What changed in this filing

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Item 1. Financial Statements

2024-07-25 compared with 2024-04-23 · 224 added, 108 removed, 557 unchanged (37% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended March 31,

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

2024 2023 2024 2023

Revenue $ 3,711 $ 3,448 $ 7,414 $ 6,797

8 unchanged sentences

Gains on foreign exchange contracts - acquisition related (1)

— ( 23 ) — ( 46 )

Interest income and other income, net ( 3 ) ( 11 ) ( 9 ) ( 20 )

2 unchanged sentences

Provision for income taxes 82 109 153 203

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

Equity in earnings of unconsolidated subsidiaries 2 2 — 5

Net income 186 282 344 552

Earnings per share:

Basic $ 0.59 $ 1.01

Diluted $ 0.59 $ 1.01

net income attributable to noncontrolling interest 1 1 1 1

Net income attributable to LKQ stockholders $ 185 $ 281 $ 343 $ 551

Basic earnings per share:

Net income $ 0.70 $ 1.05 $ 1.29 $ 2.06

net income attributable to noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.70 $ 1.05 $ 1.29 $ 2.06

Diluted earnings per share:

Net income $ 0.70 $ 1.05 $ 1.29 $ 2.06

net income attributable to noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.70 $ 1.05 $ 1.29 $ 2.06

(1) Related to the Uni-Select Inc.

5 unchanged sentences

(In millions)

Three Months Ended March 31,

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

2024 2023 2024 2023

Net income $ 186 $ 282 $ 344 $ 552

net income attributable to noncontrolling interest 1 1 1 1

Net income attributable to LKQ stockholders 185 281 343 551

Other comprehensive income (loss):

1 unchanged sentence

Net change in unrealized gains/losses on cash flow hedges, net of tax 1 10 5 ( 7 )

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

Other comprehensive income from unconsolidated subsidiaries 5 1 — 4

Other comprehensive (loss) income ( 15 ) 45 ( 73 ) 88

Comprehensive income 171 327 271 640

comprehensive income attributable to noncontrolling interest 1 1 1 1

Comprehensive income attributable to LKQ stockholders $ 170 $ 326 $ 270 $ 639

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

2 unchanged sentences

(In millions, except per share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets:

28 unchanged sentences

Stockholders' equity:

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

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 323.6 shares issued and 264.2 shares outstanding at June 30, 2024;

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

3 unchanged sentences

Treasury stock, at cost;

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

59.4 shares at June 30, 2024 and 55.9 shares at December 31, 2023

( 2,580 ) ( 2,424 )

7 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

18 unchanged sentences

Debt issuance costs ( 7 ) ( 30 )

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 —

3 unchanged sentences

Borrowings under term loans — 500

Borrowings of other debt, net 33 1

Repayments of other debt, net ( 16 ) ( 16 )

Settlement of derivative instruments 3 ( 13 )

Dividends paid to LKQ stockholders ( 161 ) ( 148 )

1 unchanged sentence

Other financing activities, net ( 36 ) ( 6 )

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

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

Net increase in cash and cash equivalents 45 64

Net cash (used in) provided by financing activities ( 276 ) 1,099

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 10 ) 9

Net increase in cash, cash equivalents and restricted cash 2 1,626

Cash and cash equivalents, beginning of period 299 278

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

Cash, cash equivalents and restricted cash, end of period (1)

$ 301 $ 1,904

Supplemental disclosure of cash paid for:

1 unchanged sentence

Interest 122 67

(1) Refer to Note 18, "Cash, Cash Equivalents and Restricted Cash" for further information on restricted cash.

