Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-34568
kar-20210630_g1.jpg
KAR Auction Services, Inc.
(Exact name of Registrant as specified in its charter)
Delaware20-8744739
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11299 N. Illinois Street,, Carmel,, Indiana46032
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (800) (800) 923-3725

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01 per shareKARNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐    No ☒
As of July 31, 2020, 129,227,5192021, 119,184,223 shares of the registrant's common stock, par value $0.01 per share, were outstanding.


Table of Contents
KAR Auction Services, Inc.
Table of Contents

Page
Page
Item 1.
Consolidated Statements of Income
3
Consolidated Statements of Comprehensive Income (Loss)
4
Consolidated Balance Sheets
5
Consolidated Statements of Stockholders' Equity
7
Consolidated Statements of Cash Flows
9
Condensed Notes to Consolidated Financial Statements
10
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
2423
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
4843
Item 4.
Controls and Procedures
4843
PART II—OTHER INFORMATION
Item 1.
Legal Proceedings
4944
Item 1A.
Risk Factors
4944
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
5044
Item 6.
Exhibits
5145
Signatures
5851


2
Table of Contents
PART I
FINANCIAL INFORMATION
Item 1.    Financial Statements
KAR Auction Services, Inc.
Consolidated Statements of Income
(In millions, except per share data)
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
2020 2019 2020 2019 2021202020212020
Operating revenues       Operating revenues  
Auction fees and services revenue$312.6
 $553.1
 $804.1
 $1,095.0
Auction feesAuction fees$236.7 $177.8 $472.2 $433.1 
Service revenueService revenue182.2 134.8 369.8 371.0 
Purchased vehicle sales49.6
 79.3
 125.1
 137.1
Purchased vehicle sales97.9 49.6 190.6 125.1 
Finance-related revenue56.8
 86.7
 135.3
 176.6
Finance-related revenue68.6 56.8 134.4 135.3 
Total operating revenues419.0
 719.1
 1,064.5
 1,408.7
Total operating revenues585.4 419.0 1,167.0 1,064.5 
Operating expenses       Operating expenses  
Cost of services (exclusive of depreciation and amortization)235.1
 417.4
 629.7
 811.3
Cost of services (exclusive of depreciation and amortization)333.2 235.1 663.6 629.7 
Selling, general and administrative112.3
 163.2
 274.7
 338.4
Selling, general and administrative140.2 112.3 289.2 274.7 
Depreciation and amortization46.5
 47.9
 94.2
 92.2
Depreciation and amortization45.4 46.5 92.4 94.2 
Goodwill and other intangibles impairment29.8
 —
 29.8
 —
Goodwill and other intangibles impairment0 29.8 0 29.8 
Total operating expenses423.7
 628.5
 1,028.4
 1,241.9
Total operating expenses518.8 423.7 1,045.2 1,028.4 
Operating profit (loss)(4.7) 90.6
 36.1
 166.8
Operating profit (loss)66.6 (4.7)121.8 36.1 
Interest expense30.9
 55.6
 68.9
 112.1
Interest expense31.2 30.9 62.1 68.9 
Other expense (income), net1.3
 (1.1) (0.7) (3.2)
Income (loss) from continuing operations before income taxes(36.9) 36.1
 (32.1) 57.9
Other (income) expense, netOther (income) expense, net14.8 1.3 (35.4)(0.7)
Income (loss) before income taxesIncome (loss) before income taxes20.6 (36.9)95.1 (32.1)
Income taxes(4.6) 8.7
 (2.6) 15.2
Income taxes9.1 (4.6)32.7 (2.6)
Income (loss) from continuing operations$(32.3) $27.4
 $(29.5) $42.7
Income from discontinued operations, net of income taxes—
 28.2
 —
 90.7
Net income (loss)$(32.3) $55.6
 $(29.5) $133.4
Net income (loss)$11.5 $(32.3)$62.4 $(29.5)
Net income (loss) per share - basic       
Income (loss) from continuing operations$(0.27) $0.21
 $(0.24) $0.32
Income from discontinued operations—
 0.21
 —
 0.68
Net income (loss) per share - basic$(0.27) $0.42
 $(0.24) $1.00
Net income (loss) per share - diluted       
Income (loss) from continuing operations$(0.27) $0.20
 $(0.24) $0.32
Income from discontinued operations—
 0.21
 —
 0.68
Net income (loss) per share - diluted$(0.27) $0.41
 $(0.24) $1.00
Net income (loss) per shareNet income (loss) per share  
BasicBasic$0.01 $(0.27)$0.27 $(0.24)
DilutedDiluted$0.01 $(0.27)$0.26 $(0.24)
Dividends declared per common share$—
 $0.35
 $0.19
 $0.70
Dividends declared per common share$0 $0 $0 $0.19 










See accompanying condensed notes to consolidated financial statements

3
Table of Contents
KAR Auction Services, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2020 2019 2020 2019 2021202020212020
Net income (loss)$(32.3) $55.6
 $(29.5) $133.4
Net income (loss)$11.5 $(32.3)$62.4 $(29.5)
Other comprehensive income (loss), net of tax       Other comprehensive income (loss), net of tax  
Foreign currency translation gain (loss)16.0
 8.4
 (19.9) 16.5
Foreign currency translation gain (loss)7.1 16.0 8.7 (19.9)
Unrealized loss on interest rate derivatives, net of tax(3.6) —
 (22.6) —
Unrealized gain (loss) on interest rate derivatives, net of taxUnrealized gain (loss) on interest rate derivatives, net of tax0.3 (3.6)7.0 (22.6)
Total other comprehensive income (loss), net of tax12.4
 8.4
 (42.5) 16.5
Total other comprehensive income (loss), net of tax7.4 12.4 15.7 (42.5)
Comprehensive income (loss)$(19.9) $64.0
 $(72.0) $149.9
Comprehensive income (loss)$18.9 $(19.9)$78.1 $(72.0)
   


























See accompanying condensed notes to consolidated financial statements

4
Table of Contents
KAR Auction Services, Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
June 30,
2020		 December 31,
2019		 June 30,
2021		December 31, 2020
Assets   Assets  
Current assets   Current assets  
Cash and cash equivalents$968.5
 $507.6
Cash and cash equivalents$621.6 $752.1 
Restricted cash50.0
 53.3
Restricted cash53.8 60.2 
Trade receivables, net of allowances of $11.8 and $9.5582.3
 457.5
Finance receivables, net of allowances of $22.0 and $15.01,526.3
 2,100.2
Trade receivables, net of allowances of $11.7 and $12.1Trade receivables, net of allowances of $11.7 and $12.1549.2 367.2 
Finance receivables, net of allowances of $24.0 and $22.0Finance receivables, net of allowances of $24.0 and $22.02,084.9 1,889.0 
Other current assets124.0
 125.9
Other current assets105.1 106.7 
Total current assets3,251.1
 3,244.5
Total current assets3,414.6 3,175.2 
Other assets   Other assets  
Goodwill1,790.9
 1,821.7
Goodwill2,212.5 2,140.2 
Customer relationships, net of accumulated amortization of $652.0 and $637.4179.3
 207.9
Other intangible assets, net of accumulated amortization of $321.3 and $292.4290.9
 298.5
Customer relationships, net of accumulated amortization of $692.2 and $668.6Customer relationships, net of accumulated amortization of $692.2 and $668.6199.8 211.3 
Other intangible assets, net of accumulated amortization of $405.8 and $362.0Other intangible assets, net of accumulated amortization of $405.8 and $362.0284.3 290.2 
Operating lease right-of-use assets353.1
 364.1
Operating lease right-of-use assets339.0 350.6 
Property and equipment, net of accumulated depreciation of $562.3 and $534.3583.7
 609.0
Property and equipment, net of accumulated depreciation of $620.7 and $596.4Property and equipment, net of accumulated depreciation of $620.7 and $596.4579.6 589.9 
Other assets45.0
 35.5
Other assets88.5 40.8 
Total other assets3,242.9
 3,336.7
Total other assets3,703.7 3,623.0 
Total assets$6,494.0
 $6,581.2
Total assets$7,118.3 $6,798.2 
   



















See accompanying condensed notes to consolidated financial statements

5
Table of Contents
KAR Auction Services, Inc.
Consolidated Balance Sheets
(In millions, except share and per share data)
(Unaudited)
 June 30,
2021		December 31, 2020
Liabilities, Temporary Equity and Stockholders' Equity  
Current liabilities  
Accounts payable$1,074.5 $688.9 
Accrued employee benefits and compensation expenses65.9 81.3 
Accrued interest6.8 6.5 
Other accrued expenses186.4 185.2 
Income taxes payable2.8 3.2 
Obligations collateralized by finance receivables1,324.2 1,261.2 
Current maturities of long-term debt22.7 24.3 
Total current liabilities2,683.3 2,250.6 
Non-current liabilities  
Long-term debt1,851.8 1,853.8 
Deferred income tax liabilities137.1 128.6 
Operating lease liabilities332.0 344.2 
Other liabilities42.8 55.4 
Total non-current liabilities2,363.7 2,382.0 
Commitments and contingencies (Note 9)00
Temporary equity
Series A convertible preferred stock570.0 549.8 
Stockholders' equity  
Common stock, $0.01 par value:  
Authorized shares: 400,000,000  
Issued and outstanding shares:  
June 30, 2021: 119,181,203  
December 31, 2020: 129,700,1561.2 1.3 
Additional paid-in capital874.6 1,046.5 
Retained earnings642.5 600.7 
Accumulated other comprehensive loss(17.0)(32.7)
Total stockholders' equity1,501.3 1,615.8 
Total liabilities, temporary equity and stockholders' equity$7,118.3 $6,798.2 
 June 30,
2020		 December 31,
2019
Liabilities, Temporary Equity and Stockholders' Equity   
Current liabilities   
Accounts payable$983.8
 $704.6
Accrued employee benefits and compensation expenses55.2
 72.7
Accrued interest7.1
 7.9
Other accrued expenses194.3
 216.9
Income taxes payable6.1
 1.1
Dividends payable—
 24.5
Obligations collateralized by finance receivables735.9
 1,461.2
Current maturities of long-term debt26.9
 28.8
Total current liabilities2,009.3
 2,517.7
Non-current liabilities   
Long-term debt1,856.9
 1,861.3
Deferred income tax liabilities115.8
 134.5
Operating lease liabilities347.3
 358.3
Other liabilities82.0
 59.2
Total non-current liabilities2,402.0
 2,413.3
Commitments and contingencies (Note 10)

 

Temporary equity   
Series A convertible preferred stock (Note 9)528.2
 —
Stockholders' equity   
Common stock, $0.01 par value:   
Authorized shares: 400,000,000 
  
Issued and outstanding shares: 
  
June 30, 2020: 129,225,465 
  
December 31, 2019: 128,833,4521.3
 1.3
Additional paid-in capital1,034.2
 1,028.9
Retained earnings592.5
 651.0
Accumulated other comprehensive loss(73.5) (31.0)
Total stockholders' equity1,554.5
 1,650.2
Total liabilities, temporary equity and stockholders' equity$6,494.0
 $6,581.2












See accompanying condensed notes to consolidated financial statements

6
Table of Contents
KAR Auction Services, Inc.
Consolidated Statements of Stockholders' Equity
(In millions)
(Unaudited)

Common
Stock
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Balance at March, 31, 2021124.8 $1.3 $969.4 $641.2 $(24.4)$1,587.5 
Net income11.5 11.5 
Other comprehensive income7.4 7.4 
Issuance of common stock under stock plans0.7 0.7 
Stock-based compensation expense4.5 4.5 
Repurchase and retirement of common stock(5.6)(0.1)(100.0)(100.1)
Dividends on preferred stock(10.2)(10.2)
Balance at June 30, 2021119.2 $1.2 $874.6 $642.5 $(17.0)$1,501.3 
Common
Stock
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Balance at December 31, 2020129.7 $1.3 $1,046.5 $600.7 $(32.7)$1,615.8 
Net income62.4 62.4 
Other comprehensive income15.7 15.7 
Issuance of common stock under stock plans0.4 1.0 1.0 
Surrender of RSUs for taxes(0.1)(2.2)(2.2)
Stock-based compensation expense9.9 9.9 
Repurchase and retirement of common stock(10.8)(0.1)(180.8)(180.9)
Dividends earned under stock plans0.2 (0.4)(0.2)
Dividends on preferred stock(20.2)(20.2)
Balance at June 30, 2021119.2 $1.2 $874.6 $642.5 $(17.0)$1,501.3 
 
Common
Stock
Shares
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 Total
Balance at March 31, 2020129.2
 $1.3
 $1,031.6
 $624.8
 $(85.9) $1,571.8
Net loss      (32.3)   (32.3)
Other comprehensive income        12.4
 12.4
Issuance of common stock under stock plans0.1
   0.3
     0.3
Surrender of RSUs for taxes(0.1)   (0.3)     (0.3)
Stock-based compensation expense    2.6
     2.6
Balance at June 30, 2020129.2
 $1.3
 $1,034.2
 $592.5
 $(73.5) $1,554.5



 
Common
Stock
Shares
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 Total
Balance at December 31, 2019128.8
 $1.3
 $1,028.9
 $651.0
 $(31.0) $1,650.2
Cumulative effect adjustment for adoption of
ASC Topic 326, net of tax		      (3.8)   (3.8)
Net loss      (29.5)   (29.5)
Other comprehensive loss        (42.5) (42.5)
Issuance of common stock under stock plans0.6
   0.7
     0.7
Surrender of RSUs for taxes(0.2)   (3.7)     (3.7)
Stock-based compensation expense    7.6
     7.6
Dividends earned under stock plan    0.7
 (0.7)   —
Cash dividends declared to stockholders ($0.19 per share)      (24.5)   (24.5)
Balance at June 30, 2020129.2
 $1.3
 $1,034.2
 $592.5
 $(73.5) $1,554.5























See accompanying condensed notes to consolidated financial statements

7
Table of Contents
KAR Auction Services, Inc.
Consolidated Statements of Stockholders' Equity
(In millions)
(Unaudited)

Common
Stock
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Balance at March, 31, 2020129.2 $1.3 $1,031.6 $624.8 $(85.9)$1,571.8 
Net loss(32.3)(32.3)
Other comprehensive income12.4 12.4 
Issuance of common stock under stock plans0.1 0.3 0.3 
Surrender of RSUs for taxes(0.1)(0.3)(0.3)
Stock-based compensation expense2.6 2.6 
Balance at June 30, 2020129.2 $1.3 $1,034.2 $592.5 $(73.5)$1,554.5 
Common
Stock
Shares		Common
Stock
Amount		Additional
Paid-In
Capital		Retained EarningsAccumulated
Other
Comprehensive
Loss		Total
Balance at December 31, 2019128.8 $1.3 $1,028.9 $651.0 $(31.0)$1,650.2 
Cumulative effect adjustment for adoption of ASC Topic 326, net of tax(3.8)(3.8)
Net loss(29.5)(29.5)
Other comprehensive loss(42.5)(42.5)
Issuance of common stock under stock plans0.6 0.7 0.7 
Surrender of RSUs for taxes(0.2)(3.7)(3.7)
Stock-based compensation expense7.6 7.6 
Dividends earned under stock plans0.7 (0.7)0 
Cash dividends declared to stockholders ($0.19 per share)(24.5)(24.5)
Balance at June 30, 2020129.2 $1.3 $1,034.2 $592.5 $(73.5)$1,554.5 

 
Common
Stock
Shares
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 Total
Balance at March 31, 2019133.3
 $1.3
 $1,131.5
 $422.9
 $(53.2) $1,502.5
Net income      55.6
   55.6
Other comprehensive income        8.4
 8.4
Issuance of common stock under stock plans0.1
   4.7
     4.7
Surrender of RSUs for taxes—
   (0.2)     (0.2)
Stock-based compensation expense    4.7
     4.7
Distribution of IAA      213.2
 10.4
 223.6
Dividends earned under stock plan    0.1
 (0.1)   —
Cash dividends declared to stockholders ($0.35 per share)      (46.7)   (46.7)
Balance at June 30, 2019133.4
 $1.3
 $1,140.8
 $644.9
 $(34.4) $1,752.6




 
Common
Stock
Shares
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 Total
Balance at December 31, 2018132.9
 $1.3
 $1,131.9
 $392.3
 $(61.3) $1,464.2
Cumulative effect adjustment for adoption of
ASC Topic 842, net of tax		      1.1
   1.1
Net income      133.4
   133.4
Other comprehensive income        16.5
 16.5
Issuance of common stock under stock plans0.7
   5.4
     5.4
Surrender of RSUs for taxes(0.2)   (10.4)     (10.4)
Stock-based compensation expense    12.1
     12.1
Distribution of IAA      213.2
 10.4
 223.6
Dividends earned under stock plan    1.8
 (1.8)   —
Cash dividends declared to stockholders ($0.70 per share)      (93.3)   (93.3)
Balance at June 30, 2019133.4
 $1.3
 $1,140.8
 $644.9
 $(34.4) $1,752.6















See accompanying condensed notes to consolidated financial statements

8
Table of Contents
KAR Auction Services, Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 Six Months Ended
June 30,
 20212020
Operating activities  
Net income (loss)$62.4 $(29.5)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation and amortization92.4 94.2 
Provision for credit losses7.6 41.6 
Deferred income taxes6.8 (13.1)
Amortization of debt issuance costs6.0 5.6 
Stock-based compensation9.9 7.6 
Contingent consideration adjustment15.7 0 
Unrealized gain on investment securities(31.6)0 
Goodwill and other intangibles impairment0 29.8 
Other non-cash, net2.1 4.9 
Changes in operating assets and liabilities, net of acquisitions:  
Trade receivables and other assets(198.5)(137.5)
Accounts payable and accrued expenses322.9 265.3 
Net cash provided by operating activities295.7 268.9 
Investing activities  
Net (increase) decrease in finance receivables held for investment(200.0)532.6 
Acquisition of businesses (net of cash acquired)(79.8)0 
Purchases of property, equipment and computer software(50.7)(46.7)
Investments in securities(20.6)0 
Proceeds from sale of investments21.4 0 
Proceeds from the sale of PWI2.1 0 
Proceeds from the sale of property and equipment1.9 0 
Net cash (used by) provided by investing activities(325.7)485.9 
Financing activities  
Net increase in book overdrafts45.4 5.0 
Net decrease in borrowings from lines of credit(1.6)(1.9)
Net increase (decrease) in obligations collateralized by finance receivables57.0 (720.5)
Proceeds from issuance of Series A Preferred Stock0 550.1 
Payments for issuance costs of Series A Preferred Stock0 (21.9)
Payments for debt issuance costs/amendments0 (3.9)
Payments on long-term debt(4.7)(4.7)
Payments on finance leases(6.0)(7.8)
Payments of contingent consideration and deferred acquisition costs(21.3)(22.3)
Issuance of common stock under stock plans1.0 0.7 
Tax withholding payments for vested RSUs(2.2)(3.7)
Repurchase and retirement of common stock(180.9)0 
Dividends paid to stockholders0 (49.0)
Net cash used by financing activities(113.3)(279.9)
Effect of exchange rate changes on cash6.4 (17.3)
Net (decrease) increase in cash, cash equivalents and restricted cash(136.9)457.6 
Cash, cash equivalents and restricted cash at beginning of period812.3 560.9 
Cash, cash equivalents and restricted cash at end of period$675.4 $1,018.5 
Cash paid for interest, net of proceeds from interest rate derivatives$55.4 $63.9 
Cash paid for taxes, net of refunds$16.6 $3.6 
 Six Months Ended June 30,
 2020 2019
Operating activities   
Net income (loss)$(29.5) $133.4
Net income from discontinued operations—
 (90.7)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization94.2
 92.2
Provision for credit losses41.6
 18.2
Deferred income taxes(13.1) 3.6
Amortization of debt issuance costs5.6
 7.1
Stock-based compensation7.6
 10.3
Loss on disposal of fixed assets—
 0.1
Goodwill and other intangibles impairment29.8
 —
Other non-cash, net4.9
 5.8
Changes in operating assets and liabilities, net of acquisitions:   
Trade receivables and other assets(137.5) (145.7)
Accounts payable and accrued expenses265.3
 127.4
Net cash provided by operating activities - continuing operations268.9
 161.7
Net cash provided by operating activities - discontinued operations—
 155.8
Investing activities   
Net decrease (increase) in finance receivables held for investment532.6
 (69.8)
Acquisition of businesses (net of cash acquired)—
 (120.7)
Purchases of property, equipment and computer software(46.7) (78.4)
Net cash provided by (used by) investing activities - continuing operations485.9
 (268.9)
Net cash used by investing activities - discontinued operations—
 (37.4)
Financing activities   
Net increase in book overdrafts5.0
 44.1
Net (decrease) increase in borrowings from lines of credit(1.9) 93.5
Net decrease in obligations collateralized by finance receivables(720.5) (31.0)
Proceeds from issuance of Series A Preferred Stock550.1
 —
Payments for issuance costs of Series A Preferred Stock(21.9) —
Payments for debt issuance costs/amendments(3.9) —
Payments on long-term debt(4.7) (1,291.1)
Payments on finance leases(7.8) (6.9)
Payments of contingent consideration and deferred acquisition costs(22.3) (0.5)
Issuance of common stock under stock plans0.7
 5.4
Tax withholding payments for vested RSUs(3.7) (10.4)
Dividends paid to stockholders(49.0) (139.8)
  Cash transferred to IAA—
 (50.9)
Net cash used by financing activities - continuing operations(279.9) (1,387.6)
Net cash provided by financing activities - discontinued operations—
 1,317.6
Effect of exchange rate changes on cash(17.3) 10.8
Net increase (decrease) in cash, cash equivalents and restricted cash457.6
 (48.0)
Cash, cash equivalents and restricted cash at beginning of period560.9
 304.7
Cash, cash equivalents and restricted cash at end of period$1,018.5
 $256.7
Cash paid for interest, net of proceeds from interest rate derivatives$63.9
 $98.2
Cash paid for taxes, net of refunds - continuing operations$3.6
 $20.5
Cash paid for taxes, net of refunds - discontinued operations$—
 $40.1




See accompanying condensed notes to consolidated financial statements

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements
June 30, 20202021 (Unaudited)

Note 1—Basis of Presentation and Nature of Operations
Defined Terms
Unless otherwise indicated or unless the context otherwise requires, the following terms used herein shall have the following meanings:
•"we," "us," "our," "KAR" and "the Company" refer, collectively, to KAR Auction Services, Inc. and all of its subsidiaries;
•"ADESA" or "ADESA Auctions" refer, collectively, to ADESA, Inc., a wholly-owned subsidiary of KAR Auction Services, and ADESA, Inc.'s subsidiaries, including Openlane, Inc. (together with Openlane, Inc.'s subsidiaries, "Openlane"), Nth Gen Software Inc. ("TradeRev"), BacklotCars, Inc. ("BacklotCars"), ADESA Remarketing Limited (formerly known as GRS Remarketing Limited ("GRS" or "ADESA Remarketing Limited")) and ADESA Europe (formerly known as CarsOnTheWeb ("COTW"));
•"AFC" refers, collectively, to Automotive Finance Corporation, a wholly-owned subsidiary of ADESA, and Automotive Finance Corporation's subsidiaries and other related entities, including PWI Holdings, Inc. (which was sold on December 1, 2020);
•"Credit Agreement" refers to the Amended and Restated Credit Agreement, dated March 11, 2014 as(as amended, on March 9, 2016, May 31, 2017, September 19, 2019amended and May 29, 2020,restated, modified or supplemented from time to time), among KAR Auction Services, Inc., as the borrower, the several banks and other financial institutions or entities from time to time parties thereto and JPMorgan Chase Bank N.A., as administrative agent;
•"Credit Facility" refers to the $950 million, senior secured term loan B-6 facility due September 19, 2026 ("Term Loan B-6") and the $325 million, senior secured revolving credit facility due September 19, 2024 (the "Revolving Credit Facility"), the terms of which are set forth in the Credit Agreement;
•"IAA" refers, collectively, to Insurance Auto Auctions, Inc., formerly a wholly-owned subsidiary of KAR Auction Services, and Insurance Auto Auctions, Inc.'s subsidiaries and other related entities, including HBC Vehicle Services Limited ("HBC"). See Note 2;;
•"KAR Auction Services" refers to KAR Auction Services, Inc. and not to its subsidiaries;
•"Senior notes" refers to the 5.125% senior notes due 2025 ($950 million aggregate principal was outstanding at June 30, 2020)2021); and
•"Term Loan B-4"Series A Preferred Stock" refers to the senior secured term loan B-4 facility, the termsSeries A Convertible Preferred Stock, par value $0.01 per share (591,785 and 571,606 shares of which are set forth in the Credit Agreement;
"Term Loan B-5" refers to the senior secured term loan B-5 facility, the terms of which are set forth in the Credit Agreement;Series A Preferred Stock were outstanding at June 30, 2021 and
"2017 Revolving Credit Facility" refers to the $350 million, senior secured revolving credit facility, the terms of which are set forth in the Credit Agreement. December 31, 2020, respectively).
Business and Nature of Operations
ADESA is a leading provider of wholesale vehicle auctions and related vehicle remarketing services for the automotive industry. As of June 30, 2020, we have2021, the ADESA Auctions segment serves a domestic and international customer base through digital marketplaces supported by more than 70 vehicle logistics center locations across North American network of 74 ADESA whole car auction sites and we also offer online auctions.America. ADESA also includes BacklotCars, an app and web-based dealer-to-dealer wholesale vehicle platform utilized in the United States, TradeRev, an online automotive remarketing systemplatform in Canada where dealers can launch and participate in real-time vehicle auctions at any time, ADESA Remarketing Limited, an online whole car vehicle remarketing business in the United Kingdom and ADESA Europe (formerly known as CarsOnTheWeb), an online wholesale vehicle auction marketplace in Continental Europe. Our auctions facilitate the sale of used vehicles through physical, online or hybrid auctions, which permit Internet buyers to participate in physical auctions.on-premise and off-premise marketplaces. ADESA's online service offerings include customized private label solutions powered with software developed by its wholly-owned subsidiary, Openlane, that allow our institutionalcommercial consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the Internet prior to arrival at the physical auction.on-premise marketplaces. Remarketing services include a variety of activities designed to transfer used vehicles between sellers and buyers throughout the vehicle life cycle. ADESA facilitates the exchange of these vehicles through an auction marketplace, which aligns sellers and buyers. As an agent for customers, the Company
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

generally does not take title to or ownership of vehicles sold at the auctions. Generally, fees are earned from the seller and buyer on each successful auction transaction in addition to fees earned for ancillary services.

