Document and Entity Information
Document and Entity Information - $ / shares | 9 Months Ended | ||
Sep. 30, 2020 | Oct. 31, 2020 | Dec. 31, 2019 | |
Cover [Abstract] | |||
Document type | 10-Q | ||
Document quarterly report | true | ||
Document period end date | Sep. 30, 2020 | ||
Document transition report | false | ||
Commission file number | 001-34568 | ||
Entity registrant name | KAR Auction Services, Inc. | ||
Entity incorporation state | DE | ||
Entity tax identification number | 20-8744739 | ||
Entity address, address line one | 11299 N. Illinois Street | ||
Entity address, city | Carmel | ||
Entity address, state | IN | ||
Entity address, postal zip code | 46032 | ||
City area code | 800 | ||
Local phone number | 923-3725 | ||
Title of 12(b) security | Common Stock, par value $0.01 per share | ||
Trading symbol | KAR | ||
Security exchange name | NYSE | ||
Entity interactive data current | Yes | ||
Entity current reporting status | Yes | ||
Entity filer category | Large Accelerated Filer | ||
Entity small business | false | ||
Entity emerging growth company | false | ||
Entity shell company | false | ||
Entity common stock, shares outstanding | 129,251,552 | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Entity central index key | 0001395942 | ||
Current fiscal year end date | --12-31 | ||
Document fiscal year focus | 2020 | ||
Document fiscal period focus | Q3 | ||
Amendment flag | false |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Operating revenues | ||||
Auction fees and services revenue | $ 440.5 | $ 534.5 | $ 1,244.6 | $ 1,629.5 |
Purchased vehicle sales | 86.2 | 79.1 | 211.3 | 216.2 |
Finance-related revenue | 66.9 | 88.3 | 202.2 | 264.9 |
Total operating revenues | 593.6 | 701.9 | 1,658.1 | 2,110.6 |
Operating expenses | ||||
Cost of services (exclusive of depreciation and amortization) | 329.7 | 410.9 | 959.4 | 1,222.2 |
Selling, general and administrative | 131 | 158.9 | 405.7 | 497.3 |
Depreciation and amortization | 46.5 | 46.4 | 140.7 | 138.6 |
Goodwill and other intangibles impairment | 0 | 0 | 29.8 | 0 |
Total operating expenses | 507.2 | 616.2 | 1,535.6 | 1,858.1 |
Operating profit | 86.4 | 85.7 | 122.5 | 252.5 |
Interest expense | 29.5 | 37.9 | 98.4 | 150 |
Other income, net | (1.1) | (2) | (1.8) | (5.2) |
Loss on extinguishment of debt | 0 | 2.2 | 0 | 2.2 |
Income from continuing operations before income taxes | 58 | 47.6 | 25.9 | 105.5 |
Income taxes | 10.9 | 13.2 | 8.3 | 28.4 |
Income from continuing operations | 47.1 | 34.4 | 17.6 | 77.1 |
Income from discontinued operations, net of income taxes | 0 | 0.9 | 0 | 91.6 |
Net income | $ 47.1 | $ 35.3 | $ 17.6 | $ 168.7 |
Net income per share - basic | ||||
Income from continuing operations | $ 0.23 | $ 0.26 | $ 0.04 | $ 0.58 |
Income from discontinued operations | 0 | 0.01 | 0 | 0.69 |
Net income per share - basic | 0.23 | 0.27 | 0.04 | 1.27 |
Net income per share - diluted | ||||
Income from continuing operations | 0.23 | 0.26 | 0.04 | 0.58 |
Income from discontinued operations | 0 | 0.01 | 0 | 0.68 |
Net income per share - diluted | 0.23 | 0.27 | 0.04 | 1.26 |
Dividends declared per common share | $ 0 | $ 0.19 | $ 0.19 | $ 0.89 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Net income | $ 47.1 | $ 35.3 | $ 17.6 | $ 168.7 |
Other comprehensive income (loss), net of tax | ||||
Foreign currency translation gain (loss) | 12.6 | (10.8) | (7.3) | 5.7 |
Unrealized gain (loss) on interest rate derivatives, net of tax | 1 | 0 | (21.6) | 0 |
Total other comprehensive income (loss), net of tax | 13.6 | (10.8) | (28.9) | 5.7 |
Comprehensive income (loss) | $ 60.7 | $ 24.5 | $ (11.3) | $ 174.4 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 1,276.7 | $ 507.6 |
Restricted cash | 54.7 | 53.3 |
Trade receivables, net of allowances of $10.9 and $9.5 | 494.1 | 457.5 |
Finance receivables, net of allowances of $22.0 and $15.0 | 1,722.8 | 2,100.2 |
Other current assets | 126.3 | 125.9 |
Total current assets | 3,674.6 | 3,244.5 |
Other assets | ||
Goodwill | 1,798.2 | 1,821.7 |
Customer relationships, net of accumulated amortization of $665.0 and $637.4 | 168.6 | 207.9 |
Other intangible assets, net of accumulated amortization of $341.5 and $292.4 | 284.4 | 298.5 |
Operating lease right-of-use assets | 354.9 | 364.1 |
Property and equipment, net of accumulated depreciation of $578.6 and $534.3 | 585.2 | 609 |
Other assets | 44 | 35.5 |
Total other assets | 3,235.3 | 3,336.7 |
Total assets | 6,909.9 | 6,581.2 |
Current liabilities | ||
Accounts payable | 938.1 | 704.6 |
Accrued employee benefits and compensation expenses | 66 | 72.7 |
Accrued interest | 19.5 | 7.9 |
Other accrued expenses | 197.9 | 216.9 |
Income taxes payable | 5.6 | 1.1 |
Dividends payable | 0 | 24.5 |
Obligations collateralized by finance receivables | 1,101 | 1,461.2 |
Current maturities of long-term debt | 26.4 | 28.8 |
Total current liabilities | 2,354.5 | 2,517.7 |
Non-current liabilities | ||
Long-term debt | 1,854.8 | 1,861.3 |
Deferred income tax liabilities | 125.1 | 134.5 |
Operating lease liabilities | 348.6 | 358.3 |
Other liabilities | 79.9 | 59.2 |
Total non-current liabilities | 2,408.4 | 2,413.3 |
Commitments and contingencies (Note 11) | ||
Temporary equity | ||
Series A convertible preferred stock (Note 10) | 540 | 0 |
Stockholders' equity | ||
Common stock, $0.01 par value: Authorized shares: 400,000,000; Issued and outstanding shares: September 30, 2020: 129,245,854, December 31, 2019: 128,833,452 | 1.3 | 1.3 |
Additional paid-in capital | 1,037.8 | 1,028.9 |
Retained earnings | 627.8 | 651 |
Accumulated other comprehensive loss | (59.9) | (31) |
Total stockholders' equity | 1,607 | 1,650.2 |
Total liabilities, temporary equity and stockholders' equity | $ 6,909.9 | $ 6,581.2 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Trade receivables, allowances (in dollars) | $ 10.9 | $ 9.5 |
Finance receivables, allowances (in dollars) | 22 | 15 |
Customer relationships, accumulated amortization (in dollars) | 665 | 637.4 |
Other intangible assets, accumulated amortization (in dollars) | 341.5 | 292.4 |
Property and equipment, accumulated depreciation (in dollars) | $ 578.6 | $ 534.3 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 400,000,000 | 400,000,000 |
Common stock, issued shares | 129,245,854 | 128,833,452 |
Common stock, outstanding shares | 129,245,854 | 128,833,452 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Cash dividends declared to stockholders (in dollars per share) | $ 0 | $ 0.19 | $ 0.19 | $ 0.89 |
Consolidated Statements of St_2
Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Additional Paid-In Capital | Retained Earnings | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | Accumulated Other Comprehensive Loss |
Beginning balance at Dec. 31, 2018 | $ 1,464.2 | $ 1.3 | $ 1,131.9 | $ 392.3 | $ (61.3) | ||
Beginning balance (in shares) at Dec. 31, 2018 | 132,900,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net income | 168.7 | 168.7 | |||||
Other comprehensive income (loss) | 5.7 | 5.7 | |||||
Issuance of common stock under stock plans | 4.1 | 4.1 | |||||
Issuance of common stock under stock plans (in shares) | 900,000 | ||||||
Surrender of RSUs for taxes | (10.5) | (10.5) | |||||
Surrender of RSUs for taxes (in shares) | (200,000) | ||||||
Stock-based compensation expense | 16.4 | 16.4 | |||||
Repurchase and retirement of common stock | (119.7) | (119.7) | |||||
Repurchase and retirement of common stock (in shares) | (4,800,000) | ||||||
Distribution of IAA | 223.6 | 213.2 | 10.4 | ||||
Dividends earned under stock plan | 0 | 1.8 | (1.8) | ||||
Cash dividends declared to stockholders | (117.8) | (117.8) | |||||
Ending balance at Sep. 30, 2019 | 1,635.8 | $ 1.1 | $ 1.3 | 1,024 | 655.7 | $ 1.1 | (45.2) |
Ending balance (in shares) at Sep. 30, 2019 | 128,800,000 | ||||||
Beginning balance at Jun. 30, 2019 | 1,752.6 | $ 1.3 | 1,140.8 | 644.9 | (34.4) | ||
Beginning balance (in shares) at Jun. 30, 2019 | 133,400,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net income | 35.3 | 35.3 | |||||
Other comprehensive income (loss) | (10.8) | (10.8) | |||||
Issuance of common stock under stock plans | 1.3 | 1.3 | |||||
Issuance of common stock under stock plans (in shares) | 200,000 | ||||||
Surrender of RSUs for taxes | (0.1) | (0.1) | |||||
Stock-based compensation expense | 4.3 | 4.3 | |||||
Repurchase and retirement of common stock | (119.7) | (119.7) | |||||
Repurchase and retirement of common stock (in shares) | (4,800,000) | ||||||
Cash dividends declared to stockholders | (24.5) | (24.5) | |||||
Ending balance at Sep. 30, 2019 | 1,635.8 | 1.1 | $ 1.3 | 1,024 | 655.7 | 1.1 | (45.2) |
Ending balance (in shares) at Sep. 30, 2019 | 128,800,000 | ||||||
Beginning balance at Dec. 31, 2019 | $ 1,650.2 | $ 1.3 | 1,028.9 | 651 | (31) | ||
Beginning balance (in shares) at Dec. 31, 2019 | 128,833,452 | 128,800,000 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net income | $ 17.6 | 17.6 | |||||
Other comprehensive income (loss) | (28.9) | (28.9) | |||||
Issuance of common stock under stock plans | 1 | 1 | |||||
Issuance of common stock under stock plans (in shares) | 600,000 | ||||||
Surrender of RSUs for taxes | (3.9) | (3.9) | |||||
Surrender of RSUs for taxes (in shares) | (200,000) | ||||||
Stock-based compensation expense | 11.1 | 11.1 | |||||
Dividends earned under stock plan | 0 | 0.7 | (0.7) | ||||
Cash dividends declared to stockholders | (24.5) | (24.5) | |||||
Dividends on preferred stock | (11.8) | (11.8) | |||||
Ending balance at Sep. 30, 2020 | $ 1,607 | (3.8) | $ 1.3 | 1,037.8 | 627.8 | (3.8) | (59.9) |
