UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 27, 2020~~March 28, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38580

IAA, Inc.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)						83-1030538 (I.R.S. Employer Identification No.)

Two Westbrook Corporate Center, Suite 500, Westchester, Illinois, 60154

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (708) 492-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

IAA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐☒

Accelerated filer ☐

Non-accelerated filer ☒☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~October 28, 2020, 134,465,274~~April 27, 2021, 134,755,385 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

Table of Contents

IAA, Inc.

Table of Contents

STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and which are subject to certain risks, trends and uncertainties. In particular, statements made in this report on Form 10-Q that are not historical facts may be forward-looking statements. Words such as "should," "may," "will," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions identify forward- looking statements. Such statements include statements regarding the impact of COVID-19 on our business; our future growth; ~~anticipated cost savings, revenue increases, credit losses~~expectations regarding vehicle volume sales, results of operations and capital expenditures; ~~tax rates and assumptions;~~ strategic initiatives, greenfields and acquisitions; our competitive position and retention of customers; and our continued investment in information technology. Such statements are based on management’s current expectations, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: uncertainties regarding the duration and severity of the COVID-19 pandemic and measures intended to reduce its spread; the loss of one or more significant vehicle ~~seller customers~~suppliers or a reduction in significant volume from such ~~sellers;~~suppliers; our ability to meet or exceed customers’ demand and expectations; significant current competition and the introduction of new competitors or other disruptive entrants in our industry; the risk that our facilities lack the capacity to accept additional vehicles and our ability to obtain land or renew/enter into new leases at commercially reasonable rates; our ability to effectively maintain or update information and technology systems; our ability to implement and maintain measures to protect against cyberattacks and comply with applicable privacy and data security requirements; our ability to successfully implement our business strategies or realize expected cost savings and revenue enhancements, including from our margin expansion ~~program;~~plan; business development activities, including acquisitions and integration of acquired businesses; our expansion into markets outside the U.S. and the operational, competitive and regulatory risks facing our non-U.S. based operations; our reliance on subhaulers and trucking fleet operations; changes in used-vehicle prices and the volume of damaged and total loss vehicles we purchase; economic conditions, including fuel prices, commodity prices, foreign exchange rates and interest rate fluctuations; trends in new- and used-vehicle sales and incentives; and other risks and uncertainties identified in our filings with the Securities and Exchange Commission (the “SEC”), including under Item 1A “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on ~~March 18, 2020 and our Quarterly Report on Form 10-Q filed with the SEC on May 6, 2020,~~February 22, 2021, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC, including subsequent Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. Many of these risk factors are outside of our control, and as such, they involve risks which are not currently known that could cause actual results to differ materially from those discussed or implied herein. The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

IAA, Inc.

Consolidated Statements of Income

(In millions, except per share data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019				March 28, 2021		March 29, 2020
Revenues		$	338.0	$	357.3	$	1,001.4	$	1,080.9
Revenues:										Revenues:
Service revenues										Service revenues		$	360.4	$	334.0
Vehicle sales										Vehicle sales		63.1		32.6
Total revenues										Total revenues		423.5		366.6
Operating expenses:	Operating expenses:									Operating expenses:
Cost of services (exclusive of depreciation and amortization)		199.7		221.3		615.8		667.4
Cost of services*										Cost of services*		196.4		203.2
Cost of vehicle sales*										Cost of vehicle sales*		54.4		27.8
Selling, general and administrative	Selling, general and administrative	34.9		38.9		107.2		106.2		Selling, general and administrative		43.4		38.0
Depreciation and amortization	Depreciation and amortization	19.4		22.1		61.5		66.0		Depreciation and amortization		19.8		22.5
Total operating expenses	Total operating expenses	254.0		282.3		784.5		839.6		Total operating expenses		314.0		291.5
Operating profit	Operating profit	84.0		75.0		216.9		241.3		Operating profit		109.5		75.1
Interest expense, net	Interest expense, net	13.3		17.5		43.1		39.1		Interest expense, net		13.0		16.0
Other income, net	Other income, net	(0.2)		0		(0.8)		(0.1)		Other income, net		(0.4)		(0.7)
Income before income taxes	Income before income taxes	70.9		57.5		174.6		202.3		Income before income taxes		96.9		59.8
Income taxes	Income taxes	18.1		15.7		43.9		54.7		Income taxes		24.4		15.1
Net income	Net income	$	52.8	$	41.8	$	130.7	$	147.6	Net income		$	72.5	$	44.7
Net income per share
Net income per share:										Net income per share:
Basic	Basic	$	0.39	$	0.31	$	0.98	$	1.11	Basic		$	0.54	$	0.33
Diluted	Diluted	$	0.39	$	0.31	$	0.97	$	1.10	Diluted		$	0.54	$	0.33

*Exclusive of depreciation and amortization

See accompanying condensed notes to consolidated financial statements

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IAA, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019				March 28, 2021		March 29, 2020
Net income	Net income	$	52.8	$	41.8	$	130.7	$	147.6	Net income		$	72.5	$	44.7
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	3.1		(1.8)		(2.6)		(4.5)		Foreign currency translation gain (loss)		3.0		(7.6)
Comprehensive income	Comprehensive income	$	55.9	$	40.0	$	128.1	$	143.1	Comprehensive income		$	75.5	$	37.1

See accompanying condensed notes to consolidated financial statements

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IAA, Inc.

Consolidated Balance Sheets

(in millions, except per share amounts)


		September 27, 2020		December 29, 2019			March 28, 2021		December 27, 2020
		(Unaudited)		(Audited)			(Unaudited)		(Audited)
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	216.2	$	47.1	Cash and cash equivalents	$	314.9	$	232.8
Accounts receivable, net of allowances of $7.5 and $4.2		323.5		335.9
Accounts receivable, net of allowances of $8.3 and $8.0						Accounts receivable, net of allowances of $8.3 and $8.0	366.9		374.8
Prepaid consigned vehicle charges	Prepaid consigned vehicle charges	49.3		50.1		Prepaid consigned vehicle charges	52.9		53.3
Other current assets	Other current assets	29.8		26.9		Other current assets	29.1		31.1
Total current assets	Total current assets	618.8		460.0		Total current assets	763.8		692.0
Non-current assets	Non-current assets					Non-current assets
Operating lease right-of-use assets, net of accumulated amortization of $140.4 and $75.2		823.7		735.9
Property and equipment, net of accumulated depreciation of $470.6 and $438.3		242.6		246.9
Operating lease right-of-use assets, net of accumulated amortization of $186.5 and $163.9						Operating lease right-of-use assets, net of accumulated amortization of $186.5 and $163.9	879.3		866.8
Property and equipment, net of accumulated depreciation of $492.5 and $481.9						Property and equipment, net of accumulated depreciation of $492.5 and $481.9	270.7		259.8
Goodwill	Goodwill	540.3		541.3		Goodwill	543.3		542.3
Intangible assets, net of accumulated amortization of $493.4 and $465.9		146.7		151.7
Intangible assets, net of accumulated amortization of $514.9 and $504.3						Intangible assets, net of accumulated amortization of $514.9 and $504.3	149.1		150.6
Other assets	Other assets	16.7		15.4		Other assets	19.6		17.4
Total non-current assets	Total non-current assets	1,770.0		1,691.2		Total non-current assets	1,862.0		1,836.9
Total assets	Total assets	$	2,388.8	$	2,151.2	Total assets	$	2,625.8	$	2,528.9

Liabilities and Stockholders' Deficit	Liabilities and Stockholders' Deficit					Liabilities and Stockholders' Deficit
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	101.3	$	96.4	Accounts payable	$	100.4	$	122.6
Short-term right-of-use operating lease liability	Short-term right-of-use operating lease liability	75.6		68.6		Short-term right-of-use operating lease liability	80.2		78.1
Accrued employee benefits and compensation expenses	Accrued employee benefits and compensation expenses	27.6		29.4		Accrued employee benefits and compensation expenses	24.0		23.4

Current maturities of long-term debt						Current maturities of long-term debt	6.0		4.0
Other accrued expenses	Other accrued expenses	61.9		49.3		Other accrued expenses	83.5		54.4
Total current liabilities	Total current liabilities	266.4		243.7		Total current liabilities	294.1		282.5
Non-current liabilities	Non-current liabilities					Non-current liabilities
Long-term debt	Long-term debt	1,250.9		1,254.7		Long-term debt	1,247.1		1,248.0
Long-term right-of-use operating lease liability	Long-term right-of-use operating lease liability	794.1		709.5		Long-term right-of-use operating lease liability	848.8		836.6
Deferred income tax liabilities	Deferred income tax liabilities	63.1		63.7		Deferred income tax liabilities	69.0		65.7
Other liabilities	Other liabilities	17.9		16.8		Other liabilities	24.6		26.7
Total non-current liabilities	Total non-current liabilities	2,126.0		2,044.7		Total non-current liabilities	2,189.5		2,177.0
Commitments and contingencies (Note 7)
Stockholders' deficit
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)	0		0
Stockholders' equity						Stockholders' equity
Preferred stock, $0.01 par value: authorized, 150.0 shares; issued and outstanding, none	Preferred stock, $0.01 par value: authorized, 150.0 shares; issued and outstanding, none	0		0		Preferred stock, $0.01 par value: authorized, 150.0 shares; issued and outstanding, none	0		0
Common stock, $0.01 par value: authorized, 750.0 shares; issued and outstanding, 134.4 shares at September 27, 2020 and 133.6 shares at December 29, 2019		1.3		1.3
Common stock, $0.01 par value: authorized, 750.0 shares; issued and outstanding, 134.8 shares at March 28, 2021 and 134.5 shares at December 27, 2020						Common stock, $0.01 par value: authorized, 750.0 shares; issued and outstanding, 134.8 shares at March 28, 2021 and 134.5 shares at December 27, 2020	1.3		1.3
Additional paid-in capital	Additional paid-in capital	9.0		3.5		Additional paid-in capital	9.3		12.0
Retained earnings (deficit)		3.6		(127.1)
Retained earnings						Retained earnings	140.2		67.7
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(17.5)		(14.9)		Accumulated other comprehensive loss	(8.6)		(11.6)
Total stockholders' deficit		(3.6)		(137.2)
Total liabilities and stockholders' deficit		$	2,388.8	$	2,151.2
Total stockholders' equity						Total stockholders' equity	142.2		69.4
Total liabilities and stockholders' equity						Total liabilities and stockholders' equity	$	2,625.8	$	2,528.9

See accompanying condensed notes to consolidated financial statements

Table of Contents

IAA, Inc.

Consolidated Statements of Stockholders' ~~Deficit~~Equity (Deficit)

(In millions)

(Unaudited)


		Three Months Ended September 27, 2020												Three Months Ended March 28, 2021
		Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit			Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance at June 28, 2020		134.0	$	1.3	$	1.1	$	(49.2)	$	(20.6)	$	(67.4)
Balance at December 27, 2020													Balance at December 27, 2020	134.5	$	1.3	$	12.0	$	67.7	$	(11.6)	$	69.4
Net income	Net income	—	—		—		52.8		—		52.8		Net income	—	—		—		72.5		—		72.5
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	—	—		—		—		3.1		3.1		Foreign currency translation adjustments, net of tax	—	—		—		—		3.0		3.0
Stock-based compensation expense	Stock-based compensation expense	—	—		2.0		—		—		2.0		Stock-based compensation expense	—	—		2.8		—		—		2.8
Common stock issued for the exercise and vesting of stock-based awards	Common stock issued for the exercise and vesting of stock-based awards	0.4	—		6.1		—		—		6.1		Common stock issued for the exercise and vesting of stock-based awards	0.4	—		0.1		—		—		0.1
Common stock issued for employee stock purchase plan	Common stock issued for employee stock purchase plan	—	—		0.7		—		—		0.7		Common stock issued for employee stock purchase plan	—	—		0.4		—		—		0.4
Withholding taxes on stock-based awards	Withholding taxes on stock-based awards	—	—		(0.9)		—		—		(0.9)		Withholding taxes on stock-based awards	(0.1)	—		(6.0)		—		—		(6.0)
Balance at September 27, 2020		134.4	$	1.3	$	9.0	$	3.6	$	(17.5)	$	(3.6)
Balance at March 28, 2021													Balance at March 28, 2021	134.8	$	1.3	$	9.3	$	140.2	$	(8.6)	$	142.2

Three Months Ended September 29, 2019
Common
Stock
Shares Common
Stock
Amount Additional
Paid-In
Capital Accumulated Deficit Accumulated
Other
Comprehensive
Loss Total Stockholders' Deficit
Balance at July 1, 2019 133.4 $ 1.3 $ 0 $ (214.5) $ (15.7) $ (228.9)
Net income — — — 41.8 — 41.8
Foreign currency translation adjustments, net of tax — — — — (1.8) (1.8)
Stock-based compensation expense — — 1.4 — — 1.4
Common stock issued for the exercise and vesting of stock-based awards 0.1 — 0.7 — — 0.7
Withholding taxes on stock-based awards — — (0.1) — — (0.1)
Balance at September 29, 2019 133.5 $ 1.3 $ 2.0 $ (172.7) $ (17.5) $ (186.9)

~~See accompanying condensed notes to consolidated financial statements~~

~~Table of Contents~~

~~IAA, Inc.~~

~~Consolidated Statements of Stockholders' Deficit (continued)~~

~~(In millions)~~

~~(Unaudited)~~

Nine Months Ended September 27, 2020
Common
Stock
Shares Common
Stock
Amount Additional
Paid-In
Capital Retained Earnings (Deficit) Accumulated
Other
Comprehensive
Loss Total Stockholders' Deficit
Balance at December 29, 2019 133.6 $ 1.3 $ 3.5 $ (127.1) $ (14.9) $ (137.2)
Net income — — — 130.7 — 130.7
Foreign currency translation adjustments, net of tax — — — — (2.6) (2.6)
Stock-based compensation expense — — 6.5 — — 6.5
Common stock issued for the exercise and vesting of stock-based awards 1.0 — 7.2 — — 7.2
Common stock issued for employee stock purchase plan — — 0.7 — — 0.7
Withholding taxes on stock-based awards (0.2) — (8.9) — — (8.9)
Balance at September 27, 2020 134.4 $ 1.3 $ 9.0 $ 3.6 $ (17.5) $ (3.6)

