• Revenue growth of 7.5% to a record $1.84 billion
  • Organic revenue growth for parts and services of 7.5%
  • Net income growth of 14.1% to $119.7 million
  • Diluted EPS increased 14.7% to $0.39
  • Annual guidance updated


CHICAGO, July 30, 2015 (GLOBE NEWSWIRE) --  LKQ Corporation (Nasdaq:LKQ) today reported record revenue for the second quarter of 2015 of $1.84 billion, an increase of 7.5% as compared to $1.71 billion in the second quarter of 2014. Net income for the second quarter of 2015 was $119.7 million, an increase of 14.1% as compared to $104.9 million for the same period of 2014. Diluted earnings per share of $0.39 for the second quarter ended June 30, 2015 increased 14.7% from $0.34 for the second quarter of 2014. The Company noted that adjusted diluted earnings per share for the second quarter 2015 was $0.39 compared to $0.35 for the second quarter of 2014 after adjusting each of the periods for net losses resulting from restructuring and acquisition related expenses and the change in fair value of contingent consideration liabilities.

"We are very pleased with our operating results during the quarter even though the headwinds of scrap prices and exchange rate fluctuations we faced in the first quarter of 2015 continued in the second quarter," stated Robert Wagman, President and Chief Executive Officer of LKQ Corporation. “I am particularly pleased with the 15% revenue growth in parts and services on a  constant currency basis and the 30 basis point expansion in segment EBITDA margins. Our Wholesale European segment showed solid improvement, with its EBITDA margins for the quarter increasing 70 basis points over the prior year. Organic revenue growth for parts and services was 7.5% on a global basis, including 10.1% in our Wholesale Europe segment.”

On a six month year-to-date basis, revenue was $3.61 billion, an increase of 8.3% from $3.34 billion for the comparable period of 2014. Parts and services organic revenue growth for the first six months of 2015 was 7.5%. Net income for the first six months of 2015 was $226.8 million, as compared to $209.5 million for the first half of 2014. Diluted earnings per share was $0.74 for the first six months of 2015, as compared to $0.69 for the comparable period of 2014

Balance Sheet and Liquidity

Cash flow from operations totaled $282.7 million on a six month year-to-date basis, which after investing approximately $109.2 million in capital expenditures and other long term assets, allowed the Company to increase cash balances and reduce its outstanding debt compared to year-end 2014. As of June 30, 2015, LKQ’s balance sheet reflected cash and equivalents of $143.4 million and outstanding debt of $1.69 billion. Total availability under the Company’s credit facility at June 30, 2015 was approximately $1.2 billion.

Other Events

On July 8, 2015, the Company announced it acquired substantially all of the assets of PartsChannel, Inc., an aftermarket collision parts distributor with fourteen warehouses servicing over thirty markets across the United States. Terms of the transaction were not disclosed.

On July 9, 2015, the Company announced that it signed a definitive agreement to acquire The Coast Distribution System, Inc. for $5.50 per share in cash.  Coast is a leading distributor of replacement parts, supplies and accessories for recreational vehicles (RVs) primarily to retail parts and supplies stores, service and repair establishments, and new and used RV dealers in North America. The Coast acquisition is expected to close in the third quarter of 2015.

Since the beginning of the second quarter of 2015, LKQ also acquired eight distributors of aftermarket automotive products in the Netherlands, a self service retail business with eight locations in California, a wholesale salvage business located in Alabama, and an aftermarket parts distributor in Iowa. LKQ’s European operations opened two Euro Car Parts branches in the second quarter of 2015.

“Our development efforts thus far in 2015 validate the breadth of acquisition candidates across our operating segments. These acquisitions should enhance our competitive position and market penetration. Once integrated into our networks, they will offer synergy opportunities that should create expense leverage and distribution efficiencies. Our goal is to generate continued margin expansion with our development and operating strategy, similar to what we witnessed in the second quarter and first half of 2015,” stated Mr. Wagman.

Company Outlook

The Company updated its guidance for 2015.

