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Business Combinations | 12 Months Ended
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Dec. 31, 2015
Business Combinations [Abstract] |
Business Combinations | Business Combinations During the year ended December 31, 2015, we completed 18 acquisitions, including 4 wholesale businesses in North America, 12 wholesale businesses in Europe, a self service retail operation, and a specialty vehicle aftermarket business. Our wholesale business acquisitions in North America included Parts Channel, an aftermarket collision parts distributor. We also acquired Coast, a specialty aftermarket business that distributes replacement parts, supplies and accessories in North America for the RV and outdoor recreation markets. Our European acquisitions included 11 aftermarket parts distribution businesses in the Netherlands, 9 of which were former customers of and distributors for our Netherlands subsidiary, Sator, and were acquired with the objective of expanding our distribution network in the Netherlands. Our other acquisitions completed during the year ended December 31, 2015 enabled us to expand our geographic presence. Total acquisition date fair value of the consideration for these acquisitions was $187.9 million, composed of $161.3 million of cash (net of cash acquired), $4.3 million of notes payable, $21.2 million of other purchase price obligations, and $1.1 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the year ended December 31, 2015, we recorded $92.2 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2014 acquisitions. We expect $69.9 million of the $92.2 million of goodwill recorded to be deductible for income tax purposes. In the period between the acquisition dates and December 31, 2015, these acquisitions generated revenue of $159.6 million and net income of $4.5 million. On December 22, 2015, LKQ and its wholly-owned subsidiary LKQ Italia S.r.l. entered into an agreement to acquire Rhiag, a distributor of aftermarket spare parts for passenger cars and commercial vehicles in Italy, Czech Republic, Switzerland, Hungary, Romania, Ukraine, Bulgaria, Slovakia, Poland and Spain. The transaction is expected to be completed in the first half of 2016 and is subject to customary closing conditions and necessary regulatory approvals. This acquisition will expand LKQ's geographic presence in continental Europe. In addition, we believe the acquisition will create potential purchasing synergies. On January 3, 2014, we completed our acquisition of Keystone Specialty, which is a leading distributor and marketer of specialty vehicle aftermarket equipment and accessories in North America. This acquisition enabled us to expand into new product lines and enter new markets. Total acquisition date fair value of the consideration for our Keystone Specialty acquisition was $471.9 million, composed of $427.1 million of cash (net of cash acquired), $31.5 million of notes payable and $13.4 million of other purchase price obligations (non-interest bearing). We recorded $237.7 million of goodwill related to our acquisition of Keystone Specialty, which we do not expect to be deductible for income tax purposes. In addition to our acquisition of Keystone Specialty, we made 22 acquisitions during 2014, including 9 wholesale businesses in North America, 9 wholesale businesses in Europe, 2 self service retail operations, and 2 specialty vehicle aftermarket businesses. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were customers of and distributors for our Netherlands subsidiary, Sator. Our European acquisitions were completed with the objective of aligning our Netherlands and U.K. distribution models; our other acquisitions completed during the year ended December 31, 2014 enabled us to expand in existing markets, introduce new product lines, and enter new markets. Total acquisition date fair value of the consideration for these additional acquisitions was $359.1 million, composed of $334.3 million of cash (net of cash acquired), $13.5 million of notes payable, $0.3 million of other purchase price obligations (non-interest bearing), $5.9 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $8.3 million), and $5.1 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the year ended December 31, 2014, we recorded $178.0 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2013 acquisitions. We expect $44.2 million of the $178.0 million of goodwill recorded to be deductible for income tax purposes. On May 1, 2013, we acquired the shares of Sator, a vehicle mechanical aftermarket parts distribution company based in the Netherlands, with operations in the Netherlands, Belgium and Northern France. With the acquisition of Sator, we expanded our geographic presence in the European vehicle mechanical aftermarket products market into continental Europe to complement our existing U.K. operations. Total acquisition date fair value of the consideration for the acquisition of Sator was €209.8 million ($272.8 million) of cash, net of cash acquired. We recorded $142.7 million of goodwill related to our acquisition of Sator, which we do not expect will be deductible for income tax