What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 100 added, 86 removed, 470 unchanged (28% of the section changed)

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Our operating results and financial condition have been and will likely continue to be adversely affected by the COVID-19 pandemic and could be adversely affected by other public health emergencies.

The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our business and operations.

Government authorities in the jurisdictions in which we operate have recommended or mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating in various locations, travel restrictions, shelter-in-place orders, and similar measures.

These measures have resulted in a significant reduction in miles driven.

As a result, we have experienced and expect to continue to experience unpredictable reductions in demand for our products.

Although we have been permitted to continue to operate in most of the jurisdictions in which we operate, including in jurisdictions that have mandated the closure of certain businesses, there is no assurance that we will be permitted to continue operations under future government orders or other restrictions.

In order to reduce costs in an attempt to offset reductions in revenue, we have implemented various cost reductions to align with the lower level of economic activity, including employee layoffs and furloughs.

These actions may result in a significant increase in employment-related claims and the associated risks and expenses related thereto.

Due to the self-insured nature of our health insurance program, we may be subject to substantial increases in healthcare costs in the event that a significant number of our employees become ill and require medical treatment due to COVID-19 infections.

Also, we may suffer workforce shortages and/or lose the services of key management personnel due to employees contracting the COVID-19 virus or due to employees being subject to quarantine because of possible exposure to a person who tested positive for the virus.

Although we have been taking precautions as recommended by governmental agencies to protect the health and safety of our employees who are continuing to work, we may be subject to claims that we did not take adequate or appropriate measures in this regard.

We have also implemented remote work arrangements for many of our employees, which may expose us to an increased risk of cyber-attack or other cyber-security threats.

In the event that the pandemic subsides and business increases, there can be no assurance that we will be able to recall or rehire the appropriate number of employees with the proper skill sets to handle the increase in business.

We are continuing to evaluate the applicability of certain financial assistance and relief programs from foreign governments.

While we have pursued and will continue to pursue this government assistance where possible and advisable, there is no guarantee as to what amount, if any, we would qualify for and receive in the future.

The COVID-19 pandemic is adversely affecting our business partners, including our suppliers and customers.

Depending on the extent of the adverse effects, we may not be able to source sufficient inventory to provide products to our customers even at reduced-demand levels, and the ability of our customers to continue operating or to pay us for our products may be disrupted.

Depending on the length and severity of the adverse effects on our business of the COVID-19 pandemic, we may determine that our goodwill or other long-lived assets have become impaired or that the carrying value of our receivables and inventory may no longer be recoverable.

If either or both occur, we may incur significant charges to our pre-tax income.

Depending on the length and severity of the adverse effects on our business of the COVID-19 pandemic, we may not satisfy one or more of the financial or other covenants in our credit facility.

Failure to satisfy any such covenant could inhibit our ability to borrow money under our credit facility should we need to do so or could result in a default under our credit facility.

The COVID-19 pandemic has caused severe macroeconomic disruptions, including substantial price volatility in the equities markets, including the price of our common stock, and concerns about the liquidity of the credit markets.

These macroeconomic disruptions may also affect our ability to borrow money or otherwise raise cash.

There is uncertainty with respect to the duration and breadth of the COVID-19 pandemic.

Moreover, even after the mitigation measures are relaxed by government authorities, the timing and extent of the recovery of the economies in the countries where we operate is difficult to estimate.

Thus, the ultimate impact on our business, financial results and financial condition cannot reasonably be estimated at this time.

In addition, even if the adverse effects of the COVID-19 pandemic subside, there is the possibility of a recurrence of COVID-19 or the emergence of a different pandemic or health emergency with similar economic disruptions.

Certain jurisdictions are reinstating mitigation measures at least through February 2021.

The COVID-19 pandemic resulted in additional risks that could materially adversely affect our business, financial condition, results of operations, and/or cash flows.

Efforts to combat the virus have been complicated by viral variants and uneven access to, and acceptance and effectiveness of, vaccines globally.

The pandemic resulted in governments and other authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business closures.

These measures have impacted and may continue to impact our workforce and operations and the operations of our customers and suppliers.

These measures also resulted in a reduction in miles driven.

As a result, we have experienced and may continue to experience unpredictable reductions in demand for our products.

We were permitted to operate in most of the jurisdictions we serve, including in jurisdictions that mandated the closure of certain businesses.

