Your Source for Up-To-Date News and Research on the Collision Repair Industry
click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email
SUBSCRIBERS-ONLY
Today's News
Industry Stocks
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor
Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide
Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...
Feedback
Letter to the Editor
This article originally appeared in the September 2006 Issue of INSIGHT
©2006 Collision Repair Industry INSIGHT All Rights Reserved
Boyd Group Reports Decline in Q2
President Bush Signs Perkins Act Renewal
Mitchell International Introduces Seminar Series
Valspar Q3 Net Sales and Income Up
China to Boost Auto Exports with New Policies
United Auto Reports Record Q2 Results
SCRS Introduces Affiliate Conference
Progressive’s Drive Insurance Signs Joint Marketing Agreement with Homesite Insurance Group
CIC Report- Solutions to Estimate Rekeying Slowly Coming to Market
I-CAR Annual Report Highlighted Growth and Challenges
State Farm Contributes $50,000 to I-CAR Education Foundation
INDUSTRY UPDATE
The Boyd Group Income Fund has reported its financial results for the three and six-month periods ended June 30, 2006. For the second quarter ended June 30, 2006, revenue declined to $45.0 million compared to revenue of $45.7 million in the second quarter of 2005, after adjusting for discontinued operations. The decline in sales resulted from the impact of foreign currency translation of sales generated from U.S. operations, offset by strong same store sales growth in Canada and new revenue generated from start-up locations in the U.S.
Sales in Canada in the second quarter of 2006 totalled $16.5 million, an increase of $1.6 million or 10.2 percent, compared to the second quarter a year ago. Sales increases in Canada are entirely due to same store sales growth, with increases reported in all four western provinces.
Sales in the U.S. in the second quarter of 2006 decreased 7.4 percent to $28.5 million compared to $30.8 million in the second quarter of 2005. Translation of U.S. dollar revenues at a weaker U.S. dollar exchange rate, relative to the Canadian dollar, during the second quarter of 2006 accounted for $3.0 million of this decline. This decline was partially offset by new sales of $1.1 million attributable to: two Illinois area start-ups commenced during the second quarter of 2005; three new start-ups commenced in 2006; and new glass repair and replacement revenues generated in the Arizona, Georgia, Nevada, and Washington markets. Excluding the impact of foreign currency translation and collision and glass repair start-ups, U.S. same store sales declined $0.4 million or 1.4 percent compared to the same period in the prior year.
Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the second quarter of 2006 totalled $2.5 million, or 5.5 percent of sales, compared to EBITDA of $2.7 million, or 6.0 percent of sales, in the second quarter of 2005. This decline is primarily a result of lower amortization of prepaid rebates.
Net loss for the second quarter of 2006 after giving effect to the non-controlling interest, and after discontinued operations, was $654,038 or ($0.07) per fully diluted unit compared to net earnings of $140,411 or $0.01 per fully diluted unit in the second quarter of 2005.
The Fund's net loss resulted primarily from the impact of losses in the U.S. for which no tax benefit was recorded.
For the six months ended June 30, 2006 revenue totalled $92.1 million compared to revenue of $92.2 million in the same period a year ago. EBITDA for the six months ended June 30, 2006 totalled $4.4 million, or 4.8 percent of sales, compared to EBITDA of $6.5 million, or 7.1 percent of sales, in the corresponding period a year ago. The Fund's net loss for the six months ended June 30, 2006 was $2.4 million or ($0.26) per fully diluted unit compared to net income of $1.5 million or $0.17 per fully diluted unit in the same period a year ago.
The Fund had total debt outstanding at June 30, 2006 of $38.7 million, comprised of: $2.0 million in bank indebtedness; $7.8 million of senior bank term debt; $14.5 million of U.S. bank debt; $0.4 million of supplier debt; $0.7 million of vendor loans; $1.0 million of obligations under capital lease; and, $12.3 million in subordinate convertible debentures and exchangeable notes. This compares to $40.6 million of total debt outstanding at March 31, 2006, and $39.8 million as at December 31, 2005. Subsequent to June 30, 2006, Boyd Group prepaid US$2.8 million of U.S. bank debt held by the Fund's senior lenders and amended senior credit facilities to increase the Fund's operating line of credit from $12 million to $15 million.
