• Revenue growth of 30% to $787 million
  • Diluted EPS from continuing operations of $0.39
  • EPS includes $0.02 loss on debt extinguishment
  • Increases 2011 outlook for income and EPS


LKQ Corporation (Nasdaq:LKQX) today reported revenue for the first quarter of 2011 of $786.6 million, an increase of 30.3% as compared to $603.5 million in the first quarter of 2010. Income from continuing operations for the first quarter of 2011 was $58.2 million, an increase of 11.9% as compared to $52.0 million for the same period of 2010. Diluted earnings per share from continuing operations of $0.39 for the first quarter ended March 31, 2011 increased 8.3% from $0.36 for the first quarter of 2010. The Company noted that the 2011 diluted earnings per share results included a loss on debt extinguishment equal to $0.02 for the write-off of debt issuance costs in conjunction with the previously announced refinancing of its credit facility.

The Company attributed the high revenue growth to a combination of acquisition activity and improved organic growth in its core lines of business. "I am particularly pleased that our wholesale parts and services organic growth exceeded ten percent," stated Joseph Holsten, Vice Chairman & Co-Chief Executive Officer of LKQ Corporation. "The quarter includes an additional $100 million of acquisition revenue compared to the same quarter last year and we are starting to see leverage in our results as we integrate those transactions," commented Mr. Holsten.

Robert Wagman, President and Co-Chief Executive Officer of LKQ Corporation added, "Despite a continued difficult buying environment for salvage cars, the Company improved its margins compared to Q4 2010."

Balance Sheet and Liquidity

As of March 31, 2011, LKQ's balance sheet reflected cash and equivalents of $64.5 million, and the outstanding obligations under the Company's credit facilities were $547.5 million ($250.0 million of term loans and $297.5 million of revolver borrowings). Availability under the revolver at March 31, 2011, including the impact of outstanding letters of credit of $25.7 million, was $426.8 million.

Other Events

During the quarter ended March 31, 2011, LKQ acquired four businesses: an engine remanufacturer, an automotive heating and cooling component distributor, a wholesale recycled products business and a recycled heavy-duty truck business. 

On March 25, 2011 the Company announced that it entered into a definitive credit agreement with several lenders to borrow up to $1.0 billion. The new facility replaced the Company's $750 million facility that would have expired in October 2013.

Company Outlook

The Company also announced that it is raising earnings guidance for 2011. Mr. Wagman commented "The revised guidance reflects our strong first quarter results."

Income from continuing operations and diluted earnings per share from continuing operations are anticipated to be within the range of $197 million to $211 million and $1.33 to $1.42, respectively. LKQ's previous guidance was $194 million to $208 million for income from continuing operations, and $1.31 to $1.39 for diluted earnings per share.

The Company left unchanged its previous 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 sale of scrap or cores in its definition of parts and services revenue. Additionally, the guidance provided excludes 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 April 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: 371279 #. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through May 27, 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, 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 operates more than 325 facilities, offering its customers a broad range of replacement systems, components and parts to repair automobiles and light, medium and heavy-duty trucks.  LKQ's operations include locations in Canada, Mexico and Central America.

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 Ended
  March 31,
  2011 2010
Revenue  $ 786,648  $ 603,516
Cost of goods sold  443,002  320,226
Gross margin  343,646  283,290
Facility and warehouse expenses  69,818  57,776
Distribution expenses  65,811  51,189
Selling, general and administrative expenses  89,761  75,087
Restructuring expenses  46  80
Depreciation and amortization  10,839  9,229
Operating income  107,371  89,929
Other expense (income):    
Interest expense, net  6,409  7,276
Loss on debt extinguishment  5,345  -- 
Other income, net  (106)  (161)
Total other expense, net  11,648  7,115
Income from continuing operations before provision for income taxes  95,723  82,814
Provision for income taxes   37,541  30,831
Income from continuing operations   58,182  51,983
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  $ 58,182  $ 53,936
     
Basic earnings per share (1):    
Income from continuing operations  $ 0.40  $ 0.37
Income from discontinued operations 0.00 0.01
Total  $ 0.40  $ 0.38
     
