• Revenue growth of 33.3% to $2.45 billion
• Organic revenue growth for parts and services of 5.4%
• Net income growth of 17.6%; adjusted net income growth of 34.0%
• Second quarter 2016 diluted EPS of $0.46; adjusted diluted EPS of $0.55
• Annual earnings guidance increased

CHICAGO, July 28, 2016 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported record revenue for the second quarter of 2016 of $2.45 billion, an increase of 33.3% as compared to $1.84 billion in the second quarter of 2015. Net income for the second quarter of 2016 was $140.7 million, an increase of 17.6% as compared to $119.7 million for the same period of 2015. On an adjusted basis, net income was $169.2 million, an increase of 34.0% as compared to the $126.3 million for the same period of 2015. Diluted earnings per share for the second quarter of 2016 was $0.46, an increase of 17.9% as compared to the $0.39 for the same period of 2015. On an adjusted basis, diluted earnings per share was $0.55 in the second quarter of 2016 reflecting a 34.1% increase over $0.41 for the same period of 2015.  See the reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share included with this press release.

“Despite tough comparable periods and the carryover impact of the mild winter in North America, organic revenue growth for parts and services was a respectable 5.4% during the quarter, demonstrating the resiliency of our operating and diversification strategy," stated Robert Wagman, President and Chief Executive Officer of LKQ Corporation. “We improved gross margins in our North American operations, which included 40 basis points of improvement from the aftermarket procurement initiatives implemented during 2016. Our European segment continued to show solid improvement in the second quarter, with its segment EBITDA margins increasing 40 basis points sequentially and 30 basis points year-over-year, even after absorbing the incremental cost associated with the new distribution facility in Tamworth, England. I am also pleased with the overall earnings growth achieved in the quarter, which is partly attributable to the smooth integration of the Rhiag and PGW acquisitions we completed earlier this year.”

On a six month year-to-date basis, revenue was $4.37 billion, an increase of 21.0% from $3.61 billion for the comparable period of 2015. Parts and services organic revenue growth for the first six months of 2016 was 5.8%. Net income for the first six months of 2016 was $248.5 million, as compared to $226.8 million for the first half of 2015. Diluted earnings per share was $0.81 for the first six months of 2016, reflecting a 9.5% increase as compared to $0.74 for the comparable period of 2015. On an adjusted basis, diluted earnings per share was $0.97 in the first six months of 2016 reflecting a 22.8% increase over $0.79 for the same period of 2015.

Balance Sheet and Liquidity

Cash flow from operations totaled $355.2 million on a six month year-to-date basis, of which approximately $102 million was invested in capital expenditures and other long term assets. As of June 30, 2016, the balance sheet reflected cash and equivalents of $273 million and outstanding debt of $3.3 billion. Total availability under the Company’s credit facility at June 30, 2016 was approximately $1.1 billion.

Other Events

In addition to the PGW acquisition, during the second quarter of 2016, LKQ acquired a distributor of aftermarket automotive products in Belgium, and LKQ’s European operations opened seven new Euro Car Parts branches.

On May 23, 2016, the Company announced that S&P Dow Jones Indices added LKQ Corporation to the S&P 500 Index. The addition became effective at the close of trading on May 20, 2016.

Company Outlook

The Company updated its guidance for 2016.

	Updated Guidance	Prior Guidance
Organic revenue growth (parts & services)	5.5% to 7.0%	6.0% to 8.0%
Adjusted net income*	$555 million to $580 million	$545 million to $575 million
Adjusted diluted EPS*	$1.79 to $1.87	$1.76 to $1.86
Cash flow from operations	$585 million to $635 million	$575 million to $625 million
Capital expenditures	$200 million to $225 million	$200 million to $225 million

*Non-GAAP measures. See the table accompanying this release that reconciles forecasted net income and diluted EPS to forecasted adjusted net income and adjusted diluted EPS.

Our revised 2016 guidance is based on current conditions (including acquisitions completed through June 30, 2016) and excludes the impact of restructuring and acquisition related expenses; loss on debt extinguishment; amortization of acquired intangibles; 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.

The updated guidance for 2016 is based on scrap prices remaining at current prices and exchange rates for the British pound, Euro and Canadian dollar holding near current levels. Changes in these figures may impact our ability to achieve the updated guidance.