Ending balance (in shares) at Sep. 30, 2020 | 129,245,854 | 129,200,000 | |||||
Beginning balance at Jun. 30, 2020 | $ 1,554.5 | $ 1.3 | 1,034.2 | 592.5 | (73.5) | ||
Beginning balance (in shares) at Jun. 30, 2020 | 129,200,000 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net income | 47.1 | 47.1 | |||||
Other comprehensive income (loss) | 13.6 | 13.6 | |||||
Issuance of common stock under stock plans | 0.3 | 0.3 | |||||
Surrender of RSUs for taxes | (0.2) | (0.2) | |||||
Stock-based compensation expense | 3.5 | 3.5 | |||||
Dividends on preferred stock | (11.8) | (11.8) | |||||
Ending balance at Sep. 30, 2020 | $ 1,607 | $ (3.8) | $ 1.3 | $ 1,037.8 | $ 627.8 | $ (3.8) | $ (59.9) |
Ending balance (in shares) at Sep. 30, 2020 | 129,245,854 | 129,200,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating activities | ||
Net income | $ 17.6 | $ 168.7 |
Net income from discontinued operations | 0 | (91.6) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 140.7 | 138.6 |
Provision for credit losses | 41.6 | 28.9 |
Deferred income taxes | (3) | 2.5 |
Amortization of debt issuance costs | 8.6 | 9.6 |
Stock-based compensation | 11.1 | 14.6 |
Goodwill and other intangibles impairment | 29.8 | 0 |
Loss on extinguishment of debt | 0 | 2.2 |
Other non-cash, net | 6.1 | 7.9 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Trade receivables and other assets | (49.4) | (41.3) |
Accounts payable and accrued expenses | 228.8 | 51 |
Net cash provided by operating activities - continuing operations | 431.9 | 291.1 |
Net cash provided by operating activities - discontinued operations | 0 | 156.7 |
Investing activities | ||
Net decrease (increase) in finance receivables held for investment | 337.1 | (119) |
Acquisition of businesses (net of cash acquired) | 0 | (120.7) |
Purchases of property, equipment and computer software | (74.3) | (127.6) |
Proceeds from the sale of property, plant, and equipment | 0.8 | 0 |
Net cash provided by (used by) investing activities - continuing operations | 263.6 | (367.3) |
Net cash used by investing activities - discontinued operations | 0 | (37.4) |
Financing activities | ||
Net increase in book overdrafts | 20.3 | 9.2 |
Net (decrease) increase in borrowings from lines of credit | (2.4) | 17.5 |
Net decrease in obligations collateralized by finance receivables | (345.1) | (25) |
Proceeds from issuance of Series A Preferred Stock | 550.1 | 0 |
Payments for issuance costs of Series A Preferred Stock | (21.9) | 0 |
Proceeds from long-term debt | 0 | 947.6 |
Payments for debt issuance costs/amendments | (18.2) | (13.7) |
Payments on long-term debt | (7.1) | (1,746.6) |
Payments on finance leases | (12.6) | (12.2) |
Payments of contingent consideration and deferred acquisition costs | (22.3) | (0.5) |
Issuance of common stock under stock plans | 1 | 4.1 |
Tax withholding payments for vested RSUs | (3.9) | (10.5) |
Repurchase and retirement of common stock | 0 | (119.7) |
Dividends paid to stockholders | (49) | (139.8) |
Cash transferred to IAA | 0 | (50.9) |
Net cash provided by (used by) financing activities - continuing operations | 88.9 | (1,140.5) |
Net cash provided by financing activities - discontinued operations | 0 | 1,317.6 |
Effect of exchange rate changes on cash | (13.9) | 7 |
Net increase in cash, cash equivalents and restricted cash | 770.5 | 227.2 |
Cash, cash equivalents and restricted cash at beginning of period | 560.9 | 304.7 |
Cash paid for interest, net of proceeds from interest rate derivatives | 77.7 | 120 |
Cash paid for taxes, net of refunds | 9.7 | 27.8 |
Cash, cash equivalents and restricted cash at end of period | 1,331.4 | 531.9 |
Discontinued Operations | ||
Cash paid for taxes, net of refunds | $ 0 | $ 40.1 |
Basis of Presenation and Nature
Basis of Presenation and Nature of Operations | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Nature of Operations | 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"), 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.; • "Credit Agreement" refers to the Amended and Restated Credit Agreement, dated March 11, 2014, as amended on March 9, 2016, May 31, 2017, September 19, 2019, May 29, 2020 and September 2, 2020, among KAR Auction Services, 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 3; • "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 outstanding at September 30, 2020); • "Term Loan B-4" refers to the senior secured term loan B-4 facility, the terms 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; 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. 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 September 30, 2020, we have a North American network of 74 facilities and we also offer online auctions. ADESA also includes TradeRev, an online automotive remarketing platform 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. ADESA's online service offerings include customized private label solutions powered with software developed by its wholly-owned subsidiary, Openlane, that allow our institutional consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the Internet prior to arrival at the physical auction. 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 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. 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 119 locations throughout the United States and Canada as of September 30, 2020. Floorplan financing supports independent used vehicle dealers in North America who purchase vehicles at ADESA, TradeRev, other used vehicle and salvage auctions and non-auction purchases. In addition to floorplan financing, AFC also provides independent used vehicle dealers with other related services and products, such as vehicle service contracts. 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, as filed with the Securities and Exchange Commission on February 19, 2020. The 2019 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' revenue reported in the consolidated statements of income for the three and nine months ended September 30, 2019 has been reclassified between "Auction fees and services revenue" and "Purchased vehicle sales" in the consolidated statements of income to conform with the presentation for the three and nine months ended September 30, 2020. 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. 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 September 30, 2020, we had accrued deferred and estimated contingent consideration with a fair value of approximately $3.7 million and $43.4 million, respectively. At September 30, 2020, the aggregate maximum potential payment remaining for undiscounted deferred payments and undiscounted contingent payments related to these acquisitions could approximate $105.1 million. For the nine months ended September 30, 2020, we made contingent consideration and deferred acquisition payments related to the CarsOnTheWeb acquisition of $22.3 million. Temporary Equity The Company records shares of convertible preferred stock at their respective fair values on the date of issuance, net of issuance costs. The convertible preferred stock is recorded outside of stockholders' equity 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 10 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. New Accounting Standards In August 2020, the FASB 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 Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible debt instruments and convertible preferred stock by 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. The Company is currently evaluating the impact the adoption of ASU 2020-06 will have on the consolidated financial statements. 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. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount 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. |
Pending Acquisition
Pending Acquisition | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Pending Acquisition | Pending AcquisitionIn September 2020, ADESA entered into an agreement and plan of merger to acquire BacklotCars, Inc. ("BacklotCars") for $425 million in cash. BacklotCars is an app and web-based dealer-to-dealer wholesale platform featuring a 24/7 “bid-ask” marketplace offering vehicles with comprehensive inspections performed by automobile mechanics. The acquisition is expected to further diversify the Company's broad portfolio of digital capabilities and accelerate the Company’s strategy to be a leading digital dealer-to-dealer marketplace provider. The merger is expected to be completed in the fourth quarter of 2020, subject to the satisfaction of customary closing conditions. On November 4, 2020, the U.S. Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the merger. |
IAA Separation and Discontinued
IAA Separation and Discontinued Operations | 9 Months Ended |
Sep. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
