|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
DELAWARE
|
|
36-4215970
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
500 WEST MADISON STREET,
SUITE 2800, CHICAGO, IL
|
|
60661
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
|
|||||||
|
March 31,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Assets
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
175,492
|
|
|
$
|
114,605
|
|
Receivables, net
|
645,037
|
|
|
601,422
|
|
||
Inventory
|
1,358,056
|
|
|
1,433,847
|
|
||
Deferred income taxes
|
78,340
|
|
|
81,744
|
|
||
Prepaid expenses and other current assets
|
80,254
|
|
|
85,799
|
|
||
Total Current Assets
|
2,337,179
|
|
|
2,317,417
|
|
||
Property and Equipment, net
|
621,571
|
|
|
629,987
|
|
||
Intangible Assets:
|
|
|
|
||||
Goodwill
|
2,235,043
|
|
|
2,288,895
|
|
||
Other intangibles, net
|
231,852
|
|
|
245,525
|
|
||
Other Assets
|
96,821
|
|
|
91,668
|
|
||
Total Assets
|
$
|
5,522,466
|
|
|
$
|
5,573,492
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
397,623
|
|
|
$
|
400,202
|
|
Accrued expenses:
|
|
|
|
||||
Accrued payroll-related liabilities
|
81,675
|
|
|
86,016
|
|
||
Other accrued expenses
|
171,145
|
|
|
164,148
|
|
||
Income taxes payable
|
37,063
|
|
|
13,763
|
|
||
Other current liabilities
|
22,505
|
|
|
23,052
|
|
||
Current portion of long-term obligations
|
62,303
|
|
|
63,515
|
|
||
Total Current Liabilities
|
772,314
|
|
|
750,696
|
|
||
Long-Term Obligations, Excluding Current Portion
|
1,672,332
|
|
|
1,801,047
|
|
||
Deferred Income Taxes
|
177,373
|
|
|
181,662
|
|
||
Other Noncurrent Liabilities
|
120,540
|
|
|
119,430
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
||||
Common stock, $0.01 par value,1,000,000,000 shares authorized, 304,164,218 and 303,452,655 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
|
3,042
|
|
|
3,035
|
|
||
Additional paid-in capital
|
1,061,233
|
|
|
1,054,686
|
|
||
Retained earnings
|
1,810,256
|
|
|
1,703,161
|
|
||
Accumulated other comprehensive loss
|
(94,624
|
)
|
|
(40,225
|
)
|
||
Total Stockholders’ Equity
|
2,779,907
|
|
|
2,720,657
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
5,522,466
|
|
|
$
|
5,573,492
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)
|
|||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Revenue
|
$
|
1,773,912
|
|
|
$
|
1,625,777
|
|
Cost of goods sold
|
1,074,433
|
|
|
973,893
|
|
||
Gross margin
|
699,479
|
|
|
651,884
|
|
||
Facility and warehouse expenses
|
132,657
|
|
|
126,159
|
|
||
Distribution expenses
|
141,714
|
|
|
137,329
|
|
||
Selling, general and administrative expenses
|
203,241
|
|
|
184,530
|
|
||
Restructuring and acquisition related expenses
|
6,488
|
|
|
3,321
|
|
||
Depreciation and amortization
|
29,453
|
|
|
26,711
|
|
||
Operating income
|
185,926
|
|
|
173,834
|
|
||
Other expense (income):
|
|
|
|
||||
Interest expense, net
|
14,906
|
|
|
16,118
|
|
||
Loss on debt extinguishment
|
—
|
|
|
324
|
|
||
Change in fair value of contingent consideration liabilities
|
151
|
|
|
(1,222
|
)
|
||
Other expense (income), net
|
1,768
|
|
|
(96
|
)
|
||
Total other expense, net
|
16,825
|
|
|
15,124
|
|
||
Income before provision for income taxes
|
169,101
|
|
|
158,710
|
|
||
Provision for income taxes
|
60,098
|
|
|
54,021
|
|
||
Equity in earnings of unconsolidated subsidiaries
|
(1,908
|
)
|
|
(36
|
)
|
||
Net income
|
$
|
107,095
|
|
|
$
|
104,653
|
|
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Diluted
|
$
|
0.35
|
|
|
$
|
0.34
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)
|
|||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Net income
|
$
|
107,095
|
|
|
$
|
104,653
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
||||
Foreign currency translation
|
(54,810
|
)
|
|
(563
|
)
|
||
Net change in unrecognized gains/losses on derivative instruments, net of tax
|
283
|
|
|
793
|
|
||
Net change in unrealized gains/losses on pension plan, net of tax
|
128
|
|
|
(37
|
)
|
||
Total other comprehensive (loss) income
|
(54,399
|
)
|
|
193
|
|
||
Total comprehensive income
|
$
|
52,696
|
|
|
$
|
104,846
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
|
||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders’
Equity
|
|||||||||||||
|
Shares
Issued
|
|
Amount
|
|
||||||||||||||||||
BALANCE, December 31, 2014
|
303,453
|
|
|
$
|
3,035
|
|
|
$
|
1,054,686
|
|
|
$
|
1,703,161
|
|
|
$
|
(40,225
|
)
|
|
$
|
2,720,657
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
107,095
|
|
|
—
|
|
|
107,095
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54,399
|
)
|
|
(54,399
|
)
|
|||||
Restricted stock units vested, net of shares withheld for employee tax
|
393
|
|
|
4
|
|
|
(2,006
|
)
|
|
—
|
|
|
—
|
|
|
(2,002
|
)
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
5,546
|
|
|
—
|
|
|
—
|
|
|
5,546
|
|
|||||
Exercise of stock options
|
462
|
|
|
5
|
|
|
2,008
|
|
|
—
|
|
|
—
|
|
|
2,013
|
|
|||||
Shares withheld for net share settlements of stock option awards
|
(144
|
)
|
|
(2
|
)
|
|
(3,934
|
)
|
|
—
|
|
|
—
|
|
|
(3,936
|
)
|
|||||
Excess tax benefit from stock-based payments
|
—
|
|
|
—
|
|
|
4,933
|
|
|
—
|
|
|
—
|
|
|
4,933
|
|
|||||
BALANCE, March 31, 2015
|
304,164
|
|
|
$
|
3,042
|
|
|
$
|
1,061,233
|
|
|
$
|
1,810,256
|
|
|
$
|
(94,624
|
)
|
|
$
|
2,779,907
|
|
Note 1.
|
Interim Financial Statements
|
Note 2.
|
Financial Statement Information
|
|
March 31,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Aftermarket and refurbished products
|
$
|
968,307
|
|
|
$
|
1,022,549
|
|
Salvage and remanufactured products
|
389,749
|
|
|
411,298
|
|
||
|
$
|
1,358,056
|
|
|
$
|
1,433,847
|
|
|
North America
|
|
Europe
|
|
Specialty
|
|
Total
|
||||||||
Balance as of January 1, 2015
|
$
|
1,392,032
|
|
|
$
|
616,819
|
|
|
$
|
280,044
|
|
|
$
|
2,288,895
|
|
Business acquisitions and adjustments to previously recorded goodwill
|
540
|
|
|
(383
|
)
|
|
(610
|
)
|
|
(453
|
)
|
||||
Exchange rate effects
|
(9,585
|
)
|
|
(43,820
|
)
|
|
6
|
|
|
(53,399
|
)
|
||||
Balance as of March 31, 2015
|
$
|
1,382,987
|
|
|
$
|
572,616
|
|
|
$
|
279,440
|
|
|
$
|
2,235,043
|
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Trade names and trademarks
|
$
|
168,761
|
|
|
$
|
(37,112
|
)
|
|
$
|
131,649
|
|
|
$
|
173,340
|
|
|
$
|
(35,538
|
)
|
|
$
|
137,802
|
|
Customer relationships
|
91,729
|
|
|
(29,862
|
)
|
|
61,867
|
|
|
92,972
|
|
|
(26,751
|
)
|
|
66,221
|
|
||||||
Software and other technology related assets
|
43,617
|
|
|
(11,811
|
)
|
|
31,806
|
|
|
44,640
|
|
|
(10,387
|
)
|
|
34,253
|
|
||||||
Covenants not to compete
|
10,507
|
|
|
(3,977
|
)
|
|
6,530
|
|
|
11,074
|
|
|
(3,825
|
)
|
|
7,249
|
|
||||||
|
$
|
314,614
|
|
|
$
|
(82,762
|
)
|
|
$
|
231,852
|
|
|
$
|
322,026
|
|
|
$
|
(76,501
|
)
|
|
$
|
245,525
|
|
Balance as of January 1, 2015
|
$
|
14,881
|
|
Warranty expense
|
7,307
|
|
|
Warranty claims
|
(6,697
|
)
|
|
Balance as of March 31, 2015
|
$
|
15,491
|
|
Note 3.
|
Stock-Based Compensation
|
|
Number
Outstanding
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Aggregate Intrinsic Value
(in thousands)
(1)
|
|||||
Unvested as of January 1, 2015
|
2,151,232
|
|
|
$
|
20.97
|
|
|
$
|
60,493
|
|
Granted
|
869,893
|
|
|
$
|
27.00
|
|
|
|
||
Vested
|
(471,050
|
)
|
|
$
|
19.54
|
|
|
|
||
Forfeited / Canceled
|
(15,666
|
)
|
|
$
|
23.61
|
|
|
|
||
Unvested as of March 31, 2015
|
2,534,409
|
|
|
$
|
23.29
|
|
|
$
|
64,780
|
|
Expected to vest after March 31, 2015
|
2,436,315
|
|
|
$
|
23.12
|
|
|
$
|
62,272
|
|
|
Number
Outstanding
|
|
Weighted
Average Exercise Price
|
|
Weighted Average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
(in thousands)
(1)
|
|||||
Balance as of January 1, 2015
|
5,207,772
|
|
|
$
|
8.04
|
|
|
3.6
|
|
$
|
105,038
|
|
Exercised
|
(462,025
|
)
|
|
$
|
4.36
|
|
|
|
|
|
|
|
Forfeited / Canceled
|
(6,109
|
)
|
|
$
|
32.31
|
|
|
|
|
|
|
|
Balance as of March 31, 2015
|
4,739,638
|
|
|
$
|
8.36
|
|
|
3.5
|
|
$
|
82,180
|
|
Exercisable as of March 31, 2015
|
4,637,000
|
|
|
$
|
7.85
|
|
|
3.4
|
|
$
|
82,134
|
|
Exercisable as of March 31, 2015 and expected to vest thereafter
|
4,729,661
|
|
|
$
|
8.31
|
|
|
3.5
|
|
$
|
82,180
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
RSUs
|
$
|
5,420
|
|
|
$
|
5,396
|
|
Stock options
|
126
|
|
|
804
|
|
||
Restricted stock
|
—
|
|
|
46
|
|
||
Total stock-based compensation expense
|
$
|
5,546
|
|
|
$
|
6,246
|
|
Note 4.
|
Long-Term Obligations
|
|
March 31,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Senior secured credit agreement:
|
|
|
|
||||
Term loans payable
|
$
|
427,500
|
|
|
$
|
433,125
|
|
Revolving credit facilities
|
546,988
|
|
|
663,912
|
|
||
Senior notes
|
600,000
|
|
|
600,000
|
|
||
Receivables securitization facility
|
97,000
|
|
|
94,900
|
|
||
Notes payable through November 2019 at weighted average interest rates of 1.0%
|
44,590
|
|
|
45,891
|
|
||
Other long-term debt at weighted average interest rates of 3.5% and 3.1%, respectively
|
18,557
|
|
|
26,734
|
|
||
|
1,734,635
|
|
|
1,864,562
|
|
||
Less current maturities
|
(62,303
|
)
|
|
(63,515
|
)
|
||
|
$
|
1,672,332
|
|
|
$
|
1,801,047
|
|
Note 5.
|
Derivative Instruments and Hedging Activities
|
|
|
Notional Amount
|
|
Fair Value at March 31, 2015 (USD)
|
|
Fair Value at December 31, 2014 (USD)
|
||||||||||||||||||
|
|
March 31, 2015
|
|
December 31, 2014
|
|
Other Accrued Expenses
|
|
Other Noncurrent Liabilities
|
|
Other Accrued Expenses
|
|
Other Noncurrent Liabilities
|
||||||||||||
Interest rate swap agreements
|
|
|
|
|
|
|
|
|
||||||||||||||||
USD denominated
|
|
$
|
420,000
|
|
|
$
|
420,000
|
|
|
$
|
1,903
|
|
|
$
|
1,857
|
|
|
$
|
2,691
|
|
|
$
|
1,615
|
|
GBP denominated
|
|
£
|
50,000
|
|
|
£
|
50,000
|
|
|
—
|
|
|
852
|
|
|
—
|
|
|
893
|
|
||||
CAD denominated
|
|
C$
|
25,000
|
|
|
C$
|
25,000
|
|
|
111
|
|
|
—
|
|
|
—
|
|
|
19
|
|
||||
Total cash flow hedges
|
|
$
|
2,014
|
|
|
$
|
2,709
|
|
|
$
|
2,691
|
|
|
$
|
2,527
|
|
Note 6.