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

ADESA has the second largest used vehicle auction network in North America, based upon the number of used vehicles sold through auctions annually, and also provides services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and collateral recovery services. ADESA is able to serve the diverse and multi-faceted needs of its customers through the wide range of services offered.
AFC is a leading provider of floorplan financing to independent used vehicle dealers and this financing is provided through 123 locations throughout the United States and Canada as of June 30, 2020.Canada. Floorplan financing supports independent used vehicle dealers in North America who purchase vehicles at ADESA, BacklotCars, TradeRev, other used vehicle and salvage auctions and non-auction purchases. In
Prior to December 2020, in addition to floorplan financing, AFC also providesprovided independent used vehicle dealers with other related services and products, such as vehicle service contracts. In October 2020, a subsidiary of ADESA signed a definitive agreement to sell all of the issued and outstanding shares of capital stock of PWI Holdings, Inc., the Company's extended vehicle service contract business ("PWI"), to certain subsidiaries of Kingsway Financial Services Inc. for a purchase price of approximately $24.3 million in cash and deferred payments of approximately $2.2 million (subject to customary adjustments). The sale was completed on December 1, 2020.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily
indicative of results that may be expected for the year as a whole. In the opinion of management, the consolidated financial
statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results
of operations, cash flows and financial position for the periods presented. These consolidated financial statements and
condensed notes to consolidated financial statements are unaudited and should be read in conjunction with the audited
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2019,2020, as filed with the Securities and Exchange Commission on February 19, 2020.18, 2021. The 20192020 year-end
consolidated balance sheet data included in this Form 10-Q was derived from the audited financial statements referenced above
and does not include all disclosures required by U.S. GAAP for annual financial statements.
Reclassifications
ADESA Auction Services' revenueADESA's "Auction fees and services revenue" reported in the consolidated statementsstatement of income for the three and six months ended June 30, 20192020 has been reclassifiedbroken out between "Auction feesfees" and services"Service revenue" and "Purchased vehicle sales" in the consolidated statementsstatement of income to conform with the presentation for the three and six months ended June 30, 2020.2021.
Prior to 2020, the costs and expenses of the holding company were reported separately from the reportable segments. Due to the spin-off of IAA in 2019 and the Company's transition from physical marketplaces to digital marketplaces, the Company has simplified its business and operations. Corporate expenses, previously reported as holding company expenses, are now included in the segments. Certain known expenses (e.g., information technology costs) were recorded directly to the ADESA and AFC segments. Interest expense previously reported by the holding company has been recorded in the ADESA segment. The residual shared services expenses were recorded at ADESA and allocated to AFC based on revenue and employee headcount. Holding company amounts reported in the segment results in the consolidated financial statements prior to December 31, 2020 have been reclassified to conform to the current presentation.
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, incremental losses on finance receivables, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies.

New Accounting Standards
Acquisition-Related Deferred and Contingent Consideration

Some of the purchase agreements related to prior year acquisitions included additional payments over a specified period, including deferred and contingent payments based on certain conditions and performance. At June 30, 2020, we had accrued deferred and estimated contingent consideration with a fair value of approximately $3.7 million and $41.8 million, respectively. At June 30,In August 2020, the aggregate maximum potential payment remainingFASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for undiscounted deferred paymentsConvertible Instruments and undiscounted contingent payments related to these acquisitions could approximate $102.9 million. ForContracts in an Entity’s Own Equity, which simplifies the six months ended June 30, 2020, we made contingent considerationaccounting for convertible debt instruments and deferred acquisition payments related to the CarsOnTheWeb acquisition of $22.3 million.


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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

Temporary Equity

The Company records shares of convertible preferred stock at their respective fair valuesby reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. The update also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The new guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update can be adopted on either a fully retrospective or a modified retrospective basis. We do not expect the dateadoption of issuance, net of issuance costs. The convertible preferred stock is recorded outside of stockholders' equityASU 2020-06 will have a material impact on the consolidated balance sheet because the shares contain liquidation features that are not solely within the Company's control. The Company has elected not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such an event would occur. Subsequent adjustments to increase the carrying value to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur. See Note 9 for a discussion of the convertible preferred stock.
Credit Losses
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. We adopted Topic 326 in the first quarter of 2020 and the change in methodology for measuring credit losses resulted in an increase in the allowance for credit losses of $5.0 million. The cumulative effect of this change was recognized, net of tax, as a $3.8 million adjustment to retained earnings on January 1, 2020.statements.
New Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740 and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new guidance is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance was effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements.

Note 2—Acquisitions
2021 Acquisition
In January 2017,May 2021, ADESA acquired Auction Frontier, LLC (“Auction Frontier”). Auction Frontier is the FASB issued ASU 2017-04, owner and operator of the cloud-based auction simulcast solution VelocicastIntangibles-Goodwill®. The acquisition is aligned with KAR’s strategy, as Velocicast powers ADESA Simulcast and Other (Topic 350): SimplifyingSimulcast+ technologies, as well as other wholesale and retail auctions across North America and Australia.
The purchased assets included accounts receivable, software, customer relationships and tradenames. The purchase agreement also included additional payments contingent on certain terms and conditions. Financial results for Auction Frontier have been included in our consolidated financial statements from the Testdate of acquisition.
The purchase price for Goodwill Impairment, Auction Frontier, net of cash acquired, was approximately $92.2 million, which simplifies the test for goodwill impairment by eliminating Step 2 (impliedincluded a net cash payment of $79.8 million and estimated contingent payments with a fair value measurement). Instead goodwill impairment would be measured as theof $12.4 million based on a probability model. The maximum amount by which a reporting unit's carrying amount exceeds itsof undiscounted contingent payment related to this acquisition could approximate $15.0 million. The acquired assets and assumed liabilities of Auction Frontier were recorded at fair value, notincluding $17.9 million to exceedintangible assets, representing the carrying amountfair value of acquired customer relationships of $10.0 million, software of $7.6 million and tradenames of $0.3 million, which are being amortized over their expected useful lives. The acquired software and tradenames are reported in "Other intangible assets" in the accompanying consolidated balance sheet. The excess earnings method was used to value the customer relationships and the relief from royalty method was used to value the software and tradenames. Both of these methods require forward looking estimates to determine fair value, including among other assumptions, forecasted revenue growth and estimated royalty and license rates. The purchase accounting associated with this acquisition is preliminary, subject to obtaining information to determine the fair value of certain assets and liabilities. The acquisition resulted in a preliminary estimate of $73.8 million of goodwill. The new guidance was effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2017-04 did not have a material impact on the consolidated financial statements.
Note 2—IAA Separation and Discontinued Operations
In February 2018, the Company announced that its board of directors had approved a plan to pursue the separation ("Separation") of its salvage auction business, IAA, through a spin-off. On June 28, 2019, the Company completed the spin-off, creating a new independent publicly traded company, IAA, Inc. ("IAA"). The Separation provided KAR stockholders with equity ownership in both KAR and IAA. On June 28, 2019, the Company’s stockholders received one share of IAA common stock for every share of Company common stock they held as of the close of business on June 18, 2019, the record date for the distribution. In additionfactors contributing to the sharesrecognition of IAA common stock, KAR received a cash distribution of approximately $1,278.0 milliongoodwill were strategic and synergistic benefits that are expected to be realized from IAA, which was used to prepay a portion of KAR's term loans. In connection with the spin-off,acquisition. The goodwill is recorded in the Company and IAA entered into various agreements to effect the Separation and provide a framework for their relationship after the Separation, including a separation and distribution agreement, a transition services agreement, an employee matters agreement and a tax matters agreement. These agreements provide for the allocation between the Company and IAA of assets, employees, liabilities and obligations (including investments, property, environmental and tax-related assets and liabilities) attributable toADESA Auctions reportable

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 20202021 (Unaudited)


periods priorsegment and all of it is expected to at and after IAA's Separation from the Company and will govern certain relationships between IAA and the Company after the Separation.

be deductible for tax purposes. The financial impact of this acquisition, including pro forma financial results, was immaterial to the Company's consolidated results for the six months ended June 30, 2021.
Deferred and Contingent Payments Related to Prior Year Acquisitions
Some of IAA have been accounted for as discontinued operationsthe purchase agreements related to prior year acquisitions included additional payments over a specified period, including deferred and contingent payments based on certain conditions and performance. At June 30, 2021, we had deferred and estimated contingent consideration with a fair value of approximately $1.9 million and $36.2 million, respectively (based on Level 3 inputs), which are reported in "Other accrued expenses" in the comparable 2019 results presented. IAA was formerly presented as oneaccompanying consolidated balance sheet. At June 30, 2021, the aggregate maximum potential payment remaining for undiscounted deferred payments and undiscounted contingent payments related to these acquisitions could approximate $47.7 million. For the six months ended June 30, 2021, we made contingent consideration payments related to the CarsOnTheWeb acquisition of the Company’s reportable segments. Discontinued operations included one-time transaction costs in "Selling, general and administrative" of approximately $30.5 million and $31.3 million for$21.3 million. For the three and six months ended June 30, 2019, in connection2021, adjustments to estimated contingent consideration associated with the separation ofCarsOnTheWeb and TradeRev acquisitions increased contingent consideration and impacted "Other (income) expense, net" by approximately $4.5 million and $15.7 million, respectively, in the two companies. These costs consisted of consulting and professional fees associated with preparing for and executing the spin-off.aggregate.

The following table presents the results of operations for IAA that have been reclassified to discontinued operations for all periods presented:
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Operating revenues$—
 $366.4
 $—
 $723.6
Operating expenses       
Cost of services (exclusive of depreciation and amortization)—
 227.7
 —
 446.1
Selling, general and administrative—
 62.1
 —
 94.5
Depreciation and amortization—
 22.1
 —
 43.9
Total operating expenses—
 311.9
 —
 584.5
Operating profit—
 54.5
 —
 139.1
Interest expense—
 2.4
 —
 2.7
Other income, net—
 (0.1) —
 —
Income from discontinued operations before income taxes—
 52.2
 —
 136.4
Income taxes—
 24.0
 —
 45.7
Income from discontinued operations$—
 $28.2
 $—
 $90.7


Note 3—Stock and Stock-Based Compensation Plans
TheWe adopted the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan in December 2009, which was amended and restated in June 2014 and further amended and restated in June 2021 ("Omnibus Plan"), and now provides that the maximum number of shares of the Company's common stock that may be issued pursuant to awards under the Omnibus Plan is approximately 7.3 million. The Omnibus Plan is intended to provide equity and/or cash-based awards to our executive officers and key employees. Our stock-based compensation expense includes expense associated with KAR Auction Services, Inc. service-based options ("service options"), market-based options ("market options"), performance-based restricted stock units ("PRSUs") and service-based restricted stock units ("RSUs"). We have determined that the KAR Auction Services, Inc. service options, market options, PRSUs and RSUs should be classified as equity awards.
The following table summarizes our stock-based compensation expense by type of award (in millions):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Service options$0.3 $0 $0.6 $0 
Market options1.7 0 2.8 0 
PRSUs0.9 0.8 3.1 2.3 
RSUs1.6 1.8 3.4 5.3 
Total stock-based compensation expense$4.5 $2.6 $9.9 $7.6 
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
PRSUs$0.8
 $1.3
 $2.3
 $4.9
RSUs1.8
 2.6
 5.3
 5.4
Total stock-based compensation expense$2.6
 $3.9
 $7.6
 $10.3

Service Options
In the first six months of 2020,2021, we granted approximately 1.0 million service options with a weighted average exercise price of $16.26 per share to certain executive officers of the Company. The service options have a life of ten years and vest in equal annual installments on each of the first 4 anniversaries of the grant dates. The weighted average fair value of the service options granted in the first six months of 2021 was $3.96 per share. The fair values of the service options granted were estimated on the dates of grant using the Black-Scholes option pricing model with an expected life of 6.25 years, a weighted average expected volatility of 36.46%, a weighted average expected dividend yield of 3.8% and a weighted average risk free interest rate of 1.05%.
Market Options
In the first six months of 2021, we granted approximately 4.0 million market options with a weighted average exercise price of $16.26 per share to certain executive officers of the Company. The market options have a life of ten years and have a service component along with an additional market component. The market options become eligible to vest and become exercisable in equal increments, each upon the later to occur of (i) the first 4 anniversaries of the grant dates, respectively, and (ii) for each respective 25% increment, the attainment of KAR's closing stock price at or above $5, $10, $15 and $20 over each respective exercise price, for 20 consecutive trading days.
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

The weighted average fair value of the market options granted in the first six months of 2021 was $3.90 per share. The fair value and requisite service period of the market options was developed with a Monte Carlo simulation using a multivariate Geometric Brownian Motion with a drift equal to the risk free rate.
PRSUs and RSUs
In the first six months of 2021, we granted a target amount of approximately 0.40.6 million PRSUs to certain executive officers and managementother employees of the Company. TheApproximately 0.4 million of the PRSUs granted in 2021 vest if and to the extent that the Company's three-year cumulative operating adjusted net income per share attains certain specified goals.goals and approximately 0.2 million of the PRSUs vest if and to the extent that certain operational goals are attained by year-end 2023 or 2024. In addition, approximately 0.40.5 million RSUs were granted to certain executive officers and management members of the Company. The RSUs are contingent upon continued employment

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

and generally vest in 3 equal annual installments. The weighted average grant date fair value of the PRSUs and the RSUs was $22.25$15.40 per share and $13.90 per share, respectively, which was determined using the closing price of the Company's common stock on the dates of grant.
KAR Auction Services, Inc. Employee Stock Purchase Plan

We adopted the KAR Auction Services, Inc. Employee Stock Purchase Plan ("ESPP") in December 2009. The ESPP, which was approved by our stockholders, is designed to provide an incentive to attract, retain and reward eligible employees and is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. At the Company’s annual meeting of stockholders in June 2020, the stockholders approved an amendment to the ESPP. As a result, the maximum number of shares reserved for issuance under the ESPP was increased from 1.0 million to 2.5 million.
Share Repurchase Program
In October 2019, the board of directors authorized a repurchase of up to $300 million of the Company’sCompany's outstanding common stock, par value $0.01 per share, through October 30, 2021. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").amended. The timing and amount of any repurchases is subject to market and other conditions. This program does not oblige the Company to repurchase any dollar amount or any number of shares under the authorization, and the program may be suspended, discontinued or modified at any time, for any reason and without notice. For the six months ended June 30, 2021, we repurchased and retired 10,847,800 shares of common stock in the open market at a weighted average price of $16.66 per share, under the October 2019 authorization. For the three months ended June 30, 2021, we repurchased and retired 5,628,000 shares of common stock in the open market at a weighted average price of $17.77 per share, aggregating $100 million. NaN shares of common stock were repurchased during the six months ended June 30, 2020 or 2019.2020.
Note 4—Net Income (Loss) from Continuing Operations Per Share
The following table sets forth the computation of net income (loss) from continuing operations per share (in millions except per share amounts):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net income (loss) from continuing operations$(32.3) $27.4
 $(29.5) $42.7
Series A Preferred Stock dividends2.1
 —
 2.1
 —
Net income (loss) attributable to common stockholders$(34.4) $27.4
 $(31.6) $42.7
Weighted average common shares outstanding129.3
 133.4
 129.2
 133.2
Effect of dilutive stock options and restricted stock awards—
 0.7
 —
 0.7
Effect of assumed conversion of Series A Preferred Stock—
 —
 —
 —
Weighted average common shares outstanding and potential common shares129.3
 134.1
 129.2
 133.9
Net income (loss) from continuing operations per share       
Basic$(0.27) $0.21
 $(0.24) $0.32
Diluted$(0.27) $0.20
 $(0.24) $0.32

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net income (loss)$11.5 $(32.3)$62.4 $(29.5)
Series A Preferred Stock dividends(10.2)(2.1)(20.2)(2.1)
Net income attributable to participating securities(0.3)0 (8.8)0 
Net income attributable to common stockholders$1.0 $(34.4)$33.4 $(31.6)
Weighted average common shares outstanding122.7 129.3 125.8 129.2 
Effect of dilutive stock options and restricted stock awards0.5 0 0.6 0 
Weighted average common shares outstanding and potential common shares123.2 129.3 126.4 129.2 
Net income (loss) per share 
Basic$0.01 $(0.27)$0.27 $(0.24)
Diluted$0.01 $(0.27)$0.26 $(0.24)
BasicPrior to June 2020, basic net income (loss) from continuing operations per share was calculated by dividing net income (loss) from continuing operations by the weighted average number of outstanding common shares for the period. Diluted net income (loss) from continuing operations per share was calculated consistent with basic net income (loss) from continuing operations per share including the effect of dilutive unissued common shares related to our stock-based employee compensation program. The effect of stock options and restricted stock on net income (loss) from continuing operations per share-diluted is determined through the application of the treasury stock method, whereby net proceeds received by the Company based on assumed exercises are hypothetically used to repurchase our common stock at the average market price during the period. As a result of the spin-off,
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

there are IAA employees who hold KAR equity awards included in the calculation. Stock options that would have an anti-dilutive effect on net income (loss) from continuing operations per diluted share and PRSUs subject to performance conditions which have not yet been satisfied are excluded from the calculations. NaNApproximately 0.6 million service options were excluded from the calculation

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

of diluted net income (loss) from continuing operations per share for the three orand six months ended June 30, 2019. In addition, approximately 0.82021, respectively. All of the market options were excluded from the calculation of diluted net income (loss) per share for the three and six months ended June 30, 2021. Approximately 1.1 million PRSUs were excluded from the calculation of diluted net income (loss) from continuing operations per share for the three and six months ended June 30, 2019.2021, respectively. Total options outstanding at June 30, 2021 and 2020 and 2019 were 0.75.5 million and 0.80.7 million, respectively. In accordance with U.S. GAAP, no potential common shares were included in the computation of diluted net income per share for the three or six months ended June 30, 2020 because to do so would have been anti-dilutive based on the period losses.
Beginning with the quarter endedin June 30, 2020, the Company also includes participating securities (Series A Preferred Stock) in the computation of net income (loss) from continuing operations per share pursuant to the two-class method. The two-class method of calculating net income (loss) from continuing operations per share is an allocation method that calculates earnings per share for common stock and participating securities. Under the two-class method, total dividends provided to the holders of the Series A Preferred Stock and undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders. During periods of net loss, from continuing operations, no effect is given to the participating securities because they do not share in the losses of the Company. In addition, the calculation does not include the effect of assumed conversion of the Series A Preferred Stock for the three or six months ended June 30, 2020, because the effect would have been anti-dilutive.
Note 5—Finance Receivables and Obligations Collateralized by Finance Receivables
AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary ("AFC Funding Corporation"), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 28, 2022.31, 2024. AFC Funding Corporation had committed liquidity of $1.70$1.60 billion for U.S. finance receivables at June 30, 2020.2021.
We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables, which expires on January 28, 2022.31, 2024. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$175 million at June 30, 2020.2021. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.
The following tables present quantitative information about delinquencies, credit loss charge-offs less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due.
 June 30, 2021Net Credit Losses
Three Months Ended
June 30, 2021		Net Credit Losses
Six Months Ended
June 30, 2021
 Total Amount of:
(in millions)ReceivablesReceivables
Delinquent
Floorplan receivables$2,099.6 $5.7 $3.3 $4.6 
Other loans9.3 0 0 0 
Total receivables managed$2,108.9 $5.7 $3.3 $4.6 
 June 30, 2020 
Net Credit Losses
Three Months Ended
June 30, 2020
 
Net Credit Losses
Six Months Ended
June 30, 2020
 Total Amount of:  
(in millions)Receivables 
Receivables
Delinquent
  
Floorplan receivables$1,532.4
 $19.0
 $22.0
 $33.9
Other loans15.9
 —
 —
 —
Total receivables managed$1,548.3
 $19.0
 $22.0
 $33.9

 December 31, 2019 
Net Credit Losses
Three Months Ended
June 30, 2019
 
Net Credit Losses
Six Months Ended
June 30, 2019
 Total Amount of:  
(in millions)Receivables 
Receivables
Delinquent
  
Floorplan receivables$2,099.4
 $28.8
 $8.2
 $16.1
Other loans15.8
 —
 —
 —
Total receivables managed$2,115.2
 $28.8
 $8.2
 $16.1


 December 31, 2020Net Credit Losses
Three Months Ended
June 30, 2020		Net Credit Losses
Six Months Ended
June 30, 2020
 Total Amount of:
(in millions)ReceivablesReceivables
Delinquent
Floorplan receivables$1,892.1 $22.9 $22.0 $33.9 
Other loans18.9 0 0 0 
Total receivables managed$1,911.0 $22.9 $22.0 $33.9 

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 20202021 (Unaudited)


The following is a summary of the changes in the allowance for credit losses related to finance receivables (in millions):
 June 30,
2020		 June 30,
2019
Allowance for Credit Losses   
Balance at December 31$15.0
 $14.0
Opening balance adjustment for adoption of ASC Topic 3265.0
 —
Provision for credit losses35.9
 16.6
Recoveries5.0
 4.1
Less charge-offs(38.9) (20.2)
Balance at June 30$22.0
 $14.5

 June 30,
2021		June 30,
2020
Allowance for Credit Losses  
Balance at December 31$22.0 $15.0 
Opening balance adjustment for adoption of ASC Topic 3260 5.0 
Provision for credit losses6.6 35.9 
Recoveries6.6 5.0 
Less charge-offs(11.2)(38.9)
Balance at end of period$24.0 $22.0 
As of June 30, 20202021 and December 31, 2019, $1,475.42020, $2,058.3 million and $2,061.6$1,865.3 million, respectively, of finance receivables and a cash reserve of 1 or 3 percent of the obligations collateralized by finance receivables served as security for the obligations collateralized by finance receivables. The amount of the cash reserve depends on circumstances which are set forth in the securitization agreements. Obligations collateralized by finance receivables consisted of the following:
 June 30,
2020		 December 31,
2019
Obligations collateralized by finance receivables, gross$747.6
 $1,474.4
Unamortized securitization issuance costs(11.7) (13.2)
Obligations collateralized by finance receivables$735.9
 $1,461.2

June 30,
2021		December 31,
2020
Obligations collateralized by finance receivables, gross$1,342.3 $1,282.8 
Unamortized securitization issuance costs(18.1)(21.6)
Obligations collateralized by finance receivables$1,324.2 $1,261.2 
Proceeds from the revolving sale of receivables to the bank facilities are used to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility. At June 30, 2020,2021, we were in compliance with the covenants in the securitization agreements.
Note 6—Goodwill and Other Intangible Assets
Goodwill consisted of the following at June 30, 2020 (in millions):
 ADESA
Auctions		 AFC Total
Balance at December 31, 2019$1,558.0
 $263.7
 $1,821.7
Impairment(25.5) —
 (25.5)
Other(5.3) —
 (5.3)
Balance at June 30, 2020$1,527.2
 $263.7
 $1,790.9


Goodwill represents the excess cost over fair value of identifiable net assets of businesses acquired. The Company tests goodwill and tradenames for impairment at the reporting unit level annually in the second quarter, or more frequently as impairment indicators arise. In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited through the first part of 2020 as compared to 2019, and the outlook for the business was significantly reduced. This analysis resulted in the impairment of the goodwill balance totaling $25.5 million in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded for this amount in the second quarter of 2020. The fair value of that reporting unit was estimated using the expected present value of future cash flows.


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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

In addition, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships. The fair value of the customer relationships was estimated using the expected present value of future cash flows.

