What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-22 · 311 added, 345 removed, 1253 unchanged (34% of the section changed)

26 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Refer to Notes 2 and 9 to the financial statements.

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Our audit procedures related to the forecasts, the selection of discount rates, and determination of market multiples included the following, among others:

• We tested the effectiveness of controls over the goodwill impairment assessments, including those over the forecasts and the selection of the discount rates and market multiples.

• We tested the effectiveness of controls over the goodwill impairment assessments, including those over the forecasts and the selection of the discount rates and the market multiples.

• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

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• With the assistance of our fair value specialists, we evaluated the market multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline public companies and the multiples used in the preceding impairment assessments.

Business Combinations - Refer to Note 3 to the financial statements.

Critical Audit Matter Description

The Company completed the acquisition of Uni-Select Inc.

for approximately $ 2.1 billion on August 1, 2023.

The Company accounted for this acquisition using the acquisition method of accounting, under which the acquisition purchase price is allocated to the assets acquired, including purchased intangible assets, and liabilities assumed based on their respective fair values.

The purchase price allocation included customer and supplier relationship intangible assets of $ 669 million and trade name intangible assets of $ 17 million.

The Company’s estimation of the value of the customer and supplier relationships and the trade names required management to make significant estimates and assumptions, including future expected cash flows including revenue growth assumptions from product sales and customer contracts, royalty rates, customer attrition rates and discount rates.

We identified the valuation of the customer and supplier relationship and trade name intangible assets for Uni-Select Inc.

as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets discussed above.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate management’s valuation methodologies and the reasonableness of management’s assumptions related to future expected cash flows and the selection of royalty rates, customer attrition rates and discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of the acquired intangible assets discussed above included the following, among others:

• We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the appropriateness of the valuation methodology, forecast of future expected cash flows, and selection of the royalty rates, customer attrition rates and discount rates.

• We assessed the reasonableness of management’s forecast of future expected cash flows by comparing the projections to historical results and certain peer companies.

We also evaluated whether the estimated future expected cash flows were consistent with evidence obtained in other areas of the audit.

• With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methodology, royalty rates, customer attrition rates and discount rates by:

◦ Testing the mathematical accuracy of the calculations.

◦ Testing the source information underlying the determination of the royalty, customer attrition and discount rates.

◦ Developing ranges of independent estimates and comparing those to the rates selected by management.

/s/ DELOITTE & TOUCHE LLP

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 20, 2025, expressed an unqualified opinion on those financial statements.

As described in the Report of Management on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Uni-Select Inc., which was acquired on August 1, 2023, and whose financial statements constitute 16% of total assets (inclusive of goodwill and acquired intangible assets) and 4% of revenue of the consolidated financial statement amounts as of and for the year ended December 31, 2023.

Accordingly, our audit did not include the internal control over financial reporting at Uni-Select Inc.

Basis for Opinion

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Interest expense 262 214 78

Loss on debt extinguishment 1 — 24

Gains on foreign exchange contracts - acquisition related (2)

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Refer to Note 4, "Discontinued Operations and Divestitures" for further information.

(2) Related to the Uni-Select Inc.

("Uni-Select") acquisition.

(2) Related to the Uni-Select acquisition.

Refer to Note 3, "Business Combinations" and Note 19, "Derivative Instruments and Hedging Activities" for further information.

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Net income attributable to LKQ stockholders 690 936 1,149

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation, net of tax ( 168 ) 90 ( 212 )

1 unchanged sentence

Net change in unrealized gains/losses on pension plans, net of tax ( 7 ) ( 5 ) 35

Other comprehensive income from unconsolidated subsidiaries 9 7 —

Other comprehensive income (loss) 83 ( 170 ) ( 54 )

Other comprehensive (loss) income from unconsolidated subsidiaries ( 4 ) 9 7

Other comprehensive (loss) income ( 177 ) 83 ( 170 )

