What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-26 compared with 2020-02-27 · 719 added, 859 removed, 1175 unchanged (57% of the section changed)

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LKQ CORPORATION AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

Report s of Independent Registered Public Accounting Firm

Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of LKQ Corporation and subsidiaries (the "Company") as of December 31, 2019 and 2018 , the related consolidated statements of income, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2019 , and the related notes and the financial statement schedule listed in the Index at Item 15.

We have audited the accompanying consolidated balance sheets of LKQ Corporation and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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Change in Accounting Principle

As discussed in Note 4 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to adoption of ASC 842, Leases .

As discussed in Note 13 to the financial statements, the Company changed its method of accounting for leases in 2019 due to adoption of ASC 842, Leases .

Basis for Opinion

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Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company’s interim and annual evaluations of goodwill for impairment involve the comparison of the fair value of each reporting unit to its carrying value.

The Company determines the fair value of its reporting units using a discounted cash flow model and the market approach, which require management to make significant estimates and assumptions.

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Our audit procedures related to the forecasts, determination of market multiples, and the selection of discount rates included the following, among others:

· We tested the effectiveness of controls over the annual goodwill impairment assessment, including those over the forecasts and the selection of the discount rates and market multiples.

· We tested the effectiveness of controls over the goodwill impairment assessments, including those over the forecasts and the selection of the discount rates and market multiples.

· We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

· We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) analyst and industry reports of the Company and companies in its peer group.

· With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

· With the assistance of our fair value specialists, we evaluated the market multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline public companies.

· We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, (3) analyst and industry reports of the Company and companies in its peer group, and (4) forecasts used in the preceding impairment assessments.

· With the assistance of our fair value specialists, we evaluated the discount rates, including (1) testing the underlying source information and the mathematical accuracy of the calculations, (2) developing a range of independent estimates and comparing those to the discount rates used by management, and (3) comparing the discount rates used by management to those used in the preceding impairment assessments.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 25, 2021

We have served as the Company's auditor since 1998.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of LKQ Corporation:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of LKQ Corporation and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 25, 2021, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles").

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 25, 2021

LKQ CORPORATION AND SUBSIDIARIES

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Year Ended December 31,

2020 2019 2018

Revenue $ 11,628,830 $ 12,506,109 $ 11,876,674

Cost of goods sold 7,035,559 7,654,315 7,301,817

Gross margin 4,593,271 4,851,794 4,574,857

Selling, general and administrative expenses 3,266,065 3,580,300 3,352,731

Restructuring and acquisition related expenses 66,163 36,979 32,428

Impairment of net assets held for sale and goodwill

Loss on disposal of businesses and impairment of net assets held for sale and goodwill 3,174 47,102 33,244

Depreciation and amortization 272,292 290,770 274,213

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Interest expense 103,784 138,504 146,377

(Gain) loss on debt extinguishment

Loss (gain) on debt extinguishment 12,751 ( 128 ) 1,350

Interest income and other income, net ( 15,953 ) ( 32,755 ) ( 8,917 )

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Provision for income taxes 249,498 215,330 191,395

Equity in (losses) earnings of unconsolidated subsidiaries

Equity in earnings (losses) of unconsolidated subsidiaries 5,012 ( 32,277 ) ( 64,471 )

Income from continuing operations 640,509 543,415 487,565

Net income (loss) from discontinued operations

net income (loss) attributable to continuing noncontrolling interest

Net (loss) income from discontinued operations ( 95 ) 1,619 ( 4,397 )

Net income 640,414 545,034 483,168

net income attributable to continuing noncontrolling interest 1,888 2,800 3,050

net income attributable to discontinued noncontrolling interest 103 974 —

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Income from continuing operations $ 2.10 $ 1.75 $ 1.55

Net income (loss) from discontinued operations

net income (loss) attributable to continuing noncontrolling interest

Net (loss) income from discontinued operations ( 0.00 ) 0.01 ( 0.01 )

Net income 2.10 1.76 1.54

net income attributable to continuing noncontrolling interest 0.01 0.01 0.01

net income attributable to discontinued noncontrolling interest 0.00 0.00 —

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Income from continuing operations $ 2.10 $ 1.75 $ 1.54

Net income (loss) from discontinued operations

net income (loss) attributable to continuing noncontrolling interest

Net (loss) income from discontinued operations ( 0.00 ) 0.01 ( 0.01 )

Net income 2.10 1.75 1.53

net income attributable to continuing noncontrolling interest 0.01 0.01 0.01

net income attributable to discontinued noncontrolling interest 0.00 0.00 —

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Year Ended December 31,

net income (loss) attributable to continuing noncontrolling interest

2020 2019 2018

Net income $ 640,414 $ 545,034 $ 483,168

net income attributable to continuing noncontrolling interest 1,888 2,800 3,050

net income attributable to discontinued noncontrolling interest 103 974 —

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Net change in unrealized gains/losses on cash flow hedges, net of tax

( 6,326 ) ( 9,016 ) 350

Net change in unrealized gains/losses on pension plans, net of tax

Net change in other comprehensive income (loss) from unconsolidated subsidiaries

Other comprehensive (loss) income

( 1,033 ) ( 23,859 ) 697

Other comprehensive (loss) income from unconsolidated subsidiaries ( 4,532 ) 236 ( 2,343 )

Other comprehensive income (loss) 101,876 ( 25,935 ) ( 109,819 )

Comprehensive income 742,290 519,099 373,349

comprehensive income (loss) attributable to continuing noncontrolling interest

comprehensive income attributable to continuing noncontrolling interest 1,888 2,800 3,050

comprehensive income attributable to discontinued noncontrolling interest

Comprehensive income attributable to LKQ stockholders

$ 740,299 $ 515,325 $ 370,299

The accompanying notes are an integral part of the consolidated financial statements.

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Receivables, net 1,073,389 1,131,132

Inventories 2,414,612 2,772,777

Prepaid expenses and other current assets 233,877 260,890

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Intangible assets:

Goodwill 4,591,569 4,406,535

Other intangibles, net 814,219 850,338

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Other noncurrent assets 163,662 153,110

Total assets $ 12,360,533 $ 12,779,956

Liabilities and Stockholders' Equity

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Year Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 640,414 $ 545,034 $ 483,168

Adjustments to reconcile net income to net cash provided by operating activities:

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Impairment of equity method investments — 41,057 70,895

Impairment of net assets held for sale and goodwill

Loss on disposal of businesses and impairment of net assets held for sale and goodwill 3,174 47,102 33,244

Stock-based compensation expense 29,078 27,695 22,760

Loss (gain) on debt extinguishment 12,751 ( 128 ) 1,350

Deferred income taxes ( 33,827 ) 7,109 ( 2,180 )

Other ( 3,934 ) ( 16,183 ) 7,116

Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:

Receivables, net 93,588 26,419 241

Inventories 433,072 15,460 ( 127,153 )

Prepaid income taxes/income taxes payable 34,945 25,776 ( 2,125 )

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Acquisitions, net of cash and restricted cash acquired ( 7,363 ) ( 27,296 ) ( 1,214,995 )

Proceeds from disposal of businesses

Proceeds from disposal of businesses, net of cash sold 5,138 18,469 —

Investments in unconsolidated subsidiaries ( 7,717 ) ( 7,594 ) ( 60,300 )

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CASH FLOWS FROM FINANCING ACTIVITIES:

Early-redemption premium ( 9,498 ) — —

Debt issuance costs ( 3,313 ) — ( 21,128 )

Redemption of U.S.

Notes (2023) ( 600,000 ) — —

Proceeds from issuance of Euro Notes (2026/28) — — 1,232,100

Purchase of treasury stock

Borrowings under revolving credit facilities 841,485 605,708 1,667,325

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Payment of notes issued and assumed debt from acquisitions — ( 19,123 ) ( 54,888 )

(Repayments) borrowings of other debt, net

Repayments of other debt, net ( 115,609 ) ( 33,922 ) ( 11,730 )

Purchase of treasury stock ( 117,292 ) ( 291,813 ) ( 60,000 )

Other financing activities, net ( 17,904 ) ( 8,298 ) 5,086

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Effect of exchange rate changes on cash, cash equivalents and restricted cash 11,865 ( 904 ) ( 77,311 )

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash ( 222,703 ) 197,607 57,484

Cash, cash equivalents and restricted cash of continuing operations, beginning of period 528,387 337,250 279,766

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The accompanying notes are an integral part of the consolidated financial statements.

LKQ CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

2020 2019 2018

Reconciliation of cash, cash equivalents and restricted cash:

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Income taxes, net of refunds $ 248,083 $ 181,306 $ 200,098

Interest 106,866 143,121 137,866

Supplemental disclosure of noncash investing and financing activities:

Stock issued in acquisitions $ — $ — $ 251,334

Noncash property, plant and equipment additions

Notes payable and other financing obligations, including notes issued, debt assumed and settlement of pre-existing balances in connection with business acquisitions

Notes and other financing receivables in connection with disposals of business/investment

Noncash property, plant and equipment and software intangible additions in accounts payable and other accrued expenses 18,841 10,154 16,518

Notes payable and other financing obligations, including notes issued, debt assumed and settlement of pre-existing balances in connection with business acquisitions and disposals 4,316 47,887 105,566

Notes receivable and contingent consideration receivable acquired in connection with disposal of businesses 8,990 — —

Trade and note receivables forgiven and assets held for sale sold with purchase of noncontrolling interest 6,079 — —

Notes issued in connection with purchase of noncontrolling interest

Contingent consideration liabilities

3,045 6,627 3,107

The accompanying notes are an integral part of the consolidated financial statements.

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LKQ Stockholders

Treasury Stock

Additional Paid-In Capital

Retained Earnings

Comprehensive (Loss) Income

Noncontrolling Interest

Total Stockholders' Equity

Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated

Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

BALANCE, January 1, 2018 309,127 $ 3,091 — $ — $ 1,141,451 $ 3,124,103 $ ( 70,476 ) $ 8,484 $ 4,206,653

Other comprehensive income

Vesting of restricted stock units, net of shares withheld for employee tax

Stock-based compensation expense

Exercise of stock options

Tax withholdings related to net share settlements of stock-based compensation awards

Sale of subsidiary shares to noncontrolling interest

BALANCE, December 31, 2017

Net income — — — — — 480,118 — 3,050 483,168

Other comprehensive loss — — — — — — ( 109,819 ) — ( 109,819 )

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BALANCE, December 31, 2018 318,418 $ 3,184 ( 2,272 ) $ ( 60,000 ) $ 1,415,188 $ 3,598,876 $ ( 174,950 ) $ 56,454 $ 4,838,752

Net income — — — — — 541,260 — 3,774 545,034

Other comprehensive loss — — — — — — ( 25,935 ) — ( 25,935 )

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Tax withholdings related to net share settlements of stock-based compensation awards

The accompanying notes are an integral part of the consolidated financial statements.

LKQ CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

(In thousands)

( 137 ) ( 1 ) — — ( 4,494 ) — — — ( 4,495 )

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 8,474 ) ( 8,474 )

Acquired noncontrolling interest (1)

— — — — — — — 10,365 10,365

Purchase and modification of noncontrolling interests (2)

— — — — ( 27,105 ) — — ( 22,415 ) ( 49,520 )

BALANCE, December 31, 2019 319,927 $ 3,199 ( 13,196 ) $ ( 351,813 ) $ 1,418,239 $ 4,140,136 $ ( 200,885 ) $ 39,704 $ 5,048,580

(1) The amount acquired during 2019 relates to discontinued operations.

See Note 3, "Discontinued Operations," for further details.

The accompanying notes are an integral part of the consolidated financial statements.

LKQ Stockholders

Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated

Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

BALANCE, December 31, 2019 319,927 $ 3,199 ( 13,196 ) $ ( 351,813 ) $ 1,418,239 $ 4,140,136 $ ( 200,885 ) $ 39,704 $ 5,048,580

Net income — — — — — 638,423 — 1,991 640,414

Other comprehensive income — — — — — — 101,876 — 101,876

Purchase of treasury stock — — ( 4,119 ) ( 117,292 ) — — — — ( 117,292 )

Vesting of restricted stock units, net of shares withheld for employee tax 829 8 — — ( 3,063 ) — — — ( 3,055 )

Stock-based compensation expense — — — — 29,078 — — — 29,078

Exercise of stock options 112 1 — — 1,466 — — — 1,467

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 3,757 ) ( 3,757 )

Adoption of ASU 2016-13 (see Note 4) — — — — — ( 2,519 ) — — ( 2,519 )

Disposition of subsidiary with noncontrolling interests (1)

— — — — — — — ( 11,404 ) ( 11,404 )

Purchase of noncontrolling interests (3)

— — — — ( 1,136 ) — — ( 10,952 ) ( 12,088 )

BALANCE, December, 31, 2020 320,868 $ 3,208 ( 17,315 ) $ ( 469,105 ) $ 1,444,584 $ 4,776,040 $ ( 99,009 ) $ 15,582 $ 5,671,300

(1) The amounts acquired during 2019 and disposed of in 2020 relate to discontinued operations.

See Note 2, "Business Combinations," and Note 3, "Discontinued Operations," for further details on the amounts acquired and disposed of, respectively.

(2) The amount recorded in 2019 relates to (i) the purchase of noncontrolling interest unrelated to a business combination, and (ii) the modification of noncontrolling interest shares.

Refer to "Stockholders' Equity–Noncontrolling Interest" in Note 4, "Summary of Significant Accounting Policies," for further information.

(3) Th e amount recorded in 2020 relates to the purchase of noncontrolling interest shares unrelated to a business combination.

Refer to "Stockholders' Equity–Noncontrolling Interest" in Note 4, "Summary of Significant Accounting Policies," for further information.

The accompanying notes are an integral part of the consolidated financial statements.

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When the terms "LKQ," "the Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries.

We are a leading provider of alternative vehicle collision replacement products and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada.

We are also a leading provider of alternative vehicle replacement and maintenance products in the United Kingdom, Germany, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Poland, Slovakia, Austria, and various other European countries.

We are a leading provider of alternative vehicle collision and mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada.

We are also a leading provider of alternative vehicle replacement and maintenance products in Germany, the United Kingdom, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries.

In addition to our wholesale operations, we operate self service retail facilities across the U.S.

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In total, we operate approximately 1,600 facilities.

The COVID-19 pandemic and the resulting governmental actions taken to control the virus have impacted, and are expected to continue to impact, our business in 2020 and into 2021.

The effects include, but are not limited to, a reduction in demand for our products and services, liquidity challenges for certain of our customers and suppliers, and organizational changes, such as personnel reductions and route consolidation, driven by cost actions to mitigate the actual and expected revenue decline.

We have considered COVID-19 impacts in the preparation of our financial statements and footnotes as of and for the year ended December 31, 2020.

Specific disclosures are presented in the following footnotes as applicable.

The ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the severity and duration of the pandemic and the related impact on the global economy, which are uncertain and cannot be predicted at this time, but may be material.

Business Combinations

During the year ended December 31, 2020, we completed two acquisitions, including one wholesale business in North America and one business in our Specialty segment.

These acquisitions were not material to our results of operations or financial position as of and for the year ended December 31, 2020.

During the year ended December 31, 2019, we completed seven acquisitions, including three wholesale businesses and one self service business in North America, and three wholesale businesses in Europe.

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On May 10, 2019, the Czech Republic competition authority approved our acquisition of Stahlgruber’s Czech Republic wholesale business subject to the requirement that we divest certain of the acquired locations.

We acquired Stahlgruber’s Czech Republic wholesale business on May 29, 2019 and decided to divest all of the acquired locations.

We acquired Stahlgruber’s Czech Republic wholesale business on

May 29, 2019 and decided to divest all of the acquired locations.

We recorded a noncontrolling interest of $ 10 million as part of the acquisition.

We immediately classified the business as discontinued operations because the business was never integrated into our Europe segment;

see Note 3, "Discontinued Operations" for further information.

The Czech Republic wholesale business represents an immaterial portion of Stahlgruber's revenue and profitability.

The Czech Republic wholesale business represented an immaterial portion of Stahlgruber's revenue and profitability.

There was no additional consideration beyond the previously remitted amounts for the Stahlgruber transaction required to complete the acquisition of the Czech Republic wholesale business.

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During the year ended December 31, 2018, we recorded $ 68 million of goodwill related to these acquisitions, of which we expected $ 4 million to be deductible for income tax purposes.

In the period

between the acquisition dates and December 31 2018, these acquisitions generated third party revenue of $ 46 million and operating income of $ 3 million .

During the year ended December 31, 2017, we completed 26 acquisitions including 6 wholesale businesses in North America, 16 wholesale businesses in Europe and 4 Specialty businesses.

Our acquisitions in Europe included the acquisition of four aftermarket parts distribution businesses in Belgium in July 2017.

Our Specialty acquisitions included the acquisition of the aftermarket business of Warn, a leading designer, manufacturer and marketer of high performance vehicle equipment and accessories, in November 2017.

Total acquisition date fair value of the consideration for our 2017 acquisitions was $ 542 million , composed of $ 510 million of cash paid (net of cash acquired), $ 6 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $ 19 million ), $ 5 million of other purchase price obligations (non-interest bearing) and $ 20 million of notes payable.

During the year ended December 31, 2017, we recorded $ 307 million of goodwill related to these acquisitions, of which we expected $ 21 million to be deductible for income tax purposes.

In the period between the acquisition dates and December 31, 2017, these acquisitions generated revenue of $ 227 million and an operating loss of $ 2 million .

On October 4, 2016, we acquired substantially all of the business assets of Andrew Page, a distributor of aftermarket automotive parts in the U.K., out of receivership.

The acquisition was subject to regulatory approval by the CMA in the U.K.

The CMA concluded its review on October 31, 2017 and required us to divest less than 10 % of the acquired locations.

Total acquisition date fair value of the consideration for this acquisition was £ 16 million ( $ 20 million ).

In connection with the acquisition, we recorded a gain on bargain purchase of $ 10 million ( $ 8 million recorded in 2016 and $ 2 million recorded in 2017), which is presented in Interest income and other income, net in our Consolidated Statements of Income.

We believe that we were able to acquire the net assets of Andrew Page for less than fair value as a result of (i) Andrew Page's financial difficulties that put the company into receivership prior to our acquisition and (ii) a motivated seller that desired to complete the sale in an expedient manner to ensure continuity of the business.

