LKQ Corporation Announces 2004 Fourth Quarter Net Income Results Up 68%
CHICAGO--Feb. 2, 20054, 2005--LKQ Corporation today reported results for its fourth quarter and year ended December 31, 2004, with revenue of $113.8 million for the quarter and $424.8 million for the year. This represents growth over 2003 of 35% for the quarter and 30% for the full year. Net income was $5.0 million for the quarter and $20.6 million for the year, representing growth over 2003 of 68% and 41%, respectively."Our Company achieved an impressive revenue growth of 35% for the quarter and 30% for the year. Our organic revenue growth was 8% for the quarter and 11% for the year. While our net income for the full year increased by 41%, our EPS showed a 15% increase as we had a 23% increase in the number of shares outstanding. We made several excellent business acquisitions in 2004 as we continued our geographic and product line expansions," said Joe Holsten, President and Chief Executive Officer.
2004 Reported Results
For the fourth quarter of 2004, revenue increased 35% to $113.8 million compared with $84.2 million for the fourth quarter of 2003. Approximately $23.0 million in revenue growth for the quarter was from businesses we acquired. For the quarter, net income increased 68% to $5.0 million compared with $3.0 million for the fourth quarter of 2003. Diluted earnings per share was $0.22 for the quarter compared with $0.14 for the fourth quarter of 2003.
During the fourth quarter of 2004, the Company recorded the effect of certain infrequent items. The net effect of these items increased income before provision for income taxes by $228,000 and increased net income by $290,000 or $0.01 in diluted earnings per share. These items were related to non-taxable proceeds from a life insurance policy partially offset by the cost of accelerating the vesting of certain stock options.
For the year ended 2004, revenue increased 30% to $424.8 million compared with $328.0 million in 2003. Approximately $60.6 million in revenue growth for the year was from business acquisitions. Our consolidated aftermarket collision replacement parts revenue in 2004 was $43.0 million. For the year ended December 31, 2004, net income increased 41% to $20.6 million compared with $14.6 million in 2003. Diluted earnings per share was $0.92 for the year ended December 31, 2004 compared with $0.80 in 2003.
The weighted average diluted shares outstanding for the quarter was 22.5 million compared to 21.5 million for the fourth quarter of 2003 and for the year was 22.4 million compared to 18.3 million for full year 2003. The number of outstanding shares of common stock in 2004 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 2004 related to our business acquisitions. Other changes in weighted average diluted shares outstanding related primarily to the effect of the exercise of stock options and warrants.
First Quarter 2005 Acquisition
On February 1, 2005, we acquired for approximately $15.4 million, net of acquired cash, Bodymaster Auto Parts, Inc. and a related company that operate in the aftermarket collision automotive replacement parts business. This business operates from two locations near Philadelphia and Washington, D.C. The revenue of this business in 2004 was approximately $19.5 million.
Company 2005 Outlook
Our 2005 guidance below is consistent with our January 10, 2005 financial guidance announcement, and the $0.03 to $0.04 increase in diluted earnings per share effect of our recent Bodymaster aftermarket business acquisition on February 1, 2005.
We expect that full year 2005 revenue will be within a range of $523.0 million to $529.0 million and that organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2004 business acquisitions and our 2005 aftermarket business acquisition. We expect net income to be within a range of $24.6 million to $25.7 million and diluted earnings per share to be between $1.07 and $1.12.
For the first quarter of 2005 we expect revenue to be between $129.0 million and $131.0 million, net income to be between $6.6 million and $7.0 million, and diluted earnings per share to be between $0.29 and $0.31.
Our 2005 guidance does not include the impact from SFAS No. 123R, Accounting for Stock-Based Compensation, which becomes effective July 1, 2005. We estimate this recent accounting statement will have a negative effect on net income of the Company in the second half of 2005 by approximately $0.5 million or $0.02 per share based on anticipated plans for our stock options. Our 2005 guidance also does not include the effect of any future business acquisitions.
We estimate the weighted average diluted shares outstanding for the full year 2005 to be approximately 23.0 million and for the first quarter to be approximately 22.9 million. These share numbers are estimates and as such will be affected by factors such as any future stock issuances, the number of our options and warrants exercised in subsequent periods, and changes in our stock price.