The Boyd Group Inc. is the largest operator of collision repair facilities in Canada and among the largest in North America. The company operates locations in the four western Canadian provinces principally under the trade names Boyd Autobody & Glass and Service Collision Repair, as well as in six U.S. states principally under the trade name Gerber Collision & Glass. The company also operates Gerber National Glass Services.
o
President George W. Bush has signed legislation to renew the Carl D. Perkins Vocational and Technical Education Act.
U.S. House and Senate conferees reached a compromise less than a month ago to renew the Perkins Act. In the administration's fiscal 2006 and 2007 budget requests, the Perkins Act was left unfunded. The Automotive Service Association has been an avid supporter of the Perkins Act.
Under the Perkins Act, states receive grants for career and technical education at the secondary and post-secondary levels. High schools and community colleges are able to prepare students for careers that do not require a four-year degree.
The House and Senate conference agreement preserves both Tech-Prep and the Perkins program and allows states to use Tech-Prep grants for more expansive Perkins programs. Tech-Prep money is controlled by state governors who decide how to divide the money among local schools. Funding formulas decide how the Perkins program grants are dispersed.
The legislation allows states to spend up to five percent of their appropriations to cover administrative costs. The legislation provided $1.18 billion in state grants last year.
Mitchell International has announced its Full Speed Ahead! Road Show which will take place from August 24 to October 26, 2006 in eight major markets. The Road Show will feature seminars designed to help autobody repair shops optimize performance management, keep abreast of the latest techniques and tools, and learn new ways to stay ahead of the competition.
Focusing on how successful shops are adapting to an increasingly competitive market, this event offers an opportunity for shop owners and managers to hear from industry experts, to network, and to share best practices.
“Collision repair shops of all sizes are operating in an environment where realizing profits is difficult. Competition is fierce, numbers of jobs are decreasing, and auto’s technological complexity places an extra cost operating burden on shop owners. Shops, more than ever, can benefit from best-in-class performance management systems and techniques to ensure that the maximum operating margin is realized,” said Marc Brungger, Senior Vice President of Client Services, Mitchell International.
The Full Speed Ahead! seminars will cover a range of topics including:
- Managing for Profit
- Industry Trends (Capacity and Cycle Times)
- Estimating for Accuracy.
“The knowledge I received from Mitchell’s “Full Speed Ahead” seminar helps our business every day. Mitchell is a lot more than just an estimating system company. They are helping us in all areas of our business,” said Lenny Chamberlain, Lenny’s Auto Body, Middleboro, Mass.
Mitchell International provides performance management information and workflow solutions to the automotive insurance claims industry.
Coatings company Valspar Corporation has reported net income for the third quarter ended July 28, 2006 of $52,635,000 or $0.51 per diluted share versus net income of $45,713,000 or $0.44 per diluted share for the comparable period last year. This year's results include expenses associated with Valspar's manufacturing rationalization plan and stock based compensation. Also included in this year's results is a favorable tax adjustment of $0.03 per diluted share. Sales for the quarter increased 9.9 percent to $797,376,000, compared to $725,477,000 last year.
Net income for the first nine months of fiscal 2006 was $123,111,000, compared with $96,652,000 for the same period a year ago. Sales for the first nine months increased 10.3 percent to $2,193,957,000 versus sales of $1,988,563,000 for the comparable period a year ago.
Commenting on the third quarter, William L. Mansfield, President and Chief Executive Officer, said, "Our sales growth for the quarter was driven by continued strength in our architectural, industrial and resin product lines. Volume growth, improved manufacturing efficiencies and year-over-year price increases contributed to our margin improvement, but recent raw material cost increases will necessitate additional price initiatives. During the quarter, we increased our investment in promotional and advertising spending for the Cabot Stains brand, which accelerated new business sales growth across Cabot's customer base. On July 26th, we acquired an 80 percent interest in Huarun Paints, a leading Chinese supplier of furniture, decorative wood and architectural coatings. Based on mid-year results, we expect Huarun to achieve full year sales of $200 - $210 million in calendar 2006. We believe our investments in Cabot and China are excellent long term growth vehicles that will generate strong returns for Valspar."
