Joseph M. Holsten.Holsten
Key Skillset: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Holsten should serve as a director of LKQ include primarily his unparalleled knowledge of our business and our industry. Mr. Holsten has been with us almost since our inception and from that time has become intimately familiar with all aspects of our business, including in particular operational and financial matters as well as mergers and acquisitions in domestic and international markets. His knowledge and experience provide a critical component for the proper functioning of our Board. Mr. Holsten also brings to our Board his significant operational experience from his key positions at Waste Management. He also contributes financial accounting skills to our Board through his qualification as a Certified Public Accountant, his attainment of an MBA in finance and accounting, and his prior work at a public accounting firm.
Blythe J. McGarvie.McGarvie
Key Skillset: The specific experience, qualifications, attributes or skills that led to the conclusion that Ms. McGarvie should serve as a director of LKQ include her significant experience in the fields of finance and accounting and her international experience. In addition, she has served on publicly-traded companies as a board member since 2001 and has considerable experience with corporate governance matters. Ms. McGarvie’s MBA with a concentration in accounting and marketing, her status as a Certified Public Accountant and her business experience as a Chief Financial Officer qualify her as an audit committee financial expert. Ms. McGarvie also has technology experience through her participation in Accenture’s recent digital technology transformation and her development of the global technology strategy for BIC Group while serving as its Chief Financial Officer.
John W. Mendel.Mendel
Background and Prior Experience: Mr. Mendel was the Executive Vice President, Automotive Division, of American Honda Motor Company from November 2004 until his retirement in April 2017, where he was responsible for Automotive business sales, marketing, product development, public relations, vehicle planning, logistics and distribution. Prior to Honda, he worked for Ford Motor Company from July 1976 to November 2004, including in a variety of roles related to field operations and commercial marketing across the Ford, Lincoln and Mercury brands, before serving as Chief Operating Officer
of Mazda America from 2001 to 2004. Mr. Mendel is a member of the board of directors of TrueCar, Inc., an operator of a digital automotive marketplace. He received a B.A. in business and economics from Austin College and an M.B.A. from Duke University.
Key Skillset: The specific experience, qualifications, attributes, and skills that led to the conclusion that Mr. Mendel should serve as a director of LKQ include his career in the automotive industry with significant experience in areas directly relevant to LKQ, including operations, sales, marketing, service, product planning and distribution. His relevant experience also includes strategy work relating to automotive technology, government relations, and executive compensation and planning. Mr. Mendel had significant exposure to the international markets, which provides insights that should be helpful for LKQ’s foreign operations. He also has previous and current public company board experience.
Jody G. Miller.Miller
Key Skillset: The specific experience, qualifications, attributes, and skills that led to the conclusion that Ms. Miller should serve as a director of LKQ include her executive officer positions and her service on the board of ana company with significant interests in the automotive company.space. Her executive experience brings insights to LKQ regarding operations, digital technology, corporate development, capital allocation and human resource management. Ms. Miller also can provide guidance regarding LKQ’s government affairs matters as a result of her public sector experience in the White House, the Department of the Treasury and as chief legal advisor to the Governor of South Carolina. In addition, she brings corporate governance insights with her service on public company governance committees.
Background and Prior Experience: Mr. O’Brien retired in 2002Subramanian has served as the Chief Executive OfficerChairman of Allmerica Financial Corporation, a public insurance company. In addition to serving on ourthe Board of Directors he is a director of Cabot Corporation, a global specialty chemicals corporation, and a director of The TJX Companies, Inc., an off-price retailer of apparel and home fashions. Mr. O'Brien was a director of a family of registered investment companies managed by BlackRock, an investment management advisory firm, until December 2018. From August 1989 to November 2002, Mr. O’Brien was President and Chief Executive Officer of Allmerica Financial Corporation. From 1968 to 1989, Mr. O’Brien held several positions at Fidelity Investments, including Group Managing Director of FMR Corporation (from 1986 to 1989), Chairman of Institutional Services Company (from 1986 to 1989) and Chairman of Brokerage Services, Inc. (from 1984 to 1989).
Harvard faculty in September 1999, Mr. Subramanian spent three years at McKinsey & Company as a consultant in their New York, Boston, and Washington, D.C. offices.
Key Skillset: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Subramanian should serve as a director of LKQ include his extensive knowledge of corporate law, corporate governance and business negotiations. His positions at Harvard Law School and Harvard Business School provide Mr. Subramanian with continuous exposure and insight into the key issues and developments affecting boards of directors and the businesses they oversee. In addition, his role as an instructor in executive education programs allows Mr. Subramanian to exchange ideas and gain knowledge from numerous prominent business leaders.
Background and Prior Experience: Mr. Urbain was the Group Chief Executive Officer from January 2014 to May 2019 of Switzerland-based CEVA Logistics, a leading supply chain company that provides end-to-end design, implementation and operational solutions in freight and transportation management, contract logistics and distribution. Prior to CEVA Logistics, Mr. Urbain held leadership positions in the global third party logistics industry, as a member of the Executive Board of Switzerland based Kuehne & Nagel, as a member of the Executive Board and the Board of Directors of UK-based Hays PLC and as CEO of Hays Logistics, and as Chief Executive Officer of ACR. He has also served as Chairman of the Board of Socotec and is the current Chairman of the Board of Netherlands-based Caldic B.V.
Key Skillset: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Urbain should serve as a director of LKQ include his extensive experience in supply chain management and logistics, including in the automotive industry, during his tenure at CEVA Logistics. Mr. Urbain has worked for international companies and his career has been based in Europe, which we expectbelieve has provided and will continue to provide valuable insights in connection with LKQ’s European and other non-U.S. businesses. He also brings to LKQ executive leadership skills including operations, investor relations, human resources and corporate governance.
Background and Prior Experience: Mr. Zarcone became our President and Chief Executive Officer in May 2017. He was our Executive Vice President and Chief Financial Officer from March 2015 to May 2017. Prior to joining our Company, he was the Managing Director and the Chief Financial Officer of Baird Financial Group, a capital markets and wealth management company, and certain of its affiliates from April 2011 to March 2015. He also served from April 2011 to March 2015 as Treasurer of Baird Funds, Inc., a family of fixed income and equity mutual funds managed by Robert W. Baird & Co. Incorporated, a registered broker/dealer. From February 1995 to April 2011, Mr. Zarcone was a Managing Director and Chief Operating Officer of the Investment Banking department of Robert W. Baird & Co. Incorporated. From February 1986 to February 1995, he was with the investment banking company Kidder, Peabody & Co., Incorporated, most recently as Senior Vice President of Investment Banking. Mr. Zarcone is a member of the Board of Directors of Generac Power Systems, Inc., a designer and manufacturer of power generation equipment and engine-powered products.
Key Skillset: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Zarcone should serve as a director of LKQ include the experience Mr. Zarcone gained serving as our President and Chief Executive Officer since June 2017 and our Chief Financial Officer from March 2015 through May 2017, the financial and operating experience he acquired at Robert W. Baird, including as a Chief Financial Officer and Chief Operating Officer -- Investment Banking, and his extensive involvement in various financing and acquisition transactions by LKQ during his tenure at Baird.
of each of the nominees for director.
In the broader context of the needs of the Board and how our Company, industry and business strategies evolve over time, some of the competencies and personal attributes that the Governance/Nominating Committee considers include a nominee’s experience, general judgment and knowledge, grasp of the Company’s business, understanding of the function of the Board to represent stockholders’ interests, willingness to devote adequate time to board duties, ability to effectively communicate, and demonstration of vision and leadership. The Governance/Nominating Committee charter also includes contributing to the diversity of the Board and ability to enhance the Board as a whole on the list of competencies and personal attributes that are considered when evaluating a board candidate. In conducting this assessment, the Governance/Nominating Committee typically considers diversity, including gender, racial and ethnic diversity, age, skills, experience, including scientific, business, financial and academic backgrounds, and such other factors as it deems appropriate. In identifying nominees for director, the Governance/Nominating Committee seeks persons with diverse and complementary (as opposed to overlapping) competencies and attributes.
Stockholders who wish the Governance/Nominating Committee to consider their recommendations for nominees for the position of director should submit their recommendations in writing to the Governance/Nominating Committee in care of the Corporate Secretary of the Company at the Company’s principal executive offices, as described in the section below entitled “Other Information -- Submitting Your Proposals for the 20212024 Annual Meeting.”
LKQ is committed to high standards of corporate governance and business practices. We seek to be transparent with our stockholders regarding these matters and publicly share the guidelines and charters that govern our Board and our Board committees, which help ensure LKQ is responsible and accountable.
Our Corporate Governance Guidelines establish our corporate governance principles and practices on a variety of topics, including:
We have different persons in the roles of Chairman of the Board and Chief Executive Officer and also have a Lead Independent Director.Officer. Mr. HolstenSubramanian has been our Chairman of the Board since November 2011 and was appointed our Executive Chairman in March 2017.May 2022. Mr. Zarcone has been our Chief Executive Officer since May 2017. We believe that this leadership structure is appropriate for our Company because our Executive Chairman of the Board and our Chief Executive Officer complement each other in their common objective of promoting the best interests of our stockholders. Mr. Holsten led our Company as its top executive from November 1998 through December 2011 (as the Co-Chief Executive Officer during the 2011 calendar year), after which he retired from his officer position. He had assumedSubramanian brings to the Chairman of the Board position shortly afterextensive knowledge of corporate law, corporate governance and business negotiations. His positions at Harvard Law School and Harvard Business School provide Mr. Subramanian with continuous exposure and insight into the deathkey issues and developments affecting boards of Donald Flynn,directors and the former Chairman. Mr. Holsten brings to the Executive Chairman of the Board position a great deal of experience operating companies and also has a strong financial accounting background.businesses they oversee. Mr. Zarcone's areas of expertise include finance, capital-raising, acquisitions and operations -- areas that overlap and supplement Mr. Holsten'sSubramanian's specialties.
identify and prioritize enterprise-wide strategic risks, assign owners to such risks, and track remediation efforts. The RMC will periodically reportreports its findings to the Board of Directors.
The Board, following consideration of all relevant facts and circumstances and upon recommendation of the Governance/Nominating Committee, has affirmatively determined that each nominee for election as a director (except Messrs. Holsten and Zarcone) is independent in that each such person has no material relationship with the Company, our management or our independent registered public accounting firm, and otherwise meets the independence and other requirements of the listing standards of Nasdaq, the rules and regulations of the SEC and applicable law. The Board determined that Mr. Holsten is not independent due to his statusservice as Executive Chairman until May 2022 and that Mr. Zarcone is not independent due to his status as a current executive officer of the Company.
We encourage all of our directors to attend our annual meeting of stockholders, and we customarily schedule a regular Board meeting on the same day as our annual meeting. All persons who were directors at the time attended our annual meeting of stockholders in 2019 except Mr. Webster.2022.
Our Board of Directors is committed to effective board succession planning and refreshment, using processes such as board self-evaluations, board refreshment discussions, and consideration of the annual slate of board nominees by our Governance/Nominating Committee and by our Board of Directors. As a result of these different processes, directors have decided (for personal or professional reasons) or have been asked (for reasons related to their ongoing contributions to the Board and the Company) not to stand for re-election at the next annual meeting of stockholders.
Our Board has four standing committees. They are the Audit Committee, the Compensation and Human Capital Committee, the Governance/Nominating Committee and the Industry, Regulatory and Consumer Awareness (IRCA)(“IRCA”) Committee. The Board reviews and determines the membership of the committees at least annually, with input from the Governance/Nominating Committee. The following table sets forth the current membership of the committees:committees is set forth in the table below.
The functions of each committee are described below.
The Audit Committee’s functions include selecting, appointing and evaluating our independent registered public accounting firm and recommending that firm for ratification by stockholders; reviewing the arrangements for, and scope of, the independent registered public accounting firm’s examination of our financial statements; overseeing the activities of our internal auditCorporate Audit department; meeting with the independent registered public accounting firm and certain of our officers to review the adequacy and appropriateness of our system of internal control and reporting, our critical accounting policies, and our public financial disclosures; reviewing compliance with our code of ethics; and performing any other duties or functions deemed appropriate by the Board of Directors. The Audit Committee meets quarterly with management and our independent registered public accounting firm to review our annual and quarterly reports and earnings releases prior to their issuance.
The compensation of our executive officers is determined through a process involving our Executive Chairman of the Board, our Chief Executive Officer and our Compensation and Human Capital Committee. Our Executive Chairman of the Board typically proposesCompensation and Human Capital Committee determines the compensation of our Chief Executive Officer.Officer after considering recommendations from our outside compensation consultant (F.W. Cook). Our Chief Executive Officer typically proposes the compensation of the remaining executive officers. The Compensation and Human Capital Committee holds a meeting near the beginning of each calendar year to consider the proposed compensation amounts for that year and to make final determinations. The executive officers are not present during the deliberations and final decisions by the Compensation and Human Capital Committee concerning executive compensation.
Stockholders desiring to contact the Board of Directors or any committee of the Board should address the communication to LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, Illinois 60661, Attention: Corporate Secretary, with a request to forward the communication to the intended recipient. All such communications will be forwarded unopened.
DIRECTOR COMPENSATION
Director Fees
The Board intends to set director compensation levels near the market median relative to director compensation at companies of comparable size, industry, and scope of operations in order to ensure directors are paid competitively and fairly for their time commitment and responsibilities. The Board periodically reviews the components and amounts of director compensation to determine if any adjustments are appropriate and as part of such review, regularly engages an outside consultantF.W. Cook to provide information and advice on such matters. The lastBoard conducted such a review was conducted in May 20182022 and benchmarked our director compensation practices against the same peer group of companies used in executive compensation comparisons (see(see page 25)31). Findings from the review as provided from F.W. Cook indicated that our director compensation levels approximatedwas below the peer group median, and the structure of our program was consistenttherefore updated in 2022 to more closely align our director compensation with current best practices, except that our outside consultant recommended that the fees for serving as the chair of the committees should be increased. Thus, in May 2018, the Board of Directors increased the annual cash paymentspeer group practices. The changes to the chairs from $25,000 to $35,000 forprogram went into effect following the Audit Committee, from $15,000 to $25,000 for the Compensation Committee, from $15,000 to $20,000 for the Governance/Nominating Committee, and from $12,000 to $18,000 for the IRCA Committee. Also, the annual cash payment for the other members of the Governance/Nominating Committee was increased from $8,000 to $10,000.2022 Annual Meeting. Following is a summary of the director compensation program as modified:for 2022 and the changes that went into effect following the 2022 Annual Meeting:
•Retainer-only cash compensation with no fees for attending meetings (which is an expected part of board service), with additional retainers for special roles such as Executive Chairman of the Board Lead Independent Director, and committee chairs and members to recognize their incremental time and effort. Cash compensation in 20192022 for our non-employee directors consisted of:of the following (changes that went into effect following the 2022 Annual Meeting are noted):
| |
◦ | annual cash board service retainer of $100,000; |
| |
◦ | annual cash payments for serving on committees of the Board: |
| |
▪ | $35,000 and $15,000 for each of the chairman and the other members of the Audit Committee, respectively; |
| |
▪ | $25,000 and $10,000 for each of the chairman and the other members of the Compensation Committee, respectively; |
| |
▪ | $20,000 and $10,000 for each of the chairman and the other members of the Governance/Nominating Committee, respectively; and |
| |
▪ | $18,000 and $8,000 for each of the chairman and the other members of the IRCA Committee, respectively. |
◦annual cash board service retainer of $100,000;
◦additional annual cash or equity board service retainer of $170,000 for the Chairman of the Board in lieu of member or chair retainers for committees on which the Chairman of the Board serves (implemented following the 2022 Annual Meeting);
◦annual cash payments for serving on committees of the Board:
▪increased from $35,000 to $40,000 for the chair and $15,000 for each of the other members of the Audit Committee;
▪increased from $25,000 to $30,000 for the chair and $10,000 for each of the other members of the Compensation and Human Capital Committee;
▪$20,000 for the chair and $10,000 for each of the other members of the Governance/Nominating Committee; and
▪increased from $18,000 to $20,000 for the chair and increased from $8,000 to $10,000 for each of the other members of the IRCA Committee.
•Significant portion of total compensation in the form of full-value equity awards, for alignment with stockholders, where annual grants are based on a fixed dollar amount and the vesting period is short vesting to avoid entrenchment. In 2019,2022, equity compensation for non-employee directors consisted of an annual grant of restricted stock units ("RSUs"(“RSUs”) covering a number of shares valued on the grant date at approximately $115,000.$160,000 (which was increased from $115,000). The 20192022 equity grant will vest in May 2020,on the earlier of one year after the date of grant or the date of the next Annual Meeting, subject to continued service through the vesting date.
•Meaningful stock ownership requirements equal in value to five times the annual cash board service retainer.
•No benefits or perquisites.
Certain director positions received additional payments. Mr. Holsten, our Executive Chairman of the Board until May 2022, was paid in 20192022 an additional annual amount of $700,000 and was also eligible for a bonus of up to $750,000, in both cases$252,151 for his oversight and mentoring of our Chief Executive Officer and other duties performed on behalf of LKQ. In May 2019, the Board of Directors approved the payment to2022, Mr. Holsten of a bonus of $468,750 (of the possible $750,000), based on an evaluation of the Company's overall performance. In 2019, Mr. Holsten alsoSubramanian received an annual grant of RSUs covering a number of shares valued on the grant date at approximately $50,000 more than the value of the annual grant received by other non-employee directors in 2019. Mr. Allen received in 2019 an annualadditional amount of $25,000$8,333 for his role as Lead Independent Director. Mr. Hanser receivedDirector until May 2022 and approximately $170,000 in 2019 an annual amount of $15,000restricted stock units, which vest quarterly over a one-year period from the grant date, for his advice and contributions torole as Chairman of the Board relating to Europe matters.Board. Mr. Zarcone does not receive compensation for serving as a member of the Board or any of its committees since he is an employee director.
See the "Director Compensation Table" below for more details regarding compensation received by each of our directors in 2019.
Each director has the option, by making an election by December 31 of each year, to receive the cash portion of director compensation for the following calendar year in shares of our common stock instead of cash. None of our directors elected to receive his or her cash compensation for 20192022 in shares of our common stock.stock except Mr. Subramanian who elected to receive his fees for serving as Chairman of the Board in RSUs instead of cash. Directors are also reimbursed for their reasonable out-of-pocket expenses incurred in connection with serving on our Board.
Indemnification
Each member of our Board of Directors is a party to an indemnification agreement with us that assures the director of indemnification and advancement of expenses to the fullest extent permitted by Delaware law and our Certificate of Incorporation.
Director Compensation Table
The following table provides compensation information for the one yearone-year period ended December 31, 20192022 for each of our directors that served during 20192022 (other than Mr. Zarcone).
| | | Name | | Fees Earned or Paid in Cash | | Stock Awards (1),(2) | | All Other Compensation (3) | | Total | Name | | Fees Earned or Paid in Cash (1) | | Stock Awards (2)(3) | | Total |
| A. Clinton Allen | | $ | 150,000 |
| | $ | 115,024 |
| | $ | — |
| | $ | 265,024 |
| |
Patrick Berard (4) | | 24,731 |
| | 70,286 |
| | — |
| | 95,017 |
| |
| Patrick Berard | | Patrick Berard | | $ | 120,000 | | | $ | 160,041 | | | $ | 280,041 | |
Meg A. Divitto | | 114,667 |
| | 115,024 |
| | — |
| | 229,691 |
| Meg A. Divitto | | $ | 119,333 | | | $ | 160,041 | | | $ | 279,374 | |
| Robert M. Hanser | | 133,000 |
| | 115,024 |
| | — |
| | 248,024 |
| Robert M. Hanser | | $ | 129,333 | | | $ | 160,041 | | | $ | 289,374 | |
| Joseph M. Holsten | | 800,000 |
| | 165,016 |
| | 468,750 |
| | 1,433,766 |
| Joseph M. Holsten | | $ | 358,817 | | | $ | 160,041 | | | $ | 518,858 | |
| Blythe J. McGarvie | | 145,000 |
| | 115,024 |
| | — |
| | 260,024 |
| Blythe J. McGarvie | | $ | 148,333 | | | $ | 160,041 | | | $ | 308,374 | |
| John W. Mendel | | 115,333 |
| | 115,024 |
| | — |
| | 230,357 |
| John W. Mendel | | $ | 143,333 | | | $ | 160,041 | | | $ | 303,374 | |
| Jody G. Miller | | 121,667 |
| | 115,024 |
| | — |
| | 236,691 |
| Jody G. Miller | | $ | 126,000 | | | $ | 160,041 | | | $ | 286,041 | |
| John F. O'Brien | | 135,000 |
| | 115,024 |
| | — |
| | 250,024 |
| |
| Guhan Subramanian | | 135,000 |
| | 115,024 |
| | — |
| | 250,024 |
| Guhan Subramanian | | $ | 120,000 | | | $ | 330,059 | | | $ | 450,059 | |
Xavier Urbain (4) | | 6,183 |
| | 48,657 |
| | — |
| | 54,840 |
| |
| William M. Webster, IV | | 128,000 |
| | 115,024 |
| | — |
| | 243,024 |
| |
| Xavier Urbain | | Xavier Urbain | | $ | 124,333 | | | $ | 160,041 | | | $ | 284,374 | |
Jacob Welch (4) | | Jacob Welch (4) | | $ | 125,000 | | | $ | 160,041 | | | $ | 285,041 | |
|
| |
(1) | The amounts represent the aggregate grant date fair value of awards granted in 2019, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, “Compensation-Stock Compensation” (“FASB ASC Topic 718”). See Note 7 of the consolidated financial statements in our 2019 Annual Report regarding assumptions underlying the valuation of equity awards. |
(2) | As of December 31, 2019, the non-employee directors held the following outstanding equity awards: Mr. Allen, 4,038 RSUs; Mr. Berard, 2,327 RSUs; Ms. Divitto, 4,038 RSUs; Mr. Hanser, 4,038 RSUs; Mr. Holsten, 5,793 RSUs; Ms. McGarvie, 4,038 RSUs; Mr. Mendel, 4,038 RSUs; Ms. Miller, 4,038 RSUs; Mr. O’Brien, 4,038 RSUs; Mr. Subramanian, 4,038 RSUs; Mr. Urbain, 1,366 RSUs; and Mr. Webster, 4,038 RSUs. |
(3) | Represents the bonus paid to Mr. Holsten as described above. |
(4) | Mr. Berard joined the Board of Directors as of October 2, 2019, and Mr. Urbain joined the Board of Directors as of December 9, 2019. |
(1) The amounts represent cash compensation, which is blended based on the director compensation program in effect prior to the 2022 Annual Meeting and the director compensation program in effect following the 2022 Annual Meeting.
(2) The amounts represent the aggregate grant date fair value of awards granted in 2022, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, “Compensation-Stock Compensation” (“FASB ASC Topic 718”). The grant date fair value was calculated by multiplying the volume-weighted average price of underlying shares on the date of grant by the number of awards granted.
(3) As of December 31, 2022, the non-employee directors held the following outstanding equity awards: Mr. Berard, 3,224 RSUs; Ms. Divitto, 3,224 RSUs; Mr. Hanser, 3,224 RSUs; Mr. Holsten, 3,224 RSUs; Ms. McGarvie, 3,224 RSUs; Mr. Mendel, 3,224 RSUs; Ms. Miller, 3,224 RSUs; Mr. Subramanian, 4,937 RSUs; Mr. Urbain, 3,224 RSUs; and Mr. Welch, 3,224 RSUs for the benefit of ValueAct as described in footnote 4.
(4) The Fees Earned or Paid in Cash and Stock Awards set forth above were paid to ValueAct and not Mr. Welch, in accordance with an arrangement between Mr. Welch and ValueAct.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board of Directors is responsible for appointing our independent registered public accounting firm, and for recommending such appointment for stockholder ratification. The Audit Committee has selected the accounting firm of Deloitte & Touche LLP ("Deloitte"(“Deloitte”) to serve as our independent registered public accounting firm for 2020.2023. The primary responsibility of Deloitte is to audit and express an opinion on our financial statements and our internal controlcontrols over financial reporting.
