KAR AUCTION SERVICES, INC., 10-Q filed on 11/5/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2013
Oct. 31, 2013
Document and Entity Information
 
 
Entity Registrant Name
KAR Auction Services, Inc. 
 
Entity Central Index Key
0001395942 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2013 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
138,830,992 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Operating revenues
 
 
 
 
ADESA Auction Services
$ 275.4 
$ 257.0 
$ 844.3 
$ 791.4 
IAA Salvage Services
198.8 
167.4 
623.2 
534.1 
AFC
59.5 
50.5 
165.2 
144.2 
Total operating revenues
533.7 
474.9 
1,632.7 
1,469.7 
Operating expenses
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
296.2 
264.1 
926.5 
796.7 
Selling, general and administrative
120.3 
102.3 
333.3 
319.9 
Depreciation and amortization
49.6 
46.8 
145.9 
143.4 
Total operating expenses
466.1 
413.2 
1,405.7 
1,260.0 
Operating profit
67.6 
61.7 
227.0 
209.7 
Interest expense
26.0 
29.9 
79.3 
89.8 
Other income, net
(0.8)
(1.2)
(2.5)
(1.6)
Loss on modification/extinguishment of debt
0 
0 
5.4 
0 
Income before income taxes
42.4 
33.0 
144.8 
121.5 
Income taxes
19.6 
13.8 
59.5 
52.4 
Net income
$ 22.8 
$ 19.2 
$ 85.3 
$ 69.1 
Net income per share
 
 
 
 
Basic (in dollars per share)
$ 0.16 
$ 0.14 
$ 0.62 
$ 0.51 
Diluted (in dollars per share)
$ 0.16 
$ 0.14 
$ 0.61 
$ 0.50 
Dividends declared per common share (in dollars per share)
$ 0.19 
$ 0 
$ 0.57 
$ 0 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Net income
$ 22.8 
$ 19.2 
$ 85.3 
$ 69.1 
Other comprehensive income (loss), net of tax
 
 
 
 
Foreign currency translation gain (loss)
4.6 
8.7 
(9.7)
9.8 
Unrealized gain (loss) on interest rate derivatives, net of tax of $0 for the three months ended September 30, 2013 and 2012, and $(0.1) and $0.2 for the nine months ended September 30, 2013 and 2012
0.1 
0 
0.2 
(0.4)
Total other comprehensive income (loss), net of tax
4.7 
8.7 
(9.5)
9.4 
Comprehensive income
$ 27.5 
$ 27.9 
$ 75.8 
$ 78.5 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
Unrealized gain (loss) on interest rate derivatives, tax
$ 0 
$ 0 
$ (0.1)
$ 0.2 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Current assets
 
 
Cash and cash equivalents
$ 196.0 
$ 108.7 
Restricted cash
9.1 
11.9 
Trade receivables, net of allowances of $4.3 and $5.3
385.4 
342.4 
Finance receivables, net of allowances $8.0 and $8.0
1,066.0 
996.2 
Deferred income tax assets
35.2 
35.4 
Other current assets
91.0 
86.8 
Total current assets
1,782.7 
1,581.4 
Other assets
 
 
Goodwill
1,702.2 
1,679.6 
Customer relationships, net of accumulated amortization of $461.3 and $405.3
582.5 
618.9 
Other intangible assets, net of accumulated amortization of $207.5 and $168.9
304.4 
305.2 
Unamortized debt issuance costs
41.1 
24.9 
Other assets
9.9 
11.6 
Total other assets
2,640.1 
2,640.2 
Property and equipment, net of accumulated depreciation of $459.3 and $415.5
699.2 
700.7 
Total assets
5,122.0 
4,922.3 
Current liabilities
 
 
Accounts payable
490.3 
388.4 
Accrued employee benefits and compensation expenses
61.4 
63.5 
Accrued interest
0.3 
1.6 
Other accrued expenses
98.1 
75.8 
Income taxes payable
0.8 
0.6 
Dividends payable
26.3 
0 
Obligations collateralized by finance receivables
742.4 
713.3 
Current maturities of long-term debt
0 
43.7 
Total current liabilities
1,419.6 
1,286.9 
Non-current liabilities
 
 
Long-term debt
1,770.3 
1,774.6 
Deferred income tax liabilities
343.0 
318.6 
Other liabilities
105.2 
98.5 
Total non-current liabilities
2,218.5 
2,191.7 
Commitments and contingencies (Note 8)
   
   
Stockholders' equity
 
 
Preferred stock, $0.01 par value: Authorized shares: 100,000,000 Issued shares: none
0 
0 
Common stock, $0.01 par value: Authorized shares: 400,000,000 Issued and outstanding shares: September 30, 2013: 138,625,706 December 31, 2012: 136,657,645
1.4 
1.4 
Additional paid-in capital
1,476.8 
1,433.9 
Accumulated deficit
(19.9)
(26.7)
Accumulated other comprehensive income
25.6 
35.1 
Total stockholders' equity
1,483.9 
1,443.7 
Total liabilities and stockholders' equity
$ 5,122.0 
$ 4,922.3 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Trade receivables, allowances (in dollars)
$ 4.3 
$ 5.3 
Finance receivables, allowances (in dollars)
8.0 
8.0 
Customer relationships, accumulated amortization (in dollars)
461.3 
405.3 
Other intangible assets, accumulated amortization (in dollars)
207.5 
168.9 
Property and equipment, accumulated depreciation (in dollars)
$ 459.3 
$ 415.5 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, Authorized shares
100,000,000 
100,000,000 
Preferred stock, Issued shares
0 
0 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, Authorized shares
400,000,000 
400,000,000 
Common stock, Issued shares
138,625,706 
136,657,645 
Common stock, outstanding shares
138,625,706 
136,657,645 
Consolidated Statements of Stockholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income
Balance at Dec. 31, 2012
$ 1,443.7 
$ 1.4 
$ 1,433.9 
$ (26.7)
$ 35.1 
Balance (in shares) at Dec. 31, 2012
136,657,645 
136,700,000 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net income
85.3 
 
 
85.3 
 
Other comprehensive loss, net of tax
(9.5)
 
 
 
(9.5)
Issuance of common stock under stock plans
20.8 
 
20.8 
 
 
Issuance of common stock under stock plans (in shares)
 
1,900,000 
 
 
 
Stock-based compensation expense
16.8 
 
16.8 
 
 
Excess tax benefits from stock-based compensation
5.3 
 
5.3 
 
 
Cash dividends declared to stockholders ($0.57 per share)
(78.5)
 
 
(78.5)
 
Balance at Sep. 30, 2013
$ 1,483.9 
$ 1.4 
$ 1,476.8 
$ (19.9)
$ 25.6 
Balance (in shares) at Sep. 30, 2013
138,625,706 
138,600,000 
 
 
 
Consolidated Statements of Stockholders' Equity (Parenthetical)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Stockholders' Equity [Abstract]
 
 
 
 
Cash dividends declared to stockholders (in dollars per share)
$ 0.19 
$ 0 
$ 0.57 
$ 0 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Operating activities
 
 
Net income
$ 85.3 
$ 69.1 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
145.9 
143.4 
Provision for credit losses
7.3 
6.8 
Deferred income taxes
11.3 
(18.6)
Amortization of debt issuance costs
8.0 
5.2 
Stock-based compensation
16.8 
20.9 
Contingent consideration adjustment
0 
1.0 
(Gain) loss on disposal of fixed assets
0.2 
(1.7)
Loss on modification/extinguishment of debt
5.4 
0 
Other non-cash, net
11.1 
7.6 
Changes in operating assets and liabilities, net of acquisitions:
 
 
Trade receivables and other assets
(21.2)
(95.3)
Accounts payable and accrued expenses
48.3 
99.6 
Net cash provided by operating activities
318.4 
238.0 
Investing activities
 
 
Net increase in finance receivables held for investment
(79.6)
(57.4)
Acquisition of businesses, net of cash acquired
(28.8)
(0.5)
Purchases of property, equipment and computer software
(75.3)
(60.8)
Proceeds from the sale of property and equipment
0.2 
5.7 
Decrease in restricted cash
2.8 
0.5 
Net cash used by investing activities
(180.7)
(112.5)
Financing activities
 
