10-Q

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, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38580

IAA, Inc.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 83-1030538 (I.R.S. Employer Identification No.)

Two Westbrook Corporate Center, Suite 500, Westchester, Illinois, 60154

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (708) 492-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	IAA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐No☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer ý Smaller reporting company o Emerging growth company o

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐    No ☒

As of July 31, 2019, 133,477,646 shares of the registrant's common stock, par value $0.01 per share, were outstanding.

IAA, Inc.

Table of Contents

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Consolidated Statements of Income	4
	Unaudited Consolidated Statements of Comprehensive Income	5
	Unaudited Consolidated Balance Sheets	6
	Unaudited Consolidated Statements of Stockholders' Equity	7
	Unaudited Consolidated Statements of Cash Flows	9
	Condensed Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 6.	Exhibits	30
Signatures		32

2

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains 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 in this report on Form 10-Q 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 include statements regarding our expectations as an independent company and our ability to enhance our competitive position and drive long-term value for shareholders. Such statements are based on management’s current expectations, 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. These risks and uncertainties include: the loss of one or more significant customers; our ability to meet or exceed customers’ expectations, as well as develop and implement information systems responsive to customer needs; significant current competition and the introduction of new competitors; the risk that our facilities lack the capacity to accept additional vehicles and our ability to obtain land or renew/enter into new leases at commercially reasonable rates; our ability to effectively maintain or update information and technology systems and to implement and maintain measures to protect against cyberattacks; our ability to successfully implement our business strategies or realize expected cost savings and revenue enhancements; business development activities, including acquisitions and integration of acquired businesses; fluctuations in consumer demand for and in the supply of damaged and total loss vehicles and the resulting impact on auction sales volumes; competitive pricing pressures; the ability of consumers to lease or finance the purchase of new and/or used vehicles; changes in the market value of vehicles auctioned, including changes in the actual cash value of damaged and total loss vehicles; economic conditions, including fuel prices, commodity prices, foreign exchange rates and interest rate fluctuations; trends in new- and used-vehicle sales and incentives; and other risks and uncertainties identified in our filings with the Securities and Exchange Commission (the “SEC”), including under "Risk Factors" in our information statement filed as Exhibit 99.1 to our Registration Statement on Form 10 filed with the SEC on June 13, 2019. Many of these risk factors are outside of our control, and as such, they involve risks which are not currently known that could cause actual results to differ materially from those discussed or implied herein. The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.

3

PART I

FINANCIAL INFORMATION

Item 1.    Financial Statements

IAA, Inc.

Consolidated Statements of Income

(In millions, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Revenues	$	366.4		$	333.2		$	723.6		$	670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	227.7			201.1			446.1			407.8
Selling, general and administrative	33.7			31.3			67.3			63.9
Depreciation and amortization	22.1			24.7			43.9			48.8
Total operating expenses	283.5			257.1			557.3			520.5
Operating profit	82.9			76.1			166.3			150.0
Interest expense	11.9			9.7			21.6			19.3
Other income, net	(0.2		)	(0.8		)	(0.1		)	(0.8		)
Income before income taxes	71.2			67.2			144.8			131.5
Income taxes	19.9			17.4			39.0			33.4
Net income	$	51.3		$	49.8		$	105.8		$	98.1
Net income per share
Basic	$	0.38		$	0.37		$	0.79		$	0.73
Diluted	$	0.38		$	0.37		$	0.79		$	0.73

See accompanying condensed notes to consolidated financial statements

4

IAA, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Net income	$	51.3		$	49.8		$	105.8		$	98.1
Other comprehensive income (loss):
Foreign currency translation gain (loss)	(5.2		)	$	(3.1	)	(2.7		)	$	(4.2	)
Comprehensive income	$	46.1		$	46.7		$	103.1		$	93.9

See accompanying condensed notes to consolidated financial statements

5

IAA, Inc.

Consolidated Balance Sheets

(in millions, except per share amounts)

	June 30, 2019			December 30, 2018
	(Unaudited)			(Audited)
Assets
Current assets
Cash and cash equivalents	$	50.9		$	60.0
Trade receivables, net of allowances of $4.3 and $3.3	284.7			311.0
Prepaid consigned vehicle charges	46.4			48.5
Other current assets	37.2			34.0
Total current assets	419.2			453.5
Other assets
Operating lease right-of-use assets, net of accumulated amortization of $35.1 and $0	655.2			—
Goodwill	531.5			530.2
Customer relationships, net of accumulated amortization of $300.5 and $286.7	62.2			74.8
Other intangible assets, net of accumulated amortization of $157.4 and $148.2	87.5			86.1
Other assets	13.3			10.4
Total other assets	1,349.7			701.5
Property and equipment, net of accumulated depreciation of $350.9 and $389.2	241.4			345.2
Total assets	$	2,010.3		$	1,500.2
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable	$	115.8		$	129.0
Short-term right-of-use operating lease liability	66.8			—
Accrued employee benefits and compensation expenses	19.0			29.6
Current maturities of long-term debt	8.0			456.6
Income taxes payable	—			2.2
Other accrued expenses	54.1			53.6
Total current liabilities	263.7			671.0
Non-current liabilities
Long-term debt	1,266.8			—
Long-term right-of-use operating lease liability	633.0			—
Deferred income tax liabilities	63.7			63.1
Deferred rent	—			186.8
Other liabilities	12.0			16.1
Total non-current liabilities	1,975.5			266.0
Commitments and contingencies (Note 7)
Stockholders' (deficit) equity
Preferred stock, $0.01 par value: 150.0 shares authorized; 0 shares issued and outstanding as of June 30, 2019	—			—
Common stock, $0.01 par value: 750.0 shares authorized; 133.4 shares issued and outstanding as of June 30, 2019	1.3			—
Additional paid-in capital	—			—
Accumulated deficit	(214.5		)	—
Accumulated other comprehensive loss	(15.7		)	(13.0		)
Net Parent Investment	—			576.2
Total stockholders' (deficit) equity	(228.9		)	563.2
Total liabilities and stockholders' (deficit) equity	$	2,010.3		$	1,500.2

See accompanying condensed notes to consolidated financial statements

6

IAA, Inc.

Consolidated Statements of Stockholders' (Deficit) Equity

(In millions)

(Unaudited)

	Three Months Ended June 30, 2019
	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit			Net Parent Investment			Accumulated Other Comprehensive Loss			Total Stockholders' (Deficit) Equity
Balance at March 31, 2019	—	$	—	$	—	$	—		$	629.4		$	(10.5	)	618.9
Net income		—		—		—			51.3			—			51.3
Foreign currency translation adjustments		—		—		—			—			(5.2		)	(5.2		)
Stock-based compensation expense		—		—		—			0.9			—			0.9
Reclassification of net parent investment to common stock and additional paid-in capital	133.4	1.3		—		(214.5		)	213.2			—			—
Dividend Paid to KAR		—		—		—			(1,278.0		)	—			(1,278.0		)
Net transfer to Parent and affiliates		—		—		—			383.2			—			383.2
Balance at June 30, 2019	133.4	$	1.3	$	—	$	(214.5	)	$	—		$	(15.7	)	$	(228.9	)

	Three Months Ended July 1, 2018
	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit		Net Parent Investment			Accumulated Other Comprehensive Loss			Total Stockholders' (Deficit) Equity
Balance at April 1, 2018	—	$	—	$	—	$	—	$	603.7		$	(12.4	)	$	591.3
Net income		—		—		—		49.8			—			49.8
Foreign currency translation adjustments		—		—		—		—			(3.1		)	(3.1		)
Stock-based compensation expense		—		—		—		0.9			—			0.9
Net transfer to Parent and affiliates		—		—		—		(90.1		)	—			(90.1		)
Balance at July 1, 2018	—	$	—	$	—	$	—	$	564.3		$	(15.5	)	$	548.8

See accompanying condensed notes to consolidated financial statements

7

IAA, Inc.

Consolidated Statements of Stockholders' (Deficit) Equity (continued)

(In millions)

(Unaudited)

	Six Months Ended June 30, 2019
	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit			Net Parent Investment			Accumulated Other Comprehensive Loss			Total Stockholders' (Deficit) Equity
Balance at December 30, 2018	—	$	—	$	—	$	—		$	576.2		$	(13.0	)	$	563.2
Cumulative effect adjustment for adoption of ASC Topic 842, net of tax		—		—		—			1.1			—			1.1
Net income		—		—		—			105.8			—			105.8
Foreign currency translation adjustments		—		—		—			—			(2.7		)	(2.7		)
Stock-based compensation expense		—		—		—			1.9			—			1.9
Reclassification of net parent investment to common stock and additional paid-in capital	133.4	1.3		—		(214.5		)	213.2			—			—
Dividend Paid to KAR		—		—		—			(1,278.0		)	—			(1,278.0		)
Net transfer to Parent and affiliates		—		—		—			379.8			—			379.8
Balance at June 30, 2019	133.4	$	1.3	$	—	$	(214.5	)	$	—		$	(15.7	)	$	(228.9	)

	Six Months Ended July 1, 2018
	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit		Net Parent Investment			Accumulated Other Comprehensive Loss			Total Stockholders' (Deficit) Equity
Balance at December 31, 2017	—	$	—	$	—	$	—	$	582.6		$	(11.3	)	$	571.3
Cumulative effect adjustment for adoption of ASC Topic 606, net of tax		—		—		—		(3.0		)	—			(3.0		)
Net income		—		—		—		98.1			—			98.1
Foreign currency translation adjustments		—		—		—		—			(4.2		)	(4.2		)
Stock-based compensation expense		—		—		—		1.8			—			1.8
Net transfer to Parent and affiliates		—		—		—		(115.2		)	—			(115.2		)
Balance at July 1, 2018	—	$	—	$	—	$	—	$	564.3		$	(15.5	)	$	548.8

See accompanying condensed notes to consolidated financial statements

8

IAA, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Six Months Ended
	June 30, 2019			July 1, 2018
Operating activities
Net income	$	105.8		$	98.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	43.9			48.8
Stock-based compensation	1.9			1.8
Deferred rent	1.3			1.4
Provision for credit losses	1.1			1.2
Deferred income taxes	0.6			(1.4		)
Gain on disposal of fixed assets	—			(0.3		)
Changes in operating assets and liabilities:
Trade receivables and other assets	15.4			24.7
Accounts payable and accrued expenses	(10.3		)	(9.3		)
Net cash provided by operating activities	159.7			165.0
Investing activities
Purchases of property, equipment and computer software	(37.5		)	(28.7		)
Proceeds from the sale of property and equipment	0.1			1.0
Net cash used by investing activities	(37.4		)	(27.7		)
Financing activities
Proceeds from debt issuance	1,300.0			—
Dividend paid to KAR	(1,278.0		)	—
Net cash transfers to Parent and affiliates	(117.7		)	(115.2		)
Deferred financing costs	(25.2		)	—
Payments on finance leases	(8.3		)	(7.9		)
Net increase in book overdrafts	(2.9		)	0.5
Net cash used by financing activities	(132.1		)	(122.6		)
Effect of exchange rate changes on cash	0.7			(0.5		)
Net (decrease) increase in cash and cash equivalents	(9.1		)	14.2
Cash and cash equivalents at beginning of period	60.0			33.1
Cash and cash equivalents at end of period	$	50.9		$	47.3

See accompanying condensed notes to consolidated financial statements

9

IAA, Inc.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Note 1—Basis of Presentation and Nature of Operations

Description of Business

IAA, Inc., together with its subsidiaries (collectively referred to herein as “IAA”, "we," "us," "our" and "the Company") is a leading provider of auction solutions for total loss, damaged and low-value vehicles in North America and is also a provider of auction services in the United Kingdom. We operate in one reportable segment. We facilitate the sale of total loss, damaged and low-value vehicles for a full spectrum of sellers. Our solutions, which are focused on a diverse set of global customers, provide buyers with the vehicles they need to, among other things, fulfill their vehicle rebuild requirements, replacement part inventory or scrap demand. Fees for our solutions are earned from both sellers and buyers of vehicles. In return for agreed-upon fees, vehicles are sold on behalf of our sellers, who continue to own the vehicle until it is sold to buyers through our marketplaces. Over 80% of volume that passes through our marketplaces is associated with insurance total loss vehicles, including vehicles from catastrophic events like hurricanes, floods and hail damage, and the remaining volume is associated with noninsurance customers such as dealerships, rental car companies, fleet lease companies, charitable organizations and the general public. At June 30, 2019, properties utilized by IAA included 181 salvage vehicle auction facilities in the United States and Canada, most of which are leased. The IAA North American properties are used primarily for auction and storage purposes consisting on average of approximately 30 acres of land per site. IAA also includes HBC Vehicle Services Limited (“HBC”), which operated 14 locations in the United Kingdom at June 30, 2019.

Separation and Distribution

On February 27, 2018, KAR Auction Services, Inc. (“KAR” or “Parent”), a Delaware corporation, announced a plan to pursue the separation and spin-off (the “Separation”) of its salvage auction business into a separate public company, IAA Spinco Inc. IAA Spinco Inc. was incorporated in Delaware on June 19, 2018 and was renamed IAA, Inc. on June 27, 2019. On June 28, 2019 (the "Separation Date"), KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA to the holders of record of KAR's common stock on June 18, 2019, on a pro rata basis (the "Distribution"). On the Separation Date, each KAR common stockholder of record received one share of IAA common stock for every one share of KAR common stock held by such stockholder as of the record date. As a result of the Distribution, KAR does not retain any ownership interest in IAA. The Distribution was made pursuant to the Separation and Distribution Agreement, dated June 27, 2019 (the "Separation and Distribution Agreement"), pursuant to which KAR contributed the subsidiaries that operated the salvage auction business to IAA. The Distribution is expected to be a tax-free transaction under provisions of the Internal Revenue Code. Following the Distribution, IAA became an independent publicly-traded company and is listed on the New York Stock Exchange under the symbol “IAA.”

In connection with the Separation, we paid a dividend to KAR of $1,278.0 million, which included $456.6 million to settle intercompany debt and $40.9 million for certain fixed assets transferred to us by KAR on the Separation Date. We also paid KAR $117.7 million to settle other intercompany accounts in connection with the Separation.

In connection with the Separation, we also entered into a non-compete and various other ancillary agreements to effect the Separation and provide a framework for our relationship with KAR after the Separation, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provide for the allocation of assets, employees, liabilities and obligations attributable to periods prior to, at and after our Separation from KAR and govern certain relationships between us and KAR after the Separation. For further information regarding these agreements, see Note 2 - Relationship with KAR and Related Entities.

Basis of Presentation

Throughout the periods covered by these unaudited consolidated financial statements and until the Separation Date, we operated as a separate reportable segment within KAR and, since the Separation Date, we have operated independently from KAR. The accompanying unaudited consolidated financial statements and condensed notes related thereto have been prepared from KAR’s historical accounting records and are presented on a stand-alone basis as if IAA's operations had been conducted independently from KAR for all periods prior to the Separation Date. Accordingly, prior to the Separation Date, KAR’s net investment in these operations (Net Parent Investment) was shown in lieu of stockholder’s (deficit) equity in the unaudited consolidated financial statements. Our historical results of operations, financial position and cash flows represented in the unaudited consolidated financial statements may not be indicative of what they would have been had we actually been a separate stand-alone entity during such periods, nor are they necessarily indicative of our future results of operations, financial position and cash flows.

10

IAA is comprised of certain stand-alone legal entities for which discrete financial information is available. The unaudited consolidated statements of income include all revenues and costs directly attributable to us, including costs for functions and services used by us. Prior to the Separation Date, certain shared costs were directly charged to us from KAR based on specific identification or other allocation methods. The results of operations also include allocations of costs for administrative functions and services performed on behalf of us by centralized staff groups within KAR. Current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, to our operations in each country as if we were a separate taxpayer (i.e., following the separate return methodology). Allocation methodologies were applied to certain shared costs to allocate amounts to us as discussed further in Note 2 - Relationship with KAR and Related Entities.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results of operations, cash flows and financial position for the periods presented. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto, for the year ended December 30, 2018 included in our Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the "SEC") on June 13, 2019. The consolidated balance sheet data as of December 30, 2018 included in this Form 10-Q was derived from the audited financial statements referenced above and does not include all disclosures required by U.S. GAAP for annual financial statements.

IAA operates as one reportable segment. On June 27, 2019, the board of directors set our fiscal year to end on the last Sunday in December in each year, consisting of either 52 or 53 weeks.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies.

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which replaces the existing lease guidance in Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (“ROU”) assets and corresponding lease liabilities on the balance sheet, with an exception for leases that meet the definition of a short-term lease. The new guidance continues to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We adopted Topic 842 in the first quarter of 2019 and, as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements, we applied the new standard at the adoption date and recognized the cumulative-effect of initially applying the new standard as an increase of $1.1 million to the opening balance of retained earnings. The cumulative-effect adjustment related to the derecognition of existing fixed assets for which we were determined to be the accounting owner under Topic 840 and related liabilities associated with certain sale leaseback transactions in build-to-suit arrangements that did not qualify for sale accounting under Topic 840. Depreciation related to these fixed assets was recorded consistently with owned property and equipment in depreciation expense. In accordance with Topic 842, the lease agreements associated with the derecognized fixed assets and related liabilities generated ROU assets and lease liabilities that will be amortized to lease expense over the lease term. In addition, we recognized additional operating liabilities of approximately $684 million with related ROU assets of approximately $641 million based on the present value of the remaining minimum rental payments for existing operating leases.

11

We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Short-term operating lease liabilities” and “Long-term operating lease liabilities” in our consolidated balance sheets. Finance leases are included in “Property and equipment, net,” “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2018-15 will have on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2017-4 will have a material impact on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures.

Note 2—Relationship with KAR and Related Entities

Historically, prior to the Separation Date, we were managed and operated in the normal course of business with other affiliates of KAR. Accordingly, certain shared costs have been allocated to us and reflected as expenses in the stand-alone unaudited consolidated financial statements. We consider the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of KAR attributable to us for purposes of the stand-alone financial statements; however, the expenses reflected in the unaudited consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we historically operated as a separate, stand-alone entity. In addition, the expenses reflected in these unaudited consolidated financial statements may not be indicative of expenses that will be incurred in the future by us.

Transactions between KAR and us, with the exception of purchase transactions and reimbursements for payments made to third-party service providers by KAR on our behalf, are reflected in equity in the Consolidated Balance Sheets as “Net Parent Investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfers to parent and affiliates.”

Corporate Costs/Allocations

These unaudited consolidated financial statements include corporate costs incurred by KAR for services that were provided to or on behalf of us. These costs consist of allocated cost pools and identifiable costs. Corporate costs were directly charged to, or allocated to, us using methods management believes are consistent and reasonable. Our identifiable costs were recorded based on dedicated employee assignments. The method for allocating corporate function costs to us was based on various proportionate formulas involving allocation factors. The methods for allocating corporate administration costs to us were based

12

on revenue, headcount or the proportion of related expenses. However, the expenses reflected in these unaudited consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we historically operated as a separate, stand-alone entity. All corporate charges and allocations have been deemed paid by us to KAR in the period in which the cost was recorded in the Consolidated Statements of Income.

Allocated corporate costs included in selling, general and administrative expenses were $1.1 million and $2.6 million for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018, allocated corporate costs included in selling, general and administrative expenses were $2.8 million and $4.7 million, respectively. The allocated corporate costs were associated with human resources, risk management, information technology and certain finance and other functions.

Beginning in the third quarter of 2019, we will be invoiced for services provided by KAR under the transition services agreement described below and, therefore, will no longer reflect these allocations in our Consolidated Statements of Income.

Cash Management and Financing

KAR generally uses a centralized approach to cash management and financing its operations, including the operations of IAA. Accordingly, none of KAR’s corporate cash and cash equivalents was allocated to IAA in the historical consolidated financial statements. Prior to the Separation Date, cash transferred daily, based on IAA’s balances, to centralized accounts maintained by KAR. As cash was disbursed or received by KAR, it was accounted for by IAA through the Net Parent Investment.

Transactions with Other KAR Businesses

Throughout the periods covered by these unaudited consolidated financial statements, we purchased goods and services from KAR’s other businesses. The cost of products and services obtained from these other businesses were $0.2 million and $0.7 million for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018, the cost of products and services obtained from these other businesses was $0.5 million and $1.5 million, respectively.

Non-Compete Agreement

Pursuant to the Separation and Distribution Agreement, we agreed not to compete with KAR in certain non-salvage activities for a period of five years following the Separation Date in certain jurisdictions, subject to certain exceptions. We are expressly permitted to continue to conduct our salvage auction business as conducted immediately prior to the Separation Date. The exceptions also permit us to conduct certain non-salvage business, in some cases subject to a revenue sharing mechanic in the event such business exceeds specified volume limits or other thresholds.

Transition Services Agreement

Under the transition services agreement, KAR and its subsidiaries will provide, on an interim, transitional basis, various services to IAA for a period of two years from the Separation Date. The services to be provided will include information technology, accounts payable, payroll, and other financial functions and administrative services. From time to time, IAA may provide similar services to KAR under the transition services agreement.

Tax Matters Agreement

The tax matters agreement generally governs our and KAR’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Separation, the Distribution or certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the Separation Date, as well as tax periods beginning after the date of the Distribution.

In addition, the tax matters agreement imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the Separation, the Distribution and certain related transactions. The tax matters agreement also provides special rules that allocate tax liabilities in the event the Separation, the Distribution, or certain related transactions fail to qualify as tax-free for U.S. federal income tax purposes.

13

Employee Matters Agreement

The employee matters agreement allocated liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The employee matters agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company. The employee matters agreement provides that, unless otherwise specified, KAR will be responsible for liabilities associated with employees who are employed by KAR following the Separation, former employees whose last employment was with the KAR businesses and certain specified current and former corporate employees, and we are responsible for liabilities associated with employees who are employed by us following the Separation, former employees whose last employment was with our businesses and certain specified current and former corporate employees.

Note 3—Stock and Stock-Based Compensation Plans

Equity Awards Granted by KAR

Prior to the Separation, KAR issued equity awards from time to time to select employees and non-employee directors

of IAA. All outstanding employee equity awards (stock options, restricted stock units and restricted stock) granted by KAR were granted prior to the Separation Date. We recognized stock-based compensation expense associated with these awards in net income based on the fair value of the awards on the date of grant. Under KAR’s long-term incentive plans, KAR common stock and restricted stock was made available for grant, at the discretion of the Compensation Committee of KAR’s Board of Directors or KAR’s Board of Directors, to non-employee directors, executive officers and key employees of IAA in the form of stock options, performance-based restricted stock units (“PRSUs”) and time-based restricted stock units (“RSUs”). The following table summarizes our stock-based compensation expense by type of award (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
PRSUs	$	0.2	$	0.2	$	0.4	$	0.5
RSUs	0.7		0.7		1.5		1.3
Total stock-based compensation expense	$	0.9	$	0.9	$	1.9	$	1.8

The employee matters agreement required that the outstanding KAR equity awards held by IAA employees and non-employee directors be converted into adjusted awards of IAA pursuant to the 2019 OSIP. The awards were adjusted based on the following principles:

• For each award recipient, the intent was to maintain the economic value of those awards before and after the Separation Date; and

• The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain PRSUs granted in 2019 will be subject to adjusted performance criteria.

2019 Omnibus Stock and Incentive Plan

On June 27, 2019, our board of directors approved the 2019 Omnibus Stock and Incentive Plan (as amended, the “2019 OSIP”). The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors, and consultants of the Company whose contributions are essential to the growth and success of our business, in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability for us.

Benefits granted under the 2019 OSIP may be granted in any one or a combination of (i) options to purchase IAA common stock; (ii) IAA share appreciation rights (“SARs”), (iii) restricted shares of IAA common stock; (vi) restricted stock units of IAA common stock; (vii) other IAA stock-based awards; or (viii) other cash-based awards. Options, restricted shares, restricted stock units and other share-based awards or cash awards may constitute performance-based awards. The granting or vesting of any performance-based awards will be based on achievement of performance objectives that are based on one or more business criteria, with respect to one or more business units or IAA and its subsidiaries as a whole. Such business criteria may be adjusted to account for unusual or infrequently occurring items or changes in accounting.

Participants will consist of any employee, director, independent contractor or consultant of IAA or any affiliate of IAA selected to receive awards under the 2019 OSIP, and, upon his or her death, his or her successors, heirs, executors and administrators, as

14

the case may be. The number of common shares reserved and available for awards under the 2019 OSIP is 7,551,042 shares, subject to adjustment made in accordance with the 2019 OSIP. Upon the occurrence of certain corporate events that affect the common stock, including but not limited to extraordinary cash dividend, stock split, reorganization or other relevant changes in capitalization, appropriate adjustments may be made with respect to the number of shares available for grants under the 2019 OSIP, the number of shares covered by outstanding awards and the maximum number of shares that may be granted to any participant.

The aggregate awards granted during any calendar year to any single individual will not exceed: (i) 1,000,000 shares subject to options or SARs, (ii) 500,000 shares subject to restricted shares or other share-based awards and (iii) $5,000,000 with respect to any cash-based award. A non-employee director of IAA may not be granted awards under the 2019 OSIP during any calendar year that, when aggregated with such non-employee director’s cash fees received with respect to such calendar year, exceed $750,000 in total value.