Goodwill and tradenames were tested for impairment in all of the Company's reporting units in the second quarter of 2020 and no impairment was identified, other than the impairments previously discussed in the ADESA Remarketing Limited reporting unit. Future events and changing market conditions, including the impact of COVID-19, may require us to re-evaluate the estimates used in our fair value measurements, which could result in additional impairment of goodwill and other intangible assets in future periods and could have a material effect on our operating results.
Note 7—Long-Term Debt
Long-term debt consisted of the following (in millions):
 Interest Rate* Maturity June 30,
2020		 December 31,
2019
Term Loan B-6Adjusted LIBOR + 2.25% September 19, 2026 $942.9
 $947.6
Revolving Credit FacilityAdjusted LIBOR + 1.75% September 19, 2024 —
 —
Senior notes  5.125% June 1, 2025 950.0
 950.0
European lines of creditEuribor + 1.25% Repayable upon demand 17.4
 19.3
Canadian line of creditCAD Prime + 0.50% Repayable upon demand —
 —
Total debt      1,910.3
 1,916.9
Unamortized debt issuance costs/discounts     (26.5) (26.8)
Current portion of long-term debt      (26.9) (28.8)
Long-term debt      $1,856.9
 $1,861.3

 Interest Rate*MaturityJune 30,
2021		December 31,
2020
Term Loan B-6Adjusted LIBOR+ 2.25%September 19, 2026$933.4 $938.1 
Revolving Credit FacilityAdjusted LIBOR+ 1.75%September 19, 20240 0 
Senior notes5.125%June 1, 2025950.0 950.0 
European lines of creditEuribor+ 1.25%Repayable upon demand13.2 14.8 
Total debt  1,896.6 1,902.9 
Unamortized debt issuance costs/discounts (22.1)(24.8)
Current portion of long-term debt  (22.7)(24.3)
Long-term debt  $1,851.8 $1,853.8 
*The interest rates presented in the table above represent the rates in place at June 30, 2020.2021.
Credit Facilities
On May 29, 2020, we entered into the Fourth Amendment Agreement (the "Fourth Amendment") to the Credit Agreement. The Fourth Amendment (1) provides a financial covenant “holiday” through and including June 30, 2021; (2) for purposes of determining compliance with the financial covenant for the fiscal quarters ending September 30, 2021 and December 31, 2021, permits the Consolidated EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the applicable test period to be calculated on an annualized basis, excluding results prior to April 1, 2021; (3) establishes a monthly minimum liquidity covenant of $225.0 million through and including September 30, 2021; and (4) effectively places certain limitations on the ability to make certain investments, junior debt repayments, acquisitions and restricted payments and to incur additional secured indebtedness until October 1, 2021.
On September 19, 2019, we entered into the Third Amendment Agreement (the "Third Amendment") to the Credit Agreement. The Third Amendment provided for, among other things, (i) the refinancing of the existing Term Loan B-4 and Term Loan B-5 with the new seven-year, $950 million Term Loan B-6 (ii) repayment of the 2017 Revolving Credit Facility and (iii) the $325 million, five-year Revolving Credit Facility.
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

The Credit Facility is available for letters of credit, working capital, permitted acquisitions and general corporate purposes. The Revolving Credit Facility also includes a $50 million sub-limit for issuance of letters of credit and a $60 million sub-limit for swingline loans. The Company also pays a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on the Company’s Consolidated Senior Secured Net Leverage Ratio, from time to time. The interest rate applicable to Term Loan B-6 was 2.50%2.38% at June 30, 2020.2021.
The obligations of the Company under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority perfected security interests in 100% of the equity interests of

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) perfected first priority security interests in substantially all other tangible and intangible assets of the Company and each Subsidiary Guarantor, subject to certain exceptions. The Credit Agreement contains affirmative and negative covenants that we believe are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with our affiliates. Other than during the financial covenant "holiday" provided by the Fourth Amendment, theThe Credit Agreement also requires us to maintain a Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), not to exceed 3.5 as of the last day of each fiscal quarter, providedif there are revolving loans outstanding. We were in compliance with the applicable covenants in the Credit Agreement at June 30, 2020.2021.
There were 0 borrowings outstanding on the Revolving Credit Facility at June 30, 2020 and2021 or December 31, 2019. In addition, we2020. We had related outstanding letters of credit in the aggregate amount of $25.0$29.7 million and $27.4$28.5 million at June 30, 20202021 and December 31, 2019,2020, respectively, which reduce the amount available for borrowings under the Revolving Credit Facility.
European Lines of Credit

COTW has lines of credit aggregating $33.7$35.6 million (€30 million). The lines of credit had an aggregate $17.4$13.2 million and $14.8 million of borrowings outstanding at June 30, 2020.2021 and December 31, 2020, respectively. The lines of credit are secured by certain inventory and receivables at COTW subsidiaries.

Fair Value of Debt
As of June 30, 2020,2021, the estimated fair value of our long-term debt amounted to $1,845.4$1,907.5 million. The estimates of fair value were based on broker-dealer quotes (Level 2 inputs) for our debt as of June 30, 2020.2021. The estimates presented on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange.
Note 8—7—Derivatives
We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay. We usehave used interest rate derivatives with the objective of managing exposure to interest rate movements, thereby reducing the effect of interest rate changes and the effect they could have on future cash flows. Currently, interest rate swap agreements are used to accomplish this objective.
In January 2020, we entered into 3 pay-fixed interest rate swaps with an aggregate notional amount of $500 million to swap variable rate interest payments under our term loan for fixed interest payments bearing a weighted average interest rate of 1.44%, for a total interest rate of 3.69%. The interest rate swaps have a five-year term, each maturing on January 23, 2025.
We have designated the interest rate swaps as cash flow hedges. The effective portion of changes in the fair value of the interest rate swaps (unrealized gains/losses)that are included in the assessment of hedge effectiveness are recorded as a component of "Accumulated other comprehensive income." For the three and six months ended June 30, 2021, the Company recorded an unrealized gain on the interest rate swaps of $0.3 million, net of tax of $0.1 million, and $7.0 million, net of tax of $2.3 million, respectively, in "Accumulated other comprehensive income." For the three and six months ended June 30, 2020, the Company recorded an unrealized loss on the interest rate swaps of $3.6 million, net of tax of $1.1 million, and $22.6 million, net of tax of $7.3 million, respectively. The Company does not expect any gains/losses currently recordedrespectively, in accumulated"Accumulated other comprehensive income to be recognized in earnings over the next 12 months.income." The earnings impact of the interest rate derivatives designated as cash flow hedges is recorded upon the recognition of the interest related to the hedged debt. NaN amount
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Table of ineffectiveness was included in net income (loss) for the six months ended Contents
KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020.2021 (Unaudited)

When derivatives are used, we are exposed to credit loss in the event of non-performance by the counterparties; however, non-performance is not anticipated.anticipated and was considered immaterial to the fair value estimates. ASC 815, Derivatives and Hedging, requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. The fair values of the interest rate derivatives are based on quoted market prices for similar instruments from commercial banks (based on significant observable inputs - Level 2 inputs). The following table presents the fair value of our interest rate derivatives included in the consolidated balance sheets for the periods presented (in millions):

Liability Derivatives
June 30, 2021December 31, 2020
Derivatives Designated as Hedging InstrumentsBalance Sheet LocationFair ValueBalance Sheet LocationFair Value
2020 Interest rate swapsOther liabilities$16.6 Other liabilities$25.9 
Note 8—Other (Income) Expense, Net
Other (income) expense, net consisted of the following (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Change in realized and unrealized gains on investment securities$11.7 $0 $(48.8)$0 
Contingent consideration valuation (Note 2)4.5 0 15.7 0 
Foreign currency (gains) losses0.4 2.7 2.5 3.1 
Other(1.8)(1.4)(4.8)(3.8)
Other (income) expense, net$14.8 $1.3 $(35.4)$(0.7)
Fair Value Measurement of Investments
The Company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $0.2 million and $17.2 million for the three and six months ended June 30, 2021, respectively. The Company had a reduction in unrealized gains of $11.9 million for the three months ended June 30, 2021 and unrealized gains of $31.6 million for the six months ended June 30, 2021.
ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A small portion of finance receivables for one entity were converted to investment securities during the first quarter of 2021. This entity became publicly traded during the first quarter of 2021 and now has a readily determinable fair value. As of June 30, 2021, the fair value of investment securities are based on quoted market prices for identical assets (Level 1 of the fair value hierarchy) and approximated $39.1 million. The unrealized gain on these investment securities was $31.6 million at June 30, 2021. The remaining investments held of $21.5 million do not have readily determinable fair values and the Company has elected to apply the measurement alternative to these investments and present them at cost. Investments are reported in "Other assets" in the accompanying consolidated balance sheets. Realized and unrealized gains and losses are reported in "Other (income) expense, net" in the consolidated statements of income.
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 20202021 (Unaudited)

  Liability Derivatives
  June 30, 2020 December 31, 2019
Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value
2020 Interest rate swaps Other liabilities $29.9
 N/A N/A

We did not designate any of the 2017 interest rate caps as hedges for accounting purposes. Accordingly, changes in the fair value of the interest rate caps were recognized as "Interest expense" in the consolidated statement of income. The following table presents the effect of the interest rate derivatives on our consolidated statements of income for the periods presented (in millions):
  Location of Gain / (Loss) Recognized in Income on Derivatives 
Amount of Gain / (Loss)
Recognized in Income on Derivatives
   Three Months Ended June 30, Six Months Ended June 30,
   2020 2019 2020 2019
Derivatives Designated as Hedging Instruments          
2020 Interest rate swaps Interest expense $—
 N/A
 $—
 N/A
Derivatives Not Designated as Hedging Instruments          
2017 Interest rate caps Interest expense N/A
 $(0.4) N/A
 $(0.9)

Note 9—Convertible Preferred Stock
In June 2020, KAR completed the issuance and sale of an aggregate of 550,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), in two closings at a purchase price of $1,000 per share (for the second closing, plus accumulated dividends from and including the first closing date to but excluding June 29, 2020) for an aggregate purchase price of approximately $550 million to an affiliate of Ignition Parent LP (“Apax”) and an affiliate of Periphas Capital GP, LLC (“Periphas”).

The Company has authorized 1,500,000 shares of Series A Preferred Stock. The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock has a liquidation preference of $1,000 per share. The holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7% per annum, payable quarterly in arrears. Dividends are payable in kind through the issuance of additional shares of Series A Preferred Stock for the first 8 dividend payments, and thereafter, in cash or in kind, or in any combination of both, at the option of the Company. As of June 30, 2020, the Series A Preferred Stock had accumulated dividends in kind of $2.1 million, which have not been declared. The holders of the Series A Preferred Stock are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis.

The Series A Preferred Stock will be convertible at the option of the holders thereof at any time after one year into shares of common stock at a conversion price of $17.75 per share of Series A Preferred Stock and a conversion rate of 56.3380 shares of common stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments. At any time after three years, if the closing price of the common stock exceeds $31.0625 per share, as may be adjusted pursuant to the Certificate of Designations, for at least 20 trading days in any period of 30 consecutive trading days, at the election of the Company, all or any portion of the Series A Preferred Stock will be convertible into the relevant number of shares of common stock.

The holders of the Series A Preferred Stock are entitled to vote with the holders of the Company's common stock as a single class on all matters submitted to a vote of the holders of the Company's common stock.


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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

At any time after six years, the Company may redeem some or all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of (x) the liquidation preference thereof, plus (y) all accrued and unpaid dividends, multiplied by (ii) (A) 105% if the redemption occurs at any time after the six-year anniversary of June 10, 2020 (the "Initial Closing Date") and prior to the seven-year anniversary of the Initial Closing Date or (B) 100% if the redemption occurs after the seven-year anniversary of the Initial Closing Date.

Upon certain change of control events involving the Company, and subject to certain limitations set forth in the Certificate of Designations, each holder of the Series A Preferred Stock will either (i) receive such number of shares of common stock into which such holder is entitled to convert all or a portion of such holder’s shares of Series A Preferred Stock at the then current conversion price, (ii) receive, in respect of all or a portion of such holder’s shares of Series A Preferred Stock, the greater of (x) the amount per share of Series A Preferred Stock that such holder would have received had such holder, immediately prior to such change of control, converted such share of Series A Preferred Stock into common stock and (y) a purchase price per share of Series A Preferred Stock, payable in cash, equal to the product of (A) 105% multiplied by (B) the sum of the liquidation preference and accrued dividends with respect to such share of Series A Preferred Stock, or (iii) unless the consideration in such change of control event is payable entirely in cash, retain all or a portion of such holder’s shares of Series A Preferred Stock.

For so long as Apax or its affiliates beneficially own a certain percentage of the shares of Series A Preferred Stock purchased in the Apax issuance on an as-converted basis, Apax will continue to have the right to appoint one individual to the board of directors. Additionally, so long as Apax or its affiliates beneficially own a certain percentage of the shares of Series A Preferred Stock purchased in the Apax issuance on an as-converted basis, Apax will have the right to appoint one non-voting observer to the board of directors. Likewise, so long as Periphas beneficially owns a certain percentage of the shares of Series A Preferred Stock purchased in the Periphas issuance on an as-converted basis, Periphas will have the right to appoint one non-voting observer to the board of directors.

Apax is subject to certain standstill restrictions, until the later of three years and the date on which Apax no longer owns 25% of the shares of Series A Preferred Stock purchased in the Apax issuance on an as-converted basis. Periphas is also subject to certain standstill restrictions, until the later of three years and the date on which Periphas no longer owns 50% of the shares of Series A Preferred Stock purchased in the Periphas issuance on an as-converted basis. Subject to certain customary exceptions, Apax and Periphas are restricted from transferring the Series A Preferred Stock for one year.

Apax, its affiliates and Periphas have certain customary registration rights with respect to shares of the Series A Preferred Stock and the shares of the common stock held by it issued upon any future conversion of the Series A Preferred Stock.
Note 10—Commitments and Contingencies
We are involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business such as employment matters and dealer disputes. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies including litigation and environmental matters are included in "Other accrued expenses" at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows. Legal fees are expensed as incurred. There has been 0 significant change in the legal and regulatory proceedings related to continuing operations which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2020 (Unaudited)

Note 11—10—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consisted of the following (in millions):
 June 30,
2021		December 31,
2020
Foreign currency translation loss$(4.5)$(13.2)
Unrealized loss on interest rate derivatives, net of tax(12.5)(19.5)
Accumulated other comprehensive loss$(17.0)$(32.7)
 June 30,
2020		 December 31,
2019
Foreign currency translation loss$(50.9) $(31.0)
Unrealized loss on interest rate derivatives, net of tax(22.6) —
Accumulated other comprehensive loss$(73.5) $(31.0)


Note 12—11—Segment Information
ASC 280,Segment Reporting, requires reporting of segment information that is consistent with the manner in which the chief operating decision maker operates and views the Company. Our operations are grouped into 2 operating segments: ADESA Auctions and AFC, which also serve as our reportable business segments. These reportable business segments offer different services and have fundamental differences in their operations. Results
Prior to 2020, the costs and expenses of the former IAA segment and spin-related costs are reported as discontinued operations (see Note 2).
The holding company is maintainedwere reported separately from the reportable segmentssegments. Due to the spin-off of IAA in 2019 and includesthe Company's transition from physical marketplaces to digital marketplaces, the Company has simplified its business and operations. Corporate expenses, associated withpreviously reported as holding company expenses, are now included in the corporate offices, such as salaries, benefits and travel costs for the corporate management team, certain human resources,segments. Certain known expenses (e.g., information technology costs) were recorded directly to the ADESA and accounting costs, and certain insurance, treasury, legal and risk management costs. Holding company interestAFC segments. Interest expense includes the interest expense incurred on finance leases and the corporate debt structure. Intercompany charges relate primarily to interest on intercompany debt or receivables and certain administrative costs allocatedpreviously reported by the holding company.company has been recorded in the ADESA segment. The residual shared services expenses were recorded at ADESA and allocated to AFC based on revenue and employee headcount. Holding company amounts reported in the segment results in the consolidated financial statements prior to December 31, 2020 have been reclassified to conform to the current presentation.
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 2021 (Unaudited)

Financial information regarding our reportable segments is set forth below as of and for the three months ended June 30, 2021 (in millions):
ADESA
Auctions		AFCConsolidated
Operating revenues$516.8 $68.6 $585.4 
Operating expenses
Cost of services (exclusive of depreciation and amortization)319.5 13.7 333.2 
Selling, general and administrative131.4 8.8 140.2 
Depreciation and amortization42.9 2.5 45.4 
Total operating expenses493.8 25.0 518.8 
Operating profit23.0 43.6 66.6 
Interest expense21.89.4 31.2 
Other (income) expense, net2.911.9 14.8 
Intercompany expense (income)0.1(0.1)0 
Income (loss) before income taxes(1.8)22.4 20.6 
Income taxes3.4 5.7 9.1 
Net income (loss)$(5.2)$16.7 $11.5 
Total assets$4,627.3 $2,491.0 $7,118.3 

Financial information regarding our reportable segments is set forth below as of and for the three months ended June 30, 2020 (in millions):
 ADESA
Auctions		 AFC Holding
Company		 Consolidated
Operating revenues$362.2
 $56.8
 $—
 $419.0
Operating expenses       
Cost of services (exclusive of depreciation and amortization)217.2
 17.9
 —
 235.1
Selling, general and administrative79.5
 5.6
 27.2
 112.3
Depreciation and amortization          38.2
 2.6
 5.7
 46.5
  Goodwill and other intangibles impairment29.8
 —
 —
 29.8
Total operating expenses364.7
 26.1
 32.9
 423.7
Operating profit (loss)(2.5) 30.7
 (32.9) (4.7)
Interest expense0.7
 9.2
 21.0
 30.9
Other (income) expense, net(1.3) —
 2.6
 1.3
Intercompany expense (income)—
 (0.1) 0.1
 —
Income (loss) from continuing operations before income taxes(1.9) 21.6
 (56.6) (36.9)
Income taxes2.5
 5.6
 (12.7) (4.6)
Net income (loss) from continuing operations$(4.4) $16.0
 $(43.9) $(32.3)
Total assets$3,607.7
 $1,973.8
 $912.5
 $6,494.0

ADESA
Auctions		AFCConsolidated
Operating revenues$362.2 $56.8 $419.0 
Operating expenses   
Cost of services (exclusive of depreciation and amortization)217.2 17.9 235.1 
Selling, general and administrative103.7 8.6 112.3 
Depreciation and amortization          43.3 3.2 46.5 
Goodwill and other intangibles impairment29.8 0 29.8 
Total operating expenses394.0 29.7 423.7 
Operating profit (loss)(31.8)27.1 (4.7)
Interest expense21.7 9.2 30.9 
Other (income) expense, net1.3 0 1.3 
Intercompany expense (income)0.2 (0.2)0 
Income (loss) before income taxes(55.0)18.1 (36.9)
Income taxes(9.5)4.9 (4.6)
Net income (loss)$(45.5)$13.2 $(32.3)
Total assets$4,518.9 $1,975.1 $6,494.0 
21
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 20202021 (Unaudited)


Financial information regarding our reportable segments is set forth below as of and for the threesix months ended June 30, 20192021 (in millions):
ADESA
Auctions		AFCConsolidated
Operating revenues$1,032.6 $134.4 $1,167.0 
Operating expenses
Cost of services (exclusive of depreciation and amortization)636.427.2663.6 
Selling, general and administrative271.617.6289.2 
Depreciation and amortization87.54.992.4 
Total operating expenses995.5 49.7 1,045.2 
Operating profit37.1 84.7 121.8 
Interest expense43.418.7 62.1 
Other (income) expense, net(3.0)(32.4)(35.4)
Intercompany expense (income)0.2(0.2)0 
Income (loss) before income taxes(3.5)98.6 95.1 
Income taxes7.5 25.2 32.7 
Net income (loss)$(11.0)$73.4 $62.4 
 
ADESA
Auctions
 AFC 
Holding
Company
 Consolidated
Operating revenues$632.4
 $86.7
 $—
 $719.1
Operating expenses       
Cost of services (exclusive of depreciation and amortization)392.9
 24.5
 —
 417.4
Selling, general and administrative121.9
 6.4
 34.9
 163.2
Depreciation and amortization          38.0
 2.6
 7.3
 47.9
Total operating expenses552.8
 33.5
 42.2
 628.5
Operating profit (loss)79.6
 53.2
 (42.2) 90.6
Interest expense1.0
 16.2
 38.4
 55.6
Other (income) expense, net(1.3) (0.1) 0.3
 (1.1)
Intercompany expense (income)7.6
 (1.6) (6.0) —
Income (loss) from continuing operations before income taxes72.3
 38.7
 (74.9) 36.1
Income taxes21.8
 11.3
 (24.4) 8.7
Net income (loss) from continuing operations$50.5
 $27.4
 $(50.5) $27.4
Total assets$3,717.0
 $2,495.1
 $165.7
 $6,377.8

Financial information regarding our reportable segments is set forth below as of and for the six months ended June 30, 2020 (in millions):
 
ADESA
Auctions
 AFC 
Holding
Company
 Consolidated
Operating revenues$929.2
 $135.3
 $—
 $1,064.5
Operating expenses       
Cost of services (exclusive of depreciation and amortization)587.9
 41.8
 —
 629.7
Selling, general and administrative202.3
 12.1
 60.3
 274.7
Depreciation and amortization          77.3
 5.3
 11.6
 94.2
  Goodwill and other intangibles impairment29.8
 —
 —
 29.8
Total operating expenses897.3
 59.2
 71.9
 1,028.4
Operating profit (loss)31.9
 76.1
 (71.9) 36.1
Interest expense1.5
 22.8
 44.6
 68.9
Other (income) expense, net(1.3) (0.1) 0.7
 (0.7)
Intercompany expense (income)0.7
 (0.9) 0.2
 —
Income (loss) from continuing operations before income taxes31.0
 54.3
 (117.4) (32.1)
Income taxes11.3
 13.7
 (27.6) (2.6)
Net income (loss) from continuing operations$19.7
 $40.6
 $(89.8) $(29.5)

ADESA
Auctions		AFCConsolidated
Operating revenues$929.2 $135.3 $1,064.5 
Operating expenses   
Cost of services (exclusive of depreciation and amortization)587.9 41.8 629.7 
Selling, general and administrative256.1 18.6 274.7 
Depreciation and amortization          87.7 6.5 94.2 
Goodwill and other intangibles impairment29.8 0 29.8 
Total operating expenses961.5 66.9 1,028.4 
Operating profit (loss)(32.3)68.4 36.1 
Interest expense46.1 22.8 68.9 
Other (income) expense, net(0.6)(0.1)(0.7)
Intercompany expense (income)1.0 (1.0)0 
Income (loss) before income taxes(78.8)46.7 (32.1)
Income taxes(14.7)12.1 (2.6)
Net income (loss)$(64.1)$34.6 $(29.5)
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KAR Auction Services, Inc.
Condensed Notes to Consolidated Financial Statements (Continued)
June 30, 20202021 (Unaudited)

Financial information regarding our reportable segments is set forth below as of and for the six months ended June 30, 2019 (in millions):
 
ADESA
Auctions
 AFC 
Holding
Company
 Consolidated
Operating revenues$1,232.1
 $176.6
 $—
 $1,408.7
Operating expenses       
Cost of services (exclusive of depreciation and amortization)763.6
 47.7
 —
 811.3
Selling, general and administrative248.5
 13.6
 76.3
 338.4
Depreciation and amortization          73.0
 5.0
 14.2
 92.2
Total operating expenses1,085.1
 66.3
 90.5
 1,241.9
Operating profit (loss)147.0
 110.3
 (90.5) 166.8
Interest expense1.7
 33.3
 77.1
 112.1
Other (income) expense, net(3.2) (0.2) 0.2
 (3.2)
Intercompany expense (income)17.9
 (2.8) (15.1) —
Income (loss) from continuing operations before income taxes130.6
 80.0
 (152.7) 57.9
Income taxes37.7
 22.1
 (44.6) 15.2
Net income (loss) from continuing operations$92.9
 $57.9
 $(108.1) $42.7
Geographic Information
Our foreign operations include Canada, Mexico, Continental Europe and the U.K. MostApproximately 56% and 54% of our operations outsideforeign operating revenues were from Canada for the U.S. are in Canada. Approximatelythree and six months ended June 30, 2021, respectively, and approximately 63% and 59% of our foreign operating revenues were from Canada for the three and six months ended June 30, 2020, respectively, and approximately 63% and 66%respectively. Most of ourthe remaining foreign operating revenues were generated from Canada for the three and six months ended June 30, 2019, respectively.Continental Europe. Information regarding the geographic areas of our operations is set forth below (in millions):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Operating revenues  
U.S.$420.4 $342.1 $860.0 $865.4 
Foreign165.0 76.9 307.0 199.1 
$585.4 $419.0 $1,167.0 $1,064.5 
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Operating revenues       
U.S. $342.1
 $580.9
 $865.4
 $1,160.8
Foreign76.9
 138.2
 199.1
 247.9
 $419.0
 $719.1
 $1,064.5
 $1,408.7
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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and which are subject to certain risks, trends and uncertainties. In particular, statements made in this report on Form 10-Q that are not historical facts (including, but not limited to, expectations, estimates, assumptions and projections regarding the industry, business, future operating results, potential acquisitions and anticipated cash requirements) may be forward-looking statements. Words such as "should," "may," "will," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions identify forward-looking statements. Such statements, including statements regarding the impactpotential impacts of COVID-19;the COVID-19 pandemic; our future growth; anticipated cost savings, revenue increases, credit losses and capital expenditures; dividend declarations and payments; common stock repurchases; tax rates and assumptions; strategic initiatives, greenfields and acquisitions; our competitive position and retention of customers; and our continued investment in information technology, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, filed on February 19, 2020. Some of these factors include:
the evolving impact of the COVID-19 pandemic on our business18, 2021, and the economy generally;
our ability to effectively maintain or update information and technology systems;
our ability to implement and maintain measures to protect against cyber-attacks;
significant current competition and the introduction of new competitors;
competitive pricing pressures;
our ability to successfully implement our business strategies or realize expected cost savings and revenue enhancements;
our ability to meet or exceed customers' expectations, as well as develop and implement information systems responsive to customer needs;
business development activities, including greenfields, acquisitions and integration of acquired businesses;
costs associated with the acquisition of businesses or technologies;
fluctuations in consumer demand for and in the supply of used, leased and salvage vehicles and the resulting impact on auction sales volumes, conversion rates and loan transaction volumes;
any losses of key personnel;
our ability to obtain land or renew/enter into new leases at commercially reasonable rates;
decreases in the number of used vehicles sold at physical auctions;
changes in the market value of vehicles auctioned;
trends in new and used vehicle sales and incentives, including wholesale used vehicle pricing;
the ability of consumers to lease or finance the purchase of new and/or used vehicles;
the ability to recover or collect from delinquent or bankrupt customers;
economic conditions including fuel prices, commodity prices, foreign exchange rates and interest rate fluctuations;
trends in the vehicle remarketing industry;
trends in the number of commercial vehicles being brought to auction, in particular off-lease volumes;
changes in the volume of vehicle production, including capacity reductions at the major original equipment manufacturers;
laws, regulations and industry standards, including changes in regulations governing the sale of used vehicles and commercial lending activities;
our ability to maintain our brand and protect our intellectual property;

the costs of environmental compliance and/or the imposition of liabilities under environmental laws and regulations;
weather, including increased expenses as a result of catastrophic events;
general business conditions;
our substantial amount of debt;
restrictive covenants in our debt agreements;
our assumption of the settlement risk for vehicles sold;
litigation developments;
our self-insurance for certain risks;
interruptions to service from our workforce;
any impairment to our goodwill or other intangible assets;
changes in effective tax rates;
the taxable nature of the spin-off of our former salvage auction business;
changes to accounting standards; and
other risksthose described from time to time in our filingsfuture reports filed with the SEC.
Securities and Exchange Commission. Many of these risk factors are outside of our control, and as such, they involve risks which are not currently known that could cause actual results to differ materially from those discussed or implied herein. The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.
Our future growth depends on a variety of factors, including our ability to increase vehicle sold volumes and loan transaction volumes, expand our product and service offerings, including information systems development, acquire and integrate additional business entities, manage expansion, control costs in our operations, introduce fee increases, and retain our executive officers and key employees. We cannot predict whether our growth strategy will be successful. In addition, we cannot predict what portion of overall sales will be conducted through online auctions or other remarketing methods in the future and what impact this may have on our auction business.
Impact of COVID-19

OnIn March 11, 2020, the World Health Organization ("WHO") designateddeclared the COVID-19 asoutbreak a pandemic. Governments around the world have mandated, and continueAlthough governmental restrictions that were imposed in 2020 to introduce, numerous and varying measures to slowreduce the spread of COVID-19 including travel bans and restrictions, quarantines, curfews, shelter-in-place and safer-at-home orders, business shutdowns and closures, and have also implemented multi-phase plans with the goal of re-opening their respective jurisdictions. Certainsince been lifted or scaled back in many jurisdictions, have begun easing restrictions only to return to tighter restrictions in the face of increases in new COVID-19 cases. cases, including more contagious variants, have resulted in the reimposition of restrictions in certain jurisdictions, and may lead to other restrictions being imposed. The COVID-19 pandemic and the related preventative measures taken to help slow the spread have caused, and may continue to cause, significant volatility, uncertainty and economic disruption.