China will issue policies designed to help boost its vehicle exports, state media said in late July, as domestic auto makers push for overseas sales in a bid to maintain their rapid growth.
The government would provide financing and insurance support to auto exporters and encourage them to team up with transport firms, Zhang Ji, a senior official at the Ministry of Commerce, was quoted as saying by the China Securities Journal.
Zhang said vehicles had the biggest growth potential among all the products exported by China, but gave no further details on the new policies.
SAIC Motor, the country's top car maker, along with its smaller rivals Chery Automobile and Geely Automobile Holdings Co. Ltd., are pursuing sales overseas as competition heats up at home.
China became a net vehicle exporter for the first time last year, exporting 172,800 units, mostly to developing countries, compared with 161,900 imported units.
The 2005 export figure was up 120 percent from the previous year, while the import figure grew at a much slower 8 percent. But SAIC and its peers are now eyeing developed markets as well, hoping to become a major global force in the foreseeable future.
Nanjing Automobile Group, which took control of Britain's collapsed MG Rover last year, announced plans last week to build China's first car plant in the United States.
SAIC, the Chinese partner of both General Motors Corp. and Volkswagen AG , aims to sell more than 200,000 of its own-brand cars annually in 2010, with 45,000 going to overseas markets, including Europe.
United Auto Group, Inc. (UAG), an international automotive retailer, has reported second quarter income from continuing operations of $36.6 million and related earnings per share of $0.39, representing increases of 15.2 percent and 14.7 percent, respectively, over the comparable period in 2005. Second quarter 2006 net income amounted to $36.8 million and related earnings per share was $0.39.
The company's revenue in-creased 11.8 percent to a record $2.9 billion during the second quarter. The revenue increase was driven by 2.9 percent same-store retail revenue growth, including same-store used vehicle revenue growth of 9.3 percent from the company's foreign nameplates. Same-store used vehicle revenues in-creased 8.5 percent.
UAG Chairman Roger Penske said, "United Auto's performance during the second quarter continues to highlight the strength of our brand portfolio and the continuing success of our investment strategy. Our overall service and parts revenue increased 17.3 percent, including 7.6 percent growth on a same-store basis, which contributed to a 20 basis-point increase in total gross margin to 15.2 percent."
The improvement in the company's gross margin was due primarily to a 50 basis-point increase in service and parts from 10.4 to 10.9 percent of total revenues, coupled with a 36 basis-point increase in margin on service and parts revenues.
For the six months ended June 30, 2006, revenues increased 11.7 percent to $5.6 billion. Income from continuing operations for the six months increased 12.7 percent to $62.6 million and related earnings per share increased 11.9 percent to $0.66 per share. Net income for the six months increased 8.6 percent to $60.9 from $56.1 million in the prior year. Second quarter 2005 results include $1.2 million ($0.01 per share) of after tax charges relating to severance costs associated with cost saving initiatives in certain markets.
The company currently projects earnings from continuing operations in the third quarter in the range of $0.37 to $0.40 per share, and continues to project earnings from continuing operations for the year in the range of $1.35 to $1.40 per share.
United Auto Group, Inc., headquartered in Bloomfield Hills, Michigan, operates 296 retail automotive franchises and 27 collision repair centers. United Auto has 173 franchises in 20 states and Puerto Rico and 123 franchises located outside the United States, primarily in the United Kingdom.
o
The Society of Collision Repair Specialists (SCRS) is gearing up for the inaugural session of the SCRS Affiliate Conference for their affiliate associations, scheduled for September 27 and 28 at the I-CAR World Headquarters in Hoffman Estates, Illinois.
