LKQ (LKQ) 8-K Results of Operations and Financial Condition

LKQ Corporation Announces 2005 Second Quarter Net Income Results Up 42.7%--

Increases Full Year Guidance

Chicago, IL--July 28, 2005--LKQ Corporation (NASDAQ: LKQX) today reported results for its second quarter ended June 30, 2005, with revenue of $136.0 million, net income of $7.6 million and diluted earnings per share of $0.33.

“For the second quarter we exceeded our previously issued revenue and earnings estimates. We once again achieved a record revenue quarter with impressive revenue growth of approximately 30%. This included very strong organic revenue growth of almost 15%. Our net income increased by close to 43% and our earnings per share increased by just over 37%. We were particularly pleased with the expansion of our operating income margin to 10.2% compared to 8.7% in the second quarter of 2004, which was largely attributable to improved gross margin and gaining leverage over our operating costs. We continue to see our 2005 acquisitions perform in line with our expectations,” said Joe Holsten, President and Chief Executive Officer.

2005 Reported Results

For the second quarter of 2005, revenue increased 29.7% to $136.0 million compared with $104.9 million for the second quarter of 2004. Approximately $15.8 million in revenue growth for the quarter was from businesses we acquired. For the quarter, net income increased 42.7% to $7.6 million compared with $5.3 million for the second quarter of 2004. Diluted earnings per share was $0.33 for the quarter compared with $0.24 for the second quarter of 2004.

For the six months ended June 30, 2005, revenue increased 31.7% to $269.8 million compared with $205.0 million for the same period in 2004. This included organic revenue growth of 12.9%. For the six months ended June 30, 2005, net income increased 46.0% to $16.0 million compared with $11.0 million for the same period in 2004. Diluted earnings per share was $0.69 for the six months ended June 30, 2005 compared with $0.49 for the same period a year ago.

Our consolidated aftermarket collision replacement parts revenue for the quarter was $19.4 million and for the six months ended June 30, 2005 was $39.7 million.

The weighted average diluted shares outstanding for the quarter was 23.4 million compared to 22.5 million for the second quarter of 2004 and for the six months ended June 30, 2005 was 23.2 million compared to 22.3 million for the six months ended June 30, 2004. The number of weighted average diluted shares of common stock in 2005 changed from 2004 due primarily to the effect of stock options and warrants and the increase in our stock price.

2005 Acquisitions

On February 1, 2005, we acquired for approximately $15.5 million net of acquired cash, Bodymaster Auto Parts, Inc. and a related company that operate in the aftermarket collision automotive replacement parts business. This business operates from two locations near Philadelphia and Washington, D.C. The revenue of this business in 2004 was approximately $19.5 million.

On April 1, 2005, we acquired A&R Auto Parts, Inc., a recycled OEM automotive replacement parts company. This business is located between Spartanburg and Greenville, South Carolina. A&R’s revenue for 2004 was approximately $11.0 million.

Company 2005 Outlook

We expect that full year 2005 revenue will be within a range of $539.0 million to $542.0 million and that organic revenue growth will be in the low double digits, with the balance of the growth from the full year impact of 2004 business acquisitions and the 2005 business acquisitions we have completed to date. We expect net income to be within a range of $28.1 million to $28.8 million and diluted earnings per share to be between $1.19 and $1.22.

For the third quarter of 2005 we expect revenue to be between $134.0 million and $135.5 million, net income to be between $5.9 million and $6.3 million, and diluted earnings per share to be between $0.25 and $0.27.

Our 2005 guidance does not include the impact from SFAS No. 123R, Share-Based Payment, which is now scheduled to become effective in our fiscal year beginning January 1, 2006. Our 2005 guidance also does not include the effect of any future business acquisitions.

We estimate the weighted average diluted shares outstanding for the full year 2005 to be approximately 23.6 million and for the third quarter to be approximately 23.7 million. These share numbers are estimates and as such will be affected by factors such as any future stock issuances, the number of our options and warrants granted and exercised in subsequent periods, and changes in our stock price.

Quarterly Conference Call

We will host an audio webcast to discuss our second quarter results on Thursday, July 28, 2005 at 10:30 a.m. Eastern Time. The live audio webcast can be accessed on the internet at www.lkqcorp.com in the Investor Relations section. An online replay of the webcast will be available on the website approximately two hours after the live presentation and will remain on the site until August 28, 2005.

