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LKQ Corporation Posts Record Second Quarter 2012 Results
  • Revenue growth of 32.5% to $1.01 billion
  • Second quarter 2012 diluted EPS increases 34% to $0.43
  • Organic revenue growth for parts and services of 6.3%

CHICAGO, July 26, 2012 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported record revenue for the second quarter of 2012 of $1.01 billion, an increase of 32.5% as compared to $759.7 million in the second quarter of 2011. Net income for the second quarter of 2012 was $64.0 million, an increase of 37% as compared to $46.7 million for the same period of 2011. Diluted earnings per share of $0.43 for the second quarter ended June 30, 2012 increased 34% from $0.32 for the second quarter of 2011. The Company noted that the second quarter 2012 diluted earnings per share included a gain equal to $0.04 per share that resulted from a favorable legal settlement, partially offset by restructuring and acquisition related expenses and change in fair value of contingent consideration liabilities totaling $0.02.

"We entered the second quarter with the continued challenges of a mild winter followed by some volatility in the scrap market, but despite those uncontrollable dynamics, the Company achieved total organic revenue growth of 3.7% and organic revenue growth for parts and services of 6.3% in the quarter. Revenue growth from acquisitions was 29%," stated Robert L. Wagman, President and Chief Executive Officer of LKQ Corporation. "We are particularly pleased with the continued growth and performance of Euro Car Parts. During the quarter, Euro Car Parts achieved revenue growth of 22% versus the comparable pre-acquisition period."

On a six month year-to-date basis, revenue was $2.04 billion, an increase of 32% from $1.55 billion for the comparable period of 2011. Net income for the first six months of 2012 was $145.0 million, as compared to $104.9 million for the first half of 2011. Diluted earnings per share was $0.97 for the first six months of 2012, as compared to $0.71 for the comparable period of 2011.

Total organic revenue growth on a six month year-to-date basis was 3.5%. Parts and services revenue grew organically by 4.9%. Acquisition revenue growth on a six month year-to-date basis was 28.5%.

"With the strength of our balance sheet and a robust pipeline of acquisition candidates, we continue to be in a good position to take advantage of acquisition opportunities. During the second quarter, we acquired seven companies that we believe are a good fit for our organization," added Mr. Wagman.

Balance Sheet and Liquidity

As of June 30, 2012, LKQ's balance sheet reflected cash and equivalents of $59.4 million, and the outstanding obligations under the Company's credit facilities were $940.2 million ($431.9 million of term loans and $508.3 million of revolver borrowings). Total availability under the credit agreement at June 30, 2012 was $394.6 million.

Other Events

During the second quarter, LKQ acquired seven North American businesses that included a chrome accessories distribution business headquartered in Nebraska, a self service operation in New Hampshire, a self service operation with two locations in Florida, a wholesale salvage operation in Texas, a precious metals extracting business based in Rhode Island, a paint distribution business with four locations in California and a self service operation with five locations in Maryland.

During the second quarter, LKQ's European operations opened 11 Euro Car Parts branches in the United Kingdom.

On May 22, 2012 the Company changed its NASDAQ ticker symbol from 'LKQX' to 'LKQ'.

Company Outlook

The Company updated its guidance for 2012.

     
  Updated Guidance Prior Guidance
Organic revenue growth 5.5% to 7% 5% to 7%
Net income $265 million to $282 million $262 million to $282 million
Diluted EPS $1.77 to $1.88 $1.75 to $1.88
Cash flow provided from operations $250 million to $280 million $250 million to $280 million
Capital expenditures $100 million to $115 million $100 million to $115 million

Guidance for 2012 is based on current conditions and excludes the impact of restructuring and acquisition related expenses and gains or losses (including changes in fair value of contingent consideration liabilities) and capital spending related to acquisitions or divestitures.

Organic revenue guidance refers only to parts and services revenue.

Quarterly Conference Call

LKQ will host a conference call and Webcast on July 26, 2012 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) with members of senior management to discuss the Company's results.

To access the investor conference call, please dial (877) 407-0315. International access to the call may be obtained by dialing (201) 689-8501. An audio webcast can be accessed via the Company's website at www.lkqcorp.com in the Investor Relations section.

A replay of the conference call will be available by telephone at (877) 660-6853 or (201) 612-7415 for international calls. The telephone replay will require you to enter account: 286 #, conference ID: 397359 #. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through August 24, 2012. Please allow approximately two hours after the live presentation before attempting to access the replay.

