Barclay's+2010+Global+Automotive+Conference+November+2010

8/8/2019 Barclay's+2010+Global+Automotive+Conference+November+2010

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Barclays 2010 Global Automotive ConferenceNovember 17, 2010

KAR Auction Services


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2

Forward-Looking Statements

This presentation includes forward-looking statements as that term isdefined in the Private Securities Litigation Reform Act of 1995. Suchforward looking statements are subject to certain risks, trends, and

uncertainties that could cause actual results to differ materially fromthose projected, expressed or implied by such forward-lookingstatements. Many of these risk factors are outside of the companyscontrol, and as such, they involve risks which are not currently knownto the company that could cause actual results to differ materiallyfrom forecasted results. Factors that could cause or contribute to

such differences include those matters disclosed in the companysSecurities and Exchange Commission filings. The forward-lookingstatements in this document are made as of the date hereof and thecompany does not undertake to update its forward-looking statements.


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Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, adjusted net income and adjusted netincome per share, and percentages or calculations using thesemeasures, as presented herein, are supplemental measures of the

company's performance that are not required by, or presented inaccordance with, generally accepted accounting principles in theUnited States, or GAAP. They are not measurements of the company'sfinancial performance under GAAP and should not be considered assubstitutes for net income (loss) or any other performance measuresderived in accordance with GAAP or as substitutes for cash flow from

operating activities as measures of the company's liquidity. SeeAppendix for additional information and a reconciliation of these non-GAAP measures to GAAP net income (loss).


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2009 Revenue: $1,730mm2009 Adj. EBITDA: $426mm1

~3.3mm Vehicles Sold in 2009

Top 2 whole car auction position

22% market share

70 North American locations

88 loan origination offices

2009 Revenue2: $1,177mm2009 Adj. EBITDA2: $335mm

2009 Revenue: $553mm2009 Adj. EBITDA: $147mm

Top 2 salvage vehicle auctionposition

35% market share

159 North American locations

Leading Provider of VehicleAuction Services in North America

1 Includes corporate charges of $56mm

2 Includes AFC revenue of $88mm and adjusted EBITDA of $49mm


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Vehicle Remarketing Life Cycle

Source: Used vehicle (whole car) value per National Auto Auction Association. New vehicle registrations, vehicles in operation and vehicles removed from operation perR.L. Polk & Co. Used vehicle transactions and consumer to consumer transactions per CNW Marketing for the U.S. and DesRosiers Automotive Consultants for Canada.All other numbers based on company estimates. Estimates based on 2008 data; actual numbers may differ.

New Vehicle Registrations

10-15 Million units

Removed fromOperation 12 Million units

Vehicles inOperation

270 Millionunits

Salvage Auctions3 - 4 Million units

Dealer Trades11 Million units

Wholesalers & Virtual Auctions

7 Million units

Consumer-to-Consumer

12 Million units

KARs CoreMarkets

Used Vehicle (Whole Car )

Auctions

9 Million units

Used VehicleTransactions inNorth America

~40 Million

units


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Value-AddedAncillary Services

Seller

Whole Car Consignors

Dealers

OEMs and their CaptiveFinance Arms

Commercial Fleet Customers

Financial Institutions

Rental Car Companies

Salvage Vehicle Consignors

Insurance Companies

Charities

Whole Car Providers

Whole Car Buyers

Salvage Buyers

BuyerAuction Fee

Franchised Dealers

Independent Dealers

Wholesale Dealers

Dismantlers

Rebuilders & Resellers

Recyclers

Vehicle Flow Whole Car andSalvage Markets

Auction Fee


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North America Whole Car Auction & SAAR Volumes (mm)

Whole Car Auction IndustryVolume vs. SAAR

Source: National Auto Auction Association and KAR Auction Services, Inc. estimates 7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

N.A. SAAR 19.0 18.7 18.6 18.3 18.4 18.6 18.2 17.8 14.9 11.9

(in Millions)

20

16

12

8

4

0

In MillionsOf Units

9.39.5 9.5

10.09.7

9.4 9.5 9.5 9.59.1

Dealers Leasing/Fleet/Repo Factory Other


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8.5%

10.6%

11.3%

12.1%

13.4%13.0%

12.9%

13.5%14.0%

14.3%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2.12.2 2.2

2.32.4

2.42.52.6

2.6 2.72.72.8

2.92.9

3.03.03.0 3.02.9 2.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Driven by Growth in Miles Driven(mm)

..And Increasing Proportion of Total LossInsurance Claims

U.S. Salvage Industry Growth

Source: US DOT Federal Highway Administration, CCC Information Services.


