LKQ Corporation (Nasdaq:LKQ) today reported fourth quarter and full
year 2023 financial results. “The fourth quarter was a strong
finish to a successful year for LKQ. I am proud of how the entire
team worked through challenging macroeconomic conditions,
persistent inflation and declining commodity prices to deliver
solid organic revenue growth, year over year improvement in Segment
EBITDA, and strong cash flow generation. I look forward to
collaborating with Justin Jude, my successor as Chief Executive
Officer, over the coming months to continue enhancing LKQ’s
industry leading business,” stated Dominick Zarcone, President and
Chief Executive Officer. “Operational excellence will remain at the
forefront in 2024 as we look to drive organic revenue growth,
productivity, strong margins and excellent free cash flow,” said
Justin Jude, Executive Vice President and Chief Operating Officer.
Fourth Quarter and Full
Year 2023 Financial
Results
Revenue for the fourth quarter of 2023 was $3.5
billion, an increase of 16.6% compared to $3.0 billion for the
fourth quarter of 2022. For the fourth quarter of 2023, parts and
services organic revenue increased 2.8% (3.4% on a per day basis),
foreign exchange rates increased revenue by 2.7% and the net impact
of acquisitions and divestitures increased revenue by 13.1% year
over year, for a total parts and services revenue increase of
18.7%. Other revenue for the fourth quarter of 2023 fell 16.4%
primarily due to weaker precious metals prices relative to the same
period in 2022.
Net income2 for the fourth quarter of 2023 was
$184 million compared to $193 million for the same period
of 2022. Diluted earnings per share2 for the fourth quarter of 2023
was $0.69 compared to $0.72 for the same period of 2022, a decrease
of 4.2%.
On an adjusted basis, net income1,2 in the
fourth quarter of 2023 was $226 million compared to $209
million for the same period of 2022, an increase of 7.9%. Adjusted
diluted earnings per share1,2 was $0.84 for the fourth quarter of
2023 compared to $0.78 for the same period of 2022, an increase of
8.0%.
Revenue for the full year of 2023 was $13.9
billion, an increase of 8.4% compared to $12.8 billion for the full
year of 2022. For the full year of 2023, parts and services organic
revenue increased 4.7% (5.1% on a per day basis), foreign exchange
rates increased revenue by 0.9% and the net impact of acquisitions
and divestitures increased revenue by 4.8% year over year, for a
total parts and services revenue increase of 10.4%. Other revenue
for the full year of 2023 fell 19.6% primarily due to weaker
commodity prices relative to 2022.
Net income2 for the full year of 2023 was $0.94
billion compared to $1.14 billion for the same period of 2022.
Diluted earnings per share2 for the full year of 2023 was $3.51
compared to $4.11 for the same period of 2022, a decrease of
14.6%.
On an adjusted basis, net income1,2 for the full
year of 2023 was $1.03 billion compared to $1.07 billion for the
same period of 2022, a decrease of 4.0%. Adjusted diluted earnings
per share1,2 was $3.83 for the full year of 2023 compared to $3.85
for the same period of 2022, a decrease of 0.5%.
Cash Flow and Balance Sheet
Cash flow from operations and free cash flow1
were $1.4 billion and $1.0 billion, respectively, for the full year
of 2023. As of December 31, 2023, the balance sheet reflected
total debt of $4.3 billion and total leverage, as defined in
our credit facility, was 2.3x EBITDA.
Stock Repurchase and Dividend
Programs
During the fourth quarter of 2023, the Company
invested $30 million to repurchase 0.7 million shares of its common
stock. For the year ended December 31, 2023, the Company
invested $35 million to repurchase 0.8 million shares of
its common stock. Since initiating the stock repurchase program in
late October 2018, the Company has repurchased approximately
56 million shares for a total of $2.4 billion through
December 31, 2023.
On February 20, 2024, the Board of Directors
declared a quarterly cash dividend of $0.30 per share of common
stock, payable on March 28, 2024, to stockholders of record at the
close of business on March 14, 2024.
Other Events
In October 2023, we entered into a definitive
agreement to sell GSF Car Parts Limited. The sale was completed on
October 25, 2023.
Uni-Select integration is ongoing with roughly
half of the FinishMaster locations converted or consolidated into
LKQ locations to date and the remainder scheduled for completion by
the end of the first quarter. Mr. Jude commented, “Our Wholesale –
North America team’s agility and integration experience has the
Uni-Select plan ahead of schedule, and we are confident in our
ability to exceed the $55 million of synergies previously
disclosed.”
On November 27, 2023, the Company announced that
the Board unanimously selected Justin Jude to succeed Dominick
Zarcone as LKQ’s next President and CEO. In the interim, the Board
has appointed Mr. Jude to serve as LKQ’s Executive Vice President
and Chief Operating Officer from January 1, 2024 until he
officially succeeds Mr. Zarcone on July 1, 2024.
2024
Outlook
Rick Galloway, Senior Vice President and Chief
Financial Officer, commented, “Our annual guidance reflects our
emphasis on profitable revenue growth and free cash flow
generation. We expect organic revenue growth from each of our
operating segments. We also believe that in 2024, our margin
enhancement initiatives will boost profitability, including a
return to double digit Europe Segment EBITDA margins.”
For 2024, management is anticipating the
following outlook:
|
|
2024 Full Year Outlook |
|
Organic revenue growth for parts and services |
3.5% to 5.5% |
|
Diluted EPS2 |
$3.43 to $3.73 |
|
Adjusted diluted EPS1,2 |
$3.90 to $4.20 |
|
Operating cash flow |
$1.35 billion |
|
Free cash flow1 |
$1.0 billion |
|
Free cash flow conversion of Adjusted EBITDA1 |
50% to 60% |
Our outlook for the full year 2024 is based on
current conditions and recent trends, and assumes a global
effective tax rate of 26.8%, the prices of scrap and precious
metals hold near the December average, and no further deterioration
due to the Ukraine/Russia conflict. We have applied foreign
currency exchange rates near recent average levels, including
$1.09, $1.27 and $0.74 for the euro, pound sterling and Canadian
dollar, respectively, for the year. Changes in these conditions may
impact our ability to achieve the estimates. Adjusted figures
exclude (to the extent applicable) the impact of restructuring and
transaction related expenses; amortization expense related to
acquired intangibles; excess tax benefits and deficiencies from
stock-based payments; losses on debt extinguishment; impairment
charges; direct impacts of the Ukraine/Russia conflict, and gains
and losses related to acquisitions or divestitures (including
changes in the fair value of contingent consideration
liabilities).
Non-GAAP Financial Measures
This release contains (and management’s
presentation on the related investor 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 each non-GAAP financial
measure with the most directly comparable financial measure
calculated in accordance with GAAP.
Conference Call Details
LKQ will host an investor conference call and
webcast on February 22, 2024 at 8:00 a.m. Eastern Time (7:00
a.m. Central Time) with members of senior management to discuss the
Company's results. To access the investor conference call, please
dial (833) 470-1428. International access to the call may be
obtained by dialing (404) 975-4839. The investor conference call
will require you to enter conference ID: 672153.
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 (866) 813-9403 or (929) 458-6194 for
international calls. The telephone replay will require you to enter
conference ID: 457147. An online replay of the audio webcast will
be available on the Company's website. Both formats of replay will
be available through March 7, 2024. 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 OEM recycled and aftermarket parts, replacement systems,
components, equipment, and services to repair and accessorize
automobiles, trucks, and recreational and performance vehicles.
