Openlane, Inc. · NYSE:OPLN
Openlane — KAR Holdings — Investor Day (February 2008)
54 slides from Openlane's investor day presentation, Feb 19, 2008
Slide 1: ADESA Analytical Services Reports
ADESA Analytical Services Reports Plus monthly postings on: www.adesa.com/kontoskorner Contact Tom Kontos tkontos@adesa.com 317/249-4235
Slide 2: GDP growth rates expected to slow below 1.0%
GDP growth rates are expected to slow to below 1.0% from year-end 2007 into early 2008. Real GDP Growth Rates 1.0% 6.4% -0.5% 2.1% -0.5% -1.4% 1.6% 2.7% 2.2% 2.4% 0.2% 1.2% 3.5% 2.7% 3.5% 3.6% 2.6% 3.1% 2.8% 4.5% 1.2% 4.8% 2.4% 1.1% 2.1% 0.6% 3.8% 4.9% 0.6% 7.5% 3.0% 1.2% -2.0% -1.0% 0.0% 1.0% 2.0%
Slide 3: Unemployment is creeping up
Unemployment is creeping up as employment growth has slowed somewhat this year. Recession: March - November 2001 Unemployment Rate 5.0% 0% 1% 2% 3% 4% 5% 6% 7% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Slide 4: Manufacturing has slowed and may be contracting
Manufacturing has slowed and may be contracting. ISM/Purchasing Managers' Index 47.7 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Recession Warning Level (41.9) Manufacturing Sector Breakeven Level (50.0)
Slide 5: Freight volumes have decreased significantly
Freight volumes have decreased significantly from their peak volumes in 2005. Truck Tonnage Index * (2000 = 100) 110.7 85.0 90.0 95.0 100.0 105.0 110.0 115.0 120.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 *Seasonally adjusted. Three-month moving average.
Slide 6: Low savings rates indicate consumers are spent-up
Low savings rates indicate that consumers are “spent-up, not pent-up.” Personal Saving as a Percent of Disposable Income -3% -2% -1% 0% 1% 2% 3% 4% 5% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
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Slide 8: Housing starts and residential construction
Low residential construction is costing the economy around 100 basis points of growth, but this is necessary to reduce unsold home inventories. Housing Starts 1,006 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 000s
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Slide 10: Fleet sales grew by 500,000 units 2003-2005
Fleet sales grew by 500,000 units between 2003 and 2005 and were steady in 2006. Fleet Sales by Manufacturers (Millions of Units) 0.92 0.83 0.77 0.83 0.96 1.01 1.68 1.71 1.77 1.94 2.08 2.05 2.59 2.54 2.54 2.77 3.04 3.06 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Commercial Fleet Rental Total (Commercial Fleet
Slide 11: Rental fleet sales dropped in 2007
Rental fleet sales dropped in 2007. Commercial fleet sales were up a bit. Domestics down ~269K; Japanese & Koreans up ~112K Fleet Sales by Manufacturers - YTD Through December - 1,010,512 1,015,625 2,054,373 1,897,486 3,064,885 2,913,111 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,50
Slide 12: Lease penetration above 25% level
Lease penetration is now above the 25% level we anticipated when interest rates started to rise. Lease Penetration (Personal Use* Leases as a Percent of Total New Vehicle Sales) 26.7% 30.5% 19.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% *"Personal use" leases are leases on vehicles used by busi
Slide 13: PIN data corroborates lease penetration growth
PIN data corroborates that lease penetration has grown since 2004. PIN and CNW Lease Penetration Data 28.7% 26.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% PIN CNW
Slide 14: Lease origination volume growing since 2004
Lease origination volume began growing in 2004 and has grown strongly since. New Lease Volume (Percent Change from Prior Year) -5.6% -16.7% -11.8% 1.6% 7.3% 7.7% 5.6% -20% -15% -10% -5% 0% 5% 10%
Slide 15: Fed data corroborates leasing is increasing
Fed data corroborates that leasing is increasing. Federal Reserve Board Consumer Leases Outstanding ($Millions) $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Slide 16: CPI for lease payments has come down
The Consumer Price Index for lease payments has come down over the last few years. Lease Payment Consumer Price Index (Dec 2001=100) 86.0 88.0 90.0 92.0 94.0 96.0 98.0 100.0 102.0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Source: U.S. Bureau of Labor Statistics. Data series began in January 2002.
