Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | Apr. 30, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | KAR Auction Services, Inc. | |
Entity Central Index Key | 0001395942 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 133,279,015 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Operating revenues | ||
ADESA Auction Services | $ 599.7 | $ 528.1 |
IAA Salvage Services | 357.2 | 337.3 |
AFC | 89.9 | 85.1 |
Total operating revenues | 1,046.8 | 950.5 |
Operating expenses | ||
Cost of services (exclusive of depreciation and amortization) | 612.3 | 535 |
Selling, general and administrative | 207.6 | 187.4 |
Depreciation and amortization | 66.1 | 70.3 |
Total operating expenses | 886 | 792.7 |
Operating profit | 160.8 | 157.8 |
Interest expense | 56.9 | 41.5 |
Other income, net | (2) | (0.1) |
Income before income taxes | 105.9 | 116.4 |
Income taxes | 28.1 | 26.4 |
Net Income | $ 77.8 | $ 90 |
Net income per share | ||
Basic (in dollars per share) | $ 0.58 | $ 0.67 |
Diluted (in dollars per share) | 0.58 | 0.66 |
Dividends declared per common share (in dollars per share) | $ 0.35 | $ 0.35 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net Income | $ 77.8 | $ 90 |
Other comprehensive income (loss) | ||
Foreign currency translation gain (loss) | 8.1 | (6.9) |
Comprehensive income | $ 85.9 | $ 83.1 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 265.6 | $ 337.1 |
Restricted cash | 24.3 | 27.6 |
Trade receivables, net of allowances of $13.7 and $12.0 | 962.5 | 765.6 |
Finance receivables, net of allowances of $14.3 and $14.0 | 1,974.8 | 2,000.8 |
Other current assets | 233 | 183.1 |
Total current assets | 3,460.2 | 3,314.2 |
Other assets | ||
Goodwill | 2,374 | 2,213.7 |
Customer relationships, net of accumulated amortization of $893.8 and $873.7 | 311.7 | 302.3 |
Other intangible assets, net of accumulated amortization of $424.8 and $403.5 | 366.4 | 358.5 |
Operating lease right-of-use assets | 942.5 | 0 |
Other assets | 41 | 41.3 |
Total other assets | 4,035.6 | 2,915.8 |
Property and equipment, net of accumulated depreciation of $825.8 and $856.6 | 828.3 | 976.2 |
Total assets | 8,324.1 | 7,206.2 |
Current liabilities | ||
Accounts payable | 997.8 | 820.3 |
Accrued employee benefits and compensation expenses | 86.4 | 102.5 |
Accrued interest | 23 | 7.9 |
Other accrued expenses | 302.8 | 186.3 |
Income taxes payable | 2.1 | 2.9 |
Dividends payable | 46.6 | 46.5 |
Obligations collateralized by finance receivables | 1,360.6 | 1,445.3 |
Current maturities of long-term debt | 126.3 | 13.1 |
Total current liabilities | 2,945.6 | 2,624.8 |
Non-current liabilities | ||
Long-term debt | 2,650.9 | 2,654.3 |
Deferred income tax liabilities | 193.2 | 188.4 |
Operating lease liabilities | 919.7 | 0 |
Other liabilities | 112.2 | 274.5 |
Total non-current liabilities | 3,876 | 3,117.2 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity | ||
Preferred stock, $0.01 par value: Authorized shares: 100,000,000; Issued shares: none | 0 | 0 |
Common stock, $0.01 par value: Authorized shares: 400,000,000; Issued and outstanding shares: March 31, 2019: 133,261,444, December 31, 2018: 132,887,029 | 1.3 | 1.3 |
Additional paid-in capital | 1,131.5 | 1,131.9 |
Retained earnings | 422.9 | 392.3 |
Accumulated other comprehensive loss | (53.2) | (61.3) |
Total stockholders' equity | 1,502.5 | 1,464.2 |
Total liabilities and stockholders' equity | $ 8,324.1 | $ 7,206.2 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2019 | Dec. 31, 2018 |
Trade receivables, allowances (in dollars) | $ 13.7 | $ 12 |
Finance receivables, allowances (in dollars) | 14.3 | 14 |
Customer relationships, accumulated amortization (in dollars) | 893.8 | 873.7 |
Other intangible assets, accumulated amortization (in dollars) | 424.8 | 403.5 |
Property and equipment, accumulated depreciation (in dollars) | $ 825.8 | $ 856.6 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, Authorized shares | 100,000,000 | 100,000,000 |
Preferred stock, Issued shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, Authorized shares | 400,000,000 | 400,000,000 |
Common stock, Issued shares | 133,261,444 | 132,887,029 |
Common stock, outstanding shares | 133,261,444 | 132,887,029 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss |
Balance at Dec. 31, 2017 | $ 1,484.9 | $ 1.3 | $ 1,251.8 | $ 257 | $ (25.2) |
Balance (in shares) at Dec. 31, 2017 | 134,300,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect adjustment for adoption of new accounting standard, net of tax | (3) | (3) | |||
Net Income | 90 | 90 | |||
Other comprehensive income (loss) | (6.9) | (6.9) | |||
Issuance of common stock under stock plans | 5.6 | 5.6 | |||
Issuance of common stock under stock plans (in shares) | 800,000 | ||||
Surrender of RSUs for taxes | (9.7) | (9.7) | |||
Surrender of RSUs for taxes (in shares) | (100,000) | ||||
Stock-based compensation expense | 6.4 | 6.4 | |||
Dividends earned under stock plans | 0 | 1.8 | (1.8) | ||
Cash dividends declared to stockholders | (47.2) | (47.2) | |||
Balance at Mar. 31, 2018 | 1,520.1 | $ 1.3 | 1,255.9 | 295 | (32.1) |
Balance (in shares) at Mar. 31, 2018 | 135,000,000 | ||||
Balance at Dec. 31, 2018 | $ 1,464.2 | $ 1.3 | 1,131.9 | 392.3 | (61.3) |
Balance (in shares) at Dec. 31, 2018 | 132,887,029 | 132,900,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect adjustment for adoption of new accounting standard, net of tax | $ 1.1 | 1.1 | |||
Net Income | 77.8 | 77.8 | |||
Other comprehensive income (loss) | 8.1 | 8.1 | |||
Issuance of common stock under stock plans | 0.7 | 0.7 | |||
Issuance of common stock under stock plans (in shares) | 600,000 | ||||
Surrender of RSUs for taxes | (10.2) | (10.2) | |||
Surrender of RSUs for taxes (in shares) | (200,000) | ||||
Stock-based compensation expense | 7.4 | 7.4 | |||
Dividends earned under stock plans | 0 | 1.7 | (1.7) | ||
Cash dividends declared to stockholders | (46.6) | (46.6) | |||
Balance at Mar. 31, 2019 | $ 1,502.5 | $ 1.3 | $ 1,131.5 | $ 422.9 | $ (53.2) |
Balance (in shares) at Mar. 31, 2019 | 133,261,444 | 133,300,000 |
Consolidated Statements of St_2
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash dividends declared to stockholders (in dollars per share) | $ 0.35 | $ 0.35 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Operating activities | ||
Net Income | $ 77.8 | $ 90 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 66.1 | 70.3 |
Provision for credit losses | 10.3 | 9.6 |
Deferred income taxes | 3.4 | 2.4 |
Amortization of debt issuance costs | 2.6 | 2.7 |
Stock-based compensation | 7.4 | 6.4 |
Loss (gain) on disposal of fixed assets | 0.1 | (0.1) |
Other non-cash, net | 4.2 | (4.4) |
Changes in operating assets and liabilities, net of acquisitions: | ||
Trade receivables and other assets | (214.4) | (249.9) |
Accounts payable and accrued expenses | 136.2 | 225.3 |
Net cash provided by operating activities | 93.7 | 152.3 |
Investing activities | ||
Net decrease (increase) in finance receivables held for investment | 18.6 | (29.6) |
Acquisition of businesses (net of cash acquired) | (120.7) | (23.3) |
Purchases of property, equipment and computer software | (54) | (38.7) |
Proceeds from the sale of property and equipment | 0.1 | 0.1 |
Net cash used by investing activities | (156) | (91.5) |
Financing activities | ||
Net increase in book overdrafts | 38.4 | 23.1 |
Net increase in borrowings from lines of credit | 108.8 | 0 |
Net decrease in obligations collateralized by finance receivables | (88.5) | (3) |
Payments on long-term debt | (10.7) | 0 |
Payments on capital leases | (10.3) | (7.8) |
Payments of contingent consideration and deferred acquisition costs | 0 | (3) |
Issuance of common stock under stock plans | 0.7 | 5.6 |
Tax withholding payments for vested RSUs | (10.2) | (9.7) |
Dividends paid to stockholders | (46.5) | (47) |
Net cash used by financing activities | (18.3) | (41.8) |
Effect of exchange rate changes on cash | 5.8 | (4.2) |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (74.8) | 14.8 |
Cash, cash equivalents and restricted cash at beginning of period | 364.7 | 336.6 |
Cash, cash equivalents and restricted cash at end of period | 289.9 | 351.4 |
Cash paid for interest, net of proceeds from interest rate caps | 35.7 | 29.8 |
Cash paid for taxes, net of refunds | $ 29.3 | $ 28.6 |
Basis of Presenation and Nature
