What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-01 compared with 2022-08-02 · 227 added, 228 removed, 453 unchanged (50% of the section changed)

55 unchanged sentences

Our 2021 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results.

There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the six months ended June 30, 2022.

Financial Information by Geographic Area

11 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 2025.

During three and six months ended June 30, 2022 we incurred $8 million and $14 million , respectively, in costs across all three categories noted above.

We expect that costs of the program, reflecting all three categories noted above, will range between $25 million and $45 million in 2022 with an additional $50 million to $70 million in 2023 and 2024 through the projected program completion date.

During the three and nine months ended September 30, 2022 we incurred $6 million and $20 million , respectively, in costs across all three categories noted above.

We expect that costs of the program, reflecting all three categories noted above, will range between $25 million and $35 million in 2022 with an additional $50 million to $80 million in 2023 through the projected program completion date in 2025.

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

6 unchanged sentences

We expect to continue operating in this manner unless conditions change.

While we do anticipate a negative impact from the consequences of this conflict, we do not expect it to have a material impact on our results of operations or cash flows.

Our operations in Ukraine represent les s than 1% of b oth our total annual revenue and total annual operating profit and comprised approxi mately $50 million of total assets as of June 30, 2022.

In addition, LKQ r evenue from customers in Russia represents less than 0.3% of our total revenue .

To date, we have experienced an immaterial negative impact from the consequences of this conflict, and we do not expect it to have a material impact on our ongoing results of operations or cash flows.

Our operations in Ukraine represent les s than 1% of b oth our total annual revenue and total annual operating profit and comprised approxi mately $50 million of total assets as of September 30, 2022.

In addition, LKQ r evenue from customers in Russia represented less than 0.3% of our total revenue in 2021 .

As future developments in the conflict are difficult to project and outside of our control, it is possible that the estimates underlying our financials may change significantly in future periods.

15 unchanged sentences

The following table sets forth statements of income data as a percentage of total revenue for the periods indicated:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Restructuring and transaction related expenses 0.1 % 0.1 % 0.1 % 0.2 %

Gain on disposal of businesses

(Gain) on disposal of businesses and impairment of net assets held for sale

(0.1) % — % (1.6) % — %

11 unchanged sentences

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

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

The following table summarizes the changes in revenue by category (in millions):

Three Months Ended June 30, Percentage Change in Revenue

Three Months Ended September 30, Percentage Change in Revenue

2022 2021 Organic Acquisition and Divestiture Foreign Exchange Total Change

5 unchanged sentences

Parts and services revenue increased by 4.8% organically, so the overall decrease was attributable to negative effects from fluctuations in foreign exchange rates of 7.4% and the net reduction from divestitures of 2.3%.

The decrease in other revenue of 2.9% was primarily driven by a decrease in organic revenue of $7 million, of which our Self Service segment contributed an $8 million decrease.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment during the second quarter of 2022 compared to the prior year period.

The decrease in other revenue of 17.4% was primarily driven by a decrease in organic revenue of $40 million, of which our Self Service segment contributed a $35 million decrease.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment during the third quarter of 2022 compared to the prior year period.

Cost of Goods Sold

Cost of goods sold increased to 59.1% of revenue in the three months ended June 30, 2022 from 58.8% of revenue in the three months ended June 30, 2021.

The cost of goods sold increase reflects impacts of 0.6% in our Self Service segment and 0.3% in our Wholesale - North America segment, partially offset by decreases of 0.4% in our Europe segment and 0.2% attributable to mix as a greater portion of sales are coming from Wholesale - North America which has higher margins.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Cost of goods sold decreased to 58.9% of revenue in the three months ended September 30, 2022 from 59.2% of revenue in the three months ended September 30, 2021.

The cost of goods sold decrease primarily reflects an impact of 0.7% in our Wholesale - North America segment, partially offset by an increase of 0.5% in our Self Service segment.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Selling, General and Administrative Expenses

Our selling, general and administrative ("SG&A") expenses as a percentage of revenue increased to 26.8% in the three months ended June 30, 2022 from 26.2% in the three months ended June 30, 2021.

The SG&A expense increase reflects impacts of 0.2% in each of our Europe, Specialty and Self Service segments.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Our selling, general and administrative ("SG&A") expenses as a percentage of revenue increased to 27.8% in the three months ended September 30, 2022 from 27.2% in the three months ended September 30, 2021.

The SG&A expense increase primarily reflects impacts of 0.3% in our Self Service segment and 0.2% in our Europe segment.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Restructuring and Transaction Related Expenses

The following table summarizes restructuring and transaction related expenses for the periods indicated (in millions):

Three Months Ended June 30,

Three Months Ended September 30,

2022 2021 Change

2 unchanged sentences

Restructuring and transaction related expenses $ 3 $ 3 $ —

(1) Restructuring expenses for the three months ended June 30, 2022 primarily consisted of $2 million related to our acquisition integration plans.

(2) Restructuring expenses for the three months ended June 30, 2021 primarily consisted of $4 million related to our global restructuring programs.

(1) Restructuring expenses for the three months ended September 30, 2022 primarily consisted of $1 million related to our global restructuring programs and $1 million related to our 1 LKQ Europe program.

(2) Restructuring expenses for the three months ended September 30, 2021 primarily consisted of $2 million related to our global restructuring programs.

See Note 4, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our restructuring and acquisition integration plans.

Gain on Disposal of Businesses

During the three months ended June 30, 2022, we recorded a $155 million pretax gain ($127 million after tax) from the sale of PGW.

See Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our gain on disposal of businesses.

(Gain) on Disposal of Businesses and Impairment of Net Assets Held for Sale

During the three months ended September 30, 2022, we recorded a $4 million pretax gain from the sale of a business within our Self Service segment.

See "Divestitures" in Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our gain on disposal of businesses.

Depreciation and Amortization

The following table summarizes depreciation and amortization for the periods indicated (in millions):

Three Months Ended June 30,

Three Months Ended September 30,

2022 2021 Change

2 unchanged sentences

Total depreciation and amortization $ 58 $ 64 $ (6)

(1) The decrease in depreciation expense included $1 million from foreign currency translation primarily related to a decrease in the euro and pound sterling rates during the three months ended June 30, 2022 compared to the prior year period and $1 million related to the sale of PGW with the remaining decrease due to individually immaterial factors.

(2) The increase in amortization expense primarily reflected (i) a $4 million increase related to software amortization, partially offset by (ii) a decrease of $2 million related to the customer relationship intangible assets recorded upon our acquisition of Stahlgruber as the accelerated amortization of the customer relationship intangible assets resulted in lower amortization expense during the three months ended June 30, 2022 compared to the prior year period and (iii) a $1 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate.

(1) The decrease in depreciation expense included (i) $2 million from foreign currency translation primarily related to a decrease in the euro and pound sterling rates during the three months ended September 30, 2022 compared to the prior year period and (ii) $1 million related to the sale of PGW.

(2) The decrease in amortization expense included $4 million from foreign currency translation primarily related to a decrease in the euro and pound sterling rates during the three months ended September 30, 2022 compared to the prior year period.

Other Expense, Net

1 unchanged sentence

Other Expense, Net

Other expense, net for the three months ended June 30, 2021 $ 34

(Decrease) increase due to:

Other expense, net for the three months ended September 30, 2021

Increase (decrease) due to:

Interest expense, net of interest income 1 (1)

Loss on debt extinguishment (24) (2)

Other expense (income), net 8 (3)

Other income, net (3) (2)

Net decrease (2)

Other expense, net for the three months ended June 30, 2022 $ 16

(1) Net interest expense decreased due to foreign exchange translation, primarily related to a decrease in the euro exchange rate, and higher interest income.

(2) The $24 million decrease in loss on debt extinguishment is due to the charge recorded in April 2021 related to the redemption of the Euro Notes (2026).

(3) The variance in Other expense (income), net is primarily related to (i) a $4 million unfavorable variance in our fair value adjustments for equity investments not accounted for under the equity method and (ii) a $3 million unfavorable variance in foreign currency gains and losses.