 
Net increase in book overdrafts
38.6 
10.8 
Net decrease in borrowings from lines of credit
0 
(68.9)
Net increase in obligations collateralized by finance receivables
31.8 
20.6 
Proceeds from long-term debt
188.0 
0 
Payments for debt issuance costs/amendments
(26.0)
0 
Payments on long-term debt
(49.2)
(12.8)
Payment for early extinguishment of debt
(188.4)
0 
Payments on capital leases
(11.4)
(10.6)
Payments of contingent consideration and deferred acquisition costs
(1.6)
(4.2)
Initial net investment for interest rate caps
(2.2)
0 
Issuance of common stock under stock plans
20.8 
2.8 
Excess tax benefits from stock-based compensation
5.3 
0 
Dividends paid to stockholders
(52.2)
0 
Net cash used by financing activities
(46.5)
(62.3)
Effect of exchange rate changes on cash
(3.9)
3.1 
Net increase in cash and cash equivalents
87.3 
66.3 
Cash and cash equivalents at beginning of period
108.7 
97.4 
Cash and cash equivalents at end of period
196.0 
163.7 
Cash paid for interest
68.7 
80.9 
Cash paid for taxes, net of refunds
$ 36.6 
$ 44.5 
Basis of Presentation and Nature of Operations
Basis of Presentation and Nature of Operations
Note 1—Basis of Presentation and Nature of Operations
Defined Terms
Unless otherwise indicated or unless the context otherwise requires, the following terms used herein shall have the following meanings:
•
"we," "us," "our" and "the Company" refer, collectively, to KAR Auction Services, Inc. and all of its subsidiaries;
•
"ADESA" refers, 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");
•
"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.;
•
"Axle LLC" refers to Axle Holdings II, LLC, which is owned by affiliates of certain of the Equity Sponsors (Kelso & Company and Parthenon), certain members or former members of IAA management and certain co-investors in connection with the acquisition of IAA in 2005. Axle LLC is the former ultimate parent company of IAA and is a holder of common equity interests in KAR LLC;
•
"Credit Agreement" refers to the Credit Agreement, dated May 19, 2011, among KAR Auction Services, as the borrower, the several banks and other financial institutions or entities from time to time parties thereto and the administrative agent, as amended on November 29, 2012 and March 12, 2013;
•
"Credit Facility" refers to the six year senior secured term loan facility ("Term Loan B") and the $250 million, five year senior secured revolving credit facility, the terms of which are set forth in the Credit Agreement;
•
"Equity Sponsors" refers, collectively, to Kelso Investment Associates VII, L.P., GS Capital Partners VI, L.P., ValueAct Capital Master Fund, L.P. and Parthenon Investors II, L.P.;
•
"IAA" refers, collectively, to Insurance Auto Auctions, Inc., a wholly owned subsidiary of KAR Auction Services, and Insurance Auto Auctions, Inc.'s subsidiaries;
•
"KAR Auction Services" refers to KAR Auction Services, Inc. and not to its subsidiaries; and
•
"KAR LLC" refers to KAR Holdings II, LLC, which is owned by affiliates of the Equity Sponsors, other equity co-investors and management of the Company.
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, or 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 generally accepted accounting principles 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates.
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, 2012. The 2012 year-end consolidated balance sheet data included in this Form 10-Q was derived from the audited financial statements referenced above, but does not include all disclosures required by U.S. GAAP for annual financial statements.
Business and Nature of Operations
As of September 30, 2013, we have a network of 66 ADESA whole car auction sites and 163 IAA salvage vehicle auction sites; in addition, we offer online auctions for both whole car and salvage vehicles. Our auctions facilitate the sale of used and salvage vehicles through physical, online or hybrid auctions, which permit internet buyers to participate in physical auctions. ADESA Auctions and IAA are leading, national providers of wholesale and salvage vehicle auctions and related vehicle remarketing services for the automotive industry in North America. ADESA's online service offerings include customized private label solutions powered with software developed by our wholly owned subsidiary, OPENLANE, that allow our institutional consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the internet prior to arrival at the physical auction. Remarketing services include a variety of activities designed to transfer used and salvage vehicles between sellers and buyers throughout the vehicle life cycle. ADESA Auctions and IAA facilitate 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 to vehicles sold at the auctions. Generally fees are earned from the seller and buyer on each successful auction transaction in addition to fees earned for ancillary services.
ADESA has the second largest used vehicle auction network in North America, based upon the number of used vehicles sold through auctions annually, and also provides services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and recovery services. ADESA is able to serve the diverse and multi-faceted needs of its customers through the wide range of services offered.
IAA is one of the leading providers of salvage vehicle auctions and related services in North America. The salvage auctions facilitate the remarketing of damaged vehicles that are designated as total losses by insurance companies, recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made, purchased vehicles and older model vehicles donated to charity or sold by dealers in salvage auctions. The salvage auction business specializes in providing services such as inbound transportation logistics, inspections, evaluations, salvage recovery services, titling and settlement administrative services.
AFC is a leading provider of floorplan financing to independent used vehicle dealers and this financing is provided through 105 locations throughout the United States and Canada as of September 30, 2013. Floorplan financing supports independent used vehicle dealers in North America who purchase vehicles at ADESA, IAA, other used vehicle and salvage auctions and non-auction purchases.
Acquisitions
Acquisitions
Note 2—Acquisitions
In June 2013, the Company purchased the stock of PWI Holdings, Inc., whose subsidiary, Preferred Warranties, Inc., markets vehicle service contracts through a network of independent used vehicle dealers. The acquisition is expected to strengthen KAR's product offerings to independent used vehicle dealers. The assets of PWI Holdings, Inc. included accounts receivable, software and customer relationships related to the business. Financial results for this acquisition have been included in our consolidated financial statements from the date of acquisition.    
The purchase price of PWI Holdings, Inc., net of cash, was approximately $27.3 million. The acquired assets and liabilities were recorded based upon fair values, including $26.9 million assigned to intangible assets, representing the fair value of acquired customer relationships, tradenames and software, which are being amortized over their respective useful lives. The acquisition resulted in goodwill of $22.7 million which is not expected to be deductible for tax purposes. The goodwill is recorded in the AFC reportable segment. The financial impact of this acquisition was immaterial to the Company's statement of income for the three and nine months ended September 30, 2013.
Stock-Based Compensation Plans
Stock-Based Compensation Plans
Note 3—Stock-Based Compensation Plans
We adopted the KAR Auction Services, Inc. 2009 Omnibus and Stock Incentive Plan ("Omnibus Plan") in December 2009. The Omnibus Plan is intended to provide equity or cash based awards to our employees. Through the first nine months of 2013, we granted approximately 0.5 million service options with a weighted average exercise price of $23.24 per share under the Omnibus Plan. The service options have a 10 year life and generally vest in four equal annual installments, commencing on the first anniversary of the grant date. The weighted average fair value of the service options granted through the first nine months of 2013 was $4.86 per share. The fair value of service options granted during 2013 was estimated on the date of grant using the Black-Scholes option pricing model with an expected life of 4 years, an expected volatility of 35%, a weighted average annual rate of quarterly dividends of 3.3% and a weighted average risk free interest rate of 0.73%.
Our stock-based compensation expense includes expense associated with KAR Auction Services, Inc. service and exit option awards, KAR LLC profit interests and Axle LLC profit interests. We have classified the KAR Auction Services, Inc. service and exit options as equity awards. We have classified the KAR LLC and Axle LLC profit interests as liability awards. The main difference between a liability-classified award and an equity-classified award is that liability-classified awards are remeasured each reporting period at fair value. The following table summarizes our stock-based compensation expense by type of award (in millions):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Service options
$
0.8