Nine Months Ended September 29, 2019
Common
Stock
Shares Common
Stock
Amount Additional
Paid-In
Capital Accumulated Deficit Net Parent Investment Accumulated
Other
Comprehensive
Loss Total Stockholders' Equity (Deficit)
Balance at December 30, 2018 0 $ 0 $ 0 $ 0 $ 576.2 $ (13.0) $ 563.2
Cumulative effect adjustment for adoption of ASC Topic 842, net of tax — — — — 1.1 — 1.1
Net income — — — 41.8 105.8 — 147.6
Foreign currency translation adjustments, net of tax — — — — — (4.5) (4.5)
Stock-based compensation expense — — 1.4 — 1.9 — 3.3
Common stock issued for the exercise and vesting of stock-based awards 0.1 — 0.7 — — — 0.7
Withholding taxes on stock-based awards — — (0.1) — — — (0.1)
Reclassification of net parent investment to common stock and additional paid-in capital 133.4 1.3 — (214.5) 213.2 — 0
Dividend paid to KAR — — — (1,278.0) — (1,278.0)
Net transfer to Parent and affiliates — — — — 379.8 — 379.8
Balance at September 29, 2019 133.5 $ 1.3 $ 2.0 $ (172.7) $ 0 $ (17.5) $ (186.9)


	Three Months Ended March 29, 2020
	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
Balance at December 30, 2019	133.6	$	1.3	$	3.5	$	(127.1)	$	(14.9)	$	(137.2)
Net income	—	—		—		44.7		—		44.7
Foreign currency translation adjustments, net of tax	—	—		—		—		(7.6)		(7.6)
Stock-based compensation expense	—	—		2.1		—		—		2.1
Common stock issued for the exercise and vesting of stock-based awards	0.3	—		0.8		—		—		0.8
Withholding taxes on stock-based awards	—	—		(6.4)		—		—		(6.4)
Balance at March 29, 2020	133.9	$	1.3	$	0	$	(82.4)	$	(22.5)	$	(103.6)

See accompanying condensed notes to consolidated financial statements

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IAA, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


		Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Operating activities	Operating activities					Operating activities
Net income	Net income	$	130.7	$	147.6	Net income	$	72.5	$	44.7
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	61.5		66.0		Depreciation and amortization	19.8		22.5
Operating lease expense	Operating lease expense	100.7		86.7		Operating lease expense	35.8		32.7
Stock-based compensation	Stock-based compensation	6.5		3.2		Stock-based compensation	2.8		2.1
Provision for credit losses	Provision for credit losses	3.8		2.0		Provision for credit losses	0.3		0.7
Amortization of debt issuance costs	Amortization of debt issuance costs	3.1		1.1		Amortization of debt issuance costs	1.1		1.0
Deferred income taxes	Deferred income taxes	(0.6)		0.2		Deferred income taxes	3.3		(0.3)
Gain on disposal of fixed assets	Gain on disposal of fixed assets	(0.5)		0		Gain on disposal of fixed assets	(0.2)		(0.1)

Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:					Changes in operating assets and liabilities, net of acquisitions:
Operating lease payments	Operating lease payments	(96.7)		(94.5)		Operating lease payments	(34.1)		(31.4)
Accounts receivable and other assets	Accounts receivable and other assets	1.4		11.5		Accounts receivable and other assets	8.1		16.0
Accounts payable and accrued expenses	Accounts payable and accrued expenses	55.3		20.8		Accounts payable and accrued expenses	11.9		9.4
Net cash provided by operating activities	Net cash provided by operating activities	265.2		244.6		Net cash provided by operating activities	121.3		97.3
Investing activities	Investing activities					Investing activities
Acquisition of businesses (net of cash acquired)		0		(16.8)

Purchases of property, equipment and computer software	Purchases of property, equipment and computer software	(41.9)		(56.4)		Purchases of property, equipment and computer software	(30.3)		(10.6)
Proceeds from the sale of property and equipment	Proceeds from the sale of property and equipment	0.5		0.1		Proceeds from the sale of property and equipment	0.2		0.1
Other						Other	(1.0)		0
Net cash used by investing activities	Net cash used by investing activities	(41.4)		(73.1)		Net cash used by investing activities	(31.1)		(10.5)
Financing activities	Financing activities					Financing activities
Net decrease in book overdrafts	Net decrease in book overdrafts	(33.6)		(51.4)		Net decrease in book overdrafts	0		(33.6)
Proceeds from debt issuance		0		1,300.0
Dividend paid to KAR		0		(1,278.0)

Payments of long-term debt	Payments of long-term debt	(4.0)		0		Payments of long-term debt	0		(4.0)
Finance lease payments	Finance lease payments	(11.4)		(10.9)		Finance lease payments	(3.1)		(3.8)
Net cash transfers to Parent and affiliates		0		(117.7)
Issuance of common stock under stock plans	Issuance of common stock under stock plans	7.2		0.7		Issuance of common stock under stock plans	0.1		0.8
Proceeds from issuance of employee stock purchase plan shares	Proceeds from issuance of employee stock purchase plan shares	0.7		0		Proceeds from issuance of employee stock purchase plan shares	0.4		0
Tax withholding payments for vested RSUs	Tax withholding payments for vested RSUs	(8.9)		(0.1)		Tax withholding payments for vested RSUs	(6.0)		(6.4)
Deferred financing costs		(2.9)		(25.2)
Payments of contingent consideration		(1.5)		0

Net cash used by financing activities	Net cash used by financing activities	(54.4)		(182.6)		Net cash used by financing activities	(8.6)		(47.0)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(0.3)		(4.1)		Effect of exchange rate changes on cash	0.5		(0.8)
Net increase (decrease) in cash and cash equivalents		169.1		(15.2)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	82.1		39.0
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	47.1		48.3		Cash and cash equivalents at beginning of period	232.8		47.1
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	216.2	$	33.1	Cash and cash equivalents at end of period	$	314.9	$	86.1
Cash paid for interest, net	Cash paid for interest, net	$	34.5	$	0.3	Cash paid for interest, net	$	5.1	$	8.3
Cash paid for taxes, net	Cash paid for taxes, net	$	44.3	$	57.7	Cash paid for taxes, net	$	1.0	$	4.0

See accompanying condensed notes to consolidated financial statements

Table of Contents

IAA, Inc.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Note 1—Basis of Presentation and Nature of Operations

Description of Business

IAA, Inc., together with its subsidiaries (collectively referred to herein as “IAA” and "the Company") is a leading global digital marketplace connecting vehicle buyers and sellers. Leveraging leading-edge technology and focusing on innovation, IAA's unique platform facilitates the marketing and sale of total loss, damaged and low-value vehicles for a full spectrum of sellers. Headquartered in Westchester, Illinois, the Company has more than 200 facilities throughout the United States, Canada and the United Kingdom. The Company serves a global buyer base and a full spectrum of sellers, including insurance companies, dealerships, fleet lease and rental car companies, and charitable organizations. The Company offers sellers a comprehensive suite of services aimed at maximizing vehicle value, reducing administrative costs, shortening selling cycle time and delivering the highest economic returns. The Company's solutions provide global buyers with the vehicles they need to, among other things, fulfill their vehicle rebuild requirements, replacement part inventory or scrap demand. IAA provides global buyers multiple bidding/buying digital channels, innovative vehicle merchandising, efficient evaluation services and ~~digital~~online bidding tools, enhancing the overall purchasing experience.

The Company operates in 2 reportable segments: United States and International. The Company earns fees for its services from both buyers and sellers of vehicles sold through its channels.

~~Separation and Distribution~~

On February 27, 2018, KAR Auction Services, Inc. (“KAR” or “ Former Parent”), a Delaware corporation, announced a plan to pursue the separation and spin-off (the “Separation”) of its salvage auction business into a separate public company, IAA Spinco Inc. IAA Spinco Inc. was incorporated in Delaware on June 19, 2018 and was renamed IAA, Inc. on June 27, 2019. On June 28, 2019 (the "Separation Date"), KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA to the holders of record of KAR's common stock on June 18, 2019, on a pro rata basis (the "Distribution"). On the Separation Date, each KAR common stockholder of record received 1 share of IAA common stock for every 1 share of KAR common stock held by such stockholder as of the record date. As a result of the Distribution, KAR does not retain any ownership interest in IAA. The Distribution was made pursuant to the Separation and Distribution Agreement, dated June 27, 2019 (the "Separation and Distribution Agreement"), pursuant to which KAR contributed the subsidiaries that operated the salvage auction business to IAA. The Distribution is expected to be a tax-free transaction under provisions of the Internal Revenue Code. Following the Distribution, IAA became an independent publicly-traded company and is listed on the New York Stock Exchange under the symbol “IAA”.

In connection with the Separation, on the Separation Date, the Company paid a dividend to KAR of $1,278.0 million, which included $456.6 million to settle intercompany debt and $40.9 million for certain fixed assets transferred to the Company by KAR on the Separation Date. The Company also paid KAR $117.7 million to settle other intercompany accounts in connection with the Separation.

In connection with the Separation, the Company also entered into a non-compete and various other ancillary agreements to effect the Separation and provide a framework for the Company's relationship with KAR after the Separation, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provide for the allocation of assets, employees, liabilities and obligations attributable to periods prior to, at and after the Company's Separation from KAR and govern certain relationships between the Company and KAR after the Separation. For further information regarding these agreements, see ~~Note 2 - Relationship with KAR and Related Entities.~~

Basis of Presentation

Until the Separation Date, the Company operated as a separate reportable segment within KAR and, since the Separation Date, the Company has operated independently from KAR. The accompanying unaudited consolidated financial statements for the period from December 31, 2018 to the Separation Date and condensed notes related thereto have been prepared from KAR’s historical accounting records and are presented on a stand-alone basis as if IAA's operations had been conducted independently from KAR for all periods prior to the Separation Date. Accordingly, prior to the Separation Date, KAR’s net investment in these operations ("Net Parent Investment") was shown in lieu of stockholder’s deficit in the unaudited consolidated financial statements. The Company's historical results of operations, financial position and cash flows presented in the unaudited consolidated financial statements may not be indicative of what they would have been had the Company actually been a

~~separate stand-alone entity during such periods, nor are they necessarily indicative of the Company's future results of operations, financial position and cash flows.~~

IAA is comprised of certain stand-alone legal entities for which discrete financial information is available. The unaudited consolidated statements of income include all revenues and costs directly attributable to IAA, including costs for functions and services used by the Company. Prior to the Separation Date, certain shared costs were directly charged to the Company by KAR based on specific identification or other allocation methods. The Company's results of operations prior to the Separation Date also include allocations of costs for administrative functions and services performed on behalf of the Company by centralized staff groups within KAR. Current and deferred income taxes and related tax expense have been determined based on the Company's stand-alone results by applying Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, ~~Income Taxes~~, to the Company's operations in each country as if the Company was a separate taxpayer (i.e., following the separate return methodology). Allocation methodologies were applied to certain shared costs to allocate amounts to the Company as discussed further in ~~Note 2 - Relationship with KAR and Related Entities.~~

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 unaudited 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~~results for the periods presented. Financial results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December ~~29, 2019~~27, 2020 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on ~~March 18, 2020.~~

~~Fiscal Periods~~February 22, 2021.

The Company's fiscal year consists of 52 weeks with every fifth year consisting of 53 weeks and ending either the last Sunday in December or the first Sunday in January. ~~Each of fiscal 2019~~Fiscal 2021 contains 53 weeks and fiscal 2020 ~~contain~~contained 52 weeks.

Use of Estimates

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect the Company's results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies.

Reclassification

~~Certain amounts~~"Revenues" reported in the ~~Company's Quarterly Report on Form 10-Q filed with~~consolidated statements of income and segment information footnote in the ~~SEC on November 13, 2019 have~~prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Service revenues" and "Vehicle sales" to conform to the current ~~year’s~~year's presentation. ~~The reclassification is related~~

"Cost of services" reported in the consolidated statements of income and segment information footnote in the prior period financial statements for the three months ended March 29, 2020 has been reclassified between "Cost of services" and "Cost of vehicle sales" to conform to the presentation of outstanding checks of one of the Company's subsidiaries. The reclassification reduced cash and cash equivalents by $11.7 million, and decreased other accrued expenses by the same amount at December 30, 2018, and reduced cash and cash equivalents by $16.7 million and decreased other accrued expenses by $5.0 million as of September 29, 2019. As a result of this reclassification, certain line items have been amended in the Consolidated Statements of Cash Flows.current year's presentation.

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements

In ~~August 2018,~~December 2019, the ~~FASB~~Financial Accounting Standards Board issued Accounting Standards Update ("ASU") ~~2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)~~2019-12, Income Taxes (Topic 740): ~~Customer's~~Simplifying the Accounting for ~~Implementation Costs Incurred~~Income Taxes, which simplifies the accounting for income taxes in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to

~~develop or obtain internal-use software.~~various areas. The adoption of ASU ~~2018-15~~2019-12 on December ~~30, 2019~~28, 2020 did not have ~~a material impact on the Company's consolidated financial statements.~~

In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The adoption of ASU 2017-4 on December 30, 2019 did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which updates the guidance related to the measurement of credit losses on financial instruments, including trade receivables. This ASU requires the recognition of credit losses on financial instruments based on an estimate of expected losses, replacing the incurred loss model in the prior guidance. The adoption of ASU 2016-13 on December 30, 2019 did not have a materialany impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company does not believe that any recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures.

Note 2—Relationship with KAR and Related Entities

Prior to ~~the Separation Date,~~June 28, 2019, the Company was ~~managed~~a subsidiary of KAR Auto Action Services, Inc. ("KAR"). On June 28, 2019, KAR completed the distribution of 100% of the issued and ~~operated~~ outstanding shares of common stock of IAA and IAA became an independent publicly-traded company.