Other expense, net for the three months ended September 30, 2022

(1) Net interest expense increased primarily due to (i) a $3 million increase resulting from higher interest rates during the three months ended September 30, 2022 compared to the prior year period and (ii) a $1 million increase from higher average borrowings in the current year, partially offset by (iii) a $2 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate.

(2) The increase in Other income, net is primarily comprised of (i) an increase related to a net $3 million change in insurance proceeds, (ii) an increase related to a net $2 million gain on previously held equity interests, partially offset by (iii) a decrease related to a net $2 million change in our fair value adjustments for equity investments not accounted for under the equity method.

Provision for Income Taxes

Our effective income tax rate for the three months ended June 30, 2022 was 23.4%, compared to 26.3% for the three months ended June 30, 2021.

The decrease in the effective tax rate for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was attributable to net favorable discrete items of 2.0%, primarily related to the sale of PGW, and the geographic distribution of income.

Our effective income tax rate for the three months ended September 30, 2022 was 25.2%, compared to 24.4% for the three months ended September 30, 2021.

In the third quarter of 2022, we increased our estimate of the annual effective rate by 20 basis points, which resulted in a year to date adjustment to increase the provision.

In the three months ended September 30, 2021, we reduced the annual effective rate by 50 basis points, which resulted in a year to date adjustment to decrease the provision.

The net change resulted in a higher effective tax rate in 2022.

See Note 12, "Income Taxes" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Equity in Earnings of Unconsolidated Subsidiaries

Equity in earnings of unconsolidated subsidiaries for the three months ended June 30, 2022 increased by $1 million primarily related to a Self Service investment.

Equity in earnings of unconsolidated subsidiaries for the three months ended September 30, 2022 decreased by $6 million primarily related to a decline in year over year results reported by Mekonomen, which is our largest equity method investment, and the negative year over year effect resulting from the divestiture of a Self Service investment in the second quarter of 2022.

Foreign Currency Impact

We translate our statements of income at the average exchange rates in effect for the period.

Relative to the rates used during the three months ended June 30, 2021, the euro, pound sterling and Czech koruna rates used to translate the 2022 statements of income decreased by 12%, 10% and 8%, respectively.

Relative to the rates used during the three months ended September 30, 2021, the euro, pound sterling and Czech koruna rates used to translate the 2022 statements of income decreased by 15%, 15% and 11%, respectively.

The negative translation effect of the change in foreign currencies against the U.S.

dollar combined with the negative impact of realized and unrealized currency gains and losses for the three months ended June 30, 2022 resulted in a negative $0.03 effect on diluted earnings per share relative to the prior year period.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

dollar combined with the negative impact of realized and unrealized currency gains and losses for the three months ended September 30, 2022 resulted in a negative $0.06 effect on diluted earnings per share relative to the prior year period.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

The following table summarizes the changes in revenue by category (in millions):

Six Months Ended June 30, Percentage Change in Revenue

Nine Months Ended September 30, Percentage Change in Revenue

2022 2021 Organic Acquisition and Divestiture Foreign Exchange Total Change

3 unchanged sentences

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

The growth in parts and services revenue of 1.4% represented increases in segment revenue of 13.9% in Self Service and 8.2% in Wholesale - North America, partially offset by decreases of 2.4% in Europe and 1.8% in Specialty.

Organic parts and services revenue growth was 5.3%, which included a 0.5% positive effect from one additional selling day in the first half of 2022, resulting in per day organic growth of 4.8%.

Additionally, there was a 4.2% negative effect on parts and services revenue from foreign exchange rates.

The decrease in other revenue of 0.5% was primarily driven by a $2 million organic decrease, attributable to a $15 million decrease in our Self Service segment, partially offset by a $12 million increase in our Wholesale - North America segment.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment during the six months ended June 30, 2022 compared to the prior year period.

The decline in parts and services revenue of 0.7% represented decreases in segment revenue of 4.8% in Europe and 2.1% in Specialty, partially offset by increases of 11.6% in Self Service and 5.4% in Wholesale - North America.

Parts and services revenue increased by 5.1% organically, so the overall decrease was attributable to negative effects from fluctuations in foreign exchange rates of 5.3% and the net reduction from divestitures of 0.6%.

The decrease in other revenue of 6.0% was primarily driven by a decrease in organic revenue of $43 million, attributable to a $50 million decrease in our Self Service segment, partially offset by an $8 million increase in our Wholesale - North America segment.

Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment during the nine months ended September 30, 2022 compared to the prior year period.

Cost of Goods Sold

Cost of goods sold increased to 59.3% of revenue in the six months ended June 30, 2022 from 59.0% of revenue in the six months ended June 30, 2021.

The cost of goods sold increase reflects impacts of 0.5% in our Self Service segment partially offset by a decrease of 0.2% attributable to mix as a greater portion of sales are coming from Wholesale - North America which has higher margins.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Cost of goods sold as a percentage of revenue remained at 59.1% for both the nine months ended September 30, 2022 and 2021.

Cost of goods sold reflects an increase of 0.5% in our Self Service segment partially offset by a decrease of 0.2% attributable to mix as a greater portion of sales are coming from Wholesale - North America which has higher margins.

The remaining decrease is related to improvements in each of our other three segments.

Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Selling, General and Administrative Expenses

Our SG&A expenses as a percentage of revenue increased to 27.2% in the six months ended June 30, 2022 from 26.5% in the six months ended June 30, 2021.

The SG&A expense increase reflects impacts of 0.2% in each of our Europe and Specialty segments and 0.3% related to individually immaterial items.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Our SG&A expenses as a percentage of revenue increased to 27.4% in the nine months ended September 30, 2022 from 26.7% in the nine months ended September 30, 2021.

The SG&A expense increase primarily reflects impacts of 0.2% in each of our Europe, Specialty, and Self Service segments.

Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Restructuring and Transaction Related Expenses

The following table summarizes restructuring and transaction related expenses for the periods indicated (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

2022 2021 Change

2 unchanged sentences

Restructuring and transaction related expenses $ 10 $ 16 $ (6)

(1) Restructuring expenses for the six months ended June 30, 2022 primarily consisted of $2 million related to our acquisition integration plans.

(2) Restructuring expenses for the six months ended June 30, 2021 primarily consisted of (i) $7 million related to our global restructuring programs and (ii) $5 million related to our 1 LKQ Europe program.

(3) Transaction related expenses for the six months ended June 30, 2022 primarily related to external costs such as legal, accounting and advisory fees for completed and potential transactions.

(1) Restructuring expenses for the nine months ended September 30, 2022 consisted of (i) $2 million related to our acquisition integration plans, (ii) $2 million related to our global restructuring programs and (iii) $1 million related to our 1 LKQ Europe program.

(2) Restructuring expenses for the nine months ended September 30, 2021 primarily consisted of (i) $9 million related to our global restructuring programs and (ii) $6 million related to our 1 LKQ Europe program.

(3) Transaction related expenses for the nine months ended September 30, 2022 primarily related to external costs such as legal, accounting and advisory fees for completed and potential transactions.

Gain on Disposal of Businesses

During the six months ended June 30, 2022, we recorded a $155 million pretax gain ($127 million after tax) from the sale of PGW.

(Gain) on Disposal of Businesses and Impairment of Net Assets Held for Sale

During the nine months ended September 30, 2022, we recorded a $159 million pretax gain from divestitures including $155 million ($127 million after tax) from the sale of PGW and $4 million from the sale of a business within our Self Service segment.

Depreciation and Amortization

The following table summarizes depreciation and amortization for the periods indicated (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

2022 2021 Change

2 unchanged sentences

Total depreciation and amortization $ 178 $ 195 $ (17)

(1) The decrease in depreciation expense included $3 million from foreign currency translation primarily related to a decrease in the euro and pound sterling rates during the six months ended June 30, 2022 compared to the prior year period and $1 million related to the sale of PGW with the remaining decrease due to individually immaterial factors.

(2) The decrease in amortization expense primarily reflected (i) a decrease of $3 million related to the customer relationship intangible assets recorded upon our acquisition of Stahlgruber as the accelerated amortization of the customer relationship intangible assets resulted in lower amortization expense during the six months ended June 30, 2022 compared to the prior year period and (ii) a $2 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate, partially offset by (iii) a $2 million increase related to software amortization.