Comprehensive income 516 1,021 980

34 unchanged sentences

Commitments and contingencies

Redeemable noncontrolling interest — 24

Stockholders' equity:

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Stock-based compensation expense 30 40 38

Loss on debt extinguishment 1 — 24

Gains on foreign exchange contracts - acquisition related — ( 49 ) —

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Inventories ( 253 ) 71 ( 342 )

Other assets ( 59 ) ( 23 ) 33

Prepaid income taxes/income taxes payable ( 15 ) ( 12 ) 33

Accounts payable 251 ( 5 ) 269

Other operating assets and liabilities 18 21 30

Other liabilities 17 37 ( 15 )

Operating lease assets and liabilities 4 4 3

Net cash provided by operating activities 1,121 1,356 1,250

1 unchanged sentence

Purchases of property, plant and equipment ( 311 ) ( 358 ) ( 222 )

Proceeds from disposals of property, plant and equipment 11 9 20

Acquisitions, net of cash acquired ( 49 ) ( 2,225 ) ( 4 )

Proceeds from disposals of businesses 110 399 7

Proceeds from disposals of businesses, net of divested cash ( 11 ) 110 399

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

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CASH FLOWS FROM FINANCING ACTIVITIES:

Early-redemption premium — — ( 16 )

Debt issuance costs ( 33 ) — —

Proceeds from issuance of U.S.

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

Repayment of Euro Notes (2026) — — ( 883 )

Borrowings under revolving credit facilities 1,312 2,186 1,644

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Borrowings under term loans — 1,031 —

Repayments under term loans — — ( 324 )

Repayments of other debt, net ( 45 ) ( 32 ) ( 17 )

Settlement of derivative instruments ( 13 ) — ( 89 )

Proceeds from issuance of U.S.

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

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

Repayment of Euro Notes (2024) ( 547 ) — —

Dividends paid to LKQ stockholders ( 318 ) ( 302 ) ( 284 )

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Other financing activities, net ( 51 ) ( 63 ) ( 22 )

Net cash provided by (used in) financing activities 1,102 ( 1,394 ) ( 985 )

Effect of exchange rate changes on cash and cash equivalents 5 ( 24 ) ( 1 )

Net increase (decrease) in cash and cash equivalents 21 4 ( 38 )

Net cash (used in) provided by financing activities ( 746 ) 1,102 ( 1,394 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 29 ) 5 ( 24 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 60 ) 21 4

Cash and cash equivalents, beginning of period 299 278 274

Cash and cash equivalents, end of period $ 299 $ 278 $ 274

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

$ 239 $ 299 $ 278

Supplemental disclosure of cash paid for:

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Interest 230 197 71

(1) Refer to Note 2, "Summary of Significant Accounting Policies" and Note 24, "Cash, Cash Equivalents and Restricted Cash" for further information on restricted cash.

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

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(In millions, except per share data)

Years Ended December 31, 2024, 2023 and 2022

LKQ Stockholders

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Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 1 ) ( 1 )

Foreign currency translation adjustment on noncontrolling interest — — — — — — — ( 1 ) ( 1 )

Balance as of December 31, 2022 322.4 $ 3 ( 55.1 ) $ ( 2,389 ) $ 1,506 $ 6,656 $ ( 323 ) $ 14 $ 5,467

Net income — — — — — 936 — 2 938

Other comprehensive loss — — — — — — ( 170 ) — ( 170 )

Other comprehensive income — — — — — — 83 — 83

Purchase of treasury stock — — ( 0.8 ) ( 35 ) — — — — ( 35 )

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Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 2 ) ( 2 )

Foreign currency translation adjustment on noncontrolling interest — — — — — — — ( 1 ) ( 1 )

Balance as of December 31, 2023 323.1 $ 3 ( 55.9 ) $ ( 2,424 ) $ 1,538 $ 7,290 $ ( 240 ) $ 14 $ 6,181

Net income — — — — — 690 — 3 693

Other comprehensive income — — — — — — 83 — 83

Other comprehensive loss — — — — — — ( 177 ) — ( 177 )

