What changed in this filing

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Item 1. Financial Statements

2024-04-23 compared with 2023-10-27 · 203 added, 478 removed, 462 unchanged (60% of the section changed)

3 unchanged sentences

(In millions, except per share data)

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

2023 2022 2023 2022

Three Months Ended March 31,

Revenue $ 3,703 $ 3,349

3 unchanged sentences

Restructuring and transaction related expenses 30 18

Gain on disposal of businesses (1)

— ( 4 ) — ( 159 )

Depreciation and amortization 89 58

3 unchanged sentences

Gains on foreign exchange contracts - acquisition related (1)

( 3 ) — ( 49 ) —

Interest income and other income, net ( 6 ) ( 9 )

Total other expense, net 58 4

Income from continuing operations before provision for income taxes 263 347 1,013 1,246

Income before provision for income taxes 231 361

Provision for income taxes 71 94

Equity in earnings of unconsolidated subsidiaries 4 2 9 8

Income from continuing operations 207 261 759 950

Net income from discontinued operations 1 1 1 5

Net income 208 262 760 955

net income attributable to continuing noncontrolling interest — — 1 —

Net income attributable to LKQ stockholders $ 208 $ 262 $ 759 $ 955

Basic earnings per share:

Income from continuing operations $ 0.77 $ 0.95 $ 2.84 $ 3.39

Net income from discontinued operations 0.01 — — 0.02

Net income 0.78 0.96 2.84 3.41

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.78 $ 0.96 $ 2.84 $ 3.41

Diluted earnings per share:

Income from continuing operations $ 0.77 $ 0.95 $ 2.83 $ 3.38

Net income from discontinued operations 0.01 — — 0.02

Equity in (losses) earnings of unconsolidated subsidiaries ( 2 ) 3

Net income $ 158 $ 270

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.78 $ 0.95 $ 2.83 $ 3.40

(1) Primarily related to the sale of PGW Auto Glass ("PGW").

Refer to Note 3, "Discontinued Operations and Divestitures" for further information.

Earnings per share:

Basic $ 0.59 $ 1.01

Diluted $ 0.59 $ 1.01

(1) Related to the Uni-Select Inc.

1 unchanged sentence

Refer to Note 2, "Business Combinations" and Note 13, "Derivative Instruments and Hedging Activities" for further information.

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

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

2 unchanged sentences

(In millions)

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

2023 2022 2023 2022

Three Months Ended March 31,

Net income $ 158 $ 270

net income attributable to continuing noncontrolling interest — — 1 —

Net income attributable to LKQ stockholders 208 262 759 955

Other comprehensive income (loss):

1 unchanged sentence

Net change in unrealized gains/losses on cash flow hedges, net of tax 4 ( 17 )

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

Other comprehensive income from unconsolidated subsidiaries 8 2 12 4

Other comprehensive loss ( 137 ) ( 184 ) ( 49 ) ( 386 )

Other comprehensive (loss) income from unconsolidated subsidiaries ( 5 ) 3

Other comprehensive (loss) income ( 58 ) 43

Comprehensive income $ 100 $ 313

comprehensive income attributable to continuing noncontrolling interest — — 1 —

Comprehensive income attributable to LKQ stockholders $ 71 $ 78 $ 710 $ 569

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, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

3 unchanged sentences

Prepaid expenses and other current assets 343 283

Assets of discontinued operations 311 —

Total current assets 5,202 4,868

16 unchanged sentences

Other current liabilities 172 149

Liabilities of discontinued operations 173 —

Total current liabilities 3,059 3,318

4 unchanged sentences

Commitments and contingencies

Redeemable noncontrolling interest 24 24

Stockholders' equity:

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 323.1 shares issued and 267.9 shares outstanding at September 30, 2023;

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 323.5 shares issued and 267.0 shares outstanding at March 31, 2024;

323.1 shares issued and 267.2 shares outstanding at December 31, 2023

3 unchanged sentences

Treasury stock, at cost;

55.2 shares at September 30, 2023 and 55.1 shares at December 31, 2022

56.5 shares at March 31, 2024 and 55.9 shares at December 31, 2023

( 2,454 ) ( 2,424 )

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 100 65

Gain on disposal of businesses — ( 159 )

Stock-based compensation expense 8 10

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

Other 22 ( 22 )

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

7 unchanged sentences

Purchases of property, plant and equipment ( 66 ) ( 70 )

Proceeds from disposals of property, plant and equipment 8 5

Acquisitions, net of cash acquired ( 17 ) ( 25 )

Proceeds from disposals of businesses — 399

Proceeds from settlement of foreign exchange contracts - acquisition related 49 —

Other investing activities, net ( 5 ) ( 2 )

Net cash (used in) provided by investing activities ( 2,389 ) 244

Net cash used in investing activities ( 88 ) ( 97 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs ( 6 ) ( 19 )

Proceeds from issuance of U.S.

Notes (2028/33), net of unamortized bond discount 1,394 —

Proceeds from issuance of Euro Notes (2031), net of unamortized bond discount 816 —

Repayment of Euro Notes (2024) ( 547 ) —

Borrowings under revolving credit facilities 392 1,543

1 unchanged sentence

Borrowings under term loans — 500

(Repayments) borrowings of other debt, net ( 12 ) 9

Settlement of derivative instruments ( 13 ) —

Borrowings of other debt, net 33 1

Dividends paid to LKQ stockholders ( 81 ) ( 74 )

1 unchanged sentence

Other financing activities, net ( 31 ) ( 6 )

Net cash provided by (used in) financing activities 1,391 ( 1,217 )

Net cash used in financing activities ( 113 ) ( 66 )

Effect of exchange rate changes on cash and cash equivalents ( 7 ) 4

Net increase (decrease) in cash and cash equivalents 146 ( 5 )

Cash and cash equivalents of continuing operations, beginning of period 278 274

Cash and cash equivalents of discontinued operations, beginning of period — —

Cash and cash equivalents of continuing and discontinued operations, beginning of period 278 274

Cash and cash equivalents of continuing and discontinued operations, end of period

Cash and cash equivalents of discontinued operations, end of period

Net increase in cash and cash equivalents 45 64

Cash and cash equivalents, beginning of period 299 278

Cash and cash equivalents, end of period $ 344 $ 342

10 unchanged sentences

Shares Amount Shares Amount

Balance as of July 1, 2023 322.9 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,520 $ 7,059 $ ( 235 ) $ 15 $ 5,968

Net income — — — — — 208 — — 208

Other comprehensive loss — — — — — — ( 137 ) — ( 137 )