|
Fair Value Measurements
|
|
Balance as of March 31, 2015
|
|
Fair Value Measurements as of March 31, 2015
|
||||||||||||
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash surrender value of life insurance
|
$
|
31,077
|
|
|
$
|
—
|
|
|
$
|
31,077
|
|
|
$
|
—
|
|
Total Assets
|
$
|
31,077
|
|
|
$
|
—
|
|
|
$
|
31,077
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration liabilities
|
$
|
5,561
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,561
|
|
Deferred compensation liabilities
|
30,074
|
|
|
—
|
|
|
30,074
|
|
|
—
|
|
||||
Interest rate swaps
|
4,723
|
|
|
—
|
|
|
4,723
|
|
|
—
|
|
||||
Total Liabilities
|
$
|
40,358
|
|
|
$
|
—
|
|
|
$
|
34,797
|
|
|
$
|
5,561
|
|
|
Balance as of December 31, 2014
|
|
Fair Value Measurements as of December 31, 2014
|
||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash surrender value of life insurance
|
$
|
28,242
|
|
|
$
|
—
|
|
|
$
|
28,242
|
|
|
$
|
—
|
|
Total Assets
|
$
|
28,242
|
|
|
$
|
—
|
|
|
$
|
28,242
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration liabilities
|
$
|
7,295
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,295
|
|
Deferred compensation liabilities
|
27,580
|
|
|
—
|
|
|
27,580
|
|
|
—
|
|
||||
Interest rate swaps
|
5,218
|
|
|
—
|
|
|
5,218
|
|
|
—
|
|
||||
Total Liabilities
|
$
|
40,093
|
|
|
$
|
—
|
|
|
$
|
32,798
|
|
|
$
|
7,295
|
|
|
March 31,
|
|
December 31,
|
||
|
2015
|
|
2014
|
||
Unobservable Input
|
(Weighted Average)
|
||||
Probability of achieving payout targets
|
75.0
|
%
|
|
79.1
|
%
|
Discount rate
|
7.5
|
%
|
|
7.5
|
%
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Beginning Balance
|
$
|
7,295
|
|
|
$
|
55,653
|
|
Contingent consideration liabilities recorded for business acquisitions
|
—
|
|
|
4,317
|
|
||
Payments
|
(1,667
|
)
|
|
(2,006
|
)
|
||
Increase (decrease) in fair value included in earnings
|
151
|
|
|
(1,222
|
)
|
||
Exchange rate effects
|
(218
|
)
|
|
349
|
|
||
Ending Balance
|
$
|
5,561
|
|
|
$
|
57,091
|
|
Note 7.
|
Commitments and Contingencies
|
Nine months ending December 31, 2015
|
$
|
105,778
|
|
Years ending December 31:
|
|
||
2016
|
124,164
|
|
|
2017
|
103,909
|
|
|
2018
|
84,474
|
|
|
2019
|
67,437
|
|
|
2020
|
55,408
|
|
|
Thereafter
|
205,658
|
|
|
Future Minimum Lease Payments
|
$
|
746,828
|
|
Note 8.
|
Business Combinations
|
|
|
Year Ended
|
||||||||||
|
|
December 31, 2014
|
||||||||||
|
|
Keystone
Specialty
|
|
Other Acquisitions
|
|
Total
|
||||||
Receivables
|
|
$
|
48,473
|
|
|
$
|
75,330
|
|
|
$
|
123,803
|
|
Receivable reserves
|
|
(7,748
|
)
|
|
(7,383
|
)
|
|
(15,131
|
)
|
|||
Inventory
|
|
150,696
|
|
|
123,815
|
|
|
274,511
|
|
|||
Income taxes receivable
|
|
14,096
|
|
|
—
|
|
|
14,096
|
|
|||
Prepaid expenses and other current assets
|
|
8,085
|
|
|
4,050
|
|
|
12,135
|
|
|||
Property and equipment
|
|
38,080
|
|
|
27,026
|
|
|
65,106
|
|
|||
Goodwill
|
|
237,729
|
|
|
177,974
|
|
|
415,703
|
|
|||
Other intangibles
|
|
78,110
|
|
|
51,135
|
|
|
129,245
|
|
|||
Other assets
|
|
6,159
|
|
|
2,793
|
|
|
8,952
|
|
|||
Deferred income taxes
|
|
(26,591
|
)
|
|
313
|
|
|
(26,278
|
)
|
|||
Current liabilities assumed
|
|
(63,513
|
)
|
|
(52,961
|
)
|
|
(116,474
|
)
|
|||
Debt assumed
|
|
—
|
|
|
(32,441
|
)
|
|
(32,441
|
)
|
|||
Other noncurrent liabilities assumed
|
|
(11,675
|
)
|
|
(10,573
|
)
|
|
(22,248
|
)
|
|||
Contingent consideration liabilities
|
|
—
|
|
|
(5,854
|
)
|
|
(5,854
|
)
|
|||
Other purchase price obligations
|
|
(13,351
|
)
|
|
(333
|
)
|
|
(13,684
|
)
|
|||
Notes issued
|
|
(31,500
|
)
|
|
(13,535
|
)
|
|
(45,035
|
)
|
|||
Settlement of pre-existing balances
|
|
—
|
|
|
(5,052
|
)
|
|
(5,052
|
)
|
|||
Cash used in acquisitions, net of cash acquired
|
|
$
|
427,050
|
|
|
$
|
334,304
|
|
|
$
|
761,354
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Revenue, as reported
|
$
|
1,773,912
|
|
|
$
|
1,625,777
|
|
Revenue of purchased businesses for the period prior to acquisition:
|
|
|
|
||||
Keystone Specialty
|
—
|
|
|
3,443
|
|
||
Other acquisitions
|
90
|
|
|
123,420
|
|
||
Pro forma revenue
|
$
|
1,774,002
|
|
|
$
|
1,752,640
|
|
|
|
|
|
||||
Net income, as reported
|
$
|
107,095
|
|
|
$
|
104,653
|
|
Net income of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
|
|
|
|
||||
Keystone Specialty
|
—
|
|
|
248
|
|
||
Other acquisitions
|
(30
|
)
|
|
1,769
|
|
||
Pro forma net income
|
$
|
107,065
|
|
|
$
|
106,670
|
|
|
|
|
|
||||
Earnings per share, basic—as reported
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Effect of purchased businesses for the period prior to acquisition:
|
|
|
|
||||
Keystone Specialty
|
—
|
|
|
0.00
|
|
||
Other acquisitions
|
0.00
|
|
|
0.01
|
|
||
Pro forma earnings per share, basic
(1)
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
|
|
|
||||
Earnings per share, diluted—as reported
|
$
|
0.35
|
|
|
$
|
0.34
|
|
Effect of purchased businesses for the period prior to acquisition:
|
|
|
|
||||
Keystone Specialty
|
—
|
|
|
0.00
|
|
||
Other acquisitions
|
0.00
|
|
|
0.01
|
|
||
Pro forma earnings per share, diluted
(1)
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Note 9.
|
Restructuring and Acquisition Related Expenses
|
Note 10.
|
Earnings Per Share
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Net Income
|
$
|
107,095
|
|
|
$
|
104,653
|
|
Denominator for basic earnings per share—Weighted-average shares outstanding
|
304,003
|
|
|
301,406
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
RSUs
|
668
|
|
|
931
|
|
||
Stock options
|
2,290
|
|
|
3,166
|
|
||
Restricted stock
|
—
|
|
|
11
|
|
||
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding
|
306,961
|
|
|
305,514
|
|
||
Earnings per share, basic
|
$
|
0.35
|
|
|
$
|
0.35
|
|
Earnings per share, diluted
|
$
|
0.35
|
|
|
$
|
0.34
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2015
|
|
2014
|
||
Antidilutive securities:
|
|
|
|
||
RSUs
|
336
|
|
|
—
|
|
Stock options
|
100
|
|
|
127
|
|
Note 11.
|
Income Taxes
|
Note 12.
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||||||||||
|
|
March 31, 2015
|
|
March 31, 2014
|
||||||||||||||||||||||||||||
|
|
Foreign
Currency Translation |
|
Unrealized (Loss) Gain
on Cash Flow Hedges |
|
Unrealized (Loss) Gain
on Pension Plan |
|
Accumulated
Other Comprehensive (Loss) Income |
|
Foreign
Currency Translation |
|
Unrealized (Loss) Gain
on Cash Flow Hedges |
|
Unrealized Gain (Loss) on Pension Plan
|
|
Accumulated
Other Comprehensive Income (Loss) |
||||||||||||||||
Beginning balance
|
|
$
|
(27,073
|
)
|
|
$
|
(3,401
|
)
|
|
$
|
(9,751
|
)
|
|
$
|
(40,225
|
)
|
|
$
|
24,906
|
|
|
$
|
(5,596
|
)
|
|
$
|
701
|
|
|
$
|
20,011
|
|
Pretax (loss) income
|
|
(54,810
|
)
|
|
(1,074
|
)
|
|
—
|
|
|
(55,884
|
)
|
|
(563
|
)
|
|
(642
|
)
|
|
—
|
|
|
(1,205
|
)
|
||||||||
Income tax effect
|
|
—
|
|
|
370
|
|
|
—
|
|
|
370
|
|
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
||||||||
Reclassification of unrealized loss (gain)
|
|
—
|
|
|
1,522
|
|
|
170
|
|
|
1,692
|
|
|
—
|
|
|
1,960
|
|
|
(47
|
)
|
|
1,913
|
|
||||||||
Reclassification of deferred income taxes
|
|
—
|
|
|
(535
|
)
|
|
(42
|
)
|
|
(577
|
)
|
|
—
|
|
|
(693
|
)
|
|
10
|
|
|
(683
|
)
|
||||||||
Ending Balance
|
|
$
|
(81,883
|
)
|
|
$
|
(3,118
|
)
|
|
$
|
(9,623
|
)
|
|
$
|
(94,624
|
)
|
|
$
|
24,343
|
|
|
$
|
(4,803
|
)
|
|
$
|
664
|
|
|
$
|
20,204
|
|
Note 13.
|
Segment and Geographic Information
|
|
North America
|
|
Europe
|
|
Specialty
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Three Months Ended March 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Third Party
|
$
|
1,046,079
|
|
|
$
|
487,346
|
|
|
$
|
240,487
|
|
|
$
|
—
|
|
|
$
|
1,773,912
|
|
Intersegment
|
94
|
|
|
—
|
|
|
735
|
|
|
(829
|
)
|
|
—
|
|
|||||
Total segment revenue
|
$
|
1,046,173
|
|
|
$
|
487,346
|
|
|
$
|
241,222
|
|
|
$
|
(829
|
)
|
|
$
|
1,773,912
|
|
Segment EBITDA
|
$
|
149,388
|
|
|
$
|
46,523
|
|
|
$
|
25,404
|
|
|
$
|
—
|
|
|
$
|
221,315
|
|
Depreciation and amortization
|
17,265
|
|
|
8,351
|
|
|
5,053
|
|
|
—
|
|
|
30,669
|
|
|||||
Three Months Ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Third Party
|
$
|
1,029,266
|
|
|
$
|
419,714
|
|
|
$
|
176,797
|
|
|
$
|
—
|
|
|
$
|
1,625,777
|
|
Intersegment
|
33
|
|
|
—
|
|
|
226
|
|
|
(259
|
)
|
|
—
|
|
|||||
Total segment revenue
|
$
|
1,029,299
|
|
|
$
|
419,714
|
|
|
$
|
177,023
|
|
|
$
|
(259
|
)
|
|
$
|
1,625,777
|
|
Segment EBITDA
|
$
|
146,138
|
|
|
$
|
41,155
|
|
|
$
|
17,804
|
|
|
$
|
—
|
|
|
$
|
205,097
|
|
Depreciation and amortization
|
17,145
|
|
|
6,966
|
|
|
3,735
|
|
|
—
|
|
|
27,846
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Segment EBITDA
|
$
|
221,315
|
|
|
$
|
205,097
|
|
Deduct:
|
|
|
|
||||
Restructuring and acquisition related expenses
(1)
|
6,488
|
|
|
3,321
|
|
||
Change in fair value of contingent consideration liabilities
(2)
|
151
|
|
|
(1,222
|
)
|
||
Add:
|
|
|
|
||||
Equity in earnings of unconsolidated subsidiaries
|
(1,908
|
)
|
|
(36
|
)
|
||
EBITDA
|
212,768
|
|
|
202,962
|
|
||
Depreciation and amortization
|
30,669
|
|
|
27,846
|
|
||
Interest expense, net
|
14,906
|
|
|
16,118
|
|
||
Loss on debt extinguishment
|
—
|
|
|
324
|
|
||
Provision for income taxes
|
60,098
|
|
|
54,021
|
|
||
Net income
|
$
|
107,095
|
|
|
$
|
104,653
|
|
|
March 31,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Receivables, net
|
|
|
|
||||
North America
|
$
|
334,817
|
|
|
$
|
322,713
|
|
Europe
|
222,519
|
|
|
227,987
|
|
||
Specialty
|
87,701
|
|
|
50,722
|
|
||
Total receivables, net
|
645,037
|
|
|
601,422
|
|
||
Inventory
|
|
|
|
||||
North America
|
784,753
|
|
|
826,429
|
|
||
Europe
|
354,936
|
|
|
402,488
|
|
||
Specialty
|
218,367
|
|
|
204,930
|
|
||
Total inventory
|
1,358,056
|
|
|
1,433,847
|
|
||
Property and Equipment, net
|
|
|
|
||||
North America
|
454,583
|
|
|
456,288
|
|
||
Europe
|
121,212
|
|
|
128,309
|
|
||
Specialty
|
45,776
|
|
|
45,390
|
|
||
Total property and equipment, net
|
621,571
|
|
|
629,987
|
|
||
Other unallocated assets
|
2,897,802
|
|
|
2,908,236
|
|
||
Total assets
|
$
|
5,522,466
|
|
|
$
|
5,573,492
|
|
|
March 31,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Long-lived Assets
|
|
|
|
||||
United States
|
$
|
471,221
|
|
|
$
|
469,450
|
|
United Kingdom
|
90,152
|
|
|
92,813
|
|
||
Other countries
|
60,198
|
|
|
67,724
|
|
||
|
$
|
621,571
|
|
|
$
|
629,987
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2015
|
|
2014
|
||||
Aftermarket, other new and refurbished products
|
$
|
1,246,471
|
|
|
$
|
1,104,649
|
|
Recycled, remanufactured and related products and services
|
398,445
|
|
|
364,904
|
|
||
Other
|
128,996
|
|
|
156,224
|
|
||
|
$
|
1,773,912
|
|
|
$
|
1,625,777
|
|
Note 14.