 Updated GuidancePrior Guidance
Organic revenue growth (parts & services)7.0% to 8.5%6.5% to 9.0%
Adjusted net income$425 million to $445 million$420 million to $450 million
Adjusted diluted EPS$1.38 to $1.45$1.36 to $1.46
Cash flow from operationsApproximately $450 millionApproximately $425 million
Capital expenditures$150 million to $180 million$150 million to $180 million


Guidance for 2015 is based on current conditions (including 2015 acquisitions completed to date) and excludes the impact of restructuring and acquisition related expenses; gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities); and capital spending related to future business acquisitions.

Conference Call Details

LKQ will host a conference call and webcast on July 30, 2015 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) with members of senior management to discuss the Company's results.

To access the investor conference call, please dial (877) 407-0668. International access to the call may be obtained by dialing (201) 689-8558.

Webcast and Presentation Details

The audio webcast and accompanying slide presentation can be accessed at www.lkqcorp.com in the Investor Relations section.

A replay of the conference call will be available by telephone at (877) 660-6853 or (201) 612-7415 for international calls. The telephone replay will require you to enter conference ID: 13612727#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through August 28, 2015. Please allow approximately two hours after the live presentation before attempting to access the replay.

About LKQ Corporation

LKQ Corporation (www.lkqcorp.com) is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles.  LKQ has operations in North America, the United Kingdom, the Netherlands, Belgium, France, Scandinavia, Australia and Taiwan. LKQ offers its customers a broad range of replacement systems, components, equipment and parts to repair and accessorize automobiles, trucks, and recreational and performance vehicles.

Forward Looking Statements

The statements in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding our outlook or guidance, 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 following (not necessarily in order of importance):

  • Changes in economic and political activity in the U.S. and other countries in which we are located or do business, and the impact of these changes on the demand for our products and our ability to obtain financing for operations;
  • fluctuations in the pricing of new original equipment manufacturer replacement products;
  • the availability and cost of our inventory;
  • variations in the number of vehicles sold, vehicle accident rates, miles driven, and the age profile of vehicles in accidents;
  • changes in state or federal laws or regulations affecting our business;
  • inaccuracies in the data relating to our industry published by independent sources upon which we rely;
  • changes in the level of acceptance and promotion of alternative automotive parts by insurance companies and auto repairers;
  • changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;
  • increasing competition in the automotive parts industry, including the pricing programs and other initiatives of original equipment manufacturers in an attempt to increase their market share;
  • our ability to satisfy our debt obligations and to operate within the limitations imposed by financing agreements;
  • our ability to obtain financing on acceptable terms to finance our growth;
  • declines in the values of our assets;
  • fluctuations in the prices of fuel, scrap metal and other commodities;
  • our ability to develop and implement the operational and financial systems needed to manage our operations;
  • our ability to identify sufficient acquisition candidates at reasonable prices to maintain our growth objectives;
  • our ability to integrate, realize expected synergies, and successfully operate acquired companies and any companies acquired in the future, and the risks associated with these companies;
  • restrictions or prohibitions on selling certain aftermarket products to the extent original equipment manufacturers seek and obtain more design patents than they have in the past and are successful in asserting infringement of these patents and defending their validity;
  • changes to our business relationships with insurance companies or changes by insurance companies to their business practices relating to the use of our products;
  • product liability claims by the end users of our products or claims by other parties who we have promised to indemnify for product liability matters;
  • costs associated with recalls of the products we sell;
  • currency fluctuations in the U.S. dollar, pound sterling and euro versus other currencies;
  • instability in regions in which we operate that can affect our supply of certain products;
  • interruptions, outages or breaches of our operational systems, security systems, or infrastructure as a result of attacks on, or malfunctions of, our systems;
  • additional unionization efforts, new collective bargaining agreements, and work stoppages;
  • higher costs and  the resulting potential inability to service our customers to the extent that our suppliers decide to discontinue business relationships with us; and
  • other risks that are described in our Form 10-K filed March 2, 2015 and in other reports filed by us from time to time with the Securities and Exchange Commission.