Vesting of restricted stock units, net of shares withheld for employee tax 0.2 — — — ( 2 ) — — — ( 2 )

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

Dividends declared to LKQ stockholders ($0.275 per share) — — — — — ( 73 ) — — ( 73 )

Balance as of September 30, 2023 323.1 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,527 $ 7,194 $ ( 372 ) $ 15 $ 5,973

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, 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

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, 2024 323.1 $ 3 ( 55.9 ) $ ( 2,424 ) $ 1,538 $ 7,290 $ ( 240 ) $ 14 $ 6,181

5 unchanged sentences

Dividends declared to LKQ stockholders ($0.30 per share) — — — — — ( 81 ) — — ( 81 )

Balance as of September 30, 2023 323.1 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,527 $ 7,194 $ ( 372 ) $ 15 $ 5,973

Balance as of March 31, 2024 323.5 $ 3 ( 56.5 ) $ ( 2,454 ) $ 1,541 $ 7,367 $ ( 298 ) $ 14 $ 6,173

LKQ Stockholders

4 unchanged sentences

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

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

8 unchanged sentences

These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.

We have reclassified certain prior period amounts to conform to the current period presentation.

Results for interim periods are not necessarily indicative of the results that can be expected for any subsequent interim period or for a full year.

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, 2023 filed with the SEC on February 22, 2024 ("2023 Form 10-K").

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

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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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.

We adopted the provisions of ASU 2022-04 on a retrospective basis (see Note 11, "Supply Chain Financing"), except for the disclosure of rollforward information, which will be adopted prospectively in our Annual Report on Form 10-K for the year ending December 31, 2024 as required.

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

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

The ASU requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

The ASU will be effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively.

Early adoption is permitted.

We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

Business Combinations

On August 1, 2023, we acquired all of Uni-Select's 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) (the "Uni-Select Acquisition"), by way of a plan of arrangement (the "Arrangement") entered into on February 26, 2023, under the provisions of the Business Corporations Act (Québec).

Uni-Select is a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster segment, 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.

During the second quarter of 2023, we received the required approvals from Uni-Select's shareholders, the Superior Court of Québec and regulators in the United States and Canada with respect to the Arrangement.

On July 26, 2023, the U.K.'s Competition and Markets Authority cleared the acquisition, except with respect to the wholesale automotive parts business, GSF Car Parts in the U.K., which was divested in October 2023.

See Note 3, "Discontinued Operations and Divestitures" for information related to the divestment of GSF Car Parts.

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

These foreign exchange contracts did 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.

We reported Gains on foreign exchange contracts - acquisition related of $ 3 million and $ 49 million for the three and nine months ended September 30, 2023.

During the three months ended March 31, 2024, we completed acquisitions of one business within our Wholesale - North America segment and one business within our Europe segment.

These acquisitions were not material to our financial position or results of operations as of and for the three months ended March 31, 2024.

Additionally, in January 2024, we paid $ 23 million (€ 21 million) to a minority shareholder to settle a put option exercised on redeemable shares issued in conjunction with a previous acquisition.

This payment was presented within Other financing activities, net in financing activities in our Unaudited Condensed Consolidated Statements of Cash Flows.

On February 26, 2023, we entered into a plan of arrangement to acquire all of Uni-Select's issued and outstanding shares.

On August 1, 2023, we completed the acquisition of Uni-Select for an aggregate consideration paid of approximately Canadian dollar (“CAD”) 2.8 billion ($ 2.1 billion).

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

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

We reported Gains on foreign exchange contracts - acquisition related of $ 23 million for the three months ended March 31, 2023.

These foreign exchange contracts were settled in July 2023 ahead of closing of the Uni-Select Acquisition, resulting in total payments received of $ 49 million.

See Note 13, "Derivative Instruments and Hedging Activities" for information related to these foreign exchange contracts.

In connection with the Uni-Select Acquisition, we entered into a senior unsecured bridge loan facility to obtain committed financing for a portion of the purchase price.

The bridge loan facility was terminated in the second quarter of 2023 after arranging the permanent financing as discussed below.

We incurred $ 9 million in upfront fees related to the bridge loan facility and fully amortized these upfront fees (reported in Interest expense in the Unaudited Condensed Consolidated Statements of Income) during the nine months ended September 30, 2023.

For the permanent financing, on March 27, 2023, we entered into a new term loan credit agreement ("CAD Note") which established an unsecured term loan facility of up to CAD 700 million maturing in July 2026.

Proceeds from the CAD Note could 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 included a non-usage fee that was incurred through the date the proceeds were drawn on the facility.

In connection with the closing of the Uni-Select Acquisition, we borrowed approximately $ 531 million (CAD 700 million) under the CAD Note on July 31, 2023.

There were no changes in borrowings against the CAD Note between the draw date and September 30, 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.

See Note 16, "Long-Term Obligations" for additional information related to the CAD Note.

Additionally, on May 24, 2023, we completed an offering of $ 1,400 million aggregate principal amount of senior unsecured notes, consisting of $ 800 million senior notes due 2028 (the "U.S.

Notes (2028)") and $ 600 million senior notes due 2033 (the "U.S.

Notes (2033)" and together with the U.S.

Notes (2028), the "U.S.

Notes (2028/33)").

The net proceeds from the offering of the U.S.

Notes (2028/33) were used, together with borrowings under our CAD Note, (i) to finance a portion of the consideration payable for the Uni-Select Acquisition, including repaying existing Uni-Select indebtedness, (ii) to pay associated fees and expenses, including fees and expenses incurred in connection with the offering, and (iii) for general corporate purposes.

Notes (2028) and U.S.

Notes (2033) bear interest at rates of 5.75 % and 6.25 %, respectively, per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.

See Note 16, "Long-Term Obligations" for additional information related to the offering of the Notes.

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

These forward-starting interest rate swaps were settled in the second quarter following the issuance of the U.S.

Notes (2028/33).

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

We funded the remainder of the purchase price with borrowings under our revolving credit facility and cash on hand of approximately $ 150 million and $ 50 million, respectively.

We recorded $ 1,230 million of goodwill related to our acquisition of Uni-Select, of which we expect $ 116 million to be deductible for income tax purposes.

In the period between the acquisition date and September 30, 2023, Uni-Select, which is reported in our Wholesale - North America segment, generated revenue of $ 239 million and an operating loss of $ 13 million, including $ 20 million of restructuring expenses and $ 12 million of amortization of acquired intangibles.