__________
(1) Non-GAAP measure.
Refer to the table accompanying this release that reconciles the
actual or forecasted U.S. GAAP measure to the actual or forecasted
adjusted measure, which is non-GAAP.
(2) References in this
release to Net income and Diluted earnings per share, and the
corresponding adjusted figures, reflect amounts from continuing
operations attributable to LKQ stockholders.
Forward Looking Statements
Statements and information in this press release
and on the related conference call, including our outlook for 2024,
as well as remarks by the Chief Executive Officer and other members
of management, 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 events or results to differ from the events
or 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, 2022 and in our
subsequent Quarterly Reports on Form 10-Q, and in our Annual Report
on Form 10-K to be filed for the year ended December 31, 2023.
These reports are available at the Investor Relations section on
our website (www.lkqcorp.com) and on the SEC's website
(www.sec.gov).
These factors include the following (not
necessarily in order of importance):
- our operating results and financial
condition have been and could continue to be adversely affected by
the economic, political and social conditions in North America,
Europe, Taiwan and other countries, as well as the economic health
of vehicle owners and numbers and types of vehicles sold;
- we face competition from local,
national, international, and internet-based vehicle products
providers, and this competition could negatively affect our
business;
- we rely upon insurance companies
and our customers to promote the usage of alternative parts;
- intellectual property claims
relating to aftermarket products could adversely affect our
business;
- if the number of vehicles involved
in accidents or being repaired declines, or the mix of the types of
vehicles in the overall vehicle population changes, our business
could suffer;
- fluctuations in the prices of
commodities could adversely affect our financial results;
- an adverse change in our
relationships with our suppliers, disruption to our supply of
inventory, or the misconduct, performance failures or negligence of
our third party vendors or service providers could increase our
expenses, impede our ability to serve our customers, or expose us
to liability;
- future public health emergencies
could have a material adverse impact on our business, results of
operation, financial condition and liquidity, the nature and extent
of which is highly uncertain;
- if we determine that our goodwill
or other intangible assets have become impaired, we may incur
significant charges to our pretax income;
- we could be subject to product
liability claims and involved in product recalls;
- we may not be able to successfully
acquire businesses or integrate acquisitions, and we may not be
able to successfully divest certain businesses;
- we have a substantial amount of
indebtedness, which could have a material adverse effect on our
financial condition and our ability to obtain financing in the
future and to react to changes in our business;
- our senior notes do not impose any
limitations on our ability to incur additional debt or protect
against certain other types of transactions, and we may incur
additional indebtedness under our credit agreement;
- our credit agreement imposes
operating and financial restrictions on us and our subsidiaries,
which may prevent us from capitalizing on business
opportunities;
- we may not be able to generate
sufficient cash to service all of our indebtedness, and may be
forced to take other actions to satisfy our obligations under our
indebtedness, which may not be successful;
- our future capital needs may
require that we seek to refinance our debt or obtain additional
debt or equity financing, events that could have a negative effect
on our business;
- our variable rate indebtedness
subjects us to interest rate risk, which could cause our
indebtedness service obligations to increase significantly;
- repayment of our indebtedness is
dependent on cash flow generated by our subsidiaries;
- a downgrade in our credit rating
would impact our cost of capital;
- the amount and frequency of our
share repurchases and dividend payments may fluctuate;
- existing or new laws and
regulations, or changes to enforcement or interpretation of
existing laws or regulations, may prohibit, restrict or burden the
sale of aftermarket, recycled, refurbished or remanufactured
products;
- we are subject to environmental
regulations and incur costs relating to environmental matters;
- if we fail to maintain proper and
effective internal control over financial reporting in the future,
our ability to produce accurate and timely financial statements
could be negatively impacted, which could harm our operating
results and investor perceptions of our company and as a result may
have a material adverse effect on the value of our common
stock;
- we may be adversely affected by
legal, regulatory or market responses to global climate
change;
- our amended and restated bylaws
provide that the courts in the State of Delaware are the exclusive
forums for substantially all disputes between us and our
stockholders, which could limit our stockholders’ ability to obtain
a favorable judicial forum for disputes with us or our directors,
officers or employees;
- our effective tax rate could
materially increase as a consequence of various factors, including
U.S. and/or international tax legislation, applicable
interpretations and administrative guidance, our mix of earnings by
jurisdiction, and U.S. and foreign jurisdictional audits;
- if significant tariffs or other
restrictions are placed on products or materials we import or any
related counter-measures are taken by countries to which we export
products, our revenue and results of operations may be materially
harmed;
- governmental agencies may refuse to
grant or renew our operating licenses and permits;
- the costs of complying with the
requirements of laws pertaining to data privacy and cybersecurity
of personal information and the potential liability associated with
the failure to comply with such laws could materially adversely
affect our business and results of operations;
- our employees are important to
successfully manage our business and achieve our objectives;
- we operate in foreign
jurisdictions, which exposes us to foreign exchange and other
risks;
- our business may be adversely
affected by union activities and labor and employment laws;
- we rely on information technology
and communication systems in critical areas of our operations and a
disruption relating to such technology could harm our
business;
- business interruptions in our
distribution centers or other facilities may affect our operations,
the function of our computer systems, and/or the availability and
distribution of merchandise, which may affect our business;
- if we experience problems with our
fleet of trucks and other vehicles, our business could be
harmed;
- we may lose the right to operate at
key locations; and
- activist investors could cause us
to incur substantial costs, divert management’s attention, and have
an adverse effect on our business.
