LKQ CORP - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - LKQ CORP	d8k.htm

Exhibit 99.1

LOGO

LKQ Corporation Announces Record Third Quarter Results

Diluted Earnings per Share Increases 11% to $0.20

Chicago, IL (October 29, 2009) – LKQ Corporation (NASDAQ: LKQX) today reported diluted earnings per share of $0.20 for the third quarter ended September 30, 2009, an 11.1% increase from $0.18 for the third quarter of 2008. Revenue for the third quarter of 2009 was $494.8 million, an increase of 2.7% as compared to $481.6 million in the third quarter of 2008. Net income in the third quarter of 2009 was $29.2 million as compared to $25.1 million in the third quarter of 2008. Excluding restructuring expenses from continuing operations and excluding a fixed asset impairment from discontinued operations, diluted earnings per share was $0.22 in the third quarter of 2009 as compared to $0.19 in the third quarter of 2008.

“I am pleased with the strong earnings growth we realized for the quarter, especially considering the solid results we had last year,” stated Joseph Holsten, CEO and president of LKQ Corporation. “While there were many positive aspects of the quarter, I was most pleased with the strength of our same store sales growth of aftermarket parts sales, which I attribute to our successful integration of Keystone into LKQ coupled with our improved inventory management. Our business performance was also positively impacted by improvement in gross margins from both aftermarket operations as well as our self service business. Before restructuring expenses, operating margin improved by roughly 100 basis points as compared to the prior year. Cash flows from operations stand at $135 million year-to-date, and should easily exceed our previously issued forecast,” added Mr. Holsten.

As previously announced, LKQ entered into an agreement to divest certain self-service recycling businesses, and LKQ has classified these divestitures as discontinued operations in its three and nine month financial statements ended September 30, 2008 and September 30, 2009.

Income from continuing operations was $30.1 million in the third quarter of 2009, an increase of 26.0% as compared to $23.9 million in the third quarter of 2008.

Organic revenue growth, excluding Other Revenue, was 5.5% for the third quarter of 2009. Aftermarket, other new and refurbished products organic revenue growth was 11.3% for the third quarter of 2009 as compared to the same period of the prior year. Organic revenue growth of recycled products of 6.6% for the third quarter of 2009 was offset by a reduction of related service revenue, resulting in a net 2.1% decline of organic revenue for recycled and related products and services as compared to the same period of the prior year.

During the third quarter of 2009, the company had restructuring expenses of $0.9 million in continuing operations related to its Keystone acquisition and a fixed asset impairment of $3.5 million included in discontinued operations related to a divested self-service business. For the third quarter of 2008, the company reported restructuring expenses of $2.4 million. These expenses reduced diluted earnings per share by $0.02 in the third quarter of 2009, and $0.01 in the third quarter of 2008. Earnings per share from discontinued operations excluding the fixed asset impairment was approximately $0.01 in both the third quarter of 2009 and the third quarter of 2008.

For the nine months ended September 30, 2009, revenue was $1,492.0 million, an increase of 3.3% as compared to $1,443.8 million in the same period of the prior year. Year to date 2009 net income was $90.3 million as compared to $86.9 million for the prior year. Year to date 2009 diluted earnings per share was $0.63 as compared to $0.62 in the prior year. Diluted earnings per share before restructuring expenses and the fixed asset impairment was $0.65 for both the year to date 2009 period and the same period of the prior year.

On a nine month, year to date basis, organic revenue declined by 1.4%; however, excluding Other Revenue, organic revenue grew by 6.1%.

Recent Business Acquisitions and Divestitures

During the third quarter of 2009, the company made two acquisitions: Superior Collision Parts, an aftermarket supplier with annualized revenue of $11.0 million and with operations in Atlanta, GA; Pittsburgh, PA; Columbus, OH; and Allentown, PA; and a heavy-duty truck business with historical annual revenue of $2.0 million in Maryland.