About LKQ Corporation

LKQ Corporation is the largest nationwide provider of aftermarket, recycled, and refurbished collision replacement parts, and a leading provider of mechanical replacement parts including remanufactured engines, all in connection with the repair of automobiles and other vehicles. LKQ also has operations in the United Kingdom, Canada, Mexico and Central America. LKQ operates more than 460 facilities, offering its customers a broad range of replacement systems, components and parts to repair automobiles and light, medium and heavy-duty trucks.

The LKQ Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13317

Forward Looking Statements

The statements in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ materially from those expressed or implied in the forward looking statements as a result of various factors.

These factors include:

  • uncertainty as to changes in North American and European general economic activity and the impact of these changes on the demand for our products and our ability to obtain financing for operations;
  • fluctuations in the pricing of new original equipment manufacturer ("OEM") replacement products;
  • the availability and cost of our inventory;
  • variations in the number of vehicles sold, vehicle accident rates, miles driven, and the age profile of vehicles in accidents;
  • changes in state or federal laws or regulations affecting our business;
  • changes in the types of replacement parts that insurance carriers will accept in the repair process;
  • changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;
  • increasing competition in the automotive parts industry;
  • uncertainty as to the impact on our industry of any terrorist attacks or responses to terrorist attacks;
  • our ability to operate within the limitations imposed by financing arrangements;
  • our ability to obtain financing on acceptable terms to finance our growth;
  • declines in the values of our assets;
  • fluctuations in fuel and other commodity prices;
  • fluctuations in the prices of scrap metal and other metals;
  • our ability to develop and implement the operational and financial systems needed to manage our operations;
  • our ability to integrate and successfully operate acquired companies and any companies acquired in the future and the risks associated with these companies;
  • claims by OEMs or others that attempt to restrict or eliminate the sale of aftermarket products:
  • termination of business relationships with insurance companies that promote the use of our products;
  • product liability claims by the end users of our products or claims by other parties who we have promised to indemnify for product liability matters;
  • currency fluctuations in the U.S. dollar versus the pound sterling, the Canadian dollar, the Mexican peso and the Taiwan dollar;
  • periodic adjustments to estimated contingent purchase price amounts;
  • instability in regions in which we operate, such as Mexico, that can affect our supply of certain products;
  • interruptions, outages or breaches of our operational systems, security systems, or infrastructure as a result of attacks on, or malfunctions of, our systems; and
  • other risks that are described in our Form 10-K filed February 27, 2012 and in other reports filed by us from time to time with the Securities and Exchange Commission.

You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Income
( In thousands, except per share data )
         
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2012 2011 2012 2011
         
Revenue  $ 1,006,531  $ 759,684  $ 2,038,308  $ 1,546,332
         
Cost of goods sold (1)  584,600  437,448  1,168,994  880,450
         
Gross margin  421,931  322,236  869,314  665,882
         
Facility and warehouse expenses  82,192  69,183  167,300  139,001
         
Distribution expenses  91,926  69,048  183,739  134,859
         
Selling, general and administrative expenses  121,698  91,395  243,412  181,156
         
Restructuring and acquisition related expenses  2,195  2,377  2,442  2,423
         
Depreciation and amortization  15,353  11,747  30,246  22,586
         
Operating income  108,567  78,486  242,175  185,857
         
Other expense (income):        
Interest expense, net  7,356  4,671  14,723  11,080
Loss on debt extinguishment  --   --   --   5,345
Change in fair value of contingent consideration liabilities  1,240  (1,615)  (105)  (1,615)
Other income, net  (1,228)  (382)  (1,739)  (488)
         
Total other expense, net  7,368  2,674  12,879  14,322
         
Income before provision for income taxes  101,199  75,812  229,296  171,535
         
Provision for income taxes   37,201  29,106  84,307  66,647
         
Net income  $ 63,998  $ 46,706  $ 144,989  $ 104,888
         
Earnings per share:        
Basic  $ 0.43  $ 0.32  $ 0.98  $ 0.72
         
Diluted  $ 0.43  $ 0.32  $ 0.97  $ 0.71
         
Weighted average common shares outstanding:        
Basic  147,645  145,917  147,392  145,765
         
