LKQ Corporation Announces Results for Fourth Quarter and Full Year 2018

February 28, 2019

Annual revenue growth of 22% to $11.9 billion; fourth quarter growth of 22%
Annual organic revenue growth for parts and services of 4.4%; fourth quarter growth of 2.5%
Operating cash flow of $711 million, up 37% compared to 2017
Non-cash impairment charges of $97 million for the full year; $75 million recorded in the fourth quarter
Annual net income from continuing operations attributable to LKQ stockholders decreased 10.4% to $485 million; adjusted net income increased 18.5% to $691 million
Annual diluted EPS from continuing operations attributable to LKQ stockholders of $1.53; adjusted diluted EPS of $2.19
Fourth quarter 2018 diluted EPS from continuing operations attributable to LKQ stockholders of $0.13; adjusted diluted EPS of $0.48

CHICAGO, Feb. 28, 2019 — LKQ Corporation (Nasdaq:LKQ) today announced results for its fourth quarter and full year ended December 31, 2018. For the fourth quarter of 2018, revenue was $3.0 billion, an increase of 22% from $2.5 billion for the comparable period of 2017. Parts and services organic revenue growth for the fourth quarter of 2018 was 2.5%.

Net income from continuing operations attributable to LKQ stockholders for the fourth quarter of 2018 was $40 million, a decrease of 68% year-over-year. Diluted earnings per share from continuing operations attributable to LKQ stockholders for the fourth quarter of 2018 was $0.13 as compared to $0.41 for the same period of 2017, a decrease of 68%. The fourth quarter 2018 results included non-cash impairment charges (net of tax) of $48 million related to the Company’s equity investment in Mekonomen AB and $26 million related to goodwill recorded on our 2017 acquisition of an aviation parts recycler. These impairment charges reduced diluted earnings per share for the fourth quarter of 2018 by $0.23. On an adjusted basis, net income from continuing operations attributable to LKQ stockholders was $151 million, an increase of 19.7% as compared to the $126 million for the same period of 2017. On an adjusted basis, diluted earnings per share from continuing operations attributable to LKQ stockholders for the fourth quarter of 2018 was $0.48, an increase of 17.1% as compared to $0.41 for the same period of 2017.

“Looking back on 2018, I am proud of the team’s efforts to complete the Stahlgruber acquisition, produce solid organic growth across all our segments, and effectively manage working capital to allow us to produce the highest annual operating cash flow figure in the Company’s history. While I acknowledge that the 2018 results didn’t live up to our initial expectations due to operational challenges in parts of the business and economic headwinds, particularly in Europe, I believe that we are taking the necessary steps to position the Company for continued success,” stated Dominick Zarcone, President and Chief Executive Officer of LKQ Corporation. “As we look forward to fiscal 2019, we will continue to execute on our productivity initiatives across each operating segment and remain focused on profitable revenue growth, margin enhancement, excellent cash conversion, and optimizing our capital allocation strategy.”

For the full year of 2018, revenue was $11.9 billion, an increase of 22% from $9.7 billion for the comparable period of 2017. Parts and services organic revenue growth for the full year of 2018 was 4.4%. Net income from continuing operations attributable to LKQ stockholders for the full year of 2018 was $485 million, a decrease of 10.4% as compared to $540 million for the comparable period of 2017. Diluted earnings per share from continuing operations attributable to LKQ stockholders for the full year of 2018 was $1.53, a decrease of 12.1% as compared to $1.74 for the same period of 2017. The 2018 results included non-cash impairment charges (net of tax) of $71 million related to the Company’s equity investment in Mekonomen AB and $26 million related to the fourth quarter goodwill write down. These impairment charges reduced diluted earnings per share for the full year of 2018 by $0.31. On an adjusted basis, diluted earnings per share from continuing operations attributable to LKQ stockholders for the full year of 2018 was $2.19, an increase of 16.5% as compared to $1.88 for the same period of 2017.

Balance Sheet and Liquidity

In 2018, we generated cash flows from operations of $711 million, invested $250 million in capital expenditures, and completed acquisitions aggregating $1.2 billion of cash paid. As of December 31, 2018, the balance sheet reflected cash and cash equivalents of $332 million and outstanding debt of $4.3 billion. The unused capacity under the Company’s credit facilities at December 31, 2018 was approximately $1.7 billion and net leverage was down to 2.9X, as defined in the credit facility.

During the fourth quarter of 2018, the Company repurchased approximately 2.3 million shares of its common stock at an average price per share of $26.41, returning approximately $60 million of capital to our stockholders.

Other Events

On November 26, 2018, the Company announced that it reset its credit facility to a total availability of $3.5 billion. Among other changes, the amendment increased the amount available under the revolving credit facility from $2.75 billion to $3.15 billion and reduced the term loan to $350 million; reduced the number of leverage pricing tiers; extended the maturity date from 2023 to 2024; reduced the unused facility fee depending on leverage category; increased the basket for indebtedness incurred under our receivables securitization facility; increased our swingline loan capacity and added the ability to borrow in British Pounds and Euros; provided flexibility to implement a supply chain finance program and a captive insurance unit; and reset all restrictive baskets to zero.

On December 20, 2018, the Company announced that effective on or about April 1, 2019, Arnd Franz will join LKQ Europe as Chief Operating Officer. He will report directly to the Chief Executive Officer and Managing Director of LKQ Europe, John Quinn. Mr. Franz is currently Corporate Executive Vice President and Member of the Management Board of the MAHLE Group, headquartered in Stuttgart, Germany. Most recently, Mr. Franz has been responsible for MAHLE’s global automotive sales and application engineering, including the aftermarket business unit. From 2006 until 2013, he was Executive Vice President and General Manager for MAHLE Aftermarket.

During the fourth quarter of 2018, we acquired three wholesale businesses in North America and two wholesale businesses in Europe for a total net consideration of approximately $14 million. Also in the fourth quarter, LKQ’s European operations opened five branches in Eastern Europe.

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.

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For additional details, including financial and supplementary data, view the full Press Release on the LKQ Investor Relations website.