IAA Separation and Discontinued Operations | 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 addition to the shares of IAA common stock, KAR received a cash distribution of approximately $1,278.0 million from IAA, which was used to prepay a portion of KAR's term loans. In connection with the spin-off, 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 to periods prior to, at and after IAA's Separation from the Company and govern certain relationships between IAA and the Company after the Separation. The financial results of IAA have been accounted for as discontinued operations in the comparable 2019 results presented. IAA was formerly presented as one of the Company’s reportable segments. Discontinued operations included one-time transaction costs in "Selling, general and administrative" of approximately $0.0 million and $31.3 million for the three and nine months ended September 30, 2019, in connection with the separation of the two companies. These costs consisted of consulting and professional fees associated with preparing for and executing the spin-off. The following table presents the results of operations for IAA that have been reclassified to discontinued operations for all periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating revenues $ — $ — $ — $ 723.6 Operating expenses Cost of services (exclusive of depreciation and amortization) — — — 446.1 Selling, general and administrative — — — 94.5 Depreciation and amortization — — — 43.9 Total operating expenses — — — 584.5 Operating profit — — — 139.1 Interest expense — — — 2.7 Other income, net — — — — Income from discontinued operations before income taxes — — — 136.4 Income taxes — (0.9) — 44.8 Income from discontinued operations $ — $ 0.9 $ — $ 91.6 |
Stock and Stock-Based Compensat
Stock and Stock-Based Compensation Plans | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock and Stock-Based Compensation Plans | Stock and Stock-Based Compensation Plans The KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan ("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. performance-based restricted stock units ("PRSUs") and service-based restricted stock units ("RSUs"). We have determined that the KAR Auction Services, Inc. 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 PRSUs $ 1.3 $ 2.6 $ 3.6 $ 7.5 RSUs 2.2 1.7 7.5 7.1 Total stock-based compensation expense $ 3.5 $ 4.3 $ 11.1 $ 14.6 In the first nine months of 2020, we granted a target amount of approximately 0.4 million PRSUs to certain executive officers and management of the Company. The PRSUs vest if and to the extent that the Company's three-year cumulative operating adjusted net income per share attains certain specified goals. In addition, approximately 0.4 million RSUs were granted to certain executive officers and management of the Company. The RSUs are contingent upon continued employment and generally vest in three equal annual installments. The weighted average grant date fair value of the PRSUs and the RSUs was $22.24 per share, 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’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"). 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. No shares of common stock were repurchased during the nine months ended September 30, 2020. For the nine months ended September 30, 2019, we used the remaining $119.7 million under the 2016 authorization to repurchase and retire 4,753,300 shares of common stock in the open market at a weighted average price of $25.18 per share. |
Net Income from Continuing Oper
Net Income from Continuing Operations Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Net income from continuing operations per share | Net Income from Continuing Operations Per Share The following table sets forth the computation of net income from continuing operations per share (in millions except per share amounts) : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net income from continuing operations $ 47.1 $ 34.4 $ 17.6 $ 77.1 Series A Preferred Stock dividends (9.7) — (11.8) — Net income attributable to participating securities (7.4) — — — Net income attributable to common stockholders $ 30.0 $ 34.4 $ 5.8 $ 77.1 Weighted average common shares outstanding 129.3 131.2 129.2 132.5 Effect of dilutive stock options and restricted stock awards 0.7 1.2 0.8 1.3 Weighted average common shares outstanding and potential common shares 130.0 132.4 130.0 133.8 Net income from continuing operations per share Basic $ 0.23 $ 0.26 $ 0.04 $ 0.58 Diluted $ 0.23 $ 0.26 $ 0.04 $ 0.58 For periods prior to June 30, 2020, basic net income from continuing operations per share was calculated by dividing net income from continuing operations by the weighted average number of outstanding common shares for the period. Diluted net income from continuing operations per share was calculated consistent with basic net income 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 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, 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 from continuing operations per diluted share and PRSUs subject to performance conditions which have not yet been satisfied are excluded from the calculations. No options were excluded from the calculation of diluted net income from continuing operations per share for each of the three or nine months ended September 30, 2020 and 2019. In addition, approximately 0.4 million and 0.3 million PRSUs were excluded from the calculation of diluted net income from continuing operations per share for the three months ended September 30, 2020 and 2019, respectively, and approximately 0.4 million and 0.3 million PRSUs were excluded from the calculation of diluted net income from continuing operations per share for the nine months ended September 30, 2020 and 2019, respectively. Total options outstanding at September 30, 2020 and 2019 were 0.7 million and 0.8 million, respectively. |
Finance Receivables and Obligat
Finance Receivables and Obligations Collateralized by Finance Receivables | 9 Months Ended |
Sep. 30, 2020 | |
Financing Receivable, after Allowance for Credit Loss, Current [Abstract] | |
Finance Receivables and Obligations Collateralized by Finance Receivables | Finance Receivables and Obligations Collateralized by Finance Receivables AFC sells 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. AFC Funding Corporation had committed liquidity of $1.60 billion for U.S. finance receivables at September 30, 2020. In September 2020, AFC and AFC Funding Corporation entered into the Ninth Amended and Restated Receivables Purchase Agreement (the "Receivables Purchase Agreement"). The Receivables Purchase Agreement decreased AFC Funding's U.S. committed liquidity from $1.70 billion to $1.60 billion and extended the facility's maturity date from January 28, 2022 to January 31, 2024. In addition, provisions designed to provide additional credit enhancement to the purchasers upon the occurrence of the certain events related to the payment rate and net spread on the receivables portfolio were added, certain portfolio performance metrics that could result in a requirement to increase the cash reserve or constitute a termination event were amended to the benefit of AFC Funding and provisions providing for a mechanism for determining an alternative rate of interest were added. We capitalized approximately $12.3 million of costs in connection with the Receivables Purchase Agreement. We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$175 million at September 30, 2020. In September 2020, AFCI entered into the Fifth Amended and Restated Receivables Purchase Agreement (the "Canadian Receivable Purchase Agreement"). The Canadian Receivables Purchase Agreement extended the facility's maturity date from January 28, 2022 to January 31, 2024. In addition, provisions designed to provide additional credit enhancement to the purchasers upon the occurrence of the certain events related to the payment rate and net spread on the receivables portfolio were added, certain portfolio performance metrics that could result in a requirement to increase the cash reserve or constitute a termination event were amended to the benefit of AFC Funding and provisions providing for a mechanism for determining an alternative rate of interest were added. We capitalized approximately $1.0 million of costs in connection with the Canadian Receivables Purchase Agreement. 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. September 30, 2020 Net Credit Losses Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 1,728.9 $ 22.6 $ — $ 33.9 Other loans 15.9 — — — Total receivables managed $ 1,744.8 $ 22.6 $ — $ 33.9 December 31, 2019 Net Credit Losses Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,099.4 $ 28.8 $ 8.6 $ 24.7 Other loans 15.8 — — — Total receivables managed $ 2,115.2 $ 28.8 $ 8.6 $ 24.7 The following is a summary of the changes in the allowance for credit losses related to finance receivables ( in millions ): September 30, September 30, Allowance for Credit Losses Balance at December 31 $ 15.0 $ 14.0 Opening balance adjustment for adoption of ASC Topic 326 5.0 — Provision for credit losses 35.9 25.5 Recoveries 8.0 5.7 Less charge-offs (41.9) (30.4) Balance at September 30 $ 22.0 $ 14.8 As of September 30, 2020 and December 31, 2019, $1,688.0 million and $2,061.6 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: September 30, December 31, Obligations collateralized by finance receivables, gross $ 1,124.2 $ 1,474.4 Unamortized securitization issuance costs (23.2) (13.2) Obligations collateralized by finance receivables $ 1,101.0 $ 1,461.2 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 September 30, 2020, we were in compliance with the covenants in the securitization agreements. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill consisted of the following at September 30, 2020 ( in millions ): ADESA AFC Total Balance at December 31, 2019 $ 1,558.0 $ 263.7 $ 1,821.7 Impairment (25.5) — (25.5) Other 2.0 — 2.0 Balance at September 30, 2020 $ 1,534.5 $ 263.7 $ 1,798.2 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. 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. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2020 | |