|
Condensed Consolidating Financial Information
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)
|
|||||||||||||||||||
|
March 31, 2015
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and equivalents
|
$
|
59,676
|
|
|
$
|
28,888
|
|
|
$
|
86,928
|
|
|
$
|
—
|
|
|
$
|
175,492
|
|
Receivables, net
|
58
|
|
|
253,910
|
|
|
391,069
|
|
|
—
|
|
|
645,037
|
|
|||||
Intercompany receivables, net
|
2,702
|
|
|
—
|
|
|
5,086
|
|
|
(7,788
|
)
|
|
—
|
|
|||||
Inventory
|
—
|
|
|
937,077
|
|
|
420,979
|
|
|
—
|
|
|
1,358,056
|
|
|||||
Deferred income taxes
|
3,774
|
|
|
71,422
|
|
|
3,144
|
|
|
—
|
|
|
78,340
|
|
|||||
Prepaid expenses and other current assets
|
1,330
|
|
|
37,822
|
|
|
41,102
|
|
|
—
|
|
|
80,254
|
|
|||||
Total Current Assets
|
67,540
|
|
|
1,329,119
|
|
|
948,308
|
|
|
(7,788
|
)
|
|
2,337,179
|
|
|||||
Property and Equipment, net
|
454
|
|
|
472,396
|
|
|
148,721
|
|
|
—
|
|
|
621,571
|
|
|||||
Intangible Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Goodwill
|
—
|
|
|
1,563,719
|
|
|
671,324
|
|
|
—
|
|
|
2,235,043
|
|
|||||
Other intangibles, net
|
—
|
|
|
151,347
|
|
|
80,505
|
|
|
—
|
|
|
231,852
|
|
|||||
Investment in Subsidiaries
|
3,207,873
|
|
|
273,352
|
|
|
—
|
|
|
(3,481,225
|
)
|
|
—
|
|
|||||
Intercompany Notes Receivable
|
647,065
|
|
|
31,709
|
|
|
—
|
|
|
(678,774
|
)
|
|
—
|
|
|||||
Other Assets
|
51,685
|
|
|
22,296
|
|
|
26,004
|
|
|
(3,164
|
)
|
|
96,821
|
|
|||||
Total Assets
|
$
|
3,974,617
|
|
|
$
|
3,843,938
|
|
|
$
|
1,874,862
|
|
|
$
|
(4,170,951
|
)
|
|
$
|
5,522,466
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
653
|
|
|
$
|
203,148
|
|
|
$
|
193,822
|
|
|
$
|
—
|
|
|
$
|
397,623
|
|
Intercompany payables, net
|
—
|
|
|
5,086
|
|
|
2,702
|
|
|
(7,788
|
)
|
|
—
|
|
|||||
Accrued expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accrued payroll-related liabilities
|
4,448
|
|
|
47,946
|
|
|
29,281
|
|
|
—
|
|
|
81,675
|
|
|||||
Other accrued expenses
|
15,013
|
|
|
81,121
|
|
|
75,011
|
|
|
—
|
|
|
171,145
|
|
|||||
Income taxes payable
|
21,857
|
|
|
—
|
|
|
15,206
|
|
|
—
|
|
|
37,063
|
|
|||||
Other current liabilities
|
283
|
|
|
15,855
|
|
|
6,367
|
|
|
—
|
|
|
22,505
|
|
|||||
Current portion of long-term obligations
|
55,112
|
|
|
4,204
|
|
|
2,987
|
|
|
—
|
|
|
62,303
|
|
|||||
Total Current Liabilities
|
97,366
|
|
|
357,360
|
|
|
325,376
|
|
|
(7,788
|
)
|
|
772,314
|
|
|||||
Long-Term Obligations, Excluding Current Portion
|
1,065,000
|
|
|
6,552
|
|
|
600,780
|
|
|
—
|
|
|
1,672,332
|
|
|||||
Intercompany Notes Payable
|
—
|
|
|
630,454
|
|
|
48,320
|
|
|
(678,774
|
)
|
|
—
|
|
|||||
Deferred Income Taxes
|
—
|
|
|
165,462
|
|
|
15,075
|
|
|
(3,164
|
)
|
|
177,373
|
|
|||||
Other Noncurrent Liabilities
|
32,344
|
|
|
63,357
|
|
|
24,839
|
|
|
—
|
|
|
120,540
|
|
|||||
Stockholders’ Equity
|
2,779,907
|
|
|
2,620,753
|
|
|
860,472
|
|
|
(3,481,225
|
)
|
|
2,779,907
|
|
|||||
Total Liabilities and Stockholders' Equity
|
$
|
3,974,617
|
|
|
$
|
3,843,938
|
|
|
$
|
1,874,862
|
|
|
$
|
(4,170,951
|
)
|
|
$
|
5,522,466
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)
|
|||||||||||||||||||
|
December 31, 2014
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and equivalents
|
$
|
14,930
|
|
|
$
|
32,103
|
|
|
$
|
67,572
|
|
|
$
|
—
|
|
|
$
|
114,605
|
|
Receivables, net
|
145
|
|
|
217,542
|
|
|
383,735
|
|
|
—
|
|
|
601,422
|
|
|||||
Intercompany receivables, net
|
1,360
|
|
|
—
|
|
|
8,048
|
|
|
(9,408
|
)
|
|
—
|
|
|||||
Inventory
|
—
|
|
|
964,477
|
|
|
469,370
|
|
|
—
|
|
|
1,433,847
|
|
|||||
Deferred income taxes
|
4,064
|
|
|
62,850
|
|
|
10,215
|
|
|
4,615
|
|
|
81,744
|
|
|||||
Prepaid expenses and other current assets
|
20,640
|
|
|
36,553
|
|
|
28,606
|
|
|
—
|
|
|
85,799
|
|
|||||
Total Current Assets
|
41,139
|
|
|
1,313,525
|
|
|
967,546
|
|
|
(4,793
|
)
|
|
2,317,417
|
|
|||||
Property and Equipment, net
|
494
|
|
|
470,791
|
|
|
158,702
|
|
|
—
|
|
|
629,987
|
|
|||||
Intangible Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Goodwill
|
—
|
|
|
1,563,796
|
|
|
725,099
|
|
|
—
|
|
|
2,288,895
|
|
|||||
Other intangibles, net
|
—
|
|
|
155,819
|
|
|
89,706
|
|
|
—
|
|
|
245,525
|
|
|||||
Investment in Subsidiaries
|
3,216,039
|
|
|
279,967
|
|
|
—
|
|
|
(3,496,006
|
)
|
|
—
|
|
|||||
Intercompany Notes Receivable
|
667,949
|
|
|
23,449
|
|
|
—
|
|
|
(691,398
|
)
|
|
—
|
|
|||||
Other Assets
|
49,601
|
|
|
24,457
|
|
|
20,481
|
|
|
(2,871
|
)
|
|
91,668
|
|
|||||
Total Assets
|
$
|
3,975,222
|
|
|
$
|
3,831,804
|
|
|
$
|
1,961,534
|
|
|
$
|
(4,195,068
|
)
|
|
$
|
5,573,492
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
682
|
|
|
$
|
182,607
|
|
|
$
|
216,913
|
|
|
$
|
—
|
|
|
$
|
400,202
|
|
Intercompany payables, net
|
—
|
|
|
8,048
|
|
|
1,360
|
|
|
(9,408
|
)
|
|
—
|
|
|||||
Accrued expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accrued payroll-related liabilities
|
8,075
|
|
|
48,850
|
|
|
29,091
|
|
|
—
|
|
|
86,016
|
|
|||||
Other accrued expenses
|
8,061
|
|
|
83,857
|
|
|
72,230
|
|
|
—
|
|
|
164,148
|
|
|||||
Income taxes payable
|
—
|
|
|
—
|
|
|
13,763
|
|
|
—
|
|
|
13,763
|
|
|||||
Other current liabilities
|
283
|
|
|
16,197
|
|
|
1,957
|
|
|
4,615
|
|
|
23,052
|
|
|||||
Current portion of long-term obligations
|
55,172
|
|
|
4,599
|
|
|
3,744
|
|
|
—
|
|
|
63,515
|
|
|||||
Total Current Liabilities
|
72,273
|
|
|
344,158
|
|
|
339,058
|
|
|
(4,793
|
)
|
|
750,696
|
|
|||||
Long-Term Obligations, Excluding Current Portion
|
1,150,624
|
|
|
6,561
|
|
|
643,862
|
|
|
—
|
|
|
1,801,047
|
|
|||||
Intercompany Notes Payable
|
—
|
|
|
649,824
|
|
|
41,574
|
|
|
(691,398
|
)
|
|
—
|
|
|||||
Deferred Income Taxes
|
—
|
|
|
156,727
|
|
|
27,806
|
|
|
(2,871
|
)
|
|
181,662
|
|
|||||
Other Noncurrent Liabilities
|
31,668
|
|
|
60,213
|
|
|
27,549
|
|
|
—
|
|
|
119,430
|
|
|||||
Stockholders’ Equity
|
2,720,657
|
|
|
2,614,321
|
|
|
881,685
|
|
|
(3,496,006
|
)
|
|
2,720,657
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
$
|
3,975,222
|
|
|
$
|
3,831,804
|
|
|
$
|
1,961,534
|
|
|
$
|
(4,195,068
|
)
|
|
$
|
5,573,492
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2015
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenue
|
$
|
—
|
|
|
$
|
1,225,908
|
|
|
$
|
582,943
|
|
|
$
|
(34,939
|
)
|
|
$
|
1,773,912
|
|
Cost of goods sold
|
—
|
|
|
740,803
|
|
|
368,569
|
|
|
(34,939
|
)
|
|
1,074,433
|
|
|||||
Gross margin
|
—
|
|
|
485,105
|
|
|
214,374
|
|
|
—
|
|
|
699,479
|
|
|||||
Facility and warehouse expenses
|
—
|
|
|
97,761
|
|
|
34,896
|
|
|
—
|
|
|
132,657
|
|
|||||
Distribution expenses
|
—
|
|
|
95,992
|
|
|
45,722
|
|
|
—
|
|
|
141,714
|
|
|||||
Selling, general and administrative expenses
|
7,631
|
|
|
121,662
|
|
|
73,948
|
|
|
—
|
|
|
203,241
|
|
|||||
Restructuring and acquisition related expenses
|
—
|
|
|
6,060
|
|
|
428
|
|
|
—
|
|
|
6,488
|
|
|||||
Depreciation and amortization
|
40
|
|
|
19,891
|
|
|
9,522
|
|
|
—
|
|
|
29,453
|
|
|||||
Operating (loss) income
|
(7,671
|
)
|
|
143,739
|
|
|
49,858
|
|
|
—
|
|
|
185,926
|
|
|||||
Other expense (income):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
12,314
|
|
|
43
|
|
|
2,549
|
|
|
—
|
|
|
14,906
|
|
|||||
Intercompany interest (income) expense, net
|
(10,823
|
)
|
|
7,259
|
|
|
3,564
|
|
|
—
|
|
|
—
|
|
|||||
Change in fair value of contingent consideration liabilities
|
—
|
|
|
55
|
|
|
96
|
|
|
—
|
|
|
151
|
|
|||||
Other expense (income), net
|
25
|
|
|
(1,790
|
)
|
|
3,533
|
|
|
—
|
|
|
1,768
|
|
|||||
Total other expense, net
|
1,516
|
|
|
5,567
|
|
|
9,742
|
|
|
—
|
|
|
16,825
|
|
|||||
(Loss) income before (benefit) provision for income taxes
|
(9,187
|
)
|
|
138,172
|
|
|
40,116
|
|
|
—
|
|
|
169,101
|
|
|||||
(Benefit) provision for income taxes
|
(3,755
|
)
|
|
55,777
|
|
|
8,076
|
|
|
—
|
|
|
60,098
|
|
|||||
Equity in earnings of unconsolidated subsidiaries
|
—
|
|
|
11
|
|
|
(1,919
|
)
|
|
—
|
|
|
(1,908
|
)
|
|||||
Equity in earnings of subsidiaries
|
112,527
|
|
|
7,260
|
|
|
—
|
|
|
(119,787
|
)
|
|
—
|
|
|||||
Net income
|
$
|
107,095
|
|
|
$
|
89,666
|
|
|
$
|
30,121
|
|
|
$
|
(119,787
|
)
|
|
$
|
107,095
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2014
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenue
|
$
|
—
|
|
|
$
|
1,140,320
|
|
|
$
|
514,519
|
|
|
$
|
(29,062
|
)
|
|
$
|
1,625,777
|
|
Cost of goods sold
|
—
|
|
|
680,630
|
|
|
322,325
|
|
|
(29,062
|
)
|
|
973,893
|
|
|||||
Gross margin
|
—
|
|
|
459,690
|
|
|
192,194
|
|
|
—
|
|
|
651,884
|
|
|||||
Facility and warehouse expenses
|
—
|
|
|
93,100
|
|
|
33,059
|
|
|
—
|
|
|
126,159
|
|
|||||
Distribution expenses
|
—
|
|
|
94,884
|
|
|
42,445
|
|
|
—
|
|
|
137,329
|
|
|||||
Selling, general and administrative expenses
|
7,911
|
|
|
114,083
|
|
|
62,536
|
|
|
—
|
|
|
184,530
|
|
|||||
Restructuring and acquisition related expenses
|
—
|
|
|
2,988
|
|
|
333
|
|
|
—
|
|
|
3,321
|
|
|||||
Depreciation and amortization
|
59
|
|
|
18,668
|
|
|
7,984
|
|
|
—
|
|
|
26,711
|
|
|||||
Operating (loss) income
|
(7,970
|
)
|
|
