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

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8-K - FORM 8-K - LKQ CORP	d248081d8k.htm

Exhibit 99.1

LOGO

LKQ CORPORATION POSTS RECORD THIRD QUARTER 2011 RESULTS

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Revenue growth of 29% to $784 million

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Organic revenue growth of 11%

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Diluted EPS increases 32%

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Increases outlook for income and EPS

Chicago, IL (October 27, 2011)—LKQ Corporation (Nasdaq:LKQX) today reported revenue for the third quarter of 2011 of $783.9 million, an increase of 29.0% as compared to $607.6 million in the third quarter of 2010. Income from continuing operations for the third quarter of 2011 was $49.2 million, an increase of 37.1% as compared to $35.9 million for the same period of 2010. Diluted earnings per share from continuing operations of $0.33 for the third quarter ended September 30, 2011 increased 32.0% from $0.25 for the third quarter of 2010. The Company noted that the third quarter 2011 diluted earnings per share results included a charge equal to $0.01 for restructuring and acquisition costs.

“We are very pleased with the strength of the quarter,” stated Robert Wagman, President and Co-Chief Executive Officer of LKQ Corporation. “The Company delivered total organic revenue growth of 11.1% in the quarter, including 7.6% for parts and services. We are particularly pleased with the organic growth of our recycled, remanufactured and related services business. In the first nine months of 2011, that business grew organically 10.1% compared to the same period in 2010.”

Joseph Holsten, Acting Chairman of the Board and Co-Chief Executive Officer added, “Acquisitions in the U.S. continue to be a key growth strategy for us to build out our domestic footprint. In addition, we continue to seek additional growth markets for the Company as witnessed by our recent acquisition of Euro Car Parts, the largest distributor of automotive aftermarket parts in the United Kingdom.”

On a nine month year-to-date basis, revenue was $2.33 billion, an increase of 29.8% from $1.80 billion for the same nine month period of 2010. Income from continuing operations for the first nine months of 2011 was $154.1 million, as compared to $125.8 million for the nine months of 2010. Diluted earnings per share from continuing operations was $1.04 for the first nine months of 2011, as compared to $0.86 for the same nine month period of 2010.

Organic revenue growth on a nine month year-to-date basis was 12.3%. Parts and services revenue grew organically by 8.8%. Acquisition revenue growth on a nine month year-to-date basis was 17.2%.

Balance Sheet and Liquidity

As of September 30, 2011, LKQ’s balance sheet reflected cash and equivalents of $45.1 million, and the outstanding obligations under the Company’s credit facilities were $618.4 million ($243.8 million of term loans and $374.6 million of revolver borrowings). Total availability under the credit agreement at September 30, 2011 was $740.0 million, composed of $540.0 million on the revolver and $200.0 million on the delayed draw term loan. After giving effect to the October borrowing to finance the Euro Car Parts acquisition, total availability was $414.4 million.

Other Events

During the third quarter, LKQ acquired ten businesses that included three heavy duty truck businesses with locations in California, Washington, Montana and Oregon, three wholesale salvage businesses in California, Idaho and Minnesota, one automotive cooling parts distribution business in North Carolina, two self service businesses in Texas and California, and one engine remanufacturing business in Washington.

On September 30, 2011, the Company amended its March 25, 2011 credit agreement to increase the credit facility to $1.4 billion from $1.0 billion.

On October 3, 2011, the Company announced the acquisition of Euro Car Parts, the largest distributor of automotive aftermarket parts in the United Kingdom.

The Company noted that on October 10, 2011 Donald F. Flynn, Founder and Chairman of the Board of Directors, passed away. Joe Holsten has been appointed to the position of Acting Chairman.

Company Outlook

The Company also announced that it is raising guidance for income from continuing operations to $204 –$212 million from

$201 –$211 million, diluted earnings per share from continuing operations to $1.38 – $1.43 from $1.36 – $1.42 and organic growth to 7 – 8% from 6–8% for parts and services revenue. Mr. Wagman commented that “the revised guidance reflects our strong third quarter results.” Full year earnings guidance includes the projected income of Euro Car Parts from the acquisition date to year-end.

The Company left unchanged its previous guidance of approximately $195 million for cash flows from continuing operations and

$85 – $95 million in capital expenditures. The Company noted that it does not include sale of scrap or cores in its definition of parts and services revenue. Additionally, the guidance provided excludes restructuring and acquisition related expenses and any gains or losses or capital expenditures related to acquisitions or divestitures (other than capital expenditures related to the Euro Car Parts acquisition).

