Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 28, 2021 | Apr. 27, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 28, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-38580 | |
Entity Registrant Name | IAA, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 83-1030538 | |
Entity Address, Address Line One | Two Westbrook Corporate Center | |
Entity Address, Address Line Two | Suite 500 | |
Entity Address, City or Town | Westchester | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 60154 | |
City Area Code | 708 | |
Local Phone Number | 492-7000 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | IAA | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 134,755,385 | |
Entity Central Index Key | 0001745041 | |
Current Fiscal Year End Date | --01-02 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Revenues: | $ 423.5 | $ 366.6 |
Operating expenses: | ||
Selling, general and administrative | 43.4 | 38 |
Depreciation and amortization | 19.8 | 22.5 |
Total operating expenses | 314 | 291.5 |
Operating profit | 109.5 | 75.1 |
Interest expense, net | 13 | 16 |
Other income, net | (0.4) | (0.7) |
Income before income taxes | 96.9 | 59.8 |
Income taxes | 24.4 | 15.1 |
Net income | $ 72.5 | $ 44.7 |
Net income per share: | ||
Basic (in dollars per share) | $ 0.54 | $ 0.33 |
Diluted (in dollars per share) | $ 0.54 | $ 0.33 |
Service revenues | ||
Revenues: | $ 360.4 | $ 334 |
Operating expenses: | ||
Cost of service and vehicle sales | 196.4 | 203.2 |
Vehicle sales | ||
Revenues: | 63.1 | 32.6 |
Operating expenses: | ||
Cost of service and vehicle sales | $ 54.4 | $ 27.8 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 72.5 | $ 44.7 |
Other comprehensive income (loss): | ||
Foreign currency translation gain (loss) | 3 | (7.6) |
Comprehensive income | $ 75.5 | $ 37.1 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 28, 2021 | Dec. 27, 2020 |
Current assets | ||
Cash and cash equivalents | $ 314.9 | $ 232.8 |
Accounts receivable, net of allowances of $8.3 and $8.0 | 366.9 | 374.8 |
Prepaid consigned vehicle charges | 52.9 | 53.3 |
Other current assets | 29.1 | 31.1 |
Total current assets | 763.8 | 692 |
Non-current assets | ||
Operating lease right-of-use assets, net of accumulated amortization of $186.5 and $163.9 | 879.3 | 866.8 |
Property and equipment, net of accumulated depreciation of $492.5 and $481.9 | 270.7 | 259.8 |
Goodwill | 543.3 | 542.3 |
Intangible assets, net of accumulated amortization of $514.9 and $504.3 | 149.1 | 150.6 |
Other assets | 19.6 | 17.4 |
Total non-current assets | 1,862 | 1,836.9 |
Total assets | 2,625.8 | 2,528.9 |
Current liabilities | ||
Accounts payable | 100.4 | 122.6 |
Short-term right-of-use operating lease liability | 80.2 | 78.1 |
Accrued employee benefits and compensation expenses | 24 | 23.4 |
Current maturities of long-term debt | 6 | 4 |
Other accrued expenses | 83.5 | 54.4 |
Total current liabilities | 294.1 | 282.5 |
Non-current liabilities | ||
Long-term debt | 1,247.1 | 1,248 |
Long-term right-of-use operating lease liability | 848.8 | 836.6 |
Deferred income tax liabilities | 69 | 65.7 |
Other liabilities | 24.6 | 26.7 |
Total non-current liabilities | 2,189.5 | 2,177 |
Commitments and contingencies (NoteĀ 9) | ||
Stockholders' equity | ||
Preferred stock, $0.01 par value: authorized, 150.0 shares; issued and outstanding, none | 0 | 0 |
Common stock, $0.01 par value: authorized, 750.0 shares; issued and outstanding, 134.8 shares at March 28, 2021 and 134.5 shares at December 27, 2020 | 1.3 | 1.3 |
Additional paid-in capital | 9.3 | 12 |
Retained earnings | 140.2 | 67.7 |
Accumulated other comprehensive loss | (8.6) | (11.6) |
Total stockholders' equity | 142.2 | 69.4 |
Total liabilities and stockholders' equity | $ 2,625.8 | $ 2,528.9 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Mar. 28, 2021 | Dec. 27, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 8.3 | $ 8 |
Accumulated amortization, operating lease right-of-use assets | 186.5 | 163.9 |
Property and equipment, accumulated depreciation | 492.5 | 481.9 |
Intangible assets, accumulated amortization | $ 514.9 | $ 504.3 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized shares (in shares) | 150,000,000 | 150,000,000 |
Preferred stock, issued shares (in shares) | 0 | 0 |
Preferred stock, outstanding shares (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares (in shares) | 750,000,000 | 750,000,000 |
Common stock issued (in shares) | 134,800,000 | 134,500,000 |
Common stock, outstanding shares (in shares) | 134,800,000 | 134,500,000 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss |
Beginning balance (in shares) at Dec. 29, 2019 | 133.6 | ||||
Beginning balance at Dec. 29, 2019 | $ (137.2) | $ 1.3 | $ 3.5 | $ (127.1) | $ (14.9) |
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 44.7 | 44.7 | |||
Foreign currency translation gain (loss) | (7.6) | (7.6) | |||
Stock-based compensation expense | 2.1 | 2.1 | |||
Common stock issued for the exercise and vesting of stock-based awards (in shares) | 0.3 | ||||
Common stock issued for the exercise and vesting of stock-based awards | 0.8 | 0.8 | |||
Withholding taxes on stock-based awards | (6.4) | (6.4) | |||
Ending balance (in shares) at Mar. 29, 2020 | 133.9 | ||||
Ending balance at Mar. 29, 2020 | $ (103.6) | $ 1.3 | 0 | (82.4) | (22.5) |
Beginning balance (in shares) at Dec. 27, 2020 | 134.5 | 134.5 | |||
Beginning balance at Dec. 27, 2020 | $ 69.4 | $ 1.3 | 12 | 67.7 | (11.6) |
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 72.5 | 72.5 | |||
Foreign currency translation gain (loss) | 3 | 3 | |||
Stock-based compensation expense | 2.8 | 2.8 | |||
Common stock issued for the exercise and vesting of stock-based awards (in shares) | 0.4 | ||||
Common stock issued for the exercise and vesting of stock-based awards | 0.1 | 0.1 | |||
Common stock issued for employee stock purchase plan | 0.4 | 0.4 | |||
Withholding taxes on stock-based awards (in shares) | (0.1) | ||||
Withholding taxes on stock-based awards | $ (6) | (6) | |||
Ending balance (in shares) at Mar. 28, 2021 | 134.8 | 134.8 | |||
Ending balance at Mar. 28, 2021 | $ 142.2 | $ 1.3 | $ 9.3 | $ 140.2 | $ (8.6) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Operating activities | ||
Net income | $ 72.5 | $ 44.7 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 19.8 | 22.5 |
Operating lease expense | 35.8 | 32.7 |
Stock-based compensation | 2.8 | 2.1 |
Provision for credit losses | 0.3 | 0.7 |
Amortization of debt issuance costs | 1.1 | 1 |
Deferred income taxes | 3.3 | (0.3) |
Gain on disposal of fixed assets | (0.2) | (0.1) |
Changes in operating assets and liabilities, net of acquisitions: | ||
Operating lease payments | (34.1) | (31.4) |
Accounts receivable and other assets | 8.1 | 16 |
Accounts payable and accrued expenses | 11.9 | 9.4 |
Net cash provided by operating activities | 121.3 | 97.3 |
Investing activities | ||
Purchases of property, equipment and computer software | (30.3) | (10.6) |
Proceeds from the sale of property and equipment | 0.2 | 0.1 |
Other | (1) | 0 |
Net cash used by investing activities | (31.1) | (10.5) |
Financing activities | ||
Net decrease in book overdrafts | 0 | (33.6) |
Payments of long-term debt | 0 | (4) |
Finance lease payments | (3.1) | (3.8) |
Issuance of common stock under stock plans | 0.1 | 0.8 |
Proceeds from issuance of employee stock purchase plan shares | 0.4 | 0 |
Tax withholding payments for vested RSUs | (6) | (6.4) |
Net cash used by financing activities | (8.6) | (47) |
Effect of exchange rate changes on cash | 0.5 | (0.8) |
Net increase in cash and cash equivalents | 82.1 | 39 |
Cash and cash equivalents at beginning of period | 232.8 | 47.1 |
Cash and cash equivalents at end of period | 314.9 | 86.1 |
