What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2022-11-01 · 302 added, 397 removed, 370 unchanged (65% of the section changed)

3 unchanged sentences

(In millions, except per share data)

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

2022 2021 2022 2021

Three Months Ended March 31,

Revenue $ 3,349 $ 3,348

3 unchanged sentences

Restructuring and transaction related expenses 18 3

(Gain) on disposal of businesses and impairment of net assets held for sale ( 4 ) 1 ( 159 ) —

Depreciation and amortization 58 59

1 unchanged sentence

Other expense (income):

Interest expense, net of interest income 17 16 46 56

Loss on debt extinguishment — — — 24

Other income, net ( 6 ) ( 3 ) ( 4 ) ( 15 )

Interest expense 36 16

Gains on foreign exchange contracts - acquisition related (1)

Interest income and other income, net ( 9 ) ( 1 )

Total other expense, net 4 15

5 unchanged sentences

Net income $ 270 $ 273

net income attributable to continuing noncontrolling interest — — — 1

Net income attributable to LKQ stockholders $ 262 $ 284 $ 955 $ 855

Basic earnings per share:

2 unchanged sentences

Net income $ 1.01 $ 0.96

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.96 $ 0.97 $ 3.41 $ 2.86

Diluted earnings per share:

2 unchanged sentences

Net income $ 1.01 $ 0.95

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.95 $ 0.96 $ 3.40 $ 2.85

(1) Related to the Uni-Select acquisition.

Refer to Note 3, "Uni-Select Acquisition" and Note 17, "Derivative Instruments and Hedging Activities" for further information.

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

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(In millions)

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

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 270 $ 273

net income attributable to continuing noncontrolling interest — — — 1

Net income attributable to LKQ stockholders 262 284 955 855

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation, net of tax 57 ( 54 )

Net change in unrealized gains/losses on cash flow hedges, net of tax ( 17 ) —

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

Other comprehensive income (loss) from unconsolidated subsidiaries 2 — 4 ( 1 )

Other comprehensive loss ( 184 ) ( 48 ) ( 386 ) ( 50 )

Other comprehensive income from unconsolidated subsidiaries 3 1

Other comprehensive income (loss) 43 ( 53 )

Comprehensive income $ 313 $ 220

comprehensive income attributable to continuing noncontrolling interest — — — 1

Comprehensive income attributable to LKQ stockholders $ 78 $ 236 $ 569 $ 805

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

2 unchanged sentences

(In millions, except per share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

Cash and cash equivalents $ 342 $ 278

Receivables, net 1,051 1,073

Receivables, net of allowance for credit losses 1,257 998

Inventories 2,733 2,752

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Stockholders' equity:

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 322.3 shares issued and 270.1 shares outstanding at September 30, 2022;

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 322.8 shares issued and 267.6 shares outstanding at March 31, 2023;

322.4 shares issued and 267.3 shares outstanding at December 31, 2022

3 unchanged sentences

Treasury stock, at cost;

52.2 shares at September 30, 2022 and 34.6 shares at December 31, 2021

55.2 shares at March 31, 2023 and 55.1 shares at December 31, 2022

( 2,394 ) ( 2,389 )

7 unchanged sentences

(In millions)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 65 65

(Gain) on disposal of businesses and impairment of net assets held for sale ( 159 ) —

Stock-based compensation expense 10 13

Loss on debt extinguishment — 24

Gains on foreign exchange contracts - acquisition related ( 23 ) —

Other 11 ( 4 )

Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:

Receivables, net ( 118 ) ( 134 )

Receivables, net of allowance for credit losses ( 236 ) ( 230 )

Inventories 57 ( 98 )

7 unchanged sentences

Acquisitions, net of cash acquired ( 25 ) —

Proceeds from disposals of businesses 399 6

Other investing activities, net ( 5 ) ( 6 )

Net cash provided by (used in) investing activities 244 ( 201 )

Net cash used in investing activities ( 97 ) ( 63 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Early-redemption premium — ( 16 )

Repayment of Euro Notes (2026) — ( 883 )

Debt issuance costs ( 19 ) —

Borrowings under revolving credit facilities 1,543 289

Repayments under revolving credit facilities ( 2,003 ) ( 334 )

Repayments under term loans — ( 324 )

Borrowings under term loans 500 —

Borrowings (repayments) of other debt, net 1 ( 8 )

Settlement of derivative instruments, net — ( 89 )

Dividends paid to LKQ stockholders ( 74 ) ( 71 )

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 4 ( 6 )

Net (decrease) increase in cash and cash equivalents ( 5 ) 91

Net increase in cash and cash equivalents, including cash classified within current assets held for sale 64 62

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

Net increase in cash and cash equivalents 64 53

Cash and cash equivalents, beginning of period 278 274

11 unchanged sentences

Shares Amount Shares Amount

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

Net income — — — — — 262 — — 262

Other comprehensive loss — — — — — — ( 184 ) — ( 184 )

Purchase of treasury stock — — ( 6.8 ) ( 343 ) — — — — ( 343 )

Vesting of restricted stock units, net of shares withheld for employee tax 0.3 — — — ( 1 ) — — — ( 1 )

Stock-based compensation expense — — — — 8 — — — 8

Dividends declared to LKQ stockholders ($0.25 per share) — — — — — ( 70 ) — — ( 70 )

Balance as of September 30, 2022 322.3 $ 3 ( 52.2 ) $ ( 2,237 ) $ 1,499 $ 6,536 $ ( 539 ) $ 15 $ 5,277

LKQ Stockholders

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

Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

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

Net income — — — — — 284 — — 284

Other comprehensive loss — — — — — — ( 48 ) — ( 48 )

Purchase of treasury stock — — ( 4.3 ) ( 219 ) — — — — ( 219 )

Vesting of restricted stock units, net of shares withheld for employee tax 0.3 — — — ( 2 ) — — — ( 2 )

Stock-based compensation expense — — — — 8 — — — 8

Balance as of September 30, 2021 321.6 $ 3 ( 29.3 ) $ ( 1,049 ) $ 1,465 $ 5,631 $ ( 149 ) $ 17 $ 5,918

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In millions, except per share data)

LKQ Stockholders

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

Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity

Shares Amount Shares Amount

Balance as of January 1, 2023 322.4 $ 3 ( 55.1 ) $ ( 2,389 ) $ 1,506 $ 6,656 $ ( 323 ) $ 14 $ 5,467

Net income — — — — — 270 — — 270

Other comprehensive loss — — — — — — ( 386 ) — ( 386 )

Other comprehensive income — — — — — — 43 — 43

Purchase of treasury stock — — ( 0.1 ) ( 5 ) — — — — ( 5 )

2 unchanged sentences

Dividends declared to LKQ stockholders ($0.275 per share) — — — — — ( 74 ) — — ( 74 )

Balance as of September 30, 2022 322.3 $ 3 ( 52.2 ) $ ( 2,237 ) $ 1,499 $ 6,536 $ ( 539 ) $ 15 $ 5,277

Balance as of March 31, 2023 322.8 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,510 $ 6,852 $ ( 280 ) $ 14 $ 5,705

LKQ Stockholders

8 unchanged sentences

Stock-based compensation expense — — — — 13 — — — 13

Balance as of September 30, 2021 321.6 $ 3 ( 29.3 ) $ ( 1,049 ) $ 1,465 $ 5,631 $ ( 149 ) $ 17 $ 5,918

Dividends declared to LKQ stockholders ($0.25 per share) — — — — — ( 72 ) — — ( 72 )

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

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

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These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023 ("2022 Form 10-K").

