What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 217 added, 218 removed, 790 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

4 unchanged sentences

Restructuring and acquisition related expenses 2,525 20,495 15,479 52,415

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

Impairment of net assets held for sale and (gain) loss on disposal of businesses 822 ( 503 ) 240 1,733

Depreciation and amortization 63,995 68,655 194,692 199,897

3 unchanged sentences

Loss on debt extinguishment — — 23,564 12,751

Other income, net ( 4,311 ) ( 8,174 ) ( 10,524 ) ( 11,796 )

Other (income) expense, net ( 2,888 ) 2,492 ( 13,412 ) ( 9,304 )

Total other expense, net 12,539 27,674 65,930 80,176

1 unchanged sentence

Provision for income taxes 89,340 78,510 290,028 180,790

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

Equity in earnings of unconsolidated subsidiaries 7,731 4,113 17,028 1,980

Income from continuing operations 284,006 193,931 855,346 459,318

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

Net loss from discontinued operations — — — ( 638 )

Net income 284,006 193,931 855,346 458,680

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

net (loss) income attributable to continuing noncontrolling interest ( 49 ) 448 754 1,166

net income attributable to discontinued noncontrolling interest — — — 103

2 unchanged sentences

Income from continuing operations $ 0.97 $ 0.64 $ 2.86 $ 1.51

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

Net loss from discontinued operations — — — ( 0.00 )

Net income 0.97 0.64 2.86 1.50

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

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

net income attributable to discontinued noncontrolling interest — — — 0.00

2 unchanged sentences

Income from continuing operations $ 0.96 $ 0.64 $ 2.85 $ 1.51

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

Net loss from discontinued operations — — — ( 0.00 )

Net income 0.96 0.64 2.85 1.50

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

net (loss) income 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Net income $ 284,006 $ 193,931 $ 855,346 $ 458,680

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

net (loss) income attributable to continuing noncontrolling interest ( 49 ) 448 754 1,166

net income attributable to discontinued noncontrolling interest — — — 103

9 unchanged sentences

Comprehensive income 236,521 263,972 805,780 449,843

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

comprehensive (loss) income attributable to continuing noncontrolling interest ( 49 ) 448 754 1,166

comprehensive income attributable to discontinued noncontrolling interest

5 unchanged sentences

(In thousands, except share and per share data)

June 30, December 31,

September 30, December 31,

Current assets:

30 unchanged sentences

Stockholders' equity:

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;

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,553,252 shares issued and 292,243,742 shares outstanding at September 30, 2021;

320,867,602 shares issued and 303,553,000 shares outstanding at December 31, 2020 3,215 3,208

3 unchanged sentences

Treasury stock, at cost;

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

29,309,510 shares at September 30, 2021 and 17,314,602 shares at December 31, 2020 ( 1,048,809 ) ( 469,105 )

Total Company stockholders' equity 5,901,809 5,655,718

6 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

28 unchanged sentences

Repayments under receivables securitization facility — ( 111,300 )

Borrowings (repayments) of other debt, net 39,533 ( 66,073 )

Repayments of other debt, net ( 18,109 ) ( 74,822 )

Settlement of derivative instruments, net ( 88,743 ) —

11 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 30,

Supplemental disclosure of cash paid for:

6 unchanged sentences

Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions and disposals 4,214 4,593

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

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

Contingent consideration liabilities 2,135 3,045

5 unchanged sentences

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

Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity

Comprehensive Loss 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

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

Net income — — — — — 284,055 — ( 49 ) 284,006

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

Other comprehensive loss — — — — — — ( 47,485 ) — ( 47,485 )

Purchase of treasury stock

3 unchanged sentences

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 99 ) ( 99 )

Disposition of subsidiary with noncontrolling interests — — — — — — — (145) (145)

Foreign currency translation adjustment on noncontrolling interest — — — — — — — 256 256

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

BALANCE, September 30, 2021 321,553 $ 3,215 ( 29,310 ) $ ( 1,048,809 ) $ 1,465,346 $ 5,630,632 $ ( 148,575 ) $ 16,048 $ 5,917,857