Cash paid for interest, net | 5.1 | 8.3 |
Cash paid for taxes, net | $ 1 | $ 4 |
Basis of Presentation and Natur
Basis of Presentation and Nature of Operations | 3 Months Ended |
Mar. 28, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Nature of Operations | Basis of Presentation and Nature of Operations Description of Business IAA, Inc., together with its subsidiaries (collectively referred to herein as āIAAā and "the Company") is a leading global digital marketplace connecting vehicle buyers and sellers. Leveraging leading-edge technology and focusing on innovation, IAA's unique platform facilitates the marketing and sale of total loss, damaged and low-value vehicles for a full spectrum of sellers. Headquartered in Westchester, Illinois, the Company has more than 200 facilities throughout the United States, Canada and the United Kingdom. The Company serves a global buyer base and a full spectrum of sellers, including insurance companies, dealerships, fleet lease and rental car companies, and charitable organizations. The Company offers sellers a comprehensive suite of services aimed at maximizing vehicle value, reducing administrative costs, shortening selling cycle time and delivering the highest economic returns. The Company's solutions provide global buyers with the vehicles they need to, among other things, fulfill their vehicle rebuild requirements, replacement part inventory or scrap demand. IAA provides global buyers multiple bidding/buying digital channels, innovative vehicle merchandising, efficient evaluation services and online bidding tools, enhancing the overall purchasing experience. The Company operates in two reportable segments: United States and International. The Company earns fees for its services from both buyers and sellers of vehicles sold through its channels. 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. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our financial results for the periods presented. Financial results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 27, 2020 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2021. The Company's fiscal year consists of 52 weeks with every fifth year consisting of 53 weeks and ending either the last Sunday in December or the first Sunday in January. Fiscal 2021 contains 53 weeks and fiscal 2020 contained 52 weeks. Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP. 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 the Company's results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies. Reclassification "Revenues" reported in the consolidated statements of income and segment information footnote in the prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Service revenues" and "Vehicle sales" to conform to the current year's presentation. "Cost of services" reported in the consolidated statements of income and segment information footnote in the prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Cost of services" and "Cost of vehicle sales" to conform to the current year's presentation. Recent Accounting Pronouncements Recently Issued and Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes in various areas. The adoption of ASU 2019-12 on December 28, 2020 did not have any impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted The Company does not believe that any recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures. |
Relationship with KAR and Relat
Relationship with KAR and Related Entities | 3 Months Ended |
Mar. 28, 2021 | |
Related Party Transactions [Abstract] | |
Relationship with KAR and Related Entities | Relationship with KAR and Related Entities Prior to June 28, 2019, the Company was a subsidiary of KAR Auto Action Services, Inc. ("KAR"). On June 28, 2019, KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA and IAA became an independent publicly-traded company. In connection with the separation (the "Separation") from KAR on June 28, 2019, the Company entered into a non-compete and various other ancillary agreements to effect the Separation and provide a framework for the Company's relationship with KAR after the Separation, including a transition services agreement, a tax matters agreement and an employee matters agreement. See Note 3 - Relationship with KAR and Related Entities in the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 27, 2020 for additional information. |
Stock-Based Compensation Plans
Stock-Based Compensation Plans | 3 Months Ended |
Mar. 28, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation Plans | Stock-Based Compensation Plans Prior to the Separation, KAR issued equity awards from time to time to select employees and non-employee directors of IAA. In connection with the Separation, IAA created its own equity plan, the 2019 Omnibus Stock and Incentive Plan (as amended, the "2019 OSIP"), as described below under 2019 Omnibus Stock and Incentive Plan. The employee matters agreement entered into with KAR in connection with the Separation required that the outstanding KAR equity awards held by IAA employees and non-employee directors be converted into adjusted awards of IAA pursuant to the 2019 OSIP. The awards were adjusted based on the following principles: ā¢ For each award recipient, the intent was to maintain the economic value of those awards before and after June 28, 2019, the date of the Separation; and ā¢ The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain performance-based restricted stock units ("PRSUs") granted in 2019 were subject to adjusted performance criteria. Such PRSUs were converted into time-based restricted stock units ("RSUs") with two-year cliff vesting in February 2020, since the adjusted performance criteria were determined to have been met. 2019 Omnibus Stock and Incentive Plan On June 27, 2019, the Company's board of directors approved the 2019 OSIP. The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors, and consultants of the Company whose contributions are essential to the growth and success of the Company, in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability for the Company. Benefits granted under the 2019 OSIP may be granted in any one or a combination of (i) options to purchase IAA common stock; (ii) IAA share appreciation rights (āSARsā); (iii) restricted shares of IAA common stock; (iv) other IAA stock-based awards; or (v) other cash-based awards. Options, restricted shares, and other share-based awards or cash awards may constitute performance-based awards. The granting or vesting of any performance-based awards will be based on achievement of performance objectives that are based on one or more financial or business criteria, with respect to one or more business units of IAA and its subsidiaries as a whole. Such financial or business criteria may be adjusted to account for unusual or infrequently occurring items or changes in accounting. Participants include any employee, director, independent contractor or consultant of IAA or any affiliate of IAA selected to receive awards under the 2019 OSIP, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be. As of March 28, 2021, the number of common shares reserved and available for awards under the 2019 OSIP is 4,662,798, subject to adjustment made in accordance with the 2019 OSIP. Upon the occurrence of certain corporate events that affect the common stock, including but not limited to any extraordinary cash dividend, stock split, reorganization or other relevant change in capitalization, appropriate adjustments may be made with respect to the number of shares available for grants under the 2019 OSIP, the number of shares covered by outstanding awards and the maximum number of shares that may be granted to any participant. The