LKQ Corporation Announces Results for Third Quarter 2015


  • Revenue growth of 6.4% to $1.83 billion; 10.2% on a constant currency basis
  • Organic revenue growth for parts and services of 6.8%
  • Third quarter 2015 diluted EPS of $0.33; adjusted EPS of $0.34
  • Net income growth of 10.7% to $101.3 million
  • Annual guidance updated

CHICAGO, Oct. 29, 2015 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported revenue for the third quarter of 2015 of $1.83 billion, an increase of 6.4% as compared to $1.72 billion in the third quarter of 2014. On a constant currency basis, revenue for the third quarter of 2015 grew by 10.2% compared to the third quarter of 2014. Net income for the third quarter of 2015 was $101.3 million, an increase of 10.7% as compared to $91.5 million for the same period of 2014. Diluted earnings per share of $0.33 for the third quarter ended September 30, 2015 increased 10.0% from $0.30 for the third quarter of 2014. The Company noted that adjusted diluted earnings per share for the third quarter 2015 would have been $0.34 compared to $0.31 for the third quarter of 2014 after adjusting each of the periods for net losses resulting from restructuring and acquisition related expenses, and the change in fair value of contingent consideration liabilities.

"We are very pleased with our operating results during the quarter even though the headwinds related to lower scrap prices and exchange rate fluctuations which we faced in the first half of 2015 continued in the third quarter," stated Robert Wagman, President and Chief Executive Officer of LKQ Corporation. “I am particularly pleased with the 14.9% revenue growth in parts and services on a constant currency basis. Our European segment showed continued improvement, with its EBITDA margins for the quarter increasing 190 basis points over the prior year. Organic revenue growth for parts and services was 6.8% on a global basis, including a solid 10.0% for our Specialty segment.”

On a nine month year-to-date basis, revenue was $5.44 billion, an increase of 7.7% from $5.06 billion for the comparable period of 2014. Parts and services organic revenue growth for the first nine months of 2015 was 7.3%. Net income for the first nine months of 2015 was $328.2 million, a 9.0% increase compared to $301.1 million for the first nine months of 2014. Diluted earnings per share was $1.07 for the first nine months of 2015, as compared to $0.98 for the comparable period of 2014, and adjusted diluted earnings per share was $1.10 for the first nine months of 2015 compared to $1.01 in 2014.

Balance Sheet and Liquidity

Cash flow from operations totaled $491.3 million on a nine month year-to-date basis, which after using approximately $253.8 million to finance acquisitions, capital expenditures and other long term assets, allowed the Company to reduce its outstanding debt compared to the same period of 2014. As of September 30, 2015, LKQ’s balance sheet reflected cash and equivalents of $137.1 million and outstanding debt of $1.6 billion. Total availability under the Company’s credit facilities at September 30, 2015 was approximately $1.3 billion.

Other Events

In addition to closing the previously announced acquisitions of PartsChannel, Inc.; The Coast Distribution System, Inc.; and eight self-service yards from Ecology Auto Parts, Inc. during the third quarter of 2015, LKQ acquired four distributors of aftermarket automotive products in the Netherlands. LKQ’s European operations opened four Euro Car Parts branches in the third quarter of 2015.

“Our acquisition of the Netherlands based distributors largely completes our efforts of converting a portion of Sator’s network to a two-step model and achieves our goal of operating over 80 branches in the market. Once fully integrated, this branch network should strengthen Sator’s long-term prospects and margin profile and position the business well for our expected entry into alternative collision parts,” stated Mr. Wagman.

Company Outlook

The Company updated its guidance for 2015.

 Updated GuidancePrior Guidance
Organic revenue growth (parts & services)7.0% to 7.5%7.0% to 8.5%
Adjusted net income$428 million to $442 million$425 million to $445 million
Adjusted diluted EPS$1.39 to $1.44$1.38 to $1.45
Cash flow from operations$525 million to $550 millionApproximately $450 million
Capital expenditures$135 million to $150 million$150 million to $180 million

Guidance for 2015 is based on current conditions (including 2015 acquisitions completed to date) and excludes the impact of restructuring and acquisition related expenses, gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities), and capital spending related to future business acquisitions.

