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Item 1. Financial Statements

2022-08-02 compared with 2022-05-04 · 230 added, 192 removed, 514 unchanged (45% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Revenue $ 3,341 $ 3,435 $ 6,689 $ 6,606

3 unchanged sentences

Restructuring and transaction related expenses 4 5 7 13

Gain on disposal of businesses ( 155 ) ( 1 ) ( 155 ) ( 1 )

Depreciation and amortization 61 65 120 131

2 unchanged sentences

Interest expense, net of interest income 14 16 29 40

Other income, net — ( 6 )

Loss on debt extinguishment — 24 — 24

Other expense (income), net 2 ( 6 ) 2 ( 12 )

Total other expense, net 16 34 31 52

5 unchanged sentences

Net income 420 306 693 572

net income attributable to continuing noncontrolling interest — 1 — 1

Net income attributable to LKQ stockholders $ 420 $ 305 $ 693 $ 571

Basic earnings per share:

2 unchanged sentences

Net income 1.49 1.01 2.45 1.89

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 1.49 $ 1.01 $ 2.44 $ 1.89

Diluted earnings per share:

2 unchanged sentences

Net income 1.49 1.01 2.44 1.89

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 1.49 $ 1.01 $ 2.44 $ 1.89

(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.

3 unchanged sentences

(In millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income $ 420 $ 306 $ 693 $ 572

net income attributable to continuing noncontrolling interest — 1 — 1

Net income attributable to LKQ stockholders 420 305 693 571

Other comprehensive (loss) income:

1 unchanged sentence

Net change in unrealized gains/losses on cash flow hedges, net of tax — — — 1

Net change in unrealized gains/losses on pension plans, net of tax — 1 — 1

Other comprehensive income (loss) from unconsolidated subsidiaries 1 2 2 ( 1 )

Other comprehensive loss ( 53 ) ( 27 )

Other comprehensive (loss) income ( 149 ) 25 ( 202 ) ( 2 )

Comprehensive income 271 331 491 570

comprehensive income attributable to continuing noncontrolling interest — 1 — 1

Comprehensive income attributable to LKQ stockholders $ 271 $ 330 $ 491 $ 569

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In millions, except per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets:

2 unchanged sentences

Inventories 2,650 2,611

Assets held for sale 290 2

Prepaid expenses and other current assets 255 296

14 unchanged sentences

Other accrued expenses 337 271

Liabilities held for sale 127 —

Current portion of operating lease liabilities 195 203

9 unchanged sentences

Stockholders' equity:

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 322.0 shares issued and 284.7 shares outstanding at March 31, 2022;

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 322.0 shares issued and 276.6 shares outstanding at June 30, 2022;

321.6 shares issued and 287.0 shares outstanding at December 31, 2021

3 unchanged sentences

Treasury stock, at cost;

37.3 shares at March 31, 2022 and 34.6 shares at December 31, 2021

45.4 shares at June 30, 2022 and 34.6 shares at December 31, 2021

( 1,894 ) ( 1,346 )

7 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 133 142

Gain on disposal of businesses ( 155 ) ( 1 )

Stock-based compensation expense 23 17

Loss on debt extinguishment — 24

Other ( 9 ) ( 24 )

9 unchanged sentences

Proceeds from disposals of property, plant and equipment 3 12

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

Proceeds from disposal of businesses 372 6

Other investing activities, net ( 6 ) ( 10 )

Net cash used in investing activities ( 63 ) ( 33 )

Net cash provided by (used in) investing activities 265 ( 109 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Early-redemption premium — ( 16 )

Repayment of Euro Notes (2026) — ( 883 )

Borrowings under revolving credit facilities 808 3,614

1 unchanged sentence

Repayments under term loans — ( 324 )

(Repayments) borrowings of other debt, net ( 8 ) 26

Borrowings of other debt, net 8 40

Settlement of derivative instruments, net — ( 89 )

4 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 26 ) 2

Net increase in cash and cash equivalents, including cash classified within current assets held for sale 62 278

increase in cash classified within current assets held for sale 9 —

Net increase in cash and cash equivalents 53 278

Net (decrease) increase in cash and cash equivalents ( 9 ) 17

Cash and cash equivalents, beginning of period 274 312

11 unchanged sentences

Shares Amount Shares Amount

Balance as of April 1, 2022 322.0 $ 3 ( 37.3 ) $ ( 1,490 ) $ 1,482 $ 5,995 $ ( 206 ) $ 15 $ 5,799

Net income — — — — — 420 — — 420

Other comprehensive loss — — — — — — ( 149 ) — ( 149 )

Purchase of treasury stock — — ( 8.1 ) ( 404 ) — — — — ( 404 )

Stock-based compensation expense — — — — 10 — — — 10

Dividends declared to LKQ stockholders ($0.25 per share) — — — — — ( 71 ) — — ( 71 )

Balance as of June 30, 2022 322.0 $ 3 ( 45.4 ) $ ( 1,894 ) $ 1,492 $ 6,344 $ ( 355 ) $ 15 $ 5,605