135,967
|
|
|
45,837
|
|
|
—
|
|
|
173,834
|
|
|||||
Other expense (income):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
13,669
|
|
|
71
|
|
|
2,378
|
|
|
—
|
|
|
16,118
|
|
|||||
Intercompany interest (income) expense, net
|
(12,324
|
)
|
|
6,021
|
|
|
6,303
|
|
|
—
|
|
|
—
|
|
|||||
Loss on debt extinguishment
|
324
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
324
|
|
|||||
Change in fair value of contingent consideration liabilities
|
—
|
|
|
(1,390
|
)
|
|
168
|
|
|
—
|
|
|
(1,222
|
)
|
|||||
Other (income) expense, net
|
(15
|
)
|
|
(1,761
|
)
|
|
1,680
|
|
|
—
|
|
|
(96
|
)
|
|||||
Total other expense, net
|
1,654
|
|
|
2,941
|
|
|
10,529
|
|
|
—
|
|
|
15,124
|
|
|||||
(Loss) income before (benefit) provision for income taxes
|
(9,624
|
)
|
|
133,026
|
|
|
35,308
|
|
|
—
|
|
|
158,710
|
|
|||||
(Benefit) provision for income taxes
|
(3,615
|
)
|
|
50,221
|
|
|
7,415
|
|
|
—
|
|
|
54,021
|
|
|||||
Equity in earnings of unconsolidated subsidiaries
|
—
|
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|||||
Equity in earnings of subsidiaries
|
110,662
|
|
|
8,746
|
|
|
—
|
|
|
(119,408
|
)
|
|
—
|
|
|||||
Net income
|
$
|
104,653
|
|
|
$
|
91,551
|
|
|
$
|
27,857
|
|
|
$
|
(119,408
|
)
|
|
$
|
104,653
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2015
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net income
|
$
|
107,095
|
|
|
$
|
89,666
|
|
|
$
|
30,121
|
|
|
$
|
(119,787
|
)
|
|
$
|
107,095
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation
|
(54,810
|
)
|
|
(14,372
|
)
|
|
(52,799
|
)
|
|
67,171
|
|
|
(54,810
|
)
|
|||||
Net change in unrecognized gains/losses on derivative instruments, net of tax
|
283
|
|
|
—
|
|
|
(62
|
)
|
|
62
|
|
|
283
|
|
|||||
Net change in unrealized gains/losses on pension plan, net of tax
|
128
|
|
|
—
|
|
|
128
|
|
|
(128
|
)
|
|
128
|
|
|||||
Total other comprehensive loss
|
(54,399
|
)
|
|
(14,372
|
)
|
|
(52,733
|
)
|
|
67,105
|
|
|
(54,399
|
)
|
|||||
Total comprehensive income (loss)
|
$
|
52,696
|
|
|
$
|
75,294
|
|
|
$
|
(22,612
|
)
|
|
$
|
(52,682
|
)
|
|
$
|
52,696
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2014
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net income
|
$
|
104,653
|
|
|
$
|
91,551
|
|
|
$
|
27,857
|
|
|
$
|
(119,408
|
)
|
|
$
|
104,653
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation
|
(563
|
)
|
|
(78
|
)
|
|
421
|
|
|
(343
|
)
|
|
(563
|
)
|
|||||
Net change in unrecognized gains/losses on derivative instruments, net of tax
|
793
|
|
|
—
|
|
|
(115
|
)
|
|
115
|
|
|
793
|
|
|||||
Net change in unrealized gains/losses on pension plan, net of tax
|
(37
|
)
|
|
—
|
|
|
(37
|
)
|
|
37
|
|
|
(37
|
)
|
|||||
Total other comprehensive income (loss)
|
193
|
|
|
(78
|
)
|
|
269
|
|
|
(191
|
)
|
|
193
|
|
|||||
Total comprehensive income
|
$
|
104,846
|
|
|
$
|
91,473
|
|
|
$
|
28,126
|
|
|
$
|
(119,599
|
)
|
|
$
|
104,846
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2015
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
$
|
110,976
|
|
|
$
|
105,119
|
|
|
$
|
33,305
|
|
|
$
|
(69,255
|
)
|
|
$
|
180,145
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of property and equipment
|
(4
|
)
|
|
(17,731
|
)
|
|
(8,361
|
)
|
|
—
|
|
|
(26,096
|
)
|
|||||
Investment and intercompany note activity with subsidiaries
|
18,167
|
|
|
—
|
|
|
—
|
|
|
(18,167
|
)
|
|
—
|
|
|||||
Acquisitions, net of cash acquired
|
—
|
|
|
(764
|
)
|
|
(100
|
)
|
|
—
|
|
|
(864
|
)
|
|||||
Other investing activities, net
|
—
|
|
|
74
|
|
|
(7,390
|
)
|
|
—
|
|
|
(7,316
|
)
|
|||||
Net cash provided by (used in) investing activities
|
18,163
|
|
|
(18,421
|
)
|
|
(15,851
|
)
|
|
(18,167
|
)
|
|
(34,276
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from exercise of stock options
|
1,318
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,318
|
|
|||||
Excess tax benefit from stock-based payments
|
5,201
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,201
|
|
|||||
Taxes paid related to net share settlements of stock-based compensation awards
|
(5,243
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,243
|
)
|
|||||
Borrowings under revolving credit facilities
|
38,000
|
|
|
—
|
|
|
47,030
|
|
|
—
|
|
|
85,030
|
|
|||||
Repayments under revolving credit facilities
|
(118,000
|
)
|
|
—
|
|
|
(37,073
|
)
|
|
—
|
|
|
(155,073
|
)
|
|||||
Repayments under term loans
|
(5,625
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,625
|
)
|
|||||
Borrowings under receivables securitization facility
|
—
|
|
|
—
|
|
|
2,100
|
|
|
—
|
|
|
2,100
|
|
|||||
Repayments of other long-term debt
|
(44
|
)
|
|
(504
|
)
|
|
(6,028
|
)
|
|
—
|
|
|
(6,576
|
)
|
|||||
Payments of other obligations
|
—
|
|
|
(1,544
|
)
|
|
—
|
|
|
—
|
|
|
(1,544
|
)
|
|||||
Investment and intercompany note activity with parent
|
—
|
|
|
(18,779
|
)
|
|
612
|
|
|
18,167
|
|
|
—
|
|
|||||
Dividends
|
—
|
|
|
(69,255
|
)
|
|
—
|
|
|
69,255
|
|
|
—
|
|
|||||
Net cash (used in) provided by financing activities
|
(84,393
|
)
|
|
(90,082
|
)
|
|
6,641
|
|
|
87,422
|
|
|
(80,412
|
)
|
|||||
Effect of exchange rate changes on cash and equivalents
|
—
|
|
|
169
|
|
|
(4,739
|
)
|
|
—
|
|
|
(4,570
|
)
|
|||||
Net increase (decrease) in cash and equivalents
|
44,746
|
|
|
(3,215
|
)
|
|
19,356
|
|
|
—
|
|
|
60,887
|
|
|||||
Cash and equivalents, beginning of period
|
14,930
|
|
|
32,103
|
|
|
67,572
|
|
|
—
|
|
|
114,605
|
|
|||||
Cash and equivalents, end of period
|
$
|
59,676
|
|
|
$
|
28,888
|
|
|
$
|
86,928
|
|
|
$
|
—
|
|
|
$
|
175,492
|
|
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
|
|||||||||||||||||||
|
For the Three Months Ended March 31, 2014
|
||||||||||||||||||
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
127,826
|
|
|
$
|
134,020
|
|
|
$
|
(73,010
|
)
|
|
$
|
(91,827
|
)
|
|
$
|
97,009
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of property and equipment
|
—
|
|
|
(19,107
|
)
|
|
(14,609
|
)
|
|
—
|
|
|
(33,716
|
)
|
|||||
Investment and intercompany note activity with subsidiaries
|
(363,124
|
)
|
|
—
|
|
|
—
|
|
|
363,124
|
|
|
—
|
|
|||||
Acquisitions, net of cash acquired
|
—
|
|
|
(485,018
|
)
|
|
(1,718
|
)
|
|
—
|
|
|
(486,736
|
)
|
|||||
Other investing activities, net
|
7
|
|
|
(539
|
)
|
|
(303
|
)
|
|
—
|
|
|
(835
|
)
|
|||||
Net cash used in investing activities
|
(363,117
|
)
|
|
(504,664
|
)
|
|
(16,630
|
)
|
|
363,124
|
|
|
(521,287
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from exercise of stock options
|
2,377
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,377
|
|
|||||
Excess tax benefit from stock-based payments
|
6,813
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,813
|
|
|||||
Debt issuance costs
|
(3,753
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,753
|
)
|
|||||
Borrowings under revolving credit facilities
|
560,000
|
|
|
—
|
|
|
140,123
|
|
|
—
|
|
|
700,123
|
|
|||||
Repayments under revolving credit facilities
|
(390,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(390,000
|
)
|
|||||
Borrowings under term loans
|
11,250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,250
|
|
|||||
Borrowings under receivables securitization facility
|
—
|
|
|
—
|
|
|
80,000
|
|
|
—
|
|
|
80,000
|
|
|||||
Repayments of other long-term debt
|
(1,920
|
)
|
|
(1,112
|
)
|
|
(5,920
|
)
|
|
—
|
|
|
(8,952
|
)
|
|||||
Payments of other obligations
|
—
|
|
|
—
|
|
|
(2,006
|
)
|
|
—
|
|
|
(2,006
|
)
|
|||||
Settlement of foreign currency forward contract
|
(9,639
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,639
|
)
|
|||||
Investment and intercompany note activity with parent
|
—
|
|
|
477,710
|
|
|
(114,586
|
)
|
|
(363,124
|
)
|
|
—
|
|
|||||
Dividends
|
—
|
|
|
(91,827
|
)
|
|
—
|
|
|
91,827
|
|
|
—
|
|
|||||
Net cash provided by financing activities
|
175,128
|
|
|
384,771
|
|
|
97,611
|
|
|
(271,297
|
)
|
|
386,213
|
|
|||||
Effect of exchange rate changes on cash and equivalents
|
—
|
|
|
(81
|
)
|
|
904
|
|
|
—
|
|
|
823
|
|
|||||
Net (decrease) increase in cash and equivalents
|
(60,163
|
)
|
|
14,046
|
|
|
8,875
|
|
|
—
|
|
|
(37,242
|
)
|
|||||
Cash and equivalents, beginning of period
|
77,926
|
|
|
13,693
|
|
|
58,869
|
|
|
—
|
|
|
150,488
|
|
|||||
Cash and equivalents, end of period
|
$
|
17,763
|
|
|
$
|
27,739
|
|
|
$
|
67,744
|
|
|
$
|
—
|
|
|
$
|
113,246
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
|
||||||||
|
March 31,
|
|
|
||||||||
|
2015
|
|
2014
|
|
Change
|
||||||
Restructuring expenses
|
$
|
5,964
|
|
(1)
|
$
|
3,123
|
|
(2)
|
$
|
2,841
|
|
Acquisition related expenses
|
524
|
|
(3)
|
198
|
|
(4)
|
326
|
|
|||
Total restructuring and acquisition related expenses
|
$
|
6,488
|
|
|
$
|
3,321
|
|
|
$
|
3,167
|
|
(1)
|
Includes $5.9 million of expense related to the integration of acquired businesses in our Specialty segment. These integration activities included the closure of duplicate facilities and termination of employees in connection with the integration of the acquisitions into our existing business.
