Market Overview

LKQ Corporation Announces Third Quarter 2012 Results

Share:
  • Revenue growth of 29.7% to $1.02 billion
  • Organic revenue growth for parts and services of 5.6%
  • Third quarter 2012 diluted EPS of $0.18
  • Updates annual guidance

CHICAGO, Oct. 25, 2012 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq: LKQ) today reported revenue for the third quarter of 2012 of $1.02 billion, an increase of 29.7% as compared to $783.9 million in the third quarter of 2011. Net income for the third quarter of 2012 was $54.0 million, an increase of 9.8% as compared to $49.2 million for the same period of 2011. Diluted earnings per share of $0.18 for the third quarter ended September 30, 2012 increased 5.9% from $0.17 for the third quarter of 2011. The Company noted that the third quarter 2012 diluted earnings per share included a charge equal to $0.01 for a change in fair value of contingent consideration liabilities and for restructuring and acquisition related expenses.

"We are particularly pleased that the Company achieved organic revenue growth for parts and services of 5.6% in the quarter, while also generating revenue growth from acquisitions of 28.2%," stated Robert L. Wagman, President and Chief Executive Officer of LKQ Corporation. "Another positive milestone is the continued growth in alternative parts usage which, according to CCC Information Services, reached 38% in the quarter. We are equally pleased with Euro Car Parts strong performance. Euro Car Parts achieved revenue growth of 28% for the third quarter versus the comparable pre-acquisition period. We were also able to produce total organic revenue growth of 1.6% and record third quarter earnings even with the continuing deterioration of scrap prices."

On a nine month year-to-date basis, revenue was $3.06 billion, an increase of 31.1% from $2.33 billion for the comparable period of 2011. Net income for the first nine months of 2012 was $199.0 million, as compared to $154.1 million for the first nine months of 2011. Diluted earnings per share was $0.66 for the first nine months of 2012, as compared to $0.52 for the comparable period of 2011.

On a nine month year-to-date basis, total organic revenue growth was 2.9%, and parts and services revenue grew organically by 5.1%. Acquisition revenue growth on a nine month year-to-date basis was 28.4%.

"Parts and services organic growth in the quarter and for the first nine months of 2012 further demonstrates the strength and value proposition of our business model and the Company's ability to gain market share during a challenging operating environment," added Mr. Wagman.

Balance Sheet and Liquidity

As of September 30, 2012, LKQ's balance sheet reflected cash and equivalents of $69.2 million, and obligations outstanding under the Company's credit facilities were $845.9 million ($426.3 million of term loans and $419.6 million of revolver borrowings). Total availability under the credit agreement at September 30, 2012 was $482.9 million.

On September 28, 2012, the Company entered into a three-year accounts receivable securitization facility allowing the Company to generate up to $80 million of proceeds. The initial use of proceeds from the receivables facility was the repayment of outstanding revolver borrowings under LKQ's senior secured credit agreement. As of September 30, 2012, outstanding obligations under the Company's accounts receivables securitization facility were $77.3 million.

Other Events

During the third quarter of 2012, LKQ acquired two North American businesses that included a company that operates two self service salvage yards, one full service salvage yard and a scrap recycling business in South Florida, and a company that operates a wholesale salvage yard and an aftermarket parts distributor in Missouri.

During the third quarter, LKQ's European operations opened ten Euro Car Parts branches. As of September 30, 2012, the Company operated from 120 Euro Car Parts branches in the United Kingdom.

On August 17, 2012, the Company announced a two-for-one split of the Company's common stock. The common stock began trading on a split-adjusted basis on September 19, 2012. All per share information in this release is presented on a split-adjusted basis.

Company Outlook

The Company updated its guidance for 2012.

"Our revised guidance reflects the strong organic growth we are achieving while recognizing that scrap prices have been a headwind this year," added Mr. Wagman.

     
  Updated Guidance Prior Guidance
Organic revenue growth 6.0% to 7.0% 5.5% to 7.0%
Net income $265 million to $272 million $265 million to $282 million
Diluted EPS $0.88 to $0.91 $0.88 to $0.94
Cash flow provided from operations $240 million to $270 million $250 million to $280 million
Capital expenditures $90 million to $100 million $100 million to $115 million

Guidance for 2012 is based on current conditions and excludes the impact of restructuring and acquisition related expenses and gains or losses (including changes in fair value of contingent consideration liabilities) and capital spending related to acquisitions or divestitures. Organic revenue guidance refers only to parts and services revenue.

Quarterly Conference Call

LKQ will host a conference call and webcast on October 25, 2012 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 conference ID: 401072 #. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through November 16, 2012. 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, recycled, and refurbished collision replacement parts, 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 480 facilities, offering its customers a broad range of replacement systems, components and parts to repair automobiles and light, medium and heavy-duty trucks.