Long-term Debt, Unclassified [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consisted of the following (in millions) : Interest Rate* Maturity September 30, December 31, Term Loan B-6 Adjusted LIBOR + 2.25% September 19, 2026 $ 940.5 $ 947.6 Revolving Credit Facility Adjusted LIBOR + 1.75% September 19, 2024 — — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 16.9 19.3 Total debt 1,907.4 1,916.9 Unamortized debt issuance costs/discounts (26.2) (26.8) Current portion of long-term debt (26.4) (28.8) Long-term debt $ 1,854.8 $ 1,861.3 *The interest rates presented in the table above represent the rates in place at September 30, 2020. Credit Facilities On September 2, 2020, we entered into the Fifth Amendment Agreement (the "Fifth Amendment") to the Credit Agreement. The Fifth Amendment (1) eliminates the financial covenant “holiday” provided by the Fourth Amendment Agreement, dated as of May 29, 2020 (the “Fourth Amendment”); (2) eliminates the changes to the calculation of Consolidated EBITDA for the purposes of the financial covenant compliance for the fiscal quarters ending September 30, 2021 and December 31, 2021, as provided by the Fourth Amendment; (3) removes the monthly minimum liquidity covenant provided by the Fourth Amendment; and (4) eliminates the limitations imposed by the Fourth Amendment on the Company’s ability to make certain investments, junior debt repayments, acquisitions and restricted payments and to incur additional secured indebtedness. On May 29, 2020, we entered into the Fourth Amendment to the Credit Agreement. The Fourth Amendment (1) provided 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, excluding results prior to April 1, 2021; (3) established a monthly minimum liquidity covenant of $225.0 million through and including September 30, 2021; and (4) effectively placed 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, (1) 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, (2) repayment of the 2017 Revolving Credit Facility and (3) 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. The Company also pay s a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving 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 2.44% at September 30, 2020. 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. 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. The 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, provided there are revolving loans outstanding. We were in compliance with the applicable covenants in the Credit Agreement at September 30, 2020. There were no borrowings on the Revolving Credit Facility at September 30, 2020 and December 31, 2019. In addition, we had related outstanding letters of credit in the aggregate amount of $25.4 million and $27.4 million at September 30, 2020 and December 31, 2019, respectively, which reduce the amount available for borrowings under the Revolving Credit Facility. European Lines of Credit COTW has lines of credit aggregating $35.2 million (€30 million). The lines of credit had an aggregate $16.9 million of borrowings outstanding at September 30, 2020. The lines of credit are secured by certain inventory and receivables at COTW subsidiaries. Fair Value of Debt As of September 30, 2020, the estimated fair value of our long-term debt amounted to $1,869.8 million. The estimates of fair value were based on broker-dealer quotes for our debt as of September 30, 2020. The estimates presented on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. |
Derivatives
Derivatives | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | 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 use 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 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. 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) are recorded as a component of "Accumulated other comprehensive income." For the three months ended September 30, 2020, the Company recorded an unrealized gain on the interest rate swaps of $1.0 million, net of tax of $0.3 million, and, for the nine months ended September 30, 2020, the Company recorded an unrealized loss on the interest rate swaps of $21.6 million, net of tax of $7.0 million. The Company does not expect any gains/losses currently recorded in accumulated other comprehensive income to be recognized in earnings over the next 12 months. 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. No amount of ineffectiveness was included in net income (loss) for the nine months ended September 30, 2020. 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. 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 September 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 $ 28.6 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) Three Months Ended September 30, Nine Months Ended September 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 $ — N/A $ (0.9) |
Convertible Preferred Stock
Convertible Preferred Stock | 9 Months Ended |
Sep. 30, 2020 | |
Temporary Equity Disclosure [Abstract] | |
Convertible Preferred Stock | 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 eight dividend payments, and thereafter, in cash or in kind, or in any combination of both, at the option of the Company. As of September 30, 2020, the holders of the Series A Preferred Stock had received dividends in kind with a value in the aggregate of approximately $11.8 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 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. 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. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesWe 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 no 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. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consisted of the following ( in millions ): September 30, December 31, Foreign currency translation loss $ (38.3) $ (31.0) Unrealized loss on interest rate derivatives, net of tax (21.6) — Accumulated other comprehensive loss $ (59.9) $ (31.0) |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment Information | 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 two 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 of the former IAA segment and spin-related costs are reported as discontinued operations (see Note 3). The holding company is maintained separately from the reportable segments and includes expenses associated with the corporate offices, such as salaries, benefits and travel costs for the corporate management team, certain human resources, information technology and accounting costs, and certain insurance, treasury, legal and risk management costs. Holding company 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 allocated by the holding company. Financial information regarding our reportable segments is set forth below as of and for the three months ended September 30, 2020 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 526.7 $ 66.9 $ — $ 593.6 Operating expenses Cost of services (exclusive of depreciation and amortization) 309.4 20.3 — 329.7 Selling, general and administrative 97.7 5.9 27.4 131.0 Depreciation and amortization 38.2 2.5 5.8 46.5 Total operating expenses 445.3 28.7 33.2 507.2 Operating profit (loss) 81.4 38.2 (33.2) 86.4 Interest expense 0.8 7.5 21.2 29.5 Other (income) expense, net (1.7) — 0.6 (1.1) Intercompany expense (income) (13.9) — 13.9 — Income (loss) from continuing operations before income taxes 96.2 30.7 (68.9) 58.0 Income taxes 26.0 4.3 (19.4) 10.9 Net income (loss) from continuing operations $ 70.2 $ 26.4 $ (49.5) $ 47.1 Total assets $ 3,559.7 $ 2,166.6 $ 1,183.6 $ 6,909.9 Financial information regarding our reportable segments is set forth below as of and for the three months ended September 30, 2019 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 613.6 $ 88.3 $ — $ 701.9 Operating expenses Cost of services (exclusive of depreciation and amortization) 386.2 24.7 — 410.9 Selling, general and administrative 121.7 5.9 31.3 158.9 Depreciation and amortization 37.2 2.6 6.6 46.4 Total operating expenses 545.1 33.2 37.9 616.2 Operating profit (loss) 68.5 55.1 (37.9) 85.7 Interest expense 1.1 15.7 21.1 37.9 Other (income) expense, net (1.3) (0.1) (0.6) (2.0) Loss on extinguishment of debt — — 2.2 2.2 Intercompany expense (income) 6.0 (1.3) (4.7) — Income (loss) from continuing operations before income taxes 62.7 40.8 (55.9) 47.6 Income taxes 16.3 10.1 (13.2) 13.2 Net income (loss) from continuing operations $ 46.4 $ 30.7 $ (42.7) $ 34.4 Total assets $ 3,713.9 $ 2,505.5 $ 360.3 $ 6,579.7 Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2020 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 1,455.9 $ 202.2 $ — $ 1,658.1 Operating expenses Cost of services (exclusive of depreciation and amortization) 897.3 62.1 — 959.4 Selling, general and administrative 300.0 18.0 87.7 405.7 Depreciation and amortization 115.5 7.8 17.4 140.7 Goodwill and other intangibles impairment 29.8 — — 29.8 Total operating expenses 1,342.6 87.9 105.1 1,535.6 Operating profit (loss) 113.3 114.3 (105.1) 122.5 Interest expense 2.3 30.3 65.8 98.4 Other (income) expense, net (3.0) (0.1) 1.3 (1.8) Intercompany expense (income) (13.2) (0.9) 14.1 — Income (loss) from continuing operations before income taxes 127.2 85.0 (186.3) 25.9 Income taxes 37.3 18.0 (47.0) 8.3 Net income (loss) from continuing operations $ 89.9 $ 67.0 $ (139.3) $ 17.6 Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2019 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 