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

2 unchanged sentences

(In millions, except per share data)

Three Months Ended June 30, 2024

LKQ Stockholders

2 unchanged sentences

Shares Amount Shares Amount

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

Net income — — — — — 185 — 1 186

Other comprehensive loss — — — — — — ( 15 ) — ( 15 )

Purchase of treasury stock — — ( 2.9 ) ( 126 ) — — — — ( 126 )

Vesting of restricted stock units, net of shares withheld for employee tax 0.1 — — — ( 1 ) — — — ( 1 )

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

Dividends declared to LKQ stockholders ($0.30 per share) — — — — — ( 80 ) — — ( 80 )

Purchase of noncontrolling interest — — — — ( 1 ) — — — ( 1 )

Balance as of June 30, 2024 323.6 $ 3 ( 59.4 ) $ ( 2,580 ) $ 1,547 $ 7,472 $ ( 313 ) $ 15 $ 6,144

Three Months Ended June 30, 2023

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 April 1, 2023 322.8 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,510 $ 6,852 $ ( 280 ) $ 14 $ 5,705

Net income — — — — — 281 — 1 282

Other comprehensive income — — — — — — 45 — 45

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

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

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

Balance as of June 30, 2023 322.9 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,520 $ 7,059 $ ( 235 ) $ 15 $ 5,968

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)

Six Months Ended June 30, 2024

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 ($0.60 per share) — — — — — ( 161 ) — — ( 161 )

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

Purchase of noncontrolling interest — — — — ( 1 ) — — — ( 1 )

Balance as of June 30, 2024 323.6 $ 3 ( 59.4 ) $ ( 2,580 ) $ 1,547 $ 7,472 $ ( 313 ) $ 15 $ 6,144

Six Months Ended June 30, 2023

LKQ Stockholders

9 unchanged sentences

Dividends declared to LKQ stockholders ($0.55 per share) — — — — — ( 148 ) — — ( 148 )

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

Balance as of June 30, 2023 322.9 $ 3 ( 55.2 ) $ ( 2,394 ) $ 1,520 $ 7,059 $ ( 235 ) $ 15 $ 5,968

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

21 unchanged sentences

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.

Improvements to Reportable Segment Disclosures." The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("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.

3 unchanged sentences

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.

Improvements to Income Tax Disclosures." 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.

2 unchanged sentences

Business Combinations

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.

During the six months ended June 30, 2024, we completed acquisitions of five businesses 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 and six months ended June 30, 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.

1 unchanged sentence

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).

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) (the "Uni-Select Acquisition").

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.

We reported Gains on foreign exchange contracts - acquisition related of $ 23 million and $ 46 million for the three and six months ended June 30, 2023, respectively.

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.

2 unchanged sentences

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;

2) valuation amounts for certain intangible assets acquired;

3) the acquisition date fair value of certain liabilities assumed;

and 4) the tax basis of the entities acquired.

During the six months ended June 30, 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 acquisition date fair value of certain liabilities assumed and the tax basis of the entities acquired.

Unaudited Pro Forma Financial Information

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 following unaudited pro forma financial information presents the effect of the businesses acquired during the six months ended June 30, 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.

2 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Revenue $ 3,715 $ 3,889 $ 7,425 $ 7,655

Net income 186 250 344 485

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.

The pro forma impact of our acquisitions also reflects the elimination of acquisition related expenses (net of tax) of $ 5 million and $ 15 million for the three and six months ended June 30, 2023, respectively, and gains on foreign exchange contracts - acquisition related of $ 23 million and $ 46 million for the three and six months ended June 30, 2023, respectively.

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

2 unchanged sentences

Inventories consist of the following (in millions):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Aftermarket and refurbished products $ 2,503 $ 2,556

3 unchanged sentences

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed 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 June 30, 2024, manufactured products inventory was composed of $ 24 million of raw materials, $ 7 million of work in process, and $ 21 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.

Allowance for Credit Losses

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.

Our allowance for credit losses was $ 55 million and $ 61 million as of June 30, 2024 and December 31, 2023, respectively.

The provision for credit losses was $ 1 million for both the three months ended June 30, 2024 and 2023 and $ 4 million and $ 6 million for the six months ended June 30, 2024 and 2023, respectively.