(1) The decrease in depreciation expense included $5 million from foreign currency translation primarily related to a decrease in the euro and pound sterling rates during the nine months ended September 30, 2022 compared to the prior year period and $3 million related to divestiture of businesses (primarily PGW) with the remaining decrease due to individually immaterial factors.

(2) The decrease in amortization expense primarily reflected (i) a $6 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate and (ii) a decrease of $4 million related to the customer relationship intangible assets recorded upon our acquisition of Stahlgruber as the accelerated amortization of the customer relationship intangible assets resulted in lower amortization expense during the nine months ended September 30, 2022 compared to the prior year period, partially offset by (iii) a $2 million increase related to software amortization with the remaining increase due to individually immaterial factors.

Other Expense, Net

The following table summarizes the components of the change in other expense, net (in thousands):

The following table summarizes the components of the change in other expense, net (in millions):

Other Expense, Net

Other expense, net for the six months ended June 30, 2021 $ 52

Other expense, net for the nine months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Loss on debt extinguishment (24) (2)

Other expense (income), net 14 (3)

Other income, net 11 (3)

Net decrease (23)

Other expense, net for the six months ended June 30, 2022 $ 31

(1) Net interest expense declined due to (i) a $7 million decrease resulting from lower interest rates during the six months ended June 30, 2022 compared to the prior year period and (ii) a $3 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate.

Other expense, net for the nine months ended September 30, 2022

(1) Net interest expense declined primarily due to (i) a $5 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate and (ii) a $4 million decrease resulting from lower interest rates during the nine months ended September 30, 2022 compared to the prior year period.

(2) The $24 million decrease in loss on debt extinguishment is due to the charge recorded in April 2021 related to the redemption of the Euro Notes (2026).

(3) The variance in Other expense (income), net is primarily related to (i) a $9 million unfavorable variance in our fair value adjustments for equity investments not accounted for under the equity method and (ii) a $4 million unfavorable variance in foreign currency gains and losses.

(3) The decrease in Other income, net is primarily comprised of (i) a decrease related to a $11 million change in our fair value adjustments for equity investments not accounted for under the equity method and (ii) a decrease related to a $5 million change in foreign currency gains and losses, partially offset by (iii) other individually insignificant increases which in the aggregate had a $5 million favorable impact.

Provision for Income Taxes

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.

Our effective income tax rate for the nine months ended September 30, 2022 was 24.4%, compared to 25.7% for the nine months ended September 30, 2021.

The decrease in the effective tax rate for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was attributable to net favorable discrete items of 1.1%, primarily related to the sale of PGW, and the geographic distribution of income.

See Note 12, "Income Taxes" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Equity in Earnings of Unconsolidated Subsidiaries

Equity in earnings of unconsolidated subsidiaries for the six months ended June 30, 2022 decreased by $3 million primarily related to a decline in year over year results reported by Mekonomen, which is our largest equity method investment.

Equity in earnings of unconsolidated subsidiaries for the nine months ended September 30, 2022 decreased by $9 million primarily related to a decline in year over year results reported by Mekonomen, which is our largest equity method investment, and the negative year over year effect resulting from the divestiture of a Self Service investment in the second quarter of 2022.

Foreign Currency Impact

We translate our statements of income at the average exchange rates in effect for the period.

Relative to the rates used during the six months ended June 30, 2021, the euro, pound sterling and Czech koruna rates used to translate the 2022 statements of income decreased by 9%, 7%, and 5%, respectively.

Relative to the rates used during the nine months ended September 30, 2021, the euro, pound sterling, and Czech koruna rates used to translate the 2022 statements of income decreased by 11%, 9%, and 7%, respectively.

The negative translation effect of the change in foreign currencies against the U.S.

dollar combined with the negative impact of realized and unrealized currency gains and losses for the six months ended June 30, 2022 resulted in a $0.05 negative effect on diluted earnings per share relative to the prior year period.

dollar combined with the negative impact of realized and unrealized currency gains and losses for the nine months ended September 30, 2022 resulted in an $0.11 negative effect on diluted earnings per share relative to the prior year period.

Results of Operations—Segment Reporting

9 unchanged sentences

The following table presents our financial performance, including third party revenue, total revenue and Segment EBITDA, by reportable segment for the periods indicated (in millions):

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 % of Total Segment Revenue 2021 % of Total Segment Revenue 2022 % of Total Segment Revenue 2021 % of Total Segment Revenue

33 unchanged sentences

See Note 13, "Segment and Geographic Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to net income.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Wholesale - North America

1 unchanged sentence

The following table summarizes the changes in third party revenue by category in our Wholesale - North America segment (in millions):

Three Months Ended June 30, Percentage Change in Revenue

Three Months Ended September 30, Percentage Change in Revenue

Wholesale - North America

7 unchanged sentences

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

(1) Parts and services organic revenue increased 10.7% for the three months ended June 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation.

Aftermarket collision parts volumes decreased year over year due to ongoing ocean freight delays and supply chain challenges, and were partially offset by increased volumes of collision parts from our salvage business.

(2) Other organic revenue decreased 0.9% primarily related to (i) an $11 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices partially offset by (ii) an $8 million increase from other scrap (e.g., aluminum) and cores mainly due to higher prices, and to a lesser extent, higher volumes and (iii) a $3 million increase in revenue from scrap steel related to higher prices and volumes.

(3) Acquisition and divestiture revenue was a net decrease due to the divestiture of PGW in the second quarter of 2022.

(1) Parts and services organic revenue increased 10.9% for the three months ended September 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation.

Aftermarket collision parts volumes increased slightly year over year due to reduced pressures on our supply chain and were largely offset by decreases in collision and mechanical parts volumes from our salvage business.

(2) Other organic revenue decreased 4.4%, primarily related to (i) a $3 million decrease in revenue from scrap steel related to lower prices and (ii) a $2 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, partially offset by higher volumes.

(3) Acquisition and divestiture revenue was a net decrease of $109 million due to the divestiture of PGW in the second quarter of 2022.

Segment EBITDA

Segment EBITDA decreased $5 million , or 2.3%, in the three months ended June 30, 2022 compared to the prior year period.

The decrease includes a $12 million decline in Segment EBITDA related to the divestiture of PGW in the second quarter of 2022 and an $8 million decline due to lower precious metals prices relative to the comparable prior year period.

Additionally, net sequential increases in scrap steel prices in our salvage operations had a $1 million favorable impact on Segment EBITDA during the three months ended June 30, 2022 , compared to a $5 million favorable impact du ring the three months ended June 30, 2021.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of 0.9% on Segment EBITDA margin relative to the comparable prior year period.

The unfavorable impacts were partially offset by higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel.

Segment EBITDA increased $26 million , or 13.5%, in the three months ended September 30, 2022 compared to the prior year period, despite the $13 million negative year over year effect resulting from the divestiture of PGW in the second quarter of 2022.

The primary drivers of the increase were higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel.

In addition, certain charitable and incentive benefit contributions totaling $15 million in the three months ended September 30, 2021 were not repeated in the three months ended September 30, 2022.

The overall increase was partially offset by decreases attributable to precious metals and scrap steel.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of $10 million, or 0.8%, on Segment EBITDA margin relative to the comparable prior year period.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Wholesale - North America segment:

1 unchanged sentence

Percentage of Total Segment Revenue

Segment EBITDA for the three months ended June 30, 2021 19.6 %

Segment EBITDA for the three months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses 0.2 % (2)

Change in other expense, net (0.2) % (3)

Segment EBITDA for the three months ended June 30, 2022 18.7 %

Change in other income and expenses, net 0.2 % (3)

Segment EBITDA for the three months ended September 30, 2022

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

(1) The decrease in gross margin of 0.8% was primarily driven by a 0.7% unfavorable impact related to precious metals and scrap steel pricing.

Inflationary increases in material and freight costs were offset by higher prices on parts and services and by productivity initiatives.

(2) Segment operating expenses as a percentage of revenue decreased 0.1% to (i) a 0.4% favorable impact from personnel expense due to lower incentive compensation offset by (ii) a 0.3% unfavorable impact from higher professional fees.

(3) Several individually immaterial factors had a 0.2% unfavorable impact on other expense, net.

