LKQ Corporation Announces 2006 Second Quarter Net Income Results Up 53% With Record Revenue
CHICAGO, July 27 -- LKQ Corporation today announced results for its second quarter ended June 30, 2006, with revenue of $195.0 million, net income of $11.7 million and diluted earnings per share of $0.21.
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"We exceeded our previously issued earnings estimates for the second quarter. We once again achieved a record revenue quarter with impressive revenue growth of approximately 43%. Our net income increased by close to 53% and our earnings per share increased by just over 31%. We were particularly pleased with the expansion of our operating income margin to 10.6% compared to 10.2% in the second quarter of 2005, despite the negative impact on our margin by the aluminum smelter operation of our recently acquired Transwheel subsidiary," said Joe Holsten, President and Chief Executive Officer.
2006 Reported Results
All earnings per share amounts, stock price amounts and share counts discussed herein reflect our January 2006 two-for-one stock split.
For the second quarter of 2006, revenue increased 43.4% to $195.0 million compared with $136.0 million for the second quarter of 2005. Our organic revenue growth for the quarter was 10.8%. Net income for the quarter increased 52.9% to $11.7 million compared with $7.6 million for the second quarter of 2005. Diluted earnings per share was $0.21 for the quarter compared with $0.16 for the second quarter of 2005.
For the six months ended June 30, 2006, revenue increased 43.5% to $387.2 million compared with $269.8 million for the same period in 2005. This included organic revenue growth of 11.6%. For the six months ended June 30, 2006, net income increased 48.2% to $23.7 million compared with $16.0 million for the same period in 2005. Diluted earnings per share was $0.43 for the six months ended June 30, 2006 compared with $0.35 for the same period a year ago.
Our results for the six months ended June 30, 2006 include approximately $1.1 million of expenses related to the expensing of stock options in accordance with Statement of Financial Accounting Standard No. 123R "Share- Based Payment" ("SFAS 123R"). SFAS 123R became effective for LKQ Corporation on January 1, 2006. These expenses had the effect of lowering our net income by approximately $657,000 and our diluted earnings per share by approximately $0.01 for the six month period.
Our consolidated aftermarket collision replacement parts revenue for the second quarter was $39.6 million and for the six months ended June 30, 2006 was $81.5 million.
The weighted average diluted shares outstanding for the second quarter was 55.7 million compared to 46.8 million for the second quarter of 2005 and for the six months ended June 30, 2006 was 55.6 million compared to 46.3 million for the six months ended June 30, 2005. The number of weighted average diluted shares of common stock outstanding in 2006 changed from 2005 due to the issuance of 6.4 million new shares in our October 2005 public offering, exercises of stock options and warrants, and the increase in our stock price.
2006 Business Acquisitions We have acquired nine businesses to date in 2006.
On January 31, 2006 we acquired Transwheel Corporation, an aluminum alloy wheel refurbishing and distribution business. Transwheel currently operates refurbishing and distribution facilities in Huntington, IN; Manchester, CT; Williamsport, MD; and Tampa, FL and distribution locations in Ferndale, MI and Chicago, IL. Transwheel's third party revenue for 2005 was approximately $28.5 million from the sale or restoration of wheels. In addition to wheel revenue, a Transwheel subsidiary operates an aluminum smelter that melts damaged and unusable wheel cores as means of product disposal. For the five months of 2006 that LKQ owned Transwheel, the smelter's third party aluminum revenue was $12.2 million at a gross margin of approximately 5%.
In February, we acquired Michael Auto Parts in Orlando, Florida a business that primarily serves the professional repair market and generated approximately $12.0 million of revenue in 2005.
Two retail businesses, one near Charleston, South Carolina and one near Baton Rouge, Louisiana were acquired in February. On a combined basis they had less than $3.0 million of revenue in 2005. Our objective during 2006 is to grow and improve these two businesses and to build their facilities into modern self-service retail operations.
In late April and late May we acquired two businesses that consisted of three facilities in Tulsa, Oklahoma and three facilities in Western Michigan. These businesses sell into both the retail and professional repair markets. They generated $9.0 million of revenue in 2005.
On May 31, we acquired an aftermarket business that had $11.0 million of revenue in 2005 and operates facilities in the Los Angeles, CA, Portland, OR and Seattle, WA markets.
In late June and early July we acquired two retail oriented businesses that operate two facilities in Houston, TX, a facility in Daytona Beach, FL and a facility outside of Denver, CO. These businesses generated $24.0 million of revenue in 2005.
Company Outlook
We expect that 2006 organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2005 business acquisitions and the nine acquisitions that we have completed so far in 2006. We expect net income to be within a range of $42.7 million to $44.7 million and diluted earnings per share to be between $0.76 and $0.80. Included in the guidance is an estimated $0.03 per share effect of expensing stock options for the first time.
For the third quarter of 2006 we expect net income to be within a range of $8.9 million to $9.7 million and diluted earnings per share to be between $0.16 and $0.17.
We anticipate that net cash provided by operating activities for 2006 will be over $40.0 million. We estimate our full year 2006 capital expenditures related to property and equipment, excluding the expenditures of acquiring businesses, will be approximately $41 million to $43 million. This includes approximately $6.0 million in property and equipment related to businesses we acquired in 2006. As of July 26, 2006 we had outstanding debt under our bank credit facility of $103.0 million.
We estimate the weighted average diluted shares outstanding for the full year 2006 will be approximately 56.0 million. These share numbers are estimates and will be affected by factors such as any future stock issuances, the number of our options exercised in subsequent periods, and changes in our stock price.
Quarterly Conference Call
We will host an audio webcast to discuss our second quarter 2006 results on Thursday, July 27, 2006 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 our website approximately two hours after the live presentation and will remain on the site until August 11, 2006.
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 and refurbished wheels. LKQ operates over 100 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, 2006 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.
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