Diluted earnings per share (1):    
Income from continuing operations  $ 0.39  $ 0.36
Income from discontinued operations 0.00 0.01
Total  $ 0.39  $ 0.37
   
Weighted average common shares outstanding:  
Basic  145,611  142,194
Diluted  147,920  145,124
     
(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)
     
  March 31, December 31,
  2011 2010
Assets    
Current Assets:    
Cash and equivalents  $ 64,517  $ 95,689
Receivables, net  222,581  191,085
Inventory  514,894  492,688
Deferred income taxes  34,135  32,506
Prepaid income taxes  --   10,923
Prepaid expenses  15,990  13,985
 Total Current Assets  852,117  836,876
     
Property and Equipment, net  342,181  331,312
Intangibles  1,125,278  1,102,275
Other Assets  35,803  29,046
 Total Assets  $ 2,355,379  $ 2,299,509
     
Liabilities and Stockholders' Equity    
Current Liabilities:    
Accounts payable  $ 75,377  $ 76,437
Accrued expenses  85,518  84,028
Income taxes payable  20,754  -- 
Deferred revenue  9,245  9,224
Current portion of long-term obligations   14,817  52,888
Liabilities of discontinued operations  2,561  2,744
     
 Total Current Liabilities  208,272  225,321
     
Long-Term Obligations, Excluding Current Portion  544,451  548,066
Deferred Income Tax Liabilities  67,582  66,059
Other Noncurrent Liabilities  49,704  45,902
     
Commitments and Contingencies    
     
Stockholders' Equity:    
Common stock, $0.01 par value, 500,000,000 shares authorized, 145,879,504 and 145,466,575 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively 1,459 1,455    
Additional paid-in capital  878,206  869,798
Retained earnings  596,712  538,530
Accumulated other comprehensive income  8,993  4,378
 Total Stockholders' Equity  1,485,370  1,414,161
 Total Liabilities and Stockholders' Equity  $ 2,355,379  $ 2,299,509
     
 
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
   
  Three Months Ended
  March 31,
  2011 2010
     
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 58,182  $ 53,936
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  11,926  9,980
Stock-based compensation expense  3,342  2,524
Deferred income taxes  562  418
Excess tax benefit from share-based payments  (2,460)  (3,500)
Gain on sale of discontinued operations  --   (2,744)
Loss on debt extinguishment  5,345  -- 
Other  642  785
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
 Receivables  (19,039)  (3,306)
 Inventory  2,678  (4,173)
 Prepaid income taxes/income taxes payable  33,769  30,276
 Accounts payable  (9,658)  5,663
 Other operating assets and liabilities  (7,974)  (1,794)
     
 Net cash provided by operating activities  77,315  88,065
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (18,093)  (10,902)
Proceeds from sales of property and equipment  91  92
Proceeds from sales of businesses, net of cash sold  --   11,992
Cash used in acquisitions, net of cash acquired  (43,517)  (3,746)
     
Net cash used in investing activities  (61,519)  (2,564)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options  2,610  3,185
Excess tax benefit from share-based payments  2,460  3,500
Debt issuance costs  (7,741)  -- 
Borrowings under line of credit  341,753  -- 
Repayments under line of credit  (44,328)  -- 
Borrowings under term loans  250,000  -- 
Repayments under term loans  (591,089)  -- 
Repayments of other long-term debt  (652)  (7,827)
Net cash used in financing activities  (46,987)  (1,142)
     
Effect of exchange rate changes on cash and equivalents  19  271
     
Net (decrease) increase in cash and equivalents  (31,172)  84,630
Cash and equivalents, beginning of period  95,689  108,906
Cash and equivalents, end of period  $ 64,517  $ 193,536
 
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
(In thousands, except per share data)
             
