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LKQ Corporation Announces Results For Fourth Quarter And Full Year 2012

Stocks in this article: LKQ

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 500 facilities, offering its customers a broad range of replacement systems, components and parts to repair automobiles and light, medium and heavy-duty trucks.

The LKQ Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13317

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;
  • inaccuracies in the data relating to industry size published by independent sources upon which we rely;
  • changes in the level of acceptance and promotion of alternative automotive parts by insurance companies and auto repairers;
  • 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 identify sufficient acquisition candidates at reasonable prices to maintain our growth objectives;
  • 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 alternative automotive 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 other currencies and currency fluctuations in the pound sterling versus other currencies;
  • 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 Year Ended
  December 31, December 31,
  2012 2011 2012 2011
Revenue  $ 1,067,915  $ 939,632  $ 4,122,930  $ 3,269,862
Cost of goods sold (1)  622,794  547,843  2,398,790  1,877,869
Gross margin  445,121  391,789  1,724,140  1,391,993
Facility and warehouse expenses  93,878  82,239  347,917  293,423
Distribution expenses  98,444  84,326  375,835  287,626
Selling, general and administrative expenses  131,130  117,800  495,591  391,942
Restructuring and acquisition related expenses  193  2,257  2,751  7,590
Depreciation and amortization  17,132  15,029  64,093  49,929
Operating income  104,344  90,138  437,953  361,483
Other expense (income):        
Interest expense  8,611  7,156  31,429  24,307
Loss on debt extinguishment  --   --   --   5,345
Change in fair value of contingent consideration liabilities  (144)  207  1,643  (1,408)
Interest and other income, net  (742)  (1,443)  (4,286)  (2,532)
Total other expense, net  7,725  5,920  28,786  25,712
Income before provision for income taxes  96,619  84,218  409,167  335,771
Provision for income taxes   34,431  28,073  147,942  125,507
Net income  $ 62,188  $ 56,145  $ 261,225  $ 210,264
         
Earnings per share:        
Basic  $ 0.21  $ 0.19  $ 0.88  $ 0.72
Diluted  $ 0.21  $ 0.19  $ 0.87  $ 0.71
         
Weighted average common shares outstanding:        
Basic  297,213  293,278  295,810  292,252
Diluted  302,075  298,068  300,693  296,750
         
(1) Cost of goods sold for the three months and year ended December 31, 2012 includes gains of $0.7 million and $17.9 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 )
     
     
  December 31, December 31,
  2012 2011
  Assets    
Current Assets:    
Cash and equivalents  $ 59,770  $ 48,247
Receivables, net  311,808  281,764
Inventory  900,803  736,846
Deferred income taxes  53,485  45,690
Prepaid income taxes  29,537  17,597
Prepaid expenses and other current assets  28,948  19,591
Total Current Assets  1,384,351  1,149,735
     
Property and Equipment, net  494,379  424,098
Intangibles  1,796,999  1,584,973
Other Assets  47,727  40,898
Total Assets  $ 3,723,456  $ 3,199,704
     
Liabilities and Stockholders' Equity    
     
Current Liabilities:    
Accounts payable  $ 219,335  $ 210,875
Accrued expenses  134,822  131,025
Income taxes payable  2,748  7,262
Contingent consideration liabilities  42,255  600
Other current liabilities  17,068  18,407
Current portion of long-term obligations   71,716  29,524
 Total Current Liabilities  487,944  397,693
     
Long-Term Obligations, Excluding Current Portion  1,046,762  926,552
Deferred Income Taxes  102,275  88,796
Contingent Consideration Liabilities  47,754  81,782
Other Noncurrent Liabilities  74,627  60,796
     
Commitments and Contingencies    
     
Stockholders' Equity:    
Common stock, $0.01 par value, 500,000,000 shares authorized, 297,810,896 and 293,897,216 shares issued and outstanding at December 31, 2012 and  2011, respectively  2,978  2,939
Additional paid-in capital  950,338  901,313
Retained earnings  1,010,019  748,794
Accumulated other comprehensive income (loss)  759  (8,961)
 Total Stockholders' Equity  1,964,094  1,644,085
 Total Liabilities and Stockholders' Equity  $ 3,723,456  $ 3,199,704
     