LKQ Stockholders

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

Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

Balance as of April 1, 2021 321.2 $ 3 ( 18.8 ) $ ( 526 ) $ 1,450 $ 5,042 $ ( 126 ) $ 16 $ 5,859

Net income — — — — — 305 — 1 306

Other comprehensive income — — — — — — 25 — 25

Purchase of treasury stock — — ( 6.2 ) ( 304 ) — — — — ( 304 )

Vesting of restricted stock units, net of shares withheld for employee tax 0.1 — — — — — — — —

Stock-based compensation expense — — — — 9 — — — 9

Balance as of June 30, 2021 321.3 $ 3 ( 25.0 ) $ ( 830 ) $ 1,459 $ 5,347 $ ( 101 ) $ 17 $ 5,895

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In millions, except per share data)

LKQ Stockholders

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

Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

Balance as of January 1, 2022 321.6 $ 3 ( 34.6 ) $ ( 1,346 ) $ 1,474 $ 5,794 $ ( 153 ) $ 15 $ 5,787

5 unchanged sentences

Dividends declared to LKQ stockholders ($0.50 per share) — — — — — ( 143 ) — — ( 143 )

Balance as of March 31, 2022 322.0 $ 3 ( 37.3 ) $ ( 1,490 ) $ 1,482 $ 5,995 $ ( 206 ) $ 15 $ 5,799

Balance as of June 30, 2022 322.0 $ 3 ( 45.4 ) $ ( 1,894 ) $ 1,492 $ 6,344 $ ( 355 ) $ 15 $ 5,605

LKQ Stockholders

8 unchanged sentences

Stock-based compensation expense — — — — 17 — — — 17

Balance as of March 31, 2021 321.2 $ 3 ( 18.8 ) $ ( 526 ) $ 1,450 $ 5,042 $ ( 126 ) $ 16 $ 5,859

Balance as of June 30, 2021 321.3 $ 3 ( 25.0 ) $ ( 830 ) $ 1,459 $ 5,347 $ ( 101 ) $ 17 $ 5,895

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

15 unchanged sentences

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

Our reserve for expected credit losses was $ 58 million and $ 53 million as of March 31, 2022 and December 31, 2021, respectively.

The provision for credit losses was $ 8 million and $ 2 million for the three months ended March 31, 2022 and 2021, respectively.

Our reserve for expected credit losses was $ 56 million and $ 53 million as of June 30, 2022 and December 31, 2021, respectively.

The provision for credit losses was $ 1 million for both the three months ended June 30, 2022 and 2021 and $ 9 million and $ 4 million for the six months ended June 30, 2022 and 2021, respectively.

Inventories consist of the following (in millions):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Aftermarket and refurbished products $ 2,172 $ 2,168

3 unchanged sentences

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

As of March 31, 2022, manufactured products inventory was composed of $ 25 million of raw materials, $ 5 million of work in process, and $ 5 million of finished goods.

As of June 30, 2022, manufactured products inventory was composed of $ 22 million of raw materials, $ 5 million of work in process, and $ 12 million of finished goods.

As of December 31, 2021, manufactured products inventory was composed of $ 27 million of raw materials, $ 4 million of work in process, and $ 5 million of finished goods.

Net Assets Held for Sale

In March 2022, we entered into a definitive agreement to sell PGW Auto Glass (“PGW”), our aftermarket glass business within our Wholesale - North America segment.

In connection with entering into this agreement, we concluded that this disposal group met the held for sale criteria and classified PGW's assets and liabilities as held for sale.

The sale was completed in April 2022 for a sales price of $ 362 million, subject to customary post-closing purchase price adjustments.

As of March 31, 2022, total assets and liabilities of the combined disposal group held for sale on the Unaudited Condensed Consolidated Balance Sheet were as follows (in millions):

March 31, 2022

Cash and cash equivalents $ 9

Receivables, net 47

Inventories 100

Prepaid expenses and other current assets 1

Total current assets held for sale 157

Property, plant and equipment, net 31

Operating lease assets, net 39

Other intangibles, net 6

Other noncurrent assets 1

Total assets held for sale $ 290

Accounts payable $ 83

Accrued payroll-related liabilities 2

Other accrued expenses 3

Current portion of operating lease liabilities 11

Total current liabilities held for sale 99

Long term operating lease liabilities, excluding current portion 27

Other noncurrent liabilities 1

Total liabilities held for sale $ 127

In March 2022, we entered into a definitive agreement to sell PGW Auto Glass (“PGW”), our aftermarket glass business within our Wholesale - North America segment, to a third party.

The sale was completed in April 2022 for $ 361 million resulting in recognition of a $ 155 million pretax gain ($ 127 million after tax).