However, there is no assurance that we will be permitted to continue operations under future government orders or other restrictions, and although certain restrictions related to the COVID-19 pandemic have eased, uncertainty continues to exist regarding such measures and potential future measures.

Continued uncertainties related to the magnitude, duration, and persistent effects of the COVID-19 pandemic may significantly adversely affect our business.

These uncertainties include, among other things:

the duration and impact of the resurgence in COVID-19 cases;

the emergence, contagiousness, and threat of new and different strains of virus;

the availability, acceptance, and effectiveness of vaccines;

additional closures or other actions as mandated or otherwise made necessary by governmental authorities, including employee vaccine mandates;

disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and a prolonged delay in resumption of operations by one or more key suppliers, or the

failure of any key supplier;

an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID-19 pandemic;

our ability to meet commitments to customers on a timely basis as a result of increased costs and supply and transportation challenges;

increased logistics costs;

additional operating costs due to continued remote working arrangements, adherence to social distancing guidelines, and other COVID-19 related challenges;

increased risk of cyberattacks on network connections used in remote working arrangements;

absence of employees due to illness;

and the impact of the pandemic on our customers and suppliers.

We have developed and implemented business continuity plans and health and safety protocols in an effort to mitigate the negative impacts we have experienced related to COVID-19 to our employees and our business.

An inability to respond to the ever changing impacts of COVID-19 to our employees and business could negatively impact our financial results.

In addition, even if the adverse effects of the COVID-19 pandemic subside, there is the possibility of the emergence of a different pandemic or health emergency with similar economic disruptions.

These factors, and others that are currently unknown or considered immaterial, could materially and adversely affect the Company’s business, liquidity, results of operations, and financial position.

Our operating results and financial condition have been and could continue to be adversely affected by the economic, political and social conditions in the U.S., Europe and elsewhere, as well as the economic health of vehicle owners and numbers and types of vehicles sold.

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Many of these factors are outside of our control.

If any of these conditions worsen, our business, results of operations, financial condition and cash flows could be adversely affected.

If inflationary pressures or any of these other conditions worsen, our business, results of operations, financial condition and cash flows could be adversely affected.

In addition, economic conditions, including decreased access to credit, may result in financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable events for our customers, suppliers, logistics and other service providers and financial institutions that are counterparties to our credit facilities and hedge transactions.

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Following the adoption of the TCA, duties have increased on some of the products we import into the U.K., and we have observed shipment delays, particularly with respect to the products we supply to our business in the ROI.

While the extent and impact of these issues is not clear at this point, they could have adverse impacts on our business.

While the long-term extent and impact of these issues remains unclear at this point, they could have adverse impacts on our business.

Notwithstanding the TCA, there continues to be uncertainty regarding the effects of Brexit on our U.K.

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and ROI companies, and disagreements about the interpretation of the TCA.

We also have a presence in the Ukraine and are monitoring the political situation there carefully.

Additionally, a number of our suppliers are based in China and Taiwan and so increasing strains and any political repercussions may have implications upon our supply chain.

The widespread use of social media platforms has increased the speed and scope that information or misinformation about us can be disseminated and could hamper our ability to correct misrepresentations or to otherwise respond effectively to negative publicity.

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Business transacted on online marketplaces has been increasing, which presents additional competitive pressures on us;

in addition, facilitators of these online marketplaces control access to this channel and may prohibit us from participating for various reasons.

in addition, facilitators of these online marketplaces control access to this channel and may prohibit us from participating.

and Europe, local companies have formed cooperative efforts in an attempt to more efficiently compete against us in all aspects of our business.

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We believe that a majority of collision parts by dollar amount are supplied by OEMs, with the balance being supplied by distributors of alternative aftermarket, recycled, refurbished and remanufactured collision parts like us.

therefore able to exert pricing pressure in the marketplace.

The OEMs are therefore able to exert pricing pressure in the marketplace.

We compete with the OEMs primarily on price and to a lesser extent on service and quality.

Our operations worldwide are dependent upon clear laws and regulation regarding the manufacture of automotive parts in competition with OEM parts.

From time to time, the OEMs have engaged in efforts seeking to increase OEM market share and to restrict consumers’ choice to use recycled or aftermarket parts to repair consumers’ vehicles.

