LKQ Corporation Posts Record Second Quarter 2011 Results

  • Revenue growth of 30% to $760 million
  • Organic revenue growth of 12%
  • Diluted EPS from continuing operations increases 23%

CHICAGO, July 28, 2011 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQX) today reported revenue for the second quarter of 2011 of $759.7 million, an increase of 29.9% as compared to $584.7 million in the second quarter of 2010. Income from continuing operations for the second quarter of 2011 was $46.7 million, an increase of 23.2% as compared to $37.9 million for the same period of 2010. Diluted earnings per share from continuing operations of $0.32 for the second quarter ended June 30, 2011 increased 23.1% from $0.26 for the second quarter of 2010.

"All of the operating groups performed well during the quarter," stated Robert Wagman, President and Co-Chief Executive Officer of LKQ Corporation. Mr. Wagman continued, "We believe higher fuel prices and lower miles driven created some challenges for certain segments of our business. Despite those challenges, the Company delivered total organic growth of 12.2% in the quarter, including 8.4% for parts and services."

Joseph Holsten, Vice Chairman and Co-Chief Executive Officer of LKQ Corporation added, "We continued our acquisition plans which contributed 17.5% to our revenue growth year-over-year. While realizing the full potential of these businesses will take some time, we are on pace with our plans for integration."

On a six month year-to-date basis, revenue was $1.55 billion, an increase of 30.1% from $1.19 billion for the same six month period of 2010. Income from continuing operations for the first six months of 2011 was $104.9 million, as compared to $89.9 million for the first half of 2010. Diluted earnings per share from continuing operations was $0.71 for the first six months of 2011, as compared to $0.62 for the same six month period of 2010.

Organic revenue growth on a six month year-to-date basis was 12.9%. Parts and services revenue grew organically by 9.4%. Acquisition revenue growth on a six month year-to-date basis was 17.0%.

Robert Wagman added: "Overall, we are excited about the industry dynamics we see today. Alternative parts usage continues to grow, our fill rates are at historical highs, and we continue to see strong insurance support as we explore alternative salvage solutions outside of the traditional auction environment."

Balance Sheet and Liquidity

As of June 30, 2011, LKQ's balance sheet reflected cash and equivalents of $42.3 million, and the outstanding obligations under the Company's credit facilities were $574.6 million ($246.9 million of term loans and $327.7 million of revolver borrowings). Availability under the revolver at June 30, 2011, including the impact of outstanding letters of credit of $33.7 million, was $388.6 million.

Other Events

During the second quarter, LKQ acquired three businesses: the U.S. paint distribution business of Akzo Nobel Coatings Inc., a wheel refinishing business in Ohio, and an aftermarket parts distributor in Ohio.

On May 25, 2011 Standard & Poor's raised LKQ's corporate credit rating to BB+ from BB reflecting the Company's increasingly improved credit ratios.

The Company noted that on July 20, 2011 Robert M. Devlin retired from the Company's Board of Directors. Mr. Devlin had been a director since 2007.

Regarding Mr. Devlin's retirement, Mr. Donald F. Flynn, Chairman of the Board of Directors stated: "The Board of Directors wishes to acknowledge the significant contributions made by Bob during his tenure and thank him for his service. Bob's vast experience in the insurance industry and extensive career in management played a key role in LKQ's success and growth."

Company Outlook

The Company announced that it is revising earnings guidance for 2011. Income from continuing operations and diluted earnings per share from continuing operations are anticipated to be within the range of $201 million to $211 million and $1.36 to $1.42, respectively. LKQ's previous guidance was $197 million to $211 million for income from continuing operations, and $1.33 to $1.42 for diluted earnings per share.

In addition, the Company left unchanged its guidance of approximately $195 million for cash flows from continuing operations, $85-$95 million in capital expenditures, and organic growth of 6-8% from parts and services revenue.

The Company noted that it does not include sales of scrap or cores in its definition of parts and services revenue. Additionally, all guidance comments exclude restructuring expenses and any gains or losses or capital expenditures related to acquisitions or divestitures.

Quarterly Conference Call

LKQ will host a conference call and Webcast on July 28, 2011 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. The 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: 374935 #. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through August 26, 2011. 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 and recycled collision replacement parts and refurbished collision replacement products such as wheels, bumper covers and lights, 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 Canada, Mexico and Central America. LKQ operates more than 340 facilities, offering its customers a broad range of replacement systems, components and parts to repair automobiles and light, medium and heavy-duty trucks.