Basis of Presenation and Nature of Operations | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Nature of Operations | Basis of Presentation and Nature of Operations Defined Terms Unless otherwise indicated or unless the context otherwise requires, the following terms used herein shall have the following meanings: • "we," "us," "our" and "the Company" refer, collectively, to KAR Auction Services, Inc. and all of its subsidiaries; • "ADESA" or "ADESA Auctions" refer, collectively, to ADESA, Inc., a wholly-owned subsidiary of KAR Auction Services, and ADESA, Inc.'s subsidiaries, including Openlane, Inc. (together with Openlane, Inc.'s subsidiaries, "Openlane"), Nth Gen Software Inc. ("TradeRev"), ADESA Remarketing Limited (formerly known as GRS Remarketing Limited ("GRS" or "ADESA Remarketing Limited")) and CarsOnTheWeb ("COTW"); • "AFC" refers, collectively, to Automotive Finance Corporation, a wholly-owned subsidiary of ADESA, and Automotive Finance Corporation's subsidiaries and other related entities, including PWI Holdings, Inc.; • "Credit Agreement" refers to the Amended and Restated Credit Agreement, dated March 11, 2014, as amended on March 9, 2016 and May 31, 2017, among KAR Auction Services, as the borrower, the several banks and other financial institutions or entities from time to time parties thereto and the administrative agent; • "Credit Facility" refers to the seven -year senior secured term loan B-2 facility ("Term Loan B-2"), the seven -year senior secured term loan B-3 facility ("Term Loan B-3"), the senior secured term loan B-4 facility due March 11, 2021 ("Term Loan B-4"), the senior secured term loan B-5 facility due March 9, 2023 ("Term Loan B-5"), the $350 million , senior secured revolving credit facility due March 9, 2021 (the "revolving credit facility") and the $300 million , five -year senior secured revolving credit facility (the "2016 revolving credit facility"), the terms of which are set forth in the Credit Agreement. Term Loan B-2, Term Loan B-3 and the 2016 revolving credit facility were repaid in May 2017 with proceeds from Term Loan B-4, Term Loan B-5 and the senior notes (defined below); • "IAA" refers, collectively, to Insurance Auto Auctions, Inc., a wholly-owned subsidiary of KAR Auction Services, and Insurance Auto Auctions, Inc.'s subsidiaries and other related entities, including HBC Vehicle Services Limited ("HBC"); • "KAR Auction Services" refers to KAR Auction Services, Inc. and not to its subsidiaries; and • "Senior notes" refers to the 5.125% senior notes due 2025 ( $950 million aggregate principal outstanding at March 31, 2019). Business and Nature of Operations As of March 31, 2019 , we have a North American network of 75 ADESA whole car auction sites and 179 IAA salvage vehicle auction sites; in addition, we offer online auctions for both whole car and salvage vehicles. ADESA also includes TradeRev, an online automotive remarketing system where dealers can launch and participate in real-time vehicle auctions at any time, ADESA Remarketing Limited, an online whole car vehicle remarketing business in the United Kingdom and CarsOnTheWeb, an online wholesale vehicle auction marketplace in Continental Europe. IAA also includes HBC Vehicle Services Limited, which operates from 14 locations in the United Kingdom. Our auctions facilitate the sale of used and salvage vehicles through physical, online or hybrid auctions, which permit Internet buyers to participate in physical auctions. ADESA and IAA are leading, national providers of wholesale and salvage vehicle auctions and related vehicle remarketing services for the automotive industry in North America. ADESA's online service offerings include customized private label solutions powered with software developed by its wholly-owned subsidiary, Openlane, that allow our institutional consignors (automobile manufacturers, captive finance companies and other institutions) to offer vehicles via the Internet prior to arrival at the physical auction. Remarketing services include a variety of activities designed to transfer used and salvage vehicles between sellers and buyers throughout the vehicle life cycle. ADESA and IAA facilitate the exchange of these vehicles through an auction marketplace, which aligns sellers and buyers. As an agent for customers, the Company generally does not take title to or ownership of vehicles sold at the auctions. Generally, fees are earned from the seller and buyer on each successful auction transaction in addition to fees earned for ancillary services. ADESA has the second largest used vehicle auction network in North America, based upon the number of used vehicles sold through auctions annually, and also provides services such as inbound and outbound transportation logistics, reconditioning, vehicle inspection and certification, titling, administrative and collateral recovery services. ADESA is able to serve the diverse and multi-faceted needs of its customers through the wide range of services offered. IAA is one of the leading providers of salvage vehicle auctions and related services. The salvage auctions facilitate the remarketing of damaged vehicles that are designated as total losses by insurance companies, recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made, purchased vehicles and older model vehicles donated to charity or sold by dealers in salvage auctions. The salvage auction business specializes in providing services such as inbound transportation logistics, inspections, evaluations, salvage recovery services, titling and settlement administrative services. AFC is a leading provider of floorplan financing to independent used vehicle dealers and this financing is provided through 127 locations throughout the United States and Canada as of March 31, 2019 . Floorplan financing supports independent used vehicle dealers in North America who purchase vehicles at ADESA, IAA, TradeRev, other used vehicle and salvage auctions and non-auction purchases. In addition to floorplan financing, AFC also provides independent used vehicle dealers with other related services and products, such as vehicle service contracts. Potential Spin-off of IAA In February 2018, the Company announced that its board of directors had approved a plan to pursue the separation of its salvage auction business, currently operated by IAA, through a spin-off. The Company also announced that the separation was subject to customary regulatory approvals, the execution of intercompany agreements between the Company and the new salvage auction company ("IAA Spinco"), final approval of the board of directors and other customary matters. The Company expects to complete the spin-off in June 2019. The Company may, at any time and for any reason until the proposed transaction is complete, abandon, modify or change the terms of the spin-off. There can be no assurance as to whether or when the spin-off will occur. IAA Spinco filed its initial Registration Statement on Form 10 on June 28, 2018, Amendment No. 1 to its Registration Statement on Form 10 on August 30, 2018, Amendment No. 2 to its Registration Statement on Form 10 on November 20, 2018 and Amendment No. 3 to its Registration Statement on Form 10 on March 5, 2019. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results of operations, cash flows and financial position for the periods presented. These consolidated financial statements and condensed notes to consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on February 21, 2019. The 2018 year-end consolidated balance sheet data included in this Form 10-Q was derived from the audited financial statements referenced above and does not include all disclosures required by U.S. GAAP for annual financial statements. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, incremental losses on finance receivables, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies. Leases In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842) , which replaces the existing lease guidance in Topic 840. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use ("ROU") assets and corresponding lease liabilities on the balance sheet, with an exception for leases that meet the definition of a short-term lease. The new guidance continues to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. We adopted Topic 842 in the first quarter of 2019 and as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements , we applied the new standard at the adoption date and recognized the cumulative-effect of initially applying the new standard as an increase of $1.1 million to the opening balance of retained earnings. The cumulative-effect adjustment related to the derecognition of existing fixed assets for which we were determined to be the accounting owner under Topic 840 and related liabilities associated with certain sale leaseback transactions in build-to-suit arrangements that did not qualify for sale accounting under Topic 840. Depreciation related to these fixed assets was recorded consistently with owned property and equipment in depreciation expense. In accordance with Topic 842, the lease agreements associated with the derecognized fixed assets and related liabilities generated ROU assets and lease liabilities that will be amortized to lease expense over the lease term. In addition, we recognized additional operating liabilities of approximately $1,026 million with related ROU assets of approximately $956 million based on the present value of the remaining minimum rental payments for existing operating leases. Our Credit Agreement specifies that the net debt covenant shall continue to be calculated as if the accounting standard had not been adopted and that we could enter into negotiations to amend such provisions in the Credit Agreement so as to equitably reflect such changes with the desired result that the criteria for evaluating our financial condition would be the same after the change as if such change had not been made. We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Other accrued expenses” and “Operating lease liabilities” in our consolidated balance sheets. Finance leases are included in “Property and equipment, net,” “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component. New Accounting Standards In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred 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. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2018-15 will have on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, 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 new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2017-04 will have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on the consolidated financial statements, however we do not expect that it will have a material impact based on the short-term nature of AFC's loans. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2019 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions In January 2019, the Company completed the acquisition of Dent-ology. Dent-ology enhances our mobile reconditioning capabilities and bolsters our offerings to include wheel repair and expanded hail catastrophe response services. In January 2019, the Company also completed the acquisition of CarsOnTheWeb. COTW is an online auction company serving the wholesale vehicle sector in Continental Europe that seamlessly connects OEMs, fleet owners, wholesalers and dealers. The acquisition advances KAR’s international strategy and extends its strong North American and U.K.-based portfolio of physical, online and digital auction marketplaces. Certain of the purchase agreements included additional payments over a specified period contingent on certain terms, conditions and performance. The purchased assets included accounts receivable, inventory, property and equipment, customer relationships, tradenames and software. Financial results for each acquisition have been included in our consolidated financial statements from the date of acquisition. The aggregate purchase price for the businesses acquired in the first quarter of 2019, net of cash acquired, was approximately $193.5 million , which included net cash payments of $120.7 million , deferred payments with a fair value of $19.7 million and estimated contingent payments with a fair value of $53.1 million . The maximum amount of undiscounted deferred payments and undiscounted contingent payments related to these acquisitions could approximate $77.0 million . The purchase price for the acquired businesses was allocated to acquired assets and liabilities based upon fair values, including $33.4 million to intangible assets, representing the fair value of acquired customer relationships of $27.0 million , software of $4.3 million and tradenames of $2.1 million , which are being amortized over their expected useful lives. The purchase accounting associated with these acquisitions is preliminary, subject to final valuation results. The acquisitions resulted in aggregate goodwill of $160.5 million . The goodwill is recorded in the ADESA Auctions reportable segment. The financial impact of these acquisitions, including pro forma financial results, was immaterial to the Company’s consolidated results for the three months ended March 31, 2019 . |
Stock and Stock-Based Compensat
Stock and Stock-Based Compensation Plans | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock and Stock-Based Compensation Plans | Stock and Stock-Based Compensation Plans The KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan ("Omnibus Plan") is intended to provide equity and/or cash-based awards to our executive officers and key employees. Our stock-based compensation expense includes expense associated with KAR Auction Services, Inc. performance-based restricted stock units ("PRSUs"), service-based restricted stock units ("RSUs") and service options. We have determined that the KAR Auction Services, Inc. PRSUs, RSUs and service options should be classified as equity awards. The following table summarizes our stock-based compensation expense by type of award (in millions) : Three Months Ended March 31, 2019 2018 PRSUs $ 3.8 $ 3.4 RSUs 3.6 2.9 Service options — 0.1 Total stock-based compensation expense $ 7.4 $ 6.4 PRSUs and RSUs In the three months ended March 31, 2019 , we granted a target amount of approximately 0.3 million PRSUs to certain executive officers and management of the Company. The PRSUs vest if and to the extent that the Company's three -year cumulative operating adjusted net income per share attains certain specified goals. In addition, approximately 0.3 million RSUs were granted to certain executive officers and management of the Company. The RSUs are contingent upon continued employment and generally vest in three equal annual installments. The weighted average grant date fair value of the PRSUs and the RSUs was $47.06 per share, which was determined using the closing price of the Company's common stock on the dates of grant. Share Repurchase Program In October 2016, the board of directors authorized a repurchase of up to $500 million of the Company’s outstanding common stock, par value $0.01 per share, through October 26, 2019 . Repurchases may be made in the open market or through privately negotiated transactions, in accordance with applicable securities laws and regulations, including pursuant to repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases is subject to market and other conditions. No shares of common stock were repurchased during the three months ended March 31, 2019 . In 2018, we repurchased and retired 2,695,978 shares of common stock in the open market at a weighted average price of $55.64 per share under the October 2016 authorization. |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Net Income Per Share | Net Income Per Share The following table sets forth the computation of net income per share (in millions except per share amounts) : Three Months Ended 2019 2018 Net income $ 77.8 $ 90.0 Weighted average common shares outstanding 133.1 134.6 Effect of dilutive stock options and restricted stock awards 0.7 1.2 Weighted average common shares outstanding and potential common shares 133.8 135.8 Net income per share Basic $ 0.58 $ 0.67 Diluted $ 0.58 $ 0.66 Basic net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. Diluted net income per share was calculated consistent with basic net income per share including the effect of dilutive unissued common shares related to our stock-based employee compensation program. The effect of stock options and restricted stock 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 our common stock at the average market price during the period. Stock options that would have an anti-dilutive effect on net income per diluted share and PRSUs subject to performance conditions which have not yet been satisfied are excluded from the calculations. No options were excluded from the calculation of diluted net income per share for each of the three months ended March 31, 2019 and 2018 . In addition, approximately 0.8 million and 0.7 million PRSUs were excluded from the calculation of diluted net income per share for the three months ended March 31, 2019 and 2018 , respectively. Total options outstanding at March 31, 2019 and 2018 were 1.0 million and 1.6 million , respectively. |
Finance Receivables and Obligat
Finance Receivables and Obligations Collateralized by Finance Receivables | 3 Months Ended |
Mar. 31, 2019 | |
Notes, Loans and Financing Receivable, Net, Current [Abstract] | |
Finance Receivables and Obligations Collateralized by Finance Receivables | Finance Receivables and Obligations Collateralized by Finance Receivables AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary ("AFC Funding Corporation"), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 28, 2022. AFC Funding Corporation had committed liquidity of $1.70 billion for U.S. finance receivables at March 31, 2019 . We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables which expires on January 28, 2022. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$175 million at March 31, 2019 . The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings. The following tables present quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due. March 31, 2019 Net Credit Losses Three Months Ended March 31, 2019 Total Amount of: (in millions) Receivables Receivables Delinquent Floorplan receivables $ 1,976.4 $ 15.5 $ 8.0 Other loans 12.7 — — Total receivables managed $ 1,989.1 $ 15.5 $ 8.0 December 31, 2018 Net Credit Losses Three Months Ended March 31, 2018 Total Amount of: (in millions) Receivables Receivables Delinquent Floorplan receivables $ 2,001.9 $ 15.9 $ 7.4 Other loans 12.9 — — Total receivables managed $ 2,014.8 $ 15.9 $ 7.4 AFC's allowance for losses was $14.3 million and $14.0 million at March 31, 2019 and December 31, 2018 , respectively. As of March 31, 2019 and December 31, 2018 , $1,916.4 million and $1,973.2 million , respectively, of finance receivables and a cash reserve of 1 percent of the obligations collateralized by finance receivables served as security for the obligations collateralized by finance receivables. Obligations collateralized by finance receivables consisted of the following: March 31, December 31, Obligations collateralized by finance receivables, gross $ 1,378.5 $ 1,464.7 Unamortized securitization issuance costs (17.9 ) (19.4 ) Obligations collateralized by finance receivables $ 1,360.6 $ 1,445.3 Proceeds from the revolving sale of receivables to the bank facilities are used to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility. At March 31, 2019 , we were in compliance with the covenants in the securitization agreements. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consisted of the following (in millions) : Interest Rate* Maturity March 31, December 31, Term Loan B-4 Adjusted LIBOR + 2.25% March 11, 2021 $ 704.4 $ 704.4 Term Loan B-5 Adjusted LIBOR + 2.50% March 9, 2023 1,031.5 1,031.5 Revolving credit facility Adjusted LIBOR + 2.0% March 9, 2021 93.5 — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 15.3 — Canadian line of credit CAD Prime + 0.50% Repayable upon demand — — Total debt 2,794.7 2,685.9 Unamortized debt issuance costs (17.5 ) (18.5 ) Current portion of long-term debt (126.3 ) (13.1 ) Long-term debt $ 2,650.9 $ 2,654.3 *The interest rates presented in the table above represent the rates in place at March 31, 2019 . Credit Facility On May 31, 2017, we entered into an Incremental Commitment Agreement and Second Amendment (the "Second Amendment") to the Credit Agreement. The Second Amendment provided for, among other things, (i) the refinancing and repricing of the existing tranche B-2 term loans ("Term Loan B-2") remaining after the repayment with new tranche B-4 term loans in an aggregate principal amount of $717 million ("Term Loan B-4"), (ii) the refinancing and repricing of existing tranche B-3 term loans ("Term Loan B-3") remaining after the repayment with new tranche B-5 term loans in an aggregate principal amount of $1.05 billion ("Term Loan B-5") and (iii) a $350 million senior secured revolving credit facility (the "revolving credit facility"). The Credit Facility is available for letters of credit, working capital, permitted acquisitions and general corporate purposes. The Company also pays a commitment fee of 30 to 35 basis points, payable quarterly, on the average daily unused amount of the revolving credit facility. The rates on Term Loan B-4 and Term Loan B-5 were 4.88% and 5.13% at March 31, 2019 , respectively. The obligations of the Company under the Credit Facility are guaranteed by certain of our domestic subsidiaries (the "Subsidiary Guarantors") and are secured by substantially all of the assets of the Company and the Subsidiary Guarantors, including but not limited to: (a) pledges of and first priority perfected security interests in 100% of the equity interests of certain of the Company's and the Subsidiary Guarantors' domestic subsidiaries and 65% of the equity interests of certain of the Company's and the Subsidiary Guarantors' first tier foreign subsidiaries and (b) perfected first priority security interests in substantially all other tangible and intangible assets of the Company and each Subsidiary Guarantor, subject to certain exceptions. The Credit Agreement contains affirmative and negative covenants that we believe are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with our affiliates. The Credit Agreement also requires us to maintain a maximum leverage ratio, provided there are revolving loans outstanding. We were in compliance with the covenants in the Credit Agreement at March 31, 2019 . On March 31, 2019, $93.5 million was drawn on the revolving credit facility and there were no borrowings on the revolving credit facility at December 31, 2018 . In addition, we had related outstanding letters of credit in the aggregate amount of $32.9 million at March 31, 2019 and December 31, 2018 , which reduce the amount available for borrowings under the revolving credit facility. The $93.5 million of outstanding borrowings under the revolving credit facility have been classified as current debt as the Company intends to repay the outstanding borrowings within the next twelve months. European Lines of Credit COTW has lines of credit aggregating €30 million . The lines of credit have an interest rate of Euribor plus 1.25% and had an aggregate $15.3 million of borrowings outstanding at March 31, 2019 . The lines of credit are guaranteed by certain COTW subsidiaries. In addition, as part of the acquisition of COTW, we assumed debt of approximately $10.7 million which was paid off in the first quarter of 2019. Fair Value of Debt As of March 31, 2019 , the estimated fair value of our long-term debt amounted to $2,785.3 million . The estimates of fair value were based on broker-dealer quotes for our debt as of March 31, 2019 . The estimates presented on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Derivatives We are exposed to interest rate risk on our variable rate borrowings. Accordingly, interest rate fluctuations affect the amount of interest expense we are obligated to pay. We use interest rate derivatives with the objective of managing exposure to interest rate movements, thereby reducing the effect of interest rate changes and the effect they could have on future cash flows. Currently, interest rate cap agreements are used to accomplish this objective. • In August 2017, we entered into two interest rate caps with an aggregate notional amount of $800 million to manage our exposure to interest rate movements on our variable rate Credit Facility when three-month LIBOR exceeds 2.0% . The interest rate cap agreements each had an effective date of September 30, 2017 and each mature on September 30, 2019. We paid an aggregate amount of approximately $1.0 million for the caps in August 2017. • In March 2017, we entered into two interest rate caps with an aggregate notional amount of $400 million to manage our exposure to interest rate movements on our variable rate Credit Facility when three-month LIBOR exceeded 2.0% . The interest rate cap agreements each had an effective date of March 31, 2017 and each matured on March 31, 2019. We paid an aggregate amount of approximately $0.7 million for the caps in April 2017. We are exposed to credit loss in the event of non-performance by the counterparties; however, non-performance is not anticipated. ASC 815, Derivatives and Hedging , requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. The fair values of the interest rate derivatives are based on quoted market prices for similar instruments from commercial banks. The following table presents the fair value of our interest rate derivatives included in the consolidated balance sheets for the periods presented ( in millions ): Asset Derivatives March 31, 2019 December 31, 2018 Derivatives Not Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value 2017 Interest rate caps Other assets $ 2.3 Other assets $ 5.2 We have not designated any of the interest rate caps as hedges for accounting purposes. Accordingly, changes in the fair value of the interest rate caps are recognized as "Interest expense" in the consolidated statement of income. The following table presents the effect of the interest rate derivatives on our consolidated statements of income for the periods presented ( in millions ): Location of Gain / (Loss) Recognized in Income on Derivatives Amount of Gain / (Loss) Recognized in Income on Derivatives Three Months Ended Derivatives Not Designated as Hedging Instruments 2019 2018 2017 Interest rate caps Interest expense $ (0.5 ) $ 4.7 |
Leases Leases
Leases Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Leases | Leases We lease property, software, automobiles, trucks and trailers pursuant to operating lease agreements. We also lease furniture, fixtures and equipment under finance leases. Our leases have varying remaining lease terms with leases expiring through 2038, some of which include options to extend the leases. The components of lease expense were as follows ( in millions ): Three Months Ended March 31, 2019 Operating lease cost $ 42.0 Finance lease cost: Amortization of right-of-use assets $ 7.6 Interest on lease liabilities 0.7 Total finance lease cost $ 8.3 Supplemental cash flow information related to leases was as follows ( in millions ): Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 41.0 Operating cash flows related to finance leases 0.7 Financing cash flows related to finance leases 10.3 Right-of-use assets obtained in exchange for lease obligations: Operating leases 14.4 Finance leases 1.7 Supplemental balance sheet information related to leases was as follows ( in millions, except lease term and discount rate ): March 31, 2019 Operating Leases Operating lease right-of-use assets $ 942.5 Other accrued expenses $ 94.3 Operating lease liabilities 919.7 Total operating lease liabilities $ 1,014.0 Finance Leases Property and equipment, gross $ 205.2 Accumulated depreciation (146.3 ) Property and equipment, net $ 58.9 Other accrued expenses $ 21.9 Other liabilities 25.1 Total finance lease liabilities $ 47.0 Weighted Average Remaining Lease Term Operating leases 11.8 years Finance leases 2.2 years Weighted Average Discount Rate Operating leases 6.1 % Finance leases 4.6 % Maturities of lease liabilities as of March 31, 2019 were as follows ( in millions ): Operating Finance Leases 2019 (excluding the three months ended March 31, 2019) $ 117.3 $ 23.6 2020 141.7 16.3 2021 132.0 9.6 2022 121.0 0.3 2023 109.8 0.1 Thereafter 834.9 — Total lease payments 1,456.7 49.9 Less imputed interest (442.7 ) (2.9 ) Total $ 1,014.0 $ 47.0 As of March 31, 2019 , we have additional operating leases of approximately $67.5 million that have not yet commenced. These leases, primarily for facilities, are expected to commence in the next 12 months with lease terms up to 15 years . |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business such as employment matters and dealer disputes. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies including litigation and environmental matters are included in "Other accrued expenses" at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows. Legal fees are expensed as incurred. There has been no significant change in the legal and regulatory proceedings which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 . |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consisted of the following ( in millions ): March 31, December 31, Foreign currency translation loss $ (53.3 ) $ (61.4 ) Unrealized gain on postretirement benefit obligation, net of tax 0.1 0.1 Accumulated other comprehensive loss $ (53.2 ) $ (61.3 ) |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information ASC 280, Segment Reporting , requires reporting of segment information that is consistent with the manner in which the chief operating decision maker operates and views the Company. Our operations are grouped into three operating segments: ADESA Auctions, IAA and AFC, which also serve as our reportable business segments. These reportable business segments offer different services and have fundamental differences in their operations. The holding company is maintained separately from the three reportable segments and includes expenses associated with the corporate offices, such as salaries, benefits and travel costs for the corporate management team, certain human resources, information technology and accounting costs, and certain insurance, treasury, legal and risk management costs. Holding company interest expense includes the interest expense incurred on capital leases and the corporate debt structure. Intercompany charges relate primarily to interest on intercompany debt or receivables and certain administrative costs allocated by the holding company. Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2019 (in millions) : ADESA IAA AFC Holding Consolidated Operating revenues $ 599.7 $ 357.2 $ 89.9 $ — $ 1,046.8 Operating expenses Cost of services (exclusive of depreciation and amortization) 370.7 218.4 23.2 — 612.3 Selling, general and administrative 126.6 31.3 7.2 42.5 207.6 Depreciation and amortization 35.0 21.8 2.4 6.9 66.1 Total operating expenses 532.3 271.5 32.8 49.4 886.0 Operating profit (loss) 67.4 85.7 57.1 (49.4 ) 160.8 Interest expense 0.7 — 17.1 39.1 56.9 Other (income) expense, net (1.9 ) 0.1 (0.1 ) (0.1 ) (2.0 ) Intercompany expense (income) 10.3 10.0 (1.2 ) (19.1 ) — Income (loss) before income taxes 58.3 75.6 41.3 (69.3 ) 105.9 Income taxes 15.9 19.2 10.8 (17.8 ) 28.1 Net income (loss) $ 42.4 $ 56.4 $ 30.5 $ (51.5 ) $ 77.8 Total assets $ 3,797.0 $ 2,022.5 $ 2,406.1 $ 98.5 $ 8,324.1 Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2018 (in millions) : ADESA Auctions IAA AFC Holding Company Consolidated Operating revenues $ 528.1 $ 337.3 $ 85.1 $ — $ 950.5 Operating expenses Cost of services (exclusive of depreciation and amortization) 306.0 206.7 22.3 — 535.0 Selling, general and administrative 108.8 30.5 8.0 40.1 187.4 Depreciation and amortization 31.2 24.1 7.8 7.2 70.3 Total operating expenses 446.0 261.3 38.1 47.3 792.7 Operating profit (loss) 82.1 76.0 47.0 (47.3 ) 157.8 Interest expense 0.6 — 13.4 27.5 41.5 Other (income) expense, net (0.3 ) — — 0.2 (0.1 ) Intercompany expense (income) 12.1 9.4 (0.5 ) (21.0 ) — Income (loss) before income taxes 69.7 66.6 34.1 (54.0 ) 116.4 Income taxes 15.5 16.3 8.4 (13.8 ) 26.4 Net income (loss) $ 54.2 $ 50.3 $ 25.7 $ (40.2 ) $ 90.0 Total assets $ 3,278.5 $ 1,465.1 $ 2,329.9 $ 192.7 $ 7,266.2 Geographic Information Our foreign operations include Canada, Mexico, Continental Europe and the U.K. Most of our operations outside the U.S. are in Canada. Approximately 73% and 89% of our foreign operating revenues were from Canada for the three months ended March 31, 2019 and 2018 , respectively. Information regarding the geographic areas of our operations is set forth below (in millions) : Three Months Ended 2019 2018 Operating revenues U.S. $ 894.2 $ 828.6 Foreign 152.6 121.9 $ 1,046.8 $ 950.5 |
Basis of Presentation and Natur
Basis of Presentation and Nature of Operations Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results of operations, cash flows and financial position for the periods presented. These consolidated financial statements and condensed notes to consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on February 21, 2019. The 2018 year-end consolidated balance sheet data included in this Form 10-Q was derived from the audited financial statements referenced above and does not include all disclosures required by U.S. GAAP for annual financial statements. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, incremental losses on finance receivables, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies. |
Leases | Leases In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842) , which replaces the existing lease guidance in Topic 840. The ASU is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use ("ROU") assets and corresponding lease liabilities on the balance sheet, with an exception for leases that meet the definition of a short-term lease. The new guidance continues to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. We adopted Topic 842 in the first quarter of 2019 and as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements , we applied the new standard at the adoption date and recognized the cumulative-effect of initially applying the new standard as an increase of $1.1 million to the opening balance of retained earnings. The cumulative-effect adjustment related to the derecognition of existing fixed assets for which we were determined to be the accounting owner under Topic 840 and related liabilities associated with certain sale leaseback transactions in build-to-suit arrangements that did not qualify for sale accounting under Topic 840. Depreciation related to these fixed assets was recorded consistently with owned property and equipment in depreciation expense. In accordance with Topic 842, the lease agreements associated with the derecognized fixed assets and related liabilities generated ROU assets and lease liabilities that will be amortized to lease expense over the lease term. In addition, we recognized additional operating liabilities of approximately $1,026 million with related ROU assets of approximately $956 million based on the present value of the remaining minimum rental payments for existing operating leases. Our Credit Agreement specifies that the net debt covenant shall continue to be calculated as if the accounting standard had not been adopted and that we could enter into negotiations to amend such provisions in the Credit Agreement so as to equitably reflect such changes with the desired result that the criteria for evaluating our financial condition would be the same after the change as if such change had not been made. We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Other accrued expenses” and “Operating lease liabilities” in our consolidated balance sheets. Finance leases are included in “Property and equipment, net,” “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component. |
New Accounting Standards | New Accounting Standards In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred 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. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2018-15 will have on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, 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 new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2017-04 will have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on the consolidated financial statements, however we do not expect that it will have a material impact based on the short-term nature of AFC's loans. |
Stock and Stock-Based Compens_2
Stock and Stock-Based Compensation Plans (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of stock-based compensation expense by type of award | The following table summarizes our stock-based compensation expense by type of award (in millions) : Three Months Ended March 31, 2019 2018 PRSUs $ 3.8 $ 3.4 RSUs 3.6 2.9 Service options — 0.1 Total stock-based compensation expense $ 7.4 $ 6.4 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of computation of net income per share | The following table sets forth the computation of net income per share (in millions except per share amounts) : Three Months Ended 2019 2018 Net income $ 77.8 $ 90.0 Weighted average common shares outstanding 133.1 134.6 Effect of dilutive stock options and restricted stock awards 0.7 1.2 Weighted average common shares outstanding and potential common shares 133.8 135.8 Net income per share Basic $ 0.58 $ 0.67 Diluted $ 0.58 $ 0.66 |
Finance Receivables and Oblig_2
Finance Receivables and Obligations Collateralized by Finance Receivables (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Notes, Loans and Financing Receivable, Net, Current [Abstract] | |
