KAR Auction Services, Inc. (NYSE:KAR) Q4 2020 Earnings Conference Call February 17, 2021 8:30 AM ET Company Participants Mike Eliason - Investor Relations Jim Hallett - CEO Eric Loughmiller - EVP and CFO Conference Call Participants Ryan Brinkman - JPMorgan John Murphy - Bank of America Merrill Lynch Craig Kennison - Robert W. Baird & Co. Stephanie Benjamin - Truist Securities Daniel Imbro - Stephens, Inc. Operator Good morning, ladies and gentlemen, and welcome to the KAR Auction Services, Incorporated Fou ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-34568 KAR Auction Services, Inc. (Exact name of Registrant as specified in its charter) Delaware 20-8744739 (State or other jurisdiction of incorporation or or ...

| --- | --- | --- | |-------|-------|-------| | | | | | | | | | | | | | | | | Disclaimer This presentation is for informational purposes only. Neither the company nor any of its affiliates or representatives makes any representation or warranty, expressed or implied, as to the accuracy or completeness of this presentation or any of the information contained herein. The company and its affiliates or representatives expressly disclaim to the fullest extent permitted by law any and all liability based, in whol ...

KAR Auction Services, Inc. (NYSE:KAR) Q3 2020 Earnings Conference Call November 4, 2020 8:30 AM ET Company Participants Mike Eliason - Investor Relations Jim Hallett - Chief Executive Officer Eric Loughmiller – Executive Vice President and Chief Financial Officer Conference Call Participants John Murphy - Bank of America Rajat Gupta - JPMorgan Craig Kennison - Baird Stephanie Benjamin - Truist Daniel Imbro - Stephens Bob Labick - CJS Securities Bret Jordan - Jefferies Gary Prestopino - Barrington Research O ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for the period ended September 30, 2020, detail the company's financial performance, position, and cash flows, accompanied by condensed notes [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) In Q3 2020, total operating revenues declined by 15.4% year-over-year, while income from continuing operations increased, contrasting with a significant decline in both for the nine-month period Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Q3 2020 | Q3 2019 | YoY Change | Nine Months 2020 | Nine Months 2019 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Operating Revenues** | $593.6 | $701.9 | -15.4% | $1,658.1 | $2,110.6 | -21.4% | | **Operating Profit** | $86.4 | $85.7 | +0.8% | $122.5 | $252.5 | -51.5% | | **Income from Continuing Operations** | $47.1 | $34.4 | +36.9% | $17.6 | $77.1 | -77.2% | | **Net Income** | $47.1 | $35.3 | +33.4% | $17.6 | $168.7 | -89.6% | | **Diluted EPS from Continuing Operations** | $0.23 | $0.26 | -11.5% | $0.04 | $0.58 | -93.1% | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $6.91 billion as of September 30, 2020, primarily due to a significant rise in cash and cash equivalents, while total liabilities and stockholders' equity saw slight reductions Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $1,276.7 | $507.6 | | **Total current assets** | $3,674.6 | $3,244.5 | | **Total assets** | $6,909.9 | $6,581.2 | | **Total current liabilities** | $2,354.5 | $2,517.7 | | **Long-term debt** | $1,854.8 | $1,861.3 | | **Total liabilities** | $4,762.9 | $4,931.0 | | **Series A convertible preferred stock** | $540.0 | $— | | **Total stockholders' equity** | $1,607.0 | $1,650.2 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased for the nine months ended September 30, 2020, with investing activities providing cash and financing activities shifting from a large use to a provision of cash Cash Flow Summary - Continuing Operations (Nine Months Ended, in millions) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $431.9 | $291.1 | | **Net cash provided by (used by) investing activities** | $263.6 | $(367.3) | | **Net cash provided by (used by) financing activities** | $88.9 | $(1,140.5) | | **Net increase in cash, cash equivalents and restricted cash** | $770.5 | $227.2 | [Condensed Notes to Consolidated Financial Statements](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) These notes detail significant financial events and accounting policies, including a pending acquisition, the IAA spin-off, impairment charges, preferred stock issuance, and debt amendments - The company entered into an agreement to acquire BacklotCars, Inc. for **$425 million** in cash, expected to close in Q4 2020[47](index=47&type=chunk) - The financial results of the salvage auction business, IAA, which was spun-off on June 28, 2019, are accounted for as discontinued operations[48](index=48&type=chunk)[49](index=49&type=chunk) - A non-cash impairment charge of **$29.8 million** was recorded in Q2 2020, comprising **$25.5 million** for goodwill and **$4.3 million** for customer relationships in the ADESA Remarketing Limited reporting unit, due to the economic impact of COVID-19[69](index=69&type=chunk)[70](index=70&type=chunk) - In June 2020, the company issued **550,000 shares** of Series A Convertible Preferred Stock for an aggregate purchase price of approximately **$550 million**[90](index=90&type=chunk) - The company's two reportable business segments