Conference Call Details

LKQ will host a conference call and webcast on October 29, 2015 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.

Webcast and Presentation Details

The audio webcast and accompanying slide presentation can be accessed 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: 13621871#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through November 29, 2015. Please allow approximately two hours after the live presentation before attempting to access the replay.

About LKQ Corporation

LKQ Corporation (www.lkqcorp.com) is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles.  LKQ has operations in North America, the United Kingdom, the Netherlands, Belgium, France, Scandinavia, Australia and Taiwan. LKQ offers its customers a broad range of replacement systems, components, equipment and parts to repair and accessorize automobiles, trucks, and recreational and performance vehicles.

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 outlook or guidance, 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 following (not necessarily in order of importance):

  • Changes in economic and political activity in the U.S. and other countries in which we are located or do business, 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 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;
  • inaccuracies in the data relating to our industry 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, including the pricing programs and other initiatives of original equipment manufacturers in an attempt to increase their market share;
  • our ability to satisfy our debt obligations and 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 the prices of fuel, scrap metal and other commodities;
  • 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;
  • restrictions or prohibitions on selling certain aftermarket products to the extent original equipment manufacturers seek and obtain more design patents than they have in the past and are successful in asserting infringement of these patents and defending their validity;
  • changes to our business relationships with insurance companies or changes by insurance companies to their business practices relating to 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, pound sterling and euro versus other currencies;
  • 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;
  • additional unionization efforts, new collective bargaining agreements, and work stoppages;
  • higher costs and  the resulting potential inability to service our customers to the extent that our suppliers decide to discontinue business relationships with us; and
  • other risks that are described in our Form 10-K filed March 2, 2015 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 Condensed Consolidated Statements of Income 
( In thousands, except per share data ) 
           
           
   Three Months Ended Nine Months Ended 
   September 30, September 30, 
    2015   2014   2015   2014  
           
Revenue $  1,831,732  $  1,721,024  $  5,443,714  $  5,055,933  
           
Cost of goods sold    1,118,953     1,056,613     3,307,512     3,068,579  
           
   Gross margin    712,779     664,411     2,136,202     1,987,354  
           
Facility and warehouse expenses    143,918     133,330     412,954     387,995  
           
Distribution expenses    158,768     148,572     450,521     432,445  
           
Selling, general and administrative expenses    207,887     192,229     616,924     563,344  
           
Restructuring and acquisition related expenses    4,578     3,594     12,729     12,816  
           
Depreciation and amortization    30,883     30,498     90,118     87,136  
           
 Operating income    166,745     156,188     552,956     503,618  
           
Other expense (income):         
 Interest expense, net    14,722     16,394     44,250     48,140  
 Loss on debt extinguishment    -      -      -      324  
 Change in fair value of contingent consideration liabilities    89     12     365     (2,000) 
 Other income, net    (3,017)    (18)    (1,277)    (1,021) 
           
 Total other expense, net    11,794     16,388     43,338     45,443  
           
 Income before provision for income taxes    154,951     139,800     509,618     458,175  
           
Provision for income taxes     52,475     47,564     177,255     155,926  
           
Equity in earnings of unconsolidated subsidiaries    (1,130)    (721)    (4,200)    (1,199) 
           
 Net income $  101,346  $  91,515  $  328,163  $  301,050  
           
           
Earnings per share:         
 Basic $  0.33  $  0.30  $  1.08  $  1.00  
           
 Diluted $  0.33  $  0.30  $  1.07  $  0.98  
           
           
Weighted average common shares outstanding:         
 Basic    305,059     302,724     304,453     302,058  
           
 Diluted    307,728     306,206     307,326     305,857  
           


  
LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Condensed Consolidated Balance Sheets 
( In thousands, except share and per share data ) 
        
        
    September 30, December 31, 
     2015   2014  
  Assets     
        
Current Assets:     
   Cash and equivalents $  137,086  $  114,605  
 Receivables, net    626,780     601,422  
 Inventory    1,464,627     1,433,847  
 Deferred income taxes    77,401     81,744  
 Prepaid expenses and other current assets    81,249     85,799  
    Total Current Assets    2,387,143     2,317,417  
        