In connection with the separation (the "Separation") from KAR on June 28, 2019, the Company entered into a non-compete and various other ancillary agreements to effect the Separation and provide a framework for the Company's relationship with KAR after the Separation, including a transition services agreement, a tax matters agreement and an employee matters agreement. See Note 3 - Relationship with KAR and Related Entities in the ~~normal course of business with other affiliates of KAR. Accordingly, certain shared costs have been allocated~~notes to the Company and reflected as expenses in the stand-alone unaudited consolidated financial statements. The Company considers the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of KAR attributable to the Company for purposes of the stand-alone financial statements; however, the expenses reflected in the unaudited consolidated financial statements ~~may not be indicative of~~included in our Annual Report on Form 10-K for the actual expenses that would have been incurred during the periods presented if the Company historically operated as a separate, stand-alone entity. In addition, the expenses reflected in these unaudited consolidated financial statements may not be indicative of expenses that will be incurred in the future by the Company.

~~Transactions between KAR and the Company, with the exception of purchase transactions and reimbursements~~fiscal year ended December 27, 2020 for payments made to third-party service providers by KAR on behalf of the Company, are reflected in equity in the nine months ended September 29, 2019 Consolidated Statements of Stockholders' Deficit as “Net Parent Investment” and in the nine months ended September 29, 2019 Consolidated Statements of Cash Flows as a financing activity in “Net cash transfers to Parent and affiliates.”

~~Corporate Costs/Allocations~~

These unaudited consolidated financial statements include corporate costs incurred by KAR for services that were provided to or on behalf of the Company. These costs consist of allocated cost pools and identifiable costs. Corporate costs were directly charged to, or allocated to, the Company using methods management believes are consistent and reasonable. The identifiable costs were recorded based on dedicated employee assignments. The method for allocating corporate function costs was based on various proportionate formulas involving allocation factors. The methods for allocating corporate administration costs were based on revenue, headcount or the proportion of related expenses. However, the expenses reflected in these unaudited consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if the Company historically operated as a separate, stand-alone entity. All corporate charges and allocations have been deemed paid to KAR in the period in which the cost was recorded in the Consolidated Statements of Income.additional information.

Allocated corporate costs included in selling, general and administrative expenses were $2.8 million for the nine months ended September 29, 2019. The allocated corporate costs were associated with human resources, risk management, information technology and certain finance and other functions.

After the Separation Date, the Company is invoiced for services provided by KAR under the transition services agreement described below and, therefore, will no longer reflect these allocations in the Consolidated Statements of Income. Costs incurred related to the transition services agreement are recorded in selling, general, and administrative expenses.

~~Cash Management and Financing~~

KAR generally used a centralized approach to cash management and financing its operations, including the operations of IAA. Accordingly, none of KAR’s corporate cash and cash equivalents was allocated to IAA in the historical consolidated financial

statements. Prior to the Separation Date, cash transferred daily, based on IAA’s balances, to centralized accounts maintained by KAR. As cash was disbursed or received by KAR, it was accounted for by IAA through the Net Parent Investment.

~~Transactions with Other KAR Businesses~~

The Company purchases goods and services from KAR’s other businesses. The cost of products and services obtained from these other businesses was $0.2 million and $0.3 million for the three months ended ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019, respectively, and $0.7 million and $0.8 million for the nine months ended September 27, 2020 and September 29, 2019,~~ respectively.

~~Non-Compete Agreement~~

Pursuant to the Separation and Distribution Agreement, the Company agreed not to compete with KAR in certain non-salvage activities for a period of five years following the Separation Date in certain jurisdictions, subject to certain exceptions. The Company is expressly permitted to continue to conduct its salvage auction business as conducted immediately prior to the Separation Date. The exceptions also permit the Company to conduct certain non-salvage business, in some cases subject to a revenue sharing mechanism in the event such business exceeds specified volume limits or other thresholds.

~~Transition Services Agreement~~

Under the transition services agreement, KAR and its subsidiaries provide, on an interim, transitional basis, various services to IAA for a period of up to two years from the Separation Date. The services provided include information technology, accounts payable, payroll, and other financial functions and administrative services. From time to time, IAA may provide similar services to KAR under the transition services agreement.

~~Tax Matters Agreement~~

The tax matters agreement generally governs IAA's and KAR’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Separation, the Distribution or certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the Separation Date, as well as tax periods beginning after the date of the Distribution.

In addition, the tax matters agreement imposes certain restrictions on the Company and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the Separation, the Distribution and certain related transactions. The tax matters agreement also provides special rules that allocate tax liabilities in the event the Separation, the Distribution, or certain related transactions fail to qualify as tax-free for U.S. federal income tax purposes.

~~Employee Matters Agreement~~

The employee matters agreement allocated liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The employee matters agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company. The employee matters agreement provides that, unless otherwise specified, KAR will be responsible for liabilities associated with employees who are employed by KAR following the Separation, former employees whose last employment was with the KAR businesses and certain specified current and former corporate employees, and the Company is responsible for liabilities associated with employees who are employed by it following the Separation, former employees whose last employment was with the Company's businesses and certain specified current and former corporate employees.

Note 3—Stock-Based Compensation Plans

Prior to the Separation, KAR issued equity awards from time to time to select employees and non-employee directors

of IAA. In connection with the Separation, IAA created its own equity plan, the 2019 Omnibus Stock and Incentive Plan (as amended, the "2019 OSIP"), as described below under 2019 Omnibus Stock and Incentive Plan.

The employee matters agreement entered into with KAR in connection with the Separation required that the outstanding KAR equity awards held by IAA employees and non-employee directors be converted into adjusted awards of IAA pursuant to the 2019 OSIP. The awards were adjusted based on the following principles:

•For each award recipient, the intent was to maintain the economic value of those awards before and after June 28, 2019, the ~~Separation Date;~~date of the Separation; and

•The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain performance-based restricted stock units ("PRSUs") granted in 2019 were subject to adjusted performance criteria. Such PRSUs were converted into time-based restricted stock units ("RSUs") with two-year cliff vesting in February 2020, since the adjusted performance criteria were determined to have been met.

2019 Omnibus Stock and Incentive Plan

On June 27, 2019, the Company's board of directors approved the 2019 OSIP. The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors, and consultants of the Company whose contributions are essential to the growth and success of the Company, in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability for the Company.

Benefits granted under the 2019 OSIP may be granted in any one or a combination of (i) options to purchase IAA common stock; (ii) IAA share appreciation rights (“SARs”); (iii) restricted shares of IAA common stock; (iv) other IAA stock-based awards; or (v) other cash-based awards. Options, restricted shares, and other share-based awards or cash awards may constitute performance-based awards. The granting or vesting of any performance-based awards will be based on achievement of performance objectives that are based on one or more financial or business criteria, with respect to one or more business units

of IAA and its subsidiaries as a whole. Such financial or business criteria may be adjusted to account for unusual or infrequently occurring items or changes in accounting.

Participants include any employee, director, independent contractor or consultant of IAA or any affiliate of IAA selected to receive awards under the 2019 OSIP, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be. As of ~~September 27, 2020,~~March 28, 2021, the number of common shares reserved and available for awards under the 2019 OSIP is ~~4,820,617,~~4,662,798, subject to adjustment made in accordance with the 2019 OSIP. Upon the occurrence of certain corporate events that affect the common stock, including but not limited to any extraordinary cash dividend, stock split, reorganization or other relevant change in capitalization, appropriate adjustments may be made with respect to the number of shares available for grants under the 2019 OSIP, the number of shares covered by outstanding awards and the maximum number of shares that may be granted to any participant.

The aggregate awards granted during any calendar year to any single individual will not exceed: (i) 1,000,000 shares subject to options or SARs, (ii) 500,000 shares subject to restricted shares or other share-based awards and (iii) $5,000,000 with respect to any cash-based award. A non-employee director of IAA may not be granted awards under the 2019 OSIP during any calendar year that, when aggregated with such non-employee director’s cash fees received with respect to such calendar year, exceed $750,000 in total value.

The following table summarizes the Company's stock-based compensation expense by type of award granted under both the KAR plans and the 2019 OSIP (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019				March 28, 2021		March 29, 2020
Performance-based Restricted Stock Units	Performance-based Restricted Stock Units	$	0.4	$	0.3	$	1.0	$	0.7	Performance-based Restricted Stock Units		$	0.4	$	0.2
Restricted Stock Units and Awards	Restricted Stock Units and Awards	1.4		1.0		4.9		2.5		Restricted Stock Units and Awards		2.2		1.7
Stock Options	Stock Options	0.2		0		0.6		0		Stock Options		0.2		0.2
Total Stock-based Compensation Expense	Total Stock-based Compensation Expense	$	2.0	$	1.3	$	6.5	$	3.2	Total Stock-based Compensation Expense		$	2.8	$	2.1

The following table summarizes the stock-based awards granted by the Company to certain employees and non-employee directors in accordance with the 2019 OSIP during the ~~nine~~three months ended ~~September 27, 2020:~~March 28, 2021:


		Three Months Ended September 27, 2020			Nine Months Ended September 27, 2020				Three Months Ended March 28, 2021
		Number of Awards Granted	Weighted Average Grant Date Fair Value		Number of Awards Granted	Weighted Average Grant Date Fair Value				Number of Awards Granted	Weighted Average Grant Date Fair Value
Performance-based Restricted Stock Units	Performance-based Restricted Stock Units	158	$	49.85	99,848	$	50.07	Performance-based Restricted Stock Units		75,185	$	63.71
Restricted Stock Awards		0	$	0	26,831	$	43.20

Restricted Stock Units	Restricted Stock Units	535	$	49.85	116,649	$	47.94	Restricted Stock Units		99,243	$	62.35

The PRSUs granted to certain executive officers and management of the Company vest at the end of a three-year performance period if and to the extent that the Company's three year average return on invested capital achieves certain specified goals. The ~~restricted share awards granted to non-employee directors vest in 4 equal installments over a one year vesting term. The~~ RSUs granted to certain executive officers and management of the Company are contingent upon continued employment and ~~have a three year vesting term.~~vest in 3 equal annual installments.

Note 4—Net Income Per Share

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 the Company's stock-based employee compensation program. The effect of stock options and RSUs on net income per share-diluted is determined through the application of the treasury stock method, whereby net proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period.

Table of Contents

The following table sets forth the computation of net income per share (in millions except per share amounts):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019				March 28, 2021		March 29, 2020
Net income	Net income	$	52.8	$	41.8	$	130.7	$	147.6	Net income		$	72.5	$	44.7
Weighted average common shares outstanding	Weighted average common shares outstanding	133.9		133.5		134.0		133.3		Weighted average common shares outstanding		134.6		133.7
Effect of dilutive stock awards	Effect of dilutive stock awards	0.9		1.2		1.0		0.9		Effect of dilutive stock awards		0.7		1.3
Weighted average common shares outstanding and potential common shares	Weighted average common shares outstanding and potential common shares	134.8		134.7		135.0		134.2		Weighted average common shares outstanding and potential common shares		135.3		135.0
Net income per share	Net income per share									Net income per share
Basic	Basic	$	0.39	$	0.31	$	0.98	$	1.11	Basic		$	0.54	$	0.33
Diluted	Diluted	$	0.39	$	0.31	$	0.97	$	1.10	Diluted		$	0.54	$	0.33

The weighted number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of the following anti-dilutive securities and awards subject to performance conditions which have not been fully satisfied at the end of the respective reporting periods:


		Three Months Ended		Nine Months Ended			Three Months Ended
		September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019			March 28, 2021	March 29, 2020
Anti-dilutive awards	Anti-dilutive awards	0.2	0.1	0.3	0.1	Anti-dilutive awards		0	0.3
Awards subject to performance conditions not fully satisfied	Awards subject to performance conditions not fully satisfied	0	0.3	0	0.3	Awards subject to performance conditions not fully satisfied		0.1	0
Total	Total	0.2	0.4	0.3	0.4	Total		0.1	0.3

Note 5—Long-Term Debt

Long-term debt consisted of the following (in millions):


		September 27, 2020		December 29, 2019			March 28, 2021		December 27, 2020
Term Loan Facility		$	774.0	$	778.0
Term Loan						Term Loan	$	774.0	$	774.0
Notes	Notes	500.0		500.0		Notes	500.0		500.0

Total debt	Total debt	1,274.0		1,278.0		Total debt	1,274.0		1,274.0
Unamortized debt issuance costs	Unamortized debt issuance costs	(23.1)		(23.3)		Unamortized debt issuance costs	(20.9)		(22.0)
Current maturities of long-term debt	Current maturities of long-term debt	0		0		Current maturities of long-term debt	(6.0)		(4.0)
Long-term debt	Long-term debt	$	1,250.9	$	1,254.7	Long-term debt	$	1,247.1	$	1,248.0

Credit Facility

On June 28, 2019, the Company entered into a credit agreement (the “Credit Agreement”), which provides for, among other things: (i) a seven-year senior secured term loan ~~facility~~ in an aggregate principal amount of $800 million (the “Term ~~Loan Facility”~~Loan”) and (ii) a five-year revolving credit facility in an aggregate principal amount of $225 million (the “Revolving Credit Facility,” and together with the Term Loan, ~~Facility,~~ the “Credit Facility”). On May 1, 2020, the Company entered into an amendment to its Credit Agreement to increase the aggregate principal amount able to be borrowed under the Revolving Credit Facility by $136.0 million to $361.0 million. The Revolving Credit Facility includes a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans, which can be borrowed on same-day notice.

The Term Loan ~~Facility~~ matures on June 28, 2026. ~~During the nine months ended September~~As of March 28, 2021 and December 27, 2020, the Company made an optional principal pre-payment of $4.0 million on the Term Loan Facility. As a result of the Company's optional principal pre-payments under the Term Loan Facility, the next mandatory principal payment under the Term Loan Facility is not due until September 30, 2021. As of September 27, 2020 and December 29, 2019, the interest rate per annum for the Term Loan ~~Facility~~ was 2.4% and ~~4.0%~~2.4%, respectively.

The Revolving Credit Facility matures on June 28, 2024. As of ~~September 27, 2020,~~March 28, 2021, 0 amounts were outstanding under the Revolving Credit Facility.

