NASDAQ: LKQ
39.51
+0.20 (+0.51%)
Volume: 3,655,515
December 15, 2017

LKQ Corporation Announces Record Results for First Quarter 2017

April 27, 2017
  • Revenue growth of 21.9% to $2.34 billion
  • Organic revenue growth for parts and services of 4.5%
  • Income from continuing operations growth of 25.5% to $141 million
  • First quarter 2017 diluted EPS from continuing operations of $0.45; adjusted diluted EPS of $0.49
  • 2017 annual earnings guidance increased

CHICAGO, April 27, 2017 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported record revenue for the first quarter of 2017 of $2.34 billion, an increase of 21.9% as compared to $1.92 billion in the first quarter of 2016. Income from continuing operations for the first quarter of 2017 was $140.8 million, an increase of 25.5% as compared to $112.2 million for the same period of 2016. Diluted earnings per share from continuing operations for the first quarter of 2017 was $0.45, an increase of 25.0% as compared to $0.36 for the same period of 2016. On an adjusted basis, diluted earnings per share from continuing operations was $0.49, an increase of 16.7% as compared to $0.42 for the same period of 2016.

“I am proud of our ability to deliver excellent top line and bottom line growth, achieving record revenue and earnings in the first quarter of 2017," stated Robert Wagman, President and Chief Executive Officer of LKQ Corporation. “I am particularly pleased with the margin improvement in the quarter, notably North America which increased Segment EBITDA margin by 210 basis points sequentially and 110 basis points year-over-year. Global revenue growth in parts and services was a strong 24.5% on a constant currency basis. Also, despite the mild weather we again faced in North America during the first quarter, global organic revenue growth for parts and services was 4.5%, consistent with our annual guidance.”

Balance Sheet and Liquidity

Cash flow from operations totaled $172 million during the first quarter, and the Company invested approximately $41 million in capital expenditures and other long term assets for continuing operations and paid $77 million for acquisitions. Proceeds from the divestiture of PGW’s automotive glass manufacturing business were used to pay down debt. As of March 31, 2017, LKQ’s balance sheet reflected cash and equivalents of $265 million and outstanding debt of $3.0 billion. Total availability under the Company’s credit facilities at March 31, 2017 was approximately $1.4 billion.

Other Events

In addition to finalizing the previously announced divestiture of PGW’s automotive glass manufacturing business, during the first quarter of 2017 LKQ acquired parts recycling businesses in Michigan and Sweden, and a specialty products business in Pennsylvania. Also, in the first quarter, LKQ’s Rhiag operations opened 12 new Elit and Auto Kelly operations in Eastern Europe.

Company Outlook

The Company updated its guidance for 2017.

 Updated GuidancePrior Guidance
Organic revenue growth for parts & services4.0% to 6.0%4.0% to 6.0%
Adjusted income from continuing operations*$565 million to $595 million$560 million to $590 million
Adjusted diluted EPS from continuing operations*$1.82 to $1.92$1.80 to $1.90
Cash flow from operations$615 million to $645 million$610 million to $640 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 2017 guidance for adjusted income from continuing operations and adjusted diluted EPS is based on current conditions (including acquisitions completed through April 27, 2017) and excludes the impact of restructuring and acquisition related expenses; amortization of acquired intangibles; income tax effects related to excess tax benefits; and gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities).The updated guidance for 2017 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.

Non-GAAP Financial Measures

This release contains and management’s presentation on the conference call will refer to non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included with this release are reconciliations of the difference between each non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP.

Conference Call Details

LKQ will host a conference call and webcast on April 27, 2017 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) 201-0168. International access to the call may be obtained by dialing (647) 788-4901.

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 (800) 585-8367 or (416) 621-4642 for international calls. The telephone replay will require you to enter conference ID: 6722550#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through May 11, 2017. 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, Europe 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

Statements and information in this press release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the “safe harbor” provisions of such Act.

Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. These statements are subject to a number of risks, uncertainties, assumptions and other factors including those identified below.  All forward-looking statements are based on information available to us at the time the statements are made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by our forward-looking statements include the factors set forth below, and other factors discussed in our filings with the SEC, including those disclosed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2016 and in our subsequent Quarterly Reports on Form 10-Q. These reports are available on our investor relations website at lkqcorp.com and on the SEC website at sec.gov.