1,845.7 $ 264.9 $ — $ 2,110.6 Operating expenses Cost of services (exclusive of depreciation and amortization) 1,149.8 72.4 — 1,222.2 Selling, general and administrative 370.2 19.5 107.6 497.3 Depreciation and amortization 110.2 7.6 20.8 138.6 Total operating expenses 1,630.2 99.5 128.4 1,858.1 Operating profit (loss) 215.5 165.4 (128.4) 252.5 Interest expense 2.8 49.0 98.2 150.0 Other (income) expense, net (4.5) (0.3) (0.4) (5.2) Loss on extinguishment of debt — — 2.2 2.2 Intercompany expense (income) 23.9 (4.1) (19.8) — Income (loss) from continuing operations before income taxes 193.3 120.8 (208.6) 105.5 Income taxes 54.0 32.2 (57.8) 28.4 Net income (loss) from continuing operations $ 139.3 $ 88.6 $ (150.8) $ 77.1 Geographic Information Our foreign operations include Canada, Mexico, Continental Europe and the U.K. Most of our operations outside the U.S. are in Canada. Approximately 57% and 59% of our foreign operating revenues were from Canada for the three and nine months ended September 30, 2020, respectively, and approximately 60% and 64% of our foreign operating revenues were from Canada for the three and nine months ended September 30, 2019, respectively. Information regarding the geographic areas of our operations is set forth below (in millions) : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating revenues U.S. $ 456.1 $ 565.6 $ 1,321.5 $ 1,726.4 Foreign 137.5 136.3 336.6 384.2 $ 593.6 $ 701.9 $ 1,658.1 $ 2,110.6 |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent EventIn 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 $24.5 million (subject to customary adjustments). The closing of the transaction is subject to customary conditions, including legal and regulatory approvals, and is expected to be completed by year-end. |
Basis of Presentation and Natur
Basis of Presentation and Nature of Operations Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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, as filed with the Securities and Exchange Commission on February 19, 2020. The 2019 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 | Reclassifications ADESA Auction Services' revenue reported in the consolidated statements of income for the three and nine months ended September 30, 2019 has been reclassified between "Auction fees and services revenue" and "Purchased vehicle sales" in the consolidated statements of income to conform with the presentation for the three and nine months ended September 30, 2020. |
Use of Estimates | 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. |
Acquisition-Related Deferred and Contingent Consideration | 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 September 30, 2020, we had accrued deferred and estimated contingent consideration with a fair value of approximately $3.7 million and $43.4 million, respectively. At September 30, 2020, the aggregate maximum potential payment remaining for undiscounted deferred payments and undiscounted contingent payments related to these acquisitions could approximate $105.1 million. For the nine months ended September 30, 2020, we made contingent consideration and deferred acquisition payments related to the CarsOnTheWeb acquisition of $22.3 million. |
Temporary Equity | Temporary Equity The Company records shares of convertible preferred stock at their respective fair values on the date of issuance, net of issuance costs. The convertible preferred stock is recorded outside of stockholders' equity 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 10 for a discussion of the convertible preferred stock. |
Credit Losses | 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. |
New Accounting Standards | New Accounting Standards In August 2020, the FASB 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 Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible debt instruments and convertible preferred stock by 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. The Company is currently evaluating the impact the adoption of ASU 2020-06 will have on the consolidated financial statements. 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. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount 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. |
IAA Separation and Discontinu_2
IAA Separation and Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | The following table presents the results of operations for IAA that have been reclassified to discontinued operations for all periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating revenues $ — $ — $ — $ 723.6 Operating expenses Cost of services (exclusive of depreciation and amortization) — — — 446.1 Selling, general and administrative — — — 94.5 Depreciation and amortization — — — 43.9 Total operating expenses — — — 584.5 Operating profit — — — 139.1 Interest expense — — — 2.7 Other income, net — — — — Income from discontinued operations before income taxes — — — 136.4 Income taxes — (0.9) — 44.8 Income from discontinued operations $ — $ 0.9 $ — $ 91.6 |
Stock and Stock-Based Compens_2
Stock and Stock-Based Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summary of stock-based compensation expense by type of award | The following table summarizes our stock-based compensation expense by type of award (in millions) : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 PRSUs $ 1.3 $ 2.6 $ 3.6 $ 7.5 RSUs 2.2 1.7 7.5 7.1 Total stock-based compensation expense $ 3.5 $ 4.3 $ 11.1 $ 14.6 |
Net Income from Continuing Op_2
Net Income from Continuing Operations Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of computation of net income from continuing operations per share | The following table sets forth the computation of net income from continuing operations per share (in millions except per share amounts) : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net income from continuing operations $ 47.1 $ 34.4 $ 17.6 $ 77.1 Series A Preferred Stock dividends (9.7) — (11.8) — Net income attributable to participating securities (7.4) — — — Net income attributable to common stockholders $ 30.0 $ 34.4 $ 5.8 $ 77.1 Weighted average common shares outstanding 129.3 131.2 129.2 132.5 Effect of dilutive stock options and restricted stock awards 0.7 1.2 0.8 1.3 Weighted average common shares outstanding and potential common shares 130.0 132.4 130.0 133.8 Net income from continuing operations per share Basic $ 0.23 $ 0.26 $ 0.04 $ 0.58 Diluted $ 0.23 $ 0.26 $ 0.04 $ 0.58 |
Finance Receivables and Oblig_2
Finance Receivables and Obligations Collateralized by Finance Receivables (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Financing Receivable, after Allowance for Credit Loss, Current [Abstract] | |
Schedule of quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed | 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. September 30, 2020 Net Credit Losses Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 1,728.9 $ 22.6 $ — $ 33.9 Other loans 15.9 — — — Total receivables managed $ 1,744.8 $ 22.6 $ — $ 33.9 December 31, 2019 Net Credit Losses Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,099.4 $ 28.8 $ 8.6 $ 24.7 Other loans 15.8 — — — Total receivables managed $ 2,115.2 $ 28.8 $ 8.6 $ 24.7 |
Summary of the changes in the allowance for credit losses and doubtful accounts | The following is a summary of the changes in the allowance for credit losses related to finance receivables ( in millions ): September 30, September 30, Allowance for Credit Losses Balance at December 31 $ 15.0 $ 14.0 Opening balance adjustment for adoption of ASC Topic 326 5.0 — Provision for credit losses 35.9 25.5 Recoveries 8.0 5.7 Less charge-offs (41.9) (30.4) Balance at September 30 $ 22.0 $ 14.8 |
Schedule of obligations collateralized by finance receivables | Obligations collateralized by finance receivables consisted of the following: September 30, December 31, Obligations collateralized by finance receivables, gross $ 1,124.2 $ 1,474.4 Unamortized securitization issuance costs (23.2) (13.2) Obligations collateralized by finance receivables $ 1,101.0 $ 1,461.2 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill | |
Schedule of Goodwill | Goodwill consisted of the following at September 30, 2020 ( in millions ): ADESA AFC Total Balance at December 31, 2019 $ 1,558.0 $ 263.7 $ 1,821.7 Impairment (25.5) — (25.5) Other 2.0 — 2.0 Balance at September 30, 2020 $ 1,534.5 $ 263.7 $ 1,798.2 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Long-term Debt, Unclassified [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (in millions) : Interest Rate* Maturity September 30, December 31, Term Loan B-6 Adjusted LIBOR + 2.25% September 19, 2026 $ 940.5 $ 947.6 Revolving Credit Facility Adjusted LIBOR + 1.75% September 19, 2024 — — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 16.9 19.3 Total debt 1,907.4 1,916.9 Unamortized debt issuance costs/discounts (26.2) (26.8) Current portion of long-term debt (26.4) (28.8) Long-term debt $ 1,854.8 $ 1,861.3 |
Derivatives (Tables)
Derivatives (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of the fair value of the entity's interest rate derivatives included in the consolidated balance sheet | 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 September 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 $ 28.6 N/A N/A |
