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Equity Incentive Plans | 12 Months Ended
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Dec. 31, 2019
Share-based Payment Arrangement [Abstract] |
Equity Incentive Plans | Stock-Based Compensation In order to attract and retain employees, non-employee directors, consultants, and other persons associated with us, we grant equity-based awards under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). The total number of shares approved by our stockholders for issuance under the Equity Incentive Plan is 70 million shares, subject to antidilution and other adjustment provisions. We have granted restricted stock units ("RSUs"), stock options, and restricted stock under the Equity Incentive Plan. Of the shares approved by our stockholders for issuance under the Equity Incentive Plan, 10 million shares remained available for issuance as of December 31, 2019. We expect to issue new or treasury shares of common stock to cover past and future equity grants. RSUs The RSUs we have issued vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs (other than PSUs, which are described below) contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case both conditions must be met before any RSUs vest. For all of the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant date. Each RSU converts into one share of LKQ common stock on the applicable vesting date. The grant date fair value of RSUs is based on the market price of LKQ stock on the grant date. Starting with our 2019 grants, participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards following retirement; if retirement occurs during the first year of the vesting period (for RSUs subject to a time-based vesting condition) or the first year of the performance period (for RSUs with a performance-based vesting condition), the participant vests in a prorated amount of the RSU grant based on the portion of the year employed. For our RSU grants prior to 2019, participants forfeit their unvested shares upon retirement. The Compensation Committee of our Board of Directors (the "Compensation Committee") approved the grant of 270,388; 189,204; and 235,537 RSUs to our executive officers that included both a performance-based vesting condition and a time-based vesting condition in 2019, 2018, and 2017, respectively. The performance-based vesting conditions for the 2019, 2018, and 2017 grants to our executive officers have been satisfied. The fair value of RSUs that vested during the years ended December 31, 2019, 2018, and 2017 was $22 million, $27 million, and $28 million, respectively; the fair value of RSUs vested is based on the market price of LKQ stock on the date vested. The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the year ended December 31, 2019:
| Number Outstanding |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands) (1)
Unvested as of January 1, 2019 | 1,475,682 |  |  | $ | 34.94 |  |  |  |  |
Granted (2) | 1,021,535 |  |  | $ | 27.82 |  |  |  |  |
Vested | (796,936 | ) |  | $ | 32.50 |  |  |  |  |
Forfeited / Canceled | (88,255 | ) |  | $ | 33.38 |  |  |  |  |
Unvested as of December 31, 2019 | 1,612,026 |  |  | $ | 31.72 |  |  |  |  |
Expected to vest after December 31, 2019 | 1,458,089 |  |  | $ | 31.75 |  |  | 2.5 |  | $ | 52,054 |
(1) The aggregate intrinsic value of expected to vest RSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units) that would have been received by the holders had all RSUs vested. This amount changes based on the market price of the Company’s common stock.
(2) | The weighted average grant date fair value of RSUs granted during the years ended December 31, 2018 and 2017 was $42.58 and $32.15, respectively.
In 2019, we granted performance-based three-year RSUs ("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan. As these awards are performance-based, the exact number of shares to be paid out may be up to twice the grant amount, depending on the Company's performance and the achievement of certain performance metrics (adjusted earnings per share, average organic parts and services revenue growth, and average return on invested capital) over the three year period ending December 31, 2021. In 2019, we also granted an immaterial amount of performance-based RSUs to employees that have different performance metrics than those described above. The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the year ended December 31, 2019:
| Number Outstanding |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands) (1)
Unvested as of January 1, 2019 | — |  |  | $ | — |  |  |  |  |
Granted (2) | 136,170 |  |  | $ | 27.69 |  |  |  |  |
Unvested as of December 31, 2019 | 136,170 |  |  | $ | 27.69 |  |  |  |  |
Expected to vest after December 31, 2019 | 136,170 |  |  | $ | 27.69 |  |  | 2.3 |  | $ | 4,861 |
(1) | The aggregate intrinsic value of expected to vest PSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units at target) that would have been received by the holders had all PSUs vested. This amount changes based on the market price of the Company’s common stock and the achievement of the performance metrics relative to the established targets.
(2) | Represents the number of PSUs at target payout.
Stock Options Stock options vest over periods of up to five years, subject to a continued service condition. Stock options expire either six years or ten years from the date they are granted. No options were granted during 2019 and 2018. No options vested during the year ended December 31, 2019; all of our outstanding options are fully vested. The following table summarizes activity related to our stock options under the Equity Incentive Plan for the year ended December 31, 2019:
| Number Outstanding |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands) (1)
Balance as of January 1, 2019 | 1,051,494 |  |  | $ | 10.15 |  |  |  |  |
Exercised | (926,809 | ) |  | $ | 9.77 |  |  |  |  | $ | 19,725 |
Canceled | (10,091 | ) |  | $ | 21.25 |  |  |  |  |
Balance as of December 31, 2019 | 114,594 |  |  | $ | 12.26 |  |  | 0.1 |  | $ | 2,686 |
Exercisable as of December 31, 2019 | 114,594 |  |  | $ | 12.26 |  |  | 0.1 |  | $ | 2,686 |
(1) The aggregate intrinsic value of outstanding and exercisable options represents the total pretax intrinsic value (the difference between the fair value of the Company's stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of the last day of the period indicated. This amount changes based on the market price of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was $18 million and $21 million, respectively. Stock-Based Compensation Expense For the RSUs that contain both a performance-based vesting condition and a time-based vesting condition, we recognize compensation expense under the accelerated attribution method, pursuant to which expense is recognized over the requisite service period for each separate vesting tranche of the award. During the years ended December 31, 2019, 2018, and 2017, we recognized $11 million, $8 million, and $7 million, respectively, of stock based compensation expense related to the RSUs containing a performance-based vesting condition. For all other awards, which are subject to only a time-based vesting condition, we recognize compensation expense on a straight-line basis over the requisite service period of the entire award. Forfeitures are recorded as they occur. The components of pre-tax stock-based compensation expense for our continuing operations are as follows (in thousands):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
RSUs | $ | 27,695 |  |  | $ | 22,760 |  |  | $ | 22,826 |
Stock options and other | — |  |  | — |  |  | 6 |
Total stock-based compensation expense | $ | 27,695 |  |  | $ | 22,760 |  |  | $ | 22,832 |
The following table sets forth the classification of total stock-based compensation expense included in our Consolidated Statements of Income for our continuing operations (in thousands):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Cost of goods sold | $ | 477 |  |  | $ | 469 |  |  | $ | 434 |
Selling, general and administrative expenses | 27,218 |  |  | 22,291 |  |  | 22,398 |
Total stock-based compensation expense | 27,695 |  |  | 22,760 |  |  | 22,832 |
Income tax benefit | (6,227 | ) |  | (5,220 | ) |  | (5,459 | )
Total stock-based compensation expense, net of tax | $ | 21,468 |  |  | $ | 17,540 |  |  | $ | 17,373 |
We have not capitalized any stock-based compensation costs during the years ended December 31, 2019, 2018, and 2017. As of December 31, 2019, unrecognized compensation expense related to unvested RSUs and PSUs is expected to be recognized as follows (in thousands):
2020 | $ | 16,776 |
2021 | 10,863 |
2022 | 6,054 |
2023 | 2,641 |
2024 | 182 |
Total unrecognized compensation expense | $ | 36,516 |
Stock-based compensation expense related to these awards will be different to the extent that forfeitures are realized and performance under the PSUs differs from target.

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