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 (including the potential competitive advantage to OEMs with “connected car” technology);
  • fluctuations in the pricing of new 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; 
  • the implementation of a border tax or tariff on imports and the negative impact on our business due to the amount of inventory we import;
  • 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;
  • the increase of accident avoidance systems being installed in vehicles;
  • the potential loss of sales of certain mechanical parts due to the rise of electric vehicle sales;
  • fluctuations in the prices of fuel, scrap metal and other commodities;
  • changes in 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 vehicles or 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 arrangements; and
  • other risks that are described in our Form 10-K filed February 27, 2017 and in other reports filed by us from time to time with the Securities and Exchange Commission.


LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated
Statements of Income, with Supplementary Data
( In thousands, except per share data )
              
    Three Months Ended March 31,
              
    2017 2016   
      % of   % of   
      Revenue (1)   Revenue (1) Change% Change
              
 Revenue $2,342,843  100.0% $1,921,476  100.0% $421,367 21.9%
              
 Cost of goods sold  1,412,750  60.3%  1,161,039  60.4%  251,711 21.7%
              
  Gross margin  930,093  39.7%  760,437  39.6%  169,656 22.3%
              
 Facility and warehouse expenses  189,780  8.1%  157,605  8.2%  32,175 20.4%
              
 Distribution expenses  185,810  7.9%  152,343  7.9%  33,467 22.0%
              
 Selling, general and administrative expenses  267,227  11.4%  218,318  11.4%  48,909 22.4%
              
 Restructuring and acquisition related expenses  2,928  0.1%  14,811  0.8%  (11,883)(80.2%)
              
 Depreciation and amortization  48,656  2.1%  31,688  1.6%  16,968 53.5%
              
  Operating income  235,692  10.1%  185,672  9.7%  50,020 26.9%
              
 Other expense (income):           
  Interest expense, net  23,988  1.0%  14,592  0.8%  9,396 64.4%
  Loss on debt extinguishment  -  0.0%  26,650  1.4%  (26,650)(100.0%)
  Gains on foreign exchange contracts - acquisition related  -  0.0%  (18,342) (1.0%)  18,342 (100.0%)
  Other income, net  (1,046) (0.0%)  (2,889) (0.2%)  1,843 (63.8%)
              
  Total other expense, net  22,942  1.0%  20,011  1.0%  2,931 14.6%
              
  Income from continuing operations before provision for income taxes  212,750  9.1%  165,661  8.6%  47,089 28.4%
              
 Provision for income taxes  72,155  3.1%  53,128  2.8%  19,027 35.8%
              
 Equity in earnings (loss) of unconsolidated subsidiaries  214  0.0%  (362) (0.0%)  576 n/m 
              
  Income from continuing operations  140,809  6.0%  112,171  5.8%  28,638 25.5%
              
 Loss from discontinued operations, net of tax  (4,531) (0.2%)  -  0.0%  (4,531)n/m 
              
  Net income $136,278  5.8% $112,171  5.8% $24,107 21.5%
              
              
 Basic earnings per share(2):           
  Income from continuing operations $0.46    $0.37    $0.09 24.3%
  Loss from discontinued operations  (0.01)    -     (0.01)n/m 
  Net income $0.44    $0.37    $0.07 18.9%
              
 Diluted earnings per share(2):           
  Income from continuing operations $0.45    $0.36    $0.09 25.0%
  Loss from discontinued operations  (0.01)    -     (0.01)n/m 
  Net income $0.44    $0.36    $0.08 22.2%
              
 Weighted average common shares outstanding:           
  Basic  308,028     306,157     1,871 0.6%
              
  Diluted  310,300     309,193     1,107 0.4%
              
              
 (1)The sum of the individual percentage of revenue components may not equal the total due to rounding. 
 (2)The sum of the individual earnings per share amounts may not equal the total due to rounding. 
             

 

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
( In thousands, except share and per share data )
       
       
    March 31, December 31,
    2017 2016
  Assets    
       
Current assets:    
 Cash and cash equivalents $264,614  $227,400 
 Receivables, net  973,670   860,549 
 Inventories  1,978,465   1,935,237 
 Prepaid expenses and other current assets  101,377   87,768 
 Assets of discontinued operations  -   456,640 
  Total current assets  3,318,126   3,567,594 
       
Property and equipment, net  809,208   811,576 
Intangible assets:    
 Goodwill  3,120,844   3,054,769 
 Other intangibles, net  576,451   584,231 
Equity method investments  185,262   183,467 
Other assets  112,355   101,562 
       
