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Business Tools | This article originally appeared in the December 2002 Issue of INSIGHT ©2002 Collision Repair Industry INSIGHT All Rights Reserved Keystone Reports Record 14% Increase in Q2 Net Sales DuPont Cuts Work Force by 650; Launches Collision Repair Network Automakers Hold Website Demonstrations at CARS AAI Files Amicus Brief for State Farm BASF Reports Earnings Increase; Strengthens Outlook Sherwin-Williams Offers See Progress Auto Watch System to A-Plus Shops CAPA Reminder: Leave Seals on Installed Parts Copart Opens Texas Auction Facility 12 in Corpus Christi ABRA Opens 2 Facilities in Minneapolis Area Insurance Auto Auctions Q3 Vehicle Sales Up 8%
INDUSTRY UPDATE
Keystone Automotive Industries, Inc. has reported record sales for its fiscal second quarter, supported by an eight percent increase in same store sales. Net income for the second quarter of fiscal 2003 ended September 27, 2002 was $2.7 million, or $0.18 per diluted share, compared with a net loss of $2.4 million, or $0.16 per diluted share for the second quarter of fiscal 2002. The loss was the result of a special charge of $6.8 million related to the company's write-off of its investment in an enterprise software system. Net sales for the second quarter of fiscal 2003 increased 14.0 percent to a record $101.1 million from $88.7 million a year earlier. Net income for the twenty-six week period ended September 27, 2002 was $6.2 million, or $0.41 per diluted share, compared with a net loss of $29.0 million, or $2.01 per diluted share, a year earlier. Net sales for the same period increased 15.3 percent to $207.9 million from $180.3 million a year ago. For the twenty-six week period, same store sales increased nine percent over the prior year. The net loss for the first six months of fiscal 2002 was due to a $28.7 million charge related to the cumulative effect of a change in accounting principle, made retroactive to the first quarter of fiscal 2002. "Operating results for the quarter represent the seventh consecutive year-over-year increase in quarterly operating performance for Keystone," said Charles J. Hogarty, president and chief executive officer. He cited several factors that continue to positively impact Keystone's sales, including more frequent specification of aftermarket parts by certain insurance companies and a growing acceptance of Keystone's private label Platinum Plus brand of products. Subsequent to the end of the quarter Keystone received its ISO 9001 registration by NSF International Strategic Regis-trations, Ltd. "Achieving ISO 9001 certification highlights Keystone's ongoing commitment to quality and has the additional benefit of further distinguishing Keystone as the industry leader for aftermarket collision replacements parts. As the aftermarket collision replacement parts industry continues to gain momentum, we remain optimistic about Keystone's prospects and the outlook for the balance of fiscal 2003," Hogarty added. Separately, the company said that while it was not adversely impacted by the initial dock-workers strike at West Coast ports, if the strike resumes in late December and were to continue for a prolonged period of time, it could affect the company. Keystone Automotive Industries, Inc. operates 114 distribution facilities located in 37 states, Vancouver, Canada and Mexico. o As part of its strategy for sustainable growth, DuPont Coatings & Color Technologies will improve the productivity of its global business units by consolidating some of its assets and optimizing processes. The DuPont Coatings & Color Technologies platform includes the Performance Coatings and the Titanium Technologies businesses. These actions will result in the reduction of about 650 positions. DuPont will offer appropriate career transition support as required by local law or practice. "These difficult but necessary actions will enable our businesses to improve customer focus while strengthening our business performance, and thus contribute more strongly to the company's goals of sustainable growth," said Edward J. Donnelly, group vice president - DuPont Coatings & Color Technologies. DuPont estimates it will realize annual pretax savings of about $60 million as a result of these actions. About one-third of this benefit will be realized in 2003, with substantially all realized in 2004. The company expects to take a one-time restructuring charge of about $.04 per share. In other DPC news, the company has launched the DuPont Performance Alliance, an interdependent collision repair network aimed at insuring customer satisfaction through process improvement, performance consistency and confidence in the DuPont corporation name. The Performance Alliance intends to improve interactions between all players in the industry value chain - jobbers, collision repair facilities, insurers, and consumers. DPC expects to be able to leverage the scale of the DuPont corporation, along