 
$
0.7

 
$
2.2

 
$
1.9

Exit options
0.3

 
1.9

 
2.3

 
7.0

KAR LLC profit interests
3.3

 
2.7

 
3.8

 
6.4

Axle LLC profit interests
8.0

 
2.3

 
8.5

 
5.6

Total
$
12.4

 
$
7.6

 
$
16.8

 
$
20.9


For the three and nine months ended September 30, 2013, approximately $0.7 million of the KAR LLC profit interest expense and approximately $6.1 million of the Axle LLC profit interest expense related to value units. There is no income tax benefit recognized by us with respect to the KAR LLC and Axle LLC profit interests. The total income tax benefit recognized in the consolidated statement of income for options was approximately $0.4 million and $0.9 million for the three months ended September 30, 2013 and 2012, respectively, and $1.6 million and $3.1 million for the nine months ended September 30, 2013 and 2012, respectively.
On March 1, 2013, the board of directors approved amendments to the outstanding exit options that previously vested based on a 90-day average closing price of the Company's common stock being above a stated dollar amount. Generally, such vesting terms were amended to require that the average closing price over a period of 90 trading days be greater than a specified dollar amount to instead requiring that the closing price be greater than the specified dollar amount over a period of 20 consecutive trading days. As a result of this change, effective on March 1, 2013, approximately 1.4 million of such exit options became vested. The incremental expense related to the modification was immaterial.
In May 2013, the vesting criteria for the third 25% of the exit options originally granted under the Axle Holdings, Inc. Stock Incentive Plan was met and as such, an additional 25% of the outstanding exit options became exercisable. In August 2013, the vesting criteria for the final 25% of the exit options originally granted under the Axle Holdings, Inc. Stock Incentive Plan was met and as such, the final 25% of the outstanding exit options became exercisable.
In August 2013, the vesting criteria for the second 25% of the exit options granted under the KAR Auction Services, Inc. Stock Incentive Plan and the Omnibus Plan was met and as such, an additional 25% of the outstanding exit options became exercisable.
Net Income Per Share
Net Income Per Share
Note 4—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 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Net income
$
22.8

 
$
19.2

 
$
85.3

 
$
69.1

Weighted average common shares outstanding
138.3

 
136.5

 
137.5

 
136.4

Effect of dilutive stock options
3.0

 
2.7

 
2.9

 
2.4

Weighted average common shares outstanding and potential common shares
141.3

 
139.2

 
140.4

 
138.8

Net income per share
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.14

 
$
0.62

 
$
0.51

Diluted
$
0.16

 
$
0.14

 
$
0.61

 
$
0.50


Basic 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 our stock-based employee compensation program. The effect of stock options on net income per share—diluted is determined through the application of the treasury stock method, whereby 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. Stock options that would have an anti-dilutive effect on net income per diluted share are excluded from the calculations. Approximately 0.4 million options were excluded from the calculation of diluted net income per share for the three months ended September 30, 2012, and approximately 0.2 million and 0.8 million options were excluded from the calculation of diluted net income per share for the nine months ended September 30, 2013 and 2012, respectively. Total options outstanding at September 30, 2013 and 2012 were 7.8 million and 9.7 million, respectively.
Finance Receivables and Obligations Collateralized by Finance Receivables
Finance Receivables and Obligations Collateralized by Finance Receivables
Note 5—Finance Receivables and Obligations Collateralized by Finance Receivables
AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly owned, bankruptcy remote, consolidated, special purpose subsidiary ("AFC Funding Corporation"), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain eligible finance receivables subject to committed liquidity. AFC Funding Corporation had committed liquidity of $800 million for U.S. finance receivables at September 30, 2013.
In June 2013, AFC and AFC Funding Corporation entered into the Fifth Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement”).  The Receivables Purchase Agreement increased AFC Funding's U.S. committed liquidity from $650 million to $800 million and extended the facility's maturity date from June 30, 2014 to June 30, 2016. In addition, certain of the covenants and termination events in the Receivables Purchase Agreement that are tied to the performance of the finance receivables portfolio were modified. In the second quarter of 2013, we recorded a $0.7 million pretax charge primarily resulting from the write-off of unamortized securitization issuance costs associated with the amendment.
We also have an agreement for the securitization of Automotive Finance Canada, Inc.'s ("AFCI") receivables. In June 2013, AFCI entered into the Second Amended and Restated Receivables Purchase Agreement (the “Canadian Receivables Purchase Agreement”). The Canadian Receivables Purchase Agreement extended the facility's maturity date from June 30, 2014 to June 30, 2016. In addition, certain of the covenants and termination events in the Canadian Receivables Purchase Agreement that are tied to the performance of the finance receivables portfolio were modified. AFCI's committed liquidity is provided through a third party conduit (separate from the U.S. facility) and was C$100 million at September 30, 2013. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.
The following table presents quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due.
 
September 30, 2013
 
 
 
 
 
Principal Amount of:
 
 
 
 
 
Net Credit Losses
Three Months Ended
September 30, 2013
 
Net Credit Losses
Nine Months Ended
September 30, 2013
(in millions)
Receivables
 
Receivables
Delinquent
 
Floorplan receivables
$
1,065.6

 
$
4.5

 
$
1.7

 
$
6.3

Other loans
8.4

 
—

 
—

 
—

Total receivables managed
$
1,074.0

 
$
4.5

 
$
1.7

 
$
6.3



 
December 31, 2012
 
 
 
 
 
Principal Amount of:
 
 
 
 
 
Net Credit Losses
Three Months Ended
September 30, 2012
 
Net Credit Losses
Nine Months Ended
September 30, 2012
(in millions)
Receivables
 
Receivables
Delinquent
 
Floorplan receivables
$
996.2

 
$
3.8

 
$
0.9

 
$
5.4

Other loans
8.0

 
—

 
0.2

 
0.2

Total receivables managed
$
1,004.2

 
$
3.8

 
$
1.1

 
$
5.6


AFC's allowance for losses was $8.0 million at September 30, 2013 and December 31, 2012.
As of September 30, 2013 and December 31, 2012, $1,065.1 million and $996.0 million, respectively, of finance receivables and a cash reserve of 1 percent of the obligations collateralized by finance receivables served as security for the $742.4 million and $713.3 million of obligations collateralized by finance receivables at September 30, 2013 and December 31, 2012, respectively.
Proceeds from the revolving sale of receivables to the bank facilities are used to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility. At September 30, 2013, we were in compliance with the covenants in the securitization agreements.
Long-Term Debt
Long-Term Debt
Note 6—Long-Term Debt
Long-term debt consisted of the following (in millions):
 
Interest Rate
 
Maturity
 
September 30, 2013
 
December 31, 2012
Term Loan B
Adjusted LIBOR
+ 2.75
%
 
May 18, 2017
 
$
1,775.3

 
$
1,674.5

$250 million revolving credit facility
Adjusted LIBOR
+ 3.50
%
 
May 18, 2016
 
—

 
—

Floating rate senior notes
LIBOR
+ 4.00
%
 
 
 
—

 
150.0

Canadian line of credit
CAD Prime
+ 1.50
%
 
Repayable upon
demand
 
—

 
—

Total debt
 
 
 
 
 
1,775.3

 
1,824.5

Unamortized debt discount
 
 
 
 
 
(5.0
)
 
(6.2
)
Current portion of long-term debt
 
 
 
 
 
—

 
(43.7
)
Long-term debt
 
 
 
 
 
$
1,770.3

 
$
1,774.6


Credit Facilities
In March 2013, we entered into the Second Amendment to the Credit Agreement. The amendment increased Term Loan B $150.0 million to $1.8 billion and decreased the interest rate on Term Loan B to Adjusted LIBOR plus 2.75% from Adjusted LIBOR plus 3.75%. In addition, the adjusted LIBOR rate floor decreased to 1.0% from 1.25%. The interest rate on Term Loan B was 3.75% at September 30, 2013. For the nine months ended September 30, 2013, we recorded a $3.9 million pretax charge resulting from certain expenses related to the Credit Agreement amendment, as well as the write-off of certain unamortized debt issuance costs associated with the term loan. The additional $150.0 million in proceeds received from Term Loan B were used to redeem the floating rate senior notes due 2014 on April 3, 2013. In the second quarter of 2013, we recorded a $0.8 million pretax charge primarily resulting from the write-off of unamortized debt issuance costs associated with the floating rate senior notes.
Term Loan B is payable in quarterly installments equal to 0.25% of the aggregate principal amount as of the Second Amendment effective date, and commenced on March 31, 2013. The Credit Facility is subject to mandatory prepayments and reduction in an amount equal to (i) the net proceeds of certain debt offerings, asset sales and certain insurance recovery events; and (ii) for any fiscal year ending on or after December 31, 2011, any Excess Cash Flow, as defined in the Credit Agreement, on or before the 105th day following the end of the fiscal year. In April 2013, the Company made an excess cash flow payment of $39.4 million for the year ended December 31, 2012. In addition, in accordance with the terms of the Credit Agreement, 50% of the net cash proceeds from the sale-leaseback of certain technology and capital equipment were used to prepay $5.2 million of Term Loan B in the first nine months of 2013. The prepayments were credited to prepay in order of maturity the unpaid amounts due on the next eight scheduled quarterly installments of Term Loan B, and thereafter to the remaining scheduled quarterly installments of Term Loan B on a pro rata basis. As such, after the debt prepayments, there are no further quarterly installments due until June 30, 2015.
There were no borrowings on the revolving credit facility at September 30, 2013 or December 31, 2012. However, we had related outstanding letters of credit in the aggregate amount of $23.6 million at September 30, 2013 and December 31, 2012, respectively, which reduce the amount available for borrowings under the credit facility. As of September 30, 2013, we were in compliance with the covenants in the Credit Agreement.
Fair Value of Debt
As of September 30, 2013, the estimated fair value of our long-term debt amounted to $1,777.5 million. The estimates of fair value are based on broker-dealer quotes for our debt as of September 30, 2013. 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
Note 7—Derivatives
We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay. We use interest rate derivatives with the objective of managing exposure to interest rate movements, thereby reducing the effect of interest rate changes and the effect they could have on future cash flows. Currently, interest rate cap agreements are used to accomplish this objective. In August 2013, we purchased four interest rate caps for an aggregate amount of approximately $2.2 million with an aggregate notional amount of $1.2 billion to manage our exposure to interest rate movements on our variable rate Term Loan B credit facility when three-month LIBOR exceeds 1.0%. The interest rate cap agreements each had an effective date of August 16, 2013 and each mature on August 16, 2015. The unamortized portion of the $2.2 million investment is recorded in “Other assets” on the consolidated balance sheet and is being amortized over the remaining life of the interest rate caps to interest expense. We are exposed to credit loss in the event of non-performance by the counterparties; however, non-performance is not anticipated.
Accounting Standards Codification ("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. 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 Derivatives
 
