KAR Auction Services, Inc. (KAR) has reported 5.80 percent fall in profit for the quarter ended Dec. 31, 2016. The company has earned $45.50 million, or $0.33 a share in the quarter, compared with $48.30 million, or $0.35 a share for the same period last year. On an adjusted basis, net profit for the quarter was almost stable at $62.70 million, or $0.45 a share, when compared with the last year period.
Revenue during the quarter grew 16.96 percent to $813.70 million from $695.70 million in the previous year period. Gross margin for the quarter contracted 46 basis points over the previous year period to 39.99 percent. Total expenses were 86.25 percent of quarterly revenues, up from 86.07 percent for the same period last year. That has resulted in a contraction of 18 basis points in operating margin to 13.75 percent.
Operating income for the quarter was $111.90 million, compared with $96.90 million in the previous year period.
However, the adjusted EBITDA for the quarter stood at $176.50 million compared with $154.50 million in the prior year period. At the same time, adjusted EBITDA margin contracted 52 basis points in the quarter to 21.69 percent from 22.21 percent in the last year period.
"Our fourth quarter and year-end 2016 results reflect the stability of our diversified and complementary business model and our ability to effectively respond to market and operational variation," said KAR Chairman and chief executive officer Jim Hallett. "We remain focused on consistent execution of our core businesses, enhancing our technology and data analytic capabilities, and exploring international and other opportunities for continued expansion."
For fiscal year 2017, Kar Auction Services expects net income to be in the range of $235.70 million to $249.70 million. The company forecasts adjusted net income to be in the range of $299.40 million to $313.40 million. The company forecasts diluted earnings per share to be in the range of $1.70 to $1.80. The company forecasts diluted earnings per share to be in the range of $2.15 to $2.25 on adjusted basis.
Operating cash flow declines
KAR Auction Services, Inc. has generated cash of $360.80 million from operating activities during the year, down 24.04 percent or $114.20 million, when compared with the last year.
The company has spent $765.30 million cash to meet investing activities during the year as against cash outgo of $547.60 million in the last year.
Cash flow from financing activities was $453.20 million for the year, up 379.58 percent or $358.70 million, when compared with the last year.
Cash and cash equivalents stood at $201.80 million as on Dec. 31, 2016, up 30.19 percent or $46.80 million from $155 million on Dec. 31, 2015.
Working capital increases sharply
KAR Auction Services, Inc. has recorded an increase in the working capital over the last year. It stood at $506.20 million as at Dec. 31, 2016, up 130.09 percent or $286.20 million from $220 million on Dec. 31, 2015. Current ratio was at 1.22 as on Dec. 31, 2016, up from 1.10 on Dec. 31, 2015.
Days sales outstanding went down to 139 days for the quarter compared with 142 days for the same period last year.
Debt increases substantially
KAR Auction Services, Inc. has witnessed an increase in total debt over the last one year. It stood at $2,470.30 million as on Dec. 31, 2016, up 32.45 percent or $605.20 million from $1,865.10 million on Dec. 31, 2015. Total debt was 37.67 percent of total assets as on Dec. 31, 2016, compared with 32.20 percent on Dec. 31, 2015. Debt to equity ratio was at 1.77 as on Dec. 31, 2016, up from 1.35 as on Dec. 31, 2015. Interest coverage ratio deteriorated to 2.94 for the quarter from 4 for the same period last year.
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