Schedule of interest rate derivatives, statements of financial performance | 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) Three Months Ended September 30, Nine Months Ended September 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 $ — N/A $ (0.9) |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of accumulated other comprehensive income (loss) | Accumulated other comprehensive loss consisted of the following ( in millions ): September 30, December 31, Foreign currency translation loss $ (38.3) $ (31.0) Unrealized loss on interest rate derivatives, net of tax (21.6) — Accumulated other comprehensive loss $ (59.9) $ (31.0) |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of financial information regarding the entity's reportable segments | Financial information regarding our reportable segments is set forth below as of and for the three months ended September 30, 2020 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 526.7 $ 66.9 $ — $ 593.6 Operating expenses Cost of services (exclusive of depreciation and amortization) 309.4 20.3 — 329.7 Selling, general and administrative 97.7 5.9 27.4 131.0 Depreciation and amortization 38.2 2.5 5.8 46.5 Total operating expenses 445.3 28.7 33.2 507.2 Operating profit (loss) 81.4 38.2 (33.2) 86.4 Interest expense 0.8 7.5 21.2 29.5 Other (income) expense, net (1.7) — 0.6 (1.1) Intercompany expense (income) (13.9) — 13.9 — Income (loss) from continuing operations before income taxes 96.2 30.7 (68.9) 58.0 Income taxes 26.0 4.3 (19.4) 10.9 Net income (loss) from continuing operations $ 70.2 $ 26.4 $ (49.5) $ 47.1 Total assets $ 3,559.7 $ 2,166.6 $ 1,183.6 $ 6,909.9 Financial information regarding our reportable segments is set forth below as of and for the three months ended September 30, 2019 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 613.6 $ 88.3 $ — $ 701.9 Operating expenses Cost of services (exclusive of depreciation and amortization) 386.2 24.7 — 410.9 Selling, general and administrative 121.7 5.9 31.3 158.9 Depreciation and amortization 37.2 2.6 6.6 46.4 Total operating expenses 545.1 33.2 37.9 616.2 Operating profit (loss) 68.5 55.1 (37.9) 85.7 Interest expense 1.1 15.7 21.1 37.9 Other (income) expense, net (1.3) (0.1) (0.6) (2.0) Loss on extinguishment of debt — — 2.2 2.2 Intercompany expense (income) 6.0 (1.3) (4.7) — Income (loss) from continuing operations before income taxes 62.7 40.8 (55.9) 47.6 Income taxes 16.3 10.1 (13.2) 13.2 Net income (loss) from continuing operations $ 46.4 $ 30.7 $ (42.7) $ 34.4 Total assets $ 3,713.9 $ 2,505.5 $ 360.3 $ 6,579.7 Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2020 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 1,455.9 $ 202.2 $ — $ 1,658.1 Operating expenses Cost of services (exclusive of depreciation and amortization) 897.3 62.1 — 959.4 Selling, general and administrative 300.0 18.0 87.7 405.7 Depreciation and amortization 115.5 7.8 17.4 140.7 Goodwill and other intangibles impairment 29.8 — — 29.8 Total operating expenses 1,342.6 87.9 105.1 1,535.6 Operating profit (loss) 113.3 114.3 (105.1) 122.5 Interest expense 2.3 30.3 65.8 98.4 Other (income) expense, net (3.0) (0.1) 1.3 (1.8) Intercompany expense (income) (13.2) (0.9) 14.1 — Income (loss) from continuing operations before income taxes 127.2 85.0 (186.3) 25.9 Income taxes 37.3 18.0 (47.0) 8.3 Net income (loss) from continuing operations $ 89.9 $ 67.0 $ (139.3) $ 17.6 Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2019 (in millions) : ADESA AFC Holding Consolidated Operating revenues $ 1,845.7 $ 264.9 $ — $ 2,110.6 Operating expenses Cost of services (exclusive of depreciation and amortization) 1,149.8 72.4 — 1,222.2 Selling, general and administrative 370.2 19.5 107.6 497.3 Depreciation and amortization 110.2 7.6 20.8 138.6 Total operating expenses 1,630.2 99.5 128.4 1,858.1 Operating profit (loss) 215.5 165.4 (128.4) 252.5 Interest expense 2.8 49.0 98.2 150.0 Other (income) expense, net (4.5) (0.3) (0.4) (5.2) Loss on extinguishment of debt — — 2.2 2.2 Intercompany expense (income) 23.9 (4.1) (19.8) — Income (loss) from continuing operations before income taxes 193.3 120.8 (208.6) 105.5 Income taxes 54.0 32.2 (57.8) 28.4 Net income (loss) from continuing operations $ 139.3 $ 88.6 $ (150.8) $ 77.1 |
Schedule of information regarding the geographic areas of entity's operations | Information regarding the geographic areas of our operations is set forth below (in millions) : Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating revenues U.S. $ 456.1 $ 565.6 $ 1,321.5 $ 1,726.4 Foreign 137.5 136.3 336.6 384.2 $ 593.6 $ 701.9 $ 1,658.1 $ 2,110.6 |
Basis of Presentation and Nat_2
Basis of Presentation and Nature of Operations (Details) $ in Millions | 9 Months Ended | |||||||
Sep. 30, 2020USD ($)networkproviderlocation | Sep. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 19, 2019USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2018USD ($) | May 31, 2017USD ($) | |
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Payments of contingent consideration and deferred acquisition costs | $ 22.3 | $ 0.5 | ||||||
Long-term debt | 1,907.4 | $ 1,916.9 | ||||||
Opening balance adjustment for adoption of ASC Topic 326 | 5 | 0 | ||||||
Cumulative effect adjustment for adoption of new accounting standard, net of tax | (1,607) | (1,635.8) | $ (1,554.5) | (1,650.2) | $ (1,752.6) | $ (1,464.2) | ||
Cumulative Effect, Period of Adoption, Adjustment | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Cumulative effect adjustment for adoption of new accounting standard, net of tax | $ 3.8 | $ (1.1) | ||||||
ADESA Auctions | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Ranking of largest providers of used vehicle auctions and related services | provider | 2 | |||||||
Number of sites for whole car auctions | network | 74 | |||||||
AFC | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Number of floorplan financing locations | location | 119 | |||||||
Term Loan B-6 | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Long-term debt | $ 940.5 | 947.6 | ||||||
Senior secured revolving credit facility | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Long-term debt | $ 0 | 0 | ||||||
Senior notes | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Senior notes stated interest rate | 5.125% | 5.125% | ||||||
Long-term debt | $ 950 | $ 950 | ||||||
Credit Agreement [Member] | Term Loan B-6 | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Long-term debt | $ 950 | |||||||
Credit Agreement [Member] | Senior secured revolving credit facility | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Maximum borrowing capacity | $ 325 | |||||||
Credit Agreement [Member] | 2017 Revolving Credit Facility | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Maximum borrowing capacity | $ 350 | |||||||
Accounting Standards Update 2016-13 [Member] | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Opening balance adjustment for adoption of ASC Topic 326 | 5 | |||||||
Series of Individually Immaterial Business Acquisitions [Member] | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Fair value of deferred payments accrued | 3.7 | |||||||
Fair value of estimated contingent payments accrued | 43.4 | |||||||
Maximum amount of undiscounted deferred and contingent payments related to acquisitions | 105.1 | |||||||
CarsOnTheWeb [Member] | ||||||||
Basis of Presentation and Nature of Operations [Abstract] | ||||||||
Payments of contingent consideration and deferred acquisition costs | $ 22.3 |
Pending Acquisition (Details)
Pending Acquisition (Details) $ in Millions | Sep. 30, 2020USD ($) |
BacklotCars [Member] | |
Business Acquisition [Line Items] | |
Pending payments to acquire businesses | $ 425 |
IAA Separation and Discontinu_3
IAA Separation and Discontinued Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Discontinued Operations | |||||
Cash distribution received from IAA | $ 1,278 | ||||
Professional fees associated with spin-off | $ 0 | $ 31.3 | |||
Discontinued Operations - Results of Operations | |||||
Operating revenues | $ 0 | 0 | $ 0 | 723.6 | |
Cost of services (exclusive of depreciation and amortization) | 0 | 0 | 0 | 446.1 | |
Selling, general and administrative | 0 | 0 | 0 | 94.5 | |
Depreciation and amortization | 0 | 0 | 0 | 43.9 | |
Total operating expenses | 0 | 0 | 0 | 584.5 | |
Operating profit | 0 | 0 | 0 | 139.1 | |
Interest expense | 0 | 0 | 0 | 2.7 | |
Other income, net | 0 | 0 | 0 | 0 | |
Income from discontinued operations before income taxes | 0 | 0 | 0 | 136.4 | |
Income taxes | 0 | (0.9) | 0 | 44.8 | |
Income from discontinued operations | $ 0 | $ 0.9 | $ 0 | $ 91.6 |
Stock and Stock-Based Compens_3
Stock and Stock-Based Compensation Summary (Details) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)installment$ / sharesshares | Sep. 30, 2019USD ($) | |
Stock and Stock-Based Compensation Plans | ||||
Stock-based compensation expense (in dollars) | $ 3.5 | $ 4.3 | $ 11.1 | $ 14.6 |
PRSUs | ||||
Stock and Stock-Based Compensation Plans | ||||
Stock-based compensation expense (in dollars) | 1.3 | 2.6 | 3.6 | 7.5 |
RSUs | ||||
Stock and Stock-Based Compensation Plans | ||||
Stock-based compensation expense (in dollars) | $ 2.2 | $ 1.7 | $ 7.5 | $ 7.1 |
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan | RSUs | ||||
Stock and Stock-Based Compensation Plans | ||||
PRSUs and/or RSUs grants | shares | 0.4 | |||
Number of equal annual installments | installment | 3 | |||
Weighted average grant date fair value of the PRSUs/RSUs | $ / shares | $ 22.24 | |||
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan | PRSUs - Operating Adjusted EPS | ||||
Stock and Stock-Based Compensation Plans | ||||
PRSUs and/or RSUs grants | shares | 0.4 | |||
PRSUs vesting period | 3 years | |||