LKQ Stockholders

2 unchanged sentences

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

BALANCE, July 1, 2020 320,530 $ 3,205 ( 16,496 ) $ ( 439,819 ) $ 1,433,338 $ 4,401,545 $ ( 279,763 ) $ 29,435 $ 5,147,941

Net income — — — — — 193,483 — 448 193,931

Other comprehensive income

4 unchanged sentences

— — — — 7,088 — — — 7,088

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

Dividends declared to noncontrolling interest shareholder — — — — — — — ( 2,485 ) ( 2,485 )

BALANCE, September 30, 2020 320,830 $ 3,208 ( 16,496 ) $ ( 439,819 ) $ 1,439,493 $ 4,595,028 $ ( 209,722 ) $ 27,398 $ 5,415,586

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

14 unchanged sentences

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 241 ) ( 241 )

Disposition of subsidiary with noncontrolling interests — — — — — — — (145) (145)

Foreign currency translation adjustment on noncontrolling interest — — — — — — — 98 98

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

BALANCE, September 30, 2021 321,553 $ 3,215 ( 29,310 ) $ ( 1,048,809 ) $ 1,465,346 $ 5,630,632 $ ( 148,575 ) $ 16,048 $ 5,917,857

LKQ Stockholders

20 unchanged sentences

— — — — — — — ( 11,404 ) ( 11,404 )

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

BALANCE, September 30, 2020 320,830 $ 3,208 ( 16,496 ) $ ( 439,819 ) $ 1,439,493 $ 4,595,028 $ ( 209,722 ) $ 27,398 $ 5,415,586

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

24 unchanged sentences

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

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 Unaudited Condensed Consolidated Statements of Income).

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 from discontinued operations in the Unaudited Condensed 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 receivable.

6 unchanged sentences

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.

Our reserve for expected lifetime credit losses was $ 63 million and $ 70 million as of September 30, 2021 and December 31, 2020, respectively.

Bad debt expense totaled $ 3 million and $ 23 million for the nine months ended September 30, 2021 and 2020, respectively.

Inventories consist of the following (in thousands):

June 30, December 31,

September 30, December 31,

Aftermarket and refurbished products $ 2,004,516 $ 2,025,002

3 unchanged sentences

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed 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 September 30, 2021, manufactured products inventory was composed of $ 24 million of raw materials, $ 5 million of work in process, and $ 1 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.

2 unchanged sentences

We performed our annual impairment test during the fourth quarter of 2020, and 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 %.

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 were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach.

Goodwill impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to 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 $ 168 million and $ 155 million as of June 30, 2021 and December 31, 2020, respectively.

Our investment in unconsolidated subsidiaries was $ 178 million and $ 155 million as of September 30, 2021 and December 31, 2020, respectively.

Europe Segment

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").

Our investment in unconsolidated subsidiaries in Europe was $ 155 million and $ 137 million as of September 30, 2021 and December 31, 2020, respectively.

We recorded equity in earnings of $ 4 million and $ 13 million during the three and nine months ended September 30, 2021, respectively, and equity in earnings of $ 4 million and $ 5 million during the three and nine months ended September 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;

As of September 30, 2021, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by $ 8 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 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.

The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at September 30, 2021 was $ 271 million (using the Mekonomen share price of SEK 156 as of September 30, 2021) compared to a carrying value of $ 144 million.

North America Segment

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.

Our investment in unconsolidated subsidiaries in the North America segment was $ 24 million and $ 19 million as of September 30, 2021 and December 31, 2020, respectively.

We recorded equity in earnings of $ 3 million and $ 4 million during the three and nine months ended September 30, 2021, respectively, and equity in earnings of an immaterial amount and equity in losses of $ 3 million during the three and nine months ended September 30, 2020, respectively, related to our North America equity method investments.

Warranty Reserve

9 unchanged sentences

Warranty claims ( 53,239 )

Balance as of June 30, 2021 $ 29,793

Balance as of September 30, 2021 $ 30,929

Litigation and Related Contingencies

2 unchanged sentences

Government Assistance

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,

During the three and nine months ended September 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 Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

2 unchanged sentences

Total government assistance $ 1,047 $ 12,449 $ 15,647 $ 45,093

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.