 
 
September 30, 2013
 
December 31, 2012
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate caps
 
Other assets
 
$
1.4

 
Other assets
 
N/A

We have not designated any of the interest rate caps as hedges for accounting purposes. Accordingly, changes in the fair value of the interest rate caps are recognized as "Interest expense" in the consolidated statement of income. The following table presents the effect of the interest rate derivatives on our consolidated statements of income for the periods presented (in millions):
 
 
 
Location of Gain / (Loss) Recognized in Income on Derivative
 
Amount of Gain / (Loss)
Recognized in Income on Derivative
 
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Derivatives Not Designated as Hedging Instruments
 
 
2013
 
2012
 
2013
 
2012
Interest rate caps
 
Interest expense
 
$
(0.8
)
 
N/A
 
$
(0.8
)
 
N/A
Commitments and Contingencies
Commitments and Contingencies
Note 8—Commitments and Contingencies
We are involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business such as employment matters and dealer disputes. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies including litigation and environmental matters are included in "Other accrued expenses" at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. 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, 2012.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Note 9—Accumulated Other Comprehensive Income
Accumulated other comprehensive income consisted of the following (in millions):
 
September 30, 2013
 
December 31, 2012
Foreign currency translation gain
$
25.4

 
$
35.1

Unrealized loss on interest rate derivatives, net of tax
—

 
(0.2
)
Unrealized gain on postretirement benefit obligation, net of tax
0.2

 
0.2

Accumulated other comprehensive income
$
25.6

 
$
35.1

Fair Value Measurements
Fair Value Measurements
Note 10—Fair Value Measurements
We apply ASC 820, Fair Value Measurements and Disclosures, to our financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The standard establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels:
•
Level 1 - Quoted prices in active markets for identical assets or liabilities.

•
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities, such as models or other valuation methodologies.

•
Level 3 - Unobservable inputs that are based on our assumptions, are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect our own assumptions about how market participants would price the asset or liability.
The following tables summarize our financial assets measured at fair value on a recurring basis in accordance with ASC 820 (in millions):
Description
 
September 30, 2013
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 

Significant Other Observable Inputs
(Level 2)
 

Significant Unobservable Inputs
(Level 3)
   Interest rate caps
 
$
1.4

 
$
—

 
$
1.4

 
$
—

 
 
 
 
 
 
 
 
 

Interest Rate Caps - Under the interest rate cap agreements purchased in August 2013, we receive interest on a notional amount when three-month LIBOR exceeds 1.0%. The fair value of the interest rate caps is based on quoted market prices for similar instruments from commercial banks.
Related Party Transactions
Related Party Transactions
Note 11—Related Party Transactions
At September 30, 2013, affiliates of the Equity Sponsors, other equity co-investors and members of our management held approximately 20.3% of our outstanding common stock directly or indirectly through their investment in KAR LLC. Pursuant to a registration rights agreement entered into with the Equity Sponsors, KAR LLC caused us to file a registration statement (Registration No. 333-174038) under the Securities Act. In March 2013, June 2013, August 2013 and September 2013, pursuant to the registration statement, KAR LLC sold 14,950,000; 17,250,000; 17,250,000; and 13,800,000, respectively, of its shares in KAR Auction Services. We incurred expenses of approximately $1.2 million related to such sales and we received no proceeds from the sales. The expenses related to the sales were recorded to "Selling, general and administrative" in the consolidated statement of income.
Segment Information
Segment Information
Note 12—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 three operating segments: ADESA Auctions, IAA and AFC, which also serve as our reportable business segments. None of our operating segments have been aggregated in our segment reporting. These reportable business segments offer different services and have fundamental differences in their operations.
The holding company is maintained separately from the three reportable segments and includes expenses associated with the corporate office, such as salaries, benefits, and travel costs for the corporate management team, certain human resources, information technology and accounting costs, and certain insurance, treasury, legal and risk management costs. Holding company interest expense includes the interest expense incurred on the corporate debt structure. Intercompany charges relate primarily to interest on intercompany debt or receivables and certain administrative costs allocated by the holding company.
Financial information regarding our reportable segments is set forth below for the three months ended September 30, 2013 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
275.4

 
$
198.8

 
$
59.5

 
$
—

 
$
533.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
152.0

 
128.1

 
16.1

 
—

 
296.2

Selling, general and administrative
62.8

 
20.4

 
6.4

 
30.7

 
120.3

Depreciation and amortization          
22.6

 
18.5

 
7.2

 
1.3

 
49.6

Total operating expenses
237.4

 
167.0

 
29.7

 
32.0

 
466.1

Operating profit (loss)
38.0

 
31.8

 
29.8

 
(32.0
)
 
67.6

Interest expense
0.2

 
0.2

 
4.6

 
21.0

 
26.0

Other (income) expense, net
(0.6
)
 
(0.2
)
 
—

 
—

 
(0.8
)
Intercompany expense (income)
14.8

 
9.6

 
(5.6
)
 
(18.8
)
 
—

Income (loss) before income taxes
23.6

 
22.2

 
30.8

 
(34.2
)
 
42.4

Income taxes
9.1

 
8.4

 
12.0

 
(9.9
)
 
19.6

Net income (loss)
$
14.5

 
$
13.8

 
$
18.8

 
$
(24.3
)
 
$
22.8

Assets
$
2,328.7

 
$
1,180.0

 
$
1,531.4

 
$
81.9

 
$
5,122.0


Financial information regarding our reportable segments is set forth below for the three months ended September 30, 2012 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
257.0

 
$
167.4

 
$
50.5

 
$
—

 
$
474.9

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
147.2

 
106.0

 
10.9

 
—

 
264.1

Selling, general and administrative
61.6

 
14.8

 
5.0

 
20.9

 
102.3

Depreciation and amortization          
23.5

 
17.1

 
5.7

 
0.5

 
46.8

Total operating expenses
232.3

 
137.9

 
21.6

 
21.4

 
413.2

Operating profit (loss)
24.7

 
29.5

 
28.9

 
(21.4
)
 
61.7

Interest expense
0.2

 
0.3

 
3.8

 
25.6

 
29.9

Other (income) expense, net
(0.7
)
 
(0.2
)
 
—

 
(0.3
)
 
(1.2
)
Intercompany expense (income)
15.0

 
9.5

 
(4.6
)
 
(19.9
)
 
—

Income (loss) before income taxes
10.2

 
19.9

 
29.7

 
(26.8
)
 
33.0

Income taxes
4.6

 
7.7

 
10.9

 
(9.4
)
 
13.8

Net income (loss)
$
5.6

 
$
12.2

 
$
18.8

 
$
(17.4
)
 
$
19.2

Assets
$
2,402.1

 
$
1,164.5

 
$
1,323.8

 
$
35.6

 
$
4,926.0




Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2013 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
844.3