LKQ announced on October 2, 2009, the acquisition of Greenleaf Auto Recyclers, LLC (“Greenleaf”) from Schnitzer Steel Industries (“SSI”). Greenleaf, a wholesale recycling business consisting of 17 operating locations in nine states, had trailing annual revenue of approximately $114.0 million.

“Greenleaf’s focus on late model wholesale recycling provides a strong strategic fit with LKQ. It enhances our network in the mid-Atlantic states and increases our presence in a number of areas where both Greenleaf and LKQ already operate. As a result of dual facilities in many of the markets, we anticipate we

will be able to consolidate up to 11 facilities as we merge operations. Our systems integration work is already well underway, and I anticipate that all of the Greenleaf operations will be converted onto LKQ yard management systems prior to the end of the year. Moving Greenleaf to the same systems sets the stage for our sales people to gain the benefits of selling from the combined inventories of the two companies, and allows our field management to focus on achieving routing and procurement synergies,” commented Mr. Holsten.

LKQ also announced on October 2, 2009 the sale to SSI of four self-service facilities and certain business assets at three other facilities with plans to close two of the sites and to convert the remaining location to a wholesale recycling business. In addition, subject to customary closing conditions, LKQ agreed to sell to SSI two other self-service recycling facilities in Dallas, TX with an anticipated closing date in mid-January 2010. The results of the facilities sold, to be sold or closed and the related restructuring expenses and the fixed asset impairment have been classified as discontinued operations by LKQ.

Balance Sheet and Liquidity

As of September 30, 2009, LKQ’s balance sheet reflected cash and equivalents of $166.0 million as compared to $79.1 million as of December 31, 2008. Debt as of September 30, 2009 was $635.6 million as compared to $642.9 million at the end of 2008. Liquidity available under LKQ’s revolving credit agreement was $65.3 million at the end of the quarter.

Company Outlook

Organic revenue growth, excluding Other Revenue, is projected to grow at a rate of 6% to 8%. Excluding the impact of any restructuring expenses or the impact of fixed asset impairments and gains related to transactions with SSI, LKQ anticipates full year 2009 net income will be in the range of $120 million to $124 million and diluted earnings per share will be in the range of $0.83 to $0.86.

Net cash provided by operating activities from continuing and discontinued operations for 2009 is projected to be approximately $150 million. Capital expenditures from continuing and discontinued operations related to property and equipment, excluding expenditures for acquiring businesses, are projected to be in the range of $65 million to $70 million.

Weighted average diluted shares outstanding are anticipated to be approximately 144 million for 2009. Share numbers are estimates and will be affected by factors such as future stock issuances, the number of options exercised in subsequent periods, and changes in stock price.

Quarterly Conference Call

LKQ will host a conference call and audio webcast to discuss its third quarter 2009 financial results on Thursday, October 29, 2009 at 10:00 a.m. Eastern Time. To access the investor conference call, please dial (877) 511-8166. International access to the call may be obtained by dialing (201) 689-8789. The 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: #335449. An online replay of the webcast will be available on the Company’s website. Both forms of the replay of the conference call will be available until November 29, 2009. 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 collision replacement products, recycled OEM products and refurbished OEM collision replacement products such as wheels, bumper covers and lights which are used to repair light vehicles. LKQ operates approximately 295 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 manufacturers replacement parts;

•

the availability and cost of our inventory;

•

variations in vehicle accident rates;

•

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;

•

the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure;

•

increasing competition in the automotive parts industry;

•

our ability to increase or maintain revenue and profitability at our facilities;

•

uncertainty as to our future profitability on a consolidated basis;

•

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, foreign exchange and other commodity prices;

•

fluctuations in the prices of scrap and other metals that could adversely affect our financial results;

•

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 original equipment manufacturers that attempt to restrict or eliminate the sale of aftermarket products;

•

decreases in the supply of end of life and crush only vehicles that we process and sell for scrap;

•

termination of business relationships with insurance companies that promote the use of our products; and

•

other risks that are described in our Form 10-K filed February 27, 2009 and in other reports filed by us from time to time with the Securities and Exchange Commission.