In the period between the acquisition dates and December 31, 2018, these acquisitions generated third party revenue of $ 46 million and operating income of $ 3 million.

Our acquisitions are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the dates of acquisition.

The purchase prices were allocated to the net assets acquired based upon estimated fair values at the dates of acquisition.

The purchase price allocations for the acquisitions made during the year ended December 31, 2019 are preliminary as we are in the process of determining the following:

1) valuation amounts for certain receivables, inventories and fixed assets acquired;

2) valuation amounts for certain intangible assets acquired;

3) the acquisition date fair value of certain liabilities assumed;

and 4) the tax basis of the entities acquired.

We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations.

During the year ended December 31, 2020, the measurement period adjustments recorded for acquisitions completed in prior periods were not material.

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December 31, 2018

Other Acquisitions (1)

Stahlgruber Other Acquisitions (1)

Receivables $ 144,826 $ 19,171 $ 163,997

Receivable reserves ( 2,818 ) ( 918 ) ( 3,736 )

Inventories 380,238 14,021 394,259

Prepaid expenses and other current assets

10,970 1,851 12,821

Property , plant and equipment

271,292 5,711 277,003

Goodwill 908,253 64,637 972,890

Other intangibles 285,255 35,159 320,414

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Current liabilities assumed ( 346,788 ) ( 20,116 ) ( 366,904 )

Debt assumed ( 79,925 ) ( 4,875 ) ( 84,800 )

Other noncurrent liabilities assumed (2)

( 80,824 ) ( 10,306 ) ( 91,130 )

Noncontrolling interest ( 44,110 ) — ( 44,110 )

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Other purchase price obligations ( 6,084 ) 3,623 ( 2,461 )

Stock issued ( 251,334 ) — ( 251,334 )

Notes issued — ( 11,347 ) ( 11,347 )

Gains on bargain purchases (3)

— ( 2,418 ) ( 2,418 )

Settlement of other purchase price obligations (non-interest bearing)

— 1,711 1,711

Cash used in acquisitions, net of cash and restricted cash acquired

$ 1,127,446 $ 87,549 $ 1,214,995

(1) The amounts recorded during the year ended December 31, 2018 include a $ 5 million adjustment to increase other intangibles related to our Warn acquisition and $ 4 million of adjustments to reduce other purchase price obligations related to other 2017 acquisitions.

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In addition, the acquisition of Stahlgruber should allow for continued improvement in procurement, logistics and infrastructure optimization.

The primary objectives of our other acquisitions made during the years ended December 31, 2019 and 2018 were to create economic value for our stockholders by enhancing our position as a

leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths.

The primary objectives of our other acquisitions made during the years ended December 31, 2020, 2019 and 2018 were to create economic value for our stockholders by enhancing our position

as a leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths.

When we identify potential acquisitions, we attempt to target companies with a leading market presence, an experienced management team and workforce that provides a fit with our existing operations, and strong cash flows.

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In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill.

The following pro forma summary presents the effect of the businesses acquired during the year ended December 31, 2019 as though the businesses had been acquired as of January 1, 2018, the businesses acquired during the year ended December 31, 2018 as though they had been acquired as of January 1, 2017, and the businesses acquired during the year ended December 31, 2017 as though they had been acquired as of January 1, 2016.

We have excluded the May 29, 2019 acquisition of the Czech Republic wholesale business as the business was never integrated into our Europe segment.

The following pro forma summary presents the effect of the businesses acquired during the year ended December 31, 2018 as though they had been acquired as of January 1, 2017.

The pro forma adjustments are based upon unaudited financial information of the acquired entities (in thousands):

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Revenue of purchased businesses for the period prior to acquisition:

Stahlgruber 815,405

Other acquisitions 164,133

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Income from continuing operations of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:

Stahlgruber 17,309

Other acquisitions 6,591

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Pro forma income from continuing operations 525,989

Net income (loss) attributable to continuing noncontrolling interest, as reported

Net income attributable to continuing noncontrolling interest, as reported 3,050

Pro forma net income attributable to noncontrolling interest 2,799

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(2) Includes expenses related to acquisitions closed in the period and excludes expenses for acquisitions not yet completed.

Excludes our acquisition of the Czech Republic wholesale business which is classified as discontinued operations.

Unaudited pro forma supplemental information is based upon accounting estimates and judgments that we believe are reasonable.

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Discontinued Operations

Czech Republic

As described in Note 2, "Business Combinations," we classified the acquired Stahlgruber Czech Republic wholesale business as discontinued operations.

We completed the sale of Stahlgruber's Czech Republic business on February 28, 2020, resulting in an immaterial loss on sale (presented in Net (loss) income from discontinued operations in the Consolidated Statements of Income).

As part of the transaction, we purchased the 48.2 % noncontrolling interest from the minority shareholder for a purchase price of € 8 million, which included the issuance of € 4 million of notes payable, and then immediately thereafter sold 100 % of the business for a purchase price of € 14 million, which included € 7 million of notes

This transaction resulted in a disposition of noncontrolling interest of $ 11 million.

From January 1, 2020 through the date of sale, we recorded an immaterial amount of net income (excluding the loss on sale) from discontinued operations related to the business, of which an immaterial amount was attributable to the noncontrolling interest.

As of December 31, 2019, the assets held for sale, liabilities held for sale, and noncontrolling interest of Stahlgruber's Czech Republic business were recorded within Prepaid expenses and other current assets, Other current liabilities, and Noncontrolling interest, respectively, on the Consolidated Balance Sheets.

Glass Manufacturing Business

On March 1, 2017, LKQ completed the sale of the glass manufacturing business of its PGW subsidiary to a subsidiary of Vitro S.A.B.

("Vitro") for a sales price of $ 301 million , including cash received of $ 316 million , net of cash disposed of $ 15 million .

Related to this transaction, the remaining portion of the Glass operating segment was combined with our Wholesale – North America operating segment, which is part of our North America reportable segment, in the first quarter of 2017.

See Note 16, "Segment and Geographic Information " for further information regarding our segments.

During the fourth quarter of 2019, we recorded an immaterial net loss from discontinued operations resulting from a reserve related to a pre-disposition matter and the related deferred tax benefit, and we settled certain tax matters with Vitro, which were recorded as a benefit for income taxes.

During the fourth quarter of 2018, we recorded a final current tax expense adjustment of $ 4 million to the loss on sale as a result of the completion of the tax return reporting the 2017 transaction.

The adjustment was primarily attributable to a valuation allowance recognized on the carryforward of a capital loss arising from the sale, the tax benefit of which is not certain to be realized during the carryforward period.

Upon execution of the Stock and Asset Purchase Agreement (the "Vitro Agreement") in December 2016, LKQ concluded that the glass manufacturing business met the criteria to be classified as held for sale in LKQ's consolidated financial statements.

In connection with the Vitro Agreement, the Company and Vitro entered into a twelve month Transition Services Agreement commencing on the transaction date with two six-month renewal periods, a three-year Purchase and Supply Agreement, and an Intellectual Property Agreement.

The Purchase and Supply Agreement expires in the first quarter of 2020, while the Intellectual Property Agreement has a perpetual term;

The Purchase and Supply Agreement expired in the first quarter of 2020, while the Intellectual Property Agreement has a perpetual term;

as of December 31, 2019, the Transition Services Agreement had expired.

The following table summarizes the operating results of the Company’s discontinued operations related to the sale described above for the years ended December 31, 2019, 2018 and 2017, as presented in Net income (loss) from discontinued operations in the Consolidated Statements of Income (in thousands):

Year Ended December 31,

Cost of goods sold

Selling, general and administrative expenses

Operating (loss) income

Total other expense, net (1)

(Loss) income from discontinued operations before taxes

(Benefit) provision for income taxes

Equity in loss of unconsolidated subsidiaries

Loss from discontinued operations, net of tax

Loss on sale of discontinued operations, net of tax (2)

Net loss from discontinued operations

The Company elected to allocate interest expense to discontinued operations based on the expected debt to be repaid.

Under this approach, allocated interest from January 1, 2017 through the date of sale was $ 2 million .

The other expenses, net were foreign currency gains and losses.

(2) In the first quarter of 2017, upon closing of the sale and write-off of the net assets of the glass manufacturing business, we recorded a pre-tax loss on sale of $ 9 million , and a $ 4 million current tax benefit.

The incremental loss primarily reflects a $ 6 million payable for intercompany sales from the glass manufacturing business to the aftermarket automotive glass distribution business incurred prior to closing, which was paid by LKQ during the second quarter of 2017, and capital expenditures in 2017 that were not reimbursed by the buyer.

During the fourth quarter of 2017, we recorded an additional loss on sale of $ 2 million as a result of post sale net working capital adjustments.

During the fourth quarter of 2019, we recorded a reserve related to a pre-disposition matter and the related deferred tax benefit, and we settled certain tax matters with Vitro, which are reflected in the benefit for income taxes.

The glass manufacturing business had $ 4 million of operating cash outflows, $ 4 million of investing cash outflows mainly consisting of capital expenditures, and $ 15 million of financing cash inflows made up of parent financing for the period from January 1, 2017 through March 1, 2017.

Pursuant to the Purchase and Supply Agreement, our aftermarket automotive glass distribution business agreed to source various products from Vitro's glass manufacturing business annually for a three-year period beginning on March 1, 2017.

Between January 1, 2017 and the sale date of March 1, 2017, intercompany sales between the glass manufacturing business and the continuing aftermarket automotive glass distribution business of PGW, which were eliminated in

consolidation, were $ 8 million .

All purchases from Vitro, including those outside of the Purchase and Supply Agreement, for the years ended December 31, 2019, 2018 and 2017, were $ 30 million , $ 24 million and $ 42 million , respectively.

Czech Republic

As described in Note 2, "Business Combinations," we classified the acquired Stahlgruber Czech Republic wholesale business as discontinued operations.

We expect to divest the business within the first half of 2020, and thus, the net assets are reflected on the Consolidated Balance Sheets at the lower of fair value less cost to sell or carrying value.

As of December 31, 2019 , the assets held for sale, liabilities held for sale, and noncontrolling interest are recorded within Prepaid expenses and other current assets, Other current liabilities, and Noncontrolling interest, respectively, on the Consolidated Balance Sheets.

As of the acquisition date, we acquired $ 5 million of cash, assumed $ 6 million of existing debt and settled $ 6 million of pre-existing balances.

During the year ended December 31, 2019, we recorded $ 2 million of net income from discontinued operations related to the business, of which $ 1 million was attributable to the noncontrolling interest.

Fair value was based on the estimated selling price, the inputs of which included projected market multiples and any reasonable offers.

Due to the uncertainties in the estimation process, it is possible that actual results could differ from the estimates used in the Company's analysis.

The inputs utilized in the fair value estimate are classified as Level 3 within the fair value hierarchy.

The fair value of the net assets was measured on a non-recurring basis as of December 31, 2019 .

All purchases from Vitro, including those outside of the Purchase and Supply Agreement, for the two months ended February 29, 2020 and the years ended December 31, 2019 and 2018, were $ 4 million, $ 30 million and $ 24 million, respectively.

Summary of Significant Accounting Policies

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costs to operate our branch locations, corporate offices and back office support centers;

costs to transport our products from our facilities to our customers;

transport our products from our facilities to our customers;

and other selling, general and administrative expenses, such as professional fees, supplies, and advertising expenses.

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Restricted cash includes cash for which the Company's ability to withdraw funds at any time is contractually limited.

As of both December 31, 2019 and 2018, we had $ 5 million of restricted cash that is recorded in Other noncurrent assets on the Consolidated Balance Sheets.

Receivables and Allowance for Doubtful Accounts

In the normal course of business, we extend credit to customers after a review of each customer's credit history.

We recorded a reserve for uncollectible accounts of approximately $ 53 million and $ 57 million at December 31, 2019 and 2018 , respectively.

The reserve is based upon the aging of the accounts receivable, our assessment of the collectability of specific customer accounts and historical experience.

Receivables are written off once collection efforts have been exhausted.

Recoveries of receivables previously written off are recorded when received.

As of December 31, 2019, we had $ 5 million of restricted cash recorded in Other noncurrent assets on the Consolidated Balance Sheets;

there was no restricted cash balance as of December 31, 2020.

Allowance for Credit Losses

Receivables, net are reported net of an allowance for credit losses.

During the first quarter of 2020, we adopted ASU No.

2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement o f Credit Losses on Financial Instruments" ("ASU 2016-13") (see the Recently Adopted Accounting Pronouncements section below for further details).

Prior to the adoption of ASU 2016-13, Receivables, net were reported net of an allowance for doubtful accounts.

Management evaluates the aging of customer receivable balances, the financial condition of our customers, historical trends, and macroeconomic factors to estimate the amount of customer receivables that may not be collected in the future and records a provision it believes is appropriate.

Our reserve for expected lifetime credit losses was $ 70 million at December 31, 2020.

Our allowance for doubtful accounts was $ 53 million at December 31, 2019.

Bad debt expense totaled $ 25 million, $ 12 million and $ 14 million for the years ended December 31, 2020, 2019, and 2018, respectivel y.

The increase in our allowance for credit losses since December 31, 2019 is attributable to an increase in expected lifetime losses, primarily attributable to the downturn in the global economy related to the effects of the COVID-19 pandemic, and a $ 3 million effect of the adoption of ASU 2016-13 .

A rollforward of our allowance for credit losses is as follows (in thousands):

Balance as of January 1, 2020 $ 52,685

Adjustment for adoption of new standard 2,519

Additions, net of recoveries 24,686

Write-offs ( 14,024 )

Impact of foreign currency 4,065

Balance as of December 31, 2020 $ 69,931

Concentrations of Credit Risk

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An aftermarket product is a new vehicle product manufactured by a company other than the original equipment manufacturer.

For all of our aftermarket products, excluding our aftermarket automotive glass products, cost is established based on the average price we pay for parts;

For our aftermarket products, excluding our aftermarket automotive glass products, cost is established based on the average price we pay for parts;

for our aftermarket automotive glass products inventory, cost is established using the first-in first-out method.

Inventory cost for all of our aftermarket products includes expenses incurred for freight in and overhead costs;

Inventory cost for our aftermarket products includes expenses incurred for freight in and overhead costs;

for items purchased from foreign companies, import fees and duties and transportation insurance are also included.

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Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods.

As of December 31, 2019 , manufactured products inventory was composed of $ 17 million of raw materials, $ 3 million

of work in process, and $ 6 million of finished goods.

As of December 31, 2020, manufactured products inventory was composed of $ 16 million of raw materials, $ 3 million of work in process, and $ 2 million of finished goods.

As of December 31, 2019, manufactured products inventory was composed of $ 17 million of raw materials, $ 3 million of work in process, and $ 6 million of finished goods.

Property, Plant and Equipment

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Our estimated useful lives are as follows:

Land improvements

Buildings and improvements

Machinery and equipment

Computer equipment and software

Vehicles and trailers

Furniture and fixtures

Land improvements 10-20 years

Buildings and improvements 20-40 years

Machinery and equipment 3-20 years

Computer equipment and software 3-10 years

Vehicles and trailers 3-10 years

Furniture and fixtures 5-7 years

Property, plant and equipment consists of the following (in thousands):

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Finance lease assets 99,061 71,724

2,066,930 1,988,740

Less—Accumulated depreciation ( 895,149 ) ( 807,680 )

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Goodwill impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment.

The fair value estimates of our reporting units are established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach.

Based on the annual goodwill impairment test in 2019, we determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least 25 % .

The fair value estimates of our reporting units were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach.

LKQ’s market capitalization declined by approximately 40 % between February 20, 2020, when the Company released its 2019 financial results, and March 31, 2020.

While we believed that the decrease was driven by market reaction to COVID-19, the magnitude of the market capitalization decrease was deemed to be a triggering event requiring an interim test of goodwill impairment in the first quarter.

At the time of our analysis, our projections for the interim impairment test assumed that the COVID-19 impact would be severe, with revenue down by as much as 50 % in the second quarter of 2020 compared to our prior forecast used in the 2019 impairment analysis, but temporary, as revenue would improve gradually in the second half of 2020.

We expected that cost mitigation actions and cash preservation measures would dampen the negative impact of the projected revenue decline.

Based on the interim test in the first quarter of 2020, we determined no impairments existed as all reporting units had a fair value estimate that exceeded the carrying value by at least 12 %, the level at which our Europe reporting unit exceeded its carrying value.

We did not identify a triggering event in the second or third quarter that necessitated an interim test of goodwill impairment.

Based on the annual goodwill impairment test performed in the fourth quarter of 2020, we determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least 30 %.

Based on our annual goodwill impairment test in 2018, we determined the carrying value of our Aviation reporting unit exceeded the fair value estimate by more than the carrying value, thus we recorded an impairment charge of $ 33 million, which represented the total carrying value of goodwill in our Aviation reporting unit (subsequently sold in the third quarter of 2019).

The impairment charge was due to a decrease in the fair value estimate from the prior year fair value estimate, primarily driven by a significant deterioration in the outlook for the Aviation reporting unit due to competition, customer financial issues and changing market conditions for the airplane platforms that the business services, which lowered our projected gross margin and related future cash flows.

We reported the impairment charge in Impairment of net assets held for sale and goodwill in the Consolidated Statements of Income for the year ended December 31, 2018 .

We reported the impairment charge in Loss on disposal of businesses and impairment of net assets held for sale and goodwill in the Consolidated Statements of Income for the year ended December 31, 2018.

We review indefinite-lived intangible assets for impairment annually or on an interim basis if events or changes in circumstances indicate that the carrying value may not be recoverable.

In the first quarter of 2020, we determined that the effect

of the uncertainty relating to the COVID-19 pandemic on our forecasted results represented a change in circumstances indicating that the carrying value of the Warn trademark, which is our only indefinite-lived intangible asset, might not be recoverable.

As a result, we performed a quantitative impairment test as of March 31, 2020 using the relief-from-royalty method and determined no impairment existed, as the trademark had a fair value estimate which exceeded the carrying value by approximately 9 %.

We did not identify a triggering event in the second or third quarter that necessitated an interim test of impairment.

