What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 106 added, 90 removed, 290 unchanged (40% of the section changed)

LKQ Corporation ("LKQ" or the "Company") is a global distributor 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.

LKQ Corporation ("LKQ", the "Company" or "we"), a member of the Standard & Poor's 500 Stock In dex ("S&P 500 Index") , is a global distributor 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.

Buyers of vehicle replacement products have the option to purchase from primarily five sources:

new products produced by original equipment manufacturers ("OEMs");

new products produced by OEMs;

new products produced by companies other than the OEMs, which are referred to as aftermarket products;

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Collectively, we refer to the four sources that are not new OEM products as alternative parts.

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

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

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

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

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

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This acquisition expanded our geographic presence in continental Europe and serves as an additional strategic hub for our European operations.

Further information regarding our recent acquisitions is included in Note 2, "Business Combinations" to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Since 2017, we have divested eight businesses resulting from (i) the ongoing rationalization of our asset base by divesting certain non-core and/or low margin businesses, and (ii) mandatory divestiture requirements due to certain acquisitions.

Since 2017, we have divested certain businesses due to the ongoing rationalization of our asset base by divesting certain non-core and/or low margin businesses, and mandatory divestiture requirements due to certain acquisitions.

Two of these divestitures have been reported as discontinued operations.

Our mission is to be the leading global value-added distributor of vehicle parts and accessories by offering our customers the most comprehensive, available and cost-effective selection of part solutions while building strong partnerships with our employees and the communities in which we operate.

Beginning in 2019, we reduced our focus on growth primarily through acquisitions and emphasized operational excellence, through a strategy of organically taking market share with leading inventory breadth and depth, high fulfillment rates, delivery reliability and customer service.

From 1998 to 2018, the Company focused on consolidating the alternative and specialty vehicle parts markets to develop scale across an extensive network of salvage and aftermarket facilities throughout North America and on building a pan-European aftermarket parts distributor in the large, fragmented European marke t.

This focus created a leading distributor of aftermarket collision, salvage collision, and major mechanical parts in North America, a leading distributor of specialty automotive and RV parts and accessories in North America, and a leading distributor of aftermarket mechanical parts in Europe.

Beginning in 2019, we reduced our focus on growth through acquisitions and increased our focus on organic growth.

Moreover, we emphasized operational excellence, driving structural margin improvements across the business to fund investments to further extend our leading positions and capabilities and grow our market share.

In our Europe segment, we are implementing a multi-year business transformation by establishing a Pan-European organization and operating model.

The purpose of this multi-year “1 LKQ Europe” program is to create one single operation by integrating the various acquisitions the Company has completed across the European continent since entering the market in 2011.

1 LKQ Europe will operationalize the full potential of our leading European scale position as a single entity in areas such as procurement, product strategy, revenue optimization, digitization, and value-added services for our customers.

We have four primary strategic pillars to build economic value:

growth through diversified product offerings;

expanding our footprint;

adaptation to evolving technology;

and rationalization of our asset base to enhance margins and return on capital.

We believe our distribution network, with a broad inventory of quality collision and mechanical repair products and specialty vehicle aftermarket products, high fulfillment rates, and superior customer service, provide us with a competitive advantage.

growing our diversified product and service offerings;

expanding our geographic footprint;

adapting to evolving technology;

and rationalizing our asset base.

We believe our extensive distribution network, with a deep and broad inventory of quality collision and mechanical repair products and specialty vehicle aftermarket products, high fulfillment rates, delivery reliability, and superior customer service, provide us with competitive advantages.

To execute our strategy, we focus on a number of key areas, including:

• Continue to build and develop our extensive distribution network.

We have invested significant capital to develop a network of alternative and specialty vehicle parts facilities across our operating segments.

Our ability to move inventory throughout our distribution networks increases the availability of our products and allows us to fill a high percentage of our customers’ requests.

In order to expand our distribution network, we may seek to enter new markets through geographic expansion, improve penetration through organic development, tuck in acquisitions, and by building critical capabilities such as diagnostic service offerings.

• Leading distribution network .

We have invested significant capital to develop an extensive network of alternative and specialty vehicle parts facilities across the geographies we serve in our operating segments.

Our ability to move inventory throughout our distribution networks increases the availability of our products and allows us to fill a higher percentage of our customers’ requests.

In order to expand our distribution network, we may seek to enter new markets through geographic expansion, organic development, or tuck-in acquisitions.