|
(2)
|
Includes $2.8 million of restructuring expenses related to the integration of our January 2014 Keystone Specialty acquisition. Our restructuring expenses included severance for termination of overlapping headcount and excess facility costs, such as lease reserves and other lease termination costs.
|
(3)
|
Includes $0.4 million and $0.1 million of external costs related to our acquisitions in our European and North American segments, respectively.
|
(4)
|
Includes external costs primarily related to our January 2014 acquisition of Keystone Specialty.
|
|
Three Months Ended
|
|
|
|
||||||||
|
March 31,
|
|
|
|
||||||||
|
2015
|
|
2014
|
|
Change
|
|
||||||
Depreciation
|
$
|
21,182
|
|
|
$
|
19,269
|
|
|
$
|
1,913
|
|
(1)
|
Amortization
|
8,271
|
|
|
7,442
|
|
|
829
|
|
(2)
|
|||
Total depreciation and amortization
|
$
|
29,453
|
|
|
$
|
26,711
|
|
|
$
|
2,742
|
|
|
(1)
|
Increase in depreciation expense is a result of increased levels of property and equipment to support our acquisition and organic related growth.
|
(2)
|
Increase in amortization expense is a result of amortization of intangible assets related to our acquisitions completed since the beginning of the prior year. We recognized $29.1 million of intangibles related to our October 2014 acquisitions of two Specialty businesses. As we amortize customer relationship intangibles on an accelerated basis, amortization expense will be relatively higher in the initial post-acquisition years.
|
(1)
|
Due to lower interest rates on borrowings under our senior secured credit agreement compared to the prior year period.
|
(2)
|
During the first quarter of 2014, we incurred a $0.3 million loss on debt extinguishment as a result of our March 2014 amendment to our senior secured credit agreement. We did not incur a similar charge during the current year first quarter.
|
(3)
|
During the three months ended March 31, 2015, we recorded losses of
$0.2 million
as a result of fair value adjustments to our contingent consideration liabilities, compared to gains of
$1.2 million
in the prior year quarter. See
Note 6, "Fair Value Measurements
" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our contingent payment arrangements.
|
(4)
|
Primarily due to $1.4 million of greater foreign currency transaction losses in our European operations, including the impact of unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of
|
|
Three Months Ended March 31,
|
||||||||||
|
2015
|
|
% of Total Segment Revenue
|
|
2014
|
|
% of Total Segment Revenue
|
||||
Third Party Revenue
|
|
|
|
|
|
|
|
||||
North America
|
$
|
1,046,079
|
|
|
|
|
$
|
1,029,266
|
|
|
|
Europe
|
487,346
|
|
|
|
|
419,714
|
|
|
|
||
Specialty
|
240,487
|
|
|
|
|
176,797
|
|
|
|
||
Total third party revenue
|
$
|
1,773,912
|
|
|
|
|
$
|
1,625,777
|
|
|
|
Total Revenue
|
|
|
|
|
|
|
|
||||
North America
|
$
|
1,046,173
|
|
|
|
|
$
|
1,029,299
|
|
|
|
Europe
|
487,346
|
|
|
|
|
419,714
|
|
|
|
||
Specialty
|
241,222
|
|
|
|
|
177,023
|
|
|
|
||
Eliminations
|
(829
|
)
|
|
|
|
(259
|
)
|
|
|
||
Total revenue
|
$
|
1,773,912
|
|
|
|
|
$
|
1,625,777
|
|
|
|
Segment EBITDA
|
|
|
|
|
|
|
|
||||
North America
|
$
|
149,388
|
|
|
14.3%
|
|
$
|
146,138
|
|
|
14.2%
|
Europe
|
46,523
|
|
|
9.5%
|
|
41,155
|
|
|
9.8%
|
||
Specialty
|
25,404
|
|
|
10.5%
|
|
17,804
|
|
|
10.1%
|
||
Total Segment EBITDA
|
$
|
221,315
|
|
|
12.5%
|
|
$
|
205,097
|
|
|
12.6%
|
|
Three Months Ended March 31,
|
|
Percentage Change in Revenue
|
||||||||||||||||
North America
|
2015
|
|
2014
|
|
Acquisition
(1)
|
|
Organic
|
|
Foreign Exchange
|
|
Total Change
|
||||||||
Parts & services revenue
|
$
|
918,333
|
|
|
$
|
873,779
|
|
|
1.4
|
%
|
|
4.6
|
%
|
(2)
|
(0.9
|
)%
|
|
5.1
|
%
|
Other revenue
|
127,746
|
|
|
155,487
|
|
|
0.3
|
%
|
|
(17.9
|
)%
|
(3)
|
(0.3
|
)%
|
|
(17.8
|
)%
|
||
Total revenue
|
$
|
1,046,079
|
|
|
$
|
1,029,266
|
|
|
1.2
|
%
|
|
1.2
|
%
|
|
(0.8
|
)%
|
|
1.6
|
%
|
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.
|
(1)
|
Reflects the impact of 10 wholesale businesses and
2
self service retail operations acquired since the beginning of 2014.
|
(2)
|
Our organic growth in parts and services revenue was primarily due to increased net pricing in our wholesale operations. Compared to the prior year first quarter, we decreased discounts offered on sales of aftermarket products. Additionally, in the third quarter of 2014, we shifted our salvage vehicle purchasing to higher quality vehicles, which increased the average revenue per part sold during the first quarter of 2015. Sales volumes in aftermarket products were flat with the prior year period, which had relatively high sales volumes due to severe winter weather conditions that resulted in increased vehicle accidents and higher insurance claims activity in the first quarter of 2014.
|
(3)
|
Approximately $21 million of the $28 million organic decline in other revenue was a result of lower prices received from the sale of scrap and other metals. This was primarily due to lower prices from the sale of crushed auto bodies, which fluctuate based on steel prices. Lower sales volumes were responsible for the remaining decline, primarily due to fewer vehicles processed relative to the prior year first quarter. Compared to the prior year period, we purchased fewer salvage vehicles, and we anticipate the reduction in purchasing volumes will impact our organic growth in other revenue into the second quarter of 2015.
|
North America
|
|
Percentage of Total Segment Revenue
|
|
|
Segment EBITDA for the three months ended March 31, 2014
|
|
14.2
|
%
|
|
(Decrease) increase due to:
|
|
|
|
|
Change in gross margin
|
|
(0.3
|
)%
|
(1)
|
Change in segment operating expenses
|
|
0.4
|
%
|
(2)
|
Segment EBITDA for the three months ended March 31, 2015
|
|
14.3
|
%
|
|
(1)
|
The decline in gross margin reflects a 0.7% negative effect from our salvage operations, partially offset by a 0.3% improvement in gross margins in our aftermarket product lines. The decline in our salvage gross margins is a result of a shift in purchasing strategy to higher cost vehicles that we believe will generate greater parts revenue dollars but
|
(2)
|
Primarily due to a reduction in fuel costs as a result of favorable pricing compared to the prior year first quarter.
|
|
Three Months Ended March 31,
|
|
Percentage Change in Revenue
|
||||||||||||||||
Europe
|
2015
|
|
2014
|
|
Acquisition
(1)
|
|
Organic
(2)
|
|
Foreign Exchange
(3)
|
|
Total Change
|
||||||||
Parts & services revenue
|
$
|
486,096
|
|
|
$
|
418,977
|
|
|
12.7
|
%
|
|
14.0
|
%
|
|
(10.7
|
)%
|
|
16.0
|
%
|
Other revenue
|
1,250
|
|
|
737
|
|
|
54.5
|
%
|
|
23.7
|
%
|
|
(8.6
|
)%
|
|
69.6
|
%
|
||
Total revenue
|
$
|
487,346
|
|
|
$
|
419,714
|
|
|
12.8
|
%
|
|
14.0
|
%
|
|
(10.7
|
)%
|
|
16.1
|
%
|
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.
|
(1)
|
Includes $45.3 million from our 2014 acquisitions of seven distribution companies in the Netherlands.
|
(2)
|
In our U.K. operations, revenue grew organically by 16.8%, while our continental European operations grew 5.3%, resulting in net organic revenue growth of
14.0%
over the prior year. Our organic revenue growth in the U.K., which resulted from higher sales volumes, was composed of a 10.2% increase from stores open more than 12 months and a 6.6% increase from revenue generated by 47 branch openings since the beginning of the prior year through the one year anniversary of their respective opening dates. Organic revenue growth in our continental European operations was primarily due to the opening of a new warehouse location in France in 2014.
|
(3)
|
Compared to the prior year, exchange rates reduced our revenue growth by
10.7%
, primarily due to the strengthening U.S. dollar against both the pound sterling and euro in the fourth quarter of 2014 through the first quarter of 2015. Based on exchange rates through April 2015 and projections for the remainder of the year, we expect there will be a negative effect on revenue growth for the remainder of 2015 as a result of foreign currency exchange movements.
|
(1)
|
Gross margins in our U.K. operations declined by 0.2% as a result of a shift in revenue to lower margin national accounts, combined with increased customer discounts to drive sales growth. This decline was offset by improvement
|
(2)
|
Reflects the offsetting effects of (i) the acquisitions of our Netherlands distributors and a salvage business in the second and fourth quarters of 2014, respectively, which have higher operating expenses than our legacy business (-0.6%), and (ii) a decline in distribution expenses as a percentage of revenue in our U.K. operations (0.3%) as a result of internalizing previously outsourced delivery expenses as well as lower fuel costs, and (iii) improved leverage of our facilities in our U.K. operations (0.2%).
|
(3)
|
Primarily due to $1.4 million of greater foreign currency transaction losses, including the impact of unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of inventory and, to a lesser extent, unrealized and realized gains and losses on foreign currency transactions for the three months ended March 31, 2015 compared to the three months ended March 31, 2014.
|
|
Three Months Ended March 31,
|
|
Percentage Change in Revenue
|
||||||||||||||||
Specialty
|
2015
|
|
2014
|
|
Acquisition
(1)
|
|
Organic
(2)
|
|
Foreign Exchange
(3)
|
|
Total Change
|
||||||||
Parts & services revenue
|
$
|
240,487
|
|
|
$
|
176,797
|
|
|
31.2
|
%
|
|
6.3
|
%
|
|
(1.5
|
)%
|
|
36.0
|
%
|
Other revenue
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
||
Total revenue
|
$
|
240,487
|
|
|
$
|
176,797
|
|
|
31.2
|
%
|
|
6.3
|
%
|
|
(1.5
|
)%
|
|
36.0
|
%
|
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.
|
(1)
|
Reflects the impact of two Specialty businesses acquired in the fourth quarter of 2014.
|
(2)
|
Primarily due to increased sales volumes as a result of favorable economic conditions.
|
(3)
|
Compared to the prior year, exchange rates reduced our revenue growth by
1.5%
, primarily due to the strengthening U.S. dollar against the Canadian dollar in the first three months of 2015.