Weighted average grant date fair value of the PRSUs/RSUs | $ / shares | $ 22.24 |
Employee Stock Purchase Plan (D
Employee Stock Purchase Plan (Details) - shares shares in Millions | Jun. 30, 2020 | Mar. 31, 2020 |
KAR Auction Services, Inc. Employee Stock Purchase Plan | ||
Stock and Stock-Based Compensation Plans | ||
Maximum number of shares to be issued pursuant to awards | 2.5 | 1 |
Share Repurchase Plan (Details)
Share Repurchase Plan (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Oct. 30, 2019 | |
Stock and Stock-Based Compensation Plans | |||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||
Stock repurchased and retired | $ 119.7 | $ 119.7 | |||
October 2019 Share Repurchase Authorization | |||||
Stock and Stock-Based Compensation Plans | |||||
Stock repurchase program, authorized amount | $ 300 | ||||
Stock repurchased and retired during period (in shares) | 0 | ||||
October 2016 Share Repurchase Program [Member] | |||||
Stock and Stock-Based Compensation Plans | |||||
Stock repurchased and retired during period (in shares) | 4,753,300 | ||||
Stock repurchased and retired | $ 119.7 | ||||
Stock repurchased and retired weighted average price per share | $ 25.18 |
Net Income from Continuing Op_3
Net Income from Continuing Operations Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||||
Net income from continuing operations | $ 47.1 | $ 34.4 | $ 17.6 | $ 77.1 |
Series A Preferred Stock dividends | (9.7) | 0 | (11.8) | 0 |
Net income attributable to participating securities | (7.4) | 0 | 0 | 0 |
Net income attributable to common stockholders | $ 30 | $ 34.4 | $ 5.8 | $ 77.1 |
Shares outstanding | ||||
Weighted average common shares outstanding | 129.3 | 131.2 | 129.2 | 132.5 |
Effect of dilutive stock options and restricted stock awards | 0.7 | 1.2 | 0.8 | 1.3 |
Weighted average common shares outstanding and potential common shares | 130 | 132.4 | 130 | 133.8 |
Net income from continuing operations per share | ||||
Basic | $ 0.23 | $ 0.26 | $ 0.04 | $ 0.58 |
Diluted | $ 0.23 | $ 0.26 | $ 0.04 | $ 0.58 |
Options excluded from calculation of diluted net income per share | 0 | 0 | 0 | 0 |
PRSUs excluded from calculation of diluted net income per share | 0.4 | 0.3 | 0.4 | 0.3 |
Stock options outstanding (in shares) | 0.7 | 0.8 | 0.7 | 0.8 |
Finance Receivables and Oblig_3
Finance Receivables and Obligations Collateralized by Finance Receivables (Details) $ in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020CAD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | |
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Receivables | $ 1,744.8 | $ 1,744.8 | $ 2,115.2 | ||||
Receivables delinquent | 22.6 | 22.6 | 28.8 | ||||
Net credit losses | 0 | $ 8.6 | 33.9 | $ 24.7 | |||
Finance receivables pledged as security | 1,688 | 1,688 | 2,061.6 | ||||
Costs capitalized in connection with US/Canada RPA | 18.2 | 13.7 | |||||
Obligations collateralized by finance receivables, gross | 1,124.2 | 1,124.2 | 1,474.4 | ||||
Obligations collateralized by finance receivables | 1,101 | 1,101 | 1,461.2 | ||||
Changes in the Allowance for Credit Losses | |||||||
Balance at beginning of period | 15 | 14 | |||||
Opening balance adjustment for adoption of ASC Topic 326 | 5 | 0 | |||||
Provision for credit losses | 35.9 | 25.5 | |||||
Recoveries | 8 | 5.7 | |||||
Less charge-offs | (41.9) | (30.4) | |||||
Balance at end of period | 22 | 14.8 | $ 22 | 14.8 | |||
Minimum | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Period to define financing receivables as past due (in days) | 31 days | ||||||
Floorplan receivables | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Receivables | 1,728.9 | $ 1,728.9 | 2,099.4 | ||||
Receivables delinquent | 22.6 | 22.6 | 28.8 | ||||
Net credit losses | 0 | 8.6 | 33.9 | 24.7 | |||
Other Loans | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Receivables | 15.9 | 15.9 | 15.8 | ||||
Receivables delinquent | 0 | 0 | 0 | ||||
Net credit losses | 0 | $ 0 | 0 | $ 0 | |||
AFC | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Unamortized securitization issuance costs | (23.2) | $ (23.2) | $ (13.2) | ||||
AFC | Minimum | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Period to define financing receivables as past due (in days) | 31 days | ||||||
AFC Funding Corporation | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Committed liquidity | 1,600 | $ 1,600 | $ 1,700 | ||||
Costs capitalized in connection with US/Canada RPA | 12.3 | ||||||
AFC Funding Corporation | Minimum | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Cash reserve as security for obligations of collateralized financing receivables (as a percent) | 1.00% | ||||||
Cash reserve as security for obligations of collaterized financing receivables (as a percent) - circumstance two | 3.00% | ||||||
AFCI | |||||||
Finance Receivables and Obligations Collateralized by Finance Receivables | |||||||
Committed liquidity | $ 175 | ||||||
Costs capitalized in connection with US/Canada RPA | $ 1 | ||||||
Cash reserve as security for obligations of collateralized financing receivables (as a percent) | 1.00% | ||||||
Cash reserve as security for obligations of collaterized financing receivables (as a percent) - circumstance two | 3.00% |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Jun. 30, 2020 | Sep. 30, 2020 | |
Goodwill Roll Forward | ||
Balance at the beginning of the year | $ 1,821.7 | |
Impairment of goodwill | (25.5) | |
Other | 2 | |
Balance at the end of the period | 1,798.2 | |
ADESA Remarketing Limited | ||
Goodwill Roll Forward | ||
Impairment of goodwill | $ (25.5) | |
Impairment of Intangible Assets (Excluding Goodwill) | ||
Impairment of customer relationships | $ (4.3) | |
ADESA Auctions | ||
Goodwill Roll Forward | ||
Balance at the beginning of the year | 1,558 | |
Impairment of goodwill | (25.5) | |
Other | 2 | |
Balance at the end of the period | 1,534.5 | |
AFC | ||
Goodwill Roll Forward | ||
Balance at the beginning of the year | 263.7 | |
Impairment of goodwill | 0 | |
Other | 0 | |
Balance at the end of the period | $ 263.7 |
Long-Term Debt Summary (Details
Long-Term Debt Summary (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | May 31, 2017 | |
Long-Term Debt | |||
Total debt | $ 1,907.4 | $ 1,916.9 | |
Unamortized debt issuance costs/discounts | (26.2) | (26.8) | |
Current portion of long-term debt | (26.4) | (28.8) | |
Long-term debt | 1,854.8 | 1,861.3 | |
Term Loan B-6 | |||
Long-Term Debt | |||
Total debt | $ 940.5 | 947.6 | |
Term Loan B-6 | Adjusted LIBOR | |||
Long-Term Debt | |||
Variable rate basis | Adjusted LIBOR | ||
Interest rate basis (as a percent) | 2.25% | ||
Revolving Credit Facility | |||
Long-Term Debt | |||
Total debt | $ 0 | 0 | |
Revolving Credit Facility | Adjusted LIBOR | |||
Long-Term Debt | |||
Variable rate basis | Adjusted LIBOR | ||
Interest rate basis (as a percent) | 1.75% | ||
Senior notes | |||
Long-Term Debt | |||
Senior notes stated interest rate | 5.125% | 5.125% | |
Total debt | $ 950 | 950 | |
European lines of credit | Foreign lines of credit | |||
Long-Term Debt | |||
Total debt | $ 16.9 | $ 19.3 | |
European lines of credit | Foreign lines of credit | Euribor rate | |||
Long-Term Debt | |||
Variable rate basis | Euribor | ||
Interest rate basis (as a percent) | 1.25% |
Credit Facilities (Details)
Credit Facilities (Details) € in Millions, $ in Millions | Sep. 19, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | Sep. 30, 2020EUR (€) | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Long-Term Debt | ||||||
Minimum liquidity covenant | $ 225 | |||||
Long-term debt | $ 1,907.4 | $ 1,916.9 | ||||
Repayments of long-term debt | $ 7.1 | $ 1,746.6 | ||||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' domestic subsidiaries pledged under the Credit Facility | 100.00% | |||||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' first-tier foreign subsidiaries pledged under the Credit Facility | 65.00% | |||||
Estimated fair value of long-term debt | $ 1,869.8 | |||||
Maximum | ||||||
Long-Term Debt | ||||||
Consolidated senior secured net leverage ratio maximum | item | 3.5 | |||||
Term Loan B-6 | ||||||
Long-Term Debt | ||||||
Long-term debt | $ 940.5 | 947.6 | ||||
Revolving Credit Facility | ||||||
Long-Term Debt | ||||||
Long-term debt | 0 | 0 | ||||
Letters of credit | ||||||
Long-Term Debt | ||||||
Maximum borrowing capacity | 50 | |||||
Outstanding letters of credit | 25.4 | 27.4 | ||||
Swing Line Loan | ||||||
Long-Term Debt | ||||||
Maximum borrowing capacity | $ 60 | |||||
Credit Agreement [Member] | Term Loan B-6 | ||||||
Long-Term Debt | ||||||
Long-term debt | $ 950 | |||||
Interest rate of loan (as a percent) | 2.44% | 2.44% | ||||
Term of debt instrument | 7 years | |||||
Credit Agreement [Member] | Revolving Credit Facility | ||||||
Long-Term Debt | ||||||
Maximum borrowing capacity | $ 325 | |||||
Frequency of commitment fee payment | quarterly | |||||
Amount borrowed | $ 0 | 0 | ||||
Term of debt instrument | 5 years | |||||
Credit Agreement [Member] | Revolving Credit Facility | Maximum | ||||||
Long-Term Debt | ||||||
Commitment fee on the unused amount of the revolving Credit Facility (as a percent) | 0.35% | |||||
Credit Agreement [Member] | Revolving Credit Facility | Minimum | ||||||
Long-Term Debt | ||||||
Commitment fee on the unused amount of the revolving Credit Facility (as a percent) | 0.25% | |||||
European lines of credit | Foreign lines of credit | ||||||
Long-Term Debt | ||||||
Long-term debt | $ 16.9 | $ 19.3 | ||||
Maximum borrowing capacity | $ 35.2 | € 30 |
Derivatives (Details)
