Openlane, Inc. · NYSE:OPLN
Openlane — KAR Holdings — Investor Day (December 2008)
59 slides from Openlane's investor day presentation, Dec 12, 2008
Slide 1: KAR Holdings, Inc. Analyst Day December 12, 2008
KAR Holdings, Inc. Analyst Day December 12, 2008 Exhibit 99.1
Slide 2: Agenda
Agenda Information Technology Update – John Nordin, EVP & CIO Used Vehicle Market Conditions and Outlook – Tom Kontos, EVP Customer Strategies and Analytics Corporate Update – Eric Loughmiller, EVP & CFO
Slide 3: Information Technology Update
Information Technology Update
Slide 4: ADESA Auction Operations
ADESA Auction Operations Business process and systems integration • Work order management system • Electronic vehicle inspection integration • Electronic vehicle check-in Acquisition integrations Improved business information systems • Business intelligence system • Management operating system Upgra
Slide 5: Slide 5
Slide 6: ADESA E-Business Channels
ADESA E-Business Channels Units Enter Stream Seller’s Value Proposition Reduced expenses and days to sell. Ability to build the brand. Seller’s Value Proposition Increase buyer base and exposure of inventory to market. Access to reconditioning and storage locations. Transportation Occurs Offered in
Slide 7: ADESA E-Business
ADESA E-Business New upstream and mid-stream product offerings: • Private label storefronts • Common back office platform • Integrated with auction ops systems New customers in 2008: • Nissan/Chrysler/Hyundai/Kia • VW/BMW/US Bank/Chrysler Fleet • New features in 2008: Autobid functionality Transport
Slide 8: ADESA E-Business
ADESA E-Business Live internet bidding platform Acquisition of LiveGlobalBid Settlement of AMS patent infringement lawsuit All auction lanes/all locations In development pipeline for 2009: ADESA.com V2 New customers Vehicle condition report and image repository
Slide 9: Nissan Dashboard
Nissan Dashboard
Slide 10: Nissan Dashboard screenshot
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Slide 11: Electronic Condition Report
Electronic Condition Report Condition Report for a vehicle
Slide 12: ADESA.com v2 Advanced Search
ADESA.com v2 Advanced Search
Slide 13: ADESA.com v2 search results screenshot
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Slide 14: Other 2009 KAR IT Initiatives
Other 2009 KAR IT Initiatives Insurance Auto Auctions Vehicle Condition Reports New Buyer Website Mobile Inventory Mgmt Pilot • AutoVin • Core Technology Refresh • Field Dispatch and Routing System • PAR • Business System Replacement
Slide 15: Corporate IT Initiatives
Corporate IT Initiatives IT outsourcing Payroll Datacenter operations E-Business development • IT expense management • KAR-level contracts • Vendor rebates • Vendor and product standardization • IT infrastructure • Redundant • Reliable • Scalable • IT talent • Fully staffed
Slide 16: Used Vehicle Market Conditions and Outlook
Used Vehicle Market Conditions and Outlook December 2008
Slide 17: Remarketing Industry Supply
Remarketing Industry Supply
Slide 18: Rental and commercial fleet sales have fallen significantly this year
Rental and commercial fleet sales have fallen significantly so far this year. Fleet Sales by Manufacturers - YTD Through October - 839,159 755,150 1,580,078 1,312,078 2,419,237 2,067,228 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Sales Volume Commercial Fleet Rental Total Units % Comm
Slide 19: Lease penetration has eroded
The withdrawal and de-emphasis of leasing, particularly of SUVs and pickups by some players, has caused some erosion in lease penetration. Lease Penetration (Personal Use* Leases as a Percent of Total New Vehicle Sales) 19.3% 30.5% 20.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% *"Personal use"
Slide 20: Decline in lease origination volume in 2008
The decline in lease origination volume in 2008 is due more to low new-vehicle sales than to the withdrawal from leasing by some players. New Lease Volume (Percent Change from Prior Year) -5.6% -16.7% -11.8% 1.6% 7.3% 7.7% 5.6% -12.8% -20% -15% -10% -5% 0% 5% 10% 2008YTD Sep
Slide 21: Consumer leases outstanding in long-term perspective