Quarterly Conference Call

LKQ will host a conference call and Webcast on October 27, 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: 379562 #. An online replay of the audio webcast will be available on the Company’s website. Both formats of replay will be available through November 25, 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 the United Kingdom, Canada, Mexico and Central America. LKQ operates more than 430 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. and U.K. 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 pound Sterling, the Canadian dollar, the Mexican peso and the Taiwan dollar;

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periodic adjustments to estimated contingent purchase price amounts may be charged to our income;

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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					Nine Months Ended
	September 30,					September 30,
	2011		2010			2011			2010
Revenue	$	783,898	$	607,621		$	2,330,230		$	1,795,818
Cost of goods sold		449,576		346,197			1,330,026			989,838

Gross margin		334,322		261,424			1,000,204			805,980
Facility and warehouse expenses		72,183		56,991			211,184			170,125
Distribution expenses		68,441		51,783			203,300			154,140
Selling, general and administrative expenses		92,986		77,671			274,142			228,437
Restructuring and acquisition related expenses		2,910		223			5,333			593
Depreciation and amortization		12,314		9,549			34,900			27,940

Operating income		85,488		65,207			271,345			224,745
Other expense (income):
Interest expense, net		4,847		7,186			15,927			21,617
Loss on debt extinguishment		—		—			5,345			—
Other expense (income), net		623		(274	)		(1,480	)		(573	)

Total other expense, net		5,470		6,912			19,792			21,044

Income from continuing operations before provision for income taxes		80,018		58,295			251,553			203,701
Provision for income taxes		30,787		22,394			97,434			77,911

Income from continuing operations		49,231		35,901			154,119			125,790
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	$	49,231	$	35,901		$	154,119		$	127,743

Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	0.34	$	0.25		$	1.06		$	0.88
Income from discontinued operations		0.00		0.00			0.00			0.01

Total	$	0.34	$	0.25		$	1.06		$	0.89

Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	0.33	$	0.25		$	1.04		$	0.86
Income from discontinued operations		0.00		0.00			0.00			0.01

Total	$	0.33	$	0.25		$	1.04		$	0.88

Weighted average common shares outstanding:
Basic		146,325		143,258			145,954			142,769

Diluted		148,402		145,798			148,144			145,470

⁽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, 2011			December 31, 2010
Assets
Current Assets:
Cash and equivalents	$	45,112		$	95,689
Receivables, net		231,147			191,085
Inventory		605,665			492,688
Deferred income taxes		35,184			32,506
Prepaid income taxes		3,131			10,923
Prepaid expenses and other current assets		16,351			13,985

Total Current Assets		936,590			836,876

Property and Equipment, net		371,160			331,312
Intangibles		1,192,238			1,102,275
Other Assets		38,024			29,046

Total Assets	$	2,538,012		$	2,299,509

Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	84,496		$	76,437
Accrued expenses		113,126			84,028
Deferred revenue		8,713			9,224
Current portion of long-term obligations		18,915			52,888
Liabilities of discontinued operations		2,276			2,744

Total Current Liabilities		227,526			225,321

Long-Term Obligations, Excluding Current Portion		613,691			548,066
Deferred Income Tax Liabilities		61,832			66,059
Other Noncurrent Liabilities		55,240			45,902

Commitments and Contingencies

Stockholders’ Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 146,528,723 and 145,466,575 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		1,465			1,455
Additional paid-in capital		892,948			869,798
Retained earnings		692,649			538,530
Accumulated other comprehensive (loss) income		(7,339	)		4,378

Total Stockholders’ Equity		1,579,723			1,414,161

Total Liabilities and Stockholders’ Equity	$	2,538,012		$	2,299,509

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Condensed Statements of Cash Flows

( In thousands )


	Nine Months Ended
	September 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	154,119		$	127,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,308			30,389
Stock-based compensation expense		10,028			7,713
Excess tax benefit from share-based payments		(5,626	)		(9,375	)
Gain on sale of discontinued operations		—			(2,744	)
Loss on debt extinguishment		5,345			—
Other		326			3
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Receivables		(18,048	)		(1,433	)
Inventory		(51,301	)		(43,818	)
Prepaid income taxes/income taxes payable		12,351			14,566
Accounts payable		1,770			11,307
Other operating assets and liabilities		11,910			10,212

