LKQ Corporation Announces 2005 Second Quarter Net Income Results Up 42.7% -- Increases Full Year Guidance
CHICAGO--July 28, 2005--LKQ Corporation today reported results for its second quarter ended June 30, 2005, with revenue of $136.0 million, net income of $7.6 million and diluted earnings per share of $0.33."For the second quarter we exceeded our previously issued revenue and earnings estimates. We once again achieved a record revenue quarter with impressive revenue growth of approximately 30%. This included very strong organic revenue growth of almost 15%. Our net income increased by close to 43% and our earnings per share increased by just over 37%. We were particularly pleased with the expansion of our operating income margin to 10.2% compared to 8.7% in the second quarter of 2004, which was largely attributable to improved gross margin and gaining leverage over our operating costs. We continue to see our 2005 acquisitions perform in line with our expectations," said Joe Holsten, President and Chief Executive Officer.
2005 Reported Results
For the second quarter of 2005, revenue increased 29.7% to $136.0 million compared with $104.9 million for the second quarter of 2004. Approximately $15.8 million in revenue growth for the quarter was from businesses we acquired. For the quarter, net income increased 42.7% to $7.6 million compared with $5.3 million for the second quarter of 2004. Diluted earnings per share was $0.33 for the quarter compared with $0.24 for the second quarter of 2004.
For the six months ended June 30, 2005, revenue increased 31.7% to $269.8 million compared with $205.0 million for the same period in 2004. This included organic revenue growth of 12.9%. For the six months ended June 30, 2005, net income increased 46.0% to $16.0 million compared with $11.0 million for the same period in 2004. Diluted earnings per share was $0.69 for the six months ended June 30, 2005 compared with $0.49 for the same period a year ago.
Our consolidated aftermarket collision replacement parts revenue for the quarter was $19.4 million and for the six months ended June 30, 2005 was $39.7 million.
The weighted average diluted shares outstanding for the quarter was 23.4 million compared to 22.5 million for the second quarter of 2004 and for the six months ended June 30, 2005 was 23.2 million compared to 22.3 million for the six months ended June 30, 2004. The number of weighted average diluted shares of common stock in 2005 changed from 2004 due primarily to the effect of stock options and warrants and the increase in our stock price.
2005 Acquisitions
On February 1, 2005, we acquired for approximately $15.5 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.
On April 1, 2005, we acquired A&R Auto Parts, Inc., a recycled OEM automotive replacement parts company. This business is located between Spartanburg and Greenville, South Carolina. A&R's revenue for 2004 was approximately $11.0 million.
Company 2005 Outlook
We expect that full year 2005 revenue will be within a range of $539.0 million to $542.0 million and that organic revenue growth will be in the low double digits, with the balance of the growth from the full year impact of 2004 business acquisitions and the 2005 business acquisitions we have completed to date. We expect net income to be within a range of $28.1 million to $28.8 million and diluted earnings per share to be between $1.19 and $1.22.
For the third quarter of 2005 we expect revenue to be between $134.0 million and $135.5 million, net income to be between $5.9 million and $6.3 million, and diluted earnings per share to be between $0.25 and $0.27.
Our 2005 guidance does not include the impact from SFAS No. 123R, Share-Based Payment, which is now scheduled to become effective in our fiscal year beginning January 1, 2006. 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 23.6 million and for the third quarter to be approximately 23.7 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 granted and exercised in subsequent periods, and changes in our stock price.
Quarterly Conference Call
We will host an audio webcast to discuss our second quarter results on Thursday, July 28, 2005 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 August 28, 2005.