aggregate awards granted during any calendar year to any single individual will not exceed: (i) 1,000,000 shares subject to options or SARs, (ii) 500,000 shares subject to restricted shares or other share-based awards and (iii) $5,000,000 with respect to any cash-based award. A non-employee director of IAA may not be granted awards under the 2019 OSIP during any calendar year that, when aggregated with such non-employee directorās cash fees received with respect to such calendar year, exceed $750,000 in total value. The following table summarizes the Company's stock-based compensation expense by type of award granted under both the KAR plans and the 2019 OSIP (in millions) : Three Months Ended March 28, 2021 March 29, 2020 Performance-based Restricted Stock Units $ 0.4 $ 0.2 Restricted Stock Units and Awards 2.2 1.7 Stock Options 0.2 0.2 Total Stock-based Compensation Expense $ 2.8 $ 2.1 The following table summarizes the stock-based awards granted by the Company to certain employees and non-employee directors in accordance with the 2019 OSIP during the three months ended March 28, 2021: Three Months Ended March 28, 2021 Number of Awards Granted Weighted Average Grant Date Fair Value Performance-based Restricted Stock Units 75,185 $ 63.71 Restricted Stock Units 99,243 $ 62.35 The PRSUs granted to certain executive officers and management of the Company vest at the end of a three-year performance period if and to the extent that the Company's three year average return on invested capital achieves certain specified goals. The RSUs granted to certain executive officers and management of the Company are contingent upon continued employment and vest in three equal annual installments. |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Net Income Per Share | Net Income Per ShareBasic net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. Diluted net income per share was calculated consistent with basic net income per share including the effect of dilutive unissued common shares related to the Company's stock-based employee compensation program. The effect of stock options and RSUs on net income 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 the Company's common stock at the average market price during the period. The following table sets forth the computation of net income per share (in millions except per share amounts): Three Months Ended March 28, 2021 March 29, 2020 Net income $ 72.5 $ 44.7 Weighted average common shares outstanding 134.6 133.7 Effect of dilutive stock awards 0.7 1.3 Weighted average common shares outstanding and potential common shares 135.3 135.0 Net income per share Basic $ 0.54 $ 0.33 Diluted $ 0.54 $ 0.33 The weighted number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of the following anti-dilutive securities and awards subject to performance conditions which have not been fully satisfied at the end of the respective reporting periods: Three Months Ended March 28, 2021 March 29, 2020 Anti-dilutive awards ā 0.3 Awards subject to performance conditions not fully satisfied 0.1 ā Total 0.1 0.3 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 28, 2021 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consisted of the following (in millions) : March 28, 2021 December 27, 2020 Term Loan $ 774.0 $ 774.0 Notes 500.0 500.0 Total debt 1,274.0 1,274.0 Unamortized debt issuance costs (20.9) (22.0) Current maturities of long-term debt (6.0) (4.0) Long-term debt $ 1,247.1 $ 1,248.0 Credit Facility On June 28, 2019, the Company entered into a credit agreement (the āCredit Agreementā), which provides for, among other things: (i) a seven-year senior secured term loan in an aggregate principal amount of $800 million (the āTerm Loanā) and (ii) a five-year revolving credit facility in an aggregate principal amount of $225 million (the āRevolving Credit Facility,ā and together with the Term Loan, the āCredit Facilityā). On May 1, 2020, the Company entered into an amendment to its Credit Agreement to increase the aggregate principal amount able to be borrowed under the Revolving Credit Facility by $136.0 million to $361.0 million. The Revolving Credit Facility includes a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans, which can be borrowed on same-day notice. The Term Loan matures on June 28, 2026. As of March 28, 2021 and December 27, 2020, the interest rate per annum for the Term Loan was 2.4% and 2.4%, respectively. The Revolving Credit Facility matures on June 28, 2024. As of March 28, 2021, no amounts were outstanding under the Revolving Credit Facility. The Credit Agreement contains affirmative and negative covenants that 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 the Company's affiliates. The Credit Agreement also requires the Company to maintain a maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) not to exceed 3.50 to 1.00 as of each test date on which any Revolving Loans (as defined in the Credit Agreement) are outstanding. The Company was in compliance with the covenants in the Credit Agreement at March 28, 2021. Subsequent to March 28, 2021, the Company entered into a new credit agreement, the proceeds of which were used, along with cash on hand, to repay in full all outstanding borrowings under the Company's Term Loan. The Credit Agreement was terminated on April 30, 2021. See Note 11, Subsequent Events for additional information. Notes On June 6, 2019, the Company issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027 (the āNotesā). The Notes mature on June 15, 2027. Interest on the Notes is due on June 15 and December 15 of each year and accrues at a rate of 5.500% per annum. The Notes contain covenants which, among other things, limit the Company and its restricted subsidiariesā ability to pay dividends on or make other distributions in respect of equity interests or make other restricted payments, make certain investments, incur liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets, or designate subsidiaries as unrestricted. The Company was in compliance with the covenants at March 28, 2021. Canadian Credit Facility On July 7, 2020, the Company entered into a credit agreement which provides for a revolving credit facility in an aggregate principal amount of $10.0 million Canadian dollars (the "Canadian Credit Facility"). The Canadian Credit Facility matures on July 6, 2021 and is secured by certain of the Company's Canadian assets. The proceeds from the Canadian Credit Facility can be used by the Company's Canadian subsidiary for its working capital requirements, capital expenditures and general corporate purposes. Borrowings under this facility, based on the type of borrowing, bear interest at either (a) Bank of Montreal Prime Rate plus 1.00%; (b) Bankers Acceptance Rate plus 2.25%; or (c) Canadian Dollar Offered Rate (CDOR) plus 2.25%. As of March 28, 2021, no amounts were outstanding under the Canadian Credit Facility. The Canadian Credit Facility contains affirmative and negative covenants which, among other things, put certain limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with the Company's affiliates. The Canadian Credit Facility also requires the Company to maintain a Minimum Working Capital Ratio (as defined in the Canadian Credit Facility) of at least 1.00 to 1.00 and a Minimum Fixed Charge Coverage Ratio (as defined in the Canadian Credit Facility) of at least 1.25 to 1.00. The Company was in compliance with the covenants under the Canadian Credit Facility at March 28, 2021. Other At both March 28, 2021 and December 27, 2020, the Company had outstanding letters of credit in the aggregate amount of $6.1 million, all of which reduce the amount available for borrowings under its Revolving Credit Facility. Fair Value of Debt The estimated fair value of the Company's debt as of March 28, 2021 and December 27, 2020 was $1,293.1 million and $1,302.6 million, respectively. The estimates of fair value were based on broker-dealer quotes for the Company's debt as of the respective dates and are considered Level 2 fair value measurements in the fair value hierarchy. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Mar. 28, 2021 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts Receivable Components of accounts receivable, net were as follows (in millions): March 28, 2021 December 27, 2020 Advanced charges receivable $ 253.3 $ 239.5 Trade accounts receivable 104.7 126.5 Other receivable 17.2 16.8 Accounts receivable, gross 375.2 382.8 Less: Allowance for credit losses (8.3) (8.0) Accounts receivable, net $ 366.9 $ 374.8 |