Purchase of treasury stock — — ( 8.6 ) ( 363 ) — — — — ( 363 )

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Dividends declared to LKQ stockholders ($1.20 per share)

— — — — — ( 318 ) — — ( 318 )

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — ( 2 ) ( 2 )

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

Balance as of December 31, 2024 323.6 $ 3 ( 64.5 ) $ ( 2,787 ) $ 1,556 $ 7,662 $ ( 417 ) $ 15 $ 6,032

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We are a global distributor of vehicle products, including replacement parts, components, and systems used in the repair and maintenance of vehicles, and specialty aftermarket products and accessories designed to improve the performance, functionality and appearance of vehicles.

We operate in the United States, Canada, Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries.

We operate in the United States, Canada, Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, France and various other European countries.

We are organized into four operating segments:

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Securities and Exchange Commission.

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

Principles of Consolidation

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Revenue for the service component is recognized as the services are rendered.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our revenue is measured at the determinable transaction price, net of any variable considerations granted to customers.

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These variable considerations are estimated throughout the year based on various factors, including contract terms, historical experience and performance levels.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sales tax and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue in the Consolidated Statements of Income and are shown as a current liability on the Consolidated Balance Sheets until remitted.

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For our salvage, remanufactured, refurbished and manufactured products, cost of goods sold also includes direct and indirect labor, equipment costs, depreciation, and other overhead to transform inventory into finished products suitable for sale.

Cost of goods sold also includes expenses for service-type warranties and for assurance-type warranty programs.

Cost of goods sold also includes expenses for service-type and assurance-type warranty programs.

Selling, General and Administrative Expenses

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The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes.

Our policy is to include any interest and penalties associated with income tax obligations in income tax expense.

We consider many factors when evaluating and estimating our tax positions

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes.

Our policy is to include any interest and penalties associated with income tax obligations in income tax expense.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on hand, operating accounts, and deposits readily convertible to known amounts of cash.

Restricted cash includes any cash that is legally or contractually restricted as to withdrawal or usage.

Allowance for Credit Losses

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Intangible Assets

Intangible assets consist primarily of goodwill (the cost of purchased businesses in excess of the fair value of the identifiable net assets acquired) and other specifically identifiable intangible assets, such as trade names, trademarks, customer and supplier relationships, software and other technology related assets, and covenants not to compete.

Intangible assets consist primarily of goodwill (the cost of purchased businesses in excess of the fair value of the identifiable net assets acquired) and other specifically identifiable intangible assets, such as customer and supplier relationships, trade names, trademarks, software and other technology related assets, and covenants not to compete.

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually.

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The goodwill reporting units had a fair value estimate which exceeded the carrying value by at least 10 %.

We determine if an arrangement is a lease at contract inception with lease right-of-use ("ROU") assets and lease liabilities being recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

We determine if an arrangement is a lease at contract inception with lease right-of-use ("ROU") assets and lease liabilities being recognized based on the present value of the future lease payments over the lease term at the commencement date.

In determining the present value of future lease payments, we use the incremental borrowing rate based on the information available at commencement date when the implicit rate is not readily determinable.

We determine the incremental borrowing rate by analyzing yield curves with consideration of lease term, country and Company specific factors.

In assessing the ROU asset, we include any lease prepayments and exclude lease incentives.

In assessing the ROU asset, we include any lease prepayments and deduct lease incentives.

We account for the lease and non-lease components of a contract as a single lease component and for leases with an initial term of 12 months or less, we have elected to not record an ROU asset and lease liability.

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Net Assets Held for Sale

We record the net assets of held for sale businesses at the lower of fair value less cost to sell or carrying value.

We record net assets held for sale at the lower of fair value less cost to sell or carrying value.

Fair values are based on projected discounted cash flows and/or estimated selling prices.

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The inputs utilized in the fair value estimates are classified as Level 3 within the fair value hierarchy.