Conference Call Details

On July 28, 2016 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) members of senior management will host a conference call and Webcast 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: 13640380#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through August 18, 2016. 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 is also a leader in the design, production and supply of automotive glass to OEMs. LKQ has operations in North America, Europe, China 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, guidance, expectations, beliefs, hopes, intentions and 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, including the U.K. withdrawal from the European Union, and the impact of these changes on our businesses, the demand for our products and our ability to obtain financing for operations;
• increasing competition in the automotive parts industry;
• fluctuations in the pricing of new original equipment manufacturer (“OEM”) replacement products;
• changes in the level of acceptance and promotion of alternative automotive parts by insurance companies and auto repairers;
• changes to our business relationships with insurance companies or changes by insurance companies to their business practices relating to the use of our products;
• 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 OEMs 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;
• variations in the number of vehicles manufactured and sold, vehicle accident rates, miles driven, and the age profile of vehicles in accidents;
• fluctuations in the prices of fuel, scrap metal and other commodities;
• changes in state or federal laws or regulations affecting our business;
• higher costs and the resulting potential inability to service our customers to the extent that our suppliers decide to discontinue business relationships with us;
• price increases, interruptions or disruptions to the supply of vehicle parts from aftermarket suppliers and from salvage auctions;
• changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;
• the risks associated with operating in foreign jurisdictions, including foreign laws and economic and political instabilities;
• declines in the values of our assets;
• additional unionization efforts, new collective bargaining agreements, and work stoppages;
• our ability to develop and implement the operational and financial systems needed to manage our operations;
• interruptions, outages or breaches of our operational systems, security systems, or infrastructure as a result of attacks on, or malfunctions of, our systems;
• 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;
• inaccuracies in the data relating to our industry published by independent sources upon which we rely;
• currency fluctuations in the U.S. dollar, pound sterling and euro versus other currencies;
• our ability to obtain financing on acceptable terms to finance our growth;
• our ability to satisfy our debt obligations and to operate within the limitations imposed by financing agreements; and
• other risks that are described in our Form 10-K filed February 25, 2016 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,
					2016				2015				2016				2015
	Revenue			$	2,450,693			$	1,838,070			$	4,372,169			$	3,611,982
	Cost of goods sold				1,528,746				1,114,126				2,689,785				2,188,559
		Gross margin			921,947				723,944				1,682,384				1,423,423
	Facility and warehouse expenses				178,670				136,379				336,275				269,036
	Distribution expenses				184,331				150,039				336,674				291,753
	Selling, general and administrative expenses				254,153				205,796				472,471				409,037
	Restructuring and acquisition related expenses				9,080				1,663				23,891				8,151
	Depreciation and amortization				52,529				29,782				84,217				59,235
		Operating income			243,184				200,285				428,856				386,211
	Other expense (income):
		Interest expense, net			26,381				14,622				40,973				29,528
		Loss on debt extinguishment			-				-				26,650				-
		Gains on foreign exchange contracts - acquisition related			-				-				(18,342	)			-
		Other expense (income), net			1,339				97				(1,550	)			2,016
		Total other expense, net			27,720				14,719				47,731				31,544
		Income before provision for income taxes			215,464				185,566				381,125				354,667
	Provision for income taxes				74,874				64,682				132,441				124,780
	Equity in earnings of unconsolidated subsidiaries				147				(1,162	)			(215	)			(3,070	)
		Net income		$	140,737			$	119,722			$	248,469			$	226,817
	Earnings per share:
		Basic		$	0.46			$	0.39			$	0.81			$	0.75
		Diluted		$	0.46			$	0.39			$	0.81			$	0.74
	Weighted average common shares outstanding:
		Basic			306,718				304,286				306,437				304,145
		Diluted			308,898				307,247				308,634				307,105

 