Leases
Leases | 3 Months Ended |
Mar. 28, 2021 | |
Leases [Abstract] | |
Leases | Leases The Company leases property, software, automobiles, trucks and trailers, pursuant to operating lease agreements. The Company also leases furniture, fixtures and equipment under finance leases. The leases have varying remaining lease terms with leases expiring through 2040, some of which include options to extend the leases. The components of leases expense were as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Operating lease cost $ 35.8 $ 32.7 Finance lease cost: Amortization of right-of-use assets $ 3.3 $ 3.7 Interest on lease liabilities 0.2 0.2 Total finance lease cost $ 3.5 $ 3.9 Supplemental cash flow information related to leases was as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 34.1 $ 31.4 Operating cash flows related to finance leases $ 0.2 $ 0.3 Financing cash flows related to finance leases $ 3.1 $ 3.8 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 35.1 $ 81.7 Finance leases $ 0.3 $ 5.2 |
Leases | Leases The Company leases property, software, automobiles, trucks and trailers, pursuant to operating lease agreements. The Company also leases furniture, fixtures and equipment under finance leases. The leases have varying remaining lease terms with leases expiring through 2040, some of which include options to extend the leases. The components of leases expense were as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Operating lease cost $ 35.8 $ 32.7 Finance lease cost: Amortization of right-of-use assets $ 3.3 $ 3.7 Interest on lease liabilities 0.2 0.2 Total finance lease cost $ 3.5 $ 3.9 Supplemental cash flow information related to leases was as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 34.1 $ 31.4 Operating cash flows related to finance leases $ 0.2 $ 0.3 Financing cash flows related to finance leases $ 3.1 $ 3.8 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 35.1 $ 81.7 Finance leases $ 0.3 $ 5.2 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 28, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date: ā¢ Level 1: Inputs that are based upon quoted prices in active markets for identical assets or liabilities. ā¢ Level 2: Inputs, other than quoted prices included within Level 1, which are observable either directly or indirectly. ā¢ Level 3: Unobservable inputs where there is little or no market activity for the asset or liability. These inputs reflect management's best estimate of what market participants would use to price the assets or liabilities at the measurement date. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities approximate fair value because of the short-term nature of those instruments. In November 2020, the Company entered into an agreement which grants the owner a right during fiscal years 2023 and 2024 to cause the Company to acquire certain assets (the "Put Option") for a price based on a pre-defined formula. The carrying value of this Put Option is reported at fair value each reporting period. The Company measured the fair value of the Put Option using a Monte Carlo simulation. Key assumptions used in the valuation include discount rate, volume volatility, risk-free interest rate, cash flow projections and other details specific to the Put Option. The estimated fair value of the Put Option was zero at both March 28, 2021 and December 27, 2020 and was categorized within Level 3 of the fair value hierarchy. See Note 5 - Debt for fair value of debt. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 28, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company is and may from time to time become 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. 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. The Company accrues 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 āOther accrued expensesā 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 the Company's operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on the Company's financial condition, results of operations or cash flows. Legal fees are expensed as incurred. Pyrite Canyon In the fourth quarter of fiscal 2020, the Companyās wholly owned subsidiary, Insurance Auto Auctions, Inc. (hereafter āIAAIā), received a letter from the California Department of Toxic Substances Control (the āDTSCā) styled āDraft Imminent and Substantial Endangerment Determination and Consent Orderā (the āDraft Orderā) in which the DTSC states that IAAI, along with nine other respondents named in the Draft Order, has been named as a potential responsible party for the release of hazardous substances at the former Universal Propulsion Company site (the āFormer UPCo Siteā). The Draft Order states that the Former UPCo Site has been identified as contributing to the Pyrite Canyon Plume by the U.S. Environmental Protection Agency and prescribes initial steps and a schedule for responding to the release of hazardous substances at the Former UPCo Site. The Draft Order further states that IAAI has been identified as a potential responsible party because it is either the company or the successor of a company responsible for a release of hazardous substances at the Former UPCo Site. The Draft Order is currently unsigned and has not been issued by DTSC. On January 26, 2021, DTSC hosted an informational teleconference for the respondents named in the Draft Order. At the meeting, DTSC described the background and current status at the Former UPCo Site, but did not provide any information related to possible response actions, associated cost estimates or financial liability determinations. DTSC directed the Respondents to provide comments upon the Draft Order by March 1, 2021. DTSC subsequently extended the response deadline to April 30, 2021 pursuant to respondent requests. On March 30, 2021, IAAI provided DTSC with its response to the Draft Order. The Company does not believe that IAAI should bear any financial liability for actions taken pursuant to the Draft Order because it does not believe that IAAI is the company or a successor of a company responsible for a release of hazardous substances at the Former UPCo Site. IAAI currently leases 50 gross acres of the Former UPCo Site, having commenced a sublease at the location on or about March 1, 2016. At all times since, IAAI has used the site for vehicle storage and general operations. The most significant contaminants at the Former UPCo Site, and the Pyrite Canyon Plume are perchlorate, NDMA and PCBs. These contaminants pre-date IAAIās occupancy and operations at the Former UPCo Site and are inconsistent with any chemicals stored at the location or used in its operations. IAAI has tendered this matter to its landlord pursuant to indemnity provisions in its sublease, and to its environmental insurance carrier. IAAI's landlord has responded by tendering its own indemnification demand to IAAI, and IAAI has notified its environmental insurance carrier of the same. At