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 U.S. 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 parts;
  • the availability and cost of our inventory;
  • variations in vehicle accident rates or miles driven;
  • 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 agreements;
  • 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 Canadian dollar, the Mexican peso and the Taiwan dollar;
  • instability in regions in which we operate, such as Mexico, that can affect our supply of certain products; and
  • other risks that are described in our Form 10-K filed February 25, 2011 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 EndedSix Months Ended
June 30,June 30,
2011201020112010
Revenue  $ 759,684  $ 584,681  $ 1,546,332  $ 1,188,197
Cost of goods sold  437,448  323,415  880,450  643,641
Gross margin  322,236  261,266  665,882  544,556
Facility and warehouse expenses  69,183  55,358  139,001  113,134
Distribution expenses  69,048  51,168  134,859  102,357
Selling, general and administrative expenses  91,395  75,679  181,156  150,766
Restructuring expenses  2,377  290  2,423  370
Depreciation and amortization  11,747  9,162  22,586  18,391
Operating income  78,486  69,609  185,857  159,538
Other expense (income):
Interest expense, net  4,671  7,155  11,080  14,431
Loss on debt extinguishment  --   --   5,345  -- 
Other income, net  (1,997)  (138)  (2,103)  (299)
Total other expense, net  2,674  7,017  14,322  14,132
Income from continuing operations before provision for income taxes  75,812  62,592  171,535  145,406
Provision for income taxes   29,106  24,686  66,647  55,517
Income from continuing operations   46,706  37,906  104,888  89,889
Discontinued operations:
Income from discontinued operations, net of taxes  --   --   --   224
Gain on sale of discontinued operations, net of taxes  --   --   --   1,729
Income from discontinued operations  --   --   --   1,953
Net income  $ 46,706  $ 37,906  $ 104,888  $ 91,842
Basic earnings per share (1):
Income from continuing operations  $ 0.32  $ 0.27  $ 0.72  $ 0.63
Income from discontinued operations  --   --   --  0.01
Total  $ 0.32  $ 0.27  $ 0.72  $ 0.64
Diluted earnings per share (1):
Income from continuing operations  $ 0.32  $ 0.26  $ 0.71  $ 0.62
Income from discontinued operations  --   --   --  0.01
Total  $ 0.32  $ 0.26  $ 0.71  $ 0.63
Weighted average common shares outstanding:
Basic  145,917  142,842  145,765  142,520
Diluted  148,131  145,496  148,007  145,307
(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
(In thousands, except share and per share data)
June 30,December 31,
20112010
Assets
Current Assets:
Cash and equivalents  $ 42,256  $ 95,689
Receivables, net  236,628  191,085
Inventory  556,541  492,688
Deferred income taxes  35,039  32,506
Prepaid income taxes  --   10,923
Prepaid expenses  19,912  13,985
Total Current Assets  890,376  836,876
Property and Equipment, net  358,443  331,312
Intangibles  1,131,723  1,102,275
Other Assets  37,172  29,046
Total Assets  $ 2,417,714  $ 2,299,509
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable  $ 77,951  $ 76,437
Accrued expenses  88,075  84,028
Income taxes payable  690  -- 
Deferred revenue  8,869  9,224
Current portion of long-term obligations   15,520  52,888
Liabilities of discontinued operations  2,364  2,744
Total Current Liabilities  193,469  225,321
Long-Term Obligations, Excluding Current Portion  570,841  548,066
Deferred Income Tax Liabilities  64,827  66,059
Other Noncurrent Liabilities  52,875  45,902
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 146,170,800 and 145,466,575 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively  1,462  1,455
Additional paid-in capital  885,555  869,798
Retained earnings  643,418  538,530
Accumulated other comprehensive income  5,267  4,378
Total Stockholders' Equity  1,535,702  1,414,161
Total Liabilities and Stockholders' Equity  $ 2,417,714  $ 2,299,509
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
20112010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income  $ 104,888  $ 91,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization  24,797  20,011
Stock-based compensation expense  6,602  5,112
Deferred income taxes  (6)  (1,097)
Excess tax benefit from share-based payments  (4,053)  (5,953)
Gain on sale of discontinued operations  --   (2,744)
Loss on debt extinguishment  5,345  -- 
Other  (498)  1,376
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Receivables  (24,769)  (1,484)
Inventory  (19,578)  (24,672)
Prepaid income taxes/income taxes payable  14,786  18,223
Accounts payable  (4,525)  (393)
Other operating assets and liabilities  (1,909)  970
Net cash provided by operating activities  101,080  101,191
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment  (42,540)  (20,847)
Proceeds from sales of property and equipment  162  236
Proceeds from sale of businesses, net of cash sold  --   11,992
Cash used in acquisitions, net of cash acquired  (95,591)  (13,742)
Net cash used in investing activities  (137,969)  (22,361)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options  5,109  5,136