Deloitte has served as our independent registered public accounting firm since 1998 and also has provided non-audit services from time to time. We believe that the long tenure of Deloitte as our auditor is beneficial to our Company because, among other reasons, it enhances the quality of the audit due to the firm’s historical knowledge and thorough understanding of our business, accounting practices and internal controls over financial reporting. At the same time, the Audit Committee is mindful of the risks of Deloitte’s long tenure and carefully monitors Deloitte’s performance, fee structure and any issues bearing on the independence of the firm.
Although ratification is not required by our Bylaws or otherwise, our Board of Directors is submitting the selection of Deloitte to our stockholders for ratification because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate practice. The Audit Committee will consider the outcome of this vote in its decision to appoint an independent registered public accounting firm but is not bound by our stockholders’ vote. Even if the selection of Deloitte is ratified, the Audit Committee may change the appointment at any time during the year if it determines a change would be in the best interests of the Company and our stockholders.
Audit Fees and Non-Audit Fees
The following table summarizes the fees and expenses of Deloitte, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates for audit and other services for the periods indicated.
| | | | | | | | | | | | | | |
| | 2022 | | 2021 |
| Audit Fees | | $ | 6,560,000 | | | $ | 6,271,634 | |
| Audit-Related Fees | | 1,574,240 | | | 555,534 | |
| Tax Fees | | 2,165,000 | | | 2,051,561 | |
| All Other Fees | | — | | | — | |
| Total Audit and Non-Audit Fees | | $ | 10,299,240 | | | $ | 8,878,729 | |
|
| | | | | | | | |
| | | 2019 | | 2018 |
| Audit Fees | | $ | 5,997,048 |
| | $ | 6,419,656 |
|
| Audit-Related Fees | | 363,543 |
| | 371,064 |
|
| Tax Fees | | 2,067,390 |
| | 2,479,814 |
|
| All Other Fees | | — |
| | — |
|
| Total Audit and Non-Audit Fees | | $ | 8,427,981 |
| | $ | 9,270,534 |
|
For 2019,2022 and 2021, audit services consisted of the audit of our annual consolidated financial statements, the review of our quarterly consolidated financial statements, the audit of internal controls over financial reporting as required by the Sarbanes-Oxley Act of 2002, and foreign statutory audits. Audit-related services primarily consisted of special purpose audits and assistance with acquisitionsacquisition due diligence. Tax services included domestic and foreign tax compliance, research and planning. Tax compliance fees totaled $327,542$211,967 and $142,031 in 2019.2022 and 2021, respectively.
For 2018, audit services consisted of the audit of our annual consolidated financial statements, the review of our quarterly consolidated financial statements, the audit of internal controls over financial reporting as required by the Sarbanes-Oxley Act of 2002, and foreign statutory audits. Audit-related services primarily consisted of assistance with acquisitions due diligence. Tax services included domestic and foreign tax compliance, research and planning. Tax compliance fees totaled $320,119 in 2018.
Policy on Audit Committee Approval of Audit and Non-Audit Services
The Audit Committee’s policy is to approve all audit and permissible non-audit services prior to the engagement of our independent registered public accounting firm to provide such services. The Audit Committee approves, at the beginning of each year, pursuant to detailed approval procedures, certain specific categories of permissible non-audit services. Such procedures include the review of (i) a detailed description by our independent registered public accounting firm of the particular services to be provided and the estimated fees for such services and (ii) a report to the committee on a periodic basis regarding the services provided and the fees paid for such services. The Audit Committee must approve on a project-by-project basis any permissible non-audit services that do not fall within a pre-approved category and any fees for pre-approved permissible non-audit services that materially exceed the previously approved amounts. In making the determinations about non-audit services, the Audit Committee considers whether the provision of non-audit services is compatible with maintaining the auditor’s independence.
Representatives of Deloitte will be available at the 20202023 Annual Meeting to respond to your questions. They have advised us that they do not presently intend to make a statement at the 20202023 Annual Meeting, although they will have the opportunity to do so.
We recommend that you vote “FOR” ratification of the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for 2020.2023.
Report of the Audit Committee
The information contained in this report will not be deemed to be “soliciting material,” or to be “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, nor will such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.
The Audit Committee assists the Board of Directors in fulfilling its responsibility to oversee management’s implementation of LKQ’s financial reporting process. In discharging its oversight role, the Audit Committee reviewed and discussed with management and Deloitte & Touche LLP ("Deloitte"(“Deloitte”), our independent registered public accounting firm, our audited financial statements as of and for the year ended December 31, 2019.2022. Management is responsible for those financial statements and the reporting process, including the system of internal control. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America.
The Audit Committee has discussed with Deloitte the matters required to be discussed by PCAOB Auditing Standard No. 1301. The Audit Committee has also received from Deloitte the written disclosures and the letter required by applicable requirements of the PCAOB regarding Deloitte's communications with the Audit Committee concerning independence and has discussed the accounting firm's independence with Deloitte. The Audit Committee also considered whether the provision of non-audit services by Deloitte, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates was compatible with maintaining Deloitte’s independence.
Based upon the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be filed with LKQ's Annual Report on Form 10-K for the year ended December 31, 2019.2022.
In compliance with the Sarbanes-Oxley Act of 2002, the Board of Directors has established procedures for the confidential reporting of employee concerns with regard to accounting controls and auditing matters. All members of the Audit Committee meet the independence standards established by Nasdaq.
Audit Committee (as of March 20, 2023):
Blythe J. McGarvie (Chair)
John W. Mendel
Guhan Subramanian
Xavier Urbain
Jacob Welch
|
| |
Audit Committee (as of March 23, 2020): | |
Blythe J. McGarvie (Chair) | |
A. Clinton Allen | |
Jody G. Miller | |
Guhan Subramanian | |
PROPOSAL NO. 3
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
The guiding principles of our compensation policies and decisions include aligning each executive’s compensation with our business strategy and the interests of our stockholders and providing incentives needed to attract, motivate and retain key executives who are important to our long-term success. Consistent with this philosophy, a significant portion of the total incentive compensation for each of our executives is directly related to our earnings and to other performance factors that measure our progress against the goals of our strategic and operating plans.
Stockholders are urged to read the “Executive Compensation -- Compensation Discussion and Analysis” and “Executive Compensation -- Compensation Tables” sections of this Proxy Statement, which discuss how our compensation design and practices reflect our compensation philosophy. The Compensation and Human Capital Committee and the Board of Directors believe that our compensation design and practices are effective in implementing our guiding principles.
We are required to submit a proposal to stockholders for a (non-binding) advisory vote to approve the compensation of our named executive officers pursuant to Section 14A of the Exchange Act. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the principles, policies and practices described in this Proxy Statement. Accordingly, the following resolution is submitted for stockholder vote at the 20202023 Annual Meeting:
“RESOLVED, that the stockholders of LKQ Corporation approve, on an advisory basis, the compensation of its named executive officers as disclosed in the Proxy Statement for the 20202023 Annual Meeting, including the Summary Compensation Table and the Compensation Discussion and Analysis set forth in such Proxy Statement and other related tables and disclosures.”
As this is an advisory vote, the result will not be binding on us, the Board of Directors or the Compensation and Human Capital Committee, although our Compensation and Human Capital Committee will consider, among other things, the outcome of the vote when evaluating our compensation principles, design and practices. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement.
We recommend that you vote “FOR” the approval, on an advisory basis, of the compensation of our named
executive officers, as disclosed in this Proxy Statement.
PROPOSAL NO. 4
ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, we submitted a proposal to stockholders in May 2017 to vote on whether the stockholder advisory “say-on-pay” vote to approve the compensation of our named executive officers should occur every one, two, or three years. In May 2017, stockholders voted, on a non-binding advisory basis, that the advisory vote on named executive officer compensation should occur every year. We are required to resubmit this question to our stockholders at least every six years, and this Proposal No. 4 is the resubmission of this question to our stockholders. You may cast your vote on this proposal by choosing “Every Year,” “Every Two Years” or “Every Three Years”or you may abstain from voting.
In formulating its recommendation, our Board of Directors considered that an annual (non-binding) advisory vote on named executive officer compensation will allow our stockholders to provide us with direct and timely input on our compensation principles, policies and practices.
Proposal No. 4 will be decided by the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the 2023 Annual Meeting. In the event that none of the three frequency options receives the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the 2023 Annual Meeting, the option of “Every Year,” “Every Two Years” or “Every Three Years” that receives the highest number of affirmative votes cast by stockholders will be the frequency for the advisory vote on named executive officers compensation that we will deem to have been selected by stockholders. However, as this is an advisory vote, the result will not be binding on us or our Board of Directors. Our Compensation and Human Capital Committee will consider the outcome of the vote when determining how often we should submit to stockholders an advisory vote to approve the compensation of our named executive officers included in our Proxy Statement. Proxies submitted without direction pursuant to this solicitation will be voted for the option of “Every Year.”
We recommend that you vote for the option of “Every Year” as the frequency with which stockholders are provided an advisory vote on the compensation of our named executive officers included in this Proxy Statement.
OTHER PROPOSALS
We know of no matters to be brought before the 20202023 Annual Meeting other than those described above. If any other business should properly come before the meeting, we expect that the persons named in the enclosed proxy will vote your shares in accordance with their best judgment on that matter.
EXECUTIVE COMPENSATION—COMPENSATION DISCUSSION AND ANALYSIS
This section describes the Company’s compensation programs for our executive officers named below that were in effect for 20192022 and the decisions made with respect to these programs. Our goal is to explain the details of our executive compensation programs as well as to describe why we believe these programs are appropriate for our Company and our stockholders. This section contains compensation information for our principal executive officer, each of the two executives who served as our principal financial officer during 2022, and our three other most highly compensated executive officers, in each case who were serving as executive officers as of December 31, 2019, as well as2022 and a former executive officer whose compensation is disclosed in accordance with applicable SEC rules (collectively referred tothat would have been one of our three other most highly compensated executive officers but for the fact that he was not serving as our “namedan executive officers”).officer as of December 31, 2022. Our named executive officers for 20192022 were:
•Dominick Zarcone, President and Chief Executive Officer
•Rick Galloway, Senior Vice President and Chief Financial Officer
•Varun Laroyia, Executive Vice President and Chief Financial Officer
Arnd Franz, Senior Vice President of the Company and Chief Executive Officer, LKQ Europe
John S. Quinn, Former Chief Executive Officer and Managing Director, LKQ Europe and Former Chief Financial Officer
•Justin L. Jude, Senior Vice President of Operations -- Wholesale Parts Division
•Walter P. Hanley, Senior Vice President -- Development
•Matthew McKay, Senior Vice President -- General Counsel and Corporate Secretary
•Arnd Franz, Former Senior Vice President and former Chief Executive Officer, LKQ Europe
Executive Summary
Compensation Highlights
For 2019, our executive compensation program was redesigned to better alignDespite facing significant headwinds from economic softness, inflationary pressures, supply chain disruptions, labor shortages, energy cost spikes and a war in Europe, we delivered one of the incentive components withmost profitable years in the primary financial objectiveshistory of the Company. Modifications from the prior yearOur teams embraced and delivered on our operational excellence initiatives of profitable revenue growth, sustainable margin expansion and strong cash flow generation throughout all of 2022. The continued robust cash flow generation enabled us to maintain our balanced capital allocation policy, and through our stock repurchase program and quarterly dividend payments, we returned $1.3 billion to our stockholders in 2022.
In September 2022, key executives transitioned to critical roles in our business. Through succession planning and successful development planning, we transitioned Varun Laroyia, former Chief Financial Officer to Chief Executive Officer and Managing Director, LKQ Europe and promoted Rick Galloway to Senior Vice President and Chief Financial Officer.
Key achievements and milestones in 2022 include:
changes to the performance metrics for the annual bonus program from adjusted diluted earnings per share (“EPS”) to earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA percentage and cash flow,
changes to the performance metrics for the cash long-term incentive program from (i) adjusted diluted EPS, (ii) average•Strong organic parts &and services revenue growth of 5.0% and (iii) average return on equity to (i) adjusted diluted EPS, (ii) average organic parts & services revenueoperating income growth of 7.2%
•Record Segment EBITDA margin for Wholesale – North America and (iii) average return on invested capital, and changes to the relative weighting of such metrics,second straight year with a double digit Segment EBITDA margin in Europe
the establishment of performance-based restricted stock units with the same performance measures as proposed•Free cash flow generation over $1 billion for the cash long-term incentive program, andthird consecutive year
reallocation•Successful divestiture of PGW aftermarket glass business
•Maintained net leverage well below our target
•Achieved an investment-grade rating from all three major rating agencies
•Repurchased 20.5 million shares of LKQ stock for a total of $1.0 billion
•Increased the grant type mix of long-term awards to include the Company’s traditional performance-based restricted stock units, the new performance-based restricted stock units, and cash long term incentive awards.
The key elements of the 2019 program are describedquarterly dividend by 10% in the table onfourth quarter
•Conducted comprehensive employee engagement surveys in North America and Europe to help in our journey to enhance the next page:employee experience
•Launched LKQ Inclusion Council and Employee Resource Group: Veterans Network
•Issued our second annual Corporate Sustainability Report and received the highest available ESG rating of AAA from MSCI (announced in January 2023)
Compensation Elements
|
| | | | | | | |
| Compensation Component | Description/Purpose | 20192022 Highlights |
| Total Direct Compensation |
| Base Salary | •Fixed compensation element •Salary levels based on market rates, executive’s experience, responsibilities, and contribution to our development and growth | •Increases in 20192022 aimed at aligning more closely with peers •Refer to “Elements of Our Compensation Programs -- Base Salaries” |
| Annual Bonus | •Cash incentive designed to reward achievement of annual performance objectives • 20192022 annual bonuses were based on EBITDA, EBITDA margin percentage, and cash flow •Segment leaders had targets reflecting both corporate and segment performance | •Our 20192022 financial results led to bonus payments for corporate program participantsranging from 137% (Europe) to 193% (Wholesale - North America) of 142% of target for North America program participants at 163% of target, and for European program participants at 47% of target •Refer to “Elements of Our Compensation Programs -- Annual Bonus Awards” |
| Cash Long-Term Incentive (“LTI”) Award | •Cash incentive designed to reward multi-year performance, as well as the executive's continued employment over the vesting period •For each of the 2019-20212020-2022, 2021-2023 and 2022-2024 performance period,periods, each executive is eligible to earn upfrom 0 to 200% of their target award based on the Company’s 3-year adjusted diluted EPS 3-year averagefor the last year of the three-year performance period, and parts & services organic revenue growth and 3-year average return on invested capital | • Goal achievement for (“ROIC”), each measured as an average over the three-year performance period ended December 31, 2019
•For each of the 2021-2023 and 2022-2024 performance periods amounts earned based on financial results may be modified up or down by up to 10% based on achievement versus multi-year ESG goals
| •For the 2020-2022 performance period, goal achievement resulted in a payout at 85%of 172% of target •Refer to “Elements of Our Compensation Programs -- Long-Term Incentive Awards” |
| Performance-Based Restricted Stock Units (PSUs) | • GrantsShare-based incentive designed to align the interests of management with those of our stockholders, reward multi-year performance, and promote retention of key talent •In 2020, 2021 and 2022, executives were granted two types of units ("PSU-1s"(“PSU-1s” and "PSU-2s")“PSU-2”s) that will be converted to a number of common shares, subject to achievement of performance goals, as well as the executive’s continued employment over the vesting period • Designed to align the interests of management with those of our stockholders and promote retention of key talent
| • In 2019, the Compensation Committee granted executive officers (a) ◦PSU-1s thatgenerally vest over a three-year period, subject to the executive’s continued employment, but only if we achieve positive diluted EPS during any fiscal year within five years from the date of grant and (b)
◦PSU-2s that vest with respect to upmay be earned from 0 to 200% of the target number of shares based on the Company's 3-year adjusted diluted EPS 3-year averagefor the last year of the three-year performance period, and parts & services organic revenue growth and 3-yearROIC, each measured as an average return on invested capitalover the three-year performance period | •Because positive diluted EPS was achieved for 2022, one-third of the PSU-1s granted in 2022 vested, and the remaining portion will vest over the next two years subject to continued service •For the 2020-2022 performance period, goal achievement resulted in a payout of 172% of target for the PSU-2s granted in 2020 •Refer to "Elements“Elements of Our Compensation Programs -- Long-Term Incentive Awards"Awards”
|
Long-Term Incentive Awards Outside General Executive Compensation Program
In connection with their respective new roles, we granted one-time awards of 1,832 and 35,605 RSUs to Mr. Galloway and Mr. Laroyia, respectively, on September 15, 2022. The RSUs granted to Mr. Galloway will vest approximately 16.67% every six months over three years with the first vesting occurring on March 1, 2023. The RSUs granted to Mr. Laroyia vest 25% every six months over two years with the first vesting occurring on March 1, 2023. These one-time awards were not part of our regular annual program.
Prior to his promotion, Mr. Galloway received long-term incentives under a non-executive long-term incentive program, which consisted of grants of time-based RSUs and cash-based LTI the same as the executive cash-based LTI program. In connection with his promotion, on September 15, 2022, we granted performance-based three-year equity awards (PSU-2s) under our Equity Incentive Plan to Mr. Galloway with respect to the 2021-2023 and 2022-2024 performance periods.
|
| | | | | | | |
| Compensation Component | Description/Purpose | 2019Program Highlights |
IndirectOther Compensation |
| Health and Welfare Benefits | •Standard health and welfare benefits to provide a level of financial support in the event of injury or illness | •Executives generally participate in the same benefits programs as other employees in their region |
| Retirement | •For U.S. executive officers, provide opportunities to save for retirement in a tax efficient manner •401(k) plan with company matching contribution and supplemental deferred compensation plan to allow executive officers to contribute (and receive a company match) onmatch on) amounts in excess of IRS limits | •Executives who participate in the 401(k) plan and supplemental plan do so on the same basis as all other eligible employees |
| Severance Protection | •Severance Policy provides financial support in the event of an involuntary termination of employment •Change of Control agreements enable executives to objectively consider transactions that will benefit stockholders even if they would result in termination of employment •Termination provisions in equity award agreements outline the treatment of each award under various termination scenarios | •In the event of a Change of Control, cash severance would be payable on a “double-trigger” basis, meaning the executive generally must experience a qualifying termination within 24 months of the Change of Control to receive benefits •Our PSUs and RSUs have “double-trigger” vesting, meaning that vesting of PSUs will accelerate in connection with abased on actual or assumed achievement of the relevant performance goals as of the Change of Control only if either (a) the successor entity does not assume, convert, or replace the awards with a similar award or (b) the participant experiences a qualifying termination within 24 months of the Change of Control |
Target Total Direct Compensation Mix
A significant portion of our executive compensation is in the form of incentive-based compensation. We consider our annual bonus awards, long-term incentive awards and equity incentive grants incentive-based compensation because their value depends in whole or in part on the financial performance of the Company and/or our stockholder returnstock performance. The following charts set forth the percentage of our Chief Executive Officer's and the other currently employed named executive officers' 20192022 target total direct compensation (consisting of base salary and annual bonuses, cash LTI awards and equity incentive awards assuming target performance) that was incentive-based.
Target Long-Term Incentive Award Mix
The graphic on the left displays Mr. Zarcone’s intended target LTI mix, which consists of Cash-Based LTI (weighted 22%), PSU-1s (weighted 44%), and PSU-2s (weighted 34%). The graphic on the right displays the intended target LTI mix for all other named executive officers, which consists of Cash-Based LTI (weighted 25%), PSU-1s (weighted 50%), and PSU-2s (weighted 25%). The LTI mix shown below excludes any one-time special equity awards such as those associated with Mr. Laroyia's new role and Mr. Galloway’s promotion, and also does not reflect the LTI mix for Mr. Galloway prior to his promotion. The Compensation and Human Capital Committee increased the weighting of Mr. Zarcone’s PSU-2s in 2022.
Compensation Governance Highlights
|
| | | | | | | | | | |
| What we do | What we don’t do |
ü | The majority of our executives’ target total direct compensation is tied to performance. | û | We do not provide golden parachute excise tax gross-ups. |
| ü |
üWe require executive officers and directors to acquire and maintain meaningful ownership of our stock to ensure their interests are closely aligned with the long-term financial interests of our stockholders.
| û | Neither our Severance Policy nor our Change of Control Agreements provide “single-trigger” cash severance upon a Change of Control. |
| ü | üOur equity awards include meaningful restrictive covenants (e.g., non-competition, non-solicitation of customers and employees, etc.) that, if violated, would result in forfeiture ofof: (i) unvested awards, (ii) shares received upon vesting of awards, orand (iii) cash proceeds received upon sale of such shares.
| û | Our equity grant agreements do not provide “single-trigger” equity vesting upon a Change of Control.
|
| û | Our equity plans expressly forbid option repricing, and exchange of underwater options for other awards or cash, without stockholder approval. |
| ü | Our Compensation and Human Capital Committee is composed entirely of independent directors.
| û | We do not allow executives or directors to pledge or hedge Company stock. |
| ü | üOur Compensation and Human Capital Committee engages an independent compensation consultant that provides no other services to the Company.
| | |
| ü | üWe periodically assess our executive compensation programs to ensure they do not create risks that are likely to have a material adverse effect on our Company.
| ûWe generally do not provide golden parachute excise tax or other tax gross-ups.
ûNeither
| |
| ü | Multi-year ESG objectives are a component of our Severance Policy nor our Change of Control Agreements provide "single-trigger" cash severance upon a Change of Control.
ûOur equity grant agreements do not provide "single-trigger" equity vesting upon a Change of Control.
ûOur equity plans expressly forbid option repricing, and exchange of underwater options for other awards or cash, without stockholder approval.
ûWe do not allow executives and directors to hedge Company stock.
long-term incentive awards. | | |
Advisory Vote on Executive Compensation
We submit to our stockholders on an annual basis a proposal for a (non-binding) advisory vote to approve the compensation of our named executive officers ("say-on-pay"(“say-on-pay”). At our 2022 Annual Meeting, our stockholders expressed strong support for our executive compensation program with more than 98% percent of shares voted cast in favor of approval of our compensation program for our named executive officers. The Compensation and Human Capital Committee considers, among other things, the outcome of this vote when evaluating our compensation principles, designs and practices. Atpractices, as well as feedback from our 2019 Annual Meeting, ourongoing engagement with stockholders expressed strong support for ouron a variety of issues, including executive compensation program, with more than 97% percent of shares voted cast in favor of approval of our compensation program for executive officers. Notwithstanding the historical support for our executive compensation program indicated by the outcome of the say on pay vote, the Compensation Committee, responding in part to communications from our stockholders, implemented certainand corporate governance. No changes were made to the program in 2019direct response to help better align the incentives of the program with the primary financial objectives of the Company.2022 say-on-pay vote outcome.
Objectives of Our Compensation Programs
Our compensation programs are intended to enable us to attract, motivate, reward and retain the management talent needed to achieve our corporate objectives in a highly competitive market, and thereby increase stockholder value. It is our policy to provide incentives to the Company’s senior management to achieve both short-term and long-term goals. To attain these goals, our policy is to provide a significant portion of executive compensation in the form of at-risk, incentive-based compensation. We believe that such a policy, which aligns the financial interests of management with the financial interests of our stockholders, provides the proper incentives to attract, motivate, reward and retain quality management.
What Our Compensation Programs are Designed to Reward
Our compensation programs are designed to reward our executive officers for the performance of our Company and the individual performance of each executive officer. Specifically, with respect to the performance of our Company,
•Our annual bonus program is designed to reward successful performance based on EBITDA, EBITDA margin percentage and cash flow generation,generation;
•Our cash long-term incentive program and new performance-based restricted stock units (“PSU-2s”) are designed to reward successful performance based on adjusted diluted EPS average organicfor the last year of the three-year performance period, and parts & services organic revenue growth and ROIC, each measured as an average returnover the three-year performance period;
•Starting with the 2021-2023 performance cycle, our cash long-term incentive program includes an ESG modifier that may increase or decrease earned amounts by up to 10% based on invested capital,performance against our multi-year ESG objectives;
•Our traditional performance-based restricted stock units (“PSU-1s”) are designeddesigned to reward profitability,profitability; and
•In addition to rewarding achievement of the performance vesting requirements for our PSU-1s and PSU-2s, all of our performance-based restricted stock unitsequity awards reward long-term total stockholder return because the ultimate value of any earned awards is tied to our stock performance during the performance and vesting periods.