Contact:Joseph P. Boutross - Vice President,
Investor RelationsLKQ Corporation(312)
621-2793jpboutross@lkqcorp.com
|
LKQ CORPORATION AND SUBSIDIARIESUnaudited
Consolidated Statements of Income, with Supplementary Data
(In millions, except per share data) |
| |
Three Months Ended December 31, |
| |
2023 |
|
2022 |
|
|
|
|
| |
|
|
% of Revenue (2) |
|
|
|
% of Revenue (2) |
|
$ Change |
|
% Change |
|
Revenue |
$ |
3,501 |
|
|
100.0 |
% |
|
$ |
3,001 |
|
|
100.0 |
% |
|
$ |
500 |
|
|
16.6 |
% |
| Cost of goods sold |
|
2,102 |
|
|
60.0 |
% |
|
|
1,778 |
|
|
59.2 |
% |
|
|
324 |
|
|
18.2 |
% |
|
Gross margin |
|
1,399 |
|
|
40.0 |
% |
|
|
1,223 |
|
|
40.8 |
% |
|
|
176 |
|
|
14.4 |
% |
| Selling, general and
administrative expenses |
|
1,022 |
|
|
29.1 |
% |
|
|
861 |
|
|
28.7 |
% |
|
|
161 |
|
|
18.7 |
% |
| Restructuring and transaction
related expenses |
|
12 |
|
|
0.4 |
% |
|
|
10 |
|
|
0.4 |
% |
|
|
2 |
|
|
20.0 |
% |
| Depreciation and
amortization |
|
88 |
|
|
2.5 |
% |
|
|
59 |
|
|
2.0 |
% |
|
|
29 |
|
|
49.2 |
% |
|
Operating income |
|
277 |
|
|
7.9 |
% |
|
|
293 |
|
|
9.8 |
% |
|
|
(16 |
) |
|
(5.5 |
)% |
| Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
64 |
|
|
1.8 |
% |
|
|
27 |
|
|
0.9 |
% |
|
|
37 |
|
|
n/m |
|
Interest income and other income, net |
|
(9 |
) |
|
(0.2 |
)% |
|
|
(6 |
) |
|
(0.2 |
)% |
|
|
(3 |
) |
|
50.0 |
% |
|
Total other expense, net |
|
55 |
|
|
1.6 |
% |
|
|
21 |
|
|
0.7 |
% |
|
|
34 |
|
|
n/m |
|
Income from continuing operations before provision for income
taxes |
|
222 |
|
|
6.3 |
% |
|
|
272 |
|
|
9.1 |
% |
|
|
(50 |
) |
|
(18.4 |
)% |
| Provision for income taxes |
|
43 |
|
|
1.2 |
% |
|
|
81 |
|
|
2.7 |
% |
|
|
(38 |
) |
|
(46.9 |
)% |
|
Equity in earnings of unconsolidated subsidiaries |
|
6 |
|
|
0.2 |
% |
|
|
3 |
|
|
0.1 |
% |
|
|
3 |
|
|
n/m |
|
Income from continuing operations |
|
185 |
|
|
5.3 |
% |
|
|
194 |
|
|
6.5 |
% |
|
|
(9 |
) |
|
(4.6 |
)% |
|
Net (loss) income from discontinued operations |
|
(7 |
) |
|
(0.2 |
)% |
|
|
1 |
|
|
— |
% |
|
|
(8 |
) |
|
n/m |
|
Net income |
|
178 |
|
|
5.1 |
% |
|
|
195 |
|
|
6.5 |
% |
|
|
(17 |
) |
|
(8.7 |
)% |
|
Less: net income attributable to continuing noncontrolling
interest |
|
1 |
|
|
— |
% |
|
|
1 |
|
|
— |
% |
|
|
— |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
177 |
|
|
5.0 |
% |
|
$ |
194 |
|
|
6.5 |
% |
|
$ |
(17 |
) |
|
(8.8 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share:
(1) |
|
|
|
|
|
|
|
|
|
|
|
| Income from continuing
operations |
$ |
0.69 |
|
|
|
|
$ |
0.73 |
|
|
|
|
$ |
(0.04 |
) |
|
(5.5 |
)% |
| Net (loss) income from
discontinued operations |
|
(0.03 |
) |
|
|
|
|
— |
|
|
|
|
|
(0.03 |
) |
|
n/m |
|
Net income |
|
0.66 |
|
|
|
|
|
0.73 |
|
|
|
|
|
(0.07 |
) |
|
(9.6 |
)% |
|
Less: net income attributable to continuing noncontrolling
interest |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
0.66 |
|
|
|
|
$ |
0.72 |
|
|
|
|
$ |
(0.06 |
) |
|
(8.3 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share:
(1) |
|
|
|
|
|
|
|
|
|
|
|
| Income from continuing
operations |
$ |
0.69 |
|
|
|
|
$ |
0.72 |
|
|
|
|
$ |
(0.03 |
) |
|
(4.2 |
)% |
| Net (loss) income from
discontinued operations |
|
(0.03 |
) |
|
|
|
|
— |
|
|
|
|
|
(0.03 |
) |
|
n/m |
|
Net income |
|
0.66 |
|
|
|
|
|
0.72 |
|
|
|
|
|
(0.06 |
) |
|
(8.3 |
)% |
|
Less: net income attributable to continuing noncontrolling
interest |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
0.66 |
|
|
|
|
$ |
0.72 |
|
|
|
|
$ |
(0.06 |
) |
|
(8.3 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
267.6 |
|
|
|
|
|
267.8 |
|
|
|
|
|
(0.2 |
) |
|
(0.1 |
)% |
|
Diluted |
|
268.1 |
|
|
|
|
|
268.7 |
|
|
|
|
|
(0.6 |
) |
|
(0.2 |
)% |
| (1) The sum of
the individual earnings per share amounts may not equal the total
due to rounding. |
| (2) The sum of
the individual percentage of revenue components may not equal the
total due to rounding. |
|
LKQ CORPORATION AND SUBSIDIARIESUnaudited
Consolidated Statements of Income, with Supplementary Data
(In millions, except per share data) |
| |
Year Ended December 31, |
| |
2023 |
|
2022 |
|
|
|
|
| |
|
|
% of Revenue (4) |
|
|
|
% of Revenue (4) |
|
$ Change |
|
% Change |
|
Revenue |
$ |
13,866 |
|
|
100.0 |
% |
|
$ |
12,794 |
|
|
100.0 |
% |
|
$ |
1,072 |
|
|
8.4 |
% |
| Cost of goods sold |
|
8,291 |
|
|
59.8 |
% |
|
|
7,571 |
|
|
59.2 |
% |
|
|
720 |
|
|
9.5 |
% |
|
Gross margin |
|
5,575 |
|
|
40.2 |
% |
|
|
5,223 |
|
|
40.8 |
% |
|
|
352 |
|
|
6.7 |
% |
| Selling, general and
administrative expenses |
|
3,870 |
|
|
27.9 |
% |
|
|
3,544 |
|
|
27.7 |
% |
|
|
326 |
|
|
9.2 |
% |
| Restructuring and transaction
related expenses |
|
65 |
|
|
0.5 |
% |
|
|
20 |
|
|
0.2 |
% |
|
|
45 |
|
|
n/m |
| Gain on disposal of businesses
(1) |
|
— |
|
|
— |
% |
|
|
(159 |
) |
|
(1.2 |
)% |
|
|
159 |
|
|
n/m |
| Depreciation and
amortization |
|
283 |
|
|
2.0 |
% |
|
|
237 |
|
|
1.8 |
% |
|
|
46 |
|
|
19.4 |
% |
|
Operating income |
|
1,357 |
|
|
9.8 |
% |
|
|
1,581 |
|
|
12.4 |
% |
|
|
(224 |
) |
|
(14.2 |
)% |
| Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
214 |
|
|
1.5 |
% |
|
|
78 |
|
|
0.6 |
% |
|
|
136 |
|
|
n/m |
|
Loss on debt extinguishment |
|
1 |
|
|
— |
% |
|
|
— |
|
|
— |
% |
|
|
1 |
|
|
n/m |
|
Gains on foreign exchange contracts - acquisition related (2) |
|
(49 |
) |
|
(0.4 |
)% |
|
|
— |
|
|
— |
% |
|
|
(49 |
) |
|
n/m |
|
Interest income and other income, net |
|
(44 |
) |
|
(0.3 |
)% |
|
|
(15 |
) |
|
(0.1 |
)% |
|
|
(29 |
) |
|
n/m |
|
Total other expense, net |
|
122 |
|
|
0.9 |
% |
|
|
63 |
|
|
0.5 |
% |
|
|
59 |
|
|
93.7 |
% |
|
Income from continuing operations before provision for income
taxes |
|
1,235 |
|
|
8.9 |
% |
|
|
1,518 |
|
|
11.9 |
% |
|
|
(283 |
) |
|
