CHICAGO, Oct. 30, 2008 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQX) today announced results for its third quarter ended September 30, 2008. Revenue for the third quarter was $490.7 million. Net income for the quarter was $25.1 million and diluted earnings per share was $0.18. The results of the quarter include the effect of restructuring expenses of $2.4 million, a reduction of approximately $0.01 in diluted earnings per share. LKQ acquired Keystone Automotive Industries in October 2007, and accordingly, year over year results are not comparable.
"The third quarter results were consistent with our expectations and benefited from the diversity of our operating model. Excluding the impact of restructuring expenses, we improved operating margins by 20 basis points in the quarter that is traditionally the weakest," commented Joseph Holsten, President and Chief Executive Officer. "We saw double digit organic growth despite reported reductions in auto insurance claims, demonstrating the resiliency of our businesses. While the recycled portion of our business continues to see steady growth, the current economic realities appear to be constraining the growth of aftermarket sales."
"Although the economic environment is somewhat unpredictable, we are maintaining our focus and continuing to execute on our strategy - to be the leader in alternative auto and light-duty truck parts. Our recent acquisitions of recycled heavy-duty truck parts operations will help us expand into a complementary segment," added Holsten.
2008 Reported Results
For the third quarter of 2008, revenue increased 102% to $490.7 million compared with $243.5 million for the third quarter of 2007. Organic revenue growth for the quarter was 12.4%, and was calculated on a pro forma basis assuming LKQ owned Keystone during the third quarter of 2007. Net income for the quarter increased 72.2% to $25.1 million compared with $14.6 million for the third quarter of 2007. Diluted earnings per share was $0.18 for the quarter, an increase of 38.5%, as compared with $0.13 for the third quarter of 2007.
On a nine month year to date basis, revenue increased by 106% to $1.47 billion compared to $712.1 million for the same period of 2007. Pro forma organic revenue growth, assuming LKQ owned Keystone for the same year to date period of 2007, was 11.6%. Net income for the first nine months of 2008 increased 95.9% to $86.9 million as compared to $44.4 million in the prior year, and diluted earnings per share increased 59.0% to $0.62 as compared to $0.39.
The Company recorded restructuring expenses of $2.4 million in its third quarter of 2008 and $6.7 million for the nine month period of 2008. Restructuring costs were included in operating expenses and were related to the Keystone acquisition in October 2007.
The weighted average diluted shares outstanding for the third quarter of 2008 were 141.2 million compared to 115.1 million for the third quarter of 2007. The number of weighted average diluted shares of common stock in 2008 increased from 2007, due largely to the issuance of 23.6 million new shares on September 25, 2007 in a follow-on public offering and the issuance of 2.9 million shares related to business acquisitions.
Balance Sheet and Liquidity
As of September 30, 2008, LKQ's balance sheet reflected cash and equivalents of $97.7 million compared to $104.1 million as of June 30, 2008. Long-term debt, including the current portion, was $642.5 million at the end of the third quarter as compared to $647.4 million at the end of the second quarter of 2008. The Company has not made any borrowings on its revolving credit facility; however, availability has been reduced by the issuance of letters of credit totaling $21.7 million.
Recent Business Acquisitions
During the third quarter, LKQ completed the acquisition of Pick-Your-Part Auto Wrecking, an auto recycler with nine locations in California. More recently the Company announced the acquisition of two heavy-duty truck recycled parts businesses. The three acquisitions collectively had approximately $135 million of historical annual revenue.
Company Outlook
"The economic downturn with the effects of lower miles driven, fewer insurance claims and decreased commodity prices will undoubtedly affect us in the short run," commented Holsten. "We continue to be optimistic, however, about our long-term strategy. In the long run we are in a favorable position to increase our market share by using our strong balance sheet and positive free cash flow to maintain high levels of inventory, which in turn should result in industry leading fulfillment rates for all of our product lines."
As a result of challenging economic conditions, the Company is modifying its outlook for 2008. Excluding the effect of any 2008 restructuring expenses related to the Keystone acquisition, LKQ now anticipates full year 2008 net income to be within a range of $107 million to $114 million and diluted earnings per share to be between $0.76 and $0.81, representing a 38% to 47% increase from diluted earnings per share for 2007. LKQ's new guidance is greater than the full year 2008 guidance it originally provided on February 27, 2008.
Net cash provided by operating activities for 2008 is projected to be more than $100 million. The Company's estimates for capital expenditures related to property and equipment, excluding expenditures for acquiring businesses, are anticipated to be between $65 million to $70 million.
