What changed in this filing

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Item 1. Business

2025-02-20 compared with 2024-02-22 · 92 added, 181 removed, 188 unchanged (59% of the section changed)

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Collectively, we refer to the four sources that are not new OEM products as alternative parts.

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada.

Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the United Kingdom ("U.K."), the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries.

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related body repair products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada.

Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S.

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that sell recycled automotive products from end-of-life-vehicles.

In 2023, we acquired Uni-Select Inc.

("Uni-Select"), a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster business and a leading distributor of automotive maintenance parts and accessories serving the Canadian market through its Canadian Automotive Group business.

This acquisition complemented our existing North American paint distribution operations and provided a scaled position in the Canadian replacement and maintenance parts market, with opportunity for future consolidation and growth.

We are organized into four operating segments:

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See Note 25, "Segment and Geographic Information" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for financial information by reportable segment and by geographic region.

We were initially formed in 1998 through the combination of a number of wholesale recycled products businesses and subsequently expanded through internal development and acquisitions of aftermarket, recycled, refurbished, and remanufactured product suppliers and manufacturers;

self service retail businesses;

and specialty vehicle aftermarket equipment and accessories suppliers.

We have completed approximately 300 business acquisitions.

Our most significant acquisitions include:

• 2007 acquisition of Keystone Automotive Industries, Inc., which, at the time of acquisition, was the leading domestic distributor of aftermarket products, including collision replacement products, paint products, refurbished steel bumpers, bumper covers and alloy wheels.

• 2011 acquisition of Euro Car Parts Holdings Limited, a vehicle mechanical aftermarket parts distribution company operating in the U.K.

This acquisition served as our entry into the European automotive aftermarket business, from which we have expanded our European footprint through organic growth and subsequent acquisitions.

• 2013 acquisition of Sator Beheer B.V.

(now known as Fource), a vehicle mechanical aftermarket parts distribution company based in the Netherlands, with operations in the Netherlands, Belgium and France.

This acquisition allowed us to further expand our geographic presence into continental Europe.

• 2014 acquisition of Keystone Automotive Holdings, Inc., which expanded our product offering and increased our addressable market to include specialty vehicle aftermarket equipment and accessories.

• 2016 acquisition of Rhiag-Inter Auto Parts Italia S.r.l., a distributor of aftermarket spare parts for passenger cars and commercial vehicles in Italy, Czech Republic, Slovakia, Switzerland, Hungary, Romania, Ukraine, Bulgaria, Poland and Spain.

This acquisition expanded our geographic presence in continental Europe.

• 2018 acquisition of Stahlgruber GmbH ("Stahlgruber"), a wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, Austria, Italy, Slovenia, and Croatia, with further sales to Switzerland.

This acquisition expanded our geographic presence in continental Europe and serves as an additional strategic hub for our European operations.

• 2023 acquisition of Uni-Select Inc.

("Uni-Select"), a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster business and a leading distributor of automotive parts and accessories serving the Canadian market through its Canadian Automotive Group business.

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

Since 2017, we have divested certain businesses due to the ongoing rationalization of our asset base by divesting certain non-core and/or lower margin businesses, and mandatory divestiture requirements due to certain acquisitions.

Three of these divestitures have been reported as discontinued operations.

Our mission is to be the leading global value-added and sustainable distributor of vehicle parts and accessories by offering our customers the most comprehensive, available and cost-effective selection of parts and service solutions while building strong partnerships with our employees and the communities in which we operate.

From 1998 to 2018, the Company focused on consolidating the alternative and specialty vehicle parts markets to develop scale across an extensive network of salvage and aftermarket facilities throughout North America and on building a pan-European aftermarket parts distributor in the large, fragmented European market.

This focus created a leading distributor of alternative collision and mechanical parts and a provider of vehicle diagnostics services in North America, a leading distributor of specialty vehicle parts and accessories for automotive, marine and recreational vehicles ("RV") in North America, a leading distributor of

aftermarket mechanical parts in Europe, and a leading self service yard operator that offers high quality older and lower cost salvage vehicle parts to a broad set of do-it-yourself and do-it-for-me customers across a network of locations in the U.S.