Derivatives (Details) $ in Millions | Jan. 23, 2020USD ($)agreement | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) |
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Total fixed interest rate | 3.69% | 3.69% | |||
Unrealized gain (loss) on interest rate derivatives, net of tax | $ 1 | $ 0 | $ (21.6) | $ 0 | |
Gain (Loss) on interest rate cash flow hedge ineffectiveness included in net income | 0 | ||||
January 2020 interest rate swap | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Number of derivative agreements entered | agreement | 3 | ||||
Aggregate notional amount | $ 500 | ||||
Swap derivative weighted average interest rate | 1.44% | ||||
Term of interest rate swaps | 5 years | ||||
Tax impact from unrealized gain (loss) on interest rate derivatives | 0.3 | (7) | |||
Other Liabilities | Designated as hedging instrument | January 2020 interest rate swap | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Liability derivatives, fair value | $ 28.6 | $ 28.6 |
Derivatives (Details 2)
Derivatives (Details 2) - Interest Expense - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
January 2020 interest rate swap | Designated as hedging instrument | ||||
Effect of the interest rate derivatives on the entity's statement of equity and consolidated statement of income | ||||
Amount of gain/(loss) recognized in income on derivatives designated as hedges | $ 0 | $ 0 | ||
March and August 2017 interest rate caps | Not designated as hedging instrument | ||||
Effect of the interest rate derivatives on the entity's statement of equity and consolidated statement of income | ||||
Amount of gain/(loss) recognized in income on derivative | $ 0 | $ (0.9) |
Convertible Preferred Stock (De
Convertible Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Temporary Equity | |||||
Proceeds from issuance of Series A Preferred Stock | $ 550.1 | $ 0 | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | ||
Value of preferred stock dividends received in-kind | $ 11.8 | $ 11.8 | |||
Series A Preferred Stock | |||||
Temporary Equity | |||||
Series A Preferred Stock shares issued | 550,000 | ||||
Series A Preferred Stock, par value (in dollars per share) | $ 0.01 | ||||
Purchase price per share | $ 1,000 | ||||
Proceeds from issuance of Series A Preferred Stock | $ 550 | ||||
Series A Preferred Stock shares authorized | 1,500,000 | 1,500,000 | |||
Liquidation preference per share | $ 1,000 | $ 1,000 | |||
Cumulative dividend rate | 7.00% | ||||
Number of dividend payments initially paid in kind | 8 | ||||
Value of preferred stock dividends received in-kind | $ 11.8 | ||||
Series A Preferred Stock conversion term for holders | 1 year | ||||
Conversion price per share | $ 17.75 | $ 17.75 | |||
Conversion ratio - number of shares of common stock per share of Series A Preferred Stock | 56.3380 | 56.3380 | |||
Series A Preferred Stock conversion term for company | 3 years | ||||
Closing price of KAR stock necessary for Series A Preferred Stock to be convertible | $ 31.0625 | $ 31.0625 | |||
Number of trading days required for common stock price to be above a certain amount | 20 days | ||||
Number of consecutive trading days within which 20 day requirement must be met | 30 days | ||||
Series A Preferred Stock redemption term for company | 6 years | ||||
Redemption price by company between six and seven years as a percentage of liquidation preference plus accrued and unpaid dividends | 105.00% | 105.00% | |||
Redemption price by company as a percentage of liquidation preference plus accrued and unpaid dividends | 100.00% | 100.00% | |||
Redemption price after change of control as a percentage of liquidation preference and accrued dividends | 105.00% | 105.00% | |||
Minimum | Apax | Series A Preferred Stock | |||||
Temporary Equity | |||||
Term of standstill restrictions | 3 years | ||||
Standstill restrictions, required ownership percentage | 25.00% | 25.00% | |||
Minimum | Periphas | Series A Preferred Stock | |||||
Temporary Equity | |||||
Term of standstill restrictions | 3 years | ||||
Standstill restrictions, required ownership percentage | 50.00% | 50.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Significant change in legal and regulatory proceedings | $ 0 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation loss | $ (38.3) | $ (31) |
Unrealized loss on interest rate derivatives, net of tax | (21.6) | 0 |
Accumulated other comprehensive loss | $ (59.9) | $ (31) |
Segment Information (Details 1)
Segment Information (Details 1) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)segment | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Segment Reporting [Abstract] | |||||
Number of operating segments | segment | 2 | ||||
Number of reportable segments | segment | 2 | ||||
Segment Information | |||||
Operating revenues | $ 593.6 | $ 701.9 | $ 1,658.1 | $ 2,110.6 | |
Operating expenses | |||||
Cost of services (exclusive of depreciation and amortization) | 329.7 | 410.9 | 959.4 | 1,222.2 | |
Selling, general and administrative | 131 | 158.9 | 405.7 | 497.3 | |
Depreciation and amortization | 46.5 | 46.4 | 140.7 | 138.6 | |
Goodwill and other intangibles impairment | 0 | 0 | 29.8 | 0 | |
Total operating expenses | 507.2 | 616.2 | 1,535.6 | 1,858.1 | |
Operating profit (loss) | 86.4 | 85.7 | 122.5 | 252.5 | |
Interest expense | 29.5 | 37.9 | 98.4 | 150 | |
Other (income) expense, net | (1.1) | (2) | (1.8) | (5.2) | |
Loss on extinguishment of debt | 0 | 2.2 | 0 | 2.2 | |
Intercompany expense (income) | 0 | 0 | 0 | 0 | |
Income (loss) from continuing operations before income taxes | 58 | 47.6 | 25.9 | 105.5 | |
Income taxes | 10.9 | 13.2 | 8.3 | 28.4 | |
Net income (loss) from continuing operations | 47.1 | 34.4 | 17.6 | 77.1 | |
Total assets | 6,909.9 | 6,579.7 | 6,909.9 | 6,579.7 | $ 6,581.2 |
Operating Segments | ADESA Auctions | |||||
Segment Information | |||||
ADESA Auction Services | 526.7 | 613.6 | 1,455.9 | 1,845.7 | |
Operating expenses | |||||
Cost of services (exclusive of depreciation and amortization) | 309.4 | 386.2 | 897.3 | 1,149.8 | |
Selling, general and administrative | 97.7 | 121.7 | 300 | 370.2 | |
Depreciation and amortization | 38.2 | 37.2 | 115.5 | 110.2 | |
Goodwill and other intangibles impairment | 29.8 | ||||
Total operating expenses | 445.3 | 545.1 | 1,342.6 | 1,630.2 | |
Operating profit (loss) | 81.4 | 68.5 | 113.3 | 215.5 | |
Interest expense | 0.8 | 1.1 | 2.3 | 2.8 | |
Other (income) expense, net | (1.7) | (1.3) | (3) | (4.5) | |
Loss on extinguishment of debt | 0 | 0 | |||
Intercompany expense (income) | (13.9) | 6 | (13.2) | 23.9 | |
Income (loss) from continuing operations before income taxes | 96.2 | 62.7 | 127.2 | 193.3 | |
Income taxes | 26 | 16.3 | 37.3 | 54 | |
Net income (loss) from continuing operations | 70.2 | 46.4 | 89.9 | 139.3 | |
Total assets | 3,559.7 | 3,713.9 | 3,559.7 | 3,713.9 | |
Operating Segments | AFC | |||||
Segment Information | |||||
AFC | 66.9 | 88.3 | 202.2 | 264.9 | |
Operating expenses | |||||
Cost of services (exclusive of depreciation and amortization) | 20.3 | 24.7 | 62.1 | 72.4 | |
Selling, general and administrative | 5.9 | 5.9 | 18 | 19.5 | |
Depreciation and amortization | 2.5 | 2.6 | 7.8 | 7.6 | |
Goodwill and other intangibles impairment | 0 | ||||
Total operating expenses | 28.7 | 33.2 | 87.9 | 99.5 | |
Operating profit (loss) | 38.2 | 55.1 | 114.3 | 165.4 | |
Interest expense | 7.5 | 15.7 | 30.3 | 49 | |
Other (income) expense, net | 0 | (0.1) | (0.1) | (0.3) | |
Loss on extinguishment of debt | 0 | 0 | |||
Intercompany expense (income) | 0 | (1.3) | (0.9) | (4.1) | |
Income (loss) from continuing operations before income taxes | 30.7 | 40.8 | 85 | 120.8 | |
Income taxes | 4.3 | 10.1 | 18 | 32.2 | |
Net income (loss) from continuing operations | 26.4 | 30.7 | 67 | 88.6 | |
Total assets | 2,166.6 | 2,505.5 | 2,166.6 | 2,505.5 | |
Holding Company | |||||
Segment Information | |||||
Operating revenues | 0 | 0 | 0 | 0 | |
Operating expenses | |||||
Cost of services (exclusive of depreciation and amortization) | 0 | 0 | 0 | 0 | |
Selling, general and administrative | 27.4 | 31.3 | 87.7 | 107.6 | |
Depreciation and amortization | 5.8 | 6.6 | 17.4 | 20.8 | |
Goodwill and other intangibles impairment | 0 | ||||
Total operating expenses | 33.2 | 37.9 | 105.1 | 128.4 | |
Operating profit (loss) | (33.2) | (37.9) | (105.1) | (128.4) | |
Interest expense | 21.2 | 21.1 | 65.8 | 98.2 | |
Other (income) expense, net | 0.6 | (0.6) | 1.3 | (0.4) | |
Loss on extinguishment of debt | 2.2 | 2.2 | |||
Intercompany expense (income) | 13.9 | (4.7) | 14.1 | (19.8) | |
Income (loss) from continuing operations before income taxes | (68.9) | (55.9) | (186.3) | (208.6) | |
Income taxes | (19.4) | (13.2) | (47) | (57.8) | |
Net income (loss) from continuing operations | (49.5) | (42.7) | (139.3) | (150.8) | |
Total assets | $ 1,183.6 | $ 360.3 | $ 1,183.6 | $ 360.3 |
Segment Information (Details 2)
Segment Information (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Geographic Information | ||||
Operating revenues | $ 593.6 | $ 701.9 | $ 1,658.1 | $ 2,110.6 |
U.S. | ||||
Geographic Information | ||||
Operating revenues | $ 456.1 | $ 565.6 | $ 1,321.5 | $ 1,726.4 |
Foreign | ||||
Geographic Information | ||||
Percent of foreign revenue from Canada | 57.00% | 60.00% | 59.00% | 64.00% |
Operating revenues | $ 137.5 | $ 136.3 | $ 336.6 | $ 384.2 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Millions | Oct. 13, 2020USD ($) |
PWI [Member] | Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Pending proceeds from divestiture of businesses | $ 24.5 |