For the nine months ended September 30, 2021 and 2020, we received grants from European governments of $ 11 million and $ 38 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).

Leases - Cash Flow Disclosure

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.

The amount disclosed for Leased assets obtained in exchange for operating lease liabilities for the nine months ended September 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 $ 81 million to address an omission of the impact of lease modifications and terminations.

Stockholders' Equity

Treasury Stock

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.

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

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.

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.

1 unchanged sentence

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.

During the three and nine months ended September 30, 2021, we repurchased 4.3 million and 12.0 million shares of common stock, respectively, for an aggregate price of $ 219 million and $ 580 million, respectively.

During the nine months ended September 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 September 30, 2020.

As of September 30, 2021, there was $ 951 million of remaining capacity under our repurchase program.

Noncontrolling Interest

27 unchanged sentences

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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

30 unchanged sentences

Warranty revenue recognized ( 45,034 )

Balance as of June 30, 2021 $ 29,618

Balance as of September 30, 2021 $ 31,747

Other Revenue

10 unchanged sentences

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 $ 106 million and $ 59 million, respectively, as of June 30, 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 $ 108 million and $ 59 million, respectively, as of September 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 $ 102 million and $ 127 million as of June 30, 2021 and December 31, 2020, respectively.

We recorded a reserve for our variable consideration of $ 131 million and $ 127 million as of September 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.

7 unchanged sentences

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

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

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.

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

During the three and nine months ended September 30, 2020, we incurred $ 1 million and $ 6 million, respectively, of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs in our Europe and North America segments.

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

The total cumulative program costs incurred to date were $ 47 million, of which $ 31 million, $ 14 million and $ 1 million were in our Europe, North America and Specialty segments, respectively.

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

2020 Global Restructuring Program

6 unchanged sentences

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 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.

During the three and nine months ended September 30, 2021, we recognized restructuring expenses of $ 1 million and $ 7 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.

During the three and nine months ended September 30, 2020, we recognized restructuring expenses totaling $ 10 million and $ 38 million, respectively, for employee-related costs, facility exit costs and inventory write-downs.

Of the cumulative program costs incurred to date, $ 29 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 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;

As of September 30, 2021 and December 31, 2020, restructuring liabilities incurred related to this program totaled $ 13 million and $ 21 million, respectively, including $ 10 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 $ 2 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 third 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 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.

During the three and nine months ended September 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 acquisitions completed in our Specialty segment during the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, we incurre d $ 2 million and $ 8 million of restructuring expenses, respectively, for our acquisition integration plans.

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

4 unchanged sentences

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.

During the nine months ended September 30, 2021, we incurred $ 6 million of employee-related restructuring charges under our 1 LKQ Europe program;

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

We estimate that we will incur between $ 40 million and $ 50 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 June 30, 2021, the restructuring liabilities related to this program were immaterial.

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

Acquisition Related Expenses

We incurred immaterial acquisition related expenses in each of the three and nine months ended September 30, 2021.

These expenses included external costs such as legal, accounting and advisory fees related to completed and potential transactions.

During the three and nine months ended September 30, 2020, we incurred $ 8 million of acquisition related expenses, primarily related to the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.

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 six months ended June 30, 2021 was $ 19 million;

Outstanding unvested RSUs earn dividend equivalents at the same rate as dividends on the Company’s common stock.

The dividend equivalents are subject to the same vesting requirements, restrictions and forfeiture provisions as the original award.

The fair value of RSUs that vested during the nine months ended September 30, 2021 was $ 34 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 six months ended June 30, 2021:

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

Outstanding Weighted

6 unchanged sentences

Forfeited / Canceled ( 46,552 ) $ 34.39

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

Unvested as of September 30, 2021 1,407,379 $ 34.86

Expected to vest after September 30, 2021 1,215,271 $ 34.89 2.9 $ 61,152

(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 six months ended June 30, 2020 was $ 31.71 .