Intangible Assets

3 unchanged sentences

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

We did not identify any indicators of impairment in the first quarter of 2022 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

We did not identify any indicators of impairment in the first six months of 2022 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

Investments in Unconsolidated Subsidiaries

1 unchanged sentence

The carrying value of our Investments in unconsolidated subsidiaries were as follows (in millions):

Ownership as of March 31, 2022

March 31, 2022 December 31, 2021

Mekonomen AB (1)(2)

Ownership as of June 30, 2022

June 30, 2022 December 31, 2021

MEKO AB (1)(2)

26.6 % $ 141 $ 145

Total $ 154 $ 181

(1) As of March 31, 2022, the fair value of our investment in Mekonomen AB ("Mekonomen") was $ 183 million based on the quoted market price for Mekonomen's common stock.

(2) As of March 31, 2022, our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $ 8 million;

(1) As of June 30, 2022, the fair value of our investment in MEKO AB ("Mekonomen") was $ 173 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value.

(2) As of June 30, 2022, our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $ 8 million ;

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

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

(3) In June 2022, we sold an investment in our Self Service segment resulting in a decrease to the carrying value of $ 22 million, recognizing an insignificant gain upon sale.

Warranty Reserve

10 unchanged sentences

Warranty claims ( 38 )

Balance as of March 31, 2022 $ 32

Balance as of June 30, 2022 $ 30

Litigation and Related Contingencies

3 unchanged sentences

Treasury Stock

As of March 31, 2022, our Board of Directors had authorized a stock repurchase program under which we are able to purchase up to $ 2,000 million of our common stock from time to time through October 25, 2024.

Our Board of Directors had authorized a stock repurchase program under which we are able to purchase our common stock from time to time through October 25, 2024.

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

1 unchanged sentence

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

During the three months ended March 31, 2022, we repurchased 2.7 million shares of common stock for an aggregate price of $ 144 million.

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

As of March 31, 2022, there was $ 510 million of remaining capacity under our repurchase program.

On May 10, 2022, our Board of Directors authorized a $ 500 million increase to our existing stock repurchase program, raising the aggregate program authorization to $ 2,500 million as of June 30, 2022.

During the three and six months ended June 30, 2022, we repurchased 8.1 million and 10.8 million shares of common stock, respectively, for an aggregate price of $ 404 million and $ 548 million, respectively.

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

As of June 30, 2022, there was $606 million of remaining capacity under our repurchase program.

Noncontrolling Interest

10 unchanged sentences

The following table sets forth our revenue by category, disaggregated by reportable segment (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Wholesale - North America $ 1,050 $ 1,024 $ 2,156 $ 1,993

4 unchanged sentences

Wholesale - North America 94 94 189 176

Europe 7 7 14 15

Self Service 148 156 290 305

7 unchanged sentences

head and tail lamps;

automotive glass products such as windshields;

and large mechanical items such as engines and transmissions.

16 unchanged sentences

Warranty revenue recognized ( 28 )

Balance as of March 31, 2022 $ 30

Balance as of June 30, 2022 $ 32

Other Revenue

7 unchanged sentences

We utilize the “expected value method” or the “most likely amount” method in order to estimate variable consideration, depending on the type of variable consideration, with contemplation of any expected reversals in revenue.

We recorded a refund liability and return asset for expected returns of $ 106 million and $ 57 million , respectively, as of March 31, 2022, and $ 107 million and $ 58 million, respectively, as of December 31, 2021.

We recorded a refund liability and return asset for expected returns of $ 108 million and $ 58 million, respectively, as of June 30, 2022, and $ 107 million and $ 58 million, respectively, as of December 31, 2021.

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

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

We recorded a reserve for our variable consideration of $ 93 million and $ 144 million as of March 31, 2022 and December 31, 2021, respectively.

We recorded a reserve for our variable consideration of $ 110 million and $ 144 million as of June 30, 2022 and December 31, 2021, respectively.

Restructuring and Transaction Related Expenses

7 unchanged sentences

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

During the three months ended March 31, 2022, we did not incur a significant amount of restructuring expenses under these programs.

During the three months ended March 31, 2021, we recognized net restructuring expenses totaling $ 3 million which included employee-related costs, facility exit costs, and a $ 3 million gain from the sale of a building to be closed.

During the three and six months ended June 30, 2022, we did not incur a significant amount of restructuring expenses under these programs.

During the three and six months ended June 30, 2021, we recognized net restructuring expenses totaling $ 4 million and $ 7 million, respectively, which included employee-related costs, facility exit costs, and a $ 3 million gain in the first quarter from the sale of a building to be closed.

Of the cumulative program costs incurred to date, $ 59 million, $ 43 million, $ 2 million and $ 2 million related to our Europe, Wholesale - North America, Specialty and Self Service segments, respectively.

The actions under the 2019 Global Restructuring Program are substantially complete and the 2020 Global Restructuring Program are expected to be completed in 2023.

The actions under the 2019 Global Restructuring Program are substantially complete and the 2020 Global Restructuring Program is expected to be completed in 2023.

We estimate total costs under the programs through their expected completion dates will be between $ 108 million and $ 115 million, of which approximately $ 63 million, $ 44 million, $ 2 million and $ 2 million will be incurred by our Europe, Wholesale - North America, Specialty and Self Service segments, respectively;

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

As of March 31, 2022 and December 31, 2021, restructuring liabilities incurred related to these programs totaled $ 12 million and $ 14 million, respectively, including $ 8 million and $ 9 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets).

Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed as of March 31, 2022 and after our planned exit date for facilities we expect to close in future periods;

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

As of June 30, 2022 and December 31, 2021, restructuring liabilities incurred related to these programs totaled $ 11 million and $ 14 million, respectively, including $ 7 million and $ 9 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets).

Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed as of June 30, 2022 and after our planned exit date for facilities we expect to close in future periods;

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

Acquisition Integration Plans

We did not incur a significant amount of restructuring expenses for our acquisition integration plans for either of the three-month periods ended March 31, 2022 or March 31, 2021.

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

We incurred $ 2 million of restructuring expenses for both the three and six months ended June 30, 2022.

These expenses were primarily related to the integration of acquisitions completed in our Europe segment.

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

During the three and six months ended June 30, 2021, we did not incur a significant amount of restructuring expenses for our acquisition integration plans.

1 LKQ Europe Program

2 unchanged sentences

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

During the three months ended March 31, 2022, we did not incur a significant amount of expenses under our 1 LKQ Europe program.

During the three months ended March 31, 2021, we recognized $ 5 million of employee-related restructuring charges.

During the three and six months ended June 30, 2022, we did not incur a significant amount of expenses under our 1 LKQ Europe program.

During the six months ended June 30, 2021, we incurred $ 5 million of employee-related restructuring charges.

We did not incur a significant amount of expenses for the three months ended June 30, 2021.

We estimate that we will incur between $ 40 million and $ 50 million in total personnel and inventory-related restructuring charges through 2024 under the program.

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

As of March 31, 2022, the restructuring liabilities related to this program were insignificant.

As of June 30, 2022, the restructuring liabilities related to this program were insignificant.

Transaction Related Expenses

During the three months ended March 31, 2022, we incurred $ 3 million of transaction related expenses.

During the three and six months ended June 30, 2022, we incurred $ 1 million and $ 4 million of transaction related expenses, respectively.

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

Stock-Based Compensation

In order to attract and retain employees, non-employee directors, consultants, and other persons associated with the Company, we grant equity-based awards under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”).

We have granted restricted stock units ("RSUs"), stock options, and restricted stock under the Equity Incentive Plan.

We expect to issue new or treasury shares of common stock to cover past and future equity grants.

The RSUs we have issued vest over periods of up to five years , subject to a continued service condition.

Currently outstanding RSUs (other than PSUs, which are described below) contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case both conditions must be met before any RSUs vest.

For all of the RSUs containing a performance-based vesting condition, we must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant date.

Each RSU converts into one share of LKQ common stock on the applicable vesting date.

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

Starting with our 2019 grants, participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards following retirement;

if retirement occurs during the first year of the vesting period (for RSUs subject to a time-based vesting condition) or the first year of the performance period (for RSUs with a performance-based vesting condition), the participant vests in a prorated amount of the RSU grant based on the portion of the year employed.

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

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

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

The fair value of RSUs that vested during the three months ended March 31, 2022 was $ 18 million ;

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

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the three months ended March 31, 2022 (in millions, except years and per share amounts):

The following table summarizes activity related to our restricted stock units ("RSUs") under the Equity Incentive Plan for the six months ended June 30, 2022 (in millions, except years and per share amounts):

Number Outstanding Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1)

1 unchanged sentence

Vested ( 0.4 ) $ 36.34

Unvested as of March 31, 2022 1.6 $ 40.24

Expected to vest after March 31, 2022 1.4 $ 40.33 3.2 $ 62

Unvested as of June 30, 2022 1.6 $ 40.14

Expected to vest after June 30, 2022 1.3 $ 40.28 2.9 $ 66

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

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

(2) The weighted average grant date fair value of RSUs granted during the three months ended March 31, 2021 was $ 38.52 .

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

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

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

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

The fair value of PSUs that vested during the three months ended March 31, 2022 was $ 8 million ;

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

The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the three months ended March 31, 2022 (in millions, except years and per share amounts):

(2) The weighted average grant date fair value of RSUs granted during the six months ended June 30, 2021 was $ 39.02 .

The fair value of RSUs that vested during the six months ended June 30, 2022 was $ 21 million;

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

The following table summarizes activity related to our performance-based RSUs ("PSUs") under the Equity Incentive Plan for the six months ended June 30, 2022 (in millions, except years and per share amounts):

Number Outstanding Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1)

1 unchanged sentence

Vested ( 0.2 ) $ 27.74

Unvested as of March 31, 2022 0.4 $ 38.32

Expected to vest after March 31, 2022 0.4 $ 38.32 1.7 $ 18

Unvested as of June 30, 2022 0.4 $ 38.64

Expected to vest after June 30, 2022 0.4 $ 38.64 1.5 $ 19

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

1 unchanged sentence

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

The weighted average grant date fair value of PSUs granted during the three months ended March 31, 2021 was $ 38.50 .

