Lkq Corporation · NASDAQ:LKQ
Lkq — Merger or Acquisition (December 2015)
26 slides from Lkq's merger presentation, Dec 22, 2015
Slide 1: LKQ to Acquire Rhiag Group
Investor/Analyst Conference Call LKQ to Acquire Rhiag Group December 22, 2015 Rob Wagman – President & Chief Executive Officer John Quinn – Chief Executive Officer & Managing Director of European Operations Nick Zarcone – Executive Vice President & Chief Financial Officer
Slide 2: Forward Looking Statement
Forward Looking Statement 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-looki
Slide 3: Agenda
Agenda • Strategic Rationale - Rob Wagman • Rhiag Overview - John Quinn • Financial Overview - Nick Zarcone • Q&A 3
Slide 4: Mission Statement
Mission Statement To be the leading global value-added distributor of vehicle parts and accessories by offering our customers the most comprehensive, available and cost effective selection of part solutions while building strong partnerships with our employees and the communities in which we operate
Slide 5: Strategic Rationale & Market Overview
Strategic Rationale & Market Overview
Slide 6: Rhiag Company Overview
Rhiag Company Overview 2014 Revenue by Geography • Rhiag is the leading automotive mechanical parts distributor in Italy operating in the independent aftermarket segment and the second largest market Bulgaria participant in Switzerland. Ukraine Poland Romania 4% 1% • The Company has a major presence
Slide 7: 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 8: European Market Overview
European Market Overview Automotive Repair Market €198 bn Do It For Me (DIFM) DIY* €188 bn €10 bn Collision Mechanical Retail Price €30 bn €158 bn Parts & Collision Parts Labor Mechanical Parts Labor Labor €22 bn €8 bn €120 bn €38 bn Collision Mark Mechanical Mark (Wholesale) up (Wholesale) up €14 b
Slide 9: Rhiag Significantly Expands LKQ's Pan-European Footprint
Rhiag Significantly Expands LKQ’s Pan-European Footprint Italy • Sells exclusively to wholesalers/ jobbers which in turn, sell to LKQ Europe independent garages SWEDEN Rhiag Group • More than 5,700 wholesalers served NORWAY • Limited customer concentration – top 10 account for ~3% of total sales NOR
Slide 10: Rhiag Expands LKQ's Leadership Position In Europe
Rhiag Expands LKQ’s Leadership Position In Europe Top 10 European Players € 2,174 € 782 € 1,392 € 1,392 € 1,170 € 1,012 € 930 € 803 € 782 € 651 € 638 € 625 € 612 (1) (1) (1) (2) LKQ LKQ Autodis Stahlgruber Intercars Trost Rhiag AAG Parts WM Mekonomen Europe Europe Alliance + Rhiag Source: Company fi
Slide 11: Rhiag Overview
Rhiag Overview
Slide 12: Rhiag's Operating Presence
Rhiag’s Operating Presence Italy Branches 19 Of which Hubs: 4 Central Warehouse 1 Customers served >8,400 POLAND Czech Republic CZECH REPUBLIC Branches 111 Central Warehouses 2 UKRAINE Customers served >49,000 UKRAINE SWITZERLAND SLOVAKIA Switzerland HUNGARY Central Warehouses 2 Customers served >1,
Slide 13: Rhiag Is A Leading Player In Its Core Markets
Rhiag Is A Leading Player In Its Core Markets Market Market Country Approximate Market Share Position Country Approximate Market Share Position Rhiag Rhiag 15% 24% #1 #1 Italy 76% 85% Slovakia Other Other Rhiag 9% Rhiag 37% #1 #3 Czech 63% Republic Other Hungary 94% Other Rhiag Rhiag 9% 3% #2 #2 Swi
Slide 14: Pro Forma Geographical Footprint
Pro Forma Geographical Footprint + + + Revenue $7.1 $1.0 $8.1 European Revenue $2.0 $1.0 $3.0 Europe Europe Europe 28% 100% 37% Geographic Contribution 63% North 72% America North America Switzerland Other (1) Switzerland Benelux 5% countries 2% 7% Czech 8% 30% Other (1) 22% Republic countries Unite
Slide 15: Rhiag Is A Consistent Performer
Rhiag Is A Consistent Performer Gross Revenue € 882 € 782 € 733 • Consistent Revenue € 673 and EBITDA growth ~10% each • Healthy & stable 11.5% 11.3% 11.4% 11.0% margin profile 2012A 2013A 2014A LTM 9/30/15 Adjusted EBITDA Margin Represents Adjusted EBITDA as defined by Rhiag with LTM results furthe
Slide 16: Financial Overview
Financial Overview
Slide 17: Transaction Summary
Transaction Summary • €1.0375 billion in total consideration (including cash & assumed debt) • Represents EV / Adjusted 2015 EBITDA: 10.6x Structure and • Transaction expected to be financed with cash on hand, existing facilities & assumed Consideration debt • Strong combined financial profile allow
Slide 18: Financing
Financing • Initial funding will be provided by LKQ’s cash, current credit facility & assumption of €475 million of Rhiag Group debt • Permanent financing is expected to utilize a combination of Euro Bonds, term loans & credit facilities Credit Facility Leverage(1) 4.0x $2,363 $2,363 $2,400 Revolver
Slide 19: LTM Margin Analysis
LTM Margin Analysis Gross Margin • Difference in gross margin profile due to 39.3% market structure & product mix 37.6% 28.0% LKQ Consolidated LKQ Europe Rhiag (1) EBITDA Margin • Offsetting the lower gross margin, Rhiag generates lower operating costs as a percentage of revenue compared 11.8% 11.0%
Slide 20: Earnings Per Share Presentation
Earnings Per Share Presentation • To provide investors an additional perspective, once the Rhiag acquisition is closed, LKQ will modify its Adjusted EPS presentation to exclude tax adjusted amortization of intangibles • LKQ’s historical stand alone results using this approach to Adjusted EPS are pre
Slide 21: EPS Accretion
EPS Accretion • Rhiag currently has ~€30mm of annual amortization expense as a result of previous transactions, LKQ expects the transaction may result in an incremental ~€10-€15mm(1) per annum • LKQ anticipates the Rhiag Group acquisition will be accretive to EPS on both an Diluted EPS & Adjusted EP
Slide 22: Key Takeaways
Key Takeways • Consistent with LKQ’s growth & acquisition strategy in Europe • Markets where LKQ can be #1 or #2 • Keep discipline on operational profile & financial return metrics • Europe is a large, fragmented addressable market with attractive fundamentals • Aging car parc, increasing complexity
Slide 23: Appendix
Corporation Appendix
Slide 24: 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: Y TD September 30, 2015 2014 2013 2012 2011 (In thousands, except per share data) Net income $ 328,163 $ 381,51
Slide 25: 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 Year Ended Year Ended Year Ended September 30, December 31, December 31, December 31, 2015 2014 2013 2012 (in thousands) Net income (loss) € 13,2
Slide 26: 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: LKQ Corporation Trailing 12 Months September 30, 2015 (in thousands) Net income $ 408,632 Depreciation and amortization 129,478 Interest expense, net