Slide 17: More off-lease units entered the market in 2007
More off-lease units entered the market in 2007. Consumer Leases and Off-Lease Volumes Returning for Wholesale Remarketing (Millions) 4.16 3.61 3.17 3.05 3.26 3.40 3.50 3.67 4.00 4.17 4.21 4.25 1.68 1.81 1.89 1.93 1.48 1.26 1.25 1.33 1.39 1.43 1.50 1.64 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Co
Slide 18: Percentage of claims resulting in total loss
The percentage of claims resulting in total losses continues at all-time-high levels. Percentage of Insurance Claims Resulting in Total Loss 8.2% 8.4% 7.9% 8.5% 10.6% 11.3% 12.0% 13.3% 13.0% 12.9% 13.5% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Slide 19: Retail sales have been weak
Retail sales have been weak. Amount % New Vehicle Sales 16,154 16,561 (407) -2.5% Used Vehicle Sales 41,419 42,566 (1,147) -2.7% Franchised Dealers 14,285 14,319 (34) -0.2% Independent Dealers 13,077 13,710 (633) -4.6% Private Individuals 14,056 14,536 (480) -3.3% Total Vehicle Sales 57,573 59,127 (
Slide 20: Recovery in used vehicle sales for franchised dealers
A recovery in used vehicle sales for franchised dealers may be underway. Retail Used Vehicle Sales Trends -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% Ja n- Fe b- Ma r- Ap r- Ma y- Ju n- J ul- Au g- Se p- Oc t- No v- De c- Ja n- Fe b- Ma r- Ap r- Ma y- Ju n- J ul- Au g- Se p- Oc t- No v- De c-
Slide 21: New vehicle incentives relatively stable
New vehicle incentives have been relatively stable after dropping in 2006. This is good news for vehicle remarketers. Average New Vehicle Incentives According to Edmunds $2,458 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Slide 22: Used car prices more competitive vs new
Used car prices are becoming more competitive relative to new car prices. Used Vehicle Price as a % of New Vehicle Price* 52.9% 50.0% 55.0% 60.0% 65.0% 70.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 *Based on vehicles financed by domestic captive finance companies.
Slide 23: Retail used prices falling faster than new
Retail used vehicle prices are coming down faster than new vehicle prices. Both look like they’re leveling off. Comparison of New and Used Vehicle Consumer Price Indices -0.4% -0.5% -5% -4% -3% -2% -1% 0% 1% 2% New Vehicle CPI Used Vehicle CPI
Slide 24: Wholesale prices rose 2004-07, so did salvage
As wholesale used vehicle prices rose from 2004-07, so did salvage prices and recoveries. Comparison of Wholesale Prices and Assessed Values for Wholecar and Salvage Units $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 Avg Wholesale Price - All Vehicles Avg Wholesale Price - Salvage Vehicles Sold at
Slide 25: Maintenance and repair costs rising faster than used values
Maintenance and repair costs have been rising faster than used vehicle values leading to more total losses. Comparison of Consumer Price Indexes for Maintenance/Repairs to Used Vehicle Prices Jan-90 Jan-91Jan-92 Jan-93 Jan-94 Jan-95Jan-96 Jan-97 Jan-98Jan-99 Jan-00 Jan-01 Jan-02Jan-03 Jan-04 Jan-05
Slide 26: Scrap metal prices have fallen from peak
Scrap metal prices have fallen from peak levels, but remain high by historical standards. Scrap Metal Price Trends (Broker Prices for Shredded Auto Scrap) - Boston ($/Ton) $254 $0 $50 $100 $150 $200 $250 $300 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Slide 27: Prices up in recent months on low supply
Prices are up in recent months primarily due to low supply of program units this year. Year-on-Year Percent Change in Average Auction Prices -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Inflection Point - May Price firming Continued firming/recovery Price softening Supply- driven recovery
Slide 28: Prices strongest for off-rental units
Prices are strongest for the off-rental units sold by manufacturers that are in short supply. AuctionNet Price Trends by Sale Type 4.0% 3.6% 3.3% 6.8% 6.3% 7.7% 10.7% 11.3% 13.5% 9.5% 5.9% 6.4% 4.7% 3.0% 2.7% 3.1% 5.3% 4.7% 4.0% 3.6% 1.6% 2.0% 0.8% -2.5% -3.5% -2.2% -1.0% 1.1% 3.1% 2.9% 3.4% 5.8% 4.
