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

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

Exhibit 99.1

LOGO

LKQ CORPORATION POSTS RECORD FIRST QUARTER 2011 RESULTS

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Revenue growth of 30% to $787 million

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Diluted EPS from continuing operations of $0.39

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EPS includes $0.02 loss on debt extinguishment

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Increases 2011 outlook for income and EPS

Chicago, IL (April 28, 2011)- 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:

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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 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, 2011		December 31, 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 Revenue						% of 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:									% Change
	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	%

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