|By Marketwired .||
|May 5, 2014 04:15 PM EDT||
CARMEL, IN -- (Marketwired) -- 05/05/14 -- KAR Auction Services, Inc. (NYSE: KAR), today reported its first quarter financial results for the period ended March 31, 2014. For the first quarter of 2014, the company reported revenue of $583.8 million as compared with revenue of $557.6 million for the first quarter of 2013, an increase of 5%. Adjusted EBITDA for the quarter ended March 31, 2014 increased 8% to $147.1 million, as compared with Adjusted EBITDA of $136.2 million for the quarter ended March 31, 2013. As a result of the refinancing activities in the first quarter of 2014, net income decreased 29% to $20.7 million, or $0.15 per diluted share, as compared with net income of $29.1 million, or $0.21 per diluted share, in the first quarter of 2013. Adjusted net income per diluted share for the quarter ended March 31, 2014 increased 32% to $0.41 versus adjusted net income per diluted share of $0.31 for the quarter ended March 31, 2013.
The company also announced a cash dividend today of $0.25 per share on the company's common stock. The dividend is payable on July 3, 2014, to stockholders of record as of the close of business on June 25, 2014.
KAR Auction Services, Inc. has updated its guidance to reflect the recent refinancing of its credit agreement. The company expects 2014 Adjusted EBITDA of $580 - $600 million. The company also expects net income per share of $0.95 - $1.05 and adjusted net income per share of $1.35 - $1.45. The company expects its 2014 effective tax rate to be approximately 40%. Adjusted net income per share for 2014 represents GAAP net income per diluted share excluding excess depreciation and amortization and stock-based compensation, both resulting from the 2007 merger, and the loss on extinguishment of debt, all net of taxes. Additionally, the company expects 2014 cash taxes of approximately $105 - $115 million, cash interest on corporate debt of approximately $61 million and capital expenditures of approximately $105 million. This would result in free cash flow before dividend payments of approximately $309 to $319 million or $2.17 - $2.24 per share.
Earnings Conference Call Information
KAR Auction Services, Inc. will be hosting an earnings conference call and webcast on Tuesday, May 6, 2014 at 11:00 a.m. EDT (10:00 a.m. CDT). The call will be hosted by KAR Auction Services, Inc.'s Chief Executive Officer, Jim Hallett, and Executive Vice President and Chief Financial Officer, Eric Loughmiller. The conference call may be accessed by calling 1-800-245-1683 and entering participant passcode 700530 while the live web cast will be available at the investor relations section of www.karauctionservices.com. Supplemental financial information for KAR Auction Services' first quarter 2014 results is available at the investor relations section of www.karauctionservices.com under the financial postings page.
A replay of the call will be available for two weeks via telephone starting approximately 30 minutes after the completion of the call. The replay may be accessed by calling 1-888-203-1112 and entering pass code 6730956. The archive of the web cast will also be available following the call and will be available at the investor relations section of www.karauctionservices.com for a limited time.
About KAR Auction Services, Inc.
KAR Auction Services, Inc. (NYSE: KAR) is the holding company for ADESA, Inc. ("ADESA"), Insurance Auto Auctions, Inc. ("IAA") and Automotive Finance Corporation ("AFC"). ADESA is a leading provider of wholesale used vehicle auctions with 65 North American locations and its subsidiary OPENLANE provides a leading Internet automotive auction platform. Insurance Auto Auctions is a leading salvage vehicle auction company with 165 sites across the United States and Canada. Automotive Finance Corporation is a leading provider of floorplan financing to independent and franchise used vehicle dealers with 105 sites across the United States and Canada. Together, KAR Auction Services provides a unique, comprehensive, end-to-end solution for our customers' remarketing needs. Visit karauctionservices.com for additional information.
Forward Looking Statements
Certain statements contained in this release include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and which are subject to certain risks, trends and uncertainties. In particular, statements made that are not historical facts may be forward-looking statements. Words such as "should," "may," "will," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and similar expressions identify forward-looking statements. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Securities and Exchange Commission filings. The Company does not undertake any obligation to update any forward-looking statements.
KAR Auction Services, Inc. Condensed Consolidated Statements of Income (In millions) (Unaudited) Three Months Ended March 31, ---------------------- 2014 2013 ---------- ---------- Operating revenues ADESA Auction Services $ 298.1 $ 283.6 IAA Salvage Services 225.0 221.6 AFC 60.7 52.4 ---------- ---------- Total operating revenues 583.8 557.6 ---------- ---------- Operating expenses Cost of services (exclusive of depreciation and amortization) 324.5 331.4 Selling, general and administrative 126.8 100.8 Depreciation and amortization 48.1 47.3 ---------- ---------- Total operating expenses 499.4 479.5 ---------- ---------- Operating profit 84.4 78.1 Interest expense 24.1 28.8 Other income, net (0.5) (0.6) Loss on extinguishment/modification of debt 30.3 3.8 ---------- ---------- Income before income taxes 30.5 46.1 Income taxes 9.8 17.0 ---------- ---------- Net income $ 20.7 $ 29.1 ========== ========== Net income per share Basic $ 0.15 $ 0.21 ========== ========== Diluted $ 0.15 $ 0.21 ========== ========== Dividends declared per common share $ 0.25 $ 0.19 ========== ========== KAR Auction Services, Inc. Condensed Consolidated Balance Sheets (In millions) (Unaudited) March 31, December 31, 2014 2013 ------------ ------------ Cash and cash equivalents $ 251.2 $ 191.6 Restricted cash 14.9 18.8 Trade receivables, net of allowances 457.4 354.3 Finance receivables, net of allowances 1,099.9 1,099.6 Other current assets 130.7 127.2 ------------ ------------ Total current assets 1,954.1 1,791.5 Goodwill 1,705.4 1,705.1 Customer relationships, net of accumulated amortization 546.9 569.9 Intangible and other assets 335.0 356.9 Property and equipment, net of accumulated depreciation 693.6 703.8 ------------ ------------ Total assets $ 5,235.0 $ 5,127.2 ============ ============ Current liabilities, excluding current maturities of debt and obligations collateralized by finance receivables $ 775.6 $ 629.7 Obligations collateralized by finance receivables 757.6 772.4 Current maturities of debt 17.7 32.5 ------------ ------------ Total current liabilities 1,550.9 1,434.6 Long-term debt 1,749.5 1,734.7 Other non-current liabilities 450.7 476.1 Stockholders' equity 1,483.9 1,481.8 ------------ ------------ Total liabilities and stockholders' equity $ 5,235.0 $ 5,127.2 ============ ============
KAR Auction Services, Inc.
