costs that we incurred due to a number of new branch additions, as well as greater-than-expected business transformation costs associated with the new system rollout. Even with these short-term negative impacts on profitability, however, we were still able to match last year's second quarter earnings results primarily because of our business process re-engineering initiative we completed a year ago." "Our primary goal at this time is implementing the new enterprise-wide IT system in a manner that does not disrupt our operations or negatively impact our customer relationships," said O'Brien. "Although this cautious implementation strategy has taken longer and required more labor than we originally anticipated, we believe it gives us the best opportunity to avoid business disruptions and maintain these customer relationships over the long term. Going forward, we will continue to place the highest emphasis on the long-term benefits of the system and the ultimate impact it should have on our customers." O'Brien continued, "In addition to maintaining a strong, cautious discipline when rolling out the new system, we have decided to shift our immediate focus to the conversion of the expansion markets before we complete the rollout in our final two major markets. We have chosen to complete these smaller branches first in order to enhance customer relationships, eliminate our need to support diverse systems and to minimize the impact of the system rollout on the two remaining major markets." The Company also continued its expansion strategy during the second quarter, acquiring new facilities in Wichita, Kansas, Wilmington, North Carolina and Orlando, Florida, all of which leverage existing operations. In addition, IAA acquired the Mountain States Salvage Pool in Salt Lake City, Utah, which represents the penetration of a new market opportunity. The total cost of adding these four new markets was less than $6 million. IAA has added a total of eight new facilities so far this year, although management expects expansion activity to decline significantly in the second half of the year. Commenting on full-year expectations, O'Brien said, "As we outlined recently, our internal forecast now calls for net earnings of $0.50 per diluted share, after business transformation costs, for the full-year 2003. This estimate takes into account additional business transformation costs as well as higher anticipated costs associated with opening our recently acquired facilities. Other factors affecting this estimate include industry trends that are pointing to slightly lower volumes for the remainder of the year and, due to the later-than-anticipated completion of the new system, its positive financial impact in 2003 will be lower than we originally forecasted." O'Brien concluded, "To summarize, despite the short-term delays associated with the new system rollout, we remain extremely confident in the overall future of IAA. Our long-term plan of making IAA a stronger, more efficient organization throughout and deploying capital in ways that provide the best return for our shareholders has not changed. The impact of our previously completed strategic initiatives, including the new business processes and the exit of the purchase agreement method of sale, continues to have lasting effects on the profitability of our business. Furthermore, the cost effective acquisitions we have completed so far this year have been strategically located and should help drive future growth. Both our customers and our employees are excited about the benefits our new system will ultimately bring, with these benefits already being witnessed in many of the branches in which it has been fully operational. Finally, we look forward to updating our shareholders on the progress of this initiative as we move forward." QUARTERLY CONFERENCE CALL The Company previously announced that it will hold its second quarter 2003 results conference call on Friday, July 25 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 www.streetevents.com or by visiting the Company's Web site at www.iaai.com. A replay will be available until midnight EST on August 2, 2003. To listen to the replay, please dial 800-642-1687 and enter conference reservation code 1726605 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 74 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; and the level of energy and labor costs. ADDITIONAL INFORMATION ABOUT INSURANCE AUTO AUCTIONS, INC. IS AVAILABLE ON THE WORLD WIDE WEB AT 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 29, JUNE 30, JUNE 29, JUNE 30, 2003 2002 2003 2002 ---------------------------- ---------------------------- (UNAUDITED) (UNAUDITED) Revenues: Vehicle sales $ 10,192 $ 17,059 $ 23,496 $ 44,810 Fee income 43,146 42,691 85,882 84,160 ----------- ----------- ----------- ----------- 53,338 59,750 109,378 128,970 Cost of sales: Vehicle cost 9,425 14,802 21,196 40,859 Branch cost 32,845 33,001 65,809 64,193 ----------- ----------- ----------- ----------- 42,270 47,803 87,005 105,052 ----------- ----------- ----------- ----------- Gross profit 11,068 11,947 22,373 23,918 Operating expense: Selling, general and administrative 7,509 6,937 14,677 14,116 Business transformation costs 921 2,237 1,718 4,186 ----------- ----------- ----------- ----------- Earnings from operations 2,638 2,773 5,978 5,616 Other (income) expense: Interest expense 503 476 558 724 Other income (43) (82) (122) (139) ----------- ----------- ----------- ----------- Earnings before income taxes 2,178 2,379 5,542 5,031 Provision for income taxes 898 1,023 2,286 2,163 ----------- ----------- ----------- ----------- Net earnings $ 1,280 $ 1,356 $ 3,256 $ 2,868 =========== =========== =========== =========== Earnings per share: Basic $ .11 $ .11 $ .28 $ .23 =========== =========== =========== =========== Diluted $ .11 $ .11 $ .27 $ .23 =========== =========== =========== =========== Weighted average shares outstanding: Basic 11,517 12,226 11,784 12,212 Effect of dilutive securities -- stock options 60 357 77 305 ----------- ----------- ----------- ----------- Diluted 11,577 12,583 11,861 12,517 =========== =========== =========== ===========
INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands except per share amounts)
JUNE 29, DECEMBER 29, 2003 2002 ----------- ----------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 28,507 $ 10,027 Accounts receivable, net 40,249 45,594 Inventories 10,175 11,158 Other current assets 2,671 3,571 ----------- ----------- Total current assets 81,602 70,350 ----------- ----------- Property and equipment, net 55,709 49,342 Deferred income taxes 8,592 7,663 Intangible assets, net 2,178 1,710 Goodwill, net 135,335 130,474 Other assets 144 111 ----------- ----------- $ 283,560 $ 259,650 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,320 $ 28,656 Accrued liabilities 14,679 15,312 Obligations under capital leases 4,785 2,552 Current installments of long-term debt 7,545 43 Income taxes 864 - ----------- ----------- Total current liabilities 53,193 46,563 ----------- ----------- Deferred income taxes 16,283 14,835 Other liabilities 2,724 2,736 Obligation under capital leases 1,306 1,355 Long-term debt, excluding current installments 20,661 59 ----------- ----------- Total liabilities 94,167 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, 11,499,919 shares issued and 12,307,128 outstanding as of June 29, 2003 and 12,292,599 shares issued and outstanding as of December 29, 2002 12 12 Additional paid-in capital 144,648 144,420 Treasury stock, 807,209 shares (8,012) - Accumulated other comprehensive income (loss) (926) (745) Retained earnings 53,671 50,415 ----------- ----------- Total shareholders' equity 189,393 194,102 ----------- ----------- $ 283,560 $ 259,650 =========== ===========
INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
SIX MONTHS ENDED JUNE 29, JUNE 30, 2003 2002 ---------- ---------- (Unaudited) Cash flows from operating activities: Net earnings $ 3,256 $ 2,868 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 4,870 4,275 (Loss) gain on disposal of fixed assets (31) 34 Loss (gain) on change in fair market value of derivative financial instrument (307) 472 Changes in assets and liabilities (excluding effects of acquired companies): (Increase) decrease in: Accounts receivable, net 7,370 11,355 Inventories 985 4,376 Other current assets 917 863 Other assets (754) 438 Increase (decrease) in: Accounts payable (3,336) (8,412) Accrued liabilities (684) (588) Income taxes, net 1,383 1,405 ---------- ---------- Total adjustments 10,412 14,218 ---------- ---------- Net cash provided by operating activities 13,669 17,086 ---------- ---------- Cash flows from investing activities: Capital expenditures (6,498) (6,601) Investments, net - 2,643 Proceeds from sale of investments - 175 Proceeds from disposal of property and equipment 44 - Payments made in connection with acquisitions, net of cash acquired (7,863) - ---------- ---------- Net cash used in investing activities (14,317) (3,783) ---------- ---------- Cash flows from financing activities: Proceeds from issuance of common stock 227 901 Proceeds from term loan 30,000 - Purchase of treasury stock (8,012) - Principal payments on long-term debt (1,896) (20,022) Principal payments-- capital leases (1,191) - ---------- ---------- Net cash provided (used) by financing activities 19,128 (19,121) ---------- ---------- Net increase (decrease) in cash and cash equivalents 18,480 (5,818) Cash and cash equivalents at beginning of period 10,027 24,467 ---------- ---------- Cash and cash equivalents at end of period $ 28,507 $ 18,649 ========== ========== Supplemental disclosures of cash flow information: Cash paid or refunded during the period for: Interest $ 647 $ 1,077 ========== ========== Income taxes paid $ 797 $ 1,735 ========== ========== Income taxes refunded $ 1,250 $ 2,250 ========== ========== Non-cash financing activities: Property and equipment additions resulting from capital leases $ 3,375 $ - ========== ==========
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