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To the extent OEMs and other manufacturers obtain design patents or trademarks and are successful in asserting claims of infringement of these patents or trademarks against us, we could be restricted or prohibited from selling certain aftermarket products, which could have an adverse effect on our business.

In the event that our license agreements, or other similar license arrangements with OEMs or others, are terminated or we are unable to agree upon renewal terms, we may be

subject to costs and uncertainties of litigation as well as restrictions on our ability to sell aftermarket parts that replicate parts covered by those design patents or trademarks.

In the event that our license agreements, or other similar license arrangements with OEMs or others, are terminated or we are unable to agree upon renewal terms, we may be subject to costs and uncertainties of litigation as well as restrictions on our ability to sell aftermarket parts that replicate parts covered by those design patents or trademarks.

We have filed, and may file in the future, challenges to OEM patents, including patents owned by OEMs with which we have patent license agreements.

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Customs and Border Protection has taken the position that certain of our aftermarket parts infringe certain OEM trademarks and seized our aftermarket parts as we attempted to import them into the U.S.

We incur costs and expenses attempting to convince Customs and Border Protection to release the seized goods and in litigation where we seek a determination of non-infringement.

In the event we are unsuccessful in obtaining their release, such goods may be subject to forfeiture and other penalties.

We have incurred costs and expenses convincing Customs and Border Protection to release the seized goods and in litigation where we sought a determination of non-infringement.

In the event Customs and Border Protection seizes our products again in the future, we may be unsuccessful in obtaining their release, and such goods may be subject to forfeiture and other penalties, and we would incur legal fees in contesting those seizures.

Aftermarket products certifying organizations may revoke the certification of parts that are the subject of the intellectual property disputes.

Lack of certification may negatively impact us because many major insurance companies recommend or require the use of aftermarket products only if they have been certified by an independent certifying organization.

If the number of vehicles involved in accidents declines or the number of cars being repaired declines, or the mix of the types of vehicles in the overall vehicle population changes, our business could suffer.

If the number of vehicles involved in accidents declines or the number of vehicles being repaired declines, or the mix of the types of vehicles in the overall vehicle population changes, our business could suffer.

Our business depends on vehicle accidents, mechanical failures and routine maintenance for both the demand for repairs using our products and the supply of recycled, remanufactured and refurbished parts.

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Additionally, an increase in fuel prices may cause the number of vehicles on the road, the number of miles driven, and the need for mechanical repairs and maintenance to decline, as motorists seek alternative transportation options.

Mild weather conditions, particularly during winter months, tend to result in a decrease in vehicle accidents.

conditions, particularly during winter months, tend to result in a decrease in vehicle accidents.

Moreover, legislation banning the use of handheld cellular telephones or other electronic devices while driving could lead to a decline in accidents.

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Periods of decreased sales could result in a reduction in the number of vehicles on the road and consequently fewer vehicles involved in accidents or in need of mechanical repair or maintenance.

Substantial further declines in automotive sales in the future could have a material adverse effect on our business, results of operations and/or financial condition.

Substantial declines in automotive sales in the future could have a material adverse effect on our business, results of operations and/or financial condition.

In addition, if vehicle population trends result in a disproportionately high number of older vehicles on the road, insurance companies may find it uneconomical to repair such vehicles or there could be less costly repairs.

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After we dismantle a salvage vehicle for wholesale parts and after vehicles have been processed in our self service retail business, the remaining vehicle hulks are sold to scrap processors and other remaining metals are sold to processors and brokers of metals.

In addition, we receive "crush only" vehicles or vehicles to be further processed from other

companies, including OEMs, which we dismantle and which generate scrap metal and other metals, in accordance with the guidelines of our agreements with the providing company.

In addition, we receive "crush only" vehicles or vehicles to be further processed from other companies, including OEMs, which we dismantle and which generate scrap metal and other metals, in accordance with the guidelines of our agreements with the providing company.

The prices of scrap and other metals have historically fluctuated, sometimes significantly, due to market factors.

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To the extent that the prices of metals decrease materially or buyers stop purchasing metals, our revenue from such sales will suffer and a write-down of our inventory value could be required.

For example, in 2018 China imposed stringent purity restrictions on the importation of various types of solid waste allegedly in an effort to reduce environmental pollution.

The cost of our wholesale recycled and our self service retail inventory purchases will change as a result of fluctuating scrap metal and other metals prices.