Forward Looking Statements

The statements in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ materially from those expressed or implied in the forward looking statements as a result of various factors.

These factors include:

  • uncertainty as to changes in North American and European 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 products;
  • the availability and cost of our inventory;
  • variations in the number of vehicles sold, vehicle accident rates, miles driven, and the age profile of vehicles in accidents;
  • 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 arrangements;
  • 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 pound sterling, the Canadian dollar, the Mexican peso and the Taiwan dollar;
  • periodic adjustments to estimated contingent purchase price amounts;
  • instability in regions in which we operate, such as Mexico, that can affect our supply of certain products;
  • interruptions, outages or breaches of our operational systems, security systems, or infrastructure as a result of attacks on, or malfunctions of, our systems; and
  • other risks that are described in our Form 10-K filed February 27, 2012 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 Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
         
Revenue  $ 1,016,707  $ 783,898  $ 3,055,015  $ 2,330,230
         
Cost of goods sold (1)  607,002  449,576  1,775,996  1,330,026
         
Gross margin  409,705  334,322  1,279,019  1,000,204
         
Facility and warehouse expenses  86,739  72,183  254,039  211,184
         
Distribution expenses  93,652  68,441  277,391  203,300
         
Selling, general and administrative expenses  121,049  92,986  364,461  274,142
         
Restructuring and acquisition related expenses  116  2,910  2,558  5,333
         
Depreciation and amortization  16,715  12,314  46,961  34,900
         
Operating income  91,434  85,488  333,609  271,345
         
Other expense (income):        
Interest expense, net  7,964  4,847  22,687  15,927
Loss on debt extinguishment  --   --   --   5,345
Change in fair value of contingent consideration liabilities  1,892  --   1,787  (1,615)
Other (income) expense, net  (1,674)  623  (3,413)  135
         
Total other expense, net  8,182  5,470  21,061  19,792
         
Income before provision for income taxes  83,252  80,018  312,548  251,553
         
Provision for income taxes   29,204  30,787  113,511  97,434
         
Net income  $ 54,048  $ 49,231  $ 199,037  $ 154,119
         
         
Earnings per share:        
Basic  $ 0.18  $ 0.17  $ 0.67  $ 0.53
         
Diluted  $ 0.18  $ 0.17  $ 0.66  $ 0.52
         
         
Weighted average common shares outstanding:        
Basic  296,437  292,650  295,338  291,908
         
Diluted  301,172  296,804  300,226  296,288
         
(1) Cost of goods sold for the three and nine months ended September 30, 2012 includes gains of $0.5 million and $17.2 million, respectively, resulting from certain settlements of a class action lawsuit against several of our suppliers.
     
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
( In thousands, except share and per share data )
     
     
  September 30, December 31,
  2012 2011
Assets    
     
Current Assets:    
Cash and equivalents  $ 69,214  $ 48,247
Receivables, net  301,891  281,764
Inventory  826,354  736,846
Deferred income taxes  47,307  45,690
Prepaid income taxes  25,065  17,597
Prepaid expenses and other current assets  26,518  19,591
Total Current Assets  1,296,349  1,149,735
     
Property and Equipment, net  453,272  424,098
Intangibles  1,706,633  1,584,973
Other Assets  46,321  40,898
     
Total Assets  $ 3,502,575  $ 3,199,704
     
Liabilities and Stockholders' Equity    
     
Current Liabilities:    
Accounts payable  $ 219,098  $ 210,875
Accrued expenses  133,512  131,025
Income taxes payable  7,163  7,262
Contingent consideration liabilities  41,005  600
Other current liabilities  11,638  18,407
Current portion of long-term obligations  52,103  29,524
     
Total Current Liabilities  464,519  397,693
     
Long-Term Obligations, Excluding Current Portion  929,743  926,552
Deferred Income Taxes  89,486  88,796
Contingent Consideration Liabilities  51,277  81,782
Other Noncurrent Liabilities  78,909  60,796
     
Commitments and Contingencies    
     
Stockholders' Equity:    
Common stock, $0.01 par value, 500,000,000 shares authorized, 297,016,666 and 293,897,216 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively  2,970  2,939
Additional paid-in capital  938,516  901,313
Retained earnings  947,831  748,794
Accumulated other comprehensive loss  (676)  (8,961)
     
Total Stockholders' Equity  1,888,641  1,644,085
     
Total Liabilities and Stockholders' Equity  $ 3,502,575  $ 3,199,704
     
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
 ( In thousands )
   