The Credit Agreement contains affirmative and negative covenants that are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with the Company's affiliates. The Credit Agreement also requires the Company to maintain a maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement)

not to exceed 3.50 to 1.00 as of each test date on which any Revolving Loans (as defined in the Credit Agreement) are outstanding. The Company was in compliance with the covenants in the Credit Agreement at ~~September 27, 2020.~~March 28, 2021.

Subsequent to March 28, 2021, the Company entered into a new credit agreement, the proceeds of which were used, along with cash on hand, to repay in full all outstanding borrowings under the Company's Term Loan. The Credit Agreement was terminated on April 30, 2021. See Note 11, Subsequent Events for additional information.

Notes

On June 6, 2019, the Company issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027 (the “Notes”). The Notes mature on June 15, 2027. Interest on the Notes is due on June 15 and December 15 of each year and accrues at a rate of 5.500% per annum.

The Notes contain covenants which, among other things, limit the Company and its restricted subsidiaries’ ability to pay dividends on or make other distributions in respect of equity interests or make other restricted payments, make certain investments, incur liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets, or designate subsidiaries as unrestricted. The Company was in compliance with the covenants at ~~September 27, 2020.~~March 28, 2021.

Canadian Credit Facility

On July 7, 2020, the Company entered into a credit agreement which provides for a revolving credit facility in an aggregate principal amount of $10.0 million Canadian dollars (the "Canadian Credit Facility"). The Canadian Credit Facility matures on July 6, 2021 and is secured by certain of the Company's Canadian assets. The proceeds from the Canadian Credit Facility can be used by the Company's Canadian subsidiary for its working capital requirements, capital expenditures and general corporate purposes. Borrowings under this facility, based on the type of borrowing, bear interest at either (a) Bank of Montreal Prime Rate plus 1.00%; (b) Bankers Acceptance Rate plus 2.25%; or (c) Canadian Dollar Offered Rate (CDOR) plus 2.25%. As of

~~September 27, 2020,~~ March 28, 2021, 0 amounts were outstanding under the Canadian Credit Facility.

The Canadian Credit Facility contains affirmative and negative covenants which, among other things, put certain limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with the Company's affiliates. The Canadian Credit Facility also requires the Company to maintain a Minimum Working Capital Ratio (as defined in the Canadian Credit Facility) of at least 1.00 to 1.00 and a Minimum Fixed Charge Coverage Ratio (as defined in the Canadian Credit Facility) of at least 1.25 to 1.00. The Company was in compliance with the covenants under the Canadian Credit Facility at ~~September 27, 2020.~~March 28, 2021.

Other

At both March 28, 2021 and December 30, 2018, the Company had intercompany debt with KAR of $456.6 million. This debt was eliminated in the Separation. This debt was comprised of 3 promissory notes, payable on demand, with a weighted average interest rate of 8.27%.

~~At September~~ 27, 2020, the Company had outstanding letters of credit in the aggregate amount of $6.5 million, of which $6.2 million reduce the amount available for borrowings under the Revolving Credit Facility and $0.3 million reduce the amount available for borrowings under the Canadian Credit Facility. At December 29, 2019, the Company had outstanding letters of credit in the aggregate amount of $7.0$6.1 million, all of which reduce the amount available for borrowings under its Revolving Credit Facility.

Fair Value of Debt

~~As of September 27, 2020, the~~The estimated fair value of the Company's ~~long-term~~ debt as of March 28, 2021 and December 27, 2020 was ~~$1,278.6 million.~~$1,293.1 million and $1,302.6 million, respectively. The estimates of fair value were based on broker-dealer quotes for the Company's debt as of ~~September 27, 2020. The estimates presented on long-term financial instruments~~the respective dates and are ~~not necessarily indicative~~considered Level 2 fair value measurements in the fair value hierarchy.

Table of ~~the amounts that would be realized in a current market exchange.~~Contents

Note 6—Accounts Receivable

Components of accounts receivable, net were as follows (in millions):


	March 28, 2021		December 27, 2020
Advanced charges receivable	$	253.3	$	239.5
Trade accounts receivable	104.7		126.5
Other receivable	17.2		16.8
Accounts receivable, gross	375.2		382.8
Less: Allowance for credit losses	(8.3)		(8.0)
Accounts receivable, net	$	366.9	$	374.8

Note 6—7—Leases

The Company leases property, software, automobiles, trucks and trailers, pursuant to operating lease agreements. The Company also leases furniture, fixtures and equipment under finance leases. The leases have varying remaining lease terms with leases expiring through ~~2038,~~2040, some of which include options to extend the leases.

The components of leases expense were as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019				March 28, 2021		March 29, 2020
Operating lease cost	Operating lease cost	$	34.4	$	30.6	$	100.7	$	86.7	Operating lease cost		$	35.8	$	32.7

Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	$	3.6	$	4.1	$	10.9	$	11.7	Amortization of right-of-use assets		$	3.3	$	3.7
Interest on lease liabilities	Interest on lease liabilities	0.2		0.3		0.7		0.8		Interest on lease liabilities		0.2		0.2
Total finance lease cost	Total finance lease cost	$	3.8	$	4.4	$	11.6	$	12.5	Total finance lease cost		$	3.5	$	3.9

Supplemental cash flow information related to leases was as follows (in millions):


		Nine Months Ended					Three Months Ended
		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	Operating cash flows related to operating leases	$	96.7	$	94.5	Operating cash flows related to operating leases	$	34.1	$	31.4
Operating cash flows related to finance leases	Operating cash flows related to finance leases	$	0.8	$	0.8	Operating cash flows related to finance leases	$	0.2	$	0.3
Financing cash flows related to finance leases	Financing cash flows related to finance leases	$	11.4	$	10.9	Financing cash flows related to finance leases	$	3.1	$	3.8
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	153.0	$	118.3	Operating leases	$	35.1	$	81.7
Finance leases	Finance leases	$	11.5	$	0	Finance leases	$	0.3	$	5.2

~~Supplemental balance sheet information related~~

Note 8—Fair Value Measurements

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to ~~leases was~~the valuation as ~~follows (~~of the measurement date:

• Level 1: Inputs that are based upon quoted prices in ~~millions, except lease term and discount rate~~):

September 27,
2020 December 29,
2019
Operating Leases
Operating lease right-of-use assets $ 964.1 $ 811.1
Accumulated amortization (140.4) (75.2)
Operating lease right-of-use assets, net $ 823.7 $ 735.9
Other accrued expenses $ 75.6 $ 68.6
Operating lease liabilities 794.1 709.5
Total operating lease liabilities $ 869.7 $ 778.1
Finance Leases
Property and equipment, gross $ 139.0 $ 127.4
Accumulated depreciation (102.4) (90.9)
Property and equipment, net $ 36.6 $ 36.5
Other accrued expenses $ 11.2 $ 12.4
Other liabilities 14.8 12.6
Total finance lease liabilities $ 26.0 $ 25.0
Weighted Average Remaining Lease Term (Years)
Operating leases 11.48 11.81
Finance leases 3.03 1.58
Weighted Average Discount Rate
Operating leases 5.6 % 5.7 %
Finance leases 3.5 % 4.6 %
active markets for identical assets or liabilities.

• Level 2: Inputs, other than quoted prices included within Level 1, which are observable either directly or indirectly.

1814

~~Maturities~~• Level 3: Unobservable inputs where there is little or no market activity for the asset or liability. These inputs reflect management's best estimate of ~~lease~~what market participants would use to price the assets or liabilities ~~as of September 27, 2020 were as follows (in millions~~):

Operating
Leases Finance Leases
2020 (excluding the nine months ended September 27, 2020) $ 28.0 $ 2.7
2021 123.9 10.9
2022 111.6 6.1
2023 102.3 3.8
2024 97.3 3.1
2025 93.5 0.8
Thereafter 647.1 0
1,203.7 27.4
Less imputed interest (334.0) (1.4)
Total $ 869.7 $ 26.0
at the measurement date.

The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities approximate fair value because of the short-term nature of those instruments.

In November 2020, the Company entered into an agreement which grants the owner a right during fiscal years 2023 and 2024 to cause the Company to acquire certain assets (the "Put Option") for a price based on a pre-defined formula. The carrying value of this Put Option is reported at fair value each reporting period. The Company measured the fair value of the Put Option using a Monte Carlo simulation. Key assumptions used in the valuation include discount rate, volume volatility, risk-free interest rate, cash flow projections and other details specific to the Put Option. The estimated fair value of the Put Option was zero at both March 28, 2021 and December 27, 2020 and was categorized within Level 3 of the fair value hierarchy.

See Note 5 - Debt for fair value of debt.

Note 7—9—Commitments and Contingencies

The Company is and may from time to time become involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. The Company accrues an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies, including litigation and environmental matters, are included in “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 the Company's operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on the Company's financial condition, results of operations or cash flows. Legal fees are expensed as incurred.

~~IAA—~~Pyrite Canyon

In the fourth quarter of fiscal 2020, the Company’s wholly owned subsidiary, Insurance Auto Auctions, Inc. (hereafter “IAAI”), received a letter from the California Department of Toxic Substances Control (the “DTSC”) styled “Draft Imminent and Substantial Endangerment Determination and Consent Order” (the “Draft Order”) in which the DTSC states that IAAI, along with nine other respondents named in the Draft Order, has been named as a potential responsible party for the release of hazardous substances at the former Universal Propulsion Company site (the “Former UPCo Site”). The Draft Order states that the Former UPCo Site has been identified as contributing to the Pyrite Canyon Plume by the U.S. Environmental Protection Agency and prescribes initial steps and a schedule for responding to the release of hazardous substances at the Former UPCo Site. The Draft Order further states that IAAI has been identified as a potential responsible party because it is either the company or the successor of a company responsible for a release of hazardous substances at the Former UPCo Site. The Draft Order is currently unsigned and has not been issued by DTSC.

On January 26, 2021, DTSC hosted an informational teleconference for the respondents named in the Draft Order. At the meeting, DTSC described the background and current status at the Former UPCo Site, but did not provide any information related to possible response actions, associated cost estimates or financial liability determinations. DTSC directed the Respondents to provide comments upon the Draft Order by March 1, 2021. DTSC subsequently extended the response deadline to April 30, 2021 pursuant to respondent requests. On March 30, 2021, IAAI provided DTSC with its response to the Draft Order.

The Company does not believe that IAAI should bear any financial liability for actions taken pursuant to the Draft Order because it does not believe that IAAI is the company or a successor of a company responsible for a release of hazardous substances at the Former UPCo Site. IAAI currently leases 50 gross acres of the Former UPCo Site, having commenced a sublease at the location on or about March 1, 2016. At all times since, IAAI has used the site for vehicle storage and

general operations. The most significant contaminants at the Former UPCo Site, and the Pyrite Canyon Plume are perchlorate, NDMA and PCBs. These contaminants pre-date IAAI’s occupancy and operations at the Former UPCo Site and are inconsistent with any chemicals stored at the location or used in its operations.

IAAI has tendered this matter to its landlord pursuant to indemnity provisions in its sublease, and to its environmental insurance carrier. IAAI's landlord has responded by tendering its own indemnification demand to IAAI, and IAAI has notified its environmental insurance carrier of the same. At this time, the Company does not have adequate information to determine IAAI’s liability, if any, for contamination at the Former UPCo Site.

Lower Duwamish Waterway

~~Beginning in~~Since June 2004, ~~IAA~~IAAI operated a branch on property it leased in Tukwila, Washington just south of Seattle. The property is located adjacent to a Superfund site known as the Lower Duwamish Waterway Superfund Site ("LDW Site"). The LDW Site had been designated a Superfund site in 2001, three years prior to ~~IAA’s~~IAAI’s tenancy. On March 25, 2008, the United States Environmental Protection Agency (the "EPA") issued ~~IAA~~IAAI a General Notice of Potential Liability, or "General Notice," pursuant to Section 107(a), and a Request for Information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") related to the LDW Site. On November 7, 2012, the EPA issued ~~IAA~~IAAI a Second General Notice of Potential Liability (the "Second General Notice") for the LDW Site. The EPA's website indicates that the EPA has issued general notice letters to approximately 116 entities, and has issued Section 104(e) Requests to more than 300 entities related to the LDW Site. In the General Notice and Second General Notice, the EPA informed ~~IAA~~IAAI that the EPA believed ~~IAA~~IAAI may be a Potentially Responsible Party ("PRP"), but the EPA did not specify the factual basis for this assertion. At this time, the EPA still has not specified the factual basis for this assertion and has not demanded that ~~IAA~~IAAI pay any funds or take any action apart from responding to the Section 104(e) Information Request. Four PRPs, The Boeing Company, the City of Seattle, the Port of Seattle and King County - the Lower Duwamish Waterway Group ("LDWG"), have funded a remedial investigation and feasibility study related to the cleanup of the LDW Site. In December 2014, the EPA issued a Record of Decision ("ROD"), detailing the final cleanup plan for the LDW Site. The ROD estimated the cost of cleanup to be $342 million, with the plan involving dredging of 105 acres, capping 24 acres, and enhanced natural recovery of 48 acres. The estimated length of the cleanup was 17 years, including 7 years of active remediation, and 10 years of monitored natural recovery. ~~IAA~~IAAI is aware that certain authorities may bring natural resource damage claims against PRPs. On February 11, 2016, ~~IAA~~IAAI received a Notice of Intent letter from the United States National Oceanic and Atmospheric Administration informing ~~IAA~~IAAI that the Elliott Bay Trustee Council were beginning to conduct an injury assessment for natural resource damages in the LDW. The Notice of Intent indicated that the decision of the trustees to proceed with this natural resources injury assessment followed a pre-assessment screen performed by the trustees. Shortly thereafter, in a letter dated August 16, 2016, EPA issued a status update to the PRPs at the LDW Site. The letter stated that EPA expected the bulk of the pre-remedial design work currently being performed by the LDWG to be completed by the beginning of 2018, with the Remedial Design/Remedial Action ("RD/

RA") phase to follow. The EPA previously anticipated that the pre-design work would be completed sometime during 2018, and the Company is not aware of any further information regarding that schedule. Accordingly, the Company is unable to predict when RD/RA negotiations with all PRPs might begin.