About LKQ Corporation
LKQ Corporation is the largest nationwide provider of recycled OEM automotive replacement parts and related services, with 47 sales and processing facilities, 9 self-service retail automotive parts facilities and 13 redistribution centers that reach most major markets in the United States. In addition, we have 3 recycled OEM facilities in Central America. We also are the second largest nationwide provider of aftermarket collision automotive replacement parts, operating in approximately 30 locations, 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 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 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; and
-- other risks that are described in our Form 10-K filed March 8, 2005 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 Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenue $136,023 $104,878 $269,830 $204,951
Cost of goods sold 71,531 55,437 142,702 108,514
--------- --------- --------- ---------
Gross margin 64,492 49,441 127,128 96,437
Facility and warehouse
expenses 14,502 11,801 28,956 22,529
Distribution expenses 15,398 11,733 29,493 22,427
Selling, general and
administrative expenses 18,719 15,040 36,444 29,247
Depreciation and amortization 2,063 1,717 4,029 3,222
--------- --------- --------- ---------
Operating income 13,810 9,150 28,206 19,012
Other (income) expense
Interest expense 735 275 1,307 812
Interest income (40) (4) (58) (22)
Other (income) expense,
net (78) (59) (240) (146)
--------- --------- --------- ---------
Total other expense 617 212 1,009 644
--------- --------- --------- ---------
Income before provision
for income taxes 13,193 8,938 27,197 18,368
Provision for income taxes 5,566 3,595 11,169 7,390
--------- --------- --------- ---------
Net income $ 7,627 $ 5,343 $ 16,028 $ 10,978
========= ========= ========= =========
Net income per share:
Basic $ 0.37 $ 0.27 $ 0.77 $ 0.55
========= ========= ========= =========
Diluted $ 0.33 $ 0.24 $ 0.69 $ 0.49
========= ========= ========= =========
Weighted average common
shares outstanding:
Basic 20,855 20,051 20,744 19,847
========= ========= ========= =========
Diluted 23,386 22,464 23,161 22,322
========= ========= ========= =========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
-------------------
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,028 $ 10,978
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,029 3,222
Deferred income taxes 831 1,891
Writeoff of debt issuance costs - 346
(Gain) loss on sale of property and equipment (214) 38
Other adjustments 42 (97)
Changes in operating assets and liabilities,
net of effects from purchase transactions:
Receivables (1,893) (1,275)
Inventory (2,004) (4,977)
Other operating assets and liabilities 3,631 (1,497)
--------- ---------
Net cash provided by operating activities 20,450 8,629
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,471) (16,160)
Proceeds from sale of property and equipment 738 34
Expenditures for intangible assets (3) (3)
Purchase of investment securities - (650)
Decrease in restricted cash in escrow 132 -
Cash used in acquisitions (24,037) (43,443)
--------- ---------
Net cash used in investing activities (29,641) (60,222)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock and
warrant exercises 4,414 2,863
Debt issuance costs (300) (249)
Net borrowings of long-term debt 5,780 34,860
--------- ---------
Net cash provided by financing activities 9,894 37,474
--------- ---------
Net increase (decrease) in cash and equivalents 703 (14,119)
Cash and equivalents, beginning of period 1,612 16,082
--------- ---------
Cash and equivalents, end of period $ 2,315 $ 1,963
========= =========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
(In thousands, except share data)
June 30, December 31,
2005 2004
------------ ------------
Assets
Current Assets:
Cash and equivalents $ 2,315 $ 1,612
Restricted cash 467 -
Receivables, net 31,633 28,305
Inventory 81,446 74,150
Prepaid expenses and other current assets 3,452 3,375
------------ ------------
Total Current Assets 119,313 107,442
Property and Equipment, net 74,323 70,730
Intangibles, net 118,327 100,364
Deferred Income Taxes 3,501 4,621
Other Assets 6,302 5,118
------------ ------------
Total Assets $ 321,766 $ 288,275
