What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 303 added, 188 removed, 705 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Revenue $ 3,435,114 $ 2,626,323 $ 6,605,900 $ 5,627,258

3 unchanged sentences

Restructuring and acquisition related expenses 5,069 24,950 12,954 31,920

Impairment of net assets held for sale and (gain on disposal of business) 15 ( 249 )

(Gain) loss on disposal of businesses and impairment of net assets held for sale ( 597 ) 2,485 ( 582 ) 2,236

Depreciation and amortization 64,896 65,747 130,697 131,242

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Provision for income taxes 107,719 41,869 200,688 102,280

Equity in earnings of unconsolidated subsidiaries 5,819 516

Equity in earnings (losses) of unconsolidated subsidiaries 3,478 ( 2,649 ) 9,297 ( 2,133 )

Income from continuing operations 305,008 118,493 571,340 265,387

Net loss from discontinued operations — ( 915 )

Net income (loss) from discontinued operations — 277 — ( 638 )

Net income 305,008 118,770 571,340 264,749

net income attributable to continuing noncontrolling interest 419 740

net income (loss) attributable to continuing noncontrolling interest 384 ( 22 ) 803 718

net income attributable to discontinued noncontrolling interest — — — 103

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Income from continuing operations $ 1.01 $ 0.39 $ 1.89 $ 0.87

Net loss from discontinued operations — ( 0.00 )

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

Net income 1.01 0.39 1.89 0.87

net income attributable to continuing noncontrolling interest 0.00 0.00

net income (loss) attributable to continuing noncontrolling interest 0.00 ( 0.00 ) 0.00 0.00

net income attributable to discontinued noncontrolling interest — — — 0.00

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Income from continuing operations $ 1.01 $ 0.39 $ 1.89 $ 0.87

Net loss from discontinued operations — ( 0.00 )

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

Net income 1.01 0.39 1.89 0.87

net income attributable to continuing noncontrolling interest 0.00 0.00

net income (loss) attributable to continuing noncontrolling interest 0.00 ( 0.00 ) 0.00 0.00

net income attributable to discontinued noncontrolling interest — — — 0.00

5 unchanged sentences

(In thousands)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Net income $ 305,008 $ 118,770 $ 571,340 $ 264,749

net income attributable to continuing noncontrolling interest 419 740

net income (loss) attributable to continuing noncontrolling interest 384 ( 22 ) 803 718

net income attributable to discontinued noncontrolling interest — — — 103

5 unchanged sentences

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

Other comprehensive loss from unconsolidated subsidiaries ( 3,512 ) ( 1,852 )

Other comprehensive loss ( 27,113 ) ( 113,018 )

313 1,875 626 1,995

Other comprehensive income (loss) from unconsolidated subsidiaries 2,644 962 ( 868 ) ( 890 )

Other comprehensive income (loss) 25,032 34,140 ( 2,081 ) ( 78,878 )

Comprehensive income 330,040 152,910 569,259 185,871

comprehensive income attributable to continuing noncontrolling interest 419 740

comprehensive income (loss) attributable to continuing noncontrolling interest 384 ( 22 ) 803 718

comprehensive income attributable to discontinued noncontrolling interest

5 unchanged sentences

(In thousands, except share and per share data)

March 31, December 31,

June 30, December 31,

Current assets:

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Stockholders' equity:

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,170,573 shares issued and 302,370,072 shares outstanding at March 31, 2021;

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,260,012 shares issued and 296,287,913 shares outstanding at June 30, 2021;

320,867,602 shares issued and 303,553,000 shares outstanding at December 31, 2020 3,212 3,208

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Treasury stock, at cost;

18,800,501 shares at March 31, 2021 and 17,314,602 shares at December 31, 2020 ( 526,084 ) ( 469,105 )

24,972,099 shares at June 30, 2021 and 17,314,602 shares at December 31, 2020 ( 829,768 ) ( 469,105 )

Total Company stockholders' equity 5,877,924 5,655,718

6 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Acquisitions, net of cash acquired ( 29,480 ) ( 5,465 )

Proceeds from disposal of businesses, net of cash sold 5,944 1,763

Investments in unconsolidated subsidiaries ( 2,824 ) ( 405 )

Other investing activities, net ( 3,502 ) 685

Net cash used in investing activities ( 109,016 ) ( 75,971 )

1 unchanged sentence

Early-redemption premium ( 16,014 ) ( 9,498 )

Repayment of Euro Notes (2026) ( 883,275 ) —

Repayment of U.S.

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Net increase (decrease) in cash, cash equivalents and restricted cash 16,546 ( 58,431 )

Cash, cash equivalents and restricted cash of continuing operations, beginning of period 312,154 528,387

Cash, cash equivalents and restricted cash of discontinued operations, beginning of period — 6,470

Cash, cash equivalents and restricted cash of continuing and discontinued operations, beginning of period 312,154 534,857

Cash, cash equivalents and restricted cash, end of period $ 590,194 $ 338,063

Cash, and cash equivalents of continuing operations, beginning of period (1)

312,154 528,387

Cash, and cash equivalents of discontinued operations, beginning of period — 6,470

Cash, and cash equivalents of continuing and discontinued operations, beginning of period 312,154 534,857

Cash, and cash equivalents, end of period $ 328,700 $ 476,426

(1) The balance as of January 1, 2020 included restricted cash of $5 million.

