Illinois-based Insurance Auto Auctions Inc., a provider of automotive salvage and claims processing services in the United States, reported higher net earnings for the quarter ended March 28, 2004. The company recorded net earnings of $2.3 million, or $0.20 per diluted share, versus net earnings of $2.0 million, or $0.16 per diluted share, for the same quarter a year ago.
Revenues for the quarter were $57.2 million compared with $56.0 million in the first quarter of 2003. Fee income in the first quarter increased to $50.1 million versus $42.7 million in the first quarter of last year.
“We are pleased to announce first quarter financial results that exceeded our expectations,” said Tom O’Brien, CEO. “As the quarter progressed, we continued to see a positive trend in volumes sold and significantly higher returns for our customers. We believe our live auctions, complemented with an Internet bidding capability, offer the optimal solution for both our insurance company suppliers and our buyers. Increased buyer participation and an increase in scrap prices during the quarter both contributed positively to the average selling price of our vehicles.”
O’Brien added, “Another positive takeaway from the first quarter was the fact that we gained some market share, which contributed to our current inventory levels and higher incoming volumes and has positioned us better for the future. We believe these customer wins validate the industry’s recognition of our improved suite of value-added services. The market share gains are especially important given the recent decline in frequency of collision claims, which could worsen as a result of rising fuel costs.”
Touching on the new, company-wide IT system that was rolled out to all of IAA’s branches during 2003, O’Brien said, “We are happy to have the rollout of the IT system and the related business transformation costs behind us. We remain focused on using our new system to create further efficiencies and drive additional visibility for both the management team and our customers. We have, and will continue to, leverage our technology to generate further market share gains, create cost effective expansion opportunities and drive a consistently improving cost structure. As a strong by-product of our new system, we have developed a real-time bidding platform that is currently being tested in four markets. We plan to continue rolling it out to many other major branches during the second quarter.”
The company also continued its expansion strategy during the first quarter with the addition of a new greenfield facility in Tucson, Ariz. This new 16-acre facility will provide needed coverage in the southern part of the state and will leverage IAA’s existing location in Phoenix. The new facility will also improve IAA’s regional coverage, complementing other existing locations in southern California and New Mexico.
“We do not foresee making many expansion announcements in the second quarter and will likely fall at the low end of our expansion target for 2004,” O’Brien said. “Instead, we will focus on leveraging our new system and generating additional market share gains. We will also continue to support our customers through additional investments in our existing facilities in order to add capacity as well as to improve yard and office functionality.”
O’Brien concluded, “In terms of guidance, due to strong current inventory levels combined with recent market share wins and their related volumes, we anticipate a solid second quarter that should produce financial results similar to those we just saw in the first quarter. However, we are cautious given the recent decline in collision claims and will provide further guidance with our second quarter results.”
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