Slide 29: Performance may vary based on model class
“ Performance may vary” based on model class as well. Total All Vehicles $9,939 $9,825 Total Cars $8,924 $9,000 Compact Car $6,203 $6,278 Midsize Car $7,414 $7,566 Fullsize Car $10,811 $10,418 Luxury Car $13,647 $13,785 Sporty Car $12,298 $12,534 Total Trucks $10,979 $10,734 Mini Van $8,204 $8,311 F
Slide 30: High inventory levels will pressure prices
High inventory levels will exert downward pressure on prices. Estimated Auction Industry Inventory Days* * Based on estimated auction industry inventory and sales levels for manufacturer and captive finance units only.
Slide 31: Luxury SUV prices trending down; luxury cars up
Luxury SUV prices have trended down compared to market of late; Luxury car prices have trended up. Price Trends in Luxury Segments Compared to Total Market $5,000 $7,000 $9,000 $11,000 $13,000 $15,000 $17,000 $19,000 $21,000 $23,000 $25,000 Luxury Car Luxury SUV All Segments
Slide 32: Monthly Prices as a % of Annual Average Price
Monthly Prices as a % of Annual Average Price Based on 1993-2006 AuctionNet Data* 99.24% 100.08% 101.60% 101.46% 101.61% 101.60% 101.23% 100.18% 99.51% 98.11% 97.15% 97.77% 94% 95% 96% 97% 98% 99% 100% 101% 102% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec *On vehicles seven model years old or le
Slide 33: In Summary
In Summary: • The macro economy is still in slow-growth mode. • Wholesale vehicle supply will increase. • Retail demand is weak. • Anticipate softer wholesale prices for first half of 2008.
Slide 34: Company Overview
KAR Holdings, Inc. Total 2007 Revenue: $1,588.9 Total 2007 PF Adjusted EBITDA: $405.2 ADESA Whole Car 2007 Revenue: $965.5 IAAI Salvage 2007 Revenue: $482.5 Automotive Finance Corp. (AFC) 2007 Revenue: $140.9 Used vehicle auctioneer Remarkets used vehicles from large institutions and dealers Salvage
Slide 35: Leading Market Positions
Manheim 51% Independents 31% Copart 37 % Independents / Other 28 % Leading Market Positions The Company operates the largest network of used and salvage vehicle auctions in North America and is a leader in the independent dealer floorplan financing market. North American Whole Car Auction Market Nor
Slide 36: Broad Geographic Footprint
Broad geographic footprint positions the Company as the preferred auction & floorplan financing provider for its customers. Broad Geographic Footprint The Company is 1 of 2 whole car & salvage providers that has a broad N.A. footprint • ADESA Whole Car — 59 auction sites • IAAI Salvage — 145 auction
Slide 37: ADESA Whole Car
Auctions strive to maximize the auction sales price for sellers by effectively and efficiently transferring the vehicles, paperwork and funds as quickly as possible. OEM 15% Fleet/Lease 26% OEM 18% Fleet/Lease 24% ADESA Whole Car 2006 Whole Car Suppliers OEM Captive Finance 22% Dealer 37% 2007 Whole
Slide 38: IAAI Salvage
Auctions strive to maximize the auction sales price for insurance company sellers and reduce their administrative costs and claim recovery cycle time. Rebuilders/ Resellers 25%–30% IAAI Salvage • One of only two salvage auctioneers with a national footprint: - Operates 145 facilities in 44 states an
Slide 39: AFC
Facilitates growth of vehicle sales at auction and allows ADESA and IAAI to have larger role in entire vehicle redistribution industry. AFC • Specializes in providing floorplan financing to independent dealers – Typical loan terms are 30 to 60 days and are secured by vehicle – Significant portion of
Slide 40: Major Initiatives
Major Initiatives Project Pride Salvage Integration Acquisitions & Relocations Whole Car Market Share Gains
Slide 41: Project Pride
Project Pride Whole car initiative led by management in tandem with Synergetics 3 regionally focused teams implementing the “MAP” at all locations Roll-out commenced Q4 6 sites completed to date 30 additional sites scheduled for 2008 Cost savings of $4.6M achieved