this time, the Company does not have adequate information to determine IAAIās liability, if any, for contamination at the Former UPCo Site. Lower Duwamish Waterway Since June 2004, IAAI operated a branch on property it leased in Tukwila, Washington just south of Seattle. The property is located adjacent to a Superfund site known as the Lower Duwamish Waterway Superfund Site ("LDW Site"). The LDW Site had been designated a Superfund site in 2001, three years prior to IAAIās tenancy. On March 25, 2008, the United States Environmental Protection Agency (the "EPA") issued IAAI a General Notice of Potential Liability, or "General Notice," pursuant to Section 107(a), and a Request for Information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") related to the LDW Site. On November 7, 2012, the EPA issued IAAI a Second General Notice of Potential Liability (the "Second General Notice") for the LDW Site. The EPA's website indicates that the EPA has issued general notice letters to approximately 116 entities, and has issued Section 104(e) Requests to more than 300 entities related to the LDW Site. In the General Notice and Second General Notice, the EPA informed IAAI that the EPA believed IAAI may be a Potentially Responsible Party ("PRP"), but the EPA did not specify the factual basis for this assertion. At this time, the EPA still has not specified the factual basis for this assertion and has not demanded that IAAI pay any funds or take any action apart from responding to the Section 104(e) Information Request. Four PRPs, The Boeing Company, the City of Seattle, the Port of Seattle and King County - the Lower Duwamish Waterway Group ("LDWG"), have funded a remedial investigation and feasibility study related to the cleanup of the LDW Site. In December 2014, the EPA issued a Record of Decision ("ROD"), detailing the final cleanup plan for the LDW Site. The ROD estimated the cost of cleanup to be $342 million, with the plan involving dredging of 105 acres, capping 24 acres, and enhanced natural recovery of 48 acres. The estimated length of the cleanup was 17 years, including 7 years of active remediation, and 10 years of monitored natural recovery. IAAI is aware that certain authorities may bring natural resource damage claims against PRPs. On February 11, 2016, IAAI received a Notice of Intent letter from the United States National Oceanic and Atmospheric Administration informing IAAI that the Elliott Bay Trustee Council were beginning to conduct an injury assessment for natural resource damages in the LDW. The Notice of Intent indicated that the decision of the trustees to proceed with this natural resources injury assessment followed a pre-assessment screen performed by the trustees. Shortly thereafter, in a letter dated August 16, 2016, EPA issued a status update to the PRPs at the LDW Site. The letter stated that EPA expected the bulk of the pre-remedial design work currently being performed by the LDWG to be completed by the beginning of 2018, with the Remedial Design/Remedial Action ("RD/RA") phase to follow. The EPA previously anticipated that the pre-design work would be completed sometime during 2018, and the Company is not aware of any further information regarding that schedule. Accordingly, the Company is unable to predict when RD/RA negotiations with all PRPs might begin. In addition, the Washington State Department of Ecology ("Ecology") is working with the EPA in relation to the LDW Site, primarily to investigate and address sources of potential contamination contributing to the LDW Site. In 2007, IAA installed a stormwater capture and filtration system designed to treat sources of potential contamination before discharge to the LDW Site. The immediate-past property owner, the former property owner and IAA have had discussions with Ecology concerning possible source control measures, including an investigation of the water and soils entering the stormwater system, an analysis of the source of contamination identified within the system, if any, and possible repairs and upgrades to the stormwater system if required. As of May 31, 2020, IAAI ceased all operations at the site and terminated its remaining lease of the property in June 2020. Accordingly, IAAI submitted a Notice of Termination of its stormwater permit to Ecology, discontinuing IAAās ongoing obligations around the stormwater system maintenance and any additional source control measures. At this time, the Company has not received any further notices from the EPA and still does not have adequate information to determine IAAI's liability, if any, for contamination at this site, or to estimate the Company's loss as a result of this potential liability which might have been incurred during IAAIās occupancy. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 28, 2021 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The Company has two operating segments: United States and International. The Company's two operating segments represent its two reportable segments. These segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results. Intercompany income (expense) related to charges for services provided by the United States segment to the International segment are based on the benefits received. Such services are related to technology and other business support services. Financial information regarding the Company's reportable segments is set forth below as of and for the three months ended March 28, 2021 (in millions) : Three Months Ended March 28, 2021 United States International Total Revenues: Service revenues $ 332.4 $ 28.0 $ 360.4 Vehicle sales 25.9 37.2 63.1 Total revenues 358.3 65.2 423.5 Operating expenses: Cost of services* 178.1 18.3 196.4 Cost of vehicle sales* 21.0 33.4 54.4 Selling, general and administrative 40.5 2.9 43.4 Depreciation and amortization 17.9 1.9 19.8 Total operating expenses 257.5 56.5 314.0 Operating profit 100.8 8.7 109.5 Interest expense, net 13.0 ā 13.0 Other income, net (0.2) (0.2) (0.4) Intercompany (income) expense (2.3) 2.3 ā Income before income taxes 90.3 6.6 96.9 Income taxes 22.7 1.7 24.4 Net income $ 67.6 $ 4.9 $ 72.5 Total assets $ 2,392.9 $ 232.9 $ 2,625.8 *Exclusive of depreciation and amortization Financial information regarding the Company's reportable segments is set forth below as of and for the three months ended March 29, 2020 (in millions) : Three Months Ended March 29, 2020 United States International Total Revenues: Service revenues 305.0 29.0 334.0 Vehicle sales 16.1 16.5 32.6 Total revenues 321.1 45.5 366.6 Operating expenses: Cost of services* 185.0 18.2 203.2 Cost of vehicle sales* 13.0 14.8 27.8 Selling, general and administrative 35.1 2.9 38.0 Depreciation and amortization 20.8 1.7 22.5 Total operating expenses 253.9 37.6 291.5 Operating profit 67.2 7.9 75.1 Interest expense, net 16.1 (0.1) 16.0 Other income, net (0.1) (0.6) (0.7) Income before income taxes 51.2 8.6 59.8 Income taxes 12.8 2.3 15.1 Net income $ 38.4 $ 6.3 $ 44.7 Total assets $ 2,036.4 $ 179.1 $ 2,215.5 *Exclusive of depreciation and amortization |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 28, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On April 30, 2021, the Company entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders from time to time party thereto (the āNew Credit Agreementā). The New Credit Agreement provides for, among other things: (i) a senior secured term loan in an aggregate principal amount of $650 million ("New Term Loan") and (ii) a senior secured revolving credit facility with revolving commitments in an aggregate principal amount of $525 million ("New Revolving Credit Facility" and, together with the New Term Loan, the āNew Credit Facilityā). Borrowing availability under the New