Financial Tables To Follow
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
( In thousands, except per share data )
Three Months Ended Year Ended
December 31, December 31,
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenue $113,760 $84,228 $424,756 $327,974
Cost of goods sold 61,264 45,331 227,140 174,238
---------- ---------- ---------- ----------
Gross margin 52,496 38,897 197,616 153,736
Facility and warehouse
expenses 13,231 9,525 47,815 38,679
Distribution expenses 12,975 9,588 47,927 35,263
Selling, general and
administrative expenses 16,515 13,274 60,095 48,289
Depreciation and
amortization 1,855 1,376 6,872 5,446
---------- ---------- ---------- ----------
Operating income 7,920 5,134 34,907 26,059
Other (income) expense
Interest expense 422 228 1,551 2,074
Interest income (18) (37) (46) (51)
Other (income) expense,
net (426) (6) (455) (117)
---------- ---------- ---------- ----------
Total other expense (22) 185 1,050 1,906
---------- ---------- ---------- ----------
Income before provision
for income taxes 7,942 4,949 33,857 24,153
Provision for income taxes 2,909 1,951 13,284 9,577
---------- ---------- ---------- ----------
Net income $5,033 $2,998 $20,573 $14,576
========== ========== ========== ==========
Net income per share:
Basic $0.25 $0.16 $1.03 $0.90
========== ========== ========== ==========
Diluted $0.22 $0.14 $0.92 $0.80
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 20,308 19,064 20,052 16,268
========== ========== ========== ==========
Diluted 22,523 21,538 22,414 18,258
========== ========== ========== ==========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
Year Ended December 31,
-----------------------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,573 $14,576
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,872 5,446
Write-off of debt issuance costs 346 -
Deferred income taxes 2,614 2,328
Other adjustments 180 (71)
Changes in operating assets and
liabilities, net of effects from
purchase transactions:
Receivables (2,143) (3,893)
Inventory (5,175) 545
Other operating assets and liabilities 2,634 2,018
----------- -----------
Net cash provided by operating
activities 25,901 20,949
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (25,566) (8,936)
Expenditures for intangible assets (6) -
Purchase of investment securities (650) -
Cash used in acquisitions (61,601) (3,286)
----------- -----------
Net cash used in investing activities (87,823) (12,222)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock and
warrant exercises 4,942 59,974
Debt issuance costs (249) (131)
Net borrowings (repayments) of long-term
debt 42,759 (30,170)
Repurchase of common stock - (22,902)
----------- -----------
Net cash provided by financing activities 47,452 6,771
----------- -----------
Net increase (decrease) in cash and
equivalents (14,470) 15,498
Cash and equivalents, beginning of period 16,082 584
----------- -----------
Cash and equivalents, end of period $1,612 $16,082
=========== ===========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
( In thousands, except share data )
December 31,
2004 2003
----------- -----------
Assets
Current Assets:
Cash and equivalents $1,612 $16,082
Receivables, net 28,305 22,542
Inventory 74,150 54,003
Prepaid expenses and other
current assets 3,392 3,078
----------- -----------
Total Current Assets 107,459 95,705
Property and Equipment, net 70,730 43,893
Intangibles, net 100,364 50,846
Deferred Income Taxes 5,318 8,556
Other Assets 5,118 4,154
----------- -----------
Total Assets $288,989 $203,154
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $8,424 $6,831
Accrued expenses and other
current liabilities 21,536 13,137
Current portion of long-term
obligations 317 1,553
----------- -----------
Total Current Liabilities 30,277 21,521
Long-Term Obligations, Excluding
Current Portion 49,945 2,444
Other Noncurrent Liabilities 4,079 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,
20,565,413 and 19,476,831 shares
issued at December 31, 2004 and
2003, respectively. 206 195
Additional paid-in capital 201,484 191,602
Warrants 261 508
Retained earnings (Accumulated
deficit) 1,140 (19,433)
Accumulated other comprehensive
income 980 1,139
----------- -----------
Total Stockholders' Equity 204,071 174,011
----------- -----------
Total Liabilities and
Stockholders' Equity $288,989 $203,154
=========== ===========
The following table reconciles EBITDA to net income:
Three Months Year
Ended December 31, Ended December 31,
2004 2003 2004 2003
---------- ---------- ---------- ----------
(In thousands)
Net income $5,033 $2,998 $20,573 $14,576
Depreciation and
amortization 1,855 1,376 6,872 5,446
Interest, net 404 191 1,505 2,023
Provision for income
taxes 2,909 1,951 13,284 9,577
---------- ---------- ---------- ----------
Earnings before interest,
taxes, depreciation and
amortization (EBITDA) $10,201 $6,516 $42,234 $31,622
========== ========== ========== ==========
EBITDA as a percentage of
revenue 9.0% 7.7% 9.9% 9.6%