Note 4—Net Income Per Share

Basic net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. Diluted net income per share was calculated consistent with basic net income per share including the effect of dilutive unissued common shares related to our stock-based employee compensation program. The effect of stock options and restricted stock on net income per share-diluted is determined through the application of the treasury stock method, whereby net proceeds received by the Company based on assumed exercises are hypothetically used to repurchase our common stock at the average market price during the period. Stock options that would have an anti-dilutive effect on net income per diluted share and PRSUs subject to performance conditions which have not yet been satisfied are excluded from the calculations. No options were excluded from the calculation of diluted net income per share for each of the three months ended June 30, 2019 and 2018. Approximately 0.8 million and 0.7 million PRSUs were excluded from the calculation of diluted net income per share for the three months ended June 30, 2019 and 2018, respectively. Total options outstanding at June 30, 2019 and 2018 were 0.8 million and 1.4 million, respectively.

Basic and dilutive net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. The following table sets forth the computation of net income per share (in millions except per share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Net income	$	51.3	$	49.8	$	105.8	$	98.1
Weighted average common shares outstanding	133.4		133.4		133.4		133.4
Effect of dilutive stock awards	0.7		0.7		0.7		0.7
Weighted average common shares outstanding and potential common shares	134.1		134.1		134.1		134.1
Net income per share
Basic	$	0.38	$	0.37	$	0.79	$	0.73
Diluted	$	0.38	$	0.37	$	0.79	$	0.73

15

Note 5—Long-Term Debt

Long-term debt consisted of the following (in millions):

	June 30, 2019			December 30, 2018
Term Loan Facility	$	800.0		$	—
Notes	500.0			—
Other	—			456.6
Total debt	1,300.0			456.6
Unamortized debt issuance costs	(25.2		)	—
Current maturities of long-term debt	(8.0		)	(456.6		)
Long-term debt	$	1,266.8		$	—

Credit Agreement

In connection with the Separation, on June 28, 2019, IAA, Inc. (formerly IAA Spinco Inc.), as borrower, entered into a credit agreement (the “Credit Agreement”), by and among IAA, the several banks and other financial institutions or entities from time to time party thereto as lenders, the issuing lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for, among other things: (i) a seven-year senior secured term loan facility in an aggregate principal amount of $800 million (the “Term Loan Facility”) and (ii) a five-year revolving credit facility in an aggregate principal amount of $225 million (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans, which can be borrowed on same-day notice. The Term Loan Facility matures on June 28, 2026. We must make principal payments of $2 million each quarter, commencing on September 30, 2019 and continuing on the last day of each September, December, March and June thereafter. The Revolving Credit Facility matures on June 28, 2024. We may prepay the obligations under our Term Loan Facility and Revolving Credit Facility at any time without penalties. The obligations under the Credit Facility are subject to mandatory prepayments for certain debt offerings, asset sales and insurance recovery events, subject to customary exceptions and reinvestment rights.

We used proceeds from the Term Loan Facility to finance the transactions relating to the Separation and Distribution related thereto. We used the remaining proceeds from the Term Loan Facility for IAA's ongoing working capital needs and general corporate purposes. The Revolving Credit Facility may be used for ongoing working capital needs and general corporate purposes. As of June 30, 2019, no amounts were outstanding under the Revolving Credit Facility.

As set forth in the Credit Agreement, the Term Loan Facility accrues interest at an adjusted LIBOR rate plus 2.25% (or at IAA’s election, Base Rate (as defined in the Credit Agreement) plus 1.25%).  Loans under the Revolving Credit Facility will bear interest at an amount equal to the rate calculated based on the type of borrowing (either adjusted LIBOR or Base Rate) and our Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans. We will also pay a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on our Consolidated Senior Secured Net Leverage Ratio, from time to time.

The obligations of IAA, Inc. under the Credit Facility are guaranteed by certain domestic subsidiaries of IAA, Inc. (the “Subsidiary Guarantors”) and are secured by substantially all of the assets, subject to certain exceptions, of IAA, Inc. and the Subsidiary Guarantors, including but not limited to pledges of and first priority perfected security interests in 100% of the equity interests of the Subsidiary Guarantors and 65% of the equity interests of any Subsidiary Guarantors’ first tier foreign subsidiaries.

The Credit Agreement contains affirmative and negative covenants that are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with our affiliates. The Credit Agreement also requires us to maintain a maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) not to exceed 3.50

16

to 1.00 as of each test date on which any Revolving Loans (as defined in the Credit Agreement) are outstanding. We were in compliance with the covenants in the Credit Agreement at June 30, 2019. The Credit Agreement also includes customary events of default, including non-payment, cross-default and change of control, in each case, subject to customary grace periods.

Notes

In connection with the Separation, IAA, Inc. issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027 (the “Notes”) on June 6, 2019 (the "Closing Date") in a private offering exempt from the registration requirements of the Securities Act. The Notes were issued pursuant to an indenture, dated as of the Closing Date (the “Indenture”), between IAA Inc. and U.S. Bank National Association, as trustee (the “Trustee”). We must pay interest on the Notes in cash on June 15 and December 15 of each year at a rate of 5.500% per annum, commencing on December 15, 2019. The Notes mature on June 15, 2027. We used the net proceeds from the Notes offering, together with borrowings under the Term Loan Facility, to make a cash distribution to KAR and to pay fees and expenses related to the Separation and Distribution.

Under certain circumstances, the Indenture permits us to designate certain of our subsidiaries as unrestricted subsidiaries, which subsidiaries will not be subject to the covenants in the Indenture and will not guarantee the Notes.

The Notes are the general unsecured senior obligations of IAA, Inc. and such obligations are guaranteed by the Subsidiary Guarantors. Each guarantee is the general unsecured senior obligation of each Subsidiary Guarantor. The Notes and the related guarantees rank equal in right of payment with all of IAA, Inc.'s and the Subsidiary Guarantors’ unsubordinated indebtedness. The Notes are structurally subordinated in right of payment to all indebtedness and other liabilities of our subsidiaries that will not be Subsidiary Guarantors and effectively junior in right of payment to all of our and the Guarantors’ secured indebtedness to the extent of the value of the collateral securing such indebtedness, including indebtedness under the Credit Facility.

At any time and from time to time prior to June 15, 2022, we may, at our option, redeem the Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. Thereafter, we may, at our option, redeem the Notes in whole or in part at the prices set forth in the Indenture. In addition, at any time and from time to time prior to June 15, 2022, we may, at our option, at a redemption price of 105.5% of the principal amount of Notes redeemed, redeem up to 40% of the original aggregate principal amount of the Notes issued under the Indenture with the proceeds of certain equity offerings.

In the event of a Change of Control Repurchase Event (as defined in the Indenture), unless we have previously or concurrently delivered a redemption notice with respect to all the outstanding Notes, we are required to make an offer to repurchase all of the Notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to, but excluding, the repurchase date. If we sell assets outside the ordinary course of business and do not use the net proceeds for specified purposes under the Indenture, we may be required to use such net proceeds to make an offer to repurchase the Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants which, among other things, limit our and our restricted subsidiaries’ ability to pay dividends on or make other distributions in respect of equity interests or make other restricted payments, make certain investments, incur liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets, or designate subsidiaries as unrestricted. The Indenture also provides for customary events of default, including non-payment of principal, interest or premium, failure to comply with covenants, and certain bankruptcy or insolvency events. We were in compliance with the covenants in the Indenture at June 30, 2019.

Other

At December 30, 2018, our intercompany debt with KAR was $456.6 million. This debt was eliminated in the Separation. This debt was comprised of three promissory notes, payable on demand, with a weighted average interest rate of 8.27%. In addition, we had outstanding letters of credit in the aggregate amount of $0.4 million and $2.1 million at June 30, 2019 and December 30, 2018, respectively, which reduce the amount available for borrowings under our Revolving Credit Facility.

17

Fair Value of Debt

As of June 30, 2019, the estimated fair value of our long-term debt amounted to $1.32 billion. The estimates of fair value were based on broker-dealer quotes for our debt as of June 30, 2019. The estimates presented on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange.

Note 6—Leases

We lease property, software, automobiles, trucks and trailers pursuant to operating lease agreements. We also lease furniture, fixtures and equipment under finance leases. Our leases have varying remaining lease terms with leases expiring through 2038, some of which include options to extend the leases.

The components of lease expense were as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	28.8	$	56.1
Finance lease cost:
Amortization of right-of-use assets	$	3.8	$	7.6
Interest on lease liabilities	0.2		0.5
Total finance lease cost	$	4.0	$	8.1

Supplemental cash flow information related to leases was as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	28.2	$	54.7
Operating cash flows related to finance leases	$	0.2	$	0.5
Financing cash flows related to finance leases	$	2.7	$	8.3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	47.1	$	49.0
Finance leases	$	—	$	—

18

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	655.2
Other accrued expenses	$	66.8
Operating lease liabilities	633.0
Total operating lease liabilities	$	699.8
Finance Leases
Property and equipment, gross	$	118.7
Accumulated depreciation	(86.2		)
Property and equipment, net	$	32.5
Other accrued expenses	$	12.1
Other liabilities	9.9
Total finance lease liabilities	$	22.0
Weighted Average Remaining Lease Term
Operating leases	12.2 years
Finance leases	2.1 years
Weighted Average Discount Rate
Operating leases	6.2		%
Finance leases	4.8		%

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases			Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	55.2		$	6.6
2020	102.4			10.7
2021	91.7			5.5
2022	82.1			0.3
2023	72.6			—
Thereafter	610.9			—
Total lease payments	1,014.9			23.1
Less imputed interest	(315.1		)	(1.1		)
Total	$	699.8		$	22.0

Note 7—Commitments and Contingencies

We are and may from time to time become involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies, including litigation and environmental matters, are included in “Other accrued expenses” at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows. Legal fees are expensed as incurred. There has been no significant change in the legal and regulatory proceedings which were disclosed in our audited consolidated financial statements for the fiscal year ended December 30, 2018.

19

IAA—Lower Duwamish Waterway

Since June 2004, IAA has operated a branch on property it leases in Tukwila, Washington just south of Seattle. The property is located adjacent to a Superfund site known as the Lower Duwamish Waterway Superfund Site ("LDW Site"). The LDW Site had been designated a Superfund site in 2001, three years prior to IAA’s tenancy. On March 25, 2008, the United States Environmental Protection Agency (the "EPA") issued IAA a General Notice of Potential Liability, or "General Notice," pursuant to Section 107(a), and a Request for Information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") related to the LDW Site. On November 7, 2012, the EPA issued IAA a Second General Notice of Potential Liability (the "Second General Notice") for the LDW Site. The EPA's website indicates that the EPA has issued general notice letters to approximately 116 entities, and has issued Section 104(e) Requests to more than 300 entities related to the LDW Site. In the General Notice and Second General Notice, the EPA informed IAA that the EPA believed IAA may be a Potentially Responsible Party ("PRP") but the EPA did not specify the factual basis for this assertion. At this time, the EPA still has not specified the factual basis for this assertion and has not demanded that IAA pay any funds or take any action apart from responding to the Section 104(e) Information Request. Four PRPs, The Boeing Company, the City of Seattle, the Port of Seattle and King County - the Lower Duwamish Waterway Group ("LDWG"), have funded a remedial investigation and feasibility study related to the cleanup of the LDW Site. In December 2014, the EPA issued a Record of Decision ("ROD"), detailing the final cleanup plan for the LDW Site. The ROD estimated the cost of cleanup to be $342 million, with the plan involving dredging of 105 acres, capping 24 acres, and enhanced natural recovery of 48 acres. The estimated length of the cleanup was 17 years, including 7 years of active remediation, and 10 years of monitored natural recovery. IAA is aware that certain authorities may bring natural resource damage claims against PRPs. On February 11, 2016, IAA received a Notice of Intent letter from the United States National Oceanic and Atmospheric Administration informing IAA that the Elliott Bay Trustee Council were beginning to conduct an injury assessment for natural resource damages in the LDW. The Notice of Intent indicated that the decision of the trustees to proceed with this natural resources injury assessment followed a pre-assessment screen performed by the trustees. Shortly thereafter, in a letter dated August 16, 2016, EPA issued a status update to the PRPs at the LDW Site. The letter stated that EPA expected the bulk of the pre-remedial design work currently being performed by the LDWG to be completed by the beginning of 2018, with the Remedial Design/Remedial Action ("RD/RA") phase to follow. The EPA previously anticipated that the pre-design work would be completed sometime during 2018, and the Company is not aware of any further information regarding that schedule. Accordingly, RD/RA negotiations with all PRPs may begin sometime in 2019. At this time, the Company has not received any further notices from the EPA and does not have adequate information to determine IAA's responsibility, if any, for contamination at this site, or to estimate IAA's loss as a result of this potential liability.

In addition, the Washington State Department of Ecology ("Ecology") is working with the EPA in relation to the LDW Site, primarily to investigate and address sources of potential contamination contributing to the LDW Site. In 2007, IAA installed a stormwater capture and filtration system designed to treat sources of potential contamination before discharge to the LDW Site. The immediate-past property owner, the former property owner and IAA have had discussions with Ecology concerning possible source control measures, including an investigation of the water and soils entering the stormwater system, an analysis of the source of contamination identified within the system, if any, and possible repairs and upgrades to the stormwater system if required. Additional source control measures, if any, are not expected to have a material adverse effect on future recurring operating costs.

Note 8—Segment Information

ASC 280, Segment Reporting, requires reporting of segment information that is consistent with the manner in which the chief operating decision maker operates and views the Company. Our operations are grouped into three operating segments: United States, Canada and United Kingdom. The operating segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results. We have one reportable business segment: United States. Canada and United Kingdom do not meet the criteria to be considered reportable segments but have been presented as “International” in the tables below to reconcile the amounts presented to consolidated totals.

20

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended June 30, 2019(in millions):

	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	United States			International			Total			United States		International			Total
Revenues	$	320.5		$	45.9		$	366.4		$	634.8	$	88.8		$	723.6
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	195.8			31.9			227.7			384.9		61.2			446.1
Selling, general and administrative	30.7			3.0			33.7			60.7		6.6			67.3
Depreciation and amortization	20.5			1.6			22.1			40.5		3.4			43.9
Total operating expenses	247.0			36.5			283.5			486.1		71.2			557.3
Operating profit	73.5			9.4			82.9			148.7		17.6			166.3
Interest expense	11.9			—			11.9			21.6		—			21.6
Other expense, net	(0.1		)	(0.1		)	(0.2		)	—		(0.1		)	(0.1		)
Income before income taxes	61.7			9.5			71.2			127.1		17.7			144.8
Income taxes	17.3			2.6			19.9			34.0		5.0			39.0
Net income	$	44.4		$	6.9		$	51.3		$	93.1	$	12.7		$	105.8
Total assets	$	1,829.0		$	181.3		$	2,010.3		$	1,829.0	$	181.3		$	2,010.3

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended July 1, 2018(in millions):

	Three Months Ended July 1, 2018								Six Months Ended July 1, 2018
	United States			International		Total			United States			International		Total
Revenues	$	300.1		$	33.1	$	333.2		$	603.5		$	67.0	$	670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	179.6			21.5		201.1			364.8			43.0		407.8
Selling, general and administrative	28.1			3.2		31.3			57.9			6.0		63.9
Depreciation and amortization	23.0			1.7		24.7			45.4			3.4		48.8
Total operating expenses	230.7			26.4		257.1			468.1			52.4		520.5
Operating profit	69.4			6.7		76.1			135.4			14.6		150.0
Interest expense	9.7			—		9.7			19.3			—		19.3
Other expense, net	(0.8		)	—		(0.8		)	(0.8		)	—		(0.8		)
Income before income taxes	60.5			6.7		67.2			116.9			14.6		131.5
Income taxes	15.5			1.9		17.4			29.4			4.0		33.4
Net income	$	45.0		$	4.8	$	49.8		$	87.5		$	10.6	$	98.1
Total assets	$	1,271.5		$	144.7	$	1,416.2		$	1,271.5		$	144.7	$	1,416.2

Note 9—Subsequent Event

On July 31, 2019, we acquired Decision Dynamics, Inc. ("DDI"), a leading electronic lien and title technology firm located in Lexington, South Carolina. The purchase price for the transaction is approximately $17 million, and could increase by an additional $4.1 million over three years, contingent on certain terms, conditions and the achievement of various performance targets. Annual revenue for DDI was approximately $8.3 million in the last twelve months ended June 30, 2019.

21

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

We refer to IAA, Inc. and its subsidiaries collectively as “IAA”, “the Company”, “we”, “our” and “us”. Our fiscal year ends on the last Sunday in December in each year, consisting of either 52 or 53 weeks.

The following discussion and analysis contains forward-looking statements within the meaning of the federal securities laws, and should be read in conjunction with the disclosures we make concerning risks and other factors that may affect our business and operating results. See “Forward-Looking Statements” immediately prior to Part I, Item 1 in this Quarterly Report on Form 10-Q.”

Executive Overview

Our Business

IAA is a leading provider of auction solutions for total loss, damaged and low-value vehicles in North America and is also a provider of auction services in the United Kingdom. Leveraging leading-edge technology and focusing on innovation, IAA’s unique multi-channel platform processes approximately 2.5 million total-loss, damaged and low-value vehicles annually. Headquartered near Chicago in Westchester, IL, we have over 3,600 talented employees and over 190 facilities throughout the US, Canada and the United Kingdom. IAA serves a global buyer base and a full spectrum of sellers, including insurance companies, dealerships, rental car companies, fleet lease companies and charitable organizations. We offer customers a comprehensive suite of services aimed at maximizing vehicle value, reducing administrative costs, shortening selling cycle time and delivering customers the highest economic returns. Buyers have access to industry leading, innovative vehicle evaluation and bidding tools, enhancing the overall purchasing experience.

At June 30, 2019, properties utilized by IAA included 181 salvage vehicle auction facilities in the United States and Canada, most of which are leased. The IAA North American properties are used primarily for auction and storage purposes consisting on average of approximately 30 acres of land per site. IAA also includes HBC Vehicle Services Limited (“HBC”), which operated 14 locations in the United Kingdom at June 30, 2019.

The Separation and Distribution

On February 27, 2018, KAR Auction Services, Inc. ("KAR") announced a plan to pursue the separation and spin-off (the "Separation") of its salvage auction businesses into a separate public company. On June 28, 2019 (the "Separation Date"), KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA to the holders of record of KAR's common stock on June 18, 2019, on a pro rata basis (the "Distribution"). On the Separation Date, each KAR common stockholder of record received one share of IAA common stock for every one share of KAR common stock held by such stockholder as of the record date. Following the Separation and Distribution, IAA became an independent publicly-traded company and is listed on the New York Stock Exchange under the symbol “IAA.” See Note 1 - Basis of Presentation and Nature of Operations in the condensed notes to unaudited consolidated financial statements for additional information.

2019 Highlights

• This quarter marked a significant milestone in our history as we successfully executed our spin-off from KAR to become an independent publicly traded company.

• In connection with the Separation, we entered into a $225 million five-year revolving credit facility, an $800 million seven-year senior secured term loan facility and we issued $500 million of senior unsecured notes due 2027. See Note 5 - Long-Term Debt in the condensed notes to unaudited consolidated financial statements for additional information.

• On July 31, 2019, we acquired Decision Dynamics, Inc. ("DDI"), a leading electronic lien and title technology firm located in Lexington, South Carolina. The purchase price for the transaction is approximately $17 million, and could increase by an additional $4.1 million over three years, contingent on certain terms, conditions and the achievement of various performance targets. Annual revenue for DDI was approximately $8.3 million in the last twelve months ended June 30, 2019.

Sources of Revenues and Expenses

A significant portion of our revenue is derived from auction fees and related services associated with our salvage auctions. Approximately two-thirds of our revenue is earned from buyers and represents fees charged based on a tiered structure that increases with the sales price of the vehicle as well as service fees for additional services. In addition, approximately one-third of our revenue is earned from sellers and represents the combination of the inbound tow, processing, storage, titling, enhancing and auctioning of the vehicle. We purchase only a small amount of vehicles as the majority of our business comprises auctioning vehicles on consignment. However, when we do purchase vehicles, we record the entire sale price as revenue and the purchase price as cost of services, which results in lower gross margin versus vehicles sold at auction on a consignment

22

basis. Although auction revenues primarily include the auction services and related fees, our related receivables and payables include the gross value of the vehicles sold.

Our operating expenses consist of cost of services, selling, general and administrative and depreciation and amortization. Cost of services is comprised of payroll and related costs, subcontract services, the cost of vehicles purchased, supplies, insurance, property taxes, utilities, service contract claims, maintenance and lease expense related to the auction sites. Cost of services excludes depreciation and amortization. Selling, general and administrative expenses are comprised of, among other things, payroll and related costs, sales and marketing, information technology services and professional fees.

Results of Operations

	Three Months Ended									Six Months Ended
(Dollars in millions)	June 30, 2019			July 1, 2018			% Change			June 30, 2019			July 1, 2018			% Change
Revenues	$	366.4		$	333.2		10.0	%		$	723.6		$	670.5		7.9	%
Cost of services*	227.7			201.1			13.2	%		446.1			407.8			9.4	%
Gross profit*	138.7			132.1			5.0	%		277.5			262.7			5.6	%
Gross margin	37.9		%	39.7		%	(180)		bp	38.4		%	39.2		%	(80)		bp
Selling, general and administrative	33.7			31.3			7.6	%		67.3			63.9			5.3	%
Depreciation and amortization	22.1			24.7			(10.6	)%		43.9			48.8			(10.1	)%
Operating profit	82.9			76.1			9.0	%		166.3			150.0			10.9	%
Interest expense	11.9			9.7			22.7	%		21.6			19.3			11.9	%
Other income, net	(0.2		)	(0.8		)	(79.8	)%		(0.1		)	(0.8		)	(92.3	)%
Income before income taxes	71.2			67.2			5.9	%		144.8			131.5			10.1	%
Income taxes	19.9			17.4			14.1	%		39.0			33.4			16.6	%
Net income	$	51.3		$	49.8		3.1	%		$	105.8		$	98.1		7.9	%
Net income per share
Basic	$	0.38		$	0.37		3.1	%		$	0.79		$	0.73		7.9	%
Diluted	$	0.38		$	0.37		3.1	%		$	0.79		$	0.73		7.9	%

________________

* Exclusive of depreciation and amortization

Revenues

In the second quarter of 2019, total consolidated revenues increased $33.2 million, or 10.0%, to $366.4 million from $333.2 million in the second quarter of fiscal 2018 primarily due to increased volumes of approximately 6% and an increase in revenue per vehicle sold of approximately 4%. U.S. revenues increased $20.4 million, or 6.8%, to $320.5 million in the second quarter of 2019 from $300.1 million in the prior year period. International revenues increased $12.8 million in the second quarter of 2019, or 38.8%, to $45.9 million from $33.1 million in the comparable prior year period. The increase in international revenues was primarily due to a higher mix of purchased vehicles as well as an increase in volume and revenue per unit.

For the six months ended June 30, 2019, total consolidated revenues increased $53.1 million, or 7.9%, to $723.6 million from $670.5 million in the comparable prior year period primarily due to increased volumes of approximately 3% and an increase in revenue per vehicles sold of approximately 5%. U.S. revenues increased $31.3 million, or 5.2%, in the first half of 2019 to $634.8 million from $603.5 million in the comparable prior year period. International revenues increased, $21.8 million, or 32.4%, to $88.8 million from $67.0 million in the comparable prior year period. The increase in international revenues was primarily due to a higher mix of purchased vehicles as well as an increase in volume and revenue per unit.

Gross Profit

Gross profit, which is defined as total consolidated revenues minus cost of services and exclusive of depreciation and amortization, increased by $6.6 million, or 5.0%, to $138.7 million from $132.1 million in the second quarter of fiscal 2018, primarily due to the increase in revenues, which was partially offset by an increase in our cost of services. Gross margin decreased 180 basis points to 37.9% in the second quarter of 2019 compared to the second quarter of 2018 primarily due to a higher mix of purchased vehicles in our international businesses as well as an increase in occupancy costs.

For the six months ended June 30, 2019, gross profit increased $14.8 million, or by 5.6%, to $277.5 million from $262.7 million in the comparable prior year period, primarily due to the increase in revenues, which was partially offset by an increase

23

in our cost of services. Gross margin decreased 80 basis points to 38.4% primarily due to a higher mix of purchased vehicles in our international businesses as well as an increase in occupancy costs.

Selling, General and Administrative

Selling, general and administrative expenses increased $2.4 million, or 7.6%, to $33.7 million from $31.3 million in the second quarter of fiscal 2018 primarily due to $1.9 million of expenses related to our spin-off from KAR.

For the six months ended June 30, 2019, selling, general and administrative expenses increased $3.4 million, or 5.3%, to $67.3 million from $63.9 million in the prior year period primarily due to $2.6 million of expenses related to our spin-off from KAR.

Depreciation and Amortization

Depreciation and amortization decreased $2.6 million, or 10.6%, to $22.1 million for three months ended June 30, 2019, compared with $24.7 million for the three months ended July 1, 2018. For the six months ended June 30, 2019, depreciation and amortization decreased $4.9 million, or 10.1%, to $43.9 million compared with $48.8 million for the six months ended July 1, 2018. The decrease in depreciation and amortization in both periods was primarily the result of the derecognition of fixed assets associated with certain sale leaseback transactions associated with the adoption of Topic 842 in the first quarter of 2019. See Note 1 - Basis of Presentation and Nature of Operations in the condensed notes to unaudited consolidated financial statements of additional information.

Interest Expense

Interest expense was $11.9 million in the second quarter of 2019 compared to $9.7 million in the comparable quarter of 2018. Interest expense for the six months ended June 30, 2019 was $21.6 million compared to $19.3 million in the comparable prior year period. The increases over the prior year for both the quarter and year-to-date period were driven by incremental interest from the $500 million aggregate principal amount of 5.50% Senior Notes due 2027 (the "Notes") issued in June 2019.