You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

LKQ CORPORATION AND SUBSIDIARIES  
Unaudited Condensed Consolidated Statements of Income  
( In thousands, except per share data )  
             
             
    Three Months Ended Six Months Ended  
    June 30, June 30,  
             
     2015   2014   2015   2014   
             
 Revenue $  1,838,070  $  1,709,132  $  3,611,982  $  3,334,909   
             
 Cost of goods sold    1,114,126     1,038,073     2,188,559     2,011,966   
             
  Gross margin    723,944     671,059     1,423,423     1,322,943   
             
 Facility and warehouse expenses    136,379     128,506     269,036     254,665   
             
 Distribution expenses    150,039     146,544     291,753     283,873   
             
 Selling, general and administrative expenses    205,796     186,585     409,037     371,115   
             
 Restructuring and acquisition related expenses    1,663     5,901     8,151     9,222   
             
 Depreciation and amortization    29,782     29,927     59,235     56,638   
             
  Operating income    200,285     173,596     386,211     347,430   
             
 Other expense (income):          
  Interest expense, net    14,622     15,628     29,528     31,746   
  Loss on debt extinguishment    -      -      -      324   
  Change in fair value of contingent consideration liabilities    125     (790)    276     (2,012)  
  Other (income) expense, net    (28)    (907)    1,740     (1,003)  
             
  Total other expense, net    14,719     13,931     31,544     29,055   
             
  Income before provision for income taxes    185,566     159,665     354,667     318,375   
             
 Provision for income taxes     64,682     54,341     124,780     108,362   
             
 Equity in earnings of unconsolidated subsidiaries    (1,162)    (442)    (3,070)    (478)  
             
  Net income $  119,722  $  104,882  $  226,817  $  209,535   
             
             
 Earnings per share:          
  Basic $  0.39  $  0.35  $  0.75  $  0.69   
             
  Diluted $  0.39  $  0.34  $  0.74  $  0.69   
             
             
 Weighted average common shares outstanding:          
  Basic    304,286     302,030     304,145     301,719   
             
  Diluted    307,247     305,837     307,105     305,677   
             

 

LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Condensed Consolidated Balance Sheets 
( In thousands, except share and per share data ) 
        
        
    June 30, December 31, 
     2015   2014  
  Assets     
        
Current Assets:     
 Cash and equivalents $  143,423  $  114,605  
 Receivables, net    651,271     601,422  
 Inventory    1,402,399     1,433,847  
 Deferred income taxes    77,968     81,744  
 Prepaid expenses and other current assets    97,560     85,799  
    Total Current Assets    2,372,621     2,317,417  
        
Property and Equipment, net    650,053     629,987  
Intangibles    2,515,098     2,534,420  
Other Assets    96,770     91,668  
        
    Total Assets $  5,634,542  $  5,573,492  
        
  Liabilities and Stockholders' Equity     
        
Current Liabilities:     
 Accounts payable $  392,951  $  400,202  
 Accrued expenses    252,750     250,164  
 Other current liabilities    41,286     36,815  
 Current portion of long-term obligations     39,378     63,515  
        
    Total Current Liabilities    726,365     750,696  
        
Long-Term Obligations, Excluding Current Portion    1,652,064     1,801,047  
Deferred Income Taxes    178,523     181,662  
Other Noncurrent Liabilities    123,497     119,430  
        
Commitments and Contingencies     
        
Stockholders' Equity:     
 Common stock, $0.01 par value, 1,000,000,000 shares     
  authorized, 304,435,529 and 303,452,655 shares issued     
  and outstanding at June 30, 2015 and      
  December 31, 2014, respectively    3,044     3,035  
 Additional paid-in capital    1,070,288     1,054,686  
 Retained earnings    1,929,978     1,703,161  
 Accumulated other comprehensive loss    (49,217)    (40,225) 
        
    Total Stockholders' Equity    2,954,093     2,720,657  
        
    Total Liabilities and Stockholders' Equity $  5,634,542  $  5,573,492  
        
        
        

 

 LKQ CORPORATION AND SUBSIDIARIES 
 Unaudited Condensed Consolidated Statements of Cash Flows 
( In thousands ) 
       