Fed data puts recent lease trends into a long-term perspective and confirms that there are a lot of leases in the pipeline. Federal Reserve Board Consumer Leases Outstanding* ($Millions) $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- J
Slide 22: Off-lease volume for the remainder of the decade
Nevertheless, the growth in lease origination volume from 2004-2007 should provide ample off- lease volume for the remainder of the decade. Growth (000s): 162 195 49 82 -174 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 3
Slide 23: Delinquency rates are at all-time highs
Delinquency rates are at all-time highs. Indirect Auto Loan Delinquency Rates - Quarterly % of Loans 30 Days or More Overdue - 3.07% 0% 1% 1% 2% 2% 3% 3% 4%
Slide 24: Repos are at all-time highs
Repos are at all-time highs and will climb to the 2 million range in 2008 and 2009. Repossessions (000s of Units) 1,004 1,078 1,185 1,183 1,197 1,267 1,113 1,235 1,376 1,428 1,506 1,494 1,521 1,643 1,000 1,200 1,400 1,600 1,800 New Used Source: CNW Marketing/Research and ADESA Analytical Services.
Slide 25: Retail Vehicle Markets
Retail Vehicle Markets
Slide 26: New and used vehicle sales in the U.S.
Franchised dealers have tried to offset declines in new vehicle sales by emphasizing used vehicle sales. Independent dealers are having an even tougher go. Amount % New Vehicle Sales 11,605 13,584 (1,979) -14.6% Used Vehicle Sales 31,410 35,204 (3,793) -10.8% Franchised Dealers 11,215 12,065 (850) -
Slide 27: Dealer consolidation now driven by exits
Dealers consolidation has shifted from being primarily due to acquisitions to being primarily due to exits. Number of Franchised and Independent Dealerships in the U.S. 18,000 19,000 20,000 21,000 22,000 23,000 24,000 25,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 Franchised I
Slide 28: Dealers carrying less inventory
Dealers have recently been unable or unwilling to carry as much inventory. Manufacturer-to-Dealer Floor Plans Outstanding $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- $Millions
Slide 29: New vehicle incentives have climbed
New vehicle incentives had been relatively stable after dropping in 2006. However, they have climbed recently in light of weak sales. Average New-Vehicle Incentives According to Edmunds $2,677 $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 Jan-08
Slide 30: Used vehicle prices relative to new vehicles
Despite higher new-car incentives, used vehicle prices are becoming more attractive relative to new vehicles. Used Vehicle Price as a % of New Vehicle Price* 60.4% 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 Jan-08 *Based on vehicles financed by domestic cap
Slide 31: New and used vehicle consumer price indices
Dealers appear to be sharply discounting their used vehicle inventories to trigger more used vehicle sales. Comparison of New and Used Vehicle Consumer Price Indices -5% -4% -3% -2% -1% 0% 1% 2% 3% New Vehicle CPI Used Vehicle CPI
Slide 32: Wholesale Vehicle Markets
Wholesale Vehicle Markets
Slide 33: October's price decline was the most dramatic
October’s price decline was the most dramatic we’ve ever seen. Year-on-Year Percent Change in Average Auction Prices -14.0% -12.0% -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 Weakening Retail Sales Supply- driven recovery fo
Slide 34: Fuel economy and auction prices by model class
Fuel economy goes a long way in explaining variances in sales prices between vehicle model class segments. Percent Change in Average Auction Price by Model Class - 2008 vs. 2007 (YTD October) 9.1% -1.3% -1.6% -9.0% -9.9% -9.9% -10.6% -11.7% -16.4% -18.5% -3.8% -4.5% -4.7% -6.0% -20% -15% -10% -5% 0%
Slide 35: Vehicle Prices Are Changing
Vehicle Prices Are Changing Ford F-150: 2008 - $12,901 2007 - $16,544 BMW 5 Series: 2008 - $19,123 2007 - $25,307 Toyota Corolla: 2008 - $6,208 2007 - $6,206
Slide 36: Auction inventories are at all-time highs
Auction inventories are at all-time highs. This represents much-needed liquidity at a time when cash is king. Estimated Auction Industry Inventory Days* * Based on estimated auction industry inventory and sales levels for manufacturer and captive finance units only.
