KAR AUCTION SERVICES, INC., 10-Q filed on 11/5/2014
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2014
Oct. 31, 2014
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, 2014 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
140,848,320 
Document Fiscal Year Focus
2014 
 
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, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Operating revenues
 
 
 
 
ADESA Auction Services
$ 308.1 
$ 275.4 
$ 908.0 
$ 844.3 
IAA Salvage Services
217.5 
198.8 
666.3 
623.2 
AFC
63.5 
59.5 
184.2 
165.2 
Total operating revenues
589.1 
533.7 
1,758.5 
1,632.7 
Operating expenses
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
328.0 
296.2 
974.6 
926.5 
Selling, general and administrative
116.5 
120.3 
357.6 
333.3 
Depreciation and amortization
48.9 
49.6 
145.3 
145.9 
Total operating expenses
493.4 
466.1 
1,477.5 
1,405.7 
Operating profit
95.7 
67.6 
281.0 
227.0 
Interest expense
20.3 
26.0 
65.3 
79.3 
Other income, net
(0.5)
(0.8)
(1.9)
(2.5)
Loss on extinguishment/modification of debt
0 
0 
30.3 
5.4 
Income before income taxes
75.9 
42.4 
187.3 
144.8 
Income taxes
28.4 
19.6 
68.3 
59.5 
Net Income
$ 47.5 
$ 22.8 
$ 119.0 
$ 85.3 
Net income per share
 
 
 
 
Basic (in dollars per share)
$ 0.34 
$ 0.16 
$ 0.85 
$ 0.62 
Diluted (in dollars per share)
$ 0.33 
$ 0.16 
$ 0.84 
$ 0.61 
Dividends declared per common share (in dollars per share)
$ 0.25 
$ 0.19 
$ 0.75 
$ 0.57 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Net Income
$ 47.5 
$ 22.8 
$ 119.0 
$ 85.3 
Other comprehensive income (loss), net of tax
 
 
 
 
Foreign currency translation gain (loss)
(10.8)
4.6 
(11.4)
(9.7)
Unrealized gain on interest rate derivatives, net of tax of $0 and $(0.1) for the three and nine months ended September 30, 2013
0 
0.1 
0 
0.2 
Total other comprehensive income (loss), net of tax
(10.8)
4.7 
(11.4)
(9.5)
Comprehensive income
$ 36.7 
$ 27.5 
$ 107.6 
$ 75.8 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2013
Unrealized gain on interest rate derivatives, tax
$ 0 
$ (0.1)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Current assets
 
 
Cash and cash equivalents
$ 214.9 
$ 191.6 
Restricted cash
16.2 
18.8 
Trade receivables, net of allowances of $5.5 and $4.8
450.5 
354.3 
Finance receivables, net of allowances $8.0 and $8.0
1,277.3 
1,099.6 
Deferred income tax assets
36.2 
36.2 
Other current assets
87.8 
91.0 
Total current assets
2,082.9 
1,791.5 
Other assets
 
 
Goodwill
1,705.4 
1,705.1 
Customer relationships, net of accumulated amortization of $534.9 and $479.0
506.5 
569.9 
Other intangible assets, net of accumulated amortization of $251.8 and $219.6
305.7 
307.1 
Unamortized debt issuance costs
17.8 
37.9 
Other assets
37.0 
11.9 
Total other assets
2,572.4 
2,631.9 
Property and equipment, net of accumulated depreciation of $515.3 and $472.6
715.1 
703.8 
Total assets
5,370.4 
5,127.2 
Current liabilities
 
 
Accounts payable
532.3 
435.5 
Accrued employee benefits and compensation expenses
75.5 
63.9 
Accrued interest
0.3 
0.3 
Other accrued expenses
106.5 
93.0 
Income taxes payable
6.9 
2.3 
Dividends payable
35.2 
34.7 
Obligations collateralized by finance receivables
858.8 
772.4 
Current maturities of long-term debt
16.1 
32.5 
Total current liabilities
1,631.6 
1,434.6 
Non-current liabilities
 
 
Long-term debt
1,740.9 
1,734.7 
Deferred income tax liabilities
325.3 
354.8 
Other liabilities
137.8 
121.3 
Total non-current liabilities
2,204.0 
2,210.8 
Commitments and contingencies (Note 8)
   
   
Stockholders' equity
 
 
Preferred stock, $0.01 par value: Authorized shares: 100,000,000; Issued shares: none
   
   
Common stock, $0.01 par value: Authorized shares: 400,000,000; Issued and outstanding shares: September 30, 2014: 140,800,441 December 31, 2013: 139,027,581
1.4 
1.4 
Additional paid-in capital
1,584.6 
1,534.0 
Accumulated deficit
(58.5)
(72.3)
Accumulated other comprehensive income
7.3 
18.7 
Total stockholders' equity
1,534.8 
1,481.8 
Total liabilities and stockholders' equity
$ 5,370.4 
$ 5,127.2 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Trade receivables, allowances (in dollars)
$ 5.5 
$ 4.8 
Finance receivables, allowances (in dollars)
8.0 
8.0 
Customer relationships, accumulated amortization (in dollars)
534.9 
479.0 
Other intangible assets, accumulated amortization (in dollars)
251.8 
219.6 
Property and equipment, accumulated depreciation (in dollars)
$ 515.3 
$ 472.6 
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
140,800,441 
139,027,581 
Common stock, outstanding shares
140,800,441 
139,027,581 
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, 2013
$ 1,481.8 
$ 1.4 
$ 1,534.0 
$ (72.3)
$ 18.7 
Balance (in shares) at Dec. 31, 2013
139,027,581 
139,000,000 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net Income
119.0 
 
 
119.0 
 
Other comprehensive loss, net of tax
(11.4)
 
 
 
(11.4)
Issuance of common stock under stock plans
20.9 
 
20.9 
 
 
Issuance of common stock under stock plans (in shares)
 
1,800,000 
 
 
 
Stock-based compensation expense
26.5 
 
26.5 
 
 
Excess tax benefits from stock-based compensation
3.2 
 
3.2 
 
 
Cash dividends declared to stockholders
(105.2)
 
 
(105.2)
 
Balance at Sep. 30, 2014
$ 1,534.8 
$ 1.4 
$ 1,584.6 
$ (58.5)
$ 7.3 
Balance (in shares) at Sep. 30, 2014
140,800,441 
140,800,000 
 
 
 
Consolidated Statements of Stockholders' Equity (Parenthetical)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Cash dividends declared to stockholders (in dollars per share)
$ 0.25 
$ 0.19 
$ 0.75 
$ 0.57 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Operating activities
 
 
Net Income
$ 119.0 
$ 85.3 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
145.3 
145.9 
Provision for credit losses
12.0 
7.3 
Deferred income taxes
(28.7)
11.3 
Amortization of debt issuance costs
5.9 
8.0 
Stock-based compensation
26.5 
16.8 
(Gain) loss on disposal of fixed assets
(0.1)
0.2 
Loss on extinguishment/modification of debt
30.3 
5.4 
Other non-cash, net
2.4 
11.1 
Changes in operating assets and liabilities, net of acquisitions:
 
 
Trade receivables and other assets
(89.2)
(21.2)
Accounts payable and accrued expenses
104.3 
48.3 
Net cash provided by operating activities
327.7 
318.4 
Investing activities
 
 
Net increase in finance receivables held for investment
(191.6)
(79.6)
Acquisition of businesses (net of cash acquired) and equity method investments
(30.9)
(28.8)
Purchases of property, equipment and computer software
(70.3)
(75.3)
Proceeds from the sale of property and equipment
0.1 
0.2 
Decrease in restricted cash
2.6 
2.8 
Net cash used by investing activities
(290.1)
(180.7)
Financing activities
 