In response to these measures and for the protection of our employees and customers, during 2020 we implemented several measures to help secure our business, including but not limited to furloughs, prohibiting non-essential business travel, suspending non-essential services provided by certain third parties at our locations, delaying or canceling capital projects at our on-premise marketplace locations and suspending the Company's quarterly dividend.
In addition, on March 20, 2020, we temporarily suspended physicalon-premise sale operations across North America, including Simulcast-only sales, across North America. We began operatingand resumed operation of Simulcast-only sales in select markets on April 6, 2020 and expanded2020. We subsequently continued to expand the Simulcast-only sales each week, where possible and as permitted by government directives. We also held Simulcast+ auctions at select locations a fully digital auction operated remotely with an automated auctioneer, sequential sales, audio and visual cues to simulate the live auction experience and all buyers and sellers interacting virtually through the Simulcast platform.

All ADESA auction locations in the U.S. and Canada are offering vehicles for sale via ADESA Simulcast, DealerBlock and Simulcast+. Most, with all ADESA auction locations have resumedin the U.S. and Canada offering ancillary and related services, where possible and as permittedvehicles for sale by government directives. While ADESA has experienced increasing volumes over the last few months, the business has not fully returned to pre-COVID operations. Given the evolving health, economic, social and governmental environments, the potential impact that COVID-19 could have on our business remains uncertain.

As a result, we proactively took significant steps to help secure our business and preserve available cash duringend of the second quarter including but not limited to the following measures:


Reduced compensation expense by
▪our CEO, CFO and President voluntarily electing to forgo 100% of their respective base salaries and the remainder of our executive officers voluntarily electing to reduce their base salaries by 50% for the second quarter of 2020,
▪reducing base salaries across many levels of the organization for part of the second quarter of 2020,
▪furloughing approximately 11,000 employees in April 2020 (approximately 5,000 have returned to work),
▪commencing a reduction in force in June 2020 (impacting approximately 3,000 of our employees), and
▪our board of directors voluntarily electing to forgo their cash compensation for the second quarter of 2020;
Prohibited non-essential business travel;
Suspended non-essential services provided by certain third parties at our locations;
Delayed or canceled capital projects at our physical auction locations;
Negotiated the deferral of rent payments with certain landlords;
Suspended the ADESA Assurance program for part of the second quarter;
AFC reduced the unused portion of certain floorplan lines with its customers; and
Suspended the Company's quarterly dividend.

In addition, in June 2020 we issued and sold an aggregate of 550,000 shares of newly issued perpetual convertible preferred stock of the Company for net proceeds of approximately $528.2 million, as described in Note 9, "Convertible Preferred Stock."2020.
We have also takentook advantage of legislation introduced to assist companies during this time.the pandemic. In the second quarterfirst six months of 2020,2021, we recorded a total of approximately $7.9$5.8 million of employee retentionclaimed under the Canada Emergency Wage Subsidy. These credits taken underpartially offset salaries recorded in Canada. We will continue to monitor and assess the impact the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and approximately $9.7 million under the Canada Emergency Wage Subsidy. These credits partially offset salaries and medical costs recorded in the U.S. and Canada. We will continue to monitor and assess the impact the CARES Act and similar legislation in other countries may have on our business and financial results.
The automotive industry has experienced unprecedented market conditions during the pandemic, including a decline in new vehicle inventory resulting from the shortage of semiconductors. This reduction in supply of new vehicles has caused increased new and used vehicle prices, as well as increased demand for used vehicles. More lessees and dealers are therefore purchasing vehicles at residual value, thus decreasing the number of off-lease vehicles coming to auction. Further, government support and loan accommodations have resulted in fewer repossessed vehicles coming to auction. These factors have contributed to our commercial vehicle volumes declining in 2021.
While we have developed and implemented and continue to develop and implement health and safety and return-to-workplace protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 toon our employees, customers and our business, the extent of the impact of the pandemic on our business and financial results will depend on numerous evolving factors that we are not ablecontinue to accurately predict.
The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments whichthat are highly uncertain and cannot be predicted,unpredictable.
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The broader implications for our business and results of operations remain uncertain and will depend on many factors outside our control, including, but not limited to,without limitation, the duration and spreadseverity of the outbreak, its severity,COVID-19 pandemic, the actionsdegree to containwhich governmental restrictions are relaxed or reimposed, the virus or treat its impact, and how quickly and to what extentlength of time it takes for normal economic and operating conditions can resume.to resume, the number and effectiveness of vaccines and numerous other uncertainties. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.business.
Overview
We provide whole car auction services in North America and Europe. Our business is divided into two reportable business segments, each of which is an integral part of the vehicle remarketing industry: ADESA Auctions and AFC.
•The ADESA Auctions segment serves a domestic and international customer base through physical and online auctions and through 74 whole car auction facilities indigital marketplaces for wholesale vehicles supported by more than 70 vehicle logistics center locations across North America that are developed and strategically located to draw professional sellers and buyers together and allow the buyers to inspect and compare vehicles remotely or in person. Through ADESA.com, ADESA offers comprehensive private label remarketing solutions to automobile manufacturers, captive finance companies and other institutions to offer vehicles via the Internet prior to arrival at the physical auction.on-premise marketplaces. Vehicles atsold on ADESA's auctionsdigital platforms are typically sold by commercial fleet operators, financial institutions, rental car companies, new and used vehicle dealers and vehicle manufacturers and their captive finance companies to franchise and independent used vehicle dealers. ADESA also provides value-added ancillary services including inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and collateral recovery services. ADESA also includes BacklotCars, an app and web-based dealer-to-dealer wholesale vehicle platform utilized in the United States, TradeRev, an online automotive remarketing systemplatform in Canada where dealers can launch and participate in real-time vehicle auctions at any time, ADESA Remarketing Limited, an online whole car vehicle remarketing business in the United Kingdom and ADESA Europe (formerly known as CarsOnTheWeb), an online wholesale vehicle auction marketplace in Continental Europe.

•The AFC segment provides short-term, inventory-secured financing, known as floorplan financing, primarily to independent used vehicle dealers. At June 30, 2020, AFC conducted business at 123 locations indealers throughout the United States and Canada. ThePrior to December 2020, the Company also sellssold vehicle service contracts through Preferred Warranties, Inc. ("PWI").
ThePrior to 2020, the costs and expenses of the holding company is maintainedwere reported separately from the reportable segmentssegments. Due to the spin-off of IAA in 2019 and includesthe Company's transition from physical marketplaces to digital marketplaces, the Company has simplified its business and operations. Corporate expenses, associated withpreviously reported as holding company expenses, are now included in the corporate offices, such as salaries, benefits and travel costs for our management team, certain human resources,segments. Certain known expenses (e.g., information technology costs) were recorded directly to the ADESA and accounting costs, and certain insurance, treasury, legal and risk management costs. Holding company interestAFC segments. Interest expense includes the interest expense incurred on finance leases and the corporate debt structure. Intercompany charges relate primarily to interest on intercompany debt or receivables and certain administrative costs allocatedpreviously reported by the holding company.company has been recorded in the ADESA segment. The residual shared services expenses were recorded at ADESA and allocated to AFC based on revenue and employee headcount. Holding company amounts reported in the segment results in the consolidated financial statements prior to December 31, 2020 have been reclassified to conform to the current presentation.
Industry Trends
Whole Car
Used vehicles sold in North America through whole car auctions, including online onlyoff-premise volumes and mobile application volumes, were approximately 10.3 million and 12.0 million in 2020 and 11.5 million in 2019, and 2018, respectively. Data for the whole car auction industry is collected by the NAAA through an annual survey. The NAAA industry volumes collected by the annual survey do not include online onlyoff-premise volumes or mobile application volumes (e.g., Openlane, TradeRev, BacklotCars and their respective competitors), but we have included these volumes in our totals. In addition to the traditional whole car auction market and online onlyoff-premise venues described above, we believe mobile applications, such as TradeRev and BacklotCars, may provide an opportunity to expand our total addressable market for whole car auctions bydealer-to-dealer transactions to as much as 15 million units from approximately 5 million units.units in 2019. TradeRev and BacklotCars sold approximately 316,000 vehicles in the digital dealer-to-dealer marketplace for the year ended December 31, 2020, compared with approximately 210,000 vehicles for the year ended December 31, 2019. TradeRev and BacklotCars sold approximately 119,000 vehicles in the digital dealer-to-dealer marketplace for the three months ended June 30, 2021, compared with approximately 72,000 vehicles for the three months ended June 30, 2020. This volume data includes vehicles sold by BacklotCars prior to its acquisition in November 2020. For the six months ended June 30, 2021 and 2020, vehicles sold by these companies in the digital dealer-to-dealer marketplace were approximately 219,000 and 127,000, respectively. The COVID-19 pandemic has had a material impact on the whole car auction industry and we are unable to estimate future volumes, but expect volumes in 2020 to be lower than in 2019.volumes.
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Automotive Finance
AFC works with independent used vehicle dealers to improve their results by providing a comprehensive set of business and financial solutions that leverages its local presence of branches and in-market representatives, industry experience and scale, as well as KAR affiliations. AFC's North American dealer base was comprised of approximately 16,10013,600 dealers in 2019,2020, and loan transactions, which includes both loans paid off and loans curtailed, were approximately 1.81.5 million in 2019. The COVID-19 pandemic has had a significant impact on AFC and we are unable to estimate future loan transaction volumes, but expect volumes in 2020 to be lower than in 2019.2020.
Key challenges for the independent used vehicle dealer include demand for used vehicles, disruptions in pricing of used vehicle inventory, lack of access to consumer financing and increased competition resulting from consolidation in the used vehicle dealer industry,car retail activity of franchise and public dealerships (most of which do not utilize AFC or its competitors for floorplan financing), as well as the ability to operate in locations experiencing pandemic shelter-in-place orders. These same challenges, to the extent they occur, could result in a material negative impact on AFC's results of operations. A significant decline in used vehicle sales would result in a decrease in consumer auto loan originations and an increased number of dealers defaulting on their loans. In addition, volatility in wholesale vehicle pricing impacts the value of recovered collateral on defaulted loans and the resulting severity of credit losses at AFC. As a result of reduced retail activity, wholesale used car pricing declined in April 2020, but rebounded in May and June 2020. A decrease in wholesale used car pricing could lead to increased losses if dealers are unable to satisfy their obligations.
Seasonality
The volume of vehicles sold through our auctions generally fluctuates from quarter-to-quarter. This seasonality is caused by several factors including weather, the timing of used vehicles available for sale from selling customers, holidays, and the seasonality of the retail market for used vehicles, which affects the demand side of the auction industry. Used vehicle auction volumes tend to decline during prolonged periods of winter weather conditions. As a result, revenues and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle auction volume as well as additional costs associated with the holidays and winter weather.
Sources of Revenues and Expenses
Our revenue is derived from auction fees and relatedvarious on-premise and off-premise services, associated with our whole car auctions, and from dealer financing fees, interest income and other service revenue at AFC. Although auction revenues primarily include the auction services and related fees, our related receivables and payables include the gross value of the vehicles sold.
Our operating expenses consist of cost of services, selling, general and administrative and depreciation and amortization. Cost of services is composed of payroll and related costs, subcontract services, the cost of vehicles purchased, supplies, insurance, property taxes, utilities, service contract claims, maintenance and lease expense related to the auction sites and loan offices. Cost of services excludes depreciation and amortization. Selling, general and administrative expenses are composed of payroll and related costs, sales and marketing, information technology services and professional fees.

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Results of Operations
Overview of Results of KAR Auction Services, Inc. for the Three Months Ended June 30, 20202021 and 2019:2020:
 Three Months Ended June 30,
(Dollars in millions except per share amounts)20212020
Revenues  
Auction fees$236.7 $177.8 
Service revenue182.2 134.8 
Purchased vehicle sales97.9 49.6 
Finance-related revenue68.6 56.8 
Total revenues585.4 419.0 
Cost of services*333.2 235.1 
Gross profit*252.2 183.9 
Selling, general and administrative140.2 112.3 
Depreciation and amortization45.4 46.5 
Goodwill and other intangibles impairment— 29.8 
Operating profit (loss)66.6 (4.7)
Interest expense31.2 30.9 
Other (income) expense, net14.8 1.3 
Income (loss) before income taxes20.6 (36.9)
Income taxes9.1 (4.6)
Net income (loss)$11.5 $(32.3)
Net income (loss) per share  
Basic$0.01 $(0.27)
Diluted$0.01 $(0.27)
 Three Months Ended June 30,
(Dollars in millions except per share amounts)2020 2019
Revenues   
Auction fees and services revenue$312.6
 $553.1
Purchased vehicle sales49.6
 79.3
Finance-related revenue56.8
 86.7
Total revenues419.0
 719.1
Cost of services*235.1
 417.4
Gross profit*183.9
 301.7
Selling, general and administrative112.3
 163.2
Depreciation and amortization46.5
 47.9
Goodwill and other intangibles impairment29.8
 —
Operating profit (loss)(4.7) 90.6
Interest expense30.9
 55.6
Other expense (income), net1.3
 (1.1)
Income (loss) from continuing operations before income taxes(36.9) 36.1
Income taxes(4.6) 8.7
Net income (loss) from continuing operations(32.3) 27.4
Net income from discontinued operations—
 28.2
Net income (loss)$(32.3) $55.6
Net income (loss) from continuing operations per share   
Basic$(0.27) $0.21
Diluted$(0.27) $0.20

* Exclusive of depreciation and amortization
Overview
For the three months ended June 30, 2020,2021, we had revenue of $419.0$585.4 million compared with revenue of $719.1$419.0 million for the three months ended June 30, 2019, a decrease2020, an increase of 42%40%. Businesses acquired in the last twelve months accounted for an increase in revenue of $39.7 million or 7% of revenue. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.
Depreciation and Amortization
Depreciation and amortization decreased $1.4$1.1 million, or 3%2%, to $45.4 million for the three months ended June 30, 2021, compared with $46.5 million for the three months ended June 30, 2020, compared with $47.9 million for the three months ended June 30, 2019.2020. The decrease in depreciation and amortization was primarily the result of fixed assets that have become fully depreciated and a reduction in assets placed in service or acquired, resulting from a reduction in capital spending and no acquisitions in 2020.service.
Goodwill and Other Intangibles Impairment
In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited through the first partsecond quarter of 2020 as compared to 2019,a $25.5 million non-cash goodwill impairment charge and the outlook for the business was significantly reduced. This analysis resulted in thea $4.3 million non-cash customer relationship impairment of the goodwill balance totaling $25.5 millioncharge were recorded in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded(doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for this amount in the second quarter of 2020.

In addition, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships.

business to be significantly reduced.
Interest Expense
Interest expense decreased $24.7increased $0.3 million, or 44%1%, to $31.2 million for the three months ended June 30, 2021, compared with $30.9 million for the three months ended June 30, 2020, compared with $55.62020. The increase was primarily attributable to an increase in interest expense at AFC of $0.2 million, which resulted from an increase in the average finance receivables balance for the three months ended June 30, 2019. The decrease was primarily attributable to a decrease in the weighted average interest rate of approximately 1.1% and a decrease of $821.9 million in the average outstanding balance of corporate debt for the three months ended June 30, 2020 compared with the three months ended June 30, 2019, resulting from the pay down of debt of approximately $1.3 billion in connection with the spin-off of IAA on June 28, 2019 and a net increase in term loan debt of approximately $0.5 billion in connection with the debt refinancing on September 19, 2019. In addition, there was a decrease in interest expense at AFC of $7.0 million, which resulted from a decrease in the average finance receivables balance and in incremental interest rates for the three months ended June 30, 2020,2021, as compared with the three months ended June 30, 2019.2020.
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Other (Income) Expense, Net
The Company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $0.2 million for the three months ended June 30, 2021. The Company had a reduction in unrealized gains of $11.9 million at June 30, 2021, as a result of the change in fair value for one of these investment securities which had a recent public offering. Any future changes in the fair value of these investment securities will be reflected as unrealized gains or losses until these securities are sold.
For the three months ended June 30, 2021, we had other expense of $14.8 million compared with $1.3 million for the three months ended June 30, 2020. The increase in other expense was primarily attributable to a reduction in unrealized gains on investment securities of approximately $11.9 million and an increase in contingent consideration valuation of $4.5 million, partially offset by a decrease in foreign currency losses of $2.3 million and other miscellaneous items aggregating $0.6 million.
Income Taxes
We had an effective tax rate of 44.2% for the three months ended June 30, 2021, compared with an effective tax rate of 12.5% for the three months ended June 30, 2020, compared with an2020. The effective tax rate of 24.1% for the three months ended June 30, 2019.2021 was unfavorably impacted by the expense for the increase in the estimated value of contingent consideration for which no tax benefits have been recorded. The rate for the three months ended June 30, 2020 rate was unfavorably impacted by the goodwill and other intangibles impairment charge for which no tax benefit has been recorded. This was recorded, partially offset by the tax benefit from recording net operating losses and deductions related to stock-based compensation expenses.
Net Income from Discontinued Operations
On June 28, 2019, the Company completed the separation of its salvage auction business, IAA, through a spin-off, creating a new independent publicly traded salvage auction company. As such, the financial results of IAA have been accounted for as discontinued operations in the comparable 2019 results presented. For the three months ended June 30, 2020 and 2019, the Company's financial statements included income from discontinued operations of $0.0 million and $28.2 million, respectively. For a further discussion, reference Note 2 of the condensed notes to the consolidated financial statements.
Impact of Foreign Currency
For the three months ended June 30, 2020,2021, fluctuations in the Canadian exchange rate decreasedincreased revenue by $1.3$9.3 million, operating profit by $0.4 million, net income (loss) by $0.1$3.4 million and net income (loss) per diluted share by less than $0.01.$2.0 million. For the three months ended June 30, 2020,2021, fluctuations in the European exchange rate decreasedincreased revenue by $0.4$5.7 million, operating profit by $0.2 million and had no impact on operating profit,decreased net income (loss) and net income (loss) per diluted share. In addition, for the three months ended June 30, 2020, as a resultby $0.2 million.
Impact of the goodwill and other intangibles impairment in the U.K., fluctuations in the British pound exchange rate decreased the net loss by $1.1 million.
Business Trends Throughout the Second QuarterCOVID-19 on Our Operations
The Company has been subject to numerous orders and directives that have impacted our ability to operate our business throughout North America and in Europe. As a result of these COVID-19 related restrictions on our operations, we have adjusted our business processes so that we can continue to meet the needs of our customers while complying with allthe various laws, regulations, mandates and directives in each individual marketof the markets in which we operate. In many cases, we have had to limit the number of employees and customers withinat our physical locations at any given time and modify the delivery of services to our customers. Our resultsHowever, these adjustments have also resulted in the quarter ended June 30, 2020 were negatively impacted by the impact COVID-19 had on our business, especially in the month of April. However, we were able to make adjustmentsimprovements in our operations that have permitted us to improve performance steadily throughoutoperations.

During this challenging time, the quarter.

New and used car retail activity was reduced to unprecedented levels in early April. Auto retail operations were required to temporarily close and supply and demand for used cars was disrupted. By mid-April, we were experiencing improved retail automobile sales and demand for used vehicle supply was beginning to improve. The Company was preparedhas worked to meet the needs of the wholesale used car marketplace with its technology-based auction platforms throughout North America and in Europe. For the month of April, total vehicles sold were approximately 27% of the volume sold in April 2019. Consolidated revenue for the month April was 28% of revenue for April 2019. Consolidated gross profit for the month of April was below 20% of revenue due to the low level of revenue and this contributed to an operating loss for the month.

The Company saw improved demand for used vehicles in May and buyers and sellers were transacting on our digital platforms in order to obtain inventory to support the level of retail demand for used vehicles. Total vehicles sold were approximately 65% of the volume sold in May 2019. Consolidated revenue for the month of May was 58% of revenue for May 2019. However, our operating processes were adjusted to support 100% of all transactions being completed through our digital platforms and KAR had gross profit of 47% of revenue for the month. The Company also maintained reduced selling, general and administrative expenses and was able to generate operating profit and Adjusted EBITDA that exceeded 70% of the amounts generated in May 2019.


Improved demand for used vehicles continued throughout June and vehicles sold in June 2020 were 8% above the volume sold in June 2019 and consolidated revenue for the month of June was 91% of revenue for June 2019. We continued to sell all vehicles using our digital platforms and were able to generate gross profit for the month that was approximately 50% of revenue. We were also able to maintain lower overhead costs through this period of volume growth. As a result, we were able to generate operating profit margins (exclusive of goodwill and other intangibles impairment) and Adjusted EBITDA margins for the month that were above 20% of revenue. The Company believes that certain changes made into its business processes that were necessitated by the COVID-19 outbreak are sustainable going forward. TheFor example, the Company has reduced the labor required to process wholesale auction transactions and reduced its selling, general and administrative expenses.