The fair values of the net assets were measured on a

The fair values of the net assets were measured on a non-

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

non-recurring basis as of December 31, 2023.

recurring basis as of December 31, 2024.

As of December 31, 2024 and 2023, assets and liabilities held for sale were insignificant.

In 2024, we divested certain operations in Slovenia, Poland and Bosnia.

Our decision to exit these businesses, as well as other factors, constituted a triggering event to evaluate our net assets held for sale for impairment, and as a result, we incurred impairment charges related to these divestitures during the year ended December 31, 2024.

See Note 13, "Restructuring and Transaction Related Expenses" for further information related to these impairment charges.

For the year ended December 31, 2023, we recorded an insignificant amount of impairment on our net assets held for sale.

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If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.

There were no material impairments to the carrying value of long-lived assets during the years ended December 31, 2023, 2022 or 2021.

As a result of the divestitures described in the "Net Assets Held for Sale" section above, we incurred impairment charges to the carrying value of long-lived assets during the year ended December 31, 2024.

See Note 13, "Restructuring and Transaction Related Expenses" for further information related to these impairment charges.

There were no significant impairments to the carrying value of long-lived assets during the years ended December 31, 2023 or 2022.

Equity Method Investments

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

Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for its proportionate share of earnings or losses and dividends, including consideration of basis differences resulting from the difference between the initial carrying amount of the investment and the underlying equity in net assets, as applicable.

Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for our proportionate share of earnings or losses and dividends, including consideration of basis differences resulting from the difference between the initial carrying amount of the investment and the underlying equity in net assets, as applicable.

Warranty Reserve

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

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

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

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We monitor new claim and claim developments as well as trends related to the claims incurred but not reported in order to assess the adequacy of our insurance reserves.

The current portion of total self-insurance reserves is recorded in Other accrued expenses on the Consolidated Balance Sheet with the noncurrent portion is recorded in Other noncurrent liabilities on the Consolidated Balance Sheet, which reflects management's estimates of when claims will be paid.

The current portion of total self-insurance reserves is recorded in Other accrued expenses on the Consolidated Balance Sheets with the noncurrent portion is recorded in Other noncurrent liabilities on the Consolidated Balance Sheets, which reflects management's estimates of when claims will be paid.

Litigation and Related Contingencies

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The excise tax on share repurchases initiated on and after January 1, 2023 is included in the cost basis of treasury stock.

See Note 24, "Income Taxes" for additional information related to the excise tax.

LKQ CORPORATION AND SUBSIDIARIES

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

We adopted the provisions of ASU 2022-04 on a retrospective basis (see Note 18, "Supply Chain Financing"), except for the disclosure of rollforward information, which will be adopted prospectively in 2024 as required.

The adoption of ASU 2022-04 did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

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

We adopted the provisions of ASU 2022-04 on a retrospective basis, except for the disclosure of rollforward information, which was adopted prospectively for the year ended December 31, 2024 as required.

The adoption of ASU 2022-04 did not have a material impact on our results of operations, financial position or cash flows but did result in additional disclosures.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No.

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

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

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

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

Early adoption is permitted.

We are currently evaluating the impact of adopting this ASU on our Consolidated Financial Statements.

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

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

We adopted the ASU on a retrospective basis beginning in this Annual Report on Form 10-K for the year ended December 31, 2024.

The adoption of ASU 2023-07 did not have a material impact on our results of operations, financial position or cash flows but did result in additional disclosures.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, "Income Taxes (Topic 740):

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

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

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

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

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

Early adoption is permitted.

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

In November 2024, the FASB issued Accounting Standards Update 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” The ASU requires disclosure of specific expense categories within relevant income statement captions.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The ASU can be adopted prospectively or retrospectively and early adoption is permitted.

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

Business Combinations

On August 1, 2023, we acquired all of Uni-Select's issued and outstanding shares for Canadian dollar ("CAD") 48.00 per share in cash, representing a total enterprise value of approximately CAD 2.8 billion ($ 2.1 billion) (the "Uni-Select Acquisition"), by way of a plan of arrangement (the "Arrangement") entered into on February 26, 2023, under the provisions of the Business Corporations Act (Québec).