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Whole Car Market Share Salvage Market Share

Manheim

Other

ADESA

Leader in Whole Car andSalvage Auction Markets

No other competitor holds more than 3% whole car market share or 10%salvage market share

Copart

IAAI

Other

Source: Market share based on company estimates of vehicles sold as of 2009 year end. Manheim market share includes sales outside of North America.


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Whole Car Market Share Drivers of Growth

Salvage Market Share

Successful sales focus in whole carbusiness

Institutional

Dealer

e-Business

Providing best venue for all remarketers

Co-located facilities

e-Business

Selected strategic acquisitions,greenfields and relocations

21 sites acquired

9 greenfield developments

3 relocations

18%

22%

0%

5%

10%

15%

20%

25%

2006 2009

33% 35%

0%

8%

16%

24%

32%

40%

2006 2009

Track Record of Market ShareExpansion

Source: Market share numbers are based on the number of vehicles sold by the Company in 2006 and 2009 and Company estimates of the number ofvehicles sold by competitors during the same periods. Actual numbers may differ.


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Differentiated Physical and InternetPresence in Whole Car and Salvage

Only company with significant presence in both internet and physical andwhole car and salvage markets

KARs unique presence in whole car and salvage markets affords customerschannel optimization opportunities

Internet, physical and hybrid model optimizes results for customers

The majority of IAAI salvage vehicles receive internet bids with approximately half ofsalvage vehicles sold to online buyers

>73% of salvage buyers, when asked, prefer hybrid auction model vs. on-line only

Unique presence maximizes proceeds to customer at auction


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The Company does business with major suppliers of whole car and salvage vehicles

Average relationship of over ten years with top ten vehicle suppliers Largest customer less than 4% of 2009 consolidated revenue

Over 150,000 registered whole car and salvage buyers from over 100 countries

VehicleManufacturers &

Finance CompaniesBanksRental

Car Companies

Established Relationships withVehicle Providers & Buyers

InsuranceCompanies

Other SalvageProviders


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Whole Car Adj. EBITDA Margin Key Drivers of Improvement

Salvage Adj. EBITDA Margin

Implementation of best practices atwhole car (PRIDE)

Integration of ADESAs and IAAIssalvage operations

Co-location of selected whole car andsalvage sites

Leverage AFCs services at ADESA andIAAI

Continuous operational improvementsand restructuring / cost reductionprograms

Economies of scale operating leverageas volumes increase

Volume and fee increases andoperational efficiency gains at acquiredfacilities

e-Business expansion / volume gains

24.5%

26.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2007 2009

Strong Margins and EfficientBusiness Model

23.6%

26.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2007 2009


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Consolidated Financial Highlights

$1,589 $1,771 $1,730$1,374

$0

$500

$1,000

$1,500

$2,000

2007 2008 2009 YTD**2010

Revenue Gross Profit

($mm)

($mm)

Adjusted EBITDA Adjusted Net Income Per Share

($mm)

$0.61

$0.85

$0.00

$0.25

$0.50

$0.75

$1.00

YTD** 2009 YTD** 2010

44.2%39.2%

$698 $718 $732$624

$0

$300

$600

$900

2007 2008 2009 YTD**2010

$396 $394 $426$372

$0

$250

$500

2007 2008 2009 YTD**2010

43.9% 40.6% 42.3% 45.5%

**

*

* Represents pro forma results for the year ended December 31, 2007 so as to illustrate the estimated effects

of the 2007 transactions as if they had occurred on January 1, 2007.** YTD through September 30


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Significant Cash Flow Generation(US$ in millions)

Operating Cash Flow Less Capital Expenditures

$95

$185

$0

$50

$100

$150

$200

$250

2008 2009

Annual Cash Flow less

Capx as a % of revenues 5.4% 10.7%


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9/30/2010 Maturity

Available Cash $322.2

Term Loan Facilities 1,219.6 2013

Floating Rate Notes 150.0 2014

Fixed Rate Notes (8.75%) 450.0 2014

Senior Sub. Notes (10%) 199.4 2015

Total Consolidated Debt $2,019.0

Net Debt $1,696.8

Net Debt /Adjusted EBITDA 3.6X

September 30, 2010 Capital Structure(US$ in millions)

Focused Commitment to Deleveraging


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KARs Diverse Business Model Adjusted EBITDA Contribution by Segment*

0%

20%

40%

60%

80%

100%

2007 2008 2009 YTD*2010

ADESA IAAI AFC

*Percentage calculations exclude holding company . YTD through September 30, 2010

$396M $394M $426M $372M

** Represents pro forma results for the year ended December 31, 2007 so as to illustrate the estimated effectsof the 2007 transactions as if they had occurred on January 1, 2007.