purposes. In addition to our acquisition of Sator, we made 19 acquisitions during 2013, including 10 wholesale businesses in North America, 7 wholesale businesses in Europe and 2 self service retail operations. Our European acquisitions included five automotive paint distribution businesses in the U.K., which enabled us to expand our collision product offerings. Our other acquisitions completed during 2013 enabled us to expand into new product lines and enter new markets. Total acquisition date fair value of the consideration for these additional 2013 acquisitions was $146.1 million, composed of $134.6 million of cash (net of cash acquired), $7.5 million of notes payable, $0.2 million of other purchase price obligations (non-interest bearing) and $3.9 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $5.0 million). During the year ended December 31, 2013 we recorded $92.7 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2012 acquisitions. We expect $18.3 million of the $92.7 million of goodwill recorded to be deductible for income tax purposes. Our acquisitions are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair market values at the dates of acquisition. In connection with the 2015 acquisitions, certain of the purchase price allocations are preliminary as we are in the process of determining the following: 1) valuation amounts for certain receivables, inventories and fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the acquisition date fair value of certain liabilities assumed; and 4) the final estimation of the tax basis of the entities acquired. We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations. The purchase price allocations for the acquisitions completed during 2015 and 2014 are as follows (in thousands):
| Year Ended |  | Year Ended
| December 31, 2015 |  | December 31, 2014
| All Acquisitions |  | Keystone Specialty |  | Other Acquisitions |  | Total
Receivables | $ | 29,628 |  |  | $ | 48,473 |  |  | $ | 75,330 |  |  | $ | 123,803 |
Receivable reserves | (3,926 | ) |  | (7,748 | ) |  | (7,383 | ) |  | (15,131 | )
Inventory | 79,646 |  |  | 150,696 |  |  | 123,815 |  |  | 274,511 |
Income taxes receivable | — |  |  | 14,096 |  |  | — |  |  | 14,096 |
Prepaid expenses and other current assets | 3,337 |  |  | 8,085 |  |  | 4,050 |  |  | 12,135 |
Property and equipment | 11,989 |  |  | 38,080 |  |  | 27,026 |  |  | 65,106 |
Goodwill | 92,175 |  |  | 237,729 |  |  | 177,974 |  |  | 415,703 |
Other intangibles | 9,926 |  |  | 78,110 |  |  | 51,135 |  |  | 129,245 |
Other assets | 5,166 |  |  | 6,159 |  |  | 2,793 |  |  | 8,952 |
Deferred income taxes | 4,102 |  |  | (26,591 | ) |  | 313 |  |  | (26,278 | )
Current liabilities assumed | (39,191 | ) |  | (63,513 | ) |  | (52,961 | ) |  | (116,474 | )
Debt assumed | (2,365 | ) |  | — |  |  | (32,441 | ) |  | (32,441 | )
Other noncurrent liabilities assumed | (2,651 | ) |  | (11,675 | ) |  | (10,573 | ) |  | (22,248 | )
Contingent consideration liabilities | — |  |  | — |  |  | (5,854 | ) |  | (5,854 | )
Other purchase price obligations | (21,199 | ) |  | (13,351 | ) |  | (333 | ) |  | (13,684 | )
Notes issued | (4,296 | ) |  | (31,500 | ) |  | (13,535 | ) |  | (45,035 | )
Settlement of pre-existing balances | (1,073 | ) |  | — |  |  | (5,052 | ) |  | (5,052 | )
Cash used in acquisitions, net of cash acquired | $ | 161,268 |  |  | $ | 427,050 |  |  | $ | 334,304 |  |  | $ | 761,354 |
We pursue acquisitions to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and expanding into other product lines and businesses that may benefit from our operating strengths. Our acquisitions in the last three years reflect this strategy through (i) broadening our product offering, (ii) entering new geographic markets and (iii) strengthening our position in our existing markets through tuck-in acquisitions. Our 2014 acquisition of Keystone Specialty allows us to enter into new product lines and increase the size of our addressable market. In addition, we believe that the acquisition creates logistics and administrative cost synergies as well as cross-selling opportunities, which contributed to the goodwill recorded on the Keystone Specialty acquisition. Additionally, our 2013 acquisitions of five automotive paint distribution businesses in the U.K. expanded our product offering beyond the core mechanical parts sold by ECP. Our 2013 acquisition of Sator enabled us to expand our market presence to continental Europe. We believe that our Sator acquisition will allow for synergies within our European operations, most notably in procurement, warehousing and product management. These projected synergies contributed to the goodwill recorded on the Sator acquisition. The majority of our other acquisitions completed during the last three years were completed to strengthen our position in existing markets by achieving greater geographic coverage, adding capacity in key locations and improving customer service. These tuck-in acquisitions tend to have high synergies as we are able to leverage our existing infrastructure to eliminate redundant warehouse, distribution and administrative costs. When we identify potential acquisitions, we attempt to target companies