Income Taxes

The effective tax rate of 27.9% for the three months ended June 30, 2019 was negatively impacted by 1.7% primarily due to an adjustment of $1.2 million to our deferred taxes related to our spin-off from KAR. This compares to an effective tax rate of 25.9% in the corresponding period of the prior year.

The effective tax rate for the six months ended June 30, 2019 and July 1, 2018 was 26.9% and 25.4%, respectively. The year to date June 30, 2019 effective tax rate was negatively impacted by 1.0% primarily due to adjustments of $1.5 million to our deferred taxes related to our spin-off from KAR.

Net Income and EPS

For the three months ended June 30, 2019, net income was $51.3 million, or $0.38 per diluted share, compared to $49.8 million, or $0.37 per diluted share, in the second quarter of fiscal 2018.

For the six months ended June 30, 2019, net income was $105.8 million, or $0.79 per diluted share, compared to $98.1 million, or $0.73 per diluted share, in the second quarter of fiscal 2018.

Liquidity and Capital Resources

We believe that the significant indicators of liquidity for our business are cash on hand, cash flow from operations and working capital. Historically, we transferred our cash flow generated by our operations to KAR to support its overall cash management strategy. Cash was transferred daily, based on our balances, to centralized accounts maintained by KAR. As cash was disbursed or received by KAR, it was accounted for by us through Net Parent Investment on our balance sheet, statement of cash flow and statement of stockholders' (deficit) equity.

On the Separation Date, our capital structure and sources of liquidity changed significantly. We no longer participate in cash management and funding arrangements with KAR. Subsequent to the Separation Date, our principal source of liquidity consists of cash generated by operations, and our Revolving Credit Facility (as defined below) provides another source of liquidity as needed. Our internally generated cash flow will be used to invest in new products and services, fund capital expenditures and fund working capital requirements, and is expected to be adequate to service any future debt, pay any future dividends, fund any stock repurchases and fund future acquisitions, if any. Our ability to fund these capital needs will depend on our ongoing ability to generate cash from operations and to access borrowings under our Revolving Credit Facility and the capital markets. We believe that our cash on hand, future cash from operations, borrowings available under our Revolving Credit Facility and access to the debt and capital markets will provide adequate resources to fund our operating and financing needs for at least the next twelve months.

24

Working Capital

A substantial amount of our working capital is generated from the payments received for services provided. The majority of our working capital needs are short-term in nature, usually less than three months in duration. Due to the decentralized nature of the business, payments for most vehicles purchased are received at each auction and branch. Most of the financial institutions place a temporary hold on the availability of the funds deposited that generally can range up to two business days, resulting in cash in our accounts and on our balance sheet that is unavailable for use until it is made available by the various financial institutions. There are outstanding checks (book overdrafts) to sellers and vendors included in current liabilities. Because a portion of these outstanding checks for operations in the United States are drawn upon bank accounts at financial institutions other than the financial institutions that hold the cash, we cannot offset all the cash and the outstanding checks on our balance sheet. Changes in working capital vary from quarter-to-quarter as a result of the timing of collections and disbursements of funds to consignors from auctions held near period end.

If funds held by our foreign subsidiaries were to be repatriated, state and local income tax expense and foreign withholding tax expense would need to be recognized, net of any applicable foreign tax credits.

Summary of Cash Flows

(in millions)	Six Months ended June 30, 2019			Six Months ended July 1, 2018
Net cash provided by (used by):
Operating activities	$	159.7		$	165.0
Investing activities	(37.4		)	(27.7		)
Financing activities	(132.1		)	(122.6		)
Effect of exchange rate on cash	0.7			(0.5		)
Net increase (decrease) in cash and cash equivalents	$	(9.1	)	$	14.2

Operating cash flows: The decrease in operating cash flow in the six months ended June 30, 2019 compared to the six months ended July 1, 2018 was primarily attributable to changes in operating assets and liabilities as a result of the timing of collections and the disbursement of funds to consignors for auctions held near period-ends. This was offset by increased profitability adjusted for non-cash items, including depreciation and amortization, stock-based compensation, deferred rent, provision for credit losses and deferred taxes.

Investing cash flows: The increase in net cash used by investing activities in the six months ended June 30, 2019 compared to the six months ended July 1, 2018 was primarily attributable to an increase in cash used for capital expenditures.

Financing cash flows: The increase in net cash used by financing activities in the six months ended June 30, 2019 compared to the six months ended July 1, 2018 was primarily attributable to the cash distribution made to KAR in connection with the Distribution, partially offset by the net proceeds from offering of Notes and our Term Loan Facility.

Our Outstanding Indebtedness

In connection with the Separation, on June 28, 2019 we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders time to time party thereto (the “Credit Agreement”), which provides for, among other things, a seven year senior secured term loan facility in an aggregate principal amount of $800 million (the “Term Loan Facility”) and a five year revolving credit facility in an aggregate principal amount of $225 million (the “Revolving Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans, which can be borrowed on same-day notice. As of June 30, 2019, no amounts were outstanding under the Revolving Credit Facility. We were in compliance with the covenants in the Credit Agreement at June 30, 2019. See Note 5 - Long Term Debt in the condensed notes to unaudited consolidated financial statements for additional information.

On June 6, 2019, we issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027 (the “Notes”). We must pay interest on the Notes in cash on June 15 and December 15 of each year at a rate of 5.500% per annum, with the first interest payment date being December 15, 2019. The Notes will mature on June 15, 2027. The net proceeds from the Notes offering, together with borrowings under our prior senior credit facility, were used to make a cash distribution to KAR and to pay fees and expenses related to the Separation. See Note 5 - Long Term Debt in the condensed notes to unaudited consolidated financial statements for additional information.

25

Prior to the Separation Date, we had intercompany debt with KAR totaling $456.6 million. This debt, which was eliminated on the Separation Date, was comprised of three promissory notes, payable on demand, with a weighted average interest rate of 8.27%.

(Dollars in millions)	June 30, 2019			December 30, 2018
Net Debt
Term Loan Facility	$	800.0		$	—
Notes	500.0			—
Revolving Credit Facility	—			—
Total finance lease liabilities	22.0			—
Other	—			456.6
Total debt	1,322.0			456.6
Less: Cash	(50.9		)	(60.0		)
Net debt	$	1,271.1		$	136.3

Capital Expenditures

Capital expenditures for the six months ended June 30, 2019 and July 1, 2018 were $37.5 million and $28.7 million, respectively. Capital expenditures were funded primarily from internally generated funds. We continue to invest in our core information technology capabilities and capacity expansion. Approximately half of our 2019 capital expenditures are expected to relate to technology-based investments, including improvements in information technology systems and infrastructure. Other anticipated capital expenditures are primarily attributable to improvements and expansion at our facilities. Future capital expenditures could vary substantially based on capital project timing, the opening of new auction facilities, capital expenditures related to acquired businesses and the initiation of new information systems projects to support our business strategies.

Off-Balance Sheet Arrangements

As of June 30, 2019, we had no off-balance sheet arrangements pursuant to Item 303(a)(4) of Regulation S-K under the Exchange Act.

Contractual Obligations

Our contractual cash obligations for capital lease obligations and operating leases as of December 30, 2018 are summarized in the table of contractual obligations disclosed under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations” in our information statement filed as Exhibit 99.1 to our Registration Statement on Form 10 filed with the SEC on June 13, 2019. Our operating lease obligations change in the ordinary course of business as we lease most of our facilities, as well as other property and equipment under operating leases. Future operating lease obligations will continue to change if renewal options are exercised and/or if we enter into additional operating lease agreements.

As more fully described above under “Our Outstanding Indebtedness” and in Note 5 - Long-Term Debt in our condensed notes to unaudited consolidated financial statements, in connection with the Separation, we entered into the $800 million Term Loan Facility and $225 million Revolving Credit Facility. The Term Loan Facility matures on June 28, 2026. We must make principal payments of $2 million each quarter, commencing on September 30, 2019 and continuing on the last day of each September, December, March and June thereafter. The Revolving Credit Facility matures on June 28, 2024. We may prepay the obligations under our Term Loan Facility and Revolving Credit Facility at any time without penalties. The Term Loan Facility accrues interest at an adjusted LIBOR rate plus 2.25% (or at IAA’s election, Base Rate (as defined in the Credit Agreement) plus 1.25%).  Loans under the Revolving Credit Facility bear interest at an amount equal to the rate calculated based on either adjusted LIBOR or Base Rate plus an applicable margin ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans, in each case depending on our consolidated senior secured net leverage ratio (as defined in the Credit Agreement).

We also issued $500 million aggregate principal amount of Notes on June 6, 2019, which pay interest semiannually at a rate of 5.500% per annum. The Notes mature on June 15, 2027. At any time and from time to time prior to June 15, 2022, we may, at our option, redeem the Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. Thereafter, we may, at our option, redeem the Notes in whole or in part at the prices set forth in the Indenture. In addition, at

26

any time and from time to time prior to June 15, 2022, we may, at our option, at a redemption price of 105.5% of the principal amount of Notes redeemed, redeem up to 40% of the original aggregate principal amount of the Notes issued under the Indenture with the proceeds of certain equity offerings.

Other than described above, there have been no material changes to the contractual obligations of the Company since December 30, 2018.

Critical Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. If these estimates differ significantly from actual results, the impact to the consolidated financial statements may be material. There have been no material changes in our critical accounting policies disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in our information statement filed as Exhibit 99.1 to our Registration Statement on Form 10 filed with the SEC on June 13, 2019. For further information about recently issued accounting pronouncements, see Note 1 - Summary of Significant Accounting Policies in the condensed notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Our outstanding indebtedness reflects a mix of fixed and variable rate debt and we are exposed to interest rate risk with respect to our variable rate indebtedness. As of June 30, 2019, we had outstanding $500.0 million of fixed rate debt from our outstanding Notes and $800.0 million of variable rate debt from our Term Loan Facility. The Term Loan Facility accrues interest at an adjusted LIBOR rate plus 2.25% (or at IAA’s election, Base Rate (as defined in the Credit Agreement) plus 1.25%).  Loans under the Revolving Credit Facility bear interest at an amount equal to the rate calculated based on either adjusted LIBOR or Base Rate plus an applicable margin ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans, in each case depending on our consolidated senior secured net leverage ratio (as defined in the Credit Agreement). A 100 basis point increase in the interest rates related to our variable rate debt based on the balance outstanding at June 30, 2019 would increase our interest expense by approximately $8.0 million annually. We may in the future manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. As of June 30, 2019, we have not entered into any swap agreements.

Other than described above, there were no material changes to market risks and related disclosures from those disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Quantitative and Qualitative Disclosures About Market Risks” in our information statement filed as Exhibit 99.1 to our Registration Statement on Form 10 filed with the SEC on June 13, 2019.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of June 30, 2019.

27

Changes in Internal Control over Financial Reporting

Due to a transition period established by SEC rules applicable to newly public companies, our management is not required to evaluate the effectiveness of our internal control over financial reporting until after the filing of our Annual Report on Form 10-K for the year ended December 29, 2019. As a result, this Quarterly Report on Form 10-Q does not address whether there have been any changes in our internal control over financial reporting.

28

PART II

OTHER INFORMATION

Item 1.    Legal Proceedings

See Note 7 - Commitments and Contingencies in the condensed notes to the unaudited consolidated financial statements for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

Item 1A.    Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the "Risk Factors" disclosed under "Item 1A. Risk Factors" in our registration statement on Form 10, as amended, which was filed with the SEC on June 13, 2019. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from the risk factors previously disclosed in "Item 1A. Risk Factors" in our information statement filed as Exhibit 99.1 our Registration Statement on Form 10 filed with the SEC on June 13, 2019.

29

Item 6.    Exhibits, Financial Statement Schedules

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
2.1	Separation and Distribution Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.†	8-K	001-38580	2.1	6/28/2019
3.1	Amended and Restated Certificate of Incorporation of IAA, Inc., dated as of June 27, 2019	8-K	001-38580	3.1	6/28/2019
3.2	Amended and Restated By-laws of IAA, Inc., dated as of June 27, 2019	8-K	001-38580	3.2	6/28/2019
4.1	Indenture, dated June 6, 2019, between IAA, Inc. (f/k/a IAA Spinco Inc.) and U.S. Bank National Association, as trustee, including the form of the 5.500% Senior Notes due 2027	Form 10	001-38580	4.1	6/13/2019
10.1	Transition Services Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.	8-K	001-38580	10.1	6/28/2019
10.2	Tax Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.	8-K	001-38580	10.2	6/28/2019
10.3	Employee Matters Agreement, dated as of June 27, 2019, by and between KAR Auction Services, Inc. and IAA, Inc.	8-K	001-38580	10.3	6/28/2019
10.4	IAA, Inc. 2019 Omnibus Stock and Incentive Plan	8-K	001-38580	10.4	6/13/2019
10.5	Credit Agreement, dated as of June 28, 2019, among IAA, Inc., the several banks and other financial institutions or entities from time to time party thereto as lenders, the issuing lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.	8-K	001-38580	10.1	6/28/2019
10.6	Form Employment Agreement for Executive Officers					X
10.7	Form of Stock Option Award Agreement (Officers)					X
10.8	Form of Restricted Stock Unit Award Agreement (Officers)					X
10.9	Form of Performance Restricted Stock Unit Award Agreement (Officers)					X
10.10	Form Indemnification Agreement entered into with directors and officers					X
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X**
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X**
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema					X

30

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase					X
101.LAB	XBRL Taxonomy Extension Label Linkbase					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase					X

_______________________________________________________________________________

† Certain information has been excluded from this exhibit because it is not material and would likely cause competitive harm to the registrant if publicly disclosed.

** Furnished herewith.

31

SIGNATURES

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 thereunto duly authorized.

		IAA, Inc.
		(Registrant)
Date:	August 13, 2019	/s/ John W. Kett
		John W. Kett President and Chief Executive Officer (Principal Executive Officer)
Date:	August 13, 2019	/s/ Vance C. Johnson
		Vance C. Johnson Executive Vice President, Chief Financial Officer (Principal Financial Officer)

32

EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this [●] day of [●] 201[●] (the “Effective Date”), by and between IAA, Inc., a Delaware corporation (the“Company”), and [●] (the “Executive”).

RECITALS

THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:

A.    The Company desires to continue to employ the Executive, and the Executive desires to accept such continued employment, on the terms and conditions set forth in this Agreement.

B.     This Agreement shall be effective immediately and shall govern the employment relationship between the Executive and the Company from and after the Effective Date, and, as of the Effective Date, supersedes and negates all previous agreements and understandings with respect to such relationship (including, without limitation, the Employment Agreement by and between the Company and the Executive dated [●] (the “Prior Employment Agreement”)).

AGREEMENT

NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:

1.    Retention and Duties.

1.1 Retention. The Company does hereby employ the Executive for the Period of Employment (as such term is defined in Section 2) on the terms and conditions expressly set forth in this Agreement. The Executive does hereby accept and agree to such employment, on the terms and conditions expressly set forth in this Agreement. Certain capitalized terms used herein are defined in Section 5.5 of this Agreement.

1.2 Duties. During the Period of Employment, the Executive shall serve the Company as its [●] and shall have the powers, authorities, duties and obligations of management usually vested in the office of such position in a company of a similar size and similar nature as the Company, and such other powers, authorities, duties and obligations commensurate with such position as the Company’s [Board of Directors (the “Board”)] [Chief Executive Officer] may assign from time to time, all subject to the directives of the [Board]¹ [Chief Executive Officer and the Company’s Board of Directors (the “Board”)]² and the corporate policies of the Company as they are in effect from time to time throughout the Period of Employment (including, without

1 NTD: For the Chief Executive Officer.

2 NTD: For all other executive Officers.            1

limitation, the Company’s business conduct and ethics policies, as they may change from time to time). [During the Period of Employment, the Executive shall be a member of the Board and shall report to the Board].¹ [During the Period of Employment, the Executive shall report to the Chief Executive Officer].² 

1.3 No Other Employment; Minimum Time Commitment. During the Period of Employment, the Executive shall (i) devote substantially all of the Executive’s business time, energy and skill to the performance of the Executive’s duties for the Company, (ii) perform such duties in a faithful, effective and efficient manner to the best of his or her abilities, and (iii) hold no other employment. The Executive’s service on the boards of directors (or similar body) of other for profit business entities is subject to the prior written approval of the Board (which approval shall not be unreasonably withheld).

1.4 No Breach of Contract. The Executive hereby represents to the Company and agrees that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder do not and shall not constitute a breach of, conflict with, or otherwise contravene or cause a default under, the terms of any other agreement or policy to which the Executive is a party or otherwise bound or any judgment, order or decree to which the Executive is subject; (ii) the Executive will not enter into any new agreement that would or reasonably could contravene or cause a default by the Executive under this Agreement; (iii) the Executive has no information (including, without limitation, confidential information and trade secrets) relating to any other Person which would prevent, or be violated by, the Executive entering into this Agreement or carrying out his or her duties hereunder; (iv) the Executive is not bound by any employment, consulting, non-compete, non-solicitation, confidentiality, trade secret or similar agreement (other than this Agreement) with any other Person; (v) to the extent the Executive has any confidential or similar information that he is not free to disclose to the Company, he or she will not disclose such information to the extent such disclosure would violate applicable law or any other agreement or policy to which the Executive is a party or by which the Executive is otherwise bound; and (vi)the Executive understands the Company will rely upon the accuracy and truth of the representations and warranties of the Executive set forth herein and the Executive consents to such reliance.

1.5 Location. The Executive’s principal place of employment shall be the Company’s principal executive office as it may be located from time to time. The Executive acknowledges that he or she will be required to travel from time to time in the course of performing his or her duties for the Company.

2. Period of Employment. The “Period of Employment” shall be a period of three (3) years commencing on the Effective Date and ending at the close of business on the third anniversary of the Effective Date (the “Termination Date”); provided, however, that this Agreement shall be automatically renewed, and the Period of Employment shall be automatically extended for one (1) additional year on the Termination Date and each

2

anniversary of the Termination Date thereafter, unless either party gives written notice at least sixty (60) days prior to the expiration of the Period of Employment (including any renewal thereof) of such party’s desire to terminate the Period of Employment (such notice to be delivered in accordance with Section 18). Notwithstanding the foregoing, the Period of Employment is subject to earlier termination as provided below in this Agreement.

3.    Compensation.

3.1 Base Salary. During the Period of Employment, the Company shall pay the Executive a base salary (the “Base Salary”), which shall be paid in accordance with the Company’s regular payroll practices in effect from time to time but not less frequently than in monthly installments. The Executive’s Base Salary shall be at an annualized rate of [● ($●)]. The Board (or a committee thereof) may, in its sole discretion, increase (but not decrease) the Executive’s rate of Base Salary.

3.2 Incentive Bonus. The Executive shall be eligible to receive an incentive bonus for each fiscal year of the Company that occurs during the Period of Employment (“Incentive Bonus”). The Executive’s target Incentive Bonus amount for a particular fiscal year of the Company shall equal [● Percent (●%)] of the Executive’s Base Salary paid by the Company to the Executive for that fiscal year; provided that the Executive’s actual Incentive Bonus amount for a particular fiscal year shall be determined by the Board (or a committee thereof) in its sole discretion, based on performance objectives (which may include corporate, business unit or division, financial, strategic, individual or other objectives) established with respect to that particular fiscal year by the Board (or a committee thereof). Notwithstanding the foregoing and except as otherwise expressly provided in this Agreement, the Executive must be employed by the Company through the last day of the fiscal year to which such bonus relates in order to earn and be eligible for an Incentive Bonus for that year (and, if the Executive is not so employed at such time, in no event shall he or she have been considered to have “earned” any Incentive Bonus with respect to the fiscal year). Payment of any Incentive Bonus that becomes payable will be made as soon as practicable but in no event later than two and one half (2.5) months following the fiscal year to which the Incentive Bonus relates.

3.3 Equity The Executive shall be eligible to participate in the 2019 Equity Plan.

4.    Benefits.

4.1 Retirement, Welfare and Fringe Benefits. During the Period of Employment, the Executive shall be entitled to participate in all employee pension and welfare benefit plans and programs, and fringe benefit plans and programs, made available by the Company to the Company’s executive-level employees, in accordance with the eligibility and participation provisions of such plans and as such plans or programs may be in effect from time to time.

4.2 Reimbursement of Business Expenses. The Executive is authorized to incur reasonable expenses in carrying out the Executive’s duties for the Company under

3

this Agreement and shall be entitled to reimbursement for all reasonable business expenses the Executive incurs during the Period of Employment in connection with carrying out the Executive’s duties for the Company, subject to the Company’s expense reimbursement policies and any pre-approval policies in effect from time to time. The Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.

4.3 Vacation and Other Leave. During the Period of Employment, the Executive shall be entitled to annual paid vacation in accordance with the Company’s policy applicable to executive-level employees, but in no event less than four (4) weeks of paid vacation during each full calendar year of employment. The Executive shall receive a pro-rated portion of such vacation during the Executive’s initial and final partial calendar years of employment under this Agreement. Unused, earned vacation shall not carry over from one calendar year to the next, unless the Company’s written policies otherwise provide for such carry over.

4.4 Automobile Allowance. During the Period of Employment, the Company shall pay the Executive an annual automobile allowance of at least [●] ($●)]. Such allowance shall be paid in accordance with the Company’s regular payroll practices, as may be in effect from time to time, but in no event less frequently than monthly.

4.5 Other Benefits. During the Period of Employment, the Company shall pay the Executive up to $3,500 annually in reimbursement of any actual costs and expenses incurred by the Executive in receiving an annual “Executive Physical” (as that term may be defined in the Company’s benefit plans). Additionally, during the Period of Employment, the Company will cover up to $60 per month, the actual out of pocket costs an Executive incurs for any identity theft protection plan in which the Executive enrolls. The Company may, in its sole discretion, increase the amounts covered hereunder in taking into account the reasonable market increases in the costs to the Executive in receiving such benefits.

5.    Termination.

5.1 Termination by the Company. During the Period of Employment, the Executive’s employment by the Company, and the Period of Employment, may be terminated at any time by the Company: (i) with Cause, or (ii) with no less than thirty (30) days advance written notice to the Executive (such notice to be delivered in accordance with Section 18), without Cause, or (iii) in the event of the Executive’s death, or (iv) in the event that the Board determines in good faith that the Executive has a Disability.

5.2 Termination by the Executive. During the Period of Employment, the Executive’s employment by the Company, and the Period of Employment, may be terminated by the Executive with no less than thirty (30) days advance written notice to the Company (such notice to be delivered in accordance with Section 18); provided,

4

however, that in the case of a termination for Good Reason, the Executive may provide immediate written notice of termination once the applicable cure period (as contemplated by the definition of Good Reason) has lapsed if the Company has not reasonably cured the circumstances that gave rise to the basis for the Good Reason termination.

5.3 Benefits upon Termination. If the Executive’s employment by the Company is terminated for any reason by the Company or by the Executive (whether or not during or following the expiration of the Period of Employment) (the date that the Executive’s employment by the Company terminates is referred to as the “Severance Date”), the Company shall have no further obligation to make or provide to the Executive, and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits except as follows:

(a)    The Company shall pay the Executive (or, in the event of his or her death, the Executive’s estate) any Accrued Obligations;

(b)    Unless the provisions of Section 5.3(c) below apply, if the Executive’s employment with the Company terminates during the Period of Employment as a result of a termination by the Company without Cause (other than due to the Executive’s death or Disability), a resignation by the Executive for Good Reason, or as a result of the Company’s provision of notice to the Executive pursuant to Section 2 that this Agreement shall not be extended or further extended, the Executive shall be entitled to the following benefits:

(i)    The Company shall pay the Executive (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to [●] times the sum of (1) his or her Base Salary at the annualized rate in effect on the Severance Date plus (2) target Incentive Bonus for the year in which termination occurs. Such amount is referred to hereinafter as the “Severance Benefit.” Subject to Section 21(b), the Company shall pay the Severance Benefit to the Executive in equal monthly installments (rounded down to the nearest whole cent) over a period of [●] ([●]) consecutive months, with the first installment payable on (or within ten (10) days following) the sixtieth (60^th) day following the Executive’s Separation from Service. (For purposes of clarity, each such installment shall equal the applicable fraction of the aggregate Severance Benefit. For example, if such installments were to be made on a monthly basis over [●] months, each installment would equal one-[●] (1/[●]^th) of the Severance Benefit.)

(ii)    The Company will pay or reimburse the Executive for his or her premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the

5

Severance Date, to the extent that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this clause (ii) shall, subject to Section 21(b), commence with continuation coverage for the month following the month in which the Executive’s Separation from Service occurs and shall cease with continuation coverage for the [●] month following the month in which the Executive’s Separation from Service occurs (or, if earlier, shall cease upon the first to occur of the Executive’s death, the date the Executive becomes eligible for coverage under the health plan of a future employer, or the date the Company ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive) (the “Continued Benefits”). To the extent the Executive elects COBRA coverage, he or she shall notify the Company in writing of such election prior to such coverage taking effect and complete any other continuation coverage enrollment procedures the Company may then have in place. The Company’s obligations pursuant to this Section 5.3(b)(ii) are subject to the Company’s ability to comply with applicable law and provide such benefit without resulting in adverse tax consequences.

(iii)    The Company shall promptly pay to the Executive any Incentive Bonus that would otherwise be paid to the Executive had his or her employment by the Company not terminated with respect to any calendar year that ended before the Severance Date, to the extent not theretofore paid (the “Earned But Unpaid Bonus”).

(iv)    At the time the Company pays bonuses with respect to the calendar year in which the Severance Date occurs, the Company shall pay the Executive the Incentive Bonus that would otherwise have been paid to the Executive had his or her employment by the Company not terminated with respect to that calendar year, multiplied by a fraction, the numerator of which is the total number of days in such calendar year in which the Executive was employed by the Company and the denominator of which is the total number of days in such calendar year (the “Pro-Rata Bonus”).