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

Three Months Ended

Reconciliation of cash, cash equivalents and restricted cash

Cash and cash equivalents $ 590,194 $ 332,784

Restricted cash included in Other noncurrent assets — 5,279

Cash, cash equivalents and restricted cash, end of period $ 590,194 $ 338,063

Six Months Ended

Supplemental disclosure of cash paid for:

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Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions and disposals 2,556 6,136

Notes receivable acquired in connection with disposal of business

Notes receivable and contingent consideration receivable acquired in connection with disposal of business

Contingent consideration liabilities — 3,045

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

Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

BALANCE, April 1, 2021 321,171 $ 3,212 ( 18,801 ) $ ( 526,084 ) $ 1,449,667 $ 5,041,953 $ ( 126,122 ) $ 16,001 $ 5,858,627

Net income — — — — — 304,624 — 384 305,008

Other comprehensive income — — — — — — 25,032 — 25,032

Purchase of treasury stock

— — ( 6,171 ) ( 303,684 ) — — — — ( 303,684 )

Vesting of restricted stock units, net of shares withheld for employee tax 89 — — — 325 — — — 325

Stock-based compensation expense — — — — 9,001 — — — 9,001

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 142 ) ( 142 )

Foreign currency translation adjustment on noncontrolling interest — — — — — — — ( 158 ) ( 158 )

BALANCE, June 30, 2021 321,260 $ 3,212 ( 24,972 ) $ ( 829,768 ) $ 1,458,993 $ 5,346,577 $ ( 101,090 ) $ 16,085 $ 5,894,009

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, April 1, 2020

320,439 $ 3,204 ( 16,496 ) $ ( 439,819 ) $ 1,425,600 $ 4,282,753 $ ( 313,903 ) $ 29,484 $ 4,987,319

Net income (loss)

— — — — — 118,792 — ( 22 ) 118,770

Other comprehensive income

— — — — — — 34,140 — 34,140

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

91 1 — — ( 57 ) — — — ( 56 )

Stock-based compensation expense

— — — — 7,795 — — — 7,795

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder

— — — — — — — ( 27 ) ( 27 )

BALANCE, June 30, 2020

320,530 $ 3,205 ( 16,496 ) $ ( 439,819 ) $ 1,433,338 $ 4,401,545 $ ( 279,763 ) $ 29,435 $ 5,147,941

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In thousands)

LKQ Stockholders

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

Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity

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Stock-based compensation expense — — — — 16,793 — — — 16,793

BALANCE, March 31, 2021 321,171 $ 3,212 ( 18,801 ) $ ( 526,084 ) $ 1,449,667 $ 5,041,953 $ ( 126,122 ) $ 16,001 $ 5,858,627

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 142 ) ( 142 )

Foreign currency translation adjustment on noncontrolling interest — — — — — — — ( 158 ) ( 158 )

BALANCE, June 30, 2021 321,260 $ 3,212 ( 24,972 ) $ ( 829,768 ) $ 1,458,993 $ 5,346,577 $ ( 101,090 ) $ 16,085 $ 5,894,009

LKQ Stockholders

Common Stock Treasury Stock Additional Paid-In Capital Retained

Earnings Accumulated

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

Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity

2 unchanged sentences

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

— — — — — 263,928 — 821 264,749

Other comprehensive loss

— — — — — — ( 78,878 ) — ( 78,878 )

Purchase of treasury stock

7 unchanged sentences

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder

— — — — — — — 314 314

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

1 unchanged sentence

— — — — — — — ( 11,404 ) ( 11,404 )

BALANCE, March 31, 2020 320,439 $ 3,204 ( 16,496 ) $ ( 439,819 ) $ 1,425,600 $ 4,282,753 $ ( 313,903 ) $ 29,484 $ 4,987,319

BALANCE, June 30, 2020

320,530 $ 3,205 ( 16,496 ) $ ( 439,819 ) $ 1,433,338 $ 4,401,545 $ ( 279,763 ) $ 29,435 $ 5,147,941

(1) The amount disposed of during 2020 relates to discontinued operations.

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The coronavirus disease 2019 ("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 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 three months ended March 31, 2021.

The effects include, but are not limited to, a reduction in demand for our products and services relative to 2019, liquidity challenges for certain of our customers and suppliers, and organizational changes, such as personnel reductions and route consolidation undertaken mostly in 2020, driven by cost actions to mitigate the revenue decline.

We have considered COVID-19 impacts in the preparation of our financial statements and footnotes.

Specific disclosures are presented in the following footnotes as applicable.

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

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 $ 68 million and $ 70 million as of March 31, 2021 and December 31, 2020, respectively.

Bad debt expense totaled $ 2 million and $ 9 million for the three months ended March 31, 2021 and 2020, respectively.

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 $ 69 million and $ 70 million as of June 30, 2021 and December 31, 2020, respectively.

Bad debt expense totaled $ 1 million and $ 14 million for the three months ended June 30, 2021 and 2020, respectively, and $ 4 million and $ 24 million for the six months ended June 30, 2021 and 2020, respectively.

Inventories consist of the following (in thousands):

March 31, December 31,

June 30, December 31,

Aftermarket and refurbished products $ 1,984,301 $ 2,025,002

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

As of March 31, 2021, manufactured products inventory was composed of $ 17 million of raw materials, $ 4 million of work in process, and $ 2 million of finished goods.

As of June 30, 2021, manufactured products inventory was composed of $ 21 million of raw materials, $ 4 million of work in process, and $ 2 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.

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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.

We did not identify a triggering event in the first quarter of 2021 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

We did not identify a triggering event in 2021 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

Investments in Unconsolidated Subsidiaries

Our investment in unconsolidated subsidiaries was $ 171 million and $ 155 million as of March 31, 2021 and December 31, 2020, respectively.

Our investment in unconsolidated subsidiaries was $ 168 million and $ 155 million as of June 30, 2021 and December 31, 2020, respectively.

Europe Segment

Our investment in unconsolidated subsidiaries in Europe was $ 150 million and $ 137 million as of March 31, 2021 and December 31, 2020, respectively.

We recorded equity in earnings of $ 6 million and $ 1 million during the three months ended March 31, 2021 and 2020, respectively, mainly related to our investment in Mekonomen AB ("Mekonomen").

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

In October 2018, we acquired an additional $ 48 million of equity in Mekonomen at a discounted share price as part of its rights issue, increasing our equity interest to 26.6 %.

We are accounting for our interest in Mekonomen using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee.

As of March 31, 2021, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by $ 7 million;

Our investment in unconsolidated subsidiaries in Europe was $ 147 million and $ 137 million as of June 30, 2021 and December 31, 2020, respectively.

We recorded equity in earnings of $ 3 million and $ 9 million during the three and six months ended June 30, 2021, respectively, and equity in losses of an immaterial amount and equity in earnings of $ 1 million during the three and six months ended June 30, 2020, respectively, mainly related to our investment in Mekonomen AB ("Mekonomen").

We are accounting for our 26.6 % equity interest in Mekonomen using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee.

As of June 30, 2021, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by $ 7 million;

this difference is primarily related to Mekonomen's Accumulated Other Comprehensive Income balance as of our acquisition date in 2016.

1 unchanged sentence

Mekonomen announced in March 2020 and February 2021, respectively, that the Mekonomen Board of Directors proposed no dividend payment in 2020 or 2021.

The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at March 31, 2021 was $ 230 million (using the Mekonomen share price of SEK 129 as of March 31, 2021) compared to a carrying value of $ 139 million.

The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at June 30, 2021 was $ 245 million (using the Mekonomen share price of SEK 141 as of June 30, 2021) compared to a carrying value of $ 137 million.

North America Segment

Our investment in unconsolidated subsidiaries in the North America segment was $ 21 million and $ 19 million as of March 31, 2021 and December 31, 2020, respectively.

Our investment in unconsolidated subsidiaries in the North America segment was $ 21 million and $ 19 million as of June 30, 2021 and December 31, 2020, respectively.

We recorded equity in earnings of an immaterial amount for each of the three and six months ended June 30, 2021, and equity in losses of $ 3 million during both the three and six months ended June 30, 2020, related to our North America equity method investments.

Warranty Reserve

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Warranty claims ( 35,238 )

Balance as of March 31, 2021 $ 28,467

Balance as of June 30, 2021 $ 29,793

Litigation and Related Contingencies

2 unchanged sentences

Government Assistance

During the three months ended March 31, 2021, we recorded $ 9 million in financial assistance from foreign governments, primarily in the form of grants, of which $ 7 million and $ 2 million related to Europe and Canada, respectively.

For the three months ended March 31, 2021, an immaterial amount was recorded as a reduction to Cost of goods sold, and $ 9 million was a reduction to Selling, general and administrative expenses, in our Unaudited Condensed Consolidated Statement of Income.

During the three and six months ended June 30, 2021 and 2020, we recorded financial assistance from foreign governments, primarily in the form of grants, as credits in the following amounts (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Cost of goods sold $ 219 $ 469 $ 363 $ 469

Selling, general and administrative expenses 5,393 32,174 14,238 32,174

Total government assistance $ 5,612 $ 32,643 $ 14,601 $ 32,643

For the six months ended June 30, 2021 and 2020, we received grants from European governments of $ 11 million and $ 28 million, respectively, with the remaining amounts related to Canada.

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).

No government assistance was recorded for the three months ended March 31, 2020.

Leases - Cash Flow Disclosure

The amount disclosed for Leased assets obtained in exchange for operating lease liabilities for the three months ended March 31, 2020 in the supplemental disclosure of noncash investing and financing activities in the Unaudited Condensed Consolidated Statements of Cash Flows includes an immaterial correction of $ 18 million to address an omission of the impact of lease modifications and terminations.

The amount disclosed for Leased assets obtained in exchange for operating lease liabilities for the six months ended June 30, 2020 in the supplemental disclosure of noncash investing and financing activities in the Unaudited Condensed Consolidated Statements of Cash Flows includes an immaterial correction of $ 55 million to address an omission of the impact of lease modifications and terminations.

Stockholders' Equity

Treasury Stock

As of March 31, 2021, our Board of Directors had authorized a stock repurchase program under which we may purchase up to $ 1.0 billion of our common stock from time to time through October 25, 2022.

As of June 30, 2021, our Board of Directors had authorized a stock repurchase program under which we may purchase up to $ 1.0 billion of our common stock from time to time through October 25, 2022.

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.

During the three months ended March 31, 2021, we repurchased 1.5 million shares of common stock for an aggregate price of $ 57 million.

During the three months ended March 31, 2020, we repurchased 3.3 million shares of common stock for an aggregate price of $ 88 million.

As of March 31, 2021, there was $ 474 million of remaining capacity under our repurchase program.

Repurchased shares are accounted for as treasury stock using the cost method.

During the three and six months ended June 30, 2021, we repurchased 6.2 million and 7.7 million shares of common stock, respectively, for an aggregate price of $ 304 million and $ 361 million, respectively, of which $ 17 million settled for cash in July.

During the six months ended June 30, 2020, we repurchased 3.3 million shares of common stock for an aggregate price

of $ 88 million;

we did not repurchase any shares during the three months ended June 30, 2020.

As of June 30, 2021, there was $ 170 million of remaining capacity under our repurchase program.

Subsequent to quarter end through July 23, 2021, we repurchased an additional 2.0 million shares for $ 100 million.

On July 28, 2021, our Board of Directors authorized a $ 1.0 billion increase and a two year extension to our stock repurchase program, raising the aggregate authorization under the program to $ 2.0 billion and authorizing repurchases through October 25, 2024.

Noncontrolling Interest

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The following table sets forth our revenue by category, with our parts and services revenue further disaggregated by reportable segment (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

North America $ 1,077,171 $ 892,826 $ 2,095,608 $ 2,000,168

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Our parts revenue is generated from the sale of vehicle products including replacement parts, components and systems used in the repair and maintenance of vehicles and specialty products and accessories to improve the performance, functionality and appearance of vehicles.

Services revenue includes (i) additional services that are generally billed concurrently with the

related product sales, such as the sale of service-type warranties, (ii) fees for admission to our self service yards, and (iii) diagnostic and repair services.

Services revenue includes (i) additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, (ii) fees for admission to our self service yards, and (iii) diagnostic and repair services.

In North America, our vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders;

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Warranty revenue recognized ( 26,966 )

Balance as of March 31, 2021 $ 27,299

Balance as of June 30, 2021 $ 29,618

Other Revenue

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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 FASB Accounting Standards Codification Topic 606 ("ASC 606"), we are required to select the “expected value method” or the “most likely amount” method in order to estimate variable consideration.

Under FASB Accounting Standards Codification Topic 606 ("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 $ 105 million and $ 59 million, respectively, as of March 31, 2021, and $ 102 million and $ 57 million, respectively, as of December 31, 2020.

We recorded a refund liability and return asset for expected returns of $ 106 million and $ 59 million, respectively, as of June 30, 2021, and $ 102 million and $ 57 million, respectively, as of December 31, 2020.

The refund liability is presented separately on the Unaudited Condensed 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 Unaudited Condensed Consolidated Balance Sheets.

We recorded a reserve for our variable consideration of $ 87 million and $ 127 million as of March 31, 2021 and December 31, 2020, respectively.

We recorded a reserve for our variable consideration of $ 102 million and $ 127 million as of June 30, 2021 and December 31, 2020, respectively.

While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions.

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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 three months ended March 31, 2021 and 2020, we incurred $ 1 million and $ 3 million, respectively, 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 Unaudited Condensed Consolidated Statements of Income.

The program costs incurred during the three months ended March 31, 2021 primarily related to our Europe segment.

Of the program costs incurred during the three months ended March 31, 2020, $ 2 million and $ 1 million related to our Europe and North America segments, respectively.

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.

As of March 31, 2021, the remaining expected costs and restructuring liabilities related to this program were immaterial.

During the three and six months ended June 30, 2020, we incur red $ 2 million and $ 5 million, re spectively, of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs.

The program costs incurred during the three and six months ended June 30, 2020, primarily related to our Europe and North America segments.

The actions under this program are substantially complete, and the expenses incurred during the three and six months ended June 30, 2021 were immaterial.

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

As of June 30, 2021, the remaining expected costs and restructuring liabilities related to this program were immaterial.

2020 Global Restructuring Program

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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 three months ended March 31, 2021, we recognized restructuring expenses of $ 2 million, representing $ 5 million of employee-related costs and facility exit costs, partially offset by a $ 3 million gain from the sale of a building to be closed as part of the restructuring plan.

During the three months ended March 31, 2020, we recognized $ 2 million of expenses related to the program.

During the three and six months ended June 30, 2021, we recognized restructuring expenses of $ 4 million and $ 6 million, respectively, which included employee-related costs, facility exit costs, and a $ 3 million gain in the first quarter from the sale of a building to be closed as part of the restructuring plan in the first half of 2021.

During the three and six months ended June 30, 2020, we recognized restructuring expenses totaling $ 25 million and $ 27 million, respectively, for employee-related costs, facility exit costs and inventory write-downs.

Of the cumulative program costs incurred to date, $ 28 million, $ 26 million and $ 1 million related to our North America, Europe and Specialty segments, respectively.

1 unchanged sentence

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

As of March 31, 2021 and December 31, 2020, restructuring liabilities incurred related to this program totaled $ 16 million and $ 21 million, respectively, including $ 13 million and $ 17 million, respectively, 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 Unaudited Condensed Consolidated Balance Sheets), and $ 3 million and $ 4 million, respectively, for employee termination costs (reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets).

Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed through the first quarter of 2021 and after our planned exit date for facilities we expect to close in future periods;

As of June 30, 2021 and December 31, 2020, restructuring liabilities incurred related to this program totaled $ 17 million and $ 21 million, respectively, including $ 13 million and $ 17 million, respectively, 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 Unaudited Condensed Consolidated Balance Sheets), and $ 3 million and $ 4 million, respectively, for employee termination costs (reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets).

Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed through the second quarter of 2021 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 three months ended March 31, 2021, we incurred immaterial restructuring expenses for our acquisition integration plans.

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

During the three months ended March 31, 2020, we incurred $ 2 million of restructuring expenses for our acquisition integration plans.

These expenses were primarily related to the integration of our acquisition of Andrew Page Limited.

During the three and six months ended June 30, 2021, we incurred immaterial restructuring expenses for our acquisition integration plans.

We expect to incur future expenses of up to $ 5 million to complete an integration plan related to an acquisition completed in our Specialty segment in 2021.

During the three and six months ended June 30, 2020, we incurre d $ 4 million and $ 5 million of restructuring expenses, respectively, for our acquisition integration plans.

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

1 LKQ Europe Program

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While certain projects were delayed in 2020 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.

During the three months ended March 31, 2021, we incurred $ 5 million of restructuring charges related to the 1 LKQ Europe program related to employee-related costs.

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 completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by 2024.

During the six months ended June 30, 2021, we incurred $ 5 million of employee-related restructuring charges under our 1 LKQ Europe program;

costs incurred in the three months ended June 30, 2021 were immaterial.

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 March 31, 2021, the restructuring liabilities related to this program were immaterial.

As of June 30, 2021, the restructuring liabilities related to this program were immaterial.

Stock-Based Compensation

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For our RSU grants prior to 2019, participants forfeit their unvested shares upon retirement.

The fair value of RSUs that vested during the three months ended March 31, 2021 was $ 14 million;

The fair value of RSUs that vested during the six months ended June 30, 2021 was $ 19 million;

the fair value of RSUs vested is based on the market price of LKQ stock on the date vested.

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the three months ended March 31, 2021:

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the six months ended June 30, 2021:

Outstanding Weighted

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Forfeited / Canceled ( 29,950 ) $ 34.06

Unvested as of March 31, 2021 1,793,159 $ 34.08

Expected to vest after March 31, 2021 1,604,984 $ 34.25 3.3 $ 67,939

Unvested as of June 30, 2021 1,723,011 $ 34.55

Expected to vest after June 30, 2021 1,539,272 $ 34.78 3.1 $ 75,763

(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 the expected to vest 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 three months ended March 31, 2020 was $ 33.14 .

In 2021 and 2020, we granted performance-based three-year RSUs ("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan.

(2) The weighted average grant date fair value of RSUs granted during the six months ended June 30, 2020 was $ 31.71 .

Starting 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 applicable three year performance periods.

The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the three months ended March 31, 2021:

The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the six months ended June 30, 2021:

Outstanding Weighted

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Forfeited / Canceled ( 1,166 ) $ 30.26

Unvested as of March 31, 2021 413,411 $ 32.49

Expected to vest after March 31, 2021 413,411 $ 32.49 1.7 $ 17,500

Unvested as of June 30, 2021 412,245 $ 32.50

Expected to vest after June 30, 2021 412,245 $ 32.50 1.4 $ 20,291

(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.

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

The weighted average grant date fair value of PSUs granted during the three months ended March 31, 2020 was $ 32.21 .

The weighted average grant date fair value of PSUs granted during the six months ended June 30, 2020 was $ 31.85 .

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 8 million for both the three months ended March 31, 2021 and 2020.

As of March 31, 2021, unrecognized compensation expense related to unvested RSUs and PSUs was $ 61 million.

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 9 million and $ 17 million the three and six months ended June 30, 2021, respectively, and $ 8 million and $ 16 million for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021, unrecognized compensation expense related to unvested RSUs and PSUs was $ 58 million.

Stock-based compensation expense related to these awards will be different to the extent that forfeitures are realized and performance under the PSUs dif fers from target.

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The following chart sets forth the computation of earnings per share (in thousands, except per share amounts):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Income from continuing operations $ 305,008 $ 118,493 $ 571,340 $ 265,387

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Effect of dilutive securities:

RSUs 712 189 670 352

PSUs 174 — 134 —

Stock options — — — 2

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

The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Antidilutive securities:

RSUs — 1,444 59 913

Accumulated Other Comprehensive Income (Loss)

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Three Months Ended

March 31, 2021

June 30, 2021

Translation Unrealized (Loss) Gain

on Cash Flow Hedges Unrealized (Loss) Gain

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

Comprehensive

(Loss) Income

BALANCE, April 1, 2021 $ ( 81,698 ) $ ( 310 ) $ ( 32,654 ) $ ( 11,460 ) $ ( 126,122 )

Pretax income (loss) 21,864 ( 296 ) — — 21,568

Income tax effect — 59 — — 59

Reclassification of unrealized loss — 585 437 — 1,022

Reclassification of deferred income taxes — ( 137 ) ( 124 ) — ( 261 )

Other comprehensive income from unconsolidated subsidiaries — — — 2,644 2,644

BALANCE, June 30, 2021 $ ( 59,834 ) $ ( 99 ) $ ( 32,341 ) $ ( 8,816 ) $ ( 101,090 )

Three Months Ended

June 30, 2020

Translation Unrealized (Loss) Gain

on Cash Flow Hedges Unrealized (Loss) Gain

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

Comprehensive

(Loss) Income

BALANCE, April 1, 2020 $ ( 274,858 ) $ ( 1,963 ) $ ( 31,814 ) $ ( 5,268 ) $ ( 313,903 )

Pretax income (loss) 30,663 ( 7,807 ) — — 22,856

Income tax effect — 1,842 — — 1,842

Reclassification of unrealized loss — 7,761 2,655 — 10,416

Reclassification of deferred income taxes — ( 1,827 ) ( 780 ) — ( 2,607 )

Disposal of business 671 — — — 671

Other comprehensive income from unconsolidated subsidiaries — — — 962 962

BALANCE, June 30, 2020 $ ( 243,524 ) $ ( 1,994 ) $ ( 29,939 ) $ ( 4,306 ) $ ( 279,763 )

Six Months Ended

June 30, 2021

Translation Unrealized (Loss) Gain

on Cash Flow Hedges Unrealized (Loss) Gain

on Pension Plans Other Comprehensive Loss from Unconsolidated Subsidiaries Accumulated

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Other comprehensive loss from unconsolidated subsidiaries — — — ( 868 ) ( 868 )

BALANCE, March 31, 2021 $ ( 81,698 ) $ ( 310 ) $ ( 32,654 ) $ ( 11,460 ) $ ( 126,122 )

Three Months Ended

March 31, 2020

BALANCE, June 30, 2021 $ ( 59,834 ) $ ( 99 ) $ ( 32,341 ) $ ( 8,816 ) $ ( 101,090 )

Six Months Ended

June 30, 2020

Translation Unrealized Gain (Loss)

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BALANCE, January 1, 2020 $ ( 170,893 ) $ 5,358 $ ( 31,934 ) $ ( 3,416 ) $ ( 200,885 )

Pretax (loss) income ( 104,060 ) 4,182 — — ( 99,878 )

Pretax loss ( 73,397 ) ( 3,625 ) — — ( 77,022 )

Income tax effect — 858 — — 858

Reclassification of unrealized (gain) loss

— ( 5,946 ) 2,769 — ( 3,177 )

Reclassification of deferred income taxes

— 1,361 ( 774 ) — 587

Disposal of business

766 — — — 766

Other comprehensive loss from unconsolidated subsidiaries

BALANCE, March 31, 2020 $ ( 274,858 ) $ ( 1,963 ) $ ( 31,814 ) $ ( 5,268 ) $ ( 313,903 )

— — — ( 890 ) ( 890 )

BALANCE, June 30, 2020 $ ( 243,524 ) $ ( 1,994 ) $ ( 29,939 ) $ ( 4,306 ) $ ( 279,763 )

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

Classification 2021 2020 2021 2020

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Unrealized gains on cross currency swaps Interest expense, net of interest income — 2,796 539 5,347

Unrealized gains on cross currency swaps (1)

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

Other income, net — ( 8,788 ) 1,973 ( 928 )

Unrealized gains on foreign currency forward contracts (1)

Unrealized (losses) gains on foreign currency forward contracts (1)

Other income, net ( 90 ) — 434 —

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(1) The amounts reclassified to Other income, net in our Unaudited Condensed Consolidated Statements of Income offset the impact of the remeasurement of the underlying transactions.

Net unrealized losses and gains related to our pension plans were reclassified to Other income, net in our Unaudited Condensed Consolidated Statements of Income during the three months ended March 31, 2021 and 2020.

Net unrealized losses and gains related to our pension plans were reclassified to Other income, net in our Unaudited Condensed Consolidated Statements of Income during each of the three and six months ended June 30, 2021 and 2020.

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 Unaudited Condensed Consolidated Statements of Income.

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Long-term obligations consist of the following (in thousands):

March 31, December 31,

June 30, December 31,

Senior secured credit agreement:

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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 quarter ended 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.