In addition, the Washington State Department of Ecology ("Ecology") is working with the EPA in relation to the LDW Site, primarily to investigate and address sources of potential contamination contributing to the LDW Site. In 2007, IAA installed a stormwater capture and filtration system designed to treat sources of potential contamination before discharge to the LDW Site. The immediate-past property owner, the former property owner and IAA have had discussions with Ecology concerning possible source control measures, including an investigation of the water and soils entering the stormwater system, an analysis of the source of contamination identified within the system, if any, and possible repairs and upgrades to the stormwater system if required. As of May 31, 2020, ~~IAA~~IAAI ceased all operations at the site and terminated its remaining lease of the property in June 2020. Accordingly, ~~IAA~~IAAI submitted a Notice of Termination of its stormwater permit to Ecology, discontinuing IAA’s ongoing obligations around the stormwater system maintenance and any additional source control measures.

At this time, the Company has not received any further notices from the EPA and still does not have adequate information to determine ~~IAA's~~IAAI's liability, if any, for contamination at this site, or to estimate ~~IAA's~~the Company's loss as a result of this potential liability which might have been incurred during ~~IAA’s~~IAAI’s occupancy.

Note 8—10—Segment Information

The Company has 2 operating segments: United States and International. The Company's 2 operating segments represent its 2 reportable segments. These segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results.

Intercompany income (expense) related to charges for services provided by the United States segment to the International segment are based on the benefits received. Such services are related to technology and other business support services.

2016

Financial information regarding the Company's reportable segments is set forth below as of and for the three ~~and nine~~ months ended ~~September 27, 2020~~March 28, 2021 (in millions):


		Three Months Ended September 27, 2020						Nine Months Ended September 27, 2020							Three Months Ended March 28, 2021
		United States		International		Total		United States		International		Total				United States		International		Total
Revenues		$	298.4	$	39.6	$	338.0	$	885.4	$	116.0	$	1,001.4
Revenues:														Revenues:
Service revenues														Service revenues		$	332.4	$	28.0	$	360.4
Vehicle sales														Vehicle sales		25.9		37.2		63.1
Total revenues														Total revenues		358.3		65.2		423.5
Operating expenses:	Operating expenses:													Operating expenses:
Cost of services (exclusive of depreciation and amortization)		172.3		27.4		199.7		532.7		83.1		615.8
Cost of services*														Cost of services*		178.1		18.3		196.4
Cost of vehicle sales*														Cost of vehicle sales*		21.0		33.4		54.4
Selling, general and administrative	Selling, general and administrative	32.5		2.4		34.9		100.5		6.7		107.2		Selling, general and administrative		40.5		2.9		43.4
Depreciation and amortization	Depreciation and amortization	17.7		1.7		19.4		56.5		5.0		61.5		Depreciation and amortization		17.9		1.9		19.8
Total operating expenses	Total operating expenses	222.5		31.5		254.0		689.7		94.8		784.5		Total operating expenses		257.5		56.5		314.0
Operating profit	Operating profit	75.9		8.1		84.0		195.7		21.2		216.9		Operating profit		100.8		8.7		109.5
Interest expense, net	Interest expense, net	13.3		0		13.3		43.2		(0.1)		43.1		Interest expense, net		13.0		0		13.0
Other (income) expense, net		(0.3)		0.1		(0.2)		(0.4)		(0.4)		(0.8)
Other income, net														Other income, net		(0.2)		(0.2)		(0.4)
Intercompany (income) expense														Intercompany (income) expense		(2.3)		2.3		0
Income before income taxes	Income before income taxes	62.9		8.0		70.9		152.9		21.7		174.6		Income before income taxes		90.3		6.6		96.9
Income taxes	Income taxes	15.3		2.8		18.1		39.1		4.8		43.9		Income taxes		22.7		1.7		24.4
Net income	Net income	$	47.6	$	5.2	$	52.8	$	113.8	$	16.9	$	130.7	Net income		$	67.6	$	4.9	$	72.5
Total assets	Total assets	$	2,183.1	$	205.7	$	2,388.8	$	2,183.1	$	205.7	$	2,388.8	Total assets		$	2,392.9	$	232.9	$	2,625.8

*Exclusive of depreciation and amortization

Financial information regarding the Company's reportable segments is set forth below as of and for the three ~~and nine~~ months ended ~~September~~March 29, ~~2019~~2020 (in millions):


		Three Months Ended September 29, 2019						Nine Months Ended September 29, 2019							Three Months Ended March 29, 2020
		United States		International		Total		United States		International		Total				United States		International		Total
Revenues		$	318.1	$	39.2	$	357.3	$	952.9	$	128.0	$	1,080.9
Revenues:														Revenues:
Service revenues														Service revenues		305.0		29.0		334.0
Vehicle sales														Vehicle sales		16.1		16.5		32.6
Total revenues														Total revenues		321.1		45.5		366.6
Operating expenses:	Operating expenses:													Operating expenses:
Cost of services (exclusive of depreciation and amortization)		193.4		27.9		221.3		578.3		89.1		667.4
Cost of services*														Cost of services*		185.0		18.2		203.2
Cost of vehicle sales*														Cost of vehicle sales*		13.0		14.8		27.8
Selling, general and administrative	Selling, general and administrative	36.5		2.4		38.9		97.2		9.0		106.2		Selling, general and administrative		35.1		2.9		38.0
Depreciation and amortization	Depreciation and amortization	20.5		1.6		22.1		61.0		5.0		66.0		Depreciation and amortization		20.8		1.7		22.5
Total operating expenses	Total operating expenses	250.4		31.9		282.3		736.5		103.1		839.6		Total operating expenses		253.9		37.6		291.5
Operating profit	Operating profit	67.7		7.3		75.0		216.4		24.9		241.3		Operating profit		67.2		7.9		75.1
Interest expense, net	Interest expense, net	17.5		0		17.5		39.1		0		39.1		Interest expense, net		16.1		(0.1)		16.0
Other income, net	Other income, net	0		0		0		0		(0.1)		(0.1)		Other income, net		(0.1)		(0.6)		(0.7)
Income before income taxes	Income before income taxes	50.2		7.3		57.5		177.3		25.0		202.3		Income before income taxes		51.2		8.6		59.8
Income taxes	Income taxes	13.7		2.0		15.7		47.7		7.0		54.7		Income taxes		12.8		2.3		15.1
Net income	Net income	$	36.5	$	5.3	$	41.8	$	129.6	$	18.0	$	147.6	Net income		$	38.4	$	6.3	$	44.7
Total assets	Total assets	$	1,886.9	$	193.0	$	2,079.9	$	1,886.9	$	193.0	$	2,079.9	Total assets		$	2,036.4	$	179.1	$	2,215.5

*Exclusive of depreciation and amortization

Note ~~9—Business Acquisition~~11—Subsequent Events

On ~~July 31, 2019,~~April 30, 2021, the Company ~~acquired Decision Dynamics, Inc.~~entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders from time to time party thereto (the “New Credit Agreement”). The New Credit Agreement provides for, among other things: (i) a senior secured term loan in an aggregate principal amount of $650 million ("~~DDI"~~New Term Loan"), and (ii) a ~~leading electronic lien~~senior secured revolving credit facility with revolving commitments in an aggregate principal amount of $525 million ("New Revolving Credit Facility" and, ~~title technology firm located in Lexington, South Carolina.~~together with the New Term Loan, the “New Credit Facility”). Borrowing availability under the New Revolving Credit Facility is subject to no default or event of default under the New Credit Agreement having occurred at the time of borrowing. The ~~Company acquired all~~proceeds of the New Credit Facility were used, along with cash on hand, to repay in full all outstanding ~~equity~~borrowings under the Company’s Term Loan under its prior Credit Agreement. The prior Credit Agreement was terminated on April 30, 2021. Future borrowings under the New Revolving Credit Facility will be used for the Company's ongoing working capital needs and general corporate purposes. The New Credit Facility matures on April 30, 2026.

Borrowings under the New Credit Agreement will bear interest (i) from April 30, 2021 until the date the Company delivers its compliance certificate for the quarter ended September 26, 2021, at a rate equal to either, (A) at the Company’s option, the highest of ~~DDI pursuant~~the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1.00% (the “Base Rate”) for base rate borrowings, or (B) one-month LIBOR for eurodollar borrowings, in each case, plus an applicable margin of 0.75% with respect to Base Rate borrowings and 1.75% with respect to eurodollar borrowings and (ii) at all other times, (A) the Base Rate or (B) LIBOR, in each case plus an applicable margin ranging from 0.375% to 1.25% with respect to Base Rate borrowings and 1.375% to 2.25% with respect to eurodollar borrowings, in each case, depending on the Company’s Consolidated Net Leverage Ratio (as defined in the New Credit Agreement). The New Credit Agreement contains additional procedures for transition to a ~~stock purchase agreement, which contains customary representations, warranties, covenants and indemnities by the sellers and the Company.~~benchmark rate other than one-month LIBOR for eurodollar borrowings. The ~~acquisition date fair value~~unused amount of the ~~total consideration transferred was $19.2 million, which consisted~~New Revolving Credit Facility is subject to a commitment fee ranging from 0.175% and 0.30% depending on the Company’s Consolidated Net Leverage Ratio. As of ~~an initial cash price of $16.7 million, net of cash acquired of $0.3 million, and~~May 4, 2021, no borrowings were outstanding under the ~~fair value of contingent consideration of $2.5 million which is payable upon achievement of certain performance targets over three years. During the nine months ended September 27, 2020,~~New Revolving Credit Facility.

The New Credit Agreement requires the Company ~~paid contingent consideration~~to comply with certain financial covenants, including a requirement that the Company’s Consolidated Net Leverage Ratio not exceed 4:00 to 1:00 as of ~~$1.5 million, which~~the last day of any fiscal quarter, subject to certain exceptions for qualifying material acquisitions. Consolidated Net Leverage Ratio is ~~included~~defined as the ratio of Consolidated Total Debt (as defined in ~~financing activities on~~ the ~~consolidated statements of cash flows.~~New Credit Agreement) to Consolidated EBITDA (as defined in the New Credit Agreement).

2118

The Company has finalized the purchase price allocation for the DDI acquisition. The fair value of acquired intangibles assets and other net liabilities assumed was $10.3 million and $0.6 million, respectively. The excess of the purchase price consideration over the estimated fair value of the acquired net assets of $9.5 million was allocated to goodwill.

The ~~intangible~~New Credit Agreement also contains other affirmative and negative covenants that are usual and customary for a senior secured credit agreement. The negative covenants include limitations on (i) the disposition of assets, ~~acquired primarily related~~(ii) mergers and acquisitions, (iii) the payment of future dividends, distributions and stock repurchases by the Company, (iv) restricted payments, (v) the incurrence of additional indebtedness, (vi) permitted acquisitions and investments and (vii) the incurrence of additional liens on property. The New Credit Agreement includes customary events of default.

During the second quarter of fiscal 2021, the Company expects to ~~customer relationships, developed technology and tradename,~~write-off approximately $10.0 million of unamortized debt issuance costs relating to the prior Credit Facility which will be ~~amortized over a weighted average-useful life~~included within the interest expense line of ~~approximately 12 years. The goodwill recognized from this acquisition reflects expected synergies resulting from adding DDI products and processes to~~ the ~~Company's products and processes. The acquired goodwill is allocated to the United States segment and is deductible for tax purpose.~~consolidated statements of income.

Annual revenue for DDI was approximately $8.3 million in the twelve months prior to acquisition. The results of DDI are included in the Company's financial statements from the date of acquisition. The pro forma effects of this acquisition are not significant to the Company's reported results for any periods presented. Accordingly, no pro forma financial statements have been presented herein.

~~Note 10—Subsequent Events~~

~~The Company has evaluated all events that occurred after the balance sheet date~~

Table of ~~September 27, 2020 through the date these financial statements were issued, and did not have any material recognizable events after September 27, 2020.~~

Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws, and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. See “Statement Regarding Forward-Looking Statements” preceding Part I, Item 1 in this Quarterly Report on Form 10-Q.

Unless the context suggests otherwise, all reference in this Quarterly Report on Form 10-Q to the "Company," "we," "us," refer to IAA, Inc. together with its ~~subsidiaries, and all references to "KAR Auction Services" and "KAR" refer to KAR Auction Services, Inc.~~subsidiaries.

Executive Overview

Our Business

We are a leading global digital marketplace connecting vehicle buyers and sellers. Leveraging leading-edge technology and focusing on innovation, our unique platform facilitates the marketing and sale of total-loss, damaged and low-value vehicles for a full spectrum of sellers. Headquartered in Westchester, IL, we have two operating segments: United States and International. We maintain operations in the United States, which make up the United States segment and operations in Canada and the United Kingdom, which make up the International segment. We have more than 200 facilities ~~throughout the United States, Canada and the United Kingdom.~~ across both business segments.

We serve a global buyer base and a full spectrum of sellers, including insurance companies, dealerships, fleet lease and rental car companies, and charitable organizations. We offer sellers a comprehensive suite of services aimed at maximizing vehicle value, reducing administrative costs, shortening selling cycle time and delivering the highest economic returns. Our solutions provide global buyers with the vehicles they need to, among other things, fulfill their vehicle rebuild requirements, replacement part inventory or scrap demand. We provide global buyers with multiple bidding/buying digital channels, innovative vehicle merchandising, efficient evaluation services and digital bidding tools, enhancing the overall purchasing experience.

We completed the roll-out of our buyer digital transformation in the United States in April 2020 and in Canada in July 2020. IAA UK has operated an online, digital only auction since 2005. As a result, we have shifted to a fully online, digital auction model, resulting in a reduction of costs previously associated with the physical auctions.