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Our North American business is dependent on a relatively small number of suppliers of aftermarket products, a large portion of which are sourced from Taiwan.

Our European business also acquires product from Asian sources.

Our European business also acquires products from Asian sources.

We incur substantial freight costs to import parts from our suppliers, many of which are located in Asia.

If the cost of freight rose, we might not be able to pass the cost increases on to our customers.

The cost of freight and shipping containers has risen in 2021 and if the cost of freight and shipping containers continue to rise, we might not be able to pass the cost increases on to our customers.

Furthermore, although alternative suppliers exist for substantially all aftermarket products distributed by us, the loss of any one supplier could have a material adverse effect on us until alternative suppliers are located and have commenced manufacturing and providing the relevant products.

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Since then, legislation has been introduced seeking to establish national uniform requirements in this area, including a uniform definition of a salvage vehicle.

The vehicle recycling industry will generally favor a uniform definition, since it will avoid inconsistencies across state lines, and will generally favor a definition that expands the number of

damaged vehicles that qualify as salvage.

The vehicle recycling industry will generally favor a uniform definition, since it will avoid inconsistencies across state lines, and will generally favor a definition that expands the number of damaged vehicles that qualify as salvage.

However, certain interest groups, including repair shops and some insurance associations, may oppose this type of legislation.

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In Europe, we acquire products from a wide variety of suppliers.

As vehicle technology changes, some parts will become more complex and the design or technology of those parts may be covered by patents or other rights that make it difficult for aftermarket suppliers to produce for sale to companies such as ours.

As vehicle technology changes, some parts will become more complex and the design or technology of those parts may be covered by patents or other rights that make it difficult for manufacturers to supply such aftermarket parts to companies such as ours.

The complexity of the parts may include software or other technical aspects that make it difficult to identify what is wrong with the vehicle.

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Our arrangements with third party vendors and service providers may cause us financial and reputational harm if those third parties fail to satisfy their obligations to us, including their obligations to maintain and protect the security and confidentiality of our information and data or the information and data relating to our customers.

See the risk factor entitled “ The costs of complying with the requirements of laws pertaining to the privacy and security of personnel information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations ” for further information about the security and confidentiality of our information and data.

Further, noncompliance with contract terms by our third party vendors or service providers could expose us to liability to other third parties or our employees.

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As of December 31, 2021, our total goodwill subject to future impairment testing was $4.5 billion.

For further discussion of our annual impairment test, see "Goodwill Impairment" in the Critical Accounting Policies and Estimates section of Item 7 in this Annual Report on Form 10-K.

For further discussion of our annual impairment test, see "Goodwill Impairment" in the Critical Accounting Estimates section of Part II, Item 7 and "Intangible Assets" in Note 3, "Summary of Significant Accounting Policies" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Except for indefinite-lived intangibles, we amortize other intangible assets over the assigned useful lives, each of which is based upon the expected period to be benefited.

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this program will present a number of execution challenges.

The COVID-19 pandemic has also impacted certain 1 LKQ Europe initiatives resulting in minor delays of certain initiatives.

In addition to acquisitions, we have divested, and will continue to divest, certain businesses that do not meet our performance standards.

The COVID-19 pandemic impacted certain 1 LKQ Europe initiatives resulting in minor delays in 2020.

In addition to acquisitions, we have divested, and will continue to divest, certain businesses, either because they do not meet our performance standards or for other reasons.

As a result of a divestment, we may not recover the carrying value of our investment in the divested business;

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We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business.

As of December 31, 2020, we had approximately $967 million aggregate principal amount of secured debt outstanding and approximately $2.4 billion of availability under our credit agreement ($2.5 billion of availability reduced by $71 million of amounts outstanding under letters of credit).

In addition, we had approximately $1.8 billion aggregate principal amount of unsecured debt outstanding comprised of €500 million ($611 million) aggregate principal amount of 3.875% senior notes due April 1, 2024 (the "Euro Notes (2024)"), and €1.0 billion ($1.2 billion) aggregate principal amount consisting of €750 million of 3.625% senior notes due 2026 (the "Euro Notes (2026)") and €250 million of 4.125% senior notes due 2028 (the "Euro Notes (2028)," together with the 2026 notes, the "Euro Notes (2026/28)," and together with the Euro Notes (2024), and Euro Notes (2026), the "senior notes").