(18.6 |
)% |
| Provision for income taxes |
|
306 |
|
|
2.2 |
% |
|
|
385 |
|
|
3.0 |
% |
|
|
(79 |
) |
|
(20.5 |
)% |
|
Equity in earnings of unconsolidated subsidiaries |
|
15 |
|
|
0.1 |
% |
|
|
11 |
|
|
0.1 |
% |
|
|
4 |
|
|
36.4 |
% |
|
Income from continuing operations |
|
944 |
|
|
6.8 |
% |
|
|
1,144 |
|
|
8.9 |
% |
|
|
(200 |
) |
|
(17.5 |
)% |
|
Net (loss) income from discontinued operations |
|
(6 |
) |
|
— |
% |
|
|
6 |
|
|
— |
% |
|
|
(12 |
) |
|
n/m |
|
Net income |
|
938 |
|
|
6.8 |
% |
|
|
1,150 |
|
|
9.0 |
% |
|
|
(212 |
) |
|
(18.4 |
)% |
|
Less: net income attributable to continuing noncontrolling
interest |
|
2 |
|
|
— |
% |
|
|
1 |
|
|
— |
% |
|
|
1 |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
936 |
|
|
6.7 |
% |
|
$ |
1,149 |
|
|
9.0 |
% |
|
$ |
(213 |
) |
|
(18.5 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share:
(3) |
|
|
|
|
|
|
|
|
|
|
|
| Income from continuing
operations |
$ |
3.53 |
|
|
|
|
$ |
4.13 |
|
|
|
|
$ |
(0.60 |
) |
|
(14.5 |
)% |
| Net (loss) income from
discontinued operations |
|
(0.02 |
) |
|
|
|
|
0.02 |
|
|
|
|
|
(0.04 |
) |
|
n/m |
|
Net income |
|
3.51 |
|
|
|
|
|
4.15 |
|
|
|
|
|
(0.64 |
) |
|
(15.4 |
)% |
| Less: net income attributable to
continuing noncontrolling interest |
|
0.01 |
|
|
|
|
|
0.01 |
|
|
|
|
|
— |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
3.50 |
|
|
|
|
$ |
4.15 |
|
|
|
|
$ |
(0.65 |
) |
|
(15.7 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: (3) |
|
|
|
|
|
|
|
|
|
|
|
| Income from continuing
operations |
$ |
3.52 |
|
|
|
|
$ |
4.12 |
|
|
|
|
$ |
(0.60 |
) |
|
(14.6 |
)% |
| Net (loss) income from
discontinued operations |
|
(0.02 |
) |
|
|
|
|
0.02 |
|
|
|
|
|
(0.04 |
) |
|
n/m |
|
Net income |
|
3.50 |
|
|
|
|
|
4.14 |
|
|
|
|
|
(0.64 |
) |
|
(15.5 |
)% |
| Less: net income attributable to
continuing noncontrolling interest |
|
0.01 |
|
|
|
|
|
0.01 |
|
|
|
|
|
— |
|
|
n/m |
|
Net income attributable to LKQ stockholders |
$ |
3.49 |
|
|
|
|
$ |
4.13 |
|
|
|
|
$ |
(0.64 |
) |
|
(15.5 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
267.6 |
|
|
|
|
|
277.1 |
|
|
|
|
|
(9.5 |
) |
|
(3.4 |
)% |
|
Diluted |
|
268.3 |
|
|
|
|
|
278.0 |
|
|
|
|
|
(9.7 |
) |
|
(3.5 |
)% |
| (1) Primarily
related to the sale of PGW Auto Glass ("PGW"). |
| (2) Related to
the Uni-Select acquisition. |
| (3) The sum of
the individual earnings per share amounts may not equal the total
due to rounding. |
| (4) The sum of
the individual percentage of revenue components may not equal the
total due to rounding. |
|
LKQ CORPORATION AND SUBSIDIARIESUnaudited
Consolidated Balance Sheets(In millions, except per share
data) |
| |
December 31, 2023 |
|
December 31, 2022 |
| Assets |
|
|
|
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
299 |
|
|
$ |
278 |
|
|
Receivables, net of allowance for credit losses |
|
1,165 |
|
|
|
998 |
|
|
Inventories |
|
3,121 |
|
|
|
2,752 |
|
|
Prepaid expenses and other current assets |
|
283 |
|
|
|
230 |
|
|
Total current assets |
|
4,868 |
|
|
|
4,258 |
|
| Property, plant and equipment,
net |
|
1,516 |
|
|
|
1,236 |
|
| Operating lease assets, net |
|
1,336 |
|
|
|
1,227 |
|
| Goodwill |
|
5,600 |
|
|
|
4,319 |
|
| Other intangibles, net |
|
1,313 |
|
|
|
653 |
|
| Equity method investments |
|
159 |
|
|
|
141 |
|
| Other noncurrent assets |
|
287 |
|
|
|
204 |
|
|
Total assets |
$ |
15,079 |
|
|
$ |
12,038 |
|
| Liabilities and
Stockholders’ Equity |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
1,648 |
|
|
$ |
1,339 |
|
|
Accrued expenses: |
|
|
|
|
Accrued payroll-related liabilities |
|
260 |
|
|
|
218 |
|
|
Refund liability |
|
132 |
|
|
|
109 |
|
|
Other accrued expenses |
|
309 |
|
|
|
294 |
|
|
Current portion of operating lease liabilities |
|
224 |
|
|
|
188 |
|
|
Current portion of long-term obligations |
|
596 |
|
|
|
34 |
|
|
Other current liabilities |
|
149 |
|
|
|
89 |
|
|
Total current liabilities |
|
3,318 |
|
|
|
2,271 |
|
| Long-term operating lease
liabilities, excluding current portion |
|
1,163 |
|
|
|
1,091 |
|
| Long-term obligations, excluding
current portion |
|
3,655 |
|
|
|
2,622 |
|
| Deferred income taxes |
|
448 |
|
|
|
280 |
|
| Other noncurrent liabilities |
|
314 |
|
|
|
283 |
|
| Commitments and
contingencies |
|
|
|
| Redeemable noncontrolling
interest |
|
— |
|
|
|
24 |
|
| Stockholders’ equity: |
|
|
|
|
Common stock, $0.01 par value, 1,000.0 shares authorized, 323.1
shares issued and 267.2 shares outstanding at December 31,
2023; 322.4 shares issued and 267.3 shares outstanding at December
31, 2022 |
|
3 |
|
|
|
3 |
|
|
Additional paid-in capital |
|
1,538 |
|
|
|
1,506 |
|
|
Retained earnings |
|
7,290 |
|
|
|
6,656 |
|
|
Accumulated other comprehensive loss |
|
(240 |
) |
|
|
(323 |
) |
|
Treasury stock, at cost; 55.9 shares at December 31, 2023 and
55.1 shares at December 31, 2022 |
|
(2,424 |
) |
|
|
(2,389 |
) |
|
Total Company stockholders’ equity |
|
6,167 |
|
|
|
5,453 |
|
|
Noncontrolling interest |
|
14 |
|
|
|
14 |
|
|
Total stockholders’ equity |
|
6,181 |
|
|
|
5,467 |
|
|
Total liabilities and stockholders’ equity |
$ |
15,079 |
|
|
$ |
12,038 |
|
|
LKQ CORPORATION AND SUBSIDIARIESUnaudited
Consolidated Statements of Cash Flows(In
millions) |
| |
Year Ended December 31, |
| |
2023 |
|
2022 |
| CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
$ |
938 |
|
|
$ |
1,150 |
|
| Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
|
319 |
|
|
|
264 |
|
|
Gain on disposal of businesses |
|
— |
|
|
|
(159 |
) |
|
Stock-based compensation expense |
|
40 |
|
|
|
38 |
|
|
Loss on debt extinguishment |
|
1 |
|
|
|
— |
|
|
Gains on foreign exchange contracts - acquisition related |
|
(49 |
) |
|
|
— |
|
|
Deferred income taxes |
|
13 |
|
|
|
6 |
|
|
