Docstoc

Management Presentation

Document Sample
Management Presentation Powered By Docstoc
					Sidoti Emerging Growth Conference
March 28, 2007
Forward Looking Statements
Certain statements in this presentation that are not historical are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward looking statements generally include
expectations, beliefs, hopes, intentions or strategies regarding our future.
Forward looking statements are subject to risks, uncertainties and other
factors some of which are not currently known to us. Actual events or results
may differ materially from those expressed or implied in the forward looking
statements as a result of various factors. Some of such risks, uncertainties
and other factors are described in our form 10-K and are described in other
periodic filings with the Securities Exchange Commission. We assume no
obligation to publicly update any forward looking statement to reflect events or
circumstances arising after the date on which it was made, except as required
by law.


2
LKQ Company Overview
    Largest provider of recycled OEM light vehicle products
    Second largest provider of collision repair aftermarket and refurbished wheel products in
    the U.S.
    Compelling value proposition ⇒ we are a national, “one-stop” solution for recycled OEM,
    aftermarket and wheel replacement parts
    Results driven by increasing market share, product expansion and accretive acquisitions

    Revenue Growth                                Net Income
    ($ in millions)                               ($ in millions)
                                                                                            $44.4
                               %           $789                               %
                           R 29                                           R 42
                        CAG         $547                               CAG          $30.9

                             $425                                           $20.6
                      $328                                          $14.6
       $287                                          $11.0




       2002           2003   2004   2005   2006      2002           2003    2004    2005    2006

3
Investment Highlights
                         Only national provider of recycled OEM products
     Market Leader       First mover advantages and high barriers to entry



        Proven           Disciplined procurement, inventory and pricing systems
    Business Model       Unique distribution model leads to industry leading fulfillment rates


                         CEO & CFO have extensive experience managing entrepreneurial
    Highly Experienced   multi-location businesses
    Management Team      Seven Region VP’s have 160 years of collective Industry
                         experience

                         Lower costs of repairs
Attractive Customer
                         Quick delivery of a broad range of repair products
 Value Proposition
                         LKQ as a “one-stop” shop
4
Investment Highlights

     Multiple Growth       Acquisitions and internal growth will continue to expand offerings
      Opportunities        Enhanced customer penetration and market share




    Attractive Financial   Strong cash flow from operations
          Metrics          Increased operating margins from 7.3% in 2002 to 9.8% in 2006




                           26 acquisitions since IPO, significantly broadening product offering
       Strong Track        and geographic reach
          Record           Operating income CAGR of 39% since 2002 through 2006



5
LKQ’s Track Record
    Business Formation           Internal Growth              Since IPO

         1997 - 1999                2000 - 2003            2004 – 2007 YTD
    Concept definition         Standardize processes     26 business acquisitions
    Industry due diligence     Implement controls        Introduced and expand
                                                         complementary product
    $120 million cash equity   Create key alliances      lines of aftermarket parts,
    30 acquisitions            Grow national network     refurbished wheels & lights

    Development of systems     Enhance operations        Improve fulfillment rates

    Integration                3 acquisitions            Introduce self-service retail
                                                         business
                               Initial Public Offering
                                                         Continue to geographically
                                                         expand national network
                                                         Identify opportunities for
                                                         growth
                                                         Improve operating margin

6
Industry is Large and Fragmented
    Recycled OEM Products
      More than 6,000 U.S. automotive recyclers
      Aggregate annual revenue in excess of $7.0 billion
      Recyclers tend to be small operators ⇒ 93% less than $3.0 million in revenue
      Historically inconsistent product availability and service levels

    Aftermarket Products
      Annual revenues for insurance repairs approaching $1.7 billion
      Has been taking market share from new OEM ⇒ 11% of parts dollars are aftermarket
      specified on insurance estimates
      One national competitor, several regional players, and many small independents
      Small competitors lack fulfillment and service capabilities
    Refurbished Wheels
      Over $900 million of reconditioned wheels and reconditioned bumpers are used on
      insured collision repairs

7
Favorable Industry Growth Dynamics
    Increasing Demand for Repairs (1)                                           Increasing Utilization of Alternative Products
       Cars on the road ↑ 2.5%
                                                                               Sources of Collision Repair Products
       Miles driven ↑ 1.5%                                                                                       Aftermarket
                                                                                                                     11%


                                                                                           New OEM
    Increasing Repair Cost             (1)                                                   71%                                 Recycled and
                                                                                                                                 Reconditioned
                                                                                                                                       18%
       Collision repair costs ↑ 5.8%
       Mechanical repair costs ↑ 3.9%
                                                                               Use of Alternative Products
    Increasing Supply                                                              23.7%   24.8%        26.3%          28.0%           28.9%

       % Vehicles declared total loss
             2005            13.0%                                                 76.3%   75.2%        73.7%          72.0%           71.1%
             2004            13.3%
             2002            11.3%
                                                                                    2001    2002         2003           2004            2005
             2000             7.9%                                                                 New OEM      Alternative Products
     _____________________
     Note: Alternative Parts include Aftermarket, Recycled and Reconditioned products.
8
     (1) Compound annual growth rates from 2000 to 2005.
Insurance Industry Momentum
    Insurance industry now requires increased utilization of recycled OEM and
    aftermarket parts
       Direct repair programs “DRP” create a “PPO” environment
       Focus on cost containment and severity management

