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Item 1. Financial Statements

2024-10-24 compared with 2024-07-25 · 149 added, 136 removed, 645 unchanged (31% of the section changed)

3 unchanged sentences

(In millions, except per share data)

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

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

2024 2023 2024 2023

12 unchanged sentences

Total other expense, net 58 45 179 67

Income before provision for income taxes 266 389 497 750

Income from continuing operations before provision for income taxes 252 263 749 1,013

Provision for income taxes 63 60 216 263

Equity in earnings of unconsolidated subsidiaries 3 4 3 9

Income from continuing operations 192 207 536 759

Net income from discontinued operations — 1 — 1

Net income 192 208 536 760

net income attributable to noncontrolling interest 1 1 1 1

net income attributable to continuing noncontrolling interest 1 — 2 1

Net income attributable to LKQ stockholders $ 191 $ 208 $ 534 $ 759

Basic earnings per share:

Income from continuing operations $ 0.73 $ 0.77 $ 2.02 $ 2.84

Net income from discontinued operations — 0.01 — —

Net income 0.73 0.78 2.02 2.84

net income attributable to noncontrolling interest — — — —

net income attributable to continuing noncontrolling interest — — — —

Net income attributable to LKQ stockholders $ 0.73 $ 0.78 $ 2.02 $ 2.84

Diluted earnings per share:

Income from continuing operations $ 0.73 $ 0.77 $ 2.02 $ 2.83

Net income from discontinued operations — 0.01 — —

Net income 0.73 0.78 2.02 2.83

net income attributable to noncontrolling interest — — — —

net income attributable to continuing noncontrolling interest — — 0.01 —

Net income attributable to LKQ stockholders $ 0.73 $ 0.78 $ 2.01 $ 2.83

6 unchanged sentences

(In millions)

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

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

2024 2023 2024 2023

Net income $ 192 $ 208 $ 536 $ 760

net income attributable to noncontrolling interest 1 1 1 1

net income attributable to continuing noncontrolling interest 1 — 2 1

Net income attributable to LKQ stockholders 191 208 534 759

2 unchanged sentences

Net change in unrealized gains/losses on cash flow hedges, net of tax ( 4 ) 2 1 ( 5 )

Other comprehensive income from unconsolidated subsidiaries 5 1 — 4

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

Other comprehensive (loss) income from unconsolidated subsidiaries ( 2 ) 8 ( 2 ) 12

Other comprehensive income (loss) 118 ( 137 ) 45 ( 49 )

Comprehensive income 310 71 581 711

comprehensive income attributable to noncontrolling interest 1 1 1 1

comprehensive income attributable to continuing noncontrolling interest 1 — 2 1

Comprehensive income attributable to LKQ stockholders $ 309 $ 71 $ 579 $ 710

3 unchanged sentences

(In millions, except per share data)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

28 unchanged sentences

Stockholders' equity:

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

Common stock, $ 0.01 par value, 1,000.0 shares authorized, 323.6 shares issued and 261.2 shares outstanding at September 30, 2024;

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

3 unchanged sentences

Treasury stock, at cost;

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

62.4 shares at September 30, 2024 and 55.9 shares at December 31, 2023

( 2,706 ) ( 2,424 )

7 unchanged sentences

(In millions)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

14 unchanged sentences

Acquisitions, net of cash acquired ( 46 ) ( 2,199 )

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

Other investing activities, net ( 29 ) ( 6 )

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Net increase in cash, cash equivalents and restricted cash 71 146

Cash and cash equivalents, beginning of period 299 278

Cash and cash equivalents of continuing operations, beginning of period 299 278

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

Cash and cash equivalents of continuing and discontinued operations, beginning of period 299 278

Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period 370 424

Cash, cash equivalents and restricted cash of discontinued operations, end of period — 23

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

$ 301 $ 1,904

Supplemental disclosure of cash paid for:

6 unchanged sentences

(In millions, except per share data)

Three Months Ended June 30, 2024

Three Months Ended September 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

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

Net income — — — — — 191 — 1 192

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

Other comprehensive income — — — — — — 118 — 118

Purchase of treasury stock — — ( 3.0 ) ( 126 ) — — — — ( 126 )

