LKQ Corporation Announces Results For Third Quarter 2013

  • Revenue growth of 28% to a record $1.3 billion
  • Organic revenue growth for parts and services of 11.7%
  • Third quarter 2013 diluted EPS of $0.24
  • Annual guidance updated

CHICAGO, Oct. 31, 2013 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported record revenue for the third quarter of 2013 of $1.30 billion, an increase of 27.7% as compared to $1.02 billion in the third quarter of 2012. Net income for the third quarter of 2013 was $73 million, an increase of 35.9% as compared to $54 million for the same period of 2012. Diluted earnings per share of $0.24 for the third quarter ended September 30, 2013 increased 33.3% from $0.18 for the third quarter of 2012. The Company noted that the third quarter of 2013 and 2012 diluted earnings per share figures both included losses totaling $0.01 per share resulting from restructuring and acquisition related expenses and the change in fair value of contingent consideration liabilities.

"Organic revenue growth for parts and services in the quarter of 11.7% remains strong with North America and Europe increasing 6.2% and 32.9%, respectively," stated Robert L. Wagman, President and Chief Executive Officer of LKQ Corporation. "Our improved operating margin in the quarter was driven by our ability to leverage our distribution network to improve efficiencies across our core operating segments," continued Mr. Wagman.

On a nine month year-to-date basis, revenue was $3.75 billion, an increase of 22.6% from $3.06 billion for the comparable period of 2012. Net income for the first nine months of 2013 was $234 million, as compared to $199 million for the first nine months of 2012. Diluted earnings per share was $0.77 for the first nine months of 2013, as compared to $0.66 for the comparable period of 2012.

Total organic revenue growth on a nine month year-to-date basis was 9.9%. Parts and services revenue grew organically by 11.4%. Acquisition revenue growth on a nine month year-to-date basis was 13.2%.

Balance Sheet and Liquidity

As of September 30, 2013, LKQ's balance sheet reflected cash and equivalents of $107 million and outstanding debt of $1.31 billion, including obligations outstanding under the Company's credit facility of $644 million ($444 million of term loans and $200 million of revolver borrowings) and senior notes of $600 million. Total availability under the credit facility at September 30, 2013 was $1.1 billion, and availability under the Company's asset securitization program was $70 million.

Other Events

On August 6, 2013, the Company announced that it acquired five paint distributors with a total of 26 locations throughout the United Kingdom. The acquired distributors include Bee Bee Refinishing Supplies Halstead, JCA Coatings, Milton Keynes Paint & Equipment, Premier Paints and Sinemaster Motor Factors.

In addition to the acquisition of five UK based paint distributors, during the third quarter of 2013 the Company acquired a specialty automotive parts distributor in the Benelux and a salvage operation in Arizona.

On August 20, 2013, the Company announced it formed a joint venture with Suncorp Group to develop an alternative auto parts business in Australia and New Zealand. Suncorp Group is Australia's largest insurer (measured by premiums) and New Zealand's second largest general insurance company.

"Our acquisition of five UK paint distributors and the forming of our joint venture in Australia further demonstrates our belief that the value proposition we offer insurance carriers and the professional automotive repair industry translates well outside of the North American footprint," stated Mr. Wagman.

The Company announced that Kevin F. Flynn, a member of the LKQ Board of Directors, passed away on August 12, 2013. Mr. Flynn was instrumental in the initial formation of LKQ, facilitated a number of acquisitions and financings, and served on the Board for more than nine years.

Company Outlook

The Company updated its guidance for 2013.
     
  Updated Guidance Prior Guidance
Organic revenue growth 10.0% to 11.5% 8.5% to 10.5%
Net income $313 million to $333 million $313 million to $333 million
Diluted EPS $1.03 to $1.10 $1.03 to $1.10
Cash flow provided from operations Approximately $340 million Approximately $300 million
Capital expenditures $85 million to $100 million $100 million to $115 million

Guidance for 2013 is based on current conditions and excludes the impact of restructuring and acquisition related expenses, losses on debt extinguishment, 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 31, 2013 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) 407-0668. International access to the call may be obtained by dialing (201) 689-8558. 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: 420558 #. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through November 22, 2013. Please allow approximately two hours after the live presentation before attempting to access the replay.

About LKQ Corporation

LKQ Corporation ( www.lkqcorp.com) is the largest nationwide provider of alternative collision replacement parts and a leading provider of recycled engines and transmissions and remanufactured engines, all in connection with the repair of automobiles and other vehicles. LKQ also has operations in the United Kingdom, Canada, Mexico, Taiwan, the Netherlands, Belgium, France, Guatemala and Costa Rica. 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.