Other |
|
17 |
|
|
|
(14 |
) |
| Changes in operating assets
and liabilities, net of effects from acquisitions and
dispositions: |
|
|
|
|
Receivables |
|
5 |
|
|
|
(16 |
) |
|
Inventories |
|
71 |
|
|
|
(342 |
) |
|
Prepaid income taxes/income taxes payable |
|
(12 |
) |
|
|
33 |
|
|
Accounts payable |
|
(5 |
) |
|
|
269 |
|
|
Other operating assets and liabilities |
|
18 |
|
|
|
21 |
|
|
Net cash provided by operating activities |
|
1,356 |
|
|
|
1,250 |
|
| CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
Purchases of property, plant and equipment |
|
(358 |
) |
|
|
(222 |
) |
|
Proceeds from disposals of property, plant and equipment |
|
11 |
|
|
|
9 |
|
|
Acquisitions, net of cash acquired |
|
(2,225 |
) |
|
|
(4 |
) |
|
Proceeds from disposals of businesses |
|
110 |
|
|
|
399 |
|
|
Proceeds from settlement of foreign exchange contracts -
acquisition related |
|
49 |
|
|
|
— |
|
|
Other investing activities, net |
|
(29 |
) |
|
|
(10 |
) |
|
Net cash (used in) provided by investing activities |
|
(2,442 |
) |
|
|
172 |
|
| CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
Debt issuance costs |
|
(33 |
) |
|
|
— |
|
|
Proceeds from issuance of U.S. Notes (2028/33), net of unamortized
bond discount |
|
1,394 |
|
|
|
— |
|
|
Borrowings under revolving credit facilities |
|
2,186 |
|
|
|
1,644 |
|
|
Repayments under revolving credit facilities |
|
(3,074 |
) |
|
|
(1,675 |
) |
|
Borrowings under term loans |
|
1,031 |
|
|
|
— |
|
|
Repayments of other debt, net |
|
(32 |
) |
|
|
(17 |
) |
|
Settlement of derivative instruments |
|
(13 |
) |
|
|
— |
|
|
Dividends paid to LKQ stockholders |
|
(302 |
) |
|
|
(284 |
) |
|
Purchase of treasury stock |
|
(38 |
) |
|
|
(1,040 |
) |
|
Other financing activities, net |
|
(17 |
) |
|
|
(22 |
) |
|
Net cash provided by (used in) financing activities |
|
1,102 |
|
|
|
(1,394 |
) |
| Effect of exchange rate changes
on cash and cash equivalents |
|
5 |
|
|
|
(24 |
) |
| Net increase in cash and cash
equivalents |
|
21 |
|
|
|
4 |
|
| Cash and cash equivalents,
beginning of period |
|
278 |
|
|
|
274 |
|
| Cash and cash equivalents, end of
period |
$ |
299 |
|
|
$ |
278 |
|
The following unaudited tables compare certain third
party revenue categories:
| |
Three Months Ended December 31, |
|
|
| (In
millions) |
|
2023 |
|
|
2022 |
|
$ Change |
|
% Change |
|
Wholesale - North America |
$ |
1,393 |
|
$ |
1,025 |
|
$ |
368 |
|
|
35.9 |
% |
|
Europe |
|
1,541 |
|
|
1,384 |
|
|
157 |
|
|
11.3 |
% |
|
Specialty |
|
371 |
|
|
364 |
|
|
7 |
|
|
1.8 |
% |
|
Self Service |
|
51 |
|
|
55 |
|
|
(4 |
) |
|
(5.6 |
)% |
| Parts and services |
|
3,356 |
|
|
2,828 |
|
|
528 |
|
|
18.7 |
% |
|
Wholesale - North America |
|
73 |
|
|
78 |
|
|
(5 |
) |
|
(7.0 |
)% |
|
Europe |
|
5 |
|
|
6 |
|
|
(1 |
) |
|
(8.0 |
)% |
|
Self Service |
|
67 |
|
|
89 |
|
|
(22 |
) |
|
(25.0 |
)% |
| Other |
|
145 |
|
|
173 |
|
|
(28 |
) |
|
(16.4 |
)% |
| Total revenue |
$ |
3,501 |
|
$ |
3,001 |
|
$ |
500 |
|
|
16.6 |
% |
Revenue changes by category for the three months
ended December 31, 2023
vs. 2022:
|
|
Revenue Change Attributable to: |
|
|
| |
Organic (1) |
|
Acquisition and Divestiture |
|
Foreign Exchange |
|
Total Change (2) |
|
Wholesale - North America |
5.3 |
% |
|
30.6 |
% |
|
— |
% |
|
35.9 |
% |
|
Europe |
3.9 |
% |
|
1.8 |
% |
|
5.6 |
% |
|
11.3 |
% |
|
Specialty |
(7.0 |
)% |
|
8.8 |
% |
|
— |
% |
|
1.8 |
% |
|
Self Service |
(5.6 |
)% |
|
— |
% |
|
— |
% |
|
(5.6 |
)% |
| Parts and services |
2.8 |
% |
|
13.1 |
% |
|
2.7 |
% |
|
18.7 |
% |
|
Wholesale - North America |
(7.0 |
)% |
|
0.1 |
% |
|
(0.1 |
)% |
|
(7.0 |
)% |
|
Europe |
(12.0 |
)% |
|
— |
% |
|
4.0 |
% |
|
(8.0 |
)% |
|
Self Service |
(24.7 |
)% |
|
(0.3 |
)% |
|
— |
% |
|
(25.0 |
)% |
| Other |
(16.4 |
)% |
|
(0.1 |
)% |
|
0.1 |
% |
|
(16.4 |
)% |
| Total revenue |
1.7 |
% |
|
12.4 |
% |
|
2.6 |
% |
|
16.6 |
% |
(1) We define organic
revenue growth as total revenue growth from continuing
operations excluding the effects of acquisitions and divestitures
(i.e., revenue generated from the date of acquisition to the first
anniversary of that acquisition, net of reduced revenue due to the
disposal of businesses) and foreign currency movements (i.e.,
impact of translating revenue at different exchange rates). Organic
revenue growth includes incremental sales from both existing and
new (i.e., opened within the last twelve months) locations and is
derived from expanding business with existing customers, securing
new customers and offering additional products and
services. We believe that organic revenue growth is a key
performance indicator as this statistic measures our ability to
serve and grow our customer base successfully.
(2) The sum of the individual
revenue change components may not equal the total percentage change
due to rounding.
The following unaudited tables compare
certain third party revenue categories:
| |
Year Ended December 31, |
|
|
| (In
millions) |
|
2023 |
|
|
2022 |
|
$ Change |
|
% Change |
|
Wholesale - North America |
$ |
4,974 |
|
$ |
4,207 |
|
$ |
767 |
|
|
18.2 |
% |
|
Europe |
|
6,303 |
|
|
5,711 |
|
|
592 |
|
|
10.4 |
% |
|
Specialty |
|
1,665 |
|
|
1,788 |
|
|
(123 |
) |
|
(6.9 |
)% |
|
Self Service |
|
232 |
|
|
227 |
|
|
5 |
|
|
2.4 |
% |
| Parts and services |
|
13,174 |
|
|
11,933 |
|
|
1,241 |
|
|
10.4 |
% |
|
Wholesale - North America |
|
307 |
|
|
349 |
|
|
(42 |
) |
|
(12.0 |
)% |
|
Europe |
|
20 |
|
|
24 |
|
|
(4 |
) |
|
(15.6 |
)% |
|
Self Service |
|
365 |
|
|
488 |
|
|
(123 |
) |
|
(25.2 |
)% |
| Other |
|
692 |
|
|
861 |
|
|
(169 |
) |
|
(19.6 |
)% |
| Total revenue |
$ |
13,866 |
|
$ |
12,794 |
|
$ |
1,072 |
|
|
8.4 |
% |
Revenue changes by category for the year ended
December 31, 2023 vs.
