IAA Separation and Discontinued Operations

3 Months Ended

Mar. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

IAA Separation and Discontinued Operations

In February 2018, the Company announced that its board of directors had approved a plan to pursue the separation ("Separation") of its salvage auction business, IAA, through a spin-off. On June 28, 2019, the Company completed the spin-off, creating a new independent publicly traded company, IAA, Inc. ("IAA"). The Separation provided KAR shareholders with equity ownership in both KAR and IAA. On June 28, 2019, the Company’s shareholders received one share of IAA common stock for every share of Company common stock they held as of the close of business on June 18, 2019, the record date for the distribution. In addition to the shares of IAA common stock, KAR received a cash distribution of approximately $1,278.0 million from IAA, which was used to prepay a portion of KAR's term loans. In connection with the spin-off, the Company and IAA entered into various agreements to effect the Separation and provide a framework for their relationship after the Separation, including a separation and distribution agreement, a transition services agreement, an employee matters agreement and a tax matters agreement. These agreements provide for the allocation between the Company and IAA of assets, employees, liabilities and obligations (including investments, property, environmental and tax-related assets and liabilities) attributable to periods prior to, at and after IAA's Separation from the Company and will govern certain relationships between IAA and the Company after the Separation.

The financial results of IAA have been accounted for as discontinued operations in the comparable 2019 results presented. IAA was formerly presented as one of the Company’s reportable segments. Discontinued operations included one-time transaction costs in "Selling, general and administrative" of approximately $0.8 million for the three months ended March 31, 2019, in connection with the separation of the two companies. These costs consisted of consulting and professional fees associated with preparing for and executing the spin-off.

The following table presents the results of operations for IAA that have been reclassified to discontinued operations for all periods presented:



	Three Months Ended March 31,
	2020		2019
Operating revenues	$	—	$	357.2
Operating expenses
Cost of services (exclusive of depreciation and amortization)	—		218.4
Selling, general and administrative	—		32.4
Depreciation and amortization	—		21.8
Total operating expenses	—		272.6
Operating profit	—		84.6
Interest expense	—		0.3
Other expense, net	—		0.1
Income from discontinued operations before income taxes	—		84.2
Income taxes	—		21.7
Income from discontinued operations	$	—	$	62.5