Diluted  150,076  148,131  149,873  148,007
         
(1) Cost of goods sold for the three and six months ended June 30, 2012 includes gains of $8.4 million and $16.7 million, respectively, resulting from certain settlements of a class action lawsuit against several of our suppliers.        
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
( In thousands, except share and per share data )
     
  June 30,
2012
December 31,
2011
Assets    
     
Current Assets:    
Cash and equivalents  $ 59,353  $ 48,247
Receivables, net  309,454  281,764
Inventory  798,807  736,846
Deferred income taxes  46,596  45,690
Prepaid income taxes  11,466  17,597
Prepaid expenses and other current assets  27,331  19,591
 Total Current Assets  1,253,007  1,149,735
     
Property and Equipment, net  443,565  424,098
Intangibles  1,684,182  1,584,973
Other Assets  44,655  40,898
     
 Total Assets  $ 3,425,409  $ 3,199,704
     
Liabilities and Stockholders' Equity    
     
Current Liabilities:    
Accounts payable  $ 224,276  $ 210,875
Accrued expenses  115,599  131,025
Income taxes payable  7,755  7,262
Contingent consideration liabilities  38,842  600
Other current liabilities  12,471  18,407
Current portion of long-term obligations   46,379  29,524
     
 Total Current Liabilities  445,322  397,693
     
Long-Term Obligations, Excluding Current Portion  954,067  926,552
Deferred Income Taxes  88,777  88,796
Contingent Consideration Liabilities  49,195  81,782
Other Noncurrent Liabilities  74,320  60,796
     
Commitments and Contingencies    
     
Stockholders' Equity:    
Common stock, $0.01 par value, 500,000,000 shares authorized, 147,973,454 and 146,948,608 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively  1,480  1,470
Additional paid-in capital  928,081  902,782
Retained earnings  893,783  748,794
Accumulated other comprehensive loss  (9,616)  (8,961)
     
 Total Stockholders' Equity  1,813,728  1,644,085
     
 Total Liabilities and Stockholders' Equity  $ 3,425,409  $ 3,199,704
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
   
  Six Months Ended
June 30,
  2012 2011
     
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 144,989  $ 104,888
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  33,446  24,797
Stock-based compensation expense  7,978  6,602
Excess tax benefit from stock-based payments  (7,219)  (4,053)
Loss on debt extinguishment  --   5,345
Other  1,369  (504)
Changes in operating assets and liabilities, net of effects from acquisitions:    
Receivables  (22,662)  (24,769)
Inventory  (30,763)  (19,578)
Prepaid income taxes/income taxes payable  13,728  14,786
Accounts payable  3,802  (4,525)
Other operating assets and liabilities  (23,656)  (1,909)
     
Net cash provided by operating activities  121,012  101,080
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (41,615)  (42,540)
Proceeds from sales of property and equipment  472  162
Cash used in acquisitions, net of cash acquired  (120,315)  (95,591)
     
Net cash used in investing activities  (161,458)  (137,969)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options  10,112  5,109
Excess tax benefit from stock-based payments  7,219  4,053
Debt issuance costs  --   (8,190)
Net borrowings (repayments) of long-term obligations  34,130  (17,505)
     
Net cash provided by (used in) financing activities  51,461  (16,533)
     
Effect of exchange rate changes on cash and equivalents  91  (11)
     
Net increase (decrease) in cash and equivalents  11,106  (53,433)
     
Cash and equivalents, beginning of period  48,247  95,689
     
Cash and equivalents, end of period  $ 59,353  $ 42,256
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
             
  Three Months Ended June 30,
Operating Highlights 2012 2011    
    % of
Revenue
  % of
Revenue
Change % Change
             
Revenue  $ 1,006,531 100.0%  $ 759,684 100.0%  $ 246,847 32.5%
             
Cost of goods sold (1)  584,600 58.1%  437,448 57.6%  147,152 33.6%
             
Gross margin  421,931 41.9%  322,236 42.4%  99,695 30.9%
             
Facility and warehouse expenses  82,192 8.2%  69,183 9.1%  13,009 18.8%
             
Distribution expenses  91,926 9.1%  69,048 9.1%  22,878 33.1%
             
Selling, general and administrative expenses  121,698 12.1%  91,395 12.0%  30,303 33.2%
             
Restructuring and acquisition related expenses  2,195 0.2%  2,377 0.3%  (182) -7.7%
             