are ADESA Auctions (wholesale vehicle auctions) and AFC (floorplan financing for independent dealers)[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for Q3 and the first nine months of 2020, highlighting the COVID-19 impact, operational responses, segment performance, and strengthened liquidity [Impact of COVID-19](index=29&type=section&id=Impact%20of%20COVID-19) The company responded to COVID-19 by transitioning to all-digital auctions, implementing cost-saving measures, bolstering liquidity through preferred stock issuance, and utilizing government aid - Temporarily suspended physical sale operations on March 20, 2020, and transitioned to digital platforms like Simulcast-only and Simulcast+[118](index=118&type=chunk)[119](index=119&type=chunk) - Implemented significant cost-saving measures, including executive salary reductions, employee furloughs (approximately **11,000** initially), and suspension of the quarterly dividend[120](index=120&type=chunk)[143](index=143&type=chunk) - Strengthened liquidity by raising net proceeds of approximately **$528.2 million** from a convertible preferred stock issuance in June 2020[121](index=121&type=chunk) - Utilized government aid, recording approximately **$8.3 million** in employee retention credits under the CARES Act and **$14.3 million** under the Canada Emergency Wage Subsidy[121](index=121&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Consolidated revenue declined in Q3 and the nine-month period of 2020, while ADESA's operating profit increased due to digital sales efficiencies, contrasting with declines in the AFC segment ADESA Segment Performance - Q3 2020 vs Q3 2019 | Metric | Q3 2020 | Q3 2019 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $526.7M | $613.6M | -14% | | **Operating Profit** | $81.4M | $68.5M | +19% | | **Vehicles Sold** | 871,000 | 957,000 | -9% | | **Percentage of vehicles sold online** | 100% | 59% | +41 p.p. | | **Gross Profit % (excl. purchased vehicles)** | 49.3% | 42.5% | +6.8 p.p. | AFC Segment Performance - Q3 2020 vs Q3 2019 | Metric | Q3 2020 | Q3 2019 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $66.9M | $88.3M | -24% | | **Operating Profit** | $38.2M | $55.1M | -31% | | **Loan Transactions** | 324,000 | 442,000 | -27% | | **Revenue per loan transaction** | $179 | $180 | -1% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company significantly improved its liquidity to **$1.28 billion** by September 30, 2020, through preferred stock issuance and credit facility amendments, ensuring compliance with debt covenants - Cash and cash equivalents increased to **$1.28 billion** at September 30, 2020, including approximately **$528.2 million** in net proceeds from the June 2020 issuance of perpetual convertible preferred stock[191](index=191&type=chunk)[192](index=192&type=chunk) - The Credit Agreement was amended twice in 2020, first providing a financial covenant 'holiday' in May, then eliminating it in September as business conditions improved[196](index=196&type=chunk)[197](index=197&type=chunk) - AFC's U.S. and Canadian securitization facilities were amended in September 2020, extending their maturity dates to January 2024[209](index=209&type=chunk)[210](index=210&type=chunk) - The company was in compliance with its Consolidated Senior Secured Net Leverage Ratio covenant, which was **negative 0.6** at September 30, 2020, well below the maximum of **3.5**[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency fluctuations, mainly from Canadian operations, and interest rate changes on variable debt, mitigated by interest rate swaps - Foreign currency exposure is primarily from Canadian operations, with a **1%** decrease in the Canadian exchange rate estimated to impact net income by approximately **$0.3 million** for Q3 2020[238](index=238&type=chunk) - In January 2020, the company entered into interest rate swaps with an aggregate notional amount of **$500 million** to hedge against interest rate risk on its variable rate term loan[240](index=240&type=chunk) - A hypothetical **100 basis point** increase in short-term rates would have increased interest expense by approximately **$1.1 million** for Q3 2020, after accounting for the interest rate swaps[241](index=241&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2020, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period[242](index=242&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[243](index=243&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal disputes not expected to materially affect its financial condition, results of operations, or cash flows - The company is involved in ordinary course litigation which is not expected to have a material adverse effect on its financial condition or results[246](index=246&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section refers to previously disclosed risk factors, noting that the COVID-19 pandemic exacerbates many of these existing risks - The report directs readers to the risk factors in the 2019 Form 10-K and prior 2020 Form 10-Qs, stating that the COVID-19 pandemic exacerbates those risks[248](index=248&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock was repurchased in Q3 2020, with the full **$300 million** authorized under the October 2019 share repurchase program remaining available - No shares of common stock were repurchased during the three months ended September 30, 2020[250](index=250&type=chunk) - As of September 30, 2020, the full **$300 million** authorized under the October 2019 share repurchase program was still available[250](index=250&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including amendments to credit agreements and certifications