In addition to our acquisition of Uni-Select, we completed acquisitions of one business within our Wholesale - North America segment, four businesses within our Europe segment and one business in our Specialty segment, during the nine months ended September 30, 2023.

Total acquisition date fair value of the consideration for these acquisitions was $ 135 million, composed of $ 118 million of cash paid (net of cash acquired), $ 5 million of notes payable, $ 6 million of other purchase price obligations (non-interest bearing) and $ 6 million of pre-existing equity method investment balances .

During the nine months ended September 30, 2023, we recorded $ 61 million of goodwill related to these acquisitions, of which we expect $ 11 million to be deductible for income tax purposes.

In the period between the acquisition dates and September 30, 2023, these acquisitions generated revenue of $ 90 million, including $ 42 million within our Europe segment and $ 35 million within our Specialty segment, and operating income of $ 9 million, primarily within our Europe segment.

Our acquisitions are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the dates of acquisition.

The purchase prices were allocated to the net assets acquired based upon estimated fair values at the dates of acquisition.

The purchase price allocations for the acquisitions made during the nine months ended September 30, 2023 are preliminary as we are in the process of determining the following:

In addition to our acquisition of Uni-Select, we completed acquisitions of three businesses within our Wholesale - North America segment, four businesses within our Europe segment and one business in our Specialty segment, during the year ended December 31, 2023.

The purchase price allocations for these acquisitions are preliminary and are subject to change during the measurement periods, which is not to exceed 12 months from the close of the acquisitions.

During the three months ended March 31, 2024, there have been no significant adjustments to the preliminary purchase price allocations from those disclosed in our December 31, 2023 Consolidated Financial Statements.

At this time, we are in the process of finalizing the purchase price allocations, which includes finalizing the following:

1) valuation amounts for certain receivables, inventories and fixed assets acquired;

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and 4) the tax basis of the entities acquired.

We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations.

During the first nine months of 2023, the measurement period adjustments recorded for acquisitions completed in prior periods were not material.

The purchase price allocations for the acquisitions completed during the nine months ended September 30, 2023 are as follows (in millions):

Nine Months Ended

September 30, 2023

Uni-Select (1)

Other Acquisitions Total

Receivables $ 123 $ 31 $ 154

Inventories 332 59 391

Prepaid expenses and other current assets 30 5 35

Assets of discontinued operations (1)

Property, plant and equipment 104 10 114

Operating lease assets 80 8 88

Goodwill 1,230 61 1,291

Other intangibles (2)

Other noncurrent assets 22 — 22

Current liabilities assumed (3)

( 330 ) ( 44 ) ( 374 )

Liabilities of discontinued operations (1)

( 183 ) — ( 183 )

Long-term operating lease liabilities, excluding current portion ( 54 ) ( 8 ) ( 62 )

Debt assumed ( 1 ) ( 12 ) ( 13 )

Other noncurrent liabilities assumed (4)

( 135 ) — ( 135 )

Other purchase price obligations ( 3 ) ( 17 ) ( 20 )

Cash used in acquisitions, net of cash acquired $ 2,081 $ 118 $ 2,199

(1) In connection with our acquisition of Uni-Select, we acquired one business (GSF Car Parts) which was required to be sold.

Therefore, such business was classified as held for sale and was included within the "Assets of discontinued operations" and "Liabilities of discontinued operations" line items in the above preliminary allocation of purchase price.

See Note 3, "Discontinued Operations and Divestitures" for information related to the GSF Car Parts business.

(2) The amount recorded for our acquisition of Uni-Select primarily includes $ 17 million of trade names (3 to 5 year useful lives) and $ 543 million of customer and supplier relationships (10 to 17 year useful lives).

(3) The amount recorded for our acquisition of Uni-Select includes $ 64 million of Accounts Payable outstanding under the supply chain financing arrangement.

See Note 15, "Supply Chain Financing" for information related to our supply chain financing programs.

(4) The amount recorded for our acquisition of Uni-Select includes $ 126 million of net deferred income tax liability, the significant components of which are as follows:

deferred tax liabilities related to customer relationships of $ 140 million net with deferred tax assets related to Canadian net operating loss carryforwards of $ 23 million.

The fair value of our intangible assets is based on a number of inputs, including projections of future cash flows, assumed royalty rates and customer attrition rates, all of which are Level 3 inputs.

The fair value of our property, plant and equipment is determined using inputs such as market comparables and current replacement or reproduction costs of the asset, adjusted for physical, functional and economic factors;

these adjustments to arrive at fair value use unobservable inputs in which little or no market data exists, and therefore, these inputs are considered to be Level 3 inputs.

See Note 18, "Fair Value Measurements" for further information regarding the tiers in the fair value hierarchy.

The acquisition of Uni-Select complements 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.

The primary objectives of our other acquisitions made during the nine months ended September 30, 2023 were to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths.

When we identify potential acquisitions, we attempt to target companies with a leading market presence, experienced management team and workforce, high synergies and/or that add critical capabilities with opportunity for future consolidation and growth.

For certain of our acquisitions, we have identified cost savings and synergies as a result of integrating the company with our existing business that provide additional value to the combined entity.

In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the effect of the businesses acquired during the nine months ended September 30, 2023 as though the businesses had been acquired as of January 1, 2022.

The following unaudited pro forma financial information presents the effect of the businesses acquired during the three months ended March 31, 2024 as though the businesses had been acquired as of January 1, 2023, and the businesses acquired during the year ended December 31, 2023 as though they had been acquired as of January 1, 2022.

The unaudited pro forma financial information is based upon accounting estimates and judgments that we believe are reasonable.

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The unaudited pro forma financial information is as follows (in millions):

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

2023 2022 2023 2022

Three Months Ended March 31,

Revenue $ 3,703 $ 3,759

Income from continuing operations 202 248 692 908

The pro forma impact of our acquisitions also reflects the elimination of acquisition related expenses (net of tax) of $ 3 million and $ 17 million and gains on foreign exchange contracts - acquisition related of $ 3 million and $ 49 million for the three and nine months ended September 30, 2023, respectively.

In addition, the unaudited pro forma financial information excludes the results of GSF Car Parts which was classified as discontinued operations upon the acquisition of Uni-Select.

Refer to Note 11, "Restructuring and Transaction Related Expenses" for further information regarding our acquisition related expenses, Note 17, "Derivative Instruments and Hedging Activities" for further information on our foreign exchange contracts and Note 3, "Discontinued Operations and Divestitures" for further information related to the divestment of GSF Car Parts.