Intangible Assets

3 unchanged sentences

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

We did not identify any indicators of impairment in the first three months of 2024 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

We did not identify any indicators of impairment in the first six months of 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 March 31, 2024

March 31, 2024 December 31, 2023

Segment Ownership as of June 30, 2024

June 30, 2024 December 31, 2023

Europe 26.6 % $ 144 $ 145

Total $ 157 $ 159

(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.

(1) As of June 30, 2024, the Level 1 fair value of our investment in MEKO AB ("Mekonomen") was $ 167 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;

26 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Wholesale - North America $ 1,398 $ 1,121 $ 2,820 $ 2,269

4 unchanged sentences

Wholesale - North America 75 78 153 159

Europe 6 5 13 12

Self Service 78 106 161 215

3 unchanged sentences

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

Classification March 31, 2024 December 31, 2023

Classification June 30, 2024 December 31, 2023

Return asset Prepaid expenses and other current assets $ 70 $ 68

4 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

United States $ 1,769 $ 1,690 $ 3,564 $ 3,371

8 unchanged sentences

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 initiative includes exiting businesses and markets that do not align with our strategic objectives and executing on opportunities to reduce costs, streamline operations and consolidate facilities.

As we move forward with our plan, we will incur impairments and other charges related to the disposal of long-lived assets, inventory, and other assets;

costs for employee severance;

lease termination charges and facility closure costs;

and other contract termination charges.

We expect that the largest portion of the activity will come from the Europe segment.

In the second quarter of 2024, we entered into agreements to divest our operations in Slovenia, which closed in April 2024;

Bosnia, which we expect to close in the second half of 2024 subject to customary closing conditions and regulatory approval;

and Poland, which we expect to close in the third quarter of 2024 subject to customary closing conditions.

Our operations in Poland will be sold to Mekonomen, an equity method investment of which we own 26.6 %.

In connection with entering into the Bosnia and Poland agreements, we concluded that these disposal groups met the held for sale criteria and classified their assets and liabilities as held for sale.

As of June 30, 2024, total assets and liabilities of the combined disposal groups held for sale were $ 46 million and $ 46 million, recorded to Prepaid expenses and other current assets and Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets, respectively.

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 with the divestiture of Slovenia and as we move forward with plans to exit Bosnia, Poland and any other identified markets.

This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $ 80 million and $ 100 million.

11 unchanged sentences

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 $ 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.

We expect to incur additional expenses of approximately $ 5 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 March 31,

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

Plan Expense Type 2024 2023 2024 2023

2024 Global Plan Inventory related costs (1)

2024 Global Plan Employee related costs $ 3 $ — $ 3 $ —

Inventory related costs (1)

Asset impairments (2)

22 unchanged sentences

Transaction Related Expenses

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.

During the three months ended June 30, 2024 and 2023, we incurred expenses totaling an insignificant amount and $ 6 million, respectively, and during the six months ended June 30, 2024 and 2023 we incurred expenses totaling $ 2 million and $ 16 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 March 31,

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

2024 2023 2024 2023

Net income $ 186 $ 282 $ 344 $ 552

10 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 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 January 1, 2024

Balance as of April 1, 2024

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

2 unchanged sentences

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

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

Balance as of March 31, 2024

Reclassification of deferred income taxes — 1 — — 1

Other comprehensive income from unconsolidated subsidiaries — — — 5 5

Balance as of June 30, 2024

$ ( 321 ) $ ( 6 ) $ 6 $ 8 $ ( 313 )

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Balance as of April 1, 2023 $ ( 276 ) $ ( 17 ) $ 11 $ 2 $ ( 280 )

Pretax income 34 14 — — 48

Income tax effect — ( 3 ) — — ( 3 )

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

Other comprehensive income from unconsolidated subsidiaries — — — 1 1

Balance as of June 30, 2023 $ ( 242 ) $ ( 7 ) $ 11 $ 3 $ ( 235 )

Six Months Ended June 30, 2024

Balance as of January 1, 2024 $ ( 243 ) $ ( 11 ) $ 6 $ 8 $ ( 240 )

Pretax (loss) income ( 78 ) 9 — — ( 69 )