  Three Months Ended March 31,
Operating Highlights 2011 2010    
    % of   % of    
    Revenue   Revenue Change % Change
Revenue  $ 786,648 100.0%  $ 603,516 100.0%  $ 183,132 30.3%
Cost of goods sold  443,002 56.3%  320,226 53.1%  122,776 38.3%
Gross margin  343,646 43.7%  283,290 46.9%  60,356 21.3%
Facility and warehouse expenses  69,818 8.9%  57,776 9.6%  12,042 20.8%
Distribution expenses  65,811 8.4%  51,189 8.5%  14,622 28.6%
Selling, general and administrative expenses  89,761 11.4%  75,087 12.4%  14,674 19.5%
Restructuring expenses  46 0.0%  80 0.0%  (34) -42.5%
Depreciation and amortization  10,839 1.4%  9,229 1.5%  1,610 17.4%
Operating income  107,371 13.6%  89,929 14.9%  17,442 19.4%
             
Other expense (income):            
Interest expense, net  6,409 0.8%  7,276 1.2%  (867) -11.9%
Loss on debt extinguishment  5,345 0.7%  --  0.0%  5,345 n/m
Other income, net  (106) 0.0%  (161) 0.0%  55 34.2%
Total other expense, net  11,648 1.5%  7,115 1.2%  4,533 63.7%
Income from continuing operations before provision for income taxes  95,723 12.2%  82,814 13.7%  12,909 15.6%
Provision for income taxes   37,541 4.8%  30,831 5.1%  6,710 21.8%
Income from continuing operations   58,182 7.4%  51,983 8.6%  6,199 11.9%
Discontinued operations:            
Income from discontinued operations, net of taxes  --  0.0%  224 0.0%  (224) n/m
Gain on sale of discontinued operations, net of taxes  --  0.0%  1,729 0.3%  (1,729) n/m
Income from discontinued operations  --  0.0%  1,953 0.3%  (1,953) n/m
Net income  $ 58,182 7.4%  $ 53,936 8.9%  $ 4,246 7.9%
             
Basic earnings per share (1):            
Income from continuing operations  $ 0.40    $ 0.37    $ 0.03 8.1%
Income from discontinued operations 0.00   0.01   (0.01) n/m
Total  $ 0.40    $ 0.38    $ 0.02 5.3%
             
Diluted earnings per share (1):            
Income from continuing operations  $ 0.39    $ 0.36    $ 0.03 8.3%
Income from discontinued operations 0.00   0.01   (0.01) n/m
Total  $ 0.39    $ 0.37    $ 0.02 5.4%
             
Weighted average common shares outstanding:            
Basic  145,611    142,194    3,417 2.4%
Diluted  147,920    145,124    2,796 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
  March 31,
  2011 2010
  (In thousands)
     
Income from continuing operations   $ 58,182  $ 51,983
Depreciation and amortization 11,926 9,980
Interest expense, net 6,409  7,276
Loss on debt extinguishment (1) 5,345  -- 
Provision for income taxes   37,541  30,831
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing  operations   $ 119,403  $ 100,070
     
EBITDA as a percentage of revenue  15.2% 16.6%
     
(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    
  March 31,    
  2011 2010 Change % Change
  (In thousands)    
         
Included Unaudited in Consolidated Condensed         
Statements of Income of LKQ Corporation        
         
Recycled, remanufactured and related products and services  $ 275,782  $ 215,223  $ 60,559 28.1%
Aftermarket, other new and refurbished products 381,116 312,373 68,743 22.0%
Parts and services 656,898 527,596 129,302 24.5%
Other  129,750 75,920 53,830 70.9%
Total  $ 786,648  $ 603,516  $ 183,132 30.3%
         
Revenue changes by category for the three months ended March 31, 2011 vs. 2010:
         
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
Recycled, remanufactured and related products and services 17.0% 10.9% 0.3% 28.1%
Aftermarket, other new and refurbished products 11.9% 10.0% 0.2% 22.0%
Parts and services 14.0% 10.3% 0.2% 24.5%
Other  34.1% 36.7% 0.1% 70.9%
Total 16.5% 13.6% 0.2% 30.3% 
CONTACT: Joseph P. Boutross
         Director, Investor Relations
         (312) 621-2793
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