In the current year, we changed the presentation of our Unaudited Condensed Consolidated Financial Statements from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.

Financial Statement Information

Allowance for Credit Losses

Receivables, net are reported net of an allowance for credit losses.

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

Our reserve for expected credit losses was $ 51 million and $ 53 million as of September 30, 2022 and December 31, 2021, respectively.

The provision for credit losses was insignificant for both the three months ended September 30, 2022 and 2021 and $ 9 million and $ 3 million for the nine months ended September 30, 2022 and 2021, respectively.

Interest income on the Unaudited Condensed Consolidated Statements of Income was updated to conform with the 2022 Form 10-K presentation.

Recently Adopted Accounting Pronouncements

During the first quarter of 2023, we adopted Accounting Standards Update No.

2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations” ("ASU 2022-04"), which requires the buyer in a supplier finance program to disclose certain information about its program, including key terms, balance sheet presentation of amounts, outstanding amounts at the end of each period, and rollforwards of balances.

We adopted the provisions of ASU 2022-04 on a retrospective basis (see Note 15, "Supply Chain Financing"), except for the disclosure of rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023.

The adoption of ASU 2022-04 did not have a material impact on our unaudited condensed consolidated financial statements.

Discontinued Operations and Divestitures

Glass Manufacturing Business

For the three months ended March 31, 2022, we recorded to discontinued operations a $ 4 million benefit primarily related to the reassessment of a previously recorded valuation allowance on a deferred tax asset related to our glass manufacturing business sold in 2017.

Other Divestitures (Not Classified in Discontinued Operations)

In April 2022, we completed the sale of PGW Auto Glass ("PGW"), our aftermarket glass business within our Wholesale - North America segment, to a third party for $ 361 million.

Uni-Select Acquisition

On February 26, 2023, we entered into a definitive agreement to acquire all of Uni-Select Inc.'s (“Uni-Select”) issued and outstanding shares for Canadian dollar (“CAD”) 48.00 per share in cash, representing a total enterprise value of approximately CAD 2.8 billion ($ 2.1 billion at the March 31, 2023 exchange rate) (the "Uni-Select Acquisition").

Uni-Select is a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster segment, and in the automotive aftermarket parts business in Canada through its Canadian Automotive Group segment and in the United Kingdom (“U.K.”) through its GSF Car Parts segment.

This acquisition will complement our existing North American paint distribution operations and provides a scaled position in the Canadian mechanical parts space, with opportunity for future consolidation and growth.

On April 27, 2023, Uni-Select's shareholders approved the proposed acquisition.

The Uni-Select Acquisition is expected to be completed in the second half of 2023 and is subject to regulatory approvals and other

customary closing conditions.

We intend to divest the GSF Car Parts segment on or shortly after the acquisition closing date and the remaining businesses will be reported within our Wholesale - North America segment.

See Note 11, "Restructuring and Transaction Related Expenses" for information related to transaction expenses related to the Uni-Select Acquisition.

In order to reduce the risk related to changes in CAD foreign exchange rates for the CAD purchase price between signing and closing, we entered into foreign exchange contracts.

These foreign exchange contracts do not qualify for hedge accounting, and therefore the changes in fair value are reported in Gains on foreign exchange contracts - acquisition related in the Unaudited Condensed Consolidated Statements of Income.

As of March 31, 2023, we reported an asset of $ 23 million with a corresponding gain for the first quarter of 2023.

See Note 17, "Derivative Instruments and Hedging Activities" for information related to these foreign exchange contracts.

In connection with the Uni-Select Acquisition, we entered into a commitment letter for a $ 2.1 billion senior unsecured bridge loan facility ("Bridge Loan") with various banks.

The capacity under the Bridge Loan was reduced to $ 1.6 billion as of March 31, 2023 upon execution of a term loan agreement as discussed below.

There were no draws on the facility as of March 31, 2023.

We incurred $ 9 million in upfront fees related to the facility and may incur additional fees and holding costs if the bridge loan facility is not canceled by specified dates.

During the three months ended March 31, 2023, we amortized $ 3 million of these upfront fees (reported in Interest expense) with the remaining balance to be amortized over the expected term of the facility.

For the permanent financing, on March 27, 2023, we entered into a new term loan credit agreement ("CAD Note") which establishes an unsecured term loan facility of up to CAD 700 million scheduled to mature three years from the date of funding.

Proceeds from the CAD Note may only be used (i) to finance a portion of the aggregate cash consideration for the Uni-Select Acquisition, (ii) to refinance certain outstanding debt of Uni-Select and (iii) to pay fees, costs and expenses related to the Uni-Select Acquisition.

The CAD Note is expected to fund one business day prior to the consummation of the Uni-Select Acquisition transaction and includes a non-usage fee that will be incurred through the date the proceeds are drawn on the facility.

There were no borrowings against the CAD Note as of March 31, 2023.

The CAD Note contains customary covenants for an unsecured term loan for a company that has debt ratings that are investment grade, such as requirements to comply with a total leverage ratio and interest coverage ratio, each calculated in accordance with the terms of the CAD Note, and limits on the Company’s and its subsidiaries’ ability to incur liens and indebtedness.

The interest rate applicable to the CAD Note may be (i) a forward-looking term rate based on the Canadian Dollar Offer Rate for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread based on the Company’s debt rating and total leverage ratio.

We anticipate funding the remainder of the purchase price with cash on hand and the issuance of senior notes.

To hedge the movement of market interest rates for senior notes prior to the expected issuance date, we entered into forward-starting interest rate swaps to lock interest rates for the potential five and ten year senior notes.

See Note 17, "Derivative Instruments and Hedging Activities" for information related to these interest rate instruments.

We classify our inventory into the following categories:

(i) aftermarket and refurbished products, (ii) salvage and remanufactured products, and (iii) manufactured products.

Inventories consist of the following (in millions):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Aftermarket and refurbished products $ 2,219 $ 2,279

3 unchanged sentences

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

As of September 30, 2022, manufactured products inventory was composed of $ 26 million of raw materials, $ 6 million of work in process, and $ 13 million of finished goods.