The conference, which has been in the planning stages for some time, will create an open forum in a state-of-the-art environment where leadership from SCRS’s affiliate associations can meet to exchange ideas with each other and SCRS leadership. Since it is a stand-alone event, not held in conjunction with any other industry meetings, attendees will be afforded ample time and opportunity to discuss the issues that concern them most.
“The primary purpose of the conference is to be an effective conduit for communication,” said Executive Director Dan Risley. “Affiliates will hear directly from each other about what is working for them, what is not working for them, and the challenges their respective members are experiencing.”
Though the details of the program are still being finalized, each affiliate association will be given the opportunity to make a brief overview presentation on what is happening in their specific region or state, including any pertinent legislative developments. Audience participation, including the brainstorming of solutions for identified problems, will be encouraged. A schedule of speakers will be announced shortly.
The increasing pace of change experienced by the industry was a key driving force behind the creation of the conference.
“Every year it seems to get more difficult to stay up on the latest developments,” stated SCRS Director at Large Barry Dorn, “and as an ever-evolving industry, we need to stay at the cutting edge. This conference will allow us the necessary time to gain a better understanding of the many issues and challenges our members face, as well as an opportunity to share pertinent information (i.e. emerging technology) that can then be shared with their respective membership.”
The SCRS Affiliate Conference is also designed to facilitate understanding between SCRS as an organization and its members.
“The SCRS Board will hear directly from its affiliates regarding their needs and ideas as to how we can work more closely together to address them,” commented SCRS Chairman Tom Moreland. “That input will help us fine-tune our approach and ensure that our members are getting what they need from us.”
Dorn added, “I think sometimes we take for granted that our entire membership knows who we are and what projects we are actively working on, but that may not always be the case. This is a chance to promote mutual awareness and a clear view of our mission, adding unity to the SCRS ranks in the process.”
SCRS Past Chairman Lou DiLisio, Jr. noted, “There’s a lot to be gained by bringing people together and building relationships—historically it’s been a true strength of the industry and SCRS. What SCRS hopes to do with this conference extends right out of that tradition — that ‘Working Together Is The Most Important Work We Do.’”
Drive(R) Insurance from Progressive, the largest writer of auto insurance through independent agents and brokers in the U.S., has signed a joint marketing agreement with Homesite Insurance Group, a national provider of home insurance products. The agreement paves the way for a test that will allow selected Drive agents in three states - Ohio, Pennsylvania, and Oregon - to provide their Drive auto insurance customers quotes for homeowners, renters, and condo insurance policies underwritten and serviced by Homesite.
In the test, independent agents will use Drive's ForAgentsOnly.com (FAO) website to provide eligible customers with homeowners’ product quotes using state-of-the-art technology, and making the transaction of selling two monoline policies - auto and home-- seamless and easy. New or existing Drive Insurance customers are eligible for a homeowners quote from Homesite if they have prior auto coverage without a lapse and at least 100/300 liability limits.
Drive and Homesite will work together to identify a hand-selected group of about 150 agents in the three states to whom this program will be offered. Drive agents will sign an agency agreement and will be appointed by Homesite. The agent is then the agent of record and owns expiration rights to policies sold.
"It is our goal to make the Drive brand a 'must-have' for all growing, successful independent agencies," said Sharena Ali, product manager, Drive. "Providing agents with more flexibility in packaging home and auto policies and leveraging existing easy-to-use technology can help us to solidify our core position in their offices and give us an additional opportunity to grow together with them."
The three-state test will launch in late 2006. If the test succeeds in helping Drive agents sell more Drive policies, further rollout may happen in 2007.
"We are excited about this opportunity," said Fabian Fond-riest, CEO, Homesite. "As a monoline home insurer with technology that is highly compatible with Drive's, we look forward to providing packaged home policies with the ease-of-use that Drive agents have come to expect."
The products and services of the Drive Group of Progressive Insurance Companies are marketed through more than 30,000 independent insurance agencies in the U.S. Progressive companies using the Drive brand make up a group that is the largest writer of auto insurance through independent agents and brokers in the U.S., based on premiums written.
Founded in 1997, the Homesite Insurance Group focuses exclusively on the homeowners market. Homesite writes homeowners, condominium owners, and renters insurance policies in 46 states and the District of Columbia.