You should not place undue reliance on the forward looking statements. We assume no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made except as required by law.

Contact:

Sarah Lewensohn

Director, Investor Relations

(312) 621-2793

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Condensed Statements of Income

( In thousands, except per share data )


	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009			2008
Revenue	$	494,812		$	481,614	$	1,492,037		$	1,443,766
Cost of goods sold		269,708			269,805		817,114			796,758

Gross margin		225,104			211,809		674,923			647,008
Facility and warehouse expenses		48,337			46,956		145,101			133,203
Distribution expenses		45,604			46,476		132,608			136,553
Selling, general and administrative expenses		65,893			60,423		198,688			185,512
Restructuring expenses		852			2,400		1,910			6,723
Depreciation and amortization		8,373			7,387		24,893			21,719

Operating income		56,045			48,167		171,723			163,298
Other expense (income):
Interest expense, net		7,780			8,190		23,082			26,891
Other (income) loss, net		(23	)		22		(170	)		(688	)

Total other expense		7,757			8,212		22,912			26,203

Income from continuing operations before provision for income taxes		48,288			39,955		148,811			137,095

Provision for income taxes		18,147			16,027		58,197			54,318

Income from continuing operations		30,141			23,928		90,614			82,777
(Loss) income from discontinued operations, net of taxes		(986	)		1,140		(298	)		4,158

Net income	$	29,155		$	25,068	$	90,316		$	86,935


Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	0.21		$	0.18	$	0.65		$	0.61
(Loss) income from discontinued operations		(0.01	)		0.01		—			0.03

Basic earnings per share	$	0.21		$	0.18	$	0.64		$	0.64


Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	0.21		$	0.17	$	0.63		$	0.59
(Loss) income from discontinued operations		(0.01	)		0.01		—			0.03

Diluted earnings per share	$	0.20		$	0.18	$	0.63		$	0.62


Weighted average common shares outstanding:
Basic		140,746			136,585		140,257			135,481

Diluted		144,047			141,190		143,669			140,458

⁽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)


	September 30, 2009			December 31, 2008
Assets

Current Assets:
Cash and equivalents	$	166,005		$	79,067
Receivables, net		127,434			147,886
Inventory		361,095			330,511
Deferred income taxes		19,732			19,644
Prepaid income taxes		6,839			21,164
Prepaid expenses		9,194			7,716
Assets of discontinued operations		24,597			24,129


Total Current Assets		714,896			630,117

Property and Equipment, net		259,453			254,346
Intangibles		998,647			978,368
Other Assets		20,987			18,973


Total Assets	$	1,993,983		$	1,881,804


Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	54,195		$	65,363
Accrued expenses		84,141			74,829
Deferred revenue		6,152			4,733
Current portion of long-term obligations		29,515			21,934
Liabilities of discontinued operations		2,723			354


Total Current Liabilities		176,726			167,213

Long-Term Obligations, Excluding Current Portion		606,048			620,940
Deferred Income Tax Liability		47,254			43,518
Other Noncurrent Liabilities		32,519			29,627

Commitments and Contingencies

Stockholders’ Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 141,175,304 and 139,921,410 shares issued at September 30, 2009 and December 31, 2008, respectively		1,412			1,399
Additional paid-in capital		806,988			790,933
Retained earnings		332,254			241,938
Accumulated other comprehensive loss		(9,218	)		(13,764	)


Total Stockholders’ Equity		1,131,436			1,020,506


Total Liabilities and Stockholders’ Equity	$	1,993,983		$	1,881,804

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Condensed Statements of Cash Flows

( In thousands )


	Nine Months Ended September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	90,316		$	86,935
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,931			23,998
Stock-based compensation expense		5,457			4,133
Deferred income taxes		2,663			9,375
Excess tax benefit from share-based payment arrangements		(5,744	)		(8,192	)
Other adjustments		3,873			2,221
Changes in operating assets and liabilities, net of effects from purchase transactions:
Receivables		18,671			(5,738	)
Inventory		(24,302	)		(5,675	)
Prepaid income taxes/income taxes payable		19,887			9,733
Accounts payable		(12,722	)		(9,798	)
Other operating assets and liabilities		9,434			(1,678	)