About LKQ Corporation

LKQ Corporation is the largest nationwide provider of recycled OEM automotive replacement parts and related services, with 47 sales and processing facilities, 9 self-service retail automotive parts facilities and 13 redistribution centers that reach most major markets in the United States. In addition, we have 3 recycled OEM facilities in Central America. We also are the second largest nationwide provider of aftermarket collision automotive replacement parts, operating in approximately 30 locations, primarily east of the Mississippi River.

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 March 8, 2005 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.

Financial Tables To Follow

CONTACT: LKQ Corporation

Mark T. Spears, Senior Vice President and Chief Financial Officer

312-621-1950

irinfo@lkqcorp.com

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
( In thousands, except per share data )
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenue	$	136,023		$	104,878		$	269,830		$	204,951
Cost of goods sold		71,531			55,437			142,702			108,514
Gross margin		64,492			49,441			127,128			96,437
Facility and warehouse expenses		14,502			11,801			28,956			22,529
Distribution expenses		15,398			11,733			29,493			22,427
Selling, general and administrative expenses		18,719			15,040			36,444			29,247
Depreciation and amortization		2,063			1,717			4,029			3,222
Operating income		13,810			9,150			28,206			19,012
Other (income) expense
Interest expense		735			275			1,307			812
Interest income		(40	)		(4	)		(58	)		(22	)
Other (income) expense, net		(78	)		(59	)		(240	)		(146	)
Total other expense		617			212			1,009			644
Income before provision for income taxes		13,193			8,938			27,197			18,368
Provision for income taxes		5,566			3,595			11,169			7,390
Net income	$	7,627		$	5,343		$	16,028		$	10,978
Net income per share:
Basic	$	0.37		$	0.27		$	0.77		$	0.55
Diluted	$	0.33		$	0.24		$	0.69		$	0.49
Weighted average common shares outstanding:
Basic		20,855			20,051			20,744			19,847
Diluted		23,386			22,464			23,161			22,322

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Condensed Statements of Cash Flows

( In thousands )

	Six Months Ended June 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,028		$	10,978
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		4,029			3,222
Deferred income taxes		831			1,891
Writeoff of debt issuance costs		-			346
(Gain) loss on sale of property and equipment		(214	)		38
Other adjustments		42			(97	)
Changes in operating assets and liabilities, net of
effects from purchase transactions:
Receivables		(1,893	)		(1,275	)
Inventory		(2,004	)		(4,977	)
Other operating assets and liabilities		3,631			(1,497	)
Net cash provided by operating activities		20,450			8,629
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(6,471	)		(16,160	)
Proceeds from sale of property and equipment		738			34
Expenditures for intangible assets		(3	)		(3	)
Purchase of investment securities		-			(650	)
Decrease in restricted cash in escrow		132			-
Cash used in acquisitions		(24,037	)		(43,443	)
Net cash used in investing activities		(29,641	)		(60,222	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock and warrant exercises		4,414			2,863
Debt issuance costs		(300	)		(249	)
Net borrowings of long-term debt		5,780			34,860
Net cash provided by financing activities		9,894			37,474
Net increase (decrease) in cash and equivalents		703			(14,119	)
Cash and equivalents, beginning of period		1,612			16,082
Cash and equivalents, end of period	$	2,315		$	1,963

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Condensed Balance Sheets

( In thousands, except share data )

	June 30, 2005		December 31, 2004
Assets
Current Assets:
Cash and equivalents	$	2,315	$	1,612
Restricted cash		467		-
Receivables, net		31,633		28,305
Inventory		81,446		74,150
Prepaid expenses and other current assets		3,452		3,375
Total Current Assets		119,313		107,442
Property and Equipment, net		74,323		70,730
Intangibles, net		118,327		100,364
Deferred Income Taxes		3,501		4,621
Other Assets		6,302		5,118
Total Assets	$	321,766	$	288,275
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	9,364	$	8,424
Accrued expenses and other current liabilities		24,664		20,822
Current portion of long-term obligations		276		317
Total Current Liabilities		34,304		29,563
Long-Term Obligations, Excluding Current Portion		56,269		49,945
Other Noncurrent Liabilities		4,016		4,079
Redeemable Common Stock, $0.01 par value, 50,000
shares issued		617		617
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares
authorized, 21,026,802 and 20,565,413 shares issued at
June 30, 2005 and December 31, 2004, respectively.		210		206
Additional paid-in capital		207,863		201,484
Warrants		259		261
Retained earnings		17,168		1,140
Accumulated other comprehensive income		1,060		980
Total Stockholders' Equity		226,560		204,071
Total Liabilities and Stockholders' Equity	$	321,766	$	288,275