Discontinued Operations and Divestitures

GSF C ar Parts

We acquired GSF Car Parts as part of the Uni-Select transaction and we were required to divest GSF Car Parts in order to comply with the U.K.'s Competition and Markets Authority regulatory ruling.

Since the GSF Car Parts business was held separate and never integrated into our business, we classified the business as discontinued operations upon acquisition.

As of September 30, 2023, the assets held for sale and liabilities held for sale are recorded within Assets of discontinued operations and Liabilities of discontinued operations, respectively, on the Unaudited Condensed Consolidated Balance Sheets.

On October 25, 2023, we completed the divestment of GSF Car Parts.

In order to manage our exposure to variability in the cash flows related the sale of GSF Car Parts, we entered into a foreign exchange forward contract to fix the amount of USD we would receive upon completion of the sale.

We do not expect to recognize a significant gain or loss upon disposal.

Glass Manufacturing Business

For the nine months ended September 30, 2022, we recorded to discontinued operations a $ 5 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, our aftermarket glass business within our Wholesale - North America segment, to a third party for $ 361 million resulting in recognition of a $ 155 million pretax gain ($ 127 million after tax).

Additionally, 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).

Net income 158 235

The pro forma impact of our acquisitions also reflects the elimination of acquisition related expenses (net of tax) of $ 10 million and gains on foreign exchange contracts - acquisition related of $ 23 million for the three months ended March 31, 2023.

Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information regarding our acquisition related expenses.

We classify our inventory into the following categories:

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Inventories consist of the following (in millions):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Aftermarket and refurbished products $ 2,570 $ 2,556

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

As of September 30, 2023, manufactured products inventory was composed of $ 29 million of raw materials, $ 7 million of work in process, and $ 18 million of finished goods.

As of March 31, 2024, manufactured products inventory was composed of $ 24 million of raw materials, $ 7 million of work in process, and $ 23 million of finished goods.

As of December 31, 2023, manufactured products inventory was composed of $ 26 million of raw materials, $ 7 million of work in process, and $ 22 million of finished goods.

Our 2023 acquisitions contributed approximately $ 380 million to our aftermarket and refurbished products inventory (including $ 332 million from Uni-Select).

Allowance for Credit Losses

Our allowance for credit losses was $ 57 million and $ 54 million as of September 30, 2023 and December 31, 2022, respectively.

The provision for credit losses was $ 1 million for both the three months ended September 30, 2023 and 2022, and $ 7 million and $ 9 million for the nine months ended September 30, 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.

Our allowance for credit losses was $ 58 million and $ 61 million as of March 31, 2024 and December 31, 2023, respectively.

The provision for credit losses was $ 3 million and $ 5 million for the three months ended March 31, 2024 and 2023, respectively.

Intangible Assets

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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 nine months of 2023 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

We did not identify any indicators of impairment in the first three months of 2024 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 September 30, 2023

September 30, 2023 December 31, 2022

MEKO AB (1)(2)

Segment Ownership as of March 31, 2024

March 31, 2024 December 31, 2023

Europe 26.6 % $ 152 $ 145

Total $ 163 $ 159

(1) As of September 30, 2023, the Level 1 fair value of our equity investment in MEKO AB ("Mekonomen") was $ 133 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value.

We evaluated our investment in Mekonomen for other-than-temporary impairment and concluded the decline in fair value was not other-than-temporary;

however, a prolonged, material impairment may cause us to account for the decline as an other-than-temporary impairment in a future period, resulting in a charge in our Unaudited Condensed Consolidated Statements of Income.

(2) As of September 30, 2023, our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $ 9 million;

(1) As of March 31, 2024, 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.

Our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $ 10 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 July 2023, we acquired the remaining equity interest in an investment in our Europe segment resulting in a decrease to the carrying value of $ 3 million.

Warranty Reserve

Some of our salvage mechanical products are sold with a standard six month warranty against defects.

Additionally, some of our remanufactured engines are sold with a standard three or four year warranty against defects.

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

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

Warranty Reserve

Balance as of December 31, 2022 $ 32

Warranty expense 65

Warranty claims ( 61 )

Balance as of September 30, 2023 $ 36

Revenue Recognition

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and large mechanical items such as engines and transmissions.

For Wholesale - North America and Europe, vehicle replacement products include a wide variety of small mechanical products such as brake pads, discs and sensors;

For Europe, and to a lesser extent for Wholesale - North America, vehicle replacement products include a wide variety of small mechanical products such as brake pads, discs and sensors;

electrical products such as spark plugs and batteries;

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

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

2023 2022 2023 2022

Three Months Ended March 31,

Wholesale - North America $ 1,422 $ 1,148

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Wholesale - North America 78 81

Europe 3 4 15 18

Self Service 83 109

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

Classification September 30, 2023 December 31, 2022

Classification March 31, 2024 December 31, 2023

Return asset Prepaid expenses and other current assets $ 72 $ 68

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

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

2023 2022 2023 2022

Three Months Ended March 31,

United States $ 1,795 $ 1,681

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2024 Global Restructuring Plan

In the first quarter of 2024, we began a global restructuring initiative focused on enhancing profitability.

The largest portion of the activity will come from the Europe segment and will include exiting certain businesses or markets which do not align with our strategic objectives.

Initially, this includes exiting markets located in Bosnia and Slovenia.

In April 2024, we entered into agreements to divest our operations in Slovenia, which closed in April 2024, and Bosnia, which we expect to close in the third quarter of 2024 subject to regulatory approval.

Our decision to exit these and other markets constituted a triggering event to evaluate certain long-lived assets for impairment, and as a result, we incurred and expect to incur impairment charges as we move forward with the plans to exit Bosnia, Slovenia and any other identified markets.

In addition to these impairment charges, we will incur charges to write-down or dispose of long-lived assets, inventory and other assets;

for employee severance;

and to terminate leases.

This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $ 55 million and $ 75 million.

In the future, we may identify additional initiatives under the plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives.

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.

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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.

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 Enterprise Resource Planning 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 2027 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 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;

employee severance and other expenditures related to employee terminations;

lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets;

other costs related to facility exits, such as moving expenses to relocate inventory and equipment;

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

This plan is expected to be completed in 2023 with a total incurred cost of between $ 106 million to $ 110 million.

Acquisition Integration Plans

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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 additional expenses of between $ 15 million and $ 25 million to complete the integration plan related to the Uni-Select Acquisition in our Wholesale - North America segment.