Schedule of quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed | The following tables present quantitative information about delinquencies, credit losses less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due. March 31, 2019 Net Credit Losses Three Months Ended March 31, 2019 Total Amount of: (in millions) Receivables Receivables Delinquent Floorplan receivables $ 1,976.4 $ 15.5 $ 8.0 Other loans 12.7 — — Total receivables managed $ 1,989.1 $ 15.5 $ 8.0 December 31, 2018 Net Credit Losses Three Months Ended March 31, 2018 Total Amount of: (in millions) Receivables Receivables Delinquent Floorplan receivables $ 2,001.9 $ 15.9 $ 7.4 Other loans 12.9 — — Total receivables managed $ 2,014.8 $ 15.9 $ 7.4 |
Schedule of obligations collateralized by finance receivables | Obligations collateralized by finance receivables consisted of the following: March 31, December 31, Obligations collateralized by finance receivables, gross $ 1,378.5 $ 1,464.7 Unamortized securitization issuance costs (17.9 ) (19.4 ) Obligations collateralized by finance receivables $ 1,360.6 $ 1,445.3 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (in millions) : Interest Rate* Maturity March 31, December 31, Term Loan B-4 Adjusted LIBOR + 2.25% March 11, 2021 $ 704.4 $ 704.4 Term Loan B-5 Adjusted LIBOR + 2.50% March 9, 2023 1,031.5 1,031.5 Revolving credit facility Adjusted LIBOR + 2.0% March 9, 2021 93.5 — Senior notes 5.125% June 1, 2025 950.0 950.0 European lines of credit Euribor + 1.25% Repayable upon demand 15.3 — Canadian line of credit CAD Prime + 0.50% Repayable upon demand — — Total debt 2,794.7 2,685.9 Unamortized debt issuance costs (17.5 ) (18.5 ) Current portion of long-term debt (126.3 ) (13.1 ) Long-term debt $ 2,650.9 $ 2,654.3 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of the fair value of the entity's interest rate derivatives included in the consolidated balance sheet | The following table presents the fair value of our interest rate derivatives included in the consolidated balance sheets for the periods presented ( in millions ): Asset Derivatives March 31, 2019 December 31, 2018 Derivatives Not Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value 2017 Interest rate caps Other assets $ 2.3 Other assets $ 5.2 |
Schedule of other derivatives not designated as hedging instruments, statements of financial performance | The following table presents the effect of the interest rate derivatives on our consolidated statements of income for the periods presented ( in millions ): Location of Gain / (Loss) Recognized in Income on Derivatives Amount of Gain / (Loss) Recognized in Income on Derivatives Three Months Ended Derivatives Not Designated as Hedging Instruments 2019 2018 2017 Interest rate caps Interest expense $ (0.5 ) $ 4.7 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Components of lease expense | The components of lease expense were as follows ( in millions ): Three Months Ended March 31, 2019 Operating lease cost $ 42.0 Finance lease cost: Amortization of right-of-use assets $ 7.6 Interest on lease liabilities 0.7 Total finance lease cost $ 8.3 |
Supplemental cash flow information related to leases | Supplemental cash flow information related to leases was as follows ( in millions ): Three Months Ended March 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 41.0 Operating cash flows related to finance leases 0.7 Financing cash flows related to finance leases 10.3 Right-of-use assets obtained in exchange for lease obligations: Operating leases 14.4 Finance leases 1.7 |
Supplemental balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows ( in millions, except lease term and discount rate ): March 31, 2019 Operating Leases Operating lease right-of-use assets $ 942.5 Other accrued expenses $ 94.3 Operating lease liabilities 919.7 Total operating lease liabilities $ 1,014.0 Finance Leases Property and equipment, gross $ 205.2 Accumulated depreciation (146.3 ) Property and equipment, net $ 58.9 Other accrued expenses $ 21.9 Other liabilities 25.1 Total finance lease liabilities $ 47.0 Weighted Average Remaining Lease Term Operating leases 11.8 years Finance leases 2.2 years Weighted Average Discount Rate Operating leases 6.1 % Finance leases 4.6 % |
Maturities of lease liabilities | Maturities of lease liabilities as of March 31, 2019 were as follows ( in millions ): Operating Finance Leases 2019 (excluding the three months ended March 31, 2019) $ 117.3 $ 23.6 2020 141.7 16.3 2021 132.0 9.6 2022 121.0 0.3 2023 109.8 0.1 Thereafter 834.9 — Total lease payments 1,456.7 49.9 Less imputed interest (442.7 ) (2.9 ) Total $ 1,014.0 $ 47.0 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of accumulated other comprehensive income (loss) | Accumulated other comprehensive loss consisted of the following ( in millions ): March 31, December 31, Foreign currency translation loss $ (53.3 ) $ (61.4 ) Unrealized gain on postretirement benefit obligation, net of tax 0.1 0.1 Accumulated other comprehensive loss $ (53.2 ) $ (61.3 ) |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of financial information regarding the entity's reportable segments | Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2019 (in millions) : ADESA IAA AFC Holding Consolidated Operating revenues $ 599.7 $ 357.2 $ 89.9 $ — $ 1,046.8 Operating expenses Cost of services (exclusive of depreciation and amortization) 370.7 218.4 23.2 — 612.3 Selling, general and administrative 126.6 31.3 7.2 42.5 207.6 Depreciation and amortization 35.0 21.8 2.4 6.9 66.1 Total operating expenses 532.3 271.5 32.8 49.4 886.0 Operating profit (loss) 67.4 85.7 57.1 (49.4 ) 160.8 Interest expense 0.7 — 17.1 39.1 56.9 Other (income) expense, net (1.9 ) 0.1 (0.1 ) (0.1 ) (2.0 ) Intercompany expense (income) 10.3 10.0 (1.2 ) (19.1 ) — Income (loss) before income taxes 58.3 75.6 41.3 (69.3 ) 105.9 Income taxes 15.9 19.2 10.8 (17.8 ) 28.1 Net income (loss) $ 42.4 $ 56.4 $ 30.5 $ (51.5 ) $ 77.8 Total assets $ 3,797.0 $ 2,022.5 $ 2,406.1 $ 98.5 $ 8,324.1 Financial information regarding our reportable segments is set forth below as of and for the three months ended March 31, 2018 (in millions) : ADESA Auctions IAA AFC Holding Company Consolidated Operating revenues $ 528.1 $ 337.3 $ 85.1 $ — $ 950.5 Operating expenses Cost of services (exclusive of depreciation and amortization) 306.0 206.7 22.3 — 535.0 Selling, general and administrative 108.8 30.5 8.0 40.1 187.4 Depreciation and amortization 31.2 24.1 7.8 7.2 70.3 Total operating expenses 446.0 261.3 38.1 47.3 792.7 Operating profit (loss) 82.1 76.0 47.0 (47.3 ) 157.8 Interest expense 0.6 — 13.4 27.5 41.5 Other (income) expense, net (0.3 ) — — 0.2 (0.1 ) Intercompany expense (income) 12.1 9.4 (0.5 ) (21.0 ) — Income (loss) before income taxes 69.7 66.6 34.1 (54.0 ) 116.4 Income taxes 15.5 16.3 8.4 (13.8 ) 26.4 Net income (loss) $ 54.2 $ 50.3 $ 25.7 $ (40.2 ) $ 90.0 Total assets $ 3,278.5 $ 1,465.1 $ 2,329.9 $ 192.7 $ 7,266.2 |
Schedule of information regarding the geographic areas of entity's operations | Information regarding the geographic areas of our operations is set forth below (in millions) : Three Months Ended 2019 2018 Operating revenues U.S. $ 894.2 $ 828.6 Foreign 152.6 121.9 $ 1,046.8 $ 950.5 |
Basis of Presentation and Nat_2
Basis of Presentation and Nature of Operations (Details) $ in Millions | Mar. 09, 2016USD ($) | Mar. 11, 2014 | Mar. 31, 2019USD ($)locationnetworkprovider | Mar. 31, 2018USD ($) | Jan. 01, 2019USD ($) | Dec. 31, 2018USD ($) | May 31, 2017USD ($) |
Basis of Presentation and Nature of Operations | |||||||
Long-term debt | $ 2,794.7 | $ 2,685.9 | |||||
Cumulative effect adjustment for adoption of new accounting standard, net of tax | 1.1 | $ (3) | |||||
Total operating lease liabilities | 1,014 | $ 1,026 | |||||
Operating lease right-of-use assets | $ 942.5 | $ 956 | 0 | ||||
ADESA Auctions | |||||||
Basis of Presentation and Nature of Operations | |||||||
Number of sites for whole car auctions | network | 75 | ||||||
Ranking of largest providers of used vehicle auctions and related services | provider | 2 | ||||||
IAA | |||||||
Basis of Presentation and Nature of Operations | |||||||
Number of sites for salvage vehicle auctions | network | 179 | ||||||
HBC | |||||||
Basis of Presentation and Nature of Operations | |||||||
Number of sites for salvage vehicle auctions | network | 14 | ||||||
AFC | |||||||
Basis of Presentation and Nature of Operations | |||||||
Number of floorplan financing locations | location | 127 | ||||||
Senior secured revolving credit facility | |||||||
Basis of Presentation and Nature of Operations | |||||||
Long-term debt | $ 93.5 | 0 | |||||
Senior Notes | |||||||
Basis of Presentation and Nature of Operations | |||||||
Senior notes stated interest rate | 5.125% | 5.125% | |||||
Long-term debt | $ 950 | $ 950 | |||||
Credit Agreement | Term Loan B-2 | |||||||
Basis of Presentation and Nature of Operations | |||||||
Term of debt instrument | 7 years | ||||||
Credit Agreement | Term Loan B-3 | |||||||
Basis of Presentation and Nature of Operations | |||||||
Term of debt instrument | 7 years | ||||||
Credit Agreement | Senior secured revolving credit facility | |||||||
Basis of Presentation and Nature of Operations | |||||||
Maximum borrowing capacity | $ 350 | $ 350 | |||||
Credit Agreement | 2016 Revolving credit facility | |||||||
