Document and Entity Information
Document and Entity Information Cover - $ / shares | 3 Months Ended | ||
Mar. 31, 2022 | Apr. 30, 2022 | Dec. 31, 2021 | |
Cover [Abstract] | |||
Document type | 10-Q/A | ||
Document quarterly report | true | ||
Document period end date | Mar. 31, 2022 | ||
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 current reporting status | Yes | ||
Entity interactive data current | 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 | 121,532,693 | ||
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 | 2022 | ||
Document fiscal period focus | Q1 | ||
Amendment flag | true | ||
Amendment Description | KAR Auction Services, Inc. (“we,” “us,” “our,” “KAR” and “the Company”) is filing this Amendment No. 1 to the Quarterly Report on Form 10-Q/A (“Form 10-Q/A”), to amend and restate the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, as originally filed with the Securities and Exchange Commission (“SEC”) on May 4, 2022 (the “Original Form 10-Q”). |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating revenues | ||
Auction fees | $ 101.4 | $ 102.5 |
Service revenue | 137.5 | 146.3 |
Purchased vehicle sales | 46.3 | 55.2 |
Finance-related revenue | 84.2 | 65.8 |
Total operating revenues | 369.4 | 369.8 |
Operating expenses | ||
Cost of services (exclusive of depreciation and amortization) | 210.8 | 203.8 |
Selling, general and administrative | 118.9 | 107.3 |
Depreciation and amortization | 26 | 26.9 |
Total operating expenses | 355.7 | 338 |
Operating profit | 13.7 | 31.8 |
Interest expense | 25.6 | 30.8 |
Other (income) expense, net | 1.2 | (49.7) |
Income (loss) from continuing operations before income taxes | (13.1) | 50.7 |
Income taxes | (4.7) | 24.5 |
Income (Loss) from Continuing Operations | (8.4) | 26.2 |
Income from discontinued operations, net of income taxes | 8.1 | 24.7 |
Net income (loss) | $ (0.3) | $ 50.9 |
Net income (loss) per share - basic | ||
Income (loss) from continuing operations | $ (0.16) | $ 0.10 |
Income from discontinued operations | 0.07 | 0.15 |
Net income (loss) | (0.09) | 0.25 |
Net income (loss) per share - diluted | ||
Income (loss) from continuing operations | (0.16) | 0.10 |
Income from discontinued operations | 0.07 | 0.15 |
Net income (loss) | $ (0.09) | $ 0.25 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Net Income (Loss) | $ (0.3) | $ 50.9 |
Other comprehensive income, net of tax | ||
Foreign currency translation gain | 1.1 | 1.6 |
Unrealized gain on interest rate derivatives, net of tax | 9.1 | 6.7 |
Total other comprehensive income, net of tax | 10.2 | 8.3 |
Comprehensive income | $ 9.9 | $ 59.2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 134.2 | $ 177.6 |
Restricted cash | 26.3 | 25.8 |
Trade receivables, net of allowances of $10.1 and $9.5 | 433.3 | 381.3 |
Finance receivables, net of allowances of $23.0 and $23.0 | 2,734.8 | 2,506 |
Other current assets | 117.8 | 87.9 |
Current assets held-for-sale | 2,058.6 | 213.2 |
Total current assets | 5,505 | 3,391.8 |
Other assets | ||
Goodwill | 1,595.4 | 1,598 |
Customer relationships, net of accumulated amortization of $407.8 and $401.5 | 153.4 | 159.1 |
Other intangible assets, net of accumulated amortization of $365.9 and $350.0 | 236.6 | 243.3 |
Operating lease right-of-use assets | 93.2 | 94.7 |
Property and equipment, net of accumulated depreciation of $206.1 and $201.6 | 142.2 | 143.5 |
Other assets | 66.6 | 53.7 |
Non-current assets held-for-sale | 0 | 1,766.6 |
Total other assets | 2,287.4 | 4,058.9 |
Total assets | 7,792.4 | 7,450.7 |
Current liabilities | ||
Accounts payable | 833.5 | 785.3 |
Accrued employee benefits and compensation expenses | 25.2 | 32.3 |
Accrued interest | 18.6 | 6.1 |
Other accrued expenses | 79 | 107.4 |
Income taxes payable | 3.4 | 7.9 |
Obligations collateralized by finance receivables | 1,866.6 | 1,692.3 |
Current maturities of long-term debt | 1,034 | 16.3 |
Current liabilities held-for-sale | 621.5 | 361.7 |
Total current liabilities | 4,481.8 | 3,009.3 |
Non-current liabilities | ||
Long-term debt | 939.8 | 1,849.7 |
Deferred income tax liabilities | 144.3 | 138.4 |
Operating lease liabilities | 86.9 | 88.1 |
Other liabilities | 22.1 | 30 |
Non-current liabilities held-for-sale | 0 | 231.3 |
Total non-current liabilities | 1,193.1 | 2,337.5 |
Commitments and contingencies (Note 9) | ||
Temporary equity | ||
Series A convertible preferred stock | 601.6 | 590.9 |
Stockholders' equity | ||
Common stock, $0.01 par value: Authorized shares: 400,000,000; Issued and outstanding shares: March 31, 2022 121,532,564 December 31, 2021: 121,163,050 | 1.2 | 1.2 |
Additional paid-in capital | 914.6 | 910.8 |
Retained earnings | 614.6 | 625.7 |
Accumulated other comprehensive loss | (14.5) | (24.7) |
Total stockholders' equity | 1,515.9 | 1,513 |
Total liabilities, temporary equity and stockholders' equity | 7,792.4 | 7,450.7 |
Other Balance Sheet Items | ||
Trade receivables allowances | 10.1 | 9.5 |
Finance receivables allowances | 23 | 23 |
Customer relationships, accumulated amortization | 407.8 | 401.5 |
Other Intangible Assets Accumulated Amortization | 365.9 | 350 |
Property, Plant and Equipment Accumulated Depreciation | $ 206.1 | $ 201.6 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 400,000,000 | 400,000,000 |
Common Stock, Shares, Issued | 121,532,564 | 121,163,050 |
Common Stock, Shares, Outstanding | 121,532,564 | 121,163,050 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss |
Beginning balance at Dec. 31, 2020 | $ 1,615.8 | $ 1.3 | $ 1,046.5 | $ 600.7 | $ (32.7) |
Beginning balance (in shares) at Dec. 31, 2020 | 129,700,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net Income (Loss) | 50.9 | 50.9 | |||
Other comprehensive income | 8.3 | 8.3 | |||
Issuance of common stock under stock plans | 0.3 | 0.3 | |||
Issuance of common stock under stock plans (in shares) | 400,000 | ||||
Surrender of RSUs for taxes | (2.2) | (2.2) | |||
Surrender of RSUs for taxes (in shares) | (100,000) | ||||
Stock-based compensation expense | 5.4 | 5.4 | |||
Repurchase and retirement of common stock | (80.8) | (80.8) | |||
Repurchase and retirement of common stock (in shares) | (5,200,000) | ||||
Dividends earned under stock plans | (0.2) | 0.2 | (0.4) | ||
Dividends on preferred stock | (10) | (10) | |||
Ending balance at Mar. 31, 2021 | 1,587.5 | $ 1.3 | 969.4 | 641.2 | (24.4) |
Ending balance (in shares) at Mar. 31, 2021 | 124,800,000 | ||||
Beginning balance at Dec. 31, 2021 | $ 1,513 | $ 1.2 | 910.8 | 625.7 | (24.7) |
Beginning balance (in shares) at Dec. 31, 2021 | 121,163,050 | 121,200,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net Income (Loss) | $ (0.3) | (0.3) | |||
Other comprehensive income | 10.2 | 10.2 | |||
Issuance of common stock under stock plans | 0.6 | 0.6 | |||
Issuance of common stock under stock plans (in shares) | 500,000 | ||||
Surrender of RSUs for taxes | (2.5) | (2.5) | |||
Surrender of RSUs for taxes (in shares) | (200,000) | ||||
Stock-based compensation expense | 5.6 | 5.6 | |||
Dividends earned under stock plans | 0 | 0.1 | (0.1) | ||
Dividends on preferred stock | (10.7) | (10.7) | |||
Ending balance at Mar. 31, 2022 | $ 1,515.9 | $ 1.2 | $ 914.6 | $ 614.6 | $ (14.5) |
Ending balance (in shares) at Mar. 31, 2022 | 121,532,564 | 121,500,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating activities | ||
Net income (loss) | $ (0.3) | $ 50.9 |
Net income from discontinued operations | (8.1) | (24.7) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 26 | 26.9 |
Provision for credit losses | 3 | 5.1 |
Deferred income taxes | 2.6 | 4.4 |
Amortization of debt issuance costs | 3.1 | 3 |
Stock-based compensation | 5 | 4.7 |
Contingent consideration adjustment | 0 | 11.2 |
Net change in unrealized (gain) loss on investment securities | 3 | (43.5) |
Other non-cash, net | (8.7) | 0.6 |
Changes in operating assets and liabilities: | ||
Trade receivables and other assets | (67.1) | (222.4) |
Accounts payable and accrued expenses | 45 | 334 |
Payments of contingent consideration in excess of acquisition-date fair value | (26.1) | 0 |
Net cash (used by) provided by operating activities - continuing operations | (22.6) | 150.2 |
Net cash used by operating activities – discontinued operations | (39.2) | 14.3 |
Investing activities | ||
Net increase in finance receivables held for investment | (229.4) | (73.3) |
Purchases of property, equipment and computer software | (13.5) | (11.9) |
Investments in securities | (4.1) | (15.3) |
Proceeds from sale of investments | 0.3 | 21.1 |
Proceeds from the sale of PWI | 0 | 0.9 |
Net cash used by investing activities - continuing operations | (246.7) | (78.5) |
Net cash used by investing activities - discontinued operations | (11.8) | (0.7) |
Financing activities | ||
Net increase in book overdrafts | 6.5 | 5.1 |
Net increase in borrowings from lines of credit | 108.8 | 6.1 |
Net increase (decrease) in obligations collateralized by finance receivables | 170.5 | (25.1) |
Payments on long-term debt | (2.4) | (2.4) |
Payments on finance leases | (1.3) | (1.5) |
Payments of contingent consideration and deferred acquisition costs | (3.5) | (21.3) |
Issuance of common stock under stock plans | 0.6 | 0.3 |
Tax withholding payments for vested RSUs | (2.5) | (2.2) |
Repurchase and retirement of common stock | 0 | (80.8) |
