LKQ Corporation Announces Third Quarter 2016 Financial

Revenue growth of 30.3% to $2.4 billion
Organic revenue growth for parts and services of 3.7%
Net income growth of 21.1%; adjusted net income growth of 26.8%
Diluted EPS of $0.40; adjusted diluted EPS of $0.45
Annual guidance updated

CHICAGO, Oct. 27, 2016 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq:LKQ) today reported revenue for the third quarter of 2016 of $2.39 billion, an increase of 30.3% as compared to $1.83 billion in the third quarter of 2015. Net income for the third quarter of 2016 was $122.7 million, an increase of 21.1% as compared to $101.3 million for the same period of 2015. On an adjusted basis, net income was $139.3 million, an increase of 26.8% as compared to the $109.9 million for the same period of 2015. Diluted earnings per share for the third quarter of 2016 was $0.40, an increase of 21.2% as compared to $0.33 for the same period of 2015. On an adjusted basis, diluted earnings per share was $0.45 in the third quarter of 2016 reflecting a 25.0% increase over $0.36 for the same period of 2015.

“The results we achieved in the third quarter reflect the benefits of our increasingly diverse and global operations. We had impressive revenue growth in parts and services of 33.2% and growth in adjusted diluted earnings per share of 25% in the third quarter. We also continued to realize the benefits associated with the productivity initiatives implemented this year,” stated Robert Wagman, President and Chief Executive Officer of LKQ Corporation. “While there was softness across parts of the global auto industry during the quarter, the Company delivered positive organic revenue growth for parts and services of 3.7%.”

On a nine month year-to-date basis, revenue was $6.76 billion, an increase of 24.2% from $5.44 billion for the comparable period of 2015. Parts and services organic revenue growth for the first nine months of 2016 was 5.1%. Net income for the first nine months of 2016 was $377.6 million, as compared to $328.2 million for the same period of 2015. Diluted earnings per share was $1.22 for the first nine months of 2016, reflecting a 14.0% increase as compared to $1.07 for the comparable period of 2015. On an adjusted basis, diluted earnings per share was $1.41 in the first nine months of 2016 reflecting a 22.6% increase over $1.15 for the same period of 2015.

See the reconciliation of net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share included with this press release.

Balance Sheet and Liquidity

Cash flow from operations totaled $524 million on a nine month year-to-date basis, of which approximately $153 million was invested in capital expenditures. As of September 30, 2016, the balance sheet reflected cash and equivalents of $272 million and outstanding debt of $3.3 billion. Total availability under the Company’s credit facility at September 30, 2016 was approximately $1.2 billion.

Other Events

During the third quarter of 2016, LKQ acquired a distributor of aftermarket automotive products in the Netherlands, a distributor of recreational vehicle products and accessories in the United Kingdom, a distributor of aftermarket automotive products in Ireland, and a heavy-duty truck salvage business in Minnesota. Also, in the third quarter, LKQ’s European operations opened three new branches in the United Kingdom and eight new branches in Eastern Europe.

On October 4, 2016, the Company announced that its United Kingdom subsidiary, Euro Car Parts, acquired substantially all the business assets of Andrew Page Limited, a distributor of automotive parts in the United Kingdom. As part of the transaction, Euro Car Parts acquired 102 Andrew Page branch locations.

Company Outlook

The Company updated its guidance for 2016.

	Updated Guidance	Prior Guidance
Organic revenue growth (parts & services)	4.5% to 5.0%	5.5% to 7.0%
Adjusted net income*	$551 million to $569 million	$555 million to $580 million
Adjusted diluted EPS*	$1.78 to $1.84	$1.79 to $1.87
Cash flow from operations	$575 million to $600 million	$585 million to $635 million
Capital expenditures	$200 million to $225 million	$200 million to $225 million

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

Our revised 2016 guidance is based on current conditions (including acquisitions completed through October 27, 2016) and excludes the impact of restructuring and acquisition related expenses; loss on debt extinguishment; amortization of acquired intangibles; gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities); income tax effects related to excess tax benefits; and capital spending related to future business acquisitions.

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

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 (SEC). Included with this release are reconciliations of each non-GAAP financial measure and the most directly comparable financial measure calculated in accordance with GAAP.