Beginning in 2019, we expanded our strategy to include a focus on driving higher levels of free cash flow, profitable growth, enhanced margins, and talent development through our operational excellence initiatives.

In our Europe segment, we are implementing a multi-year business transformation by establishing a Pan-European organization and operating model.

The purpose of this multi-year "1 LKQ Europe" plan is to create one single operation by integrating the various acquisitions the Company has completed across the European continent since entering the market in 2011.

This plan will leverage the full potential of our leading European scale position as a single entity in areas such as procurement, logistics, product strategy, revenue optimization, digitization, and value-added services for our customers.

We have four primary strategic pillars to build economic value:

growing our diversified product and service offerings;

expanding our geographic footprint;

adapting to evolving technology;

and rationalizing our asset base.

We believe our extensive distribution network, with a deep and broad inventory of quality collision and mechanical repair products and specialty vehicle aftermarket products, high fulfillment rates, delivery reliability, and superior customer service, provide us with competitive advantages.

To execute our strategy, we focus on a number of key areas, including:

• Leading distribution network .

We have invested significant capital to develop an extensive network of facilities across the geographies we serve in our operating segments.

On a global basis, we operate approximately 1,650 facilities.

Our ability to move inventory throughout our distribution networks increases the availability of our products and allows us to fill a higher percentage of our customers’ requests.

In order to expand our distribution network, we may seek to enter new markets through geographic expansion, organic development, or acquisitions that target high synergies and/or add critical capabilities.

• Broad product and service offerings .

The breadth and depth of our inventory across our operating segments reinforces our ability to provide a "one-stop" solution for our customers’ alternative parts, specialty vehicle products and vehicle services needs.

• High fulfillment rates.

We manage our inventory to optimize stocking levels in each of our operating segments.

Maintaining industry leading fill rates, coupled with best-in-class service levels, is critical to our customers' productivity and their focus on reducing cycle time for repairs.

• Strong business relationships.

We have developed business relationships with key constituents, including customers, vehicle insurance companies, multiple-location vehicle collision and mechanical repair operations, vendor partners and other industry participants in North America, Europe, and Asia.

We monitor the start-up and venture capital landscape to develop business relationships and enhance our portfolio of potential offerings.

• Technology driven business processes.

We focus on technology development to expand our competitive advantage.

We have built data analytics capabilities and data assets and believe that we can more cost effectively leverage our data to make better business decisions than most of our competitors.

Leveraging our data and market position, we utilize artificial intelligence ("AI") to make more accurate purchase decisions for our salvage business, therefore allowing us to better control our inventory.

We continue to look for and invest in opportunities to further leverage AI, machine learning and neural networks for more effective procurement methods.

• Adaptation to evolving technology in the vehicle industry .

We are committed to monitoring and adapting our business to the technological changes in the vehicle industry.

We have a forward-looking strategy and innovation team that helps us monitor megatrends and assess the potential opportunities and risks associated with several areas including, but not limited to, electric vehicles, advanced driver assistance systems, vehicle connectivity, autonomous vehicles, e-commerce and ride-sharing trends.

• Rationalized asset base .

We have a portfolio review process to continually analyze and execute on initiatives to reduce our operating costs and drive efficiencies, including brand rationalization, rightsizing efforts, and productivity initiatives with the underlying focus to drive higher levels of margins.

• Sustainability .

We are focused on driving our Sustainability strategy and message to multiple stakeholders, both internally and externally.

Our Sustainability strategy is focused on creating an inclusive culture, engaging with our employees and suppliers, tracking and reducing our carbon footprint, and supporting the communities in which we operate.

• Employees and communities.

We focus on employees and communities through continuous improvement in our social initiatives.

Our top priority is the health and safety of our employees, customers and communities in which we operate.

We measure our progress toward achieving our strategic goals based on our performance with respect to the following key priorities:

free cash flow, profitable growth, enhanced margins, and talent development.

We have implemented various improvement plans to enhance our operational efficiencies and actively monitor these and other important operating metrics.

To achieve this mission, our strategy focuses on executing three key initiatives:

Capitalizing on profitable growth opportunities

We are dedicated to building competitive advantages and maintaining our leadership positions in the markets in which we operate.

We focus on driving profitable growth and increasing free cash flow while maintaining a strong balance sheet.