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 satisfy our debt obligations and to operate within the limitations imposed by financing agreements;
  • 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, realize expected synergies and successfully operate acquired companies and any companies acquired in the future and the risks associated with these companies;
  • our ability to obtain financing on acceptable terms to finance our growth;
  • 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;
  • costs associated with recalls of the products we sell;
  • currency fluctuations in the U.S. dollar versus other currencies and currency fluctuations in the pound sterling and euro versus other currencies;
  • periodic adjustments to estimated contingent purchase price amounts;
  • instability in regions in which we operate 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 March 1, 2013 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 September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
         
Revenue  $ 1,298,094  $ 1,016,707  $ 3,745,839  $ 3,055,015
         
Cost of goods sold (1)  780,187  607,002  2,216,110  1,775,996
         
Gross margin  517,907  409,705  1,529,729  1,279,019
         
Facility and warehouse expenses  108,349  86,739  311,480  254,039
         
Distribution expenses  109,593  93,652  320,033  277,391
         
Selling, general and administrative expenses  153,546  121,049  436,614  364,461
         
Restructuring and acquisition related expenses  2,206  116  7,391  2,558
         
Depreciation and amortization  20,818  16,715  57,850  46,961
         
Operating income  123,395  91,434  396,361  333,609
         
Other expense (income):        
Interest expense, net  15,200  7,964  36,287  22,687
Loss on debt extinguishment  --   --   2,795  -- 
Change in fair value of contingent consideration liabilities  712  1,892  1,765  1,787
Other income, net  (1,562)  (1,674)  (1,737)  (3,413)
         
Total other expense, net  14,350  8,182  39,110  21,061
         
Income before provision for income taxes  109,045  83,252  357,251  312,548
         
Provision for income taxes   35,600  29,204  123,492  113,511
         
Net income  $ 73,445  $ 54,048  $ 233,759  $ 199,037
         
         
Earnings per share:        
Basic  $ 0.24  $ 0.18  $ 0.78  $ 0.67
         
Diluted  $ 0.24  $ 0.18  $ 0.77  $ 0.66
         
         
Weighted average common shares outstanding:        
Basic  300,223  296,437  299,213  295,338
         
Diluted  304,685  301,172  303,771  300,226
         
(1) Cost of goods sold for the three and nine months ended September 30, 2012 included 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, 2013 December 31, 2012
Assets    
     
Current Assets:    
Cash and equivalents  $ 107,337  $ 59,770
Receivables, net  438,800  311,808
Inventory  1,018,169  900,803
Deferred income taxes  53,129  53,485
Prepaid income taxes  13,825  29,537
Prepaid expenses and other current assets  44,391  28,948
Total Current Assets  1,675,651  1,384,351
     
Property and Equipment, net  531,897  494,379
Intangibles  2,075,345  1,796,999
Other Assets  78,166  47,727
     
Total Assets  $ 4,361,059  $ 3,723,456
     
Liabilities and Stockholders' Equity    
     
Current Liabilities:    
Accounts payable  $ 284,900  $ 219,335
Accrued expenses  213,007  134,822
Income taxes payable  16,473  2,748
Contingent consideration liabilities  49,275  42,255
Other current liabilities  17,735  17,068
Current portion of long-term obligations   61,123  71,716
     
Total Current Liabilities  642,513  487,944
     
Long-Term Obligations, Excluding Current Portion  1,250,932  1,046,762
Deferred Income Taxes  118,693  102,275
Contingent Consideration Liabilities  5,210  47,754
Other Noncurrent Liabilities  89,605  74,627
     
Commitments and Contingencies    
     
Stockholders' Equity:    
Common stock, $0.01 par value, 1,000,000,000 and 500,000,000 shares authorized, 300,548,111 and 297,810,896 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively  3,005  2,978
Additional paid-in capital  996,248  950,338
Retained earnings  1,243,778  1,010,019
Accumulated other comprehensive income   11,075  759
     
Total Stockholders' Equity  2,254,106  1,964,094
     
Total Liabilities and Stockholders' Equity  $ 4,361,059  $ 3,723,456
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
   
  Nine Months Ended September 30,
  2013 2012
     
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $ 233,759  $ 199,037
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  61,868  51,574
Stock-based compensation expense  16,292  11,976
Excess tax benefit from stock-based payments  (15,998)  (11,071)
Other  7,424  3,961
Changes in operating assets and liabilities, net of effects from acquisitions:    
Receivables  (35,287)  (12,394)
Inventory  (18,207)  (47,669)
Prepaid income taxes/income taxes payable  40,551  2,688
Accounts payable  1,641  (7,892)
Other operating assets and liabilities  48,886  (8,138)
     