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
( In thousands, except share and per share data )
				June 30,				December 31,
					2016				2015
		Assets
Current Assets:
	Cash and equivalents			$	273,203			$	87,397
	Receivables, net				995,153				590,160
	Inventories, net				1,890,536				1,556,552
	Prepaid expenses and other current assets				139,536				106,603
		Total Current Assets			3,298,428				2,340,712
Property, Plant and Equipment, net					1,055,046				696,567
Intangible Assets:
	Goodwill				3,059,488				2,319,246
	Other intangibles, net				630,360				215,117
Other Assets					142,622				76,195
		Total Assets		$	8,185,944			$	5,647,837
		Liabilities and Stockholders' Equity
Current Liabilities:
	Accounts payable			$	735,138			$	415,588
	Accrued expenses:
		Accrued payroll-related liabilities			102,962				86,527
		Other accrued expenses			228,656				162,225
	Other current liabilities				40,794				31,596
	Current portion of long-term obligations				60,832				56,034
		Total Current Liabilities			1,168,382				751,970
Long-Term Obligations, Excluding Current Portion					3,274,629				1,528,668
Deferred Income Taxes					225,338				127,239
Other Noncurrent Liabilities					209,956				125,278
Commitments and Contingencies
Stockholders' Equity:
	Common stock, $0.01 par value, 1,000,000,000
		shares authorized, 306,785,582 and 305,574,384
		shares issued and outstanding at June 30, 2016
		and December 31, 2015, respectively			3,067				3,055
	Additional paid-in capital				1,111,221				1,090,713
	Retained earnings				2,374,853				2,126,384
	Accumulated other comprehensive loss				(181,502	)			(105,470	)
		Total Stockholders' Equity			3,307,639				3,114,682
		Total Liabilities and Stockholders' Equity		$	8,185,944			$	5,647,837

 

	LKQ CORPORATION AND SUBSIDIARIES
	Unaudited Condensed Consolidated Statements of Cash Flows
( In thousands )
					Six Months Ended
					June 30,
						2016				2015
	CASH FLOWS FROM OPERATING ACTIVITIES:
		Net income			$	248,469			$	226,817
		Adjustments to reconcile net income to net cash
			provided by operating activities:
			Depreciation and amortization			90,882				61,714
			Stock-based compensation expense			11,425				11,114
			Excess tax benefit from stock-based payments			(6,685	)			(6,737	)
			Loss on debt extinguishment			26,650				-
			Gains on foreign exchange contracts - acquisition related			(18,342	)			-
			Other			7,193				5,880
			Changes in operating assets and liabilities, net of
			effects from acquisitions:
			Receivables, net			(83,515	)			(48,995	)
			Inventories, net			42,548				38,399
			Prepaid income taxes/income taxes payable			23,029				21,052
			Accounts payable			31,004				(18,597	)
			Other operating assets and liabilities			(17,428	)			(7,948	)
			Net cash provided by operating activities			355,230				282,699
	CASH FLOWS FROM INVESTING ACTIVITIES:
		Purchases of property, plant and equipment				(102,319	)			(66,763	)
		Acquisitions, net of cash acquired				(1,268,841	)			(37,208	)
		Other investing activities, net				29,655				(5,209	)
			Net cash used in investing activities			(1,341,505	)			(109,180	)
	CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from exercise of stock options				4,889				3,288
		Excess tax benefit from stock-based payments				6,685				6,737
		Taxes paid related to net share settlements of stock-based
		compensation awards				(2,281	)			(5,243	)
		Proceeds from issuance of Euro notes				563,450				-
		Repayment of Rhiag debt and related payments				(543,347	)			-
		Net borrowings (payments) of long-term and other obligations,
			excluding Rhiag debt repayments and issuance of Euro notes			1,164,740				(149,703	)
		Debt issuance costs				(16,171	)			-
			Net cash provided by (used in) financing activities			1,177,965				(144,921	)
	Effect of exchange rate changes on cash and equivalents					(5,884	)			220
	Net increase in cash and equivalents					185,806				28,818
	Cash and equivalents, beginning of period					87,397				114,605
	Cash and equivalents, end of period				$	273,203			$	143,423

 