Based on the annual impairment test performed in the fourth quarter of 2020, we determined no impairment existed at that time as the trademark had a fair value estimate which exceeded the carrying value by approximately 13 %.

The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands):

North America

North America Europe Specialty Total

Balance as of January 1, 2019 $ 1,673,532 $ 2,300,289 $ 407,637 $ 4,381,458

Business acquisitions and adjustments to previously recorded goodwill

Impairment of goodwill

38,913 15,099 — 54,012

Reclassified to net assets held for sale and discontinued operations — ( 4,721 ) — ( 4,721 )

Disposal of business — ( 1,919 ) — ( 1,919 )

Exchange rate effects 5,599 ( 27,847 ) ( 47 ) ( 22,295 )

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Business acquisitions and adjustments to previously recorded goodwill

Reclassified to net assets held for sale and discontinued operations

Disposal of business

( 123 ) 419 5,291 5,587

Exchange rate effects 2,346 176,915 186 179,447

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The components of other intangibles, net are as follows (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Intangible assets subject to amortization $ 732,919 $ 769,038

Indefinite-lived intangible assets

Trademarks 81,300 81,300

Total $ 814,219 $ 850,338

The components of intangible assets subject to amortization are as follows (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Amount Accumulated

Amortization Net Gross

Amount Accumulated

Amortization Net

Trade names and trademarks $ 519,577 $ ( 152,668 ) $ 366,909 $ 488,945 $ ( 119,957 ) $ 368,988

Customer and supplier relationships

617,952 ( 405,237 ) 212,715 580,052 ( 321,650 ) 258,402

Software and other technology related assets

326,988 ( 174,513 ) 152,475 248,941 ( 108,979 ) 139,962

Covenants not to compete 13,700 ( 12,880 ) 820 13,435 ( 11,749 ) 1,686

Total $ 1,478,217 $ ( 745,298 ) $ 732,919 $ 1,331,373 $ ( 562,335 ) $ 769,038

The components of intangible assets acquired as part of our acquisitions in 2018 are as follows (in thousands):

December 31, 2018

Other Acquisitions (1)

Stahlgruber Other Acquisitions (1)

Trade names and trademarks $ 173,946 $ 8,870 $ 182,816

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Software and other technology related assets

Covenants not to compete

33,329 376 33,705

Total $ 285,255 $ 30,025 $ 315,280

(1) The amounts recorded during the year ended December 31, 2018 exclude amounts related to our 2017 acquisitions, including a $ 5 million adjustment to increase other intangibles related to our 2017 acquisition of Warn.

The weighted-average amortization periods for our intangible assets acquired during the years ended December 31, 2018 and 2017 are as follows (in years):

December 31, 2018

The weighted-average amortization periods for our intangible assets acquired during the year ended December 31, 2018 are as follows (in years):

December 31, 2018

Other Acquisitions

All Acquisitions

Stahlgruber Other Acquisitions Total

Trade names and trademarks 18.0 10.0 17.6

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Software and other technology related assets

Covenants not to compete

Total acquired finite-lived intangible assets

12.4 8.5 12.0

Our estimated useful lives for our finite-lived intangible assets are as follows:

Method of Amortization

Trade names and trademarks

Straight-line

Customer and supplier relationships

Software and other technology related assets

Straight-line

Covenants not to compete

Straight-line

Method of Amortization Useful Life

Trade names and trademarks Straight-line 4-30 years

Customer and supplier relationships Accelerated 3-20 years

Software and other technology related assets Straight-line 3-15 years

Covenants not to compete Straight-line 2-5 years

Amortization expense for intangibles was $ 119 million, $ 140 million, and $ 137 million during the years ended December 31, 2020, 2019, and 2018, respectively.

Estimated amortization expense for each of the five years in the period ending December 31, 2025 is $ 101 million, $ 89 million, $ 77 million, $ 69 million and $ 62 million, respectively.

See Note 13, "Leases" for our accounting policies related to leases.

Net Assets Held for Sale

During the year ended December 31, 2019, we committed to plans to sell certain businesses in our North America and Europe segments.

As a result, these businesses were classified as net assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value, resulting in impairment charges totaling $ 47 million for the year ended December 31, 2019 (presented in Impairment of net assets held for sale and goodwill in the Consolidated Statements of Income).

In the third quarter of 2019, we completed the sales of two of these businesses, our aviation business in North America and a wholesale business in Bulgaria.

The disposed businesses were immaterial, generating annualized revenue of approximately $ 55 million prior to the divestiture.

Excluding the Stahlgruber Czech Republic wholesale business discussed in Note 3, "Discontinued Operations ," as of December 31, 2019, there were $ 19 million of assets held for sale, including $ 5 million of goodwill that was reclassified as held for sale related to our Europe segment, and $ 9 million of liabilities held for sale, which were recorded within Prepaid

expenses and other current assets and Other current liabilities, respectively, on the Consolidated Balance Sheets.

We expect the remaining assets held for sale to be disposed of during the next twelve months.

The assets held for sale generated annualized revenue of $ 87 million during the year ended December 31, 2019 .

During 2019 and 2020, we committed to plans to sell certain businesses in our North America and Europe segments.

As a result, these businesses were classified as net assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value, resulting in net impairment charges totaling $ 3 million for the year ended December 31, 2020.

As of December 31, 2020, assets and liabilities held for sale we re immaterial.

In the second quarter of 2020, we completed the sale of one of these businesses, a non-core telecommunications operation in Germany, resulting in an immaterial loss on sale (presented in Loss on disposal of businesses and impairment of net assets held for sale and goodwill in the Consolidated Statements of Income).

The disposed business was immaterial, generating annualized revenue of approximately $ 78 million during the twelve-month period ended May 31, 2020.

In the third quarter of 2019, we completed the sales of two of these businesses, our aviation business in North America and a wholesale business in Bulgaria, resulting in a net $ 47 million impairment charge for the year ended December 31, 2019 (presented in Loss on disposal of businesses and impairment of net assets held for sale and goodwill in the Consolidated Statements of Income).

Excluding the Stahlgruber Czech Republic wholesale business discussed in Note 3, "Discontinued Operations," as of December 31, 2019, assets and liabilities held for sale were immaterial, and were recorded within Prepaid expenses and other current assets and Other current liabilities, respectively, on the Consolidated Balance Sheet.

The disposed businesses were immaterial, generating annualized revenue of approximately $ 55 million prior to the divestitures.

We are required to record net assets of our held for sale businesses at the lower of fair value less cost to sell or carrying value.

Fair values were based on projected discounted cash flows and/or estimated selling prices.

Management's assumptions for our discounted cash flow analysis of the businesses were based on projected revenues and profits, tax rates, capital expenditures, working capital requirements and discount rates.

Management's assumptions for our discounted cash flow analyses of the businesses were based on projected revenues and profits, tax rates, capital expenditures, working capital requirements and discount rates.

For businesses for which we utilized estimated selling prices to calculate the fair value, the inputs to our estimates included projected market multiples and any reasonable offers.

Due to uncertainties in the estimation process, it is possible that actual results could differ from the estimates used in our analysis.

The inputs utilized in the fair value estimates are classified as Level 3 within the fair value hierarchy.

inputs utilized in the fair value estimates are classified as Level 3 within the fair value hierarchy.

The fair values of the net assets were measured on a non-recurring basis as of December 31, 2020.

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Our investment in unconsolidated subsidiaries in Europe was $ 137 million and $ 122 million as of December 31, 2020 and December 31, 2019, respectively.

We recorded equity in losses of $ 33 million and $ 65 million during the years ended December 31, 2019 and December 31, 2018 , respectively, and equity in earnings of $ 6 million during the year ended December 31, 2017 related to our investments in unconsolidated subsidiaries in our Europe segment, mainly related to our investment in Mekonomen.

We recorded equity in earnings of $ 8 million during the year ended December 31, 2020 and equity in losses of $ 33 million and $ 65 million during the years ended December 31, 2019 and December 31, 2018, respectively, mainly related to our investment in Mekonomen.

On December 1, 2016, we acquired a 26.5 % equity interest in Mekonomen for an aggregate purchase price of $ 181 million.

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We are recording our equity in the net earnings of Mekonomen on a one quarter lag.

During the years ended December 31, 2019 and 2018, we recognized other-than-temporary impairment charges of $ 40 million and $ 71 million , respectively, which represented the difference in the carrying value and the fair value of our investment in Mekonomen.

During the years ended December 31, 2019 and 2018, we recognized other-than-temporary impairment charges of $ 40 million and $ 71 million, which represented the difference in the carrying value and the fair value of our investment in Mekonomen.

The fair value of our investment in Mekonomen was determined using the Mekonomen share prices as of the dates of our impairment tests.

The impairment charges are recorded in Equity in (losses) earnings of unconsolidated subsidiaries in our Consolidated Statements of Income.

The impairment charges are recorded in Equity in earnings (losses) of unconsolidated subsidiaries in our Consolidated Statements of Income.

In May 2018, we received a cash dividend of $ 8 million (SEK 67 million) related to our investment in Mekonomen.

Mekonomen announced in February 2019 that the Mekonomen Board of Directors proposed no dividend payment in 2019.

Mekonomen announced in February 2019 and March 2020, respectively, that the Mekonomen Board of Directors proposed no dividend payment in 2019 or 2020.

The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at December 31, 2020 was $ 155 million (using the Mekonomen share price of SEK 91 as of December 31, 2020) compared to a carrying value of $ 126 million.

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Our investment in unconsolidated subsidiaries in the North America segment was $ 19 million and $ 18 million as of December 31, 2020 and December 31, 2019, respectively.

The equity in earnings for the North America equity investments was

$ 1 million for the year ended December 31, 2019 and an immaterial amount for the year ended December 31, 2018 ;

we did not have any equity in earnings in the North America segment in 2017.

We recorded equity in losses of $ 3 million and equity in earnings of $ 1 million for the North America equity investments during the years ended December 31, 2020 and 2019, respectively, and an immaterial amount for the year ended December 31, 2018.

Warranty Reserve

Some of our salvage mechanical products are sold with a standard six month warranty against defects.

Additionally, some of our remanufactured engines are sold with a standard three year warranty against defects.

Additionally, some of our remanufactured engines are sold with a standard three or four year warranty against defects.

We also provide a limited lifetime warranty for certain of our aftermarket products.

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We currently expect that the resolution of such contingencies will not materially affect our financial position, results of operations or cash flows.

Government Assistance

During the year ended December 31, 2020, we recorded $ 52 million in financial assistance from foreign governments, primarily in the form of grants, of which $ 43 million and $ 9 million related to Europe and Canada, respectively.

For the year ended December 31, 2020, $ 1 million was recorded as a reduction to Cost of goods sold and $ 51 million was a reduction to Selling, general and administrative expenses in our Consolidated Statement of Income.

Financial assistance received from governments is recorded during the period in which we incur the costs that the assistance is intended to offset (and only if it is probable that we will meet the conditions required under the terms of the assistance).

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted in the U.S.

to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic.

Similar legislation was enacted in many of the Company’s international jurisdictions.

Tax measures in these legislative actions did not have a material impact on the Company’s results of operations for the year ended December 31, 2020.

Those initiatives did provide the Company with the opportunity to defer the timing of certain income tax, indirect tax and payroll tax payments in various jurisdictions.

As of December 31, 2020, approximately $ 30 million of payments otherwise due by the end of 2020 were deferred, of which we estimate approximately half will be paid in 2021 and half in 2022.

Current income taxes are provided on income reported for financial reporting purposes, adjusted for transactions that do not enter into the computation of income taxes payable in the same year.

Deferred income taxes are provided for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements.

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before we are able to realize their benefit or that future deductibility is uncertain.

Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested.

We recognize the benefits of uncertain tax positions taken or expected to be taken in tax returns in the provision for income taxes only for those positions that are more likely than not to be realized.

We follow a two-step approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

The second step is to measure the tax benefit as the largest amount that is more than 50 % likely of being realized upon ultimate settlement.

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes.

Our policy is to include interest and penalties associated with income tax obligations in income tax expense.

Stockholders' Equity

Treasury Stock

On October 25, 2018, our Board of Directors authorized a stock repurchase program under which we were authorized to purchase up to $ 500 million of our common stock from time to time through October 25, 2021.

Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs.

The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time.

Delaware law imposes restrictions on stock repurchases.

On October 25, 2018, our Board of Directors authorized a stock repurchase program under which we may purchase up to $ 500 million of our common stock from time to time through October 25, 2021.

On October 25, 2019, our Board of Directors authorized an increase to our existing stock repurchase program under which the Company may purchase up to an additional $ 500 million of our common stock from time to time through October 25, 2022;

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With the increase, the Board of Directors has authorized a total of $ 1.0 billion of common stock repurchases.

Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs.

The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time.

Delaware law imposes restrictions on stock repurchases.

During the year ended December 31, 2020, we repurchased 4.1 million shares of common stock for an aggregate price of $ 117 million.

During the year ended December 31, 2019, we repurchased 10.9 million shares of common stock for an aggregate price of $ 292 million.

During 2018, we repurchased 2.3 million shares of common stock for an aggregate price of $ 60 million.

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Noncontrolling Interest

In October 2020, we purchased all of the noncontrolling interest of a subsidiary in our North America segment for a purchase price of $ 10 million.

This purchase resulted in a net decrease to Noncontrolling interest of $ 10 million and a decrease to Additional paid-in-capital of $ 1 million in our consolidated financial statements as of December 31, 2020.

In February 2020, as part of the sale of Stahlgruber's Czech Republic business, we divested the noncontrolling interest of the business, which resulted in a net decrease to Noncontrolling interest of $ 11 million in our consolidated financial statements as of March 31, 2020.

See Note 3, "Discontinued Operations," for further information.

In July 2019, we purchased substantially all of the noncontrolling interest of a subsidiary acquired in connection with the Stahlgruber acquisition for a purchase price of $ 19 million, which included the issuance of $ 14 million of notes payable.

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As the put option is outside the control of the Company, we recorded a $ 24 million Redeemable noncontrolling interest at the put option's redemption value outside of permanent equity on our Consolidated Balance Sheets.

This transaction also resulted in a decrease to Additional paid-in capital of $ 18 million , a decrease to Noncontrolling interest of $ 12 million , and a $ 7 million dividend payable ( $ 2 million recorded in Other current liabilities and $ 5 million in Other noncurrent liabilities) in our consolidated financial statements as of December 31, 2019 .

$ 5 million in Other noncurrent liabilities) in our consolidated financial statements as of December 31, 2019.

The redeemable noncontrolling interest and dividend payable represent noncash financing activities in our Consolidated Statements of Cash Flows.

Current income taxes are provided on income reported for financial reporting purposes, adjusted for transactions that do not enter into the computation of income taxes payable in the same year.

Deferred income taxes have been provided to show the effect of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements.

Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested.

We follow a two-step approach to recognizing and measuring uncertain tax positions.

The second step is to measure the tax benefit as the largest amount that is more than 50 % likely of being realized upon ultimate settlement.

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes.

Our policy is to include interest and penalties associated with income tax obligations in income tax expense.

During 2017, new tax legislation was signed into law making significant changes to the Internal Revenue Code.

See Note 15, "Income Taxes" for further information regarding the new tax law.

Rental Expense

We recognize rental expense on a straight-line basis over the respective lease terms, including reasonably assured renewal periods, for all of our operating leases.

Foreign Currency Translation

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Recent Accounting Pronouncements

Adoption of New Lease Standard

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016-02, "Leases" ("ASU 2016-02"), which represents the FASB Accounting Standards Codification Topic 842 ("ASC 842"), to increase transparency and comparability by recognizing lease assets and lease liabilities on the Consolidated Balance Sheets and disclosing key information about leasing arrangements.

The main difference between the prior standard and ASU 2016-02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under the prior standard.

We adopted the standard in the first quarter of 2019 using the modified retrospective approach and elected the transition package of practical expedients permitted within the new standard, which, among other things, allows us to carryforward the historical lease classification.

For leases with a term of 12 months or less, we elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future.

Additionally, we adopted the practical expedient to combine lease and non-lease components.

As of January 1, 2019, we recorded both an operating lease asset and operating lease liability of $ 1.3 billion .

The preexisting deferred rent liability balances from the historical straight-line treatment of operating leases was reclassified as a reduction of the lease asset upon adoption.

The adoption of the standard did not materially affect our Consolidated Statements of Income or Statements of Cash Flows as operating lease payments will still be an operating cash outflow and capital lease payments will still be a financing cash outflow.

The new standard did not have a material impact on our liquidity.

The standard will have no impact on our debt covenant compliance under our current agreements as the covenant calculations are based on the prior lease accounting rules.

Other Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

During the first quarter of 2020, we adopted ASU 2016-13 and ASU No.

2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" ("ASU 2018-19").

ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 replaces the prior “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost.

ASU 2018-19 affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the contractual right to receive cash.

We applied ASU 2016-13 and ASU 2018-19 on a modified retrospective basis.

As of January 1, 2020, we recorded a cumulative effect adjustment to retained earnings of $ 3 million.

During the first quarter of 2020, we adopted ASU No.

2017-12, "Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"), which amends the hedge accounting recognition and presentation requirements in ASC 815 ("Derivatives and Hedging").

ASU 2017-12 significantly alters the hedge accounting model by making it easier for an entity to achieve and maintain hedge accounting and provides for accounting that better reflects an entity's risk management activities.

We adopted the provisions of ASU 2017-12 by applying a modified retrospective approach to existing hedging relationships as of the adoption date.

2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"), which removes, modifies, and adds certain disclosure requirements in ASC 820.

We adopted the provisions of ASU 2018-13 by applying a prospective approach.

The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13, "Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"), which removes, modifies, and adds certain disclosure requirements in ASC 820.

ASU 2018-13 is effective for fiscal years and interim periods beginning after December 15, 2019;

early adoption is permitted.

We are in the process of evaluating the impact of this standard on our disclosures but do not currently believe that it will have a material impact.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), and in November 2018 issued a subsequent amendment, ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" ("ASU 2018-19").

ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost.

ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the contractual right to receive cash.

ASU 2016-13 and ASU 2018-19 should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic.

ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein.

In December 2019, the FASB issued ASU No.

2019-12, "Income Taxes" (Topic 740) ("ASU 2019-12"), which simplifies the accounting for income taxes and adds guidance to reduce complexity in certain areas.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We do not anticipate the adoption of this accounting standard will have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met.

