LKQ Corporation Announces Third Quarter 2004 Results
CHICAGO--Oct. 2, 20048, 2004--LKQ Corporation today reported results for its third quarter ended September 30, 2004, with revenue of $106.0 million and net income of $4.6 million, representing growth over the third quarter of 2003 of 27.0% and 29.7%, respectively."Our Company reported an impressive revenue growth of 27% for the third quarter, in spite of the adverse effects of the hurricanes on our business and a reported decrease in automotive claims by major insurance carriers. Our organic revenue growth was 8.3%, and revenue growth from acquisitions was 18.7%. While our net income increased by nearly 30%, our EPS showed a slight decline as we had a 39% increase in the number of shares outstanding. We were particularly pleased with the strong operating cash flows of the business, which improved 72% over Q3 of the prior year to $11.6 million, as we drew down the inventory of unprocessed vehicles, which we accumulated earlier in the year. Today, we are also announcing the acquisition of a major recycler in the Northwest United States that significantly adds to our asset base and facilitates our growth in the Oregon and Washington markets," said Joe Holsten, President and Chief Executive Officer.
Third Quarter 2004 Reported Results
For the third quarter of 2004, revenue increased 27.0% to $106.0 million compared with $83.5 million for the third quarter of 2003. Approximately $15.7 million in revenue growth was attributable to businesses we acquired in the first half of 2004. For the third quarter of 2004, net income increased 29.7% to $4.6 million compared with $3.5 million for the third quarter of 2003. Diluted earnings per share was $0.20 for the third quarter of 2004 compared with $0.22 for the third quarter of 2003; however, the decline in diluted earnings per share was primarily attributable to the increase in weighted average diluted shares outstanding by 6.3 million shares or 39.0%, partially offset by the increase in net income.
As previously disclosed in our press release dated October 14, 2004 and in the conference call held on the following day, our business in the third quarter was adversely affected by the severe weather in the Southeast U.S., a decrease in the number of accidents and higher cost of sales. However, we believe that the automobile damage caused by the weather in Florida and the other Eastern seaboard states should have a positive impact on our business in future quarters.
For the nine months ended September 30, 2004, revenue increased 27.6% to $311.0 million compared with $243.7 million for the same period in 2003. Organic revenue growth was 12.1%. For the nine months ended September 30, 2004, net income increased 34.2% to $15.5 million compared with $11.6 million for the same period in 2003. Diluted earnings per share was $0.69 for the nine months ended September 30, 2004 compared with $0.68 for the same period a year ago.
The weighted average diluted shares outstanding for the third quarter of 2004 was 22.5 million compared to 16.2 million for the third quarter of 2003 and for the nine months ended September 30, 2004 was 22.4 million compared to 17.1 million for the nine months ended September 30, 2003. The number of outstanding shares of common stock in 2004 has changed from 2003 due to several factors. In the first half of 2003, we repurchased 3.6 million shares from certain of our stockholders. In the fourth quarter of 2003, we issued 5.0 million shares in our initial public offering. We also issued approximately 187,000 shares in the first nine months of 2004 related to our business acquisitions. Other changes in weighted average diluted shares outstanding were related to the effect of changes in our stock price and the exercise of stock options and warrants.
Our Action Crash Parts acquisition, an aftermarket collision automotive replacement parts company we acquired in the first quarter of 2004, generated $29.0 million of revenue from the date of acquisition through September 30, 2004 with a related gross margin of 44.1%.
Fourth Quarter 2004 Acquisition
On October 26, 2004, we acquired for approximately $19 million net of acquired cash, Foster Auto Parts, Inc. and related companies, a recycled OEM automotive replacement parts business located in Portland, Oregon, which serves the Oregon and Washington market areas. This company has seven primary locations including three self-service facilities. The trailing annual revenue through September 30, 2004 of this business is approximately $28 million.
This business is expected to contribute less than $0.01 per share on a fully diluted basis to our 2004 results because the acquisition closed late in 2004.
Company 2004 Outlook
We continue to expect full year 2004 revenue to be within a range of $423 million to $427 million, net income to be within a range of $19.7 million to $20.8 million and diluted earnings per share to be between $0.88 and $0.92.
We estimate the weighted average diluted shares outstanding for the full year 2004 to be approximately 22.4 million and for the fourth quarter to be approximately 22.5 million. These share numbers are estimates and as such will be affected by factors such as stock issued in any future acquisitions we may do, the number of our options and warrants exercised in subsequent periods, and changes in our stock price.
Quarterly Conference Call
We will host an audio webcast to discuss our third quarter results along with 2004 earnings guidance on Thursday October 28, 2004 at 10:30 a.m. Eastern Time. The live audio webcast can be accessed on the internet at www.lkqcorp.com in the Investor Relations section. An online replay of the webcast will be available on the website approximately two hours after the live presentation and will remain on the site until November 28, 2004.
About LKQ Corporation
LKQ Corporation is the largest nationwide provider of recycled OEM automotive replacement parts and related services, with 45 sales and processing facilities, 7 self-service retail automotive parts facilities and 11 redistribution centers that reach most major markets in the United States. In addition, 3 facilities are located in Central America. Through our subsidiary Global Trade Alliance, Inc., which operates under the trade name Action Crash Parts, LKQ is one of the largest suppliers in the Midwest of aftermarket collision automotive replacement parts, operating in approximately 20 locations serving 15 states primarily east of the Mississippi River.