Second Quarter 2020 Earnings Slides August 4, 2020 Forward-Looking Statements This presentation includes forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on management's current expectations, are not guarantees of future performance and are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected, expressed or implied by such forward-lookin ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-34568 KAR Auction Services, Inc. (Exact name of Registrant as specified in its charter) Delaware 20-8744739 (State or other jurisdiction of incorporation o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-34568 KAR Auction Services, Inc. (Exact name of Registrant as specified in its charter) Delaware 20-8744739 (State or other jurisdiction of incorporation ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) KAR Auction Services is a leading provider of used vehicle auctions and remarketing services, operating through its ADESA and AFC segments - The company operates as two reportable business segments: ADESA Auctions (**87% of 2019 revenue**) and AFC (**13% of 2019 revenue**)[30](index=30&type=chunk) - In 2019, KAR facilitated the sale of approximately **3.8 million used vehicles** through its 74 North American physical auction locations and various online platforms[12](index=12&type=chunk) - The company's strategic initiatives are centered on digital platforms, data and analytics, international expansion, mobility solutions, and the seamless integration of its businesses[21](index=21&type=chunk)[22](index=22&type=chunk) - In 2019, the company separated from its salvage auction business, IAA, through a tax-free spin-off; IAA now operates as a separate public entity[16](index=16&type=chunk) [Our Industry](index=5&type=section&id=Our%20Industry) The North American used vehicle auction market is a highly consolidated industry, with ADESA and its main competitor representing approximately 70% of the market share - The North American used vehicle auction market volume was estimated at approximately **12 million vehicles in 2019**, including online and mobile application volumes[18](index=18&type=chunk) - The market is largely consolidated, with Manheim and ADESA accounting for an estimated **70% of the North American whole car auction market**, with ADESA's share at **30%**[19](index=19&type=chunk) [Our Business Segments](index=7&type=section&id=Our%20Business%20Segments) The company's operations are divided into the ADESA segment for whole car auctions and the AFC segment for floorplan financing to independent dealers ADESA Online Sales Volume | Metric | 2019 | | :--- | :--- | | **Online Sales Volume (% of total)** | 58% | AFC Key Metrics (as of Dec 31, 2019) | Metric | Value | | :--- | :--- | | **Active Dealers** | ~12,900 | | **Average Line of Credit** | ~$270,000 | | **Average Vehicles Floorplanned per Dealer** | ~16 | | **Average Value Outstanding per Vehicle** | ~$10,000 | - AFC utilizes securitization facilities to fund its operations, with a committed facility of **$1.70 billion** for U.S. finance receivables and **C$175 million** for Canadian receivables as of December 31, 2019[54](index=54&type=chunk)[55](index=55&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from competition, technology, operations, economic conditions, a substantial debt load, and regulations - The company faces significant competition from direct competitors like Manheim, new online entrants (e.g., ACV Auctions, EBlock), and customers selling directly to end-users[70](index=70&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - The business is exposed to information technology risks, including system disruptions and cyber-attacks, which could compromise confidential data and harm the company's reputation and operations[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - A decrease in the supply of used vehicles, particularly off-lease vehicles, or a market shift towards online-only platforms could adversely affect revenues and profitability[91](index=91&type=chunk)[93](index=93&type=chunk) - As of December 31, 2019, the company had total corporate debt of approximately **$1.9 billion**, which could limit financial flexibility and expose it to interest rate fluctuation risks[110](index=110&type=chunk)[116](index=116&type=chunk) - If the spin-off of IAA fails to qualify as a tax-free transaction, the company and its stockholders could be subject to substantial U.S. federal income tax liabilities[126](index=126&type=chunk)[128](index=128&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company operates from a leased corporate headquarters and numerous owned or leased auction and financing locations across North America - ADESA operates **74 used vehicle auction facilities** in North America, with an average size of