We believe our North America segment has the largest distribution network of vehicle parts and accessories for the automotive collision repair market in North America.

In our Europe segment, we are implementing a business transformation, a similar strategy to our North America operations, by establishing a Pan-European organization through the integration of the various acquisitions.

We currently have operations in over 20 different European countries, which we believe represents the broadest and largest footprint in the aftermarket industry in Europe.

On a global basis, we operate approximately 1,600 facilities.

• Broad product offering.

• Broad product and service offerings .

The breadth and depth of our inventory across our operating segments reinforces our ability to provide a “one-stop” solution for our customers’ alternative vehicle replacement, maintenance, diagnostic services, and specialty vehicle product needs.

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We focus on technology development to expand our competitive advantage.

We have built advanced data analytics capabilities and data assets and believe that we can more cost effectively leverage our data to make better business decisions than most of our competitors.

We have built data analytics capabilities and data assets and believe that we can more cost effectively leverage our data to make better business decisions than most of our competitors.

• Adaptation to evolving technology in the automotive industry .

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We have a portfolio review process and are continually analyzing and executing initiatives to reduce our operating costs and drive efficiencies, including brand rationalization, rightsizing efforts, and productivity initiatives.

• Environmental, Social and Governance (“ESG”) .

We are focused on driving our ESG strategy and message, to multiple stakeholders, both internally and externally.

Our ESG strategy is focused on employee engagement, diversity, equity and inclusion, carbon footprint and recycling, supply chain and community support.

• Employees and communities.

We focus on employees and communities through continuous improvement in our Environmental, Social and Governance initiatives.

One of our top priorities is the health and safety of our employees, customers and communities in which we operate.

Our top priority is the health and safety of our employees, customers and communities in which we operate.

We will measure our progress toward achieving our strategic goals based on our performance with respect to the following key priorities:

profitable growth, cash flow generation, European integration, and talent acquisition.

We have implemented various improvement plans in an attempt to enhance our operational efficiencies and actively monitor these and other important operating metrics.

We have implemented various improvement plans to enhance our operational efficiencies and actively monitor these and other important operating metrics.

COVID-19 IMPACT

The COVID-19 pandemic and the resulting governmental actions taken to control the virus have impacted, and are expected to continue to impact, our business in 2020, 2021, and into 2022.

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.

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

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 actual and expected revenue decline.

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

For further discussion regarding the impact of the COVID-19 pandemic on our business and financial results, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

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Wholesale Operations

Our wholesale operations in North America sell five product types (aftermarket, OEM recycled, OEM remanufactured, OEM refurbished and, to a lesser extent, new OEM parts) to professional collision and mechanical vehicle repair businesses.

Additionally, by way of two acquisitions in 2019, we entered the diagnostics and repair services business, which we expect to grow in the coming years as the number of technological comp onents in vehicles increases.

In January 2021, the diagnostic and repair services acquisitions were combined into a single brand, known as Elitek Vehicle Services.

Our principal aftermarket product types consist of those most frequently damaged in collisions, including bumper covers, automotive body panels, lights and automotive glass products such as windshields.

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and bumper assemblies.

In January 2021, the diagnostic and repair services acquisitions were combined into a single brand, known as Elitek Vehicle Services.

The aftermarket products we distribute are purchased from independent manufacturers and distributors located primarily in North America and Asia, principally Taiwan.

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Within our wholesale operations, we focus our procurement on products that are in the most demand, based on a number of factors such as historical sales records of vehicles by model and year, customer requests, and projections of future supply and demand trends.

Because lead times may be 40 days or more on imported aftermarket products, sales volumes and in-stock inventory are important factors in the procurement process.

Because lead times may be historically 40 days or more on imported aftermarket products, sales volumes and in-stock inventory are important factors in the procurement process.

We procure recycled products for our wholesale operations by acquiring total loss vehicles, typically sold at regional salvage auctions, and then dismantling and inventorying the parts.

The availability and pricing of the salvage vehicles we procure for our wholesale recycled products operations may be impacted by a variety of factors, including the production level of new vehicles and the percentage of damaged vehicles declared total losses.

Our bidding specialists are equipped with a proprietary software application that allows them to compare the vehicles at salvage auctions against our current inventory

levels, historical demand, and recent average selling prices to arrive at an estimated maximum bid.