We foster an entrepreneurial and employee-centric culture that enables agility and innovation, empowering our businesses to succeed in the markets they serve.

To continuously enhance the quality of our portfolio, our growth strategy is driven by organic investments in automation, productivity improvements, talent development, and strategic acquisitions.

Expanding our lean operating model

We are committed to generating sustainable returns on invested capital by driving operational excellence and lean management across our businesses.

We continuously evaluate and pursue opportunities to improve efficiency, margins and returns on invested capital.

Through targeted productivity initiatives and a disciplined approach to cost management, we drive performance across key metrics, such as free cash flow generation, organic growth and profit margins.

Our current initiatives include optimizing working capital through expansion of our vendor financing program, enhancing margins through our inventory optimization efforts and reducing selling, general and administrative costs through streamlining our footprint and reducing complexity across our business.

Disciplined capital allocation and portfolio simplification

We are focused on maximizing return on investment though efficient allocation of capital.

We seek to deploy capital for acquisitions in attractive growth areas.

We apply strict criteria, targeting accretive tuck-in acquisition opportunities with high synergies that align with the core businesses in our strategic framework.

We proactively divest businesses that no longer align with our strategic vision, financial objectives or have limited long-term value potential, as demonstrated by our divestment of certain of our operations in Poland in 2024.

Finally, we maintain a prudent and disciplined financial policy that prioritizes returning cash to shareholders through dividends and share repurchases, while maintaining our investment grade credit rating.

WHOLESALE - NORTH AMERICA SEGMENT

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We expect these areas, as well as our overall product and service offerings, to grow in the coming years as the number of technological comp onents in vehicles increases.

Most recently, we acquired Uni-Select, including Canadian Automotive Group, a leading distributor of automotive parts and accessories serving the Canadian market, providing an entry to the Canadian mechanical parts space;

and FinishMaster, a leading distributor of paint and related products and supplies, which expands our existing North American paint business.

Our aftermarket products encompass items commonly prone to damage in a collision, including bumper covers, automotive body panels, and lights.

In August 2023, we acquired Uni-Select, including Canadian Automotive Group, a leading distributor of automotive parts and accessories serving the Canadian market, which provided entry to the Canadian mechanical parts space;

and FinishMaster, a leading distributor of paint and related products and supplies, which expanded our existing North American paint business, collectively now branded as LKQ Refinish.

Our aftermarket products encompass items commonly prone to damage in a collision, including bumper covers, automotive body panels, and lights, as well as paint and paint related consumables for refinishing vehicles.

Additionally, through the acquisition of Canadian Automotive Group, we have broadened our product offerings to include a range of mechanical automotive parts and accessories.

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The aftermarket products we distribute are purchased from independent manufacturers and distributors located primarily in North America and Asia, principally Taiwan.

In 2023, approximately 51% of our aftermarket purchases were made from our top seven vendors, with our largest vendor providing approximately 12% of our annual inventory purchases for the Wholesale - North America segment.

In 2024, approximately 49% of our aftermarket purchases were made from our top six vendors, with our largest vendor providing approximately 19% of our annual inventory purchases for the Wholesale - North America segment.

This is primarily related to our acquisition of FinishMaster, where we obtained a strategic relationship with a supplier for paint and related products.

This partnership will continue to play a key role in the expansion of our offerings for paint and related products.

We believe we are one of the largest customers of each of these suppliers.

Through the acquisition of FinishMaster, we obtained a strategic relationship with a supplier for paint and related products.

This partnership will play a key role in the expansion of our offerings for paint and related products.

Outside of this group, no other supplier provided more than 4% of our supply of aftermarket products in 2024.

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Our bidding specialists are equipped with a proprietary software application that allows them to compare the vehicles at salvage auctions against our current inventory levels, historical demand, and recent average selling prices to arrive at an estimated maximum bid.

Additionally, we have embedded AI technology into

our salvage procurement software to assist in the procurement decision making process, reducing the amount of labor and human error in the process.

Scrap and Other Materials

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we compete with OEMs primarily on the basis of price and, to a lesser extent, on service and product quality.