2 unchanged sentences

Dividends declared to LKQ stockholders ($0.30 per share) — — — — — ( 79 ) — — ( 79 )

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

Balance as of September 30, 2024 323.6 $ 3 ( 62.4 ) $ ( 2,706 ) $ 1,548 $ 7,584 $ ( 195 ) $ 16 $ 6,250

Three Months Ended September 30, 2023

LKQ Stockholders

2 unchanged sentences

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

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 income — — — — — — 45 — 45

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

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

1 unchanged sentence

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

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

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

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

2 unchanged sentences

(In millions, except per share data)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

LKQ Stockholders

4 unchanged sentences

Net income — — — — — 534 — 2 536

Other comprehensive loss — — — — — — ( 73 ) — ( 73 )

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

Purchase of treasury stock — — ( 6.5 ) ( 282 ) — — — — ( 282 )

3 unchanged sentences

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

Balance as of September 30, 2024 323.6 $ 3 ( 62.4 ) $ ( 2,706 ) $ 1,548 $ 7,584 $ ( 195 ) $ 16 $ 6,250

Nine Months Ended September 30, 2023

LKQ Stockholders

4 unchanged sentences

Net income — — — — — 759 — 1 760

Other comprehensive income — — — — — — 88 — 88

Other comprehensive loss — — — — — — ( 49 ) — ( 49 )

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

2 unchanged sentences

Dividends declared to LKQ stockholders ($0.825 per share) — — — — — ( 221 ) — — ( 221 )

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

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

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

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Early adoption is permitted.

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

We expect the adoption of this standard will not materially impact our results of operations, financial position or cash flows, but will result in additional disclosures.

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

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Business Combinations

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.

During the nine months ended September 30, 2024, we completed acquisitions of six businesses within our Wholesale - North America segment and two businesses within our Europe segment.

These acquisitions were not material to our financial position or results of operations as of and for the three and nine months ended September 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.

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.

In February 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) (the "Uni-Select Acquisition").

1 unchanged sentence

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 and $ 46 million for the three and six months ended June 30, 2023, respectively.

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, 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.

1 unchanged sentence

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 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.

During the nine months ended September 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.

Unaudited Pro Forma Financial Information

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 following unaudited pro forma financial information presents the effect of the businesses acquired during the nine months ended September 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 June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

Revenue $ 3,585 $ 3,714 $ 11,022 $ 11,382

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 $ 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.

Income from continuing operations 192 201 537 685

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

Refer to Note 9, "Restructuring and Transaction Related Expenses" for further information regarding our acquisition related expenses.

Discontinued Operations

As part of the Uni-Select transaction, we were required to divest its United Kingdom ("U.K.") subsidiary, GSF Car Parts, 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.

In October 2023, we completed the divestment of GSF Car Parts resulting in an immaterial loss on sale.

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 received upon completion of the sale.

This foreign exchange contract was settled in October 2023.

We classify our inventory into the following categories:

1 unchanged sentence

Inventories consist of the following (in millions):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Aftermarket and refurbished products $ 2,576 $ 2,556

3 unchanged sentences

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed 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 September 30, 2024, manufactured products inventory was composed of $ 26 million of raw materials, $ 7 million of work in process, and $ 20 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 $ 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.

Our allowance for credit losses was $ 61 million as of both September 30, 2024 and December 31, 2023.

The provision for credit losses was $ 7 million and $ 1 million for the three months ended September 30, 2024 and 2023 and $ 11 million and $ 7 million for the nine months ended September 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 six 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 nine 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 June 30, 2024

June 30, 2024 December 31, 2023

Segment Ownership as of September 30, 2024

September 30, 2024 December 31, 2023

Europe 26.6 % $ 147 $ 145

Total $ 159 $ 159

(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.

(1) As of September 30, 2024, the Level 1 fair value of our investment in MEKO AB ("Mekonomen") was $ 202 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 June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

11 unchanged sentences

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

Classification June 30, 2024 December 31, 2023

Classification September 30, 2024 December 31, 2023

Return asset Prepaid expenses and other current assets $ 71 $ 68

4 unchanged sentences

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

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

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

2024 2023 2024 2023

15 unchanged sentences

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.