(c)    If the Executive’s employment with the Company terminates during the Period of Employment and within twenty-four (24) months following a Change in Control as a result of a termination by the Company without Cause (other than due to the Executive’s death or Disability), a resignation by the Executive for Good Reason, or as a result of the Company’s provision of notice to the Executive pursuant to Section 2 that this Agreement shall not be extended or further extended, the Executive shall be entitled to the following benefits in lieu of the benefits described under Section 5.3(b):

(i)    The Company shall pay the Executive (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an

6

amount equal to [●] times the sum of (1) his or her Base Salary at the annualized rate in effect on the Severance Date plus (2) target Incentive Bonus for the year in which termination occurs. Such amount is referred to hereinafter as the “Change in Control Severance Benefit.” Subject to Section 21(b), the Company shall pay the Change in Control Severance Benefit to the Executive in equal monthly installments (rounded down to the nearest whole cent) over a period of [●] ([●]) consecutive months, with the first installment payable on (or within ten (10) days following) the sixtieth (60^th) day following the Executive’s Separation from Service. (For purposes of clarity, each such installment shall equal the applicable fraction of the aggregate Change in Control Severance Benefit. For example, if such installments were to be made on a monthly basis over [●] months, each installment would equal one-[●] (1/[●]^th) of the Change in Control Severance Benefit.)

(ii)    The Company will provide the Continued Benefits described in Section 5.3(b)(ii) above on the terms and conditions specified in that section, but for a period ending with continuation coverage for the [●] month following the month in which the Executive’s Separation from Service occurs.

(iii)    The Company shall promptly pay to the Executive the Earned But Unpaid Bonus.

(iv)    At the time the Company pays bonuses with respect to the calendar year in which the Severance Date occurs, the Company shall pay the Executive the Pro-Rata Bonus.

(v)    At the Severance Date, all then outstanding and unvested equity awards granted under the 2019 Equity Plan shall receive full accelerated vesting (with any awards subject to performance-based vesting requirements for any then in-progress performance periods to vest in accordance with the terms of such awards, but at a minimum of the target performance level).

(d)    If the Executive’s employment with the Company terminates during the Period of Employment as a result of the Executive’s death or Disability, the Executive shall be entitled to the following benefits (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, (1) the Company will provide the Continued Benefits described in Section 5.3(b)(ii) above on the terms and conditions specified in that section, (2) the Company shall promptly pay to the Executive the Earned But Unpaid Bonus, and (3) at the time the Company pays bonuses with respect to the calendar year in which the Severance Date occurs, the Company shall pay the Executive the Pro-Rata Bonus.

(e)    Notwithstanding the foregoing provisions of this Section 5.3, if the Executive breaches his or her obligations under Section 6 of this Agreement at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to the Company, the Executive will no longer be entitled

7

to, and the Company will no longer be obligated to pay or provide, any remaining unpaid portion of the benefits provided under Section 5.3(b), 5.3(c) or 5.3(d) (other than the Accrued Obligations); provided that, if the Executive provides the Release contemplated by Section 5.4, in no event shall the Executive be entitled to cash payments of less than $5,000, which amount the parties agree is good and adequate consideration, in and of itself, for the Executive’s Release contemplated by Section 5.4.

(f)    The foregoing provisions of this Section 5.3 shall not affect: (i) the Executive’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan; (ii) the Executive’s rights under COBRA to continue health coverage; or (iii) the Executive’s receipt of benefits otherwise due in accordance with the terms of the Company’s 401(k) plan (if any).

5.4 Release; Exclusive Remedy; Leave.

(a)    This Section 5.4 shall apply notwithstanding anything else contained in this Agreement to the contrary. As a condition precedent to any Company obligation to the Executive pursuant to Section 5.3(b), 5.3(c) or 5.3(d) (other than any Earned But Unpaid Bonus), the Executive shall provide the Company with a valid, executed general release agreement in a customary form acceptable to the Company (the “Release”), and such Release shall have not been revoked by the Executive pursuant to any revocation rights afforded by applicable law. The Company shall provide the final form of Release to the Executive not later than seven (7) days following the Severance Date, and the Executive shall be required to execute and return the Release to the Company within twenty-one (21) days (or forty-five (45) days if such longer period of time is required to make the Release maximally enforceable under applicable law) after the Company provides the form of Release to the Executive.

(b)    The Executive agrees that the payments and benefits contemplated by Section 5.3 (and any applicable acceleration of vesting of an equity-based award in accordance with the terms of such award in connection with the termination of the Executive’s employment) shall constitute the exclusive and sole remedy for any termination of his or her employment and the Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and the Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement. All amounts paid to the Executive pursuant to Section 5.3 shall be paid without regard to whether the Executive has taken or takes actions to mitigate damages. The Executive agrees to resign, on the Severance Date, as an officer and director of the Company and any Affiliate of the Company, and as a fiduciary of any benefit plan of the Company or any Affiliate of the Company, and to promptly execute and provide to the Company any further documentation, as requested by the Company, to confirm such resignation, and to remove himself or herself as a signatory on any

8

accounts maintained by the Company or any of its Affiliates (or any of their respective benefit plans).

(c)    In the event that the Company provides the Executive notice of termination without Cause pursuant to Section 5.1 or the Executive provides the Company notice of termination pursuant to Section 5.2, the Company will have the option to place the Executive on paid administrative leave during the notice period.

5.5 Certain Defined Terms.

(a)    As used herein, “2019 Equity Plan” means the IAA, Inc. 2019 Omnibus Stock and Incentive Plan, together with any predecessor or successor equity incentive plan.    

(b)    As used herein, “Accrued Obligations” means:

(i)    any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the Severance Date;

(ii)    such employee benefits, if any, to which the Executive or his or her dependents may be entitled under the employee benefit plans or programs of the Company and its Affiliates, paid in accordance with the terms of the applicable plans or programs; and

(iii)    any reimbursement due to the Executive pursuant to Section 4.2 for expenses reasonably incurred by the Executive on or before the Severance Date and documented and pre-approved, to the extent applicable, in accordance with the Company’s expense reimbursement policies in effect at the applicable time.

(c)    As used herein, “Affiliate” of the Company means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company. As used in this definition, the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.

(d)    As used herein, “Cause” shall mean as reasonably determined by the Board (excluding the Executive, if he is then a member of the Board) based on the information then known to it, that one or more of the following has occurred (A) the Executive’s willful, continued and uncured failure to perform substantially the Executive’s duties under this Agreement (other than any such failure resulting from incapacity due to medically documented illness or injury) for a period of fourteen (14) days following written notice by the Company to the Executive of such failure, (B) the Executive engaging in illegal conduct or gross misconduct that is

9

demonstrably likely to lead to material injury to the Company, monetarily or otherwise, (C) the Executive’s conviction of, or plea of nolo contendere to, a crime constituting a felony or any other crime involving moral turpitude, or (D) the Executive’s violation of Section 6 of this Agreement or any other material covenants owed to the Company by the Executive.

(e)    As used herein, “Change in Control” shall have the same meaning as in the 2019 Equity Plan.

(f)    As used herein, “Disability” shall mean a physical or mental impairment which, as reasonably determined by the Board, renders the Executive unable to perform the essential functions of his employment with the Company, even with reasonable accommodation that does not impose an undue hardship on the Company, for more than 90 days in any 180-day period, unless a longer period is required by federal or state law, in which case that longer period would apply.

(g)    As used herein, “Good Reason” shall mean the occurrence (without the Executive’s consent) of any one or more of the following conditions:

(i)        Any material reduction of the Executive’s authority, duties and responsibilities;

(ii)        Any material failure by the Company to comply with any of the terms and conditions of this Agreement;

(iii)        Any failure to timely pay or provide the Executive’s Base Salary, or any reduction in the Executive’s Base Salary or target Incentive Bonus, excluding any Base Salary or target Incentive Bonus reduction made in connection with across the board reductions; or

(iv)         The requirement by the Company that the Executive relocate the Executive’s principal business location to a location more than twenty five (25) miles from the Executive’s principal base of operation as of the Effective Date, provided such relocation actually increases the Executive’s commute;

provided, however, that any such condition or conditions, as applicable, shall not constitute Good Reason unless both (x) the Executive provides written notice to the Company of the condition claimed to constitute Good Reason within ninety (90) days of the initial existence of such condition(s) (such notice to be delivered in accordance with Section 18), and (y) the Company fails to remedy such condition(s) within thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination of the Executive’s employment with the Company shall not constitute a termination for Good Reason unless such termination occurs not more than one hundred and fifty (150) days following the initial existence of the condition claimed to constitute Good Reason.

10

(h)    As used herein, the term “Person” shall be construed broadly and shall include, without limitation, an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

(i)    As used herein, a “Separation from Service” occurs when the Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

5.6. Notice of Termination; Employment Following Expiration of Period of Employment. Any termination of the Executive’s employment under this Agreement (other than due to death) shall be communicated by written notice of termination from the terminating party to the other party. This notice of termination must be delivered in accordance with Section 18 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination.

5.7 Limitation on Benefits.

(a)    Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the “Benefits”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received all of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”). In order to effectuate the Limited Benefit Amount, the Company shall reduce or eliminate the Benefits by first reducing or eliminating amounts which are payable from any cash severance, then from any payment in respect of any equity award that is not covered by Treas. Reg. Section 1.280G-1 Q/A 24(b) or (c), then from any payment in respect of an equity award that is covered by Treas. Reg. Section 1.280G-1 Q/A 24(c), in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined).

(b)    A determination as to whether the Benefits shall be reduced to the Limited Benefit Amount pursuant to this Agreement and the amount of such Limited Benefit Amount shall be made by the Company’s independent public accountants or another certified public accounting firm or executive compensation consulting firm of national reputation designated by the Company (the “Firm”) at the Company’s expense. The Firm shall provide its determination (the “Determination”), together

11

with detailed supporting calculations and documentation to the Company and the Executive within ten (10) business days of the date of termination of the Executive’s employment, if applicable, or such other time as reasonably requested by the Company or the Executive.

6. Protective Covenants.

6.1 Confidential Information; Inventions.

(a)The Executive shall not disclose or use at any time, either during the Period of Employment or thereafter, any Confidential Information (as defined below) of which the Executive is or becomes aware, whether or not such information is developed by him or her, except to the extent that such disclosure or use is directly related to and required by the Executive’s performance in good faith of duties for the Company. The Executive will take all appropriate steps to safeguard Confidential Information in his or her possession and to protect it against disclosure, misuse, espionage, loss and theft. The Executive shall deliver to the Company at the termination of the Period of Employment, or at any time the Company may request, all memoranda, equipment, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as hereinafter defined) of the business of the Company or any of its Affiliates which the Executive may then possess or have under his or her control. Notwithstanding the foregoing, the Executive may truthfully respond to a lawful and valid subpoena or other legal process, but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought, and shall assist the Company and such counsel in resisting or otherwise responding to such process. The Executive understands that nothing in this Agreement is intended to limit the Executive’s right (i) to discuss the terms, wages, and working conditions of the Executive’s employment to the extent permitted and/or protected by applicable labor laws, (ii) to report Confidential Information in a confidential manner either to a federal, state or local government official or to an attorney where such disclosure is solely for the purpose of reporting or investigating a suspected violation of law, or (iii) to disclose Confidential Information in an anti-retaliation lawsuit or other legal proceeding, so long as that disclosure or filing is made under seal and the Executive does not otherwise disclose such Confidential Information, except pursuant to court order. The Company encourages Executive, to the extent legally permitted, to give the Company the earliest possible notice of any such report or disclosure. Pursuant to the Defend Trade Secrets Act of 2016, the Executive acknowledges that he or she may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of Confidential Information that: (a) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed in a lawsuit or other proceeding, provided that such filing is made under seal. Further, the Executive

12

understands that the Company will not retaliate against him or her in any way for any such disclosure made in accordance with the law. In the event a disclosure is made, and the Executive files any type of proceeding against the Company alleging that the Company retaliated against him or her because of the Executive’s disclosure, the Executive may disclose the relevant Confidential Information to his or her attorney and may use the Confidential Information in the proceeding if (x) the Executive files any document containing the Confidential Information under seal, and (y) the Executive does not otherwise disclose the Confidential Information except pursuant to court or arbitral order.

(b)As used in this Agreement, the term “Confidential Information” means information that is not generally known to the public and that is used, developed or obtained by the Company or its Affiliates in connection with their respective businesses, including, but not limited to, information, observations and data obtained by the Executive while employed by the Company or its Affiliates or any predecessors thereof (including those obtained prior to the Effective Date) concerning (i) the business or affairs of the Company or its Affiliates (or such predecessors), (ii) products or services, (iii) fees, costs and pricing structures and strategies, (iv) designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, product roadmaps, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients, customer or client lists, and the preferences of, and negotiations with, customers and clients, (xiii) personnel information of other employees and independent contractors (including their compensation, unique skills, experience and expertise, and disciplinary matters), (xiv) other copyrightable works, (xv) all production methods, processes, technology and trade secrets, and (xvi) all similar and related information in whatever form. Confidential Information will not include any information that has been published (other than a disclosure by the Executive in breach of this Agreement) in a form generally available to the public prior to the date the Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

(c)As used in this Agreement, the term “Work Product” means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable, copyrightable, registerable as a trademark, reduced to writing, or otherwise) which relates to the Company’s or any of its Affiliates’ actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours, whether or not by the use of the facilities of the

13

Company or any of its Affiliates, and whether or not alone or in conjunction with any other person) while employed by the Company or its Affiliates or any predecessors thereof (including those conceived, developed or made prior to the Effective Date) together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. All Work Product that the Executive may have discovered, invented or originated during his or her employment by the Company or any of its Affiliates or any predecessors thereof prior to the Effective Date or that he or she may discover, invent or originate during the Period of Employment, shall be the exclusive property of the Company and its Affiliates, as applicable, and Executive hereby assigns all of Executive’s right, title and interest in and to such Work Product to the Company or its applicable Affiliate, including all intellectual property rights therein. Executive shall promptly disclose all Work Product to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its (or any of its Affiliates’, as applicable) rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s (or any of its Affiliates’, as applicable) rights therein. The Executive hereby appoints the Company as his or her attorney-in-fact to execute on the Executive’s behalf any assignments or other documents deemed necessary by the Company to protect or perfect the Company, the Company’s (and any of its Affiliates’, as applicable) rights to any Work Product.

6.2 Restriction on Competition. During the Executive’s employment with the Company and for a period of one (1) year immediately following the termination of the Executive’s employment for any reason, the Executive shall not within the United States or Canada perform for or on behalf of any Competitor (as defined below), the same or similar services as those that the Executive performed for the Company during the Executive’s employment with the Company. In addition, the Executive shall not, during the Executive’s employment with the Company and for a period of one (1) year immediately following the termination of the Executive’s employment for any reason, within the United States or Canada, engage in, own, operate, or control any Competitor. For purposes of this Agreement, “Competitor” means any person or entity engaged in the business of wholesale, retail or consumer vehicle remarketing activities, including but not limited to vehicle auctions (whole car or salvage), the solicitation and processing of vehicles on behalf of charitable organizations, vehicle titling and registration services (including digital and electronic services), vehicle inspection and claims handling services, title vaulting and title management services, or lien release and loan payoff services within the United States or Canada, provided that the Company (either directly or indirectly through its controlled subsidiaries) is engaged in such businesses.

6.3 Non-Solicitation/Non-Interference. During the Executive’s employment with the Company and for a period of one (1) year immediately following the termination of the Executive’s employment for any reason, the Executive shall not (i) induce or attempt to induce any employee of the Company or any of its Affiliates to leave the

14

employ of the Company or its Affiliates, or in any way interfere with the relationship between the Company and its Affiliates and any employees, or (ii) induce or attempt to induce any customer, client, member, supplier, licensee, licensor or other business relation of the Company or its controlled subsidiaries to cease doing business with the Company or its controlled subsidiaries, or otherwise interfere with the business relationship between the Company or its controlled subsidiaries and any such customer, client, member, supplier, licensee, licensor or business relation.

6.4 Understanding of Covenants. The Executive acknowledges that, in the course of his or her employment with the Company and/or its Affiliates and their predecessors, he has become familiar, or will become familiar, with the Company’s and its Affiliates’ and their predecessors’ trade secrets and with other confidential and proprietary information concerning the Company, its Affiliates and their respective predecessors and that his or her services have been and will be of special, unique and extraordinary value to the Company and its Affiliates. The Executive agrees that the foregoing covenants set forth in this Section 6 (together, the “Restrictive Covenants”) are reasonable and necessary to protect the Company’s and its Affiliates’ trade secrets and other confidential and proprietary information, good will, stable workforce, and customer relations.

Without limiting the generality of the Executive’s agreement in the preceding paragraph, the Executive (i) represents that he or she is familiar with and has carefully considered the Restrictive Covenants, (ii) represents that he or she is fully aware of his or her obligations hereunder, (iii) agrees to the reasonableness of the length of time, scope and geographic coverage, as applicable, of the Restrictive Covenants, (iv) agrees that the Company and its Affiliates currently conduct business throughout the United States and Canada, and (v) agrees that the Restrictive Covenants will continue in effect for the applicable periods set forth above in this Section 6 regardless of whether the Executive is then entitled to receive severance pay or benefits from the Company. The Executive understands that the Restrictive Covenants may limit his or her ability to earn a livelihood in a business similar to the business of the Company and any of its Affiliates, but he or she nevertheless believes that he or she has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder or as described in the recitals hereto to clearly justify such restrictions which, in any event (given his or her education, skills and ability), the Executive does not believe would prevent him or her from otherwise earning a living. The Executive agrees that the Restrictive Covenants do not confer a benefit upon the Company disproportionate to the detriment of the Executive.

6.5 Enforcement. The Executive agrees that the Executive’s services are unique and that he or she has access to Confidential Information and Work Product. Accordingly, without limiting the generality of Section 17, the Executive agrees that a breach by the Executive of any of the covenants in this Section 6 would cause immediate and irreparable harm to the Company that would be difficult or impossible to measure, and that damages to the Company for any such injury would

15

therefore be an inadequate remedy for any such breach. Therefore, the Executive agrees that in the event of any breach or threatened breach of any provision of this Section 6, the Company shall be entitled, in addition to and without limitation upon all other remedies the Company may have under this Agreement, at law or otherwise, to obtain specific performance, injunctive relief and/or other appropriate relief (without posting any bond or deposit) in order to enforce or prevent any violations of the provisions of this Section 6, or require the Executive to account for and pay over to the Company all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions constituting a breach of this Section 6 if and when final judgment of a court of competent jurisdiction or arbitrator, as applicable, is so entered against the Executive. The Executive further agrees that the applicable period of time any Restrictive Covenant is in effect following the Severance Date, as determined pursuant to the foregoing provisions of this Section 6, shall be extended by the same amount of time that Executive is in breach of any Restrictive Covenant following the Severance Date.

7. Withholding Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation. Except for such withholding rights, the Executive is solely responsible for any and all tax liability that may arise with respect to the compensation provided under or pursuant to this Agreement.

8. Successors and Assigns.

(a)    This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b)    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Without limiting the generality of the preceding sentence, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor or assignee, as applicable, which assumes and agrees to perform this Agreement by operation of law or otherwise.

9. Number and Gender; Examples. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders. Where specific language is used to clarify by example a general statement contained herein,

16

such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

10. Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

11. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the state of Illinois, without giving effect to any choice of law or conflicting provision or rule (whether of the state of Illinois or any other jurisdiction) that would cause the laws of any jurisdiction other than the state of Illinois to be applied. In furtherance of the foregoing, the internal law of the state of Illinois will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.

12. Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction or determined by an arbitrator pursuant to Section 16 to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction, and to this end the provisions of this Agreement are declared to be severable; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

13. Entire Agreement. This Agreement embodies the entire agreement of the parties hereto respecting the matters within its scope. This Agreement supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof (including, without limitation, the Prior Employment Agreement). Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein.

17

14. Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

15. Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

16. Arbitration. Except as provided in Sections 6.5 and 17, any non-time barred, legally actionable controversy or claim arising out of or relating to this Agreement, its enforcement, arbitrability or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other non-time barred, legally actionable controversy or claim arising out of or relating to the Executive’s employment or association with the Company or termination of the same, including, without limiting the generality of the foregoing, any alleged violation of state or federal statute, common law or constitution, shall be submitted to individual, final and binding arbitration, to be held in Cook County, Illinois, before a single arbitrator selected from Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in accordance with the then-current JAMS Arbitration Rules and Procedures for employment disputes, as modified by the terms and conditions in this Section (which may be found at www.jamsadr.com under the Rules/Clauses tab). The parties will select the arbitrator by mutual agreement or, if the parties cannot agree, then by striking from a list of qualified arbitrators supplied by JAMS from their labor and employment law panel. Final resolution of any dispute through arbitration may include any remedy or relief that is provided for through any applicable state or federal statutes, or common law. Statutes of limitations shall be the same as would be applicable were the action to be brought in court. The arbitrator selected pursuant to this Agreement may order such discovery as is necessary for a full and fair exploration of the issues and dispute, consistent with the expedited nature of arbitration. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or relief granted by the arbitrator under this Agreement shall be final and binding on the parties to this Agreement and may be enforced by any court of competent jurisdiction. The Company will pay those arbitration costs that are unique to arbitration, including the arbitrator’s fee (recognizing that each side bears its own deposition, witness, expert and attorneys’ fees and other expenses to the same extent as if the matter were being heard in court). If, however, any party prevails on a statutory claim, which affords the prevailing party attorneys’ fees and costs, then the arbitrator may award reasonable fees and costs to the prevailing party. The arbitrator may not award attorneys’ fees to a party that would not otherwise be entitled to such an award under the applicable statute. The arbitrator shall resolve any dispute as to the reasonableness of any fee or cost. Except as provided in Section 6.5 and 17, the parties acknowledge and agree that they are hereby

18

waiving any rights to trial by jury or a court in any action or proceeding brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or the Executive’s employment.

17. Remedies. Each of the parties to this Agreement and any such person or entity granted rights hereunder whether or not such person or entity is a signatory hereto shall be entitled to enforce its rights under this Agreement specifically to recover damages and costs for any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each party may in its sole discretion apply to any court of law or equity of competent jurisdiction for provisional injunctive or equitable relief and/or other appropriate equitable relief (without posting any bond or deposit) in order to enforce or prevent any violations of the provisions of this Agreement. Each party shall be responsible for paying its own attorneys’ fees, costs and other expenses pertaining to any such legal proceeding and enforcement regardless of whether an award or finding or any judgment or verdict thereon is entered against either party.

18. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, transmitted via telecopier, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if transmitted via telecopier, five days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service.

if to the Company:

IAA, Inc.                Two Westbrook Corporate Center, 10^th Floor                Westchester, IL 60154                Attention: Executive Vice President, Chief Legal Officer

if to the Executive, to the address most recently on file in the payroll records of the Company.

19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

19

20. Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he or she has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

21. Section 409A.

(a)    It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (“Code Section 409A”) so as not to subject the Executive to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive. Any installment payments provided for in this Agreement shall be treated as a series of separate payments for purposes of Code Section 409A.

(b)    If the Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s Separation from Service, the Executive shall not be entitled to any payment or benefit pursuant to Section 5.3 until the earlier of (i) the date which is six (6) months after his or her Separation from Service for any reason other than death, or (ii) the date of the Executive’s death. The provisions of this Section 21(b) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable to the Executive upon or in the six (6) month period following the Executive’s Separation from Service that are not so paid by reason of this Section 21(b) shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Executive’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Executive’s death).

(c)    To the extent that any benefits or reimbursements pursuant to this Agreement are taxable to the Executive, any reimbursement payment due to the Executive shall be paid to the Executive on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. The benefits and reimbursements pursuant to this Agreement are not subject to liquidation or exchange for another benefit and the amount of such benefits and reimbursements that the Executive receives in one taxable year shall not affect the amount of such benefits or reimbursements that the Executive receives in any other taxable year.

22. Indemnification; Liability Insurance. The Company agrees to indemnify and hold the Executive harmless against all costs, charges and expenses whatsoever incurred or

20

sustained by the Executive in connection with any action, suit or proceeding to which he or she may be made a party by reason of being or having been a director, officer or employee of the Company or any Affiliate to the fullest extent permitted by applicable laws and the Company’s governing documents, in each case as in effect at the time of the subject act or omission; provided, that in no event shall the Executive’s indemnification rights and rights to advancement of fees and expenses at any time be less favorable than the indemnification rights and rights to advancement of fees and expenses generally available to the officers or directors of the Company. In connection therewith, the Executive shall be entitled to the protection of any insurance policies which the Company elects to maintain generally for the benefit of the Company’s directors and officers, against all costs, charges and expenses whatsoever incurred or sustained by the Executive in connection with any action, suit or proceeding to which he or she may be made a party by reason of being or having been a director, officer or employee of the Company or any Affiliate. This provision shall survive any termination of the Executive’s employment hereunder.

[The remainder of this page has intentionally been left blank.]

21

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the Effective Date.

“COMPANY”

IAA, Inc.,

a Delaware corporation

By:

Name:

Title:

“EXECUTIVE”

[Name]

22

EX-10.7

Exhibit 10.7

IAA, INC.

2019 OMNIBUS STOCK AND INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

This Non-Qualified Stock Option Award Agreement (this “Award Agreement”), dated as of [●], 2019 (the “Date of Grant”), is made by and between IAA, Inc., a Delaware corporation (the “Company”), and[●] (the “Recipient”). Any capitalized term that is used but not defined in this Award Agreement shall have the meaning ascribed to such term in the IAA, Inc. 2019 Omnibus Stock and Incentive Plan (as may be amended from time to time, the “Plan”).