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

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

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

See Note 4, "Discontinued Operations and Divestitures" for information related to the divestment of GSF Car Parts.

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

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

During the year ended December 31, 2024, we completed acquisitions of eight 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 year ended December 31, 2024.

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

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

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

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

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

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

We reported Gains on foreign exchange contracts - acquisition related of $ 49 million for the year ended December 31, 2023.

1 unchanged sentence

See Note 19, "Derivative Instruments and Hedging Activities" for information related to these foreign exchange contracts.

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

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

We incurred $ 9 million in upfront fees related to the bridge loan facility and fully amortized these upfront fees (reported in Interest expense in the Consolidated Statements of Income) during the year ended December 31, 2023.

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.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

There were no changes in borrowings against the CAD Note between the draw date and December 31, 2023.

See Note 19, "Long-Term Obligations" for additional information related to the CAD Note.

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

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

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

Notes (2028), the "U.S.

Notes (2028/33)").

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

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

See Note 19, "Long-Term Obligations" for additional information related to the offering of the Notes.

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

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

Notes (2028/33).

See Note 20, "Derivative Instruments and Hedging Activities" for information related to these interest rate instruments.

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

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

The primary objectives of our other acquisitions made during the year ended December 31, 2023 were to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths.

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

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

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

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

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

The purchase price allocations for the acquisitions made during the year ended December 31, 2023 are preliminary as we are in the process of determining the following:

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

2) valuation amounts for certain intangible assets acquired;

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

and 4) the tax basis of the entities acquired.

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

From the date of our preliminary allocation for Uni-Select in the third quarter of 2023 through December 31, 2023, we recorded adjustments based on our valuation procedures, primarily related to intangibles and deferred income taxes that resulted in the allocation of $ 81 million of goodwill to acquired net assets.

The income statement effect of these measurement period adjustments for our Uni-Select acquisition that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition dates was immaterial.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The purchase price allocations for the acquisitions completed during the year ended December 31, 2023 are as follows (in millions):

Year Ended December 31, 2023

Uni-Select (7)

Other Acquisitions (8)

Receivables $ 123 $ 33 $ 156

Inventories (1)

Prepaid expenses and other current assets 30 6 36

Assets of discontinued operations (2)

Property, plant and equipment 102 11 113

Operating lease assets 80 11 91

1,149 72 1,221

Other intangibles (4)

Other noncurrent assets 25 — 25

Current liabilities assumed (5)

( 338 ) ( 47 ) ( 385 )

Liabilities of discontinued operations (2)

( 183 ) — ( 183 )

Long-term operating lease liabilities, excluding current portion ( 55 ) ( 9 ) ( 64 )

Debt assumed ( 1 ) ( 12 ) ( 13 )

Other noncurrent liabilities assumed (6)

( 167 ) ( 4 ) ( 171 )

Other purchase price obligations ( 3 ) ( 22 ) ( 25 )

Cash used in acquisitions, net of cash acquired $ 2,081 $ 144 $ 2,225

(1) Primarily comprised of aftermarket and refurbished products.

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

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

See Note 4, "Discontinued Operations and Divestitures" for information related to the GSF Car Parts business.

(3) We expect $ 116 million and $ 15 million of goodwill to be deductible for income tax purposes related to Uni-Select and our other acquisitions, respectively.

(4) The amount recorded for our acquisition of Uni-Select primarily includes $ 17 million of trade names (3 to 5 year useful lives) and $ 669 million of customer and supplier relationships (10 to 17 year useful lives).

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

See Note 18, "Supply Chain Financing" for information related to our supply chain financing programs.

(6) The amount recorded for our acquisition of Uni-Select includes $ 154 million of net deferred income tax liability, the significant components of which are as follows:

deferred tax liabilities related to customer relationships of $ 174 million net with deferred tax assets related to Canadian net operating loss carryforwards of $ 23 million.

