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KAR Holdings, Inc. Analyst Day . December 6, 2007. Forward-Looking Statements.

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KAR Holdings, Inc.

Analyst Day

December 6, 2007


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Forward-LookingStatements

This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected, expressed or implied by such forward-looking statements. Many of these risk factors are outside of the company’s control, and as such, they involve risks which are not currently known to the company that could cause actual results to differ materially from forecasted results. The forward-looking statements in this document are made as of the date hereof and the company does not undertake to update its forward-looking statements.


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AGENDA

  • Industry Update - Tom Kontos

  • Corporate Update - Eric Loughmiller

  • Q&A


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Used Vehicle Market Conditions and Outlook

Tom Kontos

Executive Vice-President

Customer Strategies and Analytics

ADESA

December 2007

Copyright 2007 ADESA, Inc. All rights reserved. The information provided here was compiled by and is proprietary to ADESA, Inc. It is for informational purposes only and its accuracy is not warranted. It is intended for the benefit of the named recipient, and may not be relied upon or utilized for any other purpose or by any other person and may not be made available to any other person without the express written permission of ADESA, Inc.

Copyright 2007 ADESA, Inc.


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ADESA Analytical Services Reports

Plus monthly postings on:

www.adesa.com/kontoskorner

Contact Tom Kontos

[email protected]

317/249-4235


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Customer Strategies and Analytics

Insight and

Trusted Business

Advice

Analytical

Services

CRM/

Salesforce.com

Dealer

Relations

  • Market and Peer Group Benchmarking Studies

  • Impact of Reconditioning

  • Dealer Surveys

  • Analysis of Vehicles Resold

  • Comparative Analysis

  • GVR, Pulse, Market Trends

  • Utilize robust database of dealer preferences and demographics

  • Design target marketing campaigns

  • Train inside and outside auction personnel

  • Monitor use and results

  • Strengthen relationships with major automotive retailers

  • Provide custom studies, analytics, and strategies to dealer groups

  • Share auction "best practices" for optimal inventory management

  • Helping national accounts make better remarketing decisions

  • Helping large dealer groups achieve economies of scale and optimize their used vehicle inventory management.



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Economic growth was slow in the first quarter & stronger than expected in the 2nd & 3rd quarters. Growth rates are expected to slow to below 2.0% during the current & next quarters.


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Unemployment remains fairly low, but is creeping up as employment growth has slowed somewhat this year.


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Manufacturing has slowed as well. employment growth has slowed somewhat this year.





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The soft housing market nicely.is a major reason for slower GDP growth (worth about 1%pt).




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Fleet sales grew by nicely.500,000 units between 2003 and 2005 and were steady in 2006.


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Rental fleet sales have continued to drop in 2007. Commercial fleet sales are also down somewhat.

Domestics down ~236K; Japanese & Koreans up ~90K




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Lease origination 2004.volume began growing in 2004 and has strengthened since.


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Fed data corroborates 2004.that leasing is increasing.




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Decreases in program 2007.vehicles sales at auction have been more than offset by increases in dealer consignment, rental risk, off-lease and fleet units.


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As a result, auction volumes have increased modestly on a year-to-date basis, though this has varied greatly by month.


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Retail Vehicle Markets year-to-date basis, though this has varied greatly by month.


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Retail sales have been weak. year-to-date basis, though this has varied greatly by month.


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Reasons for weak retail used vehicle sales: year-to-date basis, though this has varied greatly by month.

  • Used cars priced high relative to discounted new vehicles. More price adjustment is necessary to jump start used vehicle sales.

  • Maturation of economic cycle/slower economic growth.

  • More folks are upside down on their longer term vehicle loans.

  • Vehicle longevity has improved and more people own longer lasting and lightly challenged trucks and SUVs.

  • Lots of used vehicles were bought in 2005 during the employee discount period, which brought lots of young trade-ins to franchised dealerships. This brought forward sales that would have otherwise occurred in 2006 or 2007.

  • Hurricane-replacement vehicles were bought in late 2005 as well.



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New vehicle incentives have been relatively stable after dropping in 2006. This is good news for vehicle remarketers.


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Used car prices are dropping in 2006. This is good news for vehicle remarketers.becoming more competitive relative to new car prices.


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Retail used vehicle dropping in 2006. This is good news for vehicle remarketers.prices are coming down faster than new vehicle prices.


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Wholesale Vehicle Markets dropping in 2006. This is good news for vehicle remarketers.


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Prices are up primarily due to low supply of program units. dropping in 2006. This is good news for vehicle remarketers.


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Prices are strongest for dropping in 2006. This is good news for vehicle remarketers.the off-rental units sold by manufacturers that are in short supply.


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“Performance may vary” based on model class as well. dropping in 2006. This is good news for vehicle remarketers.


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In Summary: dropping in 2006. This is good news for vehicle remarketers.

  • The macro economy is still in slow-growth mode.

  • Wholesale vehicle supply will increase.

