LKQ Corporation Announces 2005 Third Quarter Net Income Results Up 45%
CHICAGO, Oct. 27, 2005 -- LKQ Corporation today reported results for its third quarter ended September 30, 2005, with revenue of $133.6 million, net income of $6.6 million and diluted earnings per share of $0.28.
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"For the third quarter we exceeded our previously issued earnings estimates. We had revenue growth of approximately 26%. This included very strong organic revenue growth of 11% in a quarter that has historically been the weakest season for us. Our net income increased by almost 45% and our diluted earnings per share increased by 40%. We were particularly pleased with the expansion of our operating income margin to 8.6% compared to 7.5% in the third quarter of 2004, which was largely attributable to improved gross margin," said Joe Holsten, President and Chief Executive Officer.
2005 Reported Results
For the third quarter of 2005, revenue increased 26.0% to $133.6 million compared with $106.0 million for the third quarter of 2004. Approximately $15.9 million in revenue growth for the quarter was from businesses we acquired. For the quarter, net income increased 44.7% to $6.6 million compared with $4.6 million for the third quarter of 2004. Diluted earnings per share was $0.28 for the quarter compared with $0.20 for the third quarter of 2004.
For the nine months ended September 30, 2005, revenue increased 29.7% to $403.5 million compared with $311.0 million for the same period in 2004. This included organic revenue growth of 12.3%. For the nine months ended September 30, 2005, net income increased 45.6% to $22.6 million compared with $15.5 million for the same period in 2004. Diluted earnings per share was $0.96 for the nine months ended September 30, 2005 compared with $0.69 for the same period a year ago.
Our consolidated aftermarket collision replacement parts revenue for the quarter was $19.2 million and for the nine months ended September 30, 2005 was $58.9 million.
The weighted average diluted shares outstanding for the quarter was 23.8 million compared to 22.5 million for the third quarter of 2004 and for the nine months ended September 30, 2005 was 23.5 million compared to 22.4 million for the nine months ended September 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 $15.4 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.
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.
In late August 2005, we acquired two businesses that operate in the aftermarket collision automotive replacement parts business. Independent Auto Parts is headquartered in Pennsylvania and Mid-State Aftermarket Parts, Inc. and a related company are headquartered in Arkansas. These businesses operate from six locations serving customers throughout the state of Arkansas, and markets in Tulsa, Memphis, central Pennsylvania and the southeastern portion of New York State. Revenue of these businesses for 2004 was approximately $16.6 million. We paid approximately $13.4 million, net of acquired cash, for these businesses.
Stock Offering
On October 4, 2005, we completed our public offering of 3,967,500 shares of our common stock at a price per share to the public of $29.00. The offering included 3,217,500 primary shares sold by us and 750,000 secondary shares sold by selling stockholders. The number of shares sold by us included 517,500 shares sold pursuant to the exercise of the underwriters' over-allotment option. We received approximately $88.0 million in net proceeds from the sale of the shares by us in the offering, after deducting underwriting discounts and commissions and the estimated expenses of the offering.
Company 2005 Outlook
We expect that full year 2005 revenue will be within a range of $542.0 million to $544.5 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 $29.2 million to $30.0 million and diluted earnings per share to be between $1.19 and $1.22.
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 24.5 million and for the fourth quarter to be approximately 27.2 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 third quarter results on Thursday, October 27, 2005 at 10:30 a.m. Eastern Time. The live audio webcast can be accessed on the internet at http://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 27, 2005.
About LKQ Corporation
LKQ Corporation is the largest nationwide provider of recycled light vehicle OEM products and related services and the second largest nationwide provider of aftermarket collision replacement products. LKQ operates over 95 facilities offering its customers a broad range of replacement systems, components, and parts to repair light vehicles.
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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenue $133,640 $106,045 $403,470 $310,996
Cost of goods sold 70,696 57,362 213,398 165,876
Gross margin 62,944 48,683 190,072 145,120
Facility and warehouse expenses 15,240 12,055 44,196 34,584
Distribution expenses 15,724 12,525 45,217 34,952
Selling, general and
administrative expenses 18,455 14,333 54,899 43,580
Depreciation and amortization 2,060 1,795 6,089 5,017
Operating income 11,465 7,975 39,671 26,987
Other (income) expense:
Interest expense 734 318 2,041 1,130
Interest income (30) (7) (88) (28)
Other (income) expense, net (361) 117 (601) (30)
Total other expense 343 428 1,352 1,072
Income before provision for
income taxes 11,122 7,547 38,319 25,915
Provision for income taxes 4,519 2,985 15,688 10,375
Net income $6,603 $4,562 $22,631 $15,540
Net income per share:
Basic $0.31 $0.23 $1.08 $0.78
Diluted $0.28 $0.20 $0.96 $0.69
Weighted average common shares
outstanding:
Basic 21,245 20,203 20,913 19,966
Diluted 23,839 22,492 23,480 22,381