The following unaudited tables compare certain third party revenue categories:
			Three Months Ended
			June 30,
				2016				2015			$ Change				% Change
			(In thousands)
Included in Unaudited Condensed Consolidated
Statements of Income of LKQ Corporation
North America			$	962,954			$	912,159			$	50,795				5.6	%
Europe				822,959				508,731				314,228				61.8	%
Specialty				335,972				283,458				52,514				18.5	%
Glass				210,104				-				210,104				n/m
Parts and services				2,331,989				1,704,348				627,641				36.8	%
Other				118,704				133,722				(15,018	)			(11.2	%)
Total			$	2,450,693			$	1,838,070			$	612,623				33.3	%
Revenue changes by category for the three months ended June 30, 2016 vs. 2015:
			Revenue Change Attributable to:
			Organic				Acquisition				Foreign Exchange				Total Change (1)
North America				3.1	%			2.8	%			(0.3	%)			5.6	%
Europe				8.0	%			57.5	%			(3.7	%)			61.8	%
Specialty				8.0	%			11.1	%			(0.5	%)			18.5	%
Glass				n/m				n/m				n/m				n/m
Parts and services				5.4	%			32.8	%			(1.4	%)			36.8	%
Other				(16.2	%)			5.2	%			(0.2	%)			(11.2	%)
Total				3.8	%			30.8	%			(1.3	%)			33.3	%
			Six Months Ended
			June 30,
				2016				2015			$ Change				% Change
			(In thousands)
Included in Unaudited Condensed Consolidated
Statements of Income of LKQ Corporation
North America			$	1,948,210			$	1,830,492			$	117,718				6.4	%
Europe				1,368,666				994,827				373,839				37.6	%
Specialty				623,334				523,945				99,389				19.0	%
Glass				210,104				-				210,104				n/m
Parts and services				4,150,314				3,349,264				801,050				23.9	%
Other				221,855				262,718				(40,863	)			(15.6	%)
Total			$	4,372,169			$	3,611,982			$	760,187				21.0	%
Revenue changes by category for the six months ended June 30, 2016 vs. 2015:
			Revenue Change Attributable to:
			Organic				Acquisition				Foreign Exchange				Total Change (1)
North America				4.0	%			3.0	%			(0.5	%)			6.4	%
Europe				7.5	%			34.2	%			(4.1	%)			37.6	%
Specialty				9.3	%			10.3	%			(0.6	%)			19.0	%
Glass				n/m				n/m				n/m				n/m
Parts and services				5.8	%			19.7	%			(1.6	%)			23.9	%
Other				(20.6	%)			5.2	%			(0.2	%)			(15.6	%)
Total				3.9	%			18.6	%			(1.5	%)			21.0	%
(1) The sum of the individual revenue change components may not equal the total percentage change due to rounding.

 

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )
						Three Months Ended June 30,
Operating Highlights							2016								2015
										% of								% of
										Revenue (1)								Revenue (1)				Change			% Change
	Revenue					$	2,450,693				100.0	%		$	1,838,070				100.0	%		$	612,623			33.3	%
	Cost of goods sold						1,528,746				62.4	%			1,114,126				60.6	%			414,620			37.2	%
				Gross margin			921,947				37.6	%			723,944				39.4	%			198,003			27.4	%
	Facility and warehouse expenses						178,670				7.3	%			136,379				7.4	%			42,291			31.0	%
	Distribution expenses						184,331				7.5	%			150,039				8.2	%			34,292			22.9	%
	Selling, general and administrative expenses						254,153				10.4	%			205,796				11.2	%			48,357			23.5	%
	Restructuring and acquisition related expenses						9,080				0.4	%			1,663				0.1	%			7,417			n/m
	Depreciation and amortization						52,529				2.1	%			29,782				1.6	%			22,747			76.4	%
				Operating income			243,184				9.9	%			200,285				10.9	%			42,899			21.4	%
	Other expense:
				Interest expense, net			26,381				1.1	%			14,622				0.8	%			11,759			80.4	%
				Loss on debt extinguishment			-				0.0	%			-				0.0	%			-			n/m
				Gains on foreign exchange contracts - acquisition related			-				0.0	%			-				0.0	%			-			n/m
				Other expense, net			1,339				0.1	%			97				0.0	%			1,242			n/m
				Total other expense, net			27,720				1.1	%			14,719				0.8	%			13,001			88.3	%
				Income before provision for income taxes			215,464				8.8	%			185,566				10.1	%			29,898			16.1	%
	Provision for income taxes						74,874				3.1	%			64,682				3.5	%			10,192			15.8	%
	Equity in earnings of unconsolidated subsidiaries						147				0.0	%			(1,162	)			(0.1	%)			1,309			n/m
				Net income		$	140,737				5.7	%		$	119,722				6.5	%		$	21,015			17.6	%
	Earnings per share:
				Basic		$	0.46							$	0.39							$	0.07			17.9	%
				Diluted		$	0.46							$	0.39							$	0.07			17.9	%
	Weighted average common shares outstanding:
				Basic			306,718								304,286								2,432			0.8	%
				Diluted			308,898								307,247								1,651			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							2016								2015
										% of								% of
										Revenue (1)								Revenue (1)				Change			% Change
	Revenue					$	4,372,169				100.0	%		$	3,611,982				100.0	%		$	760,187			21.0	%
	Cost of goods sold						2,689,785				61.5	%			2,188,559				60.6	%			501,226			22.9	%
				Gross margin			1,682,384				38.5	%			1,423,423				39.4	%			258,961			18.2	%
	Facility and warehouse expenses						336,275				7.7	%			269,036				7.4	%			67,239			25.0	%
	Distribution expenses						336,674				7.7	%			291,753				8.1	%			44,921			15.4	%
	Selling, general and administrative expenses						472,471				10.8	%			409,037				11.3	%			63,434			15.5	%
	Restructuring and acquisition related expenses						23,891				0.5	%			8,151				0.2	%			15,740			n/m
	Depreciation and amortization						84,217				1.9	%			59,235				1.6	%			24,982			42.2	%
				Operating income			428,856				9.8	%			386,211				10.7	%			42,645			11.0	%
	Other expense (income):
				Interest expense, net			40,973				0.9	%			29,528				0.8	%			11,445			38.8	%
				Loss on debt extinguishment			26,650				0.6	%			-				0.0	%			26,650			n/m
				Gains on foreign exchange contracts - acquisition related			(18,342	)			(0.4	%)			-				0.0	%			(18,342	)		n/m
				Other (income) expense, net			(1,550	)			(0.0	%)			2,016				0.1	%			(3,566	)		n/m
				Total other expense, net			47,731				1.1	%			31,544				0.9	%			16,187			51.3	%
				Income before provision for income taxes			381,125				8.7	%			354,667				9.8	%			26,458			7.5	%
	Provision for income taxes						132,441				3.0	%			124,780				3.5	%			7,661			6.1	%
	Equity in earnings of unconsolidated subsidiaries						(215	)			(0.0	%)			(3,070	)			(0.1	%)			2,855			93.0	%
				Net income		$	248,469				5.7	%		$	226,817				6.3	%		$	21,652			9.5	%
	Earnings per share:
				Basic		$	0.81							$	0.75							$	0.06			8.0	%
				Diluted		$	0.81							$	0.74							$	0.07			9.5	%
	Weighted average common shares outstanding:
				Basic			306,437								304,145								2,292			0.8	%
				Diluted			308,634								307,105								1,529			0.5	%
		(1	)	The sum of the individual percentage of revenue components may not equal the total due to rounding.