As of December 31, 2021, we had approxi mately $1,887 million aggregate principal amount of secured debt outstanding and approximate ly $1,194 million of availability under our credit agreement ($1,263 million of availability reduced by $69 million of amounts outstanding under letters of credit).

In addition, we had approximately $853 million aggregate principal amount of unsecured debt outstanding comprised o f €500 million ($569 million) aggregate principal amount of 3.875% senior notes due April 1, 2024 (the "Euro Notes (2024)"), and €250 million ($284 million) of 4.125% senior n otes due 2028 (the "Euro Notes (2028)," and together with the Euro Notes (2024), the "senior notes").

Borrowings under the credit agreement mature in January 2024.

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Our credit agreement will permit, subject to specified conditions and limitations, the incurrence of a significant amount of additional indebtedness under the existing agreement.

As of December 31, 2020, we would have been able to incur an additional $2.4 billion of indebtedness under our credit agreement ($2.5 billion of availability reduced by $71 million of amounts outstanding under letters of credit).

As of December 31, 2021, we would have been able to incur an additional $1,194 million of indebtedness under our credit agreement ($1,263 million of availability reduced by $69 million of amounts outstanding under letters of credit).

If we or our subsidiaries incur additional debt, the risks associated with our substantial leverage and the need to service such debt would increase.

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We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and

capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness.

These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

If our operating results and

available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

We may not be able to consummate those dispositions or to obtain the proceeds that we hope to realize from them, and these proceeds may not be adequate to meet any debt service obligations then due.

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If we refinance or restructure our debt, we may incur charges to write off the unamortized portion of deferred debt issuance costs from a previous financing, or we may incur charges related to hedge ineffectiveness from our interest rate swap obligations.

There are restrictions in the indenture that governs the Euro Notes (2024), Euro Notes (2026) and Euro Notes (2028) on our ability to refinance such notes prior to January 1, 2024, April 1, 2021, and April 1, 2023, respectively.

There are restrictions in the indenture that governs the Euro Notes (2024) and Euro Notes (2028) on our ability to refinance such notes prior to January 1, 2024 and April 1, 2023, respectively.

We could refinance the notes through open market purchases, subject to a limitation in our credit agreement on the amount of such purchases.

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Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly and could affect the value of our senior notes.

Certain borrowings under our credit agreement and the borrowing under our accounts receivable securitization facility are at variable rates of interest and expose us to interest rate risk.

Certain borrowings under our credit agreement are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

Moreover, changes in market interest rates could affect the trading value of the senior notes.

Certain of our variable rate debt, including our revolving credit facility, currently uses the London Interbank Offered Rate ("LIBOR") as a benchmark for establishing the interest rate.

LIBOR is the subject of proposals for reform.

These reforms and other pressures may cause LIBOR to disappear entirely, potentially as soon as the end of 2021, or to perform differently than in the past.

The consequences of these developments with respect to LIBOR cannot be entirely predicted but could result in an increase in the cost of our variable rate debt.

Because of reforms relating to the use of the London Interbank Offered Rate ("LIBOR") as a benchmark for establishing the interest rate and the move toward risk free rates, we recently amended our credit facility to provide that loans denominated in euros will use the European Money Markets Institute as a benchmark for establishing the interest rate, swingline and revolving loans denominated in Pound Sterling will use the Sterling Overnight Index Average ("SONIA") and loans denominated in Swiss Francs will use the Swiss Average Rate Overnight as administered by SIX Swiss Exchange AG.

We expect to amend our credit facility in the future to incorporate other risk free rates for those loans that still bear interest at LIBOR plus the Applicable Margin as the syndicated loan market continues to transition away from LIBOR.

The consequences of a move away from LIBOR cannot be entirely predicted but could result in an increase in the cost of our variable rate debt.

Repayment of our indebtedness, including our senior notes, is dependent on cash flow generated by our subsidiaries.

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Actions taken by the rating agencies can include maintaining, upgrading, or downgrading the current rating or placing us on a watch list for possible future downgrading.

believe our current credit ratings enhance our ability to borrow funds at favorable rates.

We believe our current credit ratings enhance our ability to borrow funds at favorable rates.

A downgrade in our current credit rating from a rating agency could adversely affect our cost of capital by causing us to pay a higher interest rate on borrowed funds under our credit facilities.

