Sandy walloped ADESA's vehicle-salvage unit, CEO says
Hurricane Sandy hit KAR Auction Services Inc. and its used-vehicle salvage arm, Insurance Auto Auctions Inc., far harder last fall than Hurricane Katrina did in 2005, KAR CEO Jim Hallett said today.
The expense and pace at which vehicles had to be towed and stored for clients in the days and weeks after Sandy "was just on steroids," Hallett said.
Hallett said the costs related to processing vehicles damaged by the storm resulted in a fourth-quarter loss of $9.1 million for Insurance Auto Auctions.
For the company as a whole, revenue in the fourth quarter that ended Dec. 31 rose 3 percent to $493.7 million, KAR said today. Net income increased 58 percent to $22.9 million.
KAR is also the parent of ADESA, the nation's second-largest auction company.
First loss on a catastrophe
It was the first time the salvage subsidiary lost money as a result of a catastrophic event, including Hurricane Katrina, Hallett said.
"Let me give you a couple of stats as we compare Sandy and Katrina," Hallett told analysts during a conference call. "With Katrina we had to secure 110 acres of land" to store salvaged vehicles, he said. With Sandy, KAR needed "over 400. With Katrina we had to bring in 50 additional towers [tow trucks]; with Sandy we had to bring in 600 additional" tow trucks.
"So everything was just on steroids. It was a lot more coming at us, a lot faster."
The comparisons, he noted, partially reflect the fact that Sandy hit areas with higher population density and more luxury vehicles than Katrina did.
Insurance Auto Auction provides salvage auction services to virtually all major auto insurance companies in the United States. Its contracts with its customers call for it to provide services, such as moving and storing damaged vehicles, in the aftermath of storms such as Hurricanes Katrina and Sandy.
Hallett also said the winter storm that hit much of the country the last week of December impacted ADESA because many dealers were hindered either from getting to the company's auctions to buy vehicles or were prevented from moving their vehicles to auction for sale.
"That did bring our volume lower than expected during the last week," he said.
Vehicle sales up 6%
Hallett said KAR sold approximately 3.3 million vehicles in 2012, up 6 percent from 2011. About 57 percent of that volume is attributed to ADESA; the rest of the volume is from salvage vehicles attributed to Insurance Auto Auction.
For the year, KAR's revenue rose 4 percent to $1.96 billion. Net income increased 27 percent to $92 million.
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