 
$
623.2

 
$
165.2

 
$
—

 
$
1,632.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
469.8

 
416.4

 
40.3

 
—

 
926.5

Selling, general and administrative
187.7

 
59.5

 
18.2

 
67.9

 
333.3

Depreciation and amortization          
66.8

 
55.4

 
20.3

 
3.4

 
145.9

Total operating expenses
724.3

 
531.3

 
78.8

 
71.3

 
1,405.7

Operating profit (loss)
120.0

 
91.9

 
86.4

 
(71.3
)
 
227.0

Interest expense
0.7

 
0.7

 
12.3

 
65.6

 
79.3

Other (income) expense, net
(2.0
)
 
(0.5
)
 
—

 
—

 
(2.5
)
Loss on modification/extinguishment of debt
—

 
—

 
0.7

 
4.7

 
5.4

Intercompany expense (income)
45.6

 
28.8

 
(15.2
)
 
(59.2
)
 
—

Income (loss) before income taxes
75.7

 
62.9

 
88.6

 
(82.4
)
 
144.8

Income taxes
28.2

 
23.6

 
34.2

 
(26.5
)
 
59.5

Net income (loss)
$
47.5

 
$
39.3

 
$
54.4

 
$
(55.9
)
 
$
85.3


Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2012 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
791.4

 
$
534.1

 
$
144.2

 
$
—

 
$
1,469.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
442.6

 
322.8

 
31.3

 
—

 
796.7

Selling, general and administrative
189.6

 
52.7

 
16.1

 
61.5

 
319.9

Depreciation and amortization          
73.6

 
50.8

 
17.6

 
1.4

 
143.4

Total operating expenses
705.8

 
426.3

 
65.0

 
62.9

 
1,260.0

Operating profit (loss)
85.6

 
107.8

 
79.2

 
(62.9
)
 
209.7

Interest expense
0.8

 
1.1

 
11.2

 
76.7

 
89.8

Other (income) expense, net
(1.8
)
 
0.5

 
—

 
(0.3
)
 
(1.6
)
Intercompany expense (income)
45.2

 
28.7

 
(13.1
)
 
(60.8
)
 
—

Income (loss) before income taxes
41.4

 
77.5

 
81.1

 
(78.5
)
 
121.5

Income taxes
19.5

 
30.8

 
29.8

 
(27.7
)
 
52.4

Net income (loss)
$
21.9

 
$
46.7

 
$
51.3

 
$
(50.8
)
 
$
69.1

Stock-Based Compensation Plans (Tables)
Summary of stock-based compensation expense by type of award
The following table summarizes our stock-based compensation expense by type of award (in millions):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Service options
$
0.8

 
$
0.7

 
$
2.2

 
$
1.9

Exit options
0.3

 
1.9

 
2.3

 
7.0

KAR LLC profit interests
3.3

 
2.7

 
3.8

 
6.4

Axle LLC profit interests
8.0

 
2.3

 
8.5

 
5.6

Total
$
12.4

 
$
7.6

 
$
16.8

 
$
20.9

Net Income Per Share (Tables)
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 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Net income
$
22.8

 
$
19.2

 
$
85.3

 
$
69.1

Weighted average common shares outstanding
138.3

 
136.5

 
137.5

 
136.4

Effect of dilutive stock options
3.0

 
2.7

 
2.9

 
2.4

Weighted average common shares outstanding and potential common shares
141.3

 
139.2

 
140.4

 
138.8

Net income per share
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.14

 
$
0.62

 
$
0.51

Diluted
$
0.16

 
$
0.14

 
$
0.61

 
$
0.50

Finance Receivables and Obligations Collateralized by Finance Receivables (Tables)
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 table presents quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due.
 
September 30, 2013
 
 
 
 
 
Principal Amount of:
 
 
 
 
 
Net Credit Losses
Three Months Ended
September 30, 2013
 
Net Credit Losses
Nine Months Ended
September 30, 2013
(in millions)
Receivables
 
Receivables
Delinquent
 
Floorplan receivables
$
1,065.6

 
$
4.5

 
$
1.7

 
$
6.3

Other loans
8.4

 
—

 
—

 
—

Total receivables managed
$
1,074.0

 
$
4.5

 
$
1.7

 
$
6.3



 
December 31, 2012
 
 
 
 
 
Principal Amount of:
 
 
 
 
 
Net Credit Losses
Three Months Ended
September 30, 2012
 
Net Credit Losses
Nine Months Ended
September 30, 2012
(in millions)
Receivables
 
Receivables
Delinquent
 
Floorplan receivables
$
996.2

 
$
3.8

 
$
0.9

 
$
5.4

Other loans
8.0

 
—

 
0.2

 
0.2

Total receivables managed
$
1,004.2

 
$
3.8

 
$
1.1

 
$
5.6

Long-Term Debt (Tables)
Schedule of long-term debt
Long-term debt consisted of the following (in millions):
 
Interest Rate
 
Maturity
 
September 30, 2013
 
December 31, 2012
Term Loan B
Adjusted LIBOR
+ 2.75
%
 
May 18, 2017
 
$
1,775.3

 
$
1,674.5

$250 million revolving credit facility
Adjusted LIBOR
+ 3.50
%
 
May 18, 2016
 
—

 
—

Floating rate senior notes
LIBOR
+ 4.00
%
 
 
 
—

 
150.0

Canadian line of credit
CAD Prime
+ 1.50
%
 
Repayable upon
demand
 
—

 
—

Total debt
 
 
 
 
 
1,775.3

 
1,824.5

Unamortized debt discount
 
 
 
 
 
(5.0
)
 
(6.2
)
Current portion of long-term debt
 
 
 
 
 
—

 
(43.7
)
Long-term debt
 
 
 
 
 
$
1,770.3

 
$
1,774.6

Derivatives (Tables)
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 Derivatives
 
 
 
September 30, 2013
 
December 31, 2012
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate caps
 
Other assets
 
$
1.4

 
Other assets
 
N/A
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance 
The following table presents the effect of the interest rate derivatives on our consolidated statements of income for the periods presented (in millions):
 
 
 
Location of Gain / (Loss) Recognized in Income on Derivative
 
Amount of Gain / (Loss)
Recognized in Income on Derivative
 
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Derivatives Not Designated as Hedging Instruments
 
 
2013
 
2012
 
2013
 
2012
Interest rate caps
 
Interest expense
 
$
(0.8
)
 
N/A
 
$
(0.8
)
 
N/A
Accumulated Other Comprehensive Income (Tables)
Schedule of accumulated other comprehensive income
Accumulated other comprehensive income consisted of the following (in millions):
 
September 30, 2013
 
December 31, 2012
Foreign currency translation gain
$
25.4

 
$
35.1

Unrealized loss on interest rate derivatives, net of tax
—

 
(0.2
)
Unrealized gain on postretirement benefit obligation, net of tax
0.2

 
0.2

Accumulated other comprehensive income
$
25.6

 
$
35.1

Fair Value Measurements (Tables)
Summary of financial assets and liabilities measured at fair value on a recurring basis
The following tables summarize our financial assets measured at fair value on a recurring basis in accordance with ASC 820 (in millions):
Description
 
September 30, 2013
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 

Significant Other Observable Inputs
(Level 2)
 

Significant Unobservable Inputs
(Level 3)
   Interest rate caps
 
$
1.4

 
$
—

 
$
1.4

 
$
—

 
 
 
 
 
 
 
 
 
Segment Information (Tables)
Schedule of financial information regarding the entity's reportable segments
Financial information regarding our reportable segments is set forth below for the three months ended September 30, 2013 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
275.4

 
$
198.8

 
$
59.5

 
$
—

 
$
533.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
152.0

 
128.1

 
16.1

 
—

 
296.2

Selling, general and administrative
62.8

 
20.4

 
6.4

 
30.7

 
120.3

Depreciation and amortization          
22.6

 
18.5

 
7.2

 
1.3

 
49.6

Total operating expenses
237.4

 
167.0

 
29.7

 
32.0

 
466.1

Operating profit (loss)
38.0

 
31.8

 
29.8

 
(32.0
)
 
67.6

Interest expense
0.2

 
0.2

 
4.6

 
21.0

 
26.0

Other (income) expense, net
(0.6
)
 
(0.2
)
 
—

 
—

 
(0.8
)
Intercompany expense (income)
14.8

 
9.6

 
(5.6
)
 
(18.8
)
 
—

Income (loss) before income taxes
23.6

 
22.2

 
30.8

 
(34.2
)
 