(1) The increase in gross margin of 1.9% was primarily driven by (i) productivity and price initiatives to offset inflation on product cost and inbound freight and (ii) a 0.8% mix benefit resulting from the PGW divestiture in the second quarter, partially offset by (iii) an unfavorable impact from a decrease in scrap steel and precious metals pricing.

(2) Segment operating expenses as a percentage of revenue decreased 0.2% due to (i) a 0.6% favorable impact from personnel expense due to non-recurring incentive compensation in 2021, (ii) a 0.4% favorable impact from lower charitable contributions, offset by (iii) a 0.4% unfavorable impact from higher professional fees, and (iv) a 0.4% unfavorable impact

of other operating expenses in the aggregate.

(3) Other income and expenses, net as a percentage of revenue was favorable by 0.2% mainly due to insurance proceeds.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Europe segment (in millions):

Three Months Ended June 30, Percentage Change in Revenue

Three Months Ended September 30, Percentage Change in Revenue

Europe 2022 2021 Organic Acquisition and Divestiture Foreign Exchange (2)

4 unchanged sentences

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

(1) Parts and services organic revenue for the three months ended June 30, 2022 increased by 4.2% (4.9% on a per day basis), primarily due to pricing initiatives across all geographies that have been implemented throughout 2022 to offset increased costs resulting from inflationary pressures.

The organic revenue growth across most of our European operations was partially offset by 0.6% (0.5% on a per day basis) of a negative effect on certain operations and product lines due to the Ukraine/Russia conflict.

(1) Parts and services organic revenue for the three months ended September 30, 2022 increased by 4.8% (5.8% on a per day basis), primarily due to pricing initiatives across all geographies that have been implemented throughout 2022 to offset increased costs resulting from inflationary pressures.

The organic revenue growth across most of our European operations was partially offset by 0.4% of an unfavorable effect on certain operations and product lines due to the Ukraine/Russia conflict.

(2) Compared to the prior year, exchange rates decreased our revenue growth by $224 million, or 14.7%, primarily due to the stronger U.S.

dollar against the euro, pound sterling, and Czech koruna during the second quarter of 2022 relative to the prior year period.

dollar against the euro, pound sterling, and Czech koruna during the third quarter of 2022 relative to the prior year period.

Segment EBITDA

Segment EBITDA decreased $8 million, or 5.2%, in the three months ended June 30, 2022 compared to the prior year period.

Segment EBITDA decreased $20 million, or 11.2%, in the three months ended September 30, 2022 compared to the prior year period.

Our Europe Segment EBITDA included a negative year over year impact of $26 million rel ated to the translation of local currency results into U.S.

dollars at lower exchange rates than those experienced during the three months ended June 30, 2021 .

dollars at lower exchange rates than those experienced during the three months ended September 30, 2021 .

On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA increased by $6 million, or 3.6% , co mpared to the prior year.

Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the three months ended June 30, 2022.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Europe segment:

Europe Percentage of Total Segment Revenue

Segment EBITDA for the three months ended June 30, 2021 10.7 %

Segment EBITDA for the three months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses (0.3) % (2)

Change in other expense, net (0.2) % (3)

Segment EBITDA for the three months ended June 30, 2022 10.8 %

Segment EBITDA for the three months ended September 30, 2022

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

(1) The increase in gross margin was primarily attributable to favorable impacts of (i) net price increases and margin improvement initiatives undertaken to support profitable revenue growth despite inflationary pressures, primarily at our businesses in the Netherlands, Germany, and Italy, and (ii) to a lesser extent, favorable sales mix shift towards private label products.

(2) The increase in segment operating expenses as a percentage of revenue reflects unfavorable impacts of (i) 0.5% of personnel costs primarily due to inflationary pressures, (ii) 0.3% from freight, vehicle and fuel expenses due to inflationary pressures, (iii) and 0.2% of increased advertising costs, partially offset by (iv) several individually immaterial factors that had a favorable impact of 0.5% in the aggregate.

(3) Several individually immaterial factors had a 0.2% unfavorable impact on other expense, net.

(1) The increase in gross margin was primarily attributable to favorable impacts of net price increases and margin improvement initiatives undertaken to support profitable revenue growth despite inflationary pressures.

(2) The increase in segment operating expenses as a percentage of revenue reflects unfavorable impacts of (i) 0.4% from freight, vehicle, and fuel expenses due to inflationary pressures, (ii) 0.3% from increased personnel costs primarily due to inflationary pressures, partially offset by favorable impacts of (iii) 0.2% from lower professional expenses and (iv) several individually immaterial factors totaling 0.2% in the aggregate.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Specialty segment (in millions):

Three Months Ended June 30, Percentage Change in Revenue

Three Months Ended September 30, Percentage Change in Revenue

Specialty 2022 2021 Organic (1)

5 unchanged sentences

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

(1) Parts and services organic revenue for the three months ended June 30, 2022 decreased by 11.5% due to the strong growth we experienced in the second quarter of 2021, when parts and services organic revenue growth was 30.1%, and demand softness from lower new vehicle sales caused by supply chain challenges as well as a decrease in drop shipment volumes.

(2) Acquisition related growth for the three months ended June 30, 2022 reflected revenue from our acquisitions of three Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

(1) Parts and services organic revenue for the three months ended September 30, 2022 decreased by 9.1% due to the strong growth we experienced in the third quarter of 2021, when parts and services organic revenue growth was 13.7%;

demand softness from lower new vehicle sales caused by supply chain challenges;

and a decrease in drop shipment volumes.

(2) Acquisition related growth for the three months ended September 30, 2022 reflected revenue from our acquisitions of two Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

Segment EBITDA

Segment EBITDA decreased $11 million, or 13.1%, in the three months ended June 30, 2022 compared to the prior year period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

Segment EBITDA decreased $3 million, or 5.0%, in the three months ended September 30, 2022 compared to the prior year period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:

Specialty Percentage of Total Segment Revenue

Segment EBITDA for the three months ended June 30, 2021 14.9 %

Segment EBITDA for the three months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses (0.8) % (2)

Segment EBITDA for the three months ended June 30, 2022 13.4 %

Segment EBITDA for the three months ended September 30, 2022

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

(1) The decrease in gross margin primarily reflects a 1.1% unfavorable impact from acquisitions, partially offset by favorable product and channel mix and, to a lesser extent, lower discounting to recover higher input costs.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 1.0% in personnel costs as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.5% in vehicle and fuel expenses primarily due to higher fuel costs, and (iii) several individually immaterial factors that had an unfavorable impact of 0.8% in the aggregate, partially offset by favorable impacts of (iv) 0.6% from operating expense synergies and leverage generated from the 2021 acquisitions, primarily Seawide, and (v) 0.5% in freight expenses primarily driven by reduced usage of third party freight carriers.

(1) The increase in gross margin primarily reflects (i) a 1.0% benefit from lower customer rebate accruals and (ii) other individually immaterial factors totaling 0.5%, partially offset by (iii) a 1.0% unfavorable impact from acquisitions.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.8% in personnel costs as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.6% in vehicle and fuel expenses primarily due to higher fuel costs, (iii) 0.4% in fixed facility expenses as a result of lower operating leverage due to the organic parts and services revenue decline and (iv) several individually immaterial factors that had an unfavorable impact of 0.5% in the aggregate, partially offset by favorable impacts of (v) 0.8% from operating expense synergies and leverage generated from the 2021 acquisitions, primarily Seawide, and (vi) 0.7% related to lower incentive compensation.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Self Service segment (in millions):

Three Months Ended June 30, Percentage Change in Revenue

Three Months Ended September 30, Percentage Change in Revenue

2022 2021 Organic Acquisition and Divestiture Foreign Exchange Total Change

5 unchanged sentences

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

(1) Parts and services organic revenue increased 13.2% for the three months ended June 30, 2022 compared to the prior year period, primarily driven by pricing initiatives to mitigate significant increases in input costs resulting from greater competition for vehicles.

(2) The 4.8%, or $8 million, year over year organic decrease in other revenue is related to (i) a $22 million decrease in revenue from precious metals (platinum, palladium, and rhodium) mainly due to lower prices, partially offset by (ii) a $9 million increase in revenue from other scrap (including aluminum) and cores mainly due to higher prices and (iii) a $6 million increase in revenue from scrap steel related to higher prices, partially offset by lower volumes.