After the amendment, the maximum permitted net leverage ratio became (i) 4.50 :1.00 for the quarter ended June 30, 2021 and (ii) 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.

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.

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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 $ 319 million as of March 31, 2021, 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.

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.

We were 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.

We also have the option to prepay outstanding amounts under the Credit Agreement without penalty.

During the second quarter, we exercised this option to prepay the outstanding amount on the term loan, and thus we did not have any term loan borrowings as of June 30, 2021.

The Credit Agreement contains customary representations and warranties and customary covenants that provide limitations and conditions on our ability to enter into certain transactions.

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Interest payments are due on the last day of the selected interest period or quarterly in arrears depending on the type of borrowing.

Including the effect of the interest rate swap agreements described in Note 10, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at March 31, 2021 and December 31, 2020 were 1.2 % and 1.7 %, respectively.

Including the effect of the interest rate swap agreements described in Note 10, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at June 30, 2021 and December 31, 2020 were 1.1 % and 1.7 %, respectively.

We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities.

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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 both March 31, 2021 and December 31, 2020.

As of March 31, 2021, there were letters of credit outstanding in the aggregate amount of $ 71 million.

The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at March 31, 2021 was $ 2.5 billion.

Of the total borrowings outstanding under the Credit Agreement, there were no current maturities as of June 30, 2021 and $ 18 million classified as current maturities as of December 31, 2020.

As of June 30, 2021, there were letters of credit outstanding in the aggregate amount of $ 71 million .

Related to the execution of Amendment No.

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We may be required to make an offer to purchase the Euro Notes (2024) upon the sale of certain assets, subject to certain exceptions, and upon a change of control.

100 % of the principal amount thereof plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

In addition, in the event of certain developments affecting taxation or under certain other circumstances which, in any case, require the payment of certain additional amounts, we may redeem the Euro Notes (2024) in whole, but not in part, at any time at a redemption price of 100 % of the principal amount thereof plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

Euro Notes (2026/28)

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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 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 "Euro Notes (2026)") and € 250 million senior notes due 2028 (the "Euro Notes (2028)" and, together with the Euro Notes (2026), 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 (i) to 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 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.

On April 1, 2021, we redeemed the 3.625 % Euro Notes (2026) at a redemption price equal to 101.813 % of the principal amount of the Euro Notes (2026) plus accrued and unpaid interest thereon to, but not including, April 1, 2021.

The total redemption payment was $ 915 million (€ 777 million), including an early-redemption premium of $ 16 million (€ 14 million) and accrued and unpaid interest of $ 16 million (€ 14 million).

In the second quarter of 2021, we recorded a loss on debt extinguishment of $ 24 million related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

The Euro Notes (2028) notes bear interest at a rate of 4.125 % 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 (2028) is payable in arrears on April 1 and October 1 of each year.

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The Euro Notes (2028) are redeemable, in whole or in part, at any time at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium.

On or after April 1, 2021, we may redeem some or all of the 2026 notes at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture.

On or after April 1, 2023, we may redeem some or all of the 2028 notes at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture.

On or after April 1, 2023, we may redeem some or all of the Euro Notes (2028) at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture.

We may be required to make an offer to purchase the Euro Notes (2028) upon the sale of certain assets, subject to certain exceptions, and upon a change of control.

In addition, in the event of certain developments affecting taxation or under certain other circumstances which, in any case, require the payment of certain additional amounts, we may redeem the Euro Notes (2028) in whole, but not in part, at any time at a redemption price of 100 % of the principal amount thereof, plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

On April 1, 2021, we redeemed the Euro Notes 2026 at a redemption price equal to 101.813 % of the principal amount of the 2026 notes plus accrued and unpaid interest thereon to, but not including, April 1, 2021.

In the second quarter of 2021, we will record a loss on debt extinguishment of $ 24 million related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

Receivables Securitization Facility

1 unchanged sentence

(i) extend the term of the facility to November 8, 2021;

(ii) increase the maximum amount available to $ 110 million;

(ii) increase the maximum amount available to $ 110

and (iii) make other clarifying and updating changes.

3 unchanged sentences

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.

Net receivables totaling

$ 111 million and $ 121 million were collateral for the investments under the receivables facility as of March 31, 2021 and December 31, 2020, respectively.

Net receivables totaling $ 113 million and $ 121 million were collateral for the investments under the receivables facility as of June 30, 2021 and December 31, 2020, respectively.

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

3 unchanged sentences

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

There was no outstanding balance as of March 31, 2021 or December 31, 2020.

There was no outstanding balance as of June 30, 2021 or December 31, 2020.

Effective July 30, 2021, we terminated the receivables securitization facility.

Derivative Instruments and Hedging Activities

We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices.

Under our current policies, we use derivatives to manage our exposure to variable interest rates on our senior secured debt and changing foreign exchange rates for certain foreign currency denominated transactions.

Under our current policies, we may use derivatives to manage our exposure to variable interest rates on our senior secured debt and changing foreign exchange rates for certain foreign currency denominated transactions.

We do not hold or issue derivatives for trading purposes.

Cash Flow Hedges

We hold interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows.

Under the terms of the interest rate swap agreements, we pay the fixed interest rate and receive payment at a variable rate of interest based on LIBOR for the respective currency of each interest rate swap agreement’s notional amount.

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, net of interest income when the underlying interest payment has an impact on earnings.

Our interest rate swap contracts have maturity dates in June 2021.

At December 31, 2020, 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.

Through June 30, 2021, we held interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows.

Under the terms of the interest rate swap agreements, we paid the fixed interest rate and received payment at a variable rate of interest based on LIBOR for the respective currency of each interest rate swap agreement’s notional amount.

Changes in the fair value of the interest rate swap agreements were recorded in Accumulated other comprehensive income (loss) and were reclassified to Interest expense, net of interest income when the underlying interest payment impacted earnings.