Income tax effect — ( 2 ) — — ( 2 )

Reclassification of unrealized gain — ( 3 ) — — ( 3 )

Reclassification of deferred income taxes — 1 — — 1

Balance as of June 30, 2024

$ ( 321 ) $ ( 6 ) $ 6 $ 8 $ ( 313 )

Six Months Ended June 30, 2023

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

Pretax income (loss) 91 ( 8 ) — — 83

Income tax effect — 2 — — 2

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

Other comprehensive income from unconsolidated subsidiaries — — — 4 4

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

Balance as of June 30, 2023

$ ( 242 ) $ ( 7 ) $ 11 $ 3 $ ( 235 )

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.

5 unchanged sentences

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

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

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 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.

As of June 30, 2024 and December 31, 2023, we had $ 445 million and $ 411 million of Accounts payable outstanding under the arrangements, respectively.

Long-Term Obligations

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

March 31, 2024

June 30, 2024

December 31, 2023

17 unchanged sentences

Other debt 5.66 % (1)

48 2.16 % (1)

Total debt 4,334 4,281

long-term debt issuance costs and unamortized bond discount ( 38 ) ( 30 )

Total debt, net of debt issuance costs and unamortized bond discount 4,249 4,251

long-term debt issuance costs and unamortized bond discounts ( 37 ) ( 30 )

Total debt, net of debt issuance costs and unamortized bond discounts 4,297 4,251

current maturities, net of debt issuance costs ( 44 ) ( 596 )

Long term debt, net of debt issuance costs and unamortized bond discount $ 4,161 $ 3,655

Long term debt, net of debt issuance costs and unamortized bond discounts $ 4,253 $ 3,655

(1) Interest rate derived via a weighted average

4 unchanged sentences

"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.

On June 5, 2024, we entered into Amendment No.

1 to the Senior Unsecured Credit Agreement which replaced the Canadian Dollar Offer Rate ("CDOR") with the Canadian Overnight Repo Rate Average ("CORRA") for CAD denominated borrowings.

Senior Unsecured Term Loan Credit Agreement

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.

On June 12, 2024, we entered into Amendment No.

1 to the CAD Note which replaced CDOR with CORRA.

The variable interest rate applicable to the CAD Note may be (i) a forward-looking term rate based on CORRA 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 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)”).

On March 13, 2024, LKQ, 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.

11 unchanged sentences

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.

In April 2024, 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.

(f/k/a LKQ Italia Bondco S.p.A.), 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.

10 unchanged sentences

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

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

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

interest payments affect earnings.

The activity related to the interest rate swaps is classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows as the activity relates to normal recurring settlements to match interest payments.

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

As of March 31, 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

As of June 30, 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):

June 30, 2024

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

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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.

The activity related to our cash flow hedges is included in Note 10, "Accumulated Other Comprehensive Income (Loss)." As of June 30, 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 of $ 23 million for the three months ended March 31, 2023.

We reported Gains on foreign exchange contracts - acquisition related of $ 23 million and $ 46 million for the three and six months ended June 30, 2023, respectively.

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.

To manage our foreign currency exposure on other non-functional currency denominated intercompany loans, we enter into short-term foreign currency forward contracts from time to time.

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.

The fair values of these short-term derivative instruments that remained outstanding as of June 30, 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 June 30, 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 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 notional amount and fair value of these contracts at June 30, 2024 and December 31, 2023, along with the effect on our results of operations during the three and six months ended June 30, 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.

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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.

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 March 31, 2024 and December 31, 2023.

Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three 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.

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and six months ended June 30, 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 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

June 30, 2024 December 31, 2023

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

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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.

We estimated the fair value by calculating the upfront cash payment a market participant would require at June 30,

2024 and December 31, 2023 to assume these obligations.

The fair values of the U.S.

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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

Based on market conditions as of June 30, 2024 and December 31, 2023, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $ 1,234 million and $ 1,414 million, respectively.

