OPENLANE, Inc 8-K, filed May 10, 2022
OPENLANE, Inc. (OPLN)
8-K
2022-05-10
For: 2022-05-09
View Original
Added on
April 11, 2026
About this 8-K
OPENLANE, Inc filed this 8-K on May 10, 2022, reporting on events of May 9, 2022.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 5.02: Director or officer change, or executive pay
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2022
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices)
(Zip Code)
(800 ) 923-3725
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
On May 9, 2022, KAR Auction Services, Inc. (the “Company”) completed the previously announced sale of its U.S. physical auction business (the “Sale”). The Sale was consummated pursuant to the previously disclosed Securities and Asset Purchase Agreement (the “Purchase Agreement”) with Carvana Group, LLC, a Delaware limited liability company (“Buyer”), and Carvana Co., a Delaware corporation, solely for purposes of Section 10.15 thereof as guarantor.
The description of the Purchase Agreement set forth under this Introductory Note does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2022 and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The description under the Introductory Note to this Form 8-K is hereby incorporated by reference herein. Total cash consideration payable by Buyer to the Company for the Sale is $2.2 billion, subject to adjustments for cash, indebtedness, transaction expenses and net working capital and certain holdbacks.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Upon the completion of the Sale, John Hammer, Chief Commercial Officer for the Company and President of ADESA, Inc., departed the Company and commenced employment with Buyer. In connection with the Sale and Mr. Hammer’s separation from the Company, Mr. Hammer received a payment of $1,716,000. Mr. Hammer will continue to be bound to the Company by the post-employment non-competition and non-solicitation obligations set forth in his employment agreement with the Company for the specified period of time set forth therein.
Item 7.01 Regulation FD Disclosure.
On May 10, 2022, the Company issued a press release announcing that the Company completed the Sale. The press release is furnished as Exhibit 99.1 to this Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information.
The unaudited pro forma consolidated financial information of the Company giving effect to the Sale is filed as Exhibit 99.2 to this Form 8-K and is incorporated by reference herein.
(d)
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KAR Auction Services, Inc.
By: /s/ Eric M. Loughmiller
Name: Eric M. Loughmiller
Title: Executive Vice President and Chief
Financial Officer
Dated: May 10, 2022
EXHIBIT 99.1
| PRESS RELEASE | ||
KAR Global Completes Sale of ADESA US
Physical Auction Business to Carvana
CARMEL, Ind.– May 10, 2022 – KAR Auction Services, Inc., d/b/a/ KAR Global (NYSE: KAR), a leading provider of digital marketplace solutions for used vehicles, successfully completed its sale of the ADESA U.S. physical auction business to Carvana. The sale, originally announced in February, includes all ADESA U.S. physical auction sites, operations and staff at 56 ADESA U.S. vehicle logistics centers and exclusive use of the ADESA.com marketplace in the U.S. The completed transaction advances KAR’s digital strategy, enhances the company’s financial profile and better positions the company and its industry-leading digital marketplaces for accelerated growth.
“We believe the future is digital, and the channel shift towards digital across our industry is gaining momentum. KAR is now better positioned than ever to lead this evolution and capture the broad opportunities ahead,” said Peter Kelly, CEO of KAR Global. “Our new, more simplified business model allows us to focus our strategy, energy and investments on developing and deploying the digital solutions our customers want, need and value the most. We believe expanding our capabilities and the portfolio of services we provide will generate the greatest benefits for those customers, increase our market share and, ultimately, deliver the greatest value to our shareholders.”
KAR will continue to operate its OPENLANE platform that supports more than 40 private label programs representing approximately 80% of North America’s off-lease inventory. KAR will also continue operating its rapidly growing digital dealer-to-dealer businesses—BacklotCars and CARWAVE in the U.S. and TradeRev in Canada. In addition, the company will retain its ADESA Canada, ADESA U.K. and ADESA Europe businesses as well as its affiliated inspections, transportation and other services brands, including leading floorplan solutions provider AFC.
Additional details on the company’s strategy and projections will be covered in KAR’s analyst day update call, which it anticipates will take place in June. Final dates and time for the call will be announced publicly and published on the investor relations section of karglobal.com.
Goldman Sachs & Co. LLC served as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to KAR.
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| KAR Media Inquiries: | KAR Analyst Inquiries: | ||||
| Jill Trudeau | Mike Eliason | ||||
| (317) 796-0945 | (317) 249-4559 | ||||
| jill.trudeau@karglobal.com | mike.eliason@karglobal.com | ||||
About KAR
KAR Auction Services, Inc. d/b/a KAR Global (NYSE: KAR), provides sellers and buyers across the global wholesale used vehicle industry with innovative, technology-driven remarketing solutions. KAR Global’s unique end-to-end platform supports whole car, financing, logistics and other ancillary and related services. Our integrated physical, online and mobile marketplaces reduce risk, improve transparency and streamline transactions for customers in about 75 countries. Headquartered in Carmel, Indiana, KAR Global has employees across the United States, Canada, Mexico, Uruguay, Europe and the Philippines. For more information and the latest KAR Global news, go to www.karglobal.com and follow us on Twitter @KARspeaks.