Net cash provided by operating activities		159,182			144,563

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(61,294	)		(36,982	)
Proceeds from sales of property and equipment		1,478			977
Proceeds from sale of businesses, net of cash sold		—			11,992
Cash used in acquisitions, net of cash acquired		(180,512	)		(70,281	)

Net cash used in investing activities		(240,328	)		(94,294	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		7,506			8,725
Excess tax benefit from share-based payments		5,626			9,375
Debt issuance costs		(10,816	)		—
Borrowings under revolving credit facility		526,753			—
Repayments under revolving credit facility		(149,328	)		—
Borrowings under term loan		250,000			—
Repayments under term loans		(597,339	)		(7,476	)
Repayments of other long-term debt		(1,680	)		(1,348	)

Net cash provided by financing activities		30,722			9,276

Effect of exchange rate changes on cash and equivalents		(153	)		227

Net (decrease) increase in cash and equivalents		(50,577	)		59,772

Cash and equivalents, beginning of period		95,689			108,906


Cash and equivalents, end of period	$	45,112		$	168,678

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( In thousands, except per share data )


	Three Months Ended September 30,
	2011					2010
Operating Highlights			% of Revenue						% of Revenue			Change			% Change
Revenue	$	783,898		100.0	%	$	607,621			100.0	%	$	176,277			29.0	%
Cost of goods sold		449,576		57.4	%		346,197			57.0	%		103,379			29.9	%

Gross margin		334,322		42.6	%		261,424			43.0	%		72,898			27.9	%
Facility and warehouse expenses		72,183		9.2	%		56,991			9.4	%		15,192			26.7	%
Distribution expenses		68,441		8.7	%		51,783			8.5	%		16,658			32.2	%
Selling, general and administrative expenses		92,986		11.9	%		77,671			12.8	%		15,315			19.7	%
Restructuring and acquisition related expenses		2,910		0.4	%		223			0.0	%		2,687			n/m
Depreciation and amortization		12,314		1.6	%		9,549			1.6	%		2,765			29.0	%

Operating income		85,488		10.9	%		65,207			10.7	%		20,281			31.1	%

Other expense (income):
Interest expense, net		4,847		0.6	%		7,186			1.2	%		(2,339	)		-32.5	%
Loss on debt extinguishment		—		0.0	%		—			0.0	%		—			n/m
Other expense (income), net		623		0.1	%		(274	)		0.0	%		897			n/m

Total other expense, net		5,470		0.7	%		6,912			1.1	%		(1,442	)		-20.9	%

Income from continuing operations before provision for income taxes		80,018		10.2	%		58,295			9.6	%		21,723			37.3	%
Provision for income taxes		30,787		3.9	%		22,394			3.7	%		8,393			37.5	%

Income from continuing operations		49,231		6.3	%		35,901			5.9	%		13,330			37.1	%
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	$	49,231		6.3	%	$	35,901			5.9	%	$	13,330			37.1	%

Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	0.34				$	0.25					$	0.09			36.0	%
Income from discontinued operations		0.00					0.00						0.00			n/m

Total	$	0.34				$	0.25					$	0.09			36.0	%

Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	0.33				$	0.25					$	0.08			32.0	%
Income from discontinued operations		0.00					0.00						0.00			n/m

Total	$	0.33				$	0.25					$	0.08			32.0	%

Weighted average common shares outstanding:
Basic		146,325					143,258						3,067			2.1	%

Diluted		148,402					145,798						2,604			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 )


	Nine Months Ended September 30,
Operating Highlights	2011						2010
Operating Highlights				% of Revenue						% of Revenue			Change			% Change
Revenue	$	2,330,230			100.0	%	$	1,795,818			100.0	%	$	534,412			29.8	%
Cost of goods sold		1,330,026			57.1	%		989,838			55.1	%		340,188			34.4	%

Gross margin		1,000,204			42.9	%		805,980			44.9	%		194,224			24.1	%
Facility and warehouse expenses		211,184			9.1	%		170,125			9.5	%		41,059			24.1	%
Distribution expenses		203,300			8.7	%		154,140			8.6	%		49,160			31.9	%
Selling, general and administrative expenses		274,142			11.8	%		228,437			12.7	%		45,705			20.0	%
Restructuring and acquisition related expenses		5,333			0.2	%		593			0.0	%		4,740			799.3	%
Depreciation and amortization		34,900			1.5	%		27,940			1.6	%		6,960			24.9	%