As of March 31, 2023, manufactured products inventory was composed of $ 29 million of raw materials, $ 7 million of work in process, and $ 14 million of finished goods.

As of December 31, 2022, manufactured products inventory was composed of $ 26 million of raw materials, $ 5 million of work in process, and $ 15 million of finished goods.

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

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

In September 2022, we completed the sale of a business within our Self Service segment, to a third party, resulting in proceeds of $ 25 million and the recognition of a $ 4 million pretax gain ($ 3 million after tax).

Discontinued Operations

For the three months ended September 30, 2022, we recorded a $ 1 million benefit related to the settlement of a previously recorded use tax liability connected to a disposed business.

For the nine months ended September 30, 2022, we recorded a $ 5 million benefit primarily related to the reassessment of a previously recorded valuation allowance on a deferred tax asset connected to a disposed business.

Allowance for Credit Losses

Our allowance for credit losses was $ 58 million and $ 54 million as of March 31, 2023 and December 31, 2022, respectively.

The provision for credit losses was $ 5 million and $ 8 million for the three months ended March 31, 2023 and 2022, respectively.

Noncontrolling Interest

We present redeemable noncontrolling interest on our balance sheet related to redeemable shares issued to a minority shareholder in conjunction with a previous acquisition.

The redeemable shares contain (i) a put option for all noncontrolling interest shares at a fixed price of $ 24 million (€ 21 million) for the minority shareholder exercisable in the fourth quarter of 2023, (ii) a call option for all noncontrolling interest shares at a fixed price of $ 26 million (€ 23 million) for us exercisable beginning in the first quarter of 2026 through the end of the fourth quarter of 2027, and (iii) a guaranteed dividend to be paid quarterly to the minority shareholder through the fourth quarter of 2023.

The redeemable shares do not provide the minority shareholder with rights to participate in the profits and losses of the subsidiary prior to the exercise date of the put option.

As the put option is outside our control, we recorded a $ 24 million Redeemable noncontrolling interest at the put option's redemption value outside of permanent equity on our Unaudited Condensed Consolidated Balance Sheets.

Intangible Assets

2 unchanged sentences

The fair value estimates of our reporting units were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach.

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

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

Investments in Unconsolidated Subsidiaries

We account for our Investments in unconsolidated subsidiaries using the equity method of accounting, as our investments give us the ability to exercise significant influence, but not control, over the investee.

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

Ownership as of September 30, 2022

September 30, 2022 December 31, 2021

Goodwill and indefinite-lived intangible assets impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment.

We did not identify any indicators of impairment in the first three months of 2023 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

Equity Method Investments

The carrying value of our Equity method investments were as follows (in millions):

Segment Ownership as of March 31, 2023

March 31, 2023 December 31, 2022

MEKO AB (1)(2)

26.6 % $ 134 $ 145

Europe 26.6 % $ 143 $ 129

Total $ 156 $ 141

(1) As of September 30, 2022, the fair value of our investment in MEKO AB ("Mekonomen") was $ 135 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value.

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

(1) As of March 31, 2023, the Level 1 fair value of our investment in MEKO AB ("Mekonomen") was $ 178 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value.

(2) As of March 31, 2023, our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $ 8 million;

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

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

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

Warranty Reserve

2 unchanged sentences

We also provide a limited lifetime warranty for certain of our aftermarket products.

These assurance-type warranties are not considered a separate performance obligation, and thus no transaction price is allocated to them.

We record warranty costs in Cost of goods sold in our Unaudited Condensed Consolidated Statements of Income.

Our warranty reserve is calculated using historical claim information to project future warranty claims activity and is recorded within Other accrued expenses and Other noncurrent liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.

The changes in the warranty reserve are as follows (in millions):

3 unchanged sentences

Warranty claims ( 19 )

Balance as of September 30, 2022 $ 31

Litigation and Related Contingencies

We have certain contingencies resulting from litigation, claims and other commitments and are subject to a variety of environmental and pollution control laws and regulations incident to the ordinary course of business.

We currently expect that the resolution of such contingencies will not materially affect our financial position, results of operations or cash flows.

Stockholders' Equity

Treasury Stock

Our Board of Directors has authorized a stock repurchase program under which we are able to purchase our common stock from time to time.

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

The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time.

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

On May 10, 2022, our Board of Directors authorized a $ 500 million increase to our existing stock repurchase program to $ 2,500 million.

On October 25, 2022, our Board of Directors authorized an additional $ 1,000 million increase to our existing stock repurchase program, raising the aggregate program authorization to $ 3,500 million, and extended the duration through October 25, 2025.

During the three and nine months ended September 30, 2022, we repurchased 6.8 million and 17.6 million shares of common stock, respectively, for an aggregate price of $ 343 million and $ 891 million, respectively.

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

As of September 30, 2022, there was $ 263 million of remaining capacity under our repurchase program.

Noncontrolling Interest

We present redeemable noncontrolling interest on our balance sheet related to redeemable shares issued to a minority shareholder in conjunction with a previous acquisition.

The redeemable shares do not provide the minority shareholder with rights to participate in the profits and losses of the subsidiary prior to the exercise date of the put option.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update No.

2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations” ("ASU 2022-04"), which requires the buyer in a supplier finance program to disclose certain information about their program, including key terms, balance sheet presentation of amounts, outstanding amounts at the end of each period, and rollforwards of balances.

ASU 2022-04 is effective for fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023.

We are currently evaluating the impact ASU 2022-04 will have on our Consolidated Financial Statements.

Balance as of March 31, 2023 $ 32

Revenue Recognition

The majority of our revenue is derived from the sale of vehicle parts.

We recognize revenue for the sale of products at the point in time when the performance obligation has been satisfied and control has transferred to the customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale.

Sources of Revenue

We report our revenue in two categories:

Disaggregated Revenue

We report revenue in two categories:

(i) parts and services and (ii) other.

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

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

2022 2021 2022 2021

Wholesale - North America $ 1,026 $ 1,025 $ 3,182 $ 3,018

Europe 1,376 1,520 4,327 4,545

Specialty 452 465 1,424 1,454

Self Service 55 51 172 154

Parts and services 2,909 3,061 9,105 9,171

Wholesale - North America 82 87 271 263

Europe 4 5 18 20

Self Service 109 144 399 449

Other 195 236 688 732

Total revenue $ 3,104 $ 3,297 $ 9,793 $ 9,903

Parts and Services

Parts revenue is generated from the sale of vehicle products including replacement parts, components and systems used in the repair and maintenance of vehicles and specialty products and accessories to improve the performance, functionality and appearance of vehicles.

