Dominick Zarcone
President and Chief Executive Officer at LKQ
Thank you, Joe, and good morning to everybody on the call. This morning, I will provide some high-level comments related to our performance in the quarter and full year 2022, and then Rick will dive into the financial details and discuss our 2023 outlook before I come back with a few closing remarks. This month, we are celebrating the 25th anniversary of our company's founding in February 1998, which started with a few salvage facilities in the U.S. has grown to a Fortune 300 business with operations in 28 countries and over 45,000 employees providing a wide array of aftermarket and recycled parts used to repair, maintain and accessorize vehicles. Our operations are leaders in their respective markets and are well-positioned to continue their success in the future. Getting to this point has been the result of the dedication of our past and present teams, and I want to express my sincere appreciation for all of these efforts. I am excited to see what this team can deliver in the future as the LKQ team is never satisfied, never rest on its laurels and is always pushing to be the best. When LKQ was founded, ESG was not the hot topic that it is today, but ESG has always been a vital part of our strategy. Through our recycling operations, we are enabling the circular economy in doing our part to reduce waste. I am proud of our contributions to date, and I can assure you that our emphasis on sustainability will continue to be an integral part of our mission. Our success in ESG is being recognized by external parties. On December 5, 2022, MSCI upgraded LKQ to their highest ESG rating of AAA, placing LKQ in the top 5% of all companies that they rate globally. And on January 31 of this year, LKQ was included in Sustainalytics 2023 top-rated ESG companies list.
The fourth quarter of 2022 closed a year where the resilience of our businesses shined through a myriad of uncontrollable headwinds ranging from economic softness, inflation, supply chain disruptions, labor shortages, energy cost spikes and a war in Europe. From an operating perspective, the fourth quarter was a very strong set of results, and I could not be more proud of our team. The continuation of exceptional organic revenue growth and strong margins in our North American wholesale segment when combined with solid organic revenue growth and the highest fourth quarter EBITDA margins in the history of our European segment offset the impact of the continued headwinds experienced in our specialty and self-service segments. The January revenue trends are similar to the levels generated in the fourth quarter. While the operations were collectively right on target with the guidance that we provided back in October, the annual tax provision was higher than anticipated, which drove a full year catch-up in the fourth quarter and resulted in quarterly EPS at the low end of the guidance range. Rick will provide more detail on the tax provision in a few minutes. Now on to the strong quarterly results. Revenue for the fourth quarter of 2022 was $3 billion, a decrease of 5.8% as compared to $3.2 billion in the fourth quarter of 2021, driven by FX translation and the divestiture of PGW. Parts and services organic revenue increased 4.5% on a reported basis and 5.9% on a per day basis. The net impact of acquisitions and divestitures decreased revenue by 3.1% and foreign exchange rates decreased revenue by 6.1%, for total parts and services revenue decrease of 4.8%. Other revenue fell 20.1%, primarily due to weaker commodity prices relative to the same period in 2021. Net income in the fourth quarter was $193 million as compared to $235 million for the same period in 2021.
Diluted earnings per share for the fourth quarter was $0.72 as compared to $0.81 for the same period last year, a decrease of 11%. During the quarter, we had an unfavorable $0.15 year-over-year impact related to the higher-than-anticipated tax rates. The tax rate was also higher than anticipated during our third quarter call, which generated an unfavorable $0.05 effect on adjusted diluted EPS relative to our guidance. On an adjusted basis, net income in the fourth quarter was $209 million as compared to $254 million for the same period of 2021, a decrease of 17.5%. Adjusted diluted earnings per share in the fourth quarter was $0.78 as compared to $0.87 for the same period of last year, a decrease of 10.3%. Net income for the full year of 2022 was $1.14 billion as compared to $1.09 billion for the same period last year. Diluted earnings per share for the full year of 2022 was $4.11 as compared to $3.66 for the same period of 2021, an increase of 12.3%. Please note that 2022 results include the gain on sale of PGW. On an adjusted basis, net income for the full year of 2022 was $1.1 billion as compared to $1.2 billion for the same period of 2021, a decrease of 9.4%. Adjusted diluted earnings per share for the full year was $3.85, as compared to $3.96 for the same period of last year, a decrease of 2.8%. Adjusted earnings exclude the gain of the PGW sale, but include the impact of the higher tax rate. Now let's turn to some of the quarterly segment highlights. As you will note from slide 12, organic revenue for parts and services in the fourth quarter for our North American segment increased 10.3% on a reported basis and 12% on a per day basis compared to the fourth quarter of 2021. We continue to perform well in North America, especially when you consider that according to CCC, collision and liability-related auto claims were down 0.9% year-over-year in the fourth quarter.