Conference Call Details

On October 27, 2016 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) members of senior management will host a conference call and Webcast to discuss the Company's results. To access the investor conference call, please dial (877) 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 (855) 859-2056 or (404) 537-3406 for international calls. The telephone replay will require you to enter conference ID: 81369558#. An online replay of the audio webcast will be available on the Company's website. Both formats of replay will be available through November 10, 2016. Please allow approximately two hours after the live presentation before attempting to access the replay.

About LKQ Corporation

LKQ Corporation (www.lkqcorp.com) is a leading provider of alternative and specialty parts to repair and accessorize automobiles and other vehicles. LKQ is also a leader in the design, production and supply of automotive glass to OEMs. LKQ has operations in North America, Europe, China and Taiwan. LKQ offers its customers a broad range of replacement systems, components, equipment and parts to repair and accessorize automobiles, trucks, and recreational and performance vehicles.

Forward Looking Statements

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, 2015 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;
fluctuations in the pricing of new original equipment manufacturer (“OEM”) replacement products;
changes in the level of acceptance and promotion of alternative automotive parts by insurance companies and auto repairers;
changes to our business relationships with insurance companies or changes by insurance companies to their business practices relating to the use of our products;
our ability to identify sufficient acquisition candidates at reasonable prices to maintain our growth objectives;
our ability to integrate, realize expected synergies, and successfully operate acquired companies and any companies acquired in the future, and the risks associated with these companies;
restrictions or prohibitions on selling certain aftermarket products to the extent OEMs seek and obtain more design patents than they have in the past and are successful in asserting infringement of these patents and defending their validity;
variations in the number of vehicles manufactured and sold, vehicle accident rates, miles driven, and the age profile of vehicles in accidents;
fluctuations in the prices of fuel, scrap metal and other commodities;
changes in 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 agreements; and
other risks that are described in our Form 10-K filed February 25, 2016 and in other reports filed by us from time to time with the SEC.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
( In thousands, except per share data )


			Three Months Ended						Nine Months Ended
			September 30,						September 30,

				2016			2015			2016			2015

	Revenue		$	2,386,830		$	1,831,732		$	6,758,999		$	5,443,714

	Cost of goods sold			1,503,418			1,118,953			4,193,203			3,307,512

		Gross margin		883,412			712,779			2,565,796			2,136,202

	Facility and warehouse expenses			183,048			143,918			519,323			412,954

	Distribution expenses			172,566			158,768			509,240			450,521

	Selling, general and administrative expenses			263,372			207,887			735,843			616,924

	Restructuring and acquisition related expenses			8,412			4,578			32,303			12,729

	Depreciation and amortization			53,016			30,883			137,233			90,118

		Operating income		202,998			166,745			631,854			552,956

	Other expense (income):
		Interest expense, net		27,059			14,722			68,032			44,250
		Loss on debt extinguishment		-			-			26,650			-
		Gains on foreign exchange contracts - acquisition related		-			-			(18,342	)		-
		Other income, net		(3,279	)		(2,928	)		(4,829	)		(912	)

		Total other expense, net		23,780			11,794			71,511			43,338

		Income before provision for income taxes		179,218			154,951			560,343			509,618

	Provision for income taxes			56,797			52,475			182,751			177,255

	Equity in earnings of unconsolidated subsidiaries			267			(1,130	)		52			(4,200	)

		Net income	$	122,688		$	101,346		$	377,644		$	328,163


	Earnings per share:
		Basic	$	0.40		$	0.33		$	1.23		$	1.08

		Diluted	$	0.40		$	0.33		$	1.22		$	1.07


	Weighted average common shares outstanding:
		Basic		307,190			305,059			306,690			304,453

		Diluted		310,036			307,728			309,671			307,326

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
( In thousands, except share and per share data )


			September 30,			December 31,
				2016			2015
		Assets

Current Assets:
	Cash and equivalents		$	271,851		$	87,397
	Receivables, net			959,321			590,160
	Inventories, net			1,912,568			1,556,552
	Prepaid expenses and other current assets			151,801			106,603
		Total Current Assets		3,295,541			2,340,712

Property, Plant and Equipment, net				1,023,707			696,567
Intangible Assets:
	Goodwill			3,117,150			2,319,246
	Other intangibles, net			619,246			215,117
Other Assets				148,308			76,195

		Total Assets	$	8,203,952		$	5,647,837

		Liabilities and Stockholders' Equity

Current Liabilities:
	Accounts payable		$	682,719		$	415,588
	Accrued expenses:
		Accrued payroll-related liabilities		106,544			86,527
		Other accrued expenses		238,302			162,225
	Other current liabilities			46,814			31,596
	Current portion of long-term obligations			74,829			56,034