Slide 37: Corporate Update
Corporate Update
Slide 38: Company Overview
KAR Holdings, Inc. Total 2007 Revenue: $1,589 million Total 2007 PF Adjusted EBITDA: $405 million ADESA Auctions 2007 Revenue: $965 million Company Overview ($ in millions) IAAI Salvage 2007 Revenue: $483 million Used vehicle auctioneer Remarkets used vehicles from large institutions and dealers Sal
Slide 39: Broad Geographic Footprint
Broad Geographic Footprint Broad geographic footprint positions the Company as the preferred auction & floorplan financing provider for its customers. The Company has the largest combined network of Used Car and Salvage Auctions in N.A. ADESA Auctions —61 auction sites IAAI Salvage —151 auction site
Slide 40: Leading Market Positions
Leading Market Positions North American Used Vehicle Auction Market – 9.5 Million Units North American Salvage Auction Market – 3.2 Million Units Source: GVR Report and Company estimates Copart 37% Insurance Auto Auctions 35% Independents 28% Manheim 51% ADESA 19% Independents 30%
Slide 41: ADESA Auctions
ADESA Auctions Auctions strive to maximize the auction sales price for sellers by effectively and efficiently transferring the vehicles, paperwork and funds as quickly as possible Fleet/Lease 30% OEM 13% Second largest whole car vehicle auctioneer in the U.S. and the largest in Canada • Operates 61
Slide 42: IAAI Salvage
IAAI Salvage Percentage of Claims Resulting in Total Loss One of only two salvage auctioneers with a national footprint • Serves all top 75 U.S. metropolitan markets Hybrid auction format, combining Internet and live auctions: • Leads to higher proceeds for suppliers • Increases international buyers
Slide 43: AFC
Facilitates growth of vehicle sales at auction and allows ADESA and IAAI to have larger role in entire vehicle redistribution industry. AFC Provides floorplan financing to independent dealers • 30 to 60 day loan terms • Serves over 800 auctions Market leader- In a market of 43,000 registered dealers
Slide 44: Major Initiatives
Major Initiatives Market Share Improvement Domestic Expansion E-Business Improved Earnings through Cost Savings and Operations Initiatives Stabilize performance of AFC
Slide 45: Market Share Improvement
Market Share Improvement Significant institutional customer wins Site expansions & improvements in meeting customer needs Improved business information systems to enhance customer reporting Increased dealer consignment sales
Slide 46: Domestic Expansion
Domestic Expansion Relocations of capacity-constrained facilities: • Dallas (used car) • Phoenix (used car) • Kansas City (used car) • Toronto (salvage) Acquisitions of independent used vehicle auctions Acquisitions of independent salvage auctions • Reduce customer towing costs • Ease capacity const
Slide 47: Cost Savings
Cost Savings Implementing consistent used car auction operating practices • 32 of 61 sites completed to date • Operational audit team in place to verify compliance Improved technology to support auction operations • Reduced administrative effort and elimination of redundant processes • Improved cust
Slide 48: Major Initiatives - AFC
Major Initiatives - AFC Streamlined Operations: • Closed 14 offices • Reduced headcount to match volumes • Increased staffing in credit & collections Tightened Credit Policies Reduced Credit for Non-Auction Purchases
Slide 49: KAR Holdings Consolidated Financial Summary
KAR Holdings Consolidated Financial Summary