  Total assets $8,122,246  $8,303,199 
       
  Liabilities and Stockholders' Equity    
       
Current liabilities:    
 Accounts payable $651,117  $633,773 
 Accrued expenses:    
  Accrued payroll-related liabilities  89,977   118,755 
  Other accrued expenses  243,018   209,101 
 Other current liabilities  83,601   37,943 
 Current portion of long-term obligations  91,988   66,109 
 Liabilities of discontinued operations  -   145,104 
       
  Total current liabilities  1,159,701   1,210,785 
       
Long-term obligations, excluding current portion  2,933,277   3,275,662 
Deferred income taxes  221,504   199,657 
Other noncurrent liabilities  200,893   174,146 
       
Commitments and contingencies    
       
Stockholders' equity:    
       
  Common stock, $0.01 par value, 1,000,000,000    
  shares authorized, 308,283,752 and 307,544,759    
  shares issued and outstanding at March 31, 2017    
  and December 31, 2016, respectively  3,083   3,075 
 Additional paid-in capital  1,122,787   1,116,690 
 Retained earnings  2,726,637   2,590,359 
 Accumulated other comprehensive loss  (245,636)  (267,175)
       
  Total stockholders' equity  3,606,871   3,442,949 
       
  Total liabilities and stockholders' equity $8,122,246  $8,303,199 
       

 

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
( In thousands )
       
      Three Months Ended
      March 31,
      2017 2016
         
 CASH FLOWS FROM OPERATING ACTIVITIES:     
  Net income  $136,278  $112,171 
  Adjustments to reconcile net income to net cash     
   provided by operating activities:     
   Depreciation and amortization   50,604   33,166 
   Stock-based compensation expense   7,285   5,916 
   Loss on debt extinguishment   -   26,650 
   Loss on sale of business   8,580   - 
   Gains on foreign exchange contracts - acquisition related   -   (18,342)
   Other   1,343   1,156 
   Changes in operating assets and liabilities, net of     
   effects from acquisitions and dispositions:     
   Receivables, net   (108,893)  (78,373)
   Inventories   (745)  18,973 
   Prepaid income taxes/income taxes payable   61,064   41,152 
   Accounts payable   24,449   20,514 
   Other operating assets and liabilities   (7,672)  (28,139)
         
   Net cash provided by operating activities   172,293   134,844 
         
 CASH FLOWS FROM INVESTING ACTIVITIES:     
  Purchases of property and equipment   (44,398)  (50,393)
  Acquisitions, net of cash acquired   (77,056)  (603,735)
  Proceeds from disposal of business/investment   301,297   10,304 
  Proceeds from foreign exchange contracts   -   18,342 
  Other investing activities, net   1,314   458 
         
   Net cash provided by (used in) investing activities   181,157   (625,024)
         
 CASH FLOWS FROM FINANCING ACTIVITIES:     
  Proceeds from exercise of stock options   2,464   3,202 
  Taxes paid related to net share settlements of stock-based   
  compensation awards   (3,644)  (2,281)
  Debt issuance costs   -   (5,907)
  Borrowings under revolving credit facilities   45,239   1,143,217 
  Repayments under revolving credit facilities   (389,313)  (345,609)
  Borrowing under term loans   -   338,478 
  Repayments under term loans   (9,295)  - 
  Borrowings under receivables securitization facility   -   97,000 
  Repayments under receivables securitization facility   (150)  (63,000)
  Borrowings of other debt, net   23,313   12,850 
  Payments of Rhiag debt and related payments   -   (543,347)
  Payments of other obligations   -   (1,437)
  Other financing activities, net   5,000   - 
         
   Net cash (used in) provided by financing activities   (326,386)  633,166 
         
 Effect of exchange rate changes on cash and cash equivalents 3,034   (1,163)
         
 Net increase in cash and cash equivalents   30,098   141,823 
 Cash and cash equivalents of continuing operations, beginning   
  of period   227,400   87,397 
  Add: Cash and cash equivalents of discontinued operations,   
   beginning of period   7,116   - 
 Cash and cash equivalents of continuing and discontinued     
  operations, beginning of period   234,516   87,397 
         
 Cash and cash equivalents, end of period  $264,614  $229,220 
         

The following unaudited tables compare certain third party revenue categories:

        
   Three Months Ended    
   March 31,    
          
   2017 2016 $ Change % Change
              
   (In thousands)    
Included in Unaudited Condensed Consolidated       
Statements of Income of LKQ Corporation       
          
North America $1,079,875  $978,499  $101,376  10.4%
Europe   819,167   545,707   273,460  50.1%
Specialty  313,899   294,119   19,780  6.7%
Parts and services 2,212,941   1,818,325   394,616  21.7%
Other   129,902   103,151   26,751  25.9%
Total  $2,342,843  $1,921,476  $421,367  21.9%
          