Immediately prior to actions taken in late March 2020, the Company had over 15,000 active employees. In early April, the Company furloughed approximately 11,000 employees. Since early April, we have called back approximately 5,000 employees throughout the Company. In late June 2020, we notified approximately 3,000 furloughed employees that changes in our business processes have resulted in the elimination
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Table of their positions in August 2020. As of August 2020, we have approximately 2,000 employees on furlough that may be called back to work. We do not expect to increase our workforce back to pre-pandemic levels.Contents
ADESA Results
 Three Months Ended June 30,
(Dollars in millions, except per vehicle amounts)20212020
Auction fees$236.7 $177.8 
Service revenue182.2 134.8 
Purchased vehicle sales97.9 49.6 
Total ADESA revenue516.8 362.2 
Cost of services*319.5 217.2 
Gross profit*197.3 145.0 
Selling, general and administrative131.4 103.7 
Depreciation and amortization42.9 43.3 
Goodwill and other intangibles impairment— 29.8 
Operating profit (loss)$23.0 $(31.8)
On-premise vehicles sold332,000 312,000 
Off-premise vehicles sold379,000 336,000 
Total vehicles sold711,000 648,000 
Auction fees per vehicle sold$333 $274 
Gross profit per vehicle sold*$277 $224 
Gross profit percentage, excluding purchased vehicles*47.1%46.4%
Dealer consignment mix41%21%
Commercial mix59%79%
 Three Months Ended June 30,
(Dollars in millions, except per vehicle amounts)2020 2019
Auction fees and services revenue$312.6
 $553.1
Purchased vehicle sales49.6
 79.3
Total ADESA revenue362.2
 632.4
Cost of services*217.2
 392.9
Gross profit*145.0
 239.5
Selling, general and administrative79.5
 121.9
Depreciation and amortization38.2
 38.0
Goodwill and other intangibles impairment29.8
 —
Operating profit (loss)$(2.5) $79.6
Vehicles sold648,000
 994,000
   Institutional vehicles sold in North America502,000
 701,000
   Dealer consignment vehicles sold in North America131,000
 268,000
   Vehicles sold in Europe15,000
 25,000
   Percentage of vehicles sold online100% 59%
   Conversion rate at North American physical auctions63.5% 66.1%
Physical auction revenue per vehicle sold, excluding purchased vehicles$839
 $882
Online only revenue per vehicle sold, excluding purchased vehicles$152
 $150

* Exclusive of depreciation and amortization
Revenue
Revenue from ADESA decreased $270.2increased $154.6 million, or 43%, to $516.8 million for the three months ended June 30, 2021, compared with $362.2 million for the three months ended June 30, 2020, compared with $632.4 million for the three months ended June 30, 2019.2020. The decreaseincrease in revenue was the result of a decreasean increase in the number of vehicles sold and a decreasean increase in average revenue per vehicle sold. Businesses acquired in the last twelve months accounted for an increase in revenue of $39.7 million. The decreasechange in revenue included the impact of decreasesan increase in revenue of $1.1$8.7 million due to fluctuations in the Canadian exchange rate and $0.4an increase of $5.7 million due to fluctuations in the European exchange rate.

On-premise marketplace sales are initiated online for vehicles at any of our locations across North America and include Simulcast, Simulcast+ and DealerBlock sales. Off-premise marketplace sales are initiated online and include Openlane, TradeRev, BacklotCars and ADESA Europe sales. The decrease10% increase in the number of vehicles sold was primarily attributable tocomprised of a 29% decrease6% increase in institutional volume, includingon-premise vehicles sold on our online only platform, as well asand a 50% decrease13% increase in dealer consignment units soldoff-premise vehicles sold. However, the Company has experienced a decline in both on-premise and off-premise commercial volumes aggregating 18% for the three months ended June 30, 20202021 compared with the three months ended June 30, 2019. Online sales volume for ADESA represented approximately 100% of the total vehicles sold in the second quarter of 2020, compared with approximately 59% in the second quarter of 2019. "Online sales" includes the following: (i) selling vehicles directly from a dealership or other interim storage location; (ii) online solutions that offer vehicles for sale while in transit to auction locations; (iii) vehicles sold on the TradeRev platform; (iv) vehicle sales in Europe, including units sold by COTW; (v) simultaneously broadcasting video and audio during the physical auctions to online bidders (ADESA Simulcast and Simulcast+); and (vi) bulletin-board or real-time online auctions (DealerBlock®). Online only sales, which do not include vehicles sold on ADESA Simulcast, Simulcast+ or DealerBlock, accounted for approximately 52% of ADESA's North American online sales volume. ADESA sold approximately 321,000 (including approximately 35,000 from TradeRev) and 416,000 (including approximately 41,000 from TradeRev) vehicles through its North American online only offerings in the second quarter of 2020 and 2019, respectively.2020. For the three monthsquarters ended June 30, 2020, dealer consignment vehicles represented approximately 30% of used vehicles sold at ADESA physical auction locations, compared with approximately 41% for the three months ended June 30, 2019. The volume of vehicles sold at physical auction locations in the second quarter of 2020 decreased approximately 44% compared with the second quarter of 2019. The used vehicle conversion percentage at North American physical auction locations, calculated as the number of vehicles sold as a percentage of the number of vehicles entered for sale at our ADESA auctions, decreased to 63.5% for the three months ended June 30, 2020, compared with 66.1% for the three months ended June 30, 2019.
Volumes sold for the three months ended June 30, 2020 were materially impacted by the COVID-19 related restrictions placed on businesses throughout the world. For the three months ended June 30,2021 and 2020, we heldconducted all sales in a Simulcast-only format to protect the health and well-being of our workforce and customers.through digital marketplaces. All vehicles were offered online, cars didwere not run acrossdriven through the blockauction lanes and we limited access to our physical locations to promote social distancing measures and help prevent the spread of COVID-19.
Physical auction revenueAuction fees per vehicle sold decreased $43, or 5%, to $839 for the three months ended June 30, 2020, compared with $8822021 increased $59, or 22%, reflecting higher vehicle values and a changing mix of vehicles sold.
Service revenue for the three months ended June 30, 2019. Physical auction revenue per vehicle sold includes revenue from seller and buyer auction fees and ancillary and other related2021 increased $47.4 million, or 35%, primarily as a result of all the Company's services which includes non-auction services and excludes the sale of purchased vehicles. Physical auction fees per car sold were consistent at $428 for the three months ended June 30, 2020 compared with the three months ended June 30, 2019. The $43 decrease was attributable to a decreasebeing available in lower margin ancillary services revenue.
Online only auction revenue per vehicle sold decreased $21 to $211 for the three months ended June 30, 2020, compared with $232 for the three months ended June 30, 2019. The decrease in online only auction revenue per vehicle sold was attributable to a decrease in purchased vehicle sales. The entire selling price2021. A substantial amount of the purchased vehicles sold at auction is recorded as revenue ("Purchased vehicle sales"). Excluding purchased vehicle sales, online only revenue per vehicle would have been $152Company's on-premise and $150off-premise services were not available for a portion of the three months ended June 30, 2020 and 2019, respectively. The $2 increase in online only revenue per vehicle, excluding purchased vehicles, was attributable to increased revenue per vehicle for units sold on the TradeRev platform.second quarter of 2020.
Gross Profit
For the three months ended June 30, 2020,2021, gross profit for ADESA decreased $94.5increased $52.3 million, or 39%36%, to $145.0$197.3 million, compared with $239.5$145.0 million for the three months ended June 30, 2019.2020. Gross profit for ADESA was 38.2% of revenue for the
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three months ended June 30, 2021, compared with 40.0% of revenue for the three months ended June 30, 2020, compared with 37.9%2020. Gross profit as a percentage of revenue decreased for the three months ended June 30, 2019. Gross profit as a percentage of revenue increased for the three months ended June 30, 20202021 as compared with the three months ended June 30, 2019 as a result2020, primarily due to the impact of a 45% decrease in cost of services. As noted elsewhere, we have taken measures to reduce expenses to help protect our business while our operations have been impacted by COVID-19, and vehicles sold online require less direct labor. In addition, ourpurchased vehicles. Excluding purchased vehicle sales, gross profit as a percentage of revenue is impacted by purchased vehicle sales.was 47.1% and 46.4% for the three months ended June 30, 2021 and 2020, respectively. The entire selling and purchase price of the vehicle is recorded as revenue and cost of services for purchased vehiclevehicles sold. Excluding purchased vehicle sales, gross profitWe have also taken measures to reduce expenses to help protect our business while our operations have been impacted by COVID-19. In the second quarter of 2021 we recorded a benefit of $1.5 million taken under the Canada Emergency Wage Subsidy as a percentagecompared with an aggregate of revenue was 46.4%$10.1 million taken under the CARES Act and 43.2%the Canada Emergency Wage Subsidy in the second quarter of 2020. Businesses acquired in the last 12 months accounted for an increase in cost of services of $23.3 million for the three months ended June 30, 2020 and 2019, respectively.2021.
Selling, General and Administrative
Selling, general and administrative expenses for the ADESA segment decreased $42.4increased $27.7 million, or 35%27%, to $79.5$131.4 million for the three months ended June 30, 2021, compared with $103.7 million for the three months ended June 30, 2020, compared with $121.9 million for the three months ended June 30, 2019, primarily due to decreasesincreases in compensation expenseselling, general and administrative expenses associated with acquisitions of $16.4$24.3 million, incentive-based compensation of $6.5$5.5 million, marketing costsfluctuations in the Canadian exchange rate of $6.0$2.1 million, travel expensesstock-based compensation of $3.8$1.8 million and professional fees of $2.9$1.3 million, suppliespartially offset by decreases in bad debt expense of $2.4$4.5 million, telecom costsseverance of $1.2$2.3 million, medical expenses of $2.2 million and other miscellaneous expenses aggregating $1.9 million and the recording of$4.3 million. In addition, the Employee Retention Credit provided under the CARES Act and the Canada Emergency Wage Subsidy of $6.9was $6.0 million partially offset by increases in bad debt expense of $3.8 million and severance of $1.8 million.

less for the three months ended June 30, 2021, compared with the three months ended June 30, 2020.
GoodwillGoodwill and Other Intangibles Impairment
In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited through the first partsecond quarter of 2020 as compared to 2019,a $25.5 million non-cash goodwill impairment charge and the outlook for the business was significantly reduced. This analysis resulted in thea $4.3 million non-cash customer relationship impairment of the goodwill balance totaling $25.5 millioncharge were recorded in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded(doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for this amount in the second quarter of 2020.

In addition, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships.business to be significantly reduced.
AFC Results
 Three Months Ended June 30,
(Dollars in millions except volumes and per loan amounts)20212020
Finance-related revenue
Interest and fee income$68.2 $65.1 
Other revenue2.2 2.0 
Provision for credit losses(1.8)(19.0)
Warranty contract revenue— 8.7 
Total AFC revenue68.6 56.8 
Cost of services*13.7 17.9 
Gross profit*54.9 38.9 
Selling, general and administrative8.8 8.6 
Depreciation and amortization2.5 3.2 
Operating profit$43.6 $27.1 
Loan transactions356,000 420,000 
Revenue per loan transaction, excluding Warranty contract revenue$193 $115 
 Three Months Ended June 30,
(Dollars in millions except volumes and per loan amounts)2020 2019
Finance-related revenue   
Interest and fee income$65.1
 $83.7
Other revenue2.0
 2.6
Provision for credit losses(19.0) (8.4)
Warranty contract revenue8.7
 8.8
Total AFC revenue56.8
 86.7
Cost of services*17.9
 24.5
Gross profit*38.9
 62.2
Selling, general and administrative5.6
 6.4
Depreciation and amortization2.6
 2.6
Operating profit$30.7
 $53.2
Loan transactions420,000
 437,000
Revenue per loan transaction, excluding "Warranty contract revenue"$115
 $178

* Exclusive of depreciation and amortization
Revenue
For the three months ended June 30, 2020,2021, AFC revenue decreased $29.9increased $11.8 million, or 34%21%, to $56.8$68.6 million, compared with $86.7$56.8 million for the three months ended June 30, 2019.2020. The decreaseincrease in revenue was primarily the result of a 35% decrease68% increase in
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revenue per loan transaction, andlargely as a 4%result of a decrease in the provision for credit losses, partially offset by a 15% decrease in loan transactions.transactions and the elimination of Warranty contract revenue as a result of the sale of PWI in December 2020.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, decreased $63,increased $78, or 35%68%, primarily as a result of an increasea decrease in provision for credit losses for the three months ended June 30, 2020, as well as decreases2021, an increase in interest yieldyields and floorplan fee income,an increase in loan values, partially offset by an increasea decrease in average portfolio duration. Revenue per loan transaction excludes "WarrantyWarranty contract revenue."revenue in 2020.
The provision for credit losses increaseddecreased to 4.3%0.4% of the average managed receivables for the three months ended June 30, 20202021 from 1.7%4.3% for the three months ended June 30, 2019.2020.
Gross Profit
For the three months ended June 30, 2020,2021, gross profit for the AFC segment decreased $23.3increased $16.0 million, or 41%, to $54.9 million, or 80.0% of revenue, compared with $38.9 million, or 68.5% of revenue, compared with $62.2 million, or 71.7% of revenue, for the three months ended June 30, 2019.2020. Excluding PWI for the three months ended June 30, 2020, AFC's gross profit as a percent of revenue was 74.3%. The decreaseincrease in gross profit as a percent of revenue was primarily the result of a 34% decrease21% increase in revenue and a 27%an 23% decrease in cost of services. The decrease in cost of services was primarily the result of decreasesa decrease in compensation expense of $3.1 million, PWI expenses of $1.7$5.5 million, partially offset by increases in incentive-based compensation of $0.6 million, collection expenses of $0.5 million and other miscellaneous expenses aggregating $1.2$0.2 million.

Selling, General and Administrative
Selling, general and administrative expenses at AFC decreased $0.8increased $0.2 million, or 13%2%, to $5.6$8.8 million for the three months ended June 30, 2021, compared with $8.6 million for the three months ended June 30, 2020 compared with $6.4 million for the three months ended June 30, 2019, primarily as a result of decreasesincreases in incentive-based compensation travel expenses, promotion expensesof $0.6 million and other miscellaneous expenses totaling $1.3aggregating $0.7 million, partially offset by an increasedecreases in compensation-relatedPWI expenses of $0.6 million and compensation expense of $0.5 million.
Holding Company Results
 Three Months Ended June 30,
(Dollars in millions)2020 2019
Selling, general and administrative$27.2
 $34.9
Depreciation and amortization5.7
 7.3
Operating loss$(32.9) $(42.2)
Selling, General and Administrative
For the three months ended June 30, 2020, selling, general and administrative expenses at the holding company decreased $7.7 million, or 22%, to $27.2 million, compared with $34.9 million for the three months ended June 30, 2019, primarily as a result of decreases in compensation expense of $3.3 million, professional fees of $2.8 million, stock-based compensation expense of $0.7 million, travel expenses of $0.7 million, incentive-based compensation of $0.5 million, telecom costs of $0.5 million and other employee related expenses of $0.5 million, partially offset by increases in information technology costs of $1.3 million.
Overview of Results of KAR Auction Services, Inc. for the Six Months Ended June 30, 20202021 and 2019:2020:
 Six Months Ended
June 30,
(Dollars in millions except per share amounts)20212020
Revenues  
Auction fees$472.2 $433.1 
Service revenue369.8 371.0 
Purchased vehicle sales190.6 125.1 
Finance-related revenue134.4 135.3 
Total revenues1,167.0 1,064.5 
Cost of services*663.6 629.7 
Gross profit*503.4 434.8 
Selling, general and administrative289.2 274.7 
Depreciation and amortization92.4 94.2 
Goodwill and other intangibles impairment— 29.8 
Operating profit121.8 36.1 
Interest expense62.1 68.9 
Other (income) expense, net(35.4)(0.7)
Income (loss) before income taxes95.1 (32.1)
Income taxes32.7 (2.6)
Net income (loss)$62.4 $(29.5)
Net income (loss) per share  
Basic$0.27 $(0.24)
Diluted$0.26 $(0.24)
 Six Months Ended June 30,
(Dollars in millions except per share amounts)2020 2019
Revenues   
Auction fees and services revenue$804.1
 $1,095.0
Purchased vehicle sales125.1
 137.1
Finance-related revenue135.3
 176.6
Total revenues1,064.5
 1,408.7
Cost of services*629.7
 811.3
Gross profit*434.8
 597.4
Selling, general and administrative274.7
 338.4
Depreciation and amortization94.2
 92.2
Goodwill and other intangibles impairment29.8
 —
Operating profit36.1
 166.8
Interest expense68.9
 112.1
Other income, net(0.7) (3.2)
Income (loss) from continuing operations before income taxes(32.1) 57.9
Income taxes(2.6) 15.2
Net income (loss) from continuing operations(29.5) 42.7
Net income from discontinued operations—
 90.7
Net income (loss)$(29.5) $133.4
Net income (loss) from continuing operations per share   
Basic$(0.24) $0.32
Diluted$(0.24) $0.32

* Exclusive of depreciation and amortization

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Overview
For the six months ended June 30, 2020,2021, we had revenue of $1,064.5$1,167.0 million compared with revenue of $1,408.7$1,064.5 million for the six months ended June 30, 2019, a decrease2020, an increase of 24%10%. Businesses acquired in the last twelve months accounted for an increase in revenue of $18.3$64.9 million or 2%6% of revenue. For a further discussion of revenues, gross profit and selling, general and administrative expenses, see the segment results discussions below.
Depreciation and Amortization
Depreciation and amortization increased $2.0decreased $1.8 million, or 2%, to $92.4 million for the six months ended June 30, 2021, compared with $94.2 million for the six months ended June 30, 2020, compared with $92.2 million for the six months ended June 30, 2019.2020. The increasedecrease in depreciation and amortization was primarily the result of certainfixed assets that have become fully depreciated and a reduction in assets placed in service over the last twelve months and depreciation and amortization for the assets of businesses acquired in 2019.service.
Goodwill and Other Intangibles Impairment
In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited through the first partsecond quarter of 2020 as compared to 2019,a $25.5 million non-cash goodwill impairment charge and the outlook for the business was significantly reduced. This analysis resulted in thea $4.3 million non-cash customer relationship impairment of the goodwill balance totaling $25.5 millioncharge were recorded in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded(doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for this amount in the second quarter of 2020.

In addition, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships.business to be significantly reduced.
Interest Expense
Interest expense decreased $43.2$6.8 million, or 39%10%, to $62.1 million for the six months ended June 30, 2021, compared with $68.9 million for the six months ended June 30, 2020, compared with $112.1 million for the six months ended June 30, 2019.2020. The decrease was primarily attributable to a decrease in interest expense at AFC of $4.1 million, which resulted from a decrease in incremental interest rates for the six months ended June 30, 2021, as compared with the six months ended June 30, 2020. In addition, there was a slight decrease in the weighted average interest rate of approximately 0.9%on corporate debt and a decrease of $880.5$8.8 million in the average outstanding balance of corporate debt for the six months ended June 30, 20202021, compared with the six months ended June 30, 2019, resulting from2020.
Other (Income) Expense, Net
The Company invests in certain early-stage automotive companies and funds that relate to the pay down of debt of approximately $1.3 billion in connection with the spin-off of IAA on June 28, 2019 and a net increase in term loan debt of approximately $0.5 billion in connection with the debt refinancing on September 19, 2019. In addition, there was a decrease in interest expense at AFC of $10.5 million, whichautomotive industry. We believe these investments have resulted from a decrease in the average finance receivables balance andexpansion of relationships in incremental interest ratesthe vehicle remarketing industry. Realized gains on these investments were $17.2 million for the six months ended June 30, 2020,2021. The Company had unrealized gains of $31.6 million at June 30, 2021, as compared witha result of a recent public offering for one of these investment securities. Any future changes in the fair value of these investment securities will be reflected as unrealized gains or losses until these securities are sold.
For the six months ended June 30, 2019.2021, we had other income of $35.4 million compared with $0.7 million for the six months ended June 30, 2020. The increase in other income was primarily attributable to an increase in realized and unrealized gains on investment securities of approximately $48.8 million, a decrease in foreign currency losses of $0.5 million and an increase in other miscellaneous items aggregating $1.1 million, partially offset by an increase in contingent consideration valuation of $15.7 million.
Income Taxes
We had an effective tax rate of 34.4% for the six months ended June 30, 2021, compared with an effective tax rate of 8.1% for the six months ended June 30, 2020, compared with an2020. The effective tax rate of 26.3% for the six months ended June 30, 2019.2021 was unfavorably impacted by the expense for the increase in the estimated value of contingent consideration for which no tax benefits have been recorded. The rate for the six months ended June 30, 2020 rate was unfavorably impacted by the goodwill and other intangibles impairment charge for which no tax benefit has beenwas recorded. This was partially offset by the tax benefit from recording net operating losses and deductions related to stock-based compensation expenses.
Net Income from Discontinued Operations
On June 28, 2019, the Company completed the separation of its salvage auction business, IAA, through a spin-off, creating a new independent publicly traded salvage auction company. As such, the financial results of IAA have been accounted for as discontinued operations in the comparable 2019 results presented. For the six months ended June 30, 2020 and 2019, the Company's financial statements included income from discontinued operations of $0.0 million and $90.7 million, respectively. For a further discussion, reference Note 2 of the condensed notes to the consolidated financial statements.
Impact of Foreign Currency
For the six months ended June 30, 2020,2021, fluctuations in the Canadian exchange rate decreasedincreased revenue by $1.5$12.6 million, operating profit by $0.3 million, net income (loss) by $0.1$4.3 million and net income (loss) per diluted share by less than $0.01.$1.9 million. For the six months ended June 30, 2020,2021, fluctuations in the European exchange rate decreasedincreased revenue by $1.6$11.3 million, operating profit by $0.5 million and had no impact on operating profit,decreased net income (loss) and net income (loss) per diluted share. In addition, for the six months ended June 30, 2020, as a resultby $0.5 million.
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Table of the goodwill and other intangibles impairment in the U.K., fluctuations in the British pound exchange rate decreased the net loss by $0.7 million.Contents

ADESA Results
 Six Months Ended
June 30,
(Dollars in millions, except per vehicle amounts)20212020
Auction fees$472.2 $433.1 
Service revenue369.8 371.0 
Purchased vehicle sales190.6 125.1 
Total ADESA revenue1,032.6 929.2 
Cost of services*636.4 587.9 
Gross profit*396.2 341.3 
Selling, general and administrative271.6 256.1 
Depreciation and amortization87.5 87.7 
Goodwill and other intangibles impairment— 29.8 
Operating profit (loss)$37.1 $(32.3)
On-premise vehicles sold681,000 780,000 
Off-premise vehicles sold783,000 730,000 
Total vehicles sold1,464,000 1,510,000 
Auction fees per vehicle sold$323 $287 
Gross profit per vehicle sold*$271 $226 
Gross profit percentage, excluding purchased vehicles*47.1%42.4%
Dealer consignment mix37%24%
Commercial mix63%76%
 Six Months Ended
June 30,
(Dollars in millions, except per vehicle amounts)2020 2019
Auction fees and services revenue$804.1
 $1,095.0
Purchased vehicle sales125.1
 137.1
Total ADESA revenue929.2
 1,232.1
Cost of services*587.9
 763.6
Gross profit*341.3
 468.5
Selling, general and administrative202.3
 248.5
Depreciation and amortization77.3
 73.0
Goodwill and other intangibles impairment29.8
 —
Operating profit$31.9
 $147.0
Vehicles sold1,510,000
 1,940,000
   Institutional vehicles sold in North America1,124,000
 1,382,000
   Dealer consignment vehicles sold in North America343,000
 510,000
   Vehicles sold in Europe43,000
 48,000
   Percentage of vehicles sold online78% 58%
   Conversion rate at North American physical auctions63.4% 64.9%
Physical auction revenue per vehicle sold, excluding purchased vehicles$884
 $879
Online only revenue per vehicle sold, excluding purchased vehicles$158
 $148

* Exclusive of depreciation and amortization
Revenue
Revenue from ADESA decreased $302.9increased $103.4 million, or 25%11%, to $1,032.6 million for the six months ended June 30, 2021, compared with $929.2 million for the six months ended June 30, 2020, compared with $1,232.1 million for the six months ended June 30, 2019.2020. The decreaseincrease in revenue was the result of an increase in average revenue per vehicle sold, partially offset by a decrease in the number of vehicles sold and a decrease in average revenue per vehicle sold. Businesses acquired in the last 12twelve months accounted for an increase in revenue of $18.3 million, of which approximately $12.7 million was included in "Purchased vehicle sales."$64.9 million. The decreasechange in revenue included the impact of decreasesan increase in revenue of $1.6$11.7 million due to fluctuations in the Canadian exchange rate and an increase of $11.3 million due to fluctuations in the European exchange raterate.
On-premise marketplace sales are initiated online for vehicles at any of our locations across North America and $1.4 million due to fluctuationsinclude Simulcast, Simulcast+ and DealerBlock sales. Off-premise marketplace sales are initiated online and include Openlane, TradeRev, BacklotCars and ADESA Europe sales. The 3% decrease in the Canadian exchange rate.
The decrease innumber of vehicles sold was primarily attributable tocomprised of a 19%13% decrease in institutional volume, includingon-premise vehicles sold on our online only platform, as well asand a 31% decrease7% increase in dealer consignment units soldoff-premise vehicles sold. In addition, the Company has experienced a decline in both on-premise and off-premise commercial volumes aggregating 19% for the six months ended June 30, 20202021 compared with the six months ended June 30, 2019. Online sales volume for ADESA represented approximately 78% of the total vehicles in the first six months of 2020, compared with approximately 58% in the first six months of 2019. "Online sales" includes the following: (i) selling vehicles directly from a dealership or other interim storage location; (ii) online solutions that offer vehicles for sale while in transit to auction locations; (iii) vehicles sold on the TradeRev platform; (iv) vehicle sales in Europe, including units sold by COTW; (v) simultaneously broadcasting video and audio during the physical auctions to online bidders (ADESA Simulcast and Simulcast+); and (vi) bulletin-board or real-time online auctions (DealerBlock®). Online only sales, which do not include vehicles sold on ADESA Simulcast, Simulcast+ or DealerBlock, accounted for approximately 61% of ADESA's North American online sales volume. ADESA sold approximately 688,000 (including approximately 68,000 from TradeRev) and 783,000 (including approximately 72,000 from TradeRev) vehicles through its North American online only offerings in the first six months of 2020 and 2019, respectively.2020. For the six months ended June 30, 2020, dealer consignment vehicles represented approximately 35% of used vehicles sold at ADESA physical auction locations, compared with approximately 39% for the six months ended June 30, 2019. The volume of vehicles sold at physical auction locations in the first six months of 2020 decreased approximately 30% compared with the first six months of 2019. The used vehicle conversion percentage at North American physical auction locations, calculated as the number of vehicles sold as a percentage of the number of vehicles entered for sale at our ADESA auctions, decreased to 63.4% for the six months ended June 30, 2020, compared with 64.9% for the six months ended June 30, 2019.