~~The Separation~~

On February 27, 2018, KAR Auction Services, Inc. ("KAR") announced a plan to pursue the separation and spin-off (the "Separation") of its salvage auction businesses into a separate public company. On June 28, 2019 (the "Separation Date"), KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA to the holders of record of KAR's common stock on June 18, 2019, on a pro rata basis (the "Distribution"). On the Separation Date, each KAR common stockholder of record received one share of IAA common stock for every one share of KAR common stock held by such stockholder as of the record date. Following the Separation and Distribution, IAA became an independent publicly-traded company. See ~~Note 1 - Basis of Presentation and Nature of Operations~~ ~~in the condensed notes to unaudited consolidated financial statements for additional information.~~

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COVID-19 Impact on our Business

The outbreak of the coronavirus ~~disease~~pandemic (COVID-19)~~, which was declared by the World Health Organization to be a pandemic on March 11, 2020,~~ has severely impacted, and continues to ~~severely~~ impact worldwide economic activities. ~~In an effort~~Although many of the governmental restrictions that were imposed in 2020 to contain and combat the spread of COVID-19 government and health authorities around the world took extraordinary and wide-ranging actions, including orders to close all business not deemed “essential”, quarantines, “stay-at-home” orders, and the practice of social distancing. Although many of these governmental restrictions have since been lifted or scaled back, ongoing surges of COVID-19 infections, ~~in certain geographies~~including new more contagious and/or vaccine resistant variants, have resulted in the re-imposition of certain restrictions from time to time, and may lead to other restrictions being re-implemented in response to efforts to reduce the spread of COVID-19.

Given the nature of our operations, we are ~~classified as~~deemed “essential” and have remained open for ~~business and our branches~~business. We continue to ~~be operational. We have implemented~~follow strict health and sanitization protocols across all of our locations ~~to keep~~aimed at keeping our employees, customers, and customers safe including, but not limited to: the use of personal protective equipment; sanitizing our facilities; continuing to temporarily require employees to work remotely where possible; suspending all non-essential travel worldwide for our employees; and discouraging employee attendance at in-person work-related meetings. We have also activated contingency plans to ensure continued operations andother business ~~continuity across our global network.~~partners safe.

~~The significant decline~~Our business in ~~miles driven resulting from~~fiscal 2020 was significantly impacted due to lower vehicle assignment volume, primarily during the first half of fiscal 2020, as the stay-at-home orders ~~that were~~ executed in ~~mid-March across North-America and the United Kingdom translated into a reduction in~~March 2020 significantly reduced the number of car ~~accidents and,~~accidents. Beginning in ~~turn, a reduction in vehicle assignments. This decline in vehicle assignments significantly impacted our business during~~ the second ~~quarter~~half of fiscal 2020, and, to a lesser extent, during the third quarter of fiscal 2020. Notwithstanding this reduction in vehicle assignments, our net revenue per vehicle sold increased due to lower supply of vehicles and strong demand from buyers, as ~~well as benefits from our buyer digital transformation and enhanced service offerings. As~~ certain economies began to re-open, we saw gradual ~~improvements~~recovery in miles driven that has resulted in ~~higher~~improved vehicle assignments through the third quarter of fiscal 2020 as compared to the second quarter. By the end of September 2020 and into October, vehicles assignments were only slightly lower than the pre-COVID-19 levels. Given that there is a lag before a change in vehicle assignments impacts the volume of vehicles sold, we are continuing to see an impact on units sold.

In response to the uncertainty surrounding COVID-19, we took a series of actions during the second quarter of fiscal 2020 to reduce costs and cash outlays, including, but not limited to, a temporary reduction in salaries at the senior leadership level through June 2020, a temporary reduction in the annual cash retainer payable in quarterly installments to directors through September 2020, aggressive cost reductions across all departments, a temporary reduction in branch labor hours across most locations that generally lasted through September 2020, employee furloughs in select international locations and a reduction or deferral of certain non-critical capital spending. In addition, we enhanced our liquidity position by: (i) entering into an amendment to our Credit Agreement in May 2020 to increase the aggregate principal amount to be borrowed under our Revolving Credit Facility (as defined below) by $136.0 million to $361.0 million; and (ii) entering into a credit agreement in July 2020 which provides for a revolving credit facility in an aggregate principal amount of $10.0 million Canadian dollars (the "Canadian Credit Facility"). We are continuing to actively monitor the rapidly evolving situation and guidance from the government and public health authorities and we may take additional actions that we determine are in the best interest of the Company and all our stakeholders.

~~The COVID-19 pandemic had limited impact on our operations~~assignments. While improving in the first quarter of fiscal ~~2020, but adversely affected~~2021, vehicles assignments continue to remain below pre-COVID-19 levels.

The extent to which the COVID-19 outbreak impacts our business and results of operations inwill depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the ~~second and third quarters~~actions to contain its impact, resurgences of ~~fiscal 2020 and~~COVID-19 or variants thereof that may continue to ~~do so thereafter, particularly if~~occur, the ~~buyer demand declines~~availability and public acceptance of vaccines for COVID-19, any delays or complications in vaccine production and distribution, the ~~stabilization in assignments~~efficacy of vaccines for COVID-19 and ~~miles driven is not sustained. All of the factors described above may have far-reaching impacts on our business, operations,~~how quickly and ~~financial results~~to what extent normal economic and operating conditions ~~directly and indirectly, including, but not limited to, impacts on vehicle assignments, branch operations, the health of our management and employees, and on the overall economy.~~

~~Given the dynamic nature of these circumstances, the severity and duration of business disruption and the related financial effects cannot be reasonably estimated at this time.~~resume. However, we expect COVID-19 and the efforts taken to reduce its spread will continue to have a negative impact on our ~~consolidated financial statements~~vehicle assignments in fiscal ~~2020,~~2021, the impact of which ~~may continue to~~could be material. ~~See Item 1A, Risk Factors for additional information.~~

Sources of Revenues and Expenses

A significant portion of our revenue is derived from auction fees and related services associated with our salvage auctions. Our revenue earned from buyers represents fees charged based on a tiered structure that increases with the sales price of the vehicle as well as service fees for additional ~~services.~~services such as storage, transportation, and vehicle condition reporting. Our revenue earned from sellers represents the combination of the inbound tow, processing, storage, titling, enhancing and auctioning of the

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vehicle. ~~We purchase only a small amount of vehicles as the~~The majority of our business comprises auctioning vehicles on ~~consignment. However, when~~a consignment basis, meaning that our sellers continue to own their vehicles until they are sold to buyers through one of our digital marketplaces. We record revenue for consigned vehicles on a net basis as we dohave no influence on the vehicle auction selling price agreed to by the seller and the buyer at the auction. When we purchase vehicles for reselling, we record the entire sale price as revenue and the purchase price as cost of services, which results in lower gross margin ~~versus~~than we recognize for vehicles

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sold at an auction on a consignment basis. ~~Although auction revenues primarily include the auction services and related fees, our related receivables and payables include the gross value of the vehicles sold.~~

Our operating expenses consist of cost of services, cost of vehicle sales, selling, general and administrative and depreciation and amortization. Cost of services is comprised of payroll and related costs, subcontract services, ~~the cost of vehicles purchased,~~ supplies, insurance, property taxes, utilities, service contract claims, maintenance, and lease expense related to the auction sites. Cost of vehicle sales is comprised of the cost of purchased vehicles. Cost of services ~~excludes~~and vehicle sales exclude depreciation and amortization. Selling, general and administrative expenses are comprised of, among other things, payroll and related costs, sales and marketing, information technology services and professional fees.

~~Factors Affecting Comparability of Financial Results~~

~~Historical KAR Cost Allocations versus IAA as a Stand-Alone Company:~~

Our historical consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The financial statements for periods prior to the Separation include certain expenses of KAR that were allocated to IAA for certain corporate functions including accounting, treasury, tax, internal audit, risk management, human resources, safety, and security, and information technology risk. These costs may not be representative of the costs IAA will incur as an independent, publicly traded company. In addition, our financial information for periods prior to the Separation does not reflect changes that IAA expects to experience as a result of IAA’s separation from KAR, including changes in IAA’s cost structure, personnel needs, tax structure, capital structure, financing and business operations. The consolidated financial statements also do not reflect the assignment of certain assets and liabilities between KAR and IAA. Consequently, the financial information included herein may not necessarily reflect IAA’s financial position, results of operations and cash flows in the future or what IAA’s financial position, results of operations and cash flows would have been had IAA been an independent, publicly traded company during the periods prior to the Separation.

~~Debt Financing:~~

In connection with the Separation, we entered into the Credit Agreement (as defined below) on June 28, 2019. We borrowed (i) an aggregate principal amount of $800 million under the Term Loan Facility (as defined below) and (ii) an aggregate principal amount of $225 million under the Revolving Credit Facility.

~~In connection with the Separation, on June 6, 2019, we also issued $500.0 million aggregate principal amount of 5.50% Senior Notes due 2027 (the "Notes").~~

We used the net proceeds from the Notes offering, together with borrowings under the Term Loan Facility and the Revolving Credit Facility, to make a cash distribution to KAR and to pay fees and expenses related to the Separation and Distribution. We used the remaining proceeds from the Term Loan Facility and borrowings under the Revolving Credit Facility for our ongoing working capital needs and general corporate purposes.

~~Acquisitions:~~

On July 31, 2019, we acquired Decision Dynamics, Inc. ("DDI"), a leading electronic lien and title technology firm located in Lexington, South Carolina for $19.2 million, which includes the fair value of contingent consideration of $2.5 million. See ~~Note 9 - Business Acquisition~~ ~~in the condensed notes to consolidated financial statements for additional information.~~

~~COVID-19:~~

The outbreak of COVID-19 pandemic and the efforts taken to reduce its spread had limited impact on our operations in the first quarter of fiscal 2020, but adversely affected our operations in the second and third quarters of fiscal 2020. See above under "COVID-19 Impact on our Business" for additional information.

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Results of Operations


		Three Months Ended						Change					Nine Months Ended						Change						Three Months Ended	Change
(Dollars in millions)		Sep 27, 2020			Sep 29, 2019			$		%			Sep 27, 2020			Sep 29, 2019			$		%
(Dollars in millions, except per share data)																								(Dollars in millions, except per share data)		Mar 28, 2021		Mar 29, 2020		$		%

Revenues		$	338.0		$	357.3		$	(19.3)	(5.4)	%		$	1,001.4		$	1,080.9		$	(79.5)	(7.4)	%
Revenues:																								Revenues:
Service revenues																								Service revenues		$	360.4	$	334.0	$	26.4	7.9	%
Vehicle sales																								Vehicle sales		63.1		32.6		30.5		93.6	%
Total revenues																								Total revenues		423.5		366.6		56.9		15.5	%
Operating expenses:																								Operating expenses:
Cost of services*	Cost of services*	199.7			221.3			(21.6)		(9.8)	%		615.8			667.4			(51.6)		(7.7)	%		Cost of services*		196.4		203.2		(6.8)		(3.3)	%
Gross profit*		138.3			136.0			2.3		1.7	%		385.6			413.5			(27.9)		(6.7)	%
Gross margin		40.9		%	38.1		%			280		bp	38.5		%	38.3		%			20		bp
Cost of vehicle sales*																								Cost of vehicle sales*		54.4		27.8		26.6		95.7	%
Selling, general and administrative	Selling, general and administrative	34.9			38.9			(4.0)		(10.3)	%		107.2			106.2			1.0		0.9	%		Selling, general and administrative		43.4		38.0		5.4		14.2	%
Depreciation and amortization	Depreciation and amortization	19.4			22.1			(2.7)		(12.2)	%		61.5			66.0			(4.5)		(6.8)	%		Depreciation and amortization		19.8		22.5		(2.7)		(12.0)	%
Total operating expenses																								Total operating expenses		314.0		291.5		22.5		7.7	%
Operating profit	Operating profit	84.0			75.0			9.0		12.0	%		216.9			241.3			(24.4)		(10.1)	%		Operating profit		109.5		75.1		34.4		45.8	%
Interest expense, net	Interest expense, net	13.3			17.5			(4.2)		(24.0)	%		43.1			39.1			4.0		10.2	%		Interest expense, net		13.0		16.0		(3.0)		(18.8)	%
Other expense (income), net	Other expense (income), net	(0.2)			—			(0.2)		NM**			(0.8)			(0.1)			(0.7)		NM**			Other expense (income), net		(0.4)		(0.7)		0.3		NM**
Income before income taxes	Income before income taxes	70.9			57.5			13.4		23.3	%		174.6			202.3			(27.7)		(13.7)	%		Income before income taxes		96.9		59.8		37.1		62.0	%
Income taxes	Income taxes	18.1			15.7			2.4		15.3	%		43.9			54.7			(10.8)		(19.7)	%		Income taxes		24.4		15.1		9.3		61.6	%
Net income	Net income	$	52.8		$	41.8		$	11.0	26.3	%		$	130.7		$	147.6		$	(16.9)	(11.4)	%		Net income		$	72.5	$	44.7	$	27.8	62.2	%
Net income per share	Net income per share																							Net income per share
Basic	Basic	$	0.39		$	0.31		$	0.08	25.8	%		$	0.98		$	1.11		$	(0.13)	(11.7)	%		Basic		$	0.54	$	0.33	$	0.21	63.6	%
Diluted	Diluted	$	0.39		$	0.31		$	0.08	25.8	%		$	0.97		$	1.10		$	(0.13)	(11.8)	%		Diluted		$	0.54	$	0.33	$	0.21	63.6	%

________________

* Exclusive of depreciation and amortization

** NM - Not meaningful

Service Revenues


		Three Months Ended				Change				Nine Months Ended				Change					Three Months Ended	Change
(Dollars in millions)	(Dollars in millions)	Sep 27, 2020		Sep 29, 2019		$		%		Sep 27, 2020		Sep 29, 2019		$		%		(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States	United States	$	298.4	$	318.1	$	(19.7)	(6.2)	%	$	885.4	$	952.9	$	(67.5)	(7.1)	%	United States		$	332.4	$	305.0	$	27.4	9.0	%
International	International	39.6		39.2		0.4		1.0	%	116.0		128.0		(12.0)		(9.4)	%	International		28.0		29.0		(1.0)		(3.4)	%
Total revenues		$	338.0	$	357.3	$	(19.3)	(5.4)	%	$	1,001.4	$	1,080.9	$	(79.5)	(7.4)	%
Total service revenues																		Total service revenues		$	360.4	$	334.0	$	26.4	7.9	%

~~Three Months Ended September 27, 2020 versus September 29, 2019~~

United States revenues decreased $19.7 million due to lower volumes of 20% which primarily resulted from the COVID-19 pandemic. This decrease in volume was partially offset by an increase in revenue per vehicle sold of 18% primarily resulting from: (i) additional revenue associated with the roll-out of our buyer digital transformation; (ii) enhanced service offerings; (iii) higher used car prices; and (iv) the positive impact that less supply had on bidding activity. Additionally, the three months ended September 27, 2020 included $1.1 million of revenue from the DDI acquisition and the three months ended September 29, 2019 benefited from a non-cash adjustment of $3.6 million relating to certain revenue agreements.