Revenue changes by category for the three months ended March 31, 2017 vs. 2016:    
          
        
   Revenue Change Attributable to:  
   Organic Acquisition Foreign Exchange Total Change (1)
          
North America  1.8%  8.3%  0.2% 10.4%
Europe   8.5%  51.5%  (9.9%) 50.1%
Specialty  6.3%  0.1%  0.3% 6.7%
Parts and services 4.5%  20.0%  (2.8%) 21.7%
Other   25.9%  0.2%  (0.1%) 25.9%
Total   5.7%  18.9%  (2.7%) 21.9%
          
          
          
(1) The sum of the individual revenue change components may not equal the total percentage change due to rounding.         
          

The following unaudited table compares revenue and Segment EBITDA by reportable segment: 

        
  Three Months Ended 
  March 31, 
        
  2017 2016 
(In thousands)  % of
Revenue
  % of
Revenue
 
        
Revenue       
North America $1,208,240   $1,080,820   
Europe  820,897    546,761   
Specialty  314,934    295,070   
Eliminations  (1,228)   (1,175)  
        
Total revenue $2,342,843   $1,921,476   
        
Segment EBITDA       
North America (1) $176,135 14.6% $145,691 13.5% 
Europe  78,694 9.6%  57,498 10.5% 
Specialty  35,441 11.3%  33,422 11.3% 
        
Total Segment EBITDA $290,270 12.4% $236,611 12.3% 
        
        
(1) In the fourth quarter of 2016, the North America Segment EBITDA was 12.5% of revenue.       
        

We have presented Segment EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our segment profit and loss. We calculate Segment EBITDA 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 discontinued operations, depreciation, amortization, interest (which includes loss on debt extinguishment) and income tax expense. Our chief operating decision maker, who is our Chief Executive Officer, uses Segment EBITDA as the key measure of our segment profit or loss. We use Segment EBITDA 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.

The following unaudited table reconciles consolidated revenue growth for parts & services to constant currency revenue growth for the same measure: 

 
     
  Three Months Ended
  March 31, 2017
  Consolidated Europe
Parts & Services    
Revenue growth as reported 21.7% 50.1%
Less: Currency impact (2.8%) (9.9%)
Revenue growth at constant currency 24.5% 60.0%
     

We have presented the growth of our revenue on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency revenue 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 are outside of our control and do not reflect our operational 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 financial 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. In addition, not all companies that report revenue growth on a constant currency basis calculate such measure in the same manner as we do and, accordingly, our calculations are not necessarily comparable to similarly-named measures of other companies and may not be appropriate measures for performance relative to other companies.

The following unaudited table reconciles Net Income to EBITDA and Segment EBITDA: 

       
    Three Months Ended
    March 31,
       
    2017 2016
           
    (In thousands)
       
Net income  $136,278  $112,171 
       
Subtract:     
 Loss from discontinued operations, net of tax   (4,531)  - 
       
Income from continuing operations   140,809   112,171 
       
Add:     
 Depreciation and amortization   50,604   33,166 
 Interest expense, net   23,988   14,592 
 Loss on debt extinguishment (1)   -   26,650 
 Provision for income taxes   72,155   53,128 
       
Earnings before interest, taxes, depreciation     
 and amortization (EBITDA)   287,556   239,707 
       
Subtract:     
 Equity in earnings (loss) of unconsolidated subsidiaries  214   (362)
 Gains on foreign exchange contracts - acquisition related  -   18,342 
Add:     
 Restructuring and acquisition related expenses   2,928   14,811 
 Change in fair value of contingent consideration liabilities  -   73 
       
Segment EBITDA  $290,270  $236,611 
       
EBITDA as a percentage of revenue   12.3%  12.5%
       
Segment EBITDA as a percentage of revenue   12.4%  12.3%
       

(1) Loss on debt extinguishment is considered a component of interest in calculating EBITDA. 

We have presented EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our operating performance and the value of our business. We calculate EBITDA as net income excluding discontinued operations, depreciation, amortization, interest (which includes loss on debt extinguishment) and income tax expense. EBITDA provides insight into our profitability trends and allows management and investors to analyze our operating results with and without the impact of discontinued operations, 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.