14 unchanged sentences

and miscellaneous accessories.

Our service-type warranties typically have service periods ranging from 6 months to 36 months.

Proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period.

The changes in deferred service-type warranty revenue are as follows (in millions):

Service-Type Warranties

Balance as of January 1, 2022 $ 32

Additional warranty revenue deferred 44

Warranty revenue recognized ( 43 )

Balance as of September 30, 2022 $ 33

Other Revenue

Revenue from other sources include sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from furnace operations.

Other revenue includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from furnace operations.

We derive scrap metal and other precious metals from several sources in both our Wholesale - North America and Self Service segments, including vehicles that have been used in our recycling operations and vehicles from original equipment manufacturers ("OEMs") and other entities that contract with us for secure disposal of "crush only" vehicles.

Revenue from the sale of hulks in our Wholesale - North America and Self Service segments is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap.

Revenue by Geographic Area

See Note 13, "Segment and Geographic Information" for information related to our revenue by geographic region.

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

Three Months Ended March 31,

Wholesale - North America $ 1,148 $ 1,106

Europe 1,548 1,481

Specialty 396 460

Self Service 60 57

Parts and services 3,152 3,104

Wholesale - North America 81 95

Self Service 109 142

Other 197 244

Total revenue $ 3,349 $ 3,348

Variable Consideration

The amount of revenue ultimately received from the customer can vary due to variable consideration including returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items.

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

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

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

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

We recorded a reserve for our variable consideration of $ 120 million and $ 144 million as of September 30, 2022 and December 31, 2021, respectively.

Amounts related to variable consideration on our Unaudited Condensed Consolidated Balance Sheets are as follows (in millions):

Classification March 31, 2023 December 31, 2022

Return asset Prepaid expenses and other current assets $ 62 $ 58

Refund liability Refund liability 119 109

Variable consideration reserve Receivables, net of allowance for credit losses 99 136

Revenue by Geographic Area

Our net sales are attributed to geographic area based on the location of the selling operation.

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

Three Months Ended March 31,

United States $ 1,681 $ 1,750

United Kingdom 415 425

Germany 416 386

Other countries 837 787

Total revenue $ 3,349 $ 3,348

Restructuring and Transaction Related Expenses

Global Restructuring Programs

From time to time, we initiate restructuring plans to integrate acquired businesses, to align our workforce with strategic business activities, or to improve efficiencies in our operations.

Below is a summary of our current restructuring plans:

2022 Global Restructuring Plan

In the fourth quarter of 2022, we began a restructuring initiative covering all of our reportable segments designed to reduce costs, streamline operations, consolidate facilities and implement other strategic changes to the overall organization.

We have incurred and expect to incur costs primarily for employee severance, inventory or other asset write-downs, and exiting facilities.

This plan is scheduled to be substantially complete by the end of 2024 with an estimated total incurred cost of between $ 30 million and $ 40 million.

1 LKQ Europe Plan

In 2019, we announced a multi-year plan called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business.

Under the 1 LKQ Europe plan, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office.

We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2025 with a total incurred cost of between $ 30 million and $ 40 million.

2019/2020 Global Restructuring Plan

In 2019, we commenced a cost reduction initiative, covering all of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies.

This program was expanded in 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19.

This plan was expanded in 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19.

We have incurred and expect to incur costs for inventory write-downs;

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

During the three and nine months ended September 30, 2022, we incurred restructuring expenses totaling $ 1 million and $ 2 million, respectively, primarily related to employee-related costs and facility exit costs under these programs.

During the three and nine months ended September 30, 2021, we recognized net restructuring expenses totaling $ 2 million and $ 9 million, respectively, which included employee-related costs, facility exit costs, and a $ 3 million gain in the first quarter from the sale of a building to be closed.

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

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

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

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

As of September 30, 2022 and December 31, 2021, restructuring liabilities incurred related to these programs totaled $ 10 million and $ 14 million, respectively, including $ 6 million and $ 9 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets).

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

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

This plan is expected to be completed in 2023 with a total incurred cost of between $ 108 million to $ 115 million.

Acquisition Integration Plans

We incurred $2 million of restructuring expenses for the nine months ended September 30, 2022, primarily related to the integration of acquisitions completed in our Europe segment.

We did not incur a significant amount of expenses for the three months ended September 30, 2022.

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

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

1 LKQ Europe Program

In 2019, we announced a multi-year program called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business.

Under the 1 LKQ Europe program, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office.

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 the three and nine months ended September 30, 2022, we incurred $ 1 million of employee-related charges under our 1 LKQ Europe program.

During the nine months ended September 30, 2021, we incurred $ 6 million of employee-related restructuring charges.

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

We estimate that we will incur between $ 40 million and $ 50 million in total personnel and inventory-related restructuring charges through 2025 under the program.

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

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

As we complete the acquisition of a business, we may incur costs related to integrating the acquired business into our current business structure and systems.

These costs are typically incurred within a year from the acquisition date and vary in magnitude depending on the size and complexity of the related integration activities.

We expect to incur an insignificant amount of future expenses to complete any open integration plans.

The following table sets forth the expenses incurred related to our restructuring plans (in millions):

Three Months Ended March 31,

Plan Expense Type 2023 2022

2022 Global Plan Employee related costs $ 2 $ —

Facility exit costs 2 —

Other costs 1 —

Total $ 5 $ —

1 LKQ Europe Plan Employee related costs $ 1 $ —

Total $ 1 $ —

Acquisition Integration Plans Facility exit costs $ 2 $ —

Total $ 2 $ —

Total restructuring expenses $ 8 $ —

The following table sets forth the cumulative plan costs by segment related to our restructuring plans (in millions):

Cumulative Program Costs

Wholesale - North America Europe Specialty Self Service Total

2022 Global Plan $ 1 $ 11 $ 2 $ 1 $ 15

2019/2020 Global Plan 43 59 2 2 106

1 LKQ Europe Plan — 8 — — 8

The following table sets forth the liabilities recorded related to our restructuring plans (in millions):

2022 Global Plan 2019/20 Global Plan 1 LKQ Europe Plan

March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

Employee related costs (1)

$ 1 $ 3 $ — $ 1 $ 1 $ 1

Facility exit costs (2)

Other costs — — 2 2 — —

Total $ 5 $ 4 $ 5 $ 9 $ 1 $ 1

(1) Reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

(2) Reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets.

Transaction Related Expenses

During the three and nine months ended September 30, 2022, we incurred $ 1 million and $ 5 million of transaction related expenses, respectively.

During the three and nine months ended September 30, 2021, we incurred $ 1 million of transaction related expenses.

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

The following table sets forth the transaction related expenses incurred (in millions):

Three Months Ended March 31,

Professional fees (1)

Transaction related expenses

(1) Included external costs such as legal, accounting and advisory fees related to completed and potential transactions (including Uni-Select transaction costs in 2023).

Stock-Based Compensation

The following table summarizes activity related to our restricted stock units ("RSUs") under the LKQ Corporation 1998 Equity Incentive Plan (the "Equity Incentive Plan") for the nine months ended September 30, 2022 (in millions, except years and per share amounts):

The following table summarizes activity related to our restricted stock units ("RSUs") under the LKQ Corporation 1998 Equity Incentive Plan (the "Equity Incentive Plan") for the three months ended March 31, 2023 (in millions, except years and per share amounts):

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

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Vested ( 0.3 ) $ 39.37

Forfeited / Canceled ( 0.1 ) $ 42.99

Unvested as of September 30, 2022 1.3 $ 40.89

Expected to vest after September 30, 2022 1.1 $ 41.23 2.8 $ 52

Unvested as of March 31, 2023 1.5 $ 47.30

Expected to vest after March 31, 2023 1.3 $ 47.87 3.1 $ 73

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

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

(2) The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2021 was $ 39.12 .

The fair value of RSUs that vested during the nine months ended September 30, 2022 was $ 36 million;

(2) The weighted average grant date fair value of RSUs granted during the three months ended March 31, 2022 was $ 48.97 .

The fair value of RSUs that vested during the three months ended March 31, 2023 was $ 16 million;

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

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

The following table summarizes activity related to our performance-based RSUs ("PSUs") under the Equity Incentive Plan for the three months ended March 31, 2023 (in millions, except years and per share amounts):

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

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Vested ( 0.2 ) $ 32.53

Unvested as of September 30, 2022 0.4 $ 38.84

Expected to vest after September 30, 2022 0.4 $ 38.81 1.2 $ 18

Unvested as of March 31, 2023 0.4 $ 46.86

Expected to vest after March 31, 2023 0.3 $ 46.22 1.6 $ 18

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

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

The weighted average grant date fair value of PSUs granted during the nine months ended September 30, 2021 was $ 38.31 .

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

The weighted average grant date fair value of PSUs granted during the three months ended March 31, 2022 was $ 48.92 .

The fair value of PSUs that vested during the three months ended March 31, 2023 was $ 12 million;

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

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 8 million and $ 31 million for the three and nine months ended September 30, 2022, respectively, and $ 8 million and $ 25 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, unrecognized compensation expense related to unvested RSUs and PSUs was $ 51 million.

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $ 10 million and $ 13 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, unrecognized compensation expense related to unvested RSUs and PSUs was $ 71 million.

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

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Income from continuing operations $ 270 $ 269

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Effect of dilutive securities:

RSUs 0.4 0.7 0.6 0.6

PSUs 0.4 0.2 0.4 0.2

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 268.3 286.8

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

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

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended September 30, 2022

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

Balance as of July 1, 2022 $ ( 325 ) $ ( 24 ) $ ( 6 ) $ ( 355 )

Pretax loss ( 187 ) — — ( 187 )

Reclassification of unrealized loss — 1 — 1

The number of antidilutive securities was insignificant for all periods presented.

Accumulated Other Comprehensive Loss

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

Three Months Ended March 31, 2023

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

Balance as of January 1, 2023

$ ( 333 ) $ — $ 11 $ ( 1 ) $ ( 323 )

Pretax income (loss) 57 ( 22 ) — — 35

Income tax effect — 5 — — 5

Other comprehensive income from unconsolidated subsidiaries — — — 3 3

Balance as of September 30, 2022 $ ( 512 ) $ ( 23 ) $ ( 4 ) $ ( 539 )

Three Months Ended September 30, 2021

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

Balance as of July 1, 2021 $ ( 60 ) $ ( 32 ) $ ( 9 ) $ ( 101 )

Pretax loss ( 48 ) — — ( 48 )

Balance as of September 30, 2021 $ ( 108 ) $ ( 32 ) $ ( 9 ) $ ( 149 )

Nine Months Ended September 30, 2022

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

Balance as of March 31, 2023

$ ( 276 ) $ ( 17 ) $ 11 $ 2 $ ( 280 )

Three Months Ended March 31, 2022

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

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

Pretax loss ( 54 ) — — ( 54 )

Reclassification of unrealized loss — 1 — 1

Disposal of business 4 — — 4

Other comprehensive income from unconsolidated subsidiaries — — 1 1

Balance as of September 30, 2022 $ ( 512 ) $ ( 23 ) $ ( 4 ) $ ( 539 )

Nine Months Ended September 30, 2021

Translation Unrealized Gain (Loss)

on Cash Flow Hedges Unrealized Gain (Loss)

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

Comprehensive Income (Loss)

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

Pretax (loss) income ( 51 ) 3 — — ( 48 )

Income tax effect — ( 1 ) — — ( 1 )

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

Reclassification of deferred income taxes — 1 — — 1

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

Balance as of September 30, 2021 $ ( 108 ) $ — $ ( 32 ) $ ( 9 ) $ ( 149 )

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

During the nine months ended September 30, 2021, net unrealized gains on cross currency swaps totaling $ 1 million were recorded to Interest expense, net of interest income in the Unaudited Condensed Consolidated Statements of Income.

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

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

Net unrealized losses and gains related to our pension plans were recorded to Other income, net in the Unaudited Condensed Consolidated Statements of Income during each of the three and nine-month periods ended September 30, 2022 and 2021.

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

During the three months ended March 31, 2023, we reclassified an immaterial amount of gains on our interest rate swaps to Interest expense in the Unaudited Condensed Consolidated Statements of Income.

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

Supply Chain Financing

We utilize voluntary supply chain finance programs to support our efforts in negotiating payment term extensions with suppliers as part of our effort to improve our operating cash flows.

These programs provide participating suppliers the opportunity to sell their LKQ receivables to financial institutions at the sole discretion of both the suppliers and the financial institutions.

We are not a party to the agreement between the suppliers and financial institutions.

The financial institutions participate in the supply chain financing initiative on an uncommitted basis and can cease purchasing receivables from our suppliers at any time.

Our obligation to our suppliers, including amount due and payment date, are not impacted by the supplier’s decision to sell amounts under these agreements.

Our payment terms to the financial institutions, including the timing and amount of payments, are unchanged from the original supplier invoice.

All outstanding payments owed under the supply chain finance programs with the participating financial institutions are recorded within Accounts payable in our Unaudited Condensed Consolidated Balance Sheets.

As of March 31, 2023 and December 31, 2022, we had $ 240 million and $ 248 million of Accounts payable outstanding under the arrangements, respectively.