Additionally, we are embedding artificial intelligence technology into our salvage procurement software to assist in the procurement decision making process, reducing the amount of labor and human error in the process.

Information Technology Systems

In our aftermarket operations, we use a third party enterprise management system and other third party software packages for an electronic data interchange tool, and E-commerce tools to enhance our online business-to-business initiatives - OrderKeystone.com and Keyless.

Our wholesale recycled product locations in North America operate an internally-developed, proprietary enterprise management system called LKQX.

We believe that the use of a single system across a majority of our wholesale recycled product operations helps facilitate the sales process;

allows for continued implementation of standard operating procedures;

and improves training efficiency, employee transferability, access to our national inventory database, management reporting and data storage.

The system also supports an electronic exchange process for identifying and locating parts at other select recyclers and facilitates brokered sales to fill customer orders for items not in stock.

We also use other third party software packages for both businesses to leverage the centralized data and information that a single system provides, such as a data warehouse to conduct enhanced analytics and reporting, and an integrated budgeting system.

Our bidding specialists are equipped with a proprietary software application that allows them to compare the vehicles at salvage auctions against our current inventory levels, historical demand, and recent average selling prices to arrive at an estimated maximum bid.

Additionally, we have embedded artificial

intelligence technology into our salvage procurement software to assist in the procurement decision making process, reducing the amount of labor and human error in the process.

Scrap and Other Materials

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Damaged and unusable wheel cores are melted in our aluminum furnace and sold to consumers of aluminum ingot and sow for the production of various automotive products, including wheels.

We also extract and sell the precious metals contained in certain of our recycled parts such as catalytic converters.

We also sell the precious metals contained in certain of our recycled parts such as catalytic converters.

We sell our products to wholesale customers that include collision and mechanical repair shops and new and used car dealerships, as well as to retail customers.

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Our sales force and local delivery drivers develop and maintain critical personal relationships with the local repair shops that benefit from access to our wide selection of products, which we are able to offer as a result of our regional inventory network.

We operate a delivery fleet of medium-sized trucks and smaller trucks and vans,

which deliver multiple product types on the same delivery routes to help minimize distribution costs and improve customer service.

We operate a delivery fleet of medium-sized trucks and smaller trucks and vans, which deliver multiple product types on the same delivery routes to help minimize distribution costs and improve customer service.

We consider all suppliers of vehicle collision and mechanical products to be competitors, including aftermarket suppliers, recycling businesses, refurbishing operations, parts remanufacturers, OEMs and internet-based suppliers.

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We do not consider retail chains that focus on the do-it-yourself market to be our direct competitors since many of our wholesale product sales are influenced by insurance companies, who ultimately pay for the repair costs of insured vehicles in excess of any deductible amount, rather than the end user, and there is limited overlap in the products that we sell.

Information Technology Systems

Our wholesale recycled product locations in North America operate an internally-developed, proprietary enterprise management system called LKQX.

We believe that the use of a single system across a majority of our wholesale recycled product operations helps facilitate the sales process;

allows for continued implementation of standard operating procedures;

and improves training efficiency, employee transferability, access to our national inventory database, management reporting and data storage.

The system also supports an electronic exchange process for identifying and locating parts at other select recyclers and facilitates brokered sales to fill customer orders for items not in stock.

Self Service Operations

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We also differentiate our business from our competitors through our app, which allows customers to receive daily push notifications when vehicles in which they have identified an interest are placed into their favorite yards.

In addition to allowing customers to see our available inventory, the app also allows customers to input search parameters, including for specific parts, and the year, make, and model of the vehicle, to identify the population of vehicles that might be available from which to pull compatible parts.

of vehicles that might be available from which to pull compatible parts.

We do not consider retail chains that focus on the do-it-yourself market to be our direct competitors, as there is limited overlap in the products that we sell.

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ECP (2011), Sator (2013), Rhiag (2016) and Stahlgruber (2018).

Additionally, in 2014 we expanded our European segment to include wholesale recycling operations through our acquisition of a business with salvage and vehicle repair facilities in Sweden and Norway, and in 2016, we acquired an equity investment in Mekonomen AB ("Mekonomen"), the leading independent car parts distributor in the

Nordic region of Europe.

Mekonomen is independent of our existing European operations, but we have identified areas where the companies can work together in a mutually beneficial manner, primarily related to procurement and category management.