With respect to individual performance of an executive officer, we analyze the growth of the performance metrics that most directly relate to such individual’s area of responsibility and consider certain subjective factors, including the individual’s management and leadership skills, ability to resolve challenges and to overcome obstacles, and overall contribution to our success. Individual performance is a factor in the determination of adjustments to base salary, annual bonus targets, and long-term incentive award opportunities, along with other considerations including external market data, the unique scope of each executive’s role and responsibilities, the criticality of certain positions to our success, and internal pay parity.
Executive Compensation Decision-Making
Role of the Compensation and Human Capital Committee and Management
Management provides to the Compensation and Human Capital Committee historical compensation information relating to our executive officers to aid the deliberations of the Compensation and Human Capital Committee regarding executive officer compensation. The information typically includes historical and proposed base salaries, bonuses, long-term cash incentive awards, equity-based awards, and any other material component of compensation or benefits. The Compensation and Human Capital Committee takes into account the historical trend of each element of compensation and the total of all of the elements for each year in connection with its decisions about proposed compensation amounts. In addition, the Compensation and Human Capital Committee receives recommendations from the Executive Chairman of the Board regarding the compensation of the Chief Executive Officer and receives recommendations from the Chief Executive Officer regarding the compensation of the other executive officers.
Role of the Compensation and Human Capital Committee’s Consultant
The Compensation and Human Capital Committee has engaged Frederic W. Cook & Co., Inc. (“F.W. Cook”) as its independent executive compensation advisors. F.W. Cook reports directly to the Compensation and Human Capital Committee and does no work for management that is not under the Compensation and Human Capital Committee’s purview. The Compensation and Human Capital Committee has considered the independence of F.W. Cook and determined that its engagement of F.W. Cook did not raise any conflicts of interest with LKQ or any of our directors or executive officers.
F.W. Cook periodically conducts comprehensive reviews of our executive officer compensation programs.programs to provide competitive context for the Compensation and Human Capital Committee's decisions on setting target pay levels and incentive program design. The reviews include a comparative analysis of our executive compensation program with the executive compensation programs of a peer group of companies. The composition of the current peer group isused for competitive comparisons to inform the Committee's decisions on setting 2022 target pay opportunities and program design was as follows:
|
| | | | |
Advance Auto Parts, Inc.Adient plc | MSC Industrial Direct Co., Inc. |
Aptiv Plc. | O’Reilly Automotive, Inc. |
AutoZone, Inc. | Republic Services, Inc. |
BorgWarner Inc. | Tenneco Inc. |
Dana Incorporated | United Rentals, Inc. |
Fastenal Company | Visteon Corporation |
Genuine Parts Company | W.W. Grainger Inc. |
| Goodyear Tire & Rubber Company | Watsco, Inc. |
HD Supply Holdings,Advance Auto Parts, Inc. | Lear Corp. |
| Aptiv Plc. | O’Reilly Automotive, Inc. |
| AutoZone, Inc. | Republic Services, Inc. |
| BorgWarner Inc. | United Rentals, Inc. |
| CDW Corp | W.W. Grainger Inc. |
| Dana Incorporated | Watsco, Inc. |
| Fastenal Company | WESCO International, Inc. |
Lear Corp.Genuine Parts Company | |
The Compensation and Human Capital Committee does not target any specific percentile with regard to setting the compensation opportunities of our executive officers in comparison to the executive officers of the peer group.
In November 2022, at the Compensation and Human Capital Committee's direction, F.W. Cook conducted another comprehensive review of our executive officer compensation program to inform decisions on 2023 target pay opportunities and program design. Prior to this competitive analysis, F.W. Cook reviewed the comparative peer group for continued appropriateness. F.W. Cook did not recommend any changes to the peer group.
Elements of Our Compensation Programs, Why We Chose Each Element, and How We Determine the Amount of Each Element
The primary elements of our direct compensation programs are base salaries, annual bonus awards, and long-term cash and equity incentive awards.awards (referred to as total direct compensation). We believe that this mix of compensation elements helps us to achieve the objectives of our compensation programs and provides appropriate short-term and long-term motivation to our executive officers.
Base Salaries. Salaries
Base salaries are the fixed component of each executive’s target total direct compensation opportunity. The Compensation and Human Capital Committee considers the following factors when setting the base salary of each of the executive officers: base salaries of executive officers in similar positions at comparable companies; the contributions of the executive officers to the Company’s development and growth; and the executive officer’s experience, responsibilities and position within the Company. No specific corporate performance measures are considered with respect to base salaries.
The 20182022 and 20192021 year-end base salaries of our named executive officers are provided in the following table. The salaries of the named executive officers (other than Mr. Zarcone) were increased in certain cases2022 to align their salaries more closely with similarly-situated executives at the peer companies. Unless otherwise noted, amounts shown representcompanies, and in the salaries in effect in Aprilcase of each year.Mr. Galloway to reflect his promotion to a senior executive role.
|
| | | | |
| Executive | | 2019 Salary | | 2018 Salary |
| Dominick Zarcone | | $975,000 | | $975,000 |
| Varun Laroyia | | $575,000 | | $500,000 |
Arnd Franz (1) | | $615,670 | | — |
John S. Quinn (2) | | $600,000 | | $595,000 |
| Justin L. Jude | | $500,000 | | $400,000 |
| Walter P. Hanley | | $460,000 | | $450,000 |
31
|
| |
(1) | Mr. Franz joined the Company in April 2019 and became Chief Executive Officer of LKQ Europe
in October 2019. The amount disclosed for 2019 represents his salary following his October 2019 promotion.
|
(2) | Mr. Quinn ceased holding the title of Chief Executive Officer and Managing Director, LKQ Europe in October 2019. |
| | | | | | | | | | | | | | | | | | | | |
| Executive | | 2022 Salary | | 2021 Salary |
| Dominick Zarcone | | $ | 1,050,000 | | | | $ | 1,050,000 | | |
| Rick Galloway | | $ | 575,000 | | (1) | | $ | — | | (2) |
| Varun Laroyia | | $ | 800,000 | | | | $ | 770,000 | | |
| Justin Jude | | $ | 620,000 | | | | $ | 600,000 | | |
| Walter Hanley | | $ | 480,000 | | | | $ | 470,000 | | |
| Matthew McKay | | $ | 450,000 | | | | $ | — | | (2) |
(1) Mr. Galloway’s base salary increased to $575,000 in connection with his promotion to the position of Senior Vice President and Chief Financial Officer on September 15, 2022. From January 1, 2022 to September 14, 2022, his weighted average base salary was $380,286.
(2) 2021 base salaries for Mr. Galloway and Mr. McKay are not disclosed because neither were named executive officers in 2021.
Annual Bonus Awards. Awards
We offer annual bonus awards underunder our Cash Incentive Plan (“CIP”) to provide incentives for superior performance over a one-year time horizon. Each participant in the bonus program (including our named executive officers) is eligible to receive a cash payment equal to a percentage of the participant’s base salary at specified threshold, target, and maximum levels of performance.
In 2019,2022, consistent with 2021, the corporate performance measures for our executive officers’ bonuses were the Company’s EBITDA (weighted 30%), EBITDA margin percentage (weighted 30%), and free cash flow (weighted 40%). BonusesThe bonuses for Messrs. Zarcone, Laroyia, Hanley, and HanleyMcKay were based entirely on the corporate performance measures. ForIn 2022, consistent with 2021, for Mr. Quinn,Franz, the former head of our European operations, and Mr. Jude, who heads our North American Wholesale operations, 20% of their bonuses were based on these
corporate performance measures, and 80% of their bonuses were based on similar measures for their respective business segments. The bonus for Mr. Galloway was based on similar measures to Mr. Jude for the period prior to his promotion to the position of Senior Vice President and Chief Financial Officer and based entirely on corporate performance measures after his promotion.
EBITDA is defined as Segment EBITDA as presented in our public filings. EBITDA margin percentage is calculated as EBITDA divided by revenue. Free cash flow reflects net cash provided by operating activities less purchases of property, plant and equipment. The EBITDA and EBITDA percentageAll performance measures were subject to adjustments for certain items as specified by the Compensation and Human Capital Committee at the time the bonus targets were established. Such adjustments for 20192022 related to currency exchange rates;rates (which had the most significant impact); atypical environmental and legal losses; and other extraordinary, unusual or infrequently occurring items. The adjustments had the net effect of (i) increasing the reported consolidated EBITDA from $1,328$1,719 million to $1,345$1,787 million, (ii) decreasing the reported EBITDA margin percentage from 13.44% to 13.39%, and (iii) increasing the reported consolidated EBITDA percentagefree cash flow from 10.6%$1,028 million to 10.7%.$1,063 million. Our bonus plan provides for the Compensation and Human Capital Committee to make adjustments to the targets for events such as the disposal of a business. The 2022 targets were established under the assumption that there would be no business disposals during the year. In April 2022, we divested our PGW Auto Glass business. As a result, pursuant to the pre-established adjustment guidelines under the plan, the Compensation and Human Capital Committee adjusted the bonus targets to remove the budgeted results for this business between the disposal date and year-end. Bonus achievement for 2022 was determined by comparing calculated results against the revised targets.
The following table sets forth with respect to the 20192022 annual bonus awards (a) the threshold, target, and maximum for each of the three performance metrics referenced above along with the actual achievement (which includes the EBITDA adjustments previously mentioned) and (b) each executive's bonus opportunity at target along with the earned bonus amount. Performance below threshold for a given measure would result in no payment for that component. Performance at threshold, target, or maximum for a given measure would result in payment of 50%, 100%, or 200% of target, respectively, for that component. Performance between levels is linearly interpolated.
|
| | | | | | | | | | | |
| | | Corporate Program | | |
| ($ in millions) | | EBITDA (30% Wtg.) | | EBITDA Percentage (30% Wtg.) | | Free Cash Flow
(40% Wtg.) | | |
| Target | | $1,360 | | 10.6 | % | | $505 | | |
| Achieved | | $1,345 | | 10.7 | % | | $798 | | |
| Payout as % of target | | 93 | % | | 115 | % | | 200 | % | | |
| Weighted Total | | 142 | % | | | | | | |
| | | | | | | | | |
| | | 2019 Target Bonus Opportunity | | 2019 Actual Bonus Earned |
2019 Bonus Opportunities (1) | | % Salary | | $ | | % Salary | | $ |
| Dominick Zarcone | | 125% | | $1,218,750 | | 178% | | $1,735,446 |
Varun Laroyia (2) | | 60% | | $332,885 | | 85% | | $474,411 |
John S. Quinn (3) | | 60% | | $359,211 | | 28% | | $167,569 |
Justin L. Jude (4) | | 60% | | $283,846 | | 98% | | $463,696 |
| Walter P. Hanley | | 60% | | $274,385 | | 85% | | $390,764 |
| | | | | | | | | | | | | | | | | | | | |
| | Corporate Program |
| ($ in millions) | | EBITDA
(30% Wtg.) | | EBITDA Percentage
(30% Wtg.) | | Free Cash Flow
(40% Wtg.) |
| Threshold | | $ | 1,593 | | 12.0 | % | | $ | 850 |
| Target | | $ | 1,722 | | 13.0 | % | | $ | 950 |
| Maximum | | $ | 1,851 | | 14.0 | % | | $ | 1,050 |
| | | | | | |
| Achieved | | $ | 1,787 | | 13.39 | % | | $ | 1,063 |
| Payout as % of target | | 150 | % | | 139 | % | | 200 | % |
| | | | | | |
| Weighted Total | | 167 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 Target Bonus Opportunity | | 2022 Actual Bonus Earned |
| | % Salary | | $ | | % of Target | | $ |
| Dominick Zarcone | | 135% | | $ | 1,417,500 | | | 167% | | $ | 2,362,781 | |
| Rick Galloway | | 40%/60% (1) | | $ | 209,187 | | | 180% | | $ | 376,417 | |
| Varun Laroyia | | 75% | | $ | 594,329 | | | 167% | | $ | 990,666 | |
| Justin Jude | | 60% | | $ | 368,975 | | | 193% | | $ | 713,367 | |
| Walter Hanley | | 60% | | $ | 286,488 | | | 167% | | $ | 477,536 | |
| Matthew McKay | | 60% | | $ | 266,219 | | | 167% | | $ | 443,751 | |
Arnd Franz (2) | | 60% | | $ | 335,396 | | | 137% | | $ | 459,593 | |
(1) In connection with his promotion, the terms of Mr. Galloway’s participation in our bonus plan were adjusted to threshold, target and maximum potential 2022 bonus payout percentages of 20/40/80 (multiplied by base salary prior to September 15, 2022) on the North America Wholesale bonus plan for the portion of the calendar year prior to September 15, 2022 and percentages of 30/60/120 (applied to base salary after September 15, 2022) on the Corporate bonus plan for the portion of the calendar year after September 15, 2022. The target bonus opportunity amount shown is the sum target under both plans for the applicable portion of 2022.
(2) Pursuant to Swiss law, Mr. Franz received a pro-rated annual bonus for 2022 based on the number of months he worked for us in 2022. The target bonus opportunity amount and actual bonus earned amount shown take into account the proration.
Bonus targets are established annually upon completion of our budget and guidance setting process and are approved by the Compensation and Human Capital Committee. Targets are based on events and circumstances as of the time that annual budgets are established and guidance is set, which may be impacted by external factors, including currency exchange rates, inflation, scrap and precious metals prices, and other external events, such as tax legislation and the COVID-19 pandemic. In some instances, based on these events and circumstances, bonus targets may be set at levels lower than the prior year actual performance. In 2022, we budgeted decreases in EBITDA dollars and EBITDA percentage primarily due to transitory effects related to metals in 2021 that were not projected to reoccur in 2022, and to a lesser extent, impacts from currency exchange rates. The 2022 target for EBITDA dollars was also lowered upon the divestiture of PGW Auto Glass in April 2022. Additionally, free cash flow in 2021 was relatively high compared to prior years as a result of, among other things, profitability improvements and extensions of payment terms. In 2022, our operational objectives included further replenishing our depleted inventory levels, which we anticipated would reduce free cash flow levels relative to 2021 as well as the projected reduction in profitability, including the effect of the PGW divestiture, as described above. As a result, the 2022 bonus target for free cash flow was set at a level lower than actual performance for 2021.
|
| |
(1) | For 2019, Mr. Franz received a guaranteed bonus of €250,000 pursuant to the terms of his offer letter. |
(2) | In addition, Mr. Laroyia was paid a discretionary bonus of $150,000 for 2019 due to his individual contributions with respect to materially exceeding our targets for certain key financial metrics.
|
(3) | Mr. Quinn's bonus for 2019 was based 20% on Corporate performance and 80% on Europe segment performance, which on an aggregate basis paid out at 47% of target. |
(4) | Mr. Jude's bonus for 2019 was based 20% on Corporate performance and 80% on North America Wholesale performance, which on an aggregate basis paid out at 163% of target. |
Long Term Incentive Awards. Awards
We grant performance awards each year to certain of our key employees (including our named executive officers) that are designed to reward multi-year performance, create retention incentives, and in the case of equity awards, to align the interests of recipients with those of stockholders because the realized value reflects our stockholder return. When making long-term incentive awards, we consider factors specific to each employee such as salary, position and responsibilities. We also consider factors such as the rate of the Company’s development and growth and an estimate of the value of each award. In addition, we determine the amount of dilution that we believe would be generally acceptable to our stockholders and correspondingly limit the aggregate number of equity awards granted each year.
In 2019,2022, our long-term incentive awards to certain of our key employees (including our named executive officers) consisted of a mix of the following threefour grant types:
•Cash-Based Long-Term Incentive (“LTI”)LTI Awards (weighted 25%): Cash-based long-term incentive opportunity granted under the CIP that may be earned from 0 to 200% of the target amount, based on performance against
financial metrics measured over the three-year performance period from January 1, 20192022 through December 31, 2021.2024. The financial metrics for the 2019-20212022-2024 performance period are three-year adjusted diluted EPS for 2024 (weighted 40%), three-year average parts & services organic revenue growth (weighted 40%), and three-year average return on invested capital (“ROIC”)ROIC (weighted 20%). Amounts earned based on financial performance may be modified up or down by up to 10%, based on achievement of multi-year ESG objectives.
•PSU-1s (weighted 50%): performance-based Performance-based restricted stock units granted under the Equity Incentive Plan that generally vest over a three-year period, subject to the executive’s continued employment through the date of vesting, but only if we achieve positive diluted EPS during any fiscal year within five years from the date of grant.
In addition, the PSU-1s are aligned with stockholders' interests because the ultimate value of any earned shares depends on our total stockholder return over the performance and vesting period.•PSU-2s (weighted 25%): performance-based Performance-based restricted stock units granted under the Equity Incentive Plan that vestmay be earned from 0 to 200% of the target number of shares based on the same financial metrics as used for the cash-based LTI awards, measured over the same three-year performance period, subject to the executive's continued employment. The Compensation Committee introducedemployment through the PSU-2s to increase the proportiondate of long-term incentives that is tied to three-year performance objectives.vesting. In addition to rewarding achievement of such performance objectives, the PSU-2s are aligned with stockholdersstockholders' interests because the ultimate value of any earned shares depends on our total stockholder return over the performance and vesting period.
•2022 RSUs: In February 2022, we granted RSUs to Mr. Galloway that were related to his prior non-executive position. These RSUs will vest approximately 10% every six months over five years with the first vesting occurring in July 2022. On September 15, 2022, we granted one-time RSU awards to Mr. Galloway and Mr. Laroyia in connection with their new roles. The RSUs granted to Mr. Galloway will vest approximately 16.67% every six months over three years with the first vesting occurring on March 1, 2023. The RSUs granted to Mr. Laroyia vest 25% every six months over two years with the first vesting occurring on March 1, 2023.
Cash-Based LTI Awards
Target awards are established for each participant (including each named executive officer) as a specified dollar amount that may be earned up to 200% of the target award value, based on performance against the financial goals.
2017-2019 LTI.
2020-2022 LTI
The performance measures for the 2017-20192020-2022 performance period were adjusted diluted EPS, average organic parts & services revenue growth and return on equity ("ROE"). ROEaverage ROIC. ROIC is calculated as adjusted net income (based on the same adjustments as described for adjusted diluted EPS)operating profit after tax divided by average stockholders' equity.invested capital, which is defined as average stockholders’ equity plus average net debt (calculated as total debt less cash and equivalents). The performance measures were subject to adjustments for certain items as specified by the Compensation and Human Capital Committee at the time the LTI targets were established. Such adjustments related to currency exchange rates;rates (for adjusted diluted EPS only); asset impairments; restructuring and acquisition expenses; gains and losses related to acquisitions and divestitures; atypical environmental and legal losses; amortization expense of acquired intangibles; change in fair value of contingent consideration liabilities; changes in U.S. tax laws in 2017; results of discontinued operations; other extraordinary, unusual or infrequently occurring items; and certain other minor adjustments. The base year (2016) figuresCompensation and Human Capital Committee, in establishing the target goals for the performance measures were calculated onin 2020, took into consideration the same basis as the 2019 amounts. The payout percentageseffect of the performance measures did not change aspotential adjustments that would be used to calculate the actual performance. Using the calculation method and adjustments approved by the Compensation and Human Capital Committee, diluted EPS for 2022 was decreased from $4.14 on a resultGAAP basis to $3.95 for the LTI calculation, average organic parts & services revenue growth for 2020-2022 was increased from 1.7% to 1.8% and average ROIC for 2020-2022 was increased from 12.6% to 13.4%.
The table below sets forth the targets for these performance measures for the 2017-20192020-2022 performance period and the actual results for each component. These results produced a payout that was 85%172% of target. The Summary Compensation Table on page 3240 sets forth under the column entitled “Non-Equity Incentive Plan Compensation” the amounts earned and subsequently paid for the years presented with respect to our named executive officers who were participants in the plan for this period. |
| | | | | | | | | | | | |
| | | Weighting | | Threshold Goal (50% of target payout) | | Target Goal Range (100% of target payout) | | Maximum Goal (200% of target payout) | | Actual Results | | Payout |
| Adjusted Diluted EPS | | 42.5% | | 30% | | >=45% and <50% | | 60% | | 23.0% | | 0% |
| Revenue | | 42.5% | | 24% | | >=30% and <32% | | 36% | | 46.0% | | 200% |
| ROE | | 15.0% | | 12.5 bps | | >=42.5 and <52.5 bps | | 72.5 bps | | (253) bps | | 0% |
| | | | | | | | | | | Weighted Average Payout | | 85% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighting | | Threshold Goal (50% of target payout) | | Target Goal (100% of target payout) | | Maximum Goal (200% of target payout) | | Actual Results | | Payout | | Weighted Payout |
Adjusted Diluted EPS (3rd Year) | | 40.0% | | $2.71 | | $2.89 | | $3.07 | | $3.95 | | 200% | | 80% |
| 3-Year Average Organic Parts & Services Revenue Growth | | 40.0% | | 0.5% | | 1.5% | | 2.5% | | 1.8% | | 130% | | 52% |
| 3-Year Average ROIC | | 20.0% | | 9.75% | | 10.0% | | 10.25% | | 13.4% | | 200% | | 40% |
| | | | | | | | | | Total Payout | | 172% |
2019-2021 LTI.
2022-2024 LTI
The performance measures for the 2019-20212022-2024 performance period are adjusted diluted EPS (calculated using the same adjustments as described in the 2020-2022 LTI section above), three-year average parts & services organic revenue growth, and three-year average ROIC. ROIC is calculated as adjusted net operating profit after tax (based on the same adjustments(calculated as described in the 2020-2022 LTI section above). The Compensation and Human Capital Committee, in establishing the target goals for adjusted diluted EPS, excluding anythe performance measures in 2022, took into consideration the effect of the potential adjustments relatedthat would be used to interest expense) divided by average invested capital (defined as stockholders' equity plus net debt (calculated as total debt less cash and equivalents)). calculate the actual performance.
The table below sets forth the targets for these performance measures for the 2019-20212022-2024 performance period and the corresponding payout as percentages of target.targets.
| | | | | | | | | | | | | | | | | | | | |
EPS Achievement in 2024
(40% Wtg.) | | 3-Year Average Parts & Services Organic Revenue Growth
(40% Wtg.) | | 3-Year Average ROIC
(20% Wtg.) | | Payout (% of Target)(1) |
| <$4.00 | | <2.0% | | <14.00% | | 0% |
| $4.00 | | 2.0% | | 14.00% | | 50% |
| $4.50 | | 3.5% | | 14.75% | | 100% |
| >=$5.00 | | >=5.0% | | >=15.50% | | 200% |
(1) Payout percentages are calculated based on the weighted sum of the respective actual results of each performance measure. If the actual achievement is between the goal levels shown above, the payout is linearly interpolated.