Long-Term Obligations

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

September 30, 2022

March 31, 2023

December 31, 2022

Maturity Date Interest Rate Amount Interest Rate Amount

Senior Unsecured Credit Agreement:

Term loans payable January 2026 6.16 % $ 500 — % $ —

Revolving credit facilities January 2028 4.79 % (1)

Senior Secured Credit Agreement:

Revolving credit facilities January 2024 — % — 4.24 % (1)

$ 1,621 1.10 % (1)

Senior Notes:

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(1) Interest rate derived via a weighted average

Senior Unsecured Credit Agreement

On January 5, 2023, we and certain other subsidiaries of ours entered into a new credit agreement (the “Senior Unsecured Credit Agreement”) which establishes:

(i) an unsecured revolving credit facility of up to a U.S.

Dollar equivalent of $ 2.0 billion, which includes a $ 150 million sublimit for the issuance of letters of credit and a $ 150 million sublimit for swing line loans and (ii) an unsecured term loan facility of up to $ 500 million.

Borrowings under the agreement bear interest at the Secured Overnight Financing Rate (i.e.

"SOFR") plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread.

The maturity date of the term loan is January 5, 2026 and may be extended by one additional year.

The term loan has no required amortization payments prior to its maturity date.

The maturity date for the revolving credit facility is January 5, 2028, and may be extended by up to two additional years in one year increments.

The Senior Unsecured Credit Agreement contains customary covenants for an unsecured credit facility for a company that has debt ratings that are investment grade, such as, requirements to comply with a total leverage ratio and interest coverage ratio, each calculated in accordance with the terms of the Senior Unsecured Credit Agreement, and limits on the Company’s and its subsidiaries’ ability to incur liens and indebtedness.

Proceeds from the Senior Unsecured Credit Agreement were used to repay the outstanding principal amount under our prior Senior Secured Credit Agreement (the "Prior Credit Agreement"), to pay fees and expenses related to the Senior Unsecured Credit Agreement, and for other general corporate purposes.

Senior Secured Credit Agreement

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

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

All other interest rates remain the same.

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

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

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

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

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

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

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

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

The applicable margin is subject to change in increments of 0.25 % depending on the net leverage ratio.

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

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

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

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

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

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

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

The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at September 30, 2022 was $ 1,460 million .

Euro Notes (2024)

On April 14, 2016, LKQ Italia Bondco S.p.A.

("LKQ Italia"), an indirect, wholly-owned subsidiary of LKQ Corporation, completed an offering of € 500 million aggregate principal amount of senior notes due April 1, 2024 (the "Euro Notes (2024)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933.

The proceeds from the offering were used to repay a portion of the revolver borrowings under the Credit Agreement and to pay related fees and expenses.

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

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

The Euro Notes (2024) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2024) Subsidiaries (the "Euro Notes (2024) Guarantors").

The Euro Notes (2024) and the related guarantees are, respectively, LKQ Italia's and each Euro Notes (2024) Guarantor's senior unsecured obligations and are subordinated to all of LKQ Italia's and the Euro Notes (2024) Guarantors' existing and future secured debt to the extent of the assets securing that secured debt.

In addition, the Euro Notes (2024) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2024) to the extent of the assets of those subsidiaries.

The Euro Notes (2024) have been listed on the ExtraMOT, Professional Segment of the Borsa Italia S.p.A.

securities exchange and the Global Exchange Market of Euronext Dublin.

The Euro Notes (2024) are redeemable, in whole or in part, at any time at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium.

On or after January 1, 2024, we may redeem some or all of the Euro Notes (2024) at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.

We may be required to make an offer to purchase the Euro Notes (2024) upon the sale of certain assets, subject to certain exceptions, and upon a change of control.

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

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

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

Euro Notes (2026/2028)

On April 9, 2018, LKQ European Holdings B.V.

("LKQ Euro Holdings"), a wholly-owned subsidiary of LKQ Corporation, completed an offering of € 1,000 million aggregate principal amount of senior notes.

The offering consisted of € 750 million senior notes due 2026 (the "Euro Notes (2026)") and € 250 million senior notes due 2028 (the "Euro Notes (2028)" and, together with the Euro Notes (2026), the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933.

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

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

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

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

The total redemption payment was $ 915 million (€ 777 million), including an early redemption premium of $ 16 million (€ 14 million) and accrued and unpaid interest of $ 16 million (€ 14 million).

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

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

The Euro Notes (2028) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2028) Subsidiaries (the "Euro Notes (2028) Guarantors").

The Euro Notes (2028) and the related guarantees are, respectively, LKQ Euro Holdings' and each Euro Notes (2028) Guarantor's senior unsecured obligations and will be subordinated to all of LKQ Euro Holdings' and the Euro Notes (2028) Guarantors' existing and future secured debt to the extent of the assets securing that secured debt.

In addition, the Euro Notes (2028) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2028) to the extent of the assets of those subsidiaries.

The Euro Notes (2028) have been listed on the Global Exchange Market of Euronext Dublin.

The Euro Notes (2028) are redeemable, in whole or in part, at any time at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium.

On or after April 1, 2023, we may redeem some or all of the Euro Notes (2028) at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture.

We may be required to make an offer to purchase the Euro Notes (2028) upon the sale of certain assets, subject to certain exceptions, and upon a change of control.

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

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

In connection with entering into the Senior Unsecured Credit Agreement noted above, Wells Fargo Bank, National Association and the various lending parties terminated the Prior Credit Agreement and each amendment thereto resulting in an immaterial loss on extinguishment of debt.

Unsecured Senior Notes

Interest on the Euro Notes (2024) and Euro Notes (2028) are payable in arrears on April 1 and October 1 of each year.

Derivative Instruments and Hedging Activities

Cash Flow Hedges

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

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

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

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

Other Derivative Instruments Not Designated as Hedges

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

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

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

We do not hold or issue derivatives for trading purposes.

Derivative Instruments Designated as Cash Flow Hedges

In February 2023, we entered into interest rate swap agreements to mitigate the risk of changing interest rates on our variable interest rate payments related to borrowings under our Senior Unsecured Credit Agreement.

Under the terms of the interest rate swap agreements, we pay the fixed interest rate and receive a variable interest rate based on term SOFR that matches a contractually specified rate under the Senior Unsecured Credit Agreement.

The agreements include a total $ 400 million notional amount maturing in February 2025 with a weighted average fixed interest rate of 4.63 % and a total $ 300 million notional amount maturing in February 2026 with a weighted average fixed interest rate of 4.23 %.

Changes in the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss and reclassified to Interest expense when the hedged interest payments affect earnings.

The activity related to the interest rate swaps is classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows.

In March 2023, we entered into forward starting interest rate swaps to hedge the risk of changes in interest rates related to forecasted debt issuance to finance a portion of the Uni-Select Acquisition.

Under the agreements, we will receive a variable interest rate based on SOFR and pay a fixed rate for the notional amount and term of the forecasted debt issuance.

We are required to terminate the swaps at September 30, 2023, and we intend to terminate the agreements upon issuance of the debt if earlier.

The forward starting interest rate swaps include a total $ 600 million notional amount covering interest payments from September 2023 through September 2028 at a rate of 3.20 %, and a total $ 600 million notional amount covering interest payments from September 2023 through September 2033 at a rate of 3.34 %.

Changes in the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss and the fair value at the termination date will be reclassified to Interest expense over the term of the debt.

The activity related to the forward starting interest swaps will be classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows.

All of our interest rate swap contracts have been executed with counterparties that we believe are creditworthy, and we closely monitor the credit ratings of these counterparties.

As of March 31, 2023, the notional amounts, balance sheet classification and fair values of our derivative instruments designated as cash flow hedges were as follows (in millions) (there were no such hedges as of December 31, 2022):

Notional Amount Balance Sheet Caption Fair Value - Asset / (Liability)

Interest rate swap agreements $ 700 Other noncurrent liabilities $ ( 9 )

Forward starting interest rate swaps $ 1,200 Other accrued expenses $ ( 13 )

The activity related to our cash flow hedges is included in Note 14, "Accumulated Other Comprehensive Loss." As of March 31, 2023, we estimate that an insignificant amount of derivative gains (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Unaudited Condensed Consolidated Statements of Income within the next 12 months.

Derivative Instruments Not Designated as Hedges

To manage the foreign currency exposure related to the Uni-Select Acquisition purchase price (denominated in CAD), we entered into foreign exchange contracts in March to purchase CAD 1.6 billion for approximately $ 1.2 billion.

These contracts are set to expire on September 29, 2023.

These contract do not qualify for hedge accounting, and therefore, the contracts are adjusted to fair value through the results of operations as of each balance sheet date.

The fair values of these foreign exchange contracts are recorded within Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2023, with a corresponding amount recorded to Gains on foreign exchange contracts - acquisition related on the Unaudited Condensed Consolidated Statements of Income for $ 23 million.

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

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

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

The notional amount and fair value of these contracts at March 31, 2023 and December 31, 2022, along with the effect on our results of operations during the three months ended March 31, 2023 and 2022, were not material.

Net Presentation for Derivative Instruments

While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge and other derivative instruments on a gross basis in our Unaudited Condensed Consolidated Balance Sheets.

The impact of netting the fair values of these contracts would result in a decrease to Prepaid expenses and other current assets and Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets of $ 6 million at March 31, 2023.

Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

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

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three months ended March 31, 2023, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.

The tiers in the fair value hierarchy include:

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

The following tables present information about our financial liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of September 30, 2022 and December 31, 2021 (in millions):

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

Level 1 Level 2 Level 3

Contingent consideration liabilities $ 13 $ — $ — $ 13

Deferred compensation liabilities 68 — 68 —

Total Liabilities $ 81 $ — $ 68 $ 13

Balance as of December 31, 2021 Fair Value Measurements as of December 31, 2021

Level 1 Level 2 Level 3

Contingent consideration liabilities $ 18 $ — $ — $ 18

Deferred compensation liabilities 89 — 89 —

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

March 31, 2023 December 31, 2022

Foreign currency forward contracts (Level 2) $ 23 $ —

Total Assets $ 23 $ —

Contingent consideration liabilities (Level 3) $ 7 $ 7

Interest rate swaps (Level 2) 22 —

Total Liabilities $ 29 $ 7

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

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

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

We obtain valuation data for the deferred compensation liabilities from third party sources, which use quoted market prices, investment allocations and reportable trades.

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

The balance sheet classification of the interest rate swap agreements and foreign currency forward contracts is presented in Note 17, "Derivative Instruments and Hedging Activities."

We value derivative instruments using a third party valuation model that performs discounted cash flow analysis based on the terms of the contracts and market observable inputs such as current and forward interest rates and current and forward foreign exchange rates.

Our contingent consideration liabilities are related to our business acquisitions.

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The liabilities for these payments are classified as Level 3 liabilities because the related fair value measurement, which is determined using an income approach, includes significant inputs not observable in the market.

We also have equity investments recorded in Other noncurrent assets that are reported at fair value.

We have used net asset value as a practical expedient to value these equity investments and thus they are excluded from the fair value hierarchy disclosure.

Financial Assets and Liabilities Not Measured at Fair Value

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

Based on market conditions as of both September 30, 2022 and December 31, 2021, the fair value of the credit agreement borrowings reasonably approximated the carrying values of $ 1,621 million and $ 1,887 million, respectively.

As of September 30, 2022 and December 31, 2021, the fair values of the Euro Notes (2024) were approximately $ 479 million and $ 605 million, respectively, compared to carrying values of $ 490 million and $ 569 million, respectively.

As of September 30, 2022 and December 31, 2021, the fair values of the Euro Notes (2028) were $ 229 million and $ 301 million, respectively, compared to carrying values of $ 245 million and $ 284 million, respectively.

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

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

Based on market conditions as of March 31, 2023, the fair value of the Senior Unsecured Credit Agreement borrowings reasonably approximated the carrying value of $ 1,835 million.

As of December 31, 2022, the fair value of the Prior Credit Agreement borrowings reasonably approximated the carrying value of $ 1,786 million.

As of March 31, 2023 and December 31, 2022, the fair values of the Euro Notes (2024) were approximately $ 540 million and $ 535 million, respectively, compared to carrying values of $ 542 million and $ 535 million, respectively.

As of March 31, 2023 and December 31, 2022, the fair values of the Euro Notes (2028) were $ 263 million and $ 254 million, respectively, compared to carrying values of $ 271 million and $ 268 million, respectively.

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

We estimated the fair value by calculating the upfront cash payment a market participant would require at March 31, 2023 and December 31, 2022 to assume these obligations.

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

We have immaterial equity investments recorded in Other noncurrent assets in which we have elected to use net asset value as a practical expedient to value and thus they are excluded from the fair value hierarchy disclosure.

We have deferred compensation liabilities which are recorded in Other noncurrent liabilities on the Unaudited Condensed Consolidated Balance Sheets.

These liabilities are determined based on the values of investments in participants' phantom accounts, which is not a fair value measurement, and thus the liabilities are not included in the fair value hierarchy disclosure.

Employee Benefit Plans

We have funded and unfunded defined benefit plans covering certain employee groups in the U.S.

and various European countries.

We have funded and unfunded defined benefit plans covering certain employee groups in various European countries.

Local statutory requirements govern many of our European plans.

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

As of September 30, 2022 and December 31, 2021, the aggregate funded status of the defined benefit plans was a liability of $ 112 million and $ 131 million , respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans totaled $ 1 million and $ 4 million for the three and nine months ended September 30, 2022, respectively, and $ 1 million and $ 4 million for the three and nine months ended September 30, 2021, respectively, and primarily related to service cost which is recorded in Selling, general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income.