Net cash provided by (used by) financing activities - continuing operations | 276.7 | (121.8) |
Net cash provided by financing activities - discontinued operations | 22 | 33.1 |
Net change in cash balances of discontinued operations | (24.3) | (15.9) |
Effect of exchange rate changes on cash | 3 | 2.6 |
Net decrease in cash, cash equivalents and restricted cash | (42.9) | (16.7) |
Cash, cash equivalents and restricted cash at beginning of period | 203.4 | 784.3 |
Cash paid for interest, net of proceeds from interest rate derivatives | 18.5 | 15.3 |
Cash paid for taxes, net of refunds | 12.6 | 11.7 |
Cash, cash equivalents and restricted cash at end of period | $ 160.5 | $ 767.6 |
Basis of Presentation and Natur
Basis of Presentation and Nature of Operations | 3 Months Ended |
Mar. 31, 2022 | |
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"), BacklotCars, Inc. ("BacklotCars"), CARWAVE Holdings LLC ("CARWAVE"), 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. (which was sold on December 1, 2020); • "Credit Agreement" refers to the Amended and Restated Credit Agreement, dated March 11, 2014 (as amended, amended and restated, modified or supplemented from time to time), among KAR Auction Services, Inc., as the borrower, the several banks and other financial institutions or entities from time to time parties thereto and JPMorgan Chase Bank N.A., as administrative agent; • "Credit Facility" refers to the $950 million, senior secured term loan B-6 facility due September 19, 2026 ("Term Loan B-6") and the $325 million, senior secured revolving credit facility due September 19, 2024 (the "Revolving Credit Facility"), the terms of which are set forth in the Credit Agreement; • "IAA" refers, collectively, to Insurance Auto Auctions, Inc., formerly a wholly-owned subsidiary of KAR Auction Services, and Insurance Auto Auctions, Inc.'s subsidiaries and other related entities, including HBC Vehicle Services Limited ("HBC"); • "KAR Auction Services" refers to KAR Auction Services, Inc. and not to its subsidiaries; • "Senior notes" refers to the 5.125% senior notes due 2025 ($950 million aggregate principal was outstanding at March 31, 2022); and • "Series A Preferred Stock" refers to the Series A Convertible Preferred Stock, par value $0.01 per share (623,397 and 612,676 shares of Series A Preferred Stock were outstanding at March 31, 2022 and December 31, 2021, respectively). Business and Nature of Operations ADESA is a leading provider of wholesale vehicle auctions and related vehicle remarketing services for the automotive industry. In February 2022, the Company announced that it had entered into a definitive agreement with Carvana Group, LLC (“Carvana”) and Carvana Co., pursuant to which Carvana will acquire the ADESA U.S. physical auction business from KAR (the “Transaction”). The Transaction includes all auction sales, operations and staff at ADESA’s U.S. vehicle logistic centers and use of the ADESA.com marketplace in the U.S. (see Note 2). As of March 31, 2022, the ADESA Auctions segment serves a domestic and international customer base through digital marketplaces and 14 vehicle logistics center locations across Canada. ADESA includes BacklotCars, an app and web-based dealer-to-dealer wholesale vehicle platform utilized in the United States, CARWAVE, an online dealer-to-dealer marketplace in the United States, TradeRev, an online automotive remarketing platform in Canada where dealers can launch and participate in real-time vehicle auctions at any time, ADESA Remarketing Limited, an online whole car vehicle remarketing business in the United Kingdom and ADESA Europe, an online wholesale vehicle auction marketplace in Continental Europe. Our auctions facilitate the sale of used vehicles through on-premise and off-premise marketplaces. ADESA's online service offerings include customized private label solutions powered with software developed by its wholly-owned subsidiary, Openlane, that allow our commercial consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the Internet prior to arrival at on-premise marketplaces. Remarketing services include a variety of activities designed to facilitate the transfer of 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 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 approximately 100 locations throughout the United States and Canada as of March 31, 2022. Floorplan financing supports independent used vehicle dealers in North America who purchase vehicles at ADESA, BacklotCars, CARWAVE, TradeRev, other used vehicle and salvage auctions. In addition, AFC provides financing for dealer inventory purchased directly from wholesalers and other dealers as well as providing liquidity for customer trade-ins which encompasses settling lien holder payoffs. AFC also provides title services for their customers. Basis of Presentation The accompanying unaudited 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, 2021, as filed with the Securities and Exchange Commission on February 23, 2022. The 2021 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 During the first quarter of 2022, the Company classified the ADESA U.S. physical auctions (vehicle logistics centers) as held-for-sale based on management’s intention to sell the business. Certain amounts reported in the consolidated financial statements and related notes prior to March 2022 have been reclassified to discontinued operations to reflect the pending sale of the Company’s ADESA U.S. physical auction business. The assets and liabilities of the ADESA U.S. physical auctions have been reclassified to "Current assets held-for-sale," "Non-current assets held-for-sale," "Current liabilities held-for-sale" and "Non-current liabilities held-for-sale" in the consolidated balance sheets for all periods presented. Likewise, certain amounts reported for segment results in the consolidated financial statements prior to March 2022 have been reclassified to conform to the discontinued operations presentation. See Note 2 for a further discussion. In addition, KAR provided transportation services of $17.7 million and $24.4 million to the ADESA U.S. physical auctions for the three months ended March 31, 2022 and 2021, respectively. The revenue and cost of services for these transportation services provided to the ADESA U.S. physical auctions was previously eliminated in consolidation, but this revenue and the related costs are now included in the Company's consolidated statements of income. AFC also has accounts payable to customers of the ADESA U.S. physical auctions related to auction proceeds financed. Previously, these accounts payables were eliminated in consolidation, but are now included in "Accounts payable" and "Current assets held-for-sale" on the consolidated balance sheets and were $40.4 million and $33.5 million at March 31, 2022 and December 31, 2021, respectively. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, incremental losses on finance receivables, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies. New Accounting Standards 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. This update can be adopted on either a fully retrospective or a modified retrospective basis. The adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements. |
Restatement of Previously Issue
Restatement of Previously Issued Consolidated Financial Statements | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement of Previously Issued Consolidated Financial Statements | Restatement of Previously Issued Consolidated Financial Statements The Company has determined that there were errors in the original Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 related to the cash flow presentation of accrued taxes and other transaction-related accruals in connection with the sale of the ADESA U.S. physical auction business that closed in May 2022. Specifically, the Company determined that the cash flows associated with these accruals were incorrectly classified within “Net cash provided by operating activities – continuing operations” rather than “Net cash used by operating activities – discontinued operations” in its consolidated statements of cash flows for the three months ended March 31, 2022. In addition, in the three months ended March 31, 2022 all payments of contingent consideration were previously included as cash flows from financing activities. The portion of the payment in excess of the acquisition-date fair value should have been reflected as a cash flow from operating activities. We also corrected the presentation of the net change in cash balances of discontinued operations. The Company is correcting these misclassifications by restating its consolidated statement of cash flows through the amendment of its Quarterly Report on Form 10-Q. The following table summarizes the impact of these adjustments for the period presented: Three Months Ended March 31, 2022 As Reported Adjustments As Restated Trade receivables and other assets $ (80.1) $ 13.0 $ (67.1) Payments of contingent consideration in excess of acquisition-date fair value — (26.1) (26.1) Net cash used by operating activities – continuing operations (9.5) (13.1) (22.6) Net cash used by operating activities – discontinued operations (50.5) 11.3 (39.2) Payments of contingent consideration (29.6) 26.1 (3.5) Net cash provided by financing activities – continuing operations 250.6 26.1 276.7 Net change in cash balances of discontinued operations — (24.3) (24.3) |