     Six Months Ended 
     June 30, 
      2015   2014  
         
 CASH FLOWS FROM OPERATING ACTIVITIES:     
  Net income $  226,817  $  209,535  
  Adjustments to reconcile net income to net cash     
   provided by operating activities:     
   Depreciation and amortization    61,714     58,893  
   Stock-based compensation expense    11,114     11,783  
   Excess tax benefit from stock-based payments    (6,737)    (9,747) 
   Other    5,880     1,645  
   Changes in operating assets and liabilities, net of     
     effects from acquisitions:     
     Receivables    (48,995)    (71,779) 
     Inventory    38,399     (40,773) 
     Prepaid income taxes/income taxes payable    21,052     9,653  
     Accounts payable    (18,597)    (20,549) 
     Other operating assets and liabilities    (7,948)    3,543  
         
     Net cash provided by operating activities    282,699     152,204  
         
 CASH FLOWS FROM INVESTING ACTIVITIES:     
  Purchases of property and equipment    (66,763)    (67,331) 
  Acquisitions, net of cash acquired    (37,208)    (635,332) 
  Other investing activities, net    (5,209)    341  
         
   Net cash used in investing activities    (109,180)    (702,322) 
         
 CASH FLOWS FROM FINANCING ACTIVITIES:     
  Proceeds from exercise of stock options    3,288     4,207  
  Excess tax benefit from stock-based payments    6,737     9,747  
  Taxes paid related to net share settlements of stock-based     
    compensation awards    (5,243)    -   
  Debt issuance costs    -      (3,715) 
  Net (payments) borrowings of long-term and other obligations   (149,703)    496,232  
         
   Net cash (used in) provided by financing activities    (144,921)    506,471  
         
 Effect of exchange rate changes on cash and equivalents    220     2,723  
         
 Net increase (decrease) in cash and equivalents    28,818     (40,924) 
         
 Cash and equivalents, beginning of period    114,605     150,488  
         
 Cash and equivalents, end of period $  143,423  $  109,564  
         

 

LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Supplementary Data 
( In thousands, except per share data ) 
               
               
    Three Months Ended June 30, 
               
Operating Highlights  2015   2014     
      % of   % of    
      Revenue (1)   Revenue (1) Change% Change 
               
 Revenue $  1,838,070   100.0% $  1,709,132   100.0% $  128,938  7.5% 
               
 Cost of goods sold    1,114,126   60.6%    1,038,073   60.7%    76,053  7.3% 
               
  Gross margin    723,944   39.4%    671,059   39.3%    52,885  7.9% 
               
 Facility and warehouse expenses    136,379   7.4%    128,506   7.5%    7,873  6.1% 
               
 Distribution expenses    150,039   8.2%    146,544   8.6%    3,495  2.4% 
               
 Selling, general and administrative expenses    205,796   11.2%    186,585   10.9%    19,211  10.3% 
               
 Restructuring and acquisition related expenses    1,663   0.1%    5,901   0.3%    (4,238) (71.8%) 
               
 Depreciation and amortization    29,782   1.6%    29,927   1.8%    (145) (0.5%) 
               
  Operating income    200,285   10.9%    173,596   10.2%    26,689  15.4% 
               
 Other expense (income):            
  Interest expense, net    14,622   0.8%    15,628   0.9%    (1,006) (6.4%) 
  Loss on debt extinguishment    -    0.0%    -    0.0%    -   n/m  
  Change in fair value of contingent consideration liabilities    125   0.0%    (790)  (0.0%)    915  n/m  
  Other income, net    (28)  (0.0%)    (907)  (0.1%)    879  96.9% 
               
  Total other expense, net    14,719   0.8%    13,931   0.8%    788  5.7% 
               
  Income before provision for income taxes    185,566   10.1%    159,665   9.3%    25,901  16.2% 
               
 Provision for income taxes     64,682   3.5%    54,341   3.2%    10,341  19.0% 
               
 Equity in earnings of unconsolidated subsidiaries    (1,162)  (0.1%)    (442)  (0.0%)    (720) n/m  
               
  Net income $  119,722   6.5% $  104,882   6.1% $  14,840  14.1% 
               
               
 Earnings per share:            
  Basic $  0.39    $  0.35    $  0.04  11.4% 
               
  Diluted $  0.39    $  0.34    $  0.05  14.7% 
               
               
 Weighted average common shares outstanding:            
  Basic    304,286       302,030       2,256  0.7% 
               
  Diluted    307,247       305,837       1,410  0.5% 
               
               
  (1)The sum of the individual percentage of revenue components may not equal the total due to rounding. 
               