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( $ in thousands )

		Three Months Ended June 30,
Operating Highlights		2005				2004
				% of Revenue				% of Revenue		$ Growth		% Growth
Revenue	$	136,023		100.0%	$	104,878		100.0%	$	31,145		29.7%
Cost of goods sold		71,531		52.6%		55,437		52.9%		16,094		29.0%
Gross margin		64,492		47.4%		49,441		47.1%		15,051		30.4%
Facility and warehouse expenses		14,502		10.7%		11,801		11.3%		2,701		22.9%
Distribution expenses		15,398		11.3%		11,733		11.2%		3,665		31.2%
Selling, general and administrative expenses		18,719		13.8%		15,040		14.3%		3,679		24.5%
Depreciation and amortization		2,063		1.5%		1,717		1.6%		346		20.2%
Operating income		13,810		10.2%		9,150		8.7%		4,660		50.9%
Other (income) expense
Interest expense		735		0.5%		275		0.3%		460		167.3%
Interest income		(40	)	0.0%		(4	)	0.0%		(36	)	900.0%
Other (income) expense, net		(78	)	-0.1%		(59	)	-0.1%		(19	)	32.2%
Total other expense		617		0.5%		212		0.2%		405		191.0%
Income before provision for income taxes		13,193		9.7%		8,938		8.5%		4,255		47.6%
Provision for income taxes		5,566		4.1%		3,595		3.4%		1,971		54.8%
Net income	$	7,627		5.6%	$	5,343		5.1%	$	2,284		42.7%

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( $ in thousands )

	Six Months Ended June 30,
Operating Highlights	2005						2004
				% of						% of
				Revenue						Revenue			$ Growth			% Growth
Revenue	$	269,830			100.0	%	$	204,951			100.0	%	$	64,879			31.7	%
Cost of goods sold		142,702			52.9	%		108,514			52.9	%		34,188			31.5	%
Gross margin		127,128			47.1	%		96,437			47.1	%		30,691			31.8	%
Facility and warehouse expenses		28,956			10.7	%		22,529			11.0	%		6,427			28.5	%
Distribution expenses		29,493			10.9	%		22,427			10.9	%		7,066			31.5	%
Selling, general and administrative expenses		36,444			13.5	%		29,247			14.3	%		7,197			24.6	%
Depreciation and amortization		4,029			1.5	%		3,222			1.6	%		807			25.0	%
Operating income		28,206			10.5	%		19,012			9.3	%		9,194			48.4	%
Other (income) expense
Interest expense		1,307			0.5	%		812			0.4	%		495			61.0	%
Interest income		(58	)		0.0	%		(22	)		0.0	%		(36	)		163.6	%
Other (income) expense, net		(240	)		-0.1	%		(146	)		-0.1	%		(94	)		64.4	%
Total other expense		1,009			0.4	%		644			0.3	%		365			56.7	%
Income before provision for income taxes		27,197			10.1	%		18,368			9.0	%		8,829			48.1	%
Provision for income taxes		11,169			4.1	%		7,390			3.6	%		3,779			51.1	%
Net income	$	16,028			5.9	%	$	10,978			5.4	%	$	5,050			46.0	%

The following table reconciles EBITDA to net income:
	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
	(In thousands)
Net income	$	7,627		$	5,343		$	16,028		$	10,978
Depreciation and amortization		2,063			1,717			4,029			3,222
Interest, net		695			271			1,249			790
Provision for income taxes		5,566			3,595			11,169			7,390
Earnings before interest, taxes, depreciation
and amortization (EBITDA)	$	15,951		$	10,926		$	32,475		$	22,380
EBITDA as a percentage of revenue		11.7	%		10.4	%		12.0	%		10.9	%