Net cash provided by operating activities  340,929  182,072
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment  (61,126)  (60,636)
Proceeds from sales of property and equipment  1,459  692
Investment in unconsolidated subsidiary  (9,136)  -- 
Acquisitions, net of cash acquired  (395,974)  (133,123)
     
Net cash used in investing activities  (464,777)  (193,067)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from exercise of stock options  13,647  14,187
Excess tax benefit from stock-based payments  15,998  11,071
Debt issuance costs  (16,912)  (175)
Net borrowings of long-term obligations  156,586  6,197
     
Net cash provided by financing activities  169,319  31,280
     
Effect of exchange rate changes on cash and equivalents  2,096  682
     
Net increase in cash and equivalents  47,567  20,967
     
Cash and equivalents, beginning of period  59,770  48,247
     
Cash and equivalents, end of period  $ 107,337  $ 69,214
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
  Three Months Ended September 30,
Operating Highlights 2013 2012    
    % of Revenue   % of Revenue Change % Change
             
Revenue  $ 1,298,094 100.0%  $ 1,016,707 100.0%  $ 281,387 27.7%
             
Cost of goods sold  780,187 60.1%  607,002 59.7%  173,185 28.5%
             
Gross margin  517,907 39.9%  409,705 40.3%  108,202 26.4%
             
Facility and warehouse expenses  108,349 8.3%  86,739 8.5%  21,610 24.9%
             
Distribution expenses  109,593 8.4%  93,652 9.2%  15,941 17.0%
             
Selling, general and administrative expenses  153,546 11.8%  121,049 11.9%  32,497 26.8%
             
Restructuring and acquisition related expenses  2,206 0.2%  116 0.0%  2,090 n/m
             
Depreciation and amortization  20,818 1.6%  16,715 1.6%  4,103 24.5%
             
Operating income  123,395 9.5%  91,434 9.0%  31,961 35.0%
             
Other expense (income):            
Interest expense, net  15,200 1.2%  7,964 0.8%  7,236 90.9%
Change in fair value of contingent consideration liabilities  712 0.1%  1,892 0.2%  (1,180) (62.4%)
Other income, net  (1,562) (0.1%)  (1,674) (0.2%)  112 6.7%
             
Total other expense, net  14,350 1.1%  8,182 0.8%  6,168 75.4%
             
Income before provision for income taxes  109,045 8.4%  83,252 8.2%  25,793 31.0%
             
Provision for income taxes   35,600 2.7%  29,204 2.9%  6,396 21.9%
             
Net income  $ 73,445 5.7%  $ 54,048 5.3%  $ 19,397 35.9%
             
Earnings per share:            
Basic  $ 0.24    $ 0.18    $ 0.06 33.3%
             
Diluted  $ 0.24    $ 0.18    $ 0.06 33.3%
             
Weighted average common shares outstanding:            
Basic  300,223    296,437    3,786 1.3%
             
Diluted  304,685    301,172    3,513 1.2%
 
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
             
  Nine Months Ended September 30,
Operating Highlights 2013 2012    
    % of Revenue   % of Revenue Change % Change
             
Revenue  $ 3,745,839 100.0%  $ 3,055,015 100.0%  $ 690,824 22.6%
             
Cost of goods sold (1)  2,216,110 59.2%  1,775,996 58.1%  440,114 24.8%
             
Gross margin  1,529,729 40.8%  1,279,019 41.9%  250,710 19.6%
             
Facility and warehouse expenses  311,480 8.3%  254,039 8.3%  57,441 22.6%
             
Distribution expenses  320,033 8.5%  277,391 9.1%  42,642 15.4%
             
Selling, general and administrative expenses  436,614 11.7%  364,461 11.9%  72,153 19.8%
             
Restructuring and acquisition related expenses  7,391 0.2%  2,558 0.1%  4,833 188.9%
             
Depreciation and amortization  57,850 1.5%  46,961 1.5%  10,889 23.2%
             
Operating income  396,361 10.6%  333,609 10.9%  62,752 18.8%
             
Other expense (income):            
Interest expense, net  36,287 1.0%  22,687 0.7%  13,600 59.9%
Loss on debt extinguishment  2,795 0.1%  --  0.0%  2,795 n/m
Change in fair value of contingent consideration liabilities  1,765 0.0%  1,787 0.1%  (22) (1.2%)
Other income, net  (1,737) (0.0%)  (3,413) (0.1%)  1,676 49.1%
             
Total other expense, net  39,110 1.0%  21,061 0.7%  18,049 85.7%
             
Income before provision for income taxes  357,251 9.5%  312,548 10.2%  44,703 14.3%
             