In the second quarter of 2024, we divested our operations in Slovenia.

In the third quarter of 2024, we divested our operations in Poland to Mekonomen, an equity method investment of which we own 26.6 %, which closed in July 2024 and we divested our operations in Bosnia, which closed in September 2024.

Our decision to exit these markets constituted a triggering event to evaluate certain long-lived assets for impairment, and as a result, we incurred impairment charges with the divestiture of Slovenia, Poland, and Bosnia.

This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $ 100 million and $ 120 million.

3 unchanged sentences

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

This plan is scheduled to be substantially complete by the end of 2024 with an estimated total incurred cost of between $ 28 million and $ 32 million.

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

1 LKQ Europe Plan

7 unchanged sentences

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

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

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

Plan Expense Type 2024 2023 2024 2023

2024 Global Plan Employee related costs $ 10 $ — $ 13 $ —

Facility exit costs 4 — 4 —

Inventory related costs (1)

4 unchanged sentences

Facility exit costs 1 2 2 5

Inventory related costs (1)

Other costs — 1 — 3

2 unchanged sentences

Facility exit costs — — 1 —

Inventory related costs (1)

Total $ 1 $ — $ 4 $ 1

13 unchanged sentences

Transaction Related Expenses

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.

During the three months ended September 30, 2024 and 2023, we incurred expenses totaling $ 1 million and $ 3 million, respectively, and during the nine months ended September 30, 2024 and 2023, we incurred expenses totaling $ 3 million and $ 19 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 June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

Net income $ 186 $ 282 $ 344 $ 552

Income from continuing operations $ 192 $ 207 $ 536 $ 759

Denominator for basic earnings per share—Weighted-average shares outstanding 262.3 267.8 264.9 267.6

3 unchanged sentences

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 262.6 268.4 265.3 268.3

Basic earnings per share $ 0.70 $ 1.05 $ 1.29 $ 2.06

Diluted earnings per share (1)

Basic earnings per share from continuing operations $ 0.73 $ 0.77 $ 2.02 $ 2.84

Diluted earnings per share from continuing operations (1)

$ 0.73 $ 0.77 $ 2.02 $ 2.83

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

(1) Diluted earnings per share from continuing operations 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 June 30, 2024

Three Months Ended September 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 April 1, 2024

Balance as of July 1, 2024

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

Pretax (loss) income ( 21 ) 3 — — ( 18 )

Pretax income (loss) 122 ( 4 ) — — 118

Income tax effect — 1 — — 1

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

Reclassification of deferred income taxes — 1 — — 1

Other comprehensive income from unconsolidated subsidiaries — — — 5 5

Balance as of June 30, 2024

Disposal of business 2 — — — 2

Other comprehensive loss from unconsolidated subsidiaries — — — ( 2 ) ( 2 )

Balance as of September 30, 2024

$ ( 197 ) $ ( 10 ) $ 6 $ 6 $ ( 195 )

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

Pretax income 34 14 — — 48

Balance as of July 1, 2023 $ ( 242 ) $ ( 7 ) $ 11 $ 3 $ ( 235 )

Pretax (loss) income ( 147 ) 4 — — ( 143 )

Income tax effect — ( 1 ) — — ( 1 )

1 unchanged sentence

Other comprehensive income from unconsolidated subsidiaries — — — 8 8

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

Six Months Ended June 30, 2024

Balance as of September 30, 2023 $ ( 389 ) $ ( 5 ) $ 11 $ 11 $ ( 372 )

Nine Months Ended September 30, 2024

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

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

Pretax income 44 5 — — 49

Income tax effect — ( 1 ) — — ( 1 )

1 unchanged sentence

Reclassification of deferred income taxes — 1 — — 1

Balance as of June 30, 2024

Disposal of business 2 — — — 2

Other comprehensive loss from unconsolidated subsidiaries — — — ( 2 ) ( 2 )

Balance as of September 30, 2024

$ ( 197 ) $ ( 10 ) $ 6 $ 6 $ ( 195 )

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

Pretax income (loss) 91 ( 8 ) — — 83

Pretax loss ( 56 ) ( 4 ) — — ( 60 )

Income tax effect — 1 — — 1

1 unchanged sentence

Other comprehensive income from unconsolidated subsidiaries — — — 12 12

Balance as of June 30, 2023

Balance as of September 30, 2023

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

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

As of September 30, 2024 and December 31, 2023, we had $ 451 million and $ 411 million of Accounts payable outstanding under the arrangements, respectively.