		Total Current Liabilities		1,149,208			751,970

Long-Term Obligations, Excluding Current Portion				3,189,345			1,528,668
Deferred Income Taxes				226,682			127,239
Other Noncurrent Liabilities				211,440			125,278

Commitments and Contingencies

Stockholders' Equity:
	Common stock, $0.01 par value, 1,000,000,000
		shares authorized, 307,487,198 and 305,574,384
		shares issued and outstanding at September 30, 2016
		and December 31, 2015, respectively		3,074			3,055
	Additional paid-in capital			1,110,841			1,090,713
	Retained earnings			2,504,028			2,126,384
	Accumulated other comprehensive loss			(190,666	)		(105,470	)

		Total Stockholders' Equity		3,427,277			3,114,682

		Total Liabilities and Stockholders' Equity	$	8,203,952		$	5,647,837

	LKQ CORPORATION AND SUBSIDIARIES
	Unaudited Condensed Consolidated Statements of Cash Flows
( In thousands )

				Nine Months Ended
				September 30,
					2016			2015

	CASH FLOWS FROM OPERATING ACTIVITIES:
		Net income		$	377,644		$	328,163
		Adjustments to reconcile net income to net cash
			provided by operating activities:
			Depreciation and amortization		150,370			94,688
			Stock-based compensation expense		17,062			16,291
			Loss on debt extinguishment		26,650			-
			Gains on foreign exchange contracts - acquisition related		(18,342	)		-
			Other		6,711			6,580
			Changes in operating assets and liabilities, net of					-
			effects from acquisitions:					-
			Receivables, net		(46,376	)		(6,304	)
			Inventories, net		27,070			22,345
			Prepaid income taxes/income taxes payable		4,134			39,639
			Accounts payable		(12,412	)		(11,139	)
			Other operating assets and liabilities		(8,360	)		14,732

			Net cash provided by operating activities		524,151			504,995

	CASH FLOWS FROM INVESTING ACTIVITIES:
		Purchases of property, plant and equipment			(152,746	)		(99,573	)
		Acquisitions, net of cash acquired			(1,301,127	)		(157,357	)
		Other investing activities, net			29,183			3,174

			Net cash used in investing activities		(1,424,690	)		(253,756	)

	CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from exercise of stock options			7,525			7,534
		Taxes paid related to net share settlements of stock-based
		compensation awards			(4,440	)		(7,423	)
		Proceeds from issuance of Euro notes			563,450			-
		Repayment of Rhiag debt and related payments			(543,347	)		-
		Net borrowings (payments) of long-term and other obligations,
			excluding Rhiag debt repayments and issuance of Euro notes		1,081,698			(226,728	)
		Debt issuance costs			(16,404	)		-

			Net cash provided by (used in) financing activities		1,088,482			(226,617	)

	Effect of exchange rate changes on cash and equivalents				(3,489	)		(2,141	)

	Net increase in cash and equivalents				184,454			22,481

	Cash and equivalents, beginning of period				87,397			114,605

	Cash and equivalents, end of period			$	271,851		$	137,086

The following unaudited tables compare certain third party revenue categories:

	Three Months Ended
	September 30,

		2016			2015		$ Change			% Change
	(In thousands)
Included in Unaudited Condensed Consolidated
Statements of Income of LKQ Corporation

North America	$	935,959		$	914,956		$	21,003			2.3	%
Europe		769,332			510,279			259,053			50.8	%
Specialty		311,621			283,456			28,165			9.9	%
Glass		258,411			-			258,411			n/m
Parts and services		2,275,323			1,708,691			566,632			33.2	%
Other		111,507			123,041			(11,534	)		(9.4	%)
Total	$	2,386,830		$	1,831,732		$	555,098			30.3	%

Revenue changes by category for the three months ended September 30, 2016 vs. 2015:


	Revenue Change Attributable to:

	Organic			Acquisition			Foreign Exchange			Total Change (1)

North America		2.1	%		0.2	%		0.0	%		2.3	%
Europe		6.7	%		54.6	%		(10.6	%)		50.8	%
Specialty		3.7	%		6.2	%		0.0	%		9.9	%
Glass		n/m			n/m			n/m			n/m
Parts and services		3.7	%		32.6	%		(3.2	%)		33.2	%
Other		(10.1	%)		0.8	%		(0.2	%)		(9.4	%)
Total		2.8	%		30.5	%		(3.0	%)		30.3	%