1.Grant of Stock Option. The Company hereby grants to the Recipient an option to purchase [●] shares of Common Stock at an Exercise Price of $[●] per share, which is not less than the Fair Market Value per share of the Common Stock on the Date of Grant (the “Option”), subject to all of the terms and conditions of this Award Agreement and the Plan.

2.Vesting.

(a)The shares of Common Stock subject to the Option shall vest and become exercisable in equal installments on each of the first three anniversaries of the Date of Grant (each, a “Vesting Date”); provided that the Recipient remains in continuous employment with the Company or an Affiliate thereof through, and has not given or received a notice of termination of such employment as of, the Vesting Date.

(b)If the Recipient experiences a termination of employment with the Company and its Affiliates on account of the Recipient’s death or Disability, then all unvested Options outstanding as of the date of such termination of employment shall immediately vest in full immediately upon the date of such termination of employment.

(c)If there is a Change in Control, unvested Options shall be eligible to become vested pursuant to the terms set forth in Section 11 of the Plan.

(d)If the Recipient is party to an individual employment or severance agreement with the Company or an Affiliate that provides for accelerated vesting in connection with certain qualifying terminations of employment, unvested Options shall vest upon the date of such qualifying termination of employment in accordance with the terms of such employment or severance agreement.

(e)If the Recipient’s employment is terminated for any reason other than those set forth in this Section 2 prior to any applicable Vesting Date, (i) all rights of the Recipient with respect to Options that have not vested shall immediately terminate, (ii) any such unvested Options shall be forfeited without payment of any consideration, and (iii) neither the Recipient nor any of the Recipient’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such unvested Options.

3.    Timing of Exercise. Following the vesting of the Option as set forth in Section 2 hereof, the Recipient may exercise all or any portion of such Option at any time prior to the earliest to occur of:

(a) The 10th anniversary of the Date of Grant;

(b)The 1st anniversary of the Recipient's termination of employment by reason of the Recipient's death, Disability, Retirement or Early Retirement;

(c)The close of business on the last business day immediately prior to the date of the Recipient's termination of employment by the Company for Cause; and

(d)90 days following the Recipient's termination of employment with the Company and its Affiliates for any reason other than as set forth in Section 3(b) or 3(c); provided, that in the event that the Recipient dies after terminating his or her employment, but within the period during which the Options would otherwise be exercisable hereunder, such ninety (90) day period shall be extended to the date that is the 1st anniversary of such termination.

The Administrator may at any time extend the post-termination exercise period of all or any portion of the Options up to and including, but not beyond, the 10th anniversary of the Date of Grant of such Options. For purposes of this Award Agreement, “Early Retirement” shall mean the Recipient’s voluntary termination of employment after attaining a combination of years of age and service with the Company and its Affiliates of at least 70, with a minimum age of 60; provided, that, notwithstanding any language to the contrary in the Plan, the Recipient’s years of service with a company prior to it becoming an Affiliate will qualify as service towards attainment of Early Retirement if and only if the Recipient has provided at least five years of service with the Company or another company that was an Affiliate at the time of service

4.    Method of Exercise. The Recipient may exercise all or any portion of the Option by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased, accompanied by payment in full of the aggregate exercise price of the shares of Common Stock so purchased in cash or its equivalent. Payment of the aggregate exercise price of such shares of Common Stock may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator (including the withholding of shares of Common Stock otherwise issuable upon exercise), (ii) in the form of unrestricted shares of Common Stock already owned by the Recipient which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Common Stock with respect to which the Option is being exercised, (iii) any other form of consideration approved by the Administrator and (iv) any combination of the foregoing.

5.    Rights as Shareholder. The Recipient shall have no rights to dividends or any other rights of a shareholder with respect to the Shares subject to the Option until the Recipient has given written notice of the exercise thereof, has paid in full for such Shares and has satisfied the tax withholding obligations in Section 7 below.

6.    No Guarantee of Employment. Nothing in this Award Agreement shall interfere with or limit in any way the right of the Company or any Affiliate to terminate the Recipient’s employment at any time, or confer upon the Recipient any right to continue in the employ of the Company or any Affiliate.

7.    Tax Withholding. The Company shall be entitled to require a cash payment by or on behalf of the Recipient and/or to deduct from the shares of Common Stock otherwise issuable hereunder or other compensation payable to the Recipient the amount of any federal, state or local withholding taxes in respect of the Option, its exercise or any payment or transfer under or with respect to the Option, in each case in accordance with the terms of the Plan.

8.    Adjustment in Capitalization. In the event of any Change in Capitalization, the Option shall be subject to adjustment as set forth in Section 5 of the Plan.

9.    Restrictions. Unless otherwise determined by the Administrator, the Option may be exercised, during the lifetime of the Recipient, only by the Recipient or, during any period during which the Recipient is under a legal disability, by the Recipient’s guardian or legal representative.

10.    Amendment. The Administrator may at any time amend, modify or terminate this Award Agreement; provided, however, that no such action of the Administrator shall adversely affect the Recipient’s rights under this Award Agreement without the consent of the Recipient. The Administrator, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Award Agreement so that the Option qualifies for exemption from or complies with Code Section 409A; provided, however, that the Administrator and the Company make no representations that the Option shall be exempt from or comply with Code Section 409A and make no undertaking to preclude Code Section 409A from applying to the Option.

11.    Plan Terms and Administrator Authority. This Award Agreement and the rights of the Recipient hereunder are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, as well as to such policies, rules and regulations as the Administrator may adopt for administration of the Plan, including but not limited to any stock ownership and stock holding guidelines. It is expressly understood that the Administrator is authorized to administer, construe and make all determinations necessary or appropriate for the administration of the Plan and this Award Agreement, all of which shall be binding upon the Recipient. Any inconsistency between this Award Agreement and the Plan shall be resolved in favor of the Plan. The Recipient hereby acknowledges receipt of a copy of the Plan and this Agreement.

12.    Severability. If any provision of this Award Agreement is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or the Award Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Board’s determination, materially altering the intent of the Plan or the Award Agreement, such provision shall be stricken as to such

jurisdiction or person, and the remainder of the Award Agreement shall remain in full force and effect.

13.    Governing Law and Jurisdiction. The Plan and this Award Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, United States of America. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan will be exclusively in the courts in the State of Illinois, County of Cook, United States of America, including the Federal Courts located therein (should Federal jurisdiction exist).

14.    Successors. All obligations of the Company under this Award Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger, consolidation or otherwise.

15.    Erroneously Awarded Compensation. This Option shall be subject to any compensation recovery policy adopted by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governances practices, as such policy may be amended from time to time.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company and the Recipient have duly executed this Award Agreement as of the date first above written.

IAA, INC.

By:
Name:
Title:

RECIPIENT

Name

[Signature Page to Non-Qualified Stock Option Award Agreement]

EX-10.8

Exhibit 10.8

IAA Inc.

2019 OMNIBUS STOCK AND INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

[2019] AWARD

THIS AGREEMENT (the “Agreement”) is made between IAA, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Recipient”) pursuant to the IAA, Inc. 2019 Omnibus Stock and Incentive Plan, as amended (the “Plan”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Plan. The parties hereto agree as follows:

1.    Grant of Restricted Stock Units. The Company hereby grants to the Recipient [_______] Restricted Stock Units (the “Award”) as of [___________], (the “Grant Date”), subject to the terms and conditions of the Plan and this Agreement. The Restricted Stock Units shall vest pursuant to the terms of this Agreement. A “Restricted Stock Unit” is an “Other Share-Based Award” under the Plan and each Restricted Stock Unit entitles the Recipient to a share of Common Stock upon vesting subject to the terms of this Agreement.

2.    Restrictions. The Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, whether voluntarily or involuntarily or by operation of law. The Recipient shall have no rights in the Common Stock underlying the Restricted Stock Units until the Award vests as described in Section 4 below or as otherwise provided in the Plan or this Agreement. The Recipient shall not have any voting rights with respect to the Restricted Stock Units.

3.    Restricted Stock Unit Account. The Company shall maintain an account (the “Restricted Stock Unit Account” or “Account”) on its books in the name of the Recipient, which shall reflect the number of Restricted Stock Units awarded to the Recipient.

4.    Period of Restriction. Subject to the Recipient’s continuous employment with the Company through the following dates and the other provisions of the Plan and this Agreement, unless vested or forfeited earlier as described in Section 5 or 6 of this Agreement, as applicable, (i) one-third (1/3) of the Award shall become vested on the first anniversary of the Grant Date, (ii) an additional one-third (1/3) of the Award shall become vested on the second anniversary of the Grant Date and (iii) the final one-third (1/3) of the Award shall become vested on the third anniversary of the Grant Date.

Upon vesting, all vested Restricted Stock Units shall cease to be considered Restricted Stock Units, subject to the terms and conditions of the Plan and this Agreement, and the Recipient shall be entitled to receive one share of Common Stock for each vested Restricted Stock Unit in the Recipient’s Restricted Stock Unit Account. Such shares of Common Stock shall be paid to the Recipient as soon as practicable after the vesting date, but in no event later than sixty (60) days following that date on which the applicable shares became vested.

5.    Termination of Employment.

(a)    If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates on account of the Recipient’s death or Disability, then all unvested Restricted Stock Units outstanding as of the date of such termination of employment shall immediately vest in full immediately upon the date of such termination of employment.

(b)    If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates by reason of the Recipient’s Retirement or Early Retirement Date (as defined below), then all unvested Restricted Stock Units that would have vested in the 12 months following his or her termination date will immediately vest upon such Retirement or Early Retirement Date, with (1) all Restricted Stock Units vesting that were scheduled to vest on the first anniversary of the Grant Date occurring in such 12 month period and (2) a pro rata amount of the Restricted Stock Units vesting that were scheduled to vest on the next anniversary of the Grant Date occurring thereafter (if any), equal to (A) the total number of unvested Restricted Stock Units that would have vested on such anniversary of the Grant Date, multiplied by (B) a fraction, the numerator of which is the number of full calendar months after the anniversary of the Grant Date described in (1) above, once the additional 12 months of post-termination vesting credit has been applied, and the denominator of which is 12. For purposes of clarity and as an example of the application of the additional 12 months of vesting credit described above, if a Recipient terminates employment by reason of Retirement or an Early Retirement Date 18 months after the Grant Date, the Recipient will immediately vest in (i) the Restricted Stock Units scheduled to vest on the 2^nd anniversary of the Grant Date and (ii) 6/12 (or ½) of the Restricted Stock Units scheduled to vest on the 3^rd anniversary of the Grant Date. The Recipient’s “Early Retirement Date” is the date of his or her voluntary termination of employment after attaining a combination of years of age and service with the Company and its Affiliates of at least 70, with a minimum age of 60; provided, that, notwithstanding any language to the contrary in the Plan, the Recipient’s years of service with a company prior to it becoming an Affiliate will qualify as service towards attainment of an Early Retirement Date if and only if the Recipient has provided at least five years of service with the Company or another company that was an Affiliate at the time of service.

(c)     If, from the Grant Date until the third anniversary of the Grant Date, the Recipient experiences a termination of employment with the Company and its Affiliates for any reason other those set forth in Section 5(a) and 5(b) above or Section 6 below, then the Recipient shall forfeit any unvested Restricted Stock Units outstanding as of the date of such termination of employment.

6.    Vesting upon Change in Control. Upon a Change in Control (determined without regard to whether such event is a “change in control event” with respect to the Company for purposes of Code Section 409A(a)(2)(A)(v)) occurring from the Grant Date until the third anniversary of the Grant Date and prior to the Recipient’s termination of employment with the Company and its Affiliates, all unvested Restricted Stock Units may be assumed or replaced by the Company or its successor with a substantially similar equity or cash incentive award and the same vesting terms as the unvested Restricted Stock Units. If such unvested Restricted Stock Units are assumed or replaced in such a Change in Control and the Recipient’s employment with the Company or its successor is terminated without Cause or by the Recipient for Good Reason (as

2

defined in the Recipient’s employment agreement with the Company, to the extent applicable) prior to the third anniversary of the Grant Date, the assumed or replaced award shall become fully vested on the date of such termination of employment and shall be paid to Recipient as soon as administratively feasible thereafter (but in no event later than sixty (60) days following the date that such termination of employment occurs). To the extent any unvested Restricted Stock Units are not assumed or replaced by the Company or its successor upon such a Change in Control as set forth above, then such unvested Restricted Stock Units shall immediately become vested on the date of such Change in Control and shall be paid to the Recipient as soon as administratively feasible thereafter (but in no event later than sixty (60) days following the date that such Change in Control occurs). Notwithstanding the prior sentence, to the extent that the Recipient is a “Deferred Compensation Recipient” (as defined below), then (a) if such Change in Control is not a “change in control event” with respect to the Company for purposes of Code Section 409A(a)(2)(A)(v), then the Restricted Stock Units that vest in accordance with the previous sentence shall not be paid as described in the immediately preceding sentence, and shall instead be paid upon the earlier of (i) at the first available subsequent payment date described in this Agreement, determined as though such Recipient’s employment with the Company or its Affiliates continued until that time, or (ii) within sixty (60) days following the Recipient’s “separation from service” within the meaning of Code Section 409A, or (b) if such Change in Control is a “change in control event” with respect to the Company for purposes of Code Section 409A(a)(2)(A)(v), that any Restricted Stock Units that are no longer subject to a “substantial risk of forfeiture” for purposes of Code Section 409A shall be paid as soon as administratively feasible thereafter (but in no event later than sixty (60) days following the date that such Change in Control occurs). For purposes of this Agreement, “Deferred Compensation Recipient” means a Recipient, as determined on the Grant Date, who (a) is or will become eligible for Retirement or reach his or her Retirement Eligibility Date at a time when the attainment of such status will result in the Restricted Stock Units being treated as “nonqualified deferred compensation” for purposes of Code Section 409A, or (b) otherwise is entitled to special vesting terms such that the Restricted Stock Units will be treated as “nonqualified deferred compensation” for purposes of Code Section 409A.

7.    Adjustment in Capitalization. In the event of any change in the Common Stock through stock dividends or stock splits, a corporate split-off or split-up, or recapitalization, merger, consolidation, exchange of shares, or a similar event, the number of Restricted Stock Units subject to this Agreement shall be equitably adjusted by the Committee.

8.    Delivery of Stock Certificates. Subject to the requirements of Sections 9 and 10 below, the Company may, if applicable, cause to be issued and delivered to a brokerage account for the benefit of the Recipient certificates or electronic book entry credit for the shares of Common Stock that correspond to the vested Restricted Stock Units.

9.    Tax Withholding. Whenever Common Stock is to be issued, a payment is to be made, or any other vesting or payment event occurs under this Agreement, the Company or any Subsidiary shall withhold, or, with the consent of the Committee, require the Recipient to remit to the Company or such Subsidiary, an amount sufficient to satisfy the federal, state, and local withholding tax requirements relating to such transaction, and the Company or such Subsidiary may defer any payment or issuance of Common Stock until such requirements are satisfied; provided that the amount of any such withholding shall not exceed the maximum statutory withholding rate applicable with respect to the Recipient.

3

10.    Securities Laws. This Award is a private offer that may be accepted only by a Recipient who satisfies the eligibility requirements outlined in the Plan and the Committee’s administrative procedures. The future value of Common Stock acquired under the Plan is unknown and could increase or decrease.

Neither the Plan nor any offering materials related to the Plan may be distributed to the public. The Common Stock should be resold only on the New York Stock Exchange and should not be resold to the public except in full compliance with local securities laws.

11.    No Guarantee of Employment. Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Recipient’s employment at any time, or confer upon the Recipient any right to continue in the employ of the Company or any Subsidiary.

12.    Compliance with Code Section 409A. Notwithstanding any provision of the Plan or this Agreement to the contrary, the Award is intended to be exempt from or, in the alternative, comply with Code Section 409A and the interpretive guidance thereunder, including the exceptions for stock rights and short-term deferrals. The Plan and the Agreement will be construed and interpreted in accordance with such intent. References in the Plan and this Agreement to “termination of employment” and similar terms shall mean a “separation from service” within the meaning of that term under Code Section 409A. Any payment or distribution that is to be made to a Recipient who is a “specified employee” of the Company within the meaning of that term under Code Section 409A and as determined by the Committee, on account of a “separation from service” under Code Section 409A, may not be made before the date which is six months after the date of such “separation from service,” unless the payment or distribution is exempt from the application of Code Section 409A by reason of the short-term deferral exemption or otherwise.

13.    Dividend Equivalents. If the Company declares a cash dividend on its shares, then, on the payment date of the dividend, the Recipient will be credited with dividend equivalents equal to the amount of cash dividend per share multiplied by the number of Restricted Stock Units credited to the Recipient through the record date. The dollar amount credited to the Recipient under the preceding sentence will be credited to an account (“Dividend Account”) established for the Recipient for bookkeeping purposes only on the books of the Company. The amounts credited to the Dividend Account will be credited as of the last day of each calendar quarter with interest, compounded quarterly, until the amount credited to the Dividend Account is paid to the Recipient. The rate of interest credited under the previous sentence will be the prime rate of interest as reported by the Wall Street Journal at the close of business of each calendar quarter. The balance in the Dividend Account will be subject to the same terms regarding vesting and forfeiture as the Recipient’s Restricted Stock Units awarded under the accompanying letter and this document, and will be paid in cash in a single sum at the time that the shares of Common Stock associated with the Recipient’s Restricted Stock Units are delivered (or forfeited at the time that the Recipient’s Restricted Stock Units are forfeited).

14.    No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered under this Agreement. The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares of Common Stock or whether such fractional shares of Common Stock or any rights thereto shall be forfeited or otherwise eliminated.

4

15.    Amendment. The Committee may at any time amend, modify or terminate this Agreement; provided, however, that no such action of the Committeeshall adversely affect the Recipient’s rights under this Agreementwithout the consent of the Recipient. The Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Agreement so that the Award qualifies for exemption from or complies with Code Section 409A; provided, however, that the Committee and the Company make no representations that the Award shall be exempt from or comply with Code Section 409A and make no undertaking to preclude Code Section 409A from applying to the Award.

16.    Plan Terms and Committee Authority. This Agreement and the rights of the Recipient hereunder are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, as well as to such policies, rules and regulations as the Committee may adopt for administration of the Plan, including but not limited to any stock ownership and stock holding guidelines. It is expressly understood that the Committee is authorized to administer, construe and make all determinations necessary or appropriate for the administration of the Plan and this Agreement, all of which shall be binding upon the Recipient. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan. The Recipient hereby acknowledges receipt of a copy of the Plan and this Agreement.

17.    Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or the Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Board’s determination, materially altering the intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or person, and the remainder of the Agreement shall remain in full force and effect.

18.    Governing Law and Jurisdiction. The Plan and this Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, United States of America. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan will be exclusively in the courts in the State of Indiana, County of Hamilton, United States of America, including the Federal Courts located therein (should Federal jurisdiction exist).

19.    Successors. All obligations of the Company under this Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger, consolidation or otherwise.

20.Erroneously Awarded Compensation. This Award shall be subject to any compensation recovery policy adopted by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governances practices, as such policy may be amended from time to time.

[signature page follows]

5

IN WITNESS WHEREOF, the Recipient and the Company have executed this Agreement as of this ___ day of [________].

_______________________________	IAA, INC. By: _______________________________
[NAME]	Its: _______________________________

6

EX-10.9

Exhibit 10.9

IAA, Inc.

2019 OMNIBUS STOCK AND INCENTIVE PLAN

PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

[2019] AWARD

THIS AGREEMENT (the “Agreement”) is made between IAA, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Recipient”) pursuant to the IAA, Inc. 2019 Omnibus Stock and Incentive Plan (the “Plan”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Plan. The parties hereto agree as follows:

1.    Grant of Restricted Stock Units. The Company hereby grants to the Recipient a target number of [_______] Restricted Stock Units (the “Award”) as of [___________], subject to the terms and conditions of the Plan and this Agreement. The Restricted Stock Units shall vest based on the Company’s performance during the “Period of Restriction,” as specified in Section 4 and pursuant to the terms of this Agreement. A “Restricted Stock Unit” is an “Other Share-Based Award” under the Plan and each Restricted Stock Unit entitles the Recipient to a share of Common Stock upon vesting subject to the terms of this Agreement.

2.    Restrictions. The Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, whether voluntarily or involuntarily or by operation of law. The Recipient shall have no rights in the Common Stock underlying the Restricted Stock Units until the termination of the Period of Restriction specified in Section 4 below or as otherwise provided in the Plan or this Agreement. The Recipient shall not have any voting rights with respect to the Restricted Stock Units.

3.    Restricted Stock Unit Account. The Company shall maintain an account (the “Restricted Stock Unit Account” or “Account”) on its books in the name of the Recipient, which shall reflect the number of Restricted Stock Units awarded to the Recipient.

4.    Period of Restriction. Subject to the provisions of the Plan and this Agreement, unless vested or forfeited earlier as described in Section 5 and 6 of this Agreement, as applicable, the number of Restricted Stock Units that shall become vested shall be calculated in accordance with the chart below, based on the Company’s [PERFORMANCE METRIC] for the “Measurement Period,” calculated as of the “Measurement Date” (each as defined below). If the Company’s [PERFORMANCE METRIC] falls between Threshold and Target or between Target and Maximum levels of performance, the number of Restricted Stock Units that vest shall be calculated using straight-line interpolation. Such vesting shall occur upon certification by the Committee that the applicable performance criteria have been met.

[Performance Metric] During the Measurement Period	Number of Restricted Stock Units Vesting
Below Threshold: Below $[____]	0
Threshold: $[____]	[0.5x]
Target: $[____]	[x]
Maximum: Greater than or equal to $[____]	[2x]

x = [Target number of Restricted Stock Units]

[PERFORMANCE METRIC] means []

“Measurement Period” shall mean the period commencing on [] and ending on the Measurement Date.

“Measurement Date” shall mean [].

Upon vesting, all vested Restricted Stock Units shall cease to be considered Restricted Stock Units, subject to the terms and conditions of the Plan and this Agreement, and the Recipient shall be entitled to receive one share of Common Stock for each vested Restricted Stock Unit in the Recipient’s Restricted Stock Unit Account.

5.    Termination of Employment.

(a)     If, from January 1, [] until the “Payment Date” (as defined in Section 8), the Recipient experiences a termination of employment by the Company and its Affiliates by reason of Disability or death, then the Recipient shall be entitled to receive, on the Payment Date, all shares of Common Stock the Recipient would have been entitled to under Section 4 if he or she had remained employed until the last day of the Period of Restriction (based on actual performance during the Period of Restriction, as described in Section 4).

(b)    If, from January 1, [] until the “Payment Date” (as defined in Section 8), the Recipient experiences a termination of employment with the Company and its Affiliates by reason of Retirement or Early Retirement Date (as defined below), then the Recipient shall be entitled to receive, on the Payment Date, a number of shares of Common Stock the Recipient would have been entitled to under Section 4 if he or she had remained employed until the last day of the Period of Restriction (based on actual performance during the Period of Restriction, as described in Section 4) multiplied by a fraction, the numerator of which shall be the number of full calendar

months during the period from January 1, [] through the date the Recipient’s employment terminated plus 12 (provided the numerator shall in no event exceed 36) and the denominator of which shall

2

be 36, the total number of months in the Period of Restriction. The Recipient’s “Early Retirement Date” is the date of his or her voluntary termination of employment after attaining a combination of years of age and service with the Company and its Affiliates of at least 70, with a minimum age of 60; provided, that, notwithstanding any language to the contrary in the Plan, the Recipient’s years of service with a company prior to it becoming an Affiliate will qualify as service towards attainment of an Early Retirement Date if and only if the Recipient has provided at least five years of service with the Company or another company that was an Affiliate at the time of service.

(c)     Prior to a Change in Control, if, from January 1, [] until the “Payment Date” (as defined in Section 8), the Recipient experiences a termination of employment with the Company and its Affiliates by the Company without Cause or by the Recipient for Good Reason (as defined in the Recipient’s employment agreement with the Company, to the extent applicable), then the Recipient shall be entitled to receive, on the Payment Date, a number of shares of Common Stock the Recipient would have been entitled to under Section 4 if he or she had remained employed until the last day of the Period of Restriction (based on actual performance during the Period of Restriction, as described in Section 4) multiplied by a fraction, the numerator of which shall be the number of full calendar months during the period from January 1, [] through the date the Recipient’s employment terminated and the denominator of which shall be 36, the total number of months in the Period of Restriction.

(d)    If, from January 1, [] until the “Payment Date” (as defined in Section 8), the Recipient experiences a termination of employment with the Company and its Affiliates for any reason other than those set forth in Sections 5(a), 5(b) or 5(c) above or Section 6 below, then the Recipient shall forfeit any Restricted Stock Units that are subject to the Period of Restriction on the date of such termination of employment.

6.    Vesting upon Change in Control. Upon a Change in Control occurring during the Measurement Period and prior to the Recipient’s termination of employment with the Company and its Affiliates, the Restricted Stock Units may be assumed or replaced by the Company or its successor for a substantially similar equity or cash incentive award that (i) is based on the Target number of Restricted Stock Units and (ii) will be subject only to service-based vesting through a date not later than the Measurement Date. If such Restricted Stock Units are assumed or replaced in a Change in Control and the Recipient’s employment with the Company or its successor is terminated without Cause or by the Recipient for Good Reason (as defined in the Recipient’s employment agreement with the Company, to the extent applicable) prior to the Measurement Date, the assumed or replaced award shall become fully vested based on the Target level of performance on the date of such termination of employment and shall be paid to Recipient as soon as administratively feasible thereafter (but in no event later than March 15 of the year following the year in which the such termination of employment occurs). To the extent any Restricted Stock Units are not assumed or replaced by the Company or its successor upon a Change in Control as set forth above (including any Restricted Stock Units that remain outstanding under Sections 5(b) and 5(c)), or the Recipient’s employment is terminated without cause effective as of the consummation of such Change in Control, then the Target number of Restricted Stock Units shall become immediately vested on the date of such Change in Control and shall be paid to the

3

Recipient as soon as administratively feasible thereafter (but in no event later than March 15 of the year following the year in which such Change in Control occurs).