These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity.

Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020).

Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have been completed.

We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures, and we have not yet elected an adoption date.

Revenue Recognition

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Year Ended December 31,

2020 2019 2018

North America $ 3,988,214 $ 4,600,903 $ 4,558,220

Europe 5,470,159 5,817,547 5,202,231

Specialty 1,505,340 1,459,396 1,472,956

Parts and services 10,963,713 11,877,846 11,233,407

Other 665,117 628,263 643,267

Total revenue $ 11,628,830 $ 12,506,109 $ 11,876,674

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speed and performance;

recreational vehicles;

wheels, tires and performance handling;

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Our service-type warranties typically have service periods ranging from 6 months to 36 months.

Under FASB Accounting Standards Codification Topic ASC 606 ("ASC 606"), proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period.

Under FASB Accounting Standards Codification Topic 606 ("ASC 606"), proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period.

The changes in deferred service-type warranty revenue are as follows (in thousands):

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Revenue from other sources includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations.

We derive scrap metal and other precious metals from several sources, including vehicles that have been used in both our wholesale and self service recycling operations and from OEMs and other entities that contract with us for secure disposal of "crush only" vehicles.

The sale of hulks in our wholesale and self service recycling operations represents one performance obligation, and revenue is recognized based on a price per weight when the customer (processor) collects the scrap.

We derive scrap metal and other precious metals from several sources, including vehicles that have been used in both our wholesale and self service recycling operations and from original equipment manufacturers ("OEMs") and other entities that contract with us for secure disposal of "crush only" vehicles.

Revenue from the sale of hulks in our wholesale and self service recycling operations is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap.

Some adjustments may occur when the customer weighs the scrap at their location, and revenue is adjusted accordingly.

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The amount of revenue ultimately received from the customer can vary due to variable consideration including returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items.

Under ASC 606 we are required to select the “expected value method” or the “most likely amount” method in order to estimate

variable consideration.

Under ASC 606

we are required to select the “expected value method” or the “most likely amount” method in order to estimate variable consideration.

We utilize both methods in practice depending on the type of variable consideration, with contemplation of any expected reversals in revenue.

We recorded a refund liability and return asset for expected returns of $ 102 million and $ 57 million, respectively, as of December 31, 2020, and $ 97 million and $ 52 million, respectively, as of December 31, 2019.

The refund liability is presented separately on the balance sheet within current liabilities while the return asset is presented within Prepaid expenses and other current assets.

Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives which are recorded in Receivables, net on the Consolidated Balance Sheets.

The refund liability is presented separately on the Consolidated Balance Sheets within current liabilities while the return asset is presented within Prepaid expenses and other current assets.

Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives that are recorded in Receivables, net on the Consolidated Balance Sheets.

We recorded a reserve for our variable consideration of $ 127 million and $ 108 million as of December 31, 2020 and December 31, 2019, respectively.

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Acquisition Related Expenses

Acquisition related expenses, which include external costs such as legal, accounting and advisory fees, were $ 2 million for the year ended December 31, 2019 .

Acquisition related expenses for the year ended December 31, 2018 were $ 18 million , which included external costs primarily related to our May 2018 acquisition of Stahlgruber.

Acquisition related expenses totaled $ 15 million for the year ended December 31, 2017 .

Acquisition related expenses for 2017 included $ 5 million of costs for our acquisition of Andrew Page, primarily related to legal and other professional fees associated with the CMA review.

The remaining acquisition related costs for the year ended December 31, 2017 consisted of external costs for (i) completed acquisitions, (ii) pending acquisitions as of December 31, 2017 , including $ 4 million related to Stahlgruber, and (iii) potential acquisitions that were terminated.

We incurred $ 8 million of acquisition related expenses for the year ended December 31, 2020.

The expenses primarily resulted from the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.

We incurred $ 2 million of acquisition related expenses for the year ended December 31, 2019.

These expenses included external costs such as legal, accounting and advisory fees related to our acquisitions.

We incurred $ 18 million of acquisition related expenses for the year ended December 31, 2018.

These expenses included external costs primarily related to our May 2018 acquisition of Stahlgruber.

2019 Global Restructuring Program

In the second quarter of 2019, we began implementing a cost reduction initiative, covering all three of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies.

We have incurred and expect to incur costs for inventory write-downs, employee severance and other expenditures related to employee terminations;

In the second quarter of 2019, we commenced a cost reduction initiative, covering all three of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies.

We have incurred and expect to incur costs for inventory write-downs;

employee severance and other expenditures related to employee terminations;

lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets;

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and accelerated depreciation of fixed assets to be disposed earlier than the end of the previously estimated useful lives.

During the year ended December 31, 2019 , we incurred $ 37 million of restructuring expenses primarily related to inventory write-downs, employee-related costs and facility exit costs.

Of these expenses, $ 17 million , primarily related to branch consolidation and brand rationalization within our Andrew Page operations, was recorded within Cost of goods sold in the Consolidated Statement of Income during the year ended December 31, 2019 , and $ 20 million was recorded within Restructuring and acquisition related expenses.

We currently expect to incur additional expenses of between $ 5 million and $ 10 million through the end of 2020 to complete the program.

During the year ended December 31, 2020, we incur r ed $ 7 million of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs.

These costs were recorded within Restructuring and acquisition related expenses in the Consolidated Statements of Income.

Of the program costs incurred during 2020, $ 4 million and $ 3 million related to our Europe and North America segments, respectively.

During the year ended December 31, 2019, we incurred $ 37 million of restructuring expenses primarily related to inventory write-downs, facility exit costs, and employee-related costs.

Of these expenses, $ 17 million, primarily related to Andrew Page Limited ("Andrew Page") branch consolidation and brand rationalization, was recorded within Cost of goods sold in the Consolidated Statement of Income during the year ended December 31, 2019, and $ 20 million was recorded within Restructuring and acquisition related expenses.

The actions under this program are substantially complete.

We estimate that total program costs will be approximately $ 46 million, of which approximately $ 31 million, $ 14 million and $ 1 million will be incurred by our Europe, North America and Specialty segments, respectively.

Costs to be incurred through 2021 under this program are estimated to be between $ 1 million and $ 3 million.

As of December 31, 2020, restructuring liabilities related to this program were immaterial.

2020 Global Restructuring Program

Beginning in the first quarter of 2020, we initiated a further restructuring program aimed at cost reductions across all our reportable segments through the elimination of underperforming assets and cost inefficiencies.

These actions are incremental to those initiated as part of the 2019 Global Restructuring Program, and include costs for inventory write-downs;

employee severance and other expenditures related to employee terminations;

lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets;

other costs related to facility exits, such as moving expenses to relocate inventory and equipment;

and accelerated depreciation of fixed assets to be disposed of earlier than t he end of the previously estimated useful lives.

We expanded this program during the second and third quarters of 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to our business from COVID-19.

During the year ended December 31, 2020, we recognized restructuring expenses totaling $ 50 million for employee-related costs, facility exit costs and inventory write-downs.

Of these expenses, $ 7 million resulted from inventory impairment charges related to facility consolidation actions and brand rationalizations and were recorded in Cost of goods sold in the Consolidated Statement of Income.

Of the cumulative program costs incurred to date, $ 26 million, $ 23 million, and $ 1 million related to our North America, Europe and Specialty segments, respectively.

We estimate total costs under the program through its expected completion date in 2023 will be between $ 65 million and $ 75 million, of which approximately $ 40 million, $ 31 million, and $ 2 million will be incurred by our Europe, North America and Specialty segments, respectively;

these segment amounts represent the midpoints of the expected ranges of costs to be incurred by each segment.

As of December 31, 2020, restructuring liabilities related to this program totaled $ 21 million, including $ 17 million related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Consolidated Balance Sheets), and $ 4 million for employee termination costs (reported in Accrued payroll-related liabilities on our Consolidated Balance Sheets).

Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed in 2020 and after our planned exit date for facilities we expect to close in future periods;

these liabilities do not reflect any estimated proceeds we may be able to achieve through subleasing the facilities.

Acquisition Integration Plans

During the year ended December 31, 2020, we incurred $ 9 million of restructuring expenses for our acquisition integration plans.

These expenses were primarily related to the integration of our operations in Belgium.

Future expenses to complete our existing integration plans are expected to be immaterial.

During the year ended December 31, 2019, we incurred $ 18 million of restructuring expenses primarily related to our acquisition integration efforts in our Europe segment.

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These integration activities included the closure of duplicate facilities and termination of employees.

During the year ended December 31, 2017 , we incurred $ 5 million of restructuring expenses.

Expenses incurred during the year ended December 31, 2017 were primarily a result of our ongoing integration activities in our North America and Specialty segments.

Expenses incurred were primarily related to facility closure and the merger of existing facilities into larger distribution centers.

We expect to incur additional expenses related to the integration of certain of our acquisitions into our existing operations in 2020.

These integration activities are expected to include the closure of duplicate facilities, rationalization of personnel in connection with the consolidation of overlapping facilities with our existing business, and moving expenses.

Future expenses to complete these integration plans are expected to be less than $ 5 million .

1 LKQ Europe Program

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Under the 1 LKQ Europe program, we will reorganize our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office.

We currently expect to incur between $ 45 million and $ 55 million in personnel and inventory related restructuring charges through 2024 as a result of executing the 1 LKQ Europe program.

In future periods, we may identify additional initiatives and projects under the 1 LKQ Europe program that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects.

While certain projects were delayed as a result of the COVID-19 pandemic, such as our procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe.

We are targeting to complete the organizational design and implementation projects by the middle of 2021, with the remaining projects scheduled to be completed by 2024.

We estimate that we will incur between $ 45 million and $ 55 million in total personnel and inventory related restructuring charges through 2024 under the program.

We may identify additional initiatives and projects under the 1 LKQ Europe program in future periods that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects.

As of December 31, 2020, there were no restructuring liabilities related to this program.

Stock-Based Compensation

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The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the year ended December 31, 2020:

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Outstanding Weighted

Fair Value Weighted Average Remaining Contractual Term

(in years) Aggregate Intrinsic Value

(in thousands) (1)

Unvested as of January 1, 2020 1,612,026 $ 31.72

902,786 $ 31.68

Vested ( 921,129 ) $ 31.57

Forfeited / Canceled ( 114,011 ) $ 32.69

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Expected to vest after December 31, 2020 1,281,785 $ 31.60 2.7 $ 45,170

(1) The aggregate intrinsic value of expected to vest RSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units) that would have been received by the holders had all RSUs vested.

This amount changes based on the market price of the Company’s common stock.

(2) The weighted average grant date fair value of RSUs granted during the years ended December 31, 2019 and 2018 was $ 27.82 and $ 42.58 , respectively.

In 2019, we granted performance-based three-year RSUs ("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan.

As these awards are performance-based, the exact number of shares to be paid out may be up to twice the grant amount, depending on the Company's performance and the achievement of certain performance metrics (adjusted earnings per share, average organic parts and services revenue growth, and average return on invested capital) over the three year period ending December 31, 2021.

In 2019, we also granted an immaterial amount of performance-based RSUs to employees that have different performance metrics than those described above.

In 2020 and 2019, we granted performance-based three-year RSUs ("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan.

As these awards are performance-based, the exact number of shares to be paid out may be up to twice the grant amount, depending on the Company's performance and the achievement of certain

performance metrics (adjusted earnings per share, average organic parts and services revenue growth, and average return on invested capital) over the applicable three year performance periods.

The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the year ended December 31, 2020:

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Outstanding Weighted

Fair Value Weighted Average Remaining Contractual Term

(in years) Aggregate Intrinsic Value

(in thousands) (1)

Unvested as of January 1, 2020 136,170 $ 27.69

164,152 $ 31.85

Forfeited / Canceled ( 8,721 ) $ 29.35

Unvested as of December 31, 2020 291,601 $ 29.98

Expected to vest after December 31, 2020 291,601 $ 29.98 1.5 $ 10,276

The aggregate intrinsic value of expected to vest PSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units at target) that would have been received by the holders had all PSUs vested.

(1) The aggregate intrinsic value of expected to vest PSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units at target) that would have been received by the holders had all the expected to vest PSUs vested.

This amount changes based on the market price of the Company’s common stock and the achievement of the performance metrics relative to the established targets.

(2) Represents the number of PSUs at target payout.

The weighted average grant date fair value of PSUs granted during the year ended December 31, 2019 was $ 27.69 .

Stock Options

Stock options vest over periods of up to five years , subject to a continued service condition.

Stock options expire either six years or ten years from the date they are granted.

Stock options vested over periods of up to five years , subject to a continued service condition.

Stock options expired either six years or ten years from the date they were granted.

No options were granted during 2020 and 2019.

No options vested during the year ended December 31, 2020.

all of our outstanding options are fully vested.

The following table summarizes activity related to our stock options under the Equity Incentive Plan for the year ended December 31, 2020:

Average Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Outstanding Weighted

Average Exercise Price Weighted Average Remaining Contractual Term

(in years) Aggregate Intrinsic Value

(in thousands)

Balance as of January 1, 2020 114,594 $ 12.26

Exercised ( 112,472 ) $ 11.88 $ 2,629

Canceled ( 2,122 ) $ 32.31

Balance as of December 31, 2020 — $ — — $ —

Exercisable as of December 31, 2019

(1) The aggregate intrinsic value of outstanding and exercisable options represents the total pretax intrinsic value (the difference between the fair value of the Company's stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of the last day of the period indicated.

This amount changes based on the market price of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was $ 18 million and $ 21 million , respectively.

All stock options were exercised or canceled as of December 31, 2020.

Stock-Based Compensation Expense

For the RSUs that contain both a performance-based vesting condition and a time-based vesting condition, we recognize compensation expense under the accelerated attribution method, pursuant to which expense is recognized over the requisite service period for each separate vesting tranche of the award.

The PSU expense is calculated using the projected award value, which is based on an estimate of the achievement of the performance objectives.

During the years ended December 31, 2020, 2019, and 2018, we recognized $ 11 million, $ 11 million, and $ 8 million, respectively, of stock based compensation expense related to the RSUs containing a performance-based vesting condition.

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Forfeitures are recorded as they occur.

The components of pre-tax stock-based compensation expense for our continuing operations are as follows (in thousands):

Year Ended December 31,

Stock options and other

Total stock-based compensation expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 29 million, $ 28 million, and $ 23 million for the years ended December 31, 2020, 2019, and 2018;

respectively.

The following table sets forth the classification of total stock-based compensation expense included in our Consolidated Statements of Income for our continuing operations (in thousands):

Year Ended December 31,

2020 2019 2018

Cost of goods sold $ 506 $ 477 $ 469

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Total stock-based compensation expense, net of tax

$ 22,464 $ 21,468 $ 17,540

We have not capitalized any stock-based compensation costs during the years ended December 31, 2020, 2019, and 2018.

As of December 31, 2020, unrecognized compensation expense related to unvested RSUs and PSUs is expected to be recognized as follows (in thousands):

2021 $ 18,034

Total unrecognized compensation expense $ 37,360

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Year Ended December 31,

2020 2019 2018

Income from continuing operations $ 640,509 $ 543,415 $ 487,565

Denominator for basic earnings per share—Weighted-average shares outstanding

304,640 310,155 314,428

Effect of dilutive securities:

RSUs 362 393 409

Stock options 1 421 1,012

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding

305,006 310,969 315,849

Basic earnings per share from continuing operations $ 2.10 $ 1.75 $ 1.55

Diluted earnings per share from continuing operations (1)

$ 2.10 $ 1.75 $ 1.54

(1) Diluted earnings per share from continuing operations was computed using the treasury stock method for dilutive securities.

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Year Ended December 31,

2020 2019 2018

Antidilutive securities:

RSUs 673 586 410

Stock options — 24 8

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The components of Accumulated Other Comprehensive Income (Loss) are as follows (in thousands):

Unrealized Gain (Loss)

on Cash Flow Hedges

Unrealized (Loss) Gain

on Pension Plans

Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized (Loss) Gain

on Pension Plans Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries Accumulated

Comprehensive

(Loss) Income

Balance at January 1, 2017

Pretax income (loss)

Income tax effect

Reclassification of unrealized loss (gain)

Reclassification of deferred income taxes

Disposal of business, net

Other comprehensive loss from unconsolidated subsidiaries

Balance at December 31, 2017

BALANCE, January 1, 2018 $ ( 71,933 ) $ 11,538 $ ( 8,772 ) $ ( 1,309 ) $ ( 70,476 )

Pretax (loss) income ( 113,030 ) 37,552 1,132 — ( 74,346 )

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Reclassification of unrealized gain

— ( 37,009 ) ( 54 ) — ( 37,063 )

Reclassification of deferred income taxes

— 8,653 22 — 8,675

Other comprehensive loss from unconsolidated subsidiaries

— — — ( 2,343 ) ( 2,343 )

Adoption of ASU 2018-02 2,859 2,486 — — 5,345

Balance at December 31, 2018

BALANCE, December 31, 2018 $ ( 177,597 ) $ 14,374 $ ( 8,075 ) $ ( 3,652 ) $ ( 174,950 )

Pretax income (loss) 7,083 23,850 ( 31,801 ) — ( 868 )

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Reclassification of unrealized gain

— ( 35,686 ) ( 782 ) — ( 36,468 )

Reclassification of deferred income taxes

— 8,399 145 — 8,544

Disposal of business

( 379 ) — — — ( 379 )

Other comprehensive income from unconsolidated subsidiaries

Balance at December 31, 2019

— — — 236 236

BALANCE, December 31, 2019 $ ( 170,893 ) $ 5,358 $ ( 31,934 ) $ ( 3,416 ) $ ( 200,885 )

Pretax income (loss) 112,695 ( 48,540 ) ( 9,165 ) — 54,990

Income tax effect — 11,559 3,058 — 14,617

Reclassification of unrealized loss — 40,359 6,926 — 47,285

Reclassification of deferred income taxes — ( 9,704 ) ( 1,852 ) — ( 11,556 )

Disposal of businesses 1,072 — — — 1,072

Other comprehensive loss from unconsolidated subsidiaries — — — ( 4,532 ) ( 4,532 )

BALANCE, December 31, 2020 $ ( 57,126 ) $ ( 968 ) $ ( 32,967 ) $ ( 7,948 ) $ ( 99,009 )

The amounts of unrealized gains and losses on our Cash Flow Hedges reclassified to our Consolidated Statements of Income are as follows (in thousands):

Classification 2020 2019 2018

Unrealized gains on interest rate swaps

Interest expense

Unrealized gains on cross currency swaps

Interest expense

Unrealized gains (losses) on cross currency swaps (1)

Unrealized (losses) gains on interest rate swaps Interest expense $ ( 3,160 ) $ 5,872 $ 5,482

Unrealized gains on cross currency swaps Interest expense 10,188 15,794 11,105

Unrealized (losses) gains on cross currency swaps (1)

Interest income and other income, net ( 38,198 ) 14,020 20,422

Unrealized losses on foreign currency forward contracts (1)

Interest income and other income, net ( 9,189 ) — —

Total $ ( 40,359 ) $ 35,686 $ 37,009

(1) The amounts reclassified to Interest income and other income, net in our Consolidated Statements of Income offset the impact of the remeasurement of the underlying transactions.