International revenues increased $0.4 million primarily due an increase in revenue per vehicle sold of 25% primarily resulting from higher purchased vehicle revenue, additional revenue associated with the roll-out of our buyer digital transformation in Canada and enhanced service offerings. These increases were partially offset by lower volumes of 19% which primarily resulted from the COVID-19 pandemic.

~~Nine Months Ended September 27, 2020 versus September 29, 2019~~

United States revenues decreased $67.5 million due to lower volumes of 17% which primarily resulted from the COVID-19 pandemic. This decrease in volume was partially offset by an increase in revenue per vehicle sold of 12% primarily resulting from: (i) additional revenue associated with the roll-out of our buyer digital transformation; (ii) enhanced service offerings; (iii)

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Three Months Ended March 28, 2021 versus March 29, 2020

United States service revenues increased $27.4 million due to an increase in revenue per unit of 21%, primarily from higher ~~used car prices;~~average selling prices due to increased buyer participation, enhanced product and ~~(iv) the positive impact that less supply had on bidding activity. Additionally, the nine months ended September 27, 2020 included $5.9 million~~service offerings, and favorable industry dynamics. This increase in revenue per unit was partially offset by a lower volume of ~~revenue~~consigned vehicles sold, which decreased by 10%, primarily resulting from the ~~DDI acquisition~~COVID-19 pandemic.

International service revenues decreased $1.0 million due to a lower volume of consigned vehicles sold of 34%, primarily as a result of the COVID-19 pandemic, and the ~~nine months ended September 29, 2019 benefited~~impact of an international provider switching from a ~~non-cash adjustment~~consignment model to a purchased vehicle model. These decreases were largely offset by an increase in revenue per unit of ~~$3.6~~45% due to higher average selling prices.

In the first quarter of 2021, we received notice from one of our top three vehicle suppliers that they would be shifting a significant amount of assignment volume away from IAA. We expect the assignment volume shift to begin in the second quarter of 2021 and be completed in the third quarter of 2021. We expect a portion of these anticipated assignment volume losses will be partially offset by known assignment volume gains from other of our top vehicle suppliers, which began in the first quarter of 2021 and have continued into the second quarter.

Vehicle Sales


	Three Months Ended	Change
(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States		$	25.9	$	16.1	$	9.8	60.9	%
International		37.2		16.5		20.7		125.5	%
Total vehicle sales		$	63.1	$	32.6	$	30.5	93.6	%

Three Months Ended March 28, 2021 versus March 29, 2020

United States vehicle sales increased $9.8 million ~~relating~~due to ~~certain~~an increase in revenue ~~agreements.~~per unit sold, which primarily resulted from higher average selling prices due to increased buyer participation, enhanced product and service offerings, and favorable industry dynamics.

International ~~revenues decreased $12.0~~vehicle sales increased $20.7 million due to ~~lower volumes~~an increase in revenue per unit sold of ~~17%~~85%, which ~~primarily~~mainly resulted from ~~the COVID-19 pandemic~~higher average selling prices due to increased buyer participation, enhanced product and ~~an unfavorable foreign currency~~service offerings, and favorable industry dynamics. In addition, International vehicles sales also benefited from higher volume of vehicle sold, which increased by 22%, primarily due to the impact of ~~$1.6 million.~~an international provider switching from a consignment model to a purchased vehicle model.

Cost of Services


	Three Months Ended	Change
(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States		$	178.1	$	185.0	$	(6.9)	(3.7)	%
International		18.3		18.2		0.1		0.5	%
Total cost of services		$	196.4	$	203.2	$	(6.8)	(3.3)	%

Three Months Ended March 28, 2021 versus March 29, 2020

United States cost of services decreased $6.9 million primarily due to lower volume of consigned vehicles sold and cost savings related to adopting a fully-digital auction model. These decreases were partially offset by an increase in ~~revenue per vehicle sold~~the occupancy cost of ~~9%, as well as benefits achieved from the completion of our buyer digital transformation in Canada and enhanced service offerings.~~storage facilities.

~~Gross profit~~

Three Months Ended Change Nine Months Ended Change
(Dollars in millions) Sep 27, 2020 Sep 29, 2019 $ % Sep 27, 2020 Sep 29, 2019 $ %
United States $ 126.1 $ 124.7 $ 1.4 1.1 % $ 352.7 $ 374.6 $ (21.9) (5.8) %
International 12.2 11.3 0.9 8.0 % 32.9 38.9 (6.0) (15.4) %
Total gross profit $ 138.3 $ 136.0 $ 2.3 1.7 % $ 385.6 $ 413.5 $ (27.9) (6.7) %

~~Gross profit is defined as total consolidated revenues minus~~International cost of services ~~and excludes depreciation and amortization.~~

~~Three Months Ended September 27, 2020 versus September 29, 2019~~

United States gross profit increased $1.4 million primarily due to higher revenue per vehicle sold, and cost reductions in response to the COVID-19 pandemic and from the buyer digital transformation, partially offset by lower volume and an increase in occupancy costs.

International gross profit increased $0.9 million primarily due to higher revenue per vehicle sold and cost reductions in response to the COVID-19 pandemic, partially offset by lower volume and an increase in occupancy costs.

~~Nine Months Ended September 27, 2020 versus September 29, 2019~~

United States gross profit decreased $21.9 million primarily due to lower volume and an increase in the cost of occupancy. These decreases were partially offset by higher revenue per vehicle sold, cost reductions in response to the COVID-19 pandemic, and benefits related to adopting a fully-digital auction model.

International gross profit decreased $6.0 million primarily due to lower volume and an increase in occupancy costs. These decreases were partially offset by higher revenue per vehicle sold and cost reductions in response to the COVID-19 pandemic.

~~Selling, General and Administrative~~

Three Months Ended Change Nine Months Ended Change
(Dollars in millions) Sep 27, 2020 Sep 29, 2019 $ % Sep 27, 2020 Sep 29, 2019 $ %
United States $ 32.5 $ 36.5 $ (4.0) (11.0) % $ 100.5 $ 97.2 $ 3.3 3.4 %
International 2.4 2.4 — — % 6.7 9.0 (2.3) (25.6) %
Total selling, general and administrative expenses $ 34.9 $ 38.9 $ (4.0) (10.3) % $ 107.2 $ 106.2 $ 1.0 0.9 %

~~Three Months Ended September 27, 2020 versus September 29, 2019~~

United States selling, general and administrative expenses decreased $4.0 million primarily due to a reduction in discretionary spending, including items such as travel and meetings, as a result of the COVID-19 pandemic. These decreases were partially offset by $0.6 million from the DDI acquisition.

~~International selling, general and administrative expenses~~ remained relatively flat as compared to the prior year ~~comparable~~ period.

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~~Nine~~Cost of Vehicle Sales


	Three Months Ended	Change
(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States		$	21.0	$	13.0	$	8.0	61.5	%
International		33.4		14.8		18.6		125.7	%
Total cost of vehicle sales		$	54.4	$	27.8	$	26.6	95.7	%

Three Months Ended ~~September 27,~~March 28, 2021 versus March 29, 2020

United States cost of vehicle sales increased $8.0 million, primarily due to higher average purchase prices.

International cost of vehicle sales increased $18.6 million primarily due to the impact of an international provider switching from a consignment model to a purchase vehicle model and higher average purchase prices.

Selling, General and Administrative


	Three Months Ended	Change
(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States		$	40.5	$	35.1	$	5.4	15.4	%
International		2.9		2.9		—		—	%
Total selling, general and administrative expenses		$	43.4	$	38.0	$	5.4	14.2	%

Three Months Ended March 28, 2021 versus ~~September~~March 29, ~~2019~~2020

United States selling, general and administrative expenses increased ~~$3.3~~$5.4 million primarily due to ~~incremental~~higher employee incentive related compensation costs ~~of $7.0 million~~and a non-income, tax related to IAA becoming a stand-alone public company, an increase in the provision for credit losses of $2.9 million, and $3.5 million from the DDI acquisition. These increases were partially offset by a reduction in discretionary spending, including items such as travel and meetings, as a result of the COVID-19 pandemic and lower employee related costs.accrual.

International selling, general and administrative expenses ~~decreased $2.3 million primarily due to a decrease in the provision of credit losses of $1.1 million and cost reductions in response~~remained flat as compared to the ~~COVID-19 pandemic.~~prior year period.

Depreciation and Amortization


		Three Months Ended				Change				Nine Months Ended				Change					Three Months Ended	Change
(Dollars in millions)	(Dollars in millions)	Sep 27, 2020		Sep 29, 2019		$		%		Sep 27, 2020		Sep 29, 2019		$		%		(Dollars in millions)		Mar 28, 2021		Mar 29, 2020		$		%
United States	United States	$	17.7	$	20.5	$	(2.8)	(13.7)	%	$	56.5	$	61.0	$	(4.5)	(7.4)	%	United States		$	17.9	$	20.8	$	(2.9)	(13.9)	%
International	International	1.7		1.6		0.1		6.3	%	5.0		5.0		—		—	%	International		1.9		1.7		0.2		11.8	%
Total depreciation and amortization	Total depreciation and amortization	$	19.4	$	22.1	$	(2.7)	(12.2)	%	$	61.5	$	66.0	$	(4.5)	(6.8)	%	Total depreciation and amortization		$	19.8	$	22.5	$	(2.7)	(12.0)	%

Three Months Ended March 28, 2021 versus March 29, 2020

Depreciation and amortization for the three months ended ~~September 27, 2020~~March 28, 2021 decreased $2.7 ~~million compared to the prior year comparable period as there were fewer intangible assets to amortize within the United States segment in the third quarter of fiscal 2020.~~

~~Depreciation and amortization for the nine months ended September 27, 2020 decreased $4.5~~ million as compared to the prior year comparable period as there were fewer intangible and fixed assets to amortize and depreciate within the United States segment during the first ~~nine~~three months of fiscal 2020.

Interest Expense

Interest expense for the three months ended ~~September 27, 2020~~March 28, 2021 decreased ~~$4.2~~$3.0 million as compared to the prior year comparable period primarily due to lower interest rates on our floating rate ~~Term Loan Facility (as defined below), as well as a slightly lower average outstanding debt balance.~~debt.

Interest expense for the nine months ended September 27, 2020 increased $4.0 million as compared to the prior year comparable period. This increase was primarily due to a higher average outstanding debt balance during the nine months ended September 27, 2020 resulting from the Notes offering and borrowings under the Term Loan Facility in June 2019 in connection with the Separation.

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~~Income Taxes~~

The effective tax rate was 25.5% for the three months ended September 27, 2020 as compared to 27.3% for the three months ended September 29, 2019. The three months ended September 27, 2020 benefited from the implementation of certain tax optimization initiatives during fiscal 2020.

The effective tax rate was 25.1% for the nine months ended September 27, 2020 as compared to 27.0% for the nine months ended September 29, 2019. The effective tax rate for the nine months ended September 29, 2019 was adversely impacted by certain discrete tax items of $1.4 million associated with the spin-off from KAR and other discrete items. The nine months ended September 27, 2020 benefited from the implementation of certain tax optimization initiatives during fiscal 2020.

Liquidity and Capital Resources

We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations and working capital. Prior to the Separation, we transferred the cash flow generated by our operations to KAR to support its overall cash management strategy. Cash was transferred daily, based on our balances, to centralized accounts maintained by KAR. As cash was disbursed or received by KAR, it was recognized through "Net Parent Investment" on our statements of stockholders' deficit and as "Net cash transfers to Parent and affiliates" on our statements of cash flows.

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On the Separation Date, our capital structure and sources of liquidity changed significantly. We no longer participate in cash management and funding arrangements with KAR. Subsequent to the Separation Date, ourOur principal source of liquidity consists of cash generated by ~~operations, and our~~operations. Our revolving credit facilities provide another source of liquidity as needed.

Our ~~internally generated~~ cash flow is used to invest in new products and services, fund capital expenditures and working capital requirements and, coupled with borrowings under our revolving credit facilities, is expected to be adequate to ~~service any future debt,~~satisfy our cash requirements, including those listed below, and fund future acquisitions, if any. Our ability to fund ~~these capital needs~~our cash requirements will depend on our ongoing ability to generate cash from operations and to access borrowings under our revolving credit ~~facilities and the capital markets.~~facilities. We believe that our cash on hand, future cash from operations, borrowings available under our revolving credit facilities and access to the debt and capital markets will provide adequate resources to fund our operating and financing needs for ~~at least~~ the next twelve ~~months.~~

~~Working Capital~~

~~A substantial amount of our working capital is generated from the payments received for services provided. The majority of our working capital needs are short-term in nature, usually less than three~~ months ~~in duration. Due to the decentralized nature of the business, payments for most vehicles purchased are received at each auction~~ and branch. Most of the financial institutions place a temporary hold on the availability of the funds deposited that generally can range up to two business days, resulting in cash in our accounts and on our balance sheet that is unavailable for use until it is made available by the various financial institutions. There are outstanding checks (book overdrafts) to sellers and vendors included in current liabilities. Because a portion of these outstanding checks for operations are drawn upon bank accounts at financial institutions other than the financial institutions that hold the cash, we cannot offset all the cash and the outstanding checks on our balance sheet. Changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from auctions held near period end.beyond.

Approximately ~~$47.0~~$62.3 million of available cash was held by our foreign subsidiaries as of ~~September 27, 2020. If~~March 28, 2021. We do not currently expect to incur significant additional tax liabilities if funds held by our foreign subsidiaries were to be ~~repatriated, state~~repatriated.