Pending Sale of ADESA U.S. Phys
Pending Sale of ADESA U.S. Physical Auction Business and Discontinued Operations | 3 Months Ended |
Mar. 31, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Pending Sale of ADESA U.S. Physical Auction Business and Discontinued Operations | Pending Sale of ADESA U.S. Physical Auction Business and Discontinued Operations In February 2022, the Company announced that it had entered into a definitive agreement with Carvana, pursuant to which Carvana will acquire the ADESA U.S. physical auction business from KAR. The Transaction is valued at $2.2 billion and includes all auction sales, operations and staff at ADESA’s U.S. vehicle logistic centers and use of the ADESA.com marketplace in the U.S. The Transaction is subject to customary closing conditions and is expected to close in May 2022. In connection with the Transaction, the Company and Carvana expect to enter into various agreements to provide a framework for their relationship after the Transaction, including a transition services agreement and a commercial agreement. In addition, KAR will continue to own the ADESA tradename and the ADESA U.S. physical auctions will continue to utilize the tradename, which has an indefinite life. The Company has classified the ADESA U.S. physical auctions as held-for-sale in its consolidated balance sheets, based on management’s intention to sell the business. The "Goodwill" shown in the balance sheets below was allocated to the ADESA U.S. physical auctions based on relative fair value. The financial results of the ADESA U.S. physical auction business have been accounted for as discontinued operations for all periods presented. The business was formerly included in the Company’s ADESA Auctions reportable segment. The following table presents the results of operations for the ADESA U.S. physical auction business that have been reclassified to discontinued operations for all periods presented (in millions) : Three Months Ended March 31, 2022 2021 Operating revenues $ 220.0 $ 236.2 Operating expenses Cost of services (exclusive of depreciation and amortization) 158.6 149.7 Selling, general and administrative 43.9 44.4 Depreciation and amortization 11.2 20.1 Total operating expenses 213.7 214.2 Operating profit 6.3 22.0 Interest expense 0.1 0.1 Other (income) expense, net (6.1) (1.9) Income from discontinued operations before income taxes 12.3 23.8 Income taxes 4.2 (0.9) Income from discontinued operations $ 8.1 $ 24.7 In preparing our 2022 annual consolidated financial statements, we identified an error in the December 31, 2021 comparative balance sheet that had been recasted and presented in the Original Form 10-Q to reflect the classification of the ADESA U.S. physical auctions as discontinued operations. In the December 31, 2021 balance sheet included in that filing, liabilities of discontinued operations were overstated by $82.5 million with a corresponding understatement of deferred income tax liabilities. Likewise, in the March 31, 2022 balance sheet included in the Original Form 10-Q, current liabilities held-for-sale were overstated by $83.8 million with a corresponding understatement of deferred income tax liabilities. The error was determined to be immaterial and has been corrected in the consolidated March 31, 2022 and December 31, 2021 balance sheets presented herein. We also corrected an immaterial error in the accompanying consolidated statement of cash flows for the three months ended March 31, 2021 to present the net change in cash balances of discontinued operations of $15.9 million as a separate line item rather than within net cash provided by operating activities – discontinued operations. There was no impact to the consolidated statements of income, statements of comprehensive income and statements of stockholders’ equity for the three months ended March 31, 2021. The following tables summarize the major classes of assets and liabilities of the ADESA U.S. physical auction business that have been classified as held-for-sale for each period presented (in millions) : March 31, Assets Cash and cash equivalents $ 36.7 Trade receivables, net of allowances 237.8 Inventory 16.5 Other current assets 6.0 Goodwill 980.5 Customer relationships, net of accumulated amortization 81.4 Other intangible assets, net of accumulated amortization 33.5 Operating lease right-of-use assets 226.6 Property and equipment, net of accumulated depreciation 437.1 Other assets 2.5 Current assets held-for-sale $ 2,058.6 Liabilities Accounts payable $ 323.1 Accrued employee benefits and compensation expenses 19.7 Other accrued expenses 27.0 Current portion of operating lease liabilities 27.7 Operating lease liabilities 222.0 Other liabilities 2.0 Current liabilities held-for-sale $ 621.5 December 31, 2021 Assets Cash and cash equivalents $ 12.4 Trade receivables, net of allowances 179.3 Inventory 15.7 Other current assets 5.8 Current assets held-for-sale 213.2 Goodwill 980.5 Customer relationships, net of accumulated amortization 84.2 Other intangible assets, net of accumulated amortization 32.6 Operating lease right-of-use assets 231.0 Property and equipment, net of accumulated depreciation 435.7 Other assets 2.6 Non-current assets held-for-sale 1,766.6 Total assets held-for-sale $ 1,979.8 Liabilities Accounts payable $ 271.7 Accrued employee benefits and compensation expenses 27.2 Other accrued expenses 35.3 Current portion of operating lease liabilities 27.5 Current liabilities held-for-sale 361.7 Operating lease liabilities 229.0 Other liabilities 2.3 Non-current liabilities held-for-sale 231.3 Total liabilities held-for-sale $ 593.0 |
Stock and Stock-Based Compensat
Stock and Stock-Based Compensation Plans | 3 Months Ended |
Mar. 31, 2022 | |
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. service-based options ("service options"), market-based options ("market options"), performance-based restricted stock units ("PRSUs") and service-based restricted stock units ("RSUs"). We have determined that the KAR Auction Services, Inc. service options, market options, PRSUs and RSUs should be classified as equity awards. The following table summarizes our stock-based compensation expense by type of award (in millions) : Three Months Ended March 31, 2022 2021 PRSUs $ 1.9 $ 2.0 RSUs 1.4 1.4 Service options 0.2 0.3 Market options 1.5 1.0 Total stock-based compensation expense $ 5.0 $ 4.7 PRSUs and RSUs In the first quarter of 2022, we granted a target amount of approximately 0.5 million PRSUs to certain executive officers of the Company. The PRSUs granted in 2022 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 0.3 million RSUs were granted to certain management members 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 $18.46 per share and $18.45 per share, respectively, which was determined using the closing price of the Company's common stock on the dates of grant. 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. In October 2021, the board of directors authorized an extension of the October 2019 share repurchase program through December 31, 2022. At March 31, 2022, approximately $109.0 million of the Company's outstanding common stock remained available for repurchase under the 2019 share repurchase program. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases is subject to market and other conditions. 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 three months ended March 31, 2022. For the three months ended March 31, 2021, we repurchased and retired 5,219,800 shares of common stock in the open market at a weighted average price of $15.47 per share, under the October 2019 authorization. |
Net Income (Loss) from Continui
Net Income (Loss) from Continuing Operations Per Share | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Net Income (Loss) from Continuing Operations Per Share | Net Income (Loss) 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 March 31, 2022 2021 Net income (loss) from continuing operations $ (8.4) $ 26.2 Series A Preferred Stock dividends (10.7) (10.0) Net income attributable to participating securities — (3.3) Net income (loss) attributable to common stockholders $ (19.1) $ 12.9 Weighted average common shares outstanding 121.4 129.0 Effect of dilutive stock options and restricted stock awards — 0.7 Weighted average common shares outstanding and potential common shares 121.4 129.7 Net income (loss) from continuing operations per share Basic $ (0.16) $ 0.10 Diluted $ (0.16) $ 0.10 The Company includes participating securities (Series A Preferred Stock) in the computation of net income from continuing operations per share pursuant to the two-class method. The two-class method of calculating net income from continuing operations per share is an allocation method that calculates earnings per share for common stock and participating securities. Under the two-class method, total dividends provided to the holders of the Series A Preferred Stock and undistributed earnings allocated to participating securities are subtracted from net income from continuing operations in determining net income attributable to common stockholders. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. 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 |