The weighted average grant date fair value of PSUs granted during the six months ended June 30, 2021 was $ 38.50 .

The fair value of PSUs that vested during the six months ended June 30, 2022 was $ 8 million;

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

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 13 million and $ 8 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, unrecognized compensation expense related to unvested RSUs and PSUs was $ 66 million .

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 10 million and $ 23 million for the three and six months ended June 30, 2022, respectively, and $ 9 million and $ 17 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, unrecognized compensation expense related to unvested RSUs and PSUs was $ 58 million.

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

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Income from continuing operations $ 420 $ 306 $ 689 $ 572

1 unchanged sentence

Effect of dilutive securities:

RSUs 0.5 0.7 0.7 0.7

PSUs 0.4 0.2 0.3 0.1

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 282.3 301.5 284.5 302.6

3 unchanged sentences

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

The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three months ended March 31, 2022 and 2021 (in millions):

Three Months Ended March 31,

Antidilutive securities:

The number of antidilutive securities was de minimis for all periods presented.

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Foreign Currency Translation Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)

Balance as of April 1, 2022 $ ( 175 ) $ ( 24 ) $ ( 7 ) $ ( 206 )

Pretax loss ( 154 ) — — ( 154 )

Disposal of business 4 — — 4

Other comprehensive income from unconsolidated subsidiaries — — 1 1

Balance as of June 30, 2022 $ ( 325 ) $ ( 24 ) $ ( 6 ) $ ( 355 )

Three Months Ended June 30, 2021

Foreign Currency Translation Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)

Balance as of April 1, 2021 $ ( 82 ) $ ( 33 ) $ ( 11 ) $ ( 126 )

Pretax income 22 — — 22

Reclassification of unrealized loss — 1 — 1

Other comprehensive income from unconsolidated subsidiaries — — 2 2

Balance as of June 30, 2021 $ ( 60 ) $ ( 32 ) $ ( 9 ) $ ( 101 )

Six Months Ended June 30, 2022

Foreign Currency Translation Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)

Balance as of January 1, 2022 $ ( 121 ) $ ( 24 ) $ ( 8 ) $ ( 153 )

Pretax loss ( 208 ) — — ( 208 )

Disposal of business 4 — — 4

Other comprehensive income from unconsolidated subsidiaries — — 2 2

Balance as of March 31, 2022 $ ( 175 ) $ ( 24 ) $ ( 7 ) $ ( 206 )

Three Months Ended March 31, 2021

Foreign Currency Translation Unrealized Gain (Loss) on Cash Flow Hedges Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)

Balance as of June 30, 2022 $ ( 325 ) $ ( 24 ) $ ( 6 ) $ ( 355 )

Six Months Ended June 30, 2021

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized Gain (Loss)

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

Comprehensive Income (Loss)

Balance as of January 1, 2021 $ ( 57 ) $ ( 1 ) $ ( 33 ) $ ( 8 ) $ ( 99 )

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Income tax effect — ( 1 ) — — ( 1 )

Reclassification of unrealized gain — ( 2 ) — — ( 2 )

Reclassification of unrealized (gain) loss — ( 2 ) 1 — ( 1 )

Reclassification of deferred income taxes — 1 — — 1

Other comprehensive loss from unconsolidated subsidiaries — — — ( 1 ) ( 1 )

Balance as of March 31, 2021 $ ( 82 ) $ — $ ( 33 ) $ ( 11 ) $ ( 126 )

During the three months ended March 31, 2021, net unrealized gains on cross currency swaps totaling $ 2 million were recorded to Other income, net in the Unaudited Condensed Consolidated Statements of Income;

Balance as of June 30, 2021 $ ( 60 ) $ — $ ( 32 ) $ ( 9 ) $ ( 101 )

During each of the three and six months ended June 30, 2021, net unrealized losses on interest rate swaps totaling $ 1 million were recorded to Interest expense, net of interest income in the Unaudited Condensed Consolidated Statements of Income.

During the six months ended June 30, 2021, net unrealized gains on cross currency swaps totaling $ 2 million were recorded to Other income, net in the Unaudited Condensed Consolidated Statements of Income;

these amounts offset the impact of the remeasurement of the underlying transactions.

Net unrealized losses and gains related to our pension plans were recorded to Other income, net in the Unaudited Condensed Consolidated Statements of Income during each of the three-month periods ended March 31, 2022 and 2021.