with the experience of partner body shops and jobbers in the collision market, to reduce common friction points within the industry. The Performance Alliance is currently field-testing programs to document and standardize paint operating processes by individual body shop and improve Direct Repair Program interactions with key shops and insurers. "Our intention is to improve customer satisfaction throughout the value delivery chain," states Alliance Program Manager Tim Carmack. "Of course, 'satisfaction' means different things to different people. Vehicle drivers, for example, want a quality repair and the stress of managing their repair after an accident minimized. Insurers are satisfied when they get repairs of outstanding quality and in a consistently acceptable timeframe. We be-lieve that the Performance Alliance can act as an impartial hub to build satisfaction across the industry to benefit all stakeholders." The Performance Alliance program will initially be offered to members of the value-added programs of all DPC's product brands, including DuPont Finishes' Assurance of Quality, Standox's Partnership In Excellence, and Spies Heckers' Colors Unlim-ited International (formerly Color Club). Shops will be required to meet minimum performance criteria. A number of select insurers are also working on elements of the Performance Alliance offering with DPC.
Representatives from 11 original equipment manufacturers (OEM) demonstrated their information availability websites at the Congress for Automotive Repair Service (CARS) in November. CARS, a four-day event hosted by the Automotive Service Association (ASA) Mechanical Division, brings together members of the independent repair community for technical and management training and a host of industry events. The OEM demonstrations, sponsored by ASA, provided attendees the opportunity to view and test the OEM web- sites for information related to non-emissions and emissions service information. The manufacturers represented were Toyota Motor Sales, Ford Motor Co., Daimler-Chrysler AG, General Motors Corp., Honda, Nissan North America, Subaru, BMW, Volks-wagen, Hyundai and Isuzu. Following the demonstrations, the National Automotive Service Task Force (NASTF) held an open meeting and discussed the progress of the ASA-OEM agreement. The meeting was held before a standing room-only audience of aftermarket professionals and interested parties. In September, the Alliance of Automobile Manufacturers (AAM), the Association of International Automobile Man-ufacturers and ASA signed an agreement with the automakers assuring that non-emissions and emissions service information, tools, tool information and training will be made available to the independent repairer by Aug. 31, 2003. Every automaker, with the exception of Porsche, signed the agreement. During the NASTF meeting, Bill Haas, AAM, ASA vice president of divisions, education and training and a NASTF member, asked the automobile manufacturers to provide updates on the implementation of the agreement and when the information will be available to the aftermarket on the automakers' Web sites. All 11 automakers present stated they would make available all service information, tools, tool information and training to the aftermarket before the end of the first quarter of 2003. The Alliance of American Insurers has filed an amicus brief with the Illinois Supreme Court in support of an appeal by State Farm Insurance in an important case involving aftermarket repair parts. In October, the court agreed to hear State Farm's appeal of a lower court's ruling in the Avery v. State Farm class-action lawsuit regarding the use of aftermarket parts. The lower court awarded the plaintiffs $1.2 billion in damages. "The Alliance argues that the lawsuit represented a class of policyholders from nearly all 50 states, but the laws on use of aftermarket parts vary from state to state," said Alliance General Counsel Ann Spra-gens. "Therefore, the court should not have applied Illinois' more restrictive use of aftermarket parts to all State Farm policyholders." "The Alliance strongly supports the use of aftermarket parts supplied by manufacturers other than the automakers," said Kirk Hansen, the Alliance's director of claims. “Insurance companies and car owners pay outrageous prices for so-called genuine parts from the automakers when studies have shown that certified aftermarket parts are equal to, or better than the automakers parts, and much less expensive." AAI, based in Downers Grove, Illinois, represents 340 property/casualty insurers. BASF reported that EBIT before special items climbed 80 percent in the third quarter of 2002. Pleased with the apparent continuing effectiveness of its cost-reduction measures and despite an unfavorable environment, BASF is strengthening its forecast for 2002. "On the basis of a roughly similar level of sales, we aim to increase EBIT before special items significantly over 2001," said