  • Retail demand is weak.

  • Anticipate softer wholesale prices for remainder of 2007 and into 2008.


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AGENDA dropping in 2006. This is good news for vehicle remarketers.

  • Industry Update - Tom Kontos

  • Corporate Update - Eric Loughmiller

  • Q&A


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Company Overview dropping in 2006. This is good news for vehicle remarketers.($ in millions)

KAR Holdings, Inc.

Total 2006 PF Revenue: $1,453.0

Total 2006 PF Adjusted EBITDA: $381.6

ADESA Whole Car

2006 PF Revenue: $853.8

IAAI Salvage

2006 PF Revenue: $455.2

Automotive Finance Corp.(AFC)

2006 PF Revenue: $144.0

  • Used vehicle auctioneer

    • Remarkets used vehicles from large institutions and dealers

  • Salvage vehicle auctioneer

    • Remarkets vehicles deemed a total-loss by insurance companies

  • Provides short-term inventory-secured financing, known as floorplan financing, for independent used vehicle dealers in North America

Auction Sites: 57

Market Position: #2

Market Share: 18 %

Auction Sites: 137

Market Position: #2

Market Share: 33 %

Offices: 91

Market Position: Leader

Market Share: NA

Note: Pro forma to give effect to full year impact of recent acquisitions, buyer fee increases at IAAI standalone and certain cost savings from salvage combination.


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Experienced and Committed dropping in 2006. This is good news for vehicle remarketers.Management Team

Name Position Years in Industry

Brian Clingen Chairman and CEO 7

Jim Hallett President and CEO

– ADESA Whole Car 32

Tom O’Brien President and CEO

– IAAI Salvage 16

Curt Phillips President and CEO – AFC 9

John Nordin EVP and CIO 4

Eric Loughmiller EVP and CFO 1

Becca Polak EVP, General Counsel & Secretary 2


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North American Whole Car Auction Market dropping in 2006. This is good news for vehicle remarketers.

ADESA

IAAI

Salvage

18%

Independents /

Other

30%

Manheim

North American Salvage Auction Market

51%

Independents

31%

Copart

37%

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

EXCEL SOURCE copied at 28-Mar-2007 15:48:43 : AUTOBAHNBK\Supporting Documents\Leading Market Positions v2.xls(Salvage)

  • EXCEL SOURCE copied at 29-Mar-2007 14:31:46 : AUTOBAHNBK\Supporting Documents\Leading Market Positions v2.xls(Salvage)

  • EXCEL SOURCE copied at 29-Mar-2007 14:41:43 : AUTOBAHNBK\Supporting Documents\Leading Market Positions v2.xls(Salvage)

33%

After the top two players in each market, there is significant fragmentation

Source: GVR Report and Company estimates for 2006.


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Broad Geographic Footprint dropping in 2006. This is good news for vehicle remarketers.

The Company is 1 of 2 whole car & salvage providers that has a broad N.A. footprint

  • Own 45 whole car and 13 salvage sites

  • Operate 8 shared sites (whole car and salvage)

  • ADESA Whole Car—57 auction sites

  • IAAI Salvage—137 auction sites

  • AFC—91 loan production offices

Broad geographic footprint positions the Company as the preferred auction & floorplan financing provider for its’ customers


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2006 Whole Car Suppliers dropping in 2006. This is good news for vehicle remarketers.

2007 YTD Whole Car Suppliers

ADESA Whole Car

OEM14%

OEM18%

Dealer39%

Dealer38%

OEM Captive Finance 22%

OEM Captive Finance 20%

Fleet/Lease 25%

Fleet/Lease 24%

Auctions strive to maximize the auction sales price for sellers by effectively and efficientlytransferring the vehicles, paperwork and funds as quickly as possible


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2006 Salvage Buyers dropping in 2006. This is good news for vehicle remarketers.

IAAI Salvage

  • One of only two salvage auctioneers with a national footprint

    • Operates 137 facilities in 43 states and 6 provinces in Canada

    • Serves 69 of top 75 U.S. metropolitan markets

  • Hybrid auction format, combining Internet and live auctions, leads to higher proceeds for suppliers

    • Increases international buyers

  • Provides wide array of value-added total-loss services that drive efficient vehicle remarketing

Recyclers5%

Rebuilders/Resellers 25%–30%

Dismantlers65%–70%

  • Tracking systems and real-time status reports through CSA Today

  • Vehicle inspection centers operated by insurance companies at salvage auction sites

Auctions strive to maximize the auction sales price for insurance company sellersand reduce their administrative costs and claim recovery cycle time


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AFC dropping in 2006. This is good news for vehicle remarketers.