Basis of Presentation and Nature of Operations | |||||||
Maximum borrowing capacity | $ 300 | ||||||
Term of debt instrument | 5 years |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Acquisitions | |||
Acquisition of businesses (net of cash acquired) | $ 120.7 | $ 23.3 | |
Goodwill | 2,374 | $ 2,213.7 | |
Series of individually immaterial business acquisitions | |||
Acquisitions | |||
Purchase price for business acquired | 193.5 | ||
Fair value of deferred payments | 19.7 | ||
Fair value of estimated contingent payments | 53.1 | ||
Maximum amount of undiscounted payments related to acquisitions | 77 | ||
Purchase price for the acquired business allocated to intangible assets | 33.4 | ||
Goodwill | 160.5 | ||
Customer relationships | Series of individually immaterial business acquisitions | |||
Acquisitions | |||
Purchase price for the acquired business allocated to intangible assets | 27 | ||
Computer software & technology | Series of individually immaterial business acquisitions | |||
Acquisitions | |||
Purchase price for the acquired business allocated to intangible assets | 4.3 | ||
Tradenames | Series of individually immaterial business acquisitions | |||
Acquisitions | |||
Purchase price for the acquired business allocated to intangible assets | $ 2.1 |
Stock and Stock-Based Compens_3
Stock and Stock-Based Compensation Summary (Details) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2019USD ($)installment$ / sharesshares | Mar. 31, 2018USD ($) | |
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | $ 7.4 | $ 6.4 |
PRSUs | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | 3.8 | 3.4 |
RSUs | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | 3.6 | 2.9 |
Service options | ||
Stock and Stock-Based Compensation Plans | ||
Stock-based compensation expense (in dollars) | $ 0 | $ 0.1 |
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan | PRSUs - Operating Adjusted EPS | ||
Stock and Stock-Based Compensation Plans | ||
PRSUs and/or RSUs grants | shares | 0.3 | |
PRSUs vesting period | 3 years | |
PRSUs and/or RSUs grant date fair value | $ / shares | $ 47.06 | |
KAR Auction Services, Inc. 2009 Omnibus Stock and Incentive Plan | RSUs | ||
Stock and Stock-Based Compensation Plans | ||
PRSUs and/or RSUs grants | shares | 0.3 | |
Number of equal annual installments | installment | 3 | |
PRSUs and/or RSUs grant date fair value | $ / shares | $ 47.06 |
Share Repurchase Plan (Details)
Share Repurchase Plan (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 26, 2016 | Mar. 31, 2019 | Dec. 31, 2018 |
Stock and Stock-Based Compensation Plans | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
October 2016 Share Repurchase Authorization | |||
Stock and Stock-Based Compensation Plans | |||
Stock repurchase program, authorized amount | $ 500 | ||
Stock repurchase program expiration date | Oct. 26, 2019 | ||
Stock repurchased and retired during period (in shares) | 0 | 2,695,978 | |
Stock repurchased and retired weighted average price per share | $ 55.64 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Net Income | $ 77.8 | $ 90 |
Shares outstanding | ||
Weighted average common shares outstanding | 133.1 | 134.6 |
Effect of dilutive stock options and restricted stock awards (in shares) | 0.7 | 1.2 |
Weighted average common shares outstanding and potential common shares | 133.8 | 135.8 |
Net income per share | ||
Basic (in dollars per share) | $ 0.58 | $ 0.67 |
Diluted (in dollars per share) | $ 0.58 | $ 0.66 |
Shares attributable to stock options excluded from the calculation of diluted net income per share | 0 | 0 |
Securities excluded from calculation of earnings per share amount due to performance conditions not yet satisfied | 0.8 | 0.7 |
Stock options outstanding (in shares) | 1 | 1.6 |
Finance Receivables and Oblig_3
Finance Receivables and Obligations Collateralized by Finance Receivables (Details) $ in Millions, $ in Millions | 3 Months Ended | |||
Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2019CAD ($) | Dec. 31, 2018USD ($) | |
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal Amount of Receivables | $ 1,989.1 | $ 2,014.8 | ||
Principal Amount of Receivables Delinquent | 15.5 | 15.9 | ||
Net Credit Losses | 8 | $ 7.4 | ||
Allowance for losses | 14.3 | 14 | ||
Finance receivables pledged as security | 1,916.4 | 1,973.2 | ||
Obligations collateralized by finance receivables, gross | 1,378.5 | 1,464.7 | ||
Obligations collateralized by finance receivables | $ 1,360.6 | 1,445.3 | ||
Minimum | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Period to define financing receivables as past due (in days) | 31 days | |||
Floorplan receivables | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal Amount of Receivables | $ 1,976.4 | 2,001.9 | ||
Principal Amount of Receivables Delinquent | 15.5 | 15.9 | ||
Net Credit Losses | 8 | 7.4 | ||
Other Loans | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Principal Amount of Receivables | 12.7 | 12.9 | ||
Principal Amount of Receivables Delinquent | 0 | 0 | ||
Net Credit Losses | 0 | $ 0 | ||
AFC | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Allowance for losses | 14.3 | 14 | ||
Unamortized debt issuance costs | $ (17.9) | $ (19.4) | ||
AFC | Minimum | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Period to define financing receivables as past due (in days) | 31 days | |||
AFC Funding Corporation | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Committed liquidity | $ 1,700 | |||
Cash reserve as security for obligations of collateralized financing receivables (as a percent) | 1.00% | |||
AFCI | ||||
Finance Receivables and Obligations Collateralized by Finance Receivables | ||||
Committed liquidity | $ 175 | |||
Cash reserve as security for obligations of collateralized financing receivables (as a percent) | 1.00% |
Long-Term Debt Summary (Details
Long-Term Debt Summary (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | May 31, 2017 | |
Long-Term Debt | |||
Total debt | $ 2,794.7 | $ 2,685.9 | |
Unamortized debt issuance costs | (17.5) | (18.5) | |
Current portion of long-term debt | (126.3) | (13.1) | |
Long-term debt | 2,650.9 | 2,654.3 | |
Term Loan B-4 | |||
Long-Term Debt | |||
Total debt | $ 704.4 | 704.4 | |
Term Loan B-4 | Adjusted LIBOR | |||
Long-Term Debt | |||
Variable rate basis | Adjusted LIBOR | ||
Interest rate basis (as a percent) | 2.25% | ||
Term Loan B-5 | |||
Long-Term Debt | |||
Total debt | $ 1,031.5 | 1,031.5 | |
Term Loan B-5 | Adjusted LIBOR | |||
Long-Term Debt | |||
Variable rate basis | Adjusted LIBOR | ||
Interest rate basis (as a percent) | 2.50% | ||
Revolving credit facility | |||
Long-Term Debt | |||
Total debt | $ 93.5 | 0 | |
Revolving credit facility | Adjusted LIBOR | |||
Long-Term Debt | |||
Variable rate basis | Adjusted LIBOR | ||
Interest rate basis (as a percent) | 2.00% | ||
Senior Notes | |||
Long-Term Debt | |||
Total debt | $ 950 | 950 | |
Senior notes stated interest rate | 5.125% | 5.125% | |
European Lines of Credit | Foreign lines of credit | |||
Long-Term Debt | |||
Total debt | $ 15.3 | 0 | |
European Lines of Credit | Foreign lines of credit | Euribor rate | |||
Long-Term Debt | |||
Variable rate basis | Euribor | ||
Interest rate basis (as a percent) | 1.25% | ||
Canadian Line of Credit | Foreign lines of credit | |||
Long-Term Debt | |||
Total debt | $ 0 | $ 0 | |
Canadian Line of Credit | Foreign lines of credit | CAD Prime | |||
Long-Term Debt | |||
Variable rate basis | CAD Prime | ||
Interest rate basis (as a percent) | 0.50% | ||
Credit Agreement | Term Loan B-4 | |||
Long-Term Debt | |||
Total debt | $ 717 | ||
Credit Agreement | Term Loan B-5 | |||
Long-Term Debt | |||
Total debt | $ 1,050 |
Credit Facilities (Details)
Credit Facilities (Details) € in Millions, $ in Millions | 3 Months Ended | |||
Mar. 31, 2019USD ($) | Mar. 31, 2019EUR (€) | Dec. 31, 2018USD ($) | May 31, 2017USD ($) | |
Long-Term Debt | ||||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' domestic subsidiaries pledged under the Credit Facility | 100.00% | |||
Percentage of equity interests of certain of the company's and the Subsidiary Guarantors' first-tier foreign subsidiaries pledged under the Credit Facility | 65.00% | |||
Long-term debt | $ 2,794.7 | $ 2,685.9 | ||
Estimated fair value of long-term debt | $ 2,785.3 | |||
Term Loan B-4 | ||||
Long-Term Debt | ||||
Interest rate of loan (as a percent) | 4.88% | 4.88% | ||
Long-term debt | $ 704.4 | 704.4 | ||
Term Loan B-5 | ||||
Long-Term Debt | ||||
Interest rate of loan (as a percent) | 5.13% | 5.13% | ||
Long-term debt | $ 1,031.5 | 1,031.5 | ||
Revolving credit facility | ||||
Long-Term Debt | ||||
Amount borrowed | 93.5 | 0 | ||
Long-term debt | 93.5 | 0 | ||
Letters of credit | ||||
Long-Term Debt | ||||
Outstanding letters of credit | 32.9 | 32.9 | ||
European Lines of Credit | Foreign lines of credit | ||||
Long-Term Debt | ||||
Maximum borrowing capacity | € | € 30 | |||
Long-term debt | 15.3 | $ 0 | ||
Credit Agreement | Term Loan B-4 | ||||
Long-Term Debt | ||||
Long-term debt | $ 717 | |||
Credit Agreement | Term Loan B-5 | ||||
Long-Term Debt | ||||
Long-term debt | 1,050 | |||
Credit Agreement | Revolving credit facility | ||||
Long-Term Debt | ||||
Maximum borrowing capacity | $ 350 | $ 350 | ||
Commitment fee on the unused amount of the Credit Facility (as a percent) | 0.30% | |||