Volumes sold for the six months ended June 30, 2020 were materially impacted by the COVID-19 related restrictions placed on businesses throughout the world. Beginning the week of March 16,2021, we experienced a significant decline in volumes, as customers began to cease operations in response to local, state and provincial directives. Throughout the second quarter, we heldconducted all sales in a Simulcast-only format to protect the health and well-being of our workforce and customers.through digital marketplaces. All vehicles were offered online, cars didwere not run acrossdriven through the blockauction lanes and we limited access to our physical locations to promote social distancing measures and help prevent the spread of COVID-19.
Physical auction revenueAuction fees per vehicle sold increased $5, or 1%, to $884 for the six months ended June 30, 2020, compared with $8792021 increased $36, or 13%, reflecting higher vehicle values and a changing mix of vehicles sold.
Service revenue for the six months ended June 30, 2019. Physical auction revenue per vehicle sold includes revenue from seller and buyer auction fees and ancillary and other related services, which includes non-auction services and excludes the sale of purchased vehicles.
Online only auction revenue per vehicle sold increased $17 to $237 for the six months ended June 30, 2020, compared with $220 for the six months ended June 30, 2019. The increase in online only auction revenue per vehicle sold was attributable to an increase in TradeRev revenue. In addition, the entire selling price2021 decreased $1.2 million, or less than 1%, primarily as a result of the purchaseddecrease in vehicles soldsold. Typically consigned vehicles located at auction is recorded as revenue ("Purchased vehicle sales"). Excluding purchased vehicle sales, online only revenue per vehicle would have been $158 and $148 for the six months ended June 30, 2020 and 2019, respectively. The $10 increase in online only revenue per vehicle, excluding purchased vehicles was attributable to increased revenue per vehicle for units sold on the TradeRev platform.our facilities utilize our service offerings at a higher rate than off-premise vehicles.
Gross Profit
For the six months ended June 30, 2020,2021, gross profit for ADESA decreased $127.2increased $54.9 million, or 27%16%, to $341.3$396.2 million, compared with $468.5$341.3 million for the six months ended June 30, 2019.2020. Gross profit for ADESA was 38.4% of revenue for the six months
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ended June 30, 2021, compared with 36.7% of revenue for the six months ended June 30, 2020, compared with 38.0%2020. Gross profit as a percentage of revenue increased for the six months ended June 30, 2019. Gross profit as a percentage of revenue decreased for the six months ended June 30, 20202021 as compared with the six months ended June 30, 20192020, as we have taken measures to reduce expenses to help protect our business while our operations have been impacted by COVID-19 and vehicles sold online require less labor. In the first six months of 2021 we also recorded a benefit of $3.7 million taken under the Canada Emergency Wage Subsidy as compared with an aggregate of $10.1 million taken under the CARES Act and the Canada Emergency Wage Subsidy in the first six months of 2020. On March 20, 2020 our on-premise auctions were shut down in response to the COVID-19 pandemic. While revenue decreased during the closure, cost of services remained consistent, as all non-essential auction employees were paid during the closure. In addition, our gross profit as a resultpercentage of revenue is impacted by purchased vehicles. Excluding purchased vehicle sales.sales, gross profit as a percentage of revenue was 47.1% and 42.4% for the six months ended June 30, 2021 and 2020, respectively. The entire selling and purchase price of the vehicle is recorded as revenue and cost of services for purchased vehiclevehicles sold. Excluding purchased vehicle sales, gross profit as a percentage of revenue was 42.4% and 42.7% for the six months ended June 30, 2020 and 2019, respectively. The remaining decrease in gross profit as a percentage of revenue relates to the shut down of the physical auctions on March 20, 2020 in response to the COVID-19 pandemic. Businesses acquired in the last 12 months accounted for an increase in cost of services of $15.6$37.2 million for the six months ended June 30, 2020.2021.
Selling, General and Administrative
Selling, general and administrative expenses for the ADESA segment decreased $46.2increased $15.5 million, or 19%6%, to $202.3$271.6 million for the six months ended June 30, 2021, compared with $256.1 million for the six months ended June 30, 2020, compared with $248.5 million for the six months ended June 30, 2019, primarily due to increases in selling, general and administrative expenses associated with acquisitions of $45.6 million, incentive-based compensation of $14.5 million, fluctuations in the Canadian exchange rate of $3.0 million and stock-based compensation of $2.0 million, partially offset by decreases in compensation expense of $15.8$21.0 million, incentive-based compensationbad debt expense of $11.8$6.3 million, severance of $4.0 million, medical expenses of $3.9 million, marketing costs of $8.4$3.7 million, telecom expenses of $2.7 million, travel expenses of $4.7 million, supplies expense of $2.3$2.5 million, professional fees of $2.1$2.4 million and other miscellaneous expenses aggregating $2.0 million and the recording of$7.9 million. In addition, the Employee Retention Credit provided under the CARES Act and the Canada Emergency Wage Subsidy of $6.9was $4.8 million partially offset by increases in bad debt expense of $3.9 million, information technology costs of $2.0 million and costs associatedless for the six months ended June 30, 2021, compared with acquisitions of $1.9 million.the six months ended June 30, 2020.
GoodwillGoodwill and Other Intangibles Impairment
In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited through the first partsecond quarter of 2020 as compared to 2019,a $25.5 million non-cash goodwill impairment charge and the outlook for the business was significantly reduced. This analysis resulted in thea $4.3 million non-cash customer relationship impairment of the goodwill balance totaling $25.5 millioncharge were recorded in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded(doing business as ADESA U.K.). The impairments resulted from the changes in economic circumstances which caused the outlook for this amount in the second quarter of 2020.
In addition, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships.

business to be significantly reduced.
AFC Results
 Six Months Ended
June 30,
(Dollars in millions except volumes and per loan amounts)20212020
Finance-related revenue
Interest and fee income$136.8 $148.9 
Other revenue4.2 4.7 
Provision for credit losses(6.6)(35.9)
Warranty contract revenue— 17.6 
Total AFC revenue134.4 135.3 
Cost of services*27.2 41.8 
Gross profit*107.2 93.5 
Selling, general and administrative17.6 18.6 
Depreciation and amortization4.9 6.5 
Operating profit$84.7 $68.4 
Loan transactions728,000 868,000 
Revenue per loan transaction, excluding Warranty contract revenue$185 $136 
 Six Months Ended
June 30,
(Dollars in millions except volumes and per loan amounts)2020 2019
Finance-related revenue   
Interest and fee income$148.9
 $170.6
Other revenue4.7
 5.4
Provision for credit losses(35.9) (16.6)
Warranty contract revenue17.6
 17.2
Total AFC revenue135.3
 176.6
Cost of services*41.8
 47.7
Gross profit*93.5
 128.9
Selling, general and administrative12.1
 13.6
Depreciation and amortization5.3
 5.0
Operating profit$76.1
 $110.3
Loan transactions868,000
 898,000
Revenue per loan transaction, excluding "Warranty contract revenue"$136
 $177

* Exclusive of depreciation and amortization
Revenue
For the six months ended June 30, 2020,2021, AFC revenue decreased $41.3$0.9 million, or 23%1%, to $135.3$134.4 million, compared with $176.6$135.3 million for the six months ended June 30, 2019.2020. The decrease in revenue was primarily the result of a 23%16% decrease in loan
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transactions and the elimination of Warranty contract revenue as a result of the sale of PWI in December 2020, partially offset by a 36% increase in revenue per loan transaction, andlargely as a 3%result of a decrease in loan transactions.the provision for credit losses.
Revenue per loan transaction, which includes both loans paid off and loans curtailed, decreased $41,increased $49, or 23%36%, primarily as a result of an increasea decrease in provision for credit losses for the six months ended June 30, 2020, as well as decreases2021 and an increase in interest yield and floorplan fee income,loan values, partially offset by an increasea decrease in average portfolio duration. Revenue per loan transaction excludes "WarrantyWarranty contract revenue."revenue in 2020.
The provision for credit losses increaseddecreased to 3.8%0.7% of the average managed receivables for the six months ended June 30, 20202021 from 1.6%3.8% for the six months ended June 30, 2019.2020.
Gross Profit
For the six months ended June 30, 2020,2021, gross profit for the AFC segment decreased $35.4increased $13.7 million, or 15%, to $107.2 million, or 79.8% of revenue, compared with $93.5 million, or 69.1% of revenue, compared with $128.9 million, or 73.0% of revenue, for the six months ended June 30, 2019.2020. Excluding PWI for the six months ended June 30, 2020, AFC's gross profit as a percent of revenue was 75.0%. The decreaseincrease in gross profit as a percent of revenue was primarily the result of a 23% decrease in revenue and a 12%35% decrease in cost of services. The decrease in cost of services was primarily the result of decreases in PWI expenses of $12.4 million, compensation expense of $2.6$2.5 million PWIand lot check expenses of $1.5$1.0 million, partially offset by increases in incentive-based compensation of $0.9$1.0 million and other miscellaneous expenses aggregating $0.9$0.3 million.
Selling, General and Administrative
Selling, general and administrative expenses at AFC decreased $1.5$1.0 million, or 11%5%, to $12.1$17.6 million for the six months ended June 30, 2021, compared with $18.6 million for the six months ended June 30, 2020 compared with $13.6 million for the six months ended June 30, 2019, primarily as a result of decreases in incentive-based compensation of $0.9 million, travelPWI expenses of $0.4$1.4 million, compensation expense of $0.8 million and other miscellaneous expenses aggregating $0.7$0.3 million, partially offset by an increase in compensation-related expense of $0.5 million.

Holding Company Results
 Six Months Ended June 30,
(Dollars in millions)2020 2019
Selling, general and administrative$60.3
 $76.3
Depreciation and amortization11.6
 14.2
Operating loss$(71.9) $(90.5)
Selling, General and Administrative
For the six months ended June 30, 2020, selling, general and administrative expenses at the holding company decreased $16.0 million, or 21%, to $60.3 million, compared with $76.3 million for the six months ended June 30, 2019, primarily as a result of decreases in professional fees of $5.3 million, compensation expense of $4.8 million, incentive-based compensation of $4.1 million, stock-based compensation expense of $1.6 million, travel expenses of $1.0 million and other miscellaneous expenses of $2.6 million, partially offset by increases in information technology costs of $2.4 million and medical expenses of $1.0$1.5 million.
LIQUIDITY AND CAPITAL RESOURCES
We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations, working capital and amounts available under our Credit Facility. Our principal sources of liquidity consist of cash generated by operations and borrowings under our Revolving Credit Facility.
 June 30,December 31,June 30,
(Dollars in millions)202120202020
Cash and cash equivalents$621.6 $752.1 $968.5 
Restricted cash53.8 60.2 50.0 
Working capital731.3 924.6 1,241.8 
Amounts available under the Revolving Credit Facility*325.0 325.0 325.0 
Cash flow from operations for the six months ended295.7 268.9 
(Dollars in millions)June 30,
2020		 December 31,
2019		 June 30,
2019
Cash and cash equivalents*$968.5
 $507.6
 $233.0
Restricted cash50.0
 53.3
 23.7
Working capital1,241.8
 726.8
 380.5
Amounts available under the Revolving Credit Facility**325.0
 325.0
 278.0
Cash flow from operations for the six months ended268.9
   161.7
*    There were related outstanding letters of credit totaling approximately $29.7 million, $28.5 million and $25.0 million at June 30, 2021, December 31, 2020 and June 30, 2020 respectively, which reduced the amount available for borrowings under the Revolving Credit Facility.
*Cash and cash equivalents at June 30, 2020 included approximately $528.2 million in net proceeds from newly issued perpetual convertible preferred stock of the Company.
**There were related outstanding letters of credit totaling approximately $25.0 million, $27.4 million and $32.5 million at June 30, 2020, December 31, 2019 and June 30, 2019, respectively, which reduced the amount available for borrowings under the revolving credit facility.
We regularly evaluate alternatives for our capital structure and liquidity given our expected cash flows, growth and operating capital requirements as well as capital market conditions. The COVID-19 pandemic has had, and is having a significantcontinuing to have, an adverse impact on our business. As a result, during 2020 we have implemented several measures that we believe will enhance liquidity for the foreseeable future. Some of these measures include, but are not limited to, the following:
Reduced compensation expense by
▪our CEO, CFO and President voluntarily electing to forgo 100% of their respective base salaries and the remainder of our executive officers voluntarily electing to reduce their base salaries by 50% for the second quarter of 2020,
▪reducing base salaries across many levels of the organization for part of the second quarter of 2020,
▪furloughing approximately 11,000 employees in April 2020 (approximately 5,000 have returned to work),
▪commencing a reduction in force in June 2020 (impacting approximately 3,000 of our employees), and
▪our board of directors voluntarily electing to forgo their cash compensation for the second quarter of 2020;
Prohibitedincluded furloughs, prohibiting non-essential business travel;
Suspendedtravel, suspending non-essential services provided by certain third parties at our locations;
Delayedlocations, delaying or canceledcanceling capital projects at our physical auction locations;
Negotiated the deferral of rent payments with certain landlords;

Suspended the ADESA Assurance program for part of the second quarter;
AFC reduced the unused portion of certain floorplan lines with its customers;on-premise marketplace locations and
Suspended suspending the Company's quarterly dividend.

In addition, in June 2020 we issued and sold an aggregate of 550,000 shares of newly issued perpetual convertible preferred stock of the Company for net proceeds of approximately $528.2 million, as described in Note 9, "Convertible Preferred Stock."
We have also takentook advantage of legislation introduced to assist companies during this time.the pandemic. In the second quarterfirst six months of 2020,2021, we recorded a total of approximately $7.9$5.8 million of employee retention credits taken under the CARES Act and approximately $9.7 millionclaimed under the Canada Emergency Wage Subsidy. These credits partially offset salaries and medical costs recorded in the U.S. and Canada. We will continue to monitor and assess the impact the CARES Act and similar legislation in other countries may have on our business and financial results. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued disruption could materially affect our liquidity.
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Working Capital
A substantial amount of our working capital is generated from the payments received for services provided. The majority of our working capital needs are short-term in nature, usually less than a week in duration. Due to the decentralized nature of the business, payments for most vehicles purchased are received at each auction and branch. Most of the financial institutions place a temporary hold on the availability of the funds deposited that generally can range up to two business days, resulting in cash in our accounts and on our balance sheet that is unavailable for use until it is made available by the various financial institutions. There are outstanding checks (book overdrafts) to sellers and vendors included in current liabilities. Because a portion of these outstanding checks for operations in the U.S. are drawn upon bank accounts at financial institutions other than the financial institutions that hold the cash, we cannot offset all the cash and the outstanding checks on our balance sheet. Changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from auctions held near period-end.period end.
Approximately $108.7$233.1 million of available cash was held by our foreign subsidiaries at June 30, 2020.2021. If funds held by our foreign subsidiaries were to be repatriated, we expect any applicable taxes to be minimal.
AFC offers short-term inventory-secured financing, also known as floorplan financing, to independent used vehicle dealers. Financing is primarily provided for terms of 30 to 90 days. AFC principally generates its funding through the sale of its receivables. The receivables sold pursuant to the securitization agreements are accounted for as secured borrowings. In response to the COVID-19 pandemic and the related economic downturn, AFC launched a Customer Relief Program in March 2020. Under the Customer Relief Program, eligible customers were able to choose to defer curtailment payments (principal, fees and interest) due through June 30, 2020, on eligible units. For further discussion of AFC's securitization arrangements, see "Securitization Facilities."
Credit Facilities
On May 29, 2020, we entered into the Fourth Amendment Agreement (the "Fourth Amendment") to the Credit Agreement. The Fourth Amendment (1) provides a financial covenant “holiday” through and including June 30, 2021; (2) for purposes of determining compliance with the financial covenant for the fiscal quarters ending September 30, 2021 and December 31, 2021, permits the Consolidated EBITDA for the applicable test period to be calculated on an annualized basis; (3) establishes a monthly minimum liquidity covenant of $225.0 million through and including September 30, 2021; and (4) effectively places certain limitations on the ability to make certain investments, junior debt repayments, acquisitions and restricted payments and to incur additional secured indebtedness until October 1, 2021.
On September 19, 2019, we entered into the Third Amendment Agreement (the "Third Amendment") to the Credit Agreement. The Third Amendment provided for, among other things, (i) the refinancing of the existing Term Loan B-4 and Term Loan B-5 with the newseven-year, $950 million Term Loan B-6 (ii) repayment of the 2017 Revolving Credit Facility and (iii) the $325 million, five-year Revolving Credit Facility.

The Credit Facility is available for letters of credit, working capital, permitted acquisitions and general corporate
purposes. The Revolving Credit Facility also includes a $50 million sub-limit for issuance of letters of credit and a $60 million sub-limit for swingline loans.
Term Loan B-6 was issued at a discount of $2.4 million and the discount is being amortized using the effective interest method to interest expense over the term of the loan. Term Loan B-6 is payable in quarterly installments equal to 0.25% of the original aggregate principal amount, with the balance payable at the maturity date.

As set forth in the Credit Agreement, the TrancheTerm Loan B-6 Term Loans bearbears interest at an adjusted LIBOR rate plus 2.25% or at the Company’s election, Base Rate (as defined in the Credit Agreement) plus 1.25%. Loans under the Revolving CreditFacility will bear interest at a rate calculated based on the type of borrowing (either adjusted LIBOR or Base Rate) and the Company’s Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans. The Company also payspays a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on the Company’s Consolidated Senior Secured Net Leverage Ratio, from time to time. The interest rate applicable to Term Loan B-6 was 2.50%2.38% at June 30, 2020.2021.
OnJune 30, 2020, $942.92021, $933.4 million was outstanding on Term LoanB-6 and there were no borrowings outstanding on the Revolving Credit Facility. In addition, weWe had related outstanding letters of credit in the aggregate amountof $29.7 million of $25.0 millionand and $27.4$28.5 million at June 30, 20202021 and December 31, 2019,2020, respectively, which reduce the amount available for borrowings under the Revolving Credit Facility. Our Canadian operations also haveEuropean a C$8 million line of credit which was undrawn at June 30, 2020. There were no related letters of credit outstanding on the Canadian line of credit at June 30, 2020. In addition, our European operations havelines of credit aggregating $33.7$35.6 million (€30 million) of which $17.4$13.2 million was drawn at June 30, 2020.2021.
The obligations of the Company under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority perfected security interests in 100% of the equity interests of certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) perfected first priority security interests in substantially all other tangible and intangible assets of the Company and each Subsidiary Guarantor, subject to certain exceptions.
Certain covenants contained within the Credit Agreement are critical to an investor’s understanding of our financial liquidity, as the failure to maintain compliance with these covenants could result in a default and allow ourthe lenders under the Credit Agreement to declare all amounts borrowed immediately due and payable. The Credit Agreement contains a financial covenant requiring thatcompliance with a Consolidated Senior Secured Net Leverage Ratio be satisfiednot to exceed 3.5 as of the last day of each fiscal quarter if revolving loans are outstanding, except during the period from May 29, 2020 through and including June 30, 2021, compliance with the financial covenant is not required.outstanding. The Consolidated Senior Secured Net Leverage Ratio is calculated as consolidated total consolidated debt (net of unrestricted cash)(as defined in the Credit Agreement) divided by the last four quarters consolidated Adjusted EBITDA, except that for purposes of determining compliance with the financial covenant for the fiscal quarters ending September 30, 2021 and December 31, 2021, theEBITDA. Consolidated EBITDA for the applicable test period is permitted to be calculated on an annualized basis pursuant to the Fourth Amendment. Total consolidatedtotal debt includes term loan borrowings, revolving loans, finance lease liabilities and financeother obligations for borrowed money
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lease liabilities less availableunrestricted cash as defined in the Credit Agreement. Consolidated Adjusted EBITDA is EBITDA (earnings before interest expense, income taxes, depreciation and amortization) adjusted to exclude among other things (a) gains and losses from asset sales; (b) unrealized foreign currency translation gains and losses in respect of indebtedness; (c) certain non-recurring gains and losses; (d) stock-based compensation expense; (e) certain other non-cash amounts included in the determination of net income; (f) charges and revenue reductions resulting from purchase accounting; (g) minority interest; (h) consulting expenses incurred for cost reduction, operating restructuring and business improvement efforts; (i) expenses realized upon the termination of employees and the termination or cancellation of leases, software licenses or other contracts in connection with the operational restructuring and business improvement efforts; (j) expenses incurred in connection with permitted acquisitions; (k) any impairment charges or write-offs of intangibles; and (l) any extraordinary, unusual or non-recurring charges, expenses or losses. Our Consolidated Senior Secured Net Leverage Ratio was 0.8 at June 30, 2021.

In addition, the Credit Agreement and the indenture governing our senior notes (see Note 7, “Long-Term Debt”6, "Long-Term Debt" for additional information) contain certain limitations on our ability to pay dividends and other distributions, make certain acquisitions or investments, grant liens and sell assets, and the Credit Agreement contains certain limitations on our ability to incur indebtedness. The applicable covenants in the Credit Agreement affect our operating flexibility by, among other things, restricting our ability to incur expenses and indebtedness that could be used to grow the business, as well as to fund general corporate purposes. During the period from May 29, 2020 through and until October 1, 2021 (the “limited waiver period”), pursuant to the Fourth Amendment, certain additional limitations are placed on our ability to make certain investments, junior debt repayments, acquisitions and restricted payments and to incur additional secured indebtedness. The Fourth Amendment also established a monthly minimum liquidity covenant of $225.0 million during the limited waiver period. We werewere in compliance withwith the covenants in the Credit Agreement and the indenture governing our senior notes on at June 30, 2020.2021.
We believe our sources of liquidity from our cash and cash equivalents on hand, working capital, cash provided by operating activities, and availability under our Credit Facility are sufficient to meet our operating needs for the foreseeable future. In addition, we believe the previously mentioned sources of liquidity will be sufficient to fund our capital requirements and debt service payments for the foreseeable future. A lack of recovery in market conditions, or further deterioration in market conditions, could materially affect the Company's liquidity.

Senior Notes
On May 31, 2017, we issued $950 million of 5.125% senior notes due June 1, 2025. The Company pays interest on the senior notes semi-annually in arrears on June 1 and December 1 of each year, which commenced on December 1, 2017. We may redeem the senior notes, in whole or in part, at any time prior to June 1, 2020 at a redemption price equal to 100% of the principal amount plus a make-whole premium and thereafter at a premium that declines ratably to par in 2023. The senior notes are guaranteed by the Subsidiary Guarantors.
Securitization Facilities
AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to AFC Funding Corporation. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 28, 2022.31, 2024. AFC Funding Corporation had committed liquidity of $1.70$1.60 billion for U.S. finance receivables at June 30, 2020.2021.
We also have an agreement for the securitization of AFCI's receivables, which expires on January 28, 2022.31, 2024. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$175 million at June 30, 2020.2021. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.
AFC managed total finance receivablesreceivables of $1,548.3$2,108.9 million and $1,911.0 million at June 30, 2021 and December 31, 2020, respectively. AFC's allowance for losses was $24.0 million anandd $2,115.2$22.0 million at June 30, 20202021 and December 31, 2019, respectively. AFC's allowance for losses wa2020s $22.0 million and $15.0 million atJune 30, 2020 and December 31, 2019,, respectively.
As of June 30, 20202021 and December 31, 2019, $1,475.42020, $2,058.3 million and $2,061.6$1,865.3 million, respectively, of finance receivables and a cash reserve of 1 or 3 percent of the obligations collateralized by finance receivables served as security for the $735.9$1,324.2 million and $1,461.2$1,261.2 million of obligations collateralized by finance receivables atJune 30, 20202021 and December 31, 2019,2020, respectively. The amount of the cash reserve depends on circumstances which are set forth in the securitization agreements. There were unamortized securitization issuance costs of approximately approximate$11.7ly $18.1 million and $13.2$21.6 million at June 30, 20202021 and December 31, 2019,2020, respectively. After the occurrence of a termination event, as defined in the U.S. securitization agreement, the banks may, and could, cause the stock of AFC Funding Corporation to be transferred to the bank facility, though as a practical matter the bank facility would look to the liquidation of the receivables under the transaction documents as their primary remedy.
Proceeds from the revolving sale of receivables to the bank facilities are used to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility. At June 30, 2020,2021, we werewere in compliance with the covenants in the securitization agreements.
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In response to the COVID-19 pandemic and the related economic downturn, AFC amended its U.S. and Canadian securitization agreements in March and May 2020, in order to provide temporary cash relief to its customers by launching a Customer Relief Program. Under this program, eligible customers were able to choose to defer curtailment payments (principal, fees and interest) due through June 30, 2020, on eligible units. These transactions were permitted as eligible loans under the amended securitization agreements. The May 2020 amendments were also made to reflect the modifications to the Credit Facility.
On April 30, 2020, AFC amended its U.S. and Canadian securitization agreements to modify certain definitions and to reduce the minimum net spread for April, May and June 2020. In addition, the one-month minimum payment rate test decreased for April, May and June 2020. On June 25, 2020, AFC amended its U.S. and Canadian securitization agreements to extend the modification of certain definitions through the end of September and to increase the minimum net spread for July, August, and September 2020 above the April amendment requirement, but below the original agreement. An Over Collateralization floor was also implemented, and the restriction on payments being made to AFC from AFC Funding Corporation was removed, thereby reducing AFC's restricted cash requirements.

EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA, as presented herein, are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States, or GAAP. They are not measurements of our financial performance under GAAP and should not be considered substitutes for net income (loss) or any other performance measures derived in accordance with GAAP.
EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings, as described above in the discussion of certain restrictive loan covenants under "Credit Facilities."
Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by our creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate our performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.
The following tables reconcile EBITDA and Adjusted EBITDA to net income (loss) from continuing operations for the periods presented:
Three Months Ended June 30, 2020 Three Months Ended June 30, 2021
(Dollars in millions)ADESA AFC Corporate Consolidated(Dollars in millions)ADESAAFCConsolidated
Net income (loss) from continuing operations$(4.4) $16.0
 $(43.9) $(32.3)
Net income (loss)Net income (loss)$(5.2)$16.7 $11.5 
Add back:       Add back: 
Income taxes2.5
 5.6
 (12.7) (4.6)Income taxes3.4 5.7 9.1 
Interest expense, net of interest income0.6
 9.2
 20.8
 30.6
Interest expense, net of interest income21.6 9.4 31.0 
Depreciation and amortization38.2
 2.6
 5.7
 46.5
Depreciation and amortization42.9 2.5 45.4 
Intercompany interest(1.5) (0.1) 1.6
 —
Intercompany interest0.1 (0.1)— 
EBITDA35.4
 33.3
 (28.5) 40.2
EBITDA62.8 34.2 97.0 
Intercompany charges1.5
 —
 (1.5) —
Non-cash stock-based compensation1.2
 0.4
 1.3
 2.9
Non-cash stock-based compensation4.3 0.6 4.9 
Acquisition related costs0.9
 —
 —
 0.9
Acquisition related costs1.8 — 1.8 
Securitization interest—
 (6.0) —
 (6.0)Securitization interest— (6.8)(6.8)
Loss on asset sales0.5
 —
 —
 0.5
Severance5.6
 0.4
 0.5
 6.5
Severance1.2 — 1.2 
Foreign currency (gains)/losses(0.1) —
 2.8
 2.7
Foreign currency (gains)/losses0.4 — 0.4 
Goodwill and other intangibles impairment29.8
 —
 —
 29.8
Contingent consideration adjustmentContingent consideration adjustment4.5 — 4.5 
Reduction in unrealized gains on investment securitiesReduction in unrealized gains on investment securities— 11.9 11.9 
Other2.3
 —
 0.2
 2.5
Other1.5 0.1 1.6 
Total addbacks41.7
 (5.2) 3.3
 39.8
Total addbacks/(deductions) Total addbacks/(deductions)13.7 5.8 19.5 
Adjusted EBITDA$77.1
 $28.1
 $(25.2) $80.0
Adjusted EBITDA$76.5 $40.0 $116.5 
 

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 Three Months Ended June 30, 2020
(Dollars in millions)ADESAAFCConsolidated
Net income (loss)$(45.5)$13.2 $(32.3)
Add back: 
Income taxes(9.5)4.9 (4.6)
Interest expense, net of interest income21.4 9.2 30.6 
Depreciation and amortization43.3 3.2 46.5 
Intercompany interest0.2 (0.2)— 
EBITDA9.9 30.3 40.2 
Non-cash stock-based compensation2.4 0.5 2.9 
Acquisition related costs0.9 — 0.9 
Securitization interest— (6.0)(6.0)
Loss on asset sales0.5 — 0.5 
Severance6.0 0.5 6.5 
Foreign currency (gains)/losses2.7 — 2.7 
Goodwill and other intangibles impairment29.8 — 29.8 
Other2.5 — 2.5 
  Total addbacks/(deductions)44.8 (5.0)39.8 
Adjusted EBITDA$54.7 $25.3 $80.0 
 Six Months Ended June 30, 2021
(Dollars in millions)ADESAAFCConsolidated
Net income (loss)$(11.0)$73.4 $62.4 
Add back: 
Income taxes7.5 25.2 32.7 
Interest expense, net of interest income43.0 18.7 61.7 
Depreciation and amortization87.5 4.9 92.4 
Intercompany interest0.2 (0.2)— 
EBITDA127.2 122.0 249.2 
Non-cash stock-based compensation9.2 1.3 10.5 
Acquisition related costs3.3 — 3.3 
Securitization interest— (13.6)(13.6)
(Gain)/Loss on asset sales1.0 (0.8)0.2 
Severance1.7 0.2 1.9 
Foreign currency (gains)/losses2.6 — 2.6 
Contingent consideration adjustment15.7 — 15.7 
Unrealized gains on investment securities— (31.6)(31.6)
Other1.7 (0.2)1.5 
  Total addbacks/(deductions)35.2 (44.7)(9.5)
Adjusted EBITDA$162.4 $77.3 $239.7 
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Three Months Ended June 30, 2019 Six Months Ended June 30, 2020
(Dollars in millions)ADESA AFC Corporate Consolidated(Dollars in millions)ADESAAFCConsolidated
Net income (loss) from continuing operations$50.5
 $27.4
 $(50.5) $27.4
Net income (loss)Net income (loss)$(64.1)$34.6 $(29.5)
Add back:       Add back: 
Income taxes21.8
 11.3
 (24.4) 8.7
Income taxes(14.7)12.1 (2.6)
Interest expense, net of interest income0.6
 16.1
 38.3
 55.0
Interest expense, net of interest income45.1 22.7 67.8 
Depreciation and amortization38.0
 2.6
 7.3
 47.9
Depreciation and amortization87.7 6.5 94.2 
Intercompany interest4.0
 (1.6) (2.4) —
Intercompany interest1.0 (1.0)— 
EBITDA114.9
 55.8
 (31.7) 139.0
EBITDA55.0 74.9 129.9 
Intercompany charges3.6
 —
 (3.6) —
Non-cash stock-based compensation1.6
 0.4
 2.0
 4.0
Non-cash stock-based compensation7.0 1.2 8.2 
Acquisition related costs1.2
 —
 2.5
 3.7
Acquisition related costs2.3 — 2.3 
Securitization interest—
 (13.8) —
 (13.8)Securitization interest— (17.4)(17.4)
Loss on asset sales0.4
 —
 —
 0.4
Loss on asset sales1.0 — 1.0 
Severance0.9
 —
 0.2
 1.1
Severance7.8 0.5 8.3 
Foreign currency (gains)/losses(0.5) —
 0.5
 —
Foreign currency (gains)/losses3.1 — 3.1 
IAA allocated costs—
 —
 0.9
 0.9
Goodwill and other intangibles impairmentGoodwill and other intangibles impairment29.8 — 29.8 
Other0.5
 0.1
 —
 0.6
Other3.3 0.1 3.4 
Total addbacks7.7
 (13.3) 2.5
 (3.1)
Total addbacks/(deductions) Total addbacks/(deductions)54.3 (15.6)38.7 
Adjusted EBITDA$122.6
 $42.5
 $(29.2) $135.9
Adjusted EBITDA$109.3 $59.3 $168.6 

 Six Months Ended June 30, 2020
(Dollars in millions)ADESA AFC Corporate Consolidated
Net income (loss) from continuing operations$19.7
 $40.6
 $(89.8) $(29.5)
Add back:       
Income taxes11.3
 13.7
 (27.6) (2.6)
Interest expense, net of interest income1.2
 22.7
 43.9
 67.8
Depreciation and amortization77.3
 5.3
 11.6
 94.2
Intercompany interest(2.5) (0.9) 3.4
 —
EBITDA107.0
 81.4
 (58.5) 129.9
Intercompany charges3.2
 —
 (3.2) —
Non-cash stock-based compensation3.3
 0.8
 4.1
 8.2
Acquisition related costs2.1
 —
 0.2
 2.3
Securitization interest—
 (17.4) —
 (17.4)
Loss on asset sales1.0
 —
 —
 1.0
Severance6.9
 0.4
 1.0
 8.3
Foreign currency (gains)/losses1.7
 —
 1.4
 3.1
Goodwill and other intangibles impairment29.8
 —
 —
 29.8
Other2.5
 —
 0.9
 3.4
  Total addbacks50.5
 (16.2) 4.4
 38.7
Adjusted EBITDA$157.5
 $65.2
 $(54.1) $168.6


 Six Months Ended June 30, 2019
(Dollars in millions)ADESA AFC Corporate Consolidated
Net income (loss) from continuing operations$92.9
 $57.9
 $(108.1) $42.7
Add back:       
Income taxes37.7
 22.1
 (44.6) 15.2
Interest expense, net of interest income1.0
 33.0
 76.9
 110.9
Depreciation and amortization73.0
 5.0
 14.2
 92.2
Intercompany interest11.1
 (2.8) (8.3) —
EBITDA215.7
 115.2
 (69.9) 261.0
Intercompany charges6.8
 —
 (6.8) —
Non-cash stock-based compensation4.0
 0.9
 5.7
 10.6
Acquisition related costs2.8
 —
 4.8
 7.6
Securitization interest—
 (28.6) —
 (28.6)
Loss on asset sales0.9
 —
 —
 0.9
Severance3.6
 —
 1.2
 4.8
Foreign currency (gains)/losses(1.1) —
 0.5
 (0.6)
IAA allocated costs—
 —
 2.3
 2.3
Other0.7
 0.1
 —
 0.8
  Total addbacks17.7
 (27.6) 7.7
 (2.2)
Adjusted EBITDA$233.4
 $87.6
 $(62.2) $258.8

Other than during the financial covenant "holiday" provided by the Fourth Amendment, certainCertain of our loan covenant calculations utilize financial results for the most recent four consecutive fiscal quarters. The following table reconciles EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:
 Three Months EndedTwelve
Months
Ended
(Dollars in millions)September 30,
2020		December 31, 2020March 31,
2021		June 30,
2021		June 30, 2021
Net income (loss)$47.1 $(17.1)$50.9 $11.5 $92.4 
Add back: 
Income taxes10.9 (3.4)23.6 9.1 40.2 
Interest expense, net of interest income29.2 30.3 30.7 31.0 121.2 
Depreciation and amortization46.5 50.6 47.0 45.4 189.5 
EBITDA133.7 60.4 152.2 97.0 443.3 
Non-cash stock-based compensation3.9 3.0 5.6 4.9 17.4 
Acquisition related costs2.4 4.1 1.5 1.8 9.8 
Securitization interest(3.7)(6.2)(6.8)(6.8)(23.5)
Loss on asset sales0.1 0.2 0.2 — 0.5 
Severance2.3 0.9 0.7 1.2 5.1 
Foreign currency (gains)/losses0.1 1.7 2.2 0.4 4.4 
Contingent consideration adjustment— 4.7 11.2 4.5 20.4 
Change in unrealized gains on investment securities— — (43.5)11.9 (31.6)
Other0.4 (1.3)(0.1)1.6 0.6 
     Total addbacks/(deductions)5.5 7.1 (29.0)19.5 3.1 
Adjusted EBITDA$139.2 $67.5 $123.2 $116.5 $446.4 

39
 Three Months Ended 
Twelve
Months
Ended
(Dollars in millions)September 30,
2019		 December 31,
2019		 March 31,
2020		 June 30,
2020		 June 30,
2020
Net income (loss)$35.3
 $19.8
 $2.8
 $(32.3) $25.6
Less: Income from discontinued operations0.9
 4.5
 —
 —
 5.4
Income (loss) from continuing operations34.4
 15.3
 2.8
 (32.3) 20.2
Add back:         
Income taxes13.2
 9.3
 2.0
 (4.6) 19.9
Interest expense, net of interest income37.2
 38.3
 37.2
 30.6
 143.3
Depreciation and amortization46.4
 50.1
 47.7
 46.5
 190.7
EBITDA131.2
 113.0
 89.7
 40.2
 374.1
Non-cash stock-based compensation4.5
 5.2
 5.3
 2.9
 17.9
Loss on extinguishment of debt2.2
 —
 —
 —
 2.2
Acquisition related costs2.7
 1.9
 1.4
 0.9
 6.9
Securitization interest(13.3) (13.0) (11.4) (6.0) (43.7)
Loss on asset sales0.8
 0.4
 0.5
 0.5
 2.2
Severance0.9
 9.6
 1.8
 6.5
 18.8
Foreign currency (gains)/losses(0.4) 0.3
 0.4
 2.7
 3.0
Goodwill and other intangibles impairment—
 —
 —
 29.8
 29.8
Other0.6
 4.6
 0.9
 2.5
 8.6
     Total addbacks(2.0) 9.0
 (1.1) 39.8
 45.7
Adjusted EBITDA$129.2
 $122.0
 $88.6
 $80.0
 $419.8

Table of Contents
Summary of Cash Flows
 Six Months Ended June 30,
(Dollars in millions)2020 2019
Net cash provided by (used by):   
Operating activities - continuing operations$268.9
 $161.7
Operating activities - discontinued operations—
 155.8
Investing activities - continuing operations485.9
 (268.9)
Investing activities - discontinued operations—
 (37.4)
Financing activities - continuing operations(279.9) (1,387.6)
Financing activities - discontinued operations—
 1,317.6
Effect of exchange rate on cash(17.3) 10.8
Net increase (decrease) in cash, cash equivalents and restricted cash$457.6
 $(48.0)
 Six Months Ended June 30,
(Dollars in millions)20212020
Net cash provided by (used by):  
Operating activities$295.7 $268.9 
Investing activities(325.7)485.9 
Financing activities(113.3)(279.9)
Effect of exchange rate on cash6.4 (17.3)
Net (decrease) increase in cash, cash equivalents and restricted cash$(136.9)$457.6 
Cash flow provided by operating activities (continuing operations) was $268.9$295.7 million for the six months ended June 30, 2020,2021, compared with $161.7$268.9 million for the six months ended June 30, 2019.2020. The increase in operating cash flow was primarily attributable to changes in operating assets and liabilities as a result of the timing of collections and the disbursement of funds to consignors for auctions held near period-ends, as well asincreased profitability, partially offset by a net increasedecrease in non-cash item adjustments, partially offset by decreased profitability attributable toadjustments. We had reduced operations beginning March 20, 2020, resulting from COVID-19 restrictions on our business.
Net cash used by investing activities was $325.7 million for the six months ended June 30, 2021, compared with net cash provided by investing activities (continuing operations) wasof $485.9 million for the six months ended June 30, 2020, compared with2020. The increase in net cash used by investing activities of $268.9 million for the six months ended June 30, 2019. The increase in net cash from investing activities was primarily attributable to:
a net decrease•an increase in the additional finance receivables held for investment of approximately $602.4$732.6 million;
a decrease•an increase in cash used for acquisitions of approximately $120.7$79.8 million; and
a reduction•an increase in capital expendituresinvestment in securities of approximately $31.7 million.$20.6 million;
partially offset by:
•proceeds from sale of investments of approximately $21.4 million.
Net cash used by financing activities (continuing operations) was $113.3 million for the six months ended June 30, 2021, compared with $279.9 million for the six months ended June 30, 2020, compared with $1,387.6 million for the six months ended June 30, 2019.2020. The decrease in net cash used by financing activities was primarily attributable to:
a decrease in payments on long-term debt. In the second quarter of 2019, the Company used net cash provided by financing activities from discontinued operations (cash received from IAA•an increase in the separation) to prepay approximately $1.3 billion of its term loan debt;
net proceedsadditional obligations collateralized by finance receivables of approximately $528.2 million received from the issuance of the Series A Preferred Stock in the second quarter of 2020;$777.5 million;
•a decrease in dividends paid to stockholders of approximately $90.8$49.0 million; and
a decrease in cash transferred to IAA of $50.9 million;
partially offset by:
•a net decrease in the obligations collateralized by finance receivables of approximately $689.5 million;
a net decrease in borrowings on lines of credit of approximately $95.4 million;
a net decreaseincrease in book overdrafts of approximately $39.1$40.4 million;
partially offset by:
•a decrease in net proceeds from Series A Preferred Stock of approximately $528.2 million; and
•an increase in cash used for paymentsthe repurchase of contingent considerationcommon stock of approximately $21.8$180.9 million.

Capital Expenditures
Capital expenditures for the six months ended June 30, 2021 and 2020 and 2019 approximated $46.7$50.7 million and $78.4$46.7 million, respectively. Capital expenditures were funded primarily from internally generated funds. We continue to invest in our core information technology capabilities and capacity expansion.our service locations. Capital expenditures are expected to be approximately $125 million for fiscal year 2021. Future capital expenditures could vary substantially based on capital project timing, the opening of new auction facilities, capital expenditures related to acquired businesses and the initiation of new information systems projects to support our business strategies. The Company's capital expenditures for 2020 are dependent on when access to our facilities is available to employees and others. As a result, we are unable to estimate capital expenditures for 2020 at this time.
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Dividends
The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7% per annum, payable quarterly in arrears. Dividends are payable in kind through the issuance of additional shares of Series A Preferred Stock for the first eight dividend payments, and thereafter, in cash or in kind, or in any combination of both, at the option of the Company. As ofFor the six months ended June 30, 2020,2021, the holders of the Series A Preferred Stock had accumulatedreceived dividends in kind with a value in the aggregate of $2.1 million, which have not been declared.approximately $20.2 million. The holders of the Series A Preferred Stock are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis.
The following common stock dividend information has been released for 2020:
On February 18, 2020, the Company announced a cash dividend of $0.19 per share that was paid on April 3, 2020, to stockholders of record at the close of business on March 20, 2020.
On November 5, 2019, the Company announced a cash dividend of $0.19 per share that was paid on January 3, 2020, to stockholders of record at the close of business on December 20, 2019.
The Company has temporarily suspended its quarterly common stock dividend in light of the impact of the COVID-19 pandemic on its operations and the limitation placed on certain payments during the financial covenant "holiday" provided by the Fourth Amendment.operations. Future dividend decisions will be based on and affected by a variety of factors, including our financial condition and results of operations, contractual restrictions, including restrictive covenants contained in our Credit Agreement and AFC's securitization facilities and the indenture governing our senior notes, capital requirements and other factors that our board of directors deems relevant. No assurance can be given as to whether any future dividends may be declared by our board of directors or the amount thereof.

Acquisition
In May 2021, ADESA acquired Auction Frontier, LLC (“Auction Frontier”). Auction Frontier is the owner and operator of the cloud-based auction simulcast solution Velocicast®. The acquisition is aligned with KAR’s strategy, as Velocicast powers ADESA Simulcast and Simulcast+ technologies, as well as other wholesale and retail auctions across North America and Australia.
The purchased assets included accounts receivable, software, customer relationships and tradenames. The purchase agreement also included additional payments contingent on certain terms and conditions. Financial results for Auction Frontier have been included in our consolidated financial statements from the date of acquisition.
The purchase price for Auction Frontier, net of cash acquired, was approximately $92.2 million, which included a net cash payment of $79.8 million and estimated contingent payments with a fair value of $12.4 million based on a probability model. The maximum amount of undiscounted contingent payment related to this acquisition could approximate $15.0 million. The acquired assets and assumed liabilities of Auction Frontier were recorded at fair value, including $17.9 million to intangible assets, representing the fair value of acquired customer relationships of $10.0 million, software of $7.6 million and tradenames of $0.3 million, which are being amortized over their expected useful lives. The acquired software and tradenames are reported in "Other intangible assets" in the accompanying consolidated balance sheet. The excess earnings method was used to value the customer relationships and the relief from royalty method was used to value the software and tradenames. Both of these methods require forward looking estimates to determine fair value, including among other assumptions, forecasted revenue growth and estimated royalty and license rates. The purchase accounting associated with this acquisition is preliminary, subject to obtaining information to determine the fair value of certain assets and liabilities. The acquisition resulted in a preliminary estimate of $73.8 million of goodwill. The factors contributing to the recognition of goodwill were strategic and synergistic benefits that are expected to be realized from the acquisition. The goodwill is recorded in the ADESA Auctions reportable segment and all of it is expected to be deductible for tax purposes. The financial impact of this acquisition, including pro forma financial results, was immaterial to the Company's consolidated results for the six months ended June 30, 2021.
Contractual Obligations
The Company's contractual cash obligations for long-term debt, interest payments related to long-term debt, finance lease obligations and operating leases are summarized in the table of contractual obligations in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. Since December 31, 2019,2020, there have been no material changes to the contractual obligations of the Company, with the exception of the following:
In June 2020, we completed the issuance and sale of 550,000 shares of the Company’s Series A Preferred Stock. The holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7% per annum, payable quarterly in arrears. Dividends are payable in kind through the issuance of additional shares of Series A Preferred Stock for the first eight dividend payments, and thereafter, in cash or in kind, or in any combination of both, at the option of the Company.
In January 2020, we entered into three pay-fixed interest rate swaps with an aggregate notional amount of $500 million to swap variable rate interest payments under our term loan for fixed interest payments bearing a weighted average interest rate of 1.44%, for a total interest rate of 3.69%. The interest rate swaps have a five-year term, each maturing on January 23, 2025.
•Operating lease obligations change in the ordinary course of business. We lease most of our facilities, as well as other property and equipment under operating leases. Future operating lease obligations will continue to change if renewal options are exercised and/or if we enter into additional operating lease agreements.
See Note 7, Note 86 and Note 97 to the Consolidated Financial Statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information about the items described above. Our contractual cash obligations as of December 31, 2019,2020, are discussed in the "Contractual Obligations" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019,2020, as filed with the Securities and Exchange Commission (the "SEC").
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Table of Contents
Critical Accounting Estimates
Our critical accounting estimates are discussed in the "Critical Accounting Estimates" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019,2020, as filed with the SEC. A summary of significant accounting policies is discussed in Note 2 and elsewhere in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, which includes audited financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2020,2021, we had no off-balance sheet arrangements pursuant to Item 303(a)(4) of Regulation S-K under the Securities Exchange Act.Act of 1934, as amended (the "Exchange Act").
New Accounting Standards
For a description of new accounting standards that could affect the Company, reference the "New Accounting Standards" section of Note 1 to the Unaudited Consolidated Financial Statements, included elsewhere in this Quarterly Report on Form 10-Q.