Slide 42: Salvage Integration
Salvage Integration All U.S. Impact sites integrated Canada integration in 2008 Integration of recently acquired branches to be completed in Redundant overhead eliminated Developing shared sites with ADESA Auctions Now offering AFC financing to qualified buyers
Slide 43: Acquisitions
Acquisitions * Syracuse, NY * Las Vegas, NV * Fargo, ND * York, PA * Sioux Falls, SD * Verastar * Quebec City * Dent Demon, LLC North Carolina (5 sites) Tennessee (3 sites) Georgia (2 sites) Alabama (1 site)
Slide 44: Relocations
Relocations Kansas City, KS Toronto, CA (Salvage) Dallas, TX Phoenix, AZ
Slide 45: Whole Car Market Share Gains
Significant institutional customer wins Substantial improvement of e-business systems Site expansions & improvements in meeting customer needs Improved business information systems to enhance customer reporting Increased dealer consignment sales Whole Car Market Share Gains
Slide 46: Long-Term Debt Structure
Long-Term Debt Structure $ in Millions Description Amount Rate Maturity Term B Loan - Hedged* 800.0 $ 5.34% + 225 Term B Loan - Unhedged 757.2 Libor + 225 Senior Credit Facility 1,557.2 $ Floating Rate Senior Notes 150.0 $ Libor + 400 Fixed Rate Senior Notes 450.0 8.75% Senior Subordinated Notes 425
Slide 47: KAR Holdings, Inc. Financial Highlights - Consolidated
Q4 Adjusted EBITDA ¹ Q4 Revenue Annual Revenue Annual Adjusted EBITDA ¹ KAR Holdings, Inc. Financial Highlights - Consolidated As defined in the Company’s senior credit facility; however, results have been adjusted to eliminate pro forma adjustments. $362 $398 $0 $100 $200 $300 $400 $500 Q4 2006 Q4
Slide 48: Financial Highlights - Whole Car
Annual Revenue Annual Adjusted EBITDA ¹ KAR Holdings, Inc. Financial Highlights - Whole Car 8% 13% As defined in the Company’s senior credit facility; however, results have been adjusted to eliminate pro forma adjustments. $965 $854 $0 $400 $800 $1,200 $213 $231 $0 $50 $100 $150 $200 $250
Slide 49: Financial Highlights - IAAI
Annual Revenue Annual Adjusted EBITDA ¹ KAR Holdings, Inc. Financial Highlights - IAAI 10% As defined in the Company’s senior credit facility; however, results have been adjusted to eliminate pro forma adjustments. $438 $483 $0 $200 $400 $600 $85 $112 $0 $50 $100 $150 32%
Slide 50: Financial Highlights - AFC
Annual Revenue Annual Adjusted EBITDA ¹ KAR Holdings, Inc. Financial Highlights - AFC As defined in the Company’s senior credit facility 2% 4% $144 $141 $0 $90 $180 $100 $96 $0 $40 $80 $120
Slide 51: Appendix
Appendix Discussion of Non-GAAP Measures: Pro forma combined presentation of segment results – This appendix includes pro forma combined presentations of the Company’s segment results for the fiscal years ended December 31, and as well as for the fourth quarter of 2006. The pro forma segment results
Slide 52: Adjusted EBITDA Reconciliation - Quarters Ended December 31, 2007 and 2006
KAR Holdings, Inc. Adjusted EBITDA Reconciliation For the Quarters Ended December 31, 2007 and 2006 EBITDA and Adjusted EBITDA, as presented herein, are supplemental measures of the Company’s performance that are not required by, or presented in accordance with, generally accepted accounting princip
Slide 53: Adjusted EBITDA Reconciliation - Year Ended December 31, 2007
KAR Holdings, Inc. Adjusted EBITDA Reconciliation For the Year Ended December 31, 2007 EBITDA, Adjusted EBITDA and Adjusted EBITDA per the Credit Agreement, as presented herein, are supplemental measures of the Company’s performance that are not required by, or presented in accordance with, generall
Slide 54: Adjusted EBITDA Reconciliation - Year Ended December 31, 2006
KAR Holdings, Inc. Adjusted EBITDA Reconciliation For the Year Ended December 31, 2006 EBITDA and Adjusted EBITDA, as presented herein, are supplemental measures of the Company’s performance that are not required by, or presented in accordance with, generally accepted accounting principles in the Un