 
Net increase in book overdrafts
22.2 
38.6 
Net increase in obligations collateralized by finance receivables
90.3 
31.8 
Proceeds from long-term debt
1,767.2 
188.0 
Payments for debt issuance costs/amendments
(11.7)
(26.0)
Payments on long-term debt
(1,782.2)
(49.2)
Payment for early extinguishment of debt
0 
(188.4)
Payments on capital leases
(14.3)
(11.4)
Payments of contingent consideration and deferred acquisition costs
(0.2)
(1.6)
Initial net investment for interest rate caps
0 
(2.2)
Issuance of common stock under stock plans
20.9 
20.8 
Excess tax benefits from stock-based compensation
3.2 
5.3 
Dividends paid to stockholders
(104.7)
(52.2)
Net cash used by financing activities
(9.3)
(46.5)
Effect of exchange rate changes on cash
(5.0)
(3.9)
Net increase in cash and cash equivalents
23.3 
87.3 
Cash and cash equivalents at beginning of period
191.6 
108.7 
Cash and cash equivalents at end of period
214.9 
196.0 
Cash paid for interest
57.3 
68.7 
Cash paid for taxes, net of refunds
$ 79.4 
$ 36.6 
Basis of Presentation and Nature of Operations
Basis of Presentation and Nature of Operations
Basis of Presentation and Nature of Operations
Defined Terms
Unless otherwise indicated or unless the context otherwise requires, the following terms used herein shall have the following meanings:
•
"we," "us," "our" and "the Company" refer, collectively, to KAR Auction Services, Inc. and all of its subsidiaries;
•
"ADESA" or "ADESA Auctions" refer, collectively, to ADESA, Inc., a wholly-owned subsidiary of KAR Auction Services, and ADESA, Inc.'s subsidiaries, including OPENLANE, Inc. (together with OPENLANE, Inc.'s subsidiaries, "OPENLANE");
•
"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, the former ultimate parent company of IAA and a holder of common equity interests in KAR LLC;
•
"Credit Agreement" refers to the Amended and Restated Credit Agreement, dated March 11, 2014, 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;
•
"Original 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 three year senior secured term loan B-1 facility ("Term Loan B-1"), the seven year senior secured term loan B-2 facility ("Term Loan B-2") and the $250 million, five year senior secured revolving credit facility (the "new revolving credit facility"), the terms of which are set forth in the Credit Agreement;
•
"Original 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 "old revolving credit facility"), the terms of which are set forth in the Original 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.
Business and Nature of Operations
As of September 30, 2014, we have a network of 65 ADESA whole car auction sites and 166 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 its wholly-owned subsidiary, OPENLANE, that allow our institutional consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the Internet prior to arrival at the physical auction. Remarketing services include a variety of activities designed to transfer used 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 of vehicles sold at the auctions. Generally, fees are earned from the seller and buyer on each successful auction transaction in addition to fees earned for ancillary services.
ADESA has the second largest used vehicle auction network in North America, based upon the number of used vehicles sold through auctions annually, and also provides services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and 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 111 locations throughout the United States and Canada as of September 30, 2014. 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. In addition to floorplan financing, AFC also provides independent used vehicle dealers with other related services and products, such as warranty service contracts.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals necessary, for a fair statement of our results of operations, cash flows and financial position for the periods presented. These consolidated financial statements and condensed notes to consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 19, 2014. The 2013 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.
The preparation of financial statements in conformity with U.S. GAAP 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.
We use the equity method to account for investments in companies when we have the ability to exercise significant influence over operating and financial policies of the investee but do not have a controlling financial interest. Our judgment regarding the level of influence over an equity method investment includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy making decisions and material intercompany transactions. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of the equity method investee and a corresponding increase or decrease to the investment balance, which is included in "Other assets" on the consolidated balance sheet. Based on the timing of when financial information is received from the investee, the Company records its share of net earnings or losses of such investments on a lag basis. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
New Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new guidance provides clarification on the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosures to help financial statement users better understand the nature, amount, timing and uncertainty of revenue that is recognized. The new guidance is effective for the first annual reporting period and interim periods beginning after December 15, 2016, and will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on the consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
Acquisitions and Equity Method Investments
Acquisitions and Equity Method Investments
Acquisitions and Equity Method Investment
In August 2014, ADESA acquired a 50% interest in Nth Gen Software Inc. (“TradeRev”) and its online vehicle remarketing system, TradeRev, for $30 million in cash. TradeRev is an online automotive remarketing system where dealers can launch and participate in real-time vehicle auctions at any time from their mobile devices or desktop. In addition, ADESA also entered into a joint marketing agreement with TradeRev to assist in expanding its footprint in the dealer-to-dealer online space in the U.S. and Canadian markets.
ASC 323, Investments - Equity Method and Joint Ventures, specifies that to the extent there is a basis difference between the cost and the underlying equity in the net assets of an equity investment, such difference is required to be allocated between tangible and intangible assets. At the date of acquisition, the carrying amount of the investment in TradeRev was greater than the Company’s equity in the underlying assets of TradeRev by approximately $21.9 million as a result of the difference in the carrying amounts of intangible assets. The Company is currently evaluating the allocation of assets. Based upon the preliminary valuation, the difference attributable to amortizable intangible assets was estimated at approximately $5.8 million at the time of the equity investment, which is being amortized on a straight-line basis over the expected useful lives of the intangible assets, which range from 7 to 15 years. The intangible assets are not reflected on the balance sheet of KAR Auction Services.
TradeRev’s results of operations are recorded on a one-month lag basis. The Company’s share in the net losses of TradeRev through August 31, 2014 was $0.2 million. This amount was recorded to “Other income, net” in the consolidated statements of income.
In December 2013, the Company purchased the assets of High Tech Locksmiths ("HTL"), which specializes in products for the automotive industry. HTL is the largest provider of transponder, remote, high-security and car smart keys in North America. HTL utilizes technologically advanced equipment and processes that the Company believes will benefit customers across the KAR business units. The purchased assets of HTL included accounts receivable, inventory, operating equipment, software, customer relationships and tradenames 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 HTL was approximately $24.9 million, which included estimated contingent payments and deferred costs with a present value of $7.6 million. The maximum amount of undiscounted contingent payments and deferred costs related to this acquisition would approximate $8.5 million. The purchase accounting associated with this acquisition has been finalized and the acquired assets and liabilities were recorded based upon fair values, including $11.0 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 $4.3 million. The goodwill is recorded in the ADESA Auctions reportable segment. The financial impact of this acquisition, including annualized pro forma financial results, was immaterial to the Company's consolidated statement of income for the year ended December 31, 2013. In addition, the financial impact of this acquisition was immaterial to the Company's consolidated results for the three and nine months ended September 30, 2014.
Stock-Based Compensation Plans
Stock-Based Compensation Plans
Stock-Based Compensation Plans
We adopted the KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan (‘‘Omnibus Plan’’) in December 2009. The Omnibus Plan is intended to provide equity or cash-based awards to our employees. At KAR Auction Services' Annual Meeting of Stockholders in June 2014, the stockholders approved the amendment and restatement of the Omnibus Plan. As a result, the maximum number of shares that may be issued pursuant to awards under the Omnibus Plan was increased from 6.5 million to 12.5 million. Our stock-based compensation expense has included expense associated with KAR Auction Services, Inc. service and exit option awards, performance-based restricted stock units ("PRSUs"), KAR LLC profit interests and Axle LLC profit interests. We have classified the KAR Auction Services, Inc. service and exit options and PRSUs as equity awards. The KAR LLC and Axle LLC profit interests were classified 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.
In the first nine months of 2014, we granted approximately 0.9 million service options with a weighted average exercise price of $30.06 per share under the Omnibus Plan. The service options have a ten 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 in the first nine months of 2014 was $6.37 per share. The fair value of service options granted was estimated on the date of grant using the Black-Scholes option pricing model with an expected life of 6.25 years, an expected volatility of 30%, a weighted average annual rate of quarterly dividends of 3.33% and a weighted average risk free interest rate of 1.85%.
In the first quarter of 2014, we granted a target amount of approximately 0.1 million PRSUs to certain executive officers of the Company. Half of the PRSUs vest three years from the grant date if and to the extent that the Company's total shareholder return relative to that of companies within the S&P 500 Index exceeds certain levels over the same period. The other half of the PRSUs vest if and to the extent that the Company's three year adjusted earnings per share attains certain specified goals.
In March 2014, the vesting criteria for 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 exit options granted became exercisable.
The total income tax benefit recognized in the consolidated statement of income for options and PRSUs was approximately $2.1 million and $0.4 million for the three months ended September 30, 2014 and 2013, respectively, and $9.6 million and $1.6 million for the nine months ended September 30, 2014 and 2013, respectively. There was no income tax benefit recognized by us with respect to the KAR LLC and Axle LLC profit interests. In addition, all of the compensation expense related to the KAR LLC and Axle LLC operating units and value units was recognized and paid as of December 31, 2013. 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,
 