7.    Adjustment in Capitalization. In the event of any change in the Common Stock through stock dividends or stock splits, a corporate split-off or split-up, or recapitalization, merger, consolidation, exchange of shares, or a similar event, the number of Restricted Stock Units subject to this Agreement shall be equitably adjusted by the Committee.

8.    Delivery of Stock Certificates. Subject to the requirements of Sections 9 and 10 below, as promptly as practicable after the Committee certifies that Restricted Stock Units ceased to be subject to the Period of Restriction in accordance with this Agreement, but in no event later than March 15 of the year following the year in which the shares became vested (the “Payment Date”), the Company may, if applicable, cause to be issued and delivered to a brokerage account for the benefit of the Recipient certificates or electronic book entry credit for the shares of Common Stock that correspond to the vested Restricted Stock Units.

9.    Tax Withholding. Whenever Common Stock is to be issued, a payment is to be made, or any other vesting or payment event occurs under this Agreement, the Company or any Subsidiary shall withhold, or, with the consent of the Committee, require the Recipient to remit to the Company or such Subsidiary, an amount sufficient to satisfy the federal, state, and local withholding tax requirements relating to such transaction, and the Company or such Subsidiary may defer any payment or issuance of Common Stock until such requirements are satisfied; provided that the amount of any such withholding shall not exceed the maximum statutory withholding rate applicable with respect to the Recipient.

10.    Securities Laws. This Award is a private offer that may be accepted only by a Recipient who satisfies the eligibility requirements outlined in the Plan and the Committee’s administrative procedures. The future value of Common Stock acquired under the Plan is unknown and could increase or decrease.

Neither the Plan nor any offering materials related to the Plan may be distributed to the public. The Common Stock should be resold only on the New York Stock Exchange and should not be resold to the public except in full compliance with local securities laws.

11.    No Guarantee of Employment. Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Recipient’s employment at any time, or confer upon the Recipient any right to continue in the employ of the Company or any Subsidiary.

12.    Compliance with Code Section 409A. Notwithstanding any provision of the Plan or this Agreement to the contrary, the Award is intended to be exempt from or, in the alternative, comply with Code Section 409A and the interpretive guidance thereunder, including the exceptions for stock rights and short-term deferrals. The Plan and the Agreement will be construed and interpreted in accordance with such intent. References in the Plan and this Agreement to “termination of employment” and similar terms shall mean a “separation from service” within the meaning of that term under Code Section 409A. Any payment or distribution that is to be made to a Recipient who is a “specified employee” of the Company within the meaning of that term

4

under Code Section 409A and as determined by the Committee, on account of a “separation from service” under Code Section 409A, may not be made before the date which is six months after the date of such “separation from service,” unless the payment or distribution is exempt from the application of Code Section 409A by reason of the short-term deferral exemption or otherwise.

13.    Dividend Equivalents. The Recipient will accrue dividend equivalents with respect to the Award. Dividend equivalents represent the right to receive additional shares of Common Stock in the future, subject to the terms and conditions of this Agreement. Dividend equivalents will be determined based on the dividends that the Recipient would have received, had the Recipient held shares of Common Stock equal to the vested number of Restricted Stock Units from January 1, [] until the earlier to occur of the Payment Date or the date of a Change in Control, and assuming that the dividends were reinvested in Common Stock (and any dividends on such shares were reinvested in Common Stock). The dividend equivalents will be subject to the same transfer restrictions and forfeiture and vesting conditions as specified in this Agreement.

14.    No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered under this Agreement. The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares of Common Stock or whether such fractional shares of Common Stock or any rights thereto shall be forfeited or otherwise eliminated.

15.    Amendment. The Committee may at any time amend, modify or terminate this Agreement; provided, however, that no such action of the Committeeshall adversely affect the Recipient’s rights under this Agreementwithout the consent of the Recipient. The Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Agreement so that the Award qualifies for exemption from or complies with Code Section 409A; provided, however, that the Committee and the Company make no representations that the Award shall be exempt from or comply with Code Section 409A and make no undertaking to preclude Code Section 409A from applying to the Award.

16.    Plan Terms and Committee Authority. This Agreement and the rights of the Recipient hereunder are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, as well as to such policies, rules and regulations as the Committee may adopt for administration of the Plan, including but not limited to any stock ownership and stock holding guidelines. It is expressly understood that the Committee is authorized to administer, construe and make all determinations necessary or appropriate for the administration of the Plan and this Agreement, all of which shall be binding upon the Recipient. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan. The Recipient hereby acknowledges receipt of a copy of the Plan and this Agreement.

17.    Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or the Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Board’s determination, materially altering the intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or person, and the remainder of the Agreement shall remain in full force and effect.

5

18.    Governing Law and Jurisdiction. The Plan and this Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, United States of America. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan will be exclusively in the courts in the State of Indiana, County of Hamilton, United States of America, including the Federal Courts located therein (should Federal jurisdiction exist).

19.    Successors. All obligations of the Company under this Agreement will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business or assets of the Company or both, or a merger, consolidation or otherwise.

20.Erroneously Awarded Compensation. This Award shall be subject to any compensation recovery policy adopted by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governances practices, as such policy may be amended from time to time.

[signature page follows]

6

IN WITNESS WHEREOF, the Recipient and the Company have executed this Agreement as of this ___ day of ________, [].

_______________________________	IAA, INC. By: _______________________________
[NAME]	Its: _______________________________

7

EX-10.10

Exhibit 10.10

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of [_______], 20[__] by and between IAA, Inc., a Delaware corporation (the “Company”), and [_______] (“Indemnitee”). This Agreement supersedes and replaces any and all previous Agreements between the Company and Indemnitee covering the subject matter of this Agreement.

RECITALS

WHEREAS, Indemnitee is [a director][an officer] of the Company;

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and the Amended and Restated Bylaws (the “Bylaws” and, together with the Certificate of Incorporation, the “Organizational Documents”) require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”). The Organizational Documents and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification may increase the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the Organizational Documents and any resolutions adopted pursuant thereto, as well as any rights of Indemnitees under any directors’ and officers’ liability insurance policy, and this Agreement shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Organizational Documents and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer or director without adequate protection, and the Company desires Indemnitee

to serve or continue to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1.’’Definitions. As used in this Agreement:

(a)References to “agent” shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

(b)A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

i.Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the ’Company’s then outstanding securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

ii.Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(b)(i), 1(b)(iii) or 1(b)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

iii.Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity) more than 50% of the combined voting power of the voting securities of the Surviving Entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such Surviving Entity;

iv.Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

v.Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any

-2-

similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

For purposes of this Section 1(b), the following terms shall have the following meanings:

(A)    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(B)    “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(C)    “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

(D)    “Surviving Entity” shall mean the surviving entity in a merger or consolidation or any entity that controls, directly or indirectly, such surviving entity.

(c)“Corporate Status” describes the status of a person who is or was a director, trustee, partner, managing member, officer, employee, agent or fiduciary of the Company or of any other corporation, limited liability company, partnership or joint venture, trust or other enterprise which such person is or was serving at the request of the Company.

(d)“Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e)“Enterprise” shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, employee, agent or fiduciary.

(f)“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and other costs of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements, obligations or expenses of the types customarily incurred in connection with, or as a result of, prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a deponent or witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i)Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, (ii) expenses

-3-

incurred in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement or Expenses or insurance recovery, as the case may be, and (iii) for purposes of Section 13(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, the Organizational Documents or under any directors’ and officers’ liability insurance policies maintained by the Company, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable in the good faith judgment of such counsel shall be presumed conclusively to be reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g)“Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(h)The term “Proceeding” shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, regulatory or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a Proceeding, this shall be considered a Proceeding under this paragraph.

(i)Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

Section 2.Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to

-4-

or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Organizational Documents, vote of the Company’s stockholders or disinterested directors or applicable law.

Section 3.Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court (as hereinafter defined) or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 4.Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 5.Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness, is or was made (or asked) to respond to discovery requests in any Proceeding, or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 6.Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for

-5-

the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 7.Additional Indemnification.

(a)Notwithstanding any limitation in Sections 2, 3, or 4, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) by reason of Indemnitee’s Corporate Status.

(b)For purposes of Section 7(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

i.to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and

ii.to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 8.Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim involving Indemnitee:

(a)for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b)for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 15(b) of the Exchange Act (as defined in Section 1(b) hereof) or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(c)except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) such payment arises in connection with any mandatory counterclaim or cross claim brought or raised by Indemnitee in any Proceeding (or any part of any Proceeding), or (iii) the Company provides

-6-

the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 9.Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section 13(d)), the Company shall advance, to the extent not prohibited by law, the Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the prior approval of the Board as provided in Section 8(c), and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 13(d), advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) by the Company pursuant to Section 9, if and only to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8.

Section 10.Procedure for Notification and Defense of Claim.

(a)Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b)The Company will be entitled to participate in the Proceeding at its own expense.

(c)    The Company shall not settle any Proceeding (in whole or in part) if such settlement would impose any Expense, judgment, liability, fine, penalty or limitation on Indemnitee in respect of which Indemnitee is not entitled to be indemnified hereunder without Indemnitee’s prior written consent, which shall not be unreasonably withheld.

Section 11.Procedure Upon Application for Indemnification.

(a)Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be

-7-

made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by or on behalf of Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.

(b)In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section10(a) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

-8-

(c)If the Company disputes a portion of the amounts for which indemnification is requested, the undisputed portion shall be paid and only the disputed portion withheld pending resolution of any such dispute.

Section 12.Presumptions and Effect of Certain Proceedings.

(a)In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b)Subject to Section 13(e), if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 11(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.

(c)The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolocontendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

-9-

(d)For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Enterprise. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e)The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 13.Remedies of Indemnitee.

(a)Subject to Section 13(e), in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 4, 5 or 6 or the second to last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 2, 3 or 7 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a denovo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c)If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

-10-

(d)The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by or on behalf of Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(e)Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

Section 14.Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a)The rights of indemnification and to receive advancement of Expenses as provided by this Agreement (i) shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Organizational Documents, any agreement, a vote of stockholders or a resolution of directors, or otherwise and (ii) shall be interpreted independently of, and without reference to, any other such rights to which Indemnitee may at any time be entitled. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Organizational Documents and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such

-11-

insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c)In the event of any payment made by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d)The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.    

(e)The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust or other enterprise.

Section 15.Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as an officer or director or, at the request of the Company, as a director, officer, trustee, partner, managing member, employee, agent or fiduciary of another Enterprise or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding (including any appeal thereof) commenced by Indemnitee pursuant to Section 13 of this Agreement relating thereto. The indemnification and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives. The Company shall require and shall cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to, by written agreement, expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

Section 16.Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this

-12-

Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 17.Enforcement.

(a)The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of the Company.

(b)This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Organizational Documents, any directors’ and officers’ insurance maintained by the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

Section 18.Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

Section 19.Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 20.Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a)If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b)If to the Company to

        IAA, Inc.

Attn: [___________]

Two Westbrook Corporate Center, Suite 500

Westchester, Illinois 60154

or to any other address as may have been furnished to Indemnitee by the Company.

-13-

Section 21.Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 22.Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Court of Chancery of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably The Corporation Service Company, 160 Greentree Drive, Suite 101, Dover, Delaware, 19904 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 23.Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 24.Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

* * *

-14-

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

IAA, INC.INDEMNITEE
By:
Name:                            Name:Title:                            

Address:

[Signature Page to Indemnification Agreement]

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John W. Kett, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of IAA, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ John W. Kett

John W. Kett

President and Chief Executive Officer

Date: August 13, 2019

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Vance C. Johnson, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of KAR Auction Services, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Vance C. Johnson

Vance C. Johnson

Executive Vice President, Chief Financial Officer

Date: August 13, 2019

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KAR Auction Services, Inc. (the "Company") for the period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John W. Kett, as Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John W. Kett

John W. Kett
President and Chief Executive Officer

Date: August 13, 2019

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KAR Auction Services, Inc. (the "Company") for the period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Vance C. Johnson, as Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Vance C. Johnson

Vance C. Johnson

Executive Vice President, Chief Financial Officer

Date: August 13, 2019

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document and Entity Information
Entity Registrant Name	IAA, Inc.
Entity Central Index Key	0001745041
Current Fiscal Year End Date	--12-29
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		133,477,646

XML

Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2019	Jul. 01, 2018
Operating revenues
Revenues	$ 366.4	$ 333.2	$ 723.6	$ 670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	227.7	201.1	446.1	407.8
Selling, general and administrative	33.7	31.3	67.3	63.9
Depreciation and amortization	22.1	24.7	43.9	48.8
Total operating expenses	283.5	257.1	557.3	520.5
Operating profit	82.9	76.1	166.3	150.0
Interest expense	11.9	9.7	21.6	19.3
Other income, net	(0.2)	(0.8)	(0.1)	(0.8)
Income before income taxes	71.2	67.2	144.8	131.5
Income taxes	19.9	17.4	39.0	33.4
Net income	$ 51.3	$ 49.8	$ 105.8	$ 98.1
Net income per share
Basic (in dollars per share)	$ 0.38	$ 0.37	$ 0.79	$ 0.73
Diluted (in dollars per share)	$ 0.38	$ 0.37	$ 0.79	$ 0.73

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2019	Jul. 01, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 51.3	$ 49.8	$ 105.8	$ 98.1
Other comprehensive income (loss):
Foreign currency translation gain (loss)	(5.2)	(3.1)	(2.7)	(4.2)
Comprehensive income	$ 46.1	$ 46.7	$ 103.1	$ 93.9

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2019	Dec. 30, 2018
Current assets
Cash and cash equivalents	$ 50.9	$ 60.0
Trade receivables, net of allowances of $4.3 and $3.3	284.7	311.0
Finance receivables, net of allowances of $14.3 and $14.0	46.4	48.5
Other current assets	37.2	34.0
Total current assets	419.2	453.5
Other assets
Operating lease right-of-use assets, net of accumulated amortization of $35.1 and $0	655.2
Goodwill	531.5	530.2
Customer relationships, net of accumulated amortization of $300.5 and $286.7	62.2	74.8
Other intangible assets, net of accumulated amortization of $157.4 and $148.2	87.5	86.1
Other assets	13.3	10.4
Total other assets	1,349.7	701.5
Property and equipment, net of accumulated depreciation of $350.9 and $389.2	241.4	345.2
Total assets	2,010.3	1,500.2
Current liabilities
Accounts payable	115.8	129.0
Short-term right-of-use operating lease liability	66.8
Accrued employee benefits and compensation expenses	19.0	29.6
Current maturities of long-term debt	8.0	456.6
Income taxes payable	0.0	2.2
Other accrued expenses	54.1	53.6
Total current liabilities	263.7	671.0
Non-current liabilities
Long-term debt	1,266.8	0.0
Long-term right-of-use operating lease liability	633.0
Deferred income tax liabilities	63.7	63.1
Deferred rent		186.8
Other liabilities	12.0	16.1
Total non-current liabilities	1,975.5	266.0
Commitments and contingencies (Note 7)
Stockholders' (deficit) equity
Preferred stock, $0.01 par value: 150.0 shares authorized; 0 shares issued and outstanding as of June 30, 2019	0.0	0.0
Common stock, $0.01 par value: 750.0 shares authorized; 133.4 shares issued and outstanding as of June 30, 2019	1.3	0.0
Additional paid-in capital	0.0	0.0
Accumulated deficit	(214.5)	0.0
Accumulated other comprehensive loss	(15.7)	(13.0)
Net Parent Investment	0.0	576.2
Total stockholders' (deficit) equity	(228.9)	563.2
Total liabilities and stockholders' (deficit) equity	$ 2,010.3	$ 1,500.2

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 30, 2018
Statement of Financial Position [Abstract]
Trade receivables, allowances	$ 4.3	$ 3.3
Accumulated amortization, operating lease right-of-use assets	35.1
Customer relationships, accumulated amortization	300.5	286.7
Other intangible assets, accumulated amortization	157.4	148.2
Property and equipment, accumulated depreciation	$ 350.9	$ 389.2
Preferred stock, par value (in dollars per share)	$ 0.01
Preferred stock, authorized shares (in shares)	150,000,000
Preferred stock, issued shares (in shares)	0
Preferred stock, outstanding shares (in shares)	0
Common stock, par value (in dollars per share)	$ 0.01
Common stock, authorized shares (in shares)	750,000,000
Common stock, issued shares (in shares)	133,400,000
Common stock, outstanding shares (in shares)	133,400,000

XML

Consolidated Statements of Stockholders' (Deficit) Equity - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Net Parent Investment	Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2017	$ 571.3	$ 0.0	$ 0.0	$ 0.0	$ 582.6	$ (11.3)
Balance (in shares) at Dec. 31, 2017		0.0
Increase (Decrease) in Stockholders' Equity
Net income	98.1				98.1
Foreign currency translation adjustments	(4.2)					(4.2)
Stock-based compensation expense	1.8				1.8
Net transfer to Parent and affiliates	(115.2)				(115.2)
Balance at Jul. 01, 2018	548.8	$ 0.0	0.0	0.0	564.3	(15.5)
Balance (in shares) at Jul. 01, 2018		0.0
Balance at Apr. 01, 2018	591.3	$ 0.0	0.0	0.0	603.7	(12.4)
Balance (in shares) at Apr. 01, 2018		0.0
Increase (Decrease) in Stockholders' Equity
Net income	49.8				49.8
Foreign currency translation adjustments	(3.1)					(3.1)
Stock-based compensation expense	0.9				0.9
Net transfer to Parent and affiliates	(90.1)				(90.1)
Balance at Jul. 01, 2018	548.8	$ 0.0	0.0	0.0	564.3	(15.5)
Balance (in shares) at Jul. 01, 2018		0.0
Balance at Dec. 30, 2018	563.2	$ 0.0	0.0	0.0	576.2	(13.0)
Balance (in shares) at Dec. 30, 2018		0.0
Increase (Decrease) in Stockholders' Equity
Net income	105.8				105.8
Foreign currency translation adjustments	(2.7)					(2.7)
Stock-based compensation expense	1.9				1.9
Reclassification of net parent investment to common stock and additional paid-in capital	0.0	$ 1.3		(214.5)	213.2
Reclassification of net parent investment to common stock and additional paid-in capital (in shares)		133.4
Dividend Paid to KAR	(1,278.0)				(1,278.0)
Net transfer to Parent and affiliates	379.8				379.8
Balance at Jun. 30, 2019	$ (228.9)	$ 1.3	0.0	(214.5)	0.0	(15.7)
Balance (in shares) at Jun. 30, 2019	133.4	133.4
Balance at Mar. 31, 2019	$ 618.9	$ 0.0	0.0	0.0	629.4	(10.5)
Balance (in shares) at Mar. 31, 2019		0.0
Increase (Decrease) in Stockholders' Equity
Net income	51.3				51.3
Foreign currency translation adjustments	(5.2)					(5.2)
Stock-based compensation expense	0.9				0.9
Reclassification of net parent investment to common stock and additional paid-in capital	0.0	$ 1.3		(214.5)	213.2
Reclassification of net parent investment to common stock and additional paid-in capital (in shares)		133.4
Dividend Paid to KAR	(1,278.0)				(1,278.0)
Net transfer to Parent and affiliates	383.2				383.2
Balance at Jun. 30, 2019	$ (228.9)	$ 1.3	$ 0.0	$ (214.5)	$ 0.0	$ (15.7)
Balance (in shares) at Jun. 30, 2019	133.4	133.4

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018
Operating activities
Net income	$ 105.8	$ 98.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	43.9	48.8
Stock-based compensation	1.9	1.8
Deferred rent	1.3	1.4
Provision for credit losses	1.1	1.2
Deferred income taxes	0.6	(1.4)
Gain on disposal of fixed assets	0.0	(0.3)
Changes in operating assets and liabilities:
Trade receivables and other assets	15.4	24.7
Accounts payable and accrued expenses	(10.3)	(9.3)
Net cash provided by operating activities	159.7	165.0
Investing activities
Purchases of property, equipment and computer software	(37.5)	(28.7)
Proceeds from the sale of property and equipment	0.1	1.0
Net cash used by investing activities	(37.4)	(27.7)
Financing activities
Proceeds from debt issuance	1,300.0	0.0
Dividend paid to KAR	(1,278.0)	0.0
Net cash transfers to Parent and affiliates	(117.7)	(115.2)
Deferred financing costs	(25.2)	0.0
Payments on finance leases	(8.3)	(7.9)
Net increase in book overdrafts	(2.9)	0.5
Net cash used by financing activities	(132.1)	(122.6)
Effect of exchange rate changes on cash	0.7	(0.5)
Net (decrease) increase in cash, cash equivalents and restricted cash	(9.1)	14.2
Cash and cash equivalents at beginning of period	60.0	33.1
Cash and cash equivalents at end of period	$ 50.9	$ 47.3

XML

Basis of Presentation and Nature of Operations

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Nature of Operations

Basis of Presentation and Nature of Operations

Description of Business

IAA, Inc., together with its subsidiaries (collectively referred to herein as “IAA”, "we," "us," "our" and "the Company") is a leading provider of auction solutions for total loss, damaged and low-value vehicles in North America and is also a provider of auction services in the United Kingdom. We operate in one reportable segment. We facilitate the sale of total loss, damaged and low-value vehicles for a full spectrum of sellers. Our solutions, which are focused on a diverse set of global customers, provide buyers with the vehicles they need to, among other things, fulfill their vehicle rebuild requirements, replacement part inventory or scrap demand. Fees for our solutions are earned from both sellers and buyers of vehicles. In return for agreed-upon fees, vehicles are sold on behalf of our sellers, who continue to own the vehicle until it is sold to buyers through our marketplaces. Over 80% of volume that passes through our marketplaces is associated with insurance total loss vehicles, including vehicles from catastrophic events like hurricanes, floods and hail damage, and the remaining volume is associated with noninsurance customers such as dealerships, rental car companies, fleet lease companies, charitable organizations and the general public. At June 30, 2019, properties utilized by IAA included 181 salvage vehicle auction facilities in the United States and Canada, most of which are leased. The IAA North American properties are used primarily for auction and storage purposes consisting on average of approximately 30 acres of land per site. IAA also includes HBC Vehicle Services Limited (“HBC”), which operated 14 locations in the United Kingdom at June 30, 2019.

Separation and Distribution

On February 27, 2018, KAR Auction Services, Inc. (“KAR” or “Parent”), a Delaware corporation, announced a plan to pursue the separation and spin-off (the “Separation”) of its salvage auction business into a separate public company, IAA Spinco Inc. IAA Spinco Inc. was incorporated in Delaware on June 19, 2018 and was renamed IAA, Inc. on June 27, 2019. On June 28, 2019 (the "Separation Date"), KAR completed the distribution of 100% of the issued and outstanding shares of common stock of IAA to the holders of record of KAR's common stock on June 18, 2019, on a pro rata basis (the "Distribution"). On the Separation Date, each KAR common stockholder of record received one share of IAA common stock for every one share of KAR common stock held by such stockholder as of the record date. As a result of the Distribution, KAR does not retain any ownership interest in IAA. The Distribution was made pursuant to the Separation and Distribution Agreement, dated June 27, 2019 (the "Separation and Distribution Agreement"), pursuant to which KAR contributed the subsidiaries that operated the salvage auction business to IAA. The Distribution is expected to be a tax-free transaction under provisions of the Internal Revenue Code. Following the Distribution, IAA became an independent publicly-traded company and is listed on the New York Stock Exchange under the symbol “IAA.”

In connection with the Separation, we paid a dividend to KAR of $1,278.0 million, which included $456.6 million to settle intercompany debt and $40.9 million for certain fixed assets transferred to us by KAR on the Separation Date. We also paid KAR $117.7 million to settle other intercompany accounts in connection with the Separation.

In connection with the Separation, we also entered into a non-compete and various other ancillary agreements to effect the Separation and provide a framework for our relationship with KAR after the Separation, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements provide for the allocation of assets, employees, liabilities and obligations attributable to periods prior to, at and after our Separation from KAR and govern certain relationships between us and KAR after the Separation. For further information regarding these agreements, see Note 2 - Relationship with KAR and Related Entities.

Basis of Presentation

Throughout the periods covered by these unaudited consolidated financial statements and until the Separation Date, we operated as a separate reportable segment within KAR and, since the Separation Date, we have operated independently from KAR. The accompanying unaudited consolidated financial statements and condensed notes related thereto have been prepared from KAR’s historical accounting records and are presented on a stand-alone basis as if IAA's operations had been conducted independently from KAR for all periods prior to the Separation Date. Accordingly, prior to the Separation Date, KAR’s net investment in these operations (Net Parent Investment) was shown in lieu of stockholder’s (deficit) equity in the unaudited consolidated financial statements. Our historical results of operations, financial position and cash flows represented in the unaudited consolidated financial statements may not be indicative of what they would have been had we actually been a separate stand-alone entity during such periods, nor are they necessarily indicative of our future results of operations, financial position and cash flows.