Dr. Jurgen F. Strube, Chairman of the Board of Executive Directors at BASF Aktiengesellschaft. From July through September, BASF posted total sales of almost EUR 7.6 billion, or 5.3 percent more than in the same quarter of 2001. In July and August, sales were only at the weak level of the previous year, and did not pick up until September. Cumulative sales for the first nine months were more than EUR 24 billion, which corresponds to a slight decline of 2.5 percent compared with the same period in 2001. In contrast, third-quarter EBIT before special items of EUR 591 million exceeded the previous year's level by EUR 263 million. This corresponds to an increase of 80 percent. From January through September, BASF achieved EBIT before special items of more than EUR 2.2 billion, which was EUR 190 million more than in the same period in 2001. With the exception of the seasonally weak business with agricultural products, all of BASF's operating divisions were in the black before special items in the third quarter. In the third quarter of 2002, BASF's earnings per share climbed significantly from EUR 0.02 in 2001 to EUR 0.43. The company has continued to buy back shares and this year has so far repurchased shares for a total of more than EUR 445 million. For 2002 overall, Strube forecast an increase in EBIT before special items of at least 15 percent compared to 2001 based on a similar level of sales. Strube commented, "Our confidence is based on the major efforts that BASF and its employees have taken since the first signs of an economic downturn were seen in early summer 2001. We are not passively waiting for an upturn in the economy, but are taking active measures to further develop BASF: From a position of financial strength, we are pursuing a strategy of active portfolio management and carrying our the necessary structural measures." Earnings in the NAFTA region were considerably higher than in the previous years, although margins remain under pressure from high costs for raw materials. Strube noted that consumer confidence is the crucial factor that will determine how growth in the NAFTA region will develop. Consumers are apprehensive about falling share prices, increasing unemployment and the threat of military action against Iraq, he said, and this has led to cautious buying and slower growth in North America. From July through September, sales in the NAFTA region were EUR 1.8 billion, or EUR 117 million more than in the same period in 2001. BASF's chairman sees 2003 as a year in which the company will again be faced with demanding tasks. "Optimistic estimates predict that the gross domestic product will grow by more than 2 percent in Western Europe and by almost 3 percent worldwide, although growth in the chemical industry is likely to be stronger. However, this growth associated with a number of uncertainties such as the possibility of military action against Iraq," said Strube. "With our financial strength, the right global position and a portfolio focused on key markets, we will face the tasks of the coming months and the year 2003 with determination and confidence."
Sherwin-Williams Automotive Finishes Corp. has announced its endorsement of the AutoWatch customer vehicle tracking system by See Progress, Inc. See Progress is offering its AutoWatch system to Sherwin-Williams' A-Plus body shops at special member rates. The AutoWatch system allows vehicle owners to view digital photos of their vehicle via the Internet throughout the repair process through a custom body shop website. The latest vehicle repair status from the shop is displayed along with the estimated delivery date and a convenient email link to the assigned service advisor. According to Brian Shenk, Sherwin-Williams A-Plus Program Manager, "We first learned of the AutoWatch program through one of our customers. After reviewing the program's benefits with our customer, we shared our findings with our top A-Plus members. We were very impressed with AutoWatch and after careful review, we feel that all of our members can benefit from this system. The addition of AutoWatch to our A-Plus certification adds significant value to the program." Collision shops in Sherwin-Williams' A-Plus program can order the AutoWatch system under preferred pricing terms. Shenk continued, "We are aware that keeping customers informed about the progress of their vehicle is one of the best ways to positively affect customer satisfaction. The Auto-Watch System is the best solution we've found to meet this need." David Henderson, President of See Progress added, "We are very pleased with Sherwin-Williams' endorsement of our product. We feel strongly that Sherwin-Williams is working very hard to bring the best programs and highest value to its customers. The addition of the AutoWatch system furthers that goal." Body shops enrolled in Sherwin-Williams' A-Plus program can order the AutoWatch system, with discounts, immediately. See Progress can add the AutoWatch system to a shop's existing web site or develop a new custom web site for the shop. The A-Plus Program from Sherwin-Williams Automotive Finishes Corp. provides services and support to a network of 820 collision repair shops throughout the U.S. and Canada. o