In the U.S., we do not consider retail chains that focus on the do-it-yourself market to be our direct competitors because many of our wholesale product sales are influenced by

insurance companies, who ultimately pay for the repair costs of insured vehicles in excess of any deductible amount, rather than the end user, and there is limited overlap in the products that we sell.

In the U.S., we do not consider retail chains that focus on the do-it-yourself market to be our direct competitors because many of our wholesale product sales are influenced by insurance companies, who ultimately pay for the repair costs of insured vehicles in excess of any deductible amount, rather than the end user, and there is limited overlap in the products that we sell.

Information Technology Systems

In our aftermarket operations, we use a third party enterprise management system along with other third party software packages to enhance our online business-to-business platforms - OrderKeystone.com and Keyless.

The recently acquired FinishMaster business will integrate onto our aftermarket systems, while Canadian Automotive Group will remain on its existing, separate, enterprise management system.

The FinishMaster business (now included within LKQ Refinish) was fully integrated onto our aftermarket systems in 2024, while Canadian Automotive Group remains on its existing, separate, enterprise management system.

Our wholesale recycled product locations in North America operate an internally-developed, proprietary enterprise management system called LKQX.

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EUROPE SEGMENT

Our Europe segment operates in over 20 countries and was built up through a series of acquisitions.

Our businesses consist primarily of aftermarket operations, but we have begun expanding into wholesale recycling operations through the acquisition of businesses with salvage and vehicle repair facilities in Sweden and Norway in 2014, remanufacturing in Tunisia in 2018, and salvage in the Netherlands and Poland in 2023.

Our European strategy, facilitated through our 1 LKQ Europe plan, is to leverage the strengths of acquired businesses, reduce procurement costs by consolidating and streamlining our product offerings, and combine into an integrated organization driving for functional excellence with the necessary technology linking our business processes with our customers and suppliers.

As part of our 1 LKQ Europe plan, we are integrating our European operations in order to optimize purchasing, warehousing, systems, logistics and back-office functions, and aligning our private label products across the segment.

This integration includes product line rationalization, and w e have phased out or replaced more t han 150 product lines in recent years.

We are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common Enterprise Resource Planning ("ERP") platform, changes to ways of working, further rationalization of our product portfolio, and creation of European headquarters and central back offices.

We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2027.

Our Europe segment operates in approximately 20 countries and was built up through a series of acquisitions.

We divested certain operations in Slovenia, Poland and Bosnia in 2024 as these operations did not align with our strategic objectives.

Our inventory is primarily composed of mechanical aftermarket parts for the repair of vehicles 3 to 15 years old.

Our top selling products include brake pads, discs and sensors, clutches, electrical products such as spark plugs and batteries, steering and suspension products, filters, and oil and automotive fluids.

We currently have over 900,000 uniq ue part numbers.

Our continuing goal is to reduce the complexity of our product portfolio, reduce the number of parts offered and reduce the number of suppliers.

In addition to the rationalization actions already taken, up to 80% of our current product portfolio is being reviewed for possible reduction.

Our inventory is comprised of over 900,000 SKU's , of which, parts related to common passenger vehicles represents the largest group.

We are committed to simplifying our business by optimizing our product offerings.

Our current efforts are focused on evaluating the product mix and market demand for common passenger vehicles parts to identify opportunities for streamlining - including reducing the number of SKU's offered, consolidating suppliers and increasing private label penetration.

This evaluation is over halfway complete, with a target of reaching 80% by the end of 2025.

Implementation actions are planned for 2025 through 2027.

In 2024, our top supplier represented 9% of our aftermarket inventory purchases for our Europe segment.

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Further, we purchased 91% of our products from companies in Europe, and 73% and 18% of our total inventory purchases were made in euros and pounds sterling, respectively, in 2024.

As part of our 1 LKQ Europe initiatives, we are expanding the distribution of our private label products.

Our key strategic private labels are Optimal, ERA and MPM Oils.

We are expanding the distribution of our private label products, which include Optimal, ERA and MPM Oils.

In our salvage operations, we purchase severely damaged or total loss vehicles from insurance companies and auctions, which are transferred to our dismantling facilities or sold to other third party dismantlers.

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In addition to our sales to repair shops and wholesale distributors, we generate a portion of our revenue through sales to retail customers from e-commerce platforms and from point of sale transactions at branch locations.

