Monday July 30
Insurance Auto Auctions Announces Second Quarter Results
SCHAUMBURG, Ill. -- Insurance Auto Auctions, Inc. has reported lower net earnings for the second quarter ended July 1, 2001. The Company recorded net earnings of $2.2 million, or $0.18 per diluted share, versus net earnings of $5.2 million, or $0.44 per diluted share, for the same quarter a year ago.
Net revenues for the quarter decreased 10.4 percent to $75.5 million compared with $84.3 million in the second 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 vehicle 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 second quarter increased 15.4 percent to $38.6 million versus $33.4 million in the second quarter of last year as a result of both increased volume and pricing changes.
Gross profit for the quarter increased slightly to $24.4 million from $24.2 million for the same quarter a year ago. Acquisitions made within the past twelve months and the opening of new greenfield sites during the same period contributed to a significant increase in operating expenses for the quarter. In addition, higher information technology expenses were recognized in 2001 as internal staffing costs have been redirected from capitalized development costs to maintenance. Earnings from operations for the quarter totaled $3.8 million compared to $8.8 million for last year's second quarter.
"We remain on track with our reorganization plans, growth strategy, and information technology platform development while we continue to focus on our cost structure. Our performance in the second quarter is in line with our near term expectations and highlights the challenges the organization faces," said Tom O'Brien, Chief Executive Officer.
In the first six months of 2001, net earnings decreased to $526,000, or 4 cents, per diluted share, as compared with $9.4 million, or 79 cents per diluted share for the same period a year ago. The Company's net earnings for the first six months of 2001 include pretax special charges of $6.0 million that were recorded in the first quarter of 2001. Six month net earnings for 2001 before special charges would have been $4.0 million or 34 cents per diluted share. Earnings from operations before special charges decreased to $7.2 million, down from $15.9 million for the same period a year ago. The special charges related to the company's previously announced reduction in workforce, abandonment of certain facilities and the repositioning of its towing operations as well as other charges. The effective income tax rate was 42 percent in 2001 versus 41 percent in 2000. The effective income tax rate reflects management's estimate of the applicable rate for the full year.
Insurance Auto Auctions, Inc., founded in 1982, provides loss and specialty salvage services in the United States and has 58 auction sites across the United States.
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