Net unrealized losses related to our pension plans were reclassified to Interest income and other income, net in our Consolidated Statements of Income during each of the years ended December 31, 2019 and 2018.

Our policy is to reclassify the income tax effect from Accumulated other comprehensive income (loss) to the Provision for income taxes when the related gains and losses are released to the Consolidated Statements of Income.

Net unrealized losses and gains related to our pension plans were reclassified to Interest income and other income, net in our Consolidated Statements of Income during each of the years ended December 31, 2020, 2019 and 2018.

Our policy is to reclassify the income tax effect from Accumulated other comprehensive loss to the Provision for income taxes when the related gains and losses are released to the Consolidated Statements of Income.

During the first quarter of 2018, we adopted ASU No.

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Revolving credit facilities 642,958 1,268,008

Notes (2023) — 600,000

Euro Notes (2024) 610,800 560,650

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Other debt at weighted average interest rates of 1.2% and 1.8%, respectively 15,706 113,010

Total debt 2,896,676 4,072,026

long-term debt issuance costs ( 25,225 ) ( 29,990 )

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The scheduled maturities of long-term obligations outstanding at December 31, 2020 are as follows (in thousands):

2024 1,532,638

Thereafter 1,239,630

Total debt (2)

Of the $ 600 million U.S.

Notes (2023) that were redeemed in January 2020, in the table above $ 185 million is included in 2020 (reflecting the amount repaid with cash on hand), $ 105 million is included in 2021 (reflecting the amount repaid using borrowings under the receivables securitization facility), and $ 310 million is included in 2024 (reflecting the amount repaid using borrowings under the revolving credit facility).

The total debt amounts presented above exclude debt issuance costs totaling $ 30 million as of December 31, 2019 .

(1) Maturities of long-term obligations due by December 31, 2021 includes $ 24 million of short-term debt that may be extended beyond the current due date.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of $ 26 million as of December 31, 2020).

Senior Secured Credit Agreement

On November 20, 2018, LKQ Corporation, LKQ Delaware LLP, and certain other subsidiaries (collectively, the "Borrowers") entered into Amendment No.

3 to the Fourth Amended and Restated Credit Agreement ("Credit Agreement"), which amended the Fourth Amended and Restated Credit Agreement dated January 29, 2016 by modifying certain terms to (1) increase the total availability under the revolving credit facility's multicurrency component from $ 2.75 billion to $ 3.15 billion ;

(2) reduce the margin on borrowings by 25 basis points at the September 30, 2018 leverage ratio, and reduce the number of leverage pricing tiers;

(3) extend the maturity date by one year to January 29, 2024;

(4) reduce the unused facility fee depending on leverage category;

(5) increase the capacity for incurring additional indebtedness under our receivables securitization facility;

(6) increase the maximum borrowing limit of swingline loans and add the ability to borrow in British Pounds and Euros;

and (7) make other immaterial or clarifying modifications and amendments to the terms of the Credit Agreement.

Borrowings will continue to bear interest at variable rates.

Amounts under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, 2024.

On June 11, 2020, LKQ Corporation and certain other subsidiaries of LKQ (collectively, the "Borrowers") entered into Amendment No.

4 to the Fourth Amended and Restated Credit Agreement dated January 29, 2016 (the "Credit Agreement"), which modifies the maximum permitted net leverage ratio through the quarter ending September 30, 2021.

Prior to the amendment, the maximum permitted net leverage ratio was 4.00 :1.00.

After the amendment, the maximum permitted net leverage ratio is (i) 5.00 :1.00 for the quarters ending December 31, 2020 and March 31, 2021, (ii) 4.50 :1.00 for the quarter ending June 30, 2021, and (iii) 4.25 :1.00 for the quarter ending September 30, 2021.

Beginning with the quarter ending December 31, 2021, the maximum permitted net leverage ratio reverts to the terms in effect prior to the amendment.

In the event that the net leverage ratio is greater than 4.00 :1.00, the Company would be restricted from repurchasing its shares.

We can at any time elect to cancel the modifications to the maximum permitted net leverage ratio and revert to the terms in effect prior to the amendment subject to compliance with the 4.00 :1.00 ratio.

Amendment No.

4 to the Credit Agreement also made certain other immaterial modifications.

The total availability under the revolving credit facility's multicurrency component is $ 3.15 billion.

Amounts outstanding under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, 2024.

Term loan borrowings, which totaled $ 324 million as of December 31, 2020, are due and payable in quarterly installments equal to approximately $ 4 million on the last day of each fiscal quarter, with the remaining balance due and payable on January 29, 2024.

The increase in the revolving credit facility's multicurrency component of $ 400 million was used in part to pay down $ 240 million of the term loan (to the new $ 350 million amount that was outstanding as of the date of the amendment);

the remainder was used for general corporate purposes.

We are required to prepay the term loan by amounts equal to proceeds from the sale or disposition of certain assets if the proceeds are not reinvested within twelve months.

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In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, and a fronting fee of 0.125 % to the issuing bank, which are due quarterly in arrears.

Of the total borrowings outstanding under the Credit Agreement, there were $ 18 million classified as current maturities at December 31, 2019 compared to $ 9 million at December 31, 2018 .

Of the total borrowings outstanding under the Credit Agreement, there were $ 18 million classified as current maturities at both December 31, 2020 and December 31, 2019.

As of December 31, 2020, there were letters of credit outstanding in the aggregate amount of $ 71 million.

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Related to the execution of Amendment No.

3 to the Fourth Amended and Restated Credit Agreement in November 2018, we incurred $ 4 million of fees, the majority of which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement.

The amounts recorded as a loss on debt extinguishment in the Consolidated Statements of Income for the years ended December 31, 2018 and 2017 were primarily related to the write-off of capitalized debt issuance costs related to various amendments to our Fourth Amended and Restated Credit Agreement.

4 to the Fourth Amended and Restated Credit Agreement in June 2020, we incurred $ 4 million of fees, the majority of which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement.

In 2013, we issued $ 600 million aggregate principal amount of 4.75 % senior notes due 2023 (the "U.S.

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Notes (2023) were fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

Notes (2023) and the related guarantees were, respectively, LKQ Corporation's and each Guarantor's senior unsecured obligations and were subordinated to all of the Guarantors' existing and future secured debt to the extent of the assets

securing that secured debt.

In addition, the U.S.

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The total redemption payment was $ 614 million, including an early-redemption premium of $ 9 million and accrued and unpaid interest of $ 4 million.

In the first quarter of 2020, we will record a loss on debt extinguishment of $ 13 million related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

In the first quarter of 2020, we recorded a loss on debt extinguishment of $ 13 million on the Consolidated Statement of Income related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

Euro Notes (2024)

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("LKQ Euro Holdings"), a wholly-owned subsidiary of LKQ Corporation, completed an offering of € 1.0 billion aggregate principal amount of senior notes.

The offering consisted of € 750 million senior notes due 2026 (the "2026 notes") and € 250 million senior notes due 2028 (the "2028 notes" and, together with the 2026 notes, the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933.

The proceeds from the offering, together with borrowings under our senior secured credit facility, were or will be used to (i) finance a portion of the consideration paid for the Stahlgruber acquisition, (ii) for general corporate purposes and (iii) to pay related fees and expenses, including the refinancing of net financial debt.

The offering consisted of € 750

million senior notes due 2026 (the "2026 notes") and € 250 million senior notes due 2028 (the "2028 notes" and, together with the 2026 notes, the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933.

The proceeds from the offering, together with borrowings under our senior secured credit facility, were used to (i) finance a portion of the consideration paid for the Stahlgruber acquisition, (ii) for general corporate purposes and (iii) to pay related fees and expenses, including the refinancing of net financial debt.

The Euro Notes (2026/28) are governed by the Indenture dated as of April 9, 2018 (the “Euro Notes (2026/28) Indenture”) among LKQ Euro Holdings, LKQ Corporation and certain of our subsidiaries (the “Euro Notes (2026/28) Subsidiaries”), the trustee, paying agent, transfer agent, and registrar.

The 2026 notes and 2028 notes bear interest at a rate of 3.625 % and 4.125 % , respectively, per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.

The 2026 notes and 2028 notes bear interest at rates of 3.625 % and 4.125 %, respectively, per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.

Interest on the Euro Notes (2026/28) is payable in arrears on April 1 and October 1 of each year.

The Euro Notes (2026/28) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2026/28) Subsidiaries (the "Euro Notes (2026/28) Guarantors").

(2026/28) Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt.

The Euro Notes (2026/28) and the related guarantees are, respectively, LKQ Euro Holdings' and each Euro Notes (2026/28) Guarantor’s senior unsecured obligations and will be subordinated to all of LKQ Euro Holdings' and the Euro Notes (2026/28) Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt.

In addition, the Euro Notes (2026/28) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2026/28) to the extent of the assets of those subsidiaries.

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Our senior secured credit agreement and our senior notes indentures contain limitations on payment of cash dividends or other distributions of assets.

Based on limitations in effect under our senior secured credit agreement and senior notes indentures, the maximum amount of dividends we could pay as of December 31, 2019 was approximately $ 1.9 billion .

Delaware law also imposes restrictions on dividend payments.

Based on limitations in effect under our senior secured credit agreement, senior notes indentures and Delaware law, the maximum amount of dividends we could have paid as of December 31, 2020 was approximately $ 2.3 billion.

The limit on the payment of dividends is calculated using historical financial information and will change from period to period.

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The receivables are held by LKQ Receivables Finance Company, LLC ("LRFC"), a wholly owned bankruptcy-remote special purpose subsidiary of LKQ, and therefore, the receivables are available first to satisfy the creditors of LRFC, including the Purchasers.

While there were no borrowings on our receivables securitization facility as of December 31, 2019, $ 132 million of net receivables were available as collateral for the investment under the receivables facility as of December 31, 2019 ;

there were also $ 132 million of net receivables available as collateral as of December 31, 2018 .

Net receivables totaling $ 121 million and $ 132 million were collateral for the investments under the receivables facility as of December 31, 2020 and December 31, 2019, respectively.

Under the receivables facility, we pay variable interest rates plus a margin on the outstanding amounts invested by the Purchasers.

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We also pay a commitment fee on the excess of the investment maximum over the average daily outstanding investment, payable monthly in arrears.

The outstanding balance was $ 110 million as of December 31, 2018 , and there was no outstanding balance as of December 31, 2019 .

At December 31, 2018 , we classified the outstanding balance as long-term on the Consolidated Balance Sheets because we have the ability and intent to refinance these borrowings on a long-term basis.

There was no outstanding balance as of December 31, 2020 or December 31, 2019.

Derivative Instruments and Hedging Activities

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Changes in the fair value of the interest rate swap agreements are recorded in Accumulated other comprehensive income (loss) and are reclassified to Interest expense when the underlying interest payment has an impact on earnings.

Our interest rate swap contracts have maturity dates ranging from January to June 2021.

In December 2018, we sold two interest rate swap contracts with a notional amount of $ 110 million .

Our interest rate swap contracts have maturity dates in January 2021 (notional amount of $ 330 million) and June 2021 (notional amount of $ 150 million).

At December 31, 2020 and 2019, we held cross currency swaps, which contained an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively convert variable rate U.S.

dollar-denominated borrowings into fixed rate euro-denominated borrowings.

The swaps were intended to minimize the impact of fluctuating exchange rates and interest rates on the cash flows resulting from the related intercompany financing arrangements.

Changes in the fair value of the derivative instruments were recorded in Accumulated other comprehensive income (loss) and were reclassified to Interest expense and Interest income and other income, net when the underlying transactions had an impact on earnings.

Our cross currency swaps matured in January 2021.

From time to time, we may hold foreign currency forward contracts related to certain foreign currency denominated intercompany transactions, with the objective of minimizing the impact of fluctuating exchange rates on these future cash flows.

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Changes in the fair value of the foreign currency forward contracts are recorded in Accumulated other comprehensive income (loss) and reclassified to Interest income and other income, net when the underlying transaction has an impact on earnings.

We hold cross currency swaps, which contain an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively convert variable rate U.S.

dollar-denominated borrowings into fixed rate euro-denominated borrowings.

The swaps are intended to minimize the impact of fluctuating exchange rates and interest rates on the cash flows resulting from the related intercompany financing arrangements.

Changes in the fair value of the derivative instruments are recorded in Accumulated Other Comprehensive Income (Loss) and are reclassified to Interest expense and Interest income and other income, net when the underlying transactions have an impact on earnings.

For certain of the swaps, the notional amount steps down by € 4 million quarterly, with the balance maturing at the end of the contract.

Our cross currency swaps have maturity dates in October 2020 and January 2021.

In October 2019, one of our cross currency swaps matured with a notional amount of $ 92 million ( € 80 million ).

The activity related to our cash flow hedges is presented in operating activities in our Consolidated Statements of Cash Flows.

The following tables summarize the notional amounts and fair values of our designated cash flow hedges as of December 31, 2019 and 2018 (in thousands):

Notional Amount

Fair Value at December 31, 2019 (USD)

December 31, 2019

Other Current Assets

Other Noncurrent Assets

Other Accrued Expenses

Other Noncurrent Liabilities

As of December 31, 2020, we held one SEK denominated foreign currency contract that matured in January 2021.

As of December 31, 2020 and December 31, 2019, we held cash flow hedges with the following notional amounts (in thousands):

December 31, 2020 December 31, 2019

Interest rate swap agreements

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Cross currency swap agreements

Euro denominated (1)

€ 340,000 € 435,000

Foreign currency forward contracts

SEK denominated kr 227,000 kr —

(1) The notional amount of our cross currency swap agreements steps down by € 4 million quarterly.

The remaining notional amount at December 31, 2020 matured in January 2021.

The following tables summarize the fair values of our designated cash flow hedges as of December 31, 2020 and December 31, 2019 (in thousands):

Fair Value at December 31, 2020

Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities

Interest rate swap agreements $ — $ — $ 899 $ —

Cross currency swap agreements — — 56,328 —

Foreign currency forward contracts — — 1,350 —

Total cash flow hedges $ — $ — $ 58,577 $ —

Notional Amount

Fair Value at December 31, 2018 (USD)

December 31, 2018

Other Current Assets

Other Noncurrent Assets

Other Accrued Expenses

Other Noncurrent Liabilities

Fair Value at December 31, 2019

Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities

Interest rate swap agreements $ — $ 3,262 $ — $ —

USD denominated

Cross currency swap agreements 2,975 181 970 23,349

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While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis on our Consolidated Balance Sheets.

The impact of netting the fair values of these contracts would result in a decrease to Prepaid expenses and other current assets and Other

accrued expenses on our Consolidated Balance Sheets of $ 1 million at December 31, 2019 .

The impact of netting the fair values of these contracts would result in a decrease to Other noncurrent assets and Other noncurrent liabilities on our Consolidated Balance Sheets of $ 1 million and $ 14 million at December 31, 2019 and 2018 , respectively.

The activity related to our cash flow hedges is included in Note 9, "Accumulated Other Comprehensive Income (Loss) ." As of December 31, 2019 , we estimate that we will reclassify $ 12 million of derivative gains (net of tax) from Accumulated Other Comprehensive Income (Loss) to Interest expense in our Consolidated Statements of Income within the next 12 months.

We estimate that we will also reclassify $ 8 million of derivative losses (net of tax) from Accumulated Other Comprehensive Income (Loss) to Interest income and other income, net in our Consolidated Statements of Income within the next 12 months;

The impact of netting the fair values of these contracts would have no effect on our Consolidated Balance Sheet at December 31, 2020 and an immaterial impact on our Consolidated Balance Sheet at December 31, 2019.

The activity related to our cash flow hedges is included in Note 9, "Accumulated Other Comprehensive Income (Loss)." As of December 31, 2020, we estimate that we will reclassify an immaterial amount of derivative losses (net of tax) from Accumulated other comprehensive income (loss) to Interest expense in our Consolidated Statements of Income within the next 12 months.

We estimate that we will also reclassify an immaterial amount of derivative losses (net of tax) from Accumulated other comprehensive income (loss) to Interest income and other income, net in our Consolidated Statements of Income within the next 12 months;

the reclassification of derivative losses to Interest income and other income, net offsets the projected impact of the remeasurement of the underlying transactions.

The activity related to our cash flow hedges is presented in either operating activities or financing activities in our Consolidated Statements of Cash Flows.

Other Derivative Instruments

We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability related to inventory purchases denominated in a non-functional currency.

We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability in the cash flows related to (i) non-functional currency denominated borrowings and (ii) inventory purchases denominated in a non-functional currency.

We have elected not to apply hedge accounting for these transactions, and therefore the contracts are adjusted to fair value through our results of operations as of each balance sheet date, which could result in volatility in our earnings.

The notional amount and fair value of these contracts at December 31, 2019 and 2018 , along with the effect on our results of operations in 2019 , 2018 and 2017 , were immaterial.

The fair values of these other short-term derivative instruments are recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Consolidated Balance Sheets.

To manage our foreign currency exposure on non-functional currency denominated borrowings, we held short-term foreign currency forward contracts with notional amounts of £ 75 million and € 142 million at December 31, 2020;

we did not hold similar contracts at December 31, 2019.

The fair values and effect on our results of operations of these contracts at December 31, 2020 was immaterial.

In February 2021, we entered into a short term foreign currency forward contract to mitigate our exposure to non-functional currency denominated borrowings in our European operations.

The forward contract has a notional amount of $ 250 million and matures in the first quarter of 2021.

We currently expect to enter into a similar instrument when this one matures.

The notional amount and fair value of the other short-term derivative contracts at December 31, 2020 and 2019, along with the effect on our results of operations in 2020, 2019 and 2018, were immaterial.

Fair Value Measurements

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The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of December 31, 2020 and December 31, 2019 (in thousands):

Balance as of December 31, 2019

Fair Value Measurements as of December 31, 2019

Balance as of December 31, 2020 Fair Value Measurements as of December 31, 2020

Level 1 Level 2 Level 3

Cash surrender value of life insurance $ 72,250 $ — $ 72,250 $ —

Interest rate swaps

Cross currency swap agreements

Total Assets $ 72,250 $ — $ 72,250 $ —

Contingent consideration liabilities $ 13,263 $ — $ — $ 13,263

Interest rate swaps 899 — 899 —

Deferred compensation liabilities 76,240 — 76,240 —

Cross currency swap agreements 56,328 — 56,328 —

Foreign currency forward contracts 5,190 — 5,190 —

Total Liabilities $ 151,920 $ — $ 138,657 $ 13,263

Balance as of December 31, 2018

Fair Value Measurements as of December 31, 2018

Balance as of December 31, 2019 Fair Value Measurements as of December 31, 2019

Level 1 Level 2 Level 3

Cash surrender value of life insurance $ 60,637 $ — $ 60,637 $ —

Interest rate swaps

3,262 — 3,262 —

Cross currency swap agreements 3,156 — 3,156 —

Total Assets $ 67,055 $ — $ 67,055 $ —

Contingent consideration liabilities $ 11,539 $ — $ — $ 11,539

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The cash surrender value of life insurance is included in Other noncurrent assets on our Consolidated Balance Sheets.

The current portion of deferred compensation is included in Accrued payroll-related liabilities and the current portion of contingent consideration liabilities is included in Other current liabilities on our Consolidated Balance Sheets;

the noncurrent portion of these amounts is included in Other noncurrent liabilities on our Consolidated Balance Sheets based on the expected timing of the related payments.

The balance sheet classification of the interest rate swaps and cross currency swap agreements is presented in Note 11, "Derivative Instruments and Hedging Activities ."

The current portion of contingent consideration liabilities is included in Other current liabilities on our Consolidated Balance Sheets;

the noncurrent portion of deferred compensation liabilities and contingent consideration liabilities is included in Other noncurrent liabilities on our Consolidated Balance Sheets based on the expected timing of the related payments.

The balance sheet classification of the interest rate swaps, cross currency swap agreements, and foreign currency forward contracts is presented in Note 11, "Derivative Instruments and Hedging Activities."

Our Level 2 assets and liabilities are valued using inputs from third parties and market observable data.

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Our debt is reflected on the Consolidated Balance Sheets at cost.

Based on market conditions as of December 31, 2019 and 2018 , the fair value of our credit agreement borrowings reasonably approximated the carrying values of $ 1.6 billion and $ 1.7 billion , respectively.

In addition, based on market conditions, the fair value of the outstanding borrowings under the receivables facility reasonably approximated the carrying value of $ 110 million at December 31, 2018 ;

as of December 31, 2019, there were no outstanding borrowings under the receivables facility.

As of December 31, 2019 and December 31, 2018 , the fair values of the U.S.

Notes (2023) were approximately $ 609 million and $ 574 million , respectively, compared to a carrying value of $ 600 million at each date.

As of December 31, 2019 and December 31, 2018 , the fair values of the Euro Notes (2024) were approximately $ 632 million and $ 586 million compared to carrying values of $ 561 million and $ 573 million , respectively.

As of December 31, 2019 , the fair value of the Euro Notes (2026/28) was $ 1.2 billion compared to a carrying value of $ 1.1 billion ;

as of December 31, 2018, the fair value of the Euro Notes (2026/28) approximated the carrying value of $ 1.1 billion .

Based on market conditions as of both December 31, 2020 and December 31, 2019, the fair value of our credit agreement borrowings reasonably approximated the carrying values of $ 1.0 billion and $ 1.6 billion, respectively.

As of December 31, 2020 and December 31, 2019 there were no outstanding borrowings under the receivables facility.

As of December 31, 2019, the fair value of the U.S.

Notes (2023) was approximately $ 609 million compared to a carrying value of $ 600 million ;

as of December 31, 2020, there were no outstanding borrowings on the U.S.

Notes (2023) as the notes were redeemed on January 10, 2020.

As of December 31, 2020 and December 31, 2019, the fair values of the Euro Notes (2024) were approximately $ 662 million and $ 632 million, respectively, compared to carrying values of $ 611 million and $ 561 million, respectively.

As of December 31, 2020 and December 31, 2019, the fair value of the Euro Notes (2026/28) was $ 1.3 billion and $ 1.2 billion, respectively, compared to a carrying value of $ 1.2 billion and $ 1.1 billion, respectively.

The fair value measurements of the borrowings under our credit agreement and receivables facility are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities.

We estimated the fair value by calculating the upfront cash payment a market participant would require at December 31, 2019 to assume these obligations.

We estimated the fair value by calculating the upfront cash payment a market participant would require at December 31, 2020 and December 31, 2019 to assume these obligations.

The fair value of our U.S.

Notes (2023) is classified as Level 1 within the fair value hierarchy since it is determined based upon observable market inputs including quoted market prices in an active market.

Notes (2023) was classified as Level 1 within the fair value hierarchy since it was determined based upon observable market inputs including quoted market prices in an active market.

The fair values of our Euro Notes (2024) and Euro Notes (2026/28) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.

We adopted the new leases accounting standard (Accounting Standards Update 2016-02, "Leases") in the first quarter of 2019 using the modified retrospective approach and elected the transition package of practical expedients permitted within the new standard, which, among other things, allowed us to carryforward the historical lease classification.

Additionally, we adopted the practical expedient to combine lease and non-lease components.

As of January 1, 2019, we recorded both an operating lease asset and operating lease liability of $ 1.3 billion.

We lease certain warehouses, distribution centers, retail stores, office space, land, vehicles and equipment.

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As the implicit rate for most of our leases is not readily determinable, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

Upon adoption of the new lease standard, we utilized our incremental borrowing rate as of the date of adoption.

We determine our incremental borrowing rate by analyzing yield curves with consideration of lease term, and country and company specific factors.

The operating lease ROU asset also includes any lease prepayments and excludes lease incentives.

Many of our leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 40 years or more.

We determine our incremental borrowing rate by analyzing yield curves with consideration of lease term, country and company specific factors.

The ROU asset also includes any lease prepayments and excludes lease incentives.

Many of our leases include one or more options to renew, with renewal terms that can extend the lease term from 1 year to 40 years or more.

For each lease, we consider whether we are reasonably certain to exercise these options to extend.

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Other variable lease costs consist of certain non-lease components that are disclosed as lease costs due to our election of the practical expedient to combine lease and non-lease components and include items such as variable payments for utilities, property taxes, common area maintenance, sales taxes, and insurance.

For leases with an initial term of 12 months or less, we have not recognized an operating lease ROU asset or operating lease liability on the Consolidated Balance Sheets;

we recognize lease expense for these leases on a straight-line basis over the lease terms.

We guarantee the residual values for the majority of our vehicles.

We guarantee the residual values for the majority of our leased vehicles.

The residual values decline over the lease terms to a defined percentage of original cost.

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Similarly, if the lessor realizes more than the residual value when a vehicle is sold, we would be paid the amount realized over the residual value.

Had we terminated all of our operating leases subject to these guarantees at December 31, 2019 , our portion of the guaranteed residual value would have totaled approximately $ 67 million .

Had we terminated all of our operating leases

subject to these guarantees at December 31, 2020, our portion of the guaranteed residual value would have totaled approximately $ 63 million .

Other than the residual value guarantees associated with our vehicles discussed above, we do not have any other material residual value guarantees or restrictive covenants.

The amounts recorded on the Consolidated Balance Sheet as of December 31, 2019 related to our lease agreements are as follows (in thousands):

Classification

December 31, 2019

Operating lease assets, net

Finance lease assets, net

Property, plant and equipment, net

In response to the COVID-19 global pandemic, we secured rent relief from some of our lessors during the second quarter of 2020.

The rent relief offered was primarily in the form of rent payment deferrals for one or more months to be paid back over a specified period of time ranging from one month to the remaining term of the lease.

As of December 31, 2020, most of the deferrals recognized in the prior quarters were repaid.

Any remaining payment deferrals were immaterial and were recorded in Other current liabilities on the Consolidated Balance Sheets.

During the year ended December 31, 2020, we also received other concessions consisting of abated rent or discounted rent, with payback not required, from various landlords, which resulted in reductions to Selling, general and administrative expenses of $ 3 million in our Consolidated Statements of Income.

The amounts recorded on the Consolidated Balance Sheets as of December 31, 2020 and 2019 related to our lease agreements are as follows (in thousands):

Leases Classification 2020 2019

Operating lease ROU assets, net Operating lease assets, net $ 1,353,124 $ 1,308,511

Finance lease assets, net Property, plant and equipment, net 55,423 39,077

Total leased assets $ 1,408,547 $ 1,347,588

Current portion of operating lease liabilities

Current portion of long-term obligations

Long-term operating lease liabilities, excluding current portion

Long-term obligations, excluding current portion

Operating Current portion of operating lease liabilities $ 221,811 $ 221,527

Finance Current portion of long-term obligations 12,239 9,409

Operating Long-term operating lease liabilities, excluding current portion

1,197,963 1,137,597

Finance Long-term obligations, excluding current portion 45,097 31,428

Total lease liabilities $ 1,477,110 $ 1,399,961

The components of lease expense are as follows (in thousands):

Classification

December 31, 2019

Operating lease cost

Cost of goods sold

Operating lease cost

Selling, general and administrative expenses

Short-term lease cost

Selling, general and administrative expenses

Variable lease cost

Selling, general and administrative expenses

Lease Cost Classification 2020 2019

Operating lease cost Cost of goods sold $ 12,447 $ 13,416

Operating lease cost SG&A expenses 297,350 303,619

Short-term lease cost SG&A expenses 6,568 9,392

Variable lease cost SG&A expenses 97,599 95,899

Finance lease cost

Amortization of leased assets

Depreciation and amortization

Interest on lease liabilities

Interest expense

Sublease income

Selling, general and administrative expenses

Amortization of leased assets Depreciation and amortization 9,876 10,277

Interest on lease liabilities Interest expense 1,785 1,546

Sublease income SG&A expenses ( 2,372 ) ( 1,640 )

Net lease cost $ 423,253 $ 432,509

The future minimum lease commitments under our noncancelable operating leases at December 31, 2018 were as follows (in thousands):

Years ending December 31:

Future Minimum Lease Payments

The future minimum lease commitments under our leases at December 31, 2020 are as follows (in thousands):

Operating leases

Finance leases (1)

Operating leases Finance leases (1)

Years ending December 31:

2021 $ 298,118 $ 13,087 $ 311,205

2022 256,544 11,562 268,106

2023 216,851 7,711 224,562

2024 180,425 7,032 187,457

2025 148,363 5,183 153,546

Thereafter 777,194 24,472 801,666

Future minimum lease payments 1,877,495 69,047 1,946,542

Interest 457,721 11,711 469,432

Present value of lease liabilities $ 1,419,774 $ 57,336 $ 1,477,110

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As of December 31, 2020, we have additional minimum operating lease payments for leases that have not yet commenced of $ 84 million .

These operating leases will commence in the next 18 months with lease terms of 1 to 25 years .

Most of these leases have not commenced as the assets are in the process of being constructed.

The amount includes payments expected to be made under the Benelux region central distribution center lease commencing in early 2021 after construction is completed.

The lease has a term of 15 years with two renewal options of 5 years each.

These operating leases will commence in the nex t 18 months with lease terms of 1 to 15 years.

Most of these leases have not commenced because the assets are in the process of being constructed.

Other information related to leases was as follows:

Lease Term and Discount Rate 2020 2019

December 31, 2019

Weighted-average remaining lease term (years)

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Supplemental cash flows information (in thousands) 2020 2019

December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities

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Financing cash outflows from finance leases (1)

11,772 11,744

Leased assets obtained in exchange for new finance lease liabilities (1)

25,049 13,326

Leased assets obtained in exchange for new operating lease liabilities 128,539 144,142

(1) During the year ended December 31, 2018, the financing cash outflow from finance leases was $ 9 million, and there were $ 13 million of leased assets obtained in exchange for new finance lease liabilities.

Employee Benefit Plans

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The defined benefit plans are mostly closed to new participants and, in some cases, existing participants no longer accrue benefits.

On June 28, 2019, we approved an amendment to terminate our primary defined benefit plan in the U.S.

Plan") and freeze all related benefit accruals, effective June 30, 2019.

The distribution of the U.S.

Plan assets pursuant to the termination will not be made until the plan termination satisfies all regulatory requirements, which is expected to be completed in 2020.

Plan participants will receive their full accrued benefits from plan assets by electing either lump sum distributions or annuity contracts with a qualifying third party annuity provider.

On June 28, 2019, we approved an amendment to terminate the U.S.

Plan and to freeze all related benefit accruals, effective June 30, 2019.

Plan participants were able to receive their full accrued benefits from plan assets by electing either lump sum distributions or annuity contracts with a qualifying third-party annuity provider.

The resulting settlement effect of the U.S.

Plan termination will be determined based on prevailing market conditions, the lump sum offer participation rate of eligible participants, the actual lump sum distributions, and annuity purchase rates at the date of distribution.

As a result, we are currently unable to reasonably estimate either the timing or the final amount of such settlement charges.

Based on the valuation performed as of December 31, 2019, the U.S.

Plan has an underfunded status of $ 8 million .

Plan termination was determined based on prevailing market conditions, the lump sum offer participation rate of eligible participants, the actual lump sum distributions, and annuity purchase rates at the date of distribution.

As a result of these elections, subsequent payments and annuity purchase cost to settle the plan obligations, we reclassified $ 6 million of unrealized loss from Accumulated other comprehensive loss to Interest income and other income, net in our Consolidated Statements of Income during the year ended December 31, 2020 to reflect the final settlement of the plan obligations.

Funded Status

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Projected benefit obligation - beginning of year $ 225,388 $ 201,492

Acquisitions (1)

Acquisitions and divestitures

( 506 ) 2,071

Service cost 3,565 3,592

Interest cost 2,740 4,077

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Benefits paid (1)

( 6,841 ) ( 6,849 )

Curtailment — ( 6 )

Settlement (2) (3)

( 40,565 ) ( 8,493 )

Currency impact 16,658 ( 2,922 )

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Fair value - beginning of year $ 83,305 $ 91,672

Acquisitions (1)

Actual return on plan assets 3,663 2,558

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Settlement (2) (3)

( 40,565 ) ( 8,493 )

Currency impact 4,891 ( 810 )

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Accumulated benefit obligation $ 208,712 $ 222,607

2018 amounts relate primarily to the addition of plans in connection with our acquisition of Stahlgruber.

(1) Includes amounts paid from plan assets as well as amounts paid from Company assets.

(2) Reflects the settlement of the plan obligations for the U.S.

Plan in 2020.

(3) During 2019, settlement accounting was triggered for three of our European pension plans resulting in a net gain of less than $ 1 million recognized in Interest income and other income, net in our Consolidated Statements of Income.

The net amounts recognized for defined benefit plans in the Consolidated Balance Sheets were as follows (in thousands):

Non-current assets

Current liabilities $ ( 3,603 ) $ ( 11,754 )

Non-current liabilities ( 148,974 ) ( 130,329 )

$ ( 152,577 ) $ ( 142,083 )

The following table summarizes the accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets (in thousands):

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The table below summarizes the components of net periodic benefit cost for our defined benefit plans (in thousands):

2020 2019 2018

Service cost $ 3,565 $ 3,592 $ 3,215

Interest cost 2,740 4,077 3,476

Expected return on plan assets (1)

Amortization of prior service credit

Amortization of actuarial (gain) loss (2)

Curtailment gain

Settlement (gain) / loss

( 2,129 ) ( 2,337 ) ( 2,949 )

Amortization of actuarial loss (gain) (2)

1,272 ( 404 ) ( 54 )

Settlement loss (gain) 5,654 ( 378 ) 74

Net periodic benefit cost $ 11,102 $ 4,550 $ 3,762

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The table below summarizes the weighted-average assumptions used to calculate the net periodic benefit cost in the table above:

2020 2019 2018

Discount rate used to determine service cost 0.7 % 1.3 % 1.3 %

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Expected long-term return on plan assets (1)

2.9 % 3.1 % 4.8 %

(1) Our expected long-term return on plan assets is determined based on our asset allocation and estimate of future long-term returns by asset class.

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In some of our European plans, a price inflation index is also an assumption in determining benefit obligations and net periodic benefit cost.

As of December 31, 2019 , the pre-tax amounts recognized in Accumulated other comprehensive income consisted of $ 42 million of net actuarial losses for our defined benefit plans that have not yet been recognized in net periodic benefit cost.

As of December 31, 2020, the pre-tax amounts recognized in Accumulated other comprehensive loss consisted of $ 47 million of net actuarial losses for our defined benefit plans that have not yet been recognized in net periodic benefit cost.

Of this amount, we expect $ 2 million to be recognized as a component of net periodic benefit cost during the year ending December 31, 2021.

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Level 1 investments:

Cash and cash equivalents are valued based on cost, which approximates fair value.

Short-term investments are valued initially at cost and adjusted for amortization of any discount or premium.

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The table below summarizes the fair value of our defined benefit plan assets by asset category within the fair value hierarchy for our funded defined benefit pension plans (in thousands):

Cash and cash-equivalents (1)

Level 1 Level 2 Level 3 NAV Total Level 1 Level 2 Level 3 NAV Total

Short-term investments $ — $ — $ — $ — $ — $ 433 $ — $ — $ — $ 433

— — — — — 29,035 — — — 29,035

Insurance contracts — — 44,753 — 44,753 — — 40,676 — 40,676

Mutual fund (2)

— — — 14,209 14,209 — — — 13,161 13,161

Total investments at fair value

Consists of institutional short-term investment funds.

$ — $ — $ 44,753 $ 14,209 $ 58,962 $ 29,468 $ — $ 40,676 $ 13,161 $ 83,305

(1) Consists primarily of U.S.

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The assets for our U.S.

plan are managed by a master trust, with oversight responsibility by our Benefits Committee.

plan were managed by a master trust, with oversight responsibility by our Benefits Committee.

During 2019, we engaged an investment advisor to help minimize the volatility in our funded status as we began the process of terminating our U.S.

As a result, we updated our investment strategy such that as of December 31, 2019, our U.S.

Plan assets reside primarily in U.S.

Plan assets resided primarily in U.S.

Bonds, with a smaller allocation of assets in short-term investments.

The new investment policy and allocation of the assets was approved by our Benefits Committee.

The master trust was liquidated in 2020 to fund the U.S.

Plan settlement.

Employer Contributions and Estimated Future Benefit Payments

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The following table summarizes estimated future benefit payments as of December 31, 2020 (in thousands):

Year Ended December 31,

(1) This amount includes the gross benefit payments expected to be paid to settle the U.S.

Plan, exclusive of plan assets.

Year Ended December 31, Amount

2026 - 2030 33,802

The provision for income taxes consists of the following components (in thousands):

Year Ended December 31,

2020 2019 2018

Federal $ 155,887 $ 101,839 $ 90,216

State 37,981 24,925 25,851

Foreign 89,123 81,081 77,508

Total current provision for income taxes $ 282,991 $ 207,845 $ 193,575

Total deferred provision (benefit) for income taxes

Federal $ ( 6,805 ) $ 22,173 $ 14,977

State ( 6,521 ) 6,376 4,386

Foreign ( 20,167 ) ( 21,064 ) ( 21,543 )

Total deferred (benefit) provision for income taxes $ ( 33,493 ) $ 7,485 $ ( 2,180 )

Provision for income taxes $ 249,498 $ 215,330 $ 191,395

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Year Ended December 31,

2020 2019 2018

Domestic $ 713,087 $ 616,842 $ 562,758

Foreign 171,908 174,180 180,673

Income from continuing operations before provision for income taxes $ 884,995 $ 791,022 $ 743,431

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Year Ended December 31,

2020 2019 2018

federal statutory rate 21.0 % 21.0 % 21.0 %

federal tax reform - federal deferred tax rate change

federal tax reform - transition tax on foreign earnings

State income taxes, net of state credits and federal tax impact 3.2 % 3.2 % 3.5 %

Impact of rates on international operations 1.9 % 1.4 % 0.9 %

Excess tax benefits from stock-based compensation

Change in valuation allowances 1.7 % 1.0 % 1.4 %

Non-deductible expenses 0.8 % 0.9 % 1.6 %

federal tax reform - transition tax on foreign earnings — % 0.1 % ( 1.3 ) %

Excess tax benefits from stock-based compensation — % ( 0.3 ) % ( 0.6 ) %

Other, net ( 0.4 ) % ( 0.1 ) % ( 0.8 ) %

Effective tax rate 28.2 % 27.2 % 25.7 %

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statutory corporate tax rate from 35 % to 21 % for tax years beginning after December 31, 2017.

Additionally, beginning in 2018 the Tax Act imposed a regime of taxation on foreign subsidiary earnings, GILTI, and on certain related party payments, BEAT.

Additionally, beginning in 2018 the Tax Act imposed a regime of taxation on foreign subsidiary earnings, GILTI.

As part of the transition of U.S.

international taxation from a worldwide tax system to a modified territorial tax system, the Tax Act imposed a one-time transition tax on the deemed repatriation of historical earnings of foreign subsidiaries as of December 31, 2017.

On December 22, 2017, the U.S.

Securities and Exchange Commission Staff issued SAB 118, which provided guidance on accounting for the tax effects of the Tax Act.

SAB 118 provided a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting required under ASC 740, Income Taxes .

In accordance with SAB 118, a company was required to reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 was complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act was incomplete but the company was able to determine a reasonable estimate, it was required to record a provisional estimate in the financial statements.

Transition Tax on Foreign Earnings:

In the fourth quarter of 2017, we recognized a provisional income tax expense of $ 51 million related to the one-time transition tax on foreign earnings.

During the third quarter of 2018, we recorded a $ 10 million favorable adjustment to the provisional amount.

During the third quarter of 2018, we recorded a $ 10 million favorable adjustment to the provisional income tax expense amount related to the one-time transition tax on foreign earnings recognized in 2017.

As of December 31, 2018, we substantially completed our analysis of the transition tax, and the liability was no longer considered provisional.

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As permitted by the Tax Act, we elected to pay the final $ 42 million liability in installments over 8 years.

This liability has been reduced by the first two installments and other payment credits to $ 33 million and is recorded in Other noncurrent liabilities on our Consolidated Balance Sheets.

Revaluation of Deferred Tax Assets and Liabilities:

As a result of the Tax Act reduction in the U.S.

federal statutory rate from 35 % to 21 % , at December 31, 2017, we recorded a provisional decrease to net deferred tax liabilities and a corresponding provisional U.S.

federal deferred tax benefit of $ 73 million .

There were no subsequent adjustments recognized with regard to the revaluation of deferred taxes, and the accounting for this impact of the Tax Act is complete.

This liability has been reduced by the first three installments and other payment credits to $ 32 million.

The next required installment of $ 3 million is recorded in Other current liabilities, and the remaining $ 28 million is recorded in Other noncurrent liabilities on our Consolidated Balance Sheets.

While the Tax Act provides for a modified territorial tax system, under a highly complex provision commonly known as GILTI, the Tax Act subjects a U.S.

shareholder to current tax on certain earnings of foreign subsidiaries, subject to relief for available foreign tax credits.

The FASB Staff Q&A, Topic 740, No.

5, "Accounting for GILTI," provides that an accounting policy election can be made either to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

We have elected to account for GILTI in the year the tax is incurred.

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Undistributed earnings of our foreign subsidiaries amounted to approximately $ 807 million at December 31, 2020.

Through December 31, 2017, it was our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries, and no U.S.

deferred income taxes or foreign withholding taxes were recorded.

Beginning in 2018, the Tax Act generally provided a 100% participation exemption from further U.S.

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Further, the 2017 transition tax reduced a majority of the previous outside basis differences in our foreign subsidiaries, and most of any new differences arising have extensive interaction with the GILTI regime discussed above.

Based on a review of our global financing and capital expenditure requirements as of December 31, 2019, we have made no changes to our assertion that we plan to permanently reinvest the undistributed earnings of our international subsidiaries.

Based on a review of our global financing and capital expenditure requirements as of December 31, 2020, we continue to plan to permanently reinvest the undistributed earnings of our international subsidiaries.

Thus, no deferred U.S.

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tax regime, it remains impractical to estimate the amount of deferred taxes potentially payable were such earnings to be repatriated.

Although the SAB 118 measurement period has closed, further technical guidance related to the Tax Act, including final regulations on a broad range of topics, is expected to be issued.

In accordance with ASC 740, the Company will recognize any effects of the guidance in the period that such guidance is issued.

The significant components of our deferred tax assets and liabilities are as follows (in thousands):

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Qualified and nonqualified retirement plans 34,143 31,053

Inventory 15,591 12,679

Accounts receivable 15,449 14,025

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Stock-based compensation 5,362 4,755

Operating lease assets, net

Operating lease liabilities 331,327 303,705

Net operating loss carryforwards 27,538 16,287

Other 24,961 11,777

Total deferred tax assets, gross 548,097 471,598

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Property, plant and equipment 95,007 100,461

Operating lease liabilities

Trade name 108,883 108,039

Operating lease assets, net 317,694 292,498

Other 11,364 8,916

Total deferred tax liabilities $ 762,278 $ 729,793

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Noncurrent deferred tax assets and noncurrent deferred tax liabilities are included in Other noncurrent assets and Deferred income taxes, respectively, on our Consolidated Balance Sheets.

We had net operating loss carryforwards, primarily for certain international tax jurisdictions, the tax benefits of which were $ 16 million and $ 13 million at December 31, 2019 and 2018 , respectively.

We had net operating loss carryforwards, primarily for certain international tax jurisdictions, the tax benefits of which were approximately $ 28 million and $ 16 million at December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, we had tax credit carryforwards for certain U.S.

state jurisdictions, the tax benefits of which total less than $ 1 million and $ 1 million , respectively.

state jurisdictions, the tax benefits of which totaled less than $ 1 million at both dates.

As of December 31, 2020 and 2019, we had interest deduction carryforwards, primarily in Italy and Germany, the tax benefits of which were $ 34 million and $ 25 million, respectively.

As of December 31, 2019 and 2018, we had a U.S.

As of both December 31, 2020 and 2019, we had a U.S.

capital loss carryforward, the tax benefit of which was $ 5 million.

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net operating loss carryforwards.

The $ 7 million net increase in valuation allowances was primarily attributable to a $ 5 million valuation allowance provided on the interest deduction carryforwards generated in 2019 due to thin capitalization constraints in Italy and Germany.

The $ 18 million net increase in valuation allowances was primarily attributable to a $ 9 million valuation allowance provided on the interest deduction carryforwards generated in 2020 due to thin capitalization constraints in Italy and Germany and an $ 8 million valuation allowance provided on the cumulative Belgium net operating loss carryforward.

The net operating losses generally carry forward for an indefinite period.

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capital losses carry forward for five years.

Realization of these deferred tax assets is dependent on the generation of sufficient taxable income prior to the expiration dates, where applicable, or in the case of interest carryforwards subject to legislative thin capitalization constraints, typically growth in EBITDA.

Based on historical and projected operating results, we believe that it is more likely than not that earnings will be sufficient to realize the deferred tax assets for which valuation allowances have not been provided.

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A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

2020 2019 2018

Balance at January 1 $ 2,317 $ 1,237 $ 1,690

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Lapse of statutes of limitations ( 297 ) ( 297 ) ( 458 )

Settlements with taxing authorities ( 958 ) — —

Cumulative translation adjustment 99 ( 49 ) —

Balance at December 31 $ 2,308 $ 2,317 $ 1,237

Included in the balance of unrecognized tax benefits above as of December 31, 2019 are approximately $ 2 million , and as of December 31, 2018 and 2017, approximately $ 1 million , of tax benefits that, if recognized, would affect the effective tax rate.

Included in the balance of unrecognized tax benefits above as of December 31, 2020, 2019 and 2018, are approximately $ 2 million, $ 2 million and $ 1 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The balance of unrecognized tax benefits at December 31, 2020, 2019 and 2018 includes approximately $ 1 million of tax benefits that, if recognized, would result in adjustments to deferred taxes.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense.

Attributable to the unrecognized tax benefits noted above, the Company had accumulated interest and penalties of less than $ 1 million at December 31, 2019 , 2018 and 2017 .

We recognize interest and penalties accrued related to unrecognized tax benefits as income tax expense.

Attributable to the unrecognized tax benefits noted above, we had accumulated interest and penalties of less than $ 1 million at December 31, 2020, 2019 and 2018.

During each of the years ended December 31, 2020, 2019 and 2018, an immaterial amount of interest and penalties were recorded through the income tax provision, prior to any reversals for lapses in the statutes of limitations.

During the twelve months beginning January 1, 2021, it is reasonably possible that we will reduce unrecognized tax benefits by less than $ 1 million, an immaterial amount of which would impact our effective tax rate, primarily as a result of the expiration of certain statutes of limitations.

The company and/or its subsidiaries file income tax returns in the U.S.

We and/or our subsidiaries file income tax returns in the U.S.

federal jurisdiction, and various U.S.

state and international jurisdictions.

With few exceptions, the company is no longer subject to U.S.

With few exceptions, we are no longer subject to U.S.

federal, state and local, or international income tax examinations by tax authorities for years before 2015.

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The following tables present our financial performance by reportable segment for the periods indicated (in thousands):

North America

North America Europe Specialty Eliminations Consolidated

Year Ended December 31, 2020

Third Party $ 4,631,306 $ 5,492,184 $ 1,505,340 $ — $ 11,628,830

Intersegment 1,033 — 3,655 ( 4,688 ) —

Total segment revenue $ 4,632,339 $ 5,492,184 $ 1,508,995 $ ( 4,688 ) $ 11,628,830

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Depreciation and amortization (1)

97,390 172,927 29,180 — 299,497

Year Ended December 31, 2019

Third Party $ 5,208,589 $ 5,838,124 $ 1,459,396 $ — $ 12,506,109

Intersegment 705 — 4,646 ( 5,351 ) —

Total segment revenue $ 5,209,294 $ 5,838,124 $ 1,464,042 $ ( 5,351 ) $ 12,506,109

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Depreciation and amortization (1)

93,747 191,195 29,464 — 314,406

Year Ended December 31, 2018

Third Party $ 5,181,964 $ 5,221,754 $ 1,472,956 $ — $ 11,876,674

Intersegment 645 — 4,724 ( 5,369 ) —

Total segment revenue $ 5,182,609 $ 5,221,754 $ 1,477,680 $ ( 5,369 ) $ 11,876,674

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Depreciation and amortization (1)

(1) Amounts presented include depreciation and amortization expense recorded within cost of goods sold.

The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA.

87,348 178,473 28,256 — 294,077

(1) Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and acquisition related expenses.

The key measure of segment profit or loss reviewed by our chief operating decision maker, our Chief Executive Officer, is Segment EBITDA.

We use Segment EBITDA to compare profitability among our segments and evaluate business strategies.

Segment EBITDA includes revenue and expenses that are controllable by the segment.

Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue.

We calculate Segment EBITDA as EBITDA excluding restructuring and acquisition related expenses (which includes restructuring expenses recorded in Cost of goods sold), change in fair value of contingent consideration liabilities, other gains and losses related to acquisitions, equity method investments or divestitures, equity in losses and earnings of unconsolidated subsidiaries, and impairment charges.

EBITDA, which is the basis for Segment EBITDA, is calculated as net income, less net income (loss) attributable to continuing and discontinued noncontrolling interest, excluding discontinued operations and discontinued noncontrolling interest, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

We calculate Segment EBITDA as EBITDA excluding restructuring and acquisition related expenses (which includes restructuring expenses recorded in Cost of goods sold);

change in fair value of contingent consideration liabilities;

other gains and losses related to acquisitions, equity method investments, or divestitures;

equity in losses and earnings of unconsolidated subsidiaries;

and impairment charges.

EBITDA, which is the basis for Segment EBITDA, is calculated as net income attributable to LKQ stockholders excluding discontinued operations and discontinued noncontrolling interest, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

The table below provides a reconciliation of Net Income to Segment EBITDA (in thousands):

Year Ended December 31,

2020 2019 2018

Net income $ 640,414 $ 545,034 $ 483,168

net income attributable to continuing noncontrolling interest

1,888 2,800 3,050

net income attributable to discontinued noncontrolling interest 103 974 —

Net income attributable to LKQ stockholders 638,423 541,260 480,118

Net income (loss) from discontinued operations

Net (loss) income from discontinued operations ( 95 ) 1,619 ( 4,397 )

Net income attributable to discontinued noncontrolling interest ( 103 ) ( 974 ) —

Net income from continuing operations attributable to LKQ stockholders

638,621 540,615 484,515

Depreciation and amortization 272,292 290,770 274,213

Depreciation and amortization - cost of goods sold 21,672 21,312 19,864

Depreciation and amortization - restructuring expenses - cost of goods sold

Depreciation and amortization - restructuring expenses (1)

5,533 2,324 —

Interest expense, net of interest income 101,874 136,274 144,536

(Gain) loss on debt extinguishment

Loss (gain) on debt extinguishment 12,751 ( 128 ) 1,350

Provision for income taxes 249,498 215,330 191,395

Equity in (losses) earnings of unconsolidated subsidiaries (1)

EBITDA 1,302,241 1,206,497 1,115,873

Equity in earnings (losses) of unconsolidated subsidiaries (2)

5,012 ( 32,277 ) ( 64,471 )

Fair value loss on Mekonomen derivative instrument (2)

— — ( 5,168 )

Gain due to resolution of acquisition related matter — 12,063 —

Gains on bargain purchases and previously held equity interests (3)

— 1,157 2,418

Restructuring and acquisition related expenses (1)

60,630 34,658 32,428

Restructuring expenses - cost of goods sold 7,141 20,654 —

Inventory step-up adjustment - acquisition related — — 403

Impairment of net assets held for sale and goodwill (5) (6)

Loss on disposal of businesses and impairment of net assets held for sale and goodwill (4) (5)

3,174 47,102 35,682

Change in fair value of contingent consideration liabilities 585 393 ( 208 )

Segment EBITDA $ 1,368,759 $ 1,328,361 $ 1,251,399

(1) The sum of these two captions represents the total amount that is reported in Restructuring and acquisition related expenses in our Consolidated Statements of Income.

Refer to Note 6, "Restructuring and Acquisition Related Expenses," for further information.

(2) Refer to "Investments in Unconsolidated Subsidiaries" in Note 4, "Summary of Significant Accounting Policies," for further information.

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See Note 2, "Business Combinations," for further information on bargain purchases.

Excludes $ 2 million of depreciation expense that is reported in Restructuring and acquisition related expenses in our Consolidated Statements of Income.

Refer to Note 6, "Restructuring and Acquisition Related Expenses," for further information.

(4) Refer to "Net Assets Held for Sale" in Note 4, "Summary of Significant Accounting Policies," for further information.

(5) Refer to "Intangible Assets" in Note 4, "Summary of Significant Accounting Policies," for further information on the impairment of goodwill recorded in 2018.

Refer to "Net Assets Held for Sale" in Note 4, "Summary of Significant Accounting Policies ," for further information on the impairment charges recorded during 2019.

In 2018, amounts were recorded in Interest income and other income, net in our Consolidated Statements of Income.

