LKQ Corporation Announces 2006 Second Quarter Net Income Results Up 53% With Record Revenue

Chicago, IL—July 27, 2006--LKQ Corporation (NASDAQ: LKQX) today announced results for its second quarter ended June 30, 2006, with revenue of $195.0 million, net income of $11.7 million and diluted earnings per share of $0.21.

“We exceeded our previously issued earnings estimates for the second quarter. We once again achieved a record revenue quarter with impressive revenue growth of approximately 43%. Our net income increased by close to 53% and our earnings per share increased by just over 31%. We were particularly pleased with the expansion of our operating income margin to 10.6% compared to 10.2% in the second quarter of 2005, despite the negative impact on our margin by the aluminum smelter operation of our recently acquired Transwheel subsidiary,” said Joe Holsten, President and Chief Executive Officer.

2006 Reported Results

All earnings per share amounts, stock price amounts and share counts discussed herein reflect our January 2006 two-for-one stock split.

For the second quarter of 2006, revenue increased 43.4% to $195.0 million compared with $136.0 million for the second quarter of 2005. Our organic revenue growth for the quarter was 10.8%. Net income for the quarter increased 52.9% to $11.7 million compared with $7.6 million for the second quarter of 2005. Diluted earnings per share was $0.21 for the quarter compared with $0.16 for the second quarter of 2005.

For the six months ended June 30, 2006, revenue increased 43.5% to $387.2 million compared with $269.8 million for the same period in 2005. This included organic revenue growth of 11.6%. For the six months ended June 30, 2006, net income increased 48.2% to $23.7 million compared with $16.0 million for the same period in 2005. Diluted earnings per share was $0.43 for the six months ended June 30, 2006 compared with $0.35 for the same period a year ago.

Our results for the six months ended June 30, 2006 include approximately $1.1 million 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 Corporation on January 1, 2006. These expenses had the effect of lowering our net income by approximately $657,000 and our diluted earnings per share by approximately $0.01 for the six month period.

Our consolidated aftermarket collision replacement parts revenue for the second quarter was $39.6 million and for the six months ended June 30, 2006 was $81.5 million.

The weighted average diluted shares outstanding for the second quarter was 55.7 million compared to 46.8 million for the second quarter of 2005 and for the six months ended

June 30, 2006 was 55.6 million compared to 46.3 million for the six months ended June 30, 2005. The number of weighted average diluted shares of common stock outstanding in 2006 changed from 2005 due to the issuance of 6.4 million new shares in our October 2005 public offering, exercises of stock options and warrants, and the increase in our stock price.

2006 Business Acquisitions

We have acquired nine businesses to date in 2006.

On January 31, 2006 we acquired Transwheel Corporation, 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 Chicago, 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 five months of 2006 that LKQ owned Transwheel, the smelter’s third party aluminum revenue was $12.2 million at a gross margin of approximately 5%.

In February, we acquired Michael Auto Parts in Orlando, Florida a business that primarily serves the professional repair market and generated approximately $12.0 million of revenue in 2005.

Two retail businesses, one near Charleston, South Carolina and one near Baton Rouge, Louisiana were acquired in February. On a combined basis they had less than $3.0 million of revenue in 2005. Our objective during 2006 is to grow and improve these two businesses and to build their facilities into modern self-service retail operations.

In late April and late May we acquired two businesses that consisted of three facilities in Tulsa, Oklahoma and three facilities in Western Michigan. These businesses sell into both the retail and professional repair markets. They generated $9.0 million of revenue in 2005.

On May 31, we acquired an aftermarket business that had $11.0 million of revenue in 2005 and operates facilities in the Los Angeles, CA, Portland, OR and Seattle, WA markets.

In late June and early July we acquired two retail oriented businesses that operate two facilities in Houston, TX, a facility in Daytona Beach, FL and a facility outside of Denver, CO. These businesses generated $24.0 million of revenue in 2005.