Property and Equipment, net    652,780     629,987  
Intangibles    2,567,724     2,534,420  
Other Assets    96,385     91,668  
        
    Total Assets $  5,704,032  $  5,573,492  
        
  Liabilities and Stockholders' Equity     
        
Current Liabilities:     
 Accounts payable $  416,341  $  400,202  
 Accrued expenses    280,086     250,164  
 Other current liabilities    64,097     36,815  
 Current portion of long-term obligations     37,174     63,515  
        
    Total Current Liabilities    797,698     750,696  
        
Long-Term Obligations, Excluding Current Portion    1,570,056     1,801,047  
Deferred Income Taxes    175,310     181,662  
Other Noncurrent Liabilities    124,255     119,430  
        
Commitments and Contingencies     
        
Stockholders' Equity:     
 Common stock, $0.01 par value, 1,000,000,000 shares     
  authorized, 305,473,459 and 303,452,655 shares issued     
  and outstanding at September 30, 2015 and      
  December 31, 2014, respectively    3,054     3,035  
 Additional paid-in capital    1,084,423     1,054,686  
 Retained earnings    2,031,324     1,703,161  
 Accumulated other comprehensive loss    (82,088)    (40,225) 
        
    Total Stockholders' Equity    3,036,713     2,720,657  
        
    Total Liabilities and Stockholders' Equity $  5,704,032  $  5,573,492  
        


  
LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Condensed Consolidated Statements of Cash Flows 
( In thousands ) 
      
    Nine Months Ended 
    September 30, 
     2015   2014  
        
CASH FLOWS FROM OPERATING ACTIVITIES:     
   Net income $  328,163  $  301,050  
 Adjustments to reconcile net income to net cash     
  provided by operating activities:
     
    Depreciation and amortization    94,688     90,647  
  Stock-based compensation expense    16,291     16,967  
  Excess tax benefit from stock-based payments    (13,672)    (14,455) 
  Other    6,580     3,440  
  Changes in operating assets and liabilities, net of     
    effects from acquisitions:     
    Receivables    (6,304)    (69,680) 
    Inventory    22,345     (55,266) 
    Prepaid income taxes/income taxes payable    39,639     20,858  
    Accounts payable    (11,139)    1,433  
    Other operating assets and liabilities    14,732     27,648  
        
       Net cash provided by operating activities    491,323     322,642  
        
CASH FLOWS FROM INVESTING ACTIVITIES:     
 Purchases of property and equipment    (99,573)    (100,191) 
 Acquisitions, net of cash acquired    (157,357)    (650,614) 
 Other investing activities, net    3,174     934  
        
  Net cash used in investing activities    (253,756)    (749,871) 
        
CASH FLOWS FROM FINANCING ACTIVITIES:     
 Proceeds from exercise of stock options    7,534     6,520  
 Excess tax benefit from stock-based payments    13,672     14,455  
 Taxes paid related to net share settlements of stock-based     
   compensation awards    (7,423)    -   
 Net (payments) borrowings of long-term and other obligations   (226,728)    509,316  
 Other financing activities, net    -      (6,881) 
        
  Net cash (used in) provided by financing activities    (212,945)    523,410  
        
Effect of exchange rate changes on cash and equivalents    (2,141)    (2,023) 
        
Net increase in cash and equivalents    22,481     94,158  
        
Cash and equivalents, beginning of period    114,605     150,488  
        
Cash and equivalents, end of period $  137,086  $  244,646  
        


  
LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Supplementary Data 
( In thousands, except per share data ) 
               
               
    Three Months Ended September 30, 
               
Operating Highlights  2015   2014     
      % of   % of    
      Revenue (1)  Revenue (1)Change% Change 
               
 Revenue $  1,831,732   100.0% $  1,721,024   100.0% $  110,708  6.4% 
               
 Cost of goods sold    1,118,953   61.1%    1,056,613   61.4%    62,340  5.9% 
               
  Gross margin    712,779   38.9%    664,411   38.6%    48,368  7.3% 
               
 Facility and warehouse expenses    143,918   7.9%    133,330   7.7%    10,588  7.9% 
               