2022:
|
|
Revenue Change Attributable to: |
|
|
| |
Organic (1) |
|
Acquisition and Divestiture |
|
Foreign Exchange |
|
Total Change (2) |
|
Wholesale - North America |
8.2 |
% |
|
10.3 |
% |
|
(0.2 |
)% |
|
18.2 |
% |
|
Europe |
6.9 |
% |
|
1.3 |
% |
|
2.1 |
% |
|
10.4 |
% |
|
Specialty |
(10.1 |
)% |
|
3.6 |
% |
|
(0.3 |
)% |
|
(6.9 |
)% |
|
Self Service |
2.4 |
% |
|
— |
% |
|
— |
% |
|
2.4 |
% |
| Parts and services |
4.7 |
% |
|
4.8 |
% |
|
0.9 |
% |
|
10.4 |
% |
|
Wholesale - North America |
(11.8 |
)% |
|
0.1 |
% |
|
(0.2 |
)% |
|
(12.0 |
)% |
|
Europe |
(14.2 |
)% |
|
— |
% |
|
(1.4 |
)% |
|
(15.6 |
)% |
|
Self Service |
(19.1 |
)% |
|
(6.1 |
)% |
|
— |
% |
|
(25.2 |
)% |
| Other |
(16.0 |
)% |
|
(3.4 |
)% |
|
(0.1 |
)% |
|
(19.6 |
)% |
| Total revenue |
3.3 |
% |
|
4.2 |
% |
|
0.8 |
% |
|
8.4 |
% |
(1) We define organic
revenue growth as total revenue growth from continuing
operations excluding the effects of acquisitions and divestitures
(i.e., revenue generated from the date of acquisition to the first
anniversary of that acquisition, net of reduced revenue due to the
disposal of businesses) and foreign currency movements (i.e.,
impact of translating revenue at different exchange rates). Organic
revenue growth includes incremental sales from both existing and
new (i.e., opened within the last twelve months) locations and is
derived from expanding business with existing customers, securing
new customers and offering additional products and
services. We believe that organic revenue growth is a key
performance indicator as this statistic measures our ability to
serve and grow our customer base successfully.
(2) The sum of the individual
revenue change components may not equal the total percentage change
due to rounding.
The following unaudited table reconciles revenue and
revenue growth for parts & services and total revenue to
constant currency revenue and revenue growth for the same
measures:
| |
|
Three Months Ended December 31, 2023 |
|
Year Ended December 31, 2023 |
| (In
millions) |
|
Consolidated |
|
Europe |
|
Consolidated |
|
Europe |
| Parts &
Services |
|
|
|
|
|
|
|
|
|
Revenue as reported |
|
$ |
3,356 |
|
$ |
1,541 |
|
$ |
13,174 |
|
$ |
6,303 |
|
Less: Currency impact |
|
|
76 |
|
|
77 |
|
|
106 |
|
|
121 |
| Revenue at constant
currency |
|
$ |
3,280 |
|
$ |
1,464 |
|
$ |
13,068 |
|
$ |
6,182 |
| |
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
| Revenue as reported |
|
$ |
3,501 |
|
|
|
$ |
13,866 |
|
|
|
Less: Currency impact |
|
|
77 |
|
|
|
|
105 |
|
|
| Revenue at constant
currency |
|
$ |
3,424 |
|
|
|
$ |
13,761 |
|
|
| |
|
Three Months Ended December 31, 2023 |
|
Year Ended December 31, 2023 |
| |
|
Consolidated |
|
Europe |
|
Consolidated |
|
Europe |
| Parts &
Services |
|
|
|
|
|
|
|
|
| Revenue growth as
reported |
|
18.7 |
% |
|
11.3 |
% |
|
10.4 |
% |
|
10.4 |
% |
|
Less: Currency impact |
|
2.7 |
% |
|
5.6 |
% |
|
0.9 |
% |
|
2.1 |
% |
| Revenue growth at constant
currency |
|
16.0 |
% |
|
5.7 |
% |
|
9.5 |
% |
|
8.3 |
% |
| |
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
| Revenue growth as
reported |
|
16.6 |
% |
|
|
|
8.4 |
% |
|
|
|
Less: Currency impact |
|
2.6 |
% |
|
|
|
0.8 |
% |
|
|
| Revenue growth at constant
currency |
|
14.0 |
% |
|
|
|
7.6 |
% |
|
|
We have presented our revenue and the growth
rate 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 compares revenue and
Segment EBITDA by reportable segment:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
| |
2023 |
|
2022 |
|
2023 |
|
2022 |
| (In
millions) |
|
% of Revenue |
|
|
% of Revenue |
|
|
% of Revenue |
|
|
% of Revenue |
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| Wholesale - North America |
$ |
1,467 |
|
|
|
$ |
1,102 |
|
|
$ |
5,282 |
|
|
|
$ |
4,556 |
|
|
| Europe |
|
1,546 |
|
|
|
|
1,390 |
|
|
|
6,323 |
|
|
|
|
5,735 |
|
|
| Specialty |
|
371 |
|
|
|
|
365 |
|
|
|
1,668 |
|
|
|
|
1,791 |
|
|
| Self Service |
|
118 |
|
|
|
|
144 |
|
|
|
597 |
|
|
|
|
715 |
|
|
| Eliminations |
|
(1 |
) |
|
|
|
— |
|
|
|
(4 |
) |
|
|
|
(3 |
) |
|
|
Total revenue |
$ |
3,501 |
|
|
|
$ |
3,001 |
|
|
$ |
13,866 |
|
|
|
$ |
12,794 |
|
|
| Segment
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale - North America |
$ |
239 |
|
16.3 |
% |
|
$ |
204 |
18.5 |
% |
|
$ |
975 |
|
18.5 |
% |
|
$ |
852 |
|
18.7 |
% |
| Europe |
|
129 |
|
8.3 |
% |
|
|
139 |
10.0 |
% |
|
|
614 |
|
9.7 |
% |
|
|
585 |
|
10.2 |
% |
| Specialty |
|
21 |
|
5.7 |
% |
|
|
23 |
6.2 |
% |
|
|
134 |
|
8.0 |
% |
|
|
199 |
|
11.1 |
% |
| Self Service |
|
7 |
|
6.0 |
% |
|
|
7 |
5.2 |
% |
|
|
36 |
|
6.0 |
% |
|
|
83 |
|
11.7 |
% |
|
Total Segment EBITDA |
$ |
396 |
|
11.3 |
% |
|
$ |
373 |
12.4 |
% |
|
$ |
1,759 |
|
12.7 |
% |
|
$ |
1,719 |
|
13.4 |
% |
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 Net Income attributable
to LKQ stockholders excluding discontinued operations;
depreciation, amortization; interest; gains and losses on debt
extinguishment; income tax expense; restructuring and transaction
related expenses (which includes restructuring expenses recorded in
Cost of goods sold); change in fair value of contingent
consideration liabilities; other gains and losses related to
acquisitions, equity method investments, or divestitures; equity in
losses and earnings of unconsolidated subsidiaries; equity
investment fair value adjustments; impairment charges; and direct
impacts of the Ukraine/Russia conflict and related sanctions
(including provisions for and subsequent adjustments to reserves
for asset recoverability and expenditures to support our employees
and their families). 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.