(7) In the period between the acquisition date and December 31, 2023, Uni-Select, which is reported in our Wholesale - North America segment, generated revenue of $ 546 million and an operating loss of $ 17 million, including $ 25 million of restructuring and transaction related expenses and $ 34 million of amortization of acquired intangibles.

(8) In the period between the acquisition dates and December 31, 2023, these acquisitions generated revenue of $ 156 million, including $ 69 million within our Specialty segment, $ 67 million within our Europe segment, and the remaining amount within our Wholesale - North America segment, and operating income of $ 11 million, primarily within our Europe segment.

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

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

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

See Note 21, "Fair Value Measurements" for further information regarding the tiers in the fair value hierarchy.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Unaudited Pro Forma Financial Information

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

On October 25, 2023, we completed the divestment of GSF Car Parts to a third party for $ 110 million of proceeds, net of cash divested, resulting in an immaterial loss on sale.

On October 25, 2023, we divested GSF Car Parts to a third party for $ 110 million of proceeds, net of cash divested, resulting in an immaterial loss on sale.

The proceeds were used for repayments on our revolving credit facilities.

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For the year ended December 31, 2022, we recorded to discontinued operations a $ 5 million benefit primarily related to the reassessment of a previously recorded valuation allowance on a deferred tax asset related to our glass manufacturing business sold in 2017.

For the year ended December 31, 2021, we recorded an insignificant gain related to the settlement of certain tax matters with the buyer.

Other Divestitures (Not Classified in Discontinued Operations)

In April 2022, we completed the sale of PGW, our aftermarket glass business within our Wholesale - North America segment, to a third party for $ 361 million resulting in recognition of a $ 155 million pretax gain ($ 127 million after tax).

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

In 2024, we divested certain operations in Slovenia, Poland and Bosnia.

See Note 13, "Restructuring and Transaction Related Expenses" for further information related to these divestitures.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We classify our inventory into the following categories:

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

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

Manufactured products are primarily composed of raw materials and finished goods.

Inventories consist of the following (in millions):

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Total inventories $ 3,220 $ 3,121

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed 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.

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

Property, Plant and Equipment

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To provide for the potential liabilities for certain risks, we use a combination of insurance and self-insurance mechanisms, including a consolidated, wholly-owned captive insurance subsidiary which provides insurance coverage for workers' compensation and automotive liability claim payments that are below our deductibles under our third-party policies.

The activity related to our captive insurance subsidiary was not material for the years ended December 31, 2023 and 2022, respectively.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The activity related to our captive insurance subsidiary was not material for the years ended December 31, 2024, 2023, and 2022.

Total self-insurance reserves were $ 144 million and $ 136 million, of which $ 79 million and $ 73 million were classified as current, as of December 31, 2024 and 2023, respectively.

We had outstanding letters of credit of $ 114 million and $ 110 million, of which $ 79 million and $ 74 million were to guarantee self-insurance claims payments at December 31, 2024 and 2023, respectively.

While we do not expect the amounts ultimately paid to differ significantly from the estimates, the insurance reserves and corresponding expenses could be affected if future claims experience differs significantly from historical trends and assumptions.

While we do not expect the amounts ultimately paid to differ significantly from the estimates, the insurance

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reserves and corresponding expenses could be affected if future claims experience differs significantly from historical trends and assumptions.

Allowance for Credit Losses

Our allowance for expected credit losses was $ 56 million and $ 61 million as of December 31, 2024 and December 31, 2023, respectively.

The provision for credit losses was an expense of $ 12 million and $ 9 million, and a benefit of $ 5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The provision for credit losses was $ 17 million, $ 12 million, and $ 9 million for the years ended December 31, 2024, 2023, and 2022, respectively.