Excess tax benefit from share-based payments  4,053  5,953
Debt issuance costs  (8,190)  -- 
Borrowings under line of credit  401,753  -- 
Repayments under line of credit  (74,328)  -- 
Borrowings under term loan  250,000  -- 
Repayments under term loans  (594,214)  (7,476)
Repayments of other long-term debt  (716)  (1,105)
Net cash (used in) provided by financing activities  (16,533)  2,508
Effect of exchange rate changes on cash and equivalents  (11)  233
Net (decrease) increase in cash and equivalents  (53,433)  81,571
Cash and equivalents, beginning of period  95,689  108,906
Cash and equivalents, end of period  $ 42,256  $ 190,477
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
(In thousands, except per share data)
Three Months Ended June 30,
Operating Highlights20112010
% of% of
RevenueRevenueChange% Change
Revenue  $ 759,684 100.0%  $ 584,681 100.0%  $ 175,003 29.9%
Cost of goods sold  437,448 57.6%  323,415 55.3%  114,033 35.3%
Gross margin  322,236 42.4%  261,266 44.7%  60,970 23.3%
Facility and warehouse expenses  69,183 9.1%  55,358 9.5%  13,825 25.0%
Distribution expenses  69,048 9.1%  51,168 8.8%  17,880 34.9%
Selling, general and administrative expenses  91,395 12.0%  75,679 12.9%  15,716 20.8%
Restructuring expenses  2,377 0.3%  290 0.0%  2,087 719.7%
Depreciation and amortization  11,747 1.5%  9,162 1.6%  2,585 28.2%
Operating income  78,486 10.3%  69,609 11.9%  8,877 12.8%
Other expense (income):
Interest expense, net  4,671 0.6%  7,155 1.2%  (2,484) -34.7%
Loss on debt extinguishment  --  0.0%  --  0.0%  --  n/m
Other income, net  (1,997) -0.3%  (138) 0.0%  (1,859) n/m
Total other expense, net  2,674 0.4%  7,017 1.2%  (4,343) -61.9%
Income from continuing operations before provision for income taxes  75,812 10.0%  62,592 10.7%  13,220 21.1%
Provision for income taxes   29,106 3.8%  24,686 4.2%  4,420 17.9%
Income from continuing operations   46,706 6.1%  37,906 6.5%  8,800 23.2%
Discontinued operations:
Income from discontinued operations, net of taxes  --  0.0%  --  0.0%  --  n/m
Gain on sale of discontinued operations, net of taxes  --  0.0%  --  0.0%  --  n/m
Income from discontinued operations  --  0.0%  --  0.0%  --  n/m
Net income  $ 46,706 6.1%  $ 37,906 6.5%  $ 8,800 23.2%
Basic earnings per share (1):
Income from continuing operations  $ 0.32  $ 0.27  $ 0.05 18.5%
Income from discontinued operations 0.00 0.00 0.00 n/m
Total  $ 0.32  $ 0.27  $ 0.05 18.5%
Diluted earnings per share (1):
Income from continuing operations  $ 0.32  $ 0.26  $ 0.06 23.1%
Income from discontinued operations 0.00 0.00 0.00 n/m
Total  $ 0.32  $ 0.26  $ 0.06 23.1%
Weighted average common shares outstanding:
Basic  145,917  142,842  3,075 2.2%
Diluted  148,131  145,496  2,635 1.8%
(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
(In thousands, except per share data)
Six Months Ended June 30,
Operating Highlights20112010
% of% of
RevenueRevenueChange% Change
Revenue  $ 1,546,332 100.0%  $ 1,188,197 100.0%  $ 358,135 30.1%
Cost of goods sold  880,450 56.9%  643,641 54.2%  236,809 36.8%
Gross margin  665,882 43.1%  544,556 45.8%  121,326 22.3%
Facility and warehouse expenses  139,001 9.0%  113,134 9.5%  25,867 22.9%
Distribution expenses  134,859 8.7%  102,357 8.6%  32,502 31.8%
Selling, general and administrative expenses  181,156 11.7%  150,766 12.7%  30,390 20.2%
Restructuring expenses  2,423 0.2%  370 0.0%  2,053 554.9%
Depreciation and amortization  22,586 1.5%  18,391 1.5%  4,195 22.8%
Operating income  185,857 12.0%  159,538 13.4%  26,319 16.5%
Other expense (income):
Interest expense, net  11,080 0.7%  14,431 1.2%  (3,351) -23.2%
Loss on debt extinguishment  5,345 0.3%  --  0.0%  5,345 n/m
Other income, net  (2,103) -0.1%  (299) 0.0%  (1,804) n/m
Total other expense, net  14,322 0.9%  14,132 1.2%  190 1.3%
Income from continuing operations before provision for income taxes  171,535 11.1%  145,406 12.2%  26,129 18.0%
Provision for income taxes   66,647 4.3%  55,517 4.7%  11,130 20.0%
Income from continuing operations   104,888 6.8%  89,889 7.6%  14,999 16.7%
Discontinued operations:
Income from discontinued operations, net of taxes  --  0.0%  224 0.0%  (224) -100.0%
Gain on sale of discontinued operations, net of taxes  --  0.0%  1,729 0.1%  (1,729) -100.0%
Income from discontinued operations  --  0.0%  1,953 0.2%  (1,953) -100.0%
Net income  $ 104,888 6.8%  $ 91,842 7.7%  $ 13,046 14.2%
Basic earnings per share (1):
Income from continuing operations  $ 0.72  $ 0.63  $ 0.09 14.3%
Income from discontinued operations 0.00 0.01 (0.01) -100.0%
Total  $ 0.72  $ 0.64  $ 0.08 12.5%
Diluted earnings per share (1):
Income from continuing operations  $ 0.71  $ 0.62  $ 0.09 14.5%
Income from discontinued operations 0.00 0.01 (0.01) -100.0%
Total  $ 0.71  $ 0.63  $ 0.08 12.7%
Weighted average common shares outstanding:
Basic  145,765  142,520  3,245 2.3%
Diluted  148,007  145,307  2,700 1.9%
(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.
 The following unaudited table reconciles income from continuing operations to EBITDA: 
Three Months EndedSix Months Ended
June 30,June 30,
2011201020112010
(In thousands)
    