Our European strategy, facilitated through our 1 LKQ Europe program, is to leverage the strengths of acquired businesses, reduce procurement costs by consolidating and streamlining our product offerings, and combine an integrated organization driving for functional excellence with the necessary technology linking our business processes with our customers and suppliers.

Our European strategy, facilitated through our 1 LKQ Europe program, is to leverage the strengths of acquired businesses, reduce procurement costs by consolidating and streamlining our product offerings, and combine into an integrated organization driving for functional excellence with the necessary technology linking our business processes with our customers and suppliers.

As part of our 1 LKQ Europe program, we are integrating our European operations as we optimize purchasing, warehousing, systems, logistics and back-office functions, and align our private label products across the segment.

Under the 1 LKQ Europe program, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, the creation of a Europe head office in Switzerland, and the establishment of a shared service center in Poland.

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

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

We are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office.

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 of resources across LKQ Europe.

We have continued the project on schedule after the restart.

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

Our inventory is primarily composed of mechanical aftermarket parts for the repair of vehicles 3 to 15 years old.

Our top selling products include brake pads, discs and sensors, clutches, electrical products such as spark plugs and batteries, steering and suspension products, filters, and oil and automotive fluids.

We currently have over 900,000 unique part numbers.

Our goal is to reduce the complexity of our product portfolio, reduce the number of parts offered and reduce the number of suppliers.

We currently have over 900,000 uniq ue part numbers.

Our goal is to reduce the complexit y of our product portfolio, reduce the number of parts offered and reduce the number of suppliers.

We have phased out or replaced more than 150 brands in the past couple of years.

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In 2021, our top supplier represented 8% of our aftermarket inventory purchases for our Europe segment.

No other suppliers comprised more than 5% of our purchases during 2020.

In 2020, we purchased 94% of our products from companies in Europe.

In 2020, 72% and 17% of our total inventory purchases were made in euros and pounds sterling, respectively.

No other suppliers comprised more than 5% of our purchases.

Further, we purchased 93% of our products from companies in Europe, and 73% and 17% of our total inventory purchases were made in euros and pounds sterling, respectively in 2021.

As part of our 1 LKQ Europe initiatives we are expanding the distribution of our private label products.

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In our Nordic operations, we purchase severely damaged or total loss vehicles from insurance companies, which are transferred to our dismantling facilities or sold to other third party dismantlers.

Information Technology Systems

Our aftermarket operations in Europe use various information technology ("IT") systems.

Our systems are complex and are designed to perform a variety of tasks (depending on the market), including but not limited to customer orders, inventory management, warehouse and logistics, and financial reporting.

Certain of our IT systems can interface with the respective IT systems of our repair shop customers, which enables our customers to identify and order the part required for the repair.

As part of our 1 LKQ Europe strategy to create an integrated European company, we initiated a multi-year program to develop and implement a European wide ERP system, which will reduce the number of IT systems we operate.

A pilot for the ERP system was successfully deployed in our operating unit in Switzerland in the first quarter of 2020.

After a pause during 2020 due to the disruption caused by the COVID-19 pandemic, the implementation of the ERP program has been resumed and will next be tested and installed at our Italian operating unit.

We primarily operate a two-step (i.e.

direct sales to repair shop customers) distribution model in Europe, although certain of our operations, such as in Italy, the Netherlands, Germany, Switzerland, and Hungary, operate partially a three-step (i.e.

direct sales to repair shop customers) distribution model in Europe, although certain businesses located in Italy, the Netherlands, Germany, Switzerland, and Hungary, operate partially a three-step (i.e.

sales to distributors who in turn sell to repair shop customers) distribution model.

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Product is moved through the distribution network on our trucks, vans or via common carrier.

We are building a new central distribution center in the Netherlands, similar to our central distribution centers in Tamworth, England and Sulzbach-Rosenberg, Germany,

that will allow us to consolidate multiple regional distribution centers.

We have built a new central distribution center in the Netherlands, similar to our central distribution centers in Tamworth, England and Sulzbach-Rosenberg, Germany, that will allow us to consolidate multiple regional distribution centers.

We believe that our distribution network is larger than those of any of our principal competitors in Europe.

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We believe we have been able to distinguish ourselves from other alternative parts suppliers primarily through our distribution network, efficient stock management systems and proprietary technology, which allows us to deliver our products quickly, as well as through our product lines and inventory availability, pricing, and service reliability.

Information Technology Systems

Our aftermarket operations in Europe use various information technology ("IT") systems.