EXHIBIT 99.2
KAR Auction Services, Inc.
Unaudited Pro Forma Consolidated Financial Information
On May 9, 2022, KAR Auction Services, Inc. ("KAR" or the "Company") completed the sale of its ADESA U.S. physical auction business (the "Sale"). The Sale was consummated pursuant to the Securities and Asset Purchase Agreement entered into on February 24, 2022 with Carvana Group, LLC ("Carvana") and Carvana Co. The total cash consideration paid by Carvana to the Company for the sale was $2.2 billion, subject to adjustments for cash, indebtedness, transaction expenses, net working capital and certain holdbacks (the "Purchase Price").
The Sale is considered a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the Company prepared the accompanying unaudited pro forma consolidated financial information in accordance with Article 11 of Regulation S-X.
The accompanying unaudited pro forma consolidated statements of income for the year ended December 31, 2021 and the three months ended March 31, 2022 give effect to the divestiture as if it had occurred on January 1, 2021. KAR's financial statements included in its quarterly report on Form 10-Q for the quarterly period ended March 31, 2022, filed with the Securities and Exchange Commission ("SEC") on May 4, 2022, present the ADESA U.S. physical auction business as a discontinued operation for the three months ended March 31, 2022. As the purpose of the pro forma information provided below is to illustrate KAR's results of operations without the discontinued operations of the ADESA U.S. physical auction business, the effects of the transaction, including the estimated gain on sale, disposal costs and related tax effects were excluded from the pro forma statements of income. The accompanying unaudited pro forma consolidated balance sheet gives effect to this divestiture as if had occurred on March 31, 2022, the date of the Company's most recently filed balance sheet. The unaudited pro forma financial data also gives effect to the expected repayment of the $926.2 million outstanding on the Company's Term Loan B-6 and the settlement of the interest rate swaps.
The unaudited consolidated pro forma financial information should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022, and (ii) the unaudited consolidated financial statements and accompanying condensed notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's quarterly report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the SEC on May 4, 2022.
The unaudited pro forma consolidated financial information is presented based on assumptions, adjustments and currently available information described in the accompanying notes and is intended for informational purposes only. The unaudited pro forma consolidated financial information is not necessarily indicative of what the Company's results of operations or financial condition would have been had the divestiture been completed on the dates assumed. In addition, it is not necessarily indicative of the Company's future results of operations or financial condition.
KAR Auction Services, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2022
(In millions)
| As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||||||
| Assets | |||||||||||||||||
| Current assets | |||||||||||||||||
| Cash and cash equivalents | $ | 134.2 | $ | 1,223.8 | (a) | $ | 1,358.0 | ||||||||||
| Restricted cash | 26.3 | — | 26.3 | ||||||||||||||
| Trade receivables, net of allowances | 433.3 | — | 433.3 | ||||||||||||||
| Finance receivables, net of allowances | 2,734.8 | — | 2,734.8 | ||||||||||||||
| Other current assets | 117.8 | — | 117.8 | ||||||||||||||
| Current assets held-for-sale | 2,058.6 | (2,058.6) | (b) | — | |||||||||||||
| Total current assets | 5,505.0 | (834.8) | 4,670.2 | ||||||||||||||
| Other assets | |||||||||||||||||
| Goodwill | 1,595.4 | — | 1,595.4 | ||||||||||||||
| Customer relationships, net of accumulated amortization | 153.4 | — | 153.4 | ||||||||||||||
| Other intangible assets, net of accumulated amortization | 236.6 | — | 236.6 | ||||||||||||||
| Operating lease right-of-use assets | 93.2 | — | 93.2 | ||||||||||||||
| Property and equipment, net of accumulated depreciation | 142.2 | — | 142.2 | ||||||||||||||
