CHICAGO, April 26 /PRNewswire-FirstCall/ -- LKQ Corporation today announced results for its first quarter ended March 31, 2007, with revenue of $235.3 million, net income of $15.8 million and diluted earnings per share of $0.28.
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"We reported record revenue for the first quarter, and delivered impressive revenue growth of over 22%, with organic revenue growth of approximately 10% for the quarter. We are pleased to announce that three acquisitions have been completed since we reported our year-end 2006 results, which include a retail oriented recycled parts operation with facilities in Dallas, TX, a small aftermarket business based in Birmingham, AL, and a parts recycling facility that will ultimately allow us to better serve the professional repair market in the greater Philadelphia area. We have signed letters of intent to acquire three additional businesses, which have combined estimated annual revenue of approximately $36 million, and we have increased our credit facility capacity up to a $205 million level to fund future acquisitions," said Joe Holsten, President and Chief Executive Officer.
Commenting on business operations, Holsten said "We were particularly pleased with the improvement in margins during the quarter. As a result of obtaining additional leverage from investments in our distribution network and other infrastructure, our business operations posted a 100 basis point improvement in our operating income margin, resulting in the highest operating income margin we have achieved so far."
2007 Reported Results
For the first quarter of 2007, revenue increased 22.5% to $235.3 million compared with $192.1 million for the first quarter of 2006. Our organic revenue growth for the quarter was 9.8%. Net income for the quarter increased 30.7% to $15.8 million compared with $12.1 million for the first quarter of 2006. Diluted earnings per share was $0.28 for the quarter compared with $0.22 for the first quarter of 2006.
Our consolidated aftermarket collision replacement parts, refurbished wheels and refurbished lighting revenue for the first quarter was $60.8 million. In addition a subsidiary operates an aluminum smelter that melts damaged and unusable wheel cores as a means of product disposal. For the first quarter of 2007, the smelter's revenue was $10.4 million at a gross margin of approximately 6.6%, compared to $4.4 million of revenue at a gross margin of approximately 6.3% for the two months we owned the smelter in the first quarter of 2006.
The weighted average diluted shares outstanding for the first quarter of 2007 was 56.0 million compared to 55.5 million for the first quarter of 2006.
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, ("FIN 48") became effective January 1, 2007, requiring us to record additional income tax liabilities of $0.3 million related to previously unrecognized interest and penalties. FIN 48 required these liabilities be charged to retained earnings as of January 1, 2007.
Business Acquisitions
In January we acquired Northern Light Refinishing, a small business near Grand Rapids, MI, that refurbishes head and tail lights. While currently a small business, we believe many of our light cores can be refurbished back into high quality replacement lights that can be sold to our collision repair and retail customers.
In February we acquired Potomac German Auto, a recycling business that serves the professional repair market from two locations totaling 13 acres. One facility is in Frederick, MD and the other is in St. Augustine, FL. These locations specialize in Mercedes Benz and BMW vehicles.
In March and April we acquired three businesses that had approximately $9.0 million in trailing annual revenue prior to our acquisition of them. These businesses are Al's Atomic, a retail oriented recycling business with two facilities in Dallas, TX totaling 50 acres, Crash Parts Warehouse, a small aftermarket business in Birmingham, AL, and Thruway, a small recycling business on 30 acres in Parryville, PA that will be a start-up for us to better serve the professional repair market in the greater Philadelphia area. We expect these three recent acquisitions on a combined basis to provide less than $0.01 in diluted earnings per share for 2007.
Company Outlook
We expect that 2007 organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2006 business acquisitions and the acquisitions that we have completed so far in 2007. We expect net income to be within a range of $54.2 million to $57.2 million and diluted earnings per share to be between $0.96 and $1.01.
Due to a new state tax law that was enacted in April 2007, we will be required to adjust some deferred tax assets in the second quarter of 2007. We estimate that our tax assets and net income will be reduced by approximately $0.6 million which will lower our diluted earnings per share by $0.01 in the second quarter of 2007.
For the second quarter of 2007, including the effect of the new state tax law, we expect net income to be within a range of $13.0 million to $13.5 million and diluted earnings per share to be between $0.23 and $0.24.
We anticipate that net cash provided by operating activities for 2007 will be over $55.0 million. We estimate our full year 2007 capital expenditures related to property and equipment, excluding expenditures for acquiring businesses, will be between $45.0 to $50.0 million. This includes approximately $5.0 million related to capital expenditures planned in late 2006 on projects that became delayed. As of April 26, 2007, we had outstanding debt under our bank credit facility of $117.5 million.
In April 2007 we increased the capacity of our bank credit facility from $135 million to $205 million with an accordion feature that could increase it to $305 million with the consent of banks participating in such increase. We also extended the maturity date of the facility to April 2012.
We estimate the weighted average diluted shares outstanding for the full year 2007 will be approximately 56.5 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 first quarter 2007 earnings results on Thursday, April 26, 2007 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 May 8, 2007.
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 February 28,
2007 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.