Starting with the 2021-2023 performance period, the Compensation and Human Capital Committee added a component to the cash-based long term incentive awards that provides that the earned and payable award amount may be modified by the Committee by increasing or decreasing the award amount by up to 10% depending on the attainment by the Company of its multi-year ESG initiatives.
|
| | | |
EPS Achievement in 2021 (40% Wtg.) | 3-Year Average Parts & Services Organic Revenue Growth (40% Wtg.) | 3-Year Average ROIC (20% Wtg.) | Payout (% of Target) (1) |
| <$2.57 | <1.5% | <9.5% | 0% |
| $2.57 | 1.5% | 9.5% | 50% |
| $2.74 | 2.0% | 9.75% | 100% |
| >=$2.92 | >=3.5% | >=10.0% | 200% |
35
|
| |
(1) | Payout percentages are calculated based on the weighted sum of the respective actual results of each performance measure. If the actual achievement is between the goal levels shown above, the payout is calculated using a linear formula. |
Each named executive officer’s threshold, target, and maximum award opportunity under the 2019-20212022-2024 LTI is set forth in the table entitled Grants of Plan-Based Awards for Fiscal Year Ended December 31, 2019 on page 35.below.
| | | | | | | | | | | | | | | | | | | | |
| | Threshold (50%) | | Target (100%) | | Maximum (200%) |
| Dominick Zarcone | | $ | 700,000 | | | $ | 1,400,000 | | | $ | 2,800,000 | |
| Rick Galloway | | $ | 80,217 | | | $ | 160,433 | | | $ | 320,866 | |
| Varun Laroyia | | $ | 262,500 | | | $ | 525,000 | | | $ | 1,050,000 | |
| Justin Jude | | $ | 185,000 | | | $ | 370,000 | | | $ | 740,000 | |
| Walter Hanley | | $ | 180,000 | | | $ | 360,000 | | | $ | 720,000 | |
| Matthew McKay | | $ | 115,000 | | | $ | 230,000 | | | $ | 460,000 | |
| Arnd Franz | | $ | 185,000 | | | $ | 370,000 | | | $ | 740,000 | |
PSU-1s
The PSU-1s generally vest in equal tranches over a three-year period on each six-month anniversary of the grant date, provided that we achieve positive diluted EPS during any fiscal year period within five years following the grant date. NoGenerally, no PSU-1s vest prior to achievement of positive diluted EPS, and, if positive diluted EPS is not achieved within the five years following grant, the PSU-1 is forfeited. The performance-based condition for the PSU-1s granted in 2022 was met in February 2020,2023, and all applicable PSU-1s that had previously met the time-based vesting condition have vested immediately and the remaining PSU-1s will vest according to the remaining schedule of the time-based condition.
PSU-2s
The PSU-2s granted in 2022, other than one of the PSU-2 awards granted to Mr. Galloway on September 15, 2022, generally vest based on the performance of the Company with respect to adjusted diluted EPS, three-year average parts & services organic revenue growth, and three-year average ROIC over the three-year performance period (January 1, 20192022 through December 31, 2021)2024). The table above under "2019-2021 LTI"“2022-2024 LTI” sets forth the targets for these performance measures for the 2019-20212022-2024 performance period and the corresponding payout as percentages of target share units. The Compensation Committee implemented
One PSU-2 award granted to Mr. Galloway on September 15, 2022 generally vests based on the PSU-2 programperformance of the Company with respect to increaseadjusted diluted EPS, three-year average parts & services organic revenue growth, and three-year average ROIC over the proportion of each executive's target total direct compensation opportunity that is tied to three-year performance objectives.
The table entitled Grants of Plan-Based Awards for Fiscal Year Endedperiod January 1, 2021 through December 31, 20192023. The goals for these measures for the 2021-2023 performance period were disclosed in the proxy statement filed with the SEC on page 35 sets forth additional information about the grants madeMarch 21, 2022 in 2019 under the LKQ Corporation 1998 Equity Incentive Plan (the "Equity Incentive Plan") toconnection with our named executive officers.2022 Annual Meeting of Stockholders.
Policy and Procedures for Granting Equity. Equity
We grant equity awards annually, historically on the second Fridayfirst business day following the Company's release of January eachearnings for the previously completed fiscal year, and in other limited circumstances, such as commencement of employment or promotion. In February 2019, the
Other Compensation Committee adopted a Policy and Procedures for Granting Equity-Based Awards to establish a written framework for a consistent process for granting equity-based awards. The Policy and Procedures states that, starting with the 2019 annual grant, annual grants of equity-based awards shall be made effective as of the business day following our release of financial results for the previously-completed fiscal year.
Other Compensation.
In order to be competitive in attracting executive personnel, we provide certain other compensation to our executive officers, including matching contributions for a portion of the executive officers’ contributions to our retirement plans, contributions to a European pensiondefined contribution plan, payment of life insurance, disability insurance, and accidental death or disability insurance premiums, and vehicle leasing. None
In connection with his new role, under his letter agreement with us dated September 14, 2022 (the “Laroyia Letter Agreement”), Mr. Laroyia is entitled to a number of additional benefits through June 20, 2024, including eligibility for him and his eligible dependents to participate in the otherGeoBlue Plan (at the cost to him equal to the premium amounts the Company charges its U.S. employees for medical, dental, and vision coverage), reimbursement for the cost associated with his family joining a health club, tax equalization on his total compensation elements we provide are grossed-up for imputed income taxes. on the basis of Illinois residency and Company paid annual tax preparation services, relocation benefits, a housing allowance, school tuition in Switzerland, family travel reimbursement, and a company vehicle.
See footnote 5 to the Summary Compensation Table for more information regarding these items of other compensation.
Retirement Plans
We have a 401(k) plan covering substantially all of our U.S. employees, including our U.S. named executive officers. The 401(k) plan allows participants to defer their eligible compensation in amounts up to the statutory limit each year. We make matching contributions equal to 100% of the portion of the participant's contributions that does not exceed 2% of the participant's eligible compensation and 50% of the portion of the participant's contributions between 2% and 6% of the participant's eligible compensation. We may make discretionary annual profit-sharing contributions on behalf of participants, but no such profit-sharing contributions were made in 2019. Each participant is fully vested in such participant’s contributions and any earnings they generate. Each 401(k) participant becomes vested in our matching contributions, and any earnings they generate, in the amounts of 50%, 75% and 100% after two, three and four years of service, respectively. Each participant becomes vested in our profit sharing contributions, if any, and any earnings they generate, in the amounts of 25%, 50%, 75%
and 100% after one, two, three and four years of service, respectively.
We also have two substantially similar plans for highly compensated U.S. employees, or HCEs, that supplement the 401(k) plan. All of our U.S. named executive officers are HCEs. The tax laws impose a maximum percentage of salary that can be contributed each year by HCEs to our 401(k) plan depending on the participation level of non-HCEs. We adopted the supplemental plans to provide additional opportunities for retirement savings that would otherwise be restricted by IRS limits. The supplemental plans operate similarly to the 401(k) plan except that contributions by HCEs to the supplemental plans are not subject to the statutory maximum percentage, the balance in each HCE’s account in the supplemental plans is a general asset of ours, and in the event of our insolvency, the HCE would be a general, unsecured creditor with respect to such amount.
The terms of the supplemental plans limit the maximum annual contribution by each participant to 100% of the HCE’s salary (including commissions), bonuses and cash long term incentive awards. Participants have the choice to invest the funds in their accounts in the supplemental plans from among a specified group of investment funds. A participant is entitled to a distribution of the funds in his or her account in the plan upon either a termination of service;service or, prior thereto, in the event the participant elected an in-service distribution.
Severance Protection
Severance Policy
We have a Severance Policy for Key Executives (the “Severance Policy”), including all of our named executive officers. The Severance Policy sets forth in a written document the terms and conditions that the Company would normally expect to follow upon an involuntary separation of service of a key executive. We believe that it is in the Company's interest to have a formal Severance Policy to provide increased certainty for the executives and the Company in the event of a severance. Further, the formalization of the policy is expected to assist the Company with the recruitment and retention of key executives, provide the Company with important protections, and reduce costs in the event of a dispute. The Severance Policy provides cash severance and other benefits in the event of a termination by the Company without “cause” or by the Covered Executive (as defined below) with “good reason” (as each term is defined in the Severance Policy)Policy or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia). For additional information about our Severance Policy, refer to “Potential Payments Upon Termination or Change in Control” on page 39.46.
Change of Control Agreements
We have Change of Control Agreements with certain of our employees, including each of our named executive officers, that provide cash severance and other benefits in the event of a qualifying termination of employment within 12 months prior to or 24 months following a Change of Control, as defined in the agreements. We provide these agreements to ensure these executives are able to objectively consider transactions that will benefit stockholders even if it is likely to result in termination of theirthe executives' employment. The agreements have an initial term of three years and will automatically renew for a two-year period at the end of the initial term and each two-year anniversary thereafter, unless notice of termination is given by the Company at least 60 days before any such renewal date. The operative provisions of the agreements will apply, however, only if a Change of Control, as defined in the agreements, occurs during the period the agreement is in effect. For additional information about our Change of Control Agreements, refer to “Potential Payments Upon Termination or Change in Control” on page 39.46.
Compensation-Related Governance Policies
Performance-Based Compensation Recovery Policy. Policy
In March 2019, our Compensation and Human Capital Committee adopted a Performance-Based Compensation Recovery Policy applicable to performance-based compensation granted to our executive officers on or after January 1, 2019. In the event that the Board of Directors determines that an executive officer engaged in fraud or intentional misconduct that caused the need for a material negative restatement of our financial statements, our Board of Directors, in its discretion and to the extent legally permitted, may recapture the incremental portion of compensation from any cash or equity-based award granted to such executive officer in the preceding three years in excess of the amount that would have been paid or payable based on the restated financial results. We intend to update our Performance-Based Compensation Recovery Policy to address the recovery of erroneously-awarded incentive compensation in compliance with the requirements of the Dodd-Frank Act, final SEC rules and applicable listing standards.
Stock Ownership Requirements.Requirements
Each of our named executive officers is expected to hold a minimum of at least the number of shares equal in value to a multiple of his or her annual base salary as set forth below. These requirements are to be satisfied within five years of an individual becoming subject to the requirements. Until the expected level of ownership is achieved, each executive must retain at least 50% of the net-after-tax shares from equity compensation vesting. For purposes of our stock ownership requirements, we include the number of shares actually owned by the named executive officer in his or her own name or in the name of an estate planning entity of which the named executive officer is the sole beneficiary. We also include restricted stock units. WeHowever, we exclude any shares of stock that the named executive officer has a right to acquire through the exercise of stock options.Theoptions and any shares of stock subject to the three-year performance awards (PSU-2s). The complete guidelines can be found on our website at www.lkqcorp.com (click the “Corporate Governance” link under “Investor Relations”).
|
| | | | |
| POSITION | MULTIPLE OF BASE SALARY |
| Chief Executive Officer | 5x |
| Executive Vice Presidents | 3x |
| Senior Vice Presidents | 2x |
Insider Trading.Trading
We have a comprehensive insider trading policy that is applicable to, among others, our named executive officers. The policy prohibits trading during quarterly “blackout” periods and other periods during which material information about us has not been publicly disclosed.
Hedging/Pledging.
Pledging/Hedging
The Company’s policies prohibit our named executivedirectors, officers, among others,and employees from pledging our common stock or engaging in hedging transactions involving our common stock. In addition, shares that are pledged do not count towardstock, including through the stock ownership requirementsuse of our named executive officers. No shares are currently pledged by any named executive officer.financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds.
Forfeiture of Equity Awards for Restrictive Covenant Violations.Violations
Our equity awards generally provide that our executive officers will forfeit to the Company their unvested equity awards, the shares received upon vesting of the equity awards, and the proceeds from the sale of shares received upon vesting of such equity awards if the executive officer violates the restrictive covenants in the award agreements relating to the equity awards. The restrictive covenants prohibit the executive officer from competing with us, soliciting our customers and employees, and improperly using our confidential information, for a specified period after the executive officer’s affiliation with us ceases.
Indemnification
Each of our named executive officers is a party to an indemnification agreement with us that assures the officer of indemnification and advancement of expenses to the fullest extent permitted by Delaware law and our Certificate of Incorporation.
Deductibility
Section 162(m) of the Internal Revenue Code (“Code”) limits the deductibility of compensation in excess of $1 million paid to any one named executive officer in any calendar year. Under the tax rules in effect before 2018, compensation that qualified as “performance-based” under Section 162(m) was deductible without regard to this $1 million limit. However, the Tax Cuts and Jobs Act, which was signed into law December 22, 2017, eliminated this performance-based compensation exception effective January 1, 2018, subject to a special rule that “grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017. As a result, compensation that our Compensation Committee structured in 2017 and prior years with the intent of qualifying as performance-based compensation under Section 162(m) that is paid on or after January 1, 2018 may not be fully deductible, depending on the application of the special grandfather rules. Moreover, from and after January 1, 2018, compensation awarded in excess of $1 million to our named executive officers generally will not be deductible. While the Tax Cuts and Jobs Act may limit the deductibility of compensation paid to our named executive officers, our Compensation Committee will, consistent with its past practice, continue to retain flexibility to design compensation programs that are in the best long-term interests of the Company and our stockholders, with deductibility of compensation being one of a variety of considerations taken into account.
Risks Relating to our Compensation Policies and Practices
We periodically undertake an analysis of our compensation policies and practices to assess whether risks arising from such policies and practices are reasonably likely to have a material adverse effect on our Company. The analysis wasis performed by our management with oversight by the Compensation and Human Capital Committee of our Board of Directors. We analyzedanalyze a number of potential risks including (a) the behaviors the compensation program would likely motivate, (b) the relative financial burden of the program, (c) the aspects of the program requiring judgment, (d) whether the program results in the loss, or failure to retain, critical talent, (e) the effects of the different time horizons of our compensation components, and (f) whether the Compensation and Human Capital Committee has discretion with respect to the administration of the program. Based on that analysis, we concluded in 2022 that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on our Company.
Compensation and Human Capital Committee Report
The information contained in this report will not be deemed to be “soliciting material,” or to be “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, nor will such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.
We have reviewed and discussed with management the Compensation Discussion and Analysis to be included in the Company’s 20202023 Annual Stockholder Meeting Schedule 14A Proxy Statement, to be filed pursuant to Section 14(a) of the Exchange Act (the “Proxy Statement”). Based on the review and discussions referred to above, we recommend to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in the Proxy Statement.
Compensation and Human Capital Committee (as of March 20, 2023):
John W. Mendel (Chair)
Patrick Berard
Meg A. Divitto
Robert M. Hanser
Jacob Welch
|
| |
Compensation Committee (as of March 23, 2020): | |
John F. O’Brien (Chair) | |
Meg A. Divitto | |
Robert M. Hanser | |
John W. Mendel | |
William M. Webster, IV | |
EXECUTIVE COMPENSATION—COMPENSATION TABLES
Summary Compensation Table
The following table includes information concerning compensation for the three yearthree-year period ended December 31, 20192022 paid to our named executive officers: |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year |
| Salary (1) | | Bonus (2) | | Stock Awards (3) | | Non-Equity Incentive Plan Compensation (4) | | All Other Compensation (5) | | Total |
| Dominick Zarcone | | 2019 | | $ | 975,000 |
| | $ | — |
| | $ | 3,000,023 |
| | $ | 2,373,814 |
| | $ | 80,235 |
| | $ | 6,429,072 |
|
| President and Chief Executive Officer | | 2018 | | $ | 955,069 |
| | $ | — |
| | $ | 1,750,036 |
| | $ | 1,215,949 |
| | $ | 57,062 |
| | $ | 3,978,116 |
|
| | 2017 | | $ | 736,039 |
| | $ | — |
| | $ | 1,680,349 |
| | $ | 1,448,073 |
| | $ | 32,970 |
| | $ | 3,897,431 |
|
| | | | | | | | | | | | | | | |
Varun Laroyia * | | 2019 | | $ | 554,808 |
| | $ | 150,000 |
| | $ | 1,275,050 |
| | $ | 734,670 |
| | $ | 38,507 |
| | $ | 2,753,035 |
|
| Executive Vice President and Chief Financial Officer | | 2018 | | $ | 500,000 |
| | $ | — |
| | $ | 1,180,019 |
| | $ | 193,750 |
| | $ | 24,408 |
| | $ | 1,898,177 |
|
| | 2017 | | $ | 125,000 |
| | $ | 350,000 |
| | $ | 1,900,006 |
| | $ | — |
| | $ | 2,321 |
| | $ | 2,377,327 |
|
| | | | | | | | | | | | | | | |
Arnd Franz ** | | 2019 | | $ | 445,607 |
| | $ | 279,850 |
| | $ | 3,100,322 |
| | $ | — |
| | $ | 122,849 |
| | $ | 3,948,628 |
|
| Chief Executive Officer and Managing Director, LKQ Europe | | | | | | | | | | | | | | |
| John S. Quinn ................... | | 2019 | | $ | 598,685 |
| | $ | — |
| | $ | 1,275,050 |
| | $ | 529,669 |
| | $ | 1,135,404 |
| | $ | 3,538,808 |
|
| Former Chief Executive Officer and Managing Director, LKQ Europe | | 2018 | | $ | 592,343 |
| | $ | — |
| | $ | 2,180,021 |
| | $ | 588,616 |
| | $ | 505,079 |
| | $ | 3,866,059 |
|
| | 2017 | | $ | 578,846 |
| | $ | — |
| | $ | 1,177,323 |
| | $ | 1,095,373 |
| | $ | 435,888 |
| | $ | 3,287,430 |
|
| | | | | | | | | | | | | | | |
| Justin L. Jude***............. | | 2019 | | $ | 473,077 |
| | $ | — |
| | $ | 900,040 |
| | $ | 765,446 |
| | $ | 32,770 |
| | $ | 2,171,333 |
|
Senior Vice President of Operations -- Wholesale Parts Division
| | | | | | | | | | | | | | |
| Walter P. Hanley | | 2019 | | $ | 457,308 |
| | $ | — |
| | $ | 1,050,005 |
| | $ | 668,374 |
| | $ | 36,121 |
| | $ | 2,211,808 |
|
| Senior Vice President - Development | | 2018 | | $ | 447,343 |
| | $ | — |
| | $ | 1,075,027 |
| | $ | 444,920 |
| | $ | 25,857 |
| | $ | 1,993,147 |
|
| | 2017 | | $ | 440,000 |
| | $ | — |
| | $ | 1,072,394 |
| | $ | 836,853 |
| | $ | 22,554 |
| | $ | 2,371,801 |
|
| | | | | | | | | | | | | | | |
|
| |
* | On October 1, 2017, Mr. Laroyia became our Chief Financial Officer; Mr. Laroyia had not been employed by us prior to that date. |
** | Effective October 1, 2019, Mr. Franz was appointed to succeed Mr. Quinn as Chief Executive Officer of LKQ Europe. Mr. Franz joined LKQ in April 2019. Amounts included within the tables above and that follow are translated from Euros to U.S. Dollars at the average 2019 exchange rate. |
*** | Compensation for 2018 and 2017 for Mr. Jude is not disclosed because he was not a named executive officer during those fiscal years |
(1) | The base compensation of our executive officers is discussed beginning on page 25. |
(2) | Mr. Laroyia was paid a guaranteed bonus of $350,000 for 2017 in connection with his appointment as Executive Vice President and Chief Financial Officer; he was paid a discretionary bonus of $150,000 for 2019 due to his individual contributions with respect to materially exceeding our targets for certain key financial metrics. Mr. Franz was paid a guaranteed bonus of €250,000 for 2019 as part of his compensation package when he commenced employment with us.
|
(3) | The amounts shown above represent the aggregate grant date fair value of awards granted during the period indicated, calculated in accordance with FASB ASC Topic 718. See Note 7 of the consolidated financial statements in our 2019 Annual Report regarding assumptions underlying the valuation of equity awards. Equity incentive grants, which are discussed beginning on page 28, include PSU-1s and PSU-2s. PSU-1s have only a single possible achievement level (target), which was the basis for the grant date fair value disclosed in the table above. PSU-2s may be earned from 0 to 200% of the target number of share units based on performance versus goals for the performance period beginning January 1, 2019 and ending December 31, 2021 and were valued based on performance at 100% of target in the table above. The amount disclosed for Mr. Franz includes a sign-on RSU grant with a value of €2 million in addition to his other equity awards in 2019. The following table summarizes the grant date fair value as disclosed above and at maximum achievement levels (except for Mr. Franz's €2 million sign-on RSU, which is subject to time-based vesting only) for each executive:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Non-Equity Incentive Plan Compensation (4) | | All Other Compensation (5) | | Total |
| Dominick Zarcone | | 2022 | | $ | 1,050,000 | | | $ | — | | | $ | 5,000,075 | | | $ | 4,515,281 | | | $ | 175,536 | | | $ | 10,740,892 | |
| President and CEO | | 2021 | | $ | 1,050,000 | | | $ | — | | | $ | 4,200,026 | | | $ | 4,035,000 | | | $ | 160,610 | | | $ | 9,445,636 | |
| 2020 | | $ | 962,828 | | | $ | — | | | $ | 3,750,034 | | | $ | 3,003,525 | | | $ | 127,286 | | | $ | 7,843,673 | |
| Rick Galloway* | | 2022 | | $ | 437,900 | | | $ | — | | | $ | 810,102 | | | $ | 635,578 | | | $ | 43,183 | | | $ | 1,926,763 | |
| SVP and CFO | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Varun Laroyia | | 2022 | | $ | 792,438 | | | $ | — | | | $ | 3,325,072 | | | $ | 1,851,666 | | | $ | 161,508 | | | $ | 6,130,684 | |
| EVP and CEO and Managing Director, LKQ Europe | | 2021 | | $ | 764,904 | | | $ | — | | | $ | 1,500,026 | | | $ | 1,657,356 | | | $ | 72,066 | | | $ | 3,994,352 | |
| 2020 | | $ | 624,631 | | | $ | — | | | $ | 1,500,021 | | | $ | 1,114,275 | | | $ | 59,882 | | | $ | 3,298,809 | |
| Justin Jude | | 2022 | | $ | 614,959 | | | $ | — | | | $ | 1,110,095 | | | $ | 1,316,067 | | | $ | 68,075 | | | $ | 3,109,196 | |
| SVP of Operations - Wholesale Parts Division | | 2021 | | $ | 587,260 | | | $ | — | | | $ | 1,050,064 | | | $ | 1,064,712 | | | $ | 50,393 | | | $ | 2,752,429 | |
| 2020 | | $ | 498,770 | | | $ | — | | | $ | 1,050,044 | | | $ | 697,779 | | | $ | 47,474 | | | $ | 2,294,067 | |
| Walter Hanley | | 2022 | | $ | 477,479 | | | $ | — | | | $ | 1,080,061 | | | $ | 1,080,236 | | | $ | 63,861 | | | $ | 2,701,637 | |
| SVP - Development | | 2021 | | $ | 467,452 | | | $ | — | | | $ | 1,050,064 | | | $ | 980,942 | | | $ | 51,986 | | | $ | 2,550,444 | |
| 2020 | | $ | 438,885 | | | $ | — | | | $ | 1,050,044 | | | $ | 683,422 | | | $ | 45,269 | | | $ | 2,217,620 | |
| Matthew McKay* | | 2022 | | $ | 443,699 | | | $ | — | | | $ | 690,006 | | | $ | 598,731 | | | $ | 54,126 | | | $ | 1,786,562 | |
| SVP - General Counsel & Corporate Secretary | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Arnd Franz ** | | 2022 | | $ | 558,993 | | | $ | — | | | $ | 1,110,095 | | | $ | 459,593 | | | $ | 114,424 | | | $ | 2,243,105 | |
| Former SVP and former CEO, LKQ Europe | | 2021 | | $ | 677,068 | | | $ | — | | | $ | 1,050,064 | | | $ | 1,028,892 | | | $ | 143,349 | | | $ | 2,899,373 | |
| 2020 | | $ | 603,552 | | | $ | 221,687 | | | $ | 1,050,044 | | | $ | 221,994 | | | $ | 145,378 | | | $ | 2,242,655 | |
* Compensation for 2021 and 2020 for Mr. Galloway and Mr. McKay is not disclosed because neither were named executive officers during those fiscal years.
** Mr. Franz's employment relationship with the Company terminated effective October 31, 2022. Amounts included within the tables above and that follow for 2022, 2021 and 2020 are translated from Swiss Francs (CHF) or Euros to U.S. Dollars at the 2022, 2021 and 2020 average exchange rates.