| Other assets | 66.6 | — | 66.6 | ||||||||||||||
| Total other assets | 2,287.4 | — | 2,287.4 | ||||||||||||||
| Total assets | $ | 7,792.4 | $ | (834.8) | $ | 6,957.6 | |||||||||||
| Liabilities, Temporary Equity and Stockholders' Equity | |||||||||||||||||
| Current liabilities | |||||||||||||||||
| Accounts payable | $ | 833.5 | $ | — | $ | 833.5 | |||||||||||
| Accrued employee benefits and compensation expenses | 25.2 | — | 25.2 | ||||||||||||||
| Accrued interest | 18.6 | — | 18.6 | ||||||||||||||
| Other accrued expenses | 79.0 | — | 79.0 | ||||||||||||||
| Income taxes payable | 3.4 | 210.3 | (d) | 213.7 | |||||||||||||
| Obligations collateralized by finance receivables | 1,866.6 | — | 1,866.6 | ||||||||||||||
| Current maturities of long-term debt | 1,034.0 | (926.2) | (a) | 107.8 | |||||||||||||
| Current liabilities held-for-sale | 705.3 | (705.3) | (b) | — | |||||||||||||
| Total current liabilities | 4,565.6 | (1,421.2) | 3,144.4 | ||||||||||||||
| Non-current liabilities | |||||||||||||||||
| Long-term debt | 939.8 | — | 939.8 | ||||||||||||||
| Deferred income tax liabilities | 60.5 | (1.2) | (c) | 59.3 | |||||||||||||
| Operating lease liabilities | 86.9 | — | 86.9 | ||||||||||||||
| Other liabilities | 22.1 | — | 22.1 | ||||||||||||||
| Total non-current liabilities | 1,109.3 | (1.2) | 1,108.1 | ||||||||||||||
| Commitments and contingencies | |||||||||||||||||
| Temporary equity | |||||||||||||||||
| Series A convertible preferred stock | 601.6 | — | 601.6 | ||||||||||||||
| Stockholders' equity | |||||||||||||||||
| Common stock | 1.2 | — | 1.2 | ||||||||||||||
| Additional paid-in capital | 914.6 | — | 914.6 | ||||||||||||||
| Retained earnings | 614.6 | 591.0 | (b), (c) | 1,205.6 | |||||||||||||
| Accumulated other comprehensive loss | (14.5) | (3.4) | (c) | (17.9) | |||||||||||||
| Total stockholders’ equity | 1,515.9 | 587.6 | 2,103.5 | ||||||||||||||
| Total liabilities, temporary equity and stockholders’ equity | $ | 7,792.4 | $ | (834.8) | $ | 6,957.6 | |||||||||||
See accompanying notes to unaudited pro forma consolidated financial information
2
KAR Auction Services, Inc.
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 2021
(In millions, except per share amounts)
| As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||||||
| Operating revenues | |||||||||||||||||
| Auction fees | $ | 877.8 | $ | (478.6) | (e) | $ | 399.2 | ||||||||||
| Service revenue | 707.2 | (165.9) | (e) | 541.3 | |||||||||||||
| Purchased vehicle sales | 377.4 | (156.5) | (e) | 220.9 | |||||||||||||
| Finance-related revenue | 289.2 | — | 289.2 | ||||||||||||||
| Total operating revenues | 2,251.6 | (801.0) | 1,450.6 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 1,299.9 | (507.4) | (e) | 792.5 | |||||||||||||
| Selling, general and administrative | 558.1 | (137.4) | (e) | 420.7 | |||||||||||||
| Depreciation and amortization | 183.0 | (73.1) | (e) | 109.9 | |||||||||||||
| Total operating expenses | 2,041.0 | (717.9) | 1,323.1 | ||||||||||||||
| Operating profit | 210.6 | (83.1) | 127.5 | ||||||||||||||
| Interest expense | 126.6 | (32.1) | (e), (f) | 94.5 | |||||||||||||
| Other (income) expense, net | (17.5) | 5.0 | (e) | (12.5) | |||||||||||||
| Income from continuing operations before income taxes | 101.5 | (56.0) | 45.5 | ||||||||||||||
| Income taxes | 35.0 | (11.7) | (e), (g) | 23.3 | |||||||||||||
| Income from continuing operations | 66.5 | (44.3) | 22.2 | ||||||||||||||
| Series A preferred stock dividends | (41.1) | — | (41.1) | ||||||||||||||
| Income from continuing operations attributable to participating securities | (5.5) | 5.5 | (h) | — | |||||||||||||
| Income (loss) from continuing operations attributable to common stockholders | $ | 19.9 | $ | (38.8) | $ | (18.9) | |||||||||||
| Weighted average common shares - basic | 123.0 | 123.0 | |||||||||||||||
| Weighted average common shares - diluted | 123.6 | 123.6 | |||||||||||||||
| Income (loss) from continuing operations attributable to common stockholders per share: | |||||||||||||||||
| Basic | $ | 0.16 | $ | (0.15) | |||||||||||||
| Diluted | $ | 0.16 | $ | (0.15) | |||||||||||||
See accompanying notes to unaudited pro forma consolidated financial information
3
KAR Auction Services, Inc.