 Distribution expenses    158,768   8.7%    148,572   8.6%    10,196  6.9% 
               
 Selling, general and administrative expenses    207,887   11.3%    192,229   11.2%    15,658  8.1% 
               
 Restructuring and acquisition related expenses    4,578   0.2%    3,594   0.2%    984  27.4% 
               
 Depreciation and amortization    30,883   1.7%    30,498   1.8%    385  1.3% 
               
  Operating income    166,745   9.1%    156,188   9.1%    10,557  6.8% 
               
 Other expense (income):            
  Interest expense, net    14,722   0.8%    16,394   1.0%    (1,672) (10.2%) 
  Loss on debt extinguishment    -    0.0%    -    0.0%    -   n/m  
  Change in fair value of contingent consideration liabilities    89   0.0%    12   0.0%    77  n/m  
  Other income, net    (3,017)  (0.2%)    (18)  (0.0%)    (2,999) n/m  
               
  Total other expense, net    11,794   0.6%    16,388   1.0%    (4,594) (28.0%) 
               
  Income before provision for income taxes    154,951   8.5%    139,800   8.1%    15,151  10.8% 
               
 Provision for income taxes     52,475   2.9%    47,564   2.8%    4,911  10.3% 
               
 Equity in earnings of unconsolidated subsidiaries    (1,130)  (0.1%)    (721)  (0.0%)    (409) 56.7% 
               
  Net income $  101,346   5.5% $  91,515   5.3% $  9,831  10.7% 
               
               
 Earnings per share:            
  Basic $  0.33    $  0.30    $  0.03  10.0% 
               
  Diluted $  0.33    $  0.30    $  0.03  10.0% 
               
               
 Weighted average common shares outstanding:            
  Basic    305,059       302,724       2,335  0.8% 
               
  Diluted    307,728       306,206       1,522  0.5% 
               
               
  (1)The sum of the individual percentage of revenue components may not equal the total due to rounding. 
               

 

  
LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Supplementary Data 
( In thousands, except per share data ) 
               
               
    Nine Months Ended September 30, 
               
Operating Highlights  2015   2014     
      % of   % of    
      Revenue (1)   Revenue (1) Change% Change 
               
 Revenue $  5,443,714   100.0% $  5,055,933   100.0% $  387,781  7.7% 
               
 Cost of goods sold    3,307,512   60.8%    3,068,579   60.7%    238,933  7.8% 
               
  Gross margin    2,136,202   39.2%    1,987,354   39.3%    148,848  7.5% 
               
 Facility and warehouse expenses    412,954   7.6%    387,995   7.7%    24,959  6.4% 
               
 Distribution expenses    450,521   8.3%    432,445   8.6%    18,076  4.2% 
               
 Selling, general and administrative expenses    616,924   11.3%    563,344   11.1%    53,580  9.5% 
               
 Restructuring and acquisition related expenses    12,729   0.2%    12,816   0.3%    (87) (0.7%) 
               
 Depreciation and amortization    90,118   1.7%    87,136   1.7%    2,982  3.4% 
               
  Operating income    552,956   10.2%    503,618   10.0%    49,338  9.8% 
               
 Other expense (income):            
  Interest expense, net    44,250   0.8%    48,140   1.0%    (3,890) (8.1%) 
  Loss on debt extinguishment    -    0.0%    324   0.0%    (324) (100.0%) 
  Change in fair value of contingent consideration liabilities    365   0.0%    (2,000)  (0.0%)    2,365  n/m  
  Other income, net    (1,277)  (0.0%)    (1,021)  (0.0%)    (256) 25.1% 
               
  Total other expense, net    43,338   0.8%    45,443   0.9%    (2,105) (4.6%) 
               
  Income before provision for income taxes    509,618   9.4%    458,175   9.1%    51,443  11.2% 
               
 Provision for income taxes     177,255   3.3%    155,926   3.1%    21,329  13.7% 
               
 Equity in earnings of unconsolidated subsidiaries    (4,200)  (0.1%)    (1,199)  (0.0%)    (3,001) n/m  
               
  Net income $  328,163   6.0% $  301,050   6.0% $  27,113  9.0% 
               
               
 Earnings per share:            
  Basic $  1.08    $  1.00    $  0.08  8.0% 
               
  Diluted $  1.07    $  0.98    $  0.09  9.2% 
               
               
 Weighted average common shares outstanding:            
  Basic    304,453       302,058       2,395  0.8% 
               
  Diluted    307,326       305,857       1,469  0.5% 
               
  (1)The sum of the individual percentage of revenue components may not equal the total due to rounding.      
           