Company Outlook

We expect 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 the

nine acquisitions that we have completed so far in 2006. We expect net income to be within a range of $42.7 million to $44.7 million and diluted earnings per share to be between $0.76 and $0.80. Included in the guidance is an estimated $0.03 per share effect of expensing stock options for the first time.

For the third quarter of 2006 we expect net income to be within a range of $8.9 million to $9.7 million and diluted earnings per share to be between $0.16 and $0.17.

We anticipate that net cash provided by operating activities for 2006 will be over $40.0 million. We estimate our full year 2006 capital expenditures related to property and equipment, excluding the expenditures of acquiring businesses, will be approximately $41 million to $43 million. This includes approximately $6.0 million in property and equipment related to businesses we acquired in 2006. As of July 26, 2006 we had outstanding debt under our bank credit facility of $103.0 million.

We estimate the weighted average diluted shares outstanding for the full year 2006 will be approximately 56.0 million. These share numbers are estimates and will be affected by factors such as any future stock issuances, the number of our options exercised in subsequent periods, and changes in our stock price.

Quarterly Conference Call

We will host an audio webcast to discuss our second quarter 2006 results on Thursday, July 27, 2006 at 10:30 a.m. Eastern Time. The live audio webcast can be accessed on the internet at www.lkqcorp.com in the Investor Relations section. An online replay of the webcast will be available on our website approximately two hours after the live presentation and will remain on the site until August 11, 2006.

About LKQ Corporation

LKQ Corporation is the largest nationwide provider of recycled light vehicle OEM products and related services and the second largest nationwide provider of aftermarket collision replacement products and refurbished wheels. LKQ operates over 100 facilities offering its customers a broad range of replacement systems, components, and parts to repair light vehicles.

Forward Looking Statements

The statements in this press release that are not historical are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward looking statements involve risks and uncertainties, 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. These factors include:

·the availability and cost of inventory;

·pricing of new OEM replacement parts;

·variations in vehicle accident rates;

·changes in state or federal laws or regulations affecting our business;

·fluctuations in fuel prices;

·changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns;

·changes in the types of replacement parts that insurance carriers will accept in the repair process;

·the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure;

·declines in asset values;

·uncertainty as to changes in U.S. general economic activity and the impact of these changes on the demand for our products;

·uncertainty as to our future profitability;

·increasing competition in the automotive parts industry;

·our ability to increase or maintain revenue and profitability at our facilities;

·uncertainty as to the impact on our industry of any terrorist attacks or responses to terrorist attacks;

·our ability to operate within the limitations imposed by financing arrangements;

·our ability to obtain financing on acceptable terms to finance our growth;

·our ability to integrate and successfully operate recently acquired companies and any companies acquired in the future and the risks associated with these companies;

·our ability to develop and implement the operational and financial systems needed to manage our growing operations; and

·other risks that are described in our Form 10-K filed March 8, 2006 and in other reports filed by us from time to time with the Securities and Exchange Commission.

You should not place undue reliance on the forward looking statements. We assume no obligation to update any forward looking statement to reflect events or circumstances arising after the date on which it was made.

CONTACT: LKQ Corporation

Mark T. Spears, Executive Vice President and Chief Financial Officer

312-621-1950

irinfo@lkqcorp.com

Financial Tables To Follow

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

( In thousands, except per share data )