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In any such event, because the senior notes are not secured by any of our assets or the equity interests in subsidiary guarantors, it is possible that there would be no assets remaining from which claims by holders of the senior notes could be satisfied or, if any assets remained, they might be insufficient to satisfy claims fully.

As of December 31, 2020 , we had approximately $967 million aggregate principal amount of secured debt outstanding and approximately $2.4 billion of availability under our credit agreement ($2.5 billion of availability reduced by $71 million of amounts outstanding under letters of credit).

As of December 31, 2021, we had approximately $1,887 million aggregate principal amount of secured debt outstanding and approximately $1,194 million of availability under our credit agreement ($1,263 million of availability reduced by $69 million of amounts outstanding under letters of credit).

United States federal and state statutes allow courts, under specific circumstances, to void the senior notes and the guarantees, subordinate claims in respect of the senior notes and the guarantees, and require holders of the senior notes to return payments received from us or the guarantors.

Our direct and indirect domestic subsidiaries that are obligors under the credit agreement guarantee the obligations under our senior notes.

In addition, certain subsidiaries of the issuer of the Euro Notes (2024) guarantee the obligations under the Euro Notes (2024).

The issuance of our senior notes and the issuance of the guarantees by the guarantors may be subject to review under state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which bankruptcy is not involved, were commenced at some future date by, or on behalf of, our unpaid creditors or the unpaid creditors of a guarantor.

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Thus, if the guarantees were legally challenged, any guarantee could be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than reasonably equivalent value or fair consideration.

If a court were to void the issuance of the senior notes or any guarantee, a holder of the senior notes would no longer have any claim against us or the applicable guarantor.

If a court were to void the issuance of the senior notes or any guarantee, a holder of the senior notes would no longer have any claim against us or the applicable

In the event of a finding that a fraudulent transfer or conveyance occurred, a holder of the senior notes may not receive any repayment on the senior notes.

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Not all of our subsidiaries have guaranteed our credit agreement or our senior notes, and the assets of our non-guarantor subsidiaries may not be available to make payments on such obligations.

Not all of our subsidiaries have guaranteed the credit agreement, Euro Notes (2024), Euro Notes (2026), and Euro Notes (2028).

Not all of our subsidiaries have guaranteed the credit agreement, Euro Notes (2024) and Euro Notes (2028).

In the event that any non-guarantor subsidiary becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of that subsidiary before any of those assets are made available to the lenders under the credit agreement or the holders of the senior notes.

Consequently, claims in respect of the credit agreement and the senior notes are structurally subordinated to all of the liabilities of our subsidiaries that are not guarantors of such instruments, including trade payables, and any claims of third party holders of preferred equity interests, if any, in our non-guarantor subsidiaries.

As of the most recent practicable date, our subsidiaries that are not borrowers under or do not guarantee the credit agreement represented approximately 50% and 24% of our total revenue and operating income, respectively.

In addition, these non-guarantor subsidiaries represented approximately 55% and 60% of our total assets and total liabilities, respectively (excluding, in each case, intercompany amounts).

As of the most recent practicable date, our subsidiaries that do not guarantee the credit agreement had approximately $1.9 billion of outstanding indebtedness.

The group of subsidiaries that does not guarantee the Euro Notes (2024) is substantially similar to the group that does not guarantee the Euro Notes (2026) and Euro Notes (2028), except that, in addition to the issuer of the Euro Notes (2024), there are four subsidiaries in the group that do not guarantee the Euro Notes (2026) and Euro Notes (2028) that guarantee the Euro Notes (2024).

As of the most recent practicable date, our subsidiaries that are not borrowers under or do not guarantee the credit agreement represented approx imately 50% and 34% o f our total revenue

and operating income, respectively.

In addition, these non-guarantor subsidiaries represented approximat ely 53% and 62% of our total assets and total liabilities, respectively (excluding, in each case, intercompany amounts).

As of the same date, our subsidiaries that do not guarantee the credit agreement had approximately $2,000 million of outstanding indebtedness (which includes $1,085 million of borrowings under our revolving credit facilities by foreign subsidiaries that are borrowers under these facilities).

The group of subsidiaries that does not guarantee the Euro Notes (2024) is substantially similar to the group that does not guarantee the Euro Notes (2028), except that, in addition to the issuer of the Euro No tes (2024), there are four subsidiaries in the group that do not guarantee the Euro Notes (2028) that guarantee the Euro Notes (2024).