IAA is comprised of certain stand-alone legal entities for which discrete financial information is available. The unaudited consolidated statements of income include all revenues and costs directly attributable to us, including costs for functions and services used by us. Prior to the Separation Date, certain shared costs were directly charged to us from KAR based on specific identification or other allocation methods. The results of operations also include allocations of costs for administrative functions and services performed on behalf of us by centralized staff groups within KAR. Current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, to our operations in each country as if we were a separate taxpayer (i.e., following the separate return methodology). Allocation methodologies were applied to certain shared costs to allocate amounts to us as discussed further in Note 2 - Relationship with KAR and Related Entities.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results of operations, cash flows and financial position for the periods presented. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto, for the year ended December 30, 2018 included in our Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the "SEC") on June 13, 2019. The consolidated balance sheet data as of December 30, 2018 included in this Form 10-Q was derived from the audited financial statements referenced above and does not include all disclosures required by U.S. GAAP for annual financial statements.

IAA operates as one reportable segment. On June 27, 2019, the board of directors set our fiscal year to end on the last Sunday in December in each year, consisting of either 52 or 53 weeks.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies.

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which replaces the existing lease guidance in Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (“ROU”) assets and corresponding lease liabilities on the balance sheet, with an exception for leases that meet the definition of a short-term lease. The new guidance continues to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We adopted Topic 842 in the first quarter of 2019 and, as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements, we applied the new standard at the adoption date and recognized the cumulative-effect of initially applying the new standard as an increase of $1.1 million to the opening balance of retained earnings. The cumulative-effect adjustment related to the derecognition of existing fixed assets for which we were determined to be the accounting owner under Topic 840 and related liabilities associated with certain sale leaseback transactions in build-to-suit arrangements that did not qualify for sale accounting under Topic 840. Depreciation related to these fixed assets was recorded consistently with owned property and equipment in depreciation expense. In accordance with Topic 842, the lease agreements associated with the derecognized fixed assets and related liabilities generated ROU assets and lease liabilities that will be amortized to lease expense over the lease term. In addition, we recognized additional operating liabilities of approximately $684 million with related ROU assets of approximately $641 million based on the present value of the remaining minimum rental payments for existing operating leases.

We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Short-term operating lease liabilities” and “Long-term operating lease liabilities” in our consolidated balance sheets. Finance leases are included in “Property and equipment, net,” “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2018-15 will have on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2017-4 will have a material impact on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures.

XML

Relationship with KAR and Related Entities

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Relationship with KAR and Related Entities

Relationship with KAR and Related Entities

Historically, prior to the Separation Date, we were managed and operated in the normal course of business with other affiliates of KAR. Accordingly, certain shared costs have been allocated to us and reflected as expenses in the stand-alone unaudited consolidated financial statements. We consider the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of KAR attributable to us for purposes of the stand-alone financial statements; however, the expenses reflected in the unaudited consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we historically operated as a separate, stand-alone entity. In addition, the expenses reflected in these unaudited consolidated financial statements may not be indicative of expenses that will be incurred in the future by us.

Transactions between KAR and us, with the exception of purchase transactions and reimbursements for payments made to third-party service providers by KAR on our behalf, are reflected in equity in the Consolidated Balance Sheets as “Net Parent Investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfers to parent and affiliates.”

Corporate Costs/Allocations

These unaudited consolidated financial statements include corporate costs incurred by KAR for services that were provided to or on behalf of us. These costs consist of allocated cost pools and identifiable costs. Corporate costs were directly charged to, or allocated to, us using methods management believes are consistent and reasonable. Our identifiable costs were recorded based on dedicated employee assignments. The method for allocating corporate function costs to us was based on various proportionate formulas involving allocation factors. The methods for allocating corporate administration costs to us were based on revenue, headcount or the proportion of related expenses. However, the expenses reflected in these unaudited consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we historically operated as a separate, stand-alone entity. All corporate charges and allocations have been deemed paid by us to KAR in the period in which the cost was recorded in the Consolidated Statements of Income.

Allocated corporate costs included in selling, general and administrative expenses were $1.1 million and $2.6 million for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018, allocated corporate costs included in selling, general and administrative expenses were $2.8 million and $4.7 million, respectively. The allocated corporate costs were associated with human resources, risk management, information technology and certain finance and other functions.

Beginning in the third quarter of 2019, we will be invoiced for services provided by KAR under the transition services agreement described below and, therefore, will no longer reflect these allocations in our Consolidated Statements of Income.

Cash Management and Financing

KAR generally uses a centralized approach to cash management and financing its operations, including the operations of IAA. Accordingly, none of KAR’s corporate cash and cash equivalents was allocated to IAA in the historical consolidated financial statements. Prior to the Separation Date, cash transferred daily, based on IAA’s balances, to centralized accounts maintained by KAR. As cash was disbursed or received by KAR, it was accounted for by IAA through the Net Parent Investment.

Transactions with Other KAR Businesses

Throughout the periods covered by these unaudited consolidated financial statements, we purchased goods and services from KAR’s other businesses. The cost of products and services obtained from these other businesses were $0.2 million and $0.7 million for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018, the cost of products and services obtained from these other businesses was $0.5 million and $1.5 million, respectively.

Non-Compete Agreement

Pursuant to the Separation and Distribution Agreement, we agreed not to compete with KAR in certain non-salvage activities for a period of five years following the Separation Date in certain jurisdictions, subject to certain exceptions. We are expressly permitted to continue to conduct our salvage auction business as conducted immediately prior to the Separation Date. The exceptions also permit us to conduct certain non-salvage business, in some cases subject to a revenue sharing mechanic in the event such business exceeds specified volume limits or other thresholds.

Transition Services Agreement

Under the transition services agreement, KAR and its subsidiaries will provide, on an interim, transitional basis, various services to IAA for a period of two years from the Separation Date. The services to be provided will include information technology, accounts payable, payroll, and other financial functions and administrative services. From time to time, IAA may provide similar services to KAR under the transition services agreement.

Tax Matters Agreement

The tax matters agreement generally governs our and KAR’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Separation, the Distribution or certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the Separation Date, as well as tax periods beginning after the date of the Distribution.

In addition, the tax matters agreement imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the Separation, the Distribution and certain related transactions. The tax matters agreement also provides special rules that allocate tax liabilities in the event the Separation, the Distribution, or certain related transactions fail to qualify as tax-free for U.S. federal income tax purposes.

Employee Matters Agreement

The employee matters agreement allocated liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The employee matters agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company. The employee matters agreement provides that, unless otherwise specified, KAR will be responsible for liabilities associated with employees who are employed by KAR following the Separation, former employees whose last employment was with the KAR businesses and certain specified current and former corporate employees, and we are responsible for liabilities associated with employees who are employed by us following the Separation, former employees whose last employment was with our businesses and certain specified current and former corporate employees.

XML

Stock and Stock-Based Compensation Plans

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock and Stock-Based Compensation Plans

Stock and Stock-Based Compensation Plans

Equity Awards Granted by KAR

Prior to the Separation, KAR issued equity awards from time to time to select employees and non-employee directors

of IAA. All outstanding employee equity awards (stock options, restricted stock units and restricted stock) granted by KAR were granted prior to the Separation Date. We recognized stock-based compensation expense associated with these awards in net income based on the fair value of the awards on the date of grant. Under KAR’s long-term incentive plans, KAR common stock and restricted stock was made available for grant, at the discretion of the Compensation Committee of KAR’s Board of Directors or KAR’s Board of Directors, to non-employee directors, executive officers and key employees of IAA in the form of stock options, performance-based restricted stock units (“PRSUs”) and time-based restricted stock units (“RSUs”). The following table summarizes our stock-based compensation expense by type of award (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
PRSUs	$	0.2	$	0.2	$	0.4	$	0.5
RSUs	0.7		0.7		1.5		1.3
Total stock-based compensation expense	$	0.9	$	0.9	$	1.9	$	1.8

The employee matters agreement required that the outstanding KAR equity awards held by IAA employees and non-employee directors be converted into adjusted awards of IAA pursuant to the 2019 OSIP. The awards were adjusted based on the following principles:

• For each award recipient, the intent was to maintain the economic value of those awards before and after the Separation Date; and

• The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain PRSUs granted in 2019 will be subject to adjusted performance criteria.

2019 Omnibus Stock and Incentive Plan

On June 27, 2019, our board of directors approved the 2019 Omnibus Stock and Incentive Plan (as amended, the “2019 OSIP”). The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors, and consultants of the Company whose contributions are essential to the growth and success of our business, in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability for us.

Benefits granted under the 2019 OSIP may be granted in any one or a combination of (i) options to purchase IAA common stock; (ii) IAA share appreciation rights (“SARs”), (iii) restricted shares of IAA common stock; (vi) restricted stock units of IAA common stock; (vii) other IAA stock-based awards; or (viii) other cash-based awards. Options, restricted shares, restricted stock units and other share-based awards or cash awards may constitute performance-based awards. The granting or vesting of any performance-based awards will be based on achievement of performance objectives that are based on one or more business criteria, with respect to one or more business units or IAA and its subsidiaries as a whole. Such business criteria may be adjusted to account for unusual or infrequently occurring items or changes in accounting.

Participants will consist of any employee, director, independent contractor or consultant of IAA or any affiliate of IAA selected to receive awards under the 2019 OSIP, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be. The number of common shares reserved and available for awards under the 2019 OSIP is 7,551,042 shares, subject to adjustment made in accordance with the 2019 OSIP. Upon the occurrence of certain corporate events that affect the common stock, including but not limited to extraordinary cash dividend, stock split, reorganization or other relevant changes in capitalization, appropriate adjustments may be made with respect to the number of shares available for grants under the 2019 OSIP, the number of shares covered by outstanding awards and the maximum number of shares that may be granted to any participant.

The aggregate awards granted during any calendar year to any single individual will not exceed: (i) 1,000,000 shares subject to options or SARs, (ii) 500,000 shares subject to restricted shares or other share-based awards and (iii) $5,000,000 with respect to any cash-based award. A non-employee director of IAA may not be granted awards under the 2019 OSIP during any calendar year that, when aggregated with such non-employee director’s cash fees received with respect to such calendar year, exceed $750,000 in total value.

XML

Net Income Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share, Basic and Diluted [Abstract]

Net Income Per Share

Net Income Per Share

Basic net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. Diluted net income per share was calculated consistent with basic net income per share including the effect of dilutive unissued common shares related to our stock-based employee compensation program. The effect of stock options and restricted stock on net income per share-diluted is determined through the application of the treasury stock method, whereby net proceeds received by the Company based on assumed exercises are hypothetically used to repurchase our common stock at the average market price during the period. Stock options that would have an anti-dilutive effect on net income per diluted share and PRSUs subject to performance conditions which have not yet been satisfied are excluded from the calculations. No options were excluded from the calculation of diluted net income per share for each of the three months ended June 30, 2019 and 2018. Approximately 0.8 million and 0.7 million PRSUs were excluded from the calculation of diluted net income per share for the three months ended June 30, 2019 and 2018, respectively. Total options outstanding at June 30, 2019 and 2018 were 0.8 million and 1.4 million, respectively.

Basic and dilutive net income per share was calculated by dividing net income by the weighted average number of outstanding common shares for the period. The following table sets forth the computation of net income per share (in millions except per share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Net income	$	51.3	$	49.8	$	105.8	$	98.1
Weighted average common shares outstanding	133.4		133.4		133.4		133.4
Effect of dilutive stock awards	0.7		0.7		0.7		0.7
Weighted average common shares outstanding and potential common shares	134.1		134.1		134.1		134.1
Net income per share
Basic	$	0.38	$	0.37	$	0.79	$	0.73
Diluted	$	0.38	$	0.37	$	0.79	$	0.73

XML

Long-Term Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consisted of the following (in millions):

	June 30, 2019			December 30, 2018
Term Loan Facility	$	800.0		$	—
Notes	500.0			—
Other	—			456.6
Total debt	1,300.0			456.6
Unamortized debt issuance costs	(25.2		)	—
Current maturities of long-term debt	(8.0		)	(456.6		)
Long-term debt	$	1,266.8		$	—

Credit Agreement

In connection with the Separation, on June 28, 2019, IAA, Inc. (formerly IAA Spinco Inc.), as borrower, entered into a credit agreement (the “Credit Agreement”), by and among IAA, the several banks and other financial institutions or entities from time to time party thereto as lenders, the issuing lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for, among other things: (i) a seven-year senior secured term loan facility in an aggregate principal amount of $800 million (the “Term Loan Facility”) and (ii) a five-year revolving credit facility in an aggregate principal amount of $225 million (the “Revolving Credit Facility,” and together with the Term Loan Facility, the “Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-limit for issuance of letters of credit and a $50 million sublimit for swing line loans, which can be borrowed on same-day notice. The Term Loan Facility matures on June 28, 2026. We must make principal payments of $2 million each quarter, commencing on September 30, 2019 and continuing on the last day of each September, December, March and June thereafter. The Revolving Credit Facility matures on June 28, 2024. We may prepay the obligations under our Term Loan Facility and Revolving Credit Facility at any time without penalties. The obligations under the Credit Facility are subject to mandatory prepayments for certain debt offerings, asset sales and insurance recovery events, subject to customary exceptions and reinvestment rights.

We used proceeds from the Term Loan Facility to finance the transactions relating to the Separation and Distribution related thereto. We used the remaining proceeds from the Term Loan Facility for IAA's ongoing working capital needs and general corporate purposes. The Revolving Credit Facility may be used for ongoing working capital needs and general corporate purposes. As of June 30, 2019, no amounts were outstanding under the Revolving Credit Facility.

As set forth in the Credit Agreement, the Term Loan Facility accrues interest at an adjusted LIBOR rate plus 2.25% (or at IAA’s election, Base Rate (as defined in the Credit Agreement) plus 1.25%).  Loans under the Revolving Credit Facility will bear interest at an amount equal to the rate calculated based on the type of borrowing (either adjusted LIBOR or Base Rate) and our Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), with such rate ranging from 2.25% to 1.75% for adjusted LIBOR loans and from 1.25% to 0.75% for Base Rate loans. We will also pay a commitment fee between 25 to 35 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on our Consolidated Senior Secured Net Leverage Ratio, from time to time.

The obligations of IAA, Inc. under the Credit Facility are guaranteed by certain domestic subsidiaries of IAA, Inc. (the “Subsidiary Guarantors”) and are secured by substantially all of the assets, subject to certain exceptions, of IAA, Inc. and the Subsidiary Guarantors, including but not limited to pledges of and first priority perfected security interests in 100% of the equity interests of the Subsidiary Guarantors and 65% of the equity interests of any Subsidiary Guarantors’ first tier foreign subsidiaries.

The Credit Agreement contains affirmative and negative covenants that are usual and customary for a senior secured credit agreement. The negative covenants include, among other things, limitations on asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with our affiliates. The Credit Agreement also requires us to maintain a maximum Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) not to exceed 3.50 to 1.00 as of each test date on which any Revolving Loans (as defined in the Credit Agreement) are outstanding. We were in compliance with the covenants in the Credit Agreement at June 30, 2019. The Credit Agreement also includes customary events of default, including non-payment, cross-default and change of control, in each case, subject to customary grace periods.

Notes

In connection with the Separation, IAA, Inc. issued $500.0 million aggregate principal amount of 5.500% Senior Notes due 2027 (the “Notes”) on June 6, 2019 (the "Closing Date") in a private offering exempt from the registration requirements of the Securities Act. The Notes were issued pursuant to an indenture, dated as of the Closing Date (the “Indenture”), between IAA Inc. and U.S. Bank National Association, as trustee (the “Trustee”). We must pay interest on the Notes in cash on June 15 and December 15 of each year at a rate of 5.500% per annum, commencing on December 15, 2019. The Notes mature on June 15, 2027. We used the net proceeds from the Notes offering, together with borrowings under the Term Loan Facility, to make a cash distribution to KAR and to pay fees and expenses related to the Separation and Distribution.

Under certain circumstances, the Indenture permits us to designate certain of our subsidiaries as unrestricted subsidiaries, which subsidiaries will not be subject to the covenants in the Indenture and will not guarantee the Notes.

The Notes are the general unsecured senior obligations of IAA, Inc. and such obligations are guaranteed by the Subsidiary Guarantors. Each guarantee is the general unsecured senior obligation of each Subsidiary Guarantor. The Notes and the related guarantees rank equal in right of payment with all of IAA, Inc.'s and the Subsidiary Guarantors’ unsubordinated indebtedness. The Notes are structurally subordinated in right of payment to all indebtedness and other liabilities of our subsidiaries that will not be Subsidiary Guarantors and effectively junior in right of payment to all of our and the Guarantors’ secured indebtedness to the extent of the value of the collateral securing such indebtedness, including indebtedness under the Credit Facility.

At any time and from time to time prior to June 15, 2022, we may, at our option, redeem the Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. Thereafter, we may, at our option, redeem the Notes in whole or in part at the prices set forth in the Indenture. In addition, at any time and from time to time prior to June 15, 2022, we may, at our option, at a redemption price of 105.5% of the principal amount of Notes redeemed, redeem up to 40% of the original aggregate principal amount of the Notes issued under the Indenture with the proceeds of certain equity offerings.

In the event of a Change of Control Repurchase Event (as defined in the Indenture), unless we have previously or concurrently delivered a redemption notice with respect to all the outstanding Notes, we are required to make an offer to repurchase all of the Notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to, but excluding, the repurchase date. If we sell assets outside the ordinary course of business and do not use the net proceeds for specified purposes under the Indenture, we may be required to use such net proceeds to make an offer to repurchase the Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants which, among other things, limit our and our restricted subsidiaries’ ability to pay dividends on or make other distributions in respect of equity interests or make other restricted payments, make certain investments, incur liens on certain assets to secure debt, sell certain assets, consummate certain mergers or consolidations or sell all or substantially all assets, or designate subsidiaries as unrestricted. The Indenture also provides for customary events of default, including non-payment of principal, interest or premium, failure to comply with covenants, and certain bankruptcy or insolvency events. We were in compliance with the covenants in the Indenture at June 30, 2019.

Other

At December 30, 2018, our intercompany debt with KAR was $456.6 million. This debt was eliminated in the Separation. This debt was comprised of three promissory notes, payable on demand, with a weighted average interest rate of 8.27%. In addition, we had outstanding letters of credit in the aggregate amount of $0.4 million and $2.1 million at June 30, 2019 and December 30, 2018, respectively, which reduce the amount available for borrowings under our Revolving Credit Facility.

Fair Value of Debt

As of June 30, 2019, the estimated fair value of our long-term debt amounted to $1.32 billion. The estimates of fair value were based on broker-dealer quotes for our debt as of June 30, 2019. The estimates presented on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange.

XML

Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

We lease property, software, automobiles, trucks and trailers pursuant to operating lease agreements. We also lease furniture, fixtures and equipment under finance leases. Our leases have varying remaining lease terms with leases expiring through 2038, some of which include options to extend the leases.

The components of lease expense were as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	28.8	$	56.1
Finance lease cost:
Amortization of right-of-use assets	$	3.8	$	7.6
Interest on lease liabilities	0.2		0.5
Total finance lease cost	$	4.0	$	8.1

Supplemental cash flow information related to leases was as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	28.2	$	54.7
Operating cash flows related to finance leases	$	0.2	$	0.5
Financing cash flows related to finance leases	$	2.7	$	8.3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	47.1	$	49.0
Finance leases	$	—	$	—

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	655.2
Other accrued expenses	$	66.8
Operating lease liabilities	633.0
Total operating lease liabilities	$	699.8
Finance Leases
Property and equipment, gross	$	118.7
Accumulated depreciation	(86.2		)
Property and equipment, net	$	32.5
Other accrued expenses	$	12.1
Other liabilities	9.9
Total finance lease liabilities	$	22.0
Weighted Average Remaining Lease Term
Operating leases	12.2 years
Finance leases	2.1 years
Weighted Average Discount Rate
Operating leases	6.2		%
Finance leases	4.8		%

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases			Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	55.2		$	6.6
2020	102.4			10.7
2021	91.7			5.5
2022	82.1			0.3
2023	72.6			—
Thereafter	610.9			—
Total lease payments	1,014.9			23.1
Less imputed interest	(315.1		)	(1.1		)
Total	$	699.8		$	22.0

Leases

Leases

We lease property, software, automobiles, trucks and trailers pursuant to operating lease agreements. We also lease furniture, fixtures and equipment under finance leases. Our leases have varying remaining lease terms with leases expiring through 2038, some of which include options to extend the leases.

The components of lease expense were as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	28.8	$	56.1
Finance lease cost:
Amortization of right-of-use assets	$	3.8	$	7.6
Interest on lease liabilities	0.2		0.5
Total finance lease cost	$	4.0	$	8.1

Supplemental cash flow information related to leases was as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	28.2	$	54.7
Operating cash flows related to finance leases	$	0.2	$	0.5
Financing cash flows related to finance leases	$	2.7	$	8.3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	47.1	$	49.0
Finance leases	$	—	$	—

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	655.2
Other accrued expenses	$	66.8
Operating lease liabilities	633.0
Total operating lease liabilities	$	699.8
Finance Leases
Property and equipment, gross	$	118.7
Accumulated depreciation	(86.2		)
Property and equipment, net	$	32.5
Other accrued expenses	$	12.1
Other liabilities	9.9
Total finance lease liabilities	$	22.0
Weighted Average Remaining Lease Term
Operating leases	12.2 years
Finance leases	2.1 years
Weighted Average Discount Rate
Operating leases	6.2		%
Finance leases	4.8		%

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases			Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	55.2		$	6.6
2020	102.4			10.7
2021	91.7			5.5
2022	82.1			0.3
2023	72.6			—
Thereafter	610.9			—
Total lease payments	1,014.9			23.1
Less imputed interest	(315.1		)	(1.1		)
Total	$	699.8		$	22.0

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

We are and may from time to time become involved in litigation and disputes arising in the ordinary course of business, such as actions related to injuries; property damage; handling, storage or disposal of vehicles; environmental laws and regulations; and other litigation incidental to the business. Management considers the likelihood of loss or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. We accrue an estimated loss contingency when it is probable that a liability has been incurred and the amount of loss (or range of possible losses) can be reasonably estimated. Management regularly evaluates current information available to determine whether accrual amounts should be adjusted. Accruals for contingencies, including litigation and environmental matters, are included in “Other accrued expenses” at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. These accruals are adjusted periodically as assessment and remediation efforts progress, or as additional technical or legal information becomes available. If the amount of an actual loss is greater than the amount accrued, this could have an adverse impact on our operating results in that period. Such matters are generally not, in the opinion of management, likely to have a material adverse effect on our financial condition, results of operations or cash flows. Legal fees are expensed as incurred. There has been no significant change in the legal and regulatory proceedings which were disclosed in our audited consolidated financial statements for the fiscal year ended December 30, 2018.

IAA—Lower Duwamish Waterway

Since June 2004, IAA has operated a branch on property it leases in Tukwila, Washington just south of Seattle. The property is located adjacent to a Superfund site known as the Lower Duwamish Waterway Superfund Site ("LDW Site"). The LDW Site had been designated a Superfund site in 2001, three years prior to IAA’s tenancy. On March 25, 2008, the United States Environmental Protection Agency (the "EPA") issued IAA a General Notice of Potential Liability, or "General Notice," pursuant to Section 107(a), and a Request for Information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") related to the LDW Site. On November 7, 2012, the EPA issued IAA a Second General Notice of Potential Liability (the "Second General Notice") for the LDW Site. The EPA's website indicates that the EPA has issued general notice letters to approximately 116 entities, and has issued Section 104(e) Requests to more than 300 entities related to the LDW Site. In the General Notice and Second General Notice, the EPA informed IAA that the EPA believed IAA may be a Potentially Responsible Party ("PRP") but the EPA did not specify the factual basis for this assertion. At this time, the EPA still has not specified the factual basis for this assertion and has not demanded that IAA pay any funds or take any action apart from responding to the Section 104(e) Information Request. Four PRPs, The Boeing Company, the City of Seattle, the Port of Seattle and King County - the Lower Duwamish Waterway Group ("LDWG"), have funded a remedial investigation and feasibility study related to the cleanup of the LDW Site. In December 2014, the EPA issued a Record of Decision ("ROD"), detailing the final cleanup plan for the LDW Site. The ROD estimated the cost of cleanup to be $342 million, with the plan involving dredging of 105 acres, capping 24 acres, and enhanced natural recovery of 48 acres. The estimated length of the cleanup was 17 years, including 7 years of active remediation, and 10 years of monitored natural recovery. IAA is aware that certain authorities may bring natural resource damage claims against PRPs. On February 11, 2016, IAA received a Notice of Intent letter from the United States National Oceanic and Atmospheric Administration informing IAA that the Elliott Bay Trustee Council were beginning to conduct an injury assessment for natural resource damages in the LDW. The Notice of Intent indicated that the decision of the trustees to proceed with this natural resources injury assessment followed a pre-assessment screen performed by the trustees. Shortly thereafter, in a letter dated August 16, 2016, EPA issued a status update to the PRPs at the LDW Site. The letter stated that EPA expected the bulk of the pre-remedial design work currently being performed by the LDWG to be completed by the beginning of 2018, with the Remedial Design/Remedial Action ("RD/RA") phase to follow. The EPA previously anticipated that the pre-design work would be completed sometime during 2018, and the Company is not aware of any further information regarding that schedule. Accordingly, RD/RA negotiations with all PRPs may begin sometime in 2019. At this time, the Company has not received any further notices from the EPA and does not have adequate information to determine IAA's responsibility, if any, for contamination at this site, or to estimate IAA's loss as a result of this potential liability.

In addition, the Washington State Department of Ecology ("Ecology") is working with the EPA in relation to the LDW Site, primarily to investigate and address sources of potential contamination contributing to the LDW Site. In 2007, IAA installed a stormwater capture and filtration system designed to treat sources of potential contamination before discharge to the LDW Site. The immediate-past property owner, the former property owner and IAA have had discussions with Ecology concerning possible source control measures, including an investigation of the water and soils entering the stormwater system, an analysis of the source of contamination identified within the system, if any, and possible repairs and upgrades to the stormwater system if required. Additional source control measures, if any, are not expected to have a material adverse effect on future recurring operating costs.