EBITDA and Adjusted EBITDA Measures
EBITDA and Adjusted EBITDA Measures
EBITDA and Adjusted EBITDA as presented herein are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). They are not measurements of our financial performance under GAAP and should not be considered as substitutes for net income (loss) or any other performance measures derived in accordance with GAAP.
EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense and expected incremental revenue and cost savings as described in our senior secured credit agreement covenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principal measures of performance used by our creditors. In addition, management uses EBITDA and Adjusted EBITDA to evaluate our performance. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.
The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented:
Three Months Ended March 31, --------------------- (Dollars in millions), (Unaudited) 2014 2013 ---------- ---------- Net income $ 20.7 $ 29.1 Add back: Income taxes 9.8 17.0 Interest expense, net of interest income 24.1 28.7 Depreciation and amortization 48.1 47.3 ---------- ---------- EBITDA 102.7 122.1 Adjustments per the Credit Agreement 44.4 3.3 Superstorm Sandy -- 10.8 ---------- ---------- Adjusted EBITDA $ 147.1 $ 136.2 ========== ==========
KAR Auction Services, Inc.
Adjusted Net Income and Adjusted Net Income Per Share
Adjusted Net Income and Adjusted Net Income Per Share
The revaluation of certain assets of the company, and resultant increase in depreciation and amortization expense which resulted from the 2007 merger, as well as stock-based compensation expense tied to the 2007 merger, have had a continuing effect on our reported results. Non-GAAP financial measures of adjusted net income and adjusted net income per share, in the opinion of the company, provide comparability to other companies that may have not incurred these types of non-cash expenses. In addition, net income and net income per share have been adjusted for certain other charges, as seen in the following reconciliation.
The following table reconciles adjusted net income and adjusted net income per share to net income and net income per share for the periods presented:
Three Months Ended March 31, --------------------- (In millions, except per share amounts) 2014 2013 ---------- ---------- Net income $ 20.7 $ 29.1 Loss on extinguishment/modification of debt, net of tax (1) 20.6 2.2 Stepped up depreciation and amortization expense, net of tax (2) 7.8 7.5 Stock-based compensation, net of tax (3) 9.2 (1.6) Superstorm Sandy, net of tax (4) -- 6.4 ---------- ---------- Adjusted net income $ 58.3 $ 43.6 ========== ========== Net income per share - diluted $ 0.15 $ 0.21 Loss on extinguishment/modification of debt, net of tax 0.15 0.02 Stepped up depreciation and amortization expense, net of tax 0.05 0.05 Stock-based compensation, net of tax 0.06 (0.01) Superstorm Sandy, net of tax -- 0.04 ---------- ---------- Adjusted net income per share - diluted $ 0.41 $ 0.31 ========== ========== Weighted average diluted shares 140.9 139.9 (1) We incurred a loss on the extinguishment/modification of debt totaling $30.3 million ($20.6 million net of tax) and $3.8 million ($2.2 million net of tax) for the three months ended March 31, 2014 and 2013, respectively. (2) Increased depreciation and amortization expense was $11.4 million ($7.8 million net of tax) and $11.9 million ($7.5 million net of tax) for the three months ended March 31, 2014 and 2013, respectively. (3) Stock-based compensation resulting from the 2007 merger was $13.6 million ($9.2 million net of tax) for the three months ended March 31, 2014. For the three months ended March 31, 2013, there was a reduction in stock- based compensation resulting from the 2007 merger of $1.3 million ($1.6 million benefit net of tax). (4) In the first quarter of 2013, we incurred a loss resulting from Superstorm Sandy of $10.8 million ($6.4 million net of tax).
Non-GAAP Financial Measures
The company provides historical and forward-looking non-GAAP measures called EBITDA, Adjusted EBITDA, free cash flow, adjusted net income and adjusted net income per share. Management believes that these measures provide investors additional meaningful methods to evaluate certain aspects of the company's results period over period and for the other reasons set forth previously.
Earnings guidance also does not contemplate future items such as business development activities, strategic developments (such as restructurings or dispositions of assets or investments), significant expenses related to litigation and changes in applicable laws and regulations (including significant accounting and tax matters). The timing and amounts of these items are highly variable, difficult to predict, and of a potential size that could have a substantial impact on the company's reported results for any given period. Prospective quantification of these items is generally not practicable. Forward-looking non-GAAP guidance excludes stock-based compensation under certain equity grants related to the 2007 merger, increased depreciation and amortization expense that resulted from the 2007 revaluation of the company's assets, as well as one-time charges, net of taxes.
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