Long-Term Obligations

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

June 30, 2024

September 30, 2024

December 31, 2023

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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 based on the Company's debt rating and total leverage ratio.

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

44 unchanged sentences

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 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

As of September 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):

September 30, 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

Interest rate swap agreements $ 400 Other accrued expenses $ —

Interest rate swap agreements 300 Other noncurrent liabilities ( 3 )

December 31, 2023

1 unchanged sentence

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 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.

The activity related to our cash flow hedges is included in Note 11, "Accumulated Other Comprehensive Income (Loss)." As of September 30, 2024, we estimate that $ 2 million of derivative losses (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

1 unchanged sentence

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 and $ 46 million for the three and six months ended June 30, 2023, respectively.

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, respectively.

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

1 unchanged sentence

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 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.

The effect on our results of operations for these contracts during the three and nine months ended September 30, 2024 and 2023, were not material.

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

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, 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 June 30, 2024 and December 31, 2023 (in millions):

June 30, 2024 December 31, 2023

September 30, 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 $ 37 $ — $ — $ 37 $ 22 $ — $ — $ 22

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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 June 30,

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 September 30, 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), 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 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

(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 September 30, 2024 and December 31, 2023, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $ 1,213 million and $ 1,414 million, respectively.

As of September 30, 2024 and December 31, 2023, the fair value of the borrowings under the CAD Note reasonably approximated the carrying values of $ 518 million and $ 529 million, respectively.

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

As of September 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 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.

As of September 30, 2024 and December 31, 2023, the aggregate funded status of the defined benefit plans was a net liability of $ 84 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 not material for each of the three and nine months ended September 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 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.

Our effective income tax rate for the nine months ended September 30, 2024 was 28.8 %, compared to 25.9 % for the nine months ended September 30, 2023.

The increase in the effective tax rate for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is primarily attributable to a 2.9 % year over year unfavorable impact of discrete items, mostly related to the unfavorable tax effects of the 2024 Global Restructuring Plan impairments in the current year and the favorable tax effects from the Uni-Select Acquisition foreign exchange forward contract gain in the prior year.

Refer to Note 9, "Restructuring and Transaction Related Expenses" for further information on the impairments and Note 14, "Derivative Instruments and Hedging Activities" for further information on the foreign exchange forward contracts.

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.

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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.

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):

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 353 $ 299

Restricted cash included in Other noncurrent assets (1)

Cash, cash equivalents and restricted cash $ 370 $ 299

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

Segment and Geographic Information

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Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Third Party $ 1,423 $ 1,613 $ 417 $ 131 $ — $ 3,584

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49 39 8 4 — 100

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

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Wholesale - North America Europe Specialty Self Service Eliminations Consolidated

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Third Party $ 4,396 $ 4,896 $ 1,305 $ 401 $ — $ 10,998

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146 118 25 11 — 300

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Third Party $ 3,815 $ 4,777 $ 1,294 $ 479 $ — $ 10,365

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

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

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

2024 2023 2024 2023

Net income $ 192 $ 208 $ 536 $ 760

net income attributable to noncontrolling interest 1 1 1 1

net income attributable to continuing noncontrolling interest 1 — 2 1

Net income attributable to LKQ stockholders 191 208 534 759

net income from discontinued operations — 1 — 1

Net income from continuing operations attributable to LKQ stockholders 191 207 534 758

Depreciation and amortization 100 84 300 219

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Restructuring expenses - cost of goods sold (3)

Gains on previously held equity interests — ( 4 ) — ( 4 )

Segment EBITDA $ 434 $ 422 $ 1,348 $ 1,363

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

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

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

2024 2023 2024 2023

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Receivables, net of allowance for credit losses

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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 United Kingdom ("U.K.").

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

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

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

As a result of the Uni-Select Acquisition, we further expanded our wholesale operations in Canada.

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Long-lived assets

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Total long-lived assets $ 2,955 $ 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.

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