(1) The base compensation of our executive officers is discussed beginning on page 31. With respect to year 2020, the base compensation of our executive officers reflects both the 20% salary reductions during the second quarter of 2020 and a four-month delay in adjusting the salaries. (2) The amount shown as bonus for Mr. Franz for 2020 represents the difference between his actual award under the annual incentive plan and the amount he would have received if his targets under that plan had not been modified as described in the proxy statement we filed with the SEC in connection with our 2021 Annual Meeting of Stockholders.
(3)The amounts shown above represent the aggregate grant date fair value of awards granted during the period indicated, calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value was calculated by multiplying the volume-weighted average price of underlying shares on the date of grant by the number of awards granted. PSU-1s have only a single possible achievement level (target), which was the basis for the grant date fair value disclosed in the table above. PSU-2s may be earned from 0% to 200% of the target number of share units based on performance versus goals for the performance period beginning January 1, 2022 and ending December 31, 2024 and were valued based on performance at 100% of target in the table above. The following table summarizes the grant date fair value of the 2022 PSU-1 and PSU-2 awards as disclosed above and at maximum achievement levels for each executive:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | PSU-1s Grant Date Fair Value | | PSU-2s Grant Date Fair Value |
| Name | | Target | | Maximum | | Target | | Maximum |
| Dominick Zarcone | | $ | 2,800,038 | | | $ | 2,800,038 | | | $ | 2,200,037 | | | $ | 4,400,074 | |
| Rick Galloway | | $ | — | | | $ | — | | | $ | 330,002 | | | $ | 660,004 | |
| Varun Laroyia | | $ | 1,050,027 | | | $ | 1,050,027 | | | $ | 525,013 | | | $ | 1,050,026 | |
| Justin Jude | | $ | 740,047 | | | $ | 740,047 | | | $ | 370,048 | | | $ | 740,096 | |
| Walter Hanley | | $ | 720,041 | | | $ | 720,041 | | | $ | 360,020 | | | $ | 720,040 | |
| Matthew McKay | | $ | 460,004 | | | $ | 460,004 | | | $ | 230,002 | | | $ | 460,004 | |
| Arnd Franz | | $ | 740,047 | | | $ | 740,047 | | | $ | 370,048 | | | $ | 740,096 | |
(4) Our Non-Equity Incentive Plan Compensation includes amounts related to our cash-based LTI awards and annual bonus awards. The amounts for each named executive officer for each of these award categories are set forth in the table below. The amounts shown under Cash-Based LTI Earned for 2022 are equal to the amounts earned and subsequently paid for the 2020-2022 performance period, the amounts shown under Cash-Based LTI Earned for 2021 are equal to the amounts earned and subsequently paid for the 2019-2021 performance period and the amounts shown under Cash-Based LTI Earned for 2020 are equal to the amounts earned and subsequently paid for the 2018-2020 performance period. The amounts shown under Annual Bonus Earned are equal to the amounts earned and subsequently paid for each annual performance period under our annual bonus program related to the years presented. For more information regarding our annual incentive awards, see the section entitled “Annual Bonus Awards” beginning on page 32. For more information regarding our Cash-Based LTI awards, see the section entitled “Long Term Incentive Awards” beginning on page 34.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Name | | Year | | Cash-Based LTI Earned | | Annual Bonus Earned | | Total |
| Dominick Zarcone | | 2022 | | $ | 2,152,500 | | | $ | 2,362,781 | | | $ | 4,515,281 | |
| | | 2021 | | $ | 1,200,000 | | | $ | 2,835,000 | | | $ | 4,035,000 | |
| | | 2020 | | $ | 483,210 | | | $ | 2,520,315 | | | $ | 3,003,525 | |
| Rick Galloway | | 2022 | | $ | 259,161 | | | $ | 376,417 | | | $ | 635,578 | |
| Varun Laroyia | | 2022 | | $ | 861,000 | | | $ | 990,666 | | | $ | 1,851,666 | |
| | | 2021 | | $ | 510,000 | | | $ | 1,147,356 | | | $ | 1,657,356 | |
| | | 2020 | | $ | 314,175 | | | $ | 800,100 | | | $ | 1,114,275 | |
| Justin Jude | | 2022 | | $ | 602,700 | | | $ | 713,367 | | | $ | 1,316,067 | |
| | | 2021 | | $ | 360,000 | | | $ | 704,712 | | | $ | 1,064,712 | |
| | | 2020 | | $ | 230,395 | | | $ | 467,384 | | | $ | 697,779 | |
| | Walter Hanley | | 2022 | | $ | 602,700 | | | $ | 477,536 | | | $ | 1,080,236 | |
| | | | 2021 | | $ | 420,000 | | | $ | 560,942 | | | $ | 980,942 | |
| | | | 2020 | | $ | 192,694 | | | $ | 490,728 | | | $ | 683,422 | |
| Matthew McKay | | 2022 | | $ | 154,980 | | | $ | 443,751 | | | $ | 598,731 | |
| Arnd Franz | | 2022 | | $ | — | | | $ | 459,593 | | | $ | 459,593 | |
| | | 2021 | | $ | 230,942 | | | $ | 797,950 | | | $ | 1,028,892 | |
| | | 2020 | | $ | — | | | $ | 221,994 | | | $ | 221,994 | |
(5) The amounts include Company matching contributions under retirement plans, payment of life insurance, disability insurance, accidental death or disability insurance premiums, and other miscellaneous compensation related payments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Retirement Plans | | Life Insurance Premiums | | Disability Insurance Premiums | | Other | | Total |
| Dominick Zarcone | | $ | 158,448 | | | $ | 7,524 | | | $ | 9,564 | | | $ | — | | | $ | 175,536 | |
| Rick Galloway | | $ | 35,218 | | | $ | 1,140 | | | $ | 6,825 | | | $ | — | | | $ | 43,183 | |
| Varun Laroyia | | $ | 82,418 | | | $ | 2,622 | | | $ | 8,812 | | | $ | 67,656 | | (a) | $ | 161,508 | |
| Justin Jude | | $ | 58,732 | | | $ | 1,710 | | | $ | 7,633 | | | $ | — | | | $ | 68,075 | |
| Walter Hanley | | $ | 48,355 | | | $ | 4,902 | | | $ | 10,604 | | | $ | — | | | $ | 63,861 | |
| Matthew McKay | | $ | 44,921 | | | $ | 1,710 | | | $ | 7,495 | | | $ | — | | | $ | 54,126 | |
| Arnd Franz | | $ | 95,193 | | (b) | $ | — | | | $ | — | | | $ | 19,231 | | | $ | 114,424 | |
|
| | | | | | | | | | | | | | | | | |
| | | | PSU-1s Grant Date Fair Value | | PSU-2s Grant-Date Fair Value |
| | Name | | Target | | Maximum | | Target | | Maximum |
| | Dominick Zarcone | | $ | 2,000,006 |
| | $ | 2,000,006 |
| | $ | 1,000,017 |
| | $ | 2,000,034 |
|
| | | | | | | | | | |
| | Varun Laroyia | | $ | 850,024 |
| | $ | 850,024 |
| | $ | 425,026 |
| | $ | 850,052 |
|
| | | | | | | | | | |
| | Arnd Franz | | $ | 672,781 |
| | $ | 672,781 |
| | $ | 184,918 |
| | $ | 369,832 |
|
| | | | | | | | | | |
| | John S. Quinn | | $ | 850,024 |
| | $ | 850,024 |
| | $ | 425,026 |
| | $ | 850,052 |
|
| | | | | | | | | | |
| | Justin L. Jude | | $ | 600,027 |
| | $ | 600,027 |
| | $ | 300,013 |
| | $ | 600,026 |
|
| | | | | | | | | | |
| | Walter P. Hanley | | $ | 700,004 |
| | $ | 700,004 |
| | $ | 350,001 |
| | $ | 700,004 |
|
| | | | | | | | | | |
41
|
| |
(4) | Our Non-Equity Incentive Plan Compensation includes amounts related to our LTI awards and annual incentive awards. The amounts for each named executive officer for each of these award categories are set forth in the table below. The amounts shown under LTI Earned for 2019 are equal to the amounts earned and subsequently paid for the 2017-2019 performance period, the amounts shown under LTI Earned for 2018 are equal to the amounts earned and subsequently paid for the 2016-2018 performance period, and the amounts shown under LTI Earned for 2017 are equal to the amounts earned and subsequently paid for the 2015-2017 performance period. The amounts shown under Deferred LTI reflect payments in the respective years for awards for the 2012-2014 performance period that were subject to mandatory deferral and continuing service requirements. The amounts shown under Annual are equal to the amounts earned and subsequently paid for each annual performance period under the CIP related to the years presented. For more information regarding our annual incentive awards, see the section entitled "Annual Bonus Awards" beginning on page 25. For more information regarding our cash LTI awards, see the section entitled "Long Term Incentive Awards" beginning on page 26. |
|
| | | | | | | | | | | | | | | |
| | Name | | Year | | LTI Earned | | Deferred LTI | | Annual |
| | Dominick Zarcone | | 2019 | | $ | 638,368 |
| | $ | — |
| | $ | 1,735,446 |
|
| | | | 2018 | | $ | 619,031 |
| | $ | — |
| | $ | 596,918 |
|
| | | | 2017 | | $ | 718,575 |
| | $ | — |
| | $ | 729,498 |
|
| | | | | | | | | | |
| | Varun Laroyia | | 2019 | | $ | 260,259 |
| | $ | — |
| | $ | 474,411 |
|
| | | | 2018 | | $ | — |
| | $ | — |
| | $ | 193,750 |
|
| | | | 2017 | | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | |
| | Arnd Franz | | 2019 | | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | |
| | John S. Quinn | | 2019 | | $ | 362,100 |
| | $ | — |
| | $ | 167,569 |
|
| | | | 2018 | | $ | 359,083 |
| | $ | — |
| | $ | 229,533 |
|
| | | | 2017 | | $ | 499,297 |
| | $ | 219,316 |
| | $ | 376,760 |
|
| | | | | | | | | | |
| | Justin Jude | | 2019 | | $ | 301,750 |
| | $ | — |
| | $ | 463,696 |
|
| | | | | | | | | | |
| | Walter P. Hanley | | 2019 | | $ | 277,610 |
| | $ | — |
| | $ | 390,764 |
|
| | | | 2018 | | $ | 271,575 |
| | $ | — |
| | $ | 173,345 |
|
| | | | 2017 | | $ | 375,400 |
| | $ | 175,453 |
| | $ | 286,000 |
|
| | | | | | | | | | |
|
| |
(5) | The amounts include Company matching contributions under retirement plans, the amount of life insurance and accidental death or disability insurance premiums paid by us for the benefit of the named executive officers, the amount we pay to our named executive officers as reimbursement for their payment of the premiums for disability insurance, vehicle lease payments, and other compensation. The amounts for each named executive officer for each such category of 2019 compensation are set forth in the table below. |
Table of Contents
(a) As part of his assignment in Europe, Mr. Laroyia received benefits in 2022 related to housing, family travel, vehicle leasing and tuition.
(b) LKQ was obligated annually to contribute CHF109,000 to a European defined contribution plan on behalf of Mr. Franz. The amount included is prorated for the portion of the year that Mr. Franz was employed by LKQ.
|
| | | | | | | | | | | | | | | | | |
| | Name | | Retirement Plans | | Life Insurance Premiums | | Disability Insurance Premiums | | Other (b) (c) |
| | Dominick Zarcone | | $ | 62,876 |
| | $ | 7,341 |
| | $ | 10,018 |
| | $ | — |
|
| | | | | | | | | | |
| | Varun Laroyia | | $ | 29,683 |
| | $ | 1,668 |
| | $ | 7,156 |
| | $ | — |
|
| | | | | | | | | | |
| | Arnd Franz (a) | | $ | 111,940 |
| | $ | — |
| | $ | — |
| | $ | 10,909 |
|
| | | | | | | | | | |
| | John S. Quinn | | $ | 33,124 |
| | $ | 7,631 |
| | $ | 755 |
| | $ | 1,093,894 |
|
| | | | | | | | | | |
| | Justin Jude | | $ | 25,383 |
| | $ | 1,112 |
| | $ | 6,275 |
| | $ | — |
|
| | | | | | | | | | |
| | Walter P. Hanley | | $ | 25,081 |
| | $ | 2,558 |
| | $ | 8,482 |
| | $ | — |
|
| | | | | | | | | | |
42
|
| |
(a) | LKQ is obligated annually to contribute €100,000 to a pension plan on behalf of Mr. Franz. The amount included here is translated from Euros to U.S. Dollars at the average 2019 exchange rate. |
(b) | Other compensation for Mr. Franz consists of lease payments for a vehicle and premium payments for an accidental death or disability policy. |
(c) | Other compensation for Mr. Quinn consists of tax equalization benefits and reimbursement of (i) housing, (ii) one vehicle lease, and (iii) family travel between the United States and the United Kingdom relating to his assignment in Europe. The amounts of each of these items that exceeded 10% of the total perquisites and personal benefits for Mr. Quinn during 2019 were as follows: tax equalization benefits - $887,755 and housing - $176,227. In addition, the Company engaged in certain foreign currency exchange transactions on behalf of Mr. Quinn. Mr. Quinn paid all fees incurred by the Company in connection with such exchange transactions. |
Grants of Plan-Based Awards for Fiscal Year Ended December 31, 20192022
The following table sets forth information regarding plan-based awards granted by us to the named executive officers during the last fiscal year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Award Type | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3) | | All Other Stock Awards: Number of Shares of Stock or Units
(#) | | Grant Date Fair Value of Stock and Option Awards (5) ($) |
| | | Threshold ($) | | Target
($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | |
| Dominick Zarcone | | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | 57,242 | | | — | | | — | | | $ | 2,800,038 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 22,488 | | | 44,976 | | | 89,952 | | | — | | | $ | 2,200,037 | |
| | Annual Bonus | | | | $ | 708,750 | | | $ | 1,417,500 | | | $ | 2,835,000 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 700,000 | | | $ | 1,400,000 | | | $ | 2,800,000 | | | — | | | — | | | — | | | — | | | $ | — | |
| Rick Galloway | | RSU (4) | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | — | | | — | | | 7,985 | | | $ | 390,055 | |
| | RSU (4) | | 9/15/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | — | | | — | | | 1,832 | | | $ | 90,045 | |
| | PSU-2 (6) | | 9/15/2022 | | $ | — | | | $ | — | | | $ | — | | | 3,357 | | | 6,714 | | | 13,428 | | | — | | | $ | 330,002 | |
| | Annual Bonus | | | | $ | 104,594 | | | $ | 209,187 | | | $ | 418,375 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 80,217 | | | $ | 160,433 | | | $ | 320,866 | | | — | | | — | | | — | | | — | | | $ | — | |
| Varun Laroyia | | RSU (4) | | 9/15/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | — | | | — | | | 35,605 | | | $ | 1,750,032 | |
| | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | | | 21,466 | | | | | �� | | | $ | 1,050,027 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 5,367 | | | 10,733 | | | 21,466 | | | — | | | $ | 525,013 | |
| | Annual Bonus | | | | $ | 297,164 | | | $ | 594,329 | | | $ | 1,188,658 | | | | | | | | | | | $ | — | |
| | LTI | | | | $ | 262,500 | | | $ | 525,000 | | | $ | 1,050,000 | | | — | | | — | | | — | | | — | | | $ | — | |
| Justin Jude | | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | 15,129 | | | — | | | — | | | $ | 740,047 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 3,783 | | | 7,565 | | | 15,130 | | | — | | | $ | 370,048 | |
| | Annual Bonus | | | | $ | 184,488 | | | $ | 368,975 | | | $ | 737,951 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 185,000 | | | $ | 370,000 | | | $ | 740,000 | | | — | | | — | | | — | | | — | | | $ | — | |
| Walter Hanley | | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | 14,720 | | | — | | | — | | | $ | 720,041 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 3,680 | | | 7,360 | | | 14,720 | | | — | | | $ | 360,020 | |
| | Annual Bonus | | | | $ | 143,244 | | | $ | 286,488 | | | $ | 572,975 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 180,000 | | | $ | 360,000 | | | $ | 720,000 | | | — | | | — | | | — | | | — | | | $ | — | |
| Matthew McKay | | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | 9,404 | | | — | | | — | | | $ | 460,004 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 2,351 | | | 4,702 | | | 9,404 | | | — | | | $ | 230,002 | |
| | Annual Bonus | | | | $ | 133,110 | | | $ | 266,219 | | | $ | 532,438 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 115,000 | | | $ | 230,000 | | | $ | 460,000 | | | — | | | — | | | — | | | — | | | $ | — | |
Arnd Franz(7) | | PSU-1 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | — | | | 15,129 | | | — | | | — | | | $ | 740,047 | |
| | PSU-2 | | 2/18/2022 | | $ | — | | | $ | — | | | $ | — | | | 3,783 | | | 7,565 | | | 15,130 | | | — | | | $ | 370,048 | |
| | Annual Bonus | | | | $ | 201,238 | | | $ | 402,475 | | | $ | 804,950 | | | — | | | — | | | — | | | — | | | $ | — | |
| | LTI | | | | $ | 185,000 | | | $ | 370,000 | | | $ | 740,000 | | | — | | | — | | | — | | | — | | | $ | — | |
(1) The amounts shown related to the annual bonus awards represent payments that were possible for the 2022 annual performance period. The annual awards for 2022 were calculated as a percentage of weighted average salary of the named executive officer. If the actual achievement is between these levels (between threshold and target or target and maximum), the payout is linearly interpolated. The 2022 annual awards for our named executive officers have been earned and paid, and the actual amount earned by each named executive officer is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The amounts shown related to our LTI represent potential payments after the completion of the three-year performance period ending December 31, 2024. If the actual achievement is between these levels (between threshold and target or target and maximum), the payout is linearly interpolated. See “Executive Compensation - Compensation Discussion and Analysis” for more information.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Award Type | | Grant
Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3) | | All other stock awards: Number of shares of stock or units | | Grant Date
Fair Value
of Stock and
Option
Awards
(4) |
| | | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | |
| Dominick Zarcone | | PSU-1 | | 3/1/2019 | | — |
| | — |
| | — |
| | — |
| | 72,217 |
| | — |
| | — |
| | $ | 2,000,006 |
|
| | PSU-2 | | 3/1/2019 | | — |
| | — |
| | — |
| | 18,055 |
| | 36,109 |
| | 72,218 |
| | — |
| | $ | 1,000,017 |
|
| | | Annual Bonus | | | | $ | 609,375 |
| | $ | 1,218,750 |
| | $ | 2,437,501 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | LTI | | | | $ | 500,000 |
| | $ | 1,000,000 |
| | $ | 2,000,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| Varun Laroyia | | PSU-1 | | 3/1/2019 | | — |
| | — |
| | — |
| | — |
| | 30,693 |
| | — |
| | — |
| | $ | 850,024 |
|
| | PSU-2 | | 3/1/2019 | | — |
| | — |
| | — |
| | 7,674 |
| | 15,347 |
| | 30,694 |
| | — |
| | $ | 425,026 |
|
| | | Annual Bonus | | | | $ | 166,443 |
| | $ | 332,885 |
| | $ | 665,770 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | LTI | | | | $ | 212,500 |
| | $ | 425,000 |
| | $ | 850,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| Arnd Franz | | RSU (5) | | 4/1/2019 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 77,394 |
| | $ | 2,242,623 |
|
| | | PSU-1 | | 4/1/2019 | | — |
| | — |
| | — |
| | — |
| | 23,218 |
| | — |
| | — |
| | $ | 672,781 |
|
| | | PSU-2 | | 4/1/2019 | | — |
| | — |
| | — |
| | 3,191 |
| | 6,382 |
| | 12,764 |
| | | | $ | 184,918 |
|
| | | LTI | | | | $ | 92,459 |
| | $ | 184,918 |
| | $ | 369,836 |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| John S. Quinn | | PSU-1 | | 3/1/2019 | | — |
| | — |
| | — |
| | — |
| | 30,693 |
| | — |
| | — |
| | $ | 850,024 |
|
| | PSU-2 | | 3/1/2019 | | — |
| | — |
| | — |
| | 7,674 |
| | 15,347 |
| | 30,694 |
| | — |
| | $ | 425,026 |
|
| | | Annual Bonus | | | | $ | 179,606 |
| | $ | 359,211 |
| | $ | 718,422 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | LTI | | | | $ | 212,500 |
| | $ | 425,000 |
| | $ | 850,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| Justin L. Jude | | PSU-1 | | 3/1/2019 | | — |
| | — |
| | — |
| | — |
| | 21,666 |
| | — |
| | — |
| | $ | 600,027 |
|
| | PSU-2 | | 3/1/2019 | | — |
| | — |
| | — |
| | 5,417 |
| | 10,833 |
| | 21,666 |
| | — |
| | $ | 300,013 |
|
| | | Annual Bonus | | | | $ | 141,923 |
| | $ | 283,846 |
| | $ | 567,692 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | LTI | | | | $ | 150,000 |
| | $ | 300,000 |
| | $ | 600,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| Walter P. Hanley | | PSU-1 | | 3/1/2019 | | — |
| | — |
| | — |
| | — |
| | 25,276 |
| | — |
| | — |
| | $ | 700,004 |
|
| | PSU-2 | | 3/1/2019 | | — |
| | — |
| | — |
| | 6,319 |
| | 12,638 |
| | 25,276 |
| | — |
| | $ | 350,001 |
|
| | | Annual Bonus | | | | $ | 137,193 |
| | $ | 274,385 |
| | $ | 548,770 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | LTI | | | | $ | 175,000 |
| | $ | 350,000 |
| | $ | 700,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | |
(3)In 2022, LKQ granted performance-based three-year equity awards (PSU-2s) under our Equity Incentive Plan. As these awards are performance-based, the exact number of shares to be paid may be zero or may range from 50% to 200% of the target number of shares, depending on the Company's performance and the achievement of certain performance metrics (adjusted diluted EPS, three-year average organic parts & services revenue growth, and three-year average ROIC) over the three-year period ending December 31, 2024 (other than the second PSU-2 grant to Mr. Galloway as described in footnote 6 below). The amounts shown represent the number of shares that may be paid out upon achievement of the threshold, target, and maximum performance levels. Payout for performance between levels will be linearly interpolated. See “Executive Compensation - Compensation Discussion and Analysis” for more information.
(4)The RSUs granted to Mr. Galloway in February 2022 were related to his prior non-executive position. These RSUs will vest approximately 10% every six months over five years with the first vesting occurring in July 2022. The amounts shown for the RSU awards granted in September 2022 to Mr. Galloway and Mr. Laroyia are in connection with their respective new roles. The RSUs granted to Mr. Galloway will vest approximately 16.67% every six months over three years with the first vesting occurring on March 1, 2023. The RSUs granted to Mr. Laroyia vest 25% every six months over two years with the first vesting occurring on March 1, 2023.
(5) The amounts disclosed under the “Grant Date Fair Value of Stock and Option Awards” column represent the grant date fair value calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For more information, please see Footnote 3 to the Summary Compensation Table above.
(6) On September 15, 2022, LKQ granted performance-based three-year equity awards (PSU-2s) under our Equity Incentive Plan to Mr. Galloway with respect to the 2021-2023 and 2022-2024 performance periods. As these awards are performance-based, the exact number of shares to be paid may be zero or may range from 50% to 200% of the target number of shares, depending on the Company's performance and the achievement of certain performance metrics (adjusted diluted EPS, three-year average organic parts & services revenue growth, and three-year average ROIC) over the three-year periods ending December 31, 2023 and December 31, 2024 (note that these are the same metrics for the PSU-2 grants to other NEOs in 2021 and 2022). The amounts shown represent the number of shares that may be paid out upon achievement of the threshold, target, and maximum performance levels. Payout for performance between levels will be linearly interpolated. See “Executive Compensation - Compensation Discussion and Analysis” for more information.