Finance Receivables and Obligat
Finance Receivables and Obligations Collateralized by Finance Receivables | 3 Months Ended |
Mar. 31, 2022 | |
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 the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary ("AFC Funding Corporation"), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 31, 2024. AFC Funding Corporation had committed liquidity of $1.70 billion for U.S. finance receivables at March 31, 2022. We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables, which expires on January 31, 2024. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$225 million at March 31, 2022. 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. March 31, 2022 Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,750.9 $ 8.4 $ 1.4 Other loans 6.9 — — Total receivables managed $ 2,757.8 $ 8.4 $ 1.4 December 31, 2021 Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,519.7 $ 7.3 $ 1.3 Other loans 9.3 — — Total receivables managed $ 2,529.0 $ 7.3 $ 1.3 The following is a summary of the changes in the allowance for credit losses related to finance receivables ( in millions ): March 31, March 31, Allowance for Credit Losses Balance at December 31 $ 23.0 $ 22.0 Provision for credit losses 1.4 4.8 Recoveries 1.9 2.5 Less charge-offs (3.3) (3.8) Balance at end of period $ 23.0 $ 25.5 As of March 31, 2022 and December 31, 2021, $2,710.9 million and $2,482.2 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 (in millions) : March 31, December 31, Obligations collateralized by finance receivables, gross $ 1,879.9 $ 1,707.4 Unamortized securitization issuance costs (13.3) (15.1) Obligations collateralized by finance receivables $ 1,866.6 $ 1,692.3 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 March 31, 2022, we were in compliance with the covenants in the securitization agreements. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2022 | |
Long-term Debt, Unclassified [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consisted of the following (in millions) : Interest Rate* Maturity March 31, December 31, Term Loan B-6 Adjusted LIBOR + 2.25% September 19, 2026 $ 926.2 $ 928.6 Revolving Credit Facility Adjusted LIBOR + 1.75% September 19, 2024 101.0 — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 14.6 6.8 Total debt 1,991.8 1,885.4 Unamortized debt issuance costs/discounts (18.0) (19.4) Current portion of long-term debt (1,034.0) (16.3) Long-term debt $ 939.8 $ 1,849.7 *The interest rates presented in the table above represent the rates in place at March 31, 2022. Credit Facilities On September 19, 2019, we entered into the seven-year, $950 million Term Loan B-6 and the $325 million, five-year Revolving Credit Facility. The outstanding balance on Term Loan B-6 is classified as current debt at March 31, 2022, net of unamortized debt issuance costs/discounts of approximately $7.8 million, as the Company expects to repay the debt with the net proceeds from the closing of the Transaction. Under the Credit Agreement, net cash proceeds from the Transaction must be used to repay Term Loan B-6 shortly after closing. 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 Credit Facility based on the Company’s Consolidated Senior Secured Net Leverage Ratio, from time to time. The interest rate applicable to Term Loan B-6 was 2.75% at March 31, 2022. 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 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) 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, if there are revolving loans outstanding. We were in compliance with the applicable covenants in the Credit Agreement at March 31, 2022. As of March 31, 2022, $101.0 million was drawn on the Revolving Credit Facility and there were no borrowings outstanding on the Revolving Credit Facility at December 31, 2021. We had related outstanding letters of credit in the aggregate amount of $27.3 million and $27.6 million at March 31, 2022 and December 31, 2021, respectively, which reduce the amount available for borrowings under the Revolving Credit Facility. Senior Notes The Company expects to use any remaining proceeds from the Transaction after the repayment of Term Loan B-6 to redeem the senior notes within 365 days of the close of the Transaction. The terms of the senior notes specify that excess proceeds must be reinvested or used to pay down a portion of the senior notes. At March 31, 2022, the senior notes are classified as non-current debt as the Company is not obligated to repay within the next year. European Lines of Credit ADESA Europe has lines of credit aggregating $33.2 million (€30 million). The lines of credit had an aggregate $14.6 million and $6.8 million of borrowings outstanding at March 31, 2022 and December 31, 2021, respectively. The lines of credit are secured by certain inventory and receivables at ADESA Europe subsidiaries. Fair Value of Debt As of March 31, 2022, the estimated fair value of our long-term debt amounted to $1,994.8 million. The estimates of fair value were based on broker-dealer quotes (Level 2 inputs) for our debt as of March 31, 2022. 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 | 3 Months Ended |
Mar. 31, 2022 | |
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 have used interest rate derivatives with the objective of managing exposure to interest rate movements, thereby reducing the effect of interest rate changes and the effect they could have on future cash flows. Currently, interest rate swap agreements are used to accomplish this objective. In January 2020, we entered into 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 originally designated the interest rate swaps as cash flow hedges. The changes in the fair value of the interest rate swaps that are included in the assessment of hedge effectiveness are recorded as a component of "Accumulated other comprehensive income." For the three months ended March 31, 2022, the Company recorded an unrealized gain on the interest rate swaps of $9.1 million, net of tax of $3.0 million, in "Accumulated other comprehensive income." For the three months ended March 31, 2021, the Company recorded an unrealized gain on the interest rate swaps of $6.7 million, net of tax of $2.2 million, in "Accumulated other comprehensive income." The earnings impact of the interest rate derivatives designated as cash flow hedges is recorded upon the recognition of the interest related to the hedged debt. In February 2022, we discontinued hedge accounting as we concluded that the forecasted interest rate payments were no longer probable of occurring in consideration of the Transaction and expected repayment of Term Loan B-6. As a result, the increase in the fair value of the swaps from the time of hedge accounting discontinuance to March 31, 2022 was recognized as an $8.7 million unrealized gain in "Interest expense" in the consolidated statement of income. 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 and was considered immaterial to the fair value estimates. ASC 815, Derivatives and Hedging , requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. The fair values of the interest rate derivatives are based on quoted market prices for similar instruments from commercial banks (based on significant observable inputs - Level 2 inputs). The following table presents the fair value of our interest rate derivatives included in the consolidated balance sheets for the periods presented ( in millions ): Asset/Liability Derivatives March 31, 2022 December 31, 2021 Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value 2020 Interest rate swaps Other assets N/A Other liabilities $ 7.5 Derivatives Not Designated as Hedging Instruments 2020 Interest rate swaps Other assets $ 13.3 Other liabilities N/A |
Other (Income) Expense, Net
Other (Income) Expense, Net | 3 Months Ended |
Mar. 31, 2022 | |
Other Nonoperating Income (Expense) [Abstract] | |
Other (Income) Expense, Net | Other (Income) Expense, Net Other (income) expense, net consisted of the following ( in millions ): Three Months Ended March 31, 2022 2021 Change in realized and unrealized (gains) losses on investment securities, net $ 3.0 $ (60.5) Contingent consideration valuation — 11.2 Foreign currency (gains) losses 1.2 2.2 Other (3.0) (2.6) Other (income) expense, net $ 1.2 $ (49.7) Fair Value Measurement of Investments The Company invests in certain early-stage automotive companies and funds that relate to the automotive industry. We believe these investments have resulted in the expansion of relationships in the vehicle remarketing industry. Realized gains on these investments were $0.0 million and $17.0 million for the three months ended March 31, 2022 and 2021, respectively. The Company had unrealized losses of $3.0 million for the three months ended March 31, 2022 and unrealized gains of $43.5 million for the three months ended March 31, 2021. ASC 820, Fair Value Measurement , defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A small portion of finance receivables for one entity were converted to investment securities during the first quarter of 2021. This entity became publicly traded during the first quarter of 2021 and now has a readily determinable fair value. As of March 31, 2022, the fair value of investment securities are based on quoted market prices for identical assets (Level 1 of the fair value hierarchy) and approximated $4.5 million. The net unrealized loss on these investment securities was $3.0 million at March 31, 2022. The remaining investments held of $26.2 million do not have readily determinable fair values and the Company has elected to apply the measurement alternative to these investments and present them at cost. Investments are reported in "Other assets" in the accompanying consolidated balance sheets. Realized and unrealized gains and losses are reported in "Other (income) expense, net" in the consolidated statements of income. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2022 | |