Revolving Credit Facility is subject to no default or event of default under the New Credit Agreement having occurred at the time of borrowing. The proceeds of the New Credit Facility were used, along with cash on hand, to repay in full all outstanding borrowings under the Companyās Term Loan under its prior Credit Agreement. The prior Credit Agreement was terminated on April 30, 2021. Future borrowings under the New Revolving Credit Facility will be used for the Company's ongoing working capital needs and general corporate purposes. The New Credit Facility matures on April 30, 2026. Borrowings under the New Credit Agreement will bear interest (i) from April 30, 2021 until the date the Company delivers its compliance certificate for the quarter ended September 26, 2021, at a rate equal to either, (A) at the Companyās option, the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1.00% (the āBase Rateā) for base rate borrowings, or (B) one-month LIBOR for eurodollar borrowings, in each case, plus an applicable margin of 0.75% with respect to Base Rate borrowings and 1.75% with respect to eurodollar borrowings and (ii) at all other times, (A) the Base Rate or (B) LIBOR, in each case plus an applicable margin ranging from 0.375% to 1.25% with respect to Base Rate borrowings and 1.375% to 2.25% with respect to eurodollar borrowings, in each case, depending on the Companyās Consolidated Net Leverage Ratio (as defined in the New Credit Agreement). The New Credit Agreement contains additional procedures for transition to a benchmark rate other than one-month LIBOR for eurodollar borrowings. The unused amount of the New Revolving Credit Facility is subject to a commitment fee ranging from 0.175% and 0.30% depending on the Companyās Consolidated Net Leverage Ratio. As of May 4, 2021, no borrowings were outstanding under the New Revolving Credit Facility. The New Credit Agreement requires the Company to comply with certain financial covenants, including a requirement that the Companyās Consolidated Net Leverage Ratio not exceed 4:00 to 1:00 as of the last day of any fiscal quarter, subject to certain exceptions for qualifying material acquisitions. Consolidated Net Leverage Ratio is defined as the ratio of Consolidated Total Debt (as defined in the New Credit Agreement) to Consolidated EBITDA (as defined in the New Credit Agreement). The New Credit Agreement also contains other affirmative and negative covenants that are usual and customary for a senior secured credit agreement. The negative covenants include limitations on (i) the disposition of assets, (ii) mergers and acquisitions, (iii) the payment of future dividends, distributions and stock repurchases by the Company, (iv) restricted payments, (v) the incurrence of additional indebtedness, (vi) permitted acquisitions and investments and (vii) the incurrence of additional liens on property. The New Credit Agreement includes customary events of default. During the second quarter of fiscal 2021, the Company expects to write-off approximately $10.0 million of unamortized debt issuance costs relating to the prior Credit Facility which will be included within the interest expense line of the consolidated statements of income. |
Basis of Presentation and Nat_2
Basis of Presentation and Nature of Operations (Policies) | 3 Months Ended |
Mar. 28, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of PresentationThe 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. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our financial results for the periods presented. Financial results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended DecemberĀ 27, 2020 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2021. |
Use of Estimates | Use of Estimates The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP. 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 the Company's results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies. |
Reclassification | Reclassification "Revenues" reported in the consolidated statements of income and segment information footnote in the prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Service revenues" and "Vehicle sales" to conform to the current year's presentation. "Cost of services" reported in the consolidated statements of income and segment information footnote in the prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Cost of services" and "Cost of vehicle sales" to conform to the current year's presentation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued and Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes in various areas. The adoption of ASU 2019-12 on December 28, 2020 did not have any impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted The Company does not believe that any recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures. |
Stock-Based Compensation Plans
Stock-Based Compensation Plans (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Summary of stock-based compensation expense by type of award | The following table summarizes the Company's stock-based compensation expense by type of award granted under both the KAR plans and the 2019 OSIP (in millions) : Three Months Ended March 28, 2021 March 29, 2020 Performance-based Restricted Stock Units $ 0.4 $ 0.2 Restricted Stock Units and Awards 2.2 1.7 Stock Options 0.2 0.2 Total Stock-based Compensation Expense $ 2.8 $ 2.1 |
Schedule of granted stock-based awards | The following table summarizes the stock-based awards granted by the Company to certain employees and non-employee directors in accordance with the 2019 OSIP during the three months ended March 28, 2021: Three Months Ended March 28, 2021 Number of Awards Granted Weighted Average Grant Date Fair Value Performance-based Restricted Stock Units 75,185 $ 63.71 Restricted Stock Units 99,243 $ 62.35 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of computation of net income per share | The following table sets forth the computation of net income per share (in millions except per share amounts): Three Months Ended March 28, 2021 March 29, 2020 Net income $ 72.5 $ 44.7 Weighted average common shares outstanding 134.6 133.7 Effect of dilutive stock awards 0.7 1.3 Weighted average common shares outstanding and potential common shares 135.3 135.0 Net income per share Basic $ 0.54 $ 0.33 Diluted $ 0.54 $ 0.33 |
Schedule of anti-dilutive securities | The weighted number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of the following anti-dilutive securities and awards subject to performance conditions which have not been fully satisfied at the end of the respective reporting periods: Three Months Ended March 28, 2021 March 29, 2020 Anti-dilutive awards ā 0.3 Awards subject to performance conditions not fully satisfied 0.1 ā Total 0.1 0.3 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (in millions) : March 28, 2021 December 27, 2020 Term Loan $ 774.0 $ 774.0 Notes 500.0 500.0 Total debt 1,274.0 1,274.0 Unamortized debt issuance costs (20.9) (22.0) Current maturities of long-term debt (6.0) (4.0) Long-term debt $ 1,247.1 $ 1,248.0 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Receivables [Abstract] | |
Schedule of Accounts, Notes, Loans and Financing Receivable | Components of accounts receivable, net were as follows (in millions): March 28, 2021 December 27, 2020 Advanced charges receivable $ 253.3 $ 239.5 Trade accounts receivable 104.7 126.5 Other receivable 17.2 16.8 Accounts receivable, gross 375.2 382.8 Less: Allowance for credit losses (8.3) (8.0) Accounts receivable, net $ 366.9 $ 374.8 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Leases [Abstract] | |