(7) Upon his termination, Mr. Franz forfeited each of these awards other than his pro-rated annual bonus, which was paid pursuant to Swiss Law.
|
| |
(1) | The amounts shown related to our LTI represent potential payments after the completion of the three-year performance period ending December 31, 2021. Under the LTI awards, a minimum amount is paid if a threshold level of performance is achieved, a target amount is paid if a target level of growth is achieved, and a maximum award is paid if a specified higher level of performance is achieved. If the actual achievement is between these levels (between target and maximum or target and minimum), the payout is calculated using a linear formula. The amounts shown related to the annual awards represent payments that were possible for the 2019 annual performance period. The annual awards are calculated as a percentage of weighted average base salary of the named executive officer. A minimum amount is paid if a threshold level of performance is achieved, and a maximum award is paid if a specified higher level of performance is achieved. Performance between these two levels results in a proportionate payment of the award. The 2019 annual awards for our named executive officers have been earned and paid, and the actual amount earned by each named executive officer is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. See "Executive Compensation - Compensation Discussion and Analysis" for more information. |
(2) | In 2019, LKQ granted performance-based three-year equity awards (PSU-2s) under our Equity Incentive Plan. As these awards are performance-based, the exact number of shares to be paid may be zero or may range from 50% to 200% of the target number of shares, depending on the Company's performance and the achievement of certain performance metrics (adjusted diluted EPS, three-year average organic parts & services revenue growth, and three-year average return on invested capital) over the three year period ending December 31, 2021. The amounts shown represent the number of shares that may be paid out upon achievement of the threshold, target, and maximum performance levels. See "Executive Compensation - Compensation Discussion and Analysis" for more information. |
(3) | The amounts shown for the PSU-1 award type represent the number of shares to be paid out upon the vesting of performance-based RSUs granted during the year. There is a single performance condition, so no threshold or maximum payouts are disclosed, and there is either a full payout of the amount shown (subject to time-based vesting) or no payout. See "Executive Compensation - Compensation Discussion and Analysis" for more information. |
(4) | The amounts disclosed under the "Grant Date Fair Value of Stock and Option Awards" column represent the grant date fair value calculated in accordance with FASB ASC Topic 718. |
(5) | In 2019, LKQ granted a sign-on RSU award to Mr. Franz that vests 16.67% every six months over three years. |
Outstanding Equity Awards at Fiscal Year-End December 31, 20192022
The following table sets forth information regarding the status of equity awards held by the named executive officers at December 31,
2019. |
| | | | | | | | | | | | | | |
| | | Stock Awards (1) |
| Name | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (2) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) |
| Dominick Zarcone | | 35,039 |
| | $ | 1,250,892 |
| | 90,272 |
| | $ | 3,222,710 |
|
| | |
|
| |
|
| | | | |
| Varun Laroyia | | 38,131 |
| | $ | 1,361,277 |
| | 38,367 |
| | $ | 1,369,702 |
|
| | |
|
| |
|
| | | | |
| Arnd Franz | | 64,495 |
| | $ | 2,302,472 |
| | 26,409 |
| | $ | 942,801 |
|
| | | | | | | | | |
| John S. Quinn | | 19,786 |
| | $ | 706,360 |
| | 38,367 |
| | $ | 1,369,702 |
|
| | |
|
| |
|
| | | | |
| Justin Jude | | 9,793 |
| | $ | 349,610 |
| | 27,083 |
| | $ | 966,863 |
|
| | |
|
| |
|
| |
|
| |
|
|
| Walter P. Hanley | | 18,024 |
| | $ | 643,457 |
| | 31,595 |
| | $ | 1,127,942 |
|
| | | | | | | | | |
|
| |
(1) | RSUs vest over periods of up to five years, subject to a continued service condition or certain other conditions following retirement. In 2019, we granted performance-based restricted stock units (PSU-2s). The exact number of shares to be paid out after completion of the performance period may be up to twice the grant amount. The following table sets forth the vesting schedule of the earned and unearned number of units for each named executive officer assuming the satisfaction of the performance vesting condition of the unearned units, which will occur subsequent to December 31, 2019: |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Stock Awards (1) |
| Name | | Number of Shares or Units of Stock That Have Not Vested
(#) | | Market Value of Shares or Units of Stock That Have Not Vested (2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2)(3) |
| Dominick Zarcone | | 106,227 | | | $ | 5,673,584 | | | 227,731 | | | $ | 12,163,113 | |
| Rick Galloway | | 23,413 | | | $ | 1,250,488 | | | 13,428 | | | $ | 717,189 | |
| Varun Laroyia | | 75,103 | | | $ | 4,011,251 | | | 73,458 | | | $ | 3,923,392 | |
| Justin Jude | | 27,750 | | | $ | 1,482,128 | | | 51,526 | | | $ | 2,752,004 | |
| Walter Hanley | | 27,341 | | | $ | 1,460,283 | | | 51,116 | | | $ | 2,730,106 | |
| Matthew McKay | | 15,638 | | | $ | 835,226 | | | 23,835 | | | $ | 1,273,027 | |
| Arnd Franz | | — | | | $ | — | | | — | | | $ | — | |
|
| | | | | | | | | | | | | |
| | | | 2020 | | 2021 | | 2022 | | Total |
| | Dominick Zarcone | | 71,148 |
| | 42,127 |
| | 12,036 |
| | 125,311 |
|
| | Varun Laroyia | | 38,433 |
| | 27,694 |
| | 10,371 |
| | 76,498 |
|
| | Arnd Franz | | 37,407 |
| | 36,729 |
| | 16,768 |
| | 90,904 |
|
| | John S. Quinn | | 30,600 |
| | 22,438 |
| | 5,115 |
| | 58,153 |
|
| | Justin Jude | | 18,898 |
| | 14,367 |
| | 3,611 |
| | 36,876 |
|
| | Walter P. Hanley | | 26,533 |
| | 18,874 |
| | 4,212 |
| | 49,619 |
|
We granted performance-based restricted stock units (PSU-2s) in 2020, 2021 and 2022. The exact number of shares to be paid out after completion of the performance period may be up to twice the grant amount. The following table sets forth the vesting schedule of the unvested number of RSUs, PSU-1s and PSU-2s for each named executive officer as of December 31, 2022, with the 2020 PSU-2s based on actual achievement of 172% of target for the performance period ended December 31, 2022, and the 2021 and 2022 PSU-2s, for which the performance period has not yet ended, based on maximum potential achievement:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Total |
| Dominick Zarcone | | 130,422 | | | 104,043 | | | 99,493 | | | — | | | — | | | 333,958 | |
| Rick Galloway | | 8,009 | | | 12,486 | | | 13,263 | | | 2,286 | | | 797 | | | 36,841 | |
| Varun Laroyia | | 68,216 | | | 55,302 | | | 25,043 | | | — | | | — | | | 148,561 | |
| Justin Jude | | 35,341 | | | 26,284 | | | 17,651 | | | — | | | — | | | 79,276 | |
| Walter Hanley | | 35,136 | | | 26,148 | | | 17,173 | | | — | | | — | | | 78,457 | |
| Matthew McKay | | 13,987 | | | 14,515 | | | 10,971 | | | — | | | — | | | 39,473 | |
| Arnd Franz | | — | | | — | | | — | | | — | | | — | | | — | |
(2) The amounts shown in these columns are based on the closing price of a share of our common stock on December 30, 2022, the last trading day of fiscal year 2022.
(3) The amounts shown in these columns include shares subject to PSU-2s, with the numbers and values of such shares based on actual achievement for the 2020 PSU-2s, for which the performance period ended December 31, 2022, and maximum potential achievement for the PSU-2s granted in 2021 and 2022, for which the performance period has not yet ended.
|
| |
(2) | The amounts shown in these columns include shares subject to PSU-2s, with the numbers and values of such shares based on performance at threshold levels.
|
Option Exercises andand Stock Vested for Fiscal Year Ended December 31, 20192022
The following table sets forth information regarding the exercisevesting of stock options by the named executive officersofficers' RSUs, PSU-1s, and the vesting of RSUsPSU-2s during the last fiscal year.
| | | | | | | | | | | | | | |
| | | Stock Awards |
| Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(1) |
| Dominick Zarcone | | 116,926 | | | $ | 5,707,504 | |
| Rick Galloway | | 6,600 | | | $ | 346,839 | |
| Varun Laroyia | | 51,849 | | | $ | 2,551,093 | |
| Justin Jude | | 32,757 | | | $ | 1,597,661 | |
| Walter Hanley | | 35,524 | | | $ | 1,730,814 | |
| Matthew McKay | | 12,504 | | | $ | 610,639 | |
| Arnd Franz | | 40,468 | | | $ | 2,074,204 | |
(1) The amounts shown in this column are based on the closing price of a share of our common stock on the vesting date of the applicable stock awards.
Pension Benefits
None of our named executive officers participated in or received benefits from a pension plan during the last fiscal year or in any prior year.
|
| | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Exercise | | Value Realized on Exercise | | Number of Shares Acquired on Vesting | | Value Realized on Vesting |
| Dominick Zarcone | | — |
| | — |
| | 56,953 |
| | $ | 1,576,438 |
|
| Varun Laroyia | | — |
| | — |
| | 27,619 |
| | $ | 747,107 |
|
| Arnd Franz | | — |
| | — |
| | 12,899 |
| | $ | 338,385 |
|
| John S. Quinn | | 160,000 |
| | $ | 3,712,032 |
| | 56,073 |
| | $ | 1,607,692 |
|
| Justin L. Jude | | 30,000 |
| | $ | 530,061 |
| | 16,224 |
| | $ | 436,714 |
|
| Walter P. Hanley | | — |
| | — |
| | 30,073 |
| | $ | 811,211 |
|
Nonqualified Deferred Compensation for Fiscal Year Ended December 31, 20192022
The following table sets forth information regarding the accounts of the named executive officers in the retirement plans that supplement our 401(k) plan. These supplemental plans are discussed beginning on page 29. |
| | | | | | | | | | | | | | | | | | | | |
| Name | | Executive Contributions in Last FY (1) | | Registrant Contributions in Last FY (2) | | Aggregate Earnings in Last FY | | Aggregate Withdrawals/ Distributions (3) | | Aggregate Balance at Last FYE (4) |
| Dominick Zarcone | | $ | 384,830 |
| | $ | 35,508 |
| | $ | 53,809 |
| | $ | — |
| | $ | 817,037 |
|
| Varun Laroyia | | $ | 33,136 |
| | $ | 19,631 |
| | $ | 34,499 |
| | $ | (2,986 | ) | | $ | 187,163 |
|
Arnd Franz (5) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| John S. Quinn | | $ | 30,687 |
| | $ | 19,282 |
| | $ | 21,165 |
| | $ | (47,099 | ) | | $ | 309,637 |
|
| Justin L. Jude | | $ | 278,214 |
| | $ | 11,652 |
| | $ | 377,928 |
| | $ | — |
| | $ | 2,180,344 |
|
| Walter P. Hanley | | $ | 18,817 |
| | $ | 11,437 |
| | $ | 598,083 |
| | $ | — |
| | $ | 3,673,996 |
|
|
| |
(1) | These amounts represent contributions to the supplemental plan by the named executive officers from their respective 2019 salaries and 2018 bonuses (paid in 2019) reported in the Summary Compensation Table under the columns entitled “Salary” (in 2019) and “Non-Equity Incentive Plan Compensation” (in 2018). |
(2) | These amounts were also reported in the Summary Compensation Table under the column entitled “All Other Compensation.” |
(3) | These amounts represent in-service distributions and transfers on behalf of the named executive officers from the nonqualified plan to our 401(k) plan that are permitted by the tax laws.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Executive Contributions in Last FY (1) | | Registrant Contributions in Last FY (2) | | Aggregate Earnings in Last FY | | Aggregate Withdrawals/Distributions | | Aggregate Balance at Last FYE (3) | | Dominick Zarcone | | $ | 305,100 | | | $ | 148,535 | | | $ | (15,675) | | | $ | — | | | $ | 2,060,482 | | | Rick Galloway | | $ | 55,927 | | | $ | 25,305 | | | $ | (41,736) | | | $ | — | | | $ | 157,281 | | | Varun Laroyia | | $ | 116,357 | | | $ | 72,505 | | | $ | (129,695) | | | $ | — | | | $ | 664,467 | | | Justin Jude | | $ | 117,553 | | | $ | 48,819 | | | $ | (479,604) | | | $ | — | | | $ | 3,212,918 | | | Walter Hanley | | $ | 62,295 | | | $ | 38,442 | | | $ | (1,163,593) | | | $ | — | | | $ | 3,641,605 | | | Matthew McKay | | $ | 56,737 | | | $ | 35,008 | | | $ | (104,981) | | | $ | — | | | $ | 841,863 | | Arnd Franz (4) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
(1) These amounts represent contributions to the supplemental plan by the named executive officers from their respective 2022 salaries and 2021 bonuses (paid in 2022) reported in the Summary Compensation Table under the columns entitled “Salary” (in 2022) and “Non-Equity Incentive Plan Compensation” (in 2021). (2) These amounts were also reported in the Summary Compensation Table under the column entitled “All Other Compensation.” (3)These amounts represent money we owe the named executive officers for salaries and incentive compensation they earned in prior years but did not receive because they elected to defer receipt. The following amounts of executive and Company contributions were included in the Summary Compensation Table in prior years: Mr. Zarcone - $1,499,543; Mr. Laroyia - $431,733; Mr. Jude - $766,578; and Mr. Hanley - $2,611,442. Mr. Galloway and Mr. McKay's contributions were not included in the Summary Compensation Table in prior years as they were not named executive officers during such years. (4)As a European executive officer, Mr. Franz did not participate in this type of retirement plan.
|
(4) | These amounts represent money we owe the named executive officers for salaries and incentive compensation they earned in prior years but did not receive because they elected to defer receipt. The following amounts of executive and Company contributions were included in the Summary Compensation Table in prior years: Mr. Zarcone - $385,648; Mr. Laroyia - $122,270; Mr. Quinn - $673,894; Mr. Hanley - $2,427,827. |
(5) | As a European executive officer, Mr. Franz does not participate in this type of retirement plan. |
Potential Payments Upon Termination or Change in Control
Severance Policy
The Severance Policy applies to the executive officers of the Company and any other executive designated by the Compensation and Human Capital Committee (“Covered Executives”). It provides that, in the event the employment of a Covered Executive is terminated by the Company without “cause” or by the Covered Executive with “good reason” (as each term is defined in the Severance Policy)Policy or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia), the Company will provide to such Covered Executive (a) a pro rata bonus for the year in which the termination occurs (based on the actual performance achieved, as applicable to other active participants), (b) during the Severance Period (defined as 18 months in the case of the Chief Executive Officer and our Chief Financial Officer and 12 months for all other Covered Executives), a monthly severance payment equal to one-twelfth of the sum of the Covered Executive’s latest annual base salary and the average annual bonus (for the two prior full fiscal years), (c) a pro rata payment of any pending long term incentive award (based on the actual performance achieved, as applicable to other active participants), (d) Company-subsidized health and dental coverage during the applicable Severance Period, (e) continuation of vesting of outstanding restricted stock units during the applicable Severance Period, and (f) outplacement services. The foregoing payments and benefits for a Covered Executive could be reduced in connection with the application of Internal Revenue Code Section 280G if such a reduction would enable the Covered Executive to financially benefit on an after-tax basis.
The receipt by a Covered Executive of any severance benefits is conditioned upon (a) the delivery by the Covered Executive of a full and unconditional release of all claims against the Company, and (b) compliance by the Covered Executive during the Severance Period with provisions relating to confidentiality, non-competition, non-solicitation of the Company’s customers, and non-hiring of the Company’s employees.
Change of Control Agreements
The Change of Control Agreements with our executive officers provide certain severance payments and other benefits upon a qualifying termination. Each of our named executive officers is a party to a change of control agreement. If the employee’s employment with the Company is terminated within two years following a Change of Control (or within 12 months prior to a Change of Control in certain circumstances) as a result of an Involuntary Termination (as defined in the agreements), then the
employee will be entitled to receive payments and benefits that include the following:
•Payment of salary and other compensation accrued through the termination date;
•Payment of a pro rata annual bonus (in a lump-sum);
•A lump sum severance payment equal to two times (two-and-one-half times in the case of Mr. Zarcone) the sum of the employee's (a) salary and (b) the greater of the employee's target annual bonus or average annual bonus over the preceding three years;
•If applicable, all unreimbursed relocation expenses;
•Continuing coverage of the employee and the employee's dependents under the Company's health and dental care plans for up to a period of 24 months (30 months in the case of Mr. Zarcone);
•Outplacement services; and
•The employee's outstanding equity-based compensation awards shall become vested and exercisable (in the case of performance-based awards, based on actual or assumed performance).
If the employee’s employment with the Company is terminated as a result of death or disability, the employee or his or her estate will be entitled to receive salary and other compensation accrued through the termination date and a pro rata annual bonus (in a lump-sum). If the employee’s employment with the Company is terminated for Cause or the employee resigns for other than Good Reason (as those terms are defined in the agreement) the employee will be entitled to receive salary and other compensation accrued through the termination date.
The agreement also contains confidentiality obligations on the part of the employee that survive indefinitely and requires that the employee deliver a release to the Company as a condition to receiving payments of benefits under the agreement. The agreement also provides that in the event of a dispute concerning an agreement, the Company will pay the legal fees of the employee.
Under the agreements, a “Change of Control” would include any of the following events:
•any "person,"“person,” as defined in the Exchange Act, acquiring 30% or more of our outstanding common stock or combined voting power of our outstanding securities, subject to certain exceptions;
•during a two-year period, our current directors (or new directors approved by them) cease to constitute a majority of our Board; and
•a merger, consolidation, share exchange, reorganization or similar transaction involving the Company or any of its subsidiaries, a sale of substantially all the Company’s assets, or the acquisition of assets or stock of another entity by the Company (unless following such business combination transaction a majority of the Company’s directors continue as directors of the resulting entity, the holders of the outstanding voting securities of the Company immediately prior to such an event continue to own shares or other securities that represent more than 50% of the combined voting power of the resulting entity after such event in substantially the same proportions as their ownership prior to such business combination transaction, and no person owns 30% or more of the resulting entity’s common stock or voting securities).
In the event of a Change of Control of the Company, certain unpaid benefits under the Severance Policy would be accelerated and paid out upon the Change of Control. The Change of Control Agreements with the Company’s executive officers were amended to address the potential overlap of benefits under the Change of Control Agreement and the Severance Policy. As a result of these revisions, in the event of a Change of Control of the Company, a Covered Executive who is a party to a Change of Control Agreement will generally be eligible only for the benefits under the Change of Control Agreement (and not Severance Policy benefits). Moreover, if a Covered Executive had already received benefits under the Severance Policy, such received benefits would reduce or offset the benefits (to the extent that they are the same type of benefit) that are otherwise provided to the Covered Executive under the Change of Control Agreement.
Other Change of Control Payments
Pursuant to the terms of our Equity Incentive Plan, upon a Change of Control, equity awards granted prior to 2016 become immediately exercisable, restrictions thereon lapse and maximum payout opportunities are deemed earned, as the case may be, as of the effective date of the Change of Control.
For equity awards, granted after 2015, upon a Change of Control, if the acquiror assumes the awards on substantially the terms existing prior to the Change of Control, the vesting periods and/or conditions of the awards do not accelerate; if the acquiror does not assume the award or if the participant’s employment is terminated within two years of the Change of Control, the awards will be deemed fully vested (for performance-based awards, the vesting will be based on the actual or assumed achievement of the performance goals as determined by the Compensation and Human Capital Committee). Pursuant to the terms of our Long Term Incentive Plan, upon a Change of Control, all performance periods are deemed to end as of the end of the calendar quarter coincident with or next following the Change of Control, each performance award will vest, the Compensation Committee will calculate the amount of each such performance award (taking into account the decreased length of the performance period and the time value of money because of early payment), and the performance awards will be paid to the participants. Pursuant to the terms of our Cash Incentive Plan, upon a Change of Control, participants remain eligible to receive payments in accordance with the terms of outstanding awards
subject to continued service, provided that the awards will be calculated based on the better of actual achievement of the performance goals or the target achievement. In addition, if the acquiror does not assume the awards or if the participant’s employment is terminated within two years of the Change of Control, the awards will be deemed earned based on the better of actual achievement of the performance goals or the target achievement.
The following table summarizes the value of payments and benefits that our named executive officers who were employed as of December 31, 2022 would have received under the circumstances described in the table assuming the event occurred on December 31, 2019.2022. The table excludes amounts accrued throughthat were fully-earned as of December 31, 2019 that would be paid in the normal course of continued employment,2022, such as accrued but unpaid salary, and earned annual bonus awards for the oneone-year performance period ended December 31, 2022, and earned cash-based long-term incentive awards and PSU-2s for the three year performance period ended December 31, 2019.2022.