Slide 50: Long-Term Debt Structure
Long-Term Debt Structure As of Description 9/30/2008 Rate Maturity Term B Loan - Hedged* 800.0 $ 5.34% + 225 Term B Loan - Unhedged 701.5 Libor + 225 Senior Credit Facility 1,501.5 $ Floating Rate Senior Notes 150.0 $ Libor + 400 Fixed Rate Senior Notes 450.0 8.75% Senior Subordinated Notes 425.0 10
Slide 51: Consolidated Balance Sheet
Consolidated Balance Sheet (millions of US dollars) 12/31/2007 9/30/2008 Cash & equivalents $221 $212 Other current assets Total current assets PP&E and Other assets 3,629 3,441 Total Assets 4,531 4,345 Current liabilities Long-term debt 2,566 2,527 Other non-current liabilities* Total Equity 1,014
Slide 52: Financial Strength – 9/30/08
Financial Strength – 9/30/08 Strong Liquidity : • $211.8M of cash & equivalents; $97.5M available • No borrowings O/S on $300M revolver Q3 Earnings : • Net loss of $169.9M, included non-cash charge of $164.4M • Charge related to write down of goodwill & trade names at AFC • No impact on compliance w
Slide 53: Financial Highlights - Consolidated
Financial Highlights - Consolidated Q3 Revenue Q3 Operating Profit YTD Revenue YTD Operating Profit Results for ADESA and IAAI prior to the April 20, 2007 merger transactions have been combined to illustrate the effect of the merger transactions as if they had occurred on January 1, 2007. * Excludes
Slide 54: Financial Highlights – ADESA Auctions
Financial Highlights – ADESA Auctions YTD Revenue YTD Operating Profit $111 $120 $0 $50 $100 $150 $863 $720 $0 $200 $400 $600 $800 $1,000 YTD Revenue YTD Operating Profit 8% 20% Results for ADESA and IAAI prior to the April 20, 2007 merger transactions have been combined to illustrate the effect of
Slide 55: Financial Highlights - IAAI
Financial Highlights - IAAI YTD Revenue YTD Operating Profit $30 $53 $0 $25 $50 $75 YTD Revenue YTD Operating Profit 18% Results for ADESA and IAAI prior to the April 20, 2007 merger transactions have been combined to illustrate the effect of the merger transactions as if they had occurred on Januar
Slide 56: Financial Highlights - AFC
Financial Highlights - AFC YTD Operating Profit YTD Revenue YTD Operating Profit 22% 49% YTD Revenue * Excludes non-cash goodwill and other intangibles impairment charge of $164.4 million $110 $86 $0 $30 $60 $90 $120 $150 $28 $55 $0 $40 $80 2008*
Slide 57: Appendix
Appendix Discussion of Non-GAAP Measures: EBITDA, Adjusted EBITDA and Adjusted EBITDA per the Credit Agreement – The Company’s management believes that EBITDA is a useful supplement and meaningful indicator of earnings performance to be used by its investors, financial analysts and others to analyze
Slide 58: Adjusted EBITDA Reconciliation For the Twelve Months Ended September 30, 2008
Adjusted EBITDA Reconciliation For the Twelve Months Ended September 30, 2008 Three Months Ended Twelve Months Ended (In millions) December 31, 2007 March 31, June 30, September 30, 2008 September 30, 2008 Net income (loss) ($34.3) ($3.2) $6.2 ($169.9) ($201.2) Add back: Income taxes (16.5) (3.7) 4.
Slide 59: Adjusted EBITDA Reconciliation For the Year Ended December 31, 2007
Adjusted EBITDA Reconciliation For the Year Ended December 31, 2007 Three Months Ended Year Ended (In millions) March 31, June 30, September 30, 2007 December 31, 2007 December 31, 2007 Net income (loss) $38.4 ($7.3) ($8.6) ($34.3) ($11.8) Add back: discontinued operations 0.1 -- -- -- 0.1 Income (l