(1) Parts and services organic revenue increased 7.2% for the three months ended September 30, 2022 compared to the prior year period, primarily driven by pricing initiatives to mitigate significant increases in input costs resulting from greater competition for vehicles.

(2) The 24.8%, or $35 million, year over year decrease in other revenue is related to (i) a $23 million decrease in revenue from scrap steel related to lower volumes and lower prices, (ii) a $13 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices and lower volumes, partially offset by (iii) a $1 million increase in revenue from other scrap (including aluminum) and cores.

Segment EBITDA

Segment EBITDA decreased $24 million, or 43.7%, in the three months ended June 30, 2022 compared to the prior year period.

This decrease is primarily attributable to unfavorable movements in commodity prices compared to the prior year.

Decreases in precious metals prices contributed an estimated $18 million decline in Segment EBITDA relative to the three months ended June 30, 2021.

Additionally, net sequential increases in scrap steel prices in our self service operations had a $3 million favorable impact on Segment EBITDA during the three months ended June 30, 2022, compared to a $5 million favorable impact during the three months ended June 30, 2021.

This favorable impact for both periods resulted from the increase in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

Segment EBITDA decreased $32 million, or 88.0%, in the three months ended September 30, 2022 compared to the prior year period.

The decrease includes a $5 million decline due to lower precious metals prices relative to the comparable prior year period.

In addition, net sequential changes in scrap steel prices in our self service operations had a $16 million unfavorable impact on Segment EBITDA during the three months ended September 30, 2022, compared to a $4 million favorable impact during the three months ended September 30, 2021.

This unfavorable impact for the three months ended September 30, 2022 resulted from the decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of 12.4% on Segment EBITDA margin relative to the comparable prior year period.

1 unchanged sentence

Percentage of Total Segment Revenue

Segment EBITDA for the three months ended June 30, 2021 27.2 %

Segment EBITDA for the three months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses (6.3) % (2)

Change in other expense, net 0.1 %

Segment EBITDA for the three months ended June 30, 2022 15.3 %

Segment EBITDA for the three months ended September 30, 2022

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

(1) The decrease in gross margin reflects (i) an unfavorable impact of 6.8% resulting from movements in metals prices, (ii) an unfavorable impact due to increases in car costs, partially offset by (iii) a favorable impact due to increased prices for parts and services.

(2) The increase in segment operating expense as a percentage of revenue reflects (i) a 1.6% unfavorable impact from movements in metals prices, (ii) a 0.8% unfavorable impact from increased freight, vehicle, and fuel costs due to inflationary pressures (iii) a 0.5% unfavorable impact from personnel expenses due to inflationary pressures.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

(1) The decrease in gross margin reflects (i) an unfavorable impact of 9.9% resulting from movements in metals prices partially offset by (ii) a favorable impact due to increased prices for parts and services.

(2) The increase in segment operating expense as a percentage of revenue reflects (i) a negative leverage effect of 5.4% from decreases in metals revenue and (ii) other individually immaterial factors representing a 0.9% unfavorable impact in the aggregate.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Wholesale - North America

1 unchanged sentence

The following table summarizes the changes in third party revenue by category in our Wholesale - North America segment (in millions):

Six Months Ended June 30, Percentage Change in Revenue

Nine Months Ended September 30, Percentage Change in Revenue

Wholesale - North America 2022 2021 Organic Acquisition and Divestiture Foreign Exchange Total Change

5 unchanged sentences

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

(1) Parts and services organic revenue increased 12.1% (11.3% on a per day basis) for the six months ended June 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation.

(2) Organic other revenue increased 6.9%, or $12 million related to (i) a $19 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices as well as higher volumes, and (ii) a $5 million increase in revenue from scrap steel due to higher prices and volumes partially offset by (iii) an $11 million decrease in revenue from precious metals (platinum, palladium, and rhodium) primarily due to lower prices.

(3) Acquisition and divestiture revenue was a net decrease due to the divestiture of PGW in the second quarter of 2022.

(1) Parts and services organic revenue increased 11.7% (11.2% on a per day basis) for the nine months ended September 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation.

Aftermarket collision parts volumes decreased in the first nine months of the year due to ocean freight delays and supply chain challenges but showed year over year improvement in the third quarter.

Increased volumes of collision parts from our salvage business partially offset the year to date aftermarket volume decline.

(2) Organic other revenue increased 3.2%, or $8 million, related to (i) a $19 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices as well as higher volumes, and (ii) a $2 million increase in revenue from scrap steel due to higher volumes, partially offset by (iii) a $13 million decrease in revenue from precious metals (platinum, palladium, and rhodium) primarily due to lower prices partially offset by higher volumes.

(3) Acquisition and divestiture revenue was a net decrease of $185 million primarily due to the divestiture of PGW in the second quarter of 2022.

Segment EBITDA

Segment EBITDA increased $19 million, or 4.6%, for the six months ended June 30, 2022 compared to the prior year.

This increase is attributable to higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel.

Decreases in precious metals prices contributed a $12 million decline in Segment EBITDA relative to the six months ended June 30, 2021.

Additionally, net sequential increases in scrap steel prices in our salvage operations had a $2 million favorable impact on Segment EBITDA during the six months ended June 30, 2022, compared to a $11 million favorable impact during the six months ended June 30, 2021.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of 0.9% on Segment EBITDA margin relative to the comparable prior year period.

Segment EBITDA increased $45 million, or 7.4%, for the nine months ended September 30, 2022 compared to the prior year, despite the $12 million negative year over year effect related to the PGW business, which we divested in the second quarter of 2022.

The increase is attributable to higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel.

The increase was partially offset by decreases attributable to precious metals and scrap steel.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of $32 million, or 0.9%, on Segment EBITDA margin relative to the comparable prior year period.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our North America segment:

Wholesale - North America Percentage of Total Segment Revenue

Segment EBITDA for the six months ended June 30, 2021

Segment EBITDA for the nine months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses — % (2)

Segment EBITDA for the six months ended June 30, 2022

Segment EBITDA for the nine months ended September 30, 2022

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

(1) The decrease in gross margin of 0.4% was primarily driven by a decrease in commodity prices resulting in a 0.7% unfavorable impact.

Inflationary increases in material and freight costs were offset by higher prices on parts and services and productivity initiatives.

(2) The increase in segment operating expense as a percentage of revenue reflects several immaterial factors that had a 0.2% unfavorable impact in the aggregate.

(1) The increase in gross margin of 0.3% was driven by (i) productivity and price initiatives to offset inflation on product cost and inbound freight and (ii) a 0.5% mix benefit resulting from the PGW divestiture in the second quarter, partially offset by (iii) an unfavorable impact from a decrease in scrap steel and precious metals pricing.

(2) The segment operating expenses as a percentage of revenue were flat which reflects favorable impacts of (i) 0.2% related to personnel costs due to lower incentive compensation and (ii) 0.2% from lower charitable contributions, partially offset by (iii) a 0.3% unfavorable impact related to professional fees and (iv) other individually immaterial factors representing a 0.1% unfavorable impact in the aggregate.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Europe segment (in millions):

Six Months Ended June 30, Percentage Change in Revenue

Nine Months Ended September 30, Percentage Change in Revenue

Europe 2022 2021 Organic Acquisition and Divestiture Foreign Exchange (2)

4 unchanged sentences

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

(1) Parts and services organic revenue for the six months ended June 30, 2022 increased by 5.5%, primarily driven by net price increases compared to prior year.

Revenue growth from net price increases reflects actions taken to offset increased costs from inflationary pressures.

(1) Parts and services organic revenue for the nine months ended September 30, 2022 increased by 5.3% (5.5% on a per day basis), primarily due to pricing initiatives across all geographies that have been implemented throughout 2022 to offset increased costs resulting from inflationary pressures.

The organic revenue growth across most of our European operations was partially offset by 0.4% of a negative effect on certain operations and product lines due to the Ukraine/Russia conflict.