The following table presents capital expenditures by reportable segment (in thousands):

Year Ended December 31,

2020 2019 2018

Capital Expenditures

North America $ 76,300 $ 131,643 $ 129,391

Discontinued operations

Europe 85,039 121,596 99,885

Specialty 11,356 12,491 20,751

Total capital expenditures $ 172,695 $ 265,730 $ 250,027

The following table presents assets by reportable segment (in thousands):

2020 2019 2018

Receivables, net

North America $ 386,289 $ 419,452 $ 411,818

Europe 598,615 636,216 649,174

Specialty 88,485 75,464 93,091

Total receivables, net 1,073,389 1,131,132 1,154,083

North America 810,798 991,062 1,076,306

Europe 1,302,649 1,401,801 1,410,264

Specialty 301,165 379,914 349,505

Total inventories 2,414,612 2,772,777 2,836,075

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North America 583,985 610,573 570,508

Europe 583,439 538,951 562,600

Specialty 81,279 84,876 87,054

Total property, plant and equipment, net 1,248,703 1,234,400 1,220,162

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North America 755,430 768,164 —

Europe 520,131 457,035 —

Specialty 77,563 83,312 —

Total operating lease assets, net 1,353,124 1,308,511 —

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North America 18,676 17,624 16,404

Europe 136,548 121,619 162,765

Total equity method investments 155,224 139,243 179,169

Other unallocated assets 6,115,481 6,193,893 6,003,913

Total assets $ 12,360,533 $ 12,779,956 $ 11,393,402

(1) Refer to Note 13, "Leases," for further information.

Refer to "Investments in Unconsolidated Subsidiaries" in Note 4, "Summary of Significant Accounting Policies ," for further information on the decrease in the balance from December 31, 2018 to December 31, 2019.

We report net receivables;

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Unallocated assets include cash and cash equivalents, prepaid and other current and noncurrent assets, goodwill and other intangibles.

Our largest countries of operation are the U.S., followed by the U.K.

Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Poland, Slovakia, Austria, and other European countries.

operations in other countries include operations in Canada, engine remanufacturing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, and administrative support functions in India.

Our largest countries of operation are the U.S., followed by Germany and the U.K.

Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, Poland, and other European countries.

Our operations in other countries include wholesale operations in Canada, remanufacturing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, and administrative support functions in India.

Our net sales are attributed to geographic area based on the location of the selling operation.

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Year Ended December 31,

2020 2019 2018

United States $ 5,755,437 $ 6,220,267 $ 6,192,636

Germany 1,522,529 1,578,543 974,514

United Kingdom 1,460,600 1,599,074 1,665,317

2 unchanged sentences

The following table sets forth our tangible long-lived assets by geographic area (in thousands):

2020 2019 2018

Long-lived assets (1)

United States $ 1,419,113 $ 1,467,701 $ 620,125

Germany 360,184 340,995 217,476

United Kingdom 315,333 330,113 165,145

1 unchanged sentence

Total long-lived assets $ 2,601,827 $ 2,542,911 $ 1,220,162

The increase in long-lived assets is primarily related to the net operating lease assets added as a result of the adoption of the new lease accounting standard.

(1) The increase in long-lived assets from December 31, 2018 to December 31, 2019 was primarily related to the net operating lease assets added as a result of the adoption of the new lease accounting standard.

Refer to Note 13, "Leases," for further information.

3 unchanged sentences

Quarter Ended

(In thousands, except per share data)

(In thousands, except per share data) Dec.

Revenue $ 2,953,888 $ 3,047,684 $ 2,626,323 $ 3,000,935

Gross margin 1,169,849 1,198,542 1,011,004 1,213,876

Operating income (1)

267,273 296,002 180,453 241,849

Income from continuing operations (2)

Net income from discontinued operations (5) (6)

181,191 193,931 118,493 146,894

Net income (loss) from discontinued operations (6)

543 — 277 ( 915 )

Net income 181,734 193,931 118,770 145,979

Net income (loss) attributable to continuing noncontrolling interest

722 448 ( 22 ) 740

Net income attributable to discontinued noncontrolling interest

1 unchanged sentence

Basic earnings per share from continuing operations (8)

$ 0.60 $ 0.64 $ 0.39 $ 0.48

Diluted earnings per share from continuing operations (8)

Quarter Ended (3)

(In thousands, except per share data)

$ 0.59 $ 0.64 $ 0.39 $ 0.48

Quarter Ended

(In thousands, except per share data) Dec.

Revenue $ 3,009,860 $ 3,147,773 $ 3,248,173 $ 3,100,303

Gross margin 1,196,014 1,200,329 1,247,187 1,208,264

Operating income (1) (3)

206,768 231,364 236,111 222,400

Income from continuing operations (4) (5)

Net loss from discontinued operations (5)

140,833 151,812 151,707 99,063

Net income from discontinued operations (6) (7)

440 781 398 —

Net income 141,273 152,593 152,105 99,063

Net income (loss) attributable to continuing noncontrolling interest

479 ( 46 ) 1,352 1,015

Net income attributable to discontinued noncontrolling interest 406 376 192 —

Net income attributable to LKQ stockholders 140,388 152,263 150,561 98,048

Basic earnings per share from continuing operations (8)

$ 0.46 $ 0.49 $ 0.49 $ 0.31

Diluted earnings per share from continuing operations (8)

$ 0.46 $ 0.49 $ 0.49 $ 0.31

(1) Reflects total restructuring and acquisition related expenses recorded within Cost of goods sold and SG&A expenses of $ 7 million, $ 31 million, $ 21 million, and $ 14 million in the first, second, third, and fourth quarters of 2020, respectively, and $ 3 million, $ 8 million, $ 26 million, and $ 20 million recorded in the first, second, third, and fourth quarters of 2019, respectively.

See Note 6, "Restructuring and Acquisition Related Expenses," for further information.

(2) In the first quarter 2020, we recorded a loss on debt extinguishment of $ 13 million related to the redemption of the U.S.

Notes (2023) due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

Notes (2023)" in Note 10, "Long-Term Obligations," for further information.

(3) Reflects impairment charges of $ 15 million, $ 33 million, and $ 2 million to net assets held for sale recorded in the first, second, and fourth quarters of 2019, respectively, and a $ 4 million net reversal of impairment in the third quarter of 2019.

See "Net Assets Held for Sale" in Note 4, "Summary of Significant Accounting Policies," for further information.

Reflects impairment charges of $ 40 million in the first quarter of 2019, and charges of $ 48 million and $ 23 million in the fourth and third quarters of 2018, respectively, related to the Mekonomen equity investment.

(4) In the fourth quarter of 2019, we recorded a $ 12 million non-recurring gain related to resolution of an acquisition related matter.

(5) Reflects an impairment charge of $ 40 million in the first quarter of 2019, related to the Mekonomen equity investment.

See "Investments in Unconsolidated Subsidiaries" in Note 4, "Summary of Significant Accounting Policies," for further information.

(3) The 2018 amounts presented above include the results of operations of Stahlgruber, from its acquisition effective May 30, 2018.

Reflects a $ 33 million goodwill impairment charge on the Aviation reporting unit recorded in the fourth quarter of 2018.

See "Intangible Assets" in Note 4, "Summary of Significant Accounting Policies ," for further information.

In the first quarter of 2017, LKQ completed the sale of the glass manufacturing business of its PGW subsidiary.

During the fourth quarter of 2019, we incurred costs related to the disposal of the glass manufacturing business of PGW and settled certain tax matters.

During the fourth quarter of 2018, we recorded a final tax expense adjustment of $ 4 million to the loss on sale of the glass manufacturing business of PGW.

See "Glass Manufacturing Business" in Note 3, "Discontinued Operations" for further information regarding the disposal of the glass manufacturing business.

(6) In the second quarter of 2019, we classified the acquired Stahlgruber Czech Republic wholesale business as discontinued operations;

See "Czech Republic" in Note 3, "Discontinued Operations" for further information regarding the planned disposal of the Czech Republic business.

we completed the sale of the business in the first quarter of 2020.

Subsequent to the completion of the sale, we recorded immaterial adjustments related to the loss on disposal of the business.

See "Czech Republic" in Note 3, "Discontinued Operations" for further information regarding the disposal of the Czech Republic business.

(7) In the first quarter of 2017, we completed the sale of the glass manufacturing business of our PGW subsidiary.

During the fourth quarter of 2019, we incurred costs related to the disposal of the glass manufacturing business of PGW and settled certain tax matters.

(8) The sum of the quarters may not equal the total of the respective year's earnings per share on either a basic or diluted basis due to changes in weighted average shares outstanding throughout the year.

Condensed Consolidating Financial Information

LKQ Corporation (the "Parent") issued, and the Guarantors have fully and unconditionally guaranteed, jointly and severally, the U.S.

Notes (2023) due on May 15, 2023.

A Guarantor's guarantee will be unconditionally and automatically released and discharged upon the occurrence of any of the following events:

(i) a transfer (including as a result of consolidation or merger) by the Guarantor to any person that is not a Guarantor of all or substantially all assets and properties of such Guarantor, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the U.S.

Notes (2023);

(ii) a transfer (including as a result of consolidation or merger) to any person that is not a Guarantor of the equity interests of a Guarantor or issuance by a Guarantor of its equity interests such that the Guarantor ceases to be a subsidiary, as defined in the U.S.

Notes (2023) Indenture, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the U.S.

Notes (2023);

(iii) the release of the Guarantor from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the U.S.

Notes (2023);

and (iv) upon legal defeasance, covenant defeasance or satisfaction and discharge of the U.S.

Notes (2023) Indenture, as defined in the U.S.

Notes (2023) Indenture.

Presented below are the condensed consolidating financial statements of the Parent, the Guarantors, the non-guarantor subsidiaries (the "Non-Guarantors"), and the elimination entries necessary to present our financial statements on a consolidated basis as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934 resulting from the guarantees of the U.S.

Notes (2023).

Investments in consolidated subsidiaries have been presented under the equity method of accounting.

The principal elimination entries eliminate investments in subsidiaries, intercompany balances, and intercompany revenue and expenses.

The condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the consolidated financial statements, and may not necessarily be indicative of the financial position, results of operations or cash flows had the Parent, Guarantors and Non-Guarantors operated as independent entities.

On January 10, 2020, we redeemed the U.S Notes (2023) at which point the guarantees were released.

Refer to "U.S.

Notes (2023)" in Note 10 "Long-Term Obligations," for further information on the redemption.

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Income

(In thousands)

Year Ended December 31, 2019

Non-Guarantors

Cost of goods sold

Selling, general and administrative expenses

Restructuring and acquisition related expenses

Impairment of net assets held for sale and goodwill

Depreciation and amortization

Operating (loss) income

Other expense (income):

Interest expense

Intercompany interest (income) expense, net

Gain on debt extinguishment

Interest income and other (income) expense, net

Total other (income) expense, net

(Loss) income from continuing operations before (benefit) provision for income taxes

(Benefit) provision for income taxes

Equity in earnings (losses) of unconsolidated subsidiaries

Equity in earnings of subsidiaries

Income from continuing operations

Net income (loss) from discontinued operations

net income attributable to continuing noncontrolling interest

net income attributable to discontinued noncontrolling interest

Net income attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Income

(In thousands)

Year Ended December 31, 2018

Non-Guarantors

Cost of goods sold

Selling, general and administrative expenses

Restructuring and acquisition related expenses

Impairment of net assets held for sale and goodwill

Depreciation and amortization

Operating (loss) income

Other expense (income):

Interest expense

Intercompany interest (income) expense, net

Loss on debt extinguishment

Interest income and other (income) expense, net

Total other expense, net

(Loss) income from continuing operations before (benefit) provision for income taxes

(Benefit) provision for income taxes

Equity in earnings (losses) of unconsolidated subsidiaries

Equity in earnings of subsidiaries

Income from continuing operations

Net loss from discontinued operations

net income attributable to noncontrolling interest

Net income attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Income

(In thousands)

Year Ended December 31, 2017

Non-Guarantors

Cost of goods sold

Selling, general and administrative expenses

Restructuring and acquisition related expenses

Depreciation and amortization

Operating (loss) income

Other expense (income):

Interest expense

Intercompany interest (income) expense, net

Loss on debt extinguishment

Interest income and other expense (income), net

Total other expense (income), net

(Loss) income from continuing operations before provision for income taxes

Provision for income taxes

Equity in earnings of unconsolidated subsidiaries

Equity in earnings of subsidiaries

Income from continuing operations

Net (loss) income from discontinued operations

net loss attributable to noncontrolling interest

Net income attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Comprehensive Income

(In thousands)

Year Ended December 31, 2019

Non-Guarantors

net income attributable to continuing noncontrolling interest

net income attributable to discontinued noncontrolling interest

Net income attributable to LKQ stockholders

Other comprehensive (loss) income:

Foreign currency translation, net of tax

Net change in unrealized gains/losses on cash flow hedges, net of tax

Net change in unrealized gains/losses on pension plans, net of tax

Net change in other comprehensive income from unconsolidated subsidiaries

Other comprehensive loss

Comprehensive income

comprehensive income attributable to continuing noncontrolling interest

comprehensive income attributable to discontinued noncontrolling interest

Comprehensive income attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Comprehensive Income

(In thousands)

Year Ended December 31, 2018

Non-Guarantors

net income attributable to noncontrolling interest

Net income attributable to LKQ stockholders

Other comprehensive (loss) income:

Foreign currency translation, net of tax

Net change in unrealized gains/losses on cash flow hedges, net of tax

Net change in unrealized gains/losses on pension plans, net of tax

Net change in other comprehensive loss from unconsolidated subsidiaries

Other comprehensive loss

Comprehensive income (loss)

comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Comprehensive Income

(In thousands)

Year Ended December 31, 2017

Non-Guarantors

net loss attributable to noncontrolling interest

Net income attributable to LKQ stockholders

Other comprehensive income (loss):

Foreign currency translation, net of tax

Net change in unrealized gains/losses on cash flow hedges, net of tax

Net change in unrealized gains/losses on pension plans, net of tax

Net change in other comprehensive loss from unconsolidated subsidiaries

Other comprehensive income

Comprehensive income

comprehensive loss attributable to noncontrolling interest

Comprehensive income attributable to LKQ stockholders

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In thousands)

December 31, 2019

Non-Guarantors

Current assets:

Cash and cash equivalents

Receivables, net

Intercompany receivables, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Operating lease assets, net

Intangible assets:

Other intangibles, net

Investment in subsidiaries

Intercompany notes receivable

Equity method investments

Other noncurrent assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Intercompany payables, net

Accrued expenses:

Accrued payroll-related liabilities

Refund liability

Other accrued expenses

Other current liabilities

Current portion of operating lease liabilities

Current portion of long-term obligations

Total current liabilities

Long-term operating lease liabilities, excluding current portion

Long-term obligations, excluding current portion

Intercompany notes payable

Deferred income taxes

Other noncurrent liabilities

Redeemable noncontrolling interest

Stockholders' equity:

Total Company stockholders’ equity

Noncontrolling interest

Total stockholders’ equity

Total liabilities and stockholders' equity

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

(In thousands)

December 31, 2018

Non-Guarantors

Current assets:

Cash and cash equivalents

Receivables, net

Intercompany receivables, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Intangible assets:

Other intangibles, net

Investment in subsidiaries

Intercompany notes receivable

Equity method investments

Other noncurrent assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Intercompany payables, net

Accrued expenses:

Accrued payroll-related liabilities

Refund liability

Other accrued expenses

Other current liabilities

Current portion of long-term obligations

Total current liabilities

Long-term obligations, excluding current portion

Intercompany notes payable

Deferred income taxes

Other noncurrent liabilities

Total Company stockholders’ equity

Noncontrolling interest

Total stockholders’ equity

Total liabilities and stockholders' equity

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In thousands)

Year Ended December 31, 2019

Non-Guarantors (1)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

Proceeds from disposals of property, plant and equipment

Investment and intercompany note activity with subsidiaries

Acquisitions, net of cash and restricted cash acquired

Proceeds from disposal of businesses

Investments in unconsolidated subsidiaries

Receipts of deferred purchase price on receivables under factoring arrangements

Other investing activities, net

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury stock

Borrowings under revolving credit facilities

Repayments under revolving credit facilities

Repayments under term loans

Borrowings under receivables securitization facility

Repayments under receivables securitization facility

Payment of notes issued and assumed debt from acquisitions

Repayments of other debt, net

Other financing activities, net

Investment and intercompany note activity with parent

Net cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash of continuing operations, beginning of period

Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period

Cash and cash equivalents of discontinued operations, end of period

Cash, cash equivalents and restricted cash, end of period

(1) Restricted cash is only included in the condensed consolidating financial information of the Non-Guarantors

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In thousands)

Year Ended December 31, 2018

Non-Guarantors (1)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

Proceeds from disposals of property, plant and equipment

Investment and intercompany note activity with subsidiaries

Return of investment in subsidiaries

Acquisitions, net of cash and restricted cash acquired

Investments in unconsolidated subsidiaries

Receipts of deferred purchase price on receivables under factoring arrangements

Other investing activities, net

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs

Proceeds from issuance of Euro Notes (2026/28)

Purchase of treasury stock

Borrowings under revolving credit facilities

Repayments under revolving credit facilities

Repayments under term loans

Borrowings under receivables securitization facility

Repayments under receivables securitization facility

Payment of notes issued and assumed debt from acquisitions

Repayments of other debt, net

Other financing activities, net

Investment and intercompany note activity with parent

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

(1) Restricted cash is only included in the condensed consolidating financial information of the Non-Guarantors

LKQ CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

(In thousands)

Year Ended December 31, 2017

Non-Guarantors

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

Proceeds from disposals of property, plant and equipment

Investment and intercompany note activity with subsidiaries

Acquisitions, net of cash and restricted cash acquired

Proceeds from disposals of businesses

Investments in unconsolidated subsidiaries

Receipts of deferred purchase price on receivables under factoring arrangements (1)

Other investing activities, net

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs

Borrowings under revolving credit facilities

Repayments under revolving credit facilities

Repayments under term loans

Borrowings under receivables securitization facility

Repayments under receivables securitization facility

(Repayments) borrowings of other debt, net

Other financing activities, net

Investment and intercompany note activity with parent

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash of continuing operations, beginning of period

Cash, cash equivalents and restricted cash of discontinued operations, beginning of period

Cash, cash equivalents and restricted cash of continuing and discontinued operations, beginning of period

Cash, cash equivalents and restricted cash, end of period

(1) Reflects the impact of adopting ASU 2016-15

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data