	Nine Months Ended
	September 30,

		2016			2015		$ Change			% Change
	(In thousands)
Included in Unaudited Condensed Consolidated
Statements of Income of LKQ Corporation

North America	$	2,884,169		$	2,745,448		$	138,721			5.1	%
Europe		2,137,998			1,505,106			632,892			42.0	%
Specialty		934,955			807,401			127,554			15.8	%
Glass		468,515			-			468,515			n/m
Parts and services		6,425,637			5,057,955			1,367,682			27.0	%
Other		333,362			385,759			(52,397	)		(13.6	%)
Total	$	6,758,999		$	5,443,714		$	1,315,285			24.2	%

Revenue changes by category for the six months ended September 30, 2016 vs. 2015:


	Revenue Change Attributable to:
	Organic			Acquisition			Foreign Exchange			Total Change (1)

North America		3.3	%		2.0	%		(0.3	%)		5.1	%
Europe		7.2	%		41.1	%		(6.3	%)		42.0	%
Specialty		7.3	%		8.9	%		(0.4	%)		15.8	%
Glass		n/m			n/m			n/m			n/m
Parts and services		5.1	%		24.0	%		(2.1	%)		27.0	%
Other		(17.2	%)		3.8	%		(0.2	%)		(13.6	%)
Total		3.5	%		22.6	%		(2.0	%)		24.2	%

⁽¹⁾The sum of the individual revenue change components may not equal the total percentage change due to rounding.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )


				Three Months Ended September 30,

Operating Highlights					2016						2015
							% of						% of
							Revenue⁽¹⁾						Revenue⁽¹⁾			Change			% Change

	Revenue			$	2,386,830			100.0	%	$	1,831,732			100.0	%	$	555,098			30.3	%

	Cost of goods sold				1,503,418			63.0	%		1,118,953			61.1	%		384,465			34.4	%

			Gross margin		883,412			37.0	%		712,779			38.9	%		170,633			23.9	%

	Facility and warehouse expenses				183,048			7.7	%		143,918			7.9	%		39,130			27.2	%

	Distribution expenses				172,566			7.2	%		158,768			8.7	%		13,798			8.7	%

	Selling, general and administrative expenses				263,372			11.0	%		207,887			11.3	%		55,485			26.7	%

	Restructuring and acquisition related expenses				8,412			0.4	%		4,578			0.2	%		3,834			83.7	%

	Depreciation and amortization				53,016			2.2	%		30,883			1.7	%		22,133			71.7	%

			Operating income		202,998			8.5	%		166,745			9.1	%		36,253			21.7	%

	Other expense (income):
			Interest expense, net		27,059			1.1	%		14,722			0.8	%		12,337			83.8	%
			Loss on debt extinguishment		-			0.0	%		-			0.0	%		-			n/m
			Gains on foreign exchange contracts - acquisition related		-			0.0	%		-			0.0	%		-			n/m
			Other income, net		(3,279	)		(0.1	%)		(2,928	)		(0.2	%)		(351	)		12.0	%

			Total other expense, net		23,780			1.0	%		11,794			0.6	%		11,986			n/m

			Income before provision for income taxes		179,218			7.5	%		154,951			8.5	%		24,267			15.7	%

	Provision for income taxes				56,797			2.4	%		52,475			2.9	%		4,322			8.2	%

	Equity in earnings of unconsolidated subsidiaries				267			0.0	%		(1,130	)		(0.1	%)		1,397			n/m

			Net income	$	122,688			5.1	%	$	101,346			5.5	%	$	21,342			21.1	%


	Earnings per share:
			Basic	$	0.40					$	0.33					$	0.07			21.2	%

			Diluted	$	0.40					$	0.33					$	0.07			21.2	%


	Weighted average common shares outstanding:
			Basic		307,190						305,059						2,131			0.7	%

			Diluted		310,036						307,728						2,308			0.8	%


	⁽¹	⁾	The sum of the individual percentage of revenue components may not equal the total due to rounding.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Supplementary Data
( In thousands, except per share data )


				Nine Months Ended September 30,

Operating Highlights					2016						2015
							% of						% of
							Revenue⁽¹⁾						Revenue ⁽¹⁾			Change			% Change