approximately 75 acres per site[142](index=142&type=chunk) - AFC has **121 locations** in North America, with 84 physically located at auction facilities (63 at ADESA sites); most AFC branches are leased[143](index=143&type=chunk) [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to have a material adverse effect on its financial condition - The company is subject to routine litigation incidental to its business but does not expect these proceedings to have a **material adverse effect** on its financial condition[145](index=145&type=chunk)[519](index=519&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, with a $300 million share repurchase program authorized in October 2019 - In October 2019, the board of directors authorized a new share repurchase program of up to **$300 million** through October 30, 2021; no shares were repurchased under this authorization as of December 31, 2019[140](index=140&type=chunk)[147](index=147&type=chunk) Cumulative Total Stockholder Return (2014-2019) | Company/Index | 12/31/2014 | 12/31/2019 | | :--- | :--- | :--- | | **KAR Auction Services, Inc.** | $100 | $191.50 | | **S&P 400 Midcap Index** | $100 | $154.07 | | **S&P 500 Index** | $100 | $173.86 | [Selected Financial Data](index=30&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial data, showing 2019 revenues of $2.78 billion and total debt of $1.89 billion Selected Financial Data (Years Ended Dec 31) | (Dollars in millions) | 2019 | 2018 | | :--- | :--- | :--- | | **Total operating revenues** | $2,781.9 | $2,442.8 | | **Operating profit** | $314.1 | $340.1 | | **Income from continuing operations** | $92.4 | $117.6 | | **Total assets from continuing operations** | $6,581.2 | $5,699.4 | | **Total debt, net** | $1,890.1 | $2,667.4 | | **Net cash provided by operating activities - continuing operations** | $380.8 | $438.6 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2019, revenue grew 14% to $2.8 billion, while operating profit and net income from continuing operations declined Consolidated Results Overview (FY 2019 vs. FY 2018) | (Dollars in millions) | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | **Total revenues** | $2,781.9 | $2,442.8 | +14% | | **Operating profit** | $314.1 | $340.1 | -8% | | **Net income from continuing operations** | $92.4 | $117.6 | -21% | - The spin-off of the salvage auction business, IAA, was completed on June 28, 2019; IAA's financial results are now reported as **discontinued operations**[180](index=180&type=chunk) - In September 2019, the company amended its Credit Agreement, refinancing existing term loans with a new **$950 million Term Loan B-6** and establishing a new **$325 million Revolving Credit Facility**[178](index=178&type=chunk)[229](index=229&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) ADESA's revenue grew 16% while its operating profit declined, whereas AFC's revenue and operating profit both increased in 2019 ADESA Segment Performance (FY 2019 vs. FY 2018) | (Dollars in millions, except where noted) | 2019 | 2018 | | :--- | :--- | :--- | | **Total ADESA revenue** | $2,429.0 | $2,101.9 | | **Operating profit** | $264.1 | $307.8 | | **Vehicles sold (thousands)** | 3,784 | 3,472 | | **Percentage of vehicles sold online** | 58% | 54% | AFC Segment Performance (FY 2019 vs. FY 2018) | (Dollars in millions, except where noted) | 2019 | 2018 | | :--- | :--- | :--- | | **Total AFC revenue** | $352.9 | $340.9 | | **Operating profit** | $220.6 | $203.5 | | **Loan transactions (thousands)** | 1,783 | 1,760 | | **Revenue per loan transaction** | $178 | $175 | - TradeRev, a key digital growth initiative, incurred operating losses of **$71.5 million in 2019**, up from $53.0 million in 2018, reflecting continued investment[167](index=167&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains liquidity through cash from operations and credit facilities, having prepaid $1.3 billion in debt after the IAA spin-off Liquidity Position (as of Dec 31) | (Dollars in millions) | 2019 | 2018 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $507.6 | $277.1 | | **Working capital** | $726.8 | $450.3 | | **Available under revolving credit facility** | $325.0 | $350.0 | - In June 2019, the company prepaid approximately **$1.28 billion** of its Term Loan B-4 and Term Loan B-5 using cash received from the IAA separation[228](index=228&type=chunk) - AFC managed total finance receivables of **$2.12 billion** as of December 31, 2019, funded primarily through securitization facilities with committed liquidity of **$1.70 billion** in the U.S. and **C$175 million** in Canada[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) [Critical Accounting Estimates](index=58&type=section&id=Critical%20Accounting%20Estimates) Management identifies critical accounting estimates related to credit losses, business combinations, goodwill impairment, and legal contingencies - Key critical accounting estimates include: (1) allowance for credit losses, (2) business combinations, (3) goodwill and other intangible assets, and (4) legal proceedings and other loss contingencies[267](index=267&type=chunk) - The allowance for credit losses is sensitive to changes in charge-offs; a hypothetical **10% increase in net charge-offs** for 2019 would