Components of lease expense | The components of leases expense were as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Operating lease cost $ 35.8 $ 32.7 Finance lease cost: Amortization of right-of-use assets $ 3.3 $ 3.7 Interest on lease liabilities 0.2 0.2 Total finance lease cost $ 3.5 $ 3.9 |
Supplemental cash flow and balance sheet information related to leases | Supplemental cash flow information related to leases was as follows ( in millions ): Three Months Ended March 28, 2021 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 34.1 $ 31.4 Operating cash flows related to finance leases $ 0.2 $ 0.3 Financing cash flows related to finance leases $ 3.1 $ 3.8 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 35.1 $ 81.7 Finance leases $ 0.3 $ 5.2 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Segment Reporting [Abstract] | |
Schedule of financial information regarding the entity's reportable segments | Financial information regarding the Company's reportable segments is set forth below as of and for the three months ended March 28, 2021 (in millions) : Three Months Ended March 28, 2021 United States International Total Revenues: Service revenues $ 332.4 $ 28.0 $ 360.4 Vehicle sales 25.9 37.2 63.1 Total revenues 358.3 65.2 423.5 Operating expenses: Cost of services* 178.1 18.3 196.4 Cost of vehicle sales* 21.0 33.4 54.4 Selling, general and administrative 40.5 2.9 43.4 Depreciation and amortization 17.9 1.9 19.8 Total operating expenses 257.5 56.5 314.0 Operating profit 100.8 8.7 109.5 Interest expense, net 13.0 ā 13.0 Other income, net (0.2) (0.2) (0.4) Intercompany (income) expense (2.3) 2.3 ā Income before income taxes 90.3 6.6 96.9 Income taxes 22.7 1.7 24.4 Net income $ 67.6 $ 4.9 $ 72.5 Total assets $ 2,392.9 $ 232.9 $ 2,625.8 *Exclusive of depreciation and amortization Financial information regarding the Company's reportable segments is set forth below as of and for the three months ended March 29, 2020 (in millions) : Three Months Ended March 29, 2020 United States International Total Revenues: Service revenues 305.0 29.0 334.0 Vehicle sales 16.1 16.5 32.6 Total revenues 321.1 45.5 366.6 Operating expenses: Cost of services* 185.0 18.2 203.2 Cost of vehicle sales* 13.0 14.8 27.8 Selling, general and administrative 35.1 2.9 38.0 Depreciation and amortization 20.8 1.7 22.5 Total operating expenses 253.9 37.6 291.5 Operating profit 67.2 7.9 75.1 Interest expense, net 16.1 (0.1) 16.0 Other income, net (0.1) (0.6) (0.7) Income before income taxes 51.2 8.6 59.8 Income taxes 12.8 2.3 15.1 Net income $ 38.4 $ 6.3 $ 44.7 Total assets $ 2,036.4 $ 179.1 $ 2,215.5 *Exclusive of depreciation and amortization |
Basis of Presentation and Nat_3
Basis of Presentation and Nature of Operations - Narrative (Details) | 3 Months Ended |
Mar. 28, 2021segmentfacility | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of facilities | facility | 200 |
Number of reportable segments | segment | 2 |
Relationship with KAR and Rel_2
Relationship with KAR and Related Entities - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Affiliated Entity | ||
Related Party Transaction [Line Items] | ||
Cost of products and services obtained | $ 0.2 | $ 0.3 |
Stock-Based Compensation Plan_2
Stock-Based Compensation Plans - Narrative (Details) | 1 Months Ended | 3 Months Ended |
Feb. 29, 2020 | Mar. 28, 2021USD ($)installmentshares | |
Stock and Stock-Based Compensation Plans | ||
Aggregate awards granted limit, options (in shares) | 1,000,000 | |
Aggregate awards granted limit, restricted shares (in shares) | 500,000 | |
Cash-based award limit | $ | $ 5,000,000 | |
Cash fees received limit | $ | $ 750,000 | |
Restricted Stock Units | ||
Stock and Stock-Based Compensation Plans | ||
Vesting period | 2 years | |
Number of annual installments | installment | 3 | |
Performance-based Restricted Stock Units | ||
Stock and Stock-Based Compensation Plans | ||
Vesting period | 3 years | |
2019 OSIP | ||
Stock and Stock-Based Compensation Plans | ||
Number of common shares reserved and available for awards (in shares) | 4,662,798 |
Stock-Based Compensation Plan_3
Stock-Based Compensation Plans - Summary of Stock-Based Compensation Expense by Type of Award (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Stock and Stock-Based Compensation Plans | ||
Total Stock-based Compensation Expense | $ 2.8 | $ 2.1 |
Performance-based Restricted Stock Units | ||
Stock and Stock-Based Compensation Plans | ||
Total Stock-based Compensation Expense | 0.4 | 0.2 |
Restricted Stock Units and Awards | ||
Stock and Stock-Based Compensation Plans | ||
Total Stock-based Compensation Expense | 2.2 | 1.7 |
Stock Options | ||
Stock and Stock-Based Compensation Plans | ||
Total Stock-based Compensation Expense | $ 0.2 | $ 0.2 |
Stock-Based Compensation Plan_4
Stock-Based Compensation Plans - Schedule of Granted Stock-Based Awards (Details) | 3 Months Ended |
Mar. 28, 2021$ / sharesshares | |
Performance-based Restricted Stock Units | |
Stock and Stock-Based Compensation Plans | |
Number of Awards Granted (in shares) | shares | 75,185 |
Weighted Average Grant Date Fair Value (in dollars per share) | $ / shares | $ 63.71 |
Restricted Stock Units | |
Stock and Stock-Based Compensation Plans | |
Number of Awards Granted (in shares) | shares | 99,243 |
Weighted Average Grant Date Fair Value (in dollars per share) | $ / shares | $ 62.35 |
Net Income Per Share - Computat
Net Income Per Share - Computation of Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Net income | $ 72.5 | $ 44.7 |
Shares outstanding | ||
Weighted average common shares outstanding (in shares) | 134.6 | 133.7 |
Effect of dilutive stock awards (in shares) | 0.7 | 1.3 |
Weighted average common shares outstanding and potential common shares (in shares) | 135.3 | 135 |
Net income per share | ||
Basic (in dollars per share) | $ 0.54 | $ 0.33 |
Diluted (in dollars per share) | $ 0.54 | $ 0.33 |
Net Income Per Share - Anti-dil
Net Income Per Share - Anti-dilutive Securities (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive awards (in shares) | 0.1 | 0.3 |
Anti-dilutive awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive awards (in shares) | 0 | 0.3 |
Awards subject to performance conditions not fully satisfied | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive awards (in shares) | 0.1 | 0 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Millions | Mar. 28, 2021 | Dec. 27, 2020 |
Long-Term Debt | ||
Total debt | $ 1,274 | $ 1,274 |
Unamortized debt issuance costs | (20.9) | (22) |
Current maturities of long-term debt | (6) | (4) |
Long-term debt | 1,247.1 | 1,248 |
Term Loan | ||
Long-Term Debt | ||
Total debt | 774 | 774 |
Notes | ||
Long-Term Debt | ||
Total debt | $ 500 | $ 500 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) | Jul. 07, 2020CAD ($) | Jun. 28, 2019USD ($) | Mar. 28, 2021USD ($) | Mar. 28, 2021CAD ($) | Dec. 27, 2020USD ($) | May 01, 2020USD ($) | Jun. 06, 2019USD ($) |
Long-Term Debt | |||||||
Outstanding letters of credit | $ 6,100,000 | $ 6,100,000 | |||||
Estimated fair value of long-term debt | $ 1,293,100,000 | $ 1,302,600,000 | |||||
Credit Agreement | |||||||
Long-Term Debt | |||||||
Net leverage ratio | 3.50 | ||||||
Notes | Senior Notes | |||||||
Long-Term Debt | |||||||
Aggregate principal amount, senior notes | $ 500,000,000 | ||||||
Senior notes stated interest rate, percentage | 5.50% | ||||||
Secured Debt | Term Loan Facility | |||||||
Long-Term Debt | |||||||
Credit facility, term | 7 years | ||||||
Aggregate principal amount, line of credit | $ 800,000,000 | ||||||
Secured Debt | Term Loan Facility | Base Rate | |||||||
Long-Term Debt | |||||||
Interest rate, per annum | 2.40% | 2.40% | 2.40% | ||||
Revolving Credit Facility | Revolving Credit Facility | |||||||
Long-Term Debt | |||||||
Credit facility, term | 5 years | ||||||