Solutions - or at least partial solutions - to the hassle of having to rekey insurer-prepared estimates are slowly becoming a reality, according to a presentation at the latest Collision Industry Conference (CIC).
During a CIC Electronic Communications Committee session in San Jose, Calif., the three estimating system providers outlined their progress on the rekeying issue, including the likely fees for their "solutions." The report comes about a year after the committee completed a study that found that time spent rekeying estimates costs the industry an estimated $17 million annually.
One partial solution is to enable insurance personnel preparing an estimate at a shop to transfer the estimate from a laptop to the shop's system (presuming both are using the same estimating system) using a flash drive or disk. This option has been available through Mitchell at no additional charge for several years, and CCC added it to Pathways 4.3 a year ago for those who pay a one-time fee of $169. Audatex, the new name for the ADP estimating system following Solera's acquisition of it earlier this year, has said it has no plans to add this ability to its system.
But shops have also found that some insurance companies prohibit field adjusters from attaching any hardware to their laptops, reducing the practicality of a physical transfer of an estimate. And many insurer estimates are not prepared at the shop itself.
At CIC in San Jose, therefore, the committee asked each provider when a shop would be able to download an estimate from an insurer's library. This is something Audatex does offer now, according to the company's Scott Jenkins. A pull-down menu in the system lists the insurers who offer this ability. Information on a printed copy of the estimate is needed by the shop to access the estimate, Jenkins said. The service, called "Claims Element," is available to Audatex users for $29 a month (or may be bundled with other Audatex services).
The shop's ability to adjust that estimate as needed and resend it to the insurer, however, is very limited. That's a step in the process Mitchell hopes to address with its rekeying solution expected to be available this January, according to the company's Chad Taylor. He said their product will likely have a one-time set-up fee and a "nominal add-on" to the monthly estimating system subscription fee.
CCC's Bruce Yungkans said his company's estimate download system should be available in Pathways 4.4 at NACE. Like its physical estimate transfer option, it will have a one-time $169 fee to activate (but will be free to those who have paid the fee to enable the physical transfer of files using Pathways 4.3). As with the other systems, Yungkans said information on the printed estimate will be needed by the shop to download that particular estimate.
Committee chair Cindy Granse said a presentation at the next CIC in Las Vegas prior to NACE will address the issue of shops being able to electronically supplement such downloaded estimates.
If you have struggled managing growth at your company, Tom McGee can relate.
The president and CEO of I-CAR, McGee reported at the training organization's annual meeting in August that during the past year, I-CAR went from having about 85 employees to now more than 400.
The change, of course, came earlier this year as I-CAR broke from its quarter-century tradition of relying on independent contractors to conduct its classroom training to making those instructors full- or part-time employees. McGee said the transition was challenging but should strengthen I-CAR's ability to deliver training when and where it's needed.
"It gives us the ability to deploy an instructor to any area that needs training that may not have had easy access to it," he said. "It gives us the opportunity to run classes virtually any time and any day of the week rather than mainly on evenings and weekends as we have in the past."
The change was just one of the aspects of I-CAR's past performance and future plans discussed at the annual meeting, held in San Jose, Calif.
McGee also was pleased to report that after a three-year fairly steep decline in "student units" - one unit equals one student taking one class - the number had rebounded somewhat to 114,238, up about seven percent from the preceding year. Though still lower than I-CAR's performance during its 2003 (118,000 student units) and 2002 (151,000 student units) fiscal years, McGee definitely viewed the increase as positive.
"We've started to see an upward trend, and I think fiscal 2007 will continue with that," he said.
McGee focused much of his presentation during the general session at the 3-day meeting on what I-CAR has in the works for the coming year. He praised California-based I-CAR instructor Toby Chess for helping pioneer "mobile welding qualification testing," something I-CAR is expanding in the coming months.