Looking back at our performance through the financial crisis from 2008 to 2010, our North American business grew organically at an average of 7.5%, which drove the alternative part usage rate or APU rate above its historical annual growth rates. As we enter 2023 and face the reality of a global recession, our alternative parts offerings clearly become more attractive during these challenging economic periods. We are also encouraged by the trend in parts per repair, which reached an all-time high in 2022. Important to note is that our sweet spot has expanded and today stands at model years four to 15 years of age. All these items combined positions North America well for continued organic growth in 2023. The upward trend in our aftermarket sales volumes and the ongoing improvement in our fill rates continued in the fourth quarter with fill rates reaching their highest percentage levels in 2022 and today stands at close to the pre-pandemic level of 93%. Importantly, as the supply chain recovered and fill rates increased, the entire industry realized a 220 basis point improvement in the aftermarket percentage or APU taking share back from the OEs as we progress throughout the year. The supply chain has stabilized and our inventory is generally where we want it to be. The main issue we are confronting today are continued delays at some of the railheads due to congestion. As many of you know, on December seven of last year, State Farm announced that they are rolling out expanded non-OEM collision repair parts to use in most of the United States. We are excited State Farm is embracing the aftermarket value proposition that the industry offers, which will ultimately benefit the end consumer. We continue to actively analyze this opportunity, and we are well-positioned to compete for our fair share of this opportunity and have built our inventory appropriately to do so. Our salvage inventory is also healthy, and we saw some relief on our cost per vehicle during the quarter.
The salvage business had solid organic growth largely driven by price, but as we entered December, we witnessed an upward trend in our salvage volumes. Total loss rates increased a bit in the fourth quarter, which were largely seasonal. And as you can see, it had no impact on our organic growth. The slightly higher loss rates played a role in our ability to source the right level of inventory at auction at attractive prices. As we have stated before, fluctuations in loss rates are largely net neutral events for LKQ. Moving on to our European segment. Europe organic revenue growth of parts and services in the quarter increased 4.6% on a reported basis and 5.8% on a per day basis, which represents the best fourth quarter per day organic revenue growth since 2016. I'd also like to highlight that Europe's segment EBITDA margin was the highest fourth quarter level since entering the European market in 2011. On a full year basis, Europe's performance is another year of double-digit segment EBITDA margins, which is consistent with our one LKQ Europe initiatives and strategy. Rick will cover more margin details in his prepared remarks. Throughout the quarter, our European team was laser-focused on the cost structure, including rationalizing headcount to create a more nimble and agile team and focusing our team on a narrow and actionable list of key projects. These projects represent the highest return opportunities that the team can execute in the near-term further cementing the long-term resiliency and market leadership of our European segment. On February 1, LKQ Europe announced that it expanded its European salvage network with the acquisition of Dutch-based Rhenoy Group. Founded in 1991, Rhenoy is a leading supplier of remanufactured engines and recycled OEM car parts. Rhenoy operates a salvage dismantling facility in the Netherlands and remanufacturing plants in both the Netherlands and Poland.
As you know, the roots of our company lie in the dismantling of salvaged vehicles to recycle OEM parts. As part of our European strategic plan, we intend to capitalize on that history and knowledge, coupled with our remanufacturing capabilities to grow our salvage network across our European footprint. And with this tuck-in acquisition, we take one small incremental step towards that objective. I want to congratulate our STAHLGRUBER team on their 100th anniversary and commend them for building a resilient and market-leading business that continues to demonstrate an ability to adapt to the ever-changing independent aftermarket, a century since founding brothers, Auto and Willy Gruber started the business. Today, the STAHLGRUBER business continues its history of embracing change, which positions them well to capture further opportunity as the car park shifts towards EVs and other forms of mobility. We can't wait to see the next -- what the next 100 years brings for STAHLGRUBER. Now let's move on to our Specialty segment. During the fourth quarter, Specialty reported a decrease in organic revenue of 10.6% -- throughout 2022, specialty was up against tough 2021 comparisons in the midst of decreased demand for certain key RV parts and a slower-than-expected recovery in U.S. light vehicle sales. Looking at the Specialty segment on a multiyear basis, since 2019, specialty has generated approximately a 4% compound annual growth rate for organic revenue, outperforming the industry growth of SEMA and RV-related products. A few specialty operational highlights would include that specialty continue to realize the full benefits of the sea-wide synergies, which exceeded our expectations in dollars and operational execution and especially one O'Reilly's 2022 Top Supply line award for the third year in a row. Now under our self-service segment. Organic revenue for parts and services for our self-service segment increased 4.8% in the fourth quarter.