As of both March 31, 2023 and December 31, 2022, the aggregate funded status of the defined benefit plans was a liability of $ 72 million, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans were insignificant for each of the three-month periods ended March 31, 2023 and 2022.

The service cost component is recorded in Selling, general and administrative ("SG&A") expenses, while the other components are recorded to Interest income and other income, net on the Unaudited Condensed Consolidated Statements of Income.

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

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

Our effective income tax rate for the 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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

Our effective income tax rate for the three months ended March 31, 2023 was 26.1 %, compared to 25.0 % for the three months ended March 31, 2022.

The increase in the effective tax rate for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 is primarily attributable to the geographic distribution of income and 0.2 % resulting from higher non-deductible transaction costs in 2023, mostly related to the Uni-Select Acquisition.

For the three months ended March 31, 2023, the effective tax rate was decreased by 0.4 % compared to the three months ended March 31, 2022, related primarily to net favorable discrete items including excess tax benefits from stock-based payments.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law in the United States.

The IRA, among other provisions, enacted a 15 % corporate minimum tax effective for taxable years beginning after December 31, 2022 and a 1 % excise tax on the repurchase of corporate stock after December 31, 2022.

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Wholesale - North America, Europe, Specialty and Self Service, each of which is presented as a reportable segment.

Beginning in 2022, the Wholesale - North America and Self Service operating segment results were separated from the previous reportable segment, North America, and each of Wholesale - North America and Self Service is now a separate reportable segment.

Segment results have been adjusted retrospectively to reflect this change.

The segments are organized based on a combination of geographic areas served and type of product lines offered.

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Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Three Months Ended September 30, 2022

Third Party $ 1,108 $ 1,380 $ 452 $ 164 $ — $ 3,104

Intersegment 1 — — — ( 1 ) —

Total segment revenue $ 1,109 $ 1,380 $ 452 $ 164 $ ( 1 ) $ 3,104

Segment EBITDA $ 216 $ 155 $ 49 $ 4 $ — $ 424

Depreciation and amortization (1)

19 34 8 3 — 64

Three Months Ended September 30, 2021

Third Party $ 1,112 $ 1,525 $ 465 $ 195 $ — $ 3,297

Intersegment — — 1 — ( 1 ) —

Total segment revenue $ 1,112 $ 1,525 $ 466 $ 195 $ ( 1 ) $ 3,297

Segment EBITDA $ 190 $ 175 $ 52 $ 36 $ — $ 453

Depreciation and amortization (1)

20 39 8 4 — 71

Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Third Party $ 1,229 $ 1,555 $ 396 $ 169 $ — $ 3,349

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Segment EBITDA $ 252 $ 151 $ 31 $ 22 $ — $ 456

Depreciation and amortization (1)

Total depreciation and amortization (1)

19 34 8 4 — 65

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Third Party $ 1,201 $ 1,488 $ 460 $ 199 $ — $ 3,348

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Segment EBITDA $ 218 $ 131 $ 58 $ 40 $ — $ 447

Depreciation and amortization (1)

Total depreciation and amortization (1)

19 34 8 4 — 65

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

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

The key measure of segment profit or loss reviewed by our chief operating decision maker, our Chief Executive Officer, is Segment EBITDA.

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Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue.

We calculate Segment EBITDA as EBITDA excluding restructuring and transaction related expenses (which includes restructuring expenses recorded in Cost of goods sold);

We calculate Segment EBITDA as Net Income excluding discontinued operations;

depreciation, amortization;

interest (which includes gains and losses on debt extinguishment);

income tax expense;

restructuring and transaction related expenses (which includes restructuring expenses recorded in Cost of goods sold);

change in fair value of contingent consideration liabilities;

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

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

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

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

2022 2021 2022 2021

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

Three Months Ended March 31,

Net income $ 270 $ 273

net income attributable to continuing noncontrolling interest — — — 1

Net income attributable to LKQ stockholders 262 284 955 855

Net income from discontinued operations — 4

Net income from continuing operations attributable to LKQ stockholders 261 284 950 855

Depreciation and amortization 58 64 178 195

Net income from continuing operations 270 269

Depreciation and amortization - SG&A 58 59

Depreciation and amortization - cost of goods sold 7 6

Depreciation and amortization - restructuring expenses (1)

Interest expense, net of interest income 33 15

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Equity in earnings of unconsolidated subsidiaries (1)

Gains on foreign exchange contracts - acquisition related (2)

Equity investment fair value adjustments ( 1 ) ( 1 )

Restructuring and transaction related expenses (3)

(Gain) on disposal of businesses and impairment of net assets held for sale (3)

( 4 ) 1 ( 159 ) —

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

Gains on previously held equity interests ( 2 ) — ( 1 ) —

Losses on previously held equity interests — 1

Direct impacts of Ukraine/Russia conflict (4)

Segment EBITDA $ 456 $ 447

(1) The sum of these two captions represents the total amount that is reported in Restructuring and transaction related expenses in our Unaudited Condensed Consolidated Statements of Income.

(1) Refer to Note 8, "Equity Method Investments" for further information.

(2) Refer to Note 3, "Uni-Select Acquisition" and Note 17, "Derivative Instruments and Hedging Activities" for further information.

(3) Refer to Note 11, "Restructuring and Transaction Related Expenses" for further information.

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

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

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

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Capital Expenditures

Wholesale - North America

$ 19 $ 21 $ 64 $ 44

Europe 21 18 63 66

Specialty 13 4

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

September 30, 2022 December 31, 2021

Receivables, net

March 31, 2023 December 31, 2022

Receivables, net of allowance for credit losses

Wholesale - North America

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Self Service 11 8

Total receivables, net 1,051 1,073

Total receivables, net of allowance for credit losses 1,257 998

Wholesale - North America

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Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, Poland, and other European countries.

Our operations in other countries include wholesale operations in Canada, remanufacturing operations in Mexico, an aftermarket parts freight

consolidation warehouse in Taiwan, and administrative support functions in India.

Our net sales are attributed to geographic area based on the location of the selling operation.

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

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

2022 2021 2022 2021

United States $ 1,612 $ 1,671 $ 5,109 $ 5,026

United Kingdom 375 428 1,193 1,253

Germany 369 414 1,145 1,221

Other countries 748 784 2,346 2,403

Total revenue $ 3,104 $ 3,297 $ 9,793 $ 9,903

Our operations in other countries include wholesale operations in Canada, remanufacturing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, and administrative support functions in India.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Long-lived assets

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Total long-lived assets $ 2,514 $ 2,463

Subsequent Event

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.

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

What changed 10-Q

Item 1. Financial Statements