2014
 
2013
 
2014
 
2013
Service options
$
1.0

 
$
0.8

 
$
2.9

 
$
2.2

Exit options
3.8

 
0.3

 
21.1

 
2.3

PRSUs
0.9

 
—

 
2.5

 
—

KAR LLC operating units - profit interests
—

 
2.6

 
—

 
3.1

KAR LLC value units - profit interests
—

 
0.7

 
—

 
0.7

Axle LLC operating units - profit interests
—

 
1.9

 
—

 
2.4

Axle LLC value units - profit interests
—

 
6.1

 
—

 
6.1

Total stock-based compensation expense
$
5.7

 
$
12.4

 
$
26.5

 
$
16.8

Net Income Per Share
Net Income Per Share
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,
 
2014
 
2013
 
2014
 
2013
Net income
$
47.5

 
$
22.8

 
$
119.0

 
$
85.3

Weighted average common shares outstanding
140.6

 
138.3

 
140.0

 
137.5

Effect of dilutive stock options and restricted stock awards
1.7

 
3.0

 
1.4

 
2.9

Weighted average common shares outstanding and potential common shares
142.3

 
141.3

 
141.4

 
140.4

Net income per share
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.16

 
$
0.85

 
$
0.62

Diluted
$
0.33

 
$
0.16

 
$
0.84

 
$
0.61


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 0.5 million options were excluded from the calculation of diluted net income per share for the three months ended September 30, 2014, and approximately 0.5 million and 0.2 million options were excluded from the calculation of diluted net income per share for the nine months ended September 30, 2014 and 2013, respectively. Total options outstanding at September 30, 2014 and 2013 were 6.5 million and 7.8 million, respectively.
Finance Receivables and Obligations Collateralized by Finance Receivables
Finance Receivables and Obligations Collateralized by Finance Receivables
Finance Receivables and Obligations Collateralized by Finance Receivables
AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated special purpose subsidiary ("AFC Funding Corporation") established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on June 30, 2016. AFC Funding Corporation had committed liquidity of $800 million for U.S. finance receivables at September 30, 2014.
We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables. This securitization facility also expires on June 30, 2016. 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, 2014. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.
The following tables present quantitative information about delinquencies, credit 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, 2014
 
Net Credit Losses
Three Months Ended
September 30, 2014
 
Net Credit Losses
Nine Months Ended
September 30, 2014
 
Principal Amount of:
 
 
(in millions)
Receivables
 
Receivables
Delinquent
 
 
Floorplan receivables
$
1,278.5

 
$
2.9

 
$
3.3

 
$
9.6

Other loans
6.8

 
—

 
—

 
—

Total receivables managed
$
1,285.3

 
$
2.9

 
$
3.3

 
$
9.6

 
December 31, 2013
 
Net Credit Losses
Three Months Ended
September 30, 2013
 
Net Credit Losses
Nine Months Ended
September 30, 2013
 
Principal Amount of:
 
 
(in millions)
Receivables
 
Receivables
Delinquent
 
 
Floorplan receivables
$
1,099.8

 
$
5.1

 
$
1.7

 
$
6.3

Other loans
7.8

 
—

 
—

 
—

Total receivables managed
$
1,107.6

 
$
5.1

 
$
1.7

 
$
6.3


AFC's allowance for losses was $8.0 million at September 30, 2014 and December 31, 2013.
As of September 30, 2014 and December 31, 2013, $1,279.1 million and $1,100.2 million, respectively, of finance receivables and a cash reserve of 1 percent of the obligations collateralized by finance receivables served as security for the $858.8 million and $772.4 million of obligations collateralized by finance receivables at September 30, 2014 and December 31, 2013, 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, 2014, we were in compliance with the covenants in the securitization agreements.
Long-Term Debt
Long-Term Debt
Long-Term Debt
Long-term debt consisted of the following (in millions):
 
Interest Rate
 
 
 
Maturity
 
September 30, 2014
 
December 31, 2013
Term Loan B-1
Adjusted LIBOR
 
+ 2.50%
 
March 11, 2017
 
$
646.2

 
$
—

Term Loan B-2
Adjusted LIBOR
 
+ 2.75%
 
March 11, 2021
 
1,113.4

 
—

Term Loan B
Adjusted LIBOR
 
+ 2.75%
 
N/A
 
—

 
1,771.8

New revolving credit facility
Adjusted LIBOR
 
+ 2.25%
 
March 11, 2019
 
—

 
—

Old revolving credit facility
Adjusted LIBOR
 
+ 3.50%
 
N/A
 
—

 
—

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

 
—

Total debt
 
 
 
 
 
 
1,759.6

 
1,771.8

Unamortized debt discount
 
 
 
 
 
 
(2.6
)
 
(4.6
)
Current portion of long-term debt
 
 
 
 
 
 
(16.1
)
 
(32.5
)
Long-term debt
 
 
 
 
 
