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Sale of ADESA U.S. Physical Auction Business and Discontinued Operations | 12 Months Ended
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Dec. 31, 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 year ended December 31, 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. In addition, the Company will continue to own the ADESA tradename and the ADESA U.S. physical auctions will continue to utilize the tradename, which had an indefinite life at the time of the Transaction. The tradename continues to generate cash flows pursuant to the purchase and commercial agreements with Carvana and its affiliates, as Carvana now pays a fee to the Company for use of the tradename for the ADESA U.S. physical auctions for a defined period. For the year ended December 31, 2023, the Company received a net cash inflow from the commercial agreement and transition services agreement of approximately $93.9 million, which includes the transportation services noted below. From the completion of the Transaction through December 31, 2022, the Company received a net cash inflow from the commercial agreement and transition services agreement of approximately $57.4 million. The Company provided transportation services of $60.3 million, $73.6 million and $80.3 million to the ADESA U.S. physical auctions for the years ended December 31, 2023, 2022 and 2021, respectively. The transportation amount noted for 2022 includes transactions before and after the sale. 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. Discontinued operations included transaction costs of approximately $37.1 million for the year ended December 31, 2022, in connection with the Transaction. These costs consisted of consulting and professional fees associated with the Transaction. The Transaction resulted in a pretax gain on disposal of approximately $521.8 million or 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 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):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Operating revenues | $ | — |  |  | $ | 305.9 |  |  | $ | 881.3 |
Operating expenses |  |  |  |  |
Cost of services (exclusive of depreciation and amortization) | — |  |  | 224.9 |  |  | 582.4 |
Selling, general and administrative | — |  |  | 67.8 |  |  | 148.7 |
Depreciation and amortization | — |  |  | 11.2 |  |  | 73.0 |
Total operating expenses | — |  |  | 303.9 |  |  | 804.1 |
Operating profit | — |  |  | 2.0 |  |  | 77.2 |
Interest expense | — |  |  | 0.1 |  |  | 0.9 |
Other (income) expense, net | — |  |  | (8.4) |  |  | (11.0) |
Income from discontinued operations before gain on disposal and income taxes | — |  |  | 10.3 |  |  | 87.3 |
Pretax gain on disposal of discontinued operations | — |  |  | 521.8 |  |  | — |
Income taxes | (0.7) |  |  | 319.5 |  |  | 20.0 |
Income from discontinued operations | $ | 0.7 |  |  | $ | 212.6 |  |  | $ | 67.3 |
The following table summarizes the major classes of assets and liabilities of the ADESA U.S. physical auction business that were classified as discontinued operations for the period presented (in millions):
| May 8, 2022
Assets |
Cash and cash equivalents | $ | 68.6 |
Trade receivables, net of allowances | 206.3 |
Inventory | 15.5 |
Other current assets | 9.3 |
Current assets of discontinued operations | 299.7 |
Goodwill | 1,099.7 |
Customer relationships, net of accumulated amortization | 81.4 |
Other intangible assets, net of accumulated amortization | 30.7 |
Operating lease right-of-use assets | 223.7 |
Property and equipment, net of accumulated depreciation | 440.1 |
Other assets | 2.4 |
Non-current assets of discontinued operations | 1,878.0 |
Total assets of discontinued operations | $ | 2,177.7 |
Liabilities |
Accounts payable | $ | 249.5 |
Accrued employee benefits and compensation expenses | 10.2 |
Other accrued expenses | 28.2 |
Current portion of operating lease liabilities | 27.7 |
Current liabilities of discontinued operations | 315.6 |
Operating lease liabilities | 216.8 |
Other liabilities | 2.0 |
Non-current liabilities of discontinued operations | 218.8 |
Total liabilities of discontinued operations | $ | 534.4 |

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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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