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

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

March 31, 2022 December 31, 2021

June 30, 2022

December 31, 2021

Maturity Date Interest Rate Amount Interest Rate Amount

Senior Secured Credit Agreement:

Revolving credit facilities $ 1,813 $ 1,887

Euro Notes (2024) 553 569

Euro Notes (2028) 277 284

Notes payable through October 2030 at weighted average interest rates of 2.9 % and 2.8 %, respectively

Finance lease obligations at weighted average interest rates of 3.5 % and 3.5 %, respectively

Other debt at weighted average interest rates of 1.5 % and 1.1 %, respectively

Revolving credit facilities January 2024 1.72 % (1)

$ 1,494 1.10 % (1)

Senior Notes:

Euro Notes (2024) April 2024 3.88 % 524 3.88 % 569

Euro Notes (2028) April 2028 4.13 % 262 4.13 % 284

Notes payable Various through October 2030 3.25 % (1)

16 2.80 % (1)

Finance lease obligations 3.54 % (1)

47 3.50 % (1)

Other debt 0.89 % (1)

26 1.10 % (1)

Total debt 2,369 2,824

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Long term debt, net of debt issuance costs $ 2,313 $ 2,777

(1) Interest rate derived via a weighted average

Senior Secured Credit Agreement

On November 23, 2021, LKQ Corporation and certain other subsidiaries of LKQ (collectively, the "Borrowers") entered into Amendment No.

Revolving Loans denominated in pound sterling shall bear interest at a rate per annum equal to SONIA plus an adjustment equal to 0.0326 % per annum plus the Applicable Rate, and (4) Loans denominated in Swiss francs shall bear interest at a rate per annum equal to the Swiss Average Rate Overnight as administered by SIX Swiss Exchange AG (or any successor administrator of the Swiss Average Rate Overnight) plus the Applicable Rate.

6 to the Fourth Amended and Restated Credit Agreement dated January 29, 2016 (the "Credit Agreement"), which modified certain interest rates to provide that (1) Loans denominated in euros shall bear interest at a rate per annum equal to the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent) plus the Applicable Rate, (2) Swingline Loans denominated in pounds sterling shall bear interest at a rate per annum equal to the Sterling Overnight Index Average as administered by the Bank of England (or any successor administrator of the Sterling Overnight Index Average) (“SONIA”) plus the Applicable Rate, (3) Revolving Loans denominated in pounds sterling shall bear interest at a rate per annum equal to SONIA plus an adjustment equal to 0.0326 % per annum plus the Applicable Rate, and (4) Loans denominated in Swiss francs shall bear interest at a rate per annum equal to the Swiss Average Rate Overnight as administered by SIX Swiss Exchange AG (or any successor administrator of the Swiss Average Rate Overnight) plus the Applicable Rate.

All other interest rates remain the same.

On April 18, 2022, S&P Global Ratings assigned LKQ an issuer credit rating of 'BBB-' with a stable outlook.

This rating upgrade triggered the banks in our credit facility to release all collateral required under the Credit Agreement and suspend all collateral requirements.

The total capacity under the revolving credit facility's multicurrency component is $ 3,150 million .

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

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

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

During the second quarter of 2021, we exercised our option to prepay the outstanding amount on the term loan, and thus did not have any term loan borrowings as of March 31, 2022.

During the second quarter of 2021, we exercised our option to prepay the outstanding amount on the term loan, and thus did not have any term loan borrowings as of June 30, 2022.

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

The Credit Agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio.

On April 18, 2022, S&P Global Ratings assigned LKQ an issuer credit rating of 'BBB-' with a stable outlook.

This rating upgrade triggered the banks in our credit facility to release all collateral required under the Credit Agreement and suspend all collateral requirements.

Borrowings under the Credit Agreement bear interest at variable rates, which depend on the currency and duration of the borrowing elected, plus an applicable margin.

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

The weighted average interest rates on borrowings outstanding under the Credit Agreement at March 31, 2022 and December 31, 2021 were 1.2 % and 1.1 %, respectively.

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

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

Of the total borrowings outstanding under the Credit Agreement, there were no current maturities as of March 31, 2022 or December 31, 2021.

As of March 31, 2022, there were letters of credit outstanding in the aggregate amount of $ 69 million .

The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at March 31, 2022 was $ 1,268 million .

The total capacity under the revolving credit facility's multicurrency component is $ 3,150 million.

Of the total borrowings outstanding under the Credit Agreement, there we re no current maturities as of June 30, 2022 or December 31, 2021.

As of June 30, 2022, there were letters of credit outstanding in the aggregate amount of $ 69 million .

Euro Notes (2024)

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The Euro Notes (2024) are governed by the Indenture dated as of April 14, 2016 (the "Euro Notes (2024) Indenture") among LKQ Italia, LKQ Corporation and certain of our subsidiaries (the "Euro Notes (2024) Subsidiaries"), the trustee, and the paying agent, transfer agent, and registrar.

The Euro Notes (2024) bear interest at a rate of 3.875 % per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.

Interest on the Euro Notes (2024) is payable in arrears on April 1 and October 1 of each year.

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

On May 31, 2022, Moody's Investors Services upgraded the rating on LKQ Italia's senior unsecured notes to Baa3 with a stable outlook.

This rating upgrade, combined with the upgrade to BBB- by S&P Global Ratings in April 2022, triggered a Covenant Suspension Event, and LKQ and its subsidiaries will no longer be required to comply with certain restrictive covenants.

Euro Notes (2026/2028)

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

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

The Euro Notes (2026/28) are governed by the Indenture dated as of April 9, 2018 (the “Euro Notes (2026/28) Indenture”) among LKQ Euro

Holdings, LKQ Corporation and certain of our subsidiaries (the “Euro Notes (2026/28) Subsidiaries”), the trustee, paying agent, transfer agent, and registrar.