 
$
1,740.9

 
$
1,734.7


Credit Facilities
On March 11, 2014, we repaid all principal outstanding and interest due under the Original Credit Agreement and established a three year senior secured term loan facility ("Term Loan B-1"), a seven year senior secured term loan facility ("Term Loan B-2") and a $250 million, five year senior secured revolving credit facility (the "new revolving credit facility"), the terms of which are set forth in the Amended and Restated Credit Agreement, dated as of March 11, 2014. The terms in the Credit Agreement supersede the terms of the Original Credit Agreement. No early termination penalties were incurred by the Company in connection with the refinancing; however, we incurred a non-cash loss on the extinguishment of debt under the Original Credit Agreement of $30.3 million. The loss was a result of the write-off of certain unamortized debt issuance costs and the unamortized debt discount on Term Loan B.
The Credit Facility is available for letters of credit, working capital and general corporate purposes. The Credit Agreement provides that with respect to the new revolving credit facility, up to $75 million is available for letters of credit and up to $75 million is available for swing line loans. Subject to certain conditions, the Credit Agreement also permits additional revolving or term loan commitments of (i) up to $300 million or (ii) an unlimited amount if the Consolidated Senior Secured Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 3.5 to 1.0, in each case from one or more of the existing lenders or other lenders (with the consent of the administrative agent).
Term Loan B-2 was issued at a discount of $2.8 million. The discount is being amortized using the effective interest method to interest expense over the seven year term of the loan. Both Term Loan B-1 and Term Loan B-2 are payable in quarterly installments equal to 0.25% of the original aggregate principal amounts of the term loans, respectively, as of the effective date, such payments commenced on June 30, 2014 and the balances are payable at each respective maturity date. The Credit Facility is subject to mandatory prepayments and reduction in an amount equal to the net proceeds of certain debt offerings, certain asset sales and certain insurance recovery events. 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 $2.8 million and $4.8 million of Term Loan B-1 and Term Loan B-2, respectively, in the first nine months of 2014. Each such prepayment is credited to prepay, on a pro rata basis, in order of maturity the unpaid amounts due on the next eight scheduled quarterly installments of Term Loan B-1 and Term Loan B-2 and thereafter to the remaining scheduled quarterly installments of each term loan on a pro rata basis.
The obligations of the Company under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority perfected security interests in 100% of the equity interests of certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) perfected first priority security interests in substantially all other tangible and intangible assets of the Company and each Subsidiary Guarantor, subject to certain exceptions. The Credit Agreement contains affirmative and negative covenants that we believe are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with our affiliates. The Credit Agreement also requires us to maintain a maximum leverage ratio, provided there are revolving loans outstanding. We were in compliance with the covenants in the Credit Agreement at September 30, 2014.
Term Loan B-1 bears interest at Adjusted LIBOR plus 2.5%, Term Loan B-2 at Adjusted LIBOR plus 2.75% (with an Adjusted LIBOR floor of 0.75% per annum for Term Loan B-2) and new revolving loan borrowings at Adjusted LIBOR plus 2.25%. However, for specified types of borrowings, the Company may elect to make Term Loan B-1 borrowings at a Base Rate (as defined in the Credit Agreement) plus 1.50%, Term Loan B-2 at a Base Rate plus 1.75% and new revolving loan borrowings at a Base Rate plus 1.25%. The rates on Term Loan B-1 and Term Loan B-2 were 2.75% and 3.50% at September 30, 2014, respectively. In addition, if the Company reduces its Consolidated Senior Secured Leverage Ratio, which is based on a net debt calculation, to levels specified in the Credit Agreement, the applicable interest rate on Term Loan B-2 and the new revolving credit facility will step down by 25 basis points. The Company also pays a commitment fee of 40 basis points, payable quarterly, on the average daily unused amount of the new revolving credit facility. The fee may step down to 35 basis points based on the Company's Consolidated Senior Secured Leverage Ratio as described above.
There were no borrowings on either the new or old revolving credit facility at September 30, 2014 or December 31, 2013, respectively. However, we had related outstanding letters of credit in the aggregate amount of $26.4 million and $26.3 million at September 30, 2014 and December 31, 2013, respectively, which reduce the amount available for borrowings under the respective credit facility.
Fair Value of Debt
As of September 30, 2014, the estimated fair value of our long-term debt amounted to $1,735.9 million. The estimates of fair value are based on broker-dealer quotes for our debt as of September 30, 2014. 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
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 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, based on the remaining term of the investment, 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.
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, 2014
 
December 31, 2013
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
2013 Interest rate caps
 
Other assets
 
$
0.1

 
Other assets
 
$
0.8

We have not designated any of the 2013 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 Derivatives
 
Amount of Gain / (Loss)
Recognized in Income on Derivatives
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Derivatives Not Designated as Hedging Instruments
 
 
2014
 
2013
 
2014
 
2013
2013 Interest rate caps
 
Interest expense
 
$
—

 
$
(0.8
)
 
$
(0.7
)
 
$
(0.8
)
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
We are involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business such as employment matters and dealer disputes. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies including litigation and environmental matters are included in "Other accrued expenses" at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows. Legal fees are expensed as incurred. There has been 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, 2013.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Accumulated other comprehensive income consisted of the following (in millions):
 
September 30, 2014
 
December 31, 2013
Foreign currency translation gain
$
7.1

 
$
18.5

Unrealized gain on postretirement benefit obligation, net of tax
0.2

 
0.2

Accumulated other comprehensive income
$
7.3

 
$
18.7

Fair Value Measurements
Fair Value Measurements
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 table summarizes our financial assets measured at fair value on a recurring basis in accordance with ASC 820 (in millions):
Description
 
September 30, 2014
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 

Significant Other Observable Inputs
(Level 2)
 

Significant Unobservable Inputs
(Level 3)
   2013 Interest rate caps
 
$
0.1

 
$
—

 
$
0.1

 
$
—

 
 
 
 
 
 
 
 
 

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
Related Party Transactions
Registration Rights Agreement
Since November 2013, affiliates of the Equity Sponsors, other equity co-investors and members of our management no longer hold an interest in our outstanding common stock directly 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 for the nine months ended September 30, 2013 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
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 capital leases and the corporate debt structure. Intercompany charges relate primarily to interest on intercompany debt or receivables and certain administrative costs allocated by the holding company.
Financial information regarding our reportable segments is set forth below for the three months ended September 30, 2014 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
308.1

 
$
217.5

 
$
63.5

 
$
—

 
$
589.1

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
174.6

 
135.4

 
18.0

 
—

 
328.0

Selling, general and administrative
64.1

 
23.5

 
6.8

 
22.1

 
116.5

Depreciation and amortization          
19.7

 
19.1

 
7.7

 
2.4

 
48.9

Total operating expenses
258.4

 
178.0

 
32.5

 
24.5

 
493.4

Operating profit (loss)
49.7

 
39.5

 
31.0

 
(24.5
)
 
95.7

Interest expense
0.2

 
—

 
4.7

 
15.4

 
20.3

Other (income) expense, net
(0.5
)
 
(0.2
)
 
—

 
0.2

 
(0.5
)
Intercompany expense (income)
14.3

 
9.6

 
(5.8
)
 
(18.1
)
 
—

Income (loss) before income taxes
35.7

 
30.1

 
32.1

 
(22.0
)
 
75.9

Income taxes
13.4

 
11.0

 
12.1

 
(8.1
)
 
28.4

Net income (loss)
$
22.3

 
$
19.1

 
$
20.0

 
$
(13.9
)
 
$
47.5

Total assets
$
2,388.5

 
$
1,208.2

 
$
1,708.7

 
$
65.0

 
$
5,370.4

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, 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

Total 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 nine months ended September 30, 2014 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
908.0

 
$
666.3

 
$
184.2

 
$
—

 
$
1,758.5

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
512.5

 
410.3

 
51.8

 
—

 
974.6

Selling, general and administrative
196.7

 
73.6

 
22.1

 
65.2

 
357.6

Depreciation and amortization          
59.0

 
56.6

 
22.7

 
7.0

 
145.3

Total operating expenses
768.2

 
540.5

 
96.6

 
72.2

 
1,477.5

Operating profit (loss)
139.8

 
125.8

 
87.6

 
(72.2
)
 
281.0

Interest expense
0.7

 
0.2

 
13.8

 
50.6

 
65.3

Other income, net
(1.4
)
 
(0.5
)
 
—

 
—

 
(1.9
)
Loss on extinguishment of debt
—

 
—

 
—

 
30.3

 
30.3

Intercompany expense (income)
42.3

 
28.9

 
(17.6
)
 
(53.6
)
 
—

Income (loss) before income taxes
98.2

 
97.2

 
91.4

 
(99.5
)
 
187.3

Income taxes
35.7

 
36.0

 
34.7

 
(38.1
)
 
68.3

Net income (loss)
$
62.5

 
$
61.2

 
$
56.7

 
$
(61.4
)
 
$
119.0

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, 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

