-----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, DsWR8YyUUBf26XZW0rsm4Yx4ryfey3fJFCm03k/vcx9Wraw0qgQT+kP/D24HISu7 +ZixDdaZCdpeRLz48R3fcA== 0001157523-06-005029.txt : 20060511 0001157523-06-005029.hdr.sgml : 20060511 20060511080051 ACCESSION NUMBER: 0001157523-06-005029 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060511 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20060511 DATE AS OF CHANGE: 20060511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE AUTO AUCTIONS, INC 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: 033-43247 FILM NUMBER: 06828196 BUSINESS ADDRESS: STREET 1: TWO WESTBROOK CORPORATE CENTER STREET 2: SUITE 500 CITY: WESTCHESTER STATE: IL ZIP: 60154 BUSINESS PHONE: 708-492-7000 MAIL ADDRESS: STREET 1: TWO WESTBROOK CORPORATE CENTER STREET 2: SUITE 500 CITY: WESTCHESTER STATE: IL ZIP: 60154 FORMER COMPANY: FORMER CONFORMED NAME: INSURANCE AUTO AUCTIONS INC /CA DATE OF NAME CHANGE: 19930328 8-K 1 a5146282.txt INSURANCE AUTO AUCTIONS, INC. 8-K UNITED STATES 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): May 11, 2006 INSURANCE AUTO AUCTIONS, INC. (Exact name of registrant as specified in its charter) Illinois 033-43247 95-3790111 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) Two Westbrook Corporate Center, Suite 500, Westchester, Illinois 60154 (Address of principal executive offices) (Zip Code) (708) 492-7000 (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- Item 2.02. Results of Operations and Financial Condition. and Item 7.01. Regulation FD Disclosure. The following information is furnished pursuant to Items 2.02 and 7.01 of Form 8-K. On May 11, 2006, Insurance Auto Auctions, Inc. (the "Company") reported its results for the first quarter ended March 26, 2006. The Company's earnings release for the first quarter ended March 26, 2006 is attached as Exhibit 99.1. The attached Exhibit is furnished pursuant to Item 2.02 and Item 7.01 on Form 8-K. Consolidated EBITDA is presented in the earnings release because management believes that this statistic is indicative of the relative strength of the Company's operating performance and is consistent with the definition under the Company's senior credit facility. EBITDA is defined as net earnings plus income tax provision (benefit), interest (net), depreciation, and amortization. The Company's senior credit facility further adjusts EBITDA, including for non-cash items, nonrecurring items, and sponsor advisory fees, to determine compliance with certain covenants in the senior credit agreement. Although Consolidated EBITDA is not a defined term under generally accepted accounting principles in the United States, we believe that the inclusion of Consolidated EBITDA is appropriate, because management uses this information in evaluating the Company's operating performance. However, Consolidated EBITDA should not be considered as a substitute for net earnings or loss, or as an indicator of whether cash flows will be sufficient to fund cash needs. Below is a table detailing Consolidate EBITDA (in thousands) for the three months ended March 26, 2006. Three Months Ended ------------------------ March 26, 2006 ------------------------ Net (loss) $ (504) Income taxes (314) Interest expense (net) 6,329 Depreciation and amortization 4,933 ------------------------ EBITDA 10,444 Non-cash charges(1) 887 Non-recurring expense (income)(2) 2,866 Advisory service fees 125 ------------------------ Consolidated EBITDA $ 14,322 ======================== ---------------- (1) For the quarter ended March 26, 2006, the non-cash charges included $1.0 million of stock-based compensation expense, which was offset by $0.1 million of rent expense reduction related to lessor-funded leasehold improvements. (2) For the quarter ended March 26, 2006, non-recurring expense consisted of a $2.9 million loss related to the Dallas flood. Such information, including the Exhibit 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 may 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. By: /s/ Thomas C. O'Brien ----------------------------- Thomas C. O'Brien Chief Executive Officer Date: May 11, 2006 3 Index of Exhibits Exhibit No. Exhibit - ------------------ ----------------------------------------------------------- 99.1 Press Release of Insurance Auto Auctions, Inc. (the "Company"), dated May 11, 2006, disclosing the Company's financial results for the first quarter ended March 26, 2006. 4 EX-99.1 2 a5146282ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Insurance Auto Auctions Announces First Quarter Results WESTCHESTER, Ill.--(BUSINESS WIRE)--May 11, 2006--Insurance Auto Auctions, Inc., a leading provider of automotive salvage and claims processing services in the United States, today announced record vehicle returns for the first quarter 2006. These results were driven by increased buying activity as a result of IAA's live auctions combined with Internet bidding capability. The Company recorded revenues for the quarter of $77.7 million compared to $70.9 million in the first quarter of 2005, an increase of 10 percent year-over-year. Fee income in the first quarter increased to $66.8 million versus $61.1 million in the first quarter of last year. IAA reported Consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), consistent with the definition in our senior credit agreement, of $14.3 million during the quarter. Consolidated EBITDA is a non-GAAP measure that the Company uses as a primary measurement of its financial results because it is indicative of the relative strength of the Company's operating performance. "During the first quarter, we continued to experience rapid sales growth, solid profitability and excellent cash flow due to our ability to add many new buyers to our customer network, which has translated into the best returns in the industry for our suppliers," said Tom O'Brien, CEO. "We have stayed committed to our dual bidding strategy that combines live physical auctions with a real-time Internet bidding capability using our state-of-the-art I-bid LIVE product." O'Brien added, "We have also identified several opportunities to expand our business through acquisitions and greenfields, which will support our ongoing commitment to improving our service offering and adding new buyers to our base, ultimately allowing us to provide even better returns to our suppliers. We once again made significant improvement on the expansion front during the quarter, including our acquisition of NW Penn Auction Sales/Warren County Salvage in Erie, Pennsylvania, which leverages the Company's existing regional coverage in this market. Since the close of the quarter we have also acquired Indiana Auto Storage Pool's two locations in Indiana and moved into a new, larger facility in Kansas City, Kansas. All four of these new facilities are already up-and-running on our technology platform and are allowing us to meet the demands of our growing buyer base." 