Weighted average diluted shares outstanding are anticipated to be approximately 143 million for the fourth quarter of 2008, and approximately 141 million for the full year of 2008. Share numbers are estimates and will be affected by factors such as future stock issuances, the number of options exercised in subsequent periods, and changes in stock price.
Quarterly Conference Call
LKQ will host a conference call and audio web cast to discuss its third quarter 2008 financial results on October 30, 2008 at 10:30 a.m. Eastern Time. The live audio web cast can be accessed on the internet at www.lkqcorp.com in the Investor Relations section.
A replay of the conference call will be available on the Company's website approximately two hours after the live presentation and will remain on the site for approximately one month.
About LKQ Corporation
LKQ Corporation is the largest nationwide provider of aftermarket collision replacement products, recycled OEM products and refurbished OEM collision replacement products such as wheels, bumper covers and lights used to repair light vehicles. LKQ operates approximately 300 facilities offering its customers a broad range of replacement systems, components, and parts to repair light vehicles and trucks.
Forward Looking Statements
The statements in this webcast 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:
* the risk that Keystone's business will not be integrated successfully or that LKQ will incur unanticipated costs of integration; * the ability to maintain Keystone's vendor relationships and retain key employees; * the availability and cost of inventory; * pricing of new OEM replacement parts; * variations in vehicle accident rates; * changes in state or federal laws or regulations affecting our business; * fluctuations in fuel and other commodity prices; * changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns; * changes in the types of replacement parts that insurance carriers will accept in the repair process; * the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure; * declines in asset values; * uncertainty as to changes in U.S. general economic activity and the impact of these changes on the demand for our products; * uncertainty as to our future profitability; * increasing competition in the automotive parts industry; * our ability to increase or maintain revenue and profitability at our facilities; * 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; * our ability to integrate and successfully operate recently acquired companies and any companies acquired in the future and the risks associated with these companies; * our ability to develop and implement the operational and financial systems needed to manage our growing operations; * decreases in the supply of end of life and crush only vehicles that we process and sell; * claims by OEMs that attempt to restrict or eliminate the sale of aftermarket products, and * other risks that are described in our Form 10-K filed February 29, 2008 and in other reports filed by us from time to time with the Securities and Exchange Commission.
You should not place undue reliance on the forward looking statements. We assume no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made 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, --------------------- ----------------------- 2008 2007 2008 2007 ---- ---- ---- ---- Revenue $ 490,701 $ 243,495 $ 1,467,001 $ 712,091 Cost of goods sold 274,786 135,038 808,064 391,455 --------- --------- ----------- --------- Gross margin 215,915 108,457 658,937 320,636 Facility and warehouse expenses 48,479 26,188 136,783 76,432 Distribution expenses 46,636 23,803 136,731 68,191 Selling, general and administrative expenses 60,929 29,107 186,791 85,969 Restructuring expenses 2,400 -- 6,723 -- Depreciation and amortization 7,513 3,768 22,029 10,549 --------- --------- ----------- --------- Operating income 49,958 25,591 169,880 79,495 Other expense (income): Interest expense, net 8,192 2,241 26,904 6,067 Other expense (income), net 1 (468) (719) (1,143) --------- --------- ----------- --------- Total other expense 8,193 1,773 26,185 4,924 --------- --------- ----------- --------- Income before provision for income taxes 41,765 23,818 143,695 74,571 Provision for income taxes 16,697 9,259 56,760 30,202 --------- --------- ----------- --------- Net income $ 25,068 $ 14,559 $ 86,935 $ 44,369 ========= ========= =========== ========= Net income per share: Basic $ 0.18 $ 0.13 $ 0.64 $ 0.41 ========= ========= =========== ========= Diluted $ 0.18 $ 0.13 $ 0.62 $ 0.39 ========= ========= =========== ========= Weighted average common shares outstanding: Basic 136,585 109,326 135,481 107,678 ========= ========= =========== ========= Diluted 141,190 115,111 140,458 113,237 ========= ========= =========== ========= LKQ CORPORATION AND SUBSIDIARIES Unaudited Consolidated Condensed Statements of Cash Flows (In thousands) Nine Months Ended September 30, --------------------- 2008 2007 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 86,935 $ 44,369 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,998 10,933 Stock-based compensation expense 4,133 2,386 Deferred income taxes 9,375 4,576 Excess tax benefit from share-based payment arrangements (8,192) (12,150) Other adjustments 2,221 (94) Changes in operating assets and liabilities, net of effects from purchase transactions: Receivables (5,738) (8,464) Inventory (5,675) (21,853) Prepaid income taxes/income taxes payable 9,733 5,299 Accounts payable (9,798) 907 Other operating assets and liabilities (1,678) 5,598 -------- -------- Net cash provided by operating activities 105,314 31,507 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, equipment and other long term assets (42,212) (26,095) Proceeds from disposal of assets 1,993 417 Purchases of investment securities -- (5,885) Cash used in acquisitions (40,258) (55,705) -------- -------- Net cash used in investing activities (80,477) (87,268) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options and warrants 4,722 8,341 Proceeds from the sale of common stock -- 349,529 Repurchase and retirement of redeemable common stock -- (1,125) Excess tax benefit from share-based payment arrangements 8,192 12,150 Debt issuance costs (219) (206) Net repayments of long-term debt (13,659) (91,693) -------- -------- Net cash (used in) provided by financing activities (964) 276,996 -------- -------- Effect of exchange rate changes on cash and equivalents (425) 74 Net increase in cash and equivalents 23,448 221,309 Cash and equivalents, beginning of period 74,241 4,031 -------- -------- Cash and equivalents, end of period $ 97,689 $225,340 ======== ======== LKQ CORPORATION AND SUBSIDIARIES Unaudited Consolidated Condensed Balance Sheets (In thousands, except share and per share data) September 30, December 31, 2008 2007 ---- ---- Assets Current Assets: Cash and equivalents $ 97,689 $ 74,241 Receivables, net 136,553 125,572 Inventory 331,028 320,238 Deferred income taxes 18,022 18,809 Prepaid income taxes 4,630 6,344 Prepaid expenses 8,472 8,088 ---------- ---------- Total Current Assets 596,394 553,292 Property and Equipment, net 241,093 217,059 Intangibles 982,394 900,832 Other Assets 28,290 21,472 ---------- ---------- Total Assets $1,848,171 $1,692,655 ========== ========== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 60,488 $ 68,871 Accrued expenses 78,797 73,172 Deferred revenue 5,203 4,844 Current portion of long-term obligations 19,425 16,936 ---------- ---------- Total Current Liabilities 163,913 163,823 Long-Term Obligations, Excluding Current Portion 623,028 641,526 Deferred Income Tax Liability 35,992 25,607 Other Noncurrent Liabilities 11,184 11,922 Commitments and Contingencies Stockholders' Equity: Common stock, $0.01 par value, 500,000,000 shares authorized, 138,659,781 and 134,149,066 shares issued at September 30, 2008 and December 31, 2007, respectively 1,387 1,341 Additional paid-in capital 779,545 705,778 Retained earnings 228,974 142,039 Accumulated other comprehensive income 4,148 619 ---------- ---------- Total Stockholders' Equity 1,014,054 849,777 ---------- ---------- Total Liabilities and Stockholders' Equity $1,848,171 $1,692,655 ========== ========== LKQ CORPORATION AND SUBSIDIARIES Unaudited Supplementary Data ($ in thousands, except per share data) Three Months Ended September 30, ------------------------------------------------------ Operating Highlights 2008 2007 ----------------------------- --------------- % of % of % Revenue Revenue Change Change Revenue $490,701 100.0% $243,495 100.0% $247,206 101.5% Cost of goods sold 274,786 56.0% 135,038 55.5% 139,748 103.5% -------- ----- -------- ----- -------- Gross margin 215,915 44.0% 108,457 44.5% 107,458 99.1% Facility and warehouse expenses 48,479 9.9% 26,188 10.8% 22,291 85.1% Distribution expenses 46,636 9.5% 23,803 9.8% 22,833 95.9% Selling, general and administrative expenses 60,929 12.4% 29,107 12.0% 31,822 109.3% Restructuring expenses 2,400 0.5% -- 0.0% 2,400 Depreciation and amortization 7,513 1.5% 3,768 1.5% 3,745 99.4% -------- ----- -------- ----- -------- Operating income 49,958 10.2% 25,591 10.5% 24,367 95.2% Other expense (income): Interest expense, net 8,192 1.7% 2,241 0.9% 5,951 265.6% Other expense (income), net 1 0.0% (468) -0.2% 469 -100.2% -------- ----- -------- ----- -------- Total other expense 8,193 1.7% 1,773 0.7% 6,420 