Lkq Corporation · NASDAQ:LKQ
Lkq — Investor Day (March 2016)
150 slides from Lkq's investor day presentation, Mar 15, 2016
Slide 1: LKQ's 2016 Investor Day
LKQ’S 2016 INVESTOR DAY Tuesday, March 15, 2016 NASDAQ MarketSite
Slide 2: Forward Looking Statements
Forward Looking Statements Statements and information included in this presentation that are not purely historical are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the “safe harbor” provisions of such Act . Forward-lo
Slide 3: Agenda
Agenda Welcome, Safe Harbor / Opening Remarks Joe Boutross 8:20 AM Company Direction & Strategy, Market Overview Rob Wagman Acquisition & Development Walter Hanley Wholesale – North America Justin Jude 9:45 AM Q&A 10:00 AM Break 10:15 AM Wholesale – Europe John Quinn, Martin Gray, Sinon Galvin Speci
Slide 4: Rob Wagman
Rob Wagman President & Chief Executive Officer
Slide 5: Rob Wagman Background
Rob Wagman Background • Started in our industry in 1987 as an Account Executive for Copart Auto Auctions • From April 1995 to October 1998 Mr. Wagman was the Outside Sales Manager of Triplett Auto Parts, Inc., a recycled auto parts company that LKQ acquired in July 1998; Triplett was LKQ’s first acq
Slide 6: Mission & Strategic Initiatives
Mission & Strategic Initiatives Mission Statement Guiding Principles To be the leading global value-added distributor of vehicle Integrity & Ethics parts and accessories by offering our customers the most Customer First comprehensive, available and cost effective selection of part Humility solutions
Slide 7: Consistent Segment Business Models
Consistent Segment Business Models Large & Fragmented Markets Industry Leading High Management Fulfillment Rates Attractive Tuck-in Acquisitions Adjacent Synergies & Markets Leverage Opportunities Sustainable Organic Growth & Margin Expansion 6
Slide 8: One More Part on the Truck
One More Part on the Truck 2003 $328 Million 94% Il Racycled Products 6% m@ Other 2015 $7.2 Billion 2003 2007 2011 $228 Million «$1.11 Billion $3.27 Bion 28% © European Operations 14% i Specialty 8% ml Other 2007 ——————_—r., $1.11 Billion | | ots: ~ Se 45% ll Rocycled Products 37% @ Aitermarket NA 3
Slide 9: LKQ's Evolution
LKQ’s Evolution Wholesale Salvage Self Serve Keystone / Paint Reman-US Europe-Benelux Rhiag / PGW (1) 1998 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aftermarket Refurbished Wheels Heavy Duty Europe-UK Keystone Specialty Collision 2003 2007 2011 2015 Total Revenue Total Revenue
Slide 10: Operating Unit Overview
Operating Unit Overview North America Total Revenue • Collision Other – Aftermarket automotive products 7% – Recycled & Refurbished • Mechanical – Recycled engines & transmissions – Remanufactured Engines Parts & Services 93% Europe • Mechanical – 175,000+ small part SKUs – Brakes, filters, hoses, b
Slide 11: Favorable Industry Dynamics
Favorable Industry Dynamics Mechanical Replacement Products Market Shift Carriers Influence Collision Repairs • Mechanical replacement products shifted to 80% • Shift to alternative collision parts driven by: from 20% alternative products over a thirty year – Need to reduce the cost of claims period
Slide 12: Shift Toward Alternative Parts Usage
Shift Toward Alternative Parts Usage Average Parts Used Per Claim 10.0 9.2 7.9 8.0 6.4 6.0 5.8 4.0 2.8 2.1 2.0 0.0 OEM Alternative Parts Total 2010 2011 2012 2013 2014 2015 Over 20 Million Vehicle Claims Source: CCC Information Services Inc. 11
Slide 13: LKQ's Sweet Spot is Growing
LKQ’s “Sweet Spot” is Growing Age & Size of US Car Parc 140 50 4 year time 117 119 118 45 120 114 115 117 113 horizon 114 107 106 40 102 97 98 Number of Vehicles (millions) 100 95 94 94 35 30 80 71 68 68 67 67 67 66 68 63 64 25 59 56 54 60 51 48 49 20 19 20 19 17 18 40 17 17 17 16 15 16 16 14 13 13
Slide 14: Driven to Distraction
Driven to Distraction “People did not drive as well (in 2015) as they did the year before. I personally believe that distracted driving ... went up a fair amount.” Warren Buffet interview CNBC 2/29/2016 State Farm posts auto loss of $4.4B in 2015 Repairer Driven News, February 26, 2016 13
Slide 15: Crash Avoidance Systems Growing… But Impact Will Be Very Slow
Crash Avoidance Systems Growing… But Impact will Be Very Slow (24.3%) CY 2050 U.S. EIA Energy Outlook 2014 Light Duty Vehicle Sales by Energy Use (20.8%) CY 2045 (17.3%) CY 2040 (13.8%) CY 2035 22% CCC estimates (10.3%) CY 2030 a 10.3% impact (6.8%) CY 2025 to losses in (3.3%) CY 2020 next 15 years
Slide 16: Calendar Year Features Reach 95% of Registered Vehicle Fleet
Calendar Year Features Reach 95% of Registered Vehicle Fleet With and Without Mandate 2050 2040 2030 2020 Forward Collision Rear Parking Lane Departure Adaptive Blind Spot Rear Camera Warning Sensors Warning Headlights Warning Without Mandate 2015 Mandate Source: IIHS “Do Smart Cars Equal Safer Road
Slide 17: LKQ's Global Exposure to Collision
LKQ’s Global Exposure to Collision (1) (1) Based on Pro Forma 2015 Revenue, includes PGW and Rhiag. 16
Slide 18: Capital Projects & Development
Capital Projects & Development
Slide 19: The T2 Site
The T2 Site • 90K tonnes of soil moved • 3K tonnes of steel used • 778K square feet warehouse with mezzanine • Main build contractor Winvic • 80K tones of concrete poured • Automation and fit out: TGW 18
Slide 20: T2 Automation
T2 Automation Fast Tote Pick Miniload System Very Narrow Aisles • High Bay (16m) Pallet storage area • Pick Rate Age 800 cases/hr • 582k totes storage • 13 rack level of various heights • 600 Fast tote Pick Faces • 15 Aisles and 36 levels • 68k pallet location • Average Daily 89k (31.5%) cases pick
Slide 21: Rhiag Company Overview
Rhiag Company Overview • Rhiag is the leading automotive mechanical 2014 Revenue by Geography parts distributor in Italy operating in the independent aftermarket segment and the Bulgaria Poland Ukraine second largest market participant in Romania Switzerland 4% 1% Hungary 4% <1% 5% • The Company has
Slide 22: Rhiag Strategic Rationale
Rhiag Strategic Rationale • Establishes LKQ as the clear #1 Player in Europe & Accelerates our Pan-European Strategy • Enhances our Global Diversification Strategy with New Large Addressable Markets • Attractive Market Structure (fragmented, professional repair focused) • Numerous Common Suppliers w
Slide 23: PGW Snapshot
PGW Snapshot Market Leading Auto Glass Select Automotive Glass Capabilities • Pittsburgh Glass Works LLC (“PGW” or the “Company”) is the leading North American manufacturer, supplier and distributor Windshields Sidelites Backlites Roof Panels of automotive glass products – #1 in OEM with approximate
Slide 24: PGW Strategic Rationale
PGW Strategic Rationale • Fills a meaningful void in the LKQ product offering worldwide • Only pure-play automotive glass provider in North America • Leading competitive position in a large and growing global market • Positioned to capitalize on industry trends toward the use of innovative, higher v
Slide 25: Key Takeaways
Key Takeaways Leading Positions Diversified Revenue Expanding Alternative Clear Solid Financial Metrics In Large Markets Stream Parts Usage Value Proposition • Largest participant in • Global balance with • Increasing availability • Insurers focused on • History of delivering each market served Pan-
Slide 26: Walter Hanley
Walter Hanley Senior Vice President – Development
Slide 27: Walter Hanley Background
Walter Hanley Background • Walter P. Hanley joined us in December 2002 as our Vice President of Development, Associate General Counsel and Assistant Secretary; in December 2005, he became our Senior Vice President of Development • Mr. Hanley served as Senior Vice President, General Counsel and Secre
Slide 28: LKQ's Growth Strategy
LKQ’s Growth Strategy LKQ Growth Strategy Share Gains in Expansion into Expansion into Existing Markets New Product Areas New Markets • Greenfield expansion • Pittsburgh Glass Works • Rhiag (pending) projects: (pending) – Italy & 9 other – Warehouse capacity – Automotive glass European countries – D
Slide 29: LKQ's Acquisition Philosophies
LKQ’s Acquisition Philosophies Strong Brands • Markets where we can be #1 or #2 • Strong and experienced management • Opportunities for growth & synergies • Financial returns – IRR (mid-teens over 10 years) – ROIC (10 years’ average >10%) • Integrity • Criteria in new markets – Among the leaders in
Slide 30: LKQ's M&A Scorecard
LKQ’s M&A Scorecard Business Acquisitions North American European Specialty Vehicle Wholesale Wholesale Self Service Retail Aftermarket Businesses Businesses Businesses Businesses Total 2015 4 12 1 1 18 2014 9 9 2 2 22 2013 10 7 2 0 19 2012 22 0 8 0 30 2011 17 1 3 0 21 62 29 16 3 110 29
Slide 31: LKQ's Experienced Internal Development Team
LKQ’s Experienced Internal Development Team • Four full-time employees who work on acquisitions • Smaller transactions pre-screened by regional management • Support from experienced in-house attorneys • Regular interaction with senior management • Internal personnel assist with financial & operation
Slide 32: LKQ's Acquisition Process
LKQ’s Acquisition Process 1 2 3 4 5 6 Identify Execute Review Meet target’s Evaluate LKQ target and confidentiality target’s management potential management interact with agreement financials and tour its synergies decides to owner and other facilities and prepare submit information Pro Forma propos
Slide 33: Sample Pro Forma Project Summary
Sample Pro Forma Project Summary A. REVENUE Fixed Working Year 1 51,674 F. CAPITAL EXPENDITURES Assets Capital 5 Years Average 58,258 Acquired 1,591 14,956 10 Years Average 68,110 Year 1 1,350 0 Year 5 350 1,188 B. R.O.I. 5 Year Average 550 872 Year 1 7.7% 5 Years Average 12.5% G. I.R.R. 18.2% 10 Ye
Slide 34: Pending Transactions
Pending Transactions Announced February 29, 2016 December 22, 2015 Revenue $1.07 billion (TTM 10/13/15) €882.4 million (TTM 9/30/15) Adjusted EBITDA $105 million (TTM 10/31/15) €103.2 million (TTM 9/30/15) Enterprise Value $635 million €1.0375 billion Multiple EV / Adjusted Trailing EBITDA: 6.0x EV
Slide 35: Key Takeaways
Key Takeaways • Target businesses in existing markets, new product areas and new markets • Continue to improve strategies, philosophies and processes • Maintain disciplined approach • Opportunities abound 34
Slide 36: Justin Jude
Justin Jude Senior Vice President of Operations Wholesale Parts Division
Slide 37: Justin Jude Background
Justin Jude Background • Joined LKQ in February 2004 • Vice President - Supply Chain March 2008 to February 2011 • Vice President - Information Systems (North America) February 2011 to May 2014 • President of Keystone Automotive Operations, Inc., our specialty automotive business from June 2014 to J
Slide 38: North America
North America 2015 Revenue: $4.1B Employees: 17,080 Recycled (DIFM) DIFM Locations: 171 Aftermarket Warehouses; 130 Dismantling Yards DIY Locations: 78 Self-Service Locations #1 Aftermarket (DIFM) • Provider of recycled and aftermarket collision parts • Provider of recycled and remanufactured engine
Slide 39: Pick Your Part (DIY)
Pick Your Part (DIY) • Vehicles sourced from: – Auctions – Towing companies – Charitable donations – Public • Customer pulls parts • Vehicles organized by brand • 78 locations in North America • Procured 471,000 vehicles in 2015 • 7.6M visitors in 2015 • Majority of revenue is scrap & other commodit
Slide 40: Large & Fragmented US Market
Large & Fragmented US Market Automotive Repair Market $213B Do It For Me (DIFM) DIY(1) $165B $48B Retail Collision Mechanical Price $40B $125B Parts & Collision Parts Labor Mechanical Parts Labor $22B $18B $68B $57B Labor Collision Mechanical Markup Markup (Wholesale) $7B (Wholesale) $22B $15B $46B
Slide 41: Competitive Dynamics
Competitive Dynamics • Body Shops • A/M • Tire and wheel shops – Taiwan manufacturers • Big Box retailers – US manufacturers • Internet Sites – US distributors Customers (e-tailers) Suppliers • Mechanical repair • Full-serve shops – Auctions • Retail / DIY – Insurance Direct – Consumers (walk-ins) •
Slide 42: Who Are Our DIFM Customers?
Who Are Our DIFM Customers? • Body Shop – Hoods, fenders, lights (New & Used) – PBE: Paint, Body & Equipment • Mechanical Repair Centers – Engines (remanufactured and recycled) – Transmissions (remanufactured and recycled) – Radiators (new and recycled) • Indirectly, Insurance Companies • Over 250K
Slide 43: Clear Value Proposition
Clear Value Proposition 2008 Chevrolet Corvette 2006 Chevrolet Silverado 2005 Honda Accord Wheel Engine Bumper Cover New OEM $995 $3,499 $610 Remanufactured $454 $2,454 $272 Recycled OEM $425 $1,450 $345 New A/M $354 N/A $231 Average Savings 55% 39% 49% …and Improved Cycle Time for Repairs Note: Par
Slide 44: Regional Distribution Improves Fulfilment
Regional Distribution Improves Fulfilment • Highly fragmented space • 20X size of next competitor • Consistent nationwide coverage and warranty • Strong management team • Strong logistics & footprint • Industry leading fill-rates – Aftermarket: 95% – Salvage • Competitor: 25% • LKQ Single Site: 35%
Slide 45: Wholesale North America Operational Regions
Wholesale North America Operational Regions Every Major Market Has Similar Network as Atlanta Was Showing 44
Slide 46: Regional Distribution Improves Fulfillment
Regional Distribution Improves Fulfillment 45
Slide 47: Aftermarket Procurement
Aftermarket Procurement • 14,500 containers imported in 2015 (15% increase YoY) • High SKU proliferation (14% / 85%) on 100K active SKUs • Taiwan consolidation • Hub & Spoke Distribution Method • Platinum Plus Branding • Full High Quality Coverage – CAPA Certified parts – NSF Certified parts – Leads
Slide 48: Salvage Procurement
Salvage Procurement • Buying recently centralized with 87 procurement specialists • 105 Full Service vehicle dismantling facilities; 25 Heavy Duty truck facilities • 288K vehicles processed in 2015 • Planned 4% increase in 2016 • $30M in OE Collision Parts • Evolving proprietary technology Suggested
Slide 49: Maximizing Recycled Parts Sales
Maximizing Recycled Parts Sales High 12 10 3-10 Years 8 Demand Medium 6 4 2 Low 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mechanical Vehicle Year Sheet Metal 48
Slide 50: Case Study – Project Marks
Case Study – “Project Marks” Project Marks Project Summary • Acquired in 2012 Annual Savings • 12 locations with revenue of $50M Facility & Warehousing 920,000 • HR & Payroll converted in first 30 days Headcount Reduction 2,479,400 • “Best” vendor standardized in first 30 days resulting in quick mar
Slide 51: Productivity Initiatives
Productivity Initiatives • Procurement of aftermarket parts, supplies and freight • Sales Force Effectiveness • Route Optimization • Moving to a lean / functional culture 50
Slide 52: Alix Partners
Alix Partners • Full team from Alix Partners on site since July • Areas of focus – Aftermarket Parts – Logistics – IT / Telecom – General Supplies • Extensive analysis of spend in each category • Joined LKQ team on multiple vendor visits to Taiwan • Implemented numerous RFPs • Significant potential
Slide 53: Procurement Savings
Procurement Savings • Corrugated boxes: – Savings through combining volume standardizing design quick pay discounts Size Volume Original Pricing New Pricing Savings 10 x 07 x 10 708,388 $1.20 $0.36 70%; $606,900 • Office Supplies: – Savings though combining volume shorter payment terms: 8.5 x 11 Cop
Slide 54: Sales Force Effectiveness
Sales Force Effectiveness Where We Were Where We Want to Be • Sales and Operations combined • Separate and distinct Sales Organization • Fragmented business units which lacked • Three separate roles focused on the consistency across selling activities customer • Selling was primarily an order taking
Slide 55: Sales Force Effectiveness
Sales Force Effectiveness Sales Districts • Changing the culture • Key Performance Indicators – Total talk time – # of Outbound calls – Hours of coaching time – Formal evaluation process • Weekly Team Meetings • Everyone works for LKQ – Salvage, Aftermarket and PBE Focus on the Customer Experience,
Slide 56: Reduce Call Volume
Reduce Call Volume 47 Million Calls in 2015 55
Slide 57: E-Commerce Revenue (B2B or B2B2C)
E-Commerce Revenue (B2B or B2B2C) Revenue of Electronic Orders by Partner ($ in millions) $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Trending for a 150% Increase Year over Year 56
Slide 58: Route Optimization Project
Route Optimization Project • Selected RoadNet as core operating platform • Completed significant IT integration • Completed rollout in Florida as a test market in Q4 2015 • Currently implementing rollout in the Southeast • Plan to complete national rollout by Q3 2016 • Primary goals are to: – Reduce
Slide 59: Key Takeaways
Key Takeaways Strength Opportunity • High quality at a fraction of the cost with Clear value pricing proposition growing demand Broad coverage via high fill rates and • Allows continual organic growth extensive network • Difficult & expensive to replicate Highly fragmented space • Further consolidat
Slide 60: John Quinn
John Quinn Chief Executive Officer & Managing Director of European Operations
Slide 61: John Quinn Background
John Quinn Background • 6.5 years with LKQ, started as CFO in 2009, March last year, moved to CEO Europe, look after European operations, live in London, UK • First job ever (in high school) was selling auto parts at Canadian Tire • Bachelor of Commerce, MBA and CPA • Out of school worked four years