We expect to incur additional expenses of between $ 5 million and $ 15 million by the end of 2024 to substantially complete the integration plan related to the Uni-Select Acquisition in our Wholesale - North America segment.

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

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

Three Months Ended March 31,

Plan Expense Type 2024 2023

2024 Global Plan Inventory related costs (1)

Asset impairments (2)

Other costs 2 —

Total $ 27 $ —

2022 Global Plan Employee related costs $ — $ 2

Facility exit costs 1 2

Inventory related costs (1)

Other costs — 1

Total $ 1 $ 5

2019/2020 Global Plan Facility exit costs $ — $ 1 $ — $ 2

Total $ — $ 1 $ — $ 2

1 LKQ Europe Plan Employee related costs $ 1 $ 1

Facility exit costs 1 —

Total $ 2 $ 1

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Facility exit costs 4 2

Other costs 1 —

Total $ 6 $ 2

Total restructuring expenses $ 36 $ 8

(1) Recorded to Cost of goods sold in the Consolidated Statements of Income

(1) Recorded to Cost of goods sold in the Unaudited Condensed Consolidated Statements of Income

(2) Related to impairment of assets in Property, plant and equipment, net and Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets.

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

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1 LKQ Europe Plan — 12 — — 12

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

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Employee related costs (1)

$ — $ 3 $ — $ 1 $ 1 $ 1

Facility exit costs (2)

Other costs — — 2 2 — —

Total $ 3 $ 4 $ 4 $ 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

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

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

2023 2022 2023 2022

Professional fees (1)

$ 3 $ 1 $ 19 $ 5

Transaction related expenses

$ 3 $ 1 $ 19 $ 5

(1) Includes 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, 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)

Unvested as of January 1, 2023 1.3 $ 41.02

Vested ( 0.6 ) $ 42.42

Forfeited / Canceled ( 0.1 ) $ 44.08

Unvested as of September 30, 2023 1.2 $ 48.53

Expected to vest after September 30, 2023 1.0 $ 49.26 2.8 $ 50

(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, 2022 was $ 49.04 .

The fair value of RSUs that vested during the nine months ended September 30, 2023 was $ 36 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, 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)

Unvested as of January 1, 2023 0.5 $ 37.87

Vested ( 0.2 ) $ 32.28

Unvested as of September 30, 2023 0.4 $ 47.56

Expected to vest after September 30, 2023 0.3 $ 46.89 1.2 $ 15

(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.

This amount changes based on the market price of LKQ’s common stock and the achievement of the performance metrics relative to the established targets.

(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, 2022 was $ 48.95 .

The fair value of PSUs that vested during the nine months ended September 30, 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 $ 9 million and $ 29 million for the three and nine months ended September 30, 2023, respectively, and $ 8 million and $ 31 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, unrecognized compensation expense related to unvested RSUs and PSUs was $ 54 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.

During the three months ended March 31, 2024 and 2023, we incurred expenses totaling $ 2 million and $ 10 million, respectively for legal, accounting and advisory services related to completed and potential transactions.

Earnings Per Share

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,

2023 2022 2023 2022

Income from continuing operations $ 207 $ 261 $ 759 $ 950

Three Months Ended March 31,

Net income $ 158 $ 270

Denominator for basic earnings per share—Weighted-average shares outstanding 267.1 267.4

Effect of dilutive securities:

RSUs 0.4 0.4 0.5 0.6

PSUs 0.2 0.4 0.2 0.4

Restricted stock units ("RSUs") 0.5 0.7

Performance-based RSUs ("PSUs") 0.1 0.2

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 267.7 268.3

Basic earnings per share from continuing operations $ 0.77 $ 0.95 $ 2.84 $ 3.39

Diluted earnings per share from continuing operations (1)

Basic earnings per share $ 0.59 $ 1.01

Diluted earnings per share (1)

$ 0.59 $ 1.01

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

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 September 30, 2023

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

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended March 31, 2024

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 July 1, 2023

Balance as of January 1, 2024

$ ( 243 ) $ ( 11 ) $ 6 $ 8 $ ( 240 )

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

Other comprehensive income from unconsolidated subsidiaries — — — 8 8

Balance as of September 30, 2023

Other comprehensive loss from unconsolidated subsidiaries — — — ( 5 ) ( 5 )

Balance as of March 31, 2024

$ ( 300 ) $ ( 7 ) $ 6 $ 3 $ ( 298 )

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

Other comprehensive income from unconsolidated subsidiaries — — 2 2

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

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

Balance as of January 1, 2023 $ ( 333 ) $ — $ 11 $ ( 1 ) $ ( 323 )

Pretax loss ( 56 ) ( 4 ) — — ( 60 )

Pretax income (loss) 57 ( 22 ) — — 35

Income tax effect — 5 — — 5

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

Other comprehensive income from unconsolidated subsidiaries — — — 3 3

Balance as of September 30, 2023

$ ( 389 ) $ ( 5 ) $ 11 $ 11 $ ( 372 )

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 January 1, 2022 $ ( 121 ) $ ( 24 ) $ ( 8 ) $ ( 153 )

Pretax loss ( 395 ) — — ( 395 )

Reclassification of unrealized loss — 1 — 1

Disposal of business 4 — — 4

Other comprehensive income from unconsolidated subsidiaries — — 4 4

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

Balance as of March 31, 2023 $ ( 276 ) $ ( 17 ) $ 11 $ 2 $ ( 280 )

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

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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 September 30, 2023 and December 31, 2022, we had $ 348 million, including amounts under the Uni-Select program, and $ 248 million of Accounts payable outstanding under the arrangements, respectively.

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

As of March 31, 2024 and December 31, 2023, we had $ 422 million and $ 411 million of Accounts payable outstanding under the arrangements, respectively.

Long-Term Obligations

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

September 30, 2023

March 31, 2024

December 31, 2023

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Senior Unsecured Credit Agreement:

Term loans payable January 2026 6.79 % $ 500 — % $ —

Revolving credit facilities January 2028 6.07 % (1)

Senior Secured Credit Agreement:

Term loan payable January 2026 6.81 % $ 500 6.83 % $ 500

Revolving credit facilities January 2028 6.58 % (1)

640 6.25 % (1)

Senior Unsecured Term Loan Agreement:

Term loans payable July 2026 6.75 % 516 — % —

Term loan payable July 2026 6.67 % 517 6.82 % 529

Unsecured Senior Notes:

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Euro Notes (2028) April 2028 4.13 % 270 4.13 % 276

Euro Notes (2031) March 2031 4.13 % 809 — % —

Notes payable Various through October 2030 3.49 % (1)

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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.

Our Senior Unsecured Credit Agreement consists of (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

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.

"SOFR") plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread based on the Company's debt rating and total leverage ratio.

Senior Unsecured Term Loan Credit Agreement

For the permanent financing related to the Uni-Select Acquisition, on March 27, 2023, we entered into the CAD Note which established an unsecured term loan facility of up to CAD 700 million maturing in July 2026.

The CAD Note was funded on July 31, 2023, which was one business day prior to the consummation of the Uni-Select Acquisition.

The Senior Unsecured Term Loan Credit Agreement ("CAD Note") established an unsecured term loan facility of up to CAD 700 million maturing in July 2026.

The variable 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.

Unsecured Senior Notes

On May 24, 2023, as part of the financing for the Uni-Select Acquisition, we completed an offering of $ 1,400 million aggregate principal amount of senior unsecured notes, consisting of $ 800 million senior notes due 2028 and $ 600 million senior notes due 2033 in a private placement conducted pursuant to Rule 144A and Regulation S under the United States Securities Act of 1933.

Notes (2028/33) are governed by the Indenture, dated as of May 24, 2023 (the "Indenture"), among the Company, certain of the Company's subsidiaries (the "Guarantors") and U.S.

Bank Trust Company, National Association, as trustee.

Notes (2028/33) will be initially fully and unconditionally guaranteed on a senior unsecured basis by each of our wholly owned domestic subsidiaries that are guarantors under our Senior Unsecured Credit Agreement, dated as of January 5, 2023, or the CAD Note and each of our domestic subsidiaries that in the future agrees to guarantee obligations under the Senior Unsecured Credit Agreement, the CAD Note, any other Credit Facility Debt or any Capital Markets Debt (as such terms are defined in the Indenture).

Each subsidiary guarantee will rank equally in right of payment with all existing and future liabilities of the applicable subsidiary guarantor that are not subordinated.

Each subsidiary guarantee will effectively rank junior to any secured indebtedness of its respective subsidiary guarantor to the extent of the lesser of the amount of such secured indebtedness and the value of the assets securing such indebtedness.

Under the terms of any subsidiary guarantee, holders of the U.S.

Notes (2028/33) will not be required to exercise their remedies against us before they proceed directly against the subsidiary guarantors.

Prior to May 15, 2028 in the case of the U.S.

Notes (2028) or March 15, 2033 in the case of the U.S.

Notes (2033) (each such date a "Par Call Date"), we may redeem the U.S.

Notes (2028) or U.S.

Notes (2033), as applicable, at our option, in whole or in part, at any time and from time to time, at a redemption price equal to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming, in each case, that such U.S.

Notes (2028/33) matured on their applicable Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 40 basis points in the case of the U.S.

Notes (2028) or 45 basis points in the case of the U.S.

Notes (2033), less interest accrued to the date of redemption;

and (ii) 100 % of the principal amount of the U.S.

Notes (2028/33) to be redeemed;

On March 13, 2024, LKQ Corporation, together with its indirect, wholly-owned subsidiary, LKQ Dutch Bond B.V., a private company with limited liability, completed an offering and sale of € 750 million aggregate principal amount of its 4.125 % Notes due March 13, 2031 (“Euro Notes (2031)”).

The Euro Notes (2031) bear interest at a rate of 4.125 % per year.

Interest on the Euro Notes (2031) is payable annually on each March 13, commencing on March 13, 2025.

The Euro Notes (2031) will be initially fully and unconditionally guaranteed on a senior unsecured basis (the “Guarantees”) by the Company and each of its wholly owned U.S.

subsidiaries that are guarantors under our Senior Unsecured Credit Agreement and our CAD Note.

The Euro Notes (2031) will also be guaranteed by each of the Company’s U.S.

subsidiaries that in the future agrees to guarantee the Company’s obligations under the Senior Unsecured Credit Agreement, the CAD Note, any other Credit Facility Debt or any Capital Markets Debt (both as defined in the Company’s preliminary prospectus supplement filed with the SEC on February 28, 2024).

Prior to December 13, 2030 (the "Par Call Date"), the Euro Notes (2031) are redeemable, in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of:

(1)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming that the Euro Notes (2031) matured on the Par Call Date) on an annual (ACTUAL/ACTUAL (ICMA)) basis at a rate equal to the Comparable Government Bond Rate (as defined in the Indenture, dated March 13, 2024 (the "Euro Notes (2031) Indenture")) plus 30 basis points, less (b) interest accrued to the date of redemption;

and (2) 100 % of the principal amount of the Euro Notes (2031) to be redeemed;

plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date.

On or after the applicable Par Call Date we may redeem the U.S.

Notes (2028/33) of the applicable series, in whole or in part, at any time and from time to time, at a redemption price equal to 100 % of the principal amount of the U.S.

Notes (2028/33) being redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date.

In connection with the sale of the U.S.

Notes (2028/33), we entered into a Registration Rights Agreement, dated as of May 24, 2023 (the "Registration Rights Agreement"), with the Guarantors and BofA Securities, Inc.

and Wells Fargo Securities, LLC, as representatives of the initial purchasers of the U.S.

Notes (2028/33) identified therein.

Pursuant to the terms of the Registration Rights Agreement, on September 1, 2023, the Company and the Guarantors filed a Registration Statement on Form S-4 ("Form S-4") with respect to a registered offer to exchange (the "Exchange Offer") each series of U.S.

Notes (2028/33) and related guarantees for new notes of such series (the "Exchange Notes") and new related guarantees, which will have terms substantially identical in all material respects to the applicable series of U.S.

Notes (2028/33) (except that the Exchange Notes will not contain terms with respect to transfer restrictions and Additional Interest (as defined below)).

The SEC declared the Form S-4 effective on September 14, 2023.

The Company currently expects the Exchange Offer to close in the fourth quarter of 2023.

Pursuant to the terms of the Registration Rights Agreement, a "Registration Default" will be deemed to occur if, among other things, we have not exchanged Exchange Notes for all U.S.

Notes (2028/33) validly tendered in accordance with the terms of an exchange offer within 365 days after the issue date of the U.S.

Notes (2028/33);

additional interest ("Additional Interest") will accrue on the principal amount of the applicable U.S.

Notes (2028/33) which have not been registered and/or exchanged at a rate of 0.25 % per annum during the 90-day period beginning on the day immediately following the occurrence of any

Registration Default, which rate will, after such 90-day period, increase to a maximum of 0.50 % per annum thereafter commencing on the day immediately following such Registration Default.