with a leading market share, an experienced management team and workforce that provide a fit with our existing operations, and strong cash flows. As described above, for certain of our acquisitions, we have identified cost savings and synergies as a result of integrating the company with our existing business that provide additional value to the combined entity. In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill. The following pro forma summary presents the effect of the businesses acquired during the year ended December 31, 2015 as though the businesses had been acquired as of January 1, 2014, the businesses acquired during the year ended December 31, 2014 as though they had been acquired as of January 1, 2013 and the businesses acquired during the year ended December 31, 2013 as though they had been acquired as of January 1, 2012. The pro forma adjustments are based upon unaudited financial information of the acquired entities (in thousands, except per share data):
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
Revenue, as reported | $ | 7,192,633 |  |  | $ | 6,740,064 |  |  | $ | 5,062,528 |
Revenue of purchased businesses for the period prior to acquisition: |  |  |  |  |
Keystone Specialty | — |  |  | 3,443 |  |  | 696,960 |
Sator | — |  |  | — |  |  | 126,309 |
Other acquisitions | 213,630 |  |  | 676,965 |  |  | 695,596 |
Pro forma revenue | $ | 7,406,263 |  |  | $ | 7,420,472 |  |  | $ | 6,581,393 |
Net income, as reported | $ | 423,223 |  |  | $ | 381,519 |  |  | $ | 311,623 |
Net income of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments: |  |  |  |  |
Keystone Specialty | — |  |  | 637 |  |  | 40,460 |
Sator | — |  |  | — |  |  | 5,712 |
Other acquisitions | 6,005 |  |  | 20,550 |  |  | 19,367 |
Pro forma net income | $ | 429,228 |  |  | $ | 402,706 |  |  | $ | 377,162 |
Earnings per share-basic, as reported | $ | 1.39 |  |  | $ | 1.26 |  |  | $ | 1.04 |
Effect of purchased businesses for the period prior to acquisition: |  |  |  |  |
Keystone Specialty | — |  |  | 0.00 |  |  | 0.14 |
Sator | — |  |  | — |  |  | 0.02 |
Other acquisitions | 0.02 |  |  | 0.07 |  |  | 0.06 |
Pro forma earnings per share-basic (1) | $ | 1.41 |  |  | $ | 1.33 |  |  | $ | 1.26 |
Earnings per share-diluted, as reported | $ | 1.38 |  |  | $ | 1.25 |  |  | $ | 1.02 |
Effect of purchased businesses for the period prior to acquisition: |  |  |  |  |
Keystone Specialty | — |  |  | 0.00 |  |  | 0.13 |
Sator | — |  |  | — |  |  | 0.02 |
Other acquisitions | 0.02 |  |  | 0.07 |  |  | 0.06 |
Pro forma earnings per share-diluted (1) | $ | 1.40 |  |  | $ | 1.31 |  |  | $ | 1.24 |
(1) The sum of the individual earnings per share amounts may not equal the total due to rounding. Unaudited pro forma supplemental information is based upon accounting estimates and judgments that we believe are reasonable. The unaudited pro forma supplemental information includes the effect of purchase accounting adjustments, such as the adjustment of inventory acquired to net realizable value, adjustments to depreciation on acquired property and equipment, adjustments to rent expense for above or below market leases, adjustments to amortization on acquired intangible assets, adjustments to interest expense, and the related tax effects. The 2014 pro forma impact of our other acquisitions includes an adjustment for intercompany sales between Sator and the five Netherlands distributors that would have been reflected as intercompany transactions if the acquisitions had occurred on January 1, 2013. Our cost of sales in the initial months after the acquisitions reflects the increased valuation of acquired inventory, which has the impact of temporarily reducing our gross margin. Moving this negative gross margin impact to the year ended December 31, 2013 for our pro forma disclosure has the effect of increasing our pro forma net income during the year ended December 31, 2014. The pro forma impact of our acquisitions reflects the elimination of acquisition related expenses totaling $2.6 million for the year ended December 31, 2015, primarily related to acquisitions of Parts Channel, Coast, and our acquisition of the aftermarket parts distribution businesses in the Netherlands. Additionally, the pro forma impact of our acquisitions reflects the elimination of acquisition related expenses totaling $3.2 million for the year ended December 31, 2014, primarily related to our May 2014 acquisitions of five aftermarket parts distribution businesses in the Netherlands. The pro forma impact of our Sator acquisition reflects the elimination of acquisition related expenses totaling $3.6 million for the year ended December 31, 2013. Additionally, the pro-forma impact of our other acquisitions reflects the elimination of acquisition related expenses totaling $2.2 million for the year ended December 31, 2013. Refer to Note 9, "Restructuring and Acquisition Related Expenses," for further information regarding our acquisition related expenses. These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the periods presented or of future results.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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