 

LKQ CORPORATION AND SUBSIDIARIES 
Unaudited Supplementary Data 
( In thousands, except per share data ) 
               
               
    Six Months Ended June 30, 
               
Operating Highlights  2015   2014     
      % of   % of    
      Revenue (1)   Revenue (1) Change% Change 
               
 Revenue $  3,611,982   100.0% $  3,334,909   100.0% $  277,073  8.3% 
               
 Cost of goods sold    2,188,559   60.6%    2,011,966   60.3%    176,593  8.8% 
               
  Gross margin    1,423,423   39.4%    1,322,943   39.7%    100,480  7.6% 
               
 Facility and warehouse expenses    269,036   7.4%    254,665   7.6%    14,371  5.6% 
               
 Distribution expenses    291,753   8.1%    283,873   8.5%    7,880  2.8% 
               
 Selling, general and administrative expenses    409,037   11.3%    371,115   11.1%    37,922  10.2% 
               
 Restructuring and acquisition related expenses    8,151   0.2%    9,222   0.3%    (1,071) (11.6%) 
               
 Depreciation and amortization    59,235   1.6%    56,638   1.7%    2,597  4.6% 
               
  Operating income    386,211   10.7%    347,430   10.4%    38,781  11.2% 
               
 Other expense (income):            
  Interest expense, net    29,528   0.8%    31,746   1.0%    (2,218) (7.0%) 
  Loss on debt extinguishment    -    0.0%    324   0.0%    (324) (100.0%) 
  Change in fair value of contingent consideration liabilities    276   0.0%    (2,012)  (0.1%)    2,288  n/m  
  Other expense (income), net    1,740   0.0%    (1,003)  (0.0%)    2,743  n/m  
               
  Total other expense, net    31,544   0.9%    29,055   0.9%    2,489  8.6% 
               
  Income before provision for income taxes    354,667   9.8%    318,375   9.5%    36,292  11.4% 
               
 Provision for income taxes     124,780   3.5%    108,362   3.2%    16,418  15.2% 
               
 Equity in earnings of unconsolidated subsidiaries    (3,070)  (0.1%)    (478)  (0.0%)    (2,592) n/m  
               
  Net income $  226,817   6.3% $  209,535   6.3% $  17,282  8.2% 
               
               
 Earnings per share:            
  Basic $  0.75    $  0.69    $  0.06  8.7% 
               
  Diluted $  0.74    $  0.69    $  0.05  7.2% 
               
               
 Weighted average common shares outstanding:            
  Basic    304,145       301,719       2,426  0.8% 
               
  Diluted    307,105       305,677       1,428  0.5% 
               

 

The following unaudited tables compare certain third party revenue categories:          
           
   Three Months Ended     
   June 30,     
           
    2015  2014  Change % Change 
   (In thousands)     
Included in Unaudited Condensed Consolidated          
Statements of Income of LKQ Corporation          
           
North America  $  912,159  $  858,193  $  53,966   6.3% 
Europe     508,731     464,698     44,033   9.5% 
Specialty     283,458     217,970     65,488   30.0% 
Parts and services     1,704,348     1,540,861     163,487   10.6% 
Other      133,722     168,271     (34,549)  (20.5%) 
Total  $  1,838,070  $  1,709,132  $  128,938   7.5% 
           
Revenue changes by category for the three months ended June 30, 2015 vs. 2014:          
           
         
   Revenue Change Attributable to:   
   Organic Acquistion Foreign Exchange % Change (1) 
           