Aggregate principal amount, line of credit | $ 225,000,000 | ||||||
Sub-limit for issuance of letters of credit | $ 50,000,000 | ||||||
Sub-limit for swing line loans | 50,000,000 | ||||||
Amount outstanding | $ 0 | ||||||
Revolving Credit Facility | Credit Agreement Amendment | |||||||
Long-Term Debt | |||||||
Aggregate principal amount, line of credit | 361,000,000 | ||||||
Increase in aggregate principal amount | $ 136,000,000 | ||||||
Revolving Credit Facility | Canadian Credit Facility | |||||||
Long-Term Debt | |||||||
Aggregate principal amount, line of credit | $ 10,000,000 | ||||||
Minimum working capital ratio | 1 | ||||||
Minimum fixed charge coverage ratio | 1.25 | ||||||
Revolving Credit Facility | Canadian Credit Facility | Bank of Montreal Prime Rate | |||||||
Long-Term Debt | |||||||
Interest rate | 1.00% | ||||||
Revolving Credit Facility | Canadian Credit Facility | Bankers Acceptance Rate | |||||||
Long-Term Debt | |||||||
Interest rate | 2.25% | ||||||
Revolving Credit Facility | Canadian Credit Facility | CDOR | |||||||
Long-Term Debt | |||||||
Interest rate | 2.25% |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Millions | Mar. 28, 2021 | Dec. 27, 2020 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | $ 375.2 | $ 382.8 |
Less: Allowance for credit losses | (8.3) | (8) |
Accounts receivable, net | 366.9 | 374.8 |
Advanced charges receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | 253.3 | 239.5 |
Trade accounts receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | 104.7 | 126.5 |
Other receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | $ 17.2 | $ 16.8 |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Leases [Abstract] | ||
Operating lease cost | $ 35.8 | $ 32.7 |
Finance lease cost: | ||
Amortization of right-of-use assets | 3.3 | 3.7 |
Interest on lease liabilities | 0.2 | 0.2 |
Total finance lease cost | $ 3.5 | $ 3.9 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow and Balance Sheet Information Related to Leases (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows related to operating leases | $ 34.1 | $ 31.4 |
Operating cash flows related to finance leases | 0.2 | 0.3 |
Financing cash flows related to finance leases | 3.1 | 3.8 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | 35.1 | 81.7 |
Finance leases | $ 0.3 | $ 5.2 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) $ in Millions | 1 Months Ended | |
Dec. 31, 2014USD ($)a | Dec. 27, 2020a | |
Loss Contingencies [Line Items] | ||
Area of leased land | 50 | |
Record of Decision | ||
Loss Contingencies [Line Items] | ||
Estimated cost of cleanup | $ | $ 342 | |
Area of land involving dredging (acres) | 105 | |
Area of land involving capping (acres) | 24 | |
Area of land involving enhanced natural recover (acres) | 48 | |
Total length of cleanup | 17 years | |
Active remediation | 7 years | |
Monitored natural recovery | 10 years |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | ||
Mar. 28, 2021USD ($)segment | Mar. 29, 2020USD ($) | Dec. 27, 2020USD ($) | |
Segment Reporting [Abstract] | |||
Number of operating segments | segment | 2 | ||
Number of reportable segments | segment | 2 | ||
Segment Information | |||
Revenues | $ 423.5 | $ 366.6 | |
Operating expenses: | |||
Selling, general and administrative | 43.4 | 38 | |
Depreciation and amortization | 19.8 | 22.5 | |
Total operating expenses | 314 | 291.5 | |
Operating profit | 109.5 | 75.1 | |
Interest expense, net | 13 | 16 | |
Other income, net | (0.4) | (0.7) | |
Intercompany (income) expense | 0 | ||
Income before income taxes | 96.9 | 59.8 | |
Income taxes | 24.4 | 15.1 | |
Net income | 72.5 | 44.7 | |
Total assets | 2,625.8 | 2,215.5 | $ 2,528.9 |
Service revenues | |||
Segment Information | |||
Revenues | 360.4 | 334 | |
Operating expenses: | |||
Cost of service and vehicle sales | 196.4 | 203.2 | |
Vehicle sales | |||
Segment Information | |||
Revenues | 63.1 | 32.6 | |
Operating expenses: | |||
Cost of service and vehicle sales | 54.4 | 27.8 | |
United States | |||
Segment Information | |||
Revenues | 358.3 | 321.1 | |
Operating expenses: | |||
Selling, general and administrative | 40.5 | 35.1 | |
Depreciation and amortization | 17.9 | 20.8 | |
Total operating expenses | 257.5 | 253.9 | |
Operating profit | 100.8 | 67.2 | |
Interest expense, net | 13 | 16.1 | |
Other income, net | (0.2) | (0.1) | |
Intercompany (income) expense | (2.3) | ||
Income before income taxes | 90.3 | 51.2 | |
Income taxes | 22.7 | 12.8 | |
Net income | 67.6 | 38.4 | |
Total assets | 2,392.9 | 2,036.4 | |
United States | Service revenues | |||
Segment Information | |||
Revenues | 332.4 | 305 | |
Operating expenses: | |||
Cost of service and vehicle sales | 178.1 | 185 | |
United States | Vehicle sales | |||
Segment Information | |||
Revenues | 25.9 | 16.1 | |
Operating expenses: | |||
Cost of service and vehicle sales | 21 | 13 | |
International | |||
Segment Information | |||
Revenues | 65.2 | 45.5 | |
Operating expenses: | |||
Selling, general and administrative | 2.9 | 2.9 | |
Depreciation and amortization | 1.9 | 1.7 | |
Total operating expenses | 56.5 | 37.6 | |
Operating profit | 8.7 | 7.9 | |
Interest expense, net | 0 | (0.1) | |
Other income, net | (0.2) | (0.6) | |
Intercompany (income) expense | 2.3 | ||
Income before income taxes | 6.6 | 8.6 | |
Income taxes | 1.7 | 2.3 | |
Net income | 4.9 | 6.3 | |
Total assets | 232.9 | 179.1 | |
International | Service revenues | |||
Segment Information | |||
Revenues | 28 | 29 | |
Operating expenses: | |||
Cost of service and vehicle sales | 18.3 | 18.2 | |
International | Vehicle sales | |||
Segment Information | |||
Revenues | 37.2 | 16.5 | |
Operating expenses: | |||
Cost of service and vehicle sales | $ 33.4 | $ 14.8 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Apr. 30, 2021 | Jun. 27, 2021 | Mar. 28, 2021 | Mar. 29, 2020 |
Subsequent Event [Line Items] | ||||
Amortization of debt issuance costs | $ 1,100,000 | $ 1,000,000 | ||
Forecast | ||||
Subsequent Event [Line Items] | ||||
Amortization of debt issuance costs | $ 10,000,000 | |||
Subsequent Event | New Credit Agreement | Minimum | New Revolving Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Commitment fee | 0.175% | |||
Subsequent Event | New Credit Agreement | Maximum | New Revolving Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Commitment fee | 0.30% | |||
Subsequent Event | New Credit Agreement | Federal Funds Rate | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 0.50% | |||
Subsequent Event | New Credit Agreement | LIBOR | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 1.00% | |||
Subsequent Event | New Credit Agreement | Base Rate | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 0.75% | |||
Subsequent Event | New Credit Agreement | Base Rate | Minimum | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 0.375% | |||
Subsequent Event | New Credit Agreement | Base Rate | Maximum | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 1.25% | |||
Subsequent Event | New Credit Agreement | Eurodollar | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 1.75% | |||
Subsequent Event | New Credit Agreement | Eurodollar | Minimum | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 1.375% | |||
Subsequent Event | New Credit Agreement | Eurodollar | Maximum | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 2.25% | |||
Subsequent Event | New Credit Agreement | JPMORGAN CHASE BANK N.A. | New Term Loan | ||||
Subsequent Event [Line Items] | ||||
Aggregate principal amount, line of credit | $ 650,000,000 | |||
Subsequent Event | New Credit Agreement | JPMORGAN CHASE BANK N.A. | New Revolving Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Aggregate principal amount, line of credit | $ 525,000,000 |