Our systems are complex and designed to perform a variety of tasks (depending on the market), including but not limited to customer orders, inventory management, warehouse and logistics, and financial reporting.

Certain of our IT systems can interface with the respective IT systems of our repair shop customers, which enables our customers to identify and order the part required for the repair.

As part of our 1 LKQ Europe strategy to create an integrated European company, we initiated a multi-year program to develop and implement a European wide Enterprise Resource Planning ("ERP") system, which will reduce the number of IT systems we operate.

A pilot for the ERP system was successfully deployed in our operating unit in Switzerland in the first quarter of 2020.

After a pause during 2020 due to the disruption caused by the COVID-19 pandemic, the implementation of the ERP program resumed, and we implemented the new ERP system in Italy in the second half of 2021.

SPECIALTY SEGMENT

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Our Specialty operations reach most major markets in the U.S.

and Canada and serve the following six product segments:

and Canada and serve the following seven product segments:

truck and off-road;

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The acquisition of Warn expanded our presence in the specialty market and created viable points of entry into related markets.

In October 2021, we acquired SeaWide Marine Distribution, Inc.

(“SeaWide”), a leading nationwide wholesale distributor supplying electrical and electronic products for the marine market.

The acquisition of SeaWide enhances our emerging position in the marine market.

The specialty vehicle aftermarket equipment and accessories we distribute and raw materials for products we manufacture are purchased from suppliers located primarily in the U.S., Canada, and China.

Our top selling products are RV appliances & air conditioners, towing hitches, truck bed covers, vehicle protection products, cargo management products, and wheels, tires & suspension products.

Our top selling products are RV appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, cargo management products, and wheels, tires, and suspension products.

Specialty aftermarket suppliers are typically small to medium-sized, independent businesses that focus on a narrow product or market niche.

Due to the highly fragmented supplier base for specialty vehicle aftermarket products, we have limited supplier concentration.

In 2020, approximately 13% of our specialty vehicle aftermarket purchases were made from our top two suppliers to this segment, with our largest supplier providing approximately 8% of our annual inventory purchases.

In 2021, approximately 23% of our specialty vehicle aftermarket purchases were made from our top three suppliers to this segment, with our largest supplier providing approximately 10% of our annual inventory purchases.

No other suppliers comprised more than 5% of our purchases during 2021.

With our 2017 acquisition of Warn, we have internal capabilities to manufacture and source aftermarket winches, hoists, and bumpers.

Most of our Specialty operations utilize an internally developed inventory management and order entry system that interfaces with third party software systems for accounting, transaction processing, data analytics, and reporting.

Overall, the specialty vehicle aftermarket parts and accessories market serves a fragmented customer base composed of RV and specialty automotive dealers, installers, jobbers, builders, parts chains, and mail-order businesses.

Overall, the specialty vehicle aftermarket parts and accessories market serves a fragmented customer base composed of RV, marine, and specialty automotive dealers, installers, jobbers, builders, parts chains, and mail-order businesses.

Our customers are principally small, independent businesses.

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We stage in-person and/or virtual trade shows across the U.S., which provide an opportunity to improve sales through the showcasing of new and innovative products from our vendors to our customers.

Online sales, which represent the majority of our sales, of our Specialty products take place primarily through our ekeystone.com and viantp.com sites and mobile app.

Online sales, which represent the majority of our sales, of our Specialty products take place primarily through our ekeystone.com and viantp.com sites and our mobile app.

These sites provide customers (i) the ability to match products with the make and model of vehicle thus allowing the customer to order the correct part, (ii) product information (e.g.

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states and 9 Canadian provinces, and we ship globally to customers in other countries.

delivery fleet utilizes a third party software provider to optimize delivery routes, and to track the progress of delivery vehicles throughout their runs.

Our delivery fleet utilizes a third party software provider to optimize delivery routes, and to track the progress of delivery vehicles throughout their runs.

Industry participants have a variety of supply choices.

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We compete on the basis of product breadth and depth, rapid and dependable delivery, marketing initiatives, support services, and price.

Information Technology Systems

By utilizing an internally developed system, real-time updates, improvements, and developments can be programmed to fit the business’s ongoing and changing needs.

INTELLECTUAL PROPERTY

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We do not believe that our business is materially dependent on any single item of intellectual property, or any single group of related intellectual property, owned or licensed, nor would the expiration of any particular item or related group of intellectual property, or the termination of any particular intellectual property license agreement, materially affect our business.