Assuming the Exchange Offer closes in the fourth quarter of 2023, as the Company currently anticipates, the Company will not be obligated to pay Additional Interest.

On or after the Par Call Date, we may redeem the Euro Notes (2031), in whole or in part, at any time and from time to time, at a redemption price equal to 100 % of the principal amount of the Euro Notes (2031) being redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date.

The Euro Notes (2031) and the Guarantees have been registered under the United States Securities Act of 1933 under the Registration Statement on Form S-3 (File No.

333-277267) filed by the Company with the SEC on February 22, 2024, as supplemented by the prospectus supplement filed by the Company with the SEC on March 1, 2024.

Subsequently, the Euro Notes (2031) were approved for listing and registration on the Nasdaq.

Related to the offering and sale of the Euro Notes (2031) in March 2024, we incurred $ 7 million of fees, which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the Euro Notes (2031).

We used the net proceeds from this offering to (i) pay outstanding indebtedness, including all of the outstanding € 500 million aggregate principal amount of the 3.875 % senior notes due 2024 (the “Euro Notes (2024)”) issued by the Company’s indirect wholly-owned subsidiary, LKQ Italia Bondco di LKQ Italia Bondco GP S.r.l e C.S.A.P.A.

(f/k/a LKQ Italia Bondco S.p.A.) (the “Redemption”), and (ii) pay accrued interest and related fees, premiums and expenses.

The Euro Notes (2031) are governed by the Euro Notes (2031) Indenture, dated as of March 13, 2024.

Interest on the U.S.

Notes (2028/33) is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023.

Interest on our 3.88 % senior notes due April 2024 (the "Euro Notes (2024)") and our 4.13 % senior notes due April 2028 (the "Euro Notes (2028)") are payable in arrears on April 1 and October 1 of each year.

Interest on our 4.13 % senior notes due April 2028 (the "Euro Notes (2028)") is payable in arrears on April 1 and October 1 of each year.

Derivative Instruments and Hedging Activities

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Notes (2028/33), resulting in total payments of $ 13 million.

See Note 16, "Long-Term Obligations" for additional information related to the offering of the U.S.

Notes (2028/33).

Changes in the fair value of the interest rate swaps were 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.

Payments made to settle the forward starting interest rate swaps were classified in financing activities in our Unaudited Condensed Consolidated Statements of Cash Flows as these payments were related to the forecasted debt issuance.

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

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 September 30, 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):

As of March 31, 2024 and December 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):

March 31, 2024

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

Interest rate swap agreements $ 400 Prepaid expenses and other current assets $ 1

Interest rate swap agreements 300 Other noncurrent assets 2

The activity related to our cash flow hedges is included in Note 14, "Accumulated Other Comprehensive Loss." As of September 30, 2023, we estimate that $ 3 million 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.

December 31, 2023

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

Interest rate swap agreements $ 700 Other noncurrent liabilities $ ( 2 )

The activity related to our cash flow hedges is included in Note 10, "Accumulated Other Comprehensive Income (Loss)." As of March 31, 2024, we estimate that $ 1 million 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

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

We reported Gains on foreign exchange contracts - acquisition related on the Unaudited Condensed Consolidated Statements of Income of $ 3 million and $ 49 million for the three and nine months ended September 30, 2023, respectively.

We reported Gains on foreign exchange contracts - acquisition related of $ 23 million for the three months ended March 31, 2023.

These contracts were settled in July 2023 resulting in total payments received of $ 49 million.

To manage our foreign currency exposure on other non-functional currency denominated intercompany loans, we entered into short-term foreign currency forward contracts in 2023.

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

The fair values of these short-term derivative instruments were recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets and were not material at September 30, 2023.

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

The fair values of these short-term derivative instruments that remained outstanding as of March 31, 2024 were recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets and were not material at March 31, 2024 and December 31, 2023.

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, 2023 and December 31, 2022, along with the effect on our results of operations during the three and nine months ended September 30, 2023 and 2022, were not material.

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

The notional amount and fair value of these contracts at March 31, 2024 and December 31, 2023, along with the effect on our results of operations during the three months ended March 31, 2024 and 2023, were not material.

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

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 an immaterial decrease to Prepaid expenses and other current assets and Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets at September 30, 2023.

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 on our Unaudited Condensed Consolidated Balance Sheets.

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, 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.

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, 2024, 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 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):

September 30, 2023 December 31, 2022

Interest rate swaps (Level 2) $ 6 $ —

The following table presents 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 as of March 31, 2024 and December 31, 2023 (in millions):

March 31, 2024 December 31, 2023

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Interest rate swaps $ — $ 3 $ — $ 3 $ — $ — $ — $ —

Investments - debt securities 21 — — 21 22 — — 22

Investments - equity securities 5 — — 5 3 — — 3

Total Assets $ 26 $ 3 $ — $ 29 $ 25 $ — $ — $ 25

Contingent consideration liabilities (Level 3) $ 8 $ 7

Interest rate swaps $ — $ — $ — $ — $ — $ 2 $ — $ 2

Contingent consideration liabilities — — 4 4 — — 2 2

Total Liabilities $ — $ — $ 4 $ 4 $ — $ 2 $ 2 $ 4

Investments in debt and equity securities relate to our captive insurance subsidiary and are included in Other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets.

The balance sheet classification of the interest rate swap agreements is presented in Note 13, "Derivative Instruments and Hedging Activities." 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.

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

Based on market conditions as of September 30, 2023, the fair value of the Senior Unsecured Credit Agreement borrowings reasonably approximated the carrying value of $ 1,546 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 September 30, 2023, the fair value of the CAD Note reasonably approximated the carrying value of $ 516 million.

As of September 30, 2023, the fair values of the U.S.

Notes (2028) and U.S.

Notes (2033) were approximately $ 784 million and $ 581 million, respectively, compared to carrying values of $ 800 million and $ 600 million, respectively.

As of September 30, 2023 and December 31, 2022, the fair values of the Euro Notes (2024) were approximately $ 527 million and $ 535 million, respectively, compared to carrying values of $ 529 million and $ 535 million, respectively.

As of September 30, 2023 and December 31, 2022, the fair values of the Euro Notes (2028) were $ 257 million and $ 254 million, respectively, compared to carrying values of $ 264 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 September 30, 2023 and December 31, 2022 to assume these obligations.

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 March 31, 2024 and December 31, 2023 to assume these obligations.

The fair values of the U.S.