 

      
The following unaudited tables compare certain third party revenue categories:
 
           
   Three Months Ended     
   September 30,     
           
    2015   2014  Change % Change 
               
   (In thousands)     
Included in Unaudited Condensed Consolidated        
Statements of Income of LKQ Corporation        
           
North America $  914,956  $  847,626  $  67,330   7.9% 
Europe     510,279     495,300     14,979   3.0% 
Specialty    283,456     200,412     83,044   41.4% 
Parts and services   1,708,691     1,543,338     165,353   10.7% 
Other      123,041     177,686     (54,645)  (30.8%) 
Total  $  1,831,732  $  1,721,024  $  110,708   6.4% 
           
Revenue changes by category for the three months ended September 30, 2015 vs. 2014:
 
           
         
   Revenue Change Attributable to:   
   Organic Acquisition Foreign Exchange % Change (1) 
           
North America  5.9%  3.3%  (1.3%)  7.9% 
Europe   7.2%  5.7%  (9.9%)  3.0% 
Specialty  10.0%  33.9%  (2.5%)  41.4% 
Parts and services 6.8%  8.1%  (4.2%)  10.7% 
Other    (33.7%)  3.4%  (0.4%)  (30.8%) 
Total   2.6%  7.6%  (3.8%)  6.4% 
           
           
   Nine Months Ended     
   September 30,     
           
    2015   2014  Change % Change 
               
   (In thousands)     
Included in Unaudited Condensed Consolidated        
Statements of Income of LKQ Corporation        
           
North America $  2,745,448  $  2,579,598  $  165,850   6.4% 
Europe     1,505,106     1,378,975     126,131   9.1% 
Specialty    807,401     595,179     212,222   35.7% 
Parts and services   5,057,955     4,553,752     504,203   11.1% 
Other      385,759     502,181     (116,422)  (23.2%) 
Total  $  5,443,714  $  5,055,933  $  387,781   7.7% 
           
Revenue changes by category for the nine months ended September 30, 2015 vs. 2014:
 
           
         
   Revenue Change Attributable to:   
   Organic Acquisition Foreign Exchange % Change (1) 
           
North America  5.6%  1.9%  (1.0%)  6.4% 
Europe   10.2%  9.7%  (10.8%)  9.1% 
Specialty  7.7%  30.0%  (2.0%)  35.7% 
Parts and services 7.3%  7.9%  (4.1%)  11.1% 
Other    (24.3%)  1.5%  (0.4%)  (23.2%) 
Total   4.1%  7.3%  (3.7%)  7.7% 
           
(1) The sum of the individual revenue change components may not equal the total percentage change due to rounding.  
           


        
The following unaudited table reconciles Net Income to EBITDA: 
 
            
    Three Months Ended Nine Months Ended 
    September 30, September 30, 
            
     2015   2014   2015   2014  
                    
    (In thousands) 
            
Net income  $  101,346  $  91,515  $  328,163  $  301,050  
Depreciation and amortization     32,974     31,754     94,688   90,647  
Interest expense, net     14,722     16,394     44,250     48,140  
Loss on debt extinguishment (1)     -      -      -      324  
Provision for income taxes      52,475     47,564     177,255   155,926  
            
Earnings before interest, taxes, depreciation          
  and amortization (EBITDA)   $  201,517  $  187,227  $  644,356  $  596,087  
            
 EBITDA as a percentage of revenue    11.0%  10.9%  11.8%  11.8% 
            
(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 table compares revenue and Segment EBITDA by reportable segment:         
                