Operating income		271,345			11.6	%		224,745			12.5	%		46,600			20.7	%
Other expense (income):
Interest expense, net		15,927			0.7	%		21,617			1.2	%		(5,690	)		-26.3	%
Loss on debt extinguishment		5,345			0.2	%		—			0.0	%		5,345			n/m
Other expense (income), net		(1,480	)		-0.1	%		(573	)		0.0	%		(907	)		n/m

Total other expense, net		19,792			0.8	%		21,044			1.2	%		(1,252	)		-5.9	%

Income from continuing operations before provision for income taxes		251,553			10.8	%		203,701			11.3	%		47,852			23.5	%
Provision for income taxes		97,434			4.2	%		77,911			4.3	%		19,523			25.1	%

Income from continuing operations		154,119			6.6	%		125,790			7.0	%		28,329			22.5	%
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			0.1	%		(1,953	)		-100.0	%

Net income	$	154,119			6.6	%	$	127,743			7.1	%	$	26,376			20.6	%

Basic earnings per share ⁽¹⁾:
Income from continuing operations	$	1.06					$	0.88					$	0.18			20.5	%
Income from discontinued operations		0.00						0.01						(0.01	)		-100.0	%

Total	$	1.06					$	0.89					$	0.17			19.1	%

Diluted earnings per share ⁽¹⁾:
Income from continuing operations	$	1.04					$	0.86					$	0.18			20.9	%
Income from discontinued operations		0.00						0.01						(0.01	)		-100.0	%

Total	$	1.04					$	0.88					$	0.16			18.2	%

Weighted average common shares outstanding:
Basic		145,954						142,769						3,185			2.2	%

Diluted		148,144						145,470						2,674			1.8	%

⁽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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands)
Income from continuing operations	$	49,231		$	35,901		$	154,119		$	125,790
Depreciation and amortization		13,511			10,378			38,308			30,389
Interest expense, net		4,847			7,186			15,927			21,617
Loss on debt extinguishment ⁽¹⁾		—			—			5,345			—
Provision for income taxes		30,787			22,394			97,434			77,911

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations	$	98,376		$	75,859		$	311,133		$	255,707

EBITDA as a percentage of revenue		12.5	%		12.5	%		13.4	%		14.2	%

⁽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 September 30,
	2011			2010			Change			% Change
	(In thousands)
Included in Unaudited Consolidated Condensed Statements of Income of LKQ Corporation
Aftermarket, other new and refurbished products	$	365,569		$	291,607		$	73,962			25.4	%
Recycled, remanufactured and related products and services		284,660			228,797			55,863			24.4	%

Parts and services		650,229			520,404			129,825			24.9	%
Other		133,669			87,217			46,452			53.3	%

Total	$	783,898		$	607,621		$	176,277			29.0	%


Revenue changes by category for the three months ended September 30, 2011 vs. 2010:

	Revenue Change Attributable to:
	Acquisition			Organic			Foreign Exchange			% Change
Aftermarket, other new and refurbished products		18.3	%		6.9	%		0.2	%		25.4	%
Recycled, remanufactured and related products and services		15.7	%		8.4	%		0.3	%		24.4	%
Parts and services		17.1	%		7.6	%		0.3	%		24.9	%
Other		20.7	%		32.5	%		0.1	%		53.3	%
Total		17.6	%		11.1	%		0.2	%		29.0	%

	Nine Months Ended September 30,
	2011			2010			Change			% Change
	(In thousands)
Included in Unaudited Consolidated Condensed Statements of Income of LKQ Corporation
Aftermarket, other new and refurbished products	$	1,102,887		$	894,251		$	208,636			23.3	%
Recycled, remanufactured and related products and services		830,142			658,179			171,963			26.1	%

Parts and services		1,933,029			1,552,430			380,599			24.5	%
Other		397,201			243,388			153,813			63.2	%

Total	$	2,330,230		$	1,795,818		$	534,412			29.8	%


Revenue changes by category for the nine months ended September 30, 2011 vs. 2010:

	Revenue Change Attributable to:
	Acquisition			Organic			Foreign Exchange			% Change
Aftermarket, other new and refurbished products		15.3	%		7.8	%		0.2	%		23.3	%
Recycled, remanufactured and related products and services		15.7	%		10.1	%		0.3	%		26.1	%
Parts and services		15.5	%		8.8	%		0.2	%		24.5	%
Other		28.0	%		35.1	%		0.1	%		63.2	%
Total		17.2	%		12.3	%		0.2	%		29.8	%

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