	Revenue			$	6,758,999			100.0	%	$	5,443,714			100.0	%	$	1,315,285			24.2	%

	Cost of goods sold				4,193,203			62.0	%		3,307,512			60.8	%		885,691			26.8	%

			Gross margin		2,565,796			38.0	%		2,136,202			39.2	%		429,594			20.1	%

	Facility and warehouse expenses				519,323			7.7	%		412,954			7.6	%		106,369			25.8	%

	Distribution expenses				509,240			7.5	%		450,521			8.3	%		58,719			13.0	%

	Selling, general and administrative expenses				735,843			10.9	%		616,924			11.3	%		118,919			19.3	%

	Restructuring and acquisition related expenses				32,303			0.5	%		12,729			0.2	%		19,574			n/m

	Depreciation and amortization				137,233			2.0	%		90,118			1.7	%		47,115			52.3	%

			Operating income		631,854			9.3	%		552,956			10.2	%		78,898			14.3	%

	Other expense (income):
			Interest expense, net		68,032			1.0	%		44,250			0.8	%		23,782			53.7	%
			Loss on debt extinguishment		26,650			0.4	%		-			0.0	%		26,650			n/m
			Gains on foreign exchange contracts - acquisition related		(18,342	)		(0.3	%)		-			0.0	%		(18,342	)		n/m
			Other income, net		(4,829	)		(0.1	%)		(912	)		(0.0	%)		(3,917	)		n/m

			Total other expense, net		71,511			1.1	%		43,338			0.8	%		28,173			65.0	%

			Income before provision for income taxes		560,343			8.3	%		509,618			9.4	%		50,725			10.0	%

	Provision for income taxes				182,751			2.7	%		177,255			3.3	%		5,496			3.1	%

	Equity in earnings of unconsolidated subsidiaries				52			0.0	%		(4,200	)		(0.1	%)		4,252			n/m

			Net income	$	377,644			5.6	%	$	328,163			6.0	%	$	49,481			15.1	%


	Earnings per share:
			Basic	$	1.23					$	1.08					$	0.15			13.9	%

			Diluted	$	1.22					$	1.07					$	0.15			14.0	%


	Weighted average common shares outstanding:
			Basic		306,690						304,453						2,237			0.7	%

			Diluted		309,671						307,326						2,345			0.8	%

	⁽¹	⁾	The sum of the individual percentage of revenue components may not equal the total due to rounding.

The following unaudited table reconciles Net Income to EBITDA:

				Three Months Ended						Nine Months Ended
				September 30,						September 30,

					2016			2015			2016			2015
				(In thousands)

Net income				$	122,688		$	101,346		$	377,644		$	328,163
Depreciation and amortization					59,488			32,974			150,370			94,688
Interest expense, net					27,059			14,722			68,032		$	44,250
Loss on debt extinguishment ⁽¹⁾					-			-			26,650			-
Provision for income taxes					56,797			52,475			182,751			177,255

Earnings before interest, taxes, depreciation
			and amortization (EBITDA)	$	266,032		$	201,517		$	805,447		$	644,356

EBITDA as a percentage of revenue					11.1	%		11.0	%		11.9	%		11.8	%

	⁽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 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 depreciation, amortization, interest (which includes loss on debt extinguishment) and income tax expense. We believe EBITDA is used by investors, securities analysts and other interested parties in evaluating the operating performance and the value of other companies, many of which present EBITDA when reporting their results. EBITDA should not be construed as an alternative to operating income, net income or net cash provided by (used in) operating activities, as determined in accordance with accounting principles generally accepted in the United States. In addition, not all companies that report EBITDA information calculate EBITDA in the same manner as we do and, accordingly, our calculation is not necessarily comparable to similarly named measures of other companies and may not be an appropriate measure for performance relative to other companies.

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



	Three Months Ended						Nine Months Ended
	September 30,						September 30,

		2016			2015			2016			2015
(In thousands, except per share data)

Net income	$	122,688		$	101,346		$	377,644		$	328,163

Adjustments:

Restructuring and acquisition related expenses		8,412			4,578			32,303			12,729
Loss on debt extinguishment		-			-			26,650			-
Amortization of acquired intangibles		25,040			8,233			58,191			24,729
Inventory step-up adjustment – acquisition related		(387	)		-			9,826			-
Change in fair value of contingent consideration liabilities		57			89			176			365
Gains on foreign exchange contracts - acquisition related		-			-			(18,342	)		-
Excess tax benefit from stock-based payments		(4,984	)		-			(11,471	)		-
Tax effect of adjustments		(11,491	)		(4,351	)		(37,748	)		(13,018	)