A rollforward of our allowance for credit losses is as follows (in millions):

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Balance as of December 31, $ 56 $ 61

Noncontrolling Interest

Prior to December 2023, we have presented redeemable shares issued to a minority shareholder in conjunction with a previous acquisition as redeemable noncontrolling interest outside of permanent equity on our Consolidated Balance Sheets.

In December 2023, the minority shareholder exercised the put option on these shares at the fixed price of $ 24 million (€ 21 million) payable in January 2024.

As a result of this exercise, the redeemable noncontrolling interest has been reclassified to Other current liabilities on the Consolidated Balance Sheets at December 31, 2023.

Intangible Assets

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Balance as of January 1, 2023 1,397 2,191 456 275 4,319

Business acquisitions and adjustments to previously recorded goodwill — 7 — — 7

Disposal of businesses ( 58 ) — — ( 7 ) ( 65 )

Business acquisitions 1,171 35 15 — 1,221

Exchange rate effects ( 12 ) 72 — — 60

Balance as of December 31, 2023 $ 2,556 $ 2,298 $ 471 $ 275 $ 5,600

Business acquisitions 1,171 35 15 — 1,221

Business acquisitions and adjustments to previously recorded goodwill 4 9 1 — 14

Disposal of businesses — ( 5 ) — — ( 5 )

Exchange rate effects ( 32 ) ( 129 ) — — ( 161 )

Balance as of December 31, 2024 $ 2,528 $ 2,173 $ 472 $ 275 $ 5,448

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of other intangibles, net are as follows (in millions):

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Amortization Net

Trade names and trademarks $ 536 $ ( 226 ) $ 310 $ 489 $ ( 194 ) $ 295

Customer and supplier relationships $ 1,150 $ ( 505 ) $ 645 $ 1,176 $ ( 412 ) $ 764

Trade names and trademarks 513 ( 248 ) 265 536 ( 226 ) 310

Software and other technology related assets 425 ( 266 ) 159 404 ( 246 ) 158

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Total other intangible assets $ 2,169 $ ( 1,019 ) $ 1,150 $ 2,199 $ ( 886 ) $ 1,313

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated useful lives for the finite-lived intangible assets are as follows:

Method of Amortization Useful Life

Trade names and trademarks Straight-line 3-30 years

Customer and supplier relationships Accelerated 3-20 years

Trade names and trademarks Straight-line 3-30 years

Software and other technology related assets Straight-line 3-15 years

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

During the year ended December 31, 2023, we received $ 5 million in dividend payments from Mekonomen.

We received $ 5 million, $ 5 million, and $ 3 million in dividend payments from Mekonomen during the years ended December 31, 2024, 2023, and 2022, respectively.

Warranty Reserve

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

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

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We provide warranties against defects and product failures on certain of our products, including remanufactured engines and transmissions (warranty periods ranging from 12 to 48 months) and certain salvage mechanical products (warranty period of 6 months or 6,000 miles).

We also offer limited lifetime warranties on certain collision sheet metal products.

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

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Services revenue includes (i) additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, (ii) fees for admission to our self service yards, and (iii) diagnostic and repair services.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For Wholesale - North America and Self Service, vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders;

29 unchanged sentences

Total revenue $ 14,355 $ 13,866 $ 12,794

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Variable Consideration

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Variable consideration reserve Receivables, net of allowance for credit losses 136 155

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue by Geographic Area

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2024 Global Restructuring Plan

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

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

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

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

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

costs for employee severance;

lease termination charges and facility closure costs;

and other contract termination charges.

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

In 2024, we divested our operations in Slovenia and Bosnia to third parties and, certain operations in Poland to Mekonomen, an equity method investment of which we own 26.6 %, and received a combination of cash and notes receivable.

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 divestitures 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 $ 130 million and $ 150 million.

2022 Global Restructuring Plan

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

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

We have incurred costs for inventory write-downs;

employee severance and other expenditures related to employee terminations;

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

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

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

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

This plan was completed in 2024 with a total incurred cost of $ 30 million.