|
Specialty
|
|
Percentage of Total Segment Revenue
|
|
|
Segment EBITDA for the three months ended March 31, 2014
|
|
10.1
|
%
|
|
(Decrease) increase due to:
|
|
|
|
|
Change in gross margin
|
|
(0.9
|
)%
|
(1)
|
Change in segment operating expenses
|
|
1.3
|
%
|
(2)
|
Segment EBITDA for the three months ended March 31, 2015
|
|
10.5
|
%
|
|
(1)
|
Primarily due to the impact of our acquisition of a supplier of parts for recreational vehicles completed in the fourth quarter of 2014. Compared to our existing Specialty business, this acquisition realizes lower gross margins than our other specialty product sales.
|
(2)
|
Primarily a result of lower distribution expenses as a percentage of revenue (1.4%), which reflects the realization of logistics synergies as we leverage our North American distribution network for the delivery of specialty products (1.1%), as well as favorable fuel pricing compared to the prior year quarter (0.3%). The acquisitions completed in the fourth quarter of 2014 generated greater facility and warehouse expenses as a percentage of revenue (-0.5%), but this was offset by a reduction in selling, general and administrative expenses (0.4%) as a result of integration synergies. We expect to realize additional integration synergies during the remainder of 2015 and into the first half of 2016 as we continue to rationalize our facilities within this segment.
|
|
March 31, 2015
|
|
December 31, 2014
|
|
March 31, 2014
|
||||||
Cash and equivalents
|
$
|
175,492
|
|
|
$
|
114,605
|
|
|
$
|
113,246
|
|
Total debt
|
1,734,635
|
|
|
1,864,562
|
|
|
1,730,733
|
|
|||
Net debt (total debt less cash and equivalents)
|
1,559,143
|
|
|
1,749,957
|
|
|
1,617,487
|
|
|||
Current maturities
|
62,303
|
|
|
63,515
|
|
|
35,106
|
|
|||
Capacity under credit facilities
(1)
|
1,947,000
|
|
|
1,947,000
|
|
|
1,930,000
|
|
|||
Availability under credit facilities
(1)
|
1,231,500
|
|
|
1,127,810
|
|
|
1,247,349
|
|
|||
Total liquidity (cash and equivalents plus availability under credit facilities)
|
1,406,992
|
|
|
1,242,415
|
|
|
1,360,595
|
|
•
|
Senior secured credit facilities maturing in May 2019, composed of $450 million in term loans (
$428 million
outstanding at
March 31, 2015
) and $1.85 billion in revolving credit (
$547 million
outstanding at
March 31, 2015
), bearing interest at variable rates (although a portion of this debt is hedged through interest rate swap contracts)
|
•
|
Senior notes totaling
$600 million
, maturing in May 2023 and bearing interest at a 4.75% fixed rate
|
•
|
Receivables securitization facility with availability up to $97 million (
$97 million
outstanding as of
March 31, 2015
), maturing in October 2017 and bearing interest at variable commercial paper rates
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
10.1
|
Form of LKQ Corporation Executive Officer Management Incentive Plan Award Memorandum.
|
10.2
|
Form of LKQ Corporation Executive Officer Long Term Incentive Plan Award Memorandum.
|
10.3
|
Services Agreement dated as of February 26, 2015 between LKQ Corporation and Robert L. Wagman (incorporated herein by reference to Exhibit 10.1 to the Company's report on Form 8-K filed with the SEC on March 3, 2015).
|
10.4
|
Offer Letter to John S. Quinn dated February 12, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company's report on Form 8-K filed with the SEC on March 3, 2015).
|
10.5
|
Services Agreement dated as of February 26, 2015 between LKQ Corporation and John S. Quinn (incorporated herein by reference to Exhibit 10.3 to the Company's report on Form 8-K filed with the SEC on March 3, 2015).
|
10.6
|
Offer Letter to Dominick P. Zarcone dated February 12, 2015 (incorporated herein by reference to Exhibit 10.4 to the Company's report on Form 8-K filed with the SEC on March 3, 2015).
|
10.7
|
Change of Control Agreement between LKQ Corporation and Dominick P. Zarcone dated as of March 30, 2015.
|
10.8
|
Restricted Stock Unit Agreement between LKQ Corporation and Dominick P. Zarcone dated as of March 30, 2015.
|
10.9
|
LKQ Corporation Management Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company's report on Form 10-K filed with the SEC on March 2, 2015).
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
LKQ CORPORATION
|
|
|
|
/s/ DOMINICK ZARCONE
|
|
Dominick Zarcone
|
|
Executive Vice President and Chief Financial Officer
|
|
(As duly authorized officer and Principal Financial Officer)
|
|
|
|
/s/ MICHAEL S. CLARK
|
|
Michael S. Clark
|
|
Vice President —
Finance and Controller
|
|
(As duly authorized officer and Principal Accounting Officer)
|
|
M E M O R A N D U M
|
|
||
|
|
|
|
|
|
|
|
|
|
TO:
|
|
|
|
|
|
|
|
|
|
FROM:
|
Compensation Committee
|
|
|
|
|
|
|
|
|
DATE:
|
March __, 2015
|
|
|
|
|
|
|
|
|
RE:
|
Management Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Period:
|
|
January 1, 2015 to December 31, 2015
|
|
|
|||
|
|
|
|
|
|
|
|
Performance Goals:
|
|
The diluted earnings per share of LKQ Corporation
|
|
||||
|
|
|
("EPS") for the Performance Period; provided, however,
|
|
|||
|
|
|
that EPS shall be increased to the extent that EPS was
|
|
|||
|
|
|
reduced in accordance with GAAP by objectively
|
|
|||
|
|
|
determinable amounts (in manner consistent with Section
|
|
|||
|
|
|
162(m) of the Internal Revenue Code), in each case due to:
|
|
|||
|
|
|
|
|
|
|
|
|
|
1.
|
A change in accounting policy or GAAP;
|
|
|||
|
|
2.
|
Dispositions of assets or businesses;
|
|
|||
|
|
3.
|
Asset impairments;
|
|
|||
|
|
4.
|
Amounts incurred in connection with any financing;
|
|
|||
|
|
5.
|
Losses on interest rate swaps resulting from mark to
|
|
|||
|
|
|
market adjustments or discontinuing hedges;
|
|
|||
|
|
6.
|
Board approved restructuring, acquisition or similar charges
|
|
|||
|
|
|
including but not limited to charges in conjunction with
|
|
|||
|
|
|
or in anticipation of an acquisition;
|
|
|||
|
|
7.
|
Losses related to environmental, legal, product liability
|
|
|||
|
|
|
or other contingencies;
|
|
|||
|
|
8.
|
Changes in tax laws;
|
|
|||
|
|
9.
|
A Board approved divestiture of a material business (i.e.
|
|
|||
|
|
|
the performance goals will be adjusted to account for the
|
|
|||
|
|
|
divestiture, including, if appropriate, the pro-rata effect
|
|
|||
|
|
|
of targeted improvements);
|
|
|
|
10.
|
Changes in contingent consideration liabilities;
|
|||
|
|
11.
|
Losses from discontinued operations; and
|
|||
|
|
12.
|
Other extraordinary, unusual or infrequently occurring
|
|||
|
|
|
items as specifically disclosed in the Company's
|
|||
|
|
|
financial statements or filings under the Securities
|
|||
|
|
|
Exchange Act of 1934.
|
|||
|
|
|
|
|||
|
|
|
In addition, the Compensation Committee shall adjust the
|
|||
|
|
|
Performance Goals or other features of the award (a) that
|
|||
|
|
|
relate to the value or number of the shares of common
|
|||
|
|
|
stock of the Company to reflect any stock dividend, stock
|
|||
|
|
|
split, recapitalization, combination or exchange of shares,
|
|||
|
|
|
or other similar changes in such stock, and (b) to account
|
|||
|
|
|
for changes in the value of foreign currencies of countries
|
|||
|
|
|
in which we operate versus the U.S. dollar (using the
|
|||
|
|
|
respective exchange rates as set forth in the Company’s
|
|||
|
|
|
budget approved by the Board of Directors on February 12,
|
|||
|
|
|
2015 of CAD0.84, EUR1.10 and GBP1.50).
|
|||
|
|
|
|
|||
|
|
|
Notwithstanding the foregoing, the Compensation
|
|||
|
|
|
Committee, in its sole discretion, may reduce the actual
|
|||
|
|
|
award payable to you below that which otherwise would be
|
|||
|
|
|
payable pursuant to the Payout Formula or may eliminate
|
|||
|
|
|
the actual award.
|
|||
|
|
|
|
|
|
|
Target Award:
|
|
|
% of Base Salary
|
|
||
|
|
|
|
|
|
|
Payout Formula:
|
|
|
|
|
|
|
|
|
|
EPS ($)
|
Percentage of Base Salary
|
||
|
|
Less than
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M E M O R A N D U M
|
|
||
|
|
|
|
|
|
|
|
|
|
TO:
|
LTIP Participant
|
|
|
|
|
|
|
|
|
FROM:
|
Compensation Committee
|
|
|
|
|
|
|
|
|
DATE:
|
March
__
, 2015
|
|
|
|
|
|
|
|
|
RE:
|
Long Term Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Period:
|
|
January 1, 2015 to December 31, 2015
|
|
|||
|
|
|
|
|
|
|
Awards Components:
|
|
See the attached Award Component Matrix
|
||||
|
|
|
|
|
|
|
|
|
|
Each of diluted earnings per share, revenue and return on
|
|||
|
|
|
equity shall be increased to the extent that it was reduced in
|
|||
|
|
|
accordance with GAAP by objectively determinable
|
|||
|
|
|
amounts
(in a manner consistent with Section 162(m) of the
|
|||
|
|
|
Internal Revenue Code), in each case due to:
|
|||
|
|
|
|
|||
|
|
1.
|
A change in accounting policy or GAAP;
|
|||
|
|
2.
|
Dispositions of assets or businesses;
|
|||
|
|
3.
|
Asset impairments;
|
|||
|
|
4.
|
Amounts incurred in connection with any financing;
|
|||
|
|
5.
|
Losses on interest rate swaps resulting from mark to
|
|||
|
|
|
market adjustments or discontinuing hedges;
|
|||
|
|
6.
|
Board approved restructuring, acquisition or similar
|
|||
|
|
|
charges including but not limited to charges in
|
|||
|
|
|
conjunction with or in anticipation of an acquisition;
|
|||
|
|
7.
|
Losses related to environmental, legal, product liability
|
|||
|
|
|
or other contingencies;
|
|||
|
|
8.
|
Changes in tax laws;
|
|
|
9.
|
A Board approved divestiture of a material business (i.e.
|
|||
|
|
|
the performance goals will be adjusted to account for the
|
|||
|
|
|
divestiture, including, if appropriate, the pro-rata effect
|
|||
|
|
of targeted improvements);
|
||||
|
|
10.
|
Changes in contingent consideration liabilities;
|
|||
|
11.
|
Losses from discontinued operations; and
|
||||
|
|
12.
|
Other extraordinary, unusual or infrequently occurring
|
|||
|
|
|
items as specifically disclosed in the Company's
|
|||
|
|
|
financial statements or other filings under the Securities
|
|||
|
|
|
Exchange Act of 1934.
|
|||
|
|
|
|
|
|
|
|
|
|
In addition, the Compensation Committee shall adjust the
|
|||
|
|
|
Award Components or other features of the award (a) that
|
|||
|
|
|
relate to the value or number of the shares of common
|
|||
|
|
|
stock of the Company to reflect any stock dividend, stock
|
|||
|
|
|
split, recapitalization, combination or exchange of shares,
|
|||
|
|
|
or other similar changes in such stock, and (b) to account
|
|||
|
|
|
for changes in the value of foreign currencies of countries
|
|||
|
|
|
in which we operate versus the U.S. dollar (using the 2014
|
|||
|
|
|
average respective exchange rates of CAD0.9057,
|
|||
|
|
|
EUR1.3285 and GBP1.6476).
|
|||
|
|
|
|
|||
|
|
|
Notwithstanding the foregoing, the Compensation
|
|||
|
|
|
Committee, in its sole discretion, may reduce the actual
|
|||
|
|
|
award payable to you below that which otherwise would be
|
|||
|
|
|
payable pursuant to the Award Component or may
|
|||
|
|
|
eliminate the actual award.
|
1.