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Table of Contents
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency
Our foreign currency exposure is limited and arises from transactions denominated in foreign currencies, particularly intercompany loans, as well as from translation of the results of operations from our Canadian and, to a much lesser extent, United Kingdom, Continental Europe and Mexican subsidiaries. However, fluctuations between U.S. and non-U.S. currency values may adversely affect our results of operations and financial position. We have not entered into any foreign exchange contracts to hedge changes in the Canadian dollar, British pound, euro or Mexican peso. Foreign currency losses on intercompany loans were approximately $0.4 million and $2.6 million for the three and six months ended June 30, 2021, respectively and approximately $2.7 million and $3.1 million for the three and six months ended June 30, 2020, respectively. Canadian currency translation positively affected net income by approximately $2.0 million and $1.9 million for the three and six months ended June 30, 2021 and negatively affected net income (loss) by approximately $0.1 million and $0.1 million for the three and six months ended June 30, 2020, respectively. A 1% decreasechange in the month-end Canadian exchange rate for the six months ended June 30, 2021 would have impacted foreign currency losses on intercompany loans by $0.8 million and net income by $0.5 million. A 1% change in the average Canadian exchange rate for the three and six months ended June 30, 20202021 would have impacted net income (loss) by approximately $0.1$0.2 million and $0.1$0.3 million, respectively. Currency exposure of our U.K., Continental Europe and Mexican operations is not material to the results of operations.
Interest Rates
We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay. We currently use interest rate swap agreements to manage our exposure to interest rate changes. We have designated the interest rate swaps as cash flow hedges for accounting purposes. Accordingly, the earnings impact of the derivatives designated as cash flow hedges are recorded upon the recognition of the interest related to the hedged debt. There was no significant ineffectiveness in the six months ended June 30, 2020.
In January 2020, we entered into three pay-fixed interest rate swaps with an aggregate notional amount of $500 million to swap variable rate interest payments under our term loan for fixed interest payments bearing a weighted average interest rate of 1.44%. The interest rate swaps have a five-year term, each maturing on January 23, 2025.
Taking our interest rate swaps into account, a sensitivity analysis of the impact on our variable rate corporate debt instruments to a hypothetical 100 basis point increase in short-term rates (LIBOR) for the three and six months ended June 30, 20202021 would have resulted in an increase in interest expense of approximately $1.1 million and $2.2 million, respectively.
Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), during the quarter ended June 30, 2020,2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table of Contents
PART II
OTHER INFORMATION
Item 1.    Legal Proceedings
We are involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business such as employment matters and dealer disputes. Such litigation is generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows.
Certain legal proceedings in which the Company is involved are discussed in Note 1718 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 20192020 and Part I, Item 3 of the same Annual Report. Unless otherwise indicated therein, all proceedings discussed in the Annual Report remain outstanding.
Item 1A.    Risk Factors
In addition to the additional risk factor related to the COVID-19 pandemicother information set forth below,in this report, readers should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and the factors discussed in Part II, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 which could materially affect our business, financial condition or future results. Other than as set forth below, there were no material changes during the six months ended June 30, 2020 to the risk factors reported in our most recent Annual Report on Form 10-K and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The risks described below and in our most recent Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. The impact of COVID-19 implicatesmay implicate and exacerbatesexacerbate other risks discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, any of which could have a material effect on us.2020, including but not limited to risks relating to general economic conditions. This situation is changing rapidlycontinues to evolve and additional impacts may arise that we are not aware of currently. Due to the unprecedented nature of the COVID-19 pandemic and responses thereto, we cannot identify all of the risks we face from the pandemic and its aftermath.
The COVID-19 pandemic continues to create significant uncertainty and has had, and is expected to continue to have, an adverse impact on our business, results of operations and financial condition.
The extent of the impact of the COVID-19 pandemic on our business, results of operations and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict, and some of which may be more than just temporary.
Governments around the world have mandated, and continue to introduce, numerous and varying measures to slow the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter-in-place and safer-at-home orders, business shutdowns and closures, and have also implemented multi-phase plans with the goal of re-opening their respective jurisdictions. Certain jurisdictions have begun easing restrictions only to return to tighter restrictions in the face of increases in new COVID-19 cases. These measures have not only negatively impacted consumer spending and business spending habits, they have also adversely impacted and are expected to continue to impact our workforce and operations and the operations of our customers, suppliers and business partners. The duration of these measures is unknown, may be extended and additional measures may be imposed, and they are likely to continue to adversely affect our business, results of operations and financial condition.
We are focused on attempting to mitigate the negative impacts of COVID-19 on our business, which has required and will continue to require a substantial investment of time and resources across our enterprise. While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 on our employees and our business, there can be no assurance that we will be successful in our efforts. Further, our enhanced reliance on remote access to our information systems continues to increase our exposure to cybersecurity attacks or data security incidents, along with other risks related to the reliability of technology to support remote operations.
COVID-19 has caused and may continue to cause us to modify our business practices. The extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak or subsequent outbreaks, the severity of outbreaks, the actions to contain the virus or treat its impact, and the extent to which normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its impact.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
The information required by Item 701 of Regulation S-K was previously disclosed (for the sale of Series A Preferred Stock) in the Company’sCompany's Current Reports on Form 8-K, filed with the SEC on June 10, 2020 and June 30, 2020.
On November 12, 2020, we also issued 857,630 shares of our common stock to three individuals and one trust in connection with the BacklotCars acquisition in the fourth quarter of 2020. We received $15 million as consideration for the sale of such securities. The issuance of these securities was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering and/or the private offering safe harbor provision of Rule 506 of Regulation D promulgated under the Securities Act.
Issuer Purchases of Equity Securities
The following table provides information about purchases by KAR Auction Services of its shares of common stock during the quarter ended June 30, 2020:2021:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(Dollars in millions)
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(Dollars in millions)
April 1 - April 30 —
 $—
 —
 $300.0
April 1 - April 30— $— — $209.0 
May 1 - May 31 —
 —
 —
 300.0
May 1 - May 314,126,000 17.71 4,126,000 135.9 
June 1 - June 30 —
 —
 —
 300.0
June 1 - June 301,502,000 17.94 1,502,000 109.0 
Total —
 $—
 —
  Total5,628,000 $17.77 5,628,000 
(1)In October 2019, the board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock, par value $0.01 per share, through October 30, 2021. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Exchange Act.
(1)     In October 2019, the board of directors authorized a repurchase of up to $300 million of the Company’s outstanding common stock, par value $0.01 per share, through October 30, 2021. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases is subject to market and other conditions.


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Table of Contents
Item 6.    Exhibits, Financial Statement Schedules
a)Exhibits—the exhibit index below is incorporated herein by reference as the list of exhibits required as part of this report.
a)     Exhibits—the exhibit index below is incorporated herein by reference as the list of exhibits required as part of this report.
In reviewing the agreements included as exhibits to this Form 10-Q, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about KAR Auction Services, ADESA, AFC or other parties to the agreements.
The agreements included or incorporated by reference as exhibits to this Quarterly Report on Form 10-Q contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of "materiality" that are different from "materiality" under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Quarterly Report on Form 10-Q not misleading. Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and KAR Auction Services, Inc.'s other public filings, which are available without charge through the SEC's website at http://www.sec.gov.
EXHIBIT INDEX
  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling
Date		Filed
Herewith
2.1+8-K001-345682.16/28/2019
2.28-K001-345682.19/8/2020
3.110-Q001-345683.18/3/2016
3.28-K001-345683.111/4/2014 
3.38-K001-345683.16/10/2020
4.18-K001-345684.15/31/2017
4.2S-1/A333-1619074.1512/10/2009 
4.310-K001-345684.32/19/2020
10.1a8-K001-3456810.13/12/2014 
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Table of Contents
    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed
Herewith
             
2.1
+
Separation and Distribution Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
 8-K 001-34568 2.1 6/28/2019  
             
3.1
 
Amended and Restated Certificate of Incorporation of KAR Auction Services, Inc.
 10-Q 001-34568 3.1 8/3/2016  
             
3.2
 
Second Amended and Restated By-Laws of KAR Auction Services, Inc.
 8-K 001-34568 3.1 11/4/2014  
             
3.3
 
Certificate of Designations Designating the Series A Convertible Preferred Stock
 8-K 001-34568 3.1 6/10/2020  
             
4.1
 
Indenture, dated as of May 31, 2017, among KAR Auction Services, Inc., the guarantors party thereto and U.S. Bank National Association, as trustee, including the form of the Notes
 8-K 001-34568 4.1 5/31/2017  
             
4.2
 
Form of common stock certificate
 S-1/A 333-161907 4.15 12/10/2009  
             
4.3
 
Description of the Company's securities
 10-K 001-34568 4.3 2/19/2020  
             
10.1a
 
Amendment and Restatement Agreement, dated March 11, 2014, among KAR Auction Services, Inc. and certain of its subsidiaries and JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and issuing lender (the Amended and Restated Credit Agreement and the Amended and Restated Guarantee and Collateral Agreement are included as Exhibits A and B thereto, respectively)
 8-K 001-34568 10.1 3/12/2014  
             
10.1b
 
Incremental Commitment Agreement and First Amendment, dated as of March 9, 2016, among KAR Auction Services, Inc., JPMorgan Chase Bank, N.A., as administrative agent, certain subsidiaries of the Company party thereto and the several lenders party thereto
 8-K 001-34568 10.1 3/9/2016  
             

  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling
Date		Filed
Herewith
10.1b8-K001-3456810.13/9/2016
10.1c8-K001-3456810.15/31/2017
10.1d8-K001-3456810.19/20/2019
10.1e10-K001-3456810.1e2/18/2021
10.1f8-K001-3456810.16/1/2020
10.1g8-K001-3456810.19/8/2020
10.2*8-K001-3456810.13/2/2021 
10.3*8-K001-3456810.23/13/2020
10.4 *8-K001-3456810.13/13/2020
10.5a*10-Q001-3456810.95/7/2020
10.5b*8-K001-3456810.23/2/2021
10.6 *10-K001-3456810.62/18/2021
10.7 *10-K001-3456810.132/19/2020
10.8 *10-K001-3456810.82/18/2021
10.9a^S-4333-14884710.321/25/2008 
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    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed
Herewith
10.1c
 
Incremental Commitment Agreement and Second Amendment, dated as of May 31, 2017, among KAR Auction Services, Inc., JPMorgan Chase Bank, N.A., as administrative agent, the guarantors party thereto and the several lenders party thereto
 8-K 001-34568 10.1 5/31/2017  
             
10.1d
 
Third Amendment Agreement, dated as of September 19, 2019, by and among KAR Auction Services, Inc., JPMorgan Chase Bank, N.A., as administrative agent, certain subsidiaries of KAR Auction Services, Inc. party thereto and the several lenders party thereto
 8-K 001-34568 10.1 9/20/2019  
             
10.1e
 
Fourth Amendment Agreement, dated as of May 29, 2020, by and among KAR Auction Services, Inc., JPMorgan Chase Bank, N.A., as administrative agent, certain subsidiaries of the Company party thereto and the certain revolving lenders party thereto
 8-K 001-34568 10.1 6/1/2020  
             
10.2
*
KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) Stock Incentive Plan
 S-8 333-164032 10.1 12/24/2009  
             
10.3
*
Form of Nonqualified Stock Option Agreement of KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) pursuant to the Stock Incentive Plan
 S-4 333-148847 10.15 1/25/2008  
             
10.4
*
Employment Agreement, dated February 27, 2012, between KAR Auction Services, Inc. and James P. Hallett
 10-K 001-34568 10.15 2/28/2012  
             
10.5a
*
Amended and Restated Employment Agreement, dated March 24, 2014, between KAR Auction Services, Inc. and Don Gottwald
 8-K 001-34568 10.1 3/20/2014  
             
10.5b
*
Amendment to Employment Agreement, dated February 19, 2018, between KAR Auction Services, Inc. and Don Gottwald
 10-K 001-34568 10.5b 2/21/2018  
             
10.5c
*
Amendment No. 2 to Employment Agreement, dated February 20, 2019, between KAR Auction Services, Inc. and Don Gottwald
 10-K 001-34568 10.5c 2/21/2019  
             
10.6
*
Employment Agreement, dated March 9, 2020, between KAR Auction Services, Inc. and Eric M. Loughmiller
 8-K 001-34568 10.2 3/13/2020  
             
10.7
*
Employment Agreement, dated March 9, 2020, between KAR Auction Services, Inc. and John C. Hammer
 8-K 001-34568 10.1 3/13/2020  
             
10.8a
*
Employment Agreement, dated December 17, 2013, between KAR Auction Services, Inc. and Rebecca Polak
 10-K 001-34568 10.13 2/19/2014  
             
10.8b
*
Amendment to Employment Agreement, dated February 19, 2018, between KAR Auction Services, Inc. and Rebecca Polak
 10-K 001-34568 10.8b 2/21/2018  
             
10.8c
*
Consulting Agreement, dated September 12, 2019, between KAR Auction Services, Inc. and Rebecca C. Polak
 10-Q 001-34568 10.8c 11/6/2019  
             
10.9
*
Employment Agreement, dated March 9, 2020, between KAR Auction Services, Inc. and Peter J. Kelly
 10-Q 001-34568 10.9 5/7/2020  
             
10.10
*
KAR Auction Services, Inc. Annual Incentive Program Summary of Terms 2017
 10-K 001-34568 10.13 2/24/2017  
             

  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling
Date		Filed
Herewith
10.9b S-4333-14884710.331/25/2008
10.9c S-4333-14884710.341/25/2008 
10.9d^S-4333-14884710.351/25/2008 
10.9e 10-K001-3456810.19e2/28/2012 
10.9f 10-K001-3456810.19f2/28/2012 
10.10^10-Q001-3456810.1511/4/2020
10.11^10-Q001-3456810.1611/4/2020
10.12a8-K333-14884710.39/9/2008 
10.12b8-K333-14884710.119/9/2008 
10.13a8-K333-14884710.49/9/2008
10.13b8-K333-14884710.129/9/2008
10.14a8-K333-14884710.59/9/2008
10.14b8-K333-14884710.139/9/2008
10.15a8-K333-14884710.69/9/2008
10.15b8-K333-14884710.149/9/2008
47
Table of Contents
    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed
Herewith
10.11
*
KAR Auction Services, Inc. Annual Incentive Program Summary of Terms 2018
 10-K 001-34568 10.12 2/21/2018  
             
10.12
*
KAR Auction Services, Inc. Annual Incentive Program Summary of Terms 2019
 10-K 001-34568 10.13 2/21/2019  
             
10.13
*
KAR Auction Services, Inc. Annual Incentive Program Summary of Terms 2020
 10-K 001-34568 10.13 2/19/2020  
             
10.14a
^
Amended and Restated Purchase and Sale Agreement, dated May 31, 2002, between AFC Funding Corporation and Automotive Finance Corporation
 S-4 333-148847 10.32 1/25/2008  
             
10.14b
 
Amendment No. 1 to Amended and Restated Purchase and Sale Agreement, dated June 15, 2004
 S-4 333-148847 10.33 1/25/2008  
             
10.14c
 
Amendment No. 2 to Amended and Restated Purchase and Sale Agreement, dated January 18, 2007
 S-4 333-148847 10.34 1/25/2008  
             
10.14d
^
Amendment No. 3 to Amended and Restated Purchase and Sale Agreement, dated April 20, 2007
 S-4 333-148847 10.35 1/25/2008  
             
10.14e
 
Amendment No. 4 to Amended and Restated Purchase and Sale Agreement, dated January 30, 2009
 10-K 001-34568 10.19e 2/28/2012  
             
10.14f
 
Amendment No. 5 to Amended and Restated Purchase and Sale Agreement, dated April 25, 2011
 10-K 001-34568 10.19f 2/28/2012  
             
10.15a
^
Eighth Amended and Restated Receivables Purchase Agreement, dated December 18, 2018, among AFC Funding Corporation, Automotive Finance Corporation, the entities from time to time parties hereto as Purchasers or Purchaser Agents and Bank of Montreal
 10-K 001-34568 10.15 2/21/2019  
             
10.15b
 
Amendment No. 1 to Eighth Amended and Restated Receivables Purchase Agreement, dated March 23, 2020, among AFC Funding Corporation, Automotive Finance Corporation, the entities from time to time parties hereto as Purchasers or Purchaser Agents and Bank of Montreal
 10-Q 001-34568 10.15b 5/7/2020  
             
10.15c
^
Amendment No. 2 to Eighth Amended and Restated Receivables Purchase Agreement, dated April 30, 2020, among AFC Funding Corporation, Automotive Finance Corporation, the entities from time to time parties hereto as Purchasers or Purchaser Agents and Bank of Montreal
 10-Q 001-34568 10.15c 5/7/2020  
             
10.15d
 
Amendment No. 3 to Eighth Amended and Restated Receivables Purchase Agreement, dated May 29, 2020, among AFC Funding Corporation, Automotive Finance Corporation, the entities from time to time parties hereto as Purchasers or Purchaser Agents and Bank of Montreal
         X
             
10.15e
^
Amendment No. 4 to Eighth Amended and Restated Receivables Purchase Agreement, dated June 25, 2020, among AFC Funding Corporation, Automotive Finance Corporation, the entities from time to time parties hereto as Purchasers or Purchaser Agents and Bank of Montreal
         X
             
10.16a
^
Fourth Amended and Restated Receivables Purchase Agreement, dated December 20, 2016, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
 10-K 001-34568 10.16 2/24/2017  
             

  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling
Date		Filed
Herewith
10.16a8-K333-14884710.79/9/2008
10.16b8-K333-14884710.159/9/2008
10.17a8-K333-14884710.89/9/2008
10.17b 8-K333-14884710.169/9/2008
10.18a 8-K333-14884710.109/9/2008 
10.18b 8-K333-14884710.189/9/2008 
10.19a 10-Q333-14884710.2111/13/2008 
10.19b 10-Q333-14884710.2211/13/2008 
10.208-K001-3456810.112/17/2013
10.21a*DEF 14A001-34568Appendix A4/29/2014 
10.21b*10-K001-3456810.24b2/18/2016
10.21c*DEF 14A001-34568Annex 14/23/2021
10.22*10-Q001-3456810.278/5/2020
10.23a*10-Q001-3456810.628/4/2010
10.23b*10-Q001-3456810.28b11/6/2019
10.24*10-Q001-3456810.298/7/2019
10.25*S-1/A333-16190710.6512/4/2009
10.26*10-K001-3456810.332/24/2017
10.27*10-K001-3456810.332/21/2018
48
Table of Contents
  Incorporated by Reference 
Exhibit No.Exhibit DescriptionFormFile No.ExhibitFiling
Date		Filed
Herewith
10.28*10-K001-3456810.352/21/2019
10.29*10-K001-3456810.352/19/2020
10.30*10-K001-3456810.302/18/2021
10.31*10-K001-3456810.382/24/2017
10.32*10-K001-3456810.382/19/2020
10.338-K001-3456810.16/28/2019
10.348-K001-3456810.26/28/2019
10.358-K001-3456810.36/28/2019
10.368-K001-3456810.15/27/2020
10.37a8-K001-3456810.25/27/2020
10.37b10-K001-3456810.37b2/18/2021
10.388-K001-3456810.16/10/2020
10.398-K001-3456810.16/29/2020
31.1      X
31.2      X
32.1      X
32.2      X
49
Table of Contents
Incorporated by Reference
Exhibit No.Exhibit DescriptionFormFile No.Exhibit
Filing

Date
Filed

Herewith
10.16b
Amending Agreement No. 1 to Fourth Amended and Restated Receivables Purchase Agreement, dated January 30, 2017, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada101
10-Q001-3456810.16b5/10/2017
10.16c
^
Amending Agreement No. 2 to Fourth Amended and Restated Receivables Purchase Agreement, dated December 18, 2018, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
10-K001-3456810.16c2/21/2019
10.16d
Amending Agreement No. 3 to Fourth Amended and Restated Receivables Purchase Agreement, dated March 23, 2020, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
10-Q001-3456810.16d5/7/2020
10.16e
^
Amending Agreement No. 4 to Fourth Amended and Restated Receivables Purchase Agreement, dated April 30, 2020, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
10-Q001-3456810.16e5/7/2020
10.16f
Amending Agreement No. 5 to Fourth Amended and Restated Receivables Purchase Agreement, dated May 29, 2020, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
X
10.16g
^
Amending Agreement No. 6 to Fourth Amended and Restated Receivables Purchase Agreement, dated June 25, 2020, between Automotive Finance Canada Inc., KAR Auction Services, Inc. and BNY Trust Company of Canada
X
10.17a
Ground Lease, dated September 4, 2008, between ADESA San Diego, LLC and First Industrial L.P. (East 39 Acres at Otay Mesa, California)
8-K333-14884710.39/9/2008
10.17b
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial L.P. (East 39 Acres at Otay Mesa, California)
8-K333-14884710.119/9/2008
10.18a
Ground Lease, dated September 4, 2008, between ADESA San Diego, LLC and First Industrial L.P. (West 39 Acres at Otay Mesa, California)
8-K333-14884710.49/9/2008
10.18b
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial L.P. (West 39 Acres at Otay Mesa, California)
8-K333-14884710.129/9/2008
10.19a
Ground Lease, dated September 4, 2008, between ADESA California, LLC and ADESA San Diego, LLC and First Industrial Pennsylvania, L.P. (Sacramento, California)
8-K333-14884710.59/9/2008
10.19b
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial Pennsylvania, L.P. (Sacramento, California)
8-K333-14884710.139/9/2008
10.20a
Ground Lease, dated September 4, 2008, between ADESA California, LLC and First Industrial Pennsylvania, L.P. (Tracy, California)
8-K333-14884710.69/9/2008

    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed
Herewith
10.20b
 
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial Pennsylvania, L.P. (Tracy, California)
 8-K 333-148847 10.14 9/9/2008  
             
10.21a
 
Ground Lease, dated September 4, 2008, between ADESA Washington, LLC and First Industrial, L.P. (Auburn, Washington)
 8-K 333-148847 10.7 9/9/2008  
             
10.21b
 
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial, L.P. (Auburn, Washington)
 8-K 333-148847 10.15 9/9/2008  
             
10.22a
 
Ground Lease, dated September 4, 2008, between ADESA Texas, Inc. and First Industrial, L.P. (Houston, Texas)
 8-K 333-148847 10.8 9/9/2008  
             
10.22b
 
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial, L.P. (Houston, Texas)
 8-K 333-148847 10.16 9/9/2008  
             
10.23a
 
Ground Lease, dated September 4, 2008, between ADESA Florida, LLC and First Industrial Financing Partnership, L.P. (Bradenton, Florida)
 8-K 333-148847 10.10 9/9/2008  
             
10.23b
 
Guaranty of Lease, dated September 4, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial Financing Partnership, L.P. (Bradenton, Florida)
 8-K 333-148847 10.18 9/9/2008  
             
10.24a
 
Ground Sublease, dated October 3, 2008, between ADESA Atlanta, LLC and First Industrial, L.P. (Fairburn, Georgia)
 10-Q 333-148847 10.21 11/13/2008  
             
10.24b
 
Guaranty of Lease, dated October 3, 2008, between KAR Auction Services, Inc. (formerly KAR Holdings, Inc.) and First Industrial, L.P. (Fairburn, Georgia)
 10-Q 333-148847 10.22 11/13/2008  
             
10.25
 
Form of Indemnification Agreement
 8-K 001-34568 10.1 12/17/2013  
             
10.26a
*
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan, as Amended June 10, 2014
 DEF 14A 001-34568 Appendix A 4/29/2014  
             
10.26b
*
First Amendment to the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
 10-K 001-34568 10.24b 2/18/2016  
             
10.27
*
KAR Auction Services, Inc. Amended and Restated Employee Stock Purchase Plan
         X
             
10.28a
*
KAR Auction Services, Inc. Directors Deferred Compensation Plan, effective December 10, 2009
 10-Q 001-34568 10.62 8/4/2010  
             
10.28b
*
Amendment No. 1 to the KAR Auction Services, Inc. Directors Deferred Compensation Plan, dated as of June 28, 2019
 10-Q 001-34568 10.28b 11/6/2019  
             
10.29
*
Director Restricted Share Agreement
 10-Q 001-34568 10.29 8/7/2019  
             
10.30
*
Form of Nonqualified Stock Option Agreement
 S-1/A 333-161907 10.65 12/4/2009  
             
10.31
*
Form of 2016 Restricted Stock Unit Award Agreement for Section 16 Officers
 10-K 001-34568 10.30 2/18/2016  
             
10.32
*
Form of 2017 Restricted Stock Unit Award Agreement for Section 16 Officers
 10-K 001-34568 10.33 2/24/2017  
             

    Incorporated by Reference  
Exhibit No. Exhibit Description Form File No. Exhibit 
Filing
Date
 
Filed
Herewith
10.33
*
Form of 2018 Restricted Stock Unit Award Agreement for Section 16 Officers
 10-K 001-34568 10.33 2/21/2018  
             
10.34
*
Form of 2019 Restricted Stock Unit Award Agreement for Section 16 Officers
 10-K 001-34568 10.35 2/21/2019  
             
10.35
*
Form 2020 Restricted Stock Unit Award Agreement for Section 16 Officers
 10-K 001-34568 10.35 2/19/2020  
             
10.36
*
Form of 2016 Performance-Based Restricted Stock Unit Agreement (Cumulative Operating Adjusted Net Income Per Share)
 10-K 001-34568 10.34 2/18/2016  
             
10.37
*
Form of 2017, 2018 and 2019 Performance-Based Restricted Stock Unit Agreement (Cumulative Operating Adjusted Net Income Per Share)
 10-K 001-34568 10.38 2/24/2017  
             
10.38
 
Form of 2020 Performance-Based Restricted Stock Unit Agreement (Cumulative Operating Adjusted Net Income Per Share)
 10-K 001-34568 10.38 2/19/2020  
             
10.39
 
Transition Services Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
 8-K 001-34568 10.1 6/28/2019  
             
10.40
 
Tax Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
 8-K 001-34568 10.2 6/28/2019  
             
10.41
 
Employee Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.
 8-K 001-34568 10.3 6/28/2019  
             
10.42
 
Investment Agreement, dated May 26, 2020, by and between KAR Auction Services, Inc. and Ignition Parent LP
 8-K 001-34568 10.1 5/27/2020  
             
10.43
 
Investment Agreement, dated May 26, 2020, by and between KAR Auction Services, Inc. and Periphas Capital GP, LLC
 8-K 001-34568 10.2 5/27/2020  
             
10.44
 
Registration Rights Agreement, dated June 10, 2020, by and among KAR Auction Services, Inc. and Ignition Parent LP
 8-K 001-34568 10.1 6/10/2020  
             
10.45
 
Registration Rights Agreement, dated June 29, 2020, by and between KAR Auction Services, Inc. and Periphas Kanga Holdings, LP
 8-K 001-34568 10.1 6/29/2020  
             
31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         X
             
31.2
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         X
             
32.1
 
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
             
32.2
 
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
             

Incorporated by Reference
Exhibit No.Exhibit DescriptionFormFile No.Exhibit
Filing
Date
Filed
Herewith
101
The following materials from KAR Auction Services, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 20202021 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statements of Income for the three and six months ended June 30, 20202021 and 2019;2020; (ii) the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20202021 and 20192020 (iii) the Consolidated Balance Sheets as of June 30, 20202021 and December 31, 2019;2020; (iv) the Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 20202021 and 2019;2020; (v) the Consolidated Statements of Cash Flows for the six months ended June 30, 20202021 and 2019;2020; and (vi) the Condensed Notes to Consolidated Financial Statements.X
104
Cover page Interactive Data File, formatted in iXBRL (contained in Exhibit 101).X


+Certain information has been excluded from this exhibit because it is not material and would likely cause competitive harm to the registrant if publicly disclosed.
^Portions of this exhibit have been redacted pursuant to a request for confidential treatment filed separately with the Secretary of the Securities and Exchange Commission pursuant to Rule 406 under the Securities Act of 1933, as amended.
*Denotes management contract or compensation plan, contract or arrangement.


50
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

KAR Auction Services, Inc.
(Registrant)
Date:August 4, 2021KAR Auction Services, Inc.
(Registrant)
Date:August 5, 2020/s/ ERIC M. LOUGHMILLER
Eric M. Loughmiller
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial and
Accounting Officer)


58
51