(2) The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2020 was $ 31.67 .

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 six months ended June 30, 2021:

Outstanding unvested PSUs earn dividend equivalents at the same rate as dividends on the Company’s common stock.

The dividend equivalents are subject to the same vesting requirements, restrictions and forfeiture provisions as the original award.

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

Outstanding Weighted

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Forfeited / Canceled ( 7,398 ) $ 31.25

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

Unvested as of September 30, 2021 409,859 $ 32.51

Expected to vest after September 30, 2021 403,290 $ 32.44 1.2 $ 20,294

(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 six months ended June 30, 2020 was $ 31.85 .

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

Stock-Based Compensation Expense

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.

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 8 million and $ 25 million for the three and nine months ended September 30, 2021, respectively, and $ 7 million and $ 23 million for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, unrecognized compensation expense related to unvested RSUs and PSUs was $ 50 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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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 and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

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 nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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Three Months Ended

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

September 30, 2021

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized Gain (Loss)

on Pension Plans Other Comprehensive Income (Loss) 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 (Loss)

BALANCE, July 1, 2021 $ ( 59,834 ) $ ( 99 ) $ ( 32,341 ) $ ( 8,816 ) $ ( 101,090 )

Pretax loss ( 48,139 ) — — — ( 48,139 )

Income tax effect — — — — —

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Other comprehensive income from unconsolidated subsidiaries — — — 348 348

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

BALANCE, September 30, 2021 $ ( 107,973 ) $ ( 99 ) $ ( 32,035 ) $ ( 8,468 ) $ ( 148,575 )

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 )

September 30, 2020

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized Gain (Loss)

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

Comprehensive Income

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

Pretax income (loss) 70,178 ( 19,865 ) ( 34 ) — 50,279

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Reclassification of deferred income taxes — ( 4,756 ) ( 966 ) — ( 5,722 )

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

Comprehensive

(Loss) Income

Other comprehensive loss from unconsolidated subsidiaries — — — ( 3,162 ) ( 3,162 )

BALANCE, September 30, 2020 $ ( 173,346 ) $ ( 1,772 ) $ ( 27,136 ) $ ( 7,468 ) $ ( 209,722 )

Nine Months Ended

September 30, 2021

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized Gain (Loss)

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

Comprehensive Income

BALANCE, January 1, 2021 $ ( 57,126 ) $ ( 968 ) $ ( 32,967 ) $ ( 7,948 ) $ ( 99,009 )

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Other comprehensive loss from unconsolidated subsidiaries — — — ( 520 ) ( 520 )

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

Six Months Ended

June 30, 2020

BALANCE, September 30, 2021 $ ( 107,973 ) $ ( 99 ) $ ( 32,035 ) $ ( 8,468 ) $ ( 148,575 )

Nine Months Ended

September 30, 2020

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized (Loss) Gain

on Pension Plans Other Comprehensive Loss from Unconsolidated Subsidiaries Accumulated

Comprehensive

(Loss) Income

on Cash Flow Hedges Unrealized Gain (Loss)

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

Comprehensive Income

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

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Income tax effect — 5,548 9 — 5,557

Reclassification of unrealized (gain) loss

— ( 5,946 ) 2,769 — ( 3,177 )

Reclassification of unrealized loss — 14,207 6,563 — 20,770

Reclassification of deferred income taxes

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Other comprehensive loss from unconsolidated subsidiaries — — — ( 4,052 ) ( 4,052 )

— — — ( 890 ) ( 890 )

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

BALANCE, September 30, 2020 $ ( 173,346 ) $ ( 1,772 ) $ ( 27,136 ) $ ( 7,468 ) $ ( 209,722 )

Net unrealized losses and gains related to our pension plans were reclassified to Other (income) expense, net in our Unaudited Condensed Consolidated Statements of Income during each of the three and nine months ended September 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.