                
   Three Months Ended Nine Months Ended  
   September 30, September 30,  
                
    2015
  2014
  2015
  2014
  
(In thousands)   % of Revenue  % of Revenue  % of Revenue  % of Revenue  
                
Revenue               
North America  $  1,037,290   $  1,024,967   $  3,128,614   $  3,080,356    
Europe     511,146      495,776      1,508,395      1,380,663    
Specialty     284,306      201,007      809,858      596,430    
Eliminations     (1,010)     (726)     (3,153)     (1,516)   
                
  Total revenue  $  1,831,732   $  1,721,024   $  5,443,714   $  5,055,933    
                
Segment EBITDA               
North America  $  128,506  12.4% $  131,851  12.9% $  416,774  13.3% $  415,139  13.5%  
Europe     52,733  10.3%    41,726  8.4%    153,199  10.2%    128,826  9.3%  
Specialty     26,075  9.2%    17,977  8.9%    91,677  11.3%    64,137  10.8%  
Eliminations     -       -       -       -     
                
  Total Segment EBITDA     207,314  11.3%    191,554  11.1%    661,650  12.2%    608,102  12.0%  
                
Deduct:               
Restructuring and acquisition related expenses     4,578      3,594      12,729      12,816    
Change in fair value of contingent consideration liabilities     89      12      365      (2,000)   
                
Add:               
Equity in earnings of unconsolidated subsidiaries     (1,130)     (721)     (4,200)     (1,199)   
                
Earnings before interest, taxes, depreciation               
 and amortization (EBITDA)   $  201,517  11.0% $  187,227  10.9% $  644,356  11.8% $  596,087  11.8%  
                
                
The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. 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.   
                

 

   
The following unaudited table reconciles Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, respectively:  
            
            
            
   Three Months Ended Nine Months Ended  
   September 30, September 30,  
            
    2015   2014   2015   2014   
(In thousands, except per share data)           
            
Net income  $  101,346  $  91,515  $  328,163  $  301,050   
            
Adjustments:           
            
Restructuring and acquisition related expenses, net of tax     3,016     2,372     8,306     8,459   
Loss on debt extinguishment, net of tax     -      -      -      214   
Change in fair value of contingent consideration liabilities     89     12     365     (2,000)  
            
Adjusted net income  $  104,451  $  93,899  $  336,834  $  307,723   
            
            
Weighted average diluted common shares outstanding     307,728     306,206     307,326     305,857   
            
Diluted earnings per share  $  0.33  $  0.30  $  1.07  $  0.98   
            
Adjusted diluted earnings per share  $  0.34  $  0.31  $  1.10  $  1.01   
            
            
We provide a reconciliation of Net Income and Diluted Earnings per Share ("EPS") to Adjusted Net Income and Adjusted Diluted EPS 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 by excluding certain items that do not directly relate to our core business operations. Adjusted Net Income and Adjusted Diluted EPS are presented as supplemental measures of our performance that management believes are useful for evaluating and comparing our operating activities across reporting periods. In 2015 and 2014, the Company defines Adjusted Net Income and Adjusted Diluted EPS as Net Income and Diluted EPS adjusted to eliminate the impact of restructuring and acquisition related expenses, net of tax, loss on debt extinguishment, net of tax, and the change in fair value of contingent consideration liabilities. Adjusted Net Income and Adjusted Diluted EPS should not be construed as alternatives to Net Income or Diluted EPS as determined in accordance with accounting principles generally accepted in the United States. In addition, because not all companies use identical calculations, this presentation of Adjusted Net Income and Adjusted Diluted EPS may not be comparable to similarly titled measures of other companies.  
            

 

 
The following unaudited table reconciles consolidated growth for Parts & Services Revenue and Total Revenue to constant currency revenue growth for the same measure:
        
  Three Months Ended   
  September 30, 2015   
  Parts & Services Total   
Revenue growth as reported  10.7%  6.4%   
Less: Currency impact  (4.2%)  (3.8%)   
Revenue growth at constant currency  14.9%  10.2%   
        
        
We evaluate growth in our operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our growth, consistent with how we evaluate our performance. Constant currency revenue results are calculated by translating prior year revenue in local currency using the current year's currency conversion rate. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Our use of this term may vary from the use of similarly-titled measures by other issuers due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
 

            

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