In connection with his termination of employment, the Company entered into a Termination Agreement with Mr. Franz, under which he received his base salary through his last day of employment (October 31, 2022), and, pursuant to Swiss Law, he received a pro rata annual bonus for 2022 based on the number of months he worked for the Company in 2022 in an amount of $459,593, which was paid at the same time annual bonuses were paid to other employees. In addition, Mr. Franz is obligated under the Transition Agreement to abide by certain restrictive covenants, including a perpetual confidentiality covenant and a two-year no hire of senior employees of the Company or its affiliates. Mr. Franz's outstanding unvested equity awards and cash-based LTI were forfeited upon his termination.
| | | | Involuntary Termination (1)(2) | | Change of Control | | Involuntary Termination Following a Change of Control (1) | | Death or Disability (3) | | Involuntary Termination (1)(2) | | Change of Control | | Involuntary Termination Following a Change of Control (1) | | Death or Disability (3) |
| Dominick Zarcone | | | | | | | | Dominick Zarcone | | | | | | | |
| Cash Severance | | Cash Severance | $ | 5,591,486 | | | $ | — | | | $ | 8,533,968 | | | $ | 3,948,424 | |
| Unvested and Accelerated Share-based Awards | | Unvested and Accelerated Share-based Awards | 4,654,468 | | | — | | | 5,673,584 | | | 5,673,584 | |
PSU - 2 Awards (4) | | PSU - 2 Awards (4) | 3,889,637 | | | — | | | 6,291,805 | | | 4,346,986 | |
Cash-Based Long-Term Incentive (5) | | Cash-Based Long-Term Incentive (5) | 2,333,333 | | | — | | | 4,200,000 | | | 2,800,000 | |
Medical and Dental Benefits (6) | | Medical and Dental Benefits (6) | 58,340 | | | — | | | 97,233 | | | — | |
Other Benefits and Perquisites (7) | | Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | | Total | $ | 16,527,264 | | | $ | — | | | $ | 24,796,590 | | | $ | 16,768,994 | |
| Rick Galloway | | Rick Galloway | | | | | | | |
| Cash Severance | $ | 2,457,312 |
| | $ | — |
| | $ | 5,484,375 |
| | $ | 3,000,000 |
| Cash Severance | $ | 1,380,000 | | | $ | — | | | $ | 1,840,000 | | | $ | 2,207,001 | |
| Unvested and Accelerated Share-based Awards | 2,969,669 |
| | 214,414 |
| | 3,829,039 |
| | 3,829,039 |
| Unvested and Accelerated Share-based Awards | 641,721 | | | — | | | 1,250,488 | | | 1,250,488 | |
PSU - 2 Awards (4) | 136,388 |
| | — |
| | 136,388 |
| | 330,000 |
| PSU - 2 Awards (4) | 239,063 | | | — | | | 478,126 | | | 358,595 | |
Cash-Based Long-Term Incentive (5) | 200,789 |
| | — |
| | 200,789 |
| | 839,535 |
| Cash-Based Long-Term Incentive (5) | 262,171 | | | — | | | 473,473 | | | 316,953 | |
Medical and Dental Benefits (6) | 45,535 |
| | — |
| | 75,892 |
| | — |
| Medical and Dental Benefits (6) | 65,481 | | | — | | | 87,308 | | | — | |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | $ | 5,809,693 |
|
| $ | 214,414 |
|
| $ | 9,726,483 |
|
| $ | 7,998,574 |
| Total | $ | 2,588,436 | | | $ | — | | | $ | 4,129,395 | | | $ | 4,133,037 | |
| Varun Laroyia | | | | | | | | Varun Laroyia | | | | | | | |
| Cash Severance | $ | 1,153,125 |
| | $ | — |
| | $ | 1,840,000 |
| | $ | 2,725,000 |
| Cash Severance | $ | 2,660,592 | | | $ | — | | | $ | 3,214,578 | | | $ | 3,535,283 | |
| Unvested and Accelerated Share-based Awards | 1,810,311 |
| | — |
| | 2,457,017 |
| | 2,457,017 |
| Unvested and Accelerated Share-based Awards | 3,153,700 | | | — | | | 4,011,251 | | | 4,011,251 | |
PSU - 2 Awards (4) | 57,965 |
| | — |
| | 57,965 |
| | 140,250 |
| PSU - 2 Awards (4) | 1,389,194 | | | — | | | 1,962,444 | | | 1,267,847 | |
Cash-Based Long-Term Incentive (5)
| 92,831 |
| | — |
| | 92,831 |
| | 413,778 |
| Cash-Based Long-Term Incentive (5) | 841,667 | | | — | | | 1,525,000 | | | 1,025,000 | |
Medical and Dental Benefits (6) | 53,199 |
| | — |
| | 70,932 |
| | — |
| Medical and Dental Benefits (6) | 43,503 | | | — | | | 58,005 | | | — | |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | $ | 3,167,431 |
| | $ | — |
| | $ | 4,518,745 |
| | $ | 5,736,045 |
| Total | $ | 8,088,656 | | | $ | — | | | $ | 10,771,278 | | | $ | 9,839,381 | |
| Arnd Franz | | | | | | | | |
| Justin Jude | | Justin Jude | | | | | | | |
| Cash Severance | $ | 985,072 |
| | $ | — |
| | $ | 1,970,144 |
| | $ | 1,119,400 |
| Cash Severance | $ | 1,206,048 | | | $ | — | | | $ | 2,330,528 | | | $ | 2,948,633 | |
| Unvested and Accelerated Share-based Awards | 1,335,430 |
| | — |
| | 3,131,354 |
| | 3,131,354 |
| Unvested and Accelerated Share-based Awards | 916,142 | | | — | | | 1,482,128 | | | 1,482,128 | |
PSU - 2 Awards (4) | 25,221 |
| | — |
| | 25,221 |
| | 61,023 |
| PSU - 2 Awards (4) | 972,489 | | | — | | | 1,376,536 | | | 890,291 | |
Cash-Based Long-Term Incentive (5) | 25,221 |
| | — |
| | 25,221 |
| | 61,023 |
| Cash-Based Long-Term Incentive (5) | 590,000 | | | — | | | 1,070,000 | | | 720,000 | |
Medical and Dental Benefits (6) | 19,771 |
| | — |
| | 39,543 |
| | — |
| Medical and Dental Benefits (6) | 16,575 | | | — | | | 33,151 | | | — | |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | $ | 2,390,715 |
| | $ | — |
| | $ | 5,191,483 |
| | $ | 4,372,800 |
| Total | $ | 3,701,254 | | | $ | — | | | $ | 6,292,343 | | | $ | 6,041,052 | |
| John S. Quinn | | | | | | | | |
| Walter Hanley | | Walter Hanley | | | | | | | |
| Cash Severance | $ | 600,000 |
| | $ | — |
| | $ | 1,920,000 |
| | $ | 1,000,000 |
| Cash Severance | $ | 1,005,835 | | | $ | — | | | $ | 1,921,623 | | | $ | 2,592,388 | |
| Unvested and Accelerated Share-based Awards | 706,360 |
| | — |
| | 706,360 |
| | 706,360 |
| Unvested and Accelerated Share-based Awards | 905,193 | | | — | | | 1,460,283 | | | 1,460,283 | |
PSU - 2 Awards (4) | 57,965 |
| | — |
| | 57,965 |
| | 140,250 |
| PSU - 2 Awards (4) | 972,489 | | | — | | | 1,365,587 | | | 879,342 | |
Cash-Based Long-Term Incentive (5)
| 94,347 |
| | — |
| | 94,347 |
| | 425,670 |
| Cash-Based Long-Term Incentive (5) | 586,667 | | | — | | | 1,060,000 | | | 710,000 | |
Medical and Dental Benefits (6) | 106,399 |
| | — |
| | 70,932 |
| | — |
| Medical and Dental Benefits (6) | 43,654 | | | — | | | 87,308 | | | — | |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | $ | 1,565,071 |
| | $ | — |
| | $ | 2,849,604 |
| | $ | 2,272,280 |
| Total | $ | 3,513,838 | | | $ | — | | | $ | 5,894,801 | | | $ | 5,642,013 | |
| Justin L. Jude | | | | | | | | |
| Matthew McKay | | Matthew McKay | | | | | | | |
| Cash Severance | $ | 707,793 |
| | $ | — |
| | $ | 1,600,000 |
| | $ | 2,500,000 |
| Cash Severance | $ | 914,538 | | | $ | — | | | $ | 1,707,502 | | | $ | 2,409,851 | |
| Unvested and Accelerated Share-based Awards | 674,659 |
| | 89,250 |
| | 1,123,086 |
| | 1,123,086 |
| Unvested and Accelerated Share-based Awards | 497,247 | | | — | | | 835,226 | | | 835,226 | |
PSU - 2 Awards (4) | 47,736 |
| | — |
| | 47,736 |
| | 99,000 |
| PSU - 2 Awards (4) | 520,961 | | | — | | | 772,095 | | | 511,614 | |
Cash-Based Long-Term Incentive (5) | 78,054 |
| | — |
| | 78,054 |
| | 336,850 |
| Cash-Based Long-Term Incentive (5) | 326,667 | | | — | | | 605,000 | | | 417,500 | |
Medical and Dental Benefits (6) | 13,067 |
| | — |
| | 26,133 |
| | — |
| Medical and Dental Benefits (6) | 43,221 | | | — | | | 86,441 | | | — | |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| Other Benefits and Perquisites (7) | — | | | — | | | — | | | — | |
| Total | $ | 1,521,309 |
| | $ | 89,250 |
| | $ | 2,875,009 |
| | $ | 4,058,936 |
| Total | $ | 2,302,634 | | | $ | — | | | $ | 4,006,264 | | | $ | 4,174,191 | |
| Walter P. Hanley | | | | | | | | |
| Cash Severance | $ | 689,673 |
| | $ | — |
| | $ | 1,472,000 |
| | $ | 2,380,000 |
| |
| Unvested and Accelerated Share-based Awards | 947,228 |
| | — |
| | 1,545,810 |
| | 1,545,810 |
| |
PSU - 2 Awards (4) | 40,916 |
| | — |
| | 40,916 |
| | 115,500 |
| |
Cash-Based Long-Term Incentive (5)
| 68,809 |
| | — |
| | 68,809 |
| | 334,322 |
| |
Medical and Dental Benefits (6) | 35,466 |
| | — |
| | 70,932 |
| | — |
| |
Other Benefits and Perquisites (7) | — |
| | — |
| | — |
| | — |
| |
| Total | $ | 1,782,092 |
|
| $ | — |
|
| $ | 3,198,467 |
|
| $ | 4,375,632 |
| |
(1) Involuntary Termination means termination of employment by the Company without Cause (as defined in the Severance Policy or Change of Control Agreement) or resignation of employment by the named executive officer for Good Reason (as defined in the Severance Policy or Change of Control Agreement or as supplemented by the Laroyia Letter Agreement for Mr. Laroyia).
|
| |
(1) | Involuntary Termination means termination of employment by the Company without Cause (as defined in the Severance Policy or Change of Control Agreement) or resignation of employment by the named executive officer for Good Reason (as defined in the Severance Policy or Change of Control Agreement). |
(2) | The amount shown for the Cash Severance payment would be paid out in equal monthly installments over the Severance Period (18 months in the case of our Chief Executive Officer and our Chief Financial Officer or 12 months in the case of all other Covered Executives), except that the amount shown for Mr. Quinn represents payment of his salary for the full remaining period of his services agreement with the Company. The Unvested and Accelerated Share Based Awards amount represents the value of share-based awards (using the market value of LKQ common stock on the last trading day of 2019, $35.70) that would continue to vest during the Severance Period (18 months in the case of our Chief Executive Officer and our Chief Financial Officer or 12 months in the case of all other Covered Executives). |
(3) | The amount shown for the Cash Severance payment represents the life insurance proceeds payable to the named executive officer’s beneficiaries pursuant to company-provided life insurance coverage in the event of death. In the event of disability, Mr. Quinn would receive long-term disability payments equal to $10,000 per month until he reached the age of 65 pursuant to employer-funded long-term disability insurance coverage; Mr. Franz would receive a long-term disability payment of €750,000 (in the event of a disability due to an accident) pursuant to employer-funded accident insurance coverage; and each of the other named executive officers would receive long-term disability payments equal to $30,000 per month until he reached the age of 65 pursuant to employer-funded long-term disability insurance coverage. |
(4) | The amounts presented for the PSU-2s, which are scheduled to vest in 2021 upon achievement of the performance conditions outlined under the award agreements, are based on actual achievement. |
(5) | The payout amount under the Cash-Based Long Term Incentive in the event of an involuntary termination, a Change of Control, or an involuntary termination following a Change of Control is calculated based on the actual performance of the Company. The payment amount in the event of death or disability is calculated assuming that the target performance metrics were met. |
(6) | Medical and Dental Benefits reflect the lump sum payment to each named executive officer in the event that the terms of the Company’s Health Plans (as defined in the agreement) do not allow participation subsequent to a termination or Change of Control. In the event the Health Plans do allow participation, such benefits paid by the Company will be dependent on actual claims incurred due to the self-insured nature of the Company’s plans. Medical and dental benefits are reduced to the extent that the individual becomes covered under a group health or dental plan providing comparable benefits. |
(7) | In addition to the benefits shown, each named executive officer is entitled to receive outplacement services at the expense of the Company. The amounts to be incurred by the Company for such services would be dependent on the terms and conditions of the services, which would be determined prior to the termination date or Change of Control date. |
(2) The amount shown for the Cash Severance payment would be paid out in equal monthly installments over the Severance Period (18 months in the case of our Chief Executive Officer and our Chief Financial Officer or 12 months in the case of all other Covered Executives except for Mr. Laroyia who also has a Severance Period of 18 months). The Unvested and Accelerated Share Based Awards amount represents the value of share-based awards (using the market value of LKQ common stock on the last trading day of 2022, $53.41) that would continue to vest during the Severance Period (18 months in the case of our Chief Executive Officer and our Chief Financial Officer or 12 months in the case of all other Covered Executives).(3)The amount shown for the Cash Severance payment represents the life insurance proceeds payable to the named executive officer’s beneficiaries pursuant to company-provided life insurance coverage in the event of death. In the event of disability each of the named executive officers would receive long-term disability payments equal to $30,000 per month until he reached the age of 65 pursuant to employer-funded long-term disability insurance coverage.
(4)The performance period for the PSU-2s granted in 2020 ended on December 31, 2022, and therefore these are not included in the table above. Pursuant to our Severance Policy, upon Involuntary Termination without Cause, not related to a Change of Control, the PSU-2s granted in 2021 would be earned on December 31, 2023, which is during the assumed Severance Period for all named executive officers, but the PSU-2s granted in 2022 would not vest during the assumed Severance Period. Amounts presented above are based on projected performance as of December 31, 2022. Pursuant to the award agreement for the PSU-2s, upon Involuntary Termination without Cause Following a Change of Control, vesting of the PSU-2s granted in 2021 and 2022 would accelerate based on projected performance as of December 31, 2022. Pursuant to the award agreement, upon termination due to death or Disability, vesting of the PSU-2s granted in 2021 and 2022 would accelerate at target.
(5)The performance period for the Cash-Based Long-Term Incentives granted in 2020 ended on December 31, 2022, and therefore these are not included in the table above. Pursuant to the Severance Policy, upon Involuntary Termination without Cause, not related to a Change of Control, a pro-rated portion of each of the Cash-Based Long-Term Incentives granted in 2021 and 2022 would be earned, based on actual performance at the end of the performance period. Amounts presented above are based on projected performance as of December 31, 2022. Pursuant to the CIP, upon Involuntary Termination without Cause Following a Change of Control, each of the Cash-Based Long-Term Incentives granted in 2021 and 2022 would be earned at the greater of actual achievement or target. Amounts presented above are based on actual achievement as of December 31, 2022. Pursuant to the CIP, upon termination due to death or Disability, the Cash-Based Long-Term Incentives granted in 2021 and 2022 would be earned at target.
(6)Medical and Dental Benefits reflect the lump sum payment to each named executive officer in the event that the terms of the Company’s Health Plans (as defined in the agreement) do not allow participation subsequent to a termination or Change of Control. In the event the Health Plans do allow participation, such benefits paid by the Company will be dependent on actual claims incurred due to the self-insured nature of the Company’s plans. Medical and dental benefits are reduced to the extent that the individual becomes covered under a group health or dental plan providing comparable benefits.
(7)In addition to the benefits shown, each named executive officer is entitled to receive outplacement services at the expense of the Company. The amounts to be incurred by the Company for such services would be dependent on the terms and conditions of the services, which would be determined prior to the termination date or Change of Control date.
Other than as described above or as set forth in the table above, we do not have any pension, change in control, severance or other post-termination plans or arrangements.
CEO Pay Ratio
As required by SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Dominick Zarcone, our Chief Executive Officer ("CEO"(“CEO”) on December 31, 2019.2022. The pay ratio provided below is a reasonable estimate calculated in accordance with SEC rules and methods for disclosure. Due to estimates, assumptions, adjustments, and statistical sampling permitted under the rules, pay ratio disclosures may involve a degree of imprecision and may not be consistent with the methodologies incorporatedutilized by other companies.
For 2019,2022, the median of the annual total compensation of all our employees, other than our CEO, was $29,945;$34,099; and the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $6,429,072.$10,740,892. As a result, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all our employees was approximately 215315 to 1.We took the following steps to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO.
1.To identify the “median employee” from our employee population determined as of December 31, 2022, we used the amount of “gross wages” for the identified employees as reflected in our payroll records for 2022. For gross wages, we generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, and other payroll withholding. We did not use any statistical sampling techniques. We annualized the
compensation for employees who began employment after the start of the year. For compensation paid to our non-U.S. employees, we applied the U.S. dollar yearly average currency exchange rate to the local currency to facilitate comparison of all employees in U.S. dollars.
2.For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K.
Pay Versus Performance
Provided below is the Company’s “pay versus performance” disclosure as required pursuant to Item 402(v) of Regulation S-K promulgated under the Exchange Act. As required by Item 402(v), we have included:
•A list of the most important measures that our Compensation and Human Capital Committee used in 2022 to link a measure of pay calculated in accordance with Item 402(v) (referred to as “compensation actually paid,” or “CAP”) to Company performance;
•A table that compares the total compensation of our named executive officers (“NEOs”) as presented in the Summary Compensation Table (“SCT”) to CAP and that compares CAP to specified performance measures; and
•Graphs that describe:
◦the relationship between our total shareholder return (“TSR”) and the TSR of the Dow Jones U.S. Auto Parts Index (“Peer Group TSR”); and
◦the relationships between CAP and our cumulative TSR, GAAP Net Income, and our Company-selected measure, Adjusted Diluted EPS.
This disclosure has been prepared in accordance with Item 402(v) and does not necessarily reflect value actually realized by the named executive officers or how our Compensation and Human Capital Committee evaluates compensation decisions in light of Company or individual performance. In particular, our Compensation and Human Capital Committee has not used CAP as a basis for making compensation decisions, nor does it use GAAP Net Income for purposes of determining incentive compensation. Please refer to our Compensation Discussion and Analysis on pages 25 to 39 for a discussion of our executive compensation program objectives and the ways in which we align executive compensation pay with performance.
Performance Measures Used for Linking Pay and Performance
The following is a list of performance measures, which in our assessment represent the most important performance measures used by the Company to link compensation actually paid to the NEOs for 2022. Each metric below is used for purposes of determining payouts under either our CIP or vesting of our PSU-2s. Please see the Compensation Discussion and Analysis for a further description of these metrics and how they are used in the Company’s executive compensation program.
| | |
1. | To identify the “median employee” from our employee population determined as of December 31, 2019, we used the amount of “gross wages” for the identified employees as reflected in our payroll records for 2019. For gross wages, we generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, and other payroll withholding. We did not use any statistical sampling techniques. We annualized the compensation for employees who began employment after the start of the year. For compensation paid to our non-U.S. employees, we applied the U.S. dollar yearly average currency exchange rate to the local currency to facilitate comparison of all employees in U.S. dollars. |
| Adjusted Diluted EPS |
2. | For the annual total compensation of our median employee, we identifiedOrganic Parts and calculated the elements of that employee’s compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of SEC Regulation S-K.Services Revenue Growth |
| Free Cash Flow |
| Return on Invested Capital |
| EBITDA Dollars |
| EBITDA Margin |
Adjusted Diluted EPS was selected as the Company-selected measure for the Pay versus Performance table that follows because this performance measure has the strongest alignment with the key attributes of our operating plan and drives the creation of long-term shareholder value.
Pay Versus Performance Table
Below is the tabular disclosure for the Company’s President and Chief Executive Officer (“CEO”) (our Principal Executive Officer) and the average of our NEOs other than the CEO for 2022, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total for CEO(1) | | Compensation Actually Paid to CEO(2) | | Average Summary Compensation Table Total for Other NEOs(3) | | Average Compensation Actually Paid to Other NEOs(4) | | Value of Initial Fixed $100 Investment Based on: | | GAAP Net Income ($ mil.)(7) | | Adjusted Diluted EPS (8) |
| | | | | Total Shareholder Return(5) | | Peer Group Total Shareholder Return(6) | | |
| 2022 | | $ | 10,740,892 | | | $ | 11,905,149 | | | $ | 2,982,991 | | | $ | 2,761,619 | | | $ | 153 | | | $ | 105 | | | $ | 1,150 | | | $ | 3.95 | |
| 2021 | | $ | 9,445,636 | | | $ | 17,406,173 | | | $ | 3,049,150 | | | $ | 5,627,834 | | | $ | 169 | | | $ | 142 | | | $ | 1,092 | | | $ | 3.94 | |
| 2020 | | $ | 7,843,673 | | | $ | 7,733,481 | | | $ | 2,513,288 | | | $ | 2,401,479 | | | $ | 99 | | | $ | 118 | | | $ | 640 | | | $ | 2.68 | |
(1) The amounts reported in this column are the amounts of total compensation reported for our Chief Executive Officer, Dominick Zarcone, each corresponding year in the “Total” column of the Summary Compensation Table.
(2) CAP to our CEO is computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to SCT total compensation to determine the CAP values:
Reconciliation of SCT to CAP for CEO
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total for CEO | | Minus Summary Compensation Table Value of Equity Granted to CEO | | Plus Year-End Fair Value of Equity Granted During Fiscal Year that is Outstanding and Unvested at Year-End | | Plus (Minus) Year-over-Year Change in Fair Value of Equity Granted in Prior Years that is Outstanding and Unvested at Year-End | | Plus Fair Value at Vesting Date of Equity Granted and Vested During the Year | | Plus (Minus) Change in Fair Value from Beginning of the Year to Vesting Date of Equity Granted in Any Prior Year that Vested During the Year | | Minus Fair Value at Beginning of the Year of Equity Granted in Prior Year that was Forfeited During the Year | | CEO CAP* |
| 2022 | | $ | 10,740,892 | | | $ | (5,000,075) | | | $ | 5,564,237 | | | $ | 1,513,443 | | | $ | — | | | $ | (913,348) | | | $ | — | | | $ | 11,905,149 | |
| 2021 | | $ | 9,445,636 | | | $ | (4,200,026) | | | $ | 6,584,867 | | | $ | 3,622,781 | | | $ | — | | | $ | 1,952,915 | | | $ | — | | | $ | 17,406,173 | |
| 2020 | | $ | 7,843,673 | | | $ | (3,750,034) | | | $ | 3,987,653 | | | $ | (36,312) | | | $ | — | | | $ | (311,499) | | | $ | — | | | $ | 7,733,481 | |
* The fair value of RSUs used to calculate CAP was based on LKQ’s closing stock price on each valuation date and includes the cash value of accrued dividends. The fair value of PSUs used to calculate CAP assumes estimated performance results as of the end of each reporting year for financial metrics (adjusted diluted EPS, organic parts and services revenue growth, and average ROIC, which were performance measures in our 2019, 2020, 2021, and 2022 PSU awards) and includes the cash value of accrued dividends.
(3) For 2022, other NEOs are Mr. Galloway, Mr. Laroyia, Mr. Franz, Mr. Jude, Mr. Hanley, and Mr. McKay; for 2021 other NEOs are Mr. Laroyia, Mr. Franz, Mr. Jude, and Mr. Hanley; and for 2020 other NEOs are Mr. Laroyia, Mr. Franz, Mr. Jude, and Mr. Hanley
(4) Average CAP to our other NEOs is computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to SCT total compensation to determine the CAP values:
Reconciliation of SCT to CAP for Other NEOs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Average Summary Compensation Table Total for Other NEOs | | Minus Summary Compensation Table Value of Equity Granted to Other NEOs | | Plus Year-End Fair Value of Equity Granted During Fiscal Year that is Outstanding and Unvested at Year-End | | Plus (Minus) Year-over-Year Change in Fair Value of Equity Granted in Prior Years that is Outstanding and Unvested at Year-End | | Plus Fair Value at Vesting Date of Equity Granted and Vested During the Year | | Plus (Minus) Change in Fair Value from Beginning of the Year to Vesting Date of Equity Granted in Any Prior Year that Vested During the Year | | Minus Fair Value at Beginning of the Year of Equity Granted in Prior Year that was Forfeited During the Year | | Average Other NEOs CAP* |
| 2022 | | $ | 2,982,991 | | | $ | (1,354,239) | | | $ | 1,286,551 | | | $ | 241,235 | | | $ | 6,692 | | | $ | (218,691) | | | $ | (182,920) | | | $ | 2,761,619 | |
| 2021 | | $ | 3,049,150 | | | $ | (1,162,555) | | | $ | 1,822,671 | | | $ | 1,226,458 | | | $ | — | | | $ | 692,110 | | | $ | — | | | $ | 5,627,834 | |
| 2020 | | $ | 2,513,288 | | | $ | (1,162,538) | | | $ | 1,205,190 | | | $ | (17,851) | | | $ | — | | | $ | (136,610) | | | $ | — | | | $ | 2,401,479 | |
* The fair value of RSUs used to calculate CAP was based on LKQ’s closing stock price on each valuation date and includes the cash value of accrued dividends. The fair value of PSUs used to calculate CAP assumes estimated performance results as of the end of each reporting year for financial metrics (adjusted diluted EPS, organic parts and services revenue growth, and average ROIC, which were performance measures in our 2019, 2020, 2021, and 2022 PSU awards) and includes the cash value of accrued dividends.
(5) Represents the cumulative TSR of LKQ for an initial investment of $100 on December 31, 2019 through and including the end of the fiscal year for each row in the table.
(6) Represents the cumulative TSR of the Dow Jones U.S. Auto Parts Index, which is an industry line peer group reported in the performance graph included in the Company’s 2022 Annual Report on Form 10-K, for an initial investment of $100 on December 31, 2019 through and including the end of the fiscal year for each row in the table.
(7) LKQ’s GAAP Net Income as reported in the Company’s Consolidated Statements of Income on Form 10-K for each fiscal year in the table.
(8) LKQ’s Adjusted Diluted EPS, which is the Company-selected measure, as calculated for purposes of our PSU-2s and Cash-based LTI for the applicable fiscal year. We define Adjusted Diluted EPS as GAAP Diluted EPS adjusted for certain items as specified by the Compensation and Human Capital Committee at the time the LTI targets were established. Such adjustments relate to currency exchange rates; asset impairments; restructuring and acquisition expenses; gains and losses related to acquisitions and divestitures; atypical environmental and legal losses; amortization expense of acquired intangibles; change in fair value of contingent consideration liabilities; results of discontinued operations; other extraordinary, unusual or infrequently occurring items; and certain other minor adjustments.
