LKQ Corporation recently reported fourth quarter and full year 2020 results that reflect continued improvement in operational and balance sheet productivity and further debt reduction, despite softening revenue trends in many markets as a result of mobility restrictions from COVID-19.
“Our focus throughout the COVID-19 crisis has been the health and safety of our employees as well as our customers. Despite the headwinds we faced throughout 2020, we were able to execute on our key operating initiatives of pursuing profitable revenue, enhanced margins and free cash flow generation. Additionally, the cost reductions our teams implemented in 2020 to confront the pandemic’s impact on demand are lessons that we will apply to our operations in 2021 and beyond,” noted Dominick Zarcone, president and CEO. “We again delivered strong quarterly results, with the fourth quarter 2020 being the second highest quarterly earnings, and highest fourth quarter earnings, in the company’s history. Additionally, we achieved our highest level of annual free cash flow at $1.3 billion and North America’s highest annual segment EBITDA margin of 16.8%. Europe completed a strong second half with a Segment EBITDA margin of 8.9%, above the range of 8.0% to 8.5% presented at our September 2020 Investor Day. As we look to the year ahead, I am confident that the strength of our operations, balance sheet and free cash flow all position LKQ for solid growth and value creation for our stakeholders.”
Fourth Quarter and Full Year 2020 Financial Results
Revenue for the fourth quarter of 2020 was $2.95 billion, a decrease of 1.9% as compared to $3.01 billion in the fourth quarter of 2019. For the fourth quarter of 2020, parts and services organic revenue decreased 5.2% (6.1% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue 0.8% and foreign exchange rates increased revenue 2.7%, for a total parts and services revenue decline of 3.3%.
Net income for the fourth quarter of 2020 was $180 million as compared to $140 million for the same period in 2019, an increase of 28.6%. Diluted earnings per share for the fourth quarter was $0.59 as compared to $0.46 for the same period of 2019, an increase of 28.3%.
On an adjusted basis, net income in the fourth quarter was $212 million compared to $167 million in the same period of 2019, a 26.7% increase. Adjusted diluted earnings per share for the fourth quarter was $0.69 as compared to $0.54 for the same period of 2019, a 27.8% increase.
Revenue for the full year of 2020 was $11.6 billion, a decrease of 7.0% as compared to $12.5 billion for the same period of 2019. For the full year of 2020, parts and services organic revenue decreased 7.6% (8.2% on a per day basis), while the net impact of acquisitions and divestitures decreased revenue 0.5% and foreign exchange rates increased revenue 0.5%, for a total parts and services revenue decline of 7.7%.
Net income for the full year of 2020 was $639 million as compared to $541 million for the same period in 2019, an increase of 18.1%. Diluted earnings per share for the full year of 2020 was $2.09 as compared to $1.74 for the same period of 2019, an increase of 20.1%.
On an adjusted basis, net income for the full year of 2020 was $777 million compared to $736 million in the same period of 2019, a 5.6% increase. Adjusted diluted earnings per share for the full year of 2020 was $2.55 as compared to $2.37 for the same period of 2019, a 7.6% increase.
Cash Flow and Balance Sheet
Cash flow from operations totaled $309 million during the fourth quarter of 2020, for a year-to-date total of $1.4 billion. Free cash flow in the quarter totaled $246 million, bringing the total to $1.3 billion for the full year of 2020. The company made $327 million of net repayments on borrowings during the fourth quarter, for a total year-to-date debt reduction of $1.4 billion. As of December 31, 2020, LKQ’s balance sheet reflected total debt, net of debt issuance costs, of $2.9 billion and net debt of $2.6 billion, the lowest net debt level since the fourth quarter of 2015. Net leverage, as defined in our credit facility, decreased to 1.9x EBITDA. As of December 31, 2020, the company had approximately $2.9 billion in available liquidity, including $2.5 billion available under our credit facilities and $312 million of cash and cash equivalents.
During the fourth quarter of 2020, the company repurchased approximately $29 million of its common stock and for the full year invested $117 million in the program. Since initiating our plan in late October 2018, the company has repurchased 17.3 million shares for a total of $469 million.