Notes (2028), U.S.

Notes (2033), 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.

Notes (2033), Euro Notes (2024), Euro Notes (2028) and Euro Notes (2031) 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.

Based on market conditions as of March 31, 2024 and December 31, 2023, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $ 1,140 million and $ 1,414 million, respectively.

As of March 31, 2024 and December 31, 2023, the fair value of the borrowings under the CAD Note reasonably approximated the carrying values of $ 517 million and $ 529 million, respectively.

The following table provides the carrying and fair value for our other financial instruments as of March 31, 2024 and December 31, 2023 (in millions):

As of March 31, 2024

As of December 31, 2023

Carrying Value Fair Value Carrying Value Fair Value

Notes (2028) $ 800 $ 815 $ 800 $ 820

Notes (2033) 600 624 600 628

Euro Notes (2024) — — 552 552

Euro Notes (2028) 270 271 276 276

Euro Notes (2031) 809 820 — —

Employee Benefit Plans

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

As of September 30, 2023 and December 31, 2022, the aggregate funded status of the defined benefit plans was a net liability of $ 75 million and $ 72 million, respectively, and is reported in Other noncurrent assets, 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 and nine-month periods ended September 30, 2023 and 2022.

As of March 31, 2024 and December 31, 2023, the aggregate funded status of the defined benefit plans was a net liability of $ 80 million and $ 83 million, respectively, and is reported in Other noncurrent assets, 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, 2024 and 2023.

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.

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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, 2023 was 25.9 %, compared to 24.4 % for the nine months ended September 30, 2022.

The increase in the effective tax rate for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is primarily attributable to:

(i) 0.9 % of unfavorable rate effects, including non-deductible transaction costs and negative impacts on foreign tax credit availability caused by Uni-Select related

transaction activity and (ii) geographic distribution of income favoring higher rate jurisdictions in 2023.

Discrete items had similar favorable effects in both years, with a 1 % rate benefit in the prior year, primarily related to the sale of PGW in the second quarter of 2022, and in the current year, primarily related to the Uni-Select Acquisition foreign exchange forward contract gain.

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.

We do not currently expect the corporate minimum tax provisions of the IRA to have a material impact on our financial results.

The impact of the excise tax provisions will be dependent upon the volume of any future stock repurchases.

Our effective income tax rate for the three months ended March 31, 2024 was 30.7 %, compared to 26.1 % for the three months ended March 31, 2023.

The increase in the effective tax rate for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily attributable to the 4.4 % unfavorable impact of discrete items, mostly related to the 2024 Global Restructuring Plan impairments.

Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information on the impairments.

The OECD released a framework, referred to as Pillar Two, to implement a global minimum corporate tax rate of 15 % on certain multinational enterprises.

Certain countries have enacted legislation to adopt the Pillar Two framework while several countries are considering or still announcing changes to their tax laws to implement the minimum tax directive.

While we do not currently estimate Pillar Two to have a material impact on our effective tax rate, our analysis will continue as the OECD continues to release additional guidance and countries implement legislation.

Segment and Geographic Information

We have four operating segments:

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

Wholesale - North America;

and Self Service, each of which is presented as a reportable segment.

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, 2023

Third Party $ 1,387 $ 1,584 $ 456 $ 141 $ — $ 3,568

Intersegment — — 1 — ( 1 ) —

Total segment revenue $ 1,387 $ 1,584 $ 457 $ 141 $ ( 1 ) $ 3,568

Segment EBITDA $ 236 $ 147 $ 40 $ ( 1 ) $ — $ 422

Total depreciation and amortization (1)

34 37 8 5 — 84

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

Total depreciation and amortization (1)

19 34 8 3 — 64

Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Third Party $ 1,500 $ 1,644 $ 422 $ 137 $ — $ 3,703

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49 39 8 4 — 100

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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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 Net Income attributable to LKQ stockholders excluding discontinued operations;

depreciation, amortization;

We calculate Segment EBITDA as Net Income excluding net income and loss attributable to noncontrolling interest;

income and loss from discontinued operations;

depreciation;

amortization;

gains and losses on debt extinguishment;

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impairment charges;

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).

and direct impacts of the Ukraine/Russia conflict and related sanctions.

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

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

2023 2022 2023 2022

Three Months Ended March 31,

Net income $ 158 $ 270

net income attributable to continuing noncontrolling interest — — 1 —

Net income attributable to LKQ stockholders 208 262 759 955

net income from discontinued operations 1 1 1 5

Net income from continuing operations attributable to LKQ stockholders 207 261 758 950

Adjustments - continuing operations attributable to LKQ stockholders:

Depreciation and amortization 100 65

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Provision for income taxes 71 94

Equity in earnings of unconsolidated subsidiaries (1)

( 4 ) ( 2 ) ( 9 ) ( 8 )

Equity in losses (earnings) of unconsolidated subsidiaries (1)

Gains on foreign exchange contracts - acquisition related (2)

( 3 ) — ( 49 ) —

Equity investment fair value adjustments — 1

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Restructuring expenses - cost of goods sold (3)

Gain on disposal of businesses (4)

— ( 4 ) — ( 159 )

Gains on previously held equity interests ( 4 ) ( 2 ) ( 4 ) ( 1 )

Direct impacts of Ukraine/Russia conflict (5)

Segment EBITDA $ 430 $ 456

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(3) Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information.

(4) Refer to "Other Divestitures (Not Classified in Discontinued Operations)" in Note 3, "Discontinued Operations and Divestitures" for further information.

(5) 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,

2023 2022 2023 2022

Three Months Ended March 31,

Capital Expenditures

Wholesale - North America

$ 39 $ 19 $ 75 $ 64

Europe 47 21 103 63

Specialty 4 13

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Receivables, net of allowance for credit losses

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Total assets $ 15,270 $ 15,079

(1) The increase in assets for the Wholesale - North America segment is primarily attributable to the Uni-Select Acquisition.

We report net receivables;

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Unallocated assets include cash and cash equivalents, prepaid expenses and other current and noncurrent assets, goodwill, other intangibles and equity method investments.

Our largest countries of operation are the U.S., followed by Germany and the U.K.

Our largest countries of operation are the U.S., followed by Germany and the United Kingdom ("U.K.").

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

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Long-lived assets

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Total long-lived assets $ 2,807 $ 2,852

Subsequent Event

On October 24, 2023, our Board of Directors declared a quarterly cash dividend of $ 0.30 per share of common stock, payable on November 30, 2023, to stockholders of record at the close of business on November 16, 2023.

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