FinishMaster, Inc., the distributor of automotive paints and related accessories, reported that net income for the third quarter ended September 30, 2002 was $3,144,000, or $0.40 per share, compared to net income of $1,619,000, or $0.21 per share, in the prior year period. Net income for the quarter increased by $1,525,000 compared to the prior year period as a result of higher net sales and gross margin dollars, and lower amortization expense and interest expense. The increase in net sales was due to same store sales growth and acquisitions. Same store sales growth for the quarter was 1.5 percent. Higher gross margin dollars were driven solely by increased sales volume. Less favorable purchasing opportunities de-creased gross margins realized as a percentage of net sales. Operating, selling and G&A expenses as a percentage of net sales declined to 28.2 percent from 29.0 percent in the prior year quarter. For the nine months ended September 30, 2002, net income was $9,932,000, or $1.27 per share, compared to net income of $4,440,000, or $0.58 per share, in the prior year period. On an SFAS No. 142 comparable basis, adjusted net income in the prior year period was $6,731,000, or $0.88 per share. Net income for the nine months ended September 30, 2002 increased $5,492,000 as a result of higher net sales, a stable gross margin rate, improved operating, selling and G&A expenses as a percentage of net sales, and lower amortization and interest expenses.
CAPA has issued a warning after hearing that some repairers are removing the CAPA Quality Seal during the repair process. The seal, a key element in the CAPA certification program, is critical to identifying and tracking CAPA parts in the marketplace. If an aftermarket part does not carry the CAPA Quality Seal, there is no way to verify that it is a CAPA part, and no way to trace it through CAPA's part database. "The CAPA seal gives all parties the ability to clearly identify parts which meet CAPA Standards. We see no reason why a repairer would remove a seal and thereby prevent clear identification of the part," said CAPA Board of Directors president, Bob Anderson of Anderson's Automotive Service. In order for a part to become CAPA certified, it must be validated through CAPA's independent, third-party testing facility. Samples of each part are tested for material properties, fit, finish, paint adhesion, coating performance, weld integrity, adhesive performance and corrosion, as well as markings identifying the CAPA manufacturer and the country and date of production. Finally, after these tests have been completed, the part must pass an extensive vehicle test fit. Only parts that comply with all of the CAPA quality standards are allowed to have a CAPA Quality Seal applied - the final step in the certification process. The CAPA Quality Seal comes with a special tab that repairers can remove to confirm to both their customer and the insurer that a CAPA part was used. Both the removable tab and permanent seal have the same unique number that can easily be used to identify the manufacturer, lot, and type of part. This enables the repairer to keep a record in their files of parts used while keeping the seal on the part. Once the seal is affixed to a surface, it will self-destruct when removed. This ensures that a seal cannot be transferred from a certified part to a non-certified part. Through the CAPA parts database, any interested party can use the unique seal number to determine which manufacturer produced the part and the date of the production lot. Any issues with a particular lot or part can be analyzed and addressed by both the manufacturer and CAPA. The CAPA Quality Seal is owned by CAPA and protected by federal and state law. Only participating CAPA manufacturers are licensed to apply the seal. Possession of the CAPA Quality Seals by anyone other than the participant to whom CAPA sold them or illicitly placing seals on parts is illegal. "The CAPA Quality Seal enables us to track parts from manufacture date through to installation and is an important part of our quality control system," said Jack Gillis, executive director of the non-profit association. "Use of the unique seal number enables us to quickly address any quality issues with our parts. If the seal number is unavailable, it makes responding to a part problem very difficult and taking important corrective action nearly impossible." Copart, Inc. has opened its 12th auction facility in the state of Texas. With the addition of this 12-acre greenfield facility Copart now has 99 locations in 40 states. "The new Corpus Christi location is in the central section of the city near the end of Interstate 37," said Willis