  Nine Months Ended
  September 30,
  2012 2011
     
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 199,037  $ 154,119
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization  51,574  38,308
Stock-based compensation expense  11,976  10,028
Excess tax benefit from stock-based payments  (11,071)  (5,626)
Loss on debt extinguishment  --   5,345
Other  3,961  326
Changes in operating assets and liabilities, net of effects from acquisitions:
 Receivables  (12,394)  (18,048)
 Inventory  (47,669)  (51,301)
 Prepaid income taxes/income taxes payable  2,688  12,351
 Accounts payable  (7,892)  1,770
 Other operating assets and liabilities  (8,138)  11,910
     
 Net cash provided by operating activities  182,072  159,182
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (60,636)  (61,294)
Proceeds from sales of property and equipment  692  1,478
Cash used in acquisitions, net of cash acquired  (133,123)  (180,512)
     
Net cash used in investing activities  (193,067)  (240,328)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options  14,187  7,506
Excess tax benefit from stock-based payments  11,071  5,626
Debt issuance costs  (175)  (10,816)
Net borrowings of long-term obligations  6,197  28,406
     
Net cash provided by financing activities  31,280  30,722
     
Effect of exchange rate changes on cash and equivalents  682  (153)
     
Net increase (decrease) in cash and equivalents  20,967  (50,577)
     
Cash and equivalents, beginning of period  48,247  95,689
     
Cash and equivalents, end of period  $ 69,214  $ 45,112
             
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
             
  Three Months Ended September 30,
Operating Highlights 2012 2011    
    % of   % of    
    Revenue   Revenue Change % Change
             
Revenue  $ 1,016,707 100.0%  $ 783,898 100.0%  $ 232,809 29.7%
             
Cost of goods sold (1)  607,002 59.7%  449,576 57.4%  157,426 35.0%
             
Gross margin  409,705 40.3%  334,322 42.6%  75,383 22.5%
             
Facility and warehouse expenses  86,739 8.5%  72,183 9.2%  14,556 20.2%
             
Distribution expenses  93,652 9.2%  68,441 8.7%  25,211 36.8%
             
Selling, general and administrative expenses  121,049 11.9%  92,986 11.9%  28,063 30.2%
             
Restructuring and acquisition related expenses  116 0.0%  2,910 0.4%  (2,794) -96.0%
             
Depreciation and amortization  16,715 1.6%  12,314 1.6%  4,401 35.7%
             
Operating income  91,434 9.0%  85,488 10.9%  5,946 7.0%
             
Other expense (income):            
Interest expense, net  7,964 0.8%  4,847 0.6%  3,117 64.3%
Change in fair value of contingent consideration liabilities  1,892 0.2%  --  0.0%  1,892 n/m
Other (income) expense, net  (1,674) -0.2%  623 0.1%  (2,297) n/m
             
Total other expense, net  8,182 0.8%  5,470 0.7%  2,712 49.6%
             
             
Income before provision for income taxes  83,252 8.2%  80,018 10.2%  3,234 4.0%
             
Provision for income taxes   29,204 2.9%  30,787 3.9%  (1,583) -5.1%
             
Net income  $ 54,048 5.3%  $ 49,231 6.3%  $ 4,817 9.8%
             
Earnings per share:            
Basic  $ 0.18    $ 0.17    $ 0.01 5.9%
             
Diluted  $ 0.18    $ 0.17    $ 0.01 5.9%
             
Weighted average common shares outstanding:            
Basic  296,437    292,650    3,787 1.3%
             
Diluted  301,172    296,804    4,368 1.5%
             
(1) Cost of goods sold for the three months ended September 30, 2012 includes a gain of $0.5 million resulting from a settlement of a class action lawsuit against several of our suppliers.
             
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
             
  Nine Months Ended September 30,
Operating Highlights 2012 2011    
    % of   % of    
    Revenue   Revenue Change % Change
             
Revenue  $ 3,055,015 100.0%  $ 2,330,230 100.0%  $ 724,785 31.1%
             
Cost of goods sold (1)  1,775,996 58.1%  1,330,026 57.1%  445,970 33.5%
             
Gross margin  1,279,019 41.9%  1,000,204 42.9%  278,815 27.9%
             
Facility and warehouse expenses  254,039 8.3%  211,184 9.1%  42,855 20.3%
             
Distribution expenses  277,391 9.1%  203,300 8.7%  74,091 36.4%
             
Selling, general and administrative expenses  364,461 11.9%  274,142 11.8%  90,319 32.9%
             
Restructuring and acquisition related expenses  2,558 0.1%  5,333 0.2%  (2,775) -52.0%
             
Depreciation and amortization  46,961 1.5%  34,900 1.5%  12,061 34.6%
             
Operating income  333,609 10.9%  271,345 11.6%  62,264 22.9%
             
Other expense (income):            
Interest expense, net  22,687 0.7%  15,927 0.7%  6,760 42.4%
Loss on debt extinguishment  --  0.0%  5,345 0.2%  (5,345) n/m
Change in fair value of contingent consideration liabilities  1,787 0.1%  (1,615) -0.1%  3,402 n/m
Other (income) expense, net  (3,413) -0.1%  135 0.0%  (3,548) n/m
             