Subsequent Event
Subsequent Events
Subsequent Event
The board of directors has authorized a repurchase of up to $300 million of the Company’s outstanding common stock, par value $0.01 per share, during the period from October 29, 2014 through October 28, 2016. Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases is subject to market and other conditions.
Basis of Presentation and Nature of Operations Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals necessary, for a fair statement of our results of operations, cash flows and financial position for the periods presented. These consolidated financial statements and condensed notes to consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 19, 2014. The 2013 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.
Use of Estimates 
The preparation of financial statements in conformity with U.S. GAAP 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.
Equity Method Investments 
We use the equity method to account for investments in companies when we have the ability to exercise significant influence over operating and financial policies of the investee but do not have a controlling financial interest. Our judgment regarding the level of influence over an equity method investment includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy making decisions and material intercompany transactions. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of the equity method investee and a corresponding increase or decrease to the investment balance, which is included in "Other assets" on the consolidated balance sheet. Based on the timing of when financial information is received from the investee, the Company records its share of net earnings or losses of such investments on a lag basis. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
New Accounting Standards 
New Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605, Revenue Recognition. The new guidance provides clarification on the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosures to help financial statement users better understand the nature, amount, timing and uncertainty of revenue that is recognized. The new guidance is effective for the first annual reporting period and interim periods beginning after December 15, 2016, and will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on the consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
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,
 
2014
 
2013
 
2014
 
2013
Service options
$
1.0

 
$
0.8

 
$
2.9

 
$
2.2

Exit options
3.8

 
0.3

 
21.1

 
2.3

PRSUs
0.9

 
—

 
2.5

 
—

KAR LLC operating units - profit interests
—

 
2.6

 
—

 
3.1

KAR LLC value units - profit interests
—

 
0.7

 
—

 
0.7

Axle LLC operating units - profit interests
—

 
1.9

 
—

 
2.4

Axle LLC value units - profit interests
—

 
6.1

 
—

 
6.1

Total stock-based compensation expense
$
5.7

 
$
12.4

 
$
26.5

 
$
16.8

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,
 
2014
 
2013
 
2014
 
2013
Net income
$
47.5

 
$
22.8

 
$
119.0

 
$
85.3

Weighted average common shares outstanding
140.6

 
138.3

 
140.0

 
137.5

Effect of dilutive stock options and restricted stock awards
1.7

 
3.0

 
1.4

 
2.9

Weighted average common shares outstanding and potential common shares
142.3

 
141.3

 
141.4

 
140.4

Net income per share
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.16

 
$
0.85

 
$
0.62

Diluted
$
0.33

 
$
0.16

 
$
0.84

 
$
0.61

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 tables present 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, 2014
 
Net Credit Losses
Three Months Ended
September 30, 2014
 
Net Credit Losses
Nine Months Ended
September 30, 2014
 
Principal Amount of:
 
 
(in millions)
Receivables
 
Receivables
Delinquent
 
 
Floorplan receivables
$
1,278.5

 
$
2.9

 
$
3.3

 
$
9.6

Other loans
6.8

 
—

 
—

 
—

Total receivables managed
$
1,285.3

 
$
2.9

 
$
3.3

 
$
9.6

 
December 31, 2013
 
Net Credit Losses
Three Months Ended
September 30, 2013
 
Net Credit Losses
Nine Months Ended
September 30, 2013
 
Principal Amount of:
 
 
(in millions)
Receivables
 
Receivables
Delinquent
 
 
Floorplan receivables
$
1,099.8

 
$
5.1

 
$
1.7

 
$
6.3

Other loans
7.8

 
—

 
—

 
—

Total receivables managed
$
1,107.6

 
$
5.1

 
$
1.7

 
$
6.3

Long-Term Debt (Tables)
Schedule of long-term debt
Long-term debt consisted of the following (in millions):
 
Interest Rate
 
 
 
Maturity
 
September 30, 2014
 
December 31, 2013
Term Loan B-1
Adjusted LIBOR
 
+ 2.50%
 
March 11, 2017
 
$
646.2

 
$
—

Term Loan B-2
Adjusted LIBOR
 
+ 2.75%
 
March 11, 2021
 
1,113.4

 
—

Term Loan B
Adjusted LIBOR
 
+ 2.75%
 
N/A
 
—

 
1,771.8

New revolving credit facility
Adjusted LIBOR
 
+ 2.25%
 
March 11, 2019
 
—

 
—

Old revolving credit facility
Adjusted LIBOR
 
+ 3.50%
 
N/A
 
—

 
—

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

 
—

Total debt
 
 
 
 
 
 
1,759.6

 
1,771.8

Unamortized debt discount
 
 
 
 
 
 
(2.6
)
 
(4.6
)
Current portion of long-term debt
 
 
 
 
 
 
(16.1
)
 
(32.5
)
Long-term debt
 
 
 
 
 
 
$
1,740.9

 
$
1,734.7

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, 2014
 
December 31, 2013
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
2013 Interest rate caps
 
Other assets
 
$
0.1

 
Other assets
 
$
0.8

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 Derivatives
 
Amount of Gain / (Loss)
Recognized in Income on Derivatives
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Derivatives Not Designated as Hedging Instruments
 
 
2014
 
2013
 
2014
 
2013
2013 Interest rate caps
 
Interest expense
 
$
—

 
$
(0.8
)
 
$
(0.7
)
 
$
(0.8
)
Accumulated Other Comprehensive Income (Tables)
Schedule of accumulated other comprehensive income
Accumulated other comprehensive income consisted of the following (in millions):
 
September 30, 2014
 
December 31, 2013
Foreign currency translation gain
$
7.1

 
$
18.5

Unrealized gain on postretirement benefit obligation, net of tax
0.2

 
0.2

Accumulated other comprehensive income
$
7.3

 
$
18.7

Fair Value Measurements (Tables)
Summary of financial assets and liabilities measured at fair value on a recurring basis
The following table summarizes our financial assets measured at fair value on a recurring basis in accordance with ASC 820 (in millions):
Description
 
September 30, 2014
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 

Significant Other Observable Inputs
(Level 2)
 

Significant Unobservable Inputs
(Level 3)
   2013 Interest rate caps
 
$
0.1

 
$
—

 
$
0.1

 
$
—

 
 
 
 
 
 
 
 
 
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, 2014 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
308.1

 
$
217.5

 
$
63.5

 
$
—

 
$
589.1

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
174.6

 
135.4

 
18.0

 
—

 
328.0

Selling, general and administrative
64.1

 
23.5

 
6.8

 
22.1

 
116.5

Depreciation and amortization          
19.7

 
19.1

 
7.7

 
2.4

 
48.9

Total operating expenses
258.4

 
178.0

 
32.5

 
24.5

 
493.4

Operating profit (loss)
49.7

 
39.5

 
31.0

 
(24.5
)
 
95.7

Interest expense
0.2

 
—

 
4.7

 
15.4

 
20.3

Other (income) expense, net
(0.5
)
 
(0.2
)
 
—

 
0.2

 
(0.5
)
Intercompany expense (income)
14.3

 
9.6

 
(5.8
)
 
(18.1
)
 
—

Income (loss) before income taxes
35.7

 
30.1

 
32.1

 
(22.0
)
 
75.9

Income taxes
13.4

 
11.0

 
12.1

 
(8.1
)
 
28.4

Net income (loss)
$
22.3

 
$
19.1

 
$
20.0

 
$
(13.9
)
 
$
47.5

Total assets
$
2,388.5

 
$
1,208.2

 
$
1,708.7

 
$
65.0

 
$
5,370.4

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, 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

Total 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 nine months ended September 30, 2014 (in millions):
 
ADESA
Auctions
 
IAA
 
AFC
 
Holding
Company
 
Consolidated
Operating revenues
$
908.0

 
$
666.3

 
$
184.2

 
$
—

 
$
1,758.5

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
512.5

 
410.3

 
51.8

 
—

 
974.6

Selling, general and administrative
196.7

 
73.6

 
22.1

 
65.2

 
357.6

Depreciation and amortization          
59.0

 
56.6

 
22.7

 
7.0

 
145.3

Total operating expenses
768.2

 
540.5

 
96.6

 
72.2

 
1,477.5

Operating profit (loss)
139.8

 
125.8

 
87.6

 
(72.2
)
 
281.0

Interest expense
0.7

 
0.2

 
13.8

 
50.6

 
65.3

Other income, net
(1.4
)
 
(0.5
)
 