**

34%

10%

60%

30%

14%

52%53%

11%22%

25% 30%

59%


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Q3 2010 Highlights

Lease Origination Levels Rebound

PAG 6-Site Acquisition

Proposed $150M Debt Paydown

Revenue & Earnings Growth

18


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Appendix


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Non-GAAP Financial Measures

EBITDA is defined as net income (loss), plus interest expense net of interest income, income tax provision (benefit),depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items of income and expense andexpected incremental revenue and cost savings as described in the company's senior secured credit agreementcovenant calculations. Management believes that the inclusion of supplementary adjustments to EBITDA applied inpresenting Adjusted EBITDA is appropriate to provide additional information to investors about one of the principalinternal measures of performance used by the companys creditors. In addition, management uses Adjusted EBITDA toevaluate the companys performance and to evaluate results relative to incentive compensation targets.

The revaluation of certain assets of the company, and resultant increase in depreciation and amortization expensewhich resulted from the 2007 merger, as well as stock-based compensation expense incurred in connection withservice and exit options tied to the 2007 merger, have had a continuing effect on the companys reported results. Non-GAAP measures of adjusted net income and adjusted net income per share, in the opinion of the company, providecomparability to other companies that may have not incurred these types of noncash expenses. In addition, net incomeand net income per share for the year ended December 31, 2008 have been adjusted to exclude the effect of the$164.4 million charge for the impairment of goodwill and other intangibles at AFC. Likewise, net income and netincome per share for the nine months ended September 30, 2010 have been adjusted to exclude the loss on

extinguishment of debt.

EBITDA, Adjusted EBITDA, adjusted net income and adjusted net income per share have limitations as analytical tools,and should not be considered in isolation, or as a substitute for analysis of the results as reported under GAAP. These

measures may not be comparable to similarly titled measures reported by other companies.


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2007 Pro Forma Results Reconciliation

KAR Auction Services ADESA IAAI

Consolidated Pro

Forma

January 1, 2007 to

December 31, 2007

January 1, 2007

to April 19, 2007

January 1, 2007

to April 19, 2007

Pro Forma

Adjustments

January 1, 2007 to

December 31, 2007

Revenues

ADESA 677.7$ 325.4$ -$ (37.6)$ 965.5$

IAAI 330.1 - 114.8 37.6 482.5

AFC 95.0 45.9 - - 140.9

1,102.8$ 371.3$ 114.8$ -$ 1,588.9$

Cost of services

ADESA 386.1$ 177.7$ -$ (22.3)$ 541.5$

IAAI 219.0 - 76.5 22.3 317.8

AFC 22.3 9.6 - - 31.9

627.4$ 187.3$ 76.5$ -$ 891.2$

Gross profit

ADESA 291.6$ 147.7$ -$ (15.3)$ 424.0$

IAAI 111.1 - 38.3 15.3 164.7

AFC 72.7 36.3 - - 109.0

475.4$ 184.0$ 38.3$ -$ 697.7$

Note: The Company was incorporated on November 9, 2006, but had no operations until the consummation of the 2007 Transactionson April 20, 2007. The pro forma adjustments noted above are presented to combine the financial results of ADESA Impact and IAAI.


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2007 Adjusted EBITDA Reconciliation

Year Ended December 31, 2007

(Dollars in millions) ADESA IAAI AFC Corporate Consolidated

Net Income (Loss) $37.0 $2.2 $25.9 $(103.4) $(38.3)

Add Back: ADESA 2007 Net Income 39.4 16.2 (28.7) 26.9

Add Back: ADESA 2007 Discontinued Ops 0.1 0.1

Add back: IAAI 2007 Net Loss (0.4) (0.4)

Income (Loss) from Continuing Operations $76.5 $1.8 $42.1 $(132.1) $(11.7)

Add Back:

Income Taxes $30.0 $2.4 $17.2 $(59.6) $(10.0)

ADESA 2007 Income Taxes 22.2 10.5 (7.8) 24.9

IAAI 2007 Income Taxes 1.5 1.5

Interest Expense, Net of Interest Income (0.4) (0.3) 156.7 156.0

ADESA 2007 Interest Expense, Net of Interest Income (0.1) 6.4 6.3

IAAI 2007 Interest Expense, Net of Interest Income 9.9 9.9

Depreciation and Amortization 64.6 40.0 17.8 4.2 126.6

ADESA 2007 Depreciation and Amortization 14.7 0.9 0.3 15.9

IAAI 2007 Depreciation and Amortization 7.9 7.9

Intercompany 20.2 22.2 1.1 (43.5)

ADESA 2007 Intercompany (4.6) 11.1 2.2 (8.7)