Commitment fee may step up to this percent | 0.35% | |||
CarsOnTheWeb | ||||
Long-Term Debt | ||||
Repayment of assumed debt | $ 10.7 |
Derivatives (Details)
Derivatives (Details) $ in Millions | Aug. 16, 2017USD ($)agreement | Apr. 06, 2017USD ($) | Mar. 31, 2017USD ($)agreement | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
August 2017 interest rate cap | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Number of derivative agreements purchased | agreement | 2 | ||||
Aggregate amount paid for interest rate caps | $ 1 | ||||
Aggregate notional amount | $ 800 | ||||
Variable rate basis | three-month LIBOR | ||||
August 2017 interest rate cap | Minimum | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Floor rate (as a percent) | 2.00% | ||||
March 2017 interest rate cap | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Number of derivative agreements purchased | agreement | 2 | ||||
Aggregate amount paid for interest rate caps | $ 0.7 | ||||
Aggregate notional amount | $ 400 | ||||
Variable rate basis | three-month LIBOR | ||||
March 2017 interest rate cap | Minimum | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Floor rate (as a percent) | 2.00% | ||||
Not designated as hedging instrument | March and August 2017 interest rate caps | |||||
Fair value of the entity's interest rate derivatives included in the consolidated balance sheet | |||||
Asset derivatives, fair value | $ 2.3 | $ 5.2 |
Derivatives (Details 2)
Derivatives (Details 2) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
March and August 2017 interest rate caps | Not designated as hedging instrument | ||
Effect of the interest rate derivatives on the entity's statement of equity and consolidated statement of income | ||
Amount of gain/(loss) recognized in income on derivative | $ (0.5) | $ 4.7 |
Leases Components of Lease Expe
Leases Components of Lease Expense (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Operating lease cost | $ 42 |
Finance lease cost: amortization of right-of-use assets | 7.6 |
Finance lease cost: interest on lease liabilities | 0.7 |
Total finance lease cost | $ 8.3 |
Leases Supplemental Cash Flow I
Leases Supplemental Cash Flow Information Related to Leases (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Cash Paid For Amounts Included In Measurement Of Lease Liabilities | |
Operating cash flows related to operating leases | $ 41 |
Operating cash flows related to finance leases | 0.7 |
Financing cash flows related to finance leases | 10.3 |
Right-Of-Use Assets Obtained In Exchange For Lease Obligations | |
Operating leases | 14.4 |
Finance leases | $ 1.7 |
Leases Supplemental Balance She
Leases Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Millions | Mar. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Schedule of supplemental balance sheet information related to leases | |||
Operating lease right-of-use assets | $ 942.5 | $ 956 | $ 0 |
Other accrued expenses | 302.8 | 186.3 | |
Operating lease liabilities | 919.7 | 0 | |
Total operating lease liabilities | 1,014 | $ 1,026 | |
Accumulated depreciation | (825.8) | (856.6) | |
Property and equipment, net | 828.3 | 976.2 | |
Other liabilities | 112.2 | $ 274.5 | |
Total finance lease liabilities | $ 47 | ||
Weighted average remaining lease term for operating leases | 11 years 9 months 17 days | ||
Weighted average remaining lease term for finance leases | 2 years 2 months | ||
Weighted average discount rate for operating leases | 6.10% | ||
Weighted average discount rate for finance leases | 4.60% | ||
Operating lease | |||
Schedule of supplemental balance sheet information related to leases | |||
Operating lease right-of-use assets | $ 942.5 | ||
Other accrued expenses | 94.3 | ||
Operating lease liabilities | 919.7 | ||
Total operating lease liabilities | 1,014 | ||
Finance lease | |||
Schedule of supplemental balance sheet information related to leases | |||
Other accrued expenses | 21.9 | ||
Property and equipment, gross | 205.2 | ||
Accumulated depreciation | (146.3) | ||
Property and equipment, net | 58.9 | ||
Other liabilities | 25.1 | ||
Total finance lease liabilities | $ 47 |
Leases Maturities of Lease Liab
Leases Maturities of Lease Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2019 | Jan. 01, 2019 |
Operating Leases | ||
2019 (excluding the three months ended March 31, 2019) | $ 117.3 | |
2020 | 141.7 | |
2021 | 132 | |
2022 | 121 | |
2023 | 109.8 | |
Thereafter | 834.9 | |
Total lease payments | 1,456.7 | |
Less imputed interest | (442.7) | |
Total operating lease liabilities | 1,014 | $ 1,026 |
Finance Leases | ||
2019 (excluding the three months ended March 31, 2019) | 23.6 | |
2020 | 16.3 | |
2021 | 9.6 | |
2022 | 0.3 | |
2023 | 0.1 | |
Thereafter | 0 | |
Total lease payments | 49.9 | |
Less imputed interest | (2.9) | |
Total finance lease liabilities | 47 | |
Operating Leases Not yet Commenced | ||
Operating leases not yet commenced | $ 67.5 | |
Maximum | ||
Operating Leases Not yet Commenced | ||
Operating leases not yet commenced - maximum lease term | 15 years |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Significant change in legal and regulatory proceedings | $ 0 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | Mar. 31, 2019 | Dec. 31, 2018 |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation loss | $ (53.3) | $ (61.4) |
Unrealized gain on postretirement benefit obligation, net of tax | 0.1 | 0.1 |
Accumulated other comprehensive loss | $ (53.2) | $ (61.3) |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019USD ($)segment | Mar. 31, 2018USD ($) | Dec. 31, 2018USD ($) | |
Segment Reporting [Abstract] | |||
Number of operating segments | segment | 3 | ||
Number of reportable segments | segment | 3 | ||
Segment Information | |||
ADESA Auction Services | $ 599.7 | $ 528.1 | |
IAA Salvage Services | 357.2 | 337.3 | |
AFC | 89.9 | 85.1 | |
Operating revenues | 1,046.8 | 950.5 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 612.3 | 535 | |
Selling, general and administrative | 207.6 | 187.4 | |
Depreciation and amortization | 66.1 | 70.3 | |
Total operating expenses | 886 | 792.7 | |
Operating profit | 160.8 | 157.8 | |
Interest expense | 56.9 | 41.5 | |
Other (income) expense, net | (2) | (0.1) | |
Intercompany expense (income) | 0 | 0 | |
Income before income taxes | 105.9 | 116.4 | |
Income taxes | 28.1 | 26.4 | |
Net Income | 77.8 | 90 | |
Total assets | 8,324.1 | 7,266.2 | $ 7,206.2 |
Operating Segments | ADESA Auctions | |||
Segment Information | |||
ADESA Auction Services | 599.7 | 528.1 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 370.7 | 306 | |
Selling, general and administrative | 126.6 | 108.8 | |
Depreciation and amortization | 35 | 31.2 | |
Total operating expenses | 532.3 | 446 | |
Operating profit | 67.4 | 82.1 | |
Interest expense | 0.7 | 0.6 | |
Other (income) expense, net | (1.9) | (0.3) | |
Intercompany expense (income) | 10.3 | 12.1 | |
Income before income taxes | 58.3 | 69.7 | |
Income taxes | 15.9 | 15.5 | |
Net Income | 42.4 | 54.2 | |
Total assets | 3,797 | 3,278.5 | |
Operating Segments | IAA | |||
Segment Information | |||
IAA Salvage Services | 357.2 | 337.3 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 218.4 | 206.7 | |
Selling, general and administrative | 31.3 | 30.5 | |
Depreciation and amortization | 21.8 | 24.1 | |
Total operating expenses | 271.5 | 261.3 | |
Operating profit | 85.7 | 76 | |
Interest expense | 0 | 0 | |
Other (income) expense, net | 0.1 | 0 | |
Intercompany expense (income) | 10 | 9.4 | |
Income before income taxes | 75.6 | 66.6 | |
Income taxes | 19.2 | 16.3 | |
Net Income | 56.4 | 50.3 | |
Total assets | 2,022.5 | 1,465.1 | |
Operating Segments | AFC | |||
Segment Information | |||
AFC | 89.9 | 85.1 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 23.2 | 22.3 | |
Selling, general and administrative | 7.2 | 8 | |
Depreciation and amortization | 2.4 | 7.8 | |
Total operating expenses | 32.8 | 38.1 | |
Operating profit | 57.1 | 47 | |
Interest expense | 17.1 | 13.4 | |
Other (income) expense, net | (0.1) | 0 | |
Intercompany expense (income) | (1.2) | (0.5) | |
Income before income taxes | 41.3 | 34.1 | |
Income taxes | 10.8 | 8.4 | |
Net Income | 30.5 | 25.7 | |
Total assets | 2,406.1 | 2,329.9 | |
Holding Company | |||
Segment Information | |||
Operating revenues | 0 | 0 | |
Operating expenses | |||
Cost of services (exclusive of depreciation and amortization) | 0 | 0 | |
Selling, general and administrative | 42.5 | 40.1 | |
Depreciation and amortization | 6.9 | 7.2 | |
Total operating expenses | 49.4 | 47.3 | |
Operating profit | (49.4) | (47.3) | |
Interest expense | 39.1 | 27.5 | |
Other (income) expense, net | (0.1) | 0.2 | |
Intercompany expense (income) | (19.1) | (21) | |
Income before income taxes | (69.3) | (54) | |
Income taxes | (17.8) | (13.8) | |
Net Income | (51.5) | (40.2) | |
Total assets | $ 98.5 | $ 192.7 |
Segment Information (Details 2)
Segment Information (Details 2) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Geographic Information | ||
Operating revenues | $ 1,046.8 | $ 950.5 |
U.S. | ||
Geographic Information | ||
Operating revenues | 894.2 | 828.6 |
Foreign | ||
Geographic Information | ||
Operating revenues | $ 152.6 | $ 121.9 |
Percent of foreign revenue from Canada | 73.00% | 89.00% |