See the risk factor " Intellectual property claims relating to aftermarket products could adversely affect our business.

See the risk factor " Intellectual property claims relating to aftermarket products

could adversely affect our business.

" in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the risks related to intellectual property.

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and enhance our culture through efforts aimed at making the workplace more engaging and inclusive.

As of December 31, 2020, we employed approximately 44,000 persons, of which approximately 17,000 were employed in North America and approximately 27,000 were employed outside of North America.

As of December 31, 2021, we employed approximately 46,000 persons, of which approximately 18,000 were based in North America and approximately 28,000 were based outside of North America.

Of our employees in North America, approximately 800 were represented by unions.

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We recruit, hire, promote and retain employees based on merit and demonstrated skills.

With respect to our employee population in the United States, as of December 31, 2020 approximately 42% have self-identified as Asian, Black or African American, Hispanic or Latino, Native American, Pacific Islander or two or more races.

With respect to our employee population in the United States, as of December 31, 2021 approximately 42% h ave self-identified as Asian, Black or African American, Hispanic or Latino, Native American, Pacific Islander or two or more races.

We have a long-standing commitment to equal employment opportunity.

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Our Code of Ethics covers topics such as use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, protecting confidential information, and reporting Code of Ethics violations.

The Code of Ethics reflects our commitment to acting with a high level of integrity and providing guidance for reporting complaints in the event of alleged violations of our policies (including through an anonymous “Speak Up” hotline).

We do not tolerate harassment or retaliation against persons that report improper behavior.

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We offer benefits that support the physical, financial and emotional well-being of our employees.

We offer eligible employees medical, dental and vision coverage, health savings and flexible spending accounts, paid time off, an employee assistance program, an employee assistance fund, voluntary short-term disability insurance, company paid long-term disability insurance, company paid term life insurance, a tuition reimbursement program, a scholarship program for the children of employees, a program to match charitable donations, and retirement plan contributions.

scholarship program for the children of employees, a program to match charitable donations, profit sharing, parental leave, and retirement plan contributions.

Our benefits vary by location and are designed to meet or exceed local laws and to be competitive in the marketplace.

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We have training programs across all levels of the Company to meet the needs of various roles, specialized skill sets and departments across the Company.

We provide legal and ethics compliance education as well as general workplace safety and training to our employees.

We are committed to the security and confidentiality of our employees’ personal information and employ software tools and periodic cyber security training to promote security and information protection.

We provide legal and ethics compliance education as well as general workplace safety training to our employees.

We are committed to the security and confidentiality of our employees’ and customers' personal information and employ software tools and periodic cyber security training to promote security and information protection.

As of December 31, 2021, our operations included approximately 1,600 facilities, most of which are leased.

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Our North American headquarters, in Nashville, Tennessee, performs certain centralized functions for our North American operations, including accounting, procurement, and information systems support.

Our Europe headquarters are located in Zug, Switzerland.

Our European headquarters are located in Zug, Switzerland.

Our European operations are distributed throughout Europe with main offices in Tamworth, England;

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In addition to these offices, we have two national distribution centers in Tamworth, England, totaling 1,025,000 and 250,000 square feet, respectively, which house inventory to supply the hubs and branches of our U.K.

and Republic of Ireland operations, and one distribution center in Sulzbach-Rosenberg, Germany which supplies our operations in Germany, Austria, Italy, the Czech Republic and Switzerland.

The shared service center in Katowice, Poland should begin operations in the second half of 2021, and the central distribution center in the Netherlands is scheduled to be fully operational by 2023.

and Republic of Ireland operations, and one distribution center totaling 900,000 square feet in Sulzbach-Rosenberg, Germany which supplies our operations in Germany, Austria, Italy, the Czech Republic and Switzerland.

The shared service center in Katowice, Poland began operations in the second half of 2021, and the central distribution center in the Netherlands will begin operations in 2022.

Our Specialty operations maintain primary procurement, accounting and finance functions in Exeter, Pennsylvania.

Certain back-office support functions for our segments are performed in Bengaluru, India.

Additionally, we operate an aftermarket parts warehouse in Taiwan to aggregate inventory for shipment to our locations in North America.

Additionally, we operate an aftermarket parts warehouse in Taiwan to aggregate inventory for shipment to our locations in North America and manage supplier relationships and purchase orders.