42.4

Income taxes
9.1

 
8.4

 
12.0

 
(9.9
)
 
19.6

Net income (loss)
$
14.5

 
$
13.8

 
$
18.8

 
$
(24.3
)
 
$
22.8

Assets
$
2,328.7

 
$
1,180.0

 
$
1,531.4

 
$
81.9

 
$
5,122.0


Financial information regarding our reportable segments is set forth below for the three months ended September 30, 2012 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
257.0

 
$
167.4

 
$
50.5

 
$
—

 
$
474.9

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
147.2

 
106.0

 
10.9

 
—

 
264.1

Selling, general and administrative
61.6

 
14.8

 
5.0

 
20.9

 
102.3

Depreciation and amortization          
23.5

 
17.1

 
5.7

 
0.5

 
46.8

Total operating expenses
232.3

 
137.9

 
21.6

 
21.4

 
413.2

Operating profit (loss)
24.7

 
29.5

 
28.9

 
(21.4
)
 
61.7

Interest expense
0.2

 
0.3

 
3.8

 
25.6

 
29.9

Other (income) expense, net
(0.7
)
 
(0.2
)
 
—

 
(0.3
)
 
(1.2
)
Intercompany expense (income)
15.0

 
9.5

 
(4.6
)
 
(19.9
)
 
—

Income (loss) before income taxes
10.2

 
19.9

 
29.7

 
(26.8
)
 
33.0

Income taxes
4.6

 
7.7

 
10.9

 
(9.4
)
 
13.8

Net income (loss)
$
5.6

 
$
12.2

 
$
18.8

 
$
(17.4
)
 
$
19.2

Assets
$
2,402.1

 
$
1,164.5

 
$
1,323.8

 
$
35.6

 
$
4,926.0




Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2013 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
844.3

 
$
623.2

 
$
165.2

 
$
—

 
$
1,632.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
469.8

 
416.4

 
40.3

 
—

 
926.5

Selling, general and administrative
187.7

 
59.5

 
18.2

 
67.9

 
333.3

Depreciation and amortization          
66.8

 
55.4

 
20.3

 
3.4

 
145.9

Total operating expenses
724.3

 
531.3

 
78.8

 
71.3

 
1,405.7

Operating profit (loss)
120.0

 
91.9

 
86.4

 
(71.3
)
 
227.0

Interest expense
0.7

 
0.7

 
12.3

 
65.6

 
79.3

Other (income) expense, net
(2.0
)
 
(0.5
)
 
—

 
—

 
(2.5
)
Loss on modification/extinguishment of debt
—

 
—

 
0.7

 
4.7

 
5.4

Intercompany expense (income)
45.6

 
28.8

 
(15.2
)
 
(59.2
)
 
—

Income (loss) before income taxes
75.7

 
62.9

 
88.6

 
(82.4
)
 
144.8

Income taxes
28.2

 
23.6

 
34.2

 
(26.5
)
 
59.5

Net income (loss)
$
47.5

 
$
39.3

 
$
54.4

 
$
(55.9
)
 
$
85.3


Financial information regarding our reportable segments is set forth below for the nine months ended September 30, 2012 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
791.4

 
$
534.1

 
$
144.2

 
$
—

 
$
1,469.7

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
442.6

 
322.8

 
31.3

 
—

 
796.7

Selling, general and administrative
189.6

 
52.7

 
16.1

 
61.5

 
319.9

Depreciation and amortization          
73.6

 
50.8

 
17.6

 
1.4

 
143.4

Total operating expenses
705.8

 
426.3

 
65.0

 
62.9

 
1,260.0

Operating profit (loss)
85.6

 
107.8

 
79.2

 
(62.9
)
 
209.7

Interest expense
0.8

 
1.1

 
11.2

 
76.7

 
89.8

Other (income) expense, net
(1.8
)
 
0.5

 
—

 
(0.3
)
 
(1.6
)
Intercompany expense (income)
45.2

 
28.7

 
(13.1
)
 
(60.8
)
 
—

Income (loss) before income taxes
41.4

 
77.5

 
81.1

 
(78.5
)
 
121.5

Income taxes
19.5

 
30.8

 
29.8

 
(27.7
)
 
52.4

Net income (loss)
$
21.9

 
$
46.7

 
$
51.3

 
$
(50.8
)
 
$
69.1

Basis of Presentation and Nature of Operations (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 1 Months Ended
Sep. 30, 2013
ADESA Auctions
provider
network
Sep. 30, 2013
IAA
network
Sep. 30, 2013
AFC
network
May 31, 2011
Senior secured term loan facility
May 31, 2011
Senior secured revolving credit facility
May 19, 2011
Senior secured revolving credit facility
Basis of Presentation and Nature of Operations
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
$ 250 
Term of debt instrument
 
 
 
6 years 
5 years 
 
Number of sites for whole car auctions
66 
 
 
 
 
 
Number of sites for salvage vehicle auctions
 
163 
 
 
 
 
Ranking of largest providers of used vehicle auctions and related services
2 
 
 
 
 
 
Number of floorplan financing locations
 
 
105 
 
 
 
Acquisitions (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Business Acquisition [Line Items]
 
Purchase price for business acquired
$ 27.3 
Purchase price of acquired business allocated to intangible assets
26.9 
Business Acquisition, Purchase Price Allocation, Goodwill Amount
$ 22.7 
Stock-Based Compensation Plans (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Service options
Sep. 30, 2012
Service options
Sep. 30, 2013
Service options
installment
Sep. 30, 2012
Service options
Sep. 30, 2013
Service options
Maximum
Sep. 30, 2013
Service options
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Mar. 1, 2013
Exit options
Sep. 30, 2013
Exit options
Sep. 30, 2012
Exit options
Sep. 30, 2013
Exit options
Sep. 30, 2012
Exit options
Sep. 30, 2013
Exit options
Axle Holdings, Inc Stock Incentive Plan
Jun. 30, 2013
Exit options
Axle Holdings, Inc Stock Incentive Plan
Aug. 31, 2013
Exit options
Axle Holdings, Inc Stock Incentive Plan
May 31, 2013
Exit options
Axle Holdings, Inc Stock Incentive Plan
Sep. 30, 2013
Exit options
KAR Auction Services, Inc Omnibus Plan and the Plan
Aug. 31, 2013
Exit options
KAR Auction Services, Inc Omnibus Plan and the Plan
Sep. 30, 2013
KAR LLC profit interests
Sep. 30, 2012
KAR LLC profit interests
Sep. 30, 2013
KAR LLC profit interests
Sep. 30, 2012
KAR LLC profit interests
Sep. 30, 2013
Axle LLC profit interests
Sep. 30, 2012
Axle LLC profit interests
Sep. 30, 2013
Axle LLC profit interests
Sep. 30, 2012
Axle LLC profit interests
Sep. 30, 2013
KAR LLC value units
Sep. 30, 2013
KAR LLC value units
Sep. 30, 2013
Axle LLC value units
Sep. 30, 2013
Axle LLC value units
Stock-Based Compensation Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options granted (in shares)
 
 
 
 
 
 
 
 
 
0.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average exercise price of options granted (in dollars per share)
 
 
 
 
 
 
 
 
 
$ 23.24 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value of stock options granted (in dollars per share)
 
 
 
 
 
 
$ 4.86 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term of award
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected lives
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equal annual installments
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility (as a percent)
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield (as a percent)
 
 
 
 
 
 
3.30% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average risk-free interest rate (as a percent)
 
 
 
 
 
 
0.73% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense (in dollars)
$ 12.4 
$ 7.6 
$ 16.8 
$ 20.9 
$ 0.8 
$ 0.7 
$ 2.2 
$ 1.9 
 
 
 
$ 0.3 
$ 1.9 
$ 2.3 
$ 7.0 
 
 
 
 
 
 
$ 3.3 
$ 2.7 
$ 3.8 
$ 6.4 
$ 8.0 
$ 2.3 
$ 8.5 
$ 5.6 
$ 0.7 
$ 0.7 
$ 6.1 
$ 6.1 
Total income tax benefit recognized for options (in dollars)
$ 0.4 
$ 0.9 
$ 1.6 
$ 3.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0 
 
 
 
 
 
 
 
 
 
Consecutive trading day period to determine price of the entity's common stock as part of vesting conditions
 
 
 
 
 
 
 
 
 
 
90 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consecutive trading day period required for entity's common stock price to be above a certain amount as part of vesting conditions
 
 
 