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
   
  Year Ended
  December 31,
  2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 261,225  $ 210,264
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  70,165  54,505
Stock-based compensation expense  15,634  13,107
Deferred income taxes  4,222  9,302
Excess tax benefit from stock-based payments  (15,737)  (7,973)
Other  4,515  6,556
Changes in operating assets and liabilities, net of effects from acquisitions:    
 Receivables  (12,813)  (18,074)
 Inventory  (95,042)  (90,091)
 Prepaid income taxes/income taxes payable  (774)  2,251
 Accounts payable  (15,097)  28,589
 Other operating assets and liabilities  (10,108)  3,336
 Net cash provided by operating activities  206,190  211,772
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (88,255)  (86,416)
Proceeds from sales of property and equipment  1,057  1,743
Cash used in acquisitions, net of cash acquired  (265,336)  (486,934)
Net cash used in investing activities  (352,534)  (571,607)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options  17,693  11,919
Excess tax benefit from stock-based payments  15,737  7,973
Debt issuance costs  (253)  (11,048)
Net borrowings of long-term obligations  123,895  302,567
Net cash provided by financing activities  157,072  311,411
     
Effect of exchange rate changes on cash and equivalents  795  982
Net increase (decrease) in cash and equivalents  11,523  (47,442)
Cash and equivalents, beginning of period  48,247  95,689
Cash and equivalents, end of period  $ 59,770  $ 48,247
     
  LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
 ( In thousands, except per share data )
             
  Three Months Ended December 31,
Operating Highlights 2012 2011    
    % of Revenue   % of Revenue Change %  Change
Revenue  $ 1,067,915 100.0%  $ 939,632 100.0%  $ 128,283 13.7%
Cost of goods sold (1)  622,794 58.3%  547,843 58.3%  74,951 13.7%
Gross margin  445,121 41.7%  391,789 41.7%  53,332 13.6%
Facility and warehouse expenses  93,878 8.8%  82,239 8.8%  11,639 14.2%
Distribution expenses  98,444 9.2%  84,326 9.0%  14,118 16.7%
Selling, general and administrative expenses  131,130 12.3%  117,800 12.5%  13,330 11.3%
Restructuring and acquisition related expenses  193 0.0%  2,257 0.2%  (2,064) -91.4%
Depreciation and amortization  17,132 1.6%  15,029 1.6%  2,103 14.0%
Operating income  104,344 9.8%  90,138 9.6%  14,206 15.8%
Other expense (income):            
Interest expense  8,611 0.8%  7,156 0.8%  1,455 20.3%
Change in fair value of contingent consideration liabilities  (144) 0.0%  207 0.0%  (351)  n/m
Interest and other income, net  (742) -0.1%  (1,443) -0.2%  701 48.6%
Total other expense, net  7,725 0.7%  5,920 0.6%  1,805 30.5%
             
Income before provision for income taxes  96,619 9.0%  84,218 9.0%  12,401 14.7%
Provision for income taxes   34,431 3.2%  28,073 3.0%  6,358 22.6%
             
Net income  $ 62,188 5.8%  $ 56,145 6.0%  $ 6,043 10.8%
             
Earnings per share:            
Basic  $ 0.21    $ 0.19    $ 0.02 10.5%
Diluted  $ 0.21    $ 0.19    $ 0.02 10.5%
             
Weighted average common shares outstanding:            
Basic  297,213    293,278    3,935 1.3%
Diluted  302,075    298,068    4,007 1.3%
             
(1) Cost of goods sold for the three months ended December 31, 2012 includes a gain of $0.7 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 )
             
             
  Year Ended December 31,
Operating Highlights 2012 2011    
    % of  Revenue   % of Revenue Change % Change
Revenue  $ 4,122,930 100.0%  $ 3,269,862 100.0%  $ 853,068 26.1%
Cost of goods sold (1)  2,398,790 58.2%  1,877,869 57.4%  520,921 27.7%
Gross margin  1,724,140 41.8%  1,391,993 42.6%  332,147 23.9%
Facility and warehouse expenses  347,917 8.4%  293,423 9.0%  54,494 18.6%
Distribution expenses  375,835 9.1%  287,626 8.8%  88,209 30.7%
Selling, general and administrative expenses  495,591 12.0%  391,942 12.0%  103,649 26.4%
Restructuring and acquisition related expenses  2,751 0.1%  7,590 0.2%  (4,839) -63.8%
Depreciation and amortization  64,093 1.6%  49,929 1.5%  14,164 28.4%
Operating income  437,953 10.6%  361,483 11.1%  76,470 21.2%
Other expense (income):            
Interest expense  31,429 0.8%  24,307 0.7%  7,122 29.3%
Loss on debt extinguishment  --  0.0%  5,345 0.2%  (5,345) n/m
Change in fair value of contingent consideration liabilities  1,643 0.0%  (1,408) 0.0%  3,051 n/m
Interest and other income, net  (4,286) -0.1%  (2,532) -0.1%  (1,754) 69.3%
Total other expense, net  28,786 0.7%  25,712 0.8%  3,074 12.0%
             
Income before provision for income taxes  409,167 9.9%  335,771 10.3%  73,396 21.9%
Provision for income taxes   147,942 3.6%  125,507 3.8%  22,435 17.9%
             