Depreciation and amortization  15,353 1.5%  11,747 1.5%  3,606 30.7%
             
Operating income  108,567 10.8%  78,486 10.3%  30,081 38.3%
             
Other expense (income):            
Interest expense, net  7,356 0.7%  4,671 0.6%  2,685 57.5%
Change in fair value of contingent consideration liabilities  1,240 0.1%  (1,615) -0.2%  2,855 n/m
Other income, net  (1,228) -0.1%  (382) -0.1%  (846) n/m
             
Total other expense, net  7,368 0.7%  2,674 0.4%  4,694 175.5%
             
             
Income before provision for income taxes  101,199 10.1%  75,812 10.0%  25,387 33.5%
             
Provision for income taxes   37,201 3.7%  29,106 3.8%  8,095 27.8%
             
             
Net income  $ 63,998 6.4%  $ 46,706 6.1%  $ 17,292 37.0%
             
             
Earnings per share:            
Basic  $ 0.43    $ 0.32    $ 0.11 34.4%
             
Diluted  $ 0.43    $ 0.32    $ 0.11 34.4%
             
Weighted average common shares outstanding:            
Basic  147,645    145,917    1,728 1.2%
             
Diluted  150,076    148,131    1,945 1.3%
             
(1) Cost of goods sold for the three months ended June 30, 2012 includes a gain of $8.4 million resulting from a settlement of a class action lawsuit against several of our suppliers.  
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
  Six Months Ended June 30,
Operating Highlights 2012 2011    
    % of
Revenue
  % of
Revenue
Change  % Change
             
Revenue  $ 2,038,308 100.0%  $ 1,546,332 100.0%  $ 491,976 31.8%
             
Cost of goods sold (1)  1,168,994 57.4%  880,450 56.9%  288,544 32.8%
             
Gross margin  869,314 42.6%  665,882 43.1%  203,432 30.6%
             
Facility and warehouse expenses  167,300 8.2%  139,001 9.0%  28,299 20.4%
             
Distribution expenses  183,739 9.0%  134,859 8.7%  48,880 36.2%
             
Selling, general and administrative expenses  243,412 11.9%  181,156 11.7%  62,256 34.4%
             
Restructuring and acquisition related expenses  2,442 0.1%  2,423 0.2%  19 0.8%
             
Depreciation and amortization  30,246 1.5%  22,586 1.5%  7,660 33.9%
             
Operating income  242,175 11.9%  185,857 12.0%  56,318 30.3%
             
Other expense (income):            
Interest expense, net  14,723 0.7%  11,080 0.7%  3,643 32.9%
Loss on debt extinguishment  --  0.0%  5,345 0.3%  (5,345) n/m
Change in fair value of contingent consideration liabilities  (105) 0.0%  (1,615) -0.1%  1,510 n/m
Other income, net  (1,739) -0.1%  (488) 0.0%  (1,251) n/m
             
Total other expense, net  12,879 0.6%  14,322 0.9%  (1,443) -10.1%
             
             
Income before provision for income taxes  229,296 11.2%  171,535 11.1%  57,761 33.7%
             
Provision for income taxes   84,307 4.1%  66,647 4.3%  17,660 26.5%
             
             
Net income  $ 144,989 7.1%  $ 104,888 6.8%  $ 40,101 38.2%
             
             
Earnings per share:            
Basic  $ 0.98    $ 0.72    $ 0.26 36.1%
             
Diluted  $ 0.97    $ 0.71    $ 0.26 36.6%
             
Weighted average common shares outstanding:            
Basic  147,392    145,765    1,627 1.1%
             
Diluted  149,873    148,007    1,866 1.3%
             
(1) Cost of goods sold for the six months ended June 30, 2012 includes a gain of $16.7 million resulting from certain settlements of a class action lawsuit against several of our suppliers.            
         
 The following unaudited table reconciles net income to EBITDA:         
         
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2012 2011 2012 2011
  (In thousands)
         
Net income  $ 63,998  $ 46,706  $ 144,989  $ 104,888
Depreciation and amortization 17,189 12,871 33,446 24,797
Interest expense, net  7,356  4,671 14,723 11,080
Loss on debt extinguishment (1)  --   --   --   5,345
Provision for income taxes   37,201  29,106 84,307 66,647
         
 Earnings before interest, taxes, depreciation and amortization (EBITDA)   $ 125,744  $ 93,354  $ 277,465  $ 212,757
         
 EBITDA as a percentage of revenue  12.5% 12.3% 13.6% 13.8%
         
(1) Loss on debt extinguishment is considered a component of interest in calculating EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.
         