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

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

The Euro Notes (2028) bear interest at a rate of 4.125 % per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.

Interest on the Euro Notes (2028) is payable in arrears on April 1 and October 1 of each year.

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

Restricted Payments

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

Delaware law also imposes restrictions on dividend payments.

These restrictions did not impact the payment of our dividend declared in February 2022 and paid in March 2022 and are not expected to impact future dividend payments.

On May 31, 2022, Moody's Investors Services upgraded the rating on LKQ Euro Holdings' senior unsecured notes to Baa3 with a stable outlook.

Derivative Instruments and Hedging Activities

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

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

We do not hold or issue derivatives for trading purposes.

Cash Flow Hedges

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

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

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

We held cross currency swaps in the beginning of 2021, which contained an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively convert variable rate U.S.

Through June 30, 2021, we held interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement and cross currency swaps, which contained an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively converted variable rate U.S.

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

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

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

We had no outstanding cross currency swaps as of March 31, 2022.

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

Under the terms of the foreign currency forward contracts, we will sell the foreign currency in exchange for U.S.

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

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

As of March 31, 2022 and December 31, 2021, we held no cash flow hedges.

The activity related to our previously matured cash flow hedges is included in Note 7, "Accumulated Other Comprehensive Income (Loss)."

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

The interest rate swap agreements and cross currency swaps were settled as of June 2021 and no cash flow hedges remained outstanding as of June 30, 2022 and December 31, 2021, respectively.

The activity related to our previously matured cash flow hedges is included in Note 7, "Accumulated Other Comprehensive Income (Loss)" and presented in either operating activities or financing activities in our Unaudited Condensed Consolidated Statements of Cash Flows.

Other Derivative Instruments Not Designated as Hedges

To manage our foreign currency exposure on non-functional currency denominated borrowings, we entered into short-term foreign currency forward contracts in 2021.

As of March 31, 2022, w e held no foreign currency forward contracts re lated to non-functional currency denominated borrowings.

We elected not to apply hedge accounting for these transactions, and therefore the contracts were adjusted to fair value through our results of operations as of each balance sheet date.

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

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

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

The notional amount and fair value of these contracts at March 31, 2022 and December 31, 2021 , along with the effect on our results of operations during the three months ended March 31, 2022 and 2021, were immaterial.

The notional amount and fair value of these contracts at June 30, 2022 and December 31, 2021, along with the effect on our results of operations during the three and six months ended June 30, 2022 and 2021, were not material.

Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three months ended March 31, 2022, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and six months ended June 30, 2022, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.

The tiers in the fair value hierarchy include:

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

The following tables present information about our financial liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of March 31, 2022 and December 31, 2021 (in millions):

Balance as of March 31, 2022 Fair Value Measurements as of March 31, 2022

Balance as of June 30, 2022 Fair Value Measurements as of June 30, 2022

Level 1 Level 2 Level 3

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

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

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

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

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

Based on market conditions as of both March 31, 2022 and December 31, 2021, the fair value of the credit agreement borrowings reasonably approximated the carrying values of $ 1,813 million and $ 1,887 million, respectively.

As of March 31, 2022 and December 31, 2021, the fair values of the Euro Notes (2024) were approximately $ 573 million and $ 605 million, respectively, compared to carrying values of $ 553 million and $ 569 million, respectively.

As of March 31, 2022 and December 31, 2021, the fair values of the Euro Notes (2028) were $ 287 million and $ 301 million, respectively, compared to carrying values of $ 277 million and $ 284 million, respectively.

Based on market conditions as of both June 30, 2022 and December 31, 2021, the fair value of the credit agreement borrowings reasonably approximated the carrying values of $ 1,494 million and $ 1,887 million, respectively.

As of June 30, 2022 and December 31, 2021, the fair values of the Euro Notes (2024) were approximately $ 527 million and $ 605 million, respectively, compared to carrying values of $ 524 million and $ 569 million, respectively.

As of June 30, 2022 and December 31, 2021, the fair values of the Euro Notes (2028) were $ 251 million and $ 301 million, respectively, compared to carrying values of $ 262 million and $ 284 million, respectively.

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

We estimated the fair value by calculating the upfront cash payment a market participant would require at March 31, 2022 and December 31, 2021 to assume these obligations.

We estimated the fair value by calculating the upfront cash payment a market participant would require at June 30, 2022 and December 31, 2021 to assume these obligations.

The fair values of the Euro Notes (2024) and Euro Notes (2028) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.

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

As of March 31, 2022 and December 31, 2021, the aggregate funded status of the defined benefit plans was a liability of $ 125 million and $ 131 million , respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans totaled $ 1 million for each of the three-month periods ended March 31, 2022 and 2021 and primarily related to service cost which is recorded to Selling, general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income.