(2) Compared to the prior year, exchange rates decreased our revenue growth by $478 million, or 10.5%, primarily due to the stronger U.S.

dollar against the euro, pound sterling and Czech koruna for the six months ended June 30, 2022 relative to the prior year period.

dollar against the euro, pound sterling and Czech koruna for the nine months ended September 30, 2022 relative to the prior year period.

Segment EBITDA

Segment EBITDA decreased $18 million, or 5.9%, for the six months ended June 30, 2022 compared to the prior year period.

Segment EBITDA decreased $38 million, or 7.8%, for the nine months ended September 30, 2022 compared to the prior year period.

Our Europe Segment EBITDA included a negative year over year impact of $52 million related to the translation of local currency results into U.S.

dollars at lower exchange rates than those experienced during the six months ended June 30, 2021.

dollars at lower exchange rates than those experienced during the nine months ended September 30, 2021.

On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA increased by $14 million, or 3.0%, com pared to the prior year.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Europe segment:

Europe Percentage of Total Segment Revenue

Segment EBITDA for the six months ended June 30, 2021

Segment EBITDA for the nine months ended September 30, 2021

Increase (decrease) due to:

2 unchanged sentences

Change in other expense, net (0.1) %

Segment EBITDA for the six months ended June 30, 2022

Segment EBITDA for the nine months ended September 30, 2022

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

(1) The increase in gross margin was primarily attributable to favorable impacts of year to date net price increases and margin improvement initiatives supporting the pursuit of profitable revenue growth to offset increased costs resulting from inflationary pressures.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.2% related to a higher provision for credit losses, including impacts related to a customer bankruptcy, (ii) 0.2% from increased freight, vehicle, and fuel expenses due to inflationary pressures and ongoing supply chain constraints, (iii) 0.2% from increased personnel costs primarily due to inflationary pressures partially offset by (iv) other individually immaterial factors representing a 0.2% favorable impact in the aggregate.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.3% from increased personnel costs primarily due to inflationary pressures, (ii) 0.3% from increased freight, vehicle, and fuel expenses due to inflationary pressures and supply chain constraints, and (iii) other individually immaterial factors representing a 0.3% favorable impact in the aggregate.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Specialty segment (in millions):

Six Months Ended June 30, Percentage Change in Revenue

Nine Months Ended September 30, Percentage Change in Revenue

Specialty 2022 2021 Organic (1)

5 unchanged sentences

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

(1) Parts and services organic revenue for the six months ended June 30, 2022, decreased by 10.0% (10.7% on a per day basis) due to the strong comparative growth for the six months ended June 30, 2021, when parts and services organic revenue growth was 30.5%, and demand softness from lower new vehicle sales caused by supply chain challenges as well as a decrease in drop shipment volumes.

(2) Acquisition related growth for the six months ended June 30, 2022 reflected revenue from our acquisitions of three Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

(1) Parts and services organic revenue for the nine months ended September 30, 2022, decreased by 9.7% (10.2% on a per day basis) due to strong comparative growth for the nine months ended September 30, 2021, when parts and services organic revenue growth was 24.6%;

demand softness from lower new vehicle sales caused by supply chain challenges;

and a decrease in drop shipment volumes.

(2) Acquisition related growth for the nine months ended September 30, 2022 reflected revenue from our acquisitions of three Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

Segment EBITDA

Segment EBITDA decreased $14 million, or 9.8%, for the six months ended June 30, 2022 compared to the prior year period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

Segment EBITDA decreased $17 million, or 8.5%, for the nine months ended September 30, 2022 compared to the prior year period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:

Specialty Percentage of Total Segment Revenue

Segment EBITDA for the six months ended June 30, 2021

Segment EBITDA for the nine months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses (1.3) % (2)

Segment EBITDA for the six months ended June 30, 2022

Segment EBITDA for the nine months ended September 30, 2022

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

(1) The increase in gross margin primarily reflects lower discounting to recover higher input costs and, to a lesser extent, favorable product and channel mix, partially offset by a 1.0% unfavorable impact from acquisitions.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 1.1% in personnel costs as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.5% in vehicle and fuel expenses primarily due to higher fuel costs, and (iii) several individually immaterial factors that had an unfavorable impact of 0.5% in the aggregate, partially offset by (iv) a favorable impact of 0.6% from operating expense synergies and leverage generated from the 2021 acquisitions.

(1) The increase in gross margin primarily reflects lower discounting to recover higher input costs and lower customer rebate accruals, partially offset by a 1.0% unfavorable impact from acquisitions.

(2) The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.8% in personnel costs primarily as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.5% in vehicle and fuel expenses primarily due to higher fuel costs, (iii) 0.3% in fixed facility expenses as a result of lower operating leverage due to the organic parts and services revenue decline, and (iv) several individually immaterial factors that had an unfavorable impact of 0.4% in the aggregate, partially offset by (v) a favorable impact of 0.7% from operating expense synergies and leverage generated from the 2021 acquisitions.

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Self Service segment (in millions):

Six Months Ended June 30, Percentage Change in Revenue

Nine Months Ended September 30, Percentage Change in Revenue

Self Service 2022 2021 Organic Acquisition and Divestiture Foreign Exchange Total Change

5 unchanged sentences

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

(1) Parts and services organic revenue increased 13.9% for the six months ended June 30, 2022 compared to the prior year period, primarily driven by pricing initiatives to mitigate significant increases in input costs resulting from greater competition for vehicles.

(2) The 4.9%, or $15 million, year over year organic decrease in other revenue is related to (i) a $38 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to both lower prices and volumes, partially offset by (ii) a $13 million increase in revenue from other scrap (including aluminum) and cores primarily related to higher prices and (iii) a $10 million increase in revenue from scrap steel primarily related to higher prices, partially offset by lower volumes.

(1) Parts and services organic revenue increased 11.6% for the nine months ended September 30, 2022 compared to the prior year period, primarily driven by pricing initiatives to mitigate significant increases in input costs resulting from greater competition for vehicles.

(2) The 11.3%, or $50 million, year over year decrease in other revenue is related to (i) a $51 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to both lower prices and volumes, and (ii) a $13 million decrease in revenue from scrap steel related to lower volumes partially offset by higher prices, partially offset by (iii) a $14 million increase in revenue from other scrap (including aluminum) and cores primarily related to higher prices.

Segment EBITDA

Segment EBITDA decreased $40 million, or 36.2%, in the six months ended June 30, 2022 compared to the prior year period.

Segment EBITDA decreased $72 million, or 48.8%, in the nine months ended September 30, 2022 compared to the prior year period.

The decrease is primarily attributable to unfavorable movements in commodity prices compared to the prior year.

Decreases in precious metals prices contributed an estimated $27 million decline in Segment EBITDA relative to the six months ended June 30, 2021.

In addition, net sequential increases in scrap steel prices in our self service operations had a $5 million favorable impact on Segment EBITDA during the six months ended June 30, 2022, compared to a $21 million favorable impact during the six months ended June 30, 2021.

The favorable impacts for both periods resulted from the increase in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

Decreases in precious metals prices contributed an estimated $32 million decline in Segment EBITDA relative to the nine months ended September 30, 2021.

In addition, net sequential changes in scrap steel prices in our self service operations had an $11 million unfavorable impact on Segment EBITDA during the nine months ended September 30, 2022, compared to a $25 million favorable impact during the nine months ended September 30, 2021.

The unfavorable impacts for the nine months ended September 30, 2022 resulted from the decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

We estimate that precious metals and scrap steel pricing had an unfavorable effect of 10.4% on Segment EBITDA margin relative to the comparable prior year period.

1 unchanged sentence

Self Service Percentage of Total Segment Revenue

Segment EBITDA for the six months ended June 30, 2021

Segment EBITDA for the nine months ended September 30, 2021

Increase (decrease) due to:

1 unchanged sentence

Change in segment operating expenses (3.1) % (2)

Change in other expense, net 0.1 %

Segment EBITDA for the six months ended June 30, 2022

Segment EBITDA for the nine months ended September 30, 2022

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

(1) The decrease in gross margin reflects (i) an unfavorable impact of 9.0% resulting from movements in metals prices and (ii) an unfavorable impact due to increases in car costs, partially offset by (iii) a favorable impact due to increased prices for parts and services.