Net income  $ 261,225 6.3%  $ 210,264 6.4%  $ 50,961 24.2%
             
Earnings per share:            
Basic  $ 0.88    $ 0.72    $ 0.16 22.2%
Diluted  $ 0.87    $ 0.71    $ 0.16 22.5%
             
Weighted average common shares outstanding:            
Basic  295,810    292,252    3,558 1.2%
Diluted  300,693    296,750    3,943 1.3%
             
(1) Cost of goods sold for the year ended December 31, 2012 includes a gain of $17.9 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 Year Ended
  December 31, December 31,
  2012 2011 2012 2011
  (In thousands)
         
Net income  $ 62,188  $ 56,145  $ 261,225  $ 210,264
Depreciation and amortization  18,591 16,197  70,165 54,505
Interest expense, net  8,528  6,520  31,215 22,447
Loss on debt extinguishment (1)  --   --   --   5,345
Provision for income taxes   34,431  28,073  147,942 125,507
         
Earnings before interest, taxes, depreciation and amortization (EBITDA)   $ 123,738  $ 106,935  $ 510,547  $ 418,068
         
 EBITDA as a percentage of revenue  11.6% 11.4% 12.4% 12.8%
         
         
(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    
  December 31,    
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed         
Statements of Income of LKQ Corporation        
         
Aftermarket, other new and refurbished products  $ 610,847  $ 531,116  $ 79,731 15.0%
Recycled, remanufactured and related products and services  309,773  284,946  24,827 8.7%
Parts and services  920,620  816,062  104,558 12.8%
Other   147,295  123,570  23,725 19.2%
Total  $ 1,067,915  $ 939,632  $ 128,283 13.7%
         
Revenue changes by category for the three months ended December 31, 2012 vs. 2011:
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
Aftermarket, other new and refurbished products 3.5% 10.8% 0.7% 15.0%
Recycled, remanufactured and related products and services 5.3% 3.2% 0.2% 8.7%
Parts and services 4.1% 8.2% 0.5% 12.8%
Other  17.3% 1.9% 0.1% 19.2%
Total 5.9% 7.4% 0.4% 13.7%
         
         
  Year Ended    
  December 31,    
  2012 2011 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed 
Statements of Income of LKQ Corporation
         
Aftermarket, other new and refurbished products  $ 2,286,853  $ 1,634,003  $ 652,850 40.0%
Recycled, remanufactured and related products and services  1,277,023  1,115,088  161,935 14.5%
Parts and services  3,563,876 2,749,091 814,785 29.6%
Other   559,054 520,771 38,283 7.4%
Total  $ 4,122,930  $ 3,269,862  $ 853,068 26.1%
         
Revenue changes by category for the year ended December 31, 2012 vs. 2011:
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
Aftermarket, other new and refurbished products 33.6% 6.2% 0.1% 40.0%
Recycled, remanufactured and related products and services 8.8% 5.8% -0.1% 14.5%
Parts and services 23.6% 6.0% 0.0% 29.6%
Other  13.2% -5.8% 0.0% 7.4%
Total 21.9% 4.1% 0.0% 26.1%
         
The following unaudited table compares our revenue and EBITDA by reportable segment:
         
         
  Three Months Ended Year Ended
  December 31, December 31,
  2012 2011 2012 2011
  (In thousands)
         
Revenue        
North America  $ 879,115  $ 801,146  $ 3,426,858  $ 3,131,376
Europe  188,800  138,486  696,072  138,486
Total revenue  $ 1,067,915  $ 939,632  $ 4,122,930  $ 3,269,862
         
EBITDA        
North America (1)  $ 109,308  $ 94,791  $ 440,448  $ 405,924
Europe (2)  14,430  12,144  70,099  12,144
Total EBITDA  $ 123,738  $ 106,935  $ 510,547  $ 418,068
         
         
(1) For the three months and year ended December 31, 2012, North America EBITDA includes gains of $0.7 million and $17.9 million, respectively, resulting from certain settlements of a class action lawsuit against several of our suppliers. North America EBITDA during the three months and year ended December 31, 2012 also includes net gains of $1.8 million and $2.0 million, respectively from the change in fair value of contingent consideration liabilities related to certain of our acquisitions, while the year ended December 31, 2011 includes a gain of $2.0 million.
(2) For the three months and year ended December 31, 2012, Europe EBITDA includes losses of $1.7 million and $3.6 million, respectively, from the change in fair value of the Euro Car Parts contingent consideration liability, while the three months and year ended December 31, 2011 each include a loss of $0.6 million.
CONTACT: Joseph P. Boutross
         Director, Investor Relations
         (312) 621-2793
         jpboutross@lkqcorp.com

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