North America   6.3%  0.9%  (0.9%)  6.3% 
Europe   10.1%  11.1%  (11.7%)  9.5% 
Specialty   6.6%  25.3%  (1.9%)  30.0% 
Parts and services   7.5%  7.4%  (4.3%)  10.6% 
Other    (20.6%)  0.4%  (0.4%)  (20.5%) 
Total   4.7%  6.7%  (3.9%)  7.5% 
           
           
   Six Months Ended     
   June 30,     
           
    2015   2014  Change % Change 
   (In thousands)     
Included in Unaudited Condensed Consolidated          
Statements of Income of LKQ Corporation          
           
North America  $  1,830,492  $  1,731,972  $  98,520   5.7% 
Europe     994,827     883,675     111,152   12.6% 
Specialty     523,945     394,767     129,178   32.7% 
Parts and services     3,349,264     3,010,414     338,850   11.3% 
Other      262,718     324,495     (61,777)  (19.0%) 
Total  $  3,611,982  $  3,334,909  $  277,073   8.3% 
           
Revenue changes by category for the six months ended June 30, 2015 vs. 2014:          
           
         
   Revenue Change Attributable to:   
   Organic Acquisiton Foreign Exchange % Change (1) 
           
North America   5.4%  1.1%  (0.9%)  5.7% 
Europe   12.0%  11.9%  (11.2%)  12.6% 
Specialty   6.5%  28.0%  (1.7%)  32.7% 
Parts and services   7.5%  7.8%  (4.0%)  11.3% 
Other    (19.2%)  0.5%  (0.3%)  (19.0%) 
Total   4.9%  7.1%  (3.7%)  8.3% 
           
(1) The sum of the individual revenue change components may not equal the total percentage change due to rounding. 
           

 

 The following unaudited table reconciles Net Income to EBITDA:            
            
    Three Months Ended Six Months Ended 
    June 30, June 30, 
            
     2015   2014   2015   2014  
    (In thousands) 
            
Net income   $  119,722  $  104,882  $  226,817  $  209,535  
Depreciation and amortization      31,045     31,047     61,714   58,893  
Interest expense, net      14,622     15,628     29,528     31,746  
Loss on debt extinguishment (1)      -      -      -      324  
Provision for income taxes       64,682     54,341     124,780   108,362  
            
Earnings before interest, taxes, depreciation           
 and amortization (EBITDA)    $  230,071  $  205,898  $  442,839  $  408,860  
            
 EBITDA as a percentage of revenue     12.5%  12.0%  12.3%  12.3% 
            
(1) Loss on debt extinguishment is considered a component of interest in calculating EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.  
  
We provide a reconciliation of Net Income to EBITDA as we believe it offers investors, securities analysts and other interested parties useful information regarding our results of operations because it assists in analyzing our performance and the value of our business. EBITDA provides insight into our profitability trends, and allows management and investors to analyze our operating results with and without the impact of depreciation, amortization,  interest and income tax expense. We believe EBITDA is used by securities analysts, investors, and other interested parties in evaluating companies, many of which present EBITDA when reporting their results.  EBITDA should not be construed as an alternative to operating income, net income or net cash provided by (used in) operating activities, as determined in accordance with accounting principles generally accepted in the United States. In addition, not all companies that report EBITDA information calculate EBITDA in the same manner as we do and, accordingly, our calculation is not necessarily comparable to similarly named measures of other companies and may not be an appropriate measure for performance relative to other companies. 
            

