EX-99.1 2 a5206891ex991.txt INSURANCE AUTO AUCTIONS, INC. EXHIBIT 99.1 Exhibit 99.1 Insurance Auto Auctions Announces Second Quarter Results WESTCHESTER, Ill.--(BUSINESS WIRE)--Aug. 9, 2006--Insurance Auto Auctions, Inc., a leading provider of automotive salvage and claims processing services in the United States, today announced results for the second quarter of 2006. The Company recorded revenues for the quarter of $78.3 million compared to $71.9 million in the second quarter of 2005, an increase of 9 percent year-over-year. Fee income in the second quarter increased to $66.4 million versus $61.3 million in the second quarter of last year. IAA reported Consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), consistent with the definition in the Company's senior credit agreement, of $13.2 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. As previously reported, the quarter was down compared to the prior year as a result of lower same store volumes in large part due to the inability to sell those vehicles damaged in a flood at the Company's Grand Prairie, Texas facility. "In the second quarter we saw a continuation of the trends that we have seen over the past several quarters, including higher sales, record returns for our suppliers, and strong cash flow generation," said Tom O'Brien, CEO. "Our unique dual bidding strategy, which combines live physical auctions with a real-time Internet bidding capability using our state-of-the-art I-bid LIVE product, remains unmatched in our industry and continues to drive new buyers to our auctions." IAA has aggressively expanded its geographic footprint during the year, making seven acquisitions that have added 15 new locations to the Company's national network of sites. In March, IAA purchased NW Penn. Auction Sales/Warren County Salvage located in Erie, Pennsylvania. In April, IAA purchased Indiana Auto Storage Pools two locations in Indianapolis and South Bend. After the end of the second quarter, IAA acquired Gardner's Insurance Auction in Missoula, Montana. This acquisition was quickly followed by the purchase of Auto Disposal Systems, Inc. in Dayton, Ohio, one of the largest independent salvage pool companies in the United States. The Auto Disposal Systems acquisition links the adjacent IAA facilities in the Midwest and East with the addition of five facilities in Cincinnati, Cleveland, Columbus, Dayton and Lima, Ohio, plus facilities in Ashland, Kentucky and Buckhannon, West Virginia. Next, the Company announced the purchase of Lenders & Insurers' three locations blanketing the state of Iowa. The sites are located in Des Moines, Cedar Falls and Sioux City. Just last week, IAA announced the acquisition of Salvage Management of Syracuse in Cicero, New York. O'Brien added, "We believe our year-to-date efforts on the expansion front will pay significant dividends for both IAA and our customers as we remain focused on upgrading our service offering to our existing buyer base while simultaneously attracting additional buyers in new geographic markets. We have been able to acquire several premiere independent salvage operators that will present our buyers with a greater supply of vehicles over an expanded geographic base. The fifteen new locations we have added so far in 2006 have bridged our excellent company-owned Midwest and East Coast operations through our entry into six new states, which is even more powerful considering the excellent coverage in those new states. Going forward, we will continue to pursue both acquisition and Greenfield opportunities in order to further strengthen our national presence in order to better service our customers." 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, turn-key solutions to process and sell total-loss and recovered-theft vehicles. The Company currently has 95 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 Reports 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 Financial Tables Follow... INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands except per share amounts) SUCCESSOR SUCCESSOR -------------- ------------- June 25, December 25, 2006 2005 -------------- ------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $25,619 $25,882 Accounts receivable, net 47,007 46,920 Inventories 21,099 19,611 Income taxes receivable 3,751 2,732 Deferred income taxes 6,512 8,511 Other current assets 6,039 5,323 -------------- ------------- Total current assets 110,027 108,979 -------------- ------------- Property and equipment, net 78,230 77,231 Intangible assets, net 122,565 126,378 Goodwill 206,628 191,266 Other assets 10,488 11,006 -------------- ------------- $527,938 $514,860 ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $44,883 $38,022 Accrued liabilities 18,736 17,445 Obligations under capital leases 334 367 Obligations under line of credit 7,000 - Current installments of long-term debt 1,143 1,143 -------------- ------------- Total current liabilities 72,096 56,977 -------------- ------------- Deferred income taxes 35,892 37,582 Other liabilities 12,415 12,765 Obligations under capital leases 158 329 Senior notes 150,000 150,000 Long-term debt, excluding current installments 112,610 113,183 -------------- ------------- Total liabilities 383,171 370,836 -------------- ------------- Shareholders' equity: Common stock, par value of $.01 per share 100 shares authorized, issued and outstanding - - Additional paid-in capital 150,776 149,458 Retained loss (6,009) (5,434) -------------- ------------- Total shareholders' equity 144,767 144,024 -------------- ------------- $527,938 $514,860 ============== ============= INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands) THREE MONTHS (unaudited) -------------------------------------------- SUCCESSOR SUCCESSOR PREDECESSOR -------------- -------------- -------------- May 25 - March 28 - June 25 June 26, May 24, 2006 2005 2005 -------------- -------------- -------------- Revenues: Fee income $66,366 $19,242 $42,102 Vehicle sales 11,938 3,119 7,399 -------------- -------------- -------------- 78,304 22,361 49,501 Cost of Sales Branch cost 49,975 14,481 29,877 Vehicle cost 10,178 2,652 6,175 -------------- -------------- -------------- 60,153 17,133 36,052 Gross profit 18,151 5,228 13,449 Operating expense: Selling, general and administrative 11,377 3,400 5,773 Loss (gain) on sale of property and equipment 11 17 (864) Loss related to flood 310 - - Merger costs - 5,021 14,508 -------------- -------------- -------------- 11,698 8,438 19,417 Earnings (loss) from operations 6,453 (3,210) (5,968) Other (income) expense Interest expense 6,741 2,642 148 Other income (123) (41) (2,411) -------------- -------------- -------------- Earnings (loss) before income taxes (165) (5,811) (3,705) Income taxes (94) (1,311) 1,756 -------------- -------------- -------------- Net loss $(71) $(4,500) $(5,461) ============== ============== ============== SIX MONTHS (unaudited) -------------------------------------------- SUCCESSOR SUCCESSOR PREDECESSOR -------------- -------------- -------------- May 25 - December 27, June 25, June 26, 2004 - May 24, 2006 2005 2005 -------------- -------------- -------------- Revenues: Fee income $133,145 $19,242 $103,203 Vehicle sales 22,812 3,119 17,242 -------------- -------------- -------------- 155,957 22,361 120,445 Cost of Sales Branch cost 98,219 14,481 72,554 Vehicle cost 19,351 2,652 14,640 -------------- -------------- -------------- 117,570 17,133 87,194 Gross profit 38,387 5,228 33,251 Operating expense: Selling, general and administrative 23,236 3,400 15,822 Loss (gain) on sale of property and equipment 17 17 (896) Loss related to flood 3,170 - - Merger costs - 5,021 15,741 -------------- -------------- -------------- 26,423 8,438 30,667 Earnings (loss) from operations 11,964 (3,210) 2,584 Other (income) expense Interest expense 13,193 2,642 567 Other income (246) (41) (2,442) -------------- -------------- -------------- Earnings (loss) before income taxes (983) (5,811) 4,459 Income taxes (408) (1,311) 4,899 -------------- -------------- -------------- Net loss $(575) $(4,500) $(440) ============== ============== ============== INSURANCE AUTO AUCTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) SUCCESSOR PREDECESSOR ----------------------------- -------------- December 27, June 25, May 25 - 2004 - May 24, 2006 June 26, 2005 2005 -------------- -------------- -------------- (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net loss $(575) $(4,500) $(440) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 10,573 1,859 5,464 (Gain) loss on disposal of fixed assets 817 17 (896) Share-based compensation expense 1,168 - - Amortization of debt costs 723 60 - Deferred compensation related to restricted stock - - 4,343 Deferred income taxes 2,054 1,489 (1,448) Tax benefit related to employee stock compensation - 678 8,394 Changes in assets and liabilities (excluding effects of acquired companies): (Increase) decrease in: Accounts receivable, net 964 13,880 (5,312) Income tax receivable (931) (7,464) (2,618) Inventories (1,165) 124 (472) Other current assets (616) (2,574) (520) Other assets (52) (72) (827) Increase (decrease) in: Accounts payable 6,861 (20,321) 6,719 Accrued liabilities (79) (7,308) 12,279 Income taxes - - (1,067) -------------- -------------- -------------- Total adjustments 20,317 (19,632) 24,039 -------------- -------------- -------------- Net cash provided by (used in) operating activities 19,742 (24,132) 23,599 -------------- -------------- -------------- Cash flows from investing activities: Purchase of IAAI., Inc. - (356,753) - Capital expenditures (8,123) (1,612) (8,221) Acquisition, net of cash acquired (18,418) - (600) Proceeds from disposal of property and equipment 291 22 1,391 -------------- -------------- -------------- Net cash used in investing activities (26,250) (358,343) (7,430) -------------- -------------- -------------- Cash flows from financing activities: Proceeds from issuance of common stock - - 905 Contributed capital 150 143,600 - Proceeds from short-term borrowings 7,000 - 3,000 Payment of financing and other fees (128) (12,758) - Principal payments on long-term debt (573) (22,125) (3,762) Purchase of treasury stock - - (1) Principal payments on capital leases (204) (79) (614) Issuance of senior notes - 150,000 - Issuance of term loan - 115,000 - -------------- -------------- -------------- Net cash provided by (used in) financing activities 6,245 373,638 (472) -------------- -------------- -------------- Net increase (decrease) increase in cash and cash equivalents (263) (8,837) 15,697 Cash and cash equivalents at beginning of period 25,882 29,022 13,325 -------------- -------------- -------------- Cash and cash equivalents at end of period $25,619 $20,185 $29,022 ============== ============== ============== Supplemental disclosures of cash flow information: Interest paid $12,623 $9 $689 ============== ============== ============== Income taxes paid $436 $3,987 $1,654 ============== ============== ============== Income taxes refunded $1,966 $- $26 ============== ============== ============== Non-cash transactions: Options exchanged in merger transaction $- $5,653 $- ============== ============== ============== CONTACT: Insurance Auto Auctions, Inc. Scott Pettit, 708-492-7040 www.iaai.com or Ashton Partners Mike Banas (Media Inquiries), 312-553-6704 mbanas@ashtonpartners.com