We may not be able to repurchase the senior notes upon a change of control or pursuant to an asset sale offer.

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Such a change of control would also be an event of default under our credit agreement.

In order to obtain sufficient funds to pay amounts due under the credit agreement and the purchase price of the

outstanding senior notes, we expect that we would have to refinance our indebtedness.

In order to obtain sufficient funds to pay amounts due under the credit agreement and the purchase price of the outstanding senior notes, we expect that we would have to refinance our indebtedness.

We cannot assure you that we would be able to refinance our indebtedness on reasonable terms, if at all.

Our failure to offer to purchase all outstanding senior notes or to purchase all validly tendered senior notes would be an event of default under the indenture.

Our failure to offer to purchase all outstanding senior notes or to purchase all validly tendered senior notes would be an event of default under the indentures governing the senior notes.

Such an event of default may cause the acceleration of our other debt.

Our other debt also may contain restrictions or repayment requirements with respect to specified events or transactions that constitute a change of control under the indenture.

Our other debt also may contain restrictions or repayment requirements with respect to specified events or transactions that constitute a change of control under the indentures governing the senior notes.

The definition of change of control in the indentures governing the senior notes includes a phrase relating to the sale of “all or substantially all” of our assets.

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The liquidity of any trading market in the senior notes, and the market price quoted for the senior notes, may be adversely affected by changes in the overall market for these types of securities, changes in interest rates, changes in our ratings, and changes in our financial performance or prospects or in the prospects for companies in our industries generally.

The amount and frequency of our share repurchases and dividend payments may fluctuate.

The amount, timing and execution of our share repurchase program may fluctuate based on our priorities for the use of cash for other purposes such as operational spending, capital spending, acquisitions or repayment of debt.

Changes in cash flows, tax laws and our share price could also impact our share repurchase program and other capital activities.

Additionally, decisions to return capital to shareholders, including through our repurchase program or the issuance of dividends on our common stock, remain subject to determination of our Board of Directors that any such activity is in the best interests of our shareholders and is in compliance with all applicable laws and contractual obligations.

Legal and Regulatory Risks

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Additionally, Congress could enact federal legislation restricting the use of aftermarket or recycled automotive products used in the course of vehicle repairs.

In Europe, the Motor Vehicle Block Exemption Regulations (MVBER) regulate the competition rules on automotive spare parts.

The 2012 MVBER are due to expire in May 2023.

The current indications are that the 2012 MVBER will be extended for 5 years, with additional guidance to be provided by the EU Commission in a supplementary guidance regarding new technology and software provided by OEMs.

The new EU proposals with respect to MVBER will be proposed for consultation in mid-2022.

The Federal Trade Commission has issued guides that regulate the use of certain terms such as “rebuilt” or “remanufactured” in connection with the sale of automotive parts.

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Third parties may also make claims against owners or operators of properties, or successors to such owners or operators, for personal injuries and property damage associated with releases of hazardous or toxic substances.

Contamination resulting from vehicle recycling processes can include soil and ground water contamination from the release, storage, transportation, or disposal of gasoline, motor oil, antifreeze, transmission fluid, chlorofluorocarbons ("CFCs") from air conditioners, other hazardous materials, or metals such as aluminum, cadmium, chromium, lead, and mercury.

Contamination resulting from vehicle recycling processes can include soil and ground water contamination from the release, storage, transportation, or disposal of gasoline, motor oil, antifreeze, transmission fluid, chlorofluorocarbons from air conditioners, other hazardous materials, or metals such as aluminum, cadmium, chromium, lead, and mercury.

Contamination from the refurbishment of chrome plated bumpers can occur from the release of the plating material.

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Our costs of complying with current and future environmental and health and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances, may adversely affect our business, results of operations, or financial condition.

We may be adversely affected by legal, regulatory or market responses to global climate change.

Growing concern over climate change has led policy makers in the U.S.

to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements on greenhouse gas emissions.

Such laws, if enacted, are likely to impact our business in a number of ways.

For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell.

We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions.

Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers.

Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows.

Moreover, the perspectives of our customers, suppliers, stockholders, employees, community partners, regulatory agencies and other stakeholders regarding climate change are evolving.