As of June 30, 2022 and December 31, 2021, the aggregate funded status of the defined benefit plans was a liability of $ 119 million and $ 131 million , respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans totaled $ 2 million and $ 3 million for the three and six months ended June 30, 2022, respectively, and $ 1 million and $ 3 million for the three and six months ended June 30, 2021, respectively, and primarily related to service cost which is recorded in Selling, general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income.

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

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

Our effective income tax rate for the three months ended March 31, 2022 was 25.0 %, compared to 26.3 % for the three months ended March 31, 2021.

The lower estimated annual effective tax rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is primarily attributable to the geographic distribution of income.

For the three months ended March 31, 2022, the effective tax rate was partially decreased by net favorable discrete items including excess tax benefits from stock-based payments partially offset by the revaluation of deferred tax balances in connection with an enacted rate change.

Net discrete items for the three months ended March 31, 2021 reduced the effective tax rate by 0.2 %, primarily due to excess tax benefits on stock-based payments.

Additionally, for the three months ended March 31, 2022, we recorded a $ 4 million benefit related to the reassessment of a previously recorded valuation allowance on a deferred tax asset.

This item was recorded to Net income from discontinued operations.

Our effective income tax rate for the six months ended June 30, 2022 was 24.1 %, compared to 26.3 % for the six months ended June 30, 2021.

The decrease in the effective tax rate for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was attributable to net favorable discrete items of 1.2 %, primarily related to the sale of PGW, and the geographic distribution of income.

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

Segment and Geographic Information

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Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Third Party $ 1,144 $ 1,477 $ 512 $ 208 $ — $ 3,341

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18 39 7 4 — 68

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Third Party $ 1,118 $ 1,577 $ 531 $ 209 $ — $ 3,435

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19 40 7 4 — 70

Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Six Months Ended June 30, 2022

Third Party $ 2,345 $ 2,965 $ 972 $ 407 $ — $ 6,689

Intersegment — — 2 — ( 2 ) —

Total segment revenue $ 2,345 $ 2,965 $ 974 $ 407 $ ( 2 ) $ 6,689

Segment EBITDA $ 432 $ 291 $ 127 $ 72 $ — $ 922

Depreciation and amortization (1)

37 73 15 8 — 133

Six Months Ended June 30, 2021

Third Party $ 2,169 $ 3,040 $ 989 $ 408 $ — $ 6,606

Intersegment 1 — 2 — ( 3 ) —

Total segment revenue $ 2,170 $ 3,040 $ 991 $ 408 $ ( 3 ) $ 6,606

Segment EBITDA $ 413 $ 309 $ 141 $ 112 $ — $ 975

Depreciation and amortization (1)

40 80 14 8 — 142

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

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impairment charges;

and direct impacts of the Ukraine/Russia conflict and related sanctions (including provisions for reserves for asset recoverability and expenditures to support our employees and their families).

and direct impacts of the Ukraine/Russia conflict and related sanctions (including provisions for and subsequent adjustments to reserves for asset recoverability and expenditures to support our employees and their families).

EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding discontinued operations, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income $ 420 $ 306 $ 693 $ 572

net income attributable to continuing noncontrolling interest — 1 — 1

Net income attributable to LKQ stockholders 420 305 693 571

Net income from discontinued operations — — 4 —

Net income from continuing operations 269 266

Net income from continuing operations attributable to LKQ stockholders 420 305 689 571

Depreciation and amortization 61 65 120 131

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Interest expense, net of interest income 14 16 29 40

Loss on debt extinguishment — 24 — 24

Provision for income taxes 127 108 216 201

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Restructuring and transaction related expenses 4 5 7 13

Gain on disposal of businesses (2)

( 155 ) ( 1 ) ( 155 ) ( 1 )

Change in fair value of contingent consideration liabilities — 1 — 1

Losses on previously held equity interests — — 1 —

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Segment EBITDA $ 475 $ 523 $ 922 $ 975

In the table above, the sum of the individual amounts may not equal the total due to rounding.

(1) Refer to "Investments in Unconsolidated Subsidiaries" in Note 2, "Financial Statement Information," for further information.

(2) Adjustments include provisions for reserves for asset recoverability (receivables and inventory) and expenditures to support our employees and their families in Ukraine.

(2) Refer to "Divestitures" in Note 2, "Financial Statement Information," for further information.

(3) Adjustments include provisions for and subsequent adjustments to reserves for asset recoverability (receivables and inventory) and expenditures to support our employees and their families in Ukraine.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Capital Expenditures

Wholesale - North America

$ 16 $ 12 $ 45 $ 23

Europe 19 22 42 48

Specialty 4 8 8 10

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

March 31, 2022 (1)

December 31, 2021

June 30, 2022 December 31, 2021

Receivables, net

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Total assets $ 12,134 $ 12,606

(1) The Wholesale - North America segment excludes amounts which are held for sale.

See Note 2, "Financial Statement Information" for information related to the held for sale balances.

We report net receivables;

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

United States $ 1,747 $ 1,750 $ 3,497 $ 3,355

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Long-lived assets

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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-Q

Item 1. Financial Statements