Relationship between Company TSR and Peer Group TSR and CAP and Company TSR
The graph below illustrate the relationship between our TSR and the Peer Group TSR, as well as the relationship between CAP and our TSR for the CEO and other NEOs.
Relationship between CAP and GAAP Net Income
The graph below reflects the relationship between the CEO and Average Other NEO CAP versus our GAAP Net Income for each fiscal year. GAAP net income is not used as a performance measure in any of our executive incentive plans.
Relationship between CAP and Adjusted Diluted EPS (our Company-Selected Measure)
The graph below reflects the relationship between the CEO and Average Other NEO CAP versus our Adjusted Diluted EPS for each fiscal year. Adjusted Diluted EPS is used as a performance measure in our cash-based LTI and PSU-2s.
OTHER INFORMATION
Principal Stockholders
The following table sets forth the following information based on the most recent information available to the Company, as of March 4, 2020, certain information10, 2023, regarding the beneficial ownership of our common stock by:
•each person known by us to be the beneficial owner of more than 5% or more of the outstanding common stock (based solely on a review of filings on Schedule 13G or 13D with the SEC);
•each of our directors and named executive officers; and
•all of our directors and executive officers as a group.
| | | | | | | | | | | | | | |
| | Shares Beneficially Owned (2) |
Name and Address of Beneficial Owner (1) | | Number | | Percent |
The Vanguard Group, 100 Vanguard Blvd, Malvern, PA 19355 (3) | | 28,547,089 | | | 10.7 | % |
BlackRock, Inc., 55 East 52nd Street, New York, NY 10055 (4) | | 21,186,240 | | | 7.9 | % |
Massachusetts Financial Services Company, 11 Huntington Avenue, Boston, MA 02199 (5) | | 14,518,975 | | | 5.4 | % |
| Patrick Berard | | 8,582 | | | * |
| Meg A. Divitto | | 11,796 | | | * |
| Robert M. Hanser | | 16,449 | | | * |
| Joseph M. Holsten | | 133,677 | | | * |
| Blythe J. McGarvie | | 23,333 | | | * |
| John W. Mendel | | 11,979 | | | * |
| Jody G. Miller | | 13,596 | | | * |
| Guhan Subramanian | | 42,644 | | | * |
| Xavier Urbain | | 7,621 | | | * |
| Jacob Welch | | — | | | — |
Dominick Zarcone (6) | | 417,452 | | | * |
| Varun Laroyia | | 127,269 | | | * |
| Arnd Franz | | 82,229 | | | * |
| Justin Jude | | 127,617 | | | * |
Walter Hanley (7) | | 276,546 | | | * |
| Rick Galloway | | 10,014 | | | * |
| Matthew McKay | | 54,278 | | | * |
| All directors and executive officers as a group (20 persons) | | 1,461,511 | | | * |
* Represents less than 1% of our outstanding common stock.
(1) Unless otherwise specified, the address of each such person is c/o LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, Illinois 60661.
(2) Shares are considered beneficially owned, for the purpose of this table only, if held by the person indicated as beneficial owner, or if such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares the power to vote, to direct the voting of and/or to dispose of or to direct the disposition of such security, or if the person has the right to acquire beneficial ownership within 60 days, unless otherwise indicated in these footnotes.
(3)Based solely on the Schedule 13G/A filed by The Vanguard Group on February 9, 2023. The Vanguard Group reported sole voting power over zero shares, shared voting power over 377,669 shares, sole dispositive power over 27,481,013 shares, and shared dispositive power over 1,066,076 shares.
(4)Based solely on the Schedule 13G/A filed by BlackRock, Inc. on February 3, 2023. BlackRock, Inc. reported sole voting power over 18,977,961 shares, shared voting power over zero shares, sole dispositive power over 21,186,240 shares, and shared dispositive power over zero shares.
(5)Based solely on the Schedule 13G filed by Massachusetts Financial Services Company (“MFS”) on February 8, 2023. MFS reported sole voting power over 12,812,411 shares, shared voting power over zero shares, sole dispositive power over 14,518,975 shares, and shared dispositive power over zero shares.
(6)Includes 1,600 shares owned by Mr. Zarcone's wife.
(7)Includes 113,850 shares owned by a trust of which Mr. Hanley's wife is the grantor and beneficiary and 113,851 shares owned by a trust of which Mr. Hanley is the grantor and beneficiary.
|
| | | | | | |
| | | Shares Beneficially Owned (2) |
Name and Address of Beneficial Owner (1) | | Number | | Percent |
The Vanguard Group, 100 Vanguard Blvd, Malvern, PA 19355 (3) | | 31,405,132 |
| | 10.2 | % |
BlackRock, Inc., 55 East 52nd Street, New York, NY 10055 (4) | | 20,477,901 |
| | 6.7 | % |
ValueAct Capital, One Letterman Drive, Building D, San Francisco, CA 94129 (5) | | 16,032,718 |
| | 5.2 | % |
A. Clinton Allen (6) | | 291,528 |
| | * |
|
| Patrick Berard | | — |
| | * |
|
| Meg A. Divitto | | 2,601 |
| | * |
|
| Robert M. Hanser | | 8,754 |
| | * |
|
| Joseph M. Holsten | | 260,927 |
| | * |
|
| Blythe J. McGarvie | | 30,647 |
| | * |
|
| John W. Mendel | | 2,601 |
| | * |
|
| Jody G. Miller | | 2,601 |
| | * |
|
| John F. O'Brien | | 132,431 |
| | * |
|
| Guhan Subramanian | | 29,081 |
| | * |
|
| Xavier Urbain | | — |
| | * |
|
William M. Webster, IV (7) | | 191,339 |
| | * |
|
Dominick Zarcone (8) | | 230,158 |
| | * |
|
| Varun Laroyia | | 41,207 |
| | * |
|
| Arnd Franz | | 11,185 |
| | * |
|
| John S. Quinn | | 260,570 |
| | * |
|
| Justin L. Jude | | 59,885 |
| | * |
|
Walter P. Hanley (9) | | 223,053 |
| | * |
|
| All directors and executive officers as a group (22 persons) | | 2,194,120 |
| | * |
|
|
| |
* | Represents less than 1% of our outstanding common stock. |
(1) | Unless otherwise specified, the address of each such person is c/o LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, Illinois 60661. |
(2) | Shares are considered beneficially owned, for the purpose of this table only, if held by the person indicated as beneficial owner, or if such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares the power to vote, to direct the voting of and/or to dispose of or to direct the disposition of such security, or if the person has the right to acquire beneficial ownership within 60 days, unless otherwise indicated in these footnotes. The numbers and percentages of shares owned by our directors and executive officers include in each case shares subject to currently outstanding equity awards that were exercisable or scheduled to vest within 60 days of March 4, 2020 as follows: Dominick Zarcone - 6,006. |
(3) | Based solely on the Schedule 13G/A filed by The Vanguard Group on February 12, 2020. The Vanguard Group reported sole voting power over 463,368 shares, shared voting power over 79,467 shares, sole dispositive power over 30,898,578 shares, and shared dispositive power 506,554 shares. |
(4) | Based solely on the Schedule 13G/A filed by BlackRock, Inc. on February 5, 2020. BlackRock, Inc. reported sole voting power over 17,247,256 shares, shared voting power over zero shares, sole dispositive power over 20,477,901 shares, and shared dispositive power zero shares. |
(5) | Based solely on the Schedule 13D filed by ValueAct Capital on September 12, 2019. ValueAct Capital reported sole voting power over zero shares, shared voting power over 16,032,718 shares, sole dispositive power over zero shares, and shared dispositive power over 16,032,718 shares. On March 9, 2020, ValueAct Capital filed an amendment to its Schedule 13D disclosing that it increased its beneficial ownership to 21,547,746 shares or 7.0% of our outstanding common stock.
|
(6) | Includes 11,000 shares held by an IRA, of which Mr. Allen is the beneficiary, and 23,300 shares owned by Mr. Allen's wife. |
(7) | Does not include shares owned by a trust of which Mr. Webster's children are beneficiaries, of which Mr. Webster is not a trustee, and as to which none of Mr. Webster or any of his children have voting or investing power. |
(8) | Includes 1,600 shares owned by Mr. Zarcone's wife. |
(9) | Includes 64,017 shares owned by Mr. Hanley's wife.
|
Certain Transactions
Transactions
Transaction with Related PersonsValueAct
On September 7, 2017, Euro Car Parts Limited ("ECP"
The Company and ValueAct are parties to a Nomination and Cooperation Agreement (the “NCA”), an indirect wholly-owned subsidiary of ours, entered into an employment agreement (the “Service Agreement”) with Sukhpal Singh Ahluwalia,dated August 11, 2020. The NCA includes various terms, conditions and provisions. Mr. Welch, while serving as a member of our Board of Directors until January 2, 2019, that superseded the previous service agreement entered into between the parties on November 7, 2014. The key terms of the Service Agreement included (a) a three-year term, (b) duties that include overseeing ECP’s business strategy and the coordination of ECP with our other businesses in Europe, (c) an annual base salary of £330,000 and a potential bonus of up to £150,000, and (d) an agreement by Mr. Ahluwalia for a period ending 12 months after his termination date not to compete with, solicit customers of, or solicit (or under certain circumstances hire) key employees of our business in Europe. On January 2, 2019, Mr. Ahluwalia resigned from his positions as a Director of LKQ and as Executive Chairman of ECP. The Settlement Agreement entered into between us and Mr. Ahluwalia in connection with his resignation provides (a) in accordance with the terms of the Service Agreement, that we will continue to pay him through the end of the term of the Service Agreement (in September 2020) an amount equal to his base salary and target bonus, payable in equal monthly installments, and (b) such payments are conditioned on Mr. Ahluwalia complying with the provisions in the Service Agreement relating to non-competition, non-solicitation of customers, non-solicitation of certain key employees, and non-hiring of certain key employees to work at a competing business, all through September 2020.
Also on September 7, 2017, ECP entered into an Investment and Shareholders Agreement (the “Shareholders Agreement”) with an affiliate of Mr. Ahluwalia and other parties with respect to development of a heavy truck parts business in the United Kingdom. The affiliate of Mr. Ahluwalia owns 55%, ECP owns 25%, and others (including management of the heavy truck parts business) own the remainder of the entity. ECP's initial capital contribution was £2.7 million. During 2019, ECP invested an additional £0.7 million through a loan to the heavy trucks part business.
ECP leases warehouse space in the United Kingdom from affiliates of Mr. Ahluwalia. The aggregate annual rent under all such leases is approximately £0.22 million plus common area expenses.
In 2009 (prior to our acquisition of ECP), ECP retained a public accounting firm to design and implement an employee incentive plan with certain intended tax characteristics. Her Majesty’s Revenue and Customs is alleging that the plan does not
comply with the requirements necessary to achieve those tax characteristics and that therefore ECP is responsible for approximately £2 million of income tax payable. At the time of our acquisition of ECP, Mr. Ahluwalia agreed to indemnify us for any losses arising from this potential liability. In March 2016, we assigned to Mr. Ahluwalia any rights we had against the public accounting firm in connection with this matter.
The brother of A. Clinton Allen, a member of our Board of Directors, is anrequired to (i) meet all director independence and other requirements of the Company, of stock exchange listing standards and of the Securities and Exchange Commission and related securities laws and regulations, (ii) be qualified to serve as a director under the Delaware General Corporation Law and (iii) comply with Company policies, guidelines and codes of conduct applicable to directors. Mr. Welch has informed the Company of his decision not to stand for re-election at the Company’s 2023 Annual Meeting and his term as a director will end on the date of the Company’s 2023 Annual Meeting.
Under the NCA, the ValueAct is subject to various restrictions, including, among other things, limitations on proposing or engaging in certain extraordinary transactions and other matters involving the Company, prohibitions on the ValueAct acquiring more than 14.9% of the Company’s outstanding shares without the Company’s consent, engaging in proxy solicitations and other stockholder-related matters and proposals, forming groups with other investors, disposing of their shares to a third party who would own more than 4.9% of the Company’s outstanding shares outside of open market sales or underwritten offerings, engaging in short sales of Company shares, and limitations on public statements regarding the Company and on interactions with third parties and employees. The ValueAct has agreed to vote its shares as set forth in the NCA, including with respect to board elections. Certain non-disparagement provisions also apply to the Company and to ValueAct under the NCA. The provisions of the NCA described above generally apply until the later of (i) two months after Mr. Welch ceases to serve on the Board or be a partner or employee of ours in the positionValueAct and (ii) the earlier of Regional Sales Manager. For his services in 2019,January 15, 2022, and 30 days before the total compensation of Mr. Allen’s brother was $178,720.stockholder nomination deadline for the Company’s 2023 Annual Meeting.
Related Party Transactions Policy
We have a written Related Party Transactions Policy that provides, and our Audit Committee charter specifies, that the Audit Committee's responsibilities include the review and approval of all transactions between us and any persons affiliated with us that would be required to be disclosed pursuant to the rules and regulations of the SEC. The factors that the Audit Committee would consider as part of its review of related party transactions include whether the terms of the transaction are fair to the Company, the business reasons for the Company to enter into the transaction, the effect of the transaction on the independence of a related party that is an outside director, and whether the transaction would present an improper conflict of interest for the related party.
Solicitation of Proxies
Our Board of Directors is soliciting your proxy by mail. Your proxy may also be solicited by our directors, officers or other employees personally or by mail, telephone, facsimile or otherwise. These persons will not be compensated for their services. Brokerage firms, banks, fiduciaries, voting trustees or other nominees will be requested to forward the proxy soliciting material to the beneficial owners of stock held of record by them. The entire cost of the solicitation by our Board of Directors will be borne by us.
Delivery of Proxy Materials to Households
Rules of the SEC permit us to use a method of delivery that is often referred to as “householding.” For stockholders who request to receive our proxy materials by mail, householding permits us to mail a single set of proxy materials to any household where two or more different stockholders reside and are members of the same household or in which one stockholder has multiple accounts, unless we receive contrary instructions from any such stockholder. In addition, certain intermediaries (i.e., brokers, banks or other nominees) have notified us that they will household proxy materials for our 20202023 Annual Meeting. For voting purposes, these materials will include a separate proxy card for each account at the shared address. We will deliver promptly, if you request orally or in writing, a separate copy of our 20202023 Proxy Statement and our 20192022 Annual Report to any stockholder at the same address. If you wish to receive a separate copy of our 20202023 Proxy Statement and our 20192022 Annual Report, then you may contact our Investor Relations Department (a) by mail at LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, Illinois 60661, (b) by telephone at 877-LKQ-CORP (toll free), or (c) by e-mail at irinfo@lkqcorp.com. You can also contact your broker, bank or other nominee to make a similar request. Stockholders sharing an address who now receive multiple copies of our proxy statement and annual report may request delivery of a single copy by contacting us as indicated above, or by contacting their broker, bank or other nominee, so long as the broker, bank or other nominee has elected to household proxy materials.
Submitting Your Proposals for the 20212024 Annual Meeting
According to the rules of the SEC, if you want to submit a proposal for inclusion in the proxy materials to be distributed by us in connection with our 20212024 annual meeting of stockholders pursuant to Rule 14a-8, you must do so no later than November 23, 2020. 21, 2023. Your proposal should be submitted in writing to the Corporate Secretary of the Company at our principal executive offices.
For proposals that are not submitted for inclusion in the proxy materials but instead are sought to be presented directly at our 20212024 annual meeting, our Bylaws require that in order for you to properly bring any business before any meeting of stockholders, including nominations for the election of directors, you must provide written notice, delivered to the Corporate Secretary of the Company at our principal executive offices, not less than 90 nor more than 120 days prior to the one year anniversary of the previous year's meeting date. In the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, your notice, in order to be timely, must be received by us not earlier than the 120th day prior to the annual meeting and not later than the later of the 90th day prior to the annual meeting or the 10th day following the day on which we mailed our notice or gave other disclosure of the meeting date. Your notice must include your name and address as it appears on our records and the number of shares of our capital stock you beneficially own as well as information about any derivative transactions by you involving our capital stock. In addition, (1) for proposals other than nominations for the election of directors, your notice must include a description of the business you want brought before the meeting, your reasons for conducting that business at the meeting, and any material interest you have in that business, and
(2) for proposals relating to nominations of directors, your notice must also include with respect to each person nominated, among other things, the information required by Regulation 14A under the Exchange Act.
Nominations for Inclusion in our Proxy Materials (Proxy Access)
Under our proxy access bylaw, a stockholder (or group of up to 20 stockholders) owning three percent or more of our common stock continuously for at least three years may nominate and include in our proxy statement the greater of (i) two directors or (ii) 20% of the number of directors on our Board. Nominations must comply with the requirements and conditions of our proxy access bylaw, including delivering proper notice to the Corporate Secretary of the Company no later than 90 and no earlier than 120 days prior to the one yearone-year anniversary of the preceding year’s annual meeting.
In order for a nominee to be considered for inclusion in our proxy statement for the 20212024 annual meeting of shareholders,stockholders, the Corporate Secretary must receive written notice of the nomination at our principal executive offices no earlier than January 12, 202111, 2024, and no later than February 11, 2021.10, 2024. The notice must contain the specific information required by our Bylaws.
In addition, in order for stockholders to give timely notice of nominations for directors for inclusion on a universal proxy card in connection with the 2024 annual meeting of stockholders, notice must be submitted by the same deadline as disclosed above under the advance notice provisions of our Bylaws and must include the information in the notice required by our Bylaws and by Rule 14a-19(b)(2) and Rule 14a-19(b)(3) under the Exchange Act. Our Bylaws are included in the Company's filings on the SEC website at www.sec.gov.
Annual Report
A copy of our Annual Report on Form 10-K for the year ended December 31, 2022 will be available to the stockholders of record as of the Record Date together with this Proxy Statement at: https://materials.proxyvote.com/501889.
An additional copy of our 2022 Annual Report may be obtained from our website, www.lkqcorp.com, or can be furnished, without charge, to beneficial stockholders or stockholders of record upon request in writing to Investor Relations Department (a) by mail at LKQ Corporation, 500 West Madison Street, Suite 2800, Chicago, Illinois 60661, (b) by telephone at 877-LKQ-CORP (toll free), or (c) by e-mail at irinfo@lkqcorp.com. Copies of exhibits to our 2022 Annual Report are available for a reasonable fee.
General
It is important that your proxy be returned promptly. Whether or not you are able to attend the meeting, you are urged, regardless of the number of shares owned, to submit your vote.
| | | | | |
| |
| By Order of the Board of Directors |
| /s/ MATTHEW MCKAY |
| Victor M. CasiniMatthew McKay |
| Senior Vice President |
| - General Counsel and Corporate Secretary |
| | | | | |
| VOTE BY INTERNET Before The Meeting - Go towww.proxyvote.com or scan the QR Barcode above |
| Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M.p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.
P.O. BOX 1342
BRENTWOOD, NY 11717
| During The Meeting - Go towww.virtualshareholdermeeting.com/LKQ2023
|
| You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. |
| VOTE BY PHONE - 1-800-690-6903 |
| Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
| VOTE BY MAIL |
| Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
|
| | | | | | | | | | | | | |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | |
| E93291-P33919D73799-P67927 | | KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LKQ CORPORATION | | | | | | | | | | | | |
| The Board of Directors recommends you vote FOR the | | | | | | | | | |
| following: | | | | | | | | | | | | |
| 1. | Election of Directors | | | | | | | | | | | | |
| Nominees: | For | Against | Abstain | | | | | | | | | |
| 1a. Patrick Berard | ¨ | ¨ | ¨ | | | | | | | | | |
| | | | | | | | | | | | | |
| LKQ CORPORATION1b. Meg A. Divitto | ¨ | ¨ | ¨ | | | | | | | | | |
| The Board of Directors recommends you vote FOR the
proposals 2 and 3 and EVERY YEAR on proposal 4. | | | | | | | | | |
| following: | | | | | | | | | | | | |
1. | Election of Directors | | | | | | | | | | | | |
| Nominees: | For | Against | Abstain | | | | | | | | | |
| 1a. Patrick Berard1c. Joseph Holsten | ¨ | ¨ | ¨ | | | For | Against | Abstain | | | | |
| | | | | | | | | | | | | |
| 1b. Meg A. Divitto1d. Blythe J. McGarvie | ¨ | ¨ | ¨ | 2. | The Board of Directors recommends you vote FOR
proposals 2 and 3.
| | | | | |
| | | | | | | | | | |
| 1c. Robert M. Hanser | ¨ | ¨ | ¨ | | | For | Against | Abstain | |
| | | | | | | | | | | | | |
| 1d. Joseph M. Holsten | ¨ | ¨ | ¨ | 2. | Ratification of the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for
our fiscal year ending December 31, 2020.
2023. | | ¨ | ¨ | ¨ | |
| | | | | | | | | | |
| 1e. Blythe J. McGarvieJohn W. Mendel | ¨ | ¨ | ¨ | | | | | | |
| | | | | | | | | | | | | |
| 1f. John W. MendelJody G. Miller | ¨ | ¨ | ¨ | 3. | Approval, on an advisory basis, of the compensation of our named executive officers. | | ¨ | ¨ | ¨ | |
| | | | | | | | | | |
| 1g. Jody G. MillerGuhan Subramanian | ¨ | ¨ | ¨ | | Every Year | Every Two Years | Every Three Years | Abstain | |
| | | | | | | | | |
| 1h. John F. O'BrienXavier Urbain | ¨ | ¨ | ¨ | | | | | |
| | | | | | | | | | | | | |
| 1i. Guhan SubramanianDominick Zarcone | ¨ | ¨ | ¨ | 4 | Advisory vote on the frequency of holding an advisory vote on named executive officer compensation. | | | | | | | |
| | | | | | | | | | | | | |
| 1j. Xavier Urbain | ¨ | ¨ | ¨ | ¨ | | | | | | | | |
| | | | | | | | | | | | | |
| 1k. Dominick Zarcone | ¨
| ¨
| ¨
| | | | | | | | | |
| | | | | | | | | | | Yes | No | |
| | | | | | Please indicate if you plan to attend this meeting. | | | ¨ | ¨ | |
| | | | | | | | | | | | | |
| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | |
| | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | |
| | | | |
| Signature [PLEASE SIGN WITHIN BOX] | Date | | | Signature (Joint Owners) | | | Date | | |
| | | | | | | | | | | | | |
1.0.0.51160
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com.
|
| | | | | | | | | | |
| | E93292-P33919D41686-P50069 | |
| LKQ CORPORATION |
| Annual Meeting of Stockholders |
| May 12, 20209, 2023 1:30 P.M. |
| This proxy is solicited by the Board of Directors |
| | | |
| | The undersigned appoints Victor M. CasiniPatrick D. Ferrell and Matthew J. McKay (the "Named Proxies"“Named Proxies”) and each of them as proxies for the undersigned, with full power of substitution, to vote the shares of common stock of LKQ Corporation, a Delaware corporation (the "Company"), the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held virtually at 500 West Madison Street, Third Floor Conference Center -- Washington Room, Chicago, IL 60661,www.virtualshareholdermeeting.com/LKQ2023, on Tuesday, May 12, 20209, 2023 at 1:30 P.M. Central Time and all adjournments thereof. | |
| | | |
| The Board of Directors of the Company recommends a vote "FOR"“FOR” all nominees for director, and "FOR"“FOR” proposals 2 and 3.3, and “EVERY YEAR” on proposal 4. | |
| | | |
| This proxy, when properly executed, will be voted in the manner directed herein. If no direction is made, this proxy will be voted "FOR"“FOR” all nominees for director, and "FOR"“FOR” proposals 2 and 3.3, and “EVERY YEAR” on proposal 4. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the Annual Meeting or any adjournment or postponement thereof. | |
| |
| |
| | |
| You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE), but you need not mark any box if you wish to vote in accordance with the Board of Directors' recommendation.recommendations. The Named Proxies cannot vote the shares unless you sign and return this card. | |
| |
| |
| | |
| Continued and to be signed on reverse side | |
| | |