Forward Looking Statements
The statements in this press release that are not historical are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including 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 availability and cost of salvage vehicles;
-- 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 prices;
-- severity of weather and seasonality of weather patterns;
-- 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;
-- 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; and
-- other risks that are described in our Form 10-K filed March 24, 2004 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.
Financial Tables To Follow
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
( In thousands, except per share data )
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2004 2003 2004 2003
--------- -------- --------- ---------
Revenue $106,045 $83,473 $310,996 $243,746
Cost of goods sold 57,362 44,432 165,876 128,907
--------- -------- --------- ---------
Gross margin 48,683 39,041 145,120 114,839
Facility and warehouse expenses 12,055 9,973 34,584 29,154
Distribution expenses 12,525 8,893 34,952 25,675
Selling, general and
administrative expenses 14,333 12,288 43,580 35,015
Depreciation and amortization 1,795 1,325 5,017 4,070
--------- -------- --------- ---------
Operating income 7,975 6,562 26,987 20,925
Other (income) expense
Interest expense 318 644 1,129 1,846
Interest income (7) (3) (28) (14)
Other (income) expense, net 117 50 (29) (111)
--------- -------- --------- ---------
Total other expense 428 691 1,072 1,721
--------- -------- --------- ---------
Income before provision for
income taxes 7,547 5,871 25,915 19,204
Provision for income taxes 2,985 2,352 10,375 7,626
--------- -------- --------- ---------
Net income $4,562 $3,519 $15,540 $11,578
========= ======== ========= =========
Net income per share:
Basic $0.23 $0.25 $0.78 $0.76
========= ======== ========= =========
Diluted $0.20 $0.22 $0.69 $0.68
========= ======== ========= =========
Weighted average common shares
outstanding:
Basic 20,203 14,205 19,966 15,326
========= ======== ========= =========
Diluted 22,492 16,178 22,381 17,135
========= ======== ========= =========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
Nine Months Ended September 30,
-------------------------------
2004 2003
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,540 $11,578
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,017 4,070
Write-off of debt issuance costs 346 -
Deferred income taxes 2,614 1,356
Other adjustments 9 (32)
Changes in operating assets and
liabilities, net of effects
from purchase transactions:
Receivables (1,630) (2,368)
Inventory (1,544) 1,066
Other operating assets and
liabilities (167) 1,356
--------------- ---------------
Net cash provided by operating
activities 20,185 17,026
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment,
net (21,283) (5,340)
Expenditures for intangible assets (4) -
Purchase of investment securities (650) -
Cash used in acquisitions (43,514) (3,285)
--------------- ---------------
Net cash used in investing
activities (65,451) (8,625)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common
stock and warrant exercises 3,705 625
Debt issuance costs (249) (131)
Net borrowings of long-term debt 28,811 14,943
Repurchase of common stock - (22,902)
--------------- ---------------
Net cash provided by (used in)
financing activities 32,267 (7,465)
--------------- ---------------
Net increase (decrease) in cash and
equivalents (12,999) 936
Cash and equivalents, beginning of
period 16,082 584
--------------- ---------------
Cash and equivalents, end of period $3,083 $1,520
=============== ===============
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
( In thousands, except share data )
September 30, December 31,
2004 2003
--------------- ---------------
Assets
Current Assets:
Cash and equivalents $3,083 $16,082
Receivables, net 26,411 22,542
Inventory 64,657 54,003
Prepaid expenses and other current
assets 2,694 3,078
--------------- ---------------
Total Current Assets 96,845 95,705
Property and Equipment, net 66,704 43,893
Intangibles, net 88,912 50,846
Deferred Income Taxes 5,821 8,556
Other Assets 4,969 4,154
--------------- ---------------
Total Assets $263,251 $203,154
=============== ===============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $7,681 $6,831
Accrued expenses and other current
liabilities 17,277 13,137
Current portion of long-term
obligations 313 1,553
--------------- ---------------
Total Current Liabilities 25,271 21,521
Long-Term Obligations, Excluding
Current Portion 36,001 2,444
Other Noncurrent Liabilities 4,182 4,561
Redeemable Common Stock, $0.01 par
value, 50,000 shares issued 617 617
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value,
500,000,000 shares authorized,
20,187,553 and 19,476,831
shares issued at
September 30, 2004 and
December 31, 2003, respectively. 202 195
Additional paid-in capital 199,635 191,602
Warrants 318 508
Retained earnings (Accumulated
deficit) (3,893) (19,433)
Accumulated other comprehensive
income 918 1,139
--------------- ---------------
Total Stockholders' Equity 197,180 174,011
--------------- ---------------
Total Liabilities and
Stockholders' Equity $263,251 $203,154
=============== ===============
The following table reconciles EBITDA to net income:
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
--------- --------- --------- ---------
(In thousands)
Net income $4,562 $3,519 $15,540 $11,578
Depreciation and amortization 1,795 1,325 5,017 4,070
Interest, net 311 641 1,101 1,832
Provision for income taxes 2,985 2,352 10,375 7,626
--------- -------- --------- ---------
Earnings before interest,
taxes, depreciation
and amortization (EBITDA) $9,653 $7,837 $32,033 $25,106
========= ======== ========= =========
EBITDA as a percentage of
revenue 9.1% 9.4% 10.3% 10.3%