(2) The increase in segment operating expense as a percentage of revenue reflects (i) a 0.8% unfavorable impact from movements in metals prices, (ii) a 0.6% unfavorable impact from increased freight, vehicle and fuel costs due to inflationary pressures, (iii) a 0.3% unfavorable impact from personnel expenses due to inflationary pressures, (iv) several individually immaterial factors that had a 0.2% unfavorable impact in the aggregate.

(1) The decrease in gross margin reflects (i) an unfavorable impact of 9.2% resulting from movements in metals prices partially offset by (ii) a favorable impact due to increased prices for parts and services.

(2) The increase in segment operating expense as a percentage of revenue reflects (i) a negative leverage effect of 2.7% from decreases in metals revenue and (ii) other individually immaterial factors representing a 0.4% unfavorable impact in the aggregate.

Liquidity and Capital Resources

The following table summarizes liquidity data as of the dates indicated (in millions):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 269 $ 274

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Total liquidity (cash and cash equivalents plus availability under credit facilities) 1,729 1,468

(1) Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of $9 million and $12 million as of June 30, 2022 and December 31, 2021, respectively).

(2) Debt amounts reflect the gross values to be repaid in the next 12 months (excluding debt issuance costs of immaterial amounts as of June 30, 2022 and December 31, 2021).

(1) Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of $7 million and $12 million as of September 30, 2022 and December 31, 2021, respectively).

(2) Debt amounts reflect the gross values to be repaid in the next 12 months (excluding debt issuance costs of immaterial amounts as of September 30, 2022 and December 31, 2021).

(3) Capacity under credit facilities includes our revolving credit facilities and availability under credit facilities is reduced by our outstanding letters of credit.

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To fund our acq uisitions, we have accessed various forms of debt financing, including revolving credit facilities and senior notes.

As of June 30, 2022, we had debt outstanding and additional available sources of financing as follows:

• Senior secured credit facilities maturing in January 2024, composed of $3,150 million in revolving credit ($1,494 million outstanding at June 30, 2022), bearing interest at variable rates, with availability reduced by $69 million of amounts outstanding under letters of credit

As of September 30, 2022, we had debt outstanding and additional available sources of financing as follows:

• Senior secured credit facilities maturing in January 2024, composed of $3,150 million in revolving credit ($1,621 million outstanding at September 30, 2022), bearing interest at variable rates, with availability reduced by $69 million of amounts outstanding under letters of credit

• Euro Notes (2024) totaling $490 million (€500 million), maturing in April 2024 and bearing interest at a 3.875% fixed rate

• Euro Notes (2028) totaling $245 million (€250 million) maturing in April 2028 and bearing interest at a 4.125% fixed rate

As of June 30, 2022, we had approximately $1,587 million available under our credit facilities.

Combined with $265 million of cash and cash equivalents at June 30, 2022, we had approximately $1,852 million i n available liquidity, an increase of $384 million from our available liquidity as of December 31, 2021.

As of September 30, 2022, we had approximately $1,460 million available under our credit facilities.

Combined with $269 million of cash and cash equivalents at September 30, 2022, we had approximately $1,729 million i n available liquidity, an increase of $261 million from our available liquidity as of December 31, 2021.

We believe that our current liquidity and cash expected to be generated by operating activities in future periods will be sufficient to meet our current operating and capital requirements.

Our 2022 plan includes spending to rebuild inventory levels, support growth driven capital projects, complete strategic acquisitions, and return stockholder value through the payment of dividends and repurchasing shares of our common stock.

A summary of the dividend activity for our common stock for the six months ended June 30, 2022 is as follows:

Our 2022 plan includes spending to rebuild inventory levels, support growth driven capital projects, complete tuck-in acquisitions, and return stockholder value through the payment of dividends and repurchasing shares of our common stock.

A summary of the dividend activity for our common stock for the nine months ended September 30, 2022 is as follows:

Dividend Amount Declaration Date Record Date Payment Date

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$0.25 April 26, 2022 May 19, 2022 June 2, 2022

On July 26, 2022, our Board of Directors declared a quarterly cash dividend of $0.25 per share of common stock, payable on September 1, 2022, to stockholders of record at the close of business on August 11, 2022.

$0.25 July 26, 2022 August 11, 2022 September 1, 2022

On October 25, 2022, our Board of Directors declared a quarterly cash dividend of $0.275 per share of common stock, payable on December 1, 2022, to stockholders of record at the close of business on November 17, 2022.

We believe that our future cash flow generation will permit us to continue paying dividends in future periods;

however, the timing, amount and frequency of such future dividends will be subject to approval by our Board of Directors, and based on considerations of capital availability, and various other factors, many of which are outside of our control.

With $1,852 million of total liquidity as of June 30, 2022 and $47 million of current maturities, we have access to funds to meet our near term commitments.

With $1,729 million of total liquidity as of September 30, 2022 and $50 million of current maturities, we have access to funds to meet our near term commitments.

We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.

Our total liquidity inclu des availability under our senior secured credit facility, which includes the two financial maintenance covenants presented below (our required debt covenants and our actual ratios with respect to those covenants as calculated per the credit agreement as of June 30, 2022):

Covenant Level Ratio Achieved as of June 30, 2022

Covenant Level Ratio Achieved as of September 30, 2022

Maximum net leverage ratio 4.00 :

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With the assignment of an investment grade rating, we are no longer required to comply with certain restrictive covenants under the credit agreement.

We were in compliance with all applicable covenants under our credit agreement as of June 30, 2022.

The indentures relating to our Euro Notes d o not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds on the credit facility.

We were in compliance with all applicable covenants under our credit agreement as of September 30, 2022.

The indentures relating to our Euro Notes d o not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds under the credit facility.

The indentures do not prohibit amendments to the financial covenants under the credit facility as needed.

In the long term, while we believe that we have adequate capacity under our existing credit facilities, from time to time we may need to raise additional funds through public or private financing, strategic relationships or modification of our existing credit facilities.

While we believe that we have adequate capacity under our existing credit facilities, from time to time we may need to raise additional funds through public or private financing, strategic relationships or modification of our existing credit facilities.

There can be no assurance that additional funding, or refinancing of our credit facilities, if needed, will be available on terms attractive to us, or at all.

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Our failure to raise capital if and when needed could have a material adverse impact on our business, operating results, and financial condition.

Our current credit facility matures in January 2024, and we expect to refinance the facility prior to that date.

We utilize a supply chain financing arrangement, which allows us to improve our operating cash flows by extending payment terms.

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In the future, if the financial institutions do not continue to purchase receivables from our suppliers under the initiative, the participating vendors may need to renegotiate their payment terms with us, which in turn could cause our borrowings under our revolving credit facility to increase.

All outstanding

payments owed under the initiative to the participating financial institutions are recorded within Accounts payable in our Unaudited Condensed Consolidated Balance Sheets.

All outstanding payments owed under the initiative to the participating financial institutions are recorded within Accounts payable in our Unaudited Condensed Consolidated Balance Sheets.

We have held interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings and currency swaps that contain an interest rate swap component and a foreign currency forward contract component.

As of June 30, 2022, we did not have any of these contracts outstanding.

The weighted average interest rate on borrowings outstanding under our credit agreement was 1.7% at June 30, 2022.

Including our senior notes, our overall weighted average interest rate on borrowings was 2.5% at June 30, 2022.

As of September 30, 2022, we did not have any of these contracts outstanding.

The weighted average interest rate on borrowings outstanding under our credit agreement was 3.0% at September 30, 2022.

Including our senior notes, our overall weighted average interest rate on borrowings was 3.3% at September 30, 2022.

Our borrowings in U.S.

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See Note 8, "Long-Term Obligations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our borrowings and related interest.

We had outstanding credit agreement borrowin gs of $1,494 million and $1,887 million at June 30, 2022 and December 31, 2021, respectively.

Of these amounts, t here wer e no current maturities at June 30, 2022 or December 31, 2021.

The scheduled maturities of long-term obligations outstanding at June 30, 2022 are as follows (in millions):

Six months ending December 31, 2022 (1)

We had outstanding credit agreement borrowin gs of $1,621 million and $1,887 million at September 30, 2022 and December 31, 2021, respectively.

