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 POSTS RECORD SECOND QUARTER 2011 RESULTS

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Revenue growth of 30% to $760 million

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Organic revenue growth of 12%

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Diluted EPS from continuing operations increases 23%

Chicago, IL (July 28, 2011) - 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:

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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;

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fluctuations in the pricing of new original equipment manufacturer (“OEM”) replacement parts;

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the availability and cost of our inventory;

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variations in vehicle accident rates or miles driven;

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changes in state or federal laws or regulations affecting our business;

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changes in the types of replacement parts that insurance carriers will accept in the repair process;

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changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;

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increasing competition in the automotive parts industry;

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uncertainty as to the impact on our industry of any terrorist attacks or responses to terrorist attacks;

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our ability to operate within the limitations imposed by financing agreements;

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our ability to obtain financing on acceptable terms to finance our growth;

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declines in the values of our assets;

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fluctuations in fuel and other commodity prices;

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fluctuations in the prices of scrap metal and other metals;

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our ability to develop and implement the operational and financial systems needed to manage our operations;

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our ability to integrate and successfully operate acquired companies and any companies acquired in the future and the risks associated with these companies;

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claims by OEMs or others that attempt to restrict or eliminate the sale of aftermarket products:

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

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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;

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currency fluctuations in the U.S. dollar versus the Canadian dollar, the Mexican peso and the Taiwan dollar;

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instability in regions in which we operate, such as Mexico, that can affect our supply of certain products; and

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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.

Contact:

Joseph P. Boutross

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						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

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, 2011		December 31, 2010
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,
	2011			2010

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 Highlights	2011						2010
				% of Revenue						% of Revenue			Change			% 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 Highlights	2011						2010
				% of Revenue						% of Revenue			Change			% 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 Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(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,
	2011		2010		Change		% 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:
	Acquisition			Organic			Foreign 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,
	2011			2010			Change			% 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:
	Acquisition			Organic			Foreign 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	%

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