United States securities and exchange commission logo
December 27, 2022
Scott A. Anderson
Chief Accounting Officer
KAR Auction Services, Inc.
11299 N. Illinois Street
Carmel , Indiana 46032
Re: KAR Auction
Services, Inc.
Form 10-K for
Fiscal Year Ended December 31, 2021
Filed February 23,
2022
Form 10-Q for
Fiscal Period Ended September 30, 2022
Filed November 2,
2022
File No. 001-34568
Dear Scott A. Anderson:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Overview of Results of KAR Auction Services, Inc. for the Years Ended
December 31, 2021 and
2020
ADESA Results
Revenue, page 35
1. It appears the increase
in total ADESA/Marketplace revenue in 2021 compared to 2020
was due to the increase
in purchased vehicle sales. Also, it appears this revenue
category was the
primary reason for the decrease in total revenue for the nine months
ended September 30,
2022 compared to the corresponding prior year period. We further
Scott A. Anderson
KAR Auction Services, Inc.
December 27, 2022
Page 2
note that for each quarter in fiscal 2022 the quarterly amount of
revenue in the current
year period was lower than that for the corresponding prior year
period for this revenue
category. However, there does not appear to be discussion of any of
these points as well
the reason for the decreased trend of contribution of this revenue
category to total
revenue.in fiscal 2022. Please explain these points to us and any
related trend information
pursuant to Item 303(b)(2)(ii) of Regulation S-K with view toward
disclosure as
appropriate to the extent relevant to interim and annual periods.
2. You disclose the increase in ADESA total revenue in fiscal 2021
compared to fiscal 2020
is due to the increase in average revenue per vehicle sold, partially
offset by a decrease in
the number of vehicles sold. You also quantify the incremental
increase in ADESA total
revenue in fiscal 2021 from businesses acquired and fluctuations in
exchange rates.
Excluding these incremental impacts, it appears ADESA total revenue in
2021 decreased
from 2020, with an apparent reverse price/volume relationship from
that disclosed (i.e.,
would now be due to a decrease in the number of vehicles sold with a
partial offset by an
increase in average revenue per vehicle sold). However, this point is
not discussed nor
any related consequential trend information. Please explain to us why
ADESA
total revenue decreased on this basis and any related trend
information with view toward
disclosure as appropriate to the extent relevant to interim and annual
periods.
Gross Profit, page 36
3. You disclose here and in the same sections for each period presented
in the Form 10-Q for
the fiscal year ended September 30, 2022 that the entire selling and
purchase price of the
vehicle are recorded as revenue and cost of services for purchased
vehicles sold. From
your disclosures it appears the gross profit of purchased vehicles
reduces the overall gross
profit margin percentage. However, the reason for this is not
disclosed nor how the
recording of the entire selling and purchase price factors into the
amount of gross profit
and the related percentage. Please explain to us the reason for these
points and any related
trend information with view toward disclosure as appropriate to the
extent relevant to
interim and annual periods.
Form 10-Q for the Fiscal Period Ended September 30, 2022
Condensed Notes to Consolidated Financial Statements
Note 2 - Sale of ADESA U.S. Physical Auction Business and Discontinued
Operations, page 12
4. In connection with your sale of the ADESA U.S. physical auction
business, you disclose
FirstName LastNameScott A. Anderson
you will continue to own the ADESA tradename, which has an indefinite
life. Please
Comapany NameKAR
explain Auction
to us with a viewServices, Inc.
toward disclosure how the book value of
this asset will be
maintained
December 27, 2022and you2 will assess this asset for impairment..
Page
FirstName LastName
Scott A. Anderson
FirstName LastNameScott
KAR Auction Services, Inc.A. Anderson
Comapany27,
December NameKAR
2022 Auction Services, Inc.
December
Page 3 27, 2022 Page 3
FirstName LastName
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 28
5. Service revenue is the largest category of revenue in each period
presented in fiscal 2022
for Marketplace, whereas it was not the largest category in fiscal
2021. Also, it appears
increases in service revenue in each period in fiscal 2022 compared to
the corresponding
prior year period is the reason for the increase in total Marketplace
revenue in each period
in fiscal 2022 compared to the corresponding prior year period.
However, these points do
not appear to be discussed. Please explain to us the reason for these
points and any related
trend information with view toward disclosure as appropriate to the
extent relevant to
interim and annual periods.
6. Please quantify to the extent practicable the amount of each variance
factor cited for
Marketplace service revenue for each period presented. Refer to
section 501.04 of our
Codification of Financial Reporting Policies for guidance.
7. For each period presented regarding Marketplace revenue, it appears
you initially attribute
the change in the total amount of Marketplace revenue to a
price/volume assessment (i.e.,
the change in revenue is the result of the change in the number of
vehicles sold and the
change in the average revenue per vehicle sold). It appears the
average revenue per
vehicle sold is computed by dividing the total amount of Marketplace
revenue by the total
number of vehicles sold. Please explain to us with a view toward
disclosure as
appropriate in relevant interim and annual periods the extent you
dictate changes in the
amount of the pricing of each factor cited as a service revenue
variance or whether the
pricing of these factors is determined by other parties or other
considerations that you pass
along in calculating the average revenue per vehicle sold.
Liquidity and Capital Resources
Summary of Cash Flows, page 43
8. For discontinued operations for the nine months ended 2022, we note
the relatively large
amount of income, net of income taxes with a relatively large amount
of net cash used by
operating activities. Please explain to us the factors that
contributed to this use of
operating cash flows.
9. Please explain to us with a view toward disclosure as appropriate in
relevant interim and
annual periods the operational reasons for the significantly lower net
cash provided by
operating activities of continuing operations in 2022 versus 2021. In
connection with this,
we note the mention of non-cash adjustments which do not affect actual
operating cash.
Also discuss the prospects of this reduced level of operating cash
flow continuing, and to
the extent it is expected to continue, how you intend to meet your
cash requirements and
maintain operations.
Scott A. Anderson
FirstName LastNameScott
KAR Auction Services, Inc.A. Anderson
Comapany27,
December NameKAR
2022 Auction Services, Inc.
December
Page 4 27, 2022 Page 4
FirstName LastName
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Aamira Chaudhry at 202-551-3389 or Doug Jones at 202-551-
3309 with any questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services