have increased the provision for credit losses by approximately **$3.4 million**[272](index=272&type=chunk) - Goodwill is tested for impairment annually in the second quarter; in 2019, the company performed a qualitative assessment and **did not identify any impairment**[275](index=275&type=chunk)[277](index=277&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from foreign currency fluctuations, particularly the Canadian dollar, and interest rate changes - The company's primary foreign currency exposure is to the Canadian dollar; a **1% decrease in the average Canadian exchange rate** in 2019 would have impacted net income by approximately **$0.3 million**[104](index=104&type=chunk)[284](index=284&type=chunk) - The company is exposed to interest rate risk on its variable rate corporate debt; a hypothetical **100 basis point increase in LIBOR** for 2019 would have increased interest expense by approximately **$6.1 million**[288](index=288&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements and the independent auditor's unqualified opinion - The independent auditor, KPMG LLP, issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019[301](index=301&type=chunk) - The company adopted new accounting standards for Leases (Topic 842) effective January 1, 2019, and for Revenue from Contracts with Customers (Topic 606) effective January 1, 2018[303](index=303&type=chunk)[304](index=304&type=chunk) [Consolidated Financial Statements](index=60&type=section&id=Consolidated%20Financial%20Statements) For 2019, the company reported total operating revenues of $2.8 billion and net income of $188.5 million, including discontinued operations Consolidated Statement of Income Highlights (FY 2019) | (In millions) | Amount | | :--- | :--- | | **Total operating revenues** | $2,781.9 | | **Operating profit** | $314.1 | | **Income from continuing operations** | $92.4 | | **Income from discontinued operations, net** | $96.1 | | **Net income** | $188.5 | Consolidated Balance Sheet Highlights (as of Dec 31, 2019) | (In millions) | Amount | | :--- | :--- | | **Total current assets** | $3,244.5 | | **Total assets** | $6,581.2 | | **Total current liabilities** | $2,517.7 | | **Long-term debt** | $1,861.3 | | **Total stockholders' equity** | $1,650.2 | Consolidated Statement of Cash Flows Highlights (FY 2019) | (In millions) | Amount | | :--- | :--- | | **Net cash provided by operating activities - continuing** | $380.8 | | **Net cash used by investing activities - continuing** | ($415.0) | | **Net cash used by financing activities - continuing** | ($1,163.8) | | **Net increase in cash** | $256.2 | [Notes to Consolidated Financial Statements](index=79&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, acquisitions, the IAA spin-off, and the company's long-term debt structure - In January 2019, the company acquired CarsOnTheWeb (an online auction company in Europe) and Dent-ology for an aggregate purchase price of **$169.2 million**, resulting in **$142.6 million of goodwill**[403](index=403&type=chunk)[404](index=404&type=chunk)[406](index=406&type=chunk) - The spin-off of IAA was completed on June 28, 2019; in connection with the separation, KAR received a cash distribution of approximately **$1.28 billion** from IAA, which was used to prepay a portion of KAR's term loans[420](index=420&type=chunk) - As of December 31, 2019, long-term debt consisted primarily of a **$947.6 million Term Loan B-6** due 2026 and **$950.0 million in 5.125% senior notes** due 2025[469](index=469&type=chunk) [Controls and Procedures](index=99&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[538](index=538&type=chunk) - There were **no changes** in internal control over financial reporting during the fourth quarter of 2019 that materially affected, or are reasonably likely to materially affect, internal controls[540](index=540&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=100&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section lists the company's executive officers and confirms the adoption of a Code of Business Conduct and Ethics - The report lists the key executive officers of the company, including James P. Hallett (CEO), Eric M. Loughmiller (CFO), John C. Hammer (President of ADESA), and James E. Money (President of AFC)[543](index=543&type=chunk) - The company has adopted a Code of Business Conduct and Ethics and a Code of Ethics for Principal Executive and Senior Financial Officers, both available on its website[554](index=554&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides information on the company's equity compensation plans as of December 31, 2019 Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | **Equity compensation plans approved by security holder(s)** | 2,035,813 | $9.07 | 5,147,288 | Part IV [Exhibits, Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K - This section provides an index of all exhibits filed with the Form 10-K, including debt agreements, compensation plans, and material contracts[563](index=563&type=chunk)[564](index=564&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-34568 KAR Auction Services, Inc. (Exact name of Registrant as specified in its charter) Delaware 20-8744739 (State or other jurisdiction of incorporat ...