Of these amounts, t here wer e no current maturities at September 30, 2022 or December 31, 2021.

The scheduled maturities of long-term obligations outstanding at September 30, 2022 are as follows (in millions):

Three months ending December 31, 2022 (1)

Years ending December 31:

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(1) Long-term obligations maturing by December 31, 2022 include $34 million of short-term debt that may be extended beyond the current year ending December 31, 2022.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of $9 million as of June 30, 2022).

As of June 30, 2022, the Company had cash and cash equivalents of $265 million, of which $210 million was held by foreign subsidiaries.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of $7 million as of September 30, 2022).

As of September 30, 2022, the Company had cash and cash equivalents of $269 million, of which $210 million was held by foreign subsidiaries.

In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries.

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We normally pay for salvage vehicles acquired at salvage auctions and under direct procurement arrangements at the time that we take possession of the vehicles.

The following table sets forth a summary of our aftermarket and manufactured inventory procurement for the three and six months ended June 30, 2022 and 2021 (in millions):

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

The following table sets forth a summary of our aftermarket and manufactured inventory procurement for the three and nine months ended September 30, 2022 and 2021 (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 Change 2022 2021 Change

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Total $ 1,439 $ 1,590 $ (151) $ 4,646 $ 4,764 $ (118)

(1) Inventory purchases across the Wholesale - North America segment increased in the six months ended June 30, 2022 compared to the prior year period primarily due to required restocking to keep up with the high demand for our products.

(2) The decrease in inventory purchases in our Europe segment included a decrease of $167 million attributable to the decrease in the value of the euro, and to a lesser extent, the pound sterling in the six months ended June 30, 2022 compared to the prior year period.

On a constant currency basis, inventory purchases increased compared to the prior year period, due to required restocking to keep up with the high demand for our products as well as purchases to improve availability for customers in certain regions.

(1) Inventory purchases across the Wholesale - North America segment increased in the nine months ended September 30, 2022 compared to the prior year period primarily due to required restocking to keep up with the demand for our products.

(2) The decrease in inventory purchases in our Europe segment included a decrease of $307 million attributable to the decrease in the value of the euro, and to a lesser extent, the pound sterling in the nine months ended September 30, 2022 compared to the prior year period.

On a constant currency basis, inventory purchases increased compared to the prior year period, due to required restocking to keep up with the demand for our products as well as purchases to improve availability for customers in certain regions.

(3) The decrease in inventory purchases in the Specialty segment compared to the prior year period was primarily due to matching inventory levels with demand.

This was partially offset by inventory purchases made by acquired companies.

These companies were not acquired until the second half of 2021.

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three and six months ended June 30, 2022 and 2021 (in thousands):

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

This was partially offset by inventory purchases made by companies acquired in the second half of 2021.

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 % Change 2022 2021 % Change

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Wholesale - North America salvage purchases in 2022 increased relative to the prior year due to limitations in the prior year on vehicles at auctions.

Self Service vehicle purchases in 2022 were roughly flat year over year.

We expect to increase inventory purchases in 2022 to support the service and fill rate requirements of our businesses based on the revenue trend and expectations for full year 2022, including normal sea sonality as supply chain challenges in 2021 deferred a portion of the inventory build to 2022 (although if supply chain challenges continue our ability to increase or maintain inventory purchases to the desired level could be affected).

Self Service salvage vehicle purchases in 2022 decreased due to increased market competition and decreased availability of vehicles.

The following table summarizes the components of the year over year changes in cash provided by operating activities (in millions):

Operating Cash

Net cash provided by operating activities for the six months ended June 30, 2021

Net cash provided by operating activities for the nine months ended September 30, 2021

Increase (decrease) due to:

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Other operating activities (72) (2)

Net cash provided by operating activities for the six months ended June 30, 2022

Net cash provided by operating activities for the nine months ended September 30, 2022

(1) Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and collections can be timed differently from period to period.

• Receivables, net was a $25 million greater outflow in 2022 primarily due to an increase in organic revenue in 2022 compared to 2021, which translated to higher receivables balances and larger net outflows in the Wholesale - North America segment of $35 million.

We had a smaller cash outflow in the Specialty segment of $11 million compared to prior period due to lower revenue.

• Inventories represented $266 million in incremental cash outflows in the first six months of 2022 compared to the same period of 2021.

The change is primarily attributable to increased inventory purchases in the current year as a result of strong demand and strategic inventory purchases to curb the impacts of supply chain constraints.

• Accounts payable produced $128 million in higher cash inflows primarily from North America which contributed a $224 million cash inflow driven by higher accounts payable balances and timing of payments partially offset by lower cash inflows in our Europe segment of $62 million and Specialty segment of $34 million.

(2) Reflects the aggregate effect of lower cash operating income and higher incentive compensation payments partially offset by lower cash paid for taxes.

Net cash provided by investing activities totaled $265 million and net cash used in investing activities totaled $109 million during the six months ended June 30, 2022 and 2021, respectively.

Proceeds from the disposal of businesses (primarily PGW) were $372 million during the six months ended June 30, 2022.

Property, plant and equipment purchases were $99 million in the six months ended June 30, 2022 compared to $88 million in the prior year period.

• Receivables, net was a $16 million benefit to cash provided by operating activities year over year.

This was driven by a $43 million inflow for our Europe segment and a $7 million inflow for our Specialty segment, both due to lesser overall cash outflows in 2022 as a result of collections and timing of sales.

This was partially offset by a $34 million outflow for our Wholesale - North America segment primarily due to an increase in organic revenue in 2022 compared to 2021, which translated to higher receivables balances in 2022.

• Inventories represented $296 million in incremental cash outflows in the first nine months of 2022 compared to the same period of 2021.

The change is primarily attributable to increased inventory purchases in the current year as a result of high input costs and volume increases due to strong demand and strategic inventory purchases to curb the impacts of supply chain constraints.

• Accounts payable produced a similar cash inflow in the first nine months of 2022 compared to the same period of 2021 on a consolidated basis.

This was primarily attributable to Wholesale - North America which contributed a $234 million cash inflow driven by higher accounts payable balances and timing of payments partially offset by a lower cash inflow in our Europe segment of $189 million and a cash outflow of $45 million from our Specialty segment.

(2) Primarily reflects the aggregate effect of lower cash operating income and higher incentive compensation payments partially offset by lower cash paid for taxes.

Net cash provided by investing activities totaled $244 million and net cash used in investing activities totaled $201 million during the nine months ended September 30, 2022 and 2021, respectively.

Proceeds from the disposal of businesses (primarily PGW) were $399 million during the nine months ended September 30, 2022.

Property, plant and equipment purchases were $148 million in the nine months ended September 30, 2022 compared to $133 million in the prior year period.

We invested $67 million of cash, net of cash acquired, in business acquisitions during the nine months ended September 30, 2021.

The following table reconciles Net Cash Provided by Operating Activities to Free Cash Flow (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by operating activities $ 1,010 $ 1,362

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Free cash flow $ 862 $ 1,229

Net cash used in financing activities increased by $176 million for the six months ended June 30, 2022 compared to the same period in 2021 due primarily to increases in repurchases of common stock of $184 million and payment of dividends in 2022 of $142 million (no dividends were paid in the six months ended June 30, 2021) partially offset by a decrease in settlement of our cross currency swap and other foreign exchange forward contracts in 2021 of $89 million and lower net repayments on our borrowings of $45 million.

Please refer to Note 2, "Financial Statement Information for additional information on repurchases of common stock.

Net cash used in financing activities increased by $151 million for the nine months ended September 30, 2022 compared to the same period in 2021 due primarily to increases in repurchases of common stock of $297 million and payment of dividends in 2022 of $210 million (no dividends were paid in the nine months ended September 30, 2021) partially offset by a decrease in settlement of our cross currency swap and other foreign exchange forward contracts in 2021 of $89 million and lower net repayments on our borrowings of $251 million.

Please refer to Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on repurchases of common stock.

We intend to continue to evaluate markets for potential growth through the internal development of distribution centers, processing and sales facilities, and warehouses, through further integration of our facilities, and through selected business acquisitions.

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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 2. Management’s Discussion and Analysis