Total other expense, net  21,061 0.7%  19,792 0.8%  1,269 6.4%
             
             
Income before provision for income taxes  312,548 10.2%  251,553 10.8%  60,995 24.2%
             
Provision for income taxes   113,511 3.7%  97,434 4.2%  16,077 16.5%
             
Net income  $ 199,037 6.5%  $ 154,119 6.6%  $ 44,918 29.1%
             
Earnings per share:            
Basic  $ 0.67    $ 0.53    $ 0.14 26.4%
             
Diluted  $ 0.66    $ 0.52    $ 0.14 26.9%
             
Weighted average common shares outstanding:            
Basic  295,338    291,908    3,430 1.2%
             
Diluted  300,226    296,288    3,938 1.3%
             
(1) Cost of goods sold for the nine months ended September 30, 2012 includes a gain of $17.2 million resulting from certain settlements of a class action lawsuit against several of our suppliers.
         
 The following unaudited table reconciles net income to EBITDA: 
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
  (In thousands)
         
Net income  $ 54,048  $ 49,231  $ 199,037  $ 154,119
Depreciation and amortization 18,128 13,511 51,574 38,308
Interest expense, net  7,964  4,847 22,687 15,927
Loss on debt extinguishment (1)  --   --   --   5,345
Provision for income taxes  29,204  30,787 113,511 97,434
         
 Earnings before interest, taxes, depreciation and amortization (EBITDA)   $ 109,344  $ 98,376  $ 386,809  $ 311,133
         
 EBITDA as a percentage of revenue  10.8% 12.5% 12.7% 13.4%
         
         
(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 Net Income 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,    
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed         
Statements of Income of LKQ Corporation        
         
Aftermarket, other new and refurbished products  $ 562,750  $ 365,569  $ 197,181 53.9%
Recycled, remanufactured and related products and services  317,877  284,660  33,217 11.7%
Parts and services  880,627  650,229  230,398 35.4%
Other   136,080  133,669  2,411 1.8%
Total  $ 1,016,707  $ 783,898  $ 232,809 29.7%
         
Revenue changes by category for the three months ended September 30, 2012 vs. 2011:
         
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
Aftermarket, other new and refurbished products 46.6% 7.5% -0.1% 53.9%
Recycled, remanufactured and related products and services 8.6% 3.1% -0.1% 11.7%
Parts and services 30.0% 5.6% -0.1% 35.4%
Other  19.6% -17.8% 0.0% 1.8%
Total 28.2% 1.6% -0.1% 29.7%
         
         
  Nine Months Ended    
  September 30,    
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed         
Statements of Income of LKQ Corporation        
         
Aftermarket, other new and refurbished products  $ 1,676,006  $ 1,102,887  $ 573,119 52.0%
Recycled, remanufactured and related products and services  967,250  830,142  137,108 16.5%
Parts and services 2,643,256 1,933,029 710,227 36.7%
Other  411,759 397,201 14,558 3.7%
Total  $ 3,055,015  $ 2,330,230  $ 724,785 31.1%
         
Revenue changes by category for the nine months ended September 30, 2012 vs. 2011:
         
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
Aftermarket, other new and refurbished products 48.1% 4.0% -0.2% 52.0%
Recycled, remanufactured and related products and services 10.0% 6.6% -0.2% 16.5%
Parts and services 31.8% 5.1% -0.2% 36.7%
Other  12.0% -8.2% -0.1% 3.7%
Total 28.4% 2.9% -0.1% 31.1%
         
The following unaudited table compares our revenue and EBITDA by reportable segment:
         
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
  (In thousands)
         
Revenue        
North America  $ 835,324  $ 783,898  $ 2,547,743  $ 2,330,230
Europe  181,383  --  507,272  --
 Total revenue  $ 1,016,707  $ 783,898  $ 3,055,015  $ 2,330,230
         
EBITDA        
North America (1)  $ 89,265  $ 98,376  $ 331,140  $ 311,133
Europe (2)  20,079  --  55,669  --
 Total EBITDA  $ 109,344  $ 98,376  $ 386,809  $ 311,133
         
         
(1) For the three and nine months ended September 30, 2012, North America EBITDA includes gains of $0.5 million and $17.2 million, respectively, resulting from certain settlements of a class action lawsuit against several of our suppliers.
         
(2) For the three and nine months ended September 30, 2012, Europe EBITDA includes losses of $2.1 million and $1.9 million, respectively, from the change in fair value of the Euro Car Parts contingent consideration liability.
CONTACT: Joseph P. Boutross Director, Investor Relations (312) 621-2793 jpboutross@lkqcorp.com

LKQ Corporation Logo

View Comments and Join the Discussion!