"We had budgeted for 2,500 welding qualification tests to be performed this past year, and Toby [oversaw] 800 just himself," McGee said. "You'll soon see eight trucks set up across North America with generators and steel and aluminum welders - and we've already hired five staff members - and with what Toby started, we're going to be doing qualification tests in the shops."
McGee said the mobile testing program will be a supplement and not a replacement for I-CAR's current 120 welding test sites, and although locations around the country for where the trucks will be based have been chosen, the goal will be to help reach areas not served by a nearby test facility.
"This will give us an opportunity to make the tests available for a business at the place of work to try to reduce any travel that may be required to obtain the tests," he said. "I think it's going to be very successful and will help move us up another notch in the delivery and convenience of the training."
McGee also said I-CAR is working with ASE and members of I-CAR's Industry Training Alliance to assist the Environmental Protection Agency (EPA) as it develops proposed new regulations impacting the industry. In an effort to reduce hazardous air pollutants, the EPA is considering requiring shops to use such long-available technologies as downdraft spray booths, HVLP spray equipment, and enclosed gun cleaners. Training and certification to ensure technicians have the knowledge and skills needed to use such technologies is likely to be part of the regulation, McGee said, and I-CAR can compile a standard curriculum - even if used by different providers - to meet the government mandate.
"This industry has something that no other industry that I'm aware of has: I-CAR and ASE," McGee said. "We were able to say [to the EPA that] we have one training program and one certification program so we all don't have to develop, maintain and deliver programs, and we don't have to have the issue of which ones are approved."
Sworn in at the annual meeting as the new chairman of I-CAR's board was Robby Robbs of Nobilas, an international fleet and claims management company that is part of Akzo Nobel Car Refinishes. Robbs, who becomes the first Canadian to serve as chairman of I-CAR, said significant changes in vehicle design, construction, systems, and materials are making collision repair ever more challenging - which makes I-CAR increasingly vital to the industry.
"It's about to become even tougher, which means the cost of errors and non-productive time created through uncertainty of what constitutes a proper repair will increase exponentially," Robbs said. "Those of us who embrace training understand that the ability to learn faster than our competitors might be the only sustainable competitive advantage that we have. Getting the job done better and quicker is the only differentiator impacting efficiency, productivity, customer satisfaction and profits."
He said it is incumbent on everyone involved with I-CAR to reach those who have not yet seen the value of ongoing technical training.
"Given the complex nature of vehicle construction, and the increasing risks associated with improper repairs, we must find ways of encouraging those in the industry who have yet to understand the value of being informed to embrace training," he said.
State Farm Insurance Company contributed $50,000 in July 2006 to the I-CAR Education Foundation. The contribution will support five major areas of concentration: image and recruitment through the collisionkids.org and collisioncareers.org websites; curriculum distribution; career and technical school and college support; training, placement, and mentorship; and administrative services.
“The generosity of State Farm Insurance Company will allow us to continue marketing current programs, products, and services, and to develop new materials to attract youth into the collision repair industry. We appreciate having the resources to continue marketing programs like PACE+ST3(R) and the Industry Training Alliance(R), which allow participating career and technical schools and colleges to offer their students a head start in the collision repair industry. Their continued support shows their commitment to the collision repair industry and their confidence in the I-CAR Education Foundation. The collision repair facilities will receive the long-term benefits from their generosity,” said Ron Ray, Executive Director of the I-CAR Education Foundation.
“State Farm is fully committed to seeing young people find placement and succeed in the collision industry and we have proven that commitment by continually providing financial support to the I-CAR Education Foundation since its inception 15 years ago,” said Chris Evans, State Farm Claim Consultant, P&C Claims. “State Farm has a vested interest in the purpose of the Education Foundation and we are proud to affiliate with and support such a worthy organization.”
The I-CAR Education Foundation, founded in 1991, is a not-for-profit organization; its IRS 501(c)(3) status allows it to accept grants and donations from government agencies, individuals and businesses.
Feedback
Have a comment about this article? Send Email to Editor, INSIGHT's Editor
©2006 Collision Repair Industry INSIGHT
All Rights Reserved
FEATURED
LINKS:
INSIGHT Supports the NABC!
Do You?