This financial measure is included in the metrics used to determine
incentive compensation for our senior management. 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 general and administrative expenses are
allocated to the segments based on usage, with shared expenses
apportioned based on the segment's percentage of consolidated
revenue. Refer to the table on the following page for a
reconciliation of net income to Segment EBITDA.
The following unaudited table reconciles Net Income to
Segment EBITDA:
| |
Three Months Ended December 31, |
|
Year Ended December 31, |
|
(In millions) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| Net income |
$ |
178 |
|
|
$ |
195 |
|
|
$ |
938 |
|
|
$ |
1,150 |
|
|
Less: net income attributable to continuing noncontrolling
interest |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
| Net income attributable to LKQ
stockholders |
|
177 |
|
|
|
194 |
|
|
|
936 |
|
|
|
1,149 |
|
|
Less: net (loss) income from discontinued operations |
|
(7 |
) |
|
|
1 |
|
|
|
(6 |
) |
|
|
6 |
|
| Net income from continuing
operations attributable to LKQ stockholders |
|
184 |
|
|
|
193 |
|
|
|
942 |
|
|
|
1,143 |
|
| Adjustments - continuing
operations attributable to LKQ stockholders: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
100 |
|
|
|
67 |
|
|
|
319 |
|
|
|
264 |
|
|
Interest expense, net of interest income |
|
58 |
|
|
|
24 |
|
|
|
186 |
|
|
|
70 |
|
|
Loss on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Provision for income taxes |
|
43 |
|
|
|
81 |
|
|
|
306 |
|
|
|
385 |
|
|
Equity in earnings of unconsolidated subsidiaries |
|
(6 |
) |
|
|
(3 |
) |
|
|
(15 |
) |
|
|
(11 |
) |
|
Gains on foreign exchange contracts - acquisition related (1) |
|
— |
|
|
|
— |
|
|
|
(49 |
) |
|
|
— |
|
|
Equity investment fair value adjustments |
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
5 |
|
|
Restructuring and transaction related expenses |
|
12 |
|
|
|
10 |
|
|
|
65 |
|
|
|
20 |
|
|
Restructuring expenses - cost of goods sold |
|
2 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
Gain on disposal of businesses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
|
Losses (gains) on previously held equity interests |
|
1 |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(1 |
) |
|
Direct impacts of Ukraine/Russia conflict (2) |
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
3 |
|
|
Impairment of net assets held for sale |
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
| Segment EBITDA |
$ |
396 |
|
|
$ |
373 |
|
|
$ |
1,759 |
|
|
$ |
1,719 |
|
| |
|
|
|
|
|
|
|
| Net income from continuing
operations attributable to LKQ stockholders as a percentage of
revenue |
|
5.3 |
% |
|
|
6.5 |
% |
|
|
6.8 |
% |
|
|
8.9 |
% |
| Segment EBITDA as a percentage
of revenue |
|
11.3 |
% |
|
|
12.4 |
% |
|
|
12.7 |
% |
|
|
13.4 |
% |
Note: In the table above, the sum of the
individual amounts may not equal the total due to rounding.
(1) Related to the Uni-Select
acquisition.(2) Adjustments include provisions for and subsequent
adjustments to reserves for asset recoverability (receivables and
inventory) and expenditures to support our employees and their
families in Ukraine.
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. Refer to paragraph under the previous table (revenue
and Segment EBITDA by reportable segment) for details on the
calculation of Segment EBITDA.
Segment EBITDA should not be construed as an
alternative to operating income, net income or net cash provided by
operating activities, as determined in accordance with accounting
principles generally accepted in the United States. In addition,
not all companies that report Segment EBITDA information calculate
Segment 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 reconciles
Net Income and Diluted Earnings per Share to Adjusted Net Income
from Continuing Operations Attributable to LKQ Stockholders and
Adjusted Diluted Earnings per Share from Continuing Operations
Attributable to LKQ Stockholders, respectively:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
(In millions, except per share data) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
| Net income |
$ |
178 |
|
|
$ |
195 |
|
|
$ |
938 |
|
|
$ |
1,150 |
|
|
Less: net income attributable to continuing noncontrolling
interest |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
| Net income attributable to LKQ
stockholders |
|
177 |
|
|
|
194 |
|
|
|
936 |
|
|
|
1,149 |
|
|
Less: net (loss) income from discontinued operations |
|
(7 |
) |
|
|
1 |
|
|
|
(6 |
) |
|
|
6 |
|
| Net income from continuing
operations attributable to LKQ stockholders |
|
184 |
|
|
|
193 |
|
|
|
942 |
|
|
|
1,143 |
|
| Adjustments - continuing
operations attributable to LKQ stockholders: |
|
|
|
|
|
|
|
|
Amortization of acquired intangibles |
|
38 |
|
|
|
16 |
|
|
|
95 |
|
|
|
64 |
|
|
Restructuring and transaction related expenses |
|
12 |
|
|
|
10 |
|
|
|
65 |
|
|
|
20 |
|
|
Restructuring expenses - cost of goods sold |
|
2 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
Loss on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Pre-acquisition interest expense, net of interest income (1) |
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
Gains on foreign exchange contracts - acquisition related (1) |
|
— |
|
|
|
— |
|
|
|
(49 |
) |
|
|
— |
|
|
Losses (gains) on previously held equity interests |
|
1 |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(1 |
) |
|
Direct impacts of Ukraine/Russia conflict (2) |
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
3 |
|
|
Gain on disposal of businesses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
|
Impairment of net assets held for sale |
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Excess tax benefit from stock-based payments |
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
|
Tax effect of adjustments |
|
(12 |
) |
|
|
(9 |
) |
|
|
(41 |
) |
|
|
2 |
|
| Adjusted net income from
continuing operations attributable to LKQ stockholders |
$ |
226 |
|
|
$ |
209 |
|
|
$ |
1,027 |
|
|
$ |
1,069 |
|
| |
|
|
|
|
|
|
|
| Weighted average diluted
common shares outstanding |
|
268.1 |
|
|
|
268.7 |
|
|
|
268.3 |
|
|
|
278.0 |
|
| |
|
|
|
|
|
|
|
| Diluted earnings per share
from continuing operations attributable to LKQ stockholders: |
|
|
|
|
|
|
|
| Reported |
$ |
0.69 |
|
|
$ |
0.72 |
|
|
$ |
3.51 |
|
|
$ |
4.11 |
|
| Adjusted |
$ |
0.84 |
|
|
$ |
0.78 |
|
|
$ |
3.83 |
|
|
$ |
3.85 |
|
(1) Related to the Uni-Select
acquisition.(2) Adjustments include provisions for and
subsequent adjustments to reserves for asset recoverability
(receivables and inventory) and expenditures to support our
employees and their families in Ukraine.