CONTACT:
LKQ Corporation
Mark T. Spears, Executive Vice President and Chief Financial Officer
312-621-1950
irinfo@lkqcorp.com
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Income
( In thousands, except per share data )
Three Months Ended
March 31,
2007 2006
Revenue $235,318 $192,139
Cost of goods sold 128,222 103,728
Gross margin 107,096 88,411
Facility and warehouse expenses 25,610 20,494
Distribution expenses 22,175 19,926
Selling, general and administrative
expenses 28,732 24,910
Depreciation and amortization 3,317 2,736
Operating income 27,262 20,345
Other (income) expense:
Interest expense, net 1,733 943
Other (income) expense, net (648) (806)
Total other expense 1,085 137
Income before provision for income
taxes 26,177 20,208
Provision for income taxes 10,383 8,124
Net income $15,794 $12,084
Net income per share:
Basic $0.30 $0.23
Diluted $0.28 $0.22
Weighted average common shares
outstanding:
Basic 53,316 52,062
Diluted 56,002 55,467
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Statements of Cash Flows
( In thousands )Three Months Ended March 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,794 $12,084
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 3,453 2,736
Share-based compensation expense 1,167 743
Deferred income taxes 686 384
Excess tax benefit from share-based
payment arrangements (157) (1,849)
Gain on sale of investment
securities -- (719)
Other adjustments 3 (12)
Changes in operating assets and
liabilities, net of effects from
purchase transactions:
Receivables (8,167) (2,108)
Inventory (10,807) (13,479)
Income taxes payable 7,453 6,907
Other operating assets and
liabilities 1,005 (593)
Net cash provided by
operating activities 10,430 4,094
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment
and other long term assets (9,080) (8,577)
Repayment of escrow -- (2,561)
Cash used in acquisitions (14,574) (29,068)
Net cash used in investing
activities (23,654) (40,206)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock
options and warrants 202 2,330
Excess tax benefit from share-based
payment arrangements 157 1,849
Repurchase and retirement of
redeemable common stock (1,125) --
Net borrowings of long-term debt 15,840 32,305
Net cash provided by financing
activities 15,07436,484
Net increase in cash and
equivalents 1,850 372
Cash and equivalents, beginning of
period 4,031 3,173
Cash and equivalents, end of
period $5,881 $3,545
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheets
(In thousands, except share and per share data)
March 31, December 31,
2007 2006
Assets
Current Assets:
Cash and equivalents $5,881 $4,031
Receivables, net 57,668 49,254
Inventory 139,095 124,541
Deferred income taxes 2,923 2,619
Prepaid expenses 2,776 3,369
Total Current Assets 208,343 183,814
Property and Equipment, net 132,373 127,084
Intangibles 256,965 246,300
Other Assets 10,118 7,157
Total Assets $607,799 $564,355
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $22,148 $19,242
Accrued expenses 28,060 29,504
Income taxes payable 7,966 304
Deferred revenue 4,201 3,859
Current portion of long-term
obligations 10,376 8,485
Total Current Liabilities 72,751 61,394
Long-Term Obligations, Excluding
Current Portion 106,662 91,962
Deferred Income Tax Liability 2,752 1,848
Other Noncurrent Liabilities 7,919 7,332
Redeemable Common Stock, $0.01 par
value, 100,000 shares issued atDecember 31, 2006 -- 617
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value,
500,000,000 shares authorized,
53,330,126 and 53,299,827 shares
issued at March 31, 2007
and December 31, 2006,
respectively. 533 533
Additional paid-in capital 324,206 323,189
Retained earnings 91,932 76,422
Accumulated other comprehensive
income 1,044 1,058
Total Stockholders' Equity 417,715 401,202
Total Liabilities and
Stockholders' Equity $607,799 $564,355
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( $ in thousands, except per share data )
Three Months Ended March 31,
Operating Highlights 2007 2006
% of % of
Revenue Revenue Growth % Growth
Revenue $235,318 100.0% $192,139 100.0% $43,179 22.5%
Cost of goods sold 128,222 54.5% 103,728 54.0% 24,494 23.6%
Gross margin 107,096 45.5% 88,411 46.0% 18,685 21.1%
Facility and
warehouse expenses 25,610 10.9% 20,494 10.7% 5,116 25.0%
Distribution
expenses 22,175 9.4% 19,926 10.4% 2,249 11.3%
Selling, general and
administrative
expenses 28,732 12.2% 24,910 13.0% 3,822 15.3%
Depreciation and
amortization 3,317 1.4% 2,736 1.4% 581 21.2%
Operating income 27,262 11.6% 20,345 10.6% 6,917 34.0%
Other (income)
expense:
Interest expense,
net 1,733 0.7% 943 0.5% 790 83.8%
Other (income)
expense, net (648) -0.3% (806) -0.4% 158 -19.6%
Total other
expense 1,085 0.5% 137 0.1% 948 692.0%
Income before
provision for
incometaxes 26,177 11.1% 20,208 10.5% 5,969 29.5%
Provision for income
taxes 10,383 4.4% 8,124 4.2% 2,259 27.8%
Net income $15,794 6.7% $12,084 6.3% $3,710 30.7%
Net income per
share:
Basic $0.30 $0.23 $0.07 30.4%
Diluted $0.28 $0.22 $0.06 27.3%
Weighted average
common shares
outstanding:
Basic 53,316 52,062 1,254 2.4%
Diluted 56,002 55,467 535 1.0%
The following table reconciles EBITDA to net income:
Three Months
Ended March 31,
2007 2006
(In thousands)
Net income $15,794 $12,084
Depreciation and amortization 3,453 2,736
Interest, net 1,733 943
Provision for income taxes 10,383 8,124
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) $31,363 $23,887
EBITDA as a percentage of revenue 13.3% 12.4%
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LKQ Corporation