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Revenue	$	195,037		$	136,023		$	387,176		$	269,830
Cost of goods sold		106,921			71,531			210,649			142,702
Gross margin		88,116			64,492			176,527			127,128
Facility and warehouse expenses		20,086			14,502			40,580			28,956
Distribution expenses		19,808			15,398			39,734			29,493
Selling, general and administrative expenses		24,731			18,719			49,641			36,444
Depreciation and amortization		2,893			2,063			5,629			4,029
Operating income		20,598			13,810			40,943			28,206
Other (income) expense
Interest expense		1,378			735			2,345			1,307
Interest income		(31	)		(40	)		(55	)		(58	)
Other (income) expense, net		(127	)		(78	)		(933	)		(240	)
Total other expense		1,220			617			1,357			1,009
Income before provision for income taxes		19,378			13,193			39,586			27,197
Provision for income taxes		7,716			5,566			15,840			11,169
Net income	$	11,662		$	7,627		$	23,746		$	16,028
Net income per share:
Basic	$	0.22		$	0.18		$	0.45		$	0.39
Diluted	$	0.21		$	0.16		$	0.43		$	0.35
Weighted average common shares outstanding:
Basic		52,802			41,710			52,434			41,488
Diluted		55,706			46,772			55,595			46,322

 LKQ CORPORATION AND SUBSIDIARIES

 Unaudited Consolidated Condensed Statements of Cash Flows

( In thousands )

	Six Months Ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	23,746		$	16,028
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		5,629			4,029
Share-based compensation expense		1,131			-
Deferred income taxes		559			831
(Gain) loss on sale of property and equipment		7			(214	)
Gain on sale of investment securities		(719	)		-
Other adjustments		-			42
Changes in operating assets and liabilities, net of
effects from purchase transactions:
Receivables		(1,518	)		(1,893	)
Inventory		(15,365	)		(2,004	)
Income taxes payable		(156	)		1,632
Other operating assets and liabilities		(253	)		1,999
Net cash provided by operating activities		13,061			20,450
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(16,504	)		(6,471	)
Proceeds from sale of property and equipment		77			738
Proceeds from sale of investment securities		849			-
Expenditures for intangible assets		-			(3	)
Repayment of escrow		(2,561	)		-
Decrease in restricted cash in escrow		450			132
Cash used in acquisitions		(56,254	)		(24,037	)
Net cash used in investing activities		(73,943	)		(29,641	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock and warrant exercises		4,063			4,414
Excess tax benefit from share-based payment arrangements		3,861			-
Debt issuance costs		-			(300	)
Net borrowings of long-term debt		53,992			5,780
Net cash provided by financing activities		61,916			9,894
Net increase in cash and equivalents		1,034			703
Cash and equivalents, beginning of period		3,173			1,612
Cash and equivalents, end of period	$	4,207		$	2,315

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share and per share data)

	June 30,		December 31,
	2006		2005
Assets
Current Assets:
Cash and equivalents	$	4,207	$	3,173
Restricted cash		-		450
Receivables, net		46,534		39,500
Inventory		130,138		103,655
Deferred income taxes		2,246		2,122
Prepaid expenses		2,697		2,437
Total Current Assets		185,822		151,337
Property and Equipment, net		113,216		97,218
Intangibles
Goodwill		229,758		181,792
Other intangibles, net		78		88
Deferred Income Taxes		1,391		2,146
Other Assets		7,127		6,845
Total Assets	$	537,392	$	439,426
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	17,592	$	15,496
Escrow liability		500		2,611
Accrued expenses
Accrued payroll-related liabilities		9,174		10,115
Accrued procurement liability		2,065		2,537
Other accrued expenses		15,465		11,062
Income taxes payable		662		819
Deferred revenue		3,812		3,440
Current portion of long-term obligations		4,601		1,481
Total Current Liabilities		53,871		47,561
Long-Term Obligations, Excluding Current Portion		102,868		45,996
Other Noncurrent Liabilities		5,905		4,032
Redeemable Common Stock, $0.01 par value,
100,000 shares issued		617		617
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized,
52,835,244 and 51,414,314 shares issued at June 30, 2006
and December 31, 2005, respectively.		528		514
Additional paid-in capital		316,426		307,304
Warrants		-		80
Retained earnings		55,773		32,027
Accumulated other comprehensive income		1,404		1,295
Total Stockholders' Equity		374,131		341,220
Total Liabilities and Stockholders' Equity	$	537,392	$	439,426