    Insurance Carrier                                            Approved Repair Shop
                                  Car Repair Volume



                              Recycled OEM & Aftermarket Utilization



    Insurance industry attempting to improve returns on totaled automobiles
    and reduce repair costs
9
A Compelling Value Proposition
        Recycled OEM
         Installed Price*      Front Door            Engine        Rear Bumper
             New OEM             $1,780              $3,935           $871
         Recycled OEM            $938                $1,939           $656
              Savings             47%                 51%             25%

           Aftermarket
         Installed Price*       Fender             Door Mirror        Hood
             New OEM             $240                 $238            $407
            Aftermarket          $185                 $190            $302
              Savings             23%                 20%             26%

                            …and improved cycle time for repairs
 *Estimated average.

10
The Recycling Process
 Salvage Vehicles                      Recycled Parts and Products




     • Auctions                     • Wholesale Customers   • Reprocessors          • Shredders
     • Insurance Companies          • Parts Installers      • Remanufacturers       • Scrap Dealers
     • Auto Manufacturers           • Extended Warranty     •Wheel Reconditioners   • Metal Processors
                                     Companies

                 $1,900*                   $3,600*           $120 - $125*             $90 - $140*


            $1,900*                                         $3,800*
 * For illustrative purposes only

11
Wheel Refurbishing – New LKQ Market Entry
     LKQ acquired Transwheel January 31, 2006
     $28.5 million in wheel related sales, in addition a small aluminum smelter is operated
     6 locations with 250 employees
     2nd largest in the U.S.
     Transwheel is on three popular shop estimating systems for wheels that will increase
     LKQ part request activity
     Strong demand from insurers
     OE wheel average $275 each vs. $179 for refurbished wheels – cost to carrier
     Supply of bad wheels (cores) are key to refurbishing, something LKQ generates in
     high volumes
     Only one national competitor gives LKQ large geographic areas in which to grow
     wheel business
     Transwheel gives LKQ more one-stop-shop capabilities by now providing refurbished
     wheels
12
LKQ’s National and Local Recycling Network
      With less than 10% market share and no dominant competitor, LKQ has
      multiple avenues for increased market penetration and market share growth




        Corporate Office
        Distribution Hub
        Sales & Processing Facility
        Co-located Salvage/Aftermarket
        Core Facility
        Major Aftermarket Warehouse
        Wheel Refurbishment Warehouse
        Light Refurbishment
        Self Service Yards

13
     Note: “Major aftermarket warehouses” include those in excess of 15,000 square feet.
Emerging Aftermarket Parts Infrastructure
     LKQ’s aftermarket and wheel operations are in the early stages of
     development




     Regional Warehouses
     Branch Stores
     Wheel Business Locations
14
LKQ is Emerging as a “One-Stop” Shop
     Historically, LKQ sales reps report over 1 million not-in-stocks
     on recycled part types that are produced by after-market
     manufacturers
     Existing distribution network is being utilized to distribute
     recycled OEM, aftermarket and refurbished repair products
     One step closer to “one-stop” shopping (i.e., LKQ receives 1st
     call)
     LKQ repair order review program
     Create increased customer loyalty


15
Efficient Distribution
     Not-in-stock rates lower than industry norm, leveraging distribution
     infrastructure to sell more products
     Next day delivery routes in most markets
     Regional capabilities and technology provide access to extensive part
     inventory across the network
 Recycled OEM                               Aftermarket and Wheels




16
Customer Relationships and Supply Partners
 Insurance Companies                 Dealers/ Repair Shops/Retailers

                                                 AUTO BODY
                                                  & GLASS




 Extended Warranty Companies         Others



        FIDELITY WARRANTY SERVICES
                                                 BMW
     A member of




17
Growth Opportunities
 Positive Repair Parts   Growing number of vehicles on the road and miles driven
   Market Dynamics       Repair costs and total loss vehicles are increasing

                         Insurance industry roll-out of DRP programs
     Favorable Insured
                         Increasing utilization of recycled OEM, aftermarket and refurbished
       Repair Trends
                         products

      Opportunity to     LKQ has fairly low market share
     Increase Market     Unique recycled, aftermarket part and refurbished part offering
          Share          Early stages of a “one-stop” shop provider

          New            Numerous untapped markets
       Geographical      Aftermarket and refurbished part development
         Markets         Proven ability to acquire and enhance operations

        Expanded         Repair order review process is growing
        Customer         Purchase vehicles direct from insurance carriers
       Relationships     Sale of additional products
18
Experienced Leadership Team
     Senior Management Team

