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LKQ First Quarter Net Income Up 44 Percent

LKQ Corp. has announced results for its first quarter, which ended March 31, with revenue of $192.1 million, net income of $12.1 million and diluted earnings per share of 22 cents.

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CHICAGO — LKQ Corp. has announced results for its first quarter, which ended March 31, with revenue of $192.1 million, net income of $12.1 million and diluted earnings per share of 22 cents.

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“Overall, we were quite pleased with the performance of the company in Q1,” said Joe Holsten, president and chief executive officer. “We achieved record quarterly revenues and earnings and exceeded our previously issued earnings estimates. We believe this level of performance, while encountering extremely mild weather conditions in a number of our markets, reflects favorably on the geographical diversity of the company, as well as our overall business model.

“We achieved revenue and net income growth of approximately 44 percent. Our organic revenue growth was approximately 12 percent, and we improved our gross margins in our recycled and aftermarket businesses compared to the first quarter of 2005. This improvement was more than offset by minimal gross margins generated by the aluminum smelter operation managed by our recently acquired Transwheel subsidiary,” said Holsten.

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All earnings per share amounts, stock price amounts and share counts reflect the company’s January two-for-one stock split.

For the first quarter of 2006, revenue increased 43.6 percent to $192.1 million compared with $133.8 million for the first quarter of 2005. The company’s organic revenue growth for the quarter was 12.4 percent. Net income for the quarter increased 43.8 percent to $12.1 million compared with $8.4 million for the first quarter of 2005. Diluted earnings per share was 22 cents for the quarter compared with 19 cents for the first quarter of 2005.

The first quarter results include approximately $725,000 of expenses related to the expensing of stock options in accordance with Statement of Financial Accounting Standard No. 123R “Share-Based Payment” (SFAS 123R). SFAS 123R became effective for LKQ on Jan. 1. These expenses lowered LKQ’s net income by approximately $434,000 and its diluted earnings per share by approximately 1 cent.

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Consolidated aftermarket collision replacement parts revenue for the quarter was $41.9 million.

The weighted average diluted shares outstanding for the quarter was 55.5 million compared to 45.4 million for the first quarter of 2005. The number of weighted average diluted shares of common stock in 2006 changed from 2005 due to the issuance of 6.4 million new shares in the company’s October 2005 follow-on public offering, exercises of stock options and warrants and the increase in our stock price.

On January 31, the company acquired Transwheel Corp., an aluminum alloy wheel refurbishing and distribution business. Transwheel currently operates refurbishing and distribution facilities in Huntington, IN; Manchester, CT; Williamsport, MD; and Tampa, FL and distribution locations in Ferndale, MI and Addison, IL. Transwheel’s third party revenue for 2005 was approximately $28.5 million from the sale or restoration of wheels. In addition to wheel revenue, a Transwheel subsidiary operates an aluminum smelter that melts damaged and unusable wheel cores as means of product disposal. For the two months in the first quarter of 2006 that LKQ owned Transwheel, the smelter’s third party aluminum revenue was $4.4 million at a gross margin of approximately 6 percent.

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During February 2006, LKQ acquired three recycling businesses, including Michael Auto Parts located in the Orlando, FL, area that primarily serves the professional repair market. This business generated approximately $12 million of revenue in 2005. In addition, the company acquired two retail businesses, one near Charleston, SC, and one near Baton Rouge, LA. These two businesses had less than $3 million of combined revenue in 2005. LKQ plans to grow and improve these two businesses and to build their facilities into modern self-service retail operations

The company said it expects that 2006 organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2005 business acquisitions and our four acquisitions that have closed in 2006. We expect net income to be within a range of $40.5 million to $42.5 million and diluted earnings per share to be between 72 cents and 76 cents. Included in the guidance is an estimated 3 cents per share effect of expensing stock options for the first time.

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For the second quarter of 2006, the company expects net income to be within a range of $10 million to $11 million and diluted earnings per share to be between 18 cents and 20 cents.

The company anticipates net cash provided by operating activities for 2006 will be approximately $40 million. Full year 2006 capital expenditures related to property and equipment, excluding expenditures relating to any future acquisitions will be approximately $36 million to $38 million. As of April 26, the company had outstanding debt under our bank credit facility of $73.5 million.

The weighted average diluted shares outstanding for the full year 2006 to be approximately 56 million.

For more information about LKQ, go to: www.lkqcorp.com .

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