Unaudited Pro Forma Consolidated Statement of Income
Three Months Ended March 31, 2022
(In millions, except per share amounts)
| As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||||||
| Operating revenues | |||||||||||||||||
| Auction fees | $ | 101.4 | $ | — | $ | 101.4 | |||||||||||
| Service revenue | 137.5 | — | 137.5 | ||||||||||||||
| Purchased vehicle sales | 46.3 | — | 46.3 | ||||||||||||||
| Finance-related revenue | 84.2 | — | 84.2 | ||||||||||||||
| Total operating revenues | 369.4 | — | 369.4 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Cost of services (exclusive of depreciation and amortization) | 210.8 | — | 210.8 | ||||||||||||||
| Selling, general and administrative | 118.9 | — | 118.9 | ||||||||||||||
| Depreciation and amortization | 26.0 | — | 26.0 | ||||||||||||||
| Total operating expenses | 355.7 | — | 355.7 | ||||||||||||||
| Operating profit | 13.7 | — | 13.7 | ||||||||||||||
| Interest expense | 25.6 | 0.9 | (f) | 26.5 | |||||||||||||
| Other (income) expense, net | 1.2 | — | 1.2 | ||||||||||||||
| Loss from continuing operations before income taxes | (13.1) | (0.9) | (14.0) | ||||||||||||||
| Income taxes | (4.7) | (0.2) | (g) | (4.9) | |||||||||||||
| Loss from continuing operations | (8.4) | (0.7) | (9.1) | ||||||||||||||
| Series A preferred stock dividends | (10.7) | — | (10.7) | ||||||||||||||
| Loss from continuing operations attributable to common stockholders | $ | (19.1) | $ | (0.7) | $ | (19.8) | |||||||||||
| Weighted average common shares - basic | 121.4 | 121.4 | |||||||||||||||
| Weighted average common shares - diluted | 121.4 | 121.4 | |||||||||||||||
| Loss from continuing operations attributable to common stockholders per share: | |||||||||||||||||
| Basic | $ | (0.16) | $ | (0.16) | |||||||||||||
| Diluted | $ | (0.16) | $ | (0.16) | |||||||||||||
See accompanying notes to unaudited pro forma consolidated financial information
4
KAR Auction Services, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Information
(a)Adjustment reflects the net cash proceeds from the sale of the ADESA U.S. physical auction business as if the closing date were March 31, 2022. Gross cash proceeds of $2.2 billion were adjusted for $50.0 million in expected transaction expenses and the expected repayment of the $926.2 million outstanding on the Company's Term Loan B-6.
(b)Adjustment reflects the sale of the ADESA U.S. physical auction business and certain related assets and liabilities for $2.2 billion in cash, which were previously classified as held-for-sale. Also includes the impact of the estimated gain on sale of approximately $586.4 million based on assets and liabilities classified as held-for-sale as of March 31, 2022. As the sale did not close until May 9, 2022, assets and liabilities ultimately disposed of and the resulting gain recognized on the Sale could change.
(c)Adjustment reflects deferred gains on interest rate swaps currently in accumulated other comprehensive loss of approximately $4.6 million anticipated to be reclassified to earnings as gains are associated with future interest payments that are deemed probable not to occur.
(d)Adjustment reflects liabilities for income taxes payable generated by the transaction using a 26.4% statutory rate.
(e)Adjustments reflect the historical operating results of the ADESA U.S. physical auction business, including the related tax effects, and the impact of intercompany revenue and cost of services previously eliminated on a consolidated basis. The intercompany revenue and cost of services previously eliminated amounted to approximately $80.4 million and $17.7 million for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively.
(f)Adjustment reflects changes in interest expense on Term Loan B-6 which is expected to be repaid with proceeds from the Sale. The changes in interest expense include adjustments related to interest on Term Loan B-6, amortization of debt issuance costs and debt discount on Term Loan B-6, earnings impact of the interest rate derivatives previously designated as a cash flow hedge and the change in fair value of the interest rate swaps upon discontinuance of the cash flow hedge. The changes in interest expense for each component were as follows:
(1)Decreases in interest expense on Term Loan B-6 of approximately $22.6 million and $5.6 million for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively.
(2)Decreases in amortization of debt issuance costs and debt discount on Term Loan B-6 of approximately $1.8 million and $0.5 million for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively.
(3)Decreases in interest expense on the swaps of approximately $6.8 million and $1.7 million for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively.
(4)An increase in interest expense for the reversal of an unrealized gain due to the change in fair value of the discontinued interest rate swaps of $8.7 million for the three months ended March 31, 2022.
(g)Adjustment reflects income tax impact at statutory rate of 26.4% on interest expense changes described in (f).
(h)Adjustment to reverse amounts allocated as the participating securities do not share in undistributed losses.
5