Adjusted net income	$	139,335		$	109,895		$	437,229		$	352,968


Weighted average diluted common shares outstanding		310,036			307,728			309,671			307,326

Diluted earnings per share	$	0.40		$	0.33		$	1.22		$	1.07

Adjusted diluted earnings per share	$	0.45		$	0.36		$	1.41		$	1.15


We have presented Adjusted Net Income and Adjusted Diluted Earnings per Share as we believe these measures are useful for evaluating the core operating performance of our business across reporting periods and in analyzing the company’s historical operating results. We define Adjusted Net Income and Adjusted Diluted Earnings per Share as Net Income and Diluted Earnings per Share adjusted to eliminate the impact of 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. 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 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 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 compares revenue and Segment EBITDA by reportable segment:


	Three Months Ended												Nine Months Ended
	September 30,												September 30,

		2016						2015						2016						2015
(In thousands)				% of Revenue						% of Revenue						% of Revenue						% of Revenue

Revenue
North America	$	1,046,665					$	1,037,290					$	3,214,762					$	3,128,614
Europe		770,219						511,146						2,141,186						1,508,395
Specialty		312,590						284,306						937,969						809,858
Glass		258,525						-						468,703
Eliminations		(1,169	)					(1,010	)					(3,621	)					(3,153	)

Total revenue	$	2,386,830					$	1,831,732					$	6,758,999					$	5,443,714

Segment EBITDA
North America	$	141,054			13.5	%	$	128,506			12.4	%	$	452,254			14.1	%	$	416,774			13.3	%
Europe		72,586			9.4	%		52,733			10.3	%		220,066			10.3	%		153,199			10.2	%
Specialty		32,449			10.4	%		26,075			9.2	%		105,979			11.3	%		91,677			11.3	%
Glass		27,758			10.7	%		-			n/m			51,059			10.9	%		-			n/m

Total Segment EBITDA		273,847			11.5	%		207,314			11.3	%		829,358			12.3	%		661,650			12.2	%

Deduct:
Restructuring and acquisition related expenses		8,412						4,578						32,303						12,729
Inventory step-up adjustment – acquisition related		(387	)					-						9,826						-
Change in fair value of contingent consideration liabilities		57						89						176						365

Add:
Equity in earnings of unconsolidated subsidiaries		267						(1,130	)					52						(4,200	)
Gains on foreign exchange contracts - acquisition related		-						-						18,342						-

EBITDA	$	266,032			11.1	%	$	201,517			11.0	%	$	805,447			11.9	%	$	644,356			11.8	%


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 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 growth for Parts & Services Revenue and Total Revenue to constant currency revenue growth for the same measure:

	Three Months Ended				Three Months Ended
	September 30, 2016				September 30, 2016
Parts & Services				Total Revenue
Revenue growth as reported		33.2	%	Revenue growth as reported		30.3	%
Less: Currency impact		(3.2	%)	Less: Currency impact		(3.0	%)
Revenue growth at constant currency		36.4	%	Revenue growth at constant currency		33.3	%


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 does not reflect our operations. 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 Forecasted Net Income and Diluted Earnings per Share to Forecasted Adjusted Net Income and Adjusted Diluted Earnings per Share, respectively:



	Forecasted
	Fiscal Year 2016

	Minimum Guidance			Maximum Guidance
(In millions, except per share data)

Net income	$	475		$	493

Adjustments:

Restructuring and acquisition related expenses		32			32
Loss on debt extinguishment		27			27
Amortization of acquired intangibles		83			83
Inventory step-up adjustment – acquisition related		10			10
Gains on foreign exchange contracts - acquisition related		(18	)		(18	)
Excess tax benefit from stock-based payments		(11	)		(11	)
Tax effect of adjustments		(47	)		(47	)

Adjusted net income	$	551		$	569


Weighted average diluted common shares outstanding		310			310

Diluted earnings per share	$	1.53		$	1.59

Adjusted diluted earnings per share	$	1.78		$	1.84


We have presented forecasted Adjusted Net Income and forecasted Adjusted Diluted Earnings per Share 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, we included estimates of net income, restructuring expenses and amortization of acquired intangibles for the full fiscal year 2016; we included for all other components the amounts incurred as of September 30, 2016.

LKQ Corporation Announces Third Quarter 2016 Financial Results

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