Net cash provided by operating activities		135,464			105,314


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(28,993	)		(42,212	)
Proceeds from disposal of assets		952			1,993
Cash used in acquisitions		(18,580	)		(40,258	)


Net cash used in investing activities		(46,621	)		(80,477	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		4,986			4,722
Excess tax benefit from share-based payment arrangements		5,744			8,192
Debt issuance costs		—			(219	)
Borrowings under line of credit		2,310			—
Repayments of long-term debt		(16,212	)		(13,659	)


Net cash used in financing activities		(3,172	)		(964	)


Effect of exchange rate changes on cash and equivalents		1,267			(425	)

Net increase in cash and equivalents		86,938			23,448

Cash and equivalents, beginning of period		79,067			74,241


Cash and equivalents, end of period	$	166,005		$	97,689

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( In thousands, except per share data )


	Three Months Ended September 30,
Operating Highlights	2009					2008
				% of Revenue				% of Revenue		Change			% Change
Revenue	$	494,812		100.0	%	$	481,614	100.0	%	$	13,198		2.7	%
Cost of goods sold		269,708		54.5	%		269,805	56.0	%		(97	)	0.0	%

Gross margin		225,104		45.5	%		211,809	44.0	%		13,295		6.3	%
Facility and warehouse expenses		48,337		9.8	%		46,956	9.7	%		1,381		2.9	%
Distribution expenses		45,604		9.2	%		46,476	9.7	%		(872	)	-1.9	%
Selling, general and administrative expenses		65,893		13.3	%		60,423	12.5	%		5,470		9.1	%
Restructuring expenses		852		0.2	%		2,400	0.5	%		(1,548	)	-64.5	%
Depreciation and amortization		8,373		1.7	%		7,387	1.5	%		986		13.3	%

Operating income		56,045		11.3	%		48,167	10.0	%		7,878		16.4	%

Other expense (income):
Interest expense, net		7,780		1.6	%		8,190	1.7	%		(410	)	-5.0	%
Other (income) loss, net		(23	)	0.0	%		22	0.0	%		(45	)	-204.5	%

Total other expense		7,757		1.6	%		8,212	1.7	%		(455	)	-5.5	%

Income from continuing operations before provision for income taxes		48,288		9.8	%		39,955	8.3	%		8,333		20.9	%
Provision for income taxes		18,147		3.7	%		16,027	3.3	%		2,120		13.2	%

Income from continuing operations		30,141		6.1	%		23,928	5.0	%		6,213		26.0	%
(Loss) income from discontinued operations, net of taxes		(986	)	-0.2	%		1,140	0.2	%		(2,126	)	-186.5	%

Net income	$	29,155		5.9	%	$	25,068	5.2	%	$	4,087		16.3	%


Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	0.21				$	0.18			$	0.03		16.7	%
(Loss) income from discontinued operations		(0.01	)				0.01				(0.02	)	-200.0	%

Basic earnings per share	$	0.21				$	0.18			$	0.03		16.7	%


Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	0.21				$	0.17			$	0.04		23.5	%
(Loss) income from discontinued operations		(0.01	)				0.01				(0.02	)	-200.0	%

Diluted earnings per share	$	0.20				$	0.18			$	0.02		11.1	%


Weighted average common shares outstanding:
Basic		140,746					136,585				4,161		3.0	%

Diluted		144,047					141,190				2,857		2.0	%

⁽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 )


	Nine Months Ended September 30,
Operating Highlights	2009					2008
				% of Revenue					% of Revenue		Change			% Change
Revenue	$	1,492,037		100.0	%	$	1,443,766		100.0	%	$	48,271		3.3	%
Cost of goods sold		817,114		54.8	%		796,758		55.2	%		20,356		2.6	%