 

The following unaudited table reconciles Net Income to EBITDA:
						Three Months Ended								Six Months Ended
						June 30,								June 30,
							2016				2015				2016				2015
						(In thousands)
Net income						$	140,737			$	119,722			$	248,469			$	226,817
Depreciation and amortization							57,716				31,045				90,882				61,714
Interest expense, net							26,381				14,622				40,973				29,528
Loss on debt extinguishment (1)							-				-				26,650				-
Provision for income taxes							74,874				64,682				132,441				124,780
Earnings before interest, taxes, depreciation
			and amortization (EBITDA)			$	299,708			$	230,071			$	539,415			$	442,839
EBITDA as a percentage of revenue							12.2	%			12.5	%			12.3	%			12.3	%
	(1	)	Loss on debt extinguishment is considered a component of interest in calculating EBITDA.
			We present EBITDA as we believe it is a supplemental financial measure that offers investors, securities analysts and other interested parties useful information to evaluate our operating performance and the value of our business.  EBITDA provides insight into our profitability trends, and allows investors, securities analysts and other interested parties to analyze our operating results with and without the impact of depreciation, amortization, interest (which includes loss on debt extinguishment) and income tax expense. We believe EBITDA is used by investors, securities analysts and other interested parties in evaluating the operating performance and the value of other 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,
				2016							2015							2016						2015
(In thousands)						% of Revenue							% of Revenue							% of Revenue						% of Revenue
Revenue
North America			$	1,080,520						$	1,045,151						$	2,168,097					$	2,091,324
Europe				824,206							509,903							1,370,967						997,249
Specialty				337,066							284,330							625,379						525,552
Glass				210,178							-							210,178						-
Eliminations				(1,277	)						(1,314	)						(2,452	)					(2,143	)
Total revenue			$	2,450,693						$	1,838,070						$	4,372,169					$	3,611,982
Segment EBITDA
North America			$	163,825			15.2	%		$	138,880			13.3	%		$	311,200			14.4	%	$	288,268			13.8	%
Europe				89,982			10.9	%			53,943			10.6	%			147,480			10.8	%		100,466			10.1	%
Specialty				41,792			12.4	%			40,198			14.1	%			73,530			11.8	%		65,602			12.5	%
Glass				23,301			11.1	%			-			n/m				23,301			11.1	%		-			n/m
Total Segment EBITDA				318,900			13.0	%			233,021			12.7	%			555,511			12.7	%		454,336			12.6	%
Deduct:
Restructuring and acquisition related expenses				9,080							1,663							23,891						8,151
Inventory step-up adjustment – acquisition related				10,213							-							10,213						-
Change in fair value of contingent consideration liabilities				46							125							119						276
Add:
Equity in earnings of unconsolidated subsidiaries				147							(1,162	)						(215	)					(3,070	)
Gains on foreign exchange contracts - acquisition related				-							-							18,342						-
EBITDA			$	299,708			12.2	%		$	230,071			12.5	%		$	539,415			12.3	%	$	442,839			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 is used by management to compare profitability among our segments and evaluate business strategies. We also consider Segment EBITDA to be a useful financial measure in evaluating our operating performance, as it provides investors, securities analysts and other interested parties with supplemental information regarding the underlying trends in our ongoing operations.  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, other acquisition related gains and losses and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (which includes loss on debt extinguishment) and income tax expense.