There have been no material changes to our cash requirements from known contractual and ~~local income tax expense and foreign withholding tax expense would need to be recognized, net of any applicable foreign tax credits.~~

~~Summary of Cash Flows~~

Nine Months Ended
(in millions) September 27, 2020 September 30, 2019 Change
Net cash provided by (used by):
Operating activities $ 265.2 $ 244.6 $ 20.6
Investing activities (41.4) (73.1) 31.7
Financing activities (54.4) (182.6) 128.2
Effect of exchange rate on cash (0.3) (4.1) 3.8
Net increase (decrease) in cash and cash equivalents $ 169.1 $ (15.2) $ 184.3

~~Net cash flow provided by operating activities during~~other obligations reported in our Annual Report on Form 10-K for the ~~nine months~~fiscal year ended ~~September~~December 27, 2020 ~~increased by $20.6 million as compared to~~filed with the nine months ended September 30, 2019. The increase in operating cash flow was primarily attributable to the timing of cash payments to vendors and the depletion of consigned vehicle inventory, partially offset by the timing of interest payments relating to the Term Loan Facility.SEC on March 18, 2020 other than those described below:

Net cash used by investing activities was $41.4 million for the nine months ended September 27, 2020 as compared to $73.1 million for the nine months ended September 30, 2019. The decrease in net cash used by investing activities was primarily due to the acquisition of DDI in the third quarter of 2019 and a decrease in cash used for capital expenditures during the nine months ended September 27, 2020. See "Capital Expenditures" below for additional information.

Net cash used by financing activities was $54.4 million for the nine months ended September 27, 2020 as compared to $182.6 million for the nine months ended September 30, 2019. The decrease in net cash used by financing activities was primarily attributable to dividends and distributions paid to KAR prior to and at the time of Separation, partially offset by net proceeds from the Notes offering and our Term Loan Facility in June 2019, and a change in bank overdrafts during the first nine months of fiscal 2020 as a result of timing of disbursements to our vendors.

Debt Service Obligations

~~Table~~On March 31, 2021, we made an optional principal pre-payment of ~~Contents~~

~~Our Outstanding Indebtedness~~$4.0 million on the Term Loan.

~~In connection with the Separation, on June 28, 2019~~On April 30, 2021, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders ~~party thereto~~ from time to time party thereto (the ~~“Credit Agreement”~~"New Credit Agreement")~~, which~~. The New Credit Agreement provides for, among other ~~things,~~things: (i) a senior secured term loan ~~facility (the "Term Loan Facility")~~ in an aggregate principal amount of ~~$800~~$650 million ("New Term Loan") and (ii) a senior secured revolving credit facility ~~(the "Revolving Credit Facility")~~with revolving commitments in an aggregate principal amount of ~~$225.0 million. On May 1, 2020, in response to~~$525 million ("New Revolving Credit Facility" and, together with the ~~uncertainty around COVID-19, we entered into an amendment to~~New Term Loan, the “New Credit ~~Agreement to increase the aggregate principal amount able to be borrowed~~Facility”). Borrowing availability under the New Revolving Credit Facility ~~by $136.0 million~~is subject to ~~$361.0 million.~~no default or event of default under the New Credit Agreement having occurred at the time of borrowing. The ~~Revolving~~proceeds of the New Credit Facility, ~~also includes a $50.0 million sub-limit for issuance of letters of credit and a $50.0 million sublimit for swing line loans, which can be borrowed~~along with cash on ~~same-day notice. As of September 27, 2020, no amounts~~hand, were used to repay in full all outstanding borrowings under ~~the Revolving~~our Term Loan under our prior Credit ~~Facility. We were in compliance with the covenants in the~~Agreement. The New Credit ~~Agreement at September 27, 2020.~~ Facility matures on April 30, 2026.

See Note 11 - Subsequent Events and Note 5 - -Long-term Debt in the notes to consolidated financial statements for additional ~~information.~~

During the fourth quarter of fiscal 2019, we repaid $22.0 million of the Term Loan Facility, consisting of $2.0 million required principal payment and a $20.0 million optional principal pre-payment. During the first quarter of fiscal 2020, we made an optional principal pre-payment of $4.0 million of the Term Loan Facility. We made no optional principal pre-payments of the Term Loan Facility during the second and third quarters of fiscal 2020. As a result of our optional principal pre-payments under the Term Loan Facility, our next mandatory principal payment under the Term Loan Facility is not due until September 30, 2021. As of September 27, 2020, $774.0 million was outstanding under the Term Loan Facility.

~~On June 6, 2019, we issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027. We must pay interest~~information on the Notes in cash on June 15 and December 15 of each year at a rate of 5.500% per annum, with the first interest payment date being December 15, 2019. The Notes will mature on June 15, 2027. The net proceeds from the Notes offering, together with borrowings under our prior senior credit facility, were used to make a cash distribution to KAR and to pay fees and expenses related to the Separation. We were in compliance with the covenants in the indenture governing the Notes at September 27, 2020. See Note 5 ~~- Debt~~ ~~in the notes to consolidated financial statements for additional information.~~

~~On July 7, 2020, we entered into the Canadian Credit Facility. The Canadian~~New Credit Facility ~~matures on July 6, 2021. The proceeds from the Canadian Credit Facility can be used by~~and our ~~Canadian subsidiary for its working capital requirements, capital expenditures and general corporate purposes. As of September 27, 2020, no amounts were~~ outstanding ~~under the Canadian Credit Facility. See Note 5 -~~ indebtedness.~~Debt~~ ~~in the notes to consolidated financial statements for additional information.~~

Capital Expenditures

Capital expenditures for the ~~nine~~three months ended ~~September 27,~~March 28, 2021 and March 29, 2020 ~~and September 29, 2019~~ were ~~$41.9~~$30.3 million and ~~$56.4~~$10.6 million, respectively. Capital expenditures were funded primarily from ~~internally generated funds.~~cash flow from operations. We continue to invest in our core information technology capabilities and capacity expansion. Our capital expenditures during the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 primarily related to real estate development and technology-based investments, including improvements in information technology systems and infrastructure. Future capital expenditures could vary substantially based on capital project timing, the opening of new auction facilities, capital expenditures related to acquired businesses and the initiation of new information systems projects to support our business strategies.

~~Off-Balance Sheet Arrangements~~

~~As of September 27, 2020, we had no off-balance sheet arrangements pursuant to Item 303(a)(4) of Regulation S-K under the Securities Exchange Act of 1934, as amended ("Exchange Act").~~

~~Contractual Obligations~~

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~~There have been no material changes~~Summary of Cash Flows


	Three Months Ended
(in millions)	March 28, 2021		March 29, 2020		Change
Net cash provided by (used by):
Operating activities	$	121.3	$	97.3	$	24.0
Investing activities	(31.1)		(10.5)		(20.6)
Financing activities	(8.6)		(47.0)		38.4
Effect of exchange rate on cash	0.5		(0.8)		1.3
Net increase in cash and cash equivalents	$	82.1	$	39.0	$	43.1

Net cash flow provided by operating activities during the three months ended March 28, 2021 increased by $24.0 million as compared to the ~~contractual obligations reported~~three months ended March 29, 2020. The increase in ~~our Annual Report on Form 10-K~~operating cash flow was primarily attributable to an increase in profitability, net of non-cash adjustments of $32.1 million, partially offset by changes in accounts receivable of $8.9 million resulting from the timing of collections from customers and other parties.

Net cash used by investing activities was $31.1 million for the ~~fiscal year~~three months ended ~~December~~March 28, 2021 as compared to $10.5 million for the three months ended March 29, ~~2019 filed with~~2020. The increase in net cash used by investing activities was primarily due to an increase in cash used for capital expenditures during the ~~SEC on~~three months ended March ~~18,~~28, 2021. See "Capital Expenditures" above for additional information.

Net cash used by financing activities was $8.6 million for the three months ended March 28, 2021 as compared to $47.0 million for the three months ended March 29, 2020. The decrease in net cash used by financing activities was primarily attributable to a decrease in bank overdrafts of $33.6 million as a result of timing of disbursements to our vendors and a $4.0 million payment of our debt during the first three months of fiscal 2020.

Critical Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. If these estimates differ significantly from actual results, the impact to the consolidated financial statements may be material. There have been no material changes in our

~~Table of Contents~~

critical accounting policies disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2019~~27, 2020 filed with the SEC on ~~March 18, 2020.~~February 22, 2021.

For further information about recently issued accounting pronouncements, see Note 1 - Summary of Significant Accounting Policies in the condensed notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to market risks and related disclosures from those disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Quantitative and Qualitative Disclosures About Market Risks” in our Annual Report on Form 10-K filed with the SEC on ~~March 18, 2020.~~February 22, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no

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matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of ~~September 27, 2020.~~March 28, 2021.

Changes in Internal Control over Financial Reporting

~~Due to a transition period established by SEC rules applicable to newly public companies, our management is not required to evaluate the effectiveness of~~There has been no change in our internal control over financial reporting ~~until~~during the ~~filing of our Annual Report on Form 10-K for the year ending December 27, 2020. As a result, this Quarterly Report on Form 10-Q does not address whether there have been any changes in~~quarter ended March 28, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

See Note 7 - Commitments and Contingencies in the condensed notes to the unaudited consolidated financial statements for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the "Risk Factors" disclosed under "Item 1A. Risk Factors" in our Annual Report on Form 10-K which was filed with the SEC on ~~March 18, 2020 and under “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q which was filed with the SEC on May 6, 2020.~~February 22, 2021. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from the risk factors previously disclosed in "Item 1A. Risk Factors" in our Annual Report on Form 10-K filed with the SEC on February 22, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March ~~18, 2020~~28, 2021, we acquired shares of our common stock held by one of our directors who tendered shares to satisfy tax withholding obligations upon the vesting of previously issued restricted stock awards. Specifically, the number of shares of common stock acquired from the director and the average price paid per share for each month in the first quarter ended March 28, 2021 are as shown in the table below.


Period	Total Number of Shares Purchased	Average Price Paid Per Share
December 28, 2020 - January 31, 2021	—	$	—
February 1, 2021 - February 28, 2021	—	—
March 1, 2021 - March 28, 2021	227	56.99
Total	227	$	56.99

Item 5. Other Information

New Credit Agreement

On April 30, 2021, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders from time to time party thereto (the “New Credit Agreement”). The New Credit Agreement and provides for, among other things: (i) a senior secured term loan in an aggregate principal amount of $650 million ("New Term Loan") and (ii) a senior secured revolving credit facility with revolving commitments in an aggregate principal amount of $525 million ("New Revolving Credit Facility" and, together with the New Term Loan, the “New Credit Facility”). The proceeds of the New Credit Facility, along with cash on hand, were used to repay in full all outstanding borrowings under ~~“Item 1A. Risk Factors” in~~the Term Loan under our prior Credit Agreement. Future borrowings under the New Revolving Credit Facility will be used for the Company's ongoing working capital needs and general corporate purposes. Our prior credit agreement was terminated on April 30, 2021.

See Note 11 - Subsequent Events for a discussion of the material terms of the New Credit Facility, which is incorporated herein

by reference. The New Credit Agreement is filed as Exhibit 10.1 to this Quarterly Report on Form ~~10-Q which was filed with the SEC on May 6, 2020.~~

10-Q.

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Item 6. Exhibits ~~Financial Statement Schedules~~

Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit Filing
Date Filed
Herewith
2.1
Separation and Distribution Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.†

8-K 001-38580 2.1 6/28/2019
3.1
Amended and Restated Certificate of Incorporation of IAA, Inc., dated as of June 27, 2019
8-K 001-38580 3.1 6/28/2019
3.2
Amended and Restated By-laws of IAA, Inc., dated as of June 27, 2019
8-K 001-38580 3.2 6/28/2019
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X*
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X*
101 The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Deficit, (v) Consolidated Statements of Cash Flows, and (vi) Condensed Notes to Consolidated Financial Statements X
104 Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

2.1

Separation and Distribution Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.†

8-K

001-38580

2.1

6/28/2019

3.1

Amended and Restated Certificate of Incorporation of IAA, Inc., dated as of June 27, 2019

8-K

001-38580

3.1

6/28/2019

3.2

Amended and Restated By-laws of IAA, Inc., dated as of June 27, 2019

8-K

001-38580

3.2

6/28/2019

10.1

Credit Agreement, dated as of April 30, 2021, among IAA, Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2021, formatted in Inline XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Condensed Notes to Consolidated Financial Statements

104

Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Furnished herewith.

† Certain information has been excluded from this exhibit because it is not material and would likely cause competitive harm to the registrant if publicly disclosed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		IAA, Inc.
		(Registrant)

Date:	~~November 2, 2020~~May 4, 2021	/s/ John W. Kett
		John W. Kett President and Chief Executive Officer (Principal Executive Officer)


Date:	~~November 2, 2020~~May 4, 2021	/s/ Vance C. Johnston
		Vance C. Johnston Executive Vice President, Chief Financial Officer (Principal Financial Officer)

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		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements

	Unaudited Consolidated Statements of Income	4

	Unaudited Consolidated Statements of Comprehensive Income	5

	Unaudited Consolidated Balance Sheets	6

	Unaudited Consolidated Statements of Stockholders' ~~Deficit~~Equity (Deficit)	7

	Unaudited Consolidated Statements of Cash Flows	98

	Condensed Notes to Consolidated Financial Statements	109

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2219

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3025

Item 4.	Controls and Procedures	3025

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3127

Item 1A.	Risk Factors	3127

Item 2.	Unregistered Sale s of Equity Securitie s and Use of Proceed s	27

Ite m 5.	Other Inf ormation	27

Item 6.	Exhibits	3228

Signatures		3329


	Operating Leases		Finance Leases
2020 (excluding the nine months ended September 27, 2020)	$	28.0	$	2.7
2021	123.9		10.9
2022	111.6		6.1
2023	102.3		3.8
2024	97.3		3.1
2025	93.5		0.8
Thereafter	647.1		0
	1,203.7		27.4
Less imputed interest	(334.0)		(1.4)
Total	$	869.7	$	26.0