We currently have operations in over 20 different European countries, which we believe represents the broadest and largest footprint in the aftermarket industry in Europe with a distribution network larger than those of any of our principal competitors.

We currently have operations in approximately 20 different European countries, which we believe represents the broadest and largest footprint in the aftermarket industry in Europe with a distribution network larger than those of any of our principal competitors.

Our European operations employ a distribution model in which inventory is stored at national or international distribution centers or regional hubs, with fast moving product stored at branch locations.

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Product is moved through the distribution network on our trucks, vans or via common carriers.

In 2021, we finished building a new central distribution center in Berkel en Rodenrijs, the Netherlands, similar to our central distribution centers in Tamworth, England and Sulzbach-Rosenberg, Germany, that is allowing us to consolidate multiple regional distribution centers.

We have major international central distribution centers in Tamworth, England, Sulzbach-Rosenberg, Germany, and Berkel en Rodenrijs, the Netherlands, that have allowed us to consolidate multiple regional distribution centers while maintaining local distribution centers as necessary to support our businesses.

We view all suppliers of replacement repair products as our competitors, including other alternative parts suppliers and OEMs and their dealer networks.

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Certain of our IT systems can interface with the respective IT systems of our repair shop customers, which enables our customers to identify and order the part required for the repair.

As part of our 1 LKQ Europe strategy, we initiated a multi-year plan to develop and implement a European wide ERP system, which has reduced and will continue to reduce the number of IT systems we operate through its projected completion date in 2027.

As part of our efforts to integrate the operations, we are executing a multi-year plan to develop and implement a European wide ERP system, which has reduced and will continue to reduce the number of IT systems we operate through its projected completion date in 2027.

SPECIALTY SEGMENT

Our Specialty segment was formed in 2014 with our acquisition of Keystone Specialty, a leading distributor and marketer of specialty vehicle aftermarket products and accessories in North America.

We have subsequently expanded through acquisitions within the core business and adjacent markets, including high performance vehicle equipment and electrical marine products.

We subsequently expanded through acquisitions within the core business and adjacent markets, including high performance vehicle equipment and electrical marine products.

Our Specialty operations reach most major markets in the U.S.

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The specialty vehicle aftermarket equipment and accessories we distribute and raw materials for products we manufacture are purchased from suppliers located primarily in the U.S., Canada, and China.

Our top selling products are RV appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, marine electronics, cargo management products, and wheels, tires, and suspension products.

Our top selling products are recreational vehicles ("RV") appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, marine electronics, cargo management products, and wheels, tires, and suspension products.

Our 2017 acquisition of Warn Industries, Inc.

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Due to the highly fragmented supplier base for specialty vehicle aftermarket products, we have limited supplier concentration.

In 2023, approximately 19% of our specialty vehicle aftermarket purchases were made from our top three suppliers to this segment, with our largest supplier

providing approximately 9% of our annual inventory purchases.

In 2024, approximately 21% of our specialty vehicle aftermarket purchases were made from our top three suppliers to this segment, with our largest supplier providing approximately 12% of our annual inventory purchases.

No other suppliers comprised more than 4% of our purchases during 2024.

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We believe this provides added value to our customers through a broader product offering and more efficient distribution process.

We use our delivery routes to provide delivery and returns of our products directly to and from our customers in all 48 continental U.S.

We use our delivery routes to provide delivery and returns of our products directly to and from our customers in all 48

continental U.S.

states and 9 Canadian provinces, and we ship globally to customers in other countries.

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We also use a module within the Carbuy system to record all sales transactions of scrap and other materials.

INTELLECTUAL PROPERTY

We own and have the right to use various intellectual property, including intellectual property acquired as a result of past acquisitions, such as intellectual property related to winches manufactured by Warn.

In addition to trade names, trademarks and patents, we also have technology-based intellectual property that has been both internally developed and obtained through license agreements and acquisitions.

We do not believe that our business is materially dependent on any single item of intellectual property, or any single group of related intellectual property, owned or licensed, nor would the expiration of any particular item or related group of intellectual property, or the termination of any particular intellectual property license agreement, materially affect our business.

See the risk factor " Intellectual property claims relating to aftermarket products could adversely affect our business.

" in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the risks related to intellectual property.