|
Operation of Agreement
. The provisions of this Agreement pertaining to the terms and conditions of your separation from the Company in connection with a Change of Control (collectively, the “
Severance Provisions
”) shall apply only if a Change of Control occurs during the Effective Period. If a Change of Control occurs during the Effective Period, the Severance Provisions become effective on the date of the Change of Control (the “
Change of Control Date
”). Notwithstanding the foregoing, if (a) a Change of Control occurs during the Effective Period; and (b) your employment with the Company is terminated (other than your voluntary resignation without Good Reason or due to your death or Disability) during the Effective Period, but within twelve (12) months prior to the date on which the Change of Control occurs; and (c) it is reasonably demonstrated by you that such termination of employment (i) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or in anticipation of a Change of Control, then the “
Change of Control Date
” shall instead mean the date immediately prior to the date of such termination of employment. In connection with the foregoing, your unvested equity-based compensation awards that are outstanding as of your termination shall remain outstanding to the extent necessary (but subject in all cases to their maximum term) to enable their potential future vesting and exercisability should a Change of Control occur within twelve months after your termination without Cause by the Company. This Agreement will remain in effect until the later of (x) the last day of the Effective Period; or (y) if a Change of Control occurs during the Effective Period, the date on which all benefits due to you under this Agreement, if any, have been
|
2.
|
Termination of Employment by Reason of Death or Disability
. Your employment shall terminate automatically if you die during the Change of Control Period. If the Company determines in good faith that you incurred a Disability during the Change of Control Period, it may give you written notice, in accordance with Section 5 hereof, of its intention to terminate your employment. In such event, your employment with the Company shall terminate effective on the thirtieth (30) calendar day after your receipt of such notice if you have not returned to full-time duties within thirty (30) calendar days after such receipt. If your employment is terminated for death or Disability during the Change of Control Period, this Agreement shall terminate without further obligations on the part of the Company other than the obligation to pay to you or your representative, as applicable, the following amounts:
|
a.
|
the Accrued Obligations, which shall be paid to you in a single lump sum cash payment within fifteen (15) calendar days of the Date of Termination;
|
b.
|
the Pro Rata Bonus, which shall be paid to you in a single lump sum cash payment no later than the later of (i) fifteen (15) calendar days following the Date of Termination or (ii) the effective date of the Waiver and Release; and
|
c.
|
the Other Benefits, which shall be paid in accordance with the terms and conditions of such plans, programs, policies, arrangements or agreements.
|
3.
|
Termination for Cause; Resignation Other Than for Good Reason
. If your employment is terminated for Cause or you resign for other than Good Reason during the Change of Control Period, your employment will terminate on the Date of Termination in accordance with Section 5 hereof and this Agreement shall terminate without further obligations on the part of the Company other than the obligation to pay to you the following:
|
a.
|
the Accrued Obligations, which shall be paid to you in a single lump sum cash payment within fifteen (15) calendar days of the Date of Termination; and
|
b.
|
the Other Benefits, which shall be paid in accordance with the terms and conditions of such plans, programs or policies.
|
4.
|
Termination as a Result of an Involuntary Termination
. In the event that your employment with the Company should terminate during the Change of Control Period as a result of an Involuntary Termination, the Company will be obligated, except as provided in Section 8 or Section 9 hereof, to provide you the following benefits:
|
a.
|
Severance Payment
. The Company shall pay to you the following amounts:
|
i.
|
the Accrued Obligations, which shall be paid to you in a single lump sum cash payment within fifteen (15) calendar days of the Date of Termination;
|
ii.
|
the Pro Rata Bonus, which shall be paid to you in a single lump sum cash payment no later than the later of (A) fifteen (15) calendar days following the Date of Termination or (B) the effective date of the Waiver and Release;
|
iii.
|
an amount equal to the product of (A) 2.0 times (B) the sum of (1) your Adjusted Base Salary plus (2) the greater of (x) your Target Bonus or (y) the average of the annual bonuses paid or to be paid to you with respect to the immediately preceding three (3)
|
iv.
|
if you had previously consented to the Company’s request to relocate your principal place of employment more than forty (40) miles from its location immediately prior to the Change of Control, all unreimbursed relocation expenses incurred by you in accordance with the Company’s relocation policies, which expenses shall be paid to you in a single lump sum cash payment no later than the later of (A) fifteen (15) calendar days following the Date of Termination or (B) the effective date of the Waiver and Release; and
|
v.
|
the Other Benefits, which shall be paid in accordance with the then-existing terms and conditions of such plans, programs or policies.
|
b.
|
Benefit Continuation
. You and your then eligible dependents shall continue to be covered by and participate in the group health and dental care plans (collectively, “
Health Plans
”) of the Company (at the Company’s cost) in which you participated, or were eligible to participate, immediately prior to the Date of Termination through the end of the Benefit Continuation Period;
provided
,
however
, that any medical or dental welfare benefit otherwise receivable by you hereunder shall be reduced to the extent that you become covered under a group health or dental care plan providing comparable medical and health benefits. You shall be eligible to participate in such Health Plans on terms that are at least as favorable as those in effect immediately prior to the Date of Termination. However, in the event that the terms of the Company’s Health Plans do not permit you to participate in those plans (other than pursuant to an election under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“
COBRA
”)), in lieu of your and your eligible dependent’s coverage and participation under the Company’s Health Plans, the Company shall pay to you within fifteen (15) calendar days after the effective date of the Waiver and Release a lump sum equal to two (2) times your monthly COBRA premium amount for the number of months remaining in the Benefit Continuation Period. In addition, for the purposes of coverage under COBRA, your COBRA event date will be the date of loss of coverage described in this paragraph above.
|
c.
|
Outplacement Services
. The Company shall, at its sole expense as incurred, provide you with outplacement services on such terms and conditions as may be reasonably determined by the Company prior to the Change of Control.
|
d.
|
Acceleration of Stock Awards
. All your outstanding awards of restricted stock, stock options, and other equity-based compensation shall become fully vested and exercisable in full immediately upon the effective date of the Waiver and Release; provided, however, that any such awards that would be out of the money as of the Date of Termination may be terminated pursuant to Section 9(b) hereof. In addition, all of your outstanding awards of restricted stock, stock options, and other equity-based compensation that are not assumed or substituted with awards of equivalent value in connection with a Change of Control shall become fully vested and exercisable in full immediately upon the Change of Control.
|
5.
|
Date and Notice of Termination
. Any termination of your employment by the Company or by you during the Change of Control Period shall be communicated by a notice of termination to the other party hereto (the “
Notice of Termination
”). The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. The date of your termination of employment with the Company (the “
Date of
|
6.
|
No Mitigation or Offset; D&O Insurance
.
|
a.
|
No Mitigation or Offset
. You shall not be required to mitigate the amount of any payment provided for herein by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by you as the result of employment by another employer.
|
b.
|
D&O Insurance, and Indemnification
. Through at least the sixth anniversary of the Date of Termination, the Company shall maintain coverage for you as a named insured on all directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide you with at least the same corporate indemnification as it provides to other senior executives.
|
7.
|
Confidentiality
. You agree to treat all Confidential Information as confidential information entrusted to you solely for use as an employee of the Company, and shall not divulge, reveal or transmit any Confidential Information in any way to persons not employed by the Company at any time from the date hereof until the end of time, whether or not you continue to be an employee of the Company, unless authorized in writing by the Company.
|
8.
|
Code Section 409A
. The Agreement is not intended to constitute a "nonqualified deferred compensation plan" within the meaning of Code Section 409A. Notwithstanding the foregoing, in the event this Agreement or any benefit paid under this Agreement to you is deemed to be subject to Code Section 409A, you consent to the Company's adoption of such conforming amendments as the Company deems advisable or necessary, in its sole discretion (but without an obligation to do so), to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A. This Agreement will be interpreted and construed to not violate Code Section 409A, although nothing herein will be construed as an entitlement to or guarantee of any particular tax treatment to you.
|
9.
|
Certain Reduction of Payments by the Company.
|
a.
|
Best Net
. Anything in this Agreement to the contrary notwithstanding, in the event that the independent auditors of the Company (the “
Accounting Firm
”) determine that receipt of all payments or distributions in the nature of compensation to or for your benefit, whether paid or
|
b.
|
Reduced Amount
. If the Accounting Firm determines that Payments should be reduced to the Reduced Amount, the Company shall promptly give you notice to that effect and a copy of the detailed calculation thereof. Absent manifest error, all determinations made by the Accounting Firm under this Section 9 shall be binding upon you and the Company and shall be made as soon as reasonably practicable and in no event later than twenty (20) business days following the Change of Control Date, or such later date on which there has been a Payment. The reduction of the Payments, if applicable, shall be made by reducing the payments and benefits hereunder in the following order, and only to the extent necessary to achieve the Reduced Amount:
|
c.
|
Subsequent Adjustment
. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to you or for your benefit pursuant to this Agreement which should not have been so paid or distributed (“
Overpayment
”) or that additional amounts which will have not been paid or distributed by the Company to you or for your benefit pursuant to this Agreement could have been so paid or distributed (“
Underpayment
”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or you that the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, you shall pay any such Overpayment to the Company;
provided
,
however
, that no amount shall be payable by you to the Company if and to the extent such payment would
|
10.
|
Successors; Binding Agreement.
|
a.
|
Assumption by Successor
. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform its obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform such obligations if no such succession had taken place;
provided
,
however
, that no such assumption shall relieve the Company of its obligations hereunder. As used herein, the “
Company
” shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform its obligations by operation of law or otherwise.
|
b.
|
Enforceability; Beneficiaries
. This Agreement shall be binding upon and inure to the benefit of you (and your personal representatives and heirs) and the Company and any organization which succeeds to substantially all of the business or assets of the Company, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of the Company or otherwise, including, without limitation, as a result of a Change of Control or by operation of law. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.
|
11.
|
Definitions
. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
|
a.
|
“
Accounting Firm
” has the meaning assigned thereto in Section 9 hereof.
|
b.
|
“
Accrued Obligations
” shall mean all compensation earned or accrued through the Date of Termination but not paid as of the Date of Termination, including base salary, bonus for the prior performance year, accrued but unused vacation, and reimbursement of business expenses accrued in accordance with the Company’s business expense reimbursement policies.
|
c.
|
“
Adjusted Base Salary
” means the greater of your base salary in effect immediately prior to (i) the Change of Control Date or (ii) the Date of Termination.
|
d.
|
“
Agreement
” has the meaning assigned thereto in the second introductory paragraph hereof.
|
e.
|
“Benefit Continuation Period
” means the period beginning on the Date of Termination and ending on the last day of the month in which occurs the earlier of (i) the 24-month anniversary of the Date of Termination and (ii) the date on which you elect coverage for you and your covered dependents under substantially comparable benefit plans of a subsequent employer.
|
f.
|
“
Board
” has the meaning assigned thereto in the first introductory paragraph hereof.
|
g.
|
“
Bonus Opportunity
” for any performance year means your maximum cash bonus opportunity for that year, on the assumption that the Company achieves all applicable performance targets and that you achieve all applicable individual performance criteria.
|
h.
|
“
Cause
” shall mean (i) your engaging in willful and continued failure to substantially perform your material duties with the Company (other than due to becoming Disabled);
provided, however
, that the Company shall have provided you with written notice of such failure and such failure is not cured by you within twenty (20) calendar days of such notice; (ii) your engaging in misconduct that is materially and demonstrably injurious to the Company; (iii) your conviction of, or plea of no contest to, a felony, other crime of moral turpitude; or (iv) a final non-appealable adjudication in a criminal or civil proceeding that you have committed fraud. For purposes of the previous sentence, no act or failure to act on your part shall be deemed “willful” if it is done, or omitted to be done, by you in good faith and with a reasonable belief that it was in the best interest of the Company.
|
i.
|
“
Change of Control
” shall mean:
|
i.
|
any “person” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (iv) any acquisition pursuant to a transaction that complies with Sections 11(i)(iii)(A), (B), and (C);
|
ii.
|
during any period of two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least three-fourths of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
|
iii.
|
there is a consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such
|
j.
|
“
Change of Control Date
” has the meaning assigned thereto in Section 1 hereof.
|
k.
|
“
Change of Control Period
” has the meaning assigned thereto in the second introductory paragraph hereof.
|
l.
|
“
COC Payments
” has the meaning assigned thereto in Section 9 hereof.
|
m.
|
“
Code
” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
|
n.
|
“
Company
” has the meaning assigned thereto in the first introductory paragraph hereof.
|
o.
|
“
Confidential Information
” shall mean all financial information, trade secrets, personnel records, training and operational manuals, records, contracts, lists, business procedures, business methods, accounts, brochures, and handbooks that was learned or obtained by you in the course of your employment by the Company, and all other documents relating to the Company or persons doing business with the Company that are proprietary to the Company.
|
p.
|
“
Date of Termination
” has the meaning assigned thereto in Section 5 hereof.
|
q.
|
“
Disability
” shall mean your incapacity due to physical or mental illness as defined in the long-term disability plan sponsored by the Company or an affiliate of the Company for your benefit and which causes you to be absent from the full-time performance of your duties.
|
r.
|
“
Effective Period
” shall mean the period commencing on the date hereof (the “
Effective Date
”) and ending on the third anniversary of the date of this Agreement;
provided, however
, that beginning on the third anniversary of the date of this Agreement and on each one-year anniversary thereafter (each such date a “
Renewal Date
”), the Effective Period shall be automatically extended for a period of two years beginning on such Renewal Date, unless at least sixty (60) calendar days prior to such Renewal Date, the Company shall give notice that the Effective Period shall not be so extended.
|
s.
|
“
Good Reason
” shall mean the occurrence of any of the following events or circumstances:
|
i.
|
a substantial adverse change in your title, position, offices, or the nature of your duties or responsibilities from those in effect immediately prior to the Change of Control, or in the position, level, or status of the person to whom you report.
|
ii.
|
a reduction by the Company in your annual base salary, Target Bonus, or benefits as in effect immediately prior to the Change of Control or as the same may be increased
|
iii.
|
a failure by the Company to pay you material compensation or benefits when due including, without limitation, failure by the Company to pay any accrued relocation expenses or Other Benefits;
|
iv.
|
the relocation of the office of the Company where you are principally employed immediately prior to the Change of Control to a location which is more than forty (40) miles from such office of the Company (except for required travel on the Company’s business to an extent substantially consistent with your customary business travel obligations in the ordinary course of business prior to the Change of Control); or any failure by a successor to the Company to assume and agree to perform this Agreement, as contemplated by
Section 10(a)
hereof, or any agreement with respect to your outstanding equity awards.
|
t.
|
“
Involuntary Termination
” shall mean, during the Change of Control Period, (i) your termination of employment by the Company without Cause or (ii) your resignation of employment with the Company for Good Reason.
|
u.
|
“
Net After-Tax Receipt
” shall mean the present value (as determined in accordance with Section 280G(d)(4) of the Code) of a Payment net of all taxes imposed on you with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to your taxable income for the immediately preceding taxable year, or such other rate(s) as you certify as likely to apply to you in the relevant tax year(s).
|
v.
|
“
Notice of Termination
” has the meaning assigned thereto in Section 5 hereof.
|
w.
|
“
Other Benefits
” means, to the extent not theretofore paid or provided, any other amounts or benefits required to be paid or provided to you or that you are eligible to receive under any plan, program, policy, practice, contract or agreement of the Company in accordance with such applicable terms at the time of the Date of Termination. Nothing herein shall prohibit the Company from changing, modifying, amending, or eliminating any benefit plans in accordance with the terms of such plans prior to the Date of Termination, with or without prior notice.
|
x.
|
“
Overpayment
” has the meaning assigned thereto in Section 9 hereof.
|
y.
|
“
Pro Rata Bonus
” means a pro rata portion of your Bonus Opportunity for the performance year in which the Date of Termination occurs, calculated based on the number of days that you are employed in the performance year up through and including the Date of Termination.
|
z.
|
“
Payment
” has the meaning assigned thereto in Section 9 hereof.
|
aa.
|
“
Reduced Amount
” shall mean $1,000.00 less than the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code.
|
12.
|
Notice
. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Board of Directors, LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, IL 60661, with a copy to the General Counsel of the Company, or to you at the address set forth on the first page of this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
|
13.
|
Release.
As a condition to receiving any payments or benefits pursuant to this Agreement by reason of your death, Disability or Involuntary Termination, you (or in the case of your death, the executor of your estate) must execute a waiver and release of claims, including confidentiality and non-disparagement covenants, substantially in the form approved by the Company prior to the Change of Control Date (as set forth on
Exhibit B
attached hereto) (a “
Waiver and Release
”), and such executed Waiver and Release must be delivered to the Company (and not revoked by you) and become effective by its own terms no later than 55 days after the later of (i) the Change of Control or (ii) the termination of your employment with the Company.
|
14.
|
Arbitration
. Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in Chicago, Illinois under the employment arbitration rules of the American Arbitration Association before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and you, or, if the Company and you cannot agree on the selection of the arbitrator, such arbitrator shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. The Company agrees to pay as incurred, to the fullest extent permitted by law, the costs and fees of the arbitration, including all legal fees and expenses which you may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, you or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by you about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.
|
15.
|
Miscellaneous
.
|
a.
|
Amendments, Waivers, Etc
. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement and this Agreement shall supersede all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to the subject matter hereof. Notwithstanding the foregoing and for avoidance of doubt, this Agreement does not supersede or replace the Severance Policy. However, any payments or benefits provided (or to be provided) under this Agreement shall be reduced and offset by payments or benefits of the same type that are received by you from the Company under the Severance Policy or any other severance arrangement.
|
b.
|
Validity
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
|
c.
|
Counterparts
. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
|
d.
|
No Contract of Employment
. Nothing in this Agreement shall be construed as giving you any right to be retained in the employ of the Company or shall affect the terms and conditions of your employment with the Company prior to the commencement of the Change of Control Period.
|
e.
|
Withholding
. Amounts paid to you hereunder shall be subject to all applicable federal, state and local withholding taxes.
|
f.
|
Source of Payments
. All payments provided under this Agreement shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment. You will have no right, title or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.
|
g.
|
Headings
. The headings contained in this Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Agreement.
|
h.
|
Governing Law
. This Agreement is governed by ERISA and, to the extent applicable, the laws of the State of Delaware without regard to conflicts of law.
|
i.
|
Effect on Benefit Plans
. In the event of any inconsistency between the provisions of this agreement and the provisions of any benefit plan of the Company, the provisions that are more favorable to you shall control.
|
Sincerely,
|
|
LKQ CORPORATION
|
|
|
|
|
|
By
|
/s/ Victor M. Casini
|
|
Name: Victor M. Casini
|
|
Title: Vice President and
|
|
General Counsel
|
|
|
By
|
/s/ Dominick Zarcone
|
|
Name: Dominick Zarcone
|
|
Title: Executive Vice President and
|
|
Chief Financial Officer
|
Name of Agreement:
|
Change of Control Agreement
|
Employer Sponsoring Agreement:
|
LKQ Corporation.
500 West Madison Street, Suite 2800, Chicago, IL 60661
|
Employer Identification Number:
|
36-4215970
|
Agreement Number:
|
509
|
Agreement Year:
|
Calendar Year
|
Agreement Administrator:
|
LKQ Corporation
c/o Senior Vice President of Human Resources
500 West Madison Street, Suite 2800, Chicago, IL 60661
Telephone No. (312) 621-1950
|
Agent for Service of Legal Process:
|
Agreement Administrator, at the above address
|
Type of Agreement:
|
Employee Welfare Benefit Plan providing for severance benefits
|
Agreement Costs:
|
The cost of the Agreement is paid by LKQ Corporation
|
Type of Administration:
|
Self-administered by the Agreement Administrator
|
1.
|
Release
.
|
a.
|
In exchange for the valuable consideration set forth in the Change of Control Agreement dated as of ____________ ___, 20___ (the “
Letter Agreement
”), between Employee and the Company, the receipt and adequacy of which are herein acknowledged, Employee hereby agrees to release and forever discharge the Company and its present, former and future partners, shareholders, affiliates, direct and indirect parents, subsidiaries, successors, directors, officers, employees, agents, attorneys, heirs and assigns (the “
Released Parties
”), from any and all claims, actions and causes of action (the “
Claims
”) arising out of (i) his employment relationship with and service as an employee of the Company and its affiliates, and the termination of such relationship or service, or (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof, including, but not limited to any Claims under Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Americans With Disabilities Act of 1990, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Employee Retirement Income Security Act of 1974 (ERISA), the Family and Medical Leave Act of 1993, the California Fair Employment and Housing Act; the California Workers’ Compensation Act; the California Unruh and Ralph Civil Rights Laws; the California Alcohol and Drug Rehabilitation Law and any other federal, state or local law, statute, regulation or ordinance, or law of any foreign jurisdiction, whether such Claim arises under statute or common law and whether or not Employee is presently aware of the existence of such Claim. Employee also forever releases, discharges and waives any right he may have to recover in any proceeding brought by any federal, state or local agency against the Released Parties to enforce any laws. To ensure that this Release is fully enforceable in accordance with its terms, Employee agrees to waive any and all rights to any Claims, whether or not he knows or suspects them to exist in his favor, which if known to him would have materially affected his execution of this Release. Notwithstanding the foregoing, this Release does not apply to Employee’s rights, claims, or benefits under the Letter Agreement or to Employee’s rights, if any, to payment of benefits pursuant to any employee benefit plan. This Release also does not apply to Employee’s rights, claims, or benefits claims for unemployment compensation benefits, workers compensation benefits, claims under the Fair Labor Standards Act, health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), or claims with regard to vested benefits under a retirement plan governed by ERISA.
|
b.
|
To ensure that this Release is fully enforceable in accordance with its terms, Employee hereby agrees to waive any and all rights under Section 1542 of the California Civil Code (to the extent applicable) as it exists from time to time, which provides:
|
c.
|
In further consideration of the payments and benefits provided to Employee under the Letter Agreement, Employee hereby releases and forever discharges the Released Parties from any and all Claims that he may have as of the date he signs this Release arising under the federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“
ADEA
”). By signing this Release, Employee hereby acknowledges and confirms the following: (i) he was advised by the Company in connection with his termination to consult with an attorney of his choice prior to signing this Release and to have such attorney explain to him the terms of this Release, including, without limitation, the terms relating to his release of claims arising under the ADEA; (ii) if Employee is 40 years of age or older as of the date of execution of this Release, he was given a period of not fewer than 21 calendar days to consider the terms of this Release and to consult with an attorney of his choosing with respect thereto; (iii) he is providing the release and discharge set forth in this Paragraph 1(c) only in exchange for consideration in addition to anything of value to which he is already entitled and (iv) he can revoke this Release without it becoming effective as described below.
|
2.
|
No Legal Claim
. Employee has not commenced any legal action, which term includes, without limitation, any demand for arbitration proceedings and any charge, complaint, filing or submission with any federal, state or local agency, court or other tribunal, to assert any Claim against a Released Party, and covenants and agrees not to do so in the future with respect to the matters released herein. If Employee commences or joins any legal action against a Released Party, Employee agrees that such an action is prohibited by this Release, and further agrees to promptly indemnify such Released Party for its reasonable costs and attorneys fees incurred in defending such action as well as forfeit or return any monetary judgment obtained by Employee against any Released Party in such action. Nothing in this Paragraph 2 is intended to reflect any party’s belief that Employee’s waiver of claims under the ADEA is invalid or unenforceable under this Release, it being the intent of the parties that such claims are waived.
|
3.
|
Nondisparagement
. Employee agrees to refrain, except as required by law or in connection with a judicial proceeding, from making directly or indirectly, now or at any time in the future, any written or oral statements, representations or other communications that disparage or are otherwise damaging to the business or reputation of the Released Parties.
|
4.
|
Continuing Obligations
. This Release shall not supersede any continuing obligations Employee may have under the terms of the Letter Agreement or any other agreement between Employee and the Company.
|
5.
|
Disclaimer
. Employee hereby certifies that Employee has read the terms of this Release, that Employee has been advised by the Company to consult with an attorney of Employee’s own
|
6.
|
Governing Law
. This Release is governed by ERISA and, to the extent applicable, the laws of the State of Delaware without regard to conflicts of law.
|
7.
|
Separability of Clauses
. If any provisions of this Release shall be finally determined to be invalid or unenforceable under applicable law by a court of competent jurisdiction, that part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining provisions of this Release.
|
8.
|
Counterparts
. This Release may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document.
|
9.
|
Effectiveness
. This Release shall be effective only when it has been executed by Employee and the executed original has been returned to the Company, and any applicable revocation period has expired.
|
Sincerely,
|
|
LKQ CORPORATION
|
|
|
|
|
|
By
|
|
|
Name:
|
|
Title:
|
|
|
|
Name:
|
Date:
|
|
|
LKQ CORPORATION
|
|
|
|
By:
|
/s/ Victor M. Casini
|
Name:
|
Victor M. Casini
|
Title:
|
Senior Vice President
|
|
|
|
|
KEY PERSON
|
|
|
|
By:
|
/s/ Dominick Zarcone
|
Name:
|
Dominick Zarcone
|
Address:
|
500 W. Madison Street, Suite 2800
|
|
Chicago, Illinois 60661
|
/s/ ROBERT L. WAGMAN
|
|
Robert L. Wagman
|
|
President and Chief Executive Officer
|
|
/
S
/ DOMINICK ZARCONE
|
|
Dominick Zarcone
|
|
Executive Vice President and Chief Financial Officer
|
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/
S
/ ROBERT L. WAGMAN
|
|
Robert L. Wagman
|
|
President and Chief Executive Officer
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/
S
/ DOMINICK ZARCONE
|
|
Dominick Zarcone
|
|
Executive Vice President and Chief Financial Officer
|