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Sale of ADESA U.S. Physical Auction Business and Discontinued Operations | 9 Months Ended
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Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract] |
Sale of ADESA U.S. Physical Auction Business and Discontinued Operations | Sale of ADESA U.S. Physical Auction Business and Discontinued Operations In February 2022, the Company announced that it had entered into a definitive agreement with Carvana, pursuant to which Carvana would acquire the ADESA U.S. physical auction business from the Company (the "Transaction"). The Transaction was completed in May 2022 for approximately $2.2 billion in cash and included all auction sales, operations and staff at ADESA’s U.S. vehicle logistics centers and use of the ADESA.com marketplace in the U.S. The net proceeds received in connection with the Transaction were included in "Net cash provided by investing activities - discontinued operations" in the consolidated statement of cash flow for the nine months ended September 30, 2022. In connection with the Transaction, the Company and Carvana entered into various agreements to provide a framework for their relationship after the Transaction, including a transition services agreement for a transitional period and a commercial agreement for a term of 7 years that provides for platform and other fees for services rendered. For the nine months ended September 30, 2023, the Company has received a net cash inflow from the commercial agreement and transition services agreement of approximately $74.6 million, which includes the transportation services noted below. The Company provided transportation services of $12.9 million and $55.7 million to the ADESA U.S. physical auctions for the three and nine months ended September 30, 2023, respectively, and $20.6 million and $56.7 million for the three and nine months ended September 30, 2022, respectively. The financial results of the ADESA U.S. physical auction business have been accounted for as discontinued operations for all periods presented. The business was formerly included in the Company’s Marketplace reportable segment. Goodwill was allocated to the ADESA U.S. physical auctions based on relative fair value. The Transaction resulted in a pretax gain on disposal of approximately $521.8 million for the year ended December 31, 2022. The effective tax rate for discontinued operations was approximately 60% primarily due to non-deductible goodwill recognized in the Transaction. The change in the pretax gain on disposal for the three months ended September 30, 2022 occurred as a result of a net working capital adjustment and additional transaction costs. The following table presents the results of operations for the ADESA U.S. physical auction business that have been reclassified to discontinued operations for all periods presented (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Operating revenues | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 305.9 |
Operating expenses |  |  |  |  |  |  |
Cost of services (exclusive of depreciation and amortization) | — |  |  | — |  |  | — |  |  | 224.9 |
Selling, general and administrative | — |  |  | — |  |  | — |  |  | 68.8 |
Depreciation and amortization | — |  |  | — |  |  | — |  |  | 11.2 |
Total operating expenses | — |  |  | — |  |  | — |  |  | 304.9 |
Operating profit (loss) | — |  |  | — |  |  | — |  |  | 1.0 |
Interest expense | — |  |  | — |  |  | — |  |  | 0.1 |
Other (income) expense, net | — |  |  | — |  |  | — |  |  | (8.4) |
Income (loss) from discontinued operations before gain on disposal and income taxes | — |  |  | — |  |  | — |  |  | 9.3 |
Pretax gain on disposal of discontinued operations | — |  |  | (11.9) |  |  | — |  |  | 521.8 |
Income taxes | — |  |  | (5.6) |  |  | — |  |  | 313.7 |
Income (loss) from discontinued operations | $ | — |  |  | $ | (6.3) |  |  | $ | — |  |  | $ | 217.4 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//360/tableOfContent + Details
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