 

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,
				2016				2015				2016				2015
(In thousands, except per share data)
Net income			$	140,737			$	119,722			$	248,469			$	226,817
Adjustments:
Restructuring and acquisition related expenses				9,080				1,663				23,891				8,151
Loss on debt extinguishment				-				-				26,650				-
Amortization of acquired intangibles				24,250				8,225				33,151				16,496
Inventory step-up adjustment – acquisition related				10,213				-				10,213				-
Change in fair value of contingent consideration liabilities				46				125				119				276
Gains on foreign exchange contracts - acquisition related				-				-				(18,342	)			-
Tax effect of adjustments				(15,130	)			(3,450	)			(26,257	)			(8,667	)
Adjusted net income			$	169,196			$	126,285			$	297,894			$	243,073
Weighted average diluted common shares outstanding				308,898				307,247				308,634				307,105
Diluted earnings per share			$	0.46			$	0.39			$	0.81			$	0.74
Adjusted diluted earnings per share			$	0.55			$	0.41			$	0.97			$	0.79
We present Adjusted Net Income and Adjusted Diluted Earnings per Share (“EPS”) as we believe these measures are useful for evaluating the core operating performance of our business across reporting periods and in analyzing the company’s historical operating results. Additionally, these measures are used by management in its decision making and overall evaluation of operating performance of the company and are included in the metrics used to determine incentive compensation for our senior management. In the table above, Adjusted Net Income and Adjusted Diluted EPS are defined as Net Income and Diluted EPS adjusted to eliminate the impact of restructuring and acquisition related expenses, loss on debt extinguishment, amortization of acquired intangibles, the change in fair value of contingent consideration liabilities, other acquisition related gains and losses, and the tax effect of these adjustments. The tax effect of these adjustments is calculated using the effective tax rate for the applicable period. 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 Forecasted Net Income and Diluted Earnings per Share to Forecasted Adjusted Net Income and Adjusted Diluted Earnings per Share, respectively:
			Forecasted
			Fiscal Year 2016
			Minimum Guidance				Maximum Guidance
(In millions, except per share data)
Net income			$	478			$	503
Adjustments:
Restructuring and acquisition related expenses				24				24
Loss on debt extinguishment				27				27
Amortization of acquired intangibles				75				75
Inventory step-up adjustment – acquisition related				10				10
Gains on foreign exchange contracts - acquisition related				(18	)			(18	)
Tax effect of adjustments				(41	)			(41	)
Adjusted net income			$	555			$	580
Weighted average diluted common shares outstanding				310				310
Diluted earnings per share			$	1.54			$	1.63
Adjusted diluted earnings per share			$	1.79			$	1.87
Refer to the discussion of Adjusted Net Income and Adjusted Diluted Earnings per Share for details on the calculation of these measures. With the exception of net income and amortization of acquired intangibles, we have not forecasted amounts for the fiscal year 2016 beyond what was incurred as of June 30, 2016.

 

The following unaudited table reconciles consolidated growth for Parts & Services Revenue and Total Revenue to constant currency revenue growth for the same measure:
		Three Months Ended						Three Months Ended
		June 30, 2016						June 30, 2016
Parts & Services						Total Revenue
Revenue growth as reported			36.8	%		Revenue growth as reported			33.3	%
Less: Currency impact			(1.4	%)		Less: Currency impact			(1.3	%)
Revenue growth at constant currency			38.2	%		Revenue growth at constant currency			34.6	%
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, as this statistic removes the translation impact of exchange rate fluctuations, which is non-operational. 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-LKQ Corporation
Director, Investor Relations
(312) 621-2793
jpboutross@lkqcorp.com