We have presented Adjusted Net Income and
Adjusted Diluted Earnings per Share from Continuing Operations
Attributable to LKQ Stockholders as we believe these measures are
useful for evaluating the core operating performance of our
continuing business across reporting periods and in analyzing our
historical operating results. We define Adjusted Net Income and
Adjusted Diluted Earnings per Share from Continuing Operations
Attributable to LKQ Stockholders as Net Income and Diluted Earnings
per Share adjusted to eliminate the impact of discontinued
operations, restructuring and transaction related expenses,
amortization expense related to all acquired intangible assets,
gains and losses on debt extinguishment, the change in fair value
of contingent consideration liabilities, other gains and losses
related to acquisitions, equity method investments, or divestitures
(including gains or losses on foreign currency forward contracts
related to the Uni-Select transaction), impairment charges, direct
impacts of the Ukraine/Russia conflict and related sanctions
(including provisions for and subsequent adjustments to reserves
for asset recoverability and expenditures to support our employees
and their families), interest and financing costs related to the
Uni-Select transaction prior to closing, 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. Given the variability and volatility of the amount
related transactions in a particular period, management believes
that these costs are not core operating expenses and should be
adjusted in our calculation of Adjusted Net Income from Continuing
Operations Attributable to LKQ Stockholders. Our adjustment of the
amortization of all acquisition-related intangible assets does not
exclude the amortization of other assets, which represents expense
that is directly attributable to ongoing operations. Management
believes that the adjustment relating to amortization of
acquisition-related intangible assets supplements the GAAP
information with a measure that can be used to assess the
comparability of operating performance. The acquired intangible
assets were recorded as part of purchase accounting and contribute
to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Any future
acquisitions may result in the amortization of additional
intangible assets. These financial measures are used by management
in its decision making and overall evaluation of our operating
performance 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 Attributable to LKQ Stockholders 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 measures similar to Adjusted Net Income and Adjusted Diluted
Earnings per Share from Continuing Operations Attributable to LKQ
Stockholders 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 Net Income and Diluted Earnings per Share from
Continuing Operations Attributable to LKQ Stockholders to
Forecasted Adjusted Net Income from Continuing Operations
Attributable to LKQ Stockholders and Adjusted Diluted Earnings per
Share from Continuing Operations Attributable to LKQ Stockholders,
respectively:
| |
Forecasted |
| |
Fiscal Year 2024 |
| (In millions, except
per share data) |
Minimum Outlook |
|
Maximum Outlook |
| Net income from continuing
operations attributable to LKQ stockholders |
$ |
918 |
|
|
$ |
998 |
|
| Adjustments: |
|
|
|
|
Amortization of acquired intangibles |
|
144 |
|
|
|
144 |
|
|
Restructuring and transaction related expenses |
|
30 |
|
|
|
30 |
|
|
Tax effect of adjustments |
|
(47 |
) |
|
|
(47 |
) |
|
Adjusted net income from continuing operations attributable to LKQ
stockholders |
$ |
1,045 |
|
|
$ |
1,125 |
|
| |
|
|
|
| Weighted average diluted
common shares outstanding |
|
267.8 |
|
|
|
267.8 |
|
| |
|
|
|
|
Diluted EPS from continuing operations attributable to LKQ
stockholders: |
|
|
|
|
U.S. GAAP |
$ |
3.43 |
|
|
$ |
3.73 |
|
|
Non-GAAP (Adjusted) |
$ |
3.90 |
|
|
$ |
4.20 |
|
We have presented forecasted Adjusted Net Income
and forecasted Adjusted Diluted Earnings per Share from Continuing
Operations Attributable to LKQ Stockholders in our financial
outlook. Refer to the discussion of Adjusted Net Income and
Adjusted Diluted Earnings per Share from Continuing Operations
Attributable to LKQ Stockholders 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 Attributable to LKQ Stockholders,
we included estimates of net income from continuing operations
attributable to LKQ stockholders, amortization of acquired
intangibles for the full fiscal year 2024, restructuring expenses
under previously announced plans, and the related tax effect.
The following unaudited tables reconciles Net Cash
Provided by Operating Activities to Free Cash Flow and Net Income
to Adjusted EBITDA:
| |
Year Ended December 31, |
|
(In millions) |
2023 |
|
2022 |
|
Net cash provided by operating activities |
$ |
1,356 |
|
$ |
1,250 |
|
Less: purchases of property, plant and equipment |
|
358 |
|
|
222 |
| Free cash flow |
$ |
998 |
|
$ |
1,028 |
| |
Year Ended December 31, |
|
(In millions) |
|
2023 |
|
|
|
2022 |
|
| Net income |
$ |
938 |
|
|
$ |
1,150 |
|
|
Less: net income attributable to continuing noncontrolling
interest |
|
2 |
|
|
|
1 |
|
| Net income attributable to LKQ
stockholders |
|
936 |
|
|
|
1,149 |
|
|
Less: net (loss) income from discontinued operations |
|
(6 |
) |
|
|
6 |
|
| Net income from continuing
operations attributable to LKQ stockholders |
|
942 |
|
|
|
1,143 |
|
| Adjustments - continuing
operations attributable to LKQ stockholders: |
|
|
|
|
Depreciation and amortization |
|
319 |
|
|
|
264 |
|
|
Interest expense, net of interest income |
|
186 |
|
|
|
70 |
|
|
Loss on debt extinguishment |
|
1 |
|
|
|
— |
|
|
Provision for income taxes |
|
306 |
|
|
|
385 |
|
|
Gain on disposal of businesses |
|
— |
|
|
|
(159 |
) |
|
Gains on foreign exchange contracts - acquisition related (1) |
|
(49 |
) |
|
|
— |
|
| Adjusted EBITDA |
$ |
1,705 |
|
|
$ |
1,703 |
|
(1) Related to the
Uni-Select acquisition.
We have presented free cash flow solely as a
supplemental disclosure that offers investors, securities analysts
and other interested parties useful information to evaluate our
liquidity. We calculate free cash flow as net cash provided by
operating activities, less purchases of property, plant and
equipment. We believe free cash flow provides insight into our
liquidity and provides useful information to management and
investors concerning our cash flow available to meet future debt
service obligations and working capital requirements, make
strategic acquisitions, pay dividends and repurchase stock. We
believe free cash flow is used by investors, securities analysts
and other interested parties in evaluating the liquidity of other
companies, many of which present free cash flow when reporting
their results. This financial measure is included in the metrics
used to determine incentive compensation for our senior management.
Free cash flow should not be construed as an alternative to net
cash provided by operating activities, as determined in accordance
with accounting principles generally accepted in the United States.
In addition, not all companies that report free cash flow
information calculate free cash flow 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 liquidity relative to other companies.
We also evaluate our free cash flow by measuring
the conversion of Adjusted EBITDA into free cash flow. For the
denominator of our conversion ratio, we calculate Adjusted EBITDA
as net income attributable to LKQ stockholders excluding
discontinued operations, depreciation, amortization, interest,
gains and losses on debt extinguishment, income tax expense, gains
and losses on the disposal of businesses, and other unusual income
and expense items that affect investing or financing cash flows. We
exclude gains and losses on the disposal of businesses as the
proceeds are included in investing cash flows, which is outside of
free cash flow. Adjusted EBITDA should not be construed as an
alternative to operating income, net income or net cash provided by
operating activities, as determined in accordance with accounting
principles generally accepted in the United States. In addition,
not all companies that report Adjusted EBITDA information calculate
Adjusted 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 reconciles Forecasted Net
Cash Provided by Operating Activities to Forecasted Free Cash
Flow:
| |
Forecasted |
| |
Fiscal Year 2024 |
| (In
millions) |
Outlook |
| Net cash provided by operating
activities |
$ |
1,350 |
|
Less: purchases of property, plant and equipment |
|
350 |
| Free cash flow |
$ |
1,000 |
We have presented forecasted free cash flow in
our financial outlook. Refer to the paragraph above for details on
the calculation of free cash flow.
LKQ (NASDAQ:LKQ)
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