HUMAN CAPITAL

Our people are our most valuable asset.

The core values of development, excellence, leadership, integrity and trust, value-added, embracing change, resourceful, and sustainability establish the foundation of our culture and give our people the opportunity to thrive.

Our key human capital management objectives are attracting, retaining, developing, and supporting the highest quality talent.

Our human resources programs aim to accomplish three things:

(i) acquire and develop talent to prepare them for critical roles within our Company, (ii) reward and support employees with competitive pay and benefit programs, and (iii) enhance our culture through efforts to make the workplace more engaging and inclusive.

As of December 31, 2023, we employed approximately 49,000 persons, of which approximately 20,000 were based in North America and approximately 29,000 were based outside of North America.

At LKQ, our team members are at the heart of everything we do.

As of December 31, 2024, we employ approximately 47,000 people globally, of which approximately 19,000 were based in North America, 26,000 based in Europe and 2,000 based in Asia.

Of our employees in North America, approximately 1,000 were represented by unions.

Outside of North America, we have government-mandated collective bargaining agreements and union contracts in certain countries, particularly in Europe where many of our employees are represented by unions and/or works councils.

We consider our employee relations to be good.

We ask our employees to participate in an annual engagement survey to better understand their needs to remain engaged.

This helps us determine how we prioritize our human capital programs.

Health and Safety

We are committed to providing all our employees with a safe and secure work environment where no one is subject to unnecessary risk.

As a key focus, we have implemented various programs and practices to prevent accidents and foster a safety culture.

We also provide several avenues for employees to speak up, including anonymously, if they see something inconsistent with good safety practices.

Inclusion and Diversity

We value and promote inclusion and diversity in our workplace.

Together, we create inclusive workplaces that represent the communities we serve.

We recognize that diverse backgrounds, skills, and experiences drive new ideas, products, and services.

We recruit, hire, promote and retain employees based on merit and demonstrated skills.

We have a long-standing commitment to provide equal employment opportunities.

It is our policy and practice to hire, train, promote and compensate employees, and administer all of our personnel policies without regard to race, color, ethnicity, national origin, ancestry, citizenship status, religion, religious creed, sex, gender, gender identity and expression, age, disability, protected medical condition, marital status, veteran or military status, sexual orientation, pregnancy, genetic information or any other characteristic protected by civil rights laws.

We are dedicated to ensuring a safe and secure work environment for all team members, where unnecessary risks are minimized, and safety is a shared priority.

Our proactive approach includes implementing a range of programs and practices aimed at preventing accidents and fostering a culture of safety throughout our organization.

Employee Engagement and Empowerment

We strive to create an environment where creativity thrives, and team members are empowered to make decisions that are best for their teams and the business.

One example of this practice is our global employee engagement survey, which provides an opportunity to listen to our organization, understand what we are doing well, and identify areas for improvement.

As a result of feedback from this survey, we launched the Inspired to Thrive Global Initiative, which reinforces our commitment to fostering an inclusive culture where every team member feels valued, respected, and empowered to contribute their unique perspectives and talents.

This initiative is built on five pillars:

(i) holistic well-being;

(ii) financial empowerment;

(iii) inclusive culture;

(iv) professional growth;

and (v) community engagement.

Each of these pillars is supported by robust programs that enable our team members to lead fulfilling lives both in and outside of the workplace.

And through this initiative, we prioritize the well-being, development, and engagement of our workforce, recognizing that a diverse and inclusive environment drives both innovation and success.

Commitment to Values and Ethics

At our Company, acting with integrity is not just expected, but required.

Our Code of Ethics guides our employees to make ethical decisions in all aspects of their work.

It includes topics such as using company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and protecting confidential information.

Our commitment to acting with a high level of integrity includes a global Speak Up program and policy that provides guidance for reporting complaints in the event of alleged violations of our Code, policies or law.

Individuals have the option of submitting concerns anonymously.

They are assured that we do not tolerate harassment or retaliation against persons that report improper behavior.

Compensation and Benefits

We strive to attract and retain our talented employees by providing market-competitive compensation and benefits.

We engage an outside consulting firm to objectively evaluate our compensation program and benchmark it against industry peers and other similarly situated organizations.