J. Johnson, Copart's Chief Executive Officer. "The new facility will allow us to better serve our suppliers in the region. Previously this area was served by our McAllen and San Antonio facilities, which are over two hours away." Since August 2001, Copart has added 15 locations including four MAG sites in New Castle, DE; Greencastle, PA; West Mifflin, PA and Richmond, VA and eleven Copart salvage sites in Savannah, GA; Tifton, GA; Charleston, WV; Lyman, ME; Tucson, AZ; Somerville, NJ; Haslet, TX; Amarillo, TX; Reno, NV; Springfield, MO and Corpus Christi, TX. ABRA Auto Body & Glass has opened two new repair centers in the Minneapolis area. A center consisting of 14,400 square feet was opened in the city of Rogers, MN. John Ekker, from Minnesota market support, has been named as General Manager of this prototype facility. The second new center is a relocation of ABRA's St. Louis Park facility. General Manager Matt Feehan and the entire staff of the previous St. Louis Park location will continue to operate the new 22,500 square feet repair center. "We are very excited about ABRA's continued growth in the Minnesota metro," stated Tim Adelmann, Chief Operating Officer of ABRA. "These two repair centers will be followed by additional growth in the Minnesota market before the end of this year and in 2003", Adelmann continued. "We look forward to continuing to offer our customers the highest quality and best customer service in our industry." ABRA Auto Body & Glass operates 72 facilities in ten states. Insurance Auto Auctions, Inc. has reported higher earnings for the quarter ended September 29, 2002, with recorded net earnings of $1.8 million, or $0.15 per diluted share, versus $0.2 million, or $0.02 per diluted share for the same quarter a year ago. Net earnings for the third quarter of 2002, were $0.6 million, or $0.05 per diluted share versus a loss of $0.02 per diluted share for the third quarter last year. Gross vehicle sales proceeds for the third quarter of 2002 were $181.5 million, up $13.6 million or 8.1 percent from the same quarter of last year. Excluding the impact of business transformation costs and goodwill amortization from both years, earnings from operations for the quarter totaled $3.2 million compared to $1.7 million last year. CEO Tom O'Brien said, "The strategic initiatives we set in motion over a year ago have really begun to take root, and the positive impact is evident in our financial results for the quarter.... In addition, the new business operating procedures are in full swing, the new system installation is well underway and purchase agreements continue to make up a smaller percentage of our revenue stream." On the systems front, O'Brien added, "It is important to note that our experience with the system rollout to date confirms our original projection of $10 to $15 million in annual savings as a result of our combined operations and system initiatives.... We are much better positioned for the future from a competitive standpoint than we were a year ago, and we look forward to reporting our progress in the coming quarters." IAA currently operates 66 auction sites across the U.S. By Jeanne Silver, Butterfield Bodyworks CARSTAR, in Mundelein, Illinois One of the most beneficial ways to promote your business, whether you are new in town, or whether you have been at your location for a while, is to hold an open house. An open house provides you with a unique opportunity to "show off" your facility to your community and to your customers. For the purpose of this article, we will be looking at how to host an open house for industry affiliates and community businesses, or business to business open house. The planning is similar for the general public, but the target audience, in that case, is much larger and must be handled in different manner. Working hand in hand with your Chamber of Commerce is a given here in that it represents those businesses that are most concerned with sharing referrals and representing the best of the business community. First Things FirstAn open house forces the business owner to take a good look at the condition of the business, building and grounds. Clean up and maintenance that may have been overlooked will now become a priority. Employees will take an active part in planning and implementing the open house, and their enthusiasm at being included as part of the team for this important event, will surprise you. Your Planning TimelineThe most successful open house takes organization and planning over a few months. We have provided a timeline that is a step by step guide for a successful event. It is based on our own experience with three business to business open houses over the last six years. Our last open house was held on September 13, 2001. Though it was a difficult time for all, we kept with our agenda and still managed to draw a huge crowd for an outdoor "Oktoberfest" type event. 120 days prior
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