  • Specializes in providing floorplan financing to independent dealers

    • Typical loan terms are 30 to 60 days and are secured by vehicle

    • Significant portion of revenue from fees

  • Network of 91 loan production offices services over 600 auctions

  • Diverse customer base with no significant concentration

    • Approximately 9,000 customers

  • Low credit risk

    • Centralized credit decisions using proprietary scoring model with additional corporate oversight

    • Perfected security interest and personal guaranty from principals of independent dealers

  • Low-cost, reliable funding through bankruptcy-remote, off-balance sheet securitization conduit

    • Utilized to finance over 60% of receivables

VISIO SOURCE copied at 26-MAR-2006 :<file://\\IBNBS019\AUTOBAHNBK\Sales Force Memo\Bank\Supporting\AFC.vsd>

  • In excess of 95% of portfolio is current and has been so over the past five years

  • Net write-offs as a % of total A/R have trended downward over the past five years

Facilitates growth of vehicle sales at auction and allows ADESA to havelarger role in entire vehicle redistribution industry


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Major Initiatives dropping in 2006. This is good news for vehicle remarketers.

  • Project Pride

  • Salvage Integration

  • Revitalized Whole Car Sales & Organizational Structure

  • Acquisitions & Relocations

  • Cash Flow & Asset Monetization


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Project Pride dropping in 2006. This is good news for vehicle remarketers.

  • Whole car initiative led by management in tandem with Synergetics

  • Over 40 teams reviewing every aspect of auction operations (staffing, vehicle flow, etc.)

  • Roll-out commenced Q4


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Salvage Integration dropping in 2006. This is good news for vehicle remarketers.

  • 30 Impact sites integrated to date

  • Redundant corporate overhead eliminated

  • U.S. to be completed in 2007 Canada integration in 2008

  • Develop shared sites with ADESA Auctions

  • Offer AFC financing to qualified buyers


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Revitalized Whole Car Sales & Organizational Structure dropping in 2006. This is good news for vehicle remarketers.

  • Jim Hallett back at ADESA. Culture shift: Bureaucratic Entrepreneurial

  • Sales & operations revitalized with new talent additions

  • Team = Customer focused, with owner / operator mindset

  • Centralized E-business approach

Customers’ Response = Vehicles to ADESA


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Acquisitions dropping in 2006. This is good news for vehicle remarketers.& Relocations

  • Acquisitions:

    *Syracuse, NY

    • *Fargo, ND

    • *Sioux Falls, SD

    • *Quebec City

  • Relocations:

    • *Phoenix, AZ – 2008

      *Kansas City, KS – 2008

      *Dallas, TX – 2009


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Cash Flow & Asset Monetization dropping in 2006. This is good news for vehicle remarketers.

  • Operating Cash Generated - $90Mthru Q3

  • Sale & Leaseback

  • Canadian Securitization


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Investor Update dropping in 2006. This is good news for vehicle remarketers.

Financial Review


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Transaction - Sources & Uses dropping in 2006. This is good news for vehicle remarketers.

$ in Millions


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Long-Term Debt Structure dropping in 2006. This is good news for vehicle remarketers.

$ in Millions


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Balance Sheet dropping in 2006. This is good news for vehicle remarketers.


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KAR Holdings, Inc. Financial Highlights - Consolidated dropping in 2006. This is good news for vehicle remarketers.

Q3 Revenue

Q3 Adjusted EBITDA 1

($mm)

($mm)

13%

YTD Revenue

YTD Adjusted EBITDA 1

($mm)

($mm)

11%

13%

1 As defined in the Company’s senior credit facility; however, 2006 results have been adjusted to eliminate pro forma adjustments.


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KAR Holdings, Inc. Financial Highlights - Whole Car dropping in 2006. This is good news for vehicle remarketers.

YTD Revenue

YTD Adjusted EBITDA 1

($mm)

($mm)

9%

11%

1 As defined in the Company’s senior credit facility; however, 2006 results have been adjusted to eliminate pro forma adjustments.


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KAR Holdings, Inc. Financial Highlights - dropping in 2006. This is good news for vehicle remarketers.IAAI

YTD Revenue

YTD Adjusted EBITDA 1

($mm)

($mm)

40%

14%

1 As defined in the Company’s senior credit facility; however, 2006 results have been adjusted to eliminate pro forma adjustments.


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KAR Holdings, Inc. Financial Highlights - dropping in 2006. This is good news for vehicle remarketers.AFC

YTD Revenue

YTD Adjusted EBITDA 1

($mm)

($mm)

2%

3%

1 As defined in the Company’s senior credit facility


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Investment Highlights dropping in 2006. This is good news for vehicle remarketers.

  • Stable Industry Fundamentals

  • Recurring Revenue Stream

  • Leading Market Positions with Broad Geographic Footprint

  • Strong Competitive Position

  • Consistent Historical Financial Performance

  • Established Relationships with Vehicle Suppliers & Buyers

  • Experienced and Committed Management Team

  • Strong Cash Flow Generation


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AGENDA dropping in 2006. This is good news for vehicle remarketers.

  • Industry Update - Tom Kontos

  • Corporate Update - Eric Loughmiller

  • Q&A


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