—

 
—

 
(1.9
)
Loss on extinguishment of debt
—

 
—

 
—

 
30.3

 
30.3

Intercompany expense (income)
42.3

 
28.9

 
(17.6
)
 
(53.6
)
 
—

Income (loss) before income taxes
98.2

 
97.2

 
91.4

 
(99.5
)
 
187.3

Income taxes
35.7

 
36.0

 
34.7

 
(38.1
)
 
68.3

Net income (loss)
$
62.5

 
$
61.2

 
$
56.7

 
$
(61.4
)
 
$
119.0

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, 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

Basis of Presentation and Nature of Operations (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 0 Months Ended
Sep. 30, 2014
ADESA Auctions
network
provider
Sep. 30, 2014
IAA
network
Sep. 30, 2014
AFC
location
Mar. 11, 2014
Credit Agreement
Term Loan B-1
Mar. 11, 2014
Credit Agreement
Term Loan B-2
Mar. 11, 2014
Credit Agreement
Senior secured revolving credit facility
Mar. 11, 2014
Credit Agreement
Senior secured revolving credit facility
May 19, 2011
Original Credit Agreement
Senior secured term loan facility
May 19, 2011
Original Credit Agreement
Senior secured revolving credit facility
May 19, 2011
Original Credit Agreement
Senior secured revolving credit facility
Basis of Presentation and Nature of Operations
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
$ 250 
 
 
$ 250 
Term of debt instrument
 
 
 
3 years 
7 years 
5 years 
 
6 years 
5 years 
 
Number of sites for whole car auctions
65 
 
 
 
 
 
 
 
 
 
Number of sites for salvage vehicle auctions
 
166 
 
 
 
 
 
 
 
 
Ranking of largest providers of used vehicle auctions and related services
2 
 
 
 
 
 
 
 
 
 
Number of floorplan financing locations
 
 
111 
 
 
 
 
 
 
 
Equity Methods Investments (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Minimum
Sep. 30, 2014
Maximum
Sep. 30, 2014
TradeRev
Aug. 5, 2014
TradeRev
Aug. 5, 2014
Amortizable intangible assets
TradeRev
Equity Method Investments
 
 
 
 
 
 
 
 
 
Equity method investment, ownership percentage
50.00% 
 
50.00% 
 
 
 
 
 
 
Equity method investment, aggregate cost
$ 30 
 
$ 30 
 
 
 
 
 
 
Equity method investment, difference between carrying amount and underlying equity
 
 
 
 
 
 
 
21.9 
5.8 
Intangible asset, useful life
 
 
 
 
7 years 
15 years 
 
 
 
Other (income) expense, net
$ (0.5)
$ (0.8)
$ (1.9)
$ (2.5)
 
 
$ 0.2 
 
 
Acquisitions (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Acquisitions
 
 
Goodwill
$ 1,705.4 
$ 1,705.1 
HTL
 
 
Acquisitions
 
 
Purchase price for business acquired
24.9 
 
Present value of estimated contingent payments
7.6 
 
Maximum amount of undiscounted contingent payments related to acquisitions
8.5 
 
Purchase price for the acquired business allocated to intangible assets
11.0 
 
Goodwill
$ 4.3 
 
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 3 Months Ended 9 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 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Jun. 10, 2014
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Jun. 9, 2014
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Sep. 30, 2014
Service options
Sep. 30, 2013
Service options
Sep. 30, 2014
Service options
Sep. 30, 2013
Service options
Sep. 30, 2014
Service options
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
anniversary
installment
Sep. 30, 2014
PRSUs
Sep. 30, 2013
PRSUs
Sep. 30, 2014
PRSUs
Sep. 30, 2013
PRSUs
Mar. 31, 2014
PRSUs
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Mar. 31, 2014
PRSUs - Total Shareholder Return
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Mar. 31, 2014
PRSUs - Adjusted EPS
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan
Sep. 30, 2013
KAR LLC & Axle LLC Profit Interests
Sep. 30, 2014
Exit options
Sep. 30, 2013
Exit options
Sep. 30, 2014
Exit options
Sep. 30, 2013
Exit options
Mar. 31, 2014
Exit options
KAR Auction Services, Inc. Omnibus Plan and the Plan
Sep. 30, 2014
KAR LLC operating units
Sep. 30, 2013
KAR LLC operating units
Sep. 30, 2014
KAR LLC operating units
Sep. 30, 2013
KAR LLC operating units
Sep. 30, 2014
KAR LLC value units
Sep. 30, 2013
KAR LLC value units
Sep. 30, 2014
KAR LLC value units
Sep. 30, 2013
KAR LLC value units
Sep. 30, 2014
Axle LLC operating units
Sep. 30, 2013
Axle LLC operating units
Sep. 30, 2014
Axle LLC operating units
Sep. 30, 2013
Axle LLC operating units
Sep. 30, 2014
Axle LLC value units
Sep. 30, 2013
Axle LLC value units
Sep. 30, 2014
Axle LLC value units
Sep. 30, 2013
Axle LLC value units
Stock-Based Compensation Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum number of shares to be issued pursuant to awards
 
 
 
 
12.5 
6.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options granted (in shares)
 
 
 
 
 
 
 
 
 
 
0.9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average exercise price of options granted (in dollars per share)
 
 
 
 
 
 
 
 
 
 
$ 30.06 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term of award
 
 
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equal annual installments
 
 
 
 
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period of commencement of vesting of awards
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value of stock options granted (in dollars per share)
 
 
 
 
 
 
 
 
 
 
$ 6.37 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected lives
 
 
 
 
 
 
 
 
 
 
6 years 3 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility (as a percent)
 
 
 
 
 
 
 
 
 
 
30.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield (as a percent)
 
 
 
 
 
 
 
 
 
 
3.33% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk-free interest rate (as a percent)
 
 
 
 
 
 
 
 
 
 
1.85% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense (in dollars)
$ 5.7 
$ 12.4 
$ 26.5 
$ 16.8 
 
 
$ 1.0 
$ 0.8 
$ 2.9 
$ 2.2 
 
$ 0.9 
$ 0 
$ 2.5 
$ 0 
 
 
 
 
$ 3.8 
$ 0.3 
$ 21.1 
$ 2.3 
 
$ 0 
$ 2.6 
$ 0 
$ 3.1 
$ 0 
$ 0.7 
$ 0 
$ 0.7 
$ 0 
$ 1.9 
$ 0 
$ 2.4 
$ 0 
$ 6.1 
$ 0 
$ 6.1 
Total income tax benefit recognized (in dollars)
$ 2.1 
$ 0.4 
$ 9.6 
$ 1.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PRSUs grants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PRSUs vesting period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of PRSUs that vest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options that vest and become exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options outstanding that became exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Earnings Per Share, Basic and Diluted [Abstract]
 
 
 
 
Net Income
$ 47.5 
$ 22.8 
$ 119.0 
$ 85.3 
Shares outstanding
 
 
 
 
Weighted average common shares outstanding
140.6 
138.3 
140.0 
137.5 
Effect of dilutive stock options and restricted stock awards (in shares)
1.7 
3.0 
1.4 
2.9 
Weighted average common shares outstanding and potential common shares
142.3 
141.3 
141.4 
140.4 
Net income per share
 
 
 
 
Basic (in dollars per share)
$ 0.34 
$ 0.16 
$ 0.85 
$ 0.62 
Diluted (in dollars per share)
$ 0.33 
$ 0.16 
$ 0.84 
$ 0.61 
Shares attributable to stock options excluded from the calculation of diluted net income per share
0.5 
 