Slide 62: European Operations – High Level Overview
European Operations – High Level Overview ($ in millions) Revenue Segment EBITDA EBITDA % Europe $1,995 $201 10.1% Rhiag 971 107 11.0% Pro Forma with Rhiag $2,966 $308 10.4% • With Rhiag Europe will be roughly 1/3 of LKQ (excludes PGW European operations) • Primary focus on mechanical parts (such as
Slide 63: European Operations
European Operations • Leading distributor of automotive aftermarket mechanical parts • Leading distributor of automotive aftermarket mechanical parts in the UK in the Benelux • Nearly 55,000 commercial customers • Proprietary, best-in-class online ordering technology for local • 3 National distribut
Slide 64: European Strategy
European Strategy To create shareholder value through the scale benefits which we expect to flow from being the first pan-European distributor of replacement auto parts Create customer connections and help them with technological changes to ensure we are their primary parts supplier 63
Slide 65: Europe - Market Observations
Europe - Market Observations • Large car parc • Fragmented industry • Often there is a “country champion” • In transition from 3-step to 2-step distribution • Professional repairer focused • Segmented by the suppliers (local conditions / currencies) • Focused on mechanical parts • Low penetration of
Slide 66: Large European Market
Large European Market Automotive Repair Market €198B Do It For Me (DIFM) DIY (1) €188B €10B Retail Collision Mechanical Price €30B €158B Parts & Collision Parts Labor Mechanical Parts Labor €22B €8B €120B €38B Labor Collision Mechanical Markup Markup (Wholesale) €8B (Wholesale) €42B €14B €78B Market
Slide 67: US Has Large Aftermarket Mechanical Parts Distributors – Europe is Fragmented
US Has Large Aftermarket Mechanical Parts Distributors – Europe is Fragmented USA (1) Europe (2) Company Name Revenue Company Name Country Revenue AutoZone $10.2 LKQ Corp (Europe) (3) Various $3.0 Advance Auto Parts $9.3 WM Fahrzeugteile + Trost Germany $1.9 Genuine Parts Company $8.1 Stahlgruber Ge
Slide 68: Examples of Country Champions and Fragmentation
Examples of “Country Champions” and Fragmentation Selected Market Players Selected Pan European Platforms • LKQ—Central and Eastern Europe, Italy, the Netherlands and the United Kingdom • Alliance Automotive—France, Germany and the United Kingdom • Mekonomen—Denmark, Finland, Norway and Sweden Sourc
Slide 69: Rhiag's Operating Presence and Position
Rhiag’s Operating Presence and Position Italy CZECH REPUBLIC Branches 19 #1 #2 Of which Hubs: 4 SLOVAKIA #1 Central Warehouses 1 Customers Served >8,400 POLAND Czech Republic Branches 111 UKRAINE Central Warehouses 2 UKRAINE Customers Served >49,000 SWITZERLAND #2 HUNGARY Switzerland Central Warehou
Slide 70: LKQ's Pan-European Footprint Post Rhiag
LKQ’s Pan-European Footprint Post Rhiag LKQ Europe Rhiag Group Norway Sweden Netherlands UK Poland Belgium Czech Ukraine Republic Slovakia Switzerland Hungary Romania Italy Bulgaria Source: Company information. 69
Slide 71: Benefits of Scale
Benefits of Scale • Lower procurement costs – OES brands (volume) – Private label brands (margin) • Reduced logistics and warehousing – e.g. Asian sourcing – e.g. long tail products • Improved overhead costs – Offshoring – Cataloguing • Brand economies of scale • Vendor financing programs Longer-Ter
Slide 72: Key Takeaways - Europe
Key Takeaways - Europe • Roughly 1/3 of LKQ’s revenue base (with Rhiag) • Large, fragmented market • Further consolidation likely (by us and others) • Currently market leader – c. $3 billion Pro Forma revenue – approximately 50% larger than #2 • Seeking additional first mover advantages through lowe
Slide 73: Martin Gray
Martin Gray Chief Executive Officer-Euro Car Parts
Slide 74: Martin Gray Background
Martin Gray Background • Promoted to UK CEO in 2013 • Joined Euro Car Parts as People Director in 2008 • 1999 – 2008 Managing Director & Group Board Director, Caudwell Group (Mobile Phone Retail & Distribution); Revenue $3.5B, 14,000 employees; Sold in 2006 for $2.2B • Previous experience Retail & H
Slide 75: ECP - Any Part for Any Car
ECP - “Any Part for Any Car” • UK Number 1 ~ 218 Branches (1) • 4 times larger than our nearest competitor • 92% coverage across the UK within a 30 min drive • 9,000 Colleagues – Strong Leadership Team • Revenue has more than tripled last 5 years ($420M in 2010 to $1,382M in 2015, 27% CAGR) • Profit
Slide 76: How We Got Here …
How We Got Here … One Team One Number 218 Integration 9,000 Paint & 186 Collision 8,200 To 144 Here First NDC 6,700 opens 90 Pioneering 3,400 move into 2016 “all makes” 85 Specialist 2,600 programmes 38 created Sukhpal 683 opens first 1 branch 10 1 1978 2 $420M $545M $982M $1,322M $1,382M+ 1978 1984
Slide 77: Today - Multi-Channel Business
Today - Multi-Channel Business Retail E-Commerce National Networks Roadside Independent Recovery Garages Bodyshops 76
Slide 78: The Future – Distributor / Enabler