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )
Nine Months Ended September 30,
2005 2004
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $22,631 $15,540
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and amortization 6,089 5,017
Deferred income taxes 1,198 2,614
Writeoff of debt issuance costs - 346
(Gain) loss on sale of property
and equipment (161) 115
Gain on sale of investment
securities (335) -
Other adjustments 42 (106)
Changes in operating assets and
liabilities, net of
effects from purchase
transactions:
Receivables 66 (1,630)
Inventory (461) (1,544)
Other operating assets and
liabilities 6,182 (167)
Net cash provided by
operating activities 35,251 20,185
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (11,111) (21,360)
Proceeds from sale of property
and equipment 877 77
Expenditures for intangible
assets (3) (4)
Purchase of investment securities - (650)
Proceeds from conversion of
escrow 2,561 -
Decrease in restricted cash in
escrow 132 -
Cash used in acquisitions (37,278) (43,514)
Net cash used in investing
activities (44,822) (65,451)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from the sale of common
stock and warrant exercises 7,387 3,705
Debt issuance costs (302) (249)
Net borrowings of long-term debt 4,712 28,811
Net cash provided by financing
activities 11,797 32,267
Net increase (decrease) in cash
and equivalents 2,226 (12,999)
Cash and equivalents, beginning of
period 1,612 16,082
Cash and equivalents, end of
period $3,838 $3,083
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
( In thousands, except share data )
September 30, December 31,
2005 2004
Assets
Current Assets:
Cash and equivalents $3,838 $1,612
Restricted cash 467 -
Receivables, net 30,818 28,305
Inventory 84,610 74,150
Prepaid expenses and other current
assets 3,441 3,375
Total Current Assets 123,174 107,442
Property and Equipment, net 77,696 70,730
Intangibles
Goodwill 126,049 100,319
Other intangibles, net 94 45
Deferred Income Taxes 3,256 4,621
Other Assets 6,466 5,118
Total Assets $336,735 $288,275
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $10,885 $8,374
Escrow liability 2,613 50
Accrued expenses
Accrued payroll-related
liabilities 7,930 6,731
Accrued procurement liability 2,678 1,989
Other accrued expenses 10,577 8,249
Income taxes payable 315 1,251
Deferred revenue 3,495 2,602
Current portion of long-term
obligations 409 317
Total Current Liabilities 38,902 29,563
Long-Term Obligations, Excluding
Current Portion 55,198 49,945
Other Noncurrent Liabilities 4,134 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, 21,361,073 and
20,565,413 shares issued at
September 30, 2005 and December
31, 2004, respectively. 214 206
Additional paid-in capital 212,568 201,484
Warrants 239 261
Retained earnings 23,771 1,140
Accumulated other comprehensive
income 1,092 980
Total Stockholders' Equity 237,884 204,071
Total Liabilities and
Stockholders' Equity $336,735 $288,275
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( $ in thousands )
Three Months Ended September 30,
Operating Highlights 2005 2004
% of % of
Revenue Revenue $ Growth % Growth
Revenue $133,640 100.0% $106,045 100.0% $27,595 26.0%
Cost of goods sold 70,696 52.9% 57,362 54.1% 13,334 23.2%
Gross margin 62,944 47.1% 48,683 45.9% 14,261 29.3%
Facility and
warehouse expenses 15,240 11.4% 12,055 11.4% 3,185 26.4%
Distribution
expenses 15,724 11.8% 12,525 11.8% 3,199 25.5%
Selling, general
and administrative
expenses 18,455 13.8% 14,333 13.5% 4,122 28.8%
Depreciation and
amortization 2,060 1.5% 1,795 1.7% 265 14.8%
Operating income 11,465 8.6% 7,975 7.5% 3,490 43.8%
Other (income)
expense:
Interest expense 734 0.5% 318 0.3% 416 130.8%
Interest income (30) 0.0% (7) 0.0% (23) 328.6%
Other (income)
expense, net (361) -0.3% 117 0.1% (478) -408.5%
Total other
expense 343 0.3% 428 0.4% (85) -19.9%
Income before
provision for
income taxes 11,122 8.3% 7,547 7.1% 3,575 47.4%
Provision for
income taxes 4,519 3.4% 2,985 2.8% 1,534 51.4%
Net income $6,603 4.9% $4,562 4.3% $2,041 44.7%
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( $ in thousands )
Nine Months Ended September 30,
Operating Highlights 2005 2004
% of % of
Revenue Revenue $ Growth % Growth
Revenue $403,470 100.0% $310,996 100.0% $92,474 29.7%
Cost of goods sold 213,398 52.9% 165,876 53.3% 47,522 28.6%
Gross margin 190,072 47.1% 145,120 46.7% 44,952 31.0%
Facility and
warehouse expenses 44,196 11.0% 34,584 11.1% 9,612 27.8%
Distribution
expenses 45,217 11.2% 34,952 11.2% 10,265 29.4%
Selling, general
and administrative
expenses 54,899 13.6% 43,580 14.0% 11,319 26.0%
Depreciation and
amortization 6,089 1.5% 5,017 1.6% 1,072 21.4%
Operating income 39,671 9.8% 26,987 8.7% 12,684 47.0%
Other (income)
expense:
Interest expense 2,041 0.5% 1,130 0.4% 911 80.6%
Interest income (88) 0.0% (28) 0.0% (60) 214.3%
Other (income)
expense, net (601) -0.1% (30) 0.0% (571) 1903.3%
Total other
expense 1,352 0.3% 1,072 0.3% 280 26.1%
Income before
provision for
income taxes 38,319 9.5% 25,915 8.3% 12,404 47.9%
Provision for
income taxes 15,688 3.9% 10,375 3.3% 5,313 51.2%
Net income $22,631 5.6% $15,540 5.0% $7,091 45.6%
The following table reconciles EBITDA to net income:
Three Months Nine Months
Ended September Ended September
30, 30,
2005 2004 2005 2004
(In thousands)
Net income $6,603 $4,562 $22,631 $15,540
Depreciation and amortization 2,060 1,795 6,089 5,017
Interest, net 704 311 1,953 1,102
Provision for income taxes 4,519 2,985 15,688 10,375
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) $13,886 $9,653 $46,361 $32,034
EBITDA as a percentage of revenue 10.4% 9.1% 11.5% 10.3%
CONTACT: LKQ Corporation
Mark T. Spears, Senior Vice President and Chief Financial Officer
312-621-1950
irinfo@lkqcorp.com
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