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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

Classification 2021 2020 2021 2020

Unrealized (losses) gains on interest rate swaps Interest expense, net of interest income $ ( 495 ) $ ( 1,769 ) $ ( 1,188 ) $ 1,527

Unrealized losses on interest rate swaps Interest expense, net of interest income $ — $ ( 2,538 ) $ ( 1,188 ) $ ( 1,011 )

Unrealized gains on cross currency swaps Interest expense, net of interest income — 2,696 539 8,043

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

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

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

Other income, net ( 90 ) — 434 —

Other (income) expense, net — ( 20,874 ) 1,973 ( 21,802 )

Unrealized gains on foreign currency forward contracts (1)

Other (income) expense, net — 563 434 563

Total $ — $ ( 20,153 ) $ 1,758 $ ( 14,207 )

(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 each of the three and six months ended June 30, 2021 and 2020.

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

Long-Term Obligations

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

June 30, December 31,

September 30, December 31,

Senior secured credit agreement:

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Euro Notes (2026/28) 289,500 1,221,600

Receivables securitization facility — —

Notes payable through October 2030 at weighted average interest rates of 3.1% and 3.3%, respectively 23,551 24,526

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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.

4 to the Fourth Amended and Restated Credit Agreement dated January 29, 2016 (the "Credit Agreement"), which modified the maximum permitted net leverage ratio through the quarter ended 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 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.

After the amendment, the maximum permitted net leverage ratio became 4.25 :1.00 for the quarter ended 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.

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.

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

We also had 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 September 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 June 30, 2021 and December 31, 2020 were 1.1 % 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 September 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.

The commitment fee is subject to change in increments of 0.05 % depending on our net leverage ratio.

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 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 .

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 June 30, 2021 was $ 1.6 billion .

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 no current maturities as of September 30, 2021 and $ 18 million classified as current maturities as of December 31, 2020.

As of September 30, 2021, there were letters of credit outstanding in the aggregate amount of $ 69 million .

Related to the execution of Amendment No.

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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.

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.

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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.

The Euro Notes (2028) 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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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.

Restricted Payments

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

Delaware law also imposes restrictions on dividend payments.

These restrictions will not impact the payment of our dividend declared in October 2021 as disclosed in Note 15, “Subsequent Event”.

Receivables Securitization Facility

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

(ii) increase the maximum amount available to $ 110

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

and (iii) make other clarifying and updating changes.

Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to MUFG for the benefit of conduit investors and/or financial institutions for cash proceeds.

Upon payment of the receivables by customers, rather than remitting to MUFG the amounts collected, LKQ retains such collections as proceeds for the sale of new receivables generated by certain of the ongoing operations of the Company.

The sale of the ownership interest in the receivables is accounted for as a secured borrowing on our Unaudited Condensed Consolidated Balance Sheets, under which the receivables included in the program collateralize the amounts invested by MUFG, the conduit investors and/or financial institutions (the "Purchasers").

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 $ 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.

The variable rates are based on (i) commercial paper rates, (ii), LIBOR, or (iii) base rates, and are payable monthly in arrears.

The commercial paper rate is the applicable variable rate unless conduit investors are not available to invest in the receivables at commercial paper rates.

In such case, financial institutions will invest at the LIBOR rate or at base rates.

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 June 30, 2021 or December 31, 2020.

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

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

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

Derivative Instruments and Hedging Activities

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Cash Flow Hedges

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.

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.

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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, net of interest income and Other income, net when the underlying transactions had an impact on earnings.

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

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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dollars at a fixed rate on the maturity dates of the contracts.

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 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):

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

As of September 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

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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.

As of September 30, 2021, w e held no foreign currency forward contracts re lated 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 elected not to apply hedge accounting for these transactions, and therefore the contracts were adjusted to fair value through our results of operations as of each balance sheet date.

The fair values of these short-term derivative instruments were 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 nine months ended September 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 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.

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

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and nine months ended September 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:

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

Balance as of June 30, 2021 Fair Value Measurements as of June 30, 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 September 30, 2021 and December 31, 2020 (in thousands):

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

Level 1 Level 2 Level 3

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the noncurrent portion of deferred compensation liabilities and contingent consideration liabilities is included in Other noncurrent liabilities on our Unaudited Condensed 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 10, "Derivative Instruments and Hedging Activities."