Our short and long-term incentive programs are aligned with our vision, and key business objectives and are intended to motivate strong performance.

We offer benefits that support our employees’ physical, financial, and emotional well-being.

We are committed to providing a nurturing environment that helps our employees thrive.

Our global initiative focuses on overall wellness in every aspect of life.

We provide eligible employees medical, dental, and vision coverage, health savings and flexible spending accounts, paid time off, an employee assistance program and fund, voluntary short-term disability insurance, company-paid long-term disability insurance, company-paid term life insurance, a tuition reimbursement program, a scholarship program for the children of employees, a program to match charitable donations, paid

parental leave, and retirement plan contributions.

Our benefits vary by location and are designed to meet or exceed local laws and to be competitive in the marketplace.

Professional Development and Training

A key factor in employee retention is training and professional development.

We have training programs across all levels of the Company to meet the needs of various roles, specialized skill sets, and departments.

Development is part of our core values and key to employee retention.

We believe in the importance of cultivating employee growth and have implemented several measures to ensure everyone is given an opportunity for development at all levels of the organization.

Our training includes creating individual plans tailored toward leadership roles, legal and compliance topics, and general workplace safety.

We are also committed to safeguarding personal information by employing advanced security software tools along with regular cybersecurity training sessions.

Our Code of Ethics empowers our team members to make principled decisions in every aspect of their work.

Covering essential topics such as the responsible use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and the safeguarding of confidential information, our Code of Ethics reflects our dedication to maintaining a high level of integrity.

Additionally, our global Speak Up program provides a secure, anonymous channel for reporting complaints related to potential violations of our Code of Ethics, policies, laws, or safety practices.

INTELLECTUAL PROPERTY

agreement, materially affect our business.

See the risk factor " Intellectual property claims relating to aftermarket products could adversely affect our business.

" in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the risks related to intellectual property.

Our operations and properties are subject to laws and regulations relating to the protection of the environment in the U.S.

and the other countries in which we operate.

See the risk factor “ We are subject to environmental regulations and incur costs relating to environmental matters ” in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the effects of environmental laws and regulations on us.

We may be affected by tariffs and other import laws and restrictions because we import into the U.S.

a significant number of products for sale and distribution.

See the risk factors “ If significant tariffs or other restrictions are placed on products or materials we import or any related counter-measures are taken by countries to which we export products, our revenue and results of operations may be materially harmed ” and “ Intellectual property claims relating to aftermarket products could adversely affect our business.

” in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding importation risks.

Our business processes and operations are subject to laws and regulations relating to privacy and data protection.

See the risk factor “ The costs of complying with the requirements of laws pertaining to data privacy and cybersecurity of personal information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations.

” in Part I, Item 1A of this Annual Report on Form 10-K for further information about privacy and data protection risks.

Some jurisdictions have enacted laws to restrict or prohibit the sale of alternative vehicle parts.

See the risk factor “ Existing or new laws and regulations, or changes to enforcement or interpretation of existing laws or regulations, may prohibit, restrict or burden the sale of aftermarket, recycled, refurbished or remanufactured products.

” in Part I, Item 1A of this Annual Report on Form 10-K for further information concerning regulatory restrictions on the sale of our products.

We have thousands of employees located in the U.S.

and many other countries and are subject to labor and employment laws in numerous jurisdictions.

See the risk factor “ Our business may be adversely affected by union activities and labor and employment laws.

” in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding these labor and employment risks.

Our operating results are subject to quarterly variations based on a variety of factors, including, but not limited to, seasonal weather patterns.

For our Wholesale - North America segment, we tend to see higher demand for our collision related products during periods of cold inclement weather, which creates a higher likelihood of increased collision frequency.

See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the effects of environmental laws and regulations on us, importation risks, privacy and data protection risks, regulatory restrictions on the sale of our products, and labor and employment risks.

Our operating results are subject to quarterly variations based on a variety of factors, including, but not limited to, seasonal weather patterns and events.

For our Europe segment, many of our aftermarket service-related products are impacted by weather patterns.

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SUSTAINABILITY MATTERS

Environmental

LKQ's business operations help reduce the use of raw materials through our vehicle recycling and reuse programs helping to contribute to a circular economy.