The Future – Distributor / “Enabler” TO BE INDEPENDENTLY ACKNOWLEDGED AS BEING A “PLEASURE TO DEAL WITH” “END TO END” MAXIMIZE OUR EFFICIENCY & COST SUPPORT SERVICES SUITE REDUCTION PROGRAMMES FOR TRADE #1 PULLING FORWARD UNPARALLELED SERVICE TO SEAMLESS OMNI-CHANNEL RETAIL NATIONAL NETWORK CUSTOMER
Slide 79: Customer Segmentation with Supporting Matrix
Customer Segmentation with Supporting Matrix National Trade Retail Accounts E-COMMERCE MARKETING WORKSHOP SOLUTIONS SALES & OPERATIONS COATINGS & COLLISION TECHNOLOGY PROCUREMENT 78
Slide 80: ECP Trade Segment
ECP Trade Segment • 55,000 trade customers • S.M.R. (Service Maintenance Repair) ~ 62% of UK total Collision / Coatings ~ 15% of UK total • OE brands from worlds leading parts & paint manufacturers – Supported by own-brand value alternatives • In-house catalogue “Top Cat” via Automotive Data Service
Slide 81: ECP Trade Segment
ECP Trade Segment • Our new Autofirst Network Garage Concept • Payment Assist – helping manage unexpected payments • Technician Tool Club – helping spread the cost of tools • Subsidised Training in ECP and 3rd Party Training Centres • Large branches 10,000 sq. ft. + including mezzanine – Large Custo
Slide 82: ECP Trade Segment - Collision & Coatings
ECP Trade Segment - Collision & Coatings • 15% of total UK Revenue • UK’s only integrated Bodyshop proposition of paint, panels, parts, consumables and equipment. – Expanded Range of Products and Brands give Full Choice of Price and Quality • The panel and bumper range was launched under the brand o
Slide 83: ECP Retail Segment – E-Commerce
ECP Retail Segment – E-Commerce • Ecommerce & counter / shop sales combined = 11% of UK total Revenue • Ecommerce turnover has quadrupled over the last 3 years – Now circa $100M pa business • 4 million visits per month on the eurocarparts.com site alone • 10 x larger than next competitor, 150,000 or
Slide 84: ECP Retail Segment - Shops & Counters
ECP Retail Segment - Shops & Counters • A genuine ‘one stop shop’ for all motoring parts and accessory requirements • Brand new experience in-store – Dedicated trade, retail and click & collect areas – Clear customer journey • Integrated marketing • Sunday opening in 45 branches • Specialist managem
Slide 85: ECP Retail Segment – E-Commerce Platforms
ECP Retail Segment – E-Commerce Platforms RETAIL TRADE PARTNER MARKETPLACE B2C B2B B2B2C B2C eurocarparts.com trade.eurocarparts.com racshop.com eBay.co.uk eurocarparts.fr autowork-online.co.uk halfords.com amazon.co.uk eurocarparts.de repairanycar.com carparts4less.co.uk 84
Slide 86: ECP National Account Segment
ECP National Account Segment • 10% of UK total revenue • Tripled our National Account business in 3 years, providing the only true ‘one stop shop’ • 100% UK Coverage, full point-of-sale control, central billing & management info • Complete solutions, not just a parts supplier – Garage Equipment, Pai
Slide 87: Euro Car Parts T2 Rationale
Euro Car Parts T2 Rationale • Supports business growth – In Logistics this means increased throughput and storage requirement • Supports business integration – Total proposition under one roof e.g. paints, e-comm, mechanical parts • More efficient logistics – Reduced double handling & transport cost
Slide 88: Euro Car Parts T2 Rationale
Euro Car Parts T2 Rationale • Semi-automated site – Automation, only where it makes sense (i.e. we get a good ROI from the automation supporting the faster moving products) • Size of warehouse – Capable of housing NDC, Bonehill and 3PL (third party logistics, i.e. external companies) storage require
Slide 89: Key Takeaways
Key Takeaways UK Number One ~ 92% coverage across the UK within a 30 min drive time New NDC (T2) will allow us to leverage best in class capability Trade “Category killer” proposition, via support services suite Seamless omni-channel retail experience Additional UK organic growth and acquisition pot
Slide 90: Sinon Galvin
Sinon Galvin Chief Executive Officer-Sator
Slide 91: Sinon Galvin Background
Sinon Galvin Background • Joined LKQ’s acquisition team in October 1998 • From Jan 2000 until Feb 2011 was LKQ’s Vice President in charge of Information Technology and systems development • From Mar 2011 until July 2014 was Vice President of Revenue Optimization and International Projects • CEO – Sa
Slide 92: Sator Today…
Sator Today… REVENUE 2015 Sales: €500+ million Customers: 25K+ Suppliers: 3K+ Stocking SKUs: 175K+ Locations: 86 Branches, 11 Distribution / Rapid Fulfillment Centers in 3 countries #1 Benelux Distributor / Wholesaler • Hybrid NL distributor / wholesaler Traditional distributor BE, LU, FR • Best in
Slide 93: Sator Offers Superior Services to Its Business Partners
Sator Offers Superior Services to Its Business Partners Sator’s Business Market Catalog Platform research • Catalogue covering 20.000 different autotypes Technical Logistical data services • Several types of autotype identification (VIN, license Concepts plate, KBA, typeschein, CNIT) Own Concepts Cl
Slide 94: Sator – Automotive Academy… Training for Today and Tomorrow
Sator – Automotive Academy… Training for Today and Tomorrow 93
Slide 95: Sator - Platform is the Key…
Sator - Platform is the Key… Solution Platform / Customer Pipeline 2013 3 Step 2014 Hybrid 94
Slide 96: Sator – Leading an Industry Transition
Sator – Leading an Industry Transition 95
Slide 97: Sator – Footprint / Margin Driver