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 83 sites across the United States. Forward-Looking Statements The statements in this release should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 25, 2005, as amended. The statements contained in this release that are not historical facts are forward-looking statements. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially form 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," "predict," "projects," "targeting," "potential," "or "contingent," the negative of these terms, or other similar expressions. Our actual results could differ materially from those discussed in or implied by forward-looking statements for various reasons, including those discussed in "Risk Factors" in our Form 10-K for the year ended December 25, 2005, as amended. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake 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 www.iaai.com INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands except per share amounts) Successor Successor --------------- --------------- March 26, December 25, 2006 2005 --------------- --------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $35,752 $25,882 Accounts receivable, net 50,226 46,920 Inventories 20,539 19,611 Income taxes receivable 2,723 2,732 Deferred income taxes 7,302 8,511 Other current assets 5,401 5,323 --------------- --------------- Total current assets 121,943 108,979 --------------- --------------- Property and equipment, net 78,188 77,231 Intangible assets, net 124,425 126,378 Goodwill 193,297 191,266 Other assets 10,683 11,006 --------------- --------------- $528,536 $514,860 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $44,285 $38,022 Accrued liabilities 24,333 17,445 Obligations under capital leases 363 367 Current installments of long-term debt 1,143 1,143 --------------- --------------- Total current liabilities 70,124 56,977 --------------- --------------- Deferred income taxes 38,066 37,582 Other liabilities 12,530 12,765 Obligations under capital leases 230 329 Senior notes 150,000 150,000 Long-term debt, excluding current installments 112,896 113,183 --------------- --------------- Total liabilities 383,846 370,836 --------------- --------------- Shareholders' equity: Common stock, par value of $.01 per share 100 shares authorized, issued and outstanding - - Additional paid-in capital 150,628 149,458 Retained loss (5,938) (5,434) --------------- --------------- Total shareholders' equity 144,690 144,024 --------------- --------------- $528,536 $514,860 =============== =============== INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands) Three Months Ended ------------------------------- Successor Predecessor --------------- --------------- March 26, March 27, 2006 2005 --------------- --------------- (unaudited) Revenues: Fee income $66,779 $61,100 Vehicle sales 10,874 9,843 --------------- --------------- 77,653 70,943 Cost of sales: Branch cost 48,244 42,677 Vehicle cost 9,173 8,465 --------------- --------------- 57,417 51,142 --------------- --------------- Gross profit 20,236 19,801 Operating expenses: Selling, general and administrative 11,859 10,049 Loss (gain) on sale of property and equipment 6 (32) Loss related to flood 2,860 - Merger costs - 1,233 --------------- --------------- Earnings from operations 5,511 8,551 Other (income) expense: Interest expense 6,452 419 Other income (123) (32) --------------- --------------- Earnings (loss) before income taxes (818) 8,164 Income taxes (314) 3,143 --------------- --------------- Net (loss) earnings $(504) $5,021 =============== =============== INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Three Months Ended ------------------------------- Successor Predecessor --------------- --------------- March 26, March 27, 2006 2005 --------------- --------------- (unaudited) Cash flows from operating activities: Net earnings (loss) $(504) $5,021 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 4,933 3,203 (Gain) loss on disposal of fixed assets 806 (32) Share-based compensation expense 1,020 - Deferred compensation related to restricted stock - 695 Deferred income taxes 1,883 15 Tax benefit related to employee stock compensation - 94 Changes in assets and liabilities (excluding effects of acquired companies): (Increase) decrease in: Accounts receivable, net (3,239) (726) Income tax receivable 9 - Inventories (928) (1,041) Other current assets 22 (1,891) Other assets 387 (80) Increase (decrease) in: Accounts payable 6,228 2,465 Accrued liabilities 6,368 (583) Income taxes - 2,946 --------------- --------------- Net cash provided by operating activities 16,985 10,086 --------------- --------------- Cash flows from investing activities: Capital expenditures (4,418) (3,148) Acquisition, net of cash acquired (2,519) - Proceeds from disposal of property and equipment 62 88 --------------- --------------- Net cash used in investing activities (6,875) (3,060) --------------- --------------- Cash flows from financing activities: Proceeds from issuance of common stock - 749 Contributed capital 150 - Proceeds from short-term borrowings - 3,000 Principal payments on long-term debt (287) (1,887) Purchase of treasury stock - (1) Principal payments on capital leases (103) (378) --------------- --------------- Net cash provided by (used in) financing activities (240) 1,483 --------------- --------------- Net increase in cash and cash equivalents 9,870 8,509 Cash and cash equivalents at beginning of period 25,882 13,325 --------------- --------------- Cash and cash equivalents at end of period $35,752 $21,834 =============== =============== Supplemental disclosures of cash flow information: Interest paid $2,083 $370 =============== =============== Income taxes paid $125 $154 =============== =============== Income taxes refunded $1,950 $2 =============== =============== CONTACT: Insurance Auto Auctions, Inc. Scott Pettit, 708-492-7040 www.iaai.com or Ashton Partners Mike Banas (Media), 312-553-6704 mbanas@ashtonpartners.com -----END PRIVACY-ENHANCED MESSAGE-----