Our operations and properties are subject to laws and regulations relating to the protection of the environment in the U.S.

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a significant number of products for sale and distribution.

See the risk factors “ If significant tariffs or other restrictions are placed on products or materials we import or any related counter-measures are taken by countries to which we export products, our revenue and results of operations may be materially harmed ” and “ Intellectual property claims relating to aftermarket products could adversely affect our business ” in Part 1, Item 1A of this Annual Report on Form 10-K for further information regarding importation risks.

See the risk factors “ If significant tariffs or other restrictions are placed on products or materials we import or any related counter-measures are taken by countries to which we export products, our revenue and results of operations may be materially harmed ” and “ Intellectual property claims relating to aftermarket products could adversely affect our business ” in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding importation risks.

Our business processes and operations are subject to laws and regulations relating to privacy and data protection.

See the risk factor “ The costs of complying with the requirements of laws pertaining to the privacy and security of personal information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations ” in Part 1, Item 1A of this Annual Report on Form 10-K for further information about privacy and data protection risks.

See the risk factor “ The costs of complying with the requirements of laws pertaining to the privacy and security of personal information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations ” in Part I, Item 1A of this Annual Report on Form 10-K for further information about privacy and data protection risks.

Some jurisdictions have enacted laws to restrict or prohibit the sale of alternative vehicle parts.

See the risk factor “ Existing or new laws and regulations, or changes to enforcement or interpretation of existing laws or regulations, may prohibit, restrict or burden the sale of aftermarket, recycled, refurbished or remanufactured products ” in Part 1, Item 1A of this Annual Report on Form 10-K for further information concerning regulatory restrictions on the sale of our products.

See the risk factor “ Existing or new laws and regulations, or changes to enforcement or interpretation of existing laws or regulations, may prohibit, restrict or burden the sale of aftermarket, recycled, refurbished or remanufactured products ” in Part I, Item 1A of this Annual Report on Form 10-K for further information concerning regulatory restrictions on the sale of our products.

We have thousands of employees located in the U.S.

and many other countries and are subject to labor and employment laws in numerous jurisdictions.

See the risk factor “ Our business may be adversely affected by union activities and labor and employment laws ” in Part 1, Item 1A of this Annual Report on Form 10-K for further information regarding these labor and employment risks.

See the risk factor “ Our business may be adversely affected by union activities and labor and employment laws.

” in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding these labor and employment risks.

Our operating results are subject to quarterly variations based on a variety of factors, influenced primarily by seasonal changes in weather patterns.

2 unchanged sentences

Our specialty vehicle operations typically generate greater revenue and earnings in the second quarter, when vehicle owners tend to install this equipment, and lower revenue and earnings in the fourth quarter, when the number of RV trips tends to decline as a result of the winter weather.

However, the COVID-19 pandemic created an increased demand in the RV market in 2020, and the effect on demand extended into the fourth quarter.

Additionally, seasonality may affect our product mix, for example, collision parts tend to have higher demand in the winter as there are generally higher accident rates.

However, the COVID-19 pandemic created an increased demand in the RV market in 2020 and 2021, and the effect on demand extended into the fourth quarter of 2021.

Additionally, seasonality may affect our product mix;

for example, collision parts tend to have higher demand in the winter as there are generally higher accident rates.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS

21 unchanged sentences

The employees at our facilities are encouraged to volunteer in local community activities, and we have established a charitable foundation to distribute funds to local causes.

We have made substantial progress in the area of corporate governance.

Our Board of Directors refreshment process has resulted in half of our current Board being added since August 2018, and we have three women on our Board.

We continue to make substantial progress in the area of corporate governance.

Our Board of Directors refreshment process has resulted in over half of our current Board being added since August 2018, and we have three women on our Board.

Additionally, over 80% of our directors are independent.

3 unchanged sentences

Our Board of Directors adopted a revised Code of Ethics in 2019 to help ensure that everyone at LKQ is clear on our mission, values and guiding ethical principles.

The Code of Ethics covers a variety of topics, including the health and safety of our employees, fair dealing with our customers, suppliers and competitors, anti-bribery rules, conflict of interest prohibitions, and protecting personal data.

The Code of Ethics covers a variety of topics, including the use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, protecting confidential information, and reporting Code of Ethics violations.

It is now available in over 20 languages through our website at www.lkqcorp.com .

We also now operate one single anonymous global Speak Up line, available in every language in which we routinely conduct business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business