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 which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Mar. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consisted of the following ( in millions ): March 31, December 31, Foreign currency translation loss $ (17.9) $ (19.0) Unrealized gain (loss) on interest rate derivatives, net of tax 3.4 (5.7) Accumulated other comprehensive loss $ (14.5) $ (24.7) |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2022 | |
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. Beginning in the first quarter of 2022, results of the ADESA U.S physical auctions are now reported as discontinued operations (see Note 2). Segment results for prior periods have been reclassified to conform with the new presentation. Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2022 (in millions) : ADESA AFC Consolidated Operating revenues $ 285.2 $ 84.2 $ 369.4 Operating expenses Cost of services (exclusive of depreciation and amortization) 195.8 15.0 210.8 Selling, general and administrative 108.4 10.5 118.9 Depreciation and amortization 23.9 2.1 26.0 Total operating expenses 328.1 27.6 355.7 Operating profit (loss) (42.9) 56.6 13.7 Interest expense 13.3 12.3 25.6 Other (income) expense, net (1.8) 3.0 1.2 Intercompany expense (income) 0.1 (0.1) — Income (loss) from continuing operations before income taxes (54.5) 41.4 (13.1) Income taxes (15.1) 10.4 (4.7) Net income (loss) from continuing operations $ (39.4) $ 31.0 $ (8.4) Total assets $ 2,630.3 $ 3,103.5 $ 5,733.8 Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2021 (in millions) : ADESA AFC Consolidated Operating revenues $ 304.0 $ 65.8 $ 369.8 Operating expenses Cost of services (exclusive of depreciation and amortization) 190.3 13.5 203.8 Selling, general and administrative 98.5 8.8 107.3 Depreciation and amortization 24.5 2.4 26.9 Total operating expenses 313.3 24.7 338.0 Operating profit (loss) (9.3) 41.1 31.8 Interest expense 21.5 9.3 30.8 Other (income) expense, net (5.4) (44.3) (49.7) Intercompany expense (income) 0.1 (0.1) — Income (loss) from continuing operations before income taxes (25.5) 76.2 50.7 Income taxes 5.0 19.5 24.5 Net income (loss) from continuing operations $ (30.5) $ 56.7 $ 26.2 Total assets $ 2,710.6 $ 2,376.8 $ 5,087.4 Geographic Information Our foreign operations include Canada, Mexico, Continental Europe and the U.K. Approximately 64% and 52% of our foreign operating revenues were from Canada for the three months ended March 31, 2022 and 2021, respectively. Most of the remaining foreign operating revenues were generated from Continental Europe. Information regarding the geographic areas of our operations is set forth below (in millions) : Three Months Ended March 31, 2022 2021 Operating revenues U.S. $ 231.1 $ 227.8 Foreign 138.3 142.0 $ 369.4 $ 369.8 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent EventOn April 27, 2022, the board of directors authorized an increase in the size of the Company’s $300 million share repurchase program by an additional $200 million and an extension of the share repurchase program through December 31, 2023. The share repurchase program was originally approved by the board of directors in October 2019. With the increase, and giving effect to the Company’s previous repurchases, approximately $309.0 million of the Company’s outstanding common stock, par value $0.01 per share, remains available for repurchases under the share repurchase program. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases is subject to market and other conditions. 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. |
Basis of Presentation and Nat_2
Basis of Presentation and Nature of Operations Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited 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, 2021, as filed with the Securities and Exchange Commission on February 23, 2022. The 2021 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 During the first quarter of 2022, the Company classified the ADESA U.S. physical auctions (vehicle logistics centers) as held-for-sale based on management’s intention to sell the business. Certain amounts reported in the consolidated financial statements and related notes prior to March 2022 have been reclassified to discontinued operations to reflect the pending sale of the Company’s ADESA U.S. physical auction business. The assets and liabilities of the ADESA U.S. physical auctions have been reclassified to "Current assets held-for-sale," "Non-current assets held-for-sale," "Current liabilities held-for-sale" and "Non-current liabilities held-for-sale" in the consolidated balance sheets for all periods presented. Likewise, certain amounts reported for segment results in the consolidated financial statements prior to March 2022 have been reclassified to conform to the discontinued operations presentation. See Note 2 for a further discussion. In addition, KAR provided transportation services of $17.7 million and $24.4 million to the ADESA U.S. physical auctions for the three months ended March 31, 2022 and 2021, respectively. The revenue and cost of services for these transportation services provided to the ADESA U.S. physical auctions was previously eliminated in consolidation, but this revenue and the related costs are now included in the Company's consolidated statements of income. AFC also has accounts payable to customers of the ADESA U.S. physical auctions related to auction proceeds financed. Previously, these accounts payables were eliminated in consolidation, but are now included in "Accounts payable" and "Current assets held-for-sale" on the consolidated balance sheets and were $40.4 million and $33.5 million at March 31, 2022 and December 31, 2021, respectively. |
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 |
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. This update can be adopted on either a fully retrospective or a modified retrospective basis. The adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements. |
Restatement of Previously Iss_2
Restatement of Previously Issued Consolidated Financial Statements (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of Error Corrections and Prior Period Adjustments | The following table summarizes the impact of these adjustments for the period presented: Three Months Ended March 31, 2022 As Reported Adjustments As Restated Trade receivables and other assets $ (80.1) $ 13.0 $ (67.1) Payments of contingent consideration in excess of acquisition-date fair value — (26.1) (26.1) Net cash used by operating activities – continuing operations (9.5) (13.1) (22.6) Net cash used by operating activities – discontinued operations (50.5) 11.3 (39.2) Payments of contingent consideration (29.6) 26.1 (3.5) Net cash provided by financing activities – continuing operations 250.6 26.1 276.7 Net change in cash balances of discontinued operations — (24.3) (24.3) |
Pending Sale of ADESA U.S. Ph_2
Pending Sale of ADESA U.S. Physical Auction Business and Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | The following table presents the results of operations for the ADESA U.S. physical auction business that have been reclassified to discontinued operations for all periods presented (in millions) : Three Months Ended March 31, 2022 2021 Operating revenues $ 220.0 $ 236.2 Operating expenses Cost of services (exclusive of depreciation and amortization) 158.6 149.7 Selling, general and administrative 43.9 44.4 Depreciation and amortization 11.2 20.1 Total operating expenses 213.7 214.2 Operating profit 6.3 22.0 Interest expense 0.1 0.1 Other (income) expense, net (6.1) (1.9) Income from discontinued operations before income taxes 12.3 23.8 Income taxes 4.2 (0.9) Income from discontinued operations $ 8.1 $ 24.7 In preparing our 2022 annual consolidated financial statements, we identified an error in the December 31, 2021 comparative balance sheet that had been recasted and presented in the Original Form 10-Q to reflect the classification of the ADESA U.S. physical auctions as discontinued operations. In the December 31, 2021 balance sheet included in that filing, liabilities of discontinued operations were overstated by $82.5 million with a corresponding understatement of deferred income tax liabilities. Likewise, in the March 31, 2022 balance sheet included in the Original Form 10-Q, current liabilities held-for-sale were overstated by $83.8 million with a corresponding understatement of deferred income tax liabilities. The error was determined