0.5 
0.2 
Stock options outstanding (in shares)
6.5 
7.8 
6.5 
7.8 
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
Sep. 30, 2014
USD ($)
Sep. 30, 2013
USD ($)
Sep. 30, 2014
USD ($)
Sep. 30, 2013
USD ($)
Dec. 31, 2013
USD ($)
Sep. 30, 2014
Minimum
Sep. 30, 2014
Floorplan receivables
USD ($)
Sep. 30, 2013
Floorplan receivables
USD ($)
Sep. 30, 2014
Floorplan receivables
USD ($)
Sep. 30, 2013
Floorplan receivables
USD ($)
Dec. 31, 2013
Floorplan receivables
USD ($)
Sep. 30, 2014
Other Loans
USD ($)
Sep. 30, 2013
Other Loans
USD ($)
Sep. 30, 2014
Other Loans
USD ($)
Sep. 30, 2013
Other Loans
USD ($)
Dec. 31, 2013
Other Loans
USD ($)
Sep. 30, 2014
AFC
USD ($)
Dec. 31, 2013
AFC
USD ($)
Sep. 30, 2014
AFC
Minimum
Sep. 30, 2014
AFC Funding Corporation
USD ($)
Sep. 30, 2014
AFCI
CAD ($)
Finance Receivables and Obligations Collateralized by Finance Receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed liquidity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800 
$ 100 
Period to define financing receivables as past due (in days)
 
 
 
 
 
31 days 
 
 
 
 
 
 
 
 
 
 
 
 
31 days 
 
 
Principal Amount of Receivables
1,285.3 
 
1,285.3 
 
1,107.6 
 
1,278.5 
 
1,278.5 
 
1,099.8 
6.8 
 
6.8 
 
7.8 
 
 
 
 
 
Principal Amount of Receivables Delinquent
2.9 
 
2.9 
 
5.1 
 
2.9 
 
2.9 
 
5.1 
0 
 
0 
 
0 
 
 
 
 
 
Net Credit Losses
3.3 
1.7 
9.6 
6.3 
 
 
3.3 
1.7 
9.6 
6.3 
 
0 
0 
0 
0 
 
 
 
 
 
 
Allowance for losses
8.0 
 
8.0 
 
8.0 
 
 
 
 
 
 
 
 
 
 
 
8.0 
8.0 
 
 
 
Finance receivables pledged as security
1,279.1 
 
1,279.1 
 
1,100.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash reserve as security for obligations of collateralized financing receivables (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
1.00% 
Obligations collateralized by finance receivables
$ 858.8 
 
$ 858.8 
 
$ 772.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 3 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Mar. 11, 2014
Dec. 31, 2013
Sep. 30, 2014
Term Loan B-1
item
Dec. 31, 2013
Term Loan B-1
Sep. 30, 2014
Term Loan B-1
Adjusted LIBOR
Sep. 30, 2014
Term Loan B-1
Base Rate
Sep. 30, 2014
Term Loan B-2
item
Mar. 11, 2014
Term Loan B-2
Dec. 31, 2013
Term Loan B-2
Sep. 30, 2014
Term Loan B-2
Adjusted LIBOR
Sep. 30, 2014
Term Loan B-2
Base Rate
Sep. 30, 2014
Term Loan B
Dec. 31, 2013
Term Loan B
Mar. 31, 2014
Term Loan B
Adjusted LIBOR
Sep. 30, 2014
Letter of credit
Mar. 11, 2014
Letter of credit
Dec. 31, 2013
Letter of credit
Mar. 11, 2014
Swing line loan
Mar. 11, 2014
Original Credit Agreement
Sep. 30, 2014
Canadian line of credit
Dec. 31, 2013
Canadian line of credit
Sep. 30, 2014
Canadian line of credit
CAD Prime
Mar. 11, 2014
Credit Agreement
Term Loan B-1
Mar. 11, 2014
Credit Agreement
Term Loan B-2
Mar. 11, 2014
Credit Agreement
Revolving credit facility
Sep. 30, 2014
Credit Agreement
Revolving credit facility
Mar. 11, 2014
Credit Agreement
Revolving credit facility
Dec. 31, 2013
Credit Agreement
Revolving credit facility
Sep. 30, 2014
Credit Agreement
Revolving credit facility
Adjusted LIBOR
Sep. 30, 2014
Credit Agreement
Revolving credit facility
Base Rate
May 19, 2011
Original Credit Agreement
Term Loan B
May 19, 2011
Original Credit Agreement
Revolving credit facility
Sep. 30, 2014
Original Credit Agreement
Revolving credit facility
Dec. 31, 2013
Original Credit Agreement
Revolving credit facility
May 19, 2011
Original Credit Agreement
Revolving credit facility
Mar. 31, 2014
Original Credit Agreement
Revolving credit facility
Adjusted LIBOR
Sep. 30, 2014
Maximum
Long-Term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total debt
$ 1,759.6 
 
$ 1,759.6 
 
 
$ 1,771.8 
$ 646.2 
$ 0 
 
 
$ 1,113.4 
 
$ 0 
 
 
$ 0 
$ 1,771.8 
 
 
 
 
 
 
$ 0 
$ 0 
 
 
 
 
$ 0 
 
$ 0 
 
 
 
 
$ 0 
$ 0 
 
 
 
Unamortized debt discount
(2.6)
 
(2.6)
 
 
(4.6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
(16.1)
 
(16.1)
 
 
(32.5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,740.9 
 
1,740.9 
 
 
1,734.7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate basis
 
 
 
 
 
 
 
 
Adjusted LIBOR 
Base Rate 
 
 
 
Adjusted LIBOR 
Base Rate 
 
 
Adjusted LIBOR 
 
 
 
 
 
 
 
CAD Prime 
 
 
 
 
 
 
Adjusted LIBOR 
Base Rate 
 
 
 
 
 
Adjusted LIBOR 
 
Interest rate basis (as a percent)
 
 
 
 
 
 
 
 
2.50% 
1.50% 
 
 
 
2.75% 
1.75% 
 
 
2.75% 
 
 
 
 
 
 
 
1.50% 
 
 
 
 
 
 
2.25% 
1.25% 
 
 
 
 
 
3.50% 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75 
 
75 
 
 
 
 
 
 
 
 
250 
 
 
 
 
 
 
 
250 
 
 
Term of debt instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
7 years 
5 years 
 
 
 
 
 
6 years 
5 years 
 
 
 
 
 
Loss on extinguishment/modification of debt
0 
0 
30.3 
5.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate floor (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.75% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum additional borrowings permitted
 
 
 
 
300 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated senior secured leverage ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.5 
Discount on Term Loan B-2 at issuance
 
 
 
 
 
 
 
 
 
 
 
(2.8)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period for amortization of discount on debt
 
 
 
 
 
 
 
 
 
 
7 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly installment payment as a percentage of original aggregate principal amount
 
 
 
 
 
 
0.25% 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash proceeds from sale lease-back, percentage
 
 
 
 
 
 
50.00% 
 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt
 
 
(1,782.2)
(49.2)
 
 
(2.8)
 
 
 
(4.8)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of scheduled quarterly installments prepaid on Term Loans
 
 
 
 
 
 
8 
 
 
 
8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' domestic subsidiaries pledged under the Credit Facility
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' first-tier foreign subsidiaries pledged under the Credit Facility
 
 
65.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate of loan (as a percent)
 
 
 
 
 
 
2.75% 
 
 
 
3.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Step down in interest rate (as a percent)
 
 
 
 
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
Commitment fee on the unused amount of the Credit Facility (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.40% 
 
 
 
 
 
 
 
 
 
 
 
The commitment fee may step down to this percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.35% 
 
 
 
 
 
 
 
 
 
 
 
Amount borrowed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
 
 
 
 
0 
 
 
 
Outstanding letters of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26.4 
 
26.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated fair value of long-term debt
$ 1,735.9 
 