Self-service was again challenged by commodity pricing as seen in the material decline of other revenue, which impacted our expectations for the quarter. On the corporate development front, the fourth quarter was fairly quiet. While we did not complete any material transactions during the quarter, our corporate development team is actively assessing various opportunities that exist across our operating segments. As the global economies continue to soften, that may lead to multiple compression, and we are well-positioned to execute on synergistic acquisitions that fit our strategic objectives. Outside of Q4 corporate development efforts, I am pleased to announce that this past January, we entered into a memorandum of understanding with Korea Zinc Company Limited, a world-class general nonferrous metal smelting company. Under the memorandum of understanding, we will work towards a potential large-scale joint venture related to the recycling of lithium-ion EV batteries in the United States. This is again evidence that we will continue to strategically position the company to adapt to and seize the longer-term opportunities that exist in the ever-changing car park. Turning to ESG. During the fourth quarter, we continued to build out our ESG program by focusing on our people efforts and various social initiatives. Here are a few worth noting. Every colleague employed by LKQ ELIT Ukraine for at least six months, received a onetime hardship payment to support paying for energy and the general increase in the cost of living owing to the Russian Invasion. Our U.K. and German operations also implemented onetime hardship payments to support our employees in those markets given the state of the overall European economy. We initiated a voluntary daily pay benefit in the United States that allows our employees to access a portion of their earned pay on demand.
The company implemented this benefit with the financial wellness of our people in mind. And we launched our first employee inclusion group, the LKQ Veterans Network, a program that embraces our proud community of employee veterans and veteran allies who support and encourage each other through shared experiences, veteran recruitment, career development, outward engagement, professional growth and retention. In 2022, our North American salvage operations continued our leadership as the largest recycler of vehicles by processing over 753,000 vehicles resulting in, among other things, the recycling of approximately 3.6 million gallons of fuel, 2.2 million gallons of waste oil, two million tires, 700,000 batteries and approximately 955,000 tons of scrap metal. The end result of these efforts resulted in nearly 13 million recycled and repurposed parts being sold into the collision and mechanical repair shop industry that otherwise would have ended up in landfills. Let's turn to the inflationary environment, again, a key item of interest for most listeners on this call. As I discussed this time last year, we expected inflation to be a headwind throughout 2022, and that expectation became a harsh reality all year across each of our segments. Fortunately, we are beginning to see some moderation with inflation in the U.S. And recently, we witnessed the rate of inflation drop for the last three months in a row across the Eurozone. Eurozone inflation stood at approximately 8.5% in January, down from October, where it was almost 11%. Despite this drop, many of our key operating markets continue to face high inflation rates with certain countries running in the high single to low double digits. In the U.S., the labor markets continue to be strained and unpredictable in the midst of higher interest rates and mounting fears of a recession. Daily, we read about high-profile layoffs yet new claims for unemployment benefits remain at a historic low.
As of late, wage inflation is beginning to slow in certain areas of our business are seeing reductions in turnover. But these reductions are not material, and we are far from out of the woods, but it is validation that our retention and employee engagement programs are gaining traction. Our engagement efforts aren't simply an HR mandate. There are programs that stretch across all levels of the organization and are a key component of our culture. Our global engagement score of 74 is significantly above the average for companies of our size. Studies have shown that employees are engaged are 14% more productive and that companies with engaged employees are 23% more profitable than those with disengaged employees. So from a business perspective, positive employee engagement is critical, but importantly, it's the right thing to do for our most important asset, our people.
Lastly, before I turn the discussion over to Rick, who will run through the details of the segment results, and discuss our outlook for 2023, I am pleased to announce that on February 21, our Board of Directors approved a quarterly cash dividend of $0.275 per share of common stock payable on March 30, 2023, to stockholders of record at the close of business on March 16, 2023.