We have presented Segment EBITDA solely as a supplemental disclosure that offers investors, securities analysts and other interested parties useful information to evaluate our segment profit and loss and underlying trends in our ongoing operations. We calculate Segment EBITDA 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. Our chief operating decision maker, who is our Chief Executive Officer, uses Segment EBITDA as the key measure of our segment profit or loss. We use Segment EBITDA to compare profitability among our segments and evaluate business strategies. 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.

EBITDA and Segment EBITDA should not be construed as an alternatives 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 or Segment EBITDA information calculate EBITDA or Segment EBITDA in the same manner as we do and, accordingly, our calculations are not necessarily comparable to similarly named measures of other companies and may not be appropriate measures for performance relative to other companies.

The following unaudited table reconciles Net Income and Diluted Earnings per Share to Adjusted Net Income  and Adjusted Diluted Earnings per Share from Continuing Operations, respectively: 

 
  Three Months Ended
March 31,
     
  2017 2016
(In thousands, except per share data)    
     
Net income $136,278  $112,171 
     
Subtract:    
     
Loss from discontinued operations, net of tax  (4,531)  - 
     
Income from continuing operations  140,809   112,171 
     
Adjustments - continuing operations:    
     
Restructuring and acquisition related expenses  2,928   14,811 
Loss on debt extinguishment  -   26,650 
Amortization of acquired intangibles  21,300   8,901 
Change in fair value of contingent consideration liabilities  -   73 
Gains on foreign exchange contracts - acquisition related  -   (18,342)
Excess tax benefit from stock-based payments  (3,256)  (4,439)
Tax effect of adjustments  (8,540)  (11,127)
     
Adjusted net income - continuing operations $153,241  $128,698 
     
     
Weighted average diluted common shares outstanding  310,300   309,193 
     
Diluted earnings per share - continuing operations $0.45  $0.36 
     
Adjusted diluted earnings per share - continuing operations$0.49  $0.42 
     

We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations as we believe these measures are useful for evaluating the core operating performance of our continuing business across reporting periods and in analyzing the company’s historical operating results. We define Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations as Net Income and Diluted Earnings per Share adjusted to eliminate the impact of discontinued operations, restructuring and acquisition related expenses, loss on debt extinguishment, amortization expense related to acquired intangibles, the change in fair value of contingent consideration liabilities, other acquisition-related gains and losses, excess tax benefits and deficiencies from stock-based payments, and any tax effect of these adjustments. The tax effect of these adjustments is calculated using the effective tax rate for the applicable period or for certain discrete items the specific tax expense or benefit for the adjustment. These financial 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. Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations should not be construed as alternatives to Net Income or Diluted Earnings per Share as determined in accordance with accounting principles generally accepted in the United States. In addition, not all companies that report Adjusted Net Income and Adjusted Diluted Earnings per Share from Continuing Operations calculate such measures in the same manner as we do and, accordingly, our calculations are not necessarily comparable to similarly-named measures of other companies and may not be appropriate measures for performance relative to other companies.

The following unaudited table reconciles Forecasted Income and Diluted Earnings per Share from Continuing Operations to Forecasted Adjusted Income from Continuing Operations and Adjusted Diluted Earnings per Share from Continuing Operations, respectively: 

    
   Forecasted
Fiscal Year 2017
      
   Minimum
Guidance
 Maximum
Guidance
(In millions, except per share data)     
      
Income from continuing operations  $511  $541 
      
Adjustments:     
      
Amortization of acquired intangibles   85   85 
Restructuring and acquisition related expenses   3   3 
Excess tax benefit from stock-based payments   (3)  (3)
Tax effect of adjustments   (31)  (31)
      
Adjusted income from continuing operations  $565  $595 
      
      
Weighted average diluted common shares outstanding   311   311 
      
Diluted earnings per share - continuing operations  $1.65  $1.74 
      
Adjusted diluted earnings per share - continuing operations $1.82  $1.92 
 

We have presented forecasted Adjusted Net Income and forecasted Adjusted Diluted Earnings per Share from Continuing Operations in our financial guidance. Refer to the discussion of Adjusted Net Income and Adjusted Diluted Earnings per Share for details on the calculation of these non-GAAP financial measures. In the calculation of forecasted Adjusted Net Income and forecasted Adjusted Diluted Earnings per Share from Continuing Operations, we included estimates of income from continuing operations and amortization of acquired intangibles for the full fiscal year 2017 and the related tax effect; we included for all other components the amounts incurred as of March 31, 2017.

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

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Source: LKQ Corporation

Contact IR

Joseph P. Boutross

Director, Investor Relations

LKQ Corporation

Phone: 312-621-2793
jpboutross@lkqcorp.com

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