The balance sheet classification of the interest rate swaps,

cross currency swap agreements, and foreign currency forward contracts is presented in Note 10, "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 Unaudited Condensed Consolidated Balance Sheets at cost.

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.

Based on market conditions as of both September 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 September 30, 2021 and December 31, 2020, the fair values of the Euro Notes (2024) were approximately $ 625 million and $ 662 million, respectively, compared to carrying values of $ 579 million and $ 611 million, respectively.

As of December 31, 2020, the fair value of the Euro Notes (2026) was $ 939 million compared to a carrying value of $ 916 million;

as of September 30, 2021, the Euro Notes (2026) were paid off.

As of September 30, 2021 and December 31, 2020, the fair values of the Euro Notes (2028) were $ 311 million and $ 332 million, respectively, compared to carrying values of $ 290 million and $ 305 million, 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 June 30, 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 September 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.

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

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,

As of September 30, 2021 and December 31, 2020, the aggregate funded status of the defined benefit plans was a liability of $ 145 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 nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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Net periodic benefit cost $ 1,266 $ 4,753 $ 3,817 $ 9,357

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

(1) Related to the 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.

For the three and nine months ended September 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) expense, 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.

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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 six months ended June 30, 2021 was 26.3 %, compared to 27.7 % 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 period in 2020, when

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.

Our effective income tax rate for the nine months ended September 30, 2021 was 25.7 %, compared to 28.3 % for the comparable prior year period.

For the nine months ended September 30, 2021, the effective tax rate was decreased 0.1 % by net favorable discrete items, primarily for excess tax benefits from stock-based payments.

For the nine months ended September 30, 2020, the effective tax rate was increased 0.3 % by unfavorable discrete items, primarily valuation allowances on net operating loss carryforwards 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 June 30, 2021

Three Months Ended September 30, 2021

Third Party $ 1,306,310 $ 1,525,274 $ 465,027 $ — $ 3,296,611

4 unchanged sentences

24,022 38,752 7,576 — 70,350

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Third Party $ 1,164,031 $ 1,484,099 $ 399,554 $ — $ 3,047,684

5 unchanged sentences

North America Europe Specialty Eliminations Consolidated

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Third Party $ 3,882,734 $ 4,565,388 $ 1,454,389 $ — $ 9,902,511

4 unchanged sentences

72,003 118,994 21,693 — 212,690

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Third Party $ 3,465,102 $ 4,058,878 $ 1,150,962 $ — $ 8,674,942

17 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Net income $ 284,006 $ 193,931 $ 855,346 $ 458,680

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

net (loss) income attributable to continuing noncontrolling interest ( 49 ) 448 754 1,166

net income attributable to discontinued noncontrolling interest — — — 103

Net income attributable to LKQ stockholders 284,055 193,483 854,592 457,411

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

Net loss from discontinued operations — — — ( 638 )

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

8 unchanged sentences

EBITDA 459,172 373,502 1,436,652 949,058

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

Equity in earnings of unconsolidated subsidiaries (2)

7,731 4,113 17,028 1,980

3 unchanged sentences

Restructuring expenses - cost of goods sold — 833 ( 163 ) 6,494

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

Impairment of net assets held for sale and (gain) loss on disposal of businesses 822 ( 503 ) 240 1,733

Change in fair value of contingent consideration liabilities 384 ( 147 ) 1,469 ( 575 )

4 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

5 unchanged sentences

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

June 30, December 31,

September 30, December 31,

Receivables, net

34 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

5 unchanged sentences

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

June 30, December 31,

September 30, December 31,

Long-lived assets

4 unchanged sentences

Total long-lived assets $ 2,533,421 $ 2,601,827

Subsequent Event

On October 26, 2021, the Board of Directors of LKQ declared a cash dividend to stockholders.

The quarterly cash dividend of $ 0.25 per share of common stock will be payable on December 2, 2021 to stockholders of record at the close of business on November 11, 2021.

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