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

5 unchanged sentences

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

As of March 31, 2021 and December 31, 2020, we held cash flow hedges with the following notional amounts (in thousands):

March 31, 2021 December 31, 2020

As of June 30, 2021, we held no cash flow hedges, and as of December 31, 2020, we held cash flow hedges with the following notional amounts and fair values (in thousands):

December 31, 2020

Interest rate swap agreements

3 unchanged sentences

Foreign currency forward contracts

SEK denominated kr — kr 227,000

The following tables summarize the fair values of our designated cash flow hedges as of March 31, 2021 and December 31, 2020 (in thousands):

SEK denominated kr 227,000

Other Accrued Expenses

Fair Value at March, 31 2021 Fair Value at December 31, 2020

Fair Value at December 31, 2020

Interest rate swap agreements $ 899

3 unchanged sentences

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 Unaudited Condensed Consolidated Balance Sheets.

The impact of netting the fair values of these contracts would have no effect on our Unaudited Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

The impact of netting the fair values of these contracts would have no effect on our Unaudited Condensed Consolidated Balance Sheets at December 31, 2020.

The activity related to our cash flow hedges is included in Note 8, "Accumulated Other Comprehensive Income (Loss)."

1 unchanged sentence

Other Derivative Instruments Not Designated as Hedges

To manage our foreign currency exposure on non-functional currency denominated borrowings, we have entered into short term foreign currency forward contracts.

We expect to enter into similar instruments as each instrument matures and expect to continue to do so until the foreign currency denominated borrowings are repaid.

As of March 31, 2021, we held foreign currency forward contracts with notional amounts of $ 315 million and € 184 million.

At December 31, 2020, the notional amounts of similar contracts were € 142 million and £ 75 million.

On April 1, 2021, in connection with the redemption of the Euro Notes 2026, we entered into an additional foreign currency forward contract with a notional amount of $ 720 million.

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 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.

The fair values of these contracts at March 31, 2021 and December 31, 2020, along with the effect on our results of operations during the three months ended March 31, 2021 and 2020, were immaterial.

To manage our foreign currency exposure on non-functional currency denominated borrowings, we entered into short term foreign currency forward contracts.

As of June 30, 2021, we held no foreign currency forward contracts related to non-functional currency denominated borrowings.

At December 31, 2020, the notional amounts of foreign currency forward contracts related to non-functional currency denominated borrowings were € 142 million and £ 75 million.

We 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.

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

The fair values of these contracts at December 31, 2020, along with the effect on our results of operations during the three and six months ended June 30, 2021 and 2020, were immaterial.

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

We have elected not to apply hedge accounting for these transactions.

The notional amount and fair value of these contracts at March 31, 2021 and December 31, 2020, along with the effect on our results of operations during the three months ended March 31, 2021 and 2020, were immaterial.

The notional amount and fair value of these contracts at June 30, 2021 and December 31, 2020, along with the effect on our results of operations during the three and six months ended June 30, 2021 and 2020 , were immaterial.

Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three months ended March 31, 2021, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and six months ended June 30, 2021, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.

The tiers in the fair value hierarchy include:

2 unchanged sentences

and Level 3, defined as significant unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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 March 31, 2021 and December 31, 2020 (in thousands):

Balance as of March 31, 2021 Fair Value Measurements as of March 31, 2021

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 June 30, 2021 and December 31, 2020 (in thousands):

Balance as of June 30, 2021 Fair Value Measurements as of June 30, 2021

Level 1 Level 2 Level 3

Cash surrender value of life insurance $ 86,706 $ — $ 86,706 $ —

Foreign currency forward contracts 4,451 — 4,451 —

Total Assets $ 86,706 $ — $ 86,706 $ —

Contingent consideration liabilities $ 3,056 $ — $ — $ 3,056

Interest rate swaps 335 — 335 —

Deferred compensation liabilities 86,865 — 86,865 —

Foreign currency forward contracts 632 — 632 —

Total Liabilities $ 89,921 $ — $ 86,865 $ 3,056

23 unchanged sentences

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

Based on market conditions as of both March 31, 2021 and December 31, 2020, the fair value of our credit agreement borrowings reasonably approximated the carrying values of $ 853 million and $ 967 million, respectively.

As of March 31, 2021 and December 31, 2020 there were no outstanding borrowings under the receivables facility.

As of March 31, 2021 and December 31, 2020, the fair values of the Euro Notes (2024) were approximately $ 633 million and $ 662 million, respectively, compared to carrying values of $ 587 million and $ 611 million, respectively.

As of March 31, 2021 and December 31, 2020, the fair values of the Euro Notes (2026/28) were $ 1.2 billion and $ 1.3 billion, respectively, compared to a carrying value of $ 1.2 billion as of both dates.

Based on market conditions as of both June 30, 2021 and December 31, 2020, the fair value of our credit agreement borrowings reasonably approximated the carrying values of $ 1.4 billion and $ 967 million, respectively.

As of June 30, 2021 and December 31, 2020, there were no outstanding borrowings under the receivables facility.

As of June 30, 2021 and December 31, 2020, the fair values of the Euro Notes (2024) were approximately $ 642 million and $ 662 million, respectively, compared to carrying values of $ 593 million and $ 611 million, respectively.

As of June 30, 2021 and December 31, 2020, the fair values of the Euro Notes (2026/28) were $ 319 million and $ 1.3 billion, respectively, compared to carrying values of $ 296 million and $ 1.2 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 March 31, 2021 and December 31, 2020 to assume these obligations.

We estimated the fair value by calculating the upfront cash payment a market participant would require at June 30, 2021 and December 31, 2020 to assume these obligations.

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.

4 unchanged sentences

The defined benefit plans are mostly closed to new participants and, in some cases, existing participants no longer accrue benefits.

As of March 31, 2021 and December 31, 2020, the aggregate funded status of the defined benefit plans was a liability of $ 146 million and $ 153 million , respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans included the following components for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

As of June 30, 2021 and December 31, 2020, the aggregate funded status of the defined benefit plans was a liability of $ 148 million and $ 153 million , respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans included the following components for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Service cost $ 933 $ 856 $ 1,828 $ 1,526

2 unchanged sentences

Amortization of actuarial loss 437 555 874 669

Settlement loss (1)

— 2,100 — 2,100

Net periodic benefit cost $ 1,300 $ 3,580 $ 2,551 $ 4,604

For the three months ended March 31, 2021 and 2020, the service cost component of net periodic benefit cost was classified in Selling, general and administrative expenses, while the other components of net periodic benefit cost were classified in Other income, net in our Unaudited Condensed Consolidated Statements of Income.