 
 
 
 
 
 
 
20 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of options vested (in shares)
 
 
 
 
 
 
 
 
 
 
1.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options that vest & become excercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
25.00% 
 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options outstanding that became exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
25.00% 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Earnings Per Share, Basic and Diluted [Abstract]
 
 
 
 
Net income (in dollars)
$ 22.8 
$ 19.2 
$ 85.3 
$ 69.1 
Shares outstanding
 
 
 
 
Weighted average common shares outstanding
138.3 
136.5 
137.5 
136.4 
Effect of dilutive stock options (in shares)
3.0 
2.7 
2.9 
2.4 
Weighted average common shares outstanding and potential common shares
141.3 
139.2 
140.4 
138.8 
Net income per share
 
 
 
 
Basic (in dollars per share)
$ 0.16 
$ 0.14 
$ 0.62 
$ 0.51 
Diluted (in dollars per share)
$ 0.16 
$ 0.14 
$ 0.61 
$ 0.50 
Shares attributable to stock options excluded from the calculation of diluted net income per share
 
0.4 
0.2 
0.8 
Stock options outstanding (in shares)
7.8 
9.7 
7.8 
9.7 
Finance Receivables and Obligations Collateralized by Finance Receivables (Details)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2013
USD ($)
Sep. 30, 2012
USD ($)
Sep. 30, 2013
USD ($)
Sep. 30, 2012
USD ($)
Dec. 31, 2012
USD ($)
Sep. 30, 2013
Minimum
Sep. 30, 2013
Floorplan receivables
USD ($)
Sep. 30, 2012
Floorplan receivables
USD ($)
Sep. 30, 2013
Floorplan receivables
USD ($)
Sep. 30, 2012
Floorplan receivables
USD ($)
Dec. 31, 2012
Floorplan receivables
USD ($)
Sep. 30, 2013
Other loans
USD ($)
Sep. 30, 2012
Other loans
USD ($)
Sep. 30, 2013
Other loans
USD ($)
Sep. 30, 2012
Other loans
USD ($)
Dec. 31, 2012
Other loans
USD ($)
Sep. 30, 2013
AFC
USD ($)
Dec. 31, 2012
AFC
USD ($)
Jun. 30, 2013
AFC Funding Corporation
USD ($)
Sep. 30, 2013
AFC Funding Corporation
USD ($)
Mar. 31, 2013
AFC Funding Corporation
USD ($)
Sep. 30, 2013
AFCI
CAD ($)
Finance Receivables and Obligations Collateralized by Finance Receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed liquidity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800 
$ 650 
$ 100 
Loss on modification/extinguishment of debt
0 
0 
5.4 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.7 
 
 
 
Period to define financing receivables as past due (in days)
 
 
 
 
 
31 days 
 
 
 
 
 
 
 
 
 
 
31 days 
 
 
 
 
 
Principal Amount of Receivables
1,074.0 
 
1,074.0 
 
1,004.2 
 
1,065.6 
 
1,065.6 
 
996.2 
8.4 
 
8.4 
 
8.0 
 
 
 
 
 
 
Principal Amount of Receivables Delinquent
4.5 
 
4.5 
 
3.8 
 
4.5 
 
4.5 
 
3.8 
0 
 
0 
 
0 
 
 
 
 
 
 
Net Credit Losses
1.7 
1.1 
6.3 
5.6 
 
 
1.7 
0.9 
6.3 
5.4 
 
0 
0.2 
0 
0.2 
 
 
 
 
 
 
 
Allowance for losses
8.0 
 
8.0 
 
8.0 
 
 
 
 
 
 
 
 
 
 
 
8.0 
8.0 
 
 
 
 
Finance receivables pledged as security
1,065.1 
 
1,065.1 
 
996.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash reserve as security for obligations of collateralized financing receivables (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
1.00% 
Obligations collateralized by finance receivables
$ 742.4 
 
$ 742.4 
 
$ 713.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Mar. 31, 2013
Dec. 31, 2012
May 31, 2011
Term Loan B
Sep. 30, 2013
Term Loan B
Jun. 30, 2013
Term Loan B
item
Sep. 30, 2013
Term Loan B
Dec. 31, 2012
Term Loan B
D
Mar. 12, 2013
Term Loan B
Adjusted LIBOR
Sep. 30, 2013
Term Loan B
Adjusted LIBOR
Dec. 31, 2012
Term Loan B
Adjusted LIBOR
May 31, 2011
Revolving credit facility
Sep. 30, 2013
Revolving credit facility
Dec. 31, 2012
Revolving credit facility
May 19, 2011
Revolving credit facility
Sep. 30, 2013
Revolving credit facility
Adjusted LIBOR
Sep. 30, 2013
Letters of credit
Dec. 31, 2012
Letters of credit
Jun. 30, 2013
Senior Notes
Sep. 30, 2013
Floating rate senior notes
Dec. 31, 2012
Floating rate senior notes
Jun. 30, 2013
Floating rate senior notes
LIBOR
Sep. 30, 2013
Canadian line of credit
Dec. 31, 2012
Canadian line of credit
Sep. 30, 2013
Canadian line of credit
CAD Prime
Long-Term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt
$ 1,775.3 
 
$ 1,775.3 
 
$ 1,800.0 
$ 1,824.5 
 
$ 1,775.3 
 
$ 1,775.3 
$ 1,674.5 
 
 
 
 
$ 0 
$ 0 
 
 
 
 
 
$ 0 
$ 150.0 
 
$ 0 
$ 0 
 
Unamortized debt discount
(5.0)
 
(5.0)
 
 
(6.2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
0 
 
0 
 
 
(43.7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,770.3 
 
1,770.3 
 
 
1,774.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate basis
 
 
 
 
 
 
 
 
 
 
 
Adjusted LIBOR 
Adjusted LIBOR 
Adjusted LIBOR 
 
 
 
 
Adjusted LIBOR 
 
 
 
 
 
LIBOR 
 
 
CAD Prime 
Interest rate basis (as a percent)
 
 
 
 
 
 
 
 
 
 
 
2.75% 
2.75% 
3.75% 
 
 
 
 
3.50% 
 
 
 
 
 
4.00% 
 
 
1.50% 
Interest rate floor (as a percent)
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
1.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate of loan (as a percent)
 
 
 
 
 
 
 
3.75% 
 
3.75% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 
 
 
 
 
 
 
 
 
 
 
Term of debt instrument
 
 
 
 
 
 
6 years 
 
 
 
 
 
 
 
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on modification/extinguishment of debt
0 
0 
5.4 
0 
 
 
 
 
 
3.9 
 
 
 
 
 
 
 
 
 
 
 
0.8 
 
 
 
 
 
 
Quarterly installment payment as a percentage of aggregate principal amount
 
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum number of days after the fiscal year to pay any excess cash flow payment
 
 
 
 
 
 
 
 
 
 
105 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excess cash flow payment
 
 
 
 
 
 
 
 
 
 
39.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash proceeds from sale lease-back, percentage
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt
 
 
(49.2)
(12.8)
 
 
 
 
 
(5.2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of scheduled quarterly installments prepaid on Term Loan B
 
 
 
 
 
 
 
 
8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount borrowed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
 
Additional borrowings
 
 
 
 
 
 
 
 
150.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding letters of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23.6 
23.6 
 
 
 
 
 
 
 
Payments for early extinguishment of debt
 
 
(188.4)
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated fair value of long-term debt
$ 1,777.5 
 
$ 1,777.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended 9 Months Ended 3 Months Ended
Aug. 31, 2013
agreement
Sep. 30, 2013
Sep. 30, 2012
Aug. 16, 2013
Sep. 30, 2013
Interest rate caps
Sep. 30, 2013
Interest rate caps
Minimum
Sep. 30, 2013
Interest rate caps
Not Designated as Hedging Instrument
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet
 
 
 
 
 
 
 
Number of derivative agreements purchased
4 
 
 
 
 
 
 
Aggregate amount paid for interest rate caps
$ 2.2 
$ 2.2 
$ 0 
 
 
 
 
Aggregate notional amount
 
 
 
1,200 
 
 
 
Variable rate basis
 
 
 
 
three-month LIBOR 
 
 
Floor rate (as a percent)
 
 
 
 
 
1.00% 
 
Asset Derivatives, Fair Value
 
 
 
 
 
