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Financial results

By Jeff Sanford

Toronto, Ontario -- July 30, 2015 -- Major auto recycler LKQ announced financial results for the second quarter of 2015. Revenue grew 7.5 percent over the quarter to hit a record $1.84 billion. The growth allowed the company to report “diluted” earnings of 39 cents per share. Net income for the second quarter was $119.7 million, an increase of 14.1 percent as compared to $104.9 million for the same period of 2014.

The company’s bottom line has benefitted from a string of acquisitions.

On July 8, 2015 LKQ announced it acquired the assets of PartsChannel, an aftermarket collision parts distributor with fourteen warehouses servicing over thirty markets across the US. The next day, July 9, 2015, LKQ announced that it signed a definitive agreement to acquire The Coast Distribution System, for $5.50 per share in cash. Coast is a leading distributor of replacement parts, supplies and accessories for recreational vehicles. The Coast acquisition is expected to close in the third quarter of 2015. Since the beginning of the second quarter of 2015 LKQ has also acquired eight distributors of aftermarket automotive products in the Netherlands, a self-service retail business with eight locations in California, a wholesale salvage business located in Alabama and an aftermarket parts distributor in Iowa.

“Our development efforts thus far in 2015 validate the breadth of acquisition candidates across our operating segments. These acquisitions should enhance our competitive position and market penetration. Once integrated into our networks, they will offer synergy opportunities that should create expense leverage and distribution efficiencies. Our goal is to generate continued margin expansion with our development and operating strategy, similar to what we witnessed in the second quarter and first half of 2015,” says the company’s CEO Robert Wagman.

The company provided guidance for the quarter ahead. Growth in organize revenue should be between 7 and 8.5 percent Adjusted net income is expected to rise from $425 million to $445 million.

Also reporting is Quebec-based automotive product and paint distributor Uni-Select. The company trades on the TSX. It reported solid financial results for the second quarter.

This past quarter, of course, the company completed the sale of its US arm to Icahn Enterprises L.P. for net cash proceeds of $324 million. The proceeds of the transaction were used to repay its outstanding debt. Sales dipped a bit as a result of the sale. But the company is now debt-free.

"I am very pleased by our solid performance in the second quarter and delighted by the balanced contribution of both our automotive products and paint and related products segments to our results. I am particularly delighted that we are starting to see Uni-Select emerge as a substantially more profitable operation featuring a very strong balance sheet," says Richard G. Roy, President and Chief Executive Officer of Uni-Select. "As I prepare to leave for retirement, I could not be prouder of what we have achieved as a team and I am confident that an exciting future awaits Uni-Select under the leadership of Henry Buckley as President and Chief Executive Officer effective August 1, 2015."

Sales of the automotive products segment declined to $252.9 million from $331.7 million in the prior year, mainly as a result of the Icahn sale and the declining Canadian dollar. Over the course of the second quarter the company repaid in its entirety $277.5 million in outstanding debt. The company reports it now has $78.5 million in cash and $405 million in available credit facility, providing Uni-Select “with the wherewithal to actively focus on its organic and acquisition growth-driven strategy.” That is, expect more deals in the future.

The company also declared a dividend of C$0.16 per share payable on October 20, 2015.

 

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