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( $ in thousands )

	Three Months Ended June 30,
Operating Highlights	2006						2005
				% of						% of
				Revenue						Revenue			$ Growth			% Growth
Revenue	$	195,037			100.0	%	$	136,023			100.0	%	$	59,014			43.4	%
Cost of goods sold		106,921			54.8	%		71,531			52.6	%		35,390			49.5	%
Gross margin		88,116			45.2	%		64,492			47.4	%		23,624			36.6	%
Facility and warehouse expenses		20,086			10.3	%		14,502			10.7	%		5,584			38.5	%
Distribution expenses		19,808			10.2	%		15,398			11.3	%		4,410			28.6	%
Selling, general and administrative expenses		24,731			12.7	%		18,719			13.8	%		6,012			32.1	%
Depreciation and amortization		2,893			1.5	%		2,063			1.5	%		830			40.2	%
Operating income		20,598			10.6	%		13,810			10.2	%		6,788			49.2	%
Other (income) expense
Interest expense		1,378			0.7	%		735			0.5	%		643			87.5	%
Interest income		(31	)		0.0	%		(40	)		0.0	%		9			-22.5	%
Other (income) expense, net		(127	)		-0.1	%		(78	)		-0.1	%		(49	)		62.8	%
Total other expense		1,220			0.6	%		617			0.5	%		603			97.7	%
Income before provision for income taxes		19,378			9.9	%		13,193			9.7	%		6,185			46.9	%
Provision for income taxes		7,716			4.0	%		5,566			4.1	%		2,150			38.6	%
Net income	$	11,662			6.0	%	$	7,627			5.6	%	$	4,035			52.9	%

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Supplementary Data

( $ in thousands )

	Six Months Ended June 30,
Operating Highlights	2006						2005
				% of						% of
				Revenue						Revenue			$ Growth			% Growth
Revenue	$	387,176			100.0	%	$	269,830			100.0	%	$	117,346			43.5	%
Cost of goods sold		210,649			54.4	%		142,702			52.9	%		67,947			47.6	%
Gross margin		176,527			45.6	%		127,128			47.1	%		49,399			38.9	%
Facility and warehouse expenses		40,580			10.5	%		28,956			10.7	%		11,624			40.1	%
Distribution expenses		39,734			10.3	%		29,493			10.9	%		10,241			34.7	%
Selling, general and administrative expenses		49,641			12.8	%		36,444			13.5	%		13,197			36.2	%
Depreciation and amortization		5,629			1.5	%		4,029			1.5	%		1,600			39.7	%
Operating income		40,943			10.6	%		28,206			10.5	%		12,737			45.2	%
Other (income) expense
Interest expense		2,345			0.6	%		1,307			0.5	%		1,038			79.4	%
Interest income		(55	)		0.0	%		(58	)		0.0	%		3			-5.2	%
Other (income) expense, net		(933	)		-0.2	%		(240	)		-0.1	%		(693	)		288.8	%
Total other expense		1,357			0.4	%		1,009			0.4	%		348			34.5	%
Income before provision for income taxes		39,586			10.2	%		27,197			10.1	%		12,389			45.6	%
Provision for income taxes		15,840			4.1	%		11,169			4.1	%		4,671			41.8	%
Net income	$	23,746			6.1	%	$	16,028			5.9	%	$	7,718			48.2	%

The following table reconciles EBITDA to net income:
	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2006			2005			2006			2005
	(In thousands)
Net income	$	11,662		$	7,627		$	23,746		$	16,028
Depreciation and amortization		2,893			2,063			5,629			4,029
Interest, net		1,347			695			2,290			1,249
Provision for income taxes		7,716			5,566			15,840			11,169
Earnings before interest, taxes, depreciation
and amortization (EBITDA)	$	23,618		$	15,951		$	47,505		$	32,475
EBITDA as a percentage of revenue		12.1	%		11.7	%		12.3	%		12.0	%