Gross margin		674,923		45.2	%		647,008		44.8	%		27,915		4.3	%
Facility and warehouse expenses		145,101		9.7	%		133,203		9.2	%		11,898		8.9	%
Distribution expenses		132,608		8.9	%		136,553		9.5	%		(3,945	)	-2.9	%
Selling, general and administrative expenses		198,688		13.3	%		185,512		12.8	%		13,176		7.1	%
Restructuring expenses		1,910		0.1	%		6,723		0.5	%		(4,813	)	-71.6	%
Depreciation and amortization		24,893		1.7	%		21,719		1.5	%		3,174		14.6	%

Operating income		171,723		11.5	%		163,298		11.3	%		8,425		5.2	%

Other expense (income):
Interest expense, net		23,082		1.5	%		26,891		1.9	%		(3,809	)	-14.2	%
Other (income) loss, net		(170	)	0.0	%		(688	)	0.0	%		518		-75.3	%

Total other expense		22,912		1.5	%		26,203		1.8	%		(3,291	)	-12.6	%

Income from continuing operations before provision for income taxes		148,811		10.0	%		137,095		9.5	%		11,716		8.5	%
Provision for income taxes		58,197		3.9	%		54,318		3.8	%		3,879		7.1	%

Income from continuing operations		90,614		6.1	%		82,777		5.7	%		7,837		9.5	%
(Loss) income from discontinued operations, net of taxes		(298	)	0.0	%		4,158		0.3	%		(4,456	)	-107.2	%

Net income	$	90,316		6.1	%	$	86,935		6.0	%	$	3,381		3.9	%


Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	0.65				$	0.61				$	0.04		6.6	%
(Loss) income from discontinued operations		—					0.03					(0.03	)	-100.0	%

Basic earnings per share	$	0.64				$	0.64				$	—		0.0	%


Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	0.63				$	0.59				$	0.04		6.8	%
(Loss) income from discontinued operations		—					0.03					(0.03	)	-100.0	%

Diluted earnings per share	$	0.63				$	0.62				$	0.01		1.6	%


Weighted average common shares outstanding:
Basic		140,257					135,481					4,776		3.5	%

Diluted		143,669					140,458					3,211		2.3	%

⁽¹⁾	The sum of the individual earnings per share amounts may not equal the total due to rounding.

The following unaudited table reconciles EBITDA to income from continuing operations:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(In thousands)
Income from continuing operations	$	30,141		$	23,928		$	90,614		$	82,777
Depreciation and amortization		9,151			8,072			27,378			23,688
Interest expense, net		7,780			8,190			23,082			26,891
Provision for income taxes		18,147			16,027			58,197			54,318


Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations	$	65,219		$	56,217		$	199,271		$	187,674


EBITDA as a percentage of revenue		13.2	%		11.7	%		13.4	%		13.0	%

We provide a reconciliation of Income from Continuing Operations to EBITDA as we believe it offers investors, security 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 security analysts, investors, and other interested parties in evaluating companies, many of which present EBITDA when reporting their results.

The following unaudited table compares certain revenue categories:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
	(In thousands)
Included in Consolidated Income Statements of LKQ Corporation

Recycled and related products and services	$	180,482	$	172,322	$	548,040	$	482,652
Aftermarket, other new and refurbished products		257,670		230,292		799,953		746,512
Other		56,660		79,000		144,044		214,602

	$	494,812	$	481,614	$	1,492,037	$	1,443,766

Results of operations for the discontinued operations are as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009			2008
	(In thousands)
Revenue	$	7,335		$	9,087	$	20,853		$	23,235

(Loss) income before taxes		(1,565	)		1,810		(473	)		6,600
Income tax (benefit) provision		(579	)		670		(175	)		2,442


(Loss) income from discontinued operations, net of taxes	$	(986	)	$	1,140	$	(298	)	$	4,158

The third quarter and nine month results for 2009 include $3.5 million ($2.2 million, net of tax) in fixed asset impairment related to the discontinued operations.

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