to be immaterial and has been corrected in the consolidated March 31, 2022 and December 31, 2021 balance sheets presented herein. We also corrected an immaterial error in the accompanying consolidated statement of cash flows for the three months ended March 31, 2021 to present the net change in cash balances of discontinued operations of $15.9 million as a separate line item rather than within net cash provided by operating activities – discontinued operations. There was no impact to the consolidated statements of income, statements of comprehensive income and statements of stockholders’ equity for the three months ended March 31, 2021. The following tables summarize the major classes of assets and liabilities of the ADESA U.S. physical auction business that have been classified as held-for-sale for each period presented (in millions) : March 31, Assets Cash and cash equivalents $ 36.7 Trade receivables, net of allowances 237.8 Inventory 16.5 Other current assets 6.0 Goodwill 980.5 Customer relationships, net of accumulated amortization 81.4 Other intangible assets, net of accumulated amortization 33.5 Operating lease right-of-use assets 226.6 Property and equipment, net of accumulated depreciation 437.1 Other assets 2.5 Current assets held-for-sale $ 2,058.6 Liabilities Accounts payable $ 323.1 Accrued employee benefits and compensation expenses 19.7 Other accrued expenses 27.0 Current portion of operating lease liabilities 27.7 Operating lease liabilities 222.0 Other liabilities 2.0 Current liabilities held-for-sale $ 621.5 December 31, 2021 Assets Cash and cash equivalents $ 12.4 Trade receivables, net of allowances 179.3 Inventory 15.7 Other current assets 5.8 Current assets held-for-sale 213.2 Goodwill 980.5 Customer relationships, net of accumulated amortization 84.2 Other intangible assets, net of accumulated amortization 32.6 Operating lease right-of-use assets 231.0 Property and equipment, net of accumulated depreciation 435.7 Other assets 2.6 Non-current assets held-for-sale 1,766.6 Total assets held-for-sale $ 1,979.8 Liabilities Accounts payable $ 271.7 Accrued employee benefits and compensation expenses 27.2 Other accrued expenses 35.3 Current portion of operating lease liabilities 27.5 Current liabilities held-for-sale 361.7 Operating lease liabilities 229.0 Other liabilities 2.3 Non-current liabilities held-for-sale 231.3 Total liabilities held-for-sale $ 593.0 |
Stock and Stock-Based Compens_2
Stock and Stock-Based Compensation Plans (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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 March 31, 2022 2021 PRSUs $ 1.9 $ 2.0 RSUs 1.4 1.4 Service options 0.2 0.3 Market options 1.5 1.0 Total stock-based compensation expense $ 5.0 $ 4.7 |
Net Income (Loss) from Contin_2
Net Income (Loss) from Continuing Operations Per Share (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of computation of net income (loss) 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 March 31, 2022 2021 Net income (loss) from continuing operations $ (8.4) $ 26.2 Series A Preferred Stock dividends (10.7) (10.0) Net income attributable to participating securities — (3.3) Net income (loss) attributable to common stockholders $ (19.1) $ 12.9 Weighted average common shares outstanding 121.4 129.0 Effect of dilutive stock options and restricted stock awards — 0.7 Weighted average common shares outstanding and potential common shares 121.4 129.7 Net income (loss) from continuing operations per share Basic $ (0.16) $ 0.10 Diluted $ (0.16) $ 0.10 |
Finance Receivables and Oblig_2
Finance Receivables and Obligations Collateralized by Finance Receivables (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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. March 31, 2022 Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,750.9 $ 8.4 $ 1.4 Other loans 6.9 — — Total receivables managed $ 2,757.8 $ 8.4 $ 1.4 December 31, 2021 Net Credit Losses Total Amount of: (in millions) Receivables Receivables Floorplan receivables $ 2,519.7 $ 7.3 $ 1.3 Other loans 9.3 — — Total receivables managed $ 2,529.0 $ 7.3 $ 1.3 |
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 ): March 31, March 31, Allowance for Credit Losses Balance at December 31 $ 23.0 $ 22.0 Provision for credit losses 1.4 4.8 Recoveries 1.9 2.5 Less charge-offs (3.3) (3.8) Balance at end of period $ 23.0 $ 25.5 |
Schedule of obligations collateralized by finance receivables | Obligations collateralized by finance receivables consisted of the following (in millions) : March 31, December 31, Obligations collateralized by finance receivables, gross $ 1,879.9 $ 1,707.4 Unamortized securitization issuance costs (13.3) (15.1) Obligations collateralized by finance receivables $ 1,866.6 $ 1,692.3 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Long-term Debt, Unclassified [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (in millions) : Interest Rate* Maturity March 31, December 31, Term Loan B-6 Adjusted LIBOR + 2.25% September 19, 2026 $ 926.2 $ 928.6 Revolving Credit Facility Adjusted LIBOR + 1.75% September 19, 2024 101.0 — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 14.6 6.8 Total debt 1,991.8 1,885.4 Unamortized debt issuance costs/discounts (18.0) (19.4) Current portion of long-term debt (1,034.0) (16.3) Long-term debt $ 939.8 $ 1,849.7 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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 ): Asset/Liability Derivatives March 31, 2022 December 31, 2021 Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value 2020 Interest rate swaps Other assets N/A Other liabilities $ 7.5 Derivatives Not Designated as Hedging Instruments 2020 Interest rate swaps Other assets $ 13.3 Other liabilities N/A |
Other (Income) Expense, Net (Ta
Other (Income) Expense, Net (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Other Nonoperating Income (Expense) [Abstract] | |
Schedule of Other (Income) Expense, Net | Other (income) expense, net consisted of the following ( in millions ): Three Months Ended March 31, 2022 2021 Change in realized and unrealized (gains) losses on investment securities, net $ 3.0 $ (60.5) Contingent consideration valuation — 11.2 Foreign currency (gains) losses 1.2 2.2 Other (3.0) (2.6) Other (income) expense, net $ 1.2 $ (49.7) |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of accumulated other comprehensive loss | Accumulated other comprehensive loss consisted of the following ( in millions ): March 31, December 31, Foreign currency translation loss $ (17.9) $ (19.0) Unrealized gain (loss) on interest rate derivatives, net of tax 3.4 (5.7) Accumulated other comprehensive loss $ (14.5) $ (24.7) |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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 March 31, 2022 (in millions) : ADESA AFC Consolidated Operating revenues $ 285.2 $ 84.2 $ 369.4 Operating expenses Cost of services (exclusive of depreciation and amortization) 195.8 15.0 210.8 Selling, general and administrative 108.4 10.5 118.9 Depreciation and amortization 23.9 2.1 26.0 Total operating expenses 328.1 27.6 355.7 Operating profit (loss) (42.9) 56.6 13.7 Interest expense 13.3 12.3 25.6 Other (income) expense, net (1.8) 3.0 1.2 Intercompany expense (income) 0.1 (0.1) — Income (loss) from continuing operations before income taxes (54.5) 41.4 (13.1) Income taxes (15.1) 10.4 (4.7) Net income (loss) from continuing operations $ (39.4) $ 31.0 $ (8.4) Total assets $ 2,630.3 $ 3,103.5 $ 5,733.8 Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2021 (in millions) : ADESA AFC Consolidated Operating revenues $ 304.0 $ 65.8 $ 369.8 Operating expenses Cost of services (exclusive of depreciation and amortization) 190.3 13.5 203.8 Selling, general and administrative 98.5 8.8 107.3 Depreciation and amortization 24.5 2.4 26.9 Total operating expenses 313.3 24.7 338.0 Operating profit (loss) (9.3) 41.1 31.8 Interest expense 21.5 9.3 30.8 Other (income) expense, net (5.4) (44.3) (49.7) Intercompany expense (income) 0.1 (0.1) — Income (loss) from continuing operations before income taxes (25.5) 76.2 50.7 Income taxes 5.0 19.5 24.5 Net income (loss) from continuing operations $ (30.5) $ 56.7 $ 26.2 Total assets $ 2,710.6 $ 2,376.8 $ 5,087.4 |
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 March 31, 2022 2021 Operating revenues U.S. $ 231.1 $ 227.8 Foreign 138.3 142.0 $ 369.4 $ 369.8 |
Basis of Presentation and Nat_3
Basis of Presentation and Nature of Operations (Details) $ / shares in Units, $ in Millions | 3 Months Ended | ||||
Mar. 31, 2022 USD ($) location network $ / shares shares | Mar. 31, 2021 USD ($) | Dec. 31, 2021 USD ($) shares | Sep. 19, 2019 USD ($) | May 31, 2017 | |
Basis of Presentation and Nature of Operations [Abstract] | |||||
Long-term debt | $ 1,991.8 | $ 1,885.4 | |||
Number of sites for whole car auctions | network | 14 | ||||
Service Revenue - KAR to ADESA U.S. Physical Auctions | $ 17.7 | $ 24.4 | |||
Cost of Service - KAR to ADESA U.S. Physical Auctions | 17.7 | $ 24.4 | |||
Accounts Payable - AFC to ADESA U.S. Physical Auctions' Customers | $ 40.4 | $ 33.5 | |||
AFC | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Number of Locations for Floorplan Financing | location | 100 | ||||