Income from continuing operations   $ 46,706  $ 37,906  $ 104,888  $ 89,889
Depreciation and amortization 12,871 10,031 24,797 20,011
Interest expense, net 4,671  7,155 11,080 14,431
Loss on debt extinguishment (1)  --   --  5,345  -- 
Provision for income taxes   29,106  24,686 66,647 55,517
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing  operations   $ 93,354  $ 79,778  $ 212,757  $ 179,848
 EBITDA as a percentage of revenue  12.3% 13.6% 13.8% 15.1%
(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 Income from Continuing Operations 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,  
20112010Change% Change
(In thousands)  
     
Included in Unaudited Consolidated Condensed     
Statements of Income of LKQ Corporation
Aftermarket, other new and refurbished products  $ 356,202  $ 290,271  $ 65,931 22.7%
Recycled, remanufactured and related products and services  269,700  214,159  55,541 25.9%
Parts and services 625,902 504,430 121,472 24.1%
Other  133,782 80,251 53,531 66.7%
Total  $ 759,684  $ 584,681  $ 175,003 29.9%
Revenue changes by category for the three months ended June 30, 2011 vs. 2010:
 
Revenue Change Attributable to:
AcquisitionOrganicForeign
Exchange
% Change
Aftermarket, other new and refurbished products 16.1% 6.4% 0.2% 22.7%
Recycled, remanufactured and related products and services 14.5% 11.0% 0.4% 25.9%
Parts and services 15.4% 8.4% 0.3% 24.1%
Other  30.1% 36.5% 0.1% 66.7%
Total 17.5% 12.2% 0.2% 29.9%
Six Months Ended  
June 30,  
20112010Change% Change
(In thousands)  
     
Included in Unaudited Consolidated Condensed     
Statements of Income of LKQ Corporation
Aftermarket, other new and refurbished products  $ 737,318  $ 602,644  $ 134,674 22.3%
Recycled, remanufactured and related products and services  545,482  429,382  116,100 27.0%
Parts and services 1,282,800 1,032,026 250,774 24.3%
Other  263,532 156,171 107,361 68.7%
Total  $ 1,546,332  $ 1,188,197  $ 358,135 30.1%
Revenue changes by category for the six months ended June 30, 2011 vs. 2010:
 
Revenue Change Attributable to:
AcquisitionOrganicForeign
Exchange
% Change
Aftermarket, other new and refurbished products 13.9% 8.2% 0.2% 22.3%
Recycled, remanufactured and related products and services 15.8% 10.9% 0.3% 27.0%
Parts and services 14.7% 9.4% 0.2% 24.3%
Other  32.0% 36.6% 0.1% 68.7%
Total 17.0% 12.9% 0.2% 30.1%
CONTACT: Joseph P. Boutross
         Director, Investor Relations
         (312) 621-2793
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