These stakeholders are increasingly requesting disclosures and actions relating to not only climate change but other environmental and social matters and corporate governance practices.

The increase in costs to comply with such evolving expectations, including any rules or regulations resulting from these evolving expectations, as well as any risk of noncompliance, could adversely impact us.

Our amended and restated bylaws provide that the courts in the State of Delaware are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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In addition, countries may impose other restrictions on the importation of products.

For example, in 2018 China imposed stringent purity restrictions on the importation of various types of solid waste allegedly in an effort to reduce environmental pollution.

Governmental agencies may refuse to grant or renew our operating licenses and permits

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General Risks

Our key management personnel are important to successfully manage our business and achieve our objectives.

Our employees are important to successfully manage our business and achieve our objectives.

Our future success depends in large part upon the leadership and performance of our executive management team and key employees at the operating level.

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If we lose the services of any of our key employees at the operating or regional level, we may not be able to replace them with similarly qualified personnel, which could harm our business.

In addition, to the extent wage inflation occurs in jurisdictions in which we operate, we may not be able to retain key employees or we may experience increased costs.

In addition, we have experienced wage inflation in the jurisdictions in which we operate.

An inability to respond to these inflationary pressures could impact our ability to retain key employees or we may experience increased costs due to difficulties related to hiring and retaining employees.

We operate in foreign jurisdictions, which exposes us to foreign exchange and other risks.

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In the event that we decide to switch providers or to implement upgrades or replacements to our own systems, we may be unsuccessful in the development of our own systems or we may underestimate the costs and expenses of switching providers or developing and implementing our own systems.

Also, our revenue may be hampered during the period of implementing an

alternative system, which period could extend longer than we anticipated.

Also, our revenue may be hampered during the period of implementing an alternative system, which period could extend longer than we anticipated.

We are in the midst of a systems conversion project for our European businesses, which will be subject to all of these risks.

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Many foreign countries and governmental bodies, including the European Union, Canada and other jurisdictions where we conduct business, have laws and regulations concerning the collection and use of PII and other data obtained from their residents or by businesses operating within their jurisdictions that are more restrictive than those in the U.S.

Additionally, the European Union adopted the General Data Protection Regulation ("GDPR") that will impose more stringent data protection requirements for processors and controllers of personal data, including expanded disclosures about how PII is to be used, limitations on retention of PII, mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities.

The GDPR became effective in May 2018, and there can be no assurance that we have timely implemented all processes required for full compliance with the regulation.

Additionally, the European Union adopted the General Data Protection Regulation ("GDPR") that imposes more stringent data protection requirements for processors and controllers of personal data, including expanded disclosures about how PII is to be used, limitations on retention of PII, mandatory data breach notification requirements, possible restrictions on cross border transfers of PII and higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities.

The GDPR provides severe penalties for noncompliance.

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Business interruptions in our distribution centers or other facilities may affect our operations, the function of our computer systems, and/or the availability and distribution of merchandise, which may affect our business.

Weather, terrorist activities, war or other disasters, or the threat of any of them, may result in the closure of our distribution centers or other facilities or may adversely affect our ability to deliver inventory through our system on a timely basis.

Weather, terrorist activities, war or other disasters, or the threat of any of them, may result in the breakdown of our distribution center systems, closure of our distribution centers or other facilities or may adversely affect our ability to deliver inventory through our system on a timely basis.

This may affect our ability to serve our customers, resulting in lost sales or a potential loss of customer loyalty.

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We use a fleet of trucks and other vehicles to deliver the majority of the products we sell.

We are subject to the risks associated with providing delivery services, including inclement weather, disruptions in the transportation infrastructure, governmental regulation, availability and price of fuel, liabilities arising from accidents to the extent we are not covered by insurance, and insurance premium increases.

In addition, our failure to deliver products in a timely and accurate manner could harm our reputation and brand, which could have a material adverse effect on our business.

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Activist investor activities could cause our business to be adversely affected because responding to proxy contests and other demands by activist investors can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees.

For example, we have retained, and may in the future be required to retain, the services of various professionals to advise us on activist investor matters, including legal, financial and communications

advisors, the costs of which may negatively impact our future financial results.

Campaigns by activist investors to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short term investor value through actions such as financial restructuring, increased debt, special dividends, stock repurchases, or sales of assets or the entire company.

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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 1A. Risk Factors