As of June 30, 2024 and December 31, 2023, the fair value of the borrowings under the CAD Note reasonably approximated the carrying values of $ 512 million and $ 529 million, respectively.

The following table provides the carrying and fair value for our other financial instruments as of June 30, 2024 and December 31, 2023 (in millions):

As of June 30, 2024

As of December 31, 2023

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

As of March 31, 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.

As of June 30, 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 and six months ended June 30, 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 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.

Our effective income tax rate for the six months ended June 30, 2024 was 30.8 %, compared to 27.1 % for the six months ended June 30, 2023.

The increase in the effective tax rate for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily attributable to the 3.9 % 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.

The Organisation for Economic Co-operation and Development ("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.

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Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Third Party $ 1,473 $ 1,639 $ 466 $ 133 $ — $ 3,711

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48 40 9 3 — 100

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Third Party $ 1,199 $ 1,638 $ 442 $ 169 $ — $ 3,448

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20 39 8 3 — 70

Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Six Months Ended June 30, 2024

Third Party $ 2,973 $ 3,283 $ 888 $ 270 $ — $ 7,414

Intersegment 1 — 1 — ( 2 ) —

Total segment revenue $ 2,974 $ 3,283 $ 889 $ 270 $ ( 2 ) $ 7,414

Segment EBITDA $ 500 $ 317 $ 68 $ 29 $ — $ 914

Total depreciation and amortization (1)

97 79 17 7 — 200

Six Months Ended June 30, 2023

Third Party $ 2,428 $ 3,193 $ 838 $ 338 $ — $ 6,797

Intersegment — — 2 — ( 2 ) —

Total segment revenue $ 2,428 $ 3,193 $ 840 $ 338 $ ( 2 ) $ 6,797

Segment EBITDA $ 500 $ 339 $ 73 $ 29 $ — $ 941

Total depreciation and amortization (1)

39 73 16 7 — 135

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

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

The key measure of segment profit or loss reviewed by our CODM, our Chief Executive Officer, is Segment EBITDA.

We use Segment EBITDA to compare profitability among the segments and evaluate business strategies.

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income tax expense;

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

restructuring and transaction related expenses;

change in fair value of contingent consideration liabilities;

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impairment charges;

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

and direct impacts of the Ukraine/Russia conflict.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Net income $ 186 $ 282 $ 344 $ 552

net income attributable to noncontrolling interest 1 1 1 1

Net income attributable to LKQ stockholders 185 281 343 551

Depreciation and amortization 100 70 200 135

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Provision for income taxes 82 109 153 203

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

Equity in earnings of unconsolidated subsidiaries (1)

( 2 ) ( 2 ) — ( 5 )

Gains on foreign exchange contracts - acquisition related (2)

— ( 23 ) — ( 46 )

Equity investment fair value adjustments 2 — 2 1

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Capital Expenditures

Wholesale - North America

$ 52 $ 16 $ 73 $ 36

Europe 20 23 58 56

Specialty 5 5 9 18

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Receivables, net of allowance for credit losses

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net property, plant and equipment;

and net operating lease assets by segment as that information is used by the chief operating decision maker in assessing segment performance.

and net operating lease assets by segment as that information is used by the CODM in assessing segment performance.

These assets provide a measure for the operating capital employed in each segment.

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Long-lived assets

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Total long-lived assets $ 2,873 $ 2,852

Cash, Cash Equivalents and Restricted Cash

Our policy is to reclassify from Cash and cash equivalents any cash that is legally or contractually restricted as to withdrawal or usage.

The following table provides a reconciliation of Cash and cash equivalents as reported in the unaudited condensed consolidated balance sheets to Cash, cash equivalents and restricted cash shown in the unaudited condensed consolidated statements of cash flows (in millions):

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 276 $ 299

Restricted cash included in Other noncurrent assets (1)

Cash, cash equivalents and restricted cash $ 301 $ 299

(1) Represents cash held with our captive insurance subsidiary for payments on self-insured claims.

This amount was largely invested into debt and equity securities in July 2024.

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