362.1% -------- ----- -------- ----- -------- Income before provision for income taxes 41,765 8.5% 23,818 9.8% 17,947 75.4% Provision for income taxes 16,697 3.4% 9,259 3.8% 7,438 80.3% -------- ----- -------- ----- -------- Net income $ 25,068 5.1% $ 14,559 6.0% $ 10,509 72.2% ======== ===== ======== ===== ======== Net income per share: Basic $ 0.18 $ 0.13 $ 0.05 38.5% ======== ======== ======== Diluted $ 0.18 $ 0.13 $ 0.05 38.5% ======== ======== ======== Weighted average common shares outstanding: Basic 136,585 109,326 27,259 24.9% ======== ======== ======== Diluted 141,190 115,111 26,079 22.7% ======== ======== ======== LKQ CORPORATION AND SUBSIDIARIES Unaudited Supplementary Data ($ in thousands, except per share data) Nine Months Ended September 30, ------------------------------------------------------ Operating Highlights 2008 2007 ------------------------------------------------ % of % of % Revenue Revenue Change Change Revenue $1,467,001 100.0% $712,091 100.0% $754,910 106.0% Cost of goods sold 808,064 55.1% 391,455 55.0% 416,609 106.4% ---------- ----- -------- ----- -------- Gross margin 658,937 44.9% 320,636 45.0% 338,301 105.5% Facility and warehouse expenses 136,783 9.3% 76,432 10.7% 60,351 79.0% Distribution expenses 136,731 9.3% 68,191 9.6% 68,540 100.5% Selling, general and admin- istrative expenses 186,791 12.7% 85,969 12.1% 100,822 117.3% Restructuring expenses 6,723 0.5% -- 0.0% 6,723 Depreciation and amort- ization 22,029 1.5% 10,549 1.5% 11,480 108.8% ---------- ----- -------- ----- -------- Operating income 169,880 11.6% 79,495 11.2% 90,385 113.7% Other (income) expense: Interest expense, net 26,904 1.8% 6,067 0.9% 20,837 343.4% Other income, net (719) 0.0% (1,143) -0.2% 424 -37.1% ---------- ----- -------- ----- -------- Total other expense 26,185 1.8% 4,924 0.7% 21,261 431.8% ---------- ----- -------- ----- -------- Income before provision for income taxes 143,695 9.8% 74,571 10.5% 69,124 92.7% Provision for income taxes 56,760 3.9% 30,202 4.2% 26,558 87.9% ---------- ----- -------- ----- -------- Net income $ 86,935 5.9% $ 44,369 6.2% $ 42,566 95.9% ========== ===== ======== ===== ======== Net income per share: Basic $ 0.64 $ 0.41 $ 0.23 56.1% ========== ======== ======== Diluted $ 0.62 $ 0.39 $ 0.23 59.0% ========== ======== ======== Weighted average common shares outstanding: Basic 135,481 107,678 27,803 25.8% ========== ======== ======== Diluted 140,458 113,237 27,221 24.0% ========== ======== ======== The following unaudited table reconciles EBITDA to net income: Three Months Nine Months Ended September 30, Ended September 30, ------------------- -------------------- 2008 2007 2008 2007 -------- -------- --------- -------- (In thousands) Net income $ 25,068 $ 14,559 $ 86,935 $ 44,369 Depreciation and amortization 8,196 3,877 23,998 10,933 Interest expense, net 8,192 2,241 26,904 6,067 Provision for income taxes 16,697 9,259 56,760 30,202 -------- -------- --------- -------- Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 58,153 $ 29,936 $ 194,597 $ 91,571 ======== ======== ========= ======== EBITDA as a percentage of revenue 11.9% 12.3% 13.3% 12.9% We have typically provided a reconciliation of Net income to EBITDA as we believe it provides investors, security 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 security analysts, investors, and other interested parties in evaluating companies, many of which present EBITDA when reporting their results. The following unaudited table compares certain revenue categories: Three Months Nine Months Ended September 30, Ended September 30, --------------------- ------------------------ 2008 2007 2008 2007 --------- --------- ----------- ----------- (In thousands) (In thousands) Included in Consolidated Income Statements of LKQ Corporation Recycled and related products and services $ 174,679 $ 139,673 $ 488,966 $ 397,898 Aftermarket, other new and refurbished products 230,328 57,750 746,618 179,816 Other 85,694 46,072 231,417 134,377 --------- --------- ----------- ----------- $ 490,701 $ 243,495 $ 1,467,001 $ 712,091 ========= ========= =========== =========== Three Months Nine Months Ended September 30, Ended September 30, --------------------- ------------------------ 2008 2007 2008 2007 --------- --------- ----------- ----------- (In thousands) (In thousands) On a Proforma Basis Assuming Keystone Automotive Industries, Inc. included in 2007 Amounts Recycled and related products and services $ 174,679 $ 139,673 $ 488,966 $ 397,898 Aftermarket, other new and refurbished products 230,328 231,962 746,618 733,087 Other 85,694 46,072 231,417 134,377 --------- --------- ----------- ----------- $ 490,701 $ 417,707 $ 1,467,001 $ 1,265,362 ========= ========= =========== ===========