Sator – Footprint / Margin Driver Traditional Modular Robot Crane 96
Slide 98: Sator - France
Sator - France Noyelles 6 14k+ 10k+ ‘Bes ia QO x» 50% belong to a network (Bosch, AD, etc...) Paris Metro Region 2009 2010 2011 2012 2013 2014 23°5 1.2 bil+ 1.2 bil+ Q- Existing Sator Operation @- Future entry:“A question of when, not if” 18% 20% 30% Less than 2% of France (12,012 km?) 97 ELKQ Corpo
Slide 99: Sator – Key Takeaways
Sator – Key Takeaways • Netherlands Business acquisition phase largely complete. Occasional acquisition as partners seek exit or opportunistic deal presents itself. • Netherlands is a powerhouse with opportunity for significant margin improvement as logistics network is re-designed • Belgium will pr
Slide 100: Bill Rogers
Bill Rogers Vice President & General Manager Keystone Automotive Operations
Slide 101: Bill Rogers – Specialty
Bill Rogers – Specialty Education: • BS Computer Science / MBA / Six Sigma - Lean Company Experience: • GE – 13 years multiple locations and businesses • Textron – 7 years multiple locations Industrial / Aircraft business • Armstrong – 3 years Building Materials business • Keystone Automotive Operat
Slide 102: About Specialty
About Specialty 2015 Sales: $1.05B Customers: 20K+ Directly Addressable Market (1) Suppliers: 800+ ($ in billions) RV, Trailer & Performance Stocking SKUs: 175K+ Other Products Locations: 53 facilities in 30 states, 3 provinces $1.4 13% $4.0 Wheels, 36% North America Tires & $2.6 #1 Wholesale Distri
Slide 103: Key Strengths
Key Strengths • Critical link between fragmented suppliers and customers Supplier Transaction • Best-in-class logistics and Relations Processing distribution network; serve over 98% of jobber customers next day Experienced Inventory Employees Breadth & • Management and infrastructure (Enthusiasts) D
Slide 104: What We Do and How It Helps
What We Do and How It Helps Competitive Advantages Enabling Utilize 7 LARGE Warehouses (2.3M sq. ft. with RF technology) and multiple • Higher fill rates cross-docks to deliver next day We own & operate our own fleet of tractor • Later cut off times – 5 PM+ trailers and cube vans • Big and bulky par
Slide 105: Competitive Landscape
Competitive Landscape • Jobbers • Manufacturers • Dealers • OE’s Customers • Retailers Suppliers • Niche • e-tailers Distributors • Wholesale Distributors • Pricing Policies • Manufacturers Direct • Online Selling Competition • Retailers Dynamics • Groups • Wobbers (Jobber/WD) • Consolidation Many B
Slide 106: Growth Strategy
Growth Strategy • Adjacent Spaces • New Lines (e.g. RV, trailering, etc.) • New Products • Channels • Services • Alliances / Associations • Delivery Expansion Increasing Deeper Customers Penetration Organic and M&A Driving Expanding • Private Label Initiatives Geography • East to West • E-Commerce S
Slide 107: Results of Our Strategy in Action
Results of Our Strategy in Action • 4 DCs, 24 CDs • 6 DCs, 47CDs • 9 DCs, 65 CDs 2010 2015 202? • <$500M • >$1B • >$2B Speed & Performance Truck & Automotive Accessories Towing Products RV Parts & Accessories Trailering Products Adjacent Markets Objective is for Annual Double-Digit Growth 106
Slide 108: Strong Acquisition Integration Process
Strong Acquisition Integration Process Key considerations are: Stag Parkway example 1) People - full associate review / changes 12 DCs integrated into existing network 2) Customers – complete analysis – tie to in 12 months DCs / Inventory, take and incorporate feedback KAO Wilsonville DC KAO Exeter
Slide 109: Consumer Types
Consumer Types Outdoorsman Fleet / Oil & Gas Gearhead Off-Roader RV’er Soccer Mom Street Truck Contractor Tuner Lifestyle Diverse Array of Enthusiast and End-User Segments 108
Slide 110: Product Overview by Market Segment
Product Overview by Market Segment Truck & Wheels and Speed & RV Towing Accessories Off-Road Tires Performance Awnings Receiver Hitches Winches Wheels Air Intakes Fender Flares Satellites 5th Wheels Toolboxes Tires Superchargers Floor Liners Accessories Electrical Tonneaus W&T Accessories Exhaust Ch
Slide 111: Leading & Recognized Brands
Leading & Recognized Brands Top Brands from Across all Market Segments 110
Slide 112: Marketing Support
Marketing Support Events Publications • Each year, Keystone hosts the BIG Shows, which marry • Keystone produces a variety of retail and wholesale suppliers and customers in the largest buying event in focused publications designed specifically to educate the Automotive Aftermarket and influence pur
Slide 113: Training and Education
Training and Education Facilities Nationally Recognized Trade Shows Top-Notch Learning Centers The largest actual Automotive Accessory and RV in Dallas and Exeter, PA Parts selling shows in North America The Expo New Orleans Convention Center The Big Show East Washington, DC Convention Center The Bi
Slide 114: Keystone's Next Day Delivery Network
Keystone’s Next Day Delivery Network 113
Slide 115: Best-in-Class Distribution Network
Best-in-Class Distribution Network 800+ X 7 70+ 46 400+ 20k+ Specialty Supplier or Distribution Tractor Trailer Cross Delivery Customers/ Aftermarket 3rd Party Centers Fleet Docks Fleet Jobbers Suppliers Trailers Where’s My Truck? Proven Process Founded on Continuous Improvement 114
Slide 116: Order Fulfillment Illustration
Order Fulfillment Illustration 4 START: ORDER PLACED END: TOOLBOX INSTALLED 3 PM: Construction worker in 2 PM: Toolbox installed on 5 Eau Claire, WI visits local truck less than 24 hours after jobber and orders Weather order 6:30 PM: Tractor trailer Guard toolbox 3:30 AM: leaves Kansas City, KS dist
Slide 117: Private Label Initiative
Private Label Initiative Lots of Runway for Higher Margin Private Label 116
Slide 118: E-Commerce Programs
E-Commerce Programs New E-Commerce Strategy B2B - Existing • Existing programs provide the ability to service core customers and the flexibility of expanding it’s presence in new channels eKeystone.com/ ViaNTP.com • New C2M program unites Suppliers and Customers with consumer direct model including
Slide 119: Crossover Product Opportunities
Crossover Product Opportunities Penetration of existing lines into new customers • Provides an opportunity for the RV dealer to expand and differentiate • Initial product focus has been on functional, easy to understand accessory products • Second wave focuses more on creating a Truck Accessory pres
Slide 120: Operational Efficiency
Operational Efficiency Operational Efficiency Leverage • State-of-the-art phone system allows • Sales per employee up 7% since 2013 interoperability among 9 call centers • Call volume up 5% vs. PY while dropping • RF technology in all DCs and cross-dock abandonment rate ensuring delivery accuracy an
Slide 121: Key Takeaways
Key Takeaways • Very strong, experienced team • Critical link between many suppliers and customers • Partnered with strong brands as well as proprietary brands • Demonstrated ability to grow organically and through acquisition • Strong integration process yielding revenue, cost synergies • Ability t
Slide 122: Nick Zarcone
Nick Zarcone Executive Vice President & Chief Financial Officer
Slide 123: Nick Zarcone Background
Nick Zarcone Background • Joined LKQ in March 2015 • Previously CFO of Baird • 25 years of Investment Banking experience with Baird and Kidder, Peabody focused on Capital Raising and M&A activities for growth oriented corporations • Led Baird Teams that were involved in 7 major LKQ transactions incl
Slide 124: LKQ – Current Snapshot
LKQ – Current Snapshot (1) ($ in millions, except per share amounts) 2015 Total Revenue Revenue $7,193 14% Segment EBITDA $855 58% Adjusted Net Income $459 28% Adjusted EPS $1.49 Segment EBITDA Total Debt (2) $1,600 13% Equity $3,115 23% 64% Market Capitalization (3) $9,295 Credit Rating (4) Ba1 / B
Slide 125: Revenue
Revenue ($ in billions) $10.0 $9.2 $8.0 $7.2 $6.7 $6.0 $5.1 $4.1 $4.0 $3.3 $2.0 $0.0 2011 2012 2013 2014 2015 PF 2015 (1) (1) Pro Forma 2015 reflects a full year impact of Rhiag and PGW acquisitions. Financial information reflects FY 2015 for LKQ, LTM 9/30/15 for Rhiag and LTM 10/31/15 for PGW. See
Slide 126: History of Strong Organic Growth
History of Strong Organic Growth Organic Revenue Growth Rates (1) 12.0% 11.0% 10.0% 9.0% 7.9% 8.0% 7.0% 6.0% 6.0% 4.0% 2.0% 0.0% 2011 2012 2013 2014 2015 (1) Parts and services only. 125
Slide 127: Adjusted EBITDA
Adjusted EBITDA (1) ($ in millions) $1,200 $1,066 $1,000 $855 $791 $800 $629 $600 $515 $424 $400 $200 $0 2011 2012 2013 2014 2015 PF 2015 (2) (1) Represents (i) LKQ Adjusted EBITDA and (ii) Adjusted EBITDA as defined by Rhiag and PGW with LTM results further adjusted by LKQ. See the Appendix for rec
Slide 128: Adjusted EPS
Adjusted EPS (1) $1.80 $1.71 $1.49 $1.50 $1.35 $1.20 $1.09 $0.90 $0.90 $0.75 $0.60 $0.30 $0.00 2011 2012 2013 2014 2015 PF 2015 (2) (1) Adjusted Diluted EPS excludes the impact of restructuring and acquisition related expenses, net of tax; losses of debt extinguishment, net of tax; changes in the fa
Slide 129: Cash Flow / Capex
Cash Flow / Capex ($ in millions) $600 $530 $500 $428 $400 $371 $300 $212 $206 $200 $170 $141 $86 $88 $90 $100 $0 2011 2012 2013 2014 2015 Operating Cash Flow Capital Spending 128
Slide 130: Financial Policy
Financial Policy Focus on Free • Organic revenue growth of ≥ 6.0% Cash Flow • Margin expansion in each business Generation • Working capital management • Cash balances • Revolver capacity Maintain Liquidity • Sufficient maturity of bank facility ≥ 18 months • Term out bank debt with longer dated not
Slide 131: 2015 Capital Allocation
2015 Capital Allocation ($ in millions) $700 $530 $600 $500 ($170) $400 $300 ($160) $200 $115 $100 $87 ($224) ($4) $0 Beginning Cash Operating Capex Acquisitions & Financing F/X Ending Cash 12/31/14 Cash Flow Other Investing 12/31/15 Activities 130
Slide 132: 5 Year Capital Allocation (2011-2015)
5 Year Capital Allocation (2011-2015) ($ in millions) $3,000 $1,747 $2,000 $1,000 ($576) $96 $929 $87 $0 ($4) ($1,000) ($2,105) ($2,000) Beginning Cash Operating Capex Acquisitions & Financing F/X Ending Cash 12/31/10 Cash Flow Other Investing 12/31/15 Activities All Free Cash Flow Has Been Reinvest
Slide 133: Net Working Capital
Net Working Capital (1) ($ in billions) $8.0 35.0% $7.2 $6.7 $6.0 30.0% $5.1 $4.1 $4.0 25.0% $3.3 23.1% $2.0 21.7% 21.5% 21.8% 21.9% 20.0% $0.0 15.0% 2011 2012 2013 2014 2015 Revenue Ratio of NWC to Revenue Working Capital Requirements are Consistent and Reflective of a Wholesale Distributor (1) Net
Slide 134: Capital Expenditures
Capital Expenditures ($ in millions) $180 10.0% $150 $34 8.0% $28 $136 $120 6.0% $113 $90 $17 $18 $18 4.0% $60 $69 $71 $72 2.6% 2.0% $30 2.4% 2.1% 2.1% 1.8% $0 0.0% 2011 2012 2013 2014 2015 Growth Maintenance % of Revenue Capital Spending is Highly Discretionary and Has Been Largely Used to Support
Slide 135: 2015 Capital Expenditures by Asset Type
2015 Capital Expenditures by Asset Type All Other 3% Buildings & Land 12% Machinery & Equipment 40% Technology 10% Vehicles 16% Leasehold Improvements 19% 134
Slide 136: Historical ROIC Trends
Historical ROIC Trends LKQ ROIC (3) NOPAT (1) ($ in billions) $0.5 10.9% 10.9% 10.8% 10.9% $0.4 0.3% 10.5% 0.3% 0.6% 0.5% $0.3 0.3% $0.3 $0.2 2011 2012 2013 2014 2015 Invested Capital (2) 10.6% 10.6% 10.4% 10.2% 10.2% ($ in billions) $4.5 $4.2 $3.3 $2.1 $2.7 $1.9 $2.1 $1.2 $0.8 $0.5 $2.0 $2.1 $2.2 $
Slide 137: ROIC Anatomy of a Hypothetical Acquisition
ROIC Anatomy of a Hypothetical Acquisition $ in millions Assumptions: EBITDA $12.0 Purchase Price (6x EBITDA): $72.0 Revenue Growth 6.0% EBITDA Margin 12.0% Year 1 Year 5 Revenue $100.0 $126.2 EBITDA 12.0 15.1 D&A 2.0 2.5 Taxes (@ 35%) 3.5 4.4 NOPAT $6.5 $8.2 Purchase Price $72.0 $72.0 Additional In
Slide 138: LKQ Weighted Average Cost of Capital
LKQ Weighted Average Cost of Capital Cost of Equity Cost of Debt Risk-free rate (1) 2.7% Pre-tax cost of debt (4) 3.4% LKQ relevered equity beta (2) 1.16 Tax rate (5) 35% Market risk premium (3) 6.2% LKQ After-tax Cost of Debt 2.2% Size premium (3) 0.9% LKQ Cost of Equity 10.7% % Equity (6) 73% % De
Slide 139: Capitalization
Capitalization (1) ($ in millions) Capitalization Pro Forma Liquidity (3) Corporate Credit Ratings (4) Amount % Amount Moody's Ba1 Negative S&P BB Stable Debt (2) $1,600 34% Cash and cash equivalents $87 Availability under Stockholders’ Equity $3,115 66% $427 credit facilities (3) Total Capitalizati
Slide 140: Debt and Interest Rate Trends
Debt and Interest Rate Trends ($ in billions) $2.0 5.0% 4.0% 4.0% $1.5 3.4% 3.4% 3.4% 3.1% 3.0% $1.0 $1.9 $1.6 2.0% $1.3 $1.1 $0.5 $1.0 1.0% $0.0 0.0% 2011 2012 2013 2014 2015 Total Outstanding Debt (1) Weighted Average Annual Borrowing Rate (1) Total outstanding debt excludes debt issuance costs. 1
Slide 141: Net Leverage Per Bank Covenants
Net Leverage Per Bank Covenants (1) ($ in millions) 3.5x 3.0x 3.0x 2.5x 2.0x 2.0x 2.0x 1.9x 1.7x 1.7x 1.5x 1.0x 0.5x 0.0x 2011 2012 2013 2014 2015 PF 2015 (2) (1) Net leverage per bank covenants is defined as (Net Debt) / (EBITDA). See the definition of Net Debt and EBITDA in the credit agreement fi
Slide 142: Liquidity
Liquidity Credit Facility Pro Forma Debt Maturity Profile ($ in millions) $3,600 $3,500 $3,200 Revolver $3,000 $3,000 $427 Availability (1) $427 $66 $2,500 $2,400 $2,261 $586 $2,000 $66 $1,800 $1,304 $1,500 $2,707 $1,200 $1,000 $1,957 $66 $600 $500 $891 $600 $14 $38 $38 $38 $38 $0 $0 (2) 2016 2017 2
Slide 143: Finance Takeaways
Finance Takeaways Diversified Revenue Stream Attractive Excellent [Tex Return on Organic t] Capital Growth Significant Invest to [Tex Casht]Flow Support Growth Generation Strong Balance Sheet LKQ has the Capacity to Achieve Long-Term Revenue Growth of 10% & EPS Growth of 15% 142
Slide 144: Mission & Strategic Initiatives
Mission & Strategic Initiatives Mission Statement Guiding Principles To be the leading global value-added distributor of vehicle Integrity & Ethics parts and accessories by offering our customers the most Customer First comprehensive, available and cost effective selection of part Humility solutions
Slide 145: Appendix
Corporation Appendix
Slide 146: Pro Forma Revenue & Adjusted EBITDA
Pro Forma Revenue & Adjusted EBITDA The following unaudited table reflects Pro Forma 2015 revenue and adjusted EBITDA for LKQ Corporation: ($ in thousands) Revenue Adjusted EBITDA LKQ Corporation $7,192,633 $854,529 Rhiag 970,640 106,920 PGW 1,066,400 105,000 Total Pro Forma $9,229,673 $1,066,449 No
Slide 147: Adjusted EBITDA Reconciliation - LKQ Corporation
Adjusted EBITDA Reconciliation - LKQ Corporation The following unaudited table reconciles Net Income to EBITDA and Adjusted EBITDA for LKQ Corporation: Year Ended December 31, ($ in thousands) 2015 2014 2013 2012 2011 Net income $423,223 $381,519 $311,623 $261,225 $210,264 Depreciation and amortizat
Slide 148: Adjusted EBITDA Reconciliation - Rhiag
Adjusted EBITDA Reconciliation - Rhiag The following unaudited table reconciles Net Income to EBITDA and Adjusted EBITDA for Rhiag: Rhiag Trailing 12 Months (€ in thousands) September 30, 2015 Net income €13,264 Depreciation and amortization 39,497 Interest expense, net 41,019 Provision for income t
Slide 149: Adjusted EBITDA Reconciliation - PGW
Adjusted EBITDA Reconciliation - PGW The following unaudited table reconciles Net Income to EBITDA and Adjusted EBITDA for PGW: PGW Trailing 12 Months (€ in thousands) October 31, 2015 Net income $25,400 Depreciation and amortization 34,800 Interest expense, net 30,200 Provision for income taxes 300
Slide 150: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation The following unaudited table reconciles Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, respectively: (in thousands, except per share data) 2015 2014 2013 2012 2011 Net income $423,223 $381,519 $311,623 $261,225 $