Series A Preferred Stock [Member] | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Series A Preferred Stock par value per share | $ / shares | $ 0.01 | ||||
Series A Preferred Stock shares outstanding | shares | 623,397 | 612,676 | |||
Term Loan B-6 | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Long-term debt | $ 926.2 | $ 928.6 | |||
Senior notes | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Long-term debt | $ 950 | 950 | |||
Senior notes stated interest rate | 5.125% | 5.125% | |||
Credit Agreement | Term Loan B-6 | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Long-term debt | $ 950 | ||||
Credit Agreement | Senior secured revolving credit facility | |||||
Basis of Presentation and Nature of Operations [Abstract] | |||||
Long-term debt | $ 101 | $ 0 | |||
Maximum borrowing capacity | $ 325 |
Restatement of Previously Iss_3
Restatement of Previously Issued Consolidated Financial Statements (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Trade receivables and other assets | $ (67.1) | $ (222.4) |
Payments of contingent consideration in excess of acquisition-date fair value | (26.1) | 0 |
Net cash used by operating activities – continuing operations | (22.6) | 150.2 |
Net cash used by operating activities – discontinued operations | (39.2) | 14.3 |
Payments of contingent consideration | (3.5) | (21.3) |
Net cash provided by financing activities – continuing operations | 276.7 | (121.8) |
Net change in cash balances of discontinued operations | (24.3) | $ (15.9) |
Previously Reported | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Trade receivables and other assets | (80.1) | |
Payments of contingent consideration in excess of acquisition-date fair value | 0 | |
Net cash used by operating activities – continuing operations | (9.5) | |
Net cash used by operating activities – discontinued operations | (50.5) | |
Payments of contingent consideration | (29.6) | |
Net cash provided by financing activities – continuing operations | 250.6 | |
Net change in cash balances of discontinued operations | 0 | |
Revision of Prior Period, Adjustment | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Trade receivables and other assets | 13 | |
Payments of contingent consideration in excess of acquisition-date fair value | (26.1) | |
Net cash used by operating activities – continuing operations | (13.1) | |
Net cash used by operating activities – discontinued operations | 11.3 | |
Payments of contingent consideration | 26.1 | |
Net cash provided by financing activities – continuing operations | 26.1 | |
Net change in cash balances of discontinued operations | $ (24.3) |
Pending Sale of ADESA U.S. Ph_3
Pending Sale of ADESA U.S. Physical Auction Business and Discontinued Operations (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2022 | Mar. 31, 2021 | Feb. 24, 2022 | Dec. 31, 2021 | |
Discontinued Operations | ||||
Pending Proceeds from Divestiture of Businesses | $ 2,200 | |||
Deferred income tax liabilities | $ 144.3 | $ 138.4 | ||
Net change in cash balances of discontinued operations | (24.3) | $ (15.9) | ||
Deferred income tax liabilities of discontinued operations | 83.8 | 82.5 | ||
Discontinued Operations - Results of Operations | ||||
Operating revenues | 220 | 236.2 | ||
Cost of services (exclusive of depreciation and amortization) | 158.6 | 149.7 | ||
Selling, general and administrative | 43.9 | 44.4 | ||
Depreciation and amortization | 11.2 | 20.1 | ||
Total operating expenses | 213.7 | 214.2 | ||
Operating profit | 6.3 | 22 | ||
Interest expense | 0.1 | 0.1 | ||
Other (income) expense, net | (6.1) | (1.9) | ||
Income from discontinued operations before income taxes | 12.3 | 23.8 | ||
Income taxes | 4.2 | (0.9) | ||
Income from discontinued operations | 8.1 | $ 24.7 | ||
Discontinued Operations - Major Classes of Assets and Liabilities | ||||
Cash and cash equivalents | 36.7 | 12.4 | ||
Trade receivables, net of allowances | 237.8 | 179.3 | ||
Inventory | 16.5 | 15.7 | ||
Other current assets | 6 | 5.8 | ||
Current assets held-for-sale | 2,058.6 | 213.2 | ||
Goodwill | 980.5 | 980.5 | ||
Customer relationships, net of accumulated amortization | 81.4 | 84.2 | ||
Other intangible assets, net of accumulated amortization | 33.5 | 32.6 | ||
Operating lease right-of-use assets | 226.6 | 231 | ||
Property and equipment, net of accumulated depreciation | 437.1 | 435.7 | ||
Other assets | 2.5 | 2.6 | ||
Non-current assets held-for-sale | 0 | 1,766.6 | ||
Total assets held-for-sale | 1,979.8 | |||
Accounts payable | 323.1 | 271.7 | ||
Accrued employee benefits and compensation expenses | 19.7 | 27.2 | ||
Other accrued expenses | 27 | 35.3 | ||
Current portion of operating lease liabilities | 27.7 | 27.5 | ||
Current liabilities held-for-sale | 621.5 | 361.7 | ||
Operating lease liabilities | 222 | 229 | ||
Other liabilities | 2 | 2.3 | ||
Non-current liabilities held-for-sale | 0 | 231.3 | ||
Total liabilities held-for-sale | 593 | |||
Continuing Operations | ||||
Discontinued Operations | ||||
Deferred income tax liabilities | $ 83.8 | $ 82.5 |
Stock and Stock-Based Compens_3
Stock and Stock-Based Compensation Plan Summary (Details) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2022 USD ($) installment $ / shares shares | Mar. 31, 2021 USD ($) | |
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | $ 5 | $ 4.7 |
PRSUs | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | 1.9 | 2 |
RSUs | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | 1.4 | 1.4 |
Service options | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | 0.2 | 0.3 |
Market options | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | $ 1.5 | $ 1 |
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan | RSUs | ||
Stock and Stock-Based Compensation Plans | ||
PRSUs and/or RSUs grants | shares | 0.3 | |
Number of equal annual installments | installment | 3 | |
PRSUs and/or RSUs grant date fair value | $ / shares | $ 18.45 | |
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 | 0.5 | |
PRSUs and/or RSUs grant date fair value | $ / shares | $ 18.46 | |
Award vesting period | 3 years |
Share Repurchase Plan (Details)
Share Repurchase Plan (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |||
Oct. 30, 2019 | Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Additional disclosures | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
October 2019 Share Repurchase Program | ||||
Additional disclosures | ||||
Stock repurchase program, authorized amount | $ 300 | |||
Stock repurchase program expiration date | Dec. 31, 2022 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 109 | |||
Stock repurchased and retired during period (in shares) | 0 | 5,219,800 | ||
Stock repurchased and retired weighted average price per share | $ 15.47 |
Net Income (Loss) from Contin_3
Net Income (Loss) from Continuing Operations Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Net income (loss) from continuing operations | $ (8.4) | $ 26.2 |
Series A Preferred Stock dividends | (10.7) | (10) |
Net income attributable to participating securities | 0 | (3.3) |
Net income (loss) attributable to common stockholders | $ (19.1) | $ 12.9 |
Shares outstanding | ||
Weighted average common shares outstanding | 121.4 | 129 |
Effect of dilutive stock options and restricted stock awards | 0 | 0.7 |
Weighted average common shares outstanding and potential common shares | 121.4 | 129.7 |
Net income (loss) from continuing operations per share | ||
Basic (in dollars per share) | $ (0.16) | $ 0.10 |
Diluted (in dollars per share) | $ (0.16) | $ 0.10 |
Shares attributable to service options excluded from the calculation of diluted net income per share | 0 | |
Securities excluded from calculation of earnings per share amount due to performance conditions not yet satisfied | 0.8 | |
Stock options outstanding (in shares) | 5.7 | 2.7 |
Finance Receivables and Oblig_3
Finance Receivables and Obligations Collateralized by Finance Receivables (Details) $ in Millions, $ in Millions | 3 Months Ended | |||
Mar. 31, 2022 USD ($) | Mar. 31, 2021 USD ($) | Mar. 31, 2022 CAD ($) | Dec. 31, 2021 USD ($) | |
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal amount of receivables | $ 2,757.8 | $ 2,529 | ||
Principal amount of receivables delinquent | 8.4 | 7.3 | ||
Net credit losses | 1.4 | $ 1.3 | ||
Finance receivables pledged as security | 2,710.9 | 2,482.2 | ||
Obligations collateralized by finance receivables, gross | 1,879.9 | 1,707.4 | ||
Obligations collateralized by finance receivables | 1,866.6 | 1,692.3 | ||
Changes in the Allowance for Credit Losses | ||||
Balance at beginning of period | 23 | 22 | ||
Provision for credit losses | 1.4 | 4.8 | ||
Recoveries | 1.9 | 2.5 | ||
Less charge-offs | (3.3) | (3.8) | ||
Balance at end of period | 23 | 25.5 | ||
Floorplan receivables | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal amount of receivables | 2,750.9 | 2,519.7 | ||
Principal amount of receivables delinquent | 8.4 | 7.3 | ||
Net credit losses | 1.4 | 1.3 | ||
Other Loans | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal amount of receivables | 6.9 | 9.3 | ||
Principal amount of receivables delinquent | 0 | 0 | ||
Net credit losses | 0 | $ 0 | ||
AFC | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Unamortized securitization issuance costs | $ (13.3) | $ (15.1) | ||