Provision for income taxes   123,492 3.3%  113,511 3.7%  9,981 8.8%
             
Net income  $ 233,759 6.2%  $ 199,037 6.5%  $ 34,722 17.4%
             
Earnings per share:            
Basic  $ 0.78    $ 0.67    $ 0.11 16.4%
             
Diluted  $ 0.77    $ 0.66    $ 0.11 16.7%
             
Weighted average common shares outstanding:            
Basic  299,213    295,338    3,875 1.3%
             
Diluted  303,771    300,226    3,545 1.2%
             
(1) Cost of goods sold for the nine months ended September 30, 2012 included gains 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 September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
  (In thousands)
         
Net income  $ 73,445  $ 54,048  $ 233,759  $ 199,037
Depreciation and amortization  22,157  18,128  61,868 51,574
Interest expense, net  15,200  7,964  36,287 22,687
Loss on debt extinguishment (1)  --   --   2,795  -- 
Provision for income taxes   35,600  29,204  123,492 113,511
         
         
Earnings before interest, taxes, depreciation and amortization (EBITDA)   $ 146,402  $ 109,344  $ 458,201  $ 386,809
         
 EBITDA as a percentage of revenue  11.3% 10.8% 12.2% 12.7%
         
(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,    
  2013 2012 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed     
Statements of Income of LKQ Corporation      
         
North America  $ 773,986  $ 699,468  $ 74,518 10.7%
Europe  369,350  181,159  188,191 103.9%
Parts and services  1,143,336  880,627  262,709 29.8%
Other   154,758  136,080  18,678 13.7%
Total  $ 1,298,094  $ 1,016,707  $ 281,387 27.7%
         
Revenue changes by category for the three months ended September 30, 2013 vs. 2012:
         
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
North America 4.7% 6.2% (0.3%) 10.7%
Europe 72.9% 32.9% (1.9%) 103.9%
Parts and services 18.7% 11.7% (0.6%) 29.8%
Other  8.9% 5.0% (0.1%) 13.7%
Total 17.4% 10.8% (0.5%) 27.7%
         
         
  Nine Months Ended September 30,    
  2013 2012 Change % Change
  (In thousands)    
         
Included in Unaudited Consolidated Condensed     
Statements of Income of LKQ Corporation      
         
North America  $ 2,380,817  $ 2,136,785  $ 244,032 11.4%
Europe  878,873  506,471  372,402 73.5%
Parts and services  3,259,690 2,643,256 616,434 23.3%
Other   486,149 411,759 74,390 18.1%
Total  $ 3,745,839  $ 3,055,015  $ 690,824 22.6%
         
Revenue changes by category for the nine months ended September 30, 2013 vs. 2012:
       
  Revenue Change Attributable to:  
  Acquisition Organic Foreign Exchange % Change
         
North America 5.5% 6.0% (0.1%) 11.4%
Europe 41.4% 34.2% (2.1%) 73.5%
Parts and services 12.4% 11.4% (0.5%) 23.3%
Other  18.2% 0.0% (0.1%) 18.1%
Total 13.2% 9.9% (0.4%) 22.6%
 
The following unaudited table compares our revenue and EBITDA by reportable segment:
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2013 2012 2013 2012
  (In thousands)
         
Revenue        
North America  $ 928,307  $ 835,324  $ 2,865,613  $ 2,547,743
Europe  369,787  181,383  880,226  507,272
Total revenue  $ 1,298,094  $ 1,016,707  $ 3,745,839  $ 3,055,015
         
EBITDA        
North America (1)  $ 108,314  $ 89,265  $ 362,281  $ 331,140
Europe (2) (3)  38,088  20,079  95,920  55,669
Total EBITDA  $ 146,402  $ 109,344  $ 458,201  $ 386,809
         
         
(1) For the three and nine months ended September 30, 2012, North America EBITDA included 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) Included within EBITDA of our European segment are losses of $0.8 million and $2.1 million during the three months ended September 30, 2013 and 2012, respectively, from the change in fair value of contingent consideration liabilities, primarily related to our 2011 ECP acquisition. During the nine month periods ended September 30, 2013 and 2012, our European segment recognized losses of $2.7 million and $1.9 million, respectively, related to the remeasurement of these contingent consideration liabilities. 
         
(3) For the three and nine months ended September 30, 2013, Europe EBITDA included restructuring and acquisition related expenses of $1.6 million and $5.3 million, respectively, related primarily to the acquisition of Sator Beheer and five automotive paint distribution businesses in the U.K.
CONTACT: Joseph P. Boutross-Director, Investor Relations         LKQ Corporation         (312) 621-2793         jpboutross@lkqcorp.com

LKQ Corporation Logo

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX