Tuesday May 22
Insurance Auto Auctions Announces First Quarter Results
SCHAUMBURG, Ill. -- Insurance Auto Auctions, Inc., a provider of automotive salvage and claims processing services in the United States, has reported lower net earnings for the first quarter ended April 1, 2001. The company recorded a net loss, including special charges, of $1.6 million, or $0.14 per diluted share, versus net income of $4.2 million, or $0.35 per share, for the same quarter a year ago.
The net loss for the first quarter reflects special charges of $6 million. The largest component of the charge, in the amount of $2.4 million, is associated with the company's reduction in workforce. Approximately $1.7 million of the charges relate to the abandonment of certain facilities, including cancellation of a planned expansion at its headquarters building. The restructuring charges also include amounts related to repositioning towing operations to stem continued losses from that initiative as well as other charges. As a result of these actions, IAAI expects to realize cost savings of approximately $3 million over the next two to three years. Excluding the effects of the special charges, net earnings for the first quarter would have been $1.9 million or $0.16 per diluted share.
Net revenues for the quarter decreased 10 percent to $77.8 million compared with $87.0 million in the first quarter of 2000. The decline in net revenues is consistent with a planned strategic shift away from vehicles sold under the purchase agreement method. Under the purchase agreement method, the entire purchase price of the vehicle is recorded as revenue compared to only the fees collected on the sale of a car under lower risk consignment fee based arrangements. This change in contract mix also contributed to the significant increase in fee income for the quarter. Fee income in the first quarter increased 18 percent to $37.6 million versus $32.0 million in the first quarter of last year as a result of both increased volume and pricing changes.
Gross profit for the quarter decreased 1.2 percent to $22.8 million from $23.1 million for the same quarter a year ago. The loss from operations for the quarter totaled $2.7 million compared to income from operations of $7.1 million for last year's first quarter. The decline in profitability reflected continued poor performance of certain purchase agreement contracts during their phase-out period as well as inventory write-downs on certain purchase agreement cars still in inventory.
"We expect that our quarterly performance will come into clearer focus as we execute the changes implemented after my arrival," added O'Brien. "While there is still much work to do, we expect to see the early benefits of our strategy in the latter half of this year."
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