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ADESA Inc. Reports Operating Results (10-K)

February 28, 2012 | About:

10qk

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ADESA

Inc. (KAR) filed Annual Report for the period ended 2011-12-31.

Kar Auction Svc has a market cap of $2.15 billion; its shares were traded at around $16.19 with a P/E ratio of 18.1 and P/S ratio of 1.2.

Highlight of Business Operations:

Revenue from ADESA decreased $58.5 million, or 5%, to $1,017.4 million for the year ended December 31, 2011, compared with $1,075.9 million for the year ended December 31, 2010. The decrease in revenue was primarily a result of a 7% decrease in the number of vehicles sold, partially offset by a 2% increase in revenue per vehicle sold to approximately $585 for the year ended December 31, 2011, compared to over $570 for the year ended December 31, 2010.

Our effective tax rate was 28.1% for the year ended December 31, 2010 compared with 32.4% for the year ended December 31, 2009. Excluding the effect of the discrete items, our effective tax rates for the years ended December 31, 2010 and December 31, 2009 would have been 38.3% and 51.8%, respectively. The change in the tax rate, excluding the effect of discrete items, was primarily attributable to the reduction of expenses permanently nondeductible for tax purposes, the increase in consolidated pre-tax profits and lower tax rates in state and foreign jurisdictions.

Revenue from ADESA decreased $12.6 million, or 1%, to $1,075.9 million for the year ended December 31, 2010, compared with $1,088.5 million for the year ended December 31, 2009. The decrease in revenue was primarily a result of a 7% decrease in the number of vehicles sold, partially offset by a 6% increase in revenue per vehicle sold to over $570 for the year ended December 31, 2010, compared to approximately $540 for the year ended December 31, 2009.

Note: Prior to 2011, certain AFC fees collected from customers were netted against cost of services, as well as certain selling, general and administrative expenses. Such fees included lot check fees, filing fees and postage fees, each of which are charged to and collected from AFC's customers. At December 31, 2011, these fees were included in revenue with the corresponding costs reflected in their respective expense categories, resulting in an increase to "Other revenue" as well as an increase to the related expenses for 2010 and 2009. For the year ended December 31, 2010, "Other revenue" has been increased by $7.6 million, "Cost of services" has been increased by $5.6 million and "Selling, general and administrative" has been increased by $2.0 million. For the year ended December 31, 2009, "Other revenue" has been increased by $5.9 million, "Cost of services" has been increased by $4.2 million and "Selling, general and administrative" has been increased by $1.7 million.

Some of our acquisitions from prior years include contingent payments related to revenues or unit volumes of certain vehicles sold subsequent to the purchase dates. We made contingent payments in 2011, 2010 and 2009 totaling approximately $1.8 million, $2.0 million and $1.6 million, respectively, pursuant to these agreements, which resulted in additional goodwill. In addition, in 2011, we reversed contingent consideration of approximately $4.6 million related to certain prior year acquisitions based on revised forecasts which indicated the unit volumes required during the measurement period in order for the contingent consideration to become payable would not be met. The net $4.6 million of contingent consideration adjustments were recorded to "Other (income) expense, net" in the consolidated statement of income.

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