XML

Segment Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

Segment Information

ASC 280, Segment Reporting, requires reporting of segment information that is consistent with the manner in which the chief operating decision maker operates and views the Company. Our operations are grouped into three operating segments: United States, Canada and United Kingdom. The operating segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results. We have one reportable business segment: United States. Canada and United Kingdom do not meet the criteria to be considered reportable segments but have been presented as “International” in the tables below to reconcile the amounts presented to consolidated totals.

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended June 30, 2019(in millions):

	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	United States			International			Total			United States		International			Total
Revenues	$	320.5		$	45.9		$	366.4		$	634.8	$	88.8		$	723.6
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	195.8			31.9			227.7			384.9		61.2			446.1
Selling, general and administrative	30.7			3.0			33.7			60.7		6.6			67.3
Depreciation and amortization	20.5			1.6			22.1			40.5		3.4			43.9
Total operating expenses	247.0			36.5			283.5			486.1		71.2			557.3
Operating profit	73.5			9.4			82.9			148.7		17.6			166.3
Interest expense	11.9			—			11.9			21.6		—			21.6
Other expense, net	(0.1		)	(0.1		)	(0.2		)	—		(0.1		)	(0.1		)
Income before income taxes	61.7			9.5			71.2			127.1		17.7			144.8
Income taxes	17.3			2.6			19.9			34.0		5.0			39.0
Net income	$	44.4		$	6.9		$	51.3		$	93.1	$	12.7		$	105.8
Total assets	$	1,829.0		$	181.3		$	2,010.3		$	1,829.0	$	181.3		$	2,010.3

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended July 1, 2018(in millions):

	Three Months Ended July 1, 2018								Six Months Ended July 1, 2018
	United States			International		Total			United States			International		Total
Revenues	$	300.1		$	33.1	$	333.2		$	603.5		$	67.0	$	670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	179.6			21.5		201.1			364.8			43.0		407.8
Selling, general and administrative	28.1			3.2		31.3			57.9			6.0		63.9
Depreciation and amortization	23.0			1.7		24.7			45.4			3.4		48.8
Total operating expenses	230.7			26.4		257.1			468.1			52.4		520.5
Operating profit	69.4			6.7		76.1			135.4			14.6		150.0
Interest expense	9.7			—		9.7			19.3			—		19.3
Other expense, net	(0.8		)	—		(0.8		)	(0.8		)	—		(0.8		)
Income before income taxes	60.5			6.7		67.2			116.9			14.6		131.5
Income taxes	15.5			1.9		17.4			29.4			4.0		33.4
Net income	$	45.0		$	4.8	$	49.8		$	87.5		$	10.6	$	98.1
Total assets	$	1,271.5		$	144.7	$	1,416.2		$	1,271.5		$	144.7	$	1,416.2

XML

Subsequent Event

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

On July 31, 2019, we acquired Decision Dynamics, Inc. ("DDI"), a leading electronic lien and title technology firm located in Lexington, South Carolina. The purchase price for the transaction is approximately $17 million, and could increase by an additional $4.1 million over three years, contingent on certain terms, conditions and the achievement of various performance targets. Annual revenue for DDI was approximately $8.3 million in the last twelve months ended June 30, 2019.

XML

Basis of Presentation and Nature of Operations (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Throughout the periods covered by these unaudited consolidated financial statements and until the Separation Date, we operated as a separate reportable segment within KAR and, since the Separation Date, we have operated independently from KAR. The accompanying unaudited consolidated financial statements and condensed notes related thereto have been prepared from KAR’s historical accounting records and are presented on a stand-alone basis as if IAA's operations had been conducted independently from KAR for all periods prior to the Separation Date. Accordingly, prior to the Separation Date, KAR’s net investment in these operations (Net Parent Investment) was shown in lieu of stockholder’s (deficit) equity in the unaudited consolidated financial statements. Our historical results of operations, financial position and cash flows represented in the unaudited consolidated financial statements may not be indicative of what they would have been had we actually been a separate stand-alone entity during such periods, nor are they necessarily indicative of our future results of operations, financial position and cash flows.

IAA is comprised of certain stand-alone legal entities for which discrete financial information is available. The unaudited consolidated statements of income include all revenues and costs directly attributable to us, including costs for functions and services used by us. Prior to the Separation Date, certain shared costs were directly charged to us from KAR based on specific identification or other allocation methods. The results of operations also include allocations of costs for administrative functions and services performed on behalf of us by centralized staff groups within KAR. Current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, to our operations in each country as if we were a separate taxpayer (i.e., following the separate return methodology). Allocation methodologies were applied to certain shared costs to allocate amounts to us as discussed further in Note 2 - Relationship with KAR and Related Entities.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, generally consisting of normal recurring accruals, necessary for a fair statement of our results of operations, cash flows and financial position for the periods presented. These unaudited consolidated financial statements and condensed notes thereto are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto, for the year ended December 30, 2018 included in our Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the "SEC") on June 13, 2019. The consolidated balance sheet data as of December 30, 2018 included in this Form 10-Q was derived from the audited financial statements referenced above and does not include all disclosures required by U.S. GAAP for annual financial statements.

IAA operates as one reportable segment. On June 27, 2019, the board of directors set our fiscal year to end on the last Sunday in December in each year, consisting of either 52 or 53 weeks.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates based in part on assumptions about current, and for some estimates, future economic and market conditions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Although the current estimates contemplate current conditions and expected future changes, as appropriate, it is reasonably possible that future conditions could differ from these estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in future impairments of goodwill, intangible assets and long-lived assets, additional allowances on accounts receivable and deferred tax assets and changes in litigation and other loss contingencies.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which replaces the existing lease guidance in Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (“ROU”) assets and corresponding lease liabilities on the balance sheet, with an exception for leases that meet the definition of a short-term lease. The new guidance continues to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We adopted Topic 842 in the first quarter of 2019 and, as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements, we applied the new standard at the adoption date and recognized the cumulative-effect of initially applying the new standard as an increase of $1.1 million to the opening balance of retained earnings. The cumulative-effect adjustment related to the derecognition of existing fixed assets for which we were determined to be the accounting owner under Topic 840 and related liabilities associated with certain sale leaseback transactions in build-to-suit arrangements that did not qualify for sale accounting under Topic 840. Depreciation related to these fixed assets was recorded consistently with owned property and equipment in depreciation expense. In accordance with Topic 842, the lease agreements associated with the derecognized fixed assets and related liabilities generated ROU assets and lease liabilities that will be amortized to lease expense over the lease term. In addition, we recognized additional operating liabilities of approximately $684 million with related ROU assets of approximately $641 million based on the present value of the remaining minimum rental payments for existing operating leases.

We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Short-term operating lease liabilities” and “Long-term operating lease liabilities” in our consolidated balance sheets. Finance leases are included in “Property and equipment, net,” “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, we account for the lease and non-lease components as a single lease component.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of ASU 2018-15 will have on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-4, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 (implied fair value measurement). Instead goodwill impairment would be measured as the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of ASU 2017-4 will have a material impact on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its unaudited consolidated financial statements or disclosures.

XML

Stock and Stock-Based Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Summary of stock-based compensation expense by type of award

The following table summarizes our stock-based compensation expense by type of award (in millions):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
PRSUs	$	0.2	$	0.2	$	0.4	$	0.5
RSUs	0.7		0.7		1.5		1.3
Total stock-based compensation expense	$	0.9	$	0.9	$	1.9	$	1.8

XML

Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share, Basic and Diluted [Abstract]

Schedule of computation of net income per share

The following table sets forth the computation of net income per share (in millions except per share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Net income	$	51.3	$	49.8	$	105.8	$	98.1
Weighted average common shares outstanding	133.4		133.4		133.4		133.4
Effect of dilutive stock awards	0.7		0.7		0.7		0.7
Weighted average common shares outstanding and potential common shares	134.1		134.1		134.1		134.1
Net income per share
Basic	$	0.38	$	0.37	$	0.79	$	0.73
Diluted	$	0.38	$	0.37	$	0.79	$	0.73

XML

Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of long-term debt

Long-term debt consisted of the following (in millions):

	June 30, 2019			December 30, 2018
Term Loan Facility	$	800.0		$	—
Notes	500.0			—
Other	—			456.6
Total debt	1,300.0			456.6
Unamortized debt issuance costs	(25.2		)	—
Current maturities of long-term debt	(8.0		)	(456.6		)
Long-term debt	$	1,266.8		$	—

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Components of lease expense

The components of lease expense were as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	28.8	$	56.1
Finance lease cost:
Amortization of right-of-use assets	$	3.8	$	7.6
Interest on lease liabilities	0.2		0.5
Total finance lease cost	$	4.0	$	8.1

Supplemental cash flow and balance sheet information related to leases

Supplemental cash flow information related to leases was as follows (in millions):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	28.2	$	54.7
Operating cash flows related to finance leases	$	0.2	$	0.5
Financing cash flows related to finance leases	$	2.7	$	8.3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	47.1	$	49.0
Finance leases	$	—	$	—

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	655.2
Other accrued expenses	$	66.8
Operating lease liabilities	633.0
Total operating lease liabilities	$	699.8
Finance Leases
Property and equipment, gross	$	118.7
Accumulated depreciation	(86.2		)
Property and equipment, net	$	32.5
Other accrued expenses	$	12.1
Other liabilities	9.9
Total finance lease liabilities	$	22.0
Weighted Average Remaining Lease Term
Operating leases	12.2 years
Finance leases	2.1 years
Weighted Average Discount Rate
Operating leases	6.2		%
Finance leases	4.8		%

Maturities of lease liabilities, operating leases

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases			Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	55.2		$	6.6
2020	102.4			10.7
2021	91.7			5.5
2022	82.1			0.3
2023	72.6			—
Thereafter	610.9			—
Total lease payments	1,014.9			23.1
Less imputed interest	(315.1		)	(1.1		)
Total	$	699.8		$	22.0

Maturities of lease liabilities, finance leases

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases			Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	55.2		$	6.6
2020	102.4			10.7
2021	91.7			5.5
2022	82.1			0.3
2023	72.6			—
Thereafter	610.9			—
Total lease payments	1,014.9			23.1
Less imputed interest	(315.1		)	(1.1		)
Total	$	699.8		$	22.0

XML

Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of financial information regarding the entity's reportable segments

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended June 30, 2019(in millions):

	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	United States			International			Total			United States		International			Total
Revenues	$	320.5		$	45.9		$	366.4		$	634.8	$	88.8		$	723.6
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	195.8			31.9			227.7			384.9		61.2			446.1
Selling, general and administrative	30.7			3.0			33.7			60.7		6.6			67.3
Depreciation and amortization	20.5			1.6			22.1			40.5		3.4			43.9
Total operating expenses	247.0			36.5			283.5			486.1		71.2			557.3
Operating profit	73.5			9.4			82.9			148.7		17.6			166.3
Interest expense	11.9			—			11.9			21.6		—			21.6
Other expense, net	(0.1		)	(0.1		)	(0.2		)	—		(0.1		)	(0.1		)
Income before income taxes	61.7			9.5			71.2			127.1		17.7			144.8
Income taxes	17.3			2.6			19.9			34.0		5.0			39.0
Net income	$	44.4		$	6.9		$	51.3		$	93.1	$	12.7		$	105.8
Total assets	$	1,829.0		$	181.3		$	2,010.3		$	1,829.0	$	181.3		$	2,010.3

Financial information regarding our reportable segment is set forth below as of and for the three and six months ended July 1, 2018(in millions):

	Three Months Ended July 1, 2018								Six Months Ended July 1, 2018
	United States			International		Total			United States			International		Total
Revenues	$	300.1		$	33.1	$	333.2		$	603.5		$	67.0	$	670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	179.6			21.5		201.1			364.8			43.0		407.8
Selling, general and administrative	28.1			3.2		31.3			57.9			6.0		63.9
Depreciation and amortization	23.0			1.7		24.7			45.4			3.4		48.8
Total operating expenses	230.7			26.4		257.1			468.1			52.4		520.5
Operating profit	69.4			6.7		76.1			135.4			14.6		150.0
Interest expense	9.7			—		9.7			19.3			—		19.3
Other expense, net	(0.8		)	—		(0.8		)	(0.8		)	—		(0.8		)
Income before income taxes	60.5			6.7		67.2			116.9			14.6		131.5
Income taxes	15.5			1.9		17.4			29.4			4.0		33.4
Net income	$	45.0		$	4.8	$	49.8		$	87.5		$	10.6	$	98.1
Total assets	$	1,271.5		$	144.7	$	1,416.2		$	1,271.5		$	144.7	$	1,416.2

XML

Basis of Presentation and Nature of Operations - Narrative (Details) $ in Millions		6 Months Ended
	Jun. 28, 2019 USD ($) shares	Jun. 30, 2019 USD ($) a segment facility location	Jul. 01, 2018 USD ($)	Jan. 01, 2019 USD ($)	Jan. 01, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of reportable segments | segment		1
Salvage vehicle auction facilities | facility		181
Acres of land per site | a		30
Number of locations | location		14
Issued and outstanding shares distributed to holders of record, percentage	100.00%
Subsidiary common stock, conversion rate | shares	1
Parent common stock, conversion rate | shares	1
Dividend paid to KAR		$ 1,278.0	$ 0.0
Cumulative effect adjustment for adoption of new accounting standard				$ 1.1	$ (3.0)
Operating lease liabilities		699.8
Operating lease right-of-use assets		$ 655.2
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment for adoption of new accounting standard				1.1
Operating lease liabilities				684.0
Operating lease right-of-use assets				$ 641.0
Affiliated Entity
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Dividend paid to KAR	$ 1,278.0
Payments to settle intercompany debt	456.6
Payments for certain fixed assets	40.9
Payments to settle other intercompany accounts	$ 117.7

XML

Relationship with KAR and Related Entities - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2019	Jul. 01, 2018
Related Party Transaction [Line Items]
Selling, general and administrative	$ 33.7	$ 31.3	$ 67.3	$ 63.9
Cost of products and services obtained	227.7	201.1	$ 446.1	407.8
Non-compete period			5 years
Services period			2 years
Affiliated Entity
Related Party Transaction [Line Items]
Cost of products and services obtained	0.2	0.7	$ 0.5	1.5
Corporate
Related Party Transaction [Line Items]
Selling, general and administrative	$ 1.1	$ 2.6	$ 2.8	$ 4.7

XML

Stock and Stock-Based Compensation Plans - Summary of Stock-Based Compensation Expense by Type of Award (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2019	Jul. 01, 2018
Stock and Stock-Based Compensation Plans
Total stock-based compensation expense	$ 0.9	$ 0.9	$ 1.9	$ 1.8
PRSUs
Stock and Stock-Based Compensation Plans
Total stock-based compensation expense	0.2	0.2	0.4	0.5
RSUs
Stock and Stock-Based Compensation Plans
Total stock-based compensation expense	$ 0.7	$ 0.7	$ 1.5	$ 1.3

XML

Stock and Stock-Based Compensation Plans - Narrative (Details) - 2019 OSIP	Jun. 27, 2019 USD ($) shares
Stock and Stock-Based Compensation Plans
Number of common shares reserved and available for awards (in shares)	7,551,042
Aggregate awards granted limit, options (in shares)	1,000,000
Aggregate awards granted limit, restricted shares (in shares)	500,000
Cash-based award limit | $	$ 5,000,000
Cash fees received limit | $	$ 750,000

XML

Net Income Per Share - Narrative (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jul. 01, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options outstanding (in shares)	800,000	1,400,000	1,400,000
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares attributable to awards excluded from the calculation of diluted net income per share (in shares)	0		0
PRSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares attributable to awards excluded from the calculation of diluted net income per share (in shares)	800,000	700,000

XML

Net Income Per Share - Computation of Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jul. 01, 2018	Jun. 30, 2019	Jul. 01, 2018
Earnings Per Share, Basic and Diluted [Abstract]
Net income	$ 51.3	$ 49.8	$ 105.8	$ 98.1
Shares outstanding
Weighted average common shares outstanding (in shares)	133.4	133.4	133.4	133.4
Effect of dilutive stock awards (in shares)	0.7	0.7	0.7	0.7
Weighted average common shares outstanding and potential common shares (in shares)	134.1	134.1	134.1	134.1
Net income per share
Basic (in dollars per share)	$ 0.38	$ 0.37	$ 0.79	$ 0.73
Diluted (in dollars per share)	$ 0.38	$ 0.37	$ 0.79	$ 0.73

XML

Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 30, 2018
Long-Term Debt
Total debt	$ 1,300.0	$ 456.6
Unamortized debt issuance costs	(25.2)	0.0
Current maturities of long-term debt	(8.0)	(456.6)
Long-term debt	1,266.8	0.0
Term Loan Facility
Long-Term Debt
Total debt	800.0	0.0
Notes
Long-Term Debt
Total debt	500.0	0.0
Other
Long-Term Debt
Total debt	$ 0.0	$ 456.6

XML

Long-Term Debt - Narrative (Details)	Jun. 28, 2019 USD ($)	Jun. 06, 2019 USD ($)	Jun. 30, 2019 USD ($)	Dec. 30, 2018 USD ($) note
Long-Term Debt
Outstanding letters of credit			$ 400,000	$ 2,100,000
Estimated fair value of long-term debt			1,320,000,000
Promissory Notes | Affiliated Entity
Long-Term Debt
Intercompany debt				$ 456,600,000
Number of promissory notes | note				3
Weighted average interest rate				8.27%
Credit Agreement
Long-Term Debt
Net leverage ratio	3.50
Notes | Senior Notes
Long-Term Debt
Aggregate principal amount, senior notes		$ 500,000,000.0
Senior notes stated interest rate, percentage		5.50%
Redemption price plus make-whole premium percentage		100.00%
Notes | Senior Notes | Debt Instrument, Redemption, Period One
Long-Term Debt
Redemption price percentage		105.50%
Notes | Senior Notes | Debt Instrument, Redemption, Period Two
Long-Term Debt
Redemption price percentage		40.00%
Notes | Senior Notes | Debt Instrument, Redemption, Period Three
Long-Term Debt
Redemption price percentage		101.00%
Notes | Senior Notes | Debt Instrument, Redemption, Period Four
Long-Term Debt
Redemption price percentage		100.00%
Secured Debt | Term Loan Facility
Long-Term Debt
Credit facility, term	7 years
Aggregate principal amount, line of credit	$ 800,000,000
Principal payments	$ 2,000,000
Secured Debt | Term Loan Facility | Adjusted LIBOR
Long-Term Debt
Interest rate basis, percentage	2.25%
Secured Debt | Term Loan Facility | Base Rate
Long-Term Debt
Interest rate basis, percentage	1.25%
Revolving Credit Facility | Revolving Credit Facility
Long-Term Debt
Credit facility, term	5 years
Aggregate principal amount, line of credit	$ 225,000,000
Sub-limit for issuance of letters of credit	50,000,000
Sub-limit for swing line loans	$ 50,000,000
Amount outstanding			$ 0
Revolving Credit Facility | Revolving Credit Facility | Minimum
Long-Term Debt
Commitment fee	0.25%
Revolving Credit Facility | Revolving Credit Facility | Maximum
Long-Term Debt
Commitment fee	0.35%
Revolving Credit Facility | Revolving Credit Facility | Adjusted LIBOR | Minimum
Long-Term Debt
Interest rate basis, percentage	2.25%
Revolving Credit Facility | Revolving Credit Facility | Adjusted LIBOR | Maximum
Long-Term Debt
Interest rate basis, percentage	1.75%
Revolving Credit Facility | Revolving Credit Facility | Base Rate | Minimum
Long-Term Debt
Interest rate basis, percentage	1.25%
Revolving Credit Facility | Revolving Credit Facility | Base Rate | Maximum
Long-Term Debt
Interest rate basis, percentage	0.75%
Revolving Credit Facility | Credit Agreement | Guarantor Subsidiaries
Long-Term Debt
Equity interests of subsidiary guarantors			100.00%
Equity interest of subsidiary guarantors' first tier foreign subsidiaries			65.00%

XML

Leases - Components of Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Operating lease cost	$ 28.8	$ 56.1
Finance lease cost:
Amortization of right-of-use assets	3.8	7.6
Interest on lease liabilities	0.2	0.5
Total finance lease cost	$ 4.0	$ 8.1

XML

Leases - Supplemental Cash Flow and Balance Sheet Information Related to Leases (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jul. 01, 2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$ 28.2	$ 54.7
Operating cash flows related to finance leases	0.2	0.5
Financing cash flows related to finance leases	2.7	8.3	$ 7.9
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	47.1	49.0
Finance leases	0.0	0.0
Operating Leases
Operating lease right-of-use assets	655.2	655.2
Other accrued expenses	66.8	66.8
Operating lease liabilities	633.0	633.0
Total operating lease liabilities	699.8	699.8
Finance Leases
Property and equipment, gross	118.7	118.7
Accumulated depreciation	(86.2)	(86.2)
Property and equipment, net	32.5	32.5
Other accrued expenses	12.1	12.1
Other liabilities	9.9	9.9
Total finance lease liabilities	$ 22.0	$ 22.0
Weighted Average Remaining Lease Term
Weighted Average Remaining Lease Term, Operating leases	12 years 2 months 17 days	12 years 2 months 17 days
Weighted Average Remaining Lease Term, Finance leases	2 years 1 month 6 days	2 years 1 month 6 days
Weighted Average Discount Rate
Weighted Average Discount Rate, Operating leases	6.20%	6.20%
Weighted Average Discount Rate, Finance leases	4.80%	4.80%

XML

Leases - Schedule of Maturities Of Operating And Financing Leases Liabilities (Details) $ in Millions	Jun. 30, 2019 USD ($)
Operating Leases
2019 (excluding the six months ended June 30, 2019)	$ 55.2
2020	102.4
2021	91.7
2022	82.1
2023	72.6
Thereafter	610.9
Total lease payments	1,014.9
Less imputed interest	(315.1)
Total	699.8
Finance Leases
2019 (excluding the six months ended June 30, 2019)	6.6
2020	10.7
2021	5.5
2022	0.3
2023	0.0
Thereafter	0.0
Total lease payments	23.1
Less imputed interest	(1.1)
Total	$ 22.0

XML

Commitments and Contingencies - Narrative (Details) - Record of Decision $ in Millions	1 Months Ended
	Dec. 31, 2014	Dec. 28, 2014 USD ($) a
Loss Contingencies [Line Items]
Estimated cost of cleanup | $		$ 342
Area of land involving dredging (acres)		105
Area of land involving capping (acres)		24
Area of land involving enhanced natural recover (acres)		48
Total length of cleanup	17 years
Active remediation	7 years
Monitored natural recovery	10 years

XML

Segment Information (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jul. 01, 2018 USD ($)	Jun. 30, 2019 USD ($) segment	Jul. 01, 2018 USD ($)	Dec. 30, 2018 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			3
Number of reportable segments | segment			1
Segment Information
Revenues	$ 366.4	$ 333.2	$ 723.6	$ 670.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	227.7	201.1	446.1	407.8
Selling, general and administrative	33.7	31.3	67.3	63.9
Depreciation and amortization	22.1	24.7	43.9	48.8
Total operating expenses	283.5	257.1	557.3	520.5
Operating profit	82.9	76.1	166.3	150.0
Interest expense	11.9	9.7	21.6	19.3
Other expense, net	(0.2)	(0.8)	(0.1)	(0.8)
Income before income taxes	71.2	67.2	144.8	131.5
Income taxes	19.9	17.4	39.0	33.4
Net income	51.3	49.8	105.8	98.1
Total assets	2,010.3	1,416.2	2,010.3	1,416.2	$ 1,500.2
United States
Segment Information
Revenues	320.5	300.1	634.8	603.5
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	195.8	179.6	384.9	364.8
Selling, general and administrative	30.7	28.1	60.7	57.9
Depreciation and amortization	20.5	23.0	40.5	45.4
Total operating expenses	247.0	230.7	486.1	468.1
Operating profit	73.5	69.4	148.7	135.4
Interest expense	11.9	9.7	21.6	19.3
Other expense, net	(0.1)	(0.8)	0.0	(0.8)
Income before income taxes	61.7	60.5	127.1	116.9
Income taxes	17.3	15.5	34.0	29.4
Net income	44.4	45.0	93.1	87.5
Total assets	1,829.0	1,271.5	1,829.0	1,271.5
International
Segment Information
Revenues	45.9	33.1	88.8	67.0
Operating expenses:
Cost of services (exclusive of depreciation and amortization)	31.9	21.5	61.2	43.0
Selling, general and administrative	3.0	3.2	6.6	6.0
Depreciation and amortization	1.6	1.7	3.4	3.4
Total operating expenses	36.5	26.4	71.2	52.4
Operating profit	9.4	6.7	17.6	14.6
Interest expense	0.0	0.0	0.0	0.0
Other expense, net	(0.1)	0.0	(0.1)	0.0
Income before income taxes	9.5	6.7	17.7	14.6
Income taxes	2.6	1.9	5.0	4.0
Net income	6.9	4.8	12.7	10.6
Total assets	$ 181.3	$ 144.7	$ 181.3	$ 144.7

XML

Subsequent Event (Details) - DDI - Subsequent Event $ in Millions	Jul. 31, 2019 USD ($)
Subsequent Event [Line Items]
Purchase price for the transaction	$ 17.0
Additional purchase price, contingent on certain terms, conditions and various performance targets	$ 4.1
Contingent consideration term	3 years
Annual revenue for DDI	$ 8.3

XML

Label	Element	Value
Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (3,000,000)
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 1,100,000