 

The following unaudited table compares revenue and Segment EBITDA by reportable segment:        
               
               
   Three Months Ended Six Months Ended 
   June 30, June 30, 
               
    2015   2014   2015   2014  
(In thousands)   % of Revenue  % of Revenue  % of Revenue  % of Revenue 
               
Revenue              
North America  $  1,045,151   $  1,026,090   $  2,091,324   $  2,055,389   
Europe     509,903      465,173      997,249      884,887   
Specialty     284,330      218,400      525,552      395,423   
Eliminations     (1,314)     (531)     (2,143)     (790)  
               
  Total revenue  $  1,838,070   $  1,709,132   $  3,611,982   $  3,334,909   
               
Segment EBITDA              
North America  $  138,880  13.3% $  137,150  13.4% $  288,268  13.8% $  283,288  13.8% 
Europe     53,943  10.6%    45,945  9.9%    100,466  10.1%    87,100  9.8% 
Specialty     40,198  14.1%    28,356  13.0%    65,602  12.5%    46,160  11.7% 
Eliminations     -       -       -       -    
               
  Total Segment EBITDA     233,021  12.7%    211,451  12.4%    454,336  12.6%    416,548  12.5% 
               
Deduct:              
Restructuring and acquisition related expenses     1,663      5,901      8,151      9,222   
Change in fair value of contingent consideration liabilities     125      (790)     276      (2,012)  
               
Add:              
Equity in earnings of unconsolidated subsidiaries     (1,162)     (442)     (3,070)     (478)  
               
Earnings before interest, taxes, depreciation              
 and amortization (EBITDA)   $  230,071  12.5% $  205,898  12.0% $  442,839  12.3% $  408,860  12.3% 
               
               
The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. Loss on debt extinguishment is considered a component of interest in calculating EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.  
               

 

The following unaudited table reconciles Net Income and Diluted Earnings per Share to Adjusted Net Income and Adjusted Diluted Earnings per Share, respectively:  
            
            
            
   Three Months Ended Six Months Ended  
   June 30, June 30,  
            
    2015   2014   2015   2014   
(In thousands, except per share data)           
            
Net income  $  119,722  $  104,882  $  226,817  $  209,535   
            
Adjustments:           
            
Restructuring and acquisition related expenses, net of tax     1,079     3,895     5,290     6,087   
Loss on debt extinguishment, net of tax     -      -      -      214   
Change in fair value of contingent consideration liabilities     125     (790)    276     (2,012)  
            
Adjusted net income  $  120,926  $  107,987  $  232,383  $  213,824   
            
            
Weighted average diluted common shares outstanding     307,247     305,837     307,105     305,677   
            
Diluted earnings per share  $  0.39  $  0.34  $  0.74  $  0.69   
            
Adjusted diluted earnings per share  $  0.39  $  0.35  $  0.76  $  0.70   
            
            
We provide a reconciliation of Net Income and Diluted Earnings per Share ("EPS") to Adjusted Net Income and Adjusted Diluted EPS as we believe it offers investors, securities analysts and other interested parties useful information regarding our results of operations because it assists in analyzing our performance and the value of our business.  Adjusted Net Income and Adjusted Diluted EPS are presented as supplemental measures of our performance that management believes are useful for evaluating and comparing our operating activities across reporting periods.  In 2015 and 2014, the Company defines Adjusted Net Income and Adjusted Diluted EPS as Net Income and Diluted EPS adjusted to eliminate the impact of restructuring and acquisition related expenses, net of tax, loss on debt extinguishment, net of tax, and the change in fair value of contingent consideration liabilities.  Adjusted Net Income and Adjusted Diluted EPS should not be construed as alternatives to Net Income or Diluted EPS as determined in accordance with accounting principles generally accepted in the United States.  In addition, because not all companies use identical calculations, this presentation of Adjusted Net Income and Adjusted Diluted EPS may not be comparable to similarly titled measures of other companies.  
            

 

The following unaudited table reconciles consolidated revenue growth for Parts & Services to constant currency revenue growth for the same measure:
          
  Three Months Ended       
  June 30, 2015       
Parts & Services         
Revenue growth as reported  10.6%       
Less: Currency impact  -4.3%       
Revenue growth at constant currency  14.9%       
          
          
We evaluate growth in our operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our growth, consistent with how we evaluate our performance. Constant currency revenue results are calculated by translating prior year revenue in local currency using the current year's currency conversion rate. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Our use of this term may vary from the use of similarly-titled measures by other issuers due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.       


Contact:

Joseph P. Boutross-Director, Investor Relations
LKQ Corporation  
(312) 621-2793
jpboutross@lkqcorp.com

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