We provide a reconciliation of Net Income to EBITDA as we believe it offers investors, securities analysts and other interested parties useful information regarding our results of operations because it assists in analyzing our performance and the value of our business. EBITDA provides insight into our profitability trends, and allows management and investors to analyze our operating results with and without the impact of depreciation, amortization, interest and income tax expense. We believe EBITDA is used by securities analysts, investors, and other interested parties in evaluating companies, many of which present EBITDA when reporting their results. EBITDA should not be construed as an alternative to operating income, net income or net cash provided by (used in) operating activities, as determined in accordance with accounting principles generally accepted in the United States. In addition, not all companies that report EBITDA information calculate EBITDA in the same manner as we do and, accordingly, our calculation is not necessarily comparable to similarly named measures of other companies and may not be an appropriate measure for performance relative to other companies.        
         
The following unaudited tables compare certain revenue categories:        
         
  Three Months Ended
June 30,
   
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed Statements of Income of LKQ Corporation      
         
Aftermarket, other new and refurbished products  $ 547,912  $ 356,202  $ 191,710 53.8%
Recycled, remanufactured and related products and services  323,669  269,700  53,969 20.0%
Parts and services  871,581  625,902  245,679 39.3%
Other   134,950  133,782  1,168 0.9%
Total  $ 1,006,531  $ 759,684  $ 246,847 32.5%
         
Revenue changes by category for the three months ended June 30, 2012 vs. 2011:        
         
  Revenue Change Attributable to:  
  Acquisition Organic Foreign
Exchange
% Change
         
Aftermarket, other new and refurbished products 49.5% 4.6% -0.3% 53.8%
Recycled, remanufactured and related products and services 11.8% 8.5% -0.3% 20.0%
         
Parts and services 33.3% 6.3% -0.3% 39.3%
         
Other  9.2% -8.2% -0.1% 0.9%
         
Total 29.0% 3.7% -0.3% 32.5%
         
  Six Months Ended
June 30,
   
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed Statements of Income of LKQ Corporation      
         
Aftermarket, other new and refurbished products  $ 1,113,256  $ 737,318  $ 375,938 51.0%
Recycled, remanufactured and related products and services  649,373  545,482  103,891 19.0%
Parts and services 1,762,629 1,282,800 479,829 37.4%
Other  275,679 263,532 12,147 4.6%
Total  $ 2,038,308  $ 1,546,332  $ 491,976 31.8%
         
Revenue changes by category for the six months ended June 30, 2012 vs. 2011:        
         
  Revenue Change Attributable to:  
  Acquisition Organic Foreign
Exchange
% Change
         
Aftermarket, other new and refurbished products 48.9% 2.3% -0.2% 51.0%
Recycled, remanufactured and related products and services 10.8% 8.5% -0.2% 19.0%
         
Parts and services 32.7% 4.9% -0.2% 37.4%
         
Other  8.1% -3.4% -0.1% 4.6%
         
Total 28.5% 3.5% -0.2% 31.8%
 
The following unaudited table compares our revenue and EBITDA by reportable segment:
         
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2012 2011 2012 2011
  (In thousands)
         
Revenue        
North America  $ 841,335  $ 759,684  $ 1,712,419  $ 1,546,332
Europe  165,196  --  325,889  --
Total revenue  $ 1,006,531  $ 759,684  $ 2,038,308  $ 1,546,332
         
EBITDA        
North America (1)  $ 109,687  $ 93,354  $ 241,875  $ 212,757
Europe (2)  16,057  --  35,590  --
Total EBITDA  $ 125,744  $ 93,354  $ 277,465  $ 212,757
         
(1) For the three and six months ended June 30, 2012, North America EBITDA includes gains of $8.4 million and $16.7 million, respectively, resulting from certain settlements of a class action lawsuit against several of our suppliers.
         
(2) For the three and six months ended June 30, 2012, Europe EBITDA includes a loss of $1.1 million and a gain of $0.2 million, respectively, from the change in fair value of the Euro Car Parts contingent consideration liability.
CONTACT: Joseph P. Boutross
         Director, Investor Relations
         (312) 621-2793
         jpboutross@lkqcorp.com

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