(1) Related to the partial settlement of a U.S.

plan in 2020.

For the three and six months ended June 30, 2021 and 2020, the service cost component of net periodic benefit cost was classified in Selling, general and administrative expenses, while the other components of net periodic benefit cost were classified in Other income, net in our Unaudited Condensed Consolidated Statements of Income.

At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our interim earnings.

2 unchanged sentences

The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes.

Our effective income tax rate for the three months ended March 31, 2021 was 26.3 %, compared to 29.2 % for the comparable prior year period.

The lower estimated annual effective tax rate for 2021 is primarily attributable to the higher forecasted 2021 results of operations, as compared to the forecasts available during the comparable quarter in 2020, when COVID-19 pandemic economic disruptions were depressing forecasted 2020 results.

Higher projected income contributes to lower anticipated valuation allowances on the tax benefit of net operating losses and suspended interest deductions in certain

jurisdictions where realization may be uncertain.

For the three months ended March 31, 2021, the effective tax rate was decreased 0.2 % by favorable discrete items, primarily excess tax benefits on stock-based compensation.

Net discrete items for the three months ended March 31, 2020 reduced the effective tax rate by 0.8 %, primarily due to excess tax benefits on stock-based compensation and deferred tax adjustments as a result of statutory tax rate changes.

Our effective income tax rate for the six months ended June 30, 2021 was 26.3 %, compared to 27.7 % for the comparable prior year period.

COVID-19 pandemic economic disruptions were depressing forecasted 2020 results.

For the six months ended June 30, 2021, the effective tax rate was increased 0.1 % by net unfavorable discrete items, primarily a deferred tax adjustment required as a result of a United Kingdom staged tax rate increase that will become effective April 1, 2023.

Net discrete items for the six months ended June 30, 2020 reduced the effective tax rate by 0.3 %, primarily due to excess tax benefits on stock-based compensation and deferred tax adjustments as a result of statutory tax rate changes.

Segment and Geographic Information

9 unchanged sentences

North America Europe Specialty Eliminations Consolidated

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Third Party $ 1,327,050 $ 1,576,661 $ 531,403 $ — $ 3,435,114

4 unchanged sentences

23,721 39,984 7,038 — 70,743

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Third Party $ 1,011,136 $ 1,211,185 $ 404,002 $ — $ 2,626,323

4 unchanged sentences

25,050 40,493 7,387 — 72,930

North America Europe Specialty Eliminations Consolidated

Six Months Ended June 30, 2021

Third Party $ 2,576,424 $ 3,040,114 $ 989,362 $ — $ 6,605,900

Intersegment 963 — 1,856 ( 2,819 ) —

Total segment revenue $ 2,577,387 $ 3,040,114 $ 991,218 $ ( 2,819 ) $ 6,605,900

Segment EBITDA $ 525,353 $ 309,064 $ 140,881 $ — $ 975,298

Depreciation and amortization (1)

47,981 80,242 14,117 — 142,340

Six Months Ended June 30, 2020

Third Party $ 2,301,071 $ 2,574,779 $ 751,408 $ — $ 5,627,258

Intersegment 519 — 2,048 ( 2,567 ) —

Total segment revenue $ 2,301,590 $ 2,574,779 $ 753,456 $ ( 2,567 ) $ 5,627,258

Segment EBITDA $ 360,992 $ 167,649 $ 84,465 $ — $ 613,106

Depreciation and amortization (1)

48,198 81,588 14,523 — 144,309

(1) Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and acquisition related expenses.

11 unchanged sentences

The table below provides a reconciliation of Net Income to Segment EBITDA (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Net income $ 305,008 $ 118,770 $ 571,340 $ 264,749

net income attributable to continuing noncontrolling interest 419 740

net income (loss) attributable to continuing noncontrolling interest 384 ( 22 ) 803 718

net income attributable to discontinued noncontrolling interest — — — 103

Net income attributable to LKQ stockholders 304,624 118,792 570,537 263,928

Net loss from discontinued operations — ( 915 )

Net income (loss) from discontinued operations — 277 — ( 638 )

Net income attributable to discontinued noncontrolling interest — — — ( 103 )

3 unchanged sentences

Depreciation and amortization - restructuring expenses (1)

198 3,173 379 3,972

Interest expense, net of interest income 16,172 25,616 40,351 51,547

2 unchanged sentences

EBITDA 522,822 258,930 977,480 575,556

Equity in earnings of unconsolidated subsidiaries (2)

Equity in earnings (losses) of unconsolidated subsidiaries (2)

3,478 ( 2,649 ) 9,297 ( 2,133 )

Equity investment mark to market adjustments 1,061 — 5,800 —

Restructuring and acquisition related expenses (1)

4,871 21,777 12,575 27,948

Restructuring expenses - cost of goods sold — 5,665 ( 163 ) 5,661

Impairment of net assets held for sale and (gain on disposal of business) 15 ( 249 )

(Gain) loss on disposal of businesses and impairment of net assets held for sale ( 597 ) 2,485 ( 582 ) 2,236

Change in fair value of contingent consideration liabilities 1,134 ( 332 ) 1,085 ( 428 )

4 unchanged sentences

The following table presents capital expenditures by reportable segment (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Capital Expenditures

4 unchanged sentences

The following table presents assets by reportable segment (in thousands):

March 31, December 31,

June 30, December 31,

Receivables, net

34 unchanged sentences

The following table sets forth our revenue by geographic area (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

United States $ 1,749,496 $ 1,330,543 $ 3,354,929 $ 2,864,489

4 unchanged sentences

The following table sets forth our tangible long-lived assets by geographic area (in thousands):

March 31, December 31,

June 30, December 31,

Long-lived assets

5 unchanged sentences

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-Q

Item 1. Financial Statements