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 9,364 $ 8,424
Accrued expenses and other current
liabilities 24,664 20,822
Current portion of long-term obligations 276 317
------------ ------------
Total Current Liabilities 34,304 29,563
Long-Term Obligations, Excluding Current
Portion 56,269 49,945
Other Noncurrent Liabilities 4,016 4,079
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, 21,026,802 and
20,565,413 shares issued at June 30, 2005
and December 31, 2004, respectively. 210 206
Additional paid-in capital 207,863 201,484
Warrants 259 261
Retained earnings 17,168 1,140
Accumulated other comprehensive income 1,060 980
------------ ------------
Total Stockholders' Equity 226,560 204,071
------------ ------------
Total Liabilities and Stockholders'
Equity $ 321,766 $ 288,275
============ ============
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
($ in thousands)
Three Months Ended June 30,
----------------------------------------------------
Operating
Highlights 2005 2004
----------------- ----------------- -----------------
% of % of %
Revenue Revenue $ Growth Growth
Revenue $136,023 100.0% $104,878 100.0% $ 31,145 29.7%
Cost of goods
sold 71,531 52.6% 55,437 52.9% 16,094 29.0%
--------- ------- --------- ------- ---------
Gross margin 64,492 47.4% 49,441 47.1% 15,051 30.4%
Facility and
warehouse
expenses 14,502 10.7% 11,801 11.3% 2,701 22.9%
Distribution
expenses 15,398 11.3% 11,733 11.2% 3,665 31.2%
Selling, general
and
administrative
expenses 18,719 13.8% 15,040 14.3% 3,679 24.5%
Depreciation and
amortization 2,063 1.5% 1,717 1.6% 346 20.2%
--------- ------- --------- ------- ---------
Operating income 13,810 10.2% 9,150 8.7% 4,660 50.9%
Other (income)
expense
Interest expense 735 0.5% 275 0.3% 460 167.3%
Interest income (40) 0.0% (4) 0.0% (36) 900.0%
Other (income)
expense, net (78) -0.1% (59) -0.1% (19) 32.2%
--------- ------- --------- ------- ---------
Total other
expense 617 0.5% 212 0.2% 405 191.0%
--------- ------- --------- ------- ---------
Income before
provision for
income taxes 13,193 9.7% 8,938 8.5% 4,255 47.6%
Provision for
income taxes 5,566 4.1% 3,595 3.4% 1,971 54.8%
--------- ------- --------- ------- ---------
Net income $ 7,627 5.6% $ 5,343 5.1% $ 2,284 42.7%
========= ======= ========= ======= =========
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
($ in thousands)
Six Months Ended June 30,
-----------------------------------------------------
Operating
Highlights 2005 2004
---------------- ----------------- -----------------
% of % of %
Revenue Revenue $ Growth Growth
Revenue $269,830 100.0% $204,951 100.0% $ 64,879 31.7%
Cost of goods
sold 142,702 52.9% 108,514 52.9% 34,188 31.5%
--------- ------- --------- ------- ---------
Gross margin 127,128 47.1% 96,437 47.1% 30,691 31.8%
Facility and
warehouse
expenses 28,956 10.7% 22,529 11.0% 6,427 28.5%
Distribution
expenses 29,493 10.9% 22,427 10.9% 7,066 31.5%
Selling, general
and
administrative
expenses 36,444 13.5% 29,247 14.3% 7,197 24.6%
Depreciation and
amortization 4,029 1.5% 3,222 1.6% 807 25.0%
--------- ------- --------- ------- ---------
Operating
income 28,206 10.5% 19,012 9.3% 9,194 48.4%
Other (income)
expense
Interest
expense 1,307 0.5% 812 0.4% 495 61.0%
Interest income (58) 0.0% (22) 0.0% (36) 163.6%
Other (income)
expense, net (240) -0.1% (146) -0.1% (94) 64.4%
--------- ------- --------- ------- ---------
Total other
expense 1,009 0.4% 644 0.3% 365 56.7%
--------- ------- --------- ------- ---------
Income before
provision for
income taxes 27,197 10.1% 18,368 9.0% 8,829 48.1%
Provision for
income taxes 11,169 4.1% 7,390 3.6% 3,779 51.1%
--------- ------- --------- ------- ---------
Net income $ 16,028 5.9% $ 10,978 5.4% $ 5,050 46.0%
========= ======= ========= ======= =========
The following table reconciles EBITDA to net income:
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
-------- -------- -------- --------
(In thousands)
Net income $ 7,627 $ 5,343 $16,028 $10,978
Depreciation and amortization 2,063 1,717 4,029 3,222
Interest, net 695 271 1,249 790
Provision for income taxes 5,566 3,595 11,169 7,390
-------- -------- -------- --------
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) $15,951 $10,926 $32,475 $22,380
======== ======== ======== ========
EBITDA as a percentage of revenue 11.7% 10.4% 12.0% 10.9%