Our North American and European recycling operations harvest vehicle components for reuse in the repair of vehicles.

Once the parts are harvested, the remaining valuable materials are removed and repurposed for use in the manufacturing of new basic materials such as steel, aluminum, plastic and rubber.

Additionally, we extract fluids that we recycle or utilize in our own operations, such as fuel to run our own truck fleet.

Our recycling expertise and efforts are a key pillar of our mission statement of being a responsible steward of the environment and a true partner with the communities in which we operate.

This stewardship has been embedded in our culture since our inception in 1998.

Our recycling efforts preserve natural resources, reduce the demand for scarce landfill space, and help decrease air and water pollution, the latter attributed due to the avoidance of new manufacturing that otherwise would be required for these materials.

We believe diverse thinking and an inclusive work environment encourages human ingenuity and a culture of integrity where everyone feels they belong.

LKQ puts our employees first and they are the heart of LKQ.

Refer to the "Human Capital" section above for more information.

Part of LKQ’s mission is to build strong partnerships with our employees and the communities where we live and operate.

LKQ continually seeks to grow effective, strategic partnerships and to create awareness of these initiatives with our employees.

Our employees are encouraged to volunteer in local community activities, and we have established a charitable foundation (the "LKQ Community Foundation") to distribute funds to local and international causes.

We continue to make substantial progress in the area of corporate governance.

Profitably Delivering Sustainable Solutions

LKQ's North American and European operations purchase used vehicles and remove certain components for reuse in the repair of vehicles which helps reduce the use of raw materials and contributes to a circular economy.

Once the parts are removed from end-of-life vehicles, some of the remaining valuable materials are collected and repurposed for use in the manufacturing of new basic materials such as steel, aluminum, plastic, and rubber.

Additionally, we extract fluids, some of which are recycled or utilized in our own operations, such as fuel to run our own on- and off-site fleet, and washer fluid.

Our recycling expertise and efforts are a key pillar of our mission statement of being a leading global value-added and sustainable distributor of vehicle parts and accessories.

Our recycling efforts preserve natural resources, reduce the demand for scarce landfill space, and help decrease air and water pollution, the latter attributed to the avoidance of new manufacturing activities that would otherwise be required.

People-led Performance

Part of LKQ’s mission is to build strong partnerships with our employees and the communities in which we operate.

Along those lines, we strive to create a culture of respect and inclusivity and encourage everyone to be their authentic selves.

We are committed to maintaining a physically and psychologically safe and inclusive environment, free from bullying and harassment, in alignment with our core values.

And in furtherance of our mission, in 2020 we established the LKQ Community Foundation, which is committed to supporting charitable organizations that help the communities where our employees live and LKQ operates.

Strong Governance and Ethical Practices

Our Board of Directors (the “Board") refreshment process has resulted in over half of our current Board being added since August 2018, and currently, 38% of our Board is comprised of persons from underrepresented groups.

Additionally, seven of our nine directors are independent.

We believe that the skill sets of our Board effectively address the areas of focus that are important for our short and long-term strategic objectives.

Additionally, eleven of our thirteen directors are independent.

We have adopted “proxy access,” which permits an eligible stockholder to nominate and include in our proxy materials director nominees (subject to the terms set forth in our Bylaws).

We also have majority voting for the election of our directors, requiring a director who fails to receive a majority vote to tender his or her resignation to the Board.

Our Board adopted a revised Code of Ethics in 2019 to help ensure that everyone at LKQ is clear on our mission, values and guiding ethical principles.

Our Code of Ethics covers a variety of topics, including the use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, protecting confidential information, and reporting Code of Ethics violations.

It is now available in 19 languages through our website at www.lkqcorp.com .

We also operate an anonymous global Speak Up line, available in every language in which we routinely conduct business.

More information on our Sustainability initiatives can be found in our 2022 Sustainability Report on our website at www.lkqcorp.com .

Our Board adopted a revised Code of Ethics in 2024, which covers a variety of topics, including the use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and the safeguarding of confidential information, and reporting Code of Ethics violations.

It is available in 16 languages through our Website.

More information on our Sustainability initiatives can be found in our 2023 Sustainability Report on our Website.

The Sustainability Report is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.

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What changed 10-K

Item 1. Business