 
$ 1.4 
Derivatives (Details 2) (Interest rate caps, Not Designated as Hedging Instrument, USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2013
Interest rate caps |
Not Designated as Hedging Instrument
 
 
Effect of the interest rate derivatives on the entity's consolidated statements of income
 
 
Gain/(Loss) Recognized in Income on Derivative
$ (0.8)
$ (0.8)
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
 
Significant change in legal and regulatory proceedings
$ 0 
Accumulated Other Comprehensive Income (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Foreign currency translation gain
$ 25.4 
$ 35.1 
Unrealized loss on interest rate derivatives, net of tax
0 
(0.2)
Unrealized gain on postretirement benefit obligation, net of tax
0.2 
0.2 
Accumulated other comprehensive income
$ 25.6 
$ 35.1 
Fair Value Measurements (Details) (Interest rate caps, USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2013
Financial assets and liabilities measured at fair value on a recurring basis
 
Variable rate basis
three-month LIBOR 
Minimum
 
Financial assets and liabilities measured at fair value on a recurring basis
 
Floor rate (as a percent)
1.00% 
Recurring |
Total
 
Financial assets and liabilities measured at fair value on a recurring basis
 
Asset Derivatives, Fair Value
$ 1.4 
Recurring |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Financial assets and liabilities measured at fair value on a recurring basis
 
Asset Derivatives, Fair Value
0 
Recurring |
Significant Other Observable Inputs (Level 2)
 
Financial assets and liabilities measured at fair value on a recurring basis
 
Asset Derivatives, Fair Value
1.4 
Recurring |
Significant Unobservable Inputs (Level 3)
 
Financial assets and liabilities measured at fair value on a recurring basis
 
Asset Derivatives, Fair Value
$ 0 
Related Party Transactions (Details) (Equity Sponsors, Registration Rights Agreement, USD $)
In Millions, except Share data in Thousands, unless otherwise specified
1 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2013
Aug. 31, 2013
Jun. 30, 2013
Mar. 31, 2013
Sep. 30, 2013
Equity Sponsors |
Registration Rights Agreement
 
 
 
 
 
Related Party Transactions
 
 
 
 
 
Percentage of outstanding common stock held directly or indirectly by affiliates of the Equity Sponsors, other equity co-investors and members of management of the entity
20.30% 
 
 
 
20.30% 
Sale of shares by KAR LLC
13,800 
17,250 
17,250 
14,950 
 
Amount paid to related party
 
 
 
 
$ 1.2 
Proceeds from the sale of shares
 
 
 
 
$ 0 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
segment
Sep. 30, 2012
Dec. 31, 2012
Segment Reporting [Abstract]
 
 
 
 
 
Number of operating segments
 
 
3 
 
 
Number of operating segments aggregated in segment reporting
 
 
0 
 
 
Number of reportable segments
 
 
3 
 
 
Segment Information
 
 
 
 
 
ADESA Auction Services
$ 275.4 
$ 257.0 
$ 844.3 
$ 791.4 
 
IAA Salvage Services
198.8 
167.4 
623.2 
534.1 
 
AFC
59.5 
50.5 
165.2 
144.2 
 
Operating revenues
533.7 
474.9 
1,632.7 
1,469.7 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
296.2 
264.1 
926.5 
796.7 
 
Selling, general and administrative
120.3 
102.3 
333.3 
319.9 
 
Depreciation and amortization
49.6 
46.8 
145.9 
143.4 
 
Total operating expenses
466.1 
413.2 
1,405.7 
1,260.0 
 
Operating profit
67.6 
61.7 
227.0 
209.7 
 
Interest expense
26.0 
29.9 
79.3 
89.8 
 
Other income, net
(0.8)
(1.2)
(2.5)
(1.6)
 
Loss on modification/extinguishment of debt
0 
0 
5.4 
0 
 
Intercompany expense (income)
0 
0 
0 
0 
 
Income before income taxes
42.4 
33.0 
144.8 
121.5 
 
Income taxes
19.6 
13.8 
59.5 
52.4 
 
Net income
22.8 
19.2 
85.3 
69.1 
 
Assets
5,122.0 
4,926.0 
5,122.0 
4,926.0 
4,922.3 
ADESA Auctions
 
 
 
 
 
Segment Information
 
 
 
 
 
ADESA Auction Services
275.4 
257.0 
844.3 
791.4 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
152.0 
147.2 
469.8 
442.6 
 
Selling, general and administrative
62.8 
61.6 
187.7 
189.6 
 
Depreciation and amortization
22.6 
23.5 
66.8 
73.6 
 
Total operating expenses
237.4 
232.3 
724.3 
705.8 
 
Operating profit
38.0 
24.7 
120.0 
85.6 
 
Interest expense
0.2 
0.2 
0.7 
0.8 
 
Other income, net
(0.6)
(0.7)
(2.0)
(1.8)
 
Loss on modification/extinguishment of debt
 
 
0 
 
 
Intercompany expense (income)
14.8 
15.0 
45.6 
45.2 
 
Income before income taxes
23.6 
10.2 
75.7 
41.4 
 
Income taxes
9.1 
4.6 
28.2 
19.5 
 
Net income
14.5 
5.6 
47.5 
21.9 
 
Assets
2,328.7 
2,402.1 
2,328.7 
2,402.1 
 
IAA
 
 
 
 
 
Segment Information
 
 
 
 
 
IAA Salvage Services
198.8 
167.4 
623.2 
534.1 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
128.1 
106.0 
416.4 
322.8 
 
Selling, general and administrative
20.4 
14.8 
59.5 
52.7 
 
Depreciation and amortization
18.5 
17.1 
55.4 
50.8 
 
Total operating expenses
167.0 
137.9 
531.3 
426.3 
 
Operating profit
31.8 
29.5 
91.9 
107.8 
 
Interest expense
0.2 
0.3 
0.7 
1.1 
 
Other income, net
(0.2)
(0.2)
(0.5)
0.5 
 
Loss on modification/extinguishment of debt
 
 
0 
 
 
Intercompany expense (income)
9.6 
9.5 
28.8 
28.7 
 
Income before income taxes
22.2 
19.9 
62.9 
77.5 
 
Income taxes
8.4 
7.7 
23.6 
30.8 
 
Net income
13.8 
12.2 
39.3 
46.7 
 
Assets
1,180.0 
1,164.5 
1,180.0 
1,164.5 
 
AFC
 
 
 
 
 
Segment Information
 
 
 
 
 
AFC
59.5 
50.5 
165.2 
144.2 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
16.1 
10.9 
40.3 
31.3 
 
Selling, general and administrative
6.4 
5.0 
18.2 
16.1 
 
Depreciation and amortization
7.2 
5.7 
20.3 
17.6 
 
Total operating expenses
29.7 
21.6 
78.8 
65.0 
 
Operating profit
29.8 
28.9 
86.4 
79.2 
 
Interest expense
4.6 
3.8 
12.3 
11.2 
 
Other income, net
0 
0 
0 
0 
 
Loss on modification/extinguishment of debt
 
 
0.7 
 
 
Intercompany expense (income)
(5.6)
(4.6)
(15.2)
(13.1)
 
Income before income taxes
30.8 
29.7 
88.6 
81.1 
 
Income taxes
12.0 
10.9 
34.2 
29.8 
 
Net income
18.8 
18.8 
54.4 
51.3 
 
Assets
1,531.4 
1,323.8 
1,531.4 
1,323.8 
 
Holding Company
 
 
 
 
 
Segment Information
 
 
 
 
 
Operating revenues
0 
0 
0 
0 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
0 
0 
0 
0 
 
Selling, general and administrative
30.7 
20.9 
67.9 
61.5 
 
Depreciation and amortization
1.3 
0.5 
3.4 
1.4 
 
Total operating expenses
32.0 
21.4 
71.3 
62.9 
 
Operating profit
(32.0)
(21.4)
(71.3)
(62.9)
 
Interest expense
21.0 
25.6 
65.6 
76.7 
 
Other income, net
0 
(0.3)
0 
(0.3)
 
Loss on modification/extinguishment of debt
 
 
4.7 
 
 
Intercompany expense (income)
(18.8)
(19.9)
(59.2)
(60.8)
 
Income before income taxes
(34.2)
(26.8)
(82.4)
(78.5)
 
Income taxes
(9.9)
(9.4)
(26.5)
(27.7)
 
Net income
(24.3)
(17.4)
(55.9)
(50.8)
 
Assets
$ 81.9 
$ 35.6 
$ 81.9 
$ 35.6