$ 1,735.9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended 0 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Aug. 16, 2013
Interest rate caps
agreement
Sep. 30, 2014
Interest rate caps
Aug. 16, 2013
Interest rate caps
Sep. 30, 2014
Interest rate caps
Minimum
Sep. 30, 2014
Not designated as hedging instrument
Interest rate caps
Dec. 31, 2013
Not designated as hedging instrument
Interest rate caps
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
$ 0 
$ 2.2 
$ 2.2 
 
 
 
 
 
Aggregate notional amount
 
 
 
 
1,200 
 
 
 
Variable rate basis
 
 
 
three-month LIBOR 
 
 
 
 
Floor rate (as a percent)
 
 
 
 
 
1.00% 
 
 
Asset derivatives, fair value
 
 
 
 
 
 
$ 0.1 
$ 0.8 
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, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Interest rate caps |
Not designated as hedging instrument
 
 
 
 
Effect of the interest rate derivatives on the entity's statement of equity and consolidated statements of income
 
 
 
 
Amount of gain/(loss) recognized in income on derivative
$ 0 
$ (0.8)
$ (0.7)
$ (0.8)
Commitments and Contingencies (Details) (USD $)
9 Months Ended
Sep. 30, 2014
Commitments and Contingencies
 
Significant change in legal and regulatory proceedings
$ 0 
Accumulated Other Comprehensive Income (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Foreign currency translation gain
$ 7.1 
$ 18.5 
Unrealized gain on postretirement benefit obligation, net of tax
0.2 
0.2 
Accumulated other comprehensive income
$ 7.3 
$ 18.7 
Fair Value Measurements (Details) (Interest rate caps, USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
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
$ 0.1 
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
0.1 
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, 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
 
 
 
 
 
Sale of shares by KAR LLC
13,800,000 
17,250,000 
17,250,000 
14,950,000 
 
Amount paid to related party
 
 
 
 
$ 1.2 
Proceeds from Sale of Shares
 
 
 
 
$ 0 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
segment
Sep. 30, 2013
Dec. 31, 2013
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
$ 308.1 
$ 275.4 
$ 908.0 
$ 844.3 
 
IAA Salvage Services
217.5 
198.8 
666.3 
623.2 
 
AFC
63.5 
59.5 
184.2 
165.2 
 
Operating revenues
589.1 
533.7 
1,758.5 
1,632.7 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
328.0 
296.2 
974.6 
926.5 
 
Selling, general and administrative
116.5 
120.3 
357.6 
333.3 
 
Depreciation and amortization
48.9 
49.6 
145.3 
145.9 
 
Total operating expenses
493.4 
466.1 
1,477.5 
1,405.7 
 
Operating profit
95.7 
67.6 
281.0 
227.0 
 
Interest expense
20.3 
26.0 
65.3 
79.3 
 
Other income, net
(0.5)
(0.8)
(1.9)
(2.5)
 
Loss on extinguishment/modification of debt
0 
0 
30.3 
5.4 
 
Intercompany expense (income)
0 
0 
0 
0 
 
Income before income taxes
75.9 
42.4 
187.3 
144.8 
 
Income taxes
28.4 
19.6 
68.3 
59.5 
 
Net Income
47.5 
22.8 
119.0 
85.3 
 
Total assets
5,370.4 
5,122.0 
5,370.4 
5,122.0 
5,127.2 
Operating Segments |
ADESA Auctions
 
 
 
 
 
Segment Information
 
 
 
 
 
ADESA Auction Services
308.1 
275.4 
908.0 
844.3 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
174.6 
152.0 
512.5 
469.8 
 
Selling, general and administrative
64.1 
62.8 
196.7 
187.7 
 
Depreciation and amortization
19.7 
22.6 
59.0 
66.8 
 
Total operating expenses
258.4 
237.4 
768.2 
724.3 
 
Operating profit
49.7 
38.0 
139.8 
120.0 
 
Interest expense
0.2 
0.2 
0.7 
0.7 
 
Other income, net
(0.5)
(0.6)
(1.4)
(2.0)
 
Loss on extinguishment/modification of debt
 
 
0 
0 
 
Intercompany expense (income)
14.3 
14.8 
42.3 
45.6 
 
Income before income taxes
35.7 
23.6 
98.2 
75.7 
 
Income taxes
13.4 
9.1 
35.7 
28.2 
 
Net Income
22.3 
14.5 
62.5 
47.5 
 
Total assets
2,388.5 
2,328.7 
2,388.5 
2,328.7 
 
Operating Segments |
IAA
 
 
 
 
 
Segment Information
 
 
 
 
 
IAA Salvage Services
217.5 
198.8 
666.3 
623.2 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
135.4 
128.1 
410.3 
416.4 
 
Selling, general and administrative
23.5 
20.4 
73.6 
59.5 
 
Depreciation and amortization
19.1 
18.5 
56.6 
55.4 
 
Total operating expenses
178.0 
167.0 
540.5 
531.3 
 
Operating profit
39.5 
31.8 
125.8 
91.9 
 
Interest expense
0 
0.2 
0.2 
0.7 
 
Other income, net
(0.2)
(0.2)
(0.5)
(0.5)
 
Loss on extinguishment/modification of debt
 
 
0 
0 
 
Intercompany expense (income)
9.6 
9.6 
28.9 
28.8 
 
Income before income taxes
30.1 
22.2 
97.2 
62.9 
 
Income taxes
11.0 
8.4 
36.0 
23.6 
 
Net Income
19.1 
13.8 
61.2 
39.3 
 
Total assets
1,208.2 
1,180.0 
1,208.2 
1,180.0 
 
Operating Segments |
AFC
 
 
 
 
 
Segment Information
 
 
 
 
 
AFC
63.5 
59.5 
184.2 
165.2 
 
Operating expenses
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
18.0 
16.1 
51.8 
40.3 
 
Selling, general and administrative
6.8 
6.4 
22.1 
18.2 
 
Depreciation and amortization
7.7 
7.2 
22.7 
20.3 
 
Total operating expenses
32.5 
29.7 
96.6 
78.8 
 
Operating profit
31.0 
29.8 
87.6 
86.4 
 
Interest expense
4.7 
4.6 
13.8 
12.3 
 
Other income, net
0 
0 
0 
0 
 
Loss on extinguishment/modification of debt
 
 
0 
0.7 
 
Intercompany expense (income)
(5.8)
(5.6)
(17.6)
(15.2)
 
Income before income taxes
32.1 
30.8 
91.4 
88.6 
 
Income taxes
12.1 
12.0 
34.7 
34.2 
 
Net Income
20.0 
18.8 
56.7 
54.4 
 
Total assets
1,708.7 
1,531.4 
1,708.7 
1,531.4 
 
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
22.1 
30.7 
65.2 
67.9 
 
Depreciation and amortization
2.4 
1.3 
7.0 
3.4 
 
Total operating expenses
24.5 
32.0 
72.2 
71.3 
 
Operating profit
(24.5)
(32.0)
(72.2)
(71.3)
 
Interest expense
15.4 
21.0 
50.6 
65.6 
 
Other income, net
0.2 
0 
0 
0 
 
Loss on extinguishment/modification of debt
 
 
30.3 
4.7 
 
Intercompany expense (income)
(18.1)
(18.8)
(53.6)
(59.2)
 
Income before income taxes
(22.0)
(34.2)
(99.5)
(82.4)
 
Income taxes
(8.1)
(9.9)
(38.1)
(26.5)
 
Net Income
(13.9)
(24.3)
(61.4)
(55.9)
 
Total assets
$ 65.0 
$ 81.9 
$ 65.0 
$ 81.9 
 
Subsequent Event (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
0 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Oct. 29, 2014
Subsequent event
Oct. 29, 2014
Subsequent event
Subsequent Event
 
 
 
 
Stock repurchase program, authorized amount
 
 
 
$ 300 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
 
 
Stock repurchase program expiration date
 
 
Oct. 28, 2016