EBITDA $223.1 $96.5 $91.8 $(84.1) $327.3

Adjustments 13.4 17.3 5.5 32.0 68.2

Adjusted EBITDA $236.5 $113.8 $97.3 $(52.1) $395.5

Revenue

ADESA - January 1 - April 19, 2007 $287.8 $37.6 $45.9 $ $371.3

IAAI - January 1 - April 19, 2007 114.8 114.8

KAR - April 20 - December 31, 2007 677.7 330.1 95.0 1,102.8

Total Revenue $965.5 $482.5 $140.9 $1,588.9

Adjusted EBITDA Margin % 24.5% 23.6% 69.1% 24.9%


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Net Income (Loss) $52.5 $9.2 $(151.3) $(126.6) $(216.2)

Add back:

Income Taxes 33.7 6.3 10.2 (81.6) (31.4)

Interest Expense, Net of Interest Income 0.2 213.2 213.4


Intercompany 44.4 38.4 (0.7) (82.1)

EBITDA $223.8 $115.7 $(116.5) $(74.4) $148.6

Adjustments 41.3 17.5 166.9 19.2 244.9

Adjusted EBITDA $265.1 $133.2 $50.4 $(55.2) $393.5

Revenue $1,123.4 $550.3 $97.7 $ $1,771.4



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Net Income (Loss) $94.4 $25.8 $19.1 $(116.1) $23.2

Add back:

Income Taxes 56.0 16.2 8.4 (69.5) 11.1

Interest Expense, Net of Interest Income 0.5 1.4 170.3 172.2


Intercompany 28.9 36.2 (6.8) (58.3)

EBITDA $268.2 $137.9 $45.4 $(72.6) $378.9

Adjustments 18.1 8.7 3.8 16.4 47.0

Adjusted EBITDA $286.3 $146.6 $49.2 $(56.2) $425.9

Revenue $1,088.5 $553.1 $88.0 $ $1,729.6



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YTD 2010 Adjusted EBITDA Reconciliation

Nine Months Ended September 30, 2010


Net Income (Loss) $72.0 $33.3 $27.2 $(70.2) $62.3

Add back:

Income Taxes 38.7 21.5 17.4 (47.9) 29.7

Interest Expense, Net of Interest Income 0.8 1.7 5.1 98.7 106.3


Intercompany 31.0 28.6 (8.5) (51.1)

EBITDA $207.1 $128.8 $59.8 $(70.1) $325.6

Adjustments 11.3 11.8 (0.7) 24.2 46.6

Adjusted EBITDA $218.4 $140.6 $59.1 $(45.9) $372.2

Revenue $821.1 $458.4 $94.2 $ $1,373.7



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LTM Adjusted EBITDA Reconciliation

Three Months Ended

Twelve Months

Ended

(Dollars in millions) (Unaudited)

December 31,

2009

March 31,

2010

June 30,

2010

September 30,

2010

September 30,

2010

Net income$5.3 $8.1 $28.6 $25.6 $67.6

Add back:

Income taxes

0.1 (1.3) 19.9 11.1 29.8Interest expense, net of interest income

39.7 34.9 35.9 35.5 146.0

Depreciation and amortization42.5 43.3 41.8 42.2 169.8

EBITDA87.6 85.0 126.2 114.4 413.2

Nonrecurring charges2.0 21.1 3.0 2.8 28.9

Noncash charges(1.3) 12.6 3.6 5.8 20.7

Advisory services11.4 -- -- -- 11.4

AFC interest expense -- (1.4) (1.8) (1.9) (5.1)

Accounting change-- 2.8 -- -- 2.8

Adjusted EBITDA$99.7 $120.1 $131.0 $121.1 $471.9


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Adjusted Net Income PerShare Reconciliation

(1) The loss on extinguishment of debt was $25.3 million ($15.7 million net of tax) and was incurred in the first quarter 2010.

(2) For the nine months ended September 30, 2010 and 2009, increased depreciation and amortization expense was $48.0million ($30.1 million net of tax) and $55.2 million ($34.7 million net of tax).

(3) For the nine months ended September 30, 2010 and 2009, such stock-based compensation was $12.4 million ($7.6 millionnet of tax) and $15.7 million ($13.0 million net of tax).

Nine Months EndedSeptember 30,

(In millions, except per share amounts) 2010 2009

Net income $ 62.3 $ 17.9

Loss on extinguishment of debt, net of tax (1) 15.7 -

Stepped up depreciation and amortization expense, net of tax (2) 30.1 34.7

Stock-based compensation, net of tax (3) 7.6 13.0

Adjusted net income $ 115.7 $ 65.6

Net income per share - diluted $ 0.46 $ 0.17

Loss on extinguishment of debt, net of tax 0.12 -

Stepped up depreciation and amortization expense, net of tax 0.22 0.32

Stock-based compensation, net of tax 0.05 0.12

Adjusted net income per share $ 0.85 $ 0.61

Weighted average diluted shares 135.8 106.9

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