                   Industry Years
        Name         Experience                          Role                     Experience & Background
Joe Holsten              8          President, CEO & Director            Waste Management
Mark Spears              7          EVP & CFO                            Waste Management
Leonard Damron          30          SVP of Southeast & Self-Service      Prior owner – career in industry
                                    Regions
Bradley Willen          17          VP of Midwest Region                 Prior owner – career in industry
Mike Dufresne           21          VP of Northeast Region               Prior owner – career in industry
Steve Jones             25          VP of Core, Central & West Regions   Prior owner – career in industry
Gary Ackerman           33          VP of North Central Region           Prior Owner – career in industry
Steven Greenspan        16          VP of Mid-Atlantic                   Career in industry
Walter Hanley            3          SVP of Development                   Flynn Enterprises & Bell, Boyd & Lloyd LLC
Howard Nusbaum          25          VP of Sales                          Career as industry consultant
Rob Wagman              18          VP of Insurance Services &
                                                                         Auction & Salvage industries
                                    Aftermarket/Wheels
Laurie Garcia            8          VP of Marketing                      Experience at OEM

19
Key Financial Characteristics
        Consistent, organic growth and accretive acquisitions
        Increased operating leverage from penetration and scale
        Strong operating cash flow and conservative capital structure
                                               9%
                                      CAGR 2                            $789.4
     Revenue
     ($ in millions)
                                                        $547.4
                                         $424.8
                          $328.0
                $287.1




                  2002     2003           2004           2005            2006

20
     2006 Revenue Mix
                                           Brokered Recycled
                                               Products
                                       Other *    5%
                                        11%

                 Aluminum Smelter
                        4%


                                                               Recycled Products
                                                                from Inventory
             Aftermarket Products
                                                                      56%
                 & Refurbished
                    Wheels
                     24%


 * Includes bulk products and scrap.


21
Strong Growth Dynamics
     Internal growth has been a strong driver of growth
                                      Revenue Growth

                               Organic            Overall

              2001              11%                11%

              2002              15%                15%

              2003              12%                14%

              2004              11%                30%

              2005              12%                29%

              2006              12%                44%



22
Stable Gross Margins from Disciplined Procurement

          Consistently ranged from 45.3% to 47.1% of revenue
                      ($ in millions)

                    $375.0                                                  $357.5   60.0%
                    $325.0                                                           55.0%

                    $275.0                                         $257.5            50.0%




                                                                                             As a Percentage of Revenue
     Gross Margin




                                                                                     45.0%
                    $225.0                                $197.6
                                                                                     40.0%
                    $175.0                       $153.7
                                        $132.6                                       35.0%
                    $125.0                                                           30.0%
                     $75.0                                                           25.0%
                     $25.0                                                           20.0%
                                         2002     2003     2004     2005     2006


23
        Strong Operating Income Leverage
                     ($ in millions)



                   $80.0                                                       $77.2   18.0%

                   $70.0
                                                             R 3 9%                    16.0%

                                                       C   AG                          14.0%
                   $60.0                                               $52.9




                                                                                               As a Percentage of Revenue
                                                                                       12.0%
Operating Income




                   $50.0
                                                                                       10.0%
                   $40.0                                       $34.9
                                                                                       8.0%
                   $30.0                       $26.1
                                       $20.8                                           6.0%
                   $20.0
                                                                                       4.0%
                   $10.0                                                               2.0%

                    $0.0                                                               0.0%
                                       2002    2003             2004   2005    2006

   24
Strong Operating Income Leverage

                                                                   2005        2006

     Operating Income Margin, as reported                             9.7%      9.8%




     Operating Income Margin, without effect of
      stock option expense, Transwheel FAS 141
      inventory adjustments (1), and effect of
      Transwheel aluminum smelter operating
      at the low gross margin of 7.1%                                 9.7%     10.3%

     (1) FAS 141 adjustment increased opening inventory by $0.3 million, and




25
Net Income and EPS Growth
                               Net Income                                       EPS
     ($ in millions)

                                                                                              $0.80
                                                $44.4
                                                                            0   %
                                    %                                    R3
                               42                                    G                $0.63
                             R                                    CA
                          CAG
                                        $30.9
                                                                          $0.46
                                                                $0.40
                                $20.6
                                                        $0.28
                       $14.6
     $11.0




     2002              2003     2004    2005    2006    2002    2003      2004        2005    2006



26
Maintain Conservative Capitalization

        ($ in millions)
                                             As of 12/31/2006
     Credit Facility Debt                          $86.0
     Other Debt                                      14.4
     Stockholders’ Equity                          401.2
     Total Capitalization                         $501.6
     Debt / EBITDA                                    1.1x
     Debt / Cap                                      20.0%

     Note: Credit facility debt at February 26 was $97.0 million, total facility line
     can currently go to $135.0 million

27
 Favorable 2007 Outlook

                                         2006                         2007                       Year-Over-Year Change

      Revenue                          $789.4


      Net Income                        $44.4               $53.5 to $56.5                                20% - 27%


      Diluted EPS                       $0.80               $0.95 to $1.00                                19% - 25%



 Note: As of February 27, 2007.
 (1) Q1 2007 guidance range for net income of $14.2 to $15.2 million and diluted EPS of $0.25 to $0.27.
28

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4
posted:9/29/2012
language:Unknown
pages:29