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 | $ 1,700 | |||
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% | |||
Cash reserve as security for obligations of collateralized financing receivables - circumstance two (as a percent) | 3% | |||
AFCI | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Committed liquidity | $ 225 | |||
AFCI | Minimum | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Cash reserve as security for obligations of collateralized financing receivables (as a percent) | 1% | |||
Cash reserve as security for obligations of collateralized financing receivables - circumstance two (as a percent) | 3% |
Long-Term Debt Summary (Details
Long-Term Debt Summary (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2022 | Dec. 31, 2021 | Sep. 19, 2019 | May 31, 2017 | |
Long-Term Debt | ||||
Total debt | $ 1,991.8 | $ 1,885.4 | ||
Unamortized debt issuance costs/discounts | (18) | (19.4) | ||
Current portion of long-term debt | (1,034) | (16.3) | ||
Long-term debt | 939.8 | 1,849.7 | ||
Term Loan B-6 | ||||
Long-Term Debt | ||||
Total debt | $ 926.2 | 928.6 | ||
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 | 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 | ||
Credit Agreement | Term Loan B-6 | ||||
Long-Term Debt | ||||
Total debt | $ 950 | |||
Unamortized debt issuance costs/discounts | 7.8 | |||
Credit Agreement | Revolving Credit Facility | ||||
Long-Term Debt | ||||
Total debt | 101 | 0 | ||
European lines of credit | Foreign line of credit | ||||
Long-Term Debt | ||||
Total debt | $ 14.6 | $ 6.8 | ||
European lines of credit | Foreign line 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 | 3 Months Ended | ||||
Sep. 19, 2019 USD ($) | Mar. 31, 2022 USD ($) item | Mar. 31, 2021 USD ($) | Mar. 31, 2022 EUR (€) | Dec. 31, 2021 USD ($) | |
Long-Term Debt | |||||
Long-term debt | $ 1,991.8 | $ 1,885.4 | |||
Payments on long-term debt | (2.4) | $ (2.4) | |||
Unamortized debt issuance costs/discounts | $ (18) | (19.4) | |||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' domestic subsidiaries pledged under the Credit Facility | 100% | ||||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' first-tier foreign subsidiaries pledged under the Credit Facility | 65% | ||||
Estimated fair value of long-term debt | $ 1,994.8 | ||||
Term Loan B-6 | |||||
Long-Term Debt | |||||
Long-term debt | 926.2 | 928.6 | |||
Letters of credit | |||||
Long-Term Debt | |||||
Maximum borrowing capacity | 50 | ||||
Outstanding letters of credit | 27.3 | 27.6 | |||
Swing line loans | |||||
Long-Term Debt | |||||
Maximum borrowing capacity | 60 | ||||
Senior notes | |||||
Long-Term Debt | |||||
Long-term debt | 950 | 950 | |||
Credit Agreement | Term Loan B-6 | |||||
Long-Term Debt | |||||
Long-term debt | $ 950 | ||||
Unamortized debt issuance costs/discounts | $ 7.8 | ||||
Interest rate of loan (as a percent) | 2.75% | 2.75% | |||
Term of debt instrument | 7 years | ||||
Credit Agreement | Revolving Credit Facility | |||||
Long-Term Debt | |||||
Long-term debt | $ 101 | 0 | |||
Maximum borrowing capacity | $ 325 | ||||
Frequency of commitment fee payment | quarterly | ||||
Amount borrowed | $ 101 | 0 | |||
Term of debt instrument | 5 years | ||||
European lines of credit | Foreign line of credit | |||||
Long-Term Debt | |||||
Long-term debt | 14.6 | $ 6.8 | |||
Maximum borrowing capacity | $ 33.2 | € 30 | |||
Maximum | |||||
Long-Term Debt | |||||
Credit facility consolidated senior secured net leverage ratio | item | 3.5 | ||||
Maximum | Credit Agreement | Revolving Credit Facility | |||||
Long-Term Debt | |||||
Commitment fee on the unused amount of the Revolving Credit Facility (as a percent) | 0.35% | ||||
Minimum | Credit Agreement | Revolving Credit Facility | |||||
Long-Term Debt | |||||
Commitment fee on the unused amount of the Revolving Credit Facility (as a percent) | 0.25% |
Derivatives (Details)
Derivatives (Details) $ in Millions | 3 Months Ended | |||
Jan. 23, 2020 USD ($) agreement | Mar. 31, 2022 USD ($) | Mar. 31, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | ||||
Fixed Interest Rate | 3.69% | |||
Unrealized gain on interest rate derivatives, net of tax | $ 9.1 | $ 6.7 | ||
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 | 3 | $ 2.2 | ||
Unrealized Gain in "Interest expense" | 8.7 | |||
Other Assets | Not Designated as Hedging Instrument | January 2020 interest rate swap | ||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | ||||
Derivative asset, fair value | $ 13.3 | |||
Other Liabilities [Member] | Designated as Hedging Instrument [Member] | January 2020 interest rate swap | ||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | ||||
Derivative Liability, Fair Value | $ 7.5 |
Other (Income) Expense, Net (De
Other (Income) Expense, Net (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Other Nonoperating Income (Expense) [Abstract] | ||
Change in realized and unrealized (gains) losses on investment securities, net | $ 3 | $ (60.5) |
Contingent consideration valuation | 0 | 11.2 |
Foreign currency (gains) losses | 1.2 | 2.2 |
Other | (3) | (2.6) |
Other (income) expense, net | 1.2 | (49.7) |
Realized (gains) losses on investments | 0 | (17) |
Unrealized (gain) loss on investment securities | 3 | $ (43.5) |
Fair value of investment securities | 4.5 | |
Investments recorded at cost | $ 26.2 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2022 USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Significant Change In Legal And Regulatory Proceedings | $ 0 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation loss | $ (17.9) | $ (19) |
Unrealized gain (loss) on interest rate derivatives, net of tax | 3.4 | (5.7) |
Accumulated other comprehensive loss | $ (14.5) | $ (24.7) |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 USD ($) segment | Mar. 31, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Segment Reporting [Abstract] | |||
Number of operating segments | segment | 2 | ||
Number of reportable segments | segment | 2 | ||
Segment Information | |||
Operating revenues | $ 369.4 | $ 369.8 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 210.8 | 203.8 | |
Selling, general and administrative | 118.9 | 107.3 | |
Depreciation and amortization | 26 | 26.9 | |
Total operating expenses | 355.7 | 338 | |
Operating profit (loss) | 13.7 | 31.8 | |
Interest expense | 25.6 | 30.8 | |
Other (income) expense, net | 1.2 | (49.7) | |
Intercompany expense (income) | 0 | 0 | |
Income (loss) from continuing operations before income taxes | (13.1) | 50.7 | |
Income taxes | (4.7) | 24.5 | |
Net income (loss) from continuing operations | (8.4) | 26.2 | |
Total assets | 7,792.4 | $ 7,450.7 | |
Operating Segments | ADESA Auctions | |||
Segment Information | |||
Operating revenues | 285.2 | 304 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 195.8 | 190.3 | |
Selling, general and administrative | 108.4 | 98.5 | |
Depreciation and amortization | 23.9 | 24.5 | |
Total operating expenses | 328.1 | 313.3 | |
Operating profit (loss) | (42.9) | (9.3) | |
Interest expense | 13.3 | 21.5 | |
Other (income) expense, net | (1.8) | (5.4) | |
Intercompany expense (income) | 0.1 | 0.1 | |
Income (loss) from continuing operations before income taxes | (54.5) | (25.5) | |
Income taxes | (15.1) | 5 | |
Net income (loss) from continuing operations | (39.4) | (30.5) | |
Total assets | 2,630.3 | 2,710.6 | |
Operating Segments | AFC | |||
Segment Information | |||
Operating revenues | 84.2 | 65.8 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 15 | 13.5 | |
Selling, general and administrative | 10.5 | 8.8 | |
Depreciation and amortization | 2.1 | 2.4 | |
Total operating expenses | 27.6 | 24.7 | |
Operating profit (loss) | 56.6 | 41.1 | |
Interest expense | 12.3 | 9.3 | |
Other (income) expense, net | 3 | (44.3) | |
Intercompany expense (income) | (0.1) | (0.1) | |
Income (loss) from continuing operations before income taxes | 41.4 | 76.2 | |
Income taxes | 10.4 | 19.5 | |
Net income (loss) from continuing operations | 31 | 56.7 | |
Total assets | 3,103.5 | 2,376.8 | |
Operating Segments | Continuing Operations | |||
Operating expenses | |||
Total assets | $ 5,733.8 | $ 5,087.4 |
Segment Information (Details 2)
Segment Information (Details 2) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Geographic Information | ||
Operating revenues | $ 369.4 | $ 369.8 |
U.S. | ||
Geographic Information | ||
Operating revenues | $ 231.1 | $ 227.8 |
Foreign | ||
Geographic Information | ||
Percent of foreign revenue from Canada | 64% | 52% |
Operating revenues | $ 138.3 | $ 142 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 27, 2022 | Oct. 30, 2019 | Mar. 31, 2022 | Dec. 31, 2021 |
Subsequent Event | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
October 2019 Share Repurchase Program | ||||
Subsequent Event | ||||
Stock repurchase program, authorized amount | $ 300 | |||
Stock repurchase program expiration date | Dec. 31, 2022 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 109 | |||
October 2019 Share Repurchase Program | Subsequent Event [Member] | ||||
Subsequent Event | ||||
Stock repurchase program, authorized amount | $ 200 | |||
Stock repurchase program expiration date | Dec. 31, 2023 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 309 | |||
Common stock, par value (in dollars per share) | $ 0.01 |