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

We completed the organizational design and implementation projects in

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 2021, with the remaining projects scheduled to be completed by the end of 2027 with a total incurred cost of between $ 30 million and $ 40 million.

We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2027 with a total incurred cost of between $ 30 million and $ 40 million.

Acquisition Integration Plans

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

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

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

We expect to incur additional expenses of between $ 10 million and $ 20 million primarily in 2024 to complete the integration plan related to the Uni-Select Acquisition in our Wholesale - North America segment.

We substantially completed the integration plan in 2024 related to the Uni-Select Acquisition in our Wholesale - North America segment.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Inventory related costs (1)

Asset impairments (2)

Other costs 7 — —

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Facility exit costs 3 7 1

Inventory related costs (1)

Other costs — 2 3

Total $ 5 $ 15 $ 10

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

Total $ — $ 1 $ 1

1 LKQ Europe Plan Employee related costs $ 2 $ 1 $ 1

Facility exit costs 1 — —

Inventory related costs (1)

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Total restructuring expenses $ 146 $ 48 $ 15

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

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

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

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

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1 LKQ Europe Plan — 15 — — 15

The liabilities recorded related to our restructuring plans were not material as of December 31, 2023 and 2022.

Transaction Related Expenses

During the years ended December 31, 2024, 2023 and 2022, we incurred expenses totaling $ 4 million, $ 21 million and $ 5 million, respectively, for legal, accounting and advisory services related to completed and potential transactions.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transaction Related Expenses

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

Year Ended December 31,

2023 2022 2021

Professional fees (1)

Transaction related expenses

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

Stock-Based Compensation

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

Starting with our 2019 grants, participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards following retirement;

Participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards following retirement;

if retirement occurs during the first year of the vesting period (for RSUs subject to a time-based vesting condition) or the first year of the performance period (for RSUs with a performance-based vesting condition), the participant vests in a prorated amount of the RSU grant based on the portion of the year employed.

For our RSU grants prior to 2019, participants forfeit their unvested shares upon retirement.

Outstanding unvested RSUs earn dividend equivalents at the same rate as dividends on LKQ’s common stock.

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the year ended December 31, 2024 (in millions, except years and per share amounts):

8 unchanged sentences

(2) The weighted average grant date fair value of RSUs granted during the years ended December 31, 2023 and 2022 was $ 56.57 and $ 49.21 , respectively.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We grant PSUs with a three-year performance period to certain employees, including executive officers, under our Equity Incentive Plan.

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The dividend equivalents are subject to the same vesting requirements, restrictions and forfeiture provisions as the original award.

The fair value of PSUs that vested during the years ended December 31, 2023 and 2022 was $ 13 million and $ 9 million, respectively;

The fair value of PSUs that vested during the years ended December 31, 2024, 2023 and 2022 was $ 11 million, $ 13 million, and $ 9 million respectively;

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

3 unchanged sentences

Performance-based adjustment (3)

( 0.1 ) $ 48.96

Vested ( 0.2 ) $ 38.77

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(3) Represents the net adjustment to the number of shares issuable upon vesting of performance-based PSUs based on the Company's actual financial performance metrics for the three year performance period ended December 31, 2024.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation Expense

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We did not capitalize any stock-based compensation costs during the years ended December 31, 2024, 2023, and 2022.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, unrecognized compensation expense related to unvested RSUs and PSUs is expected to be recognized as follows (in millions):

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

The number of antidilutive securities was insignificant for the years ended December 31, 2023, 2022, and 2021.

LKQ CORPORATION AND SUBSIDIARIES

7 unchanged sentences

Income tax effect — — ( 14 ) — ( 14 )

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

Reclassification of deferred income taxes — 1 ( 1 ) — —

Balance as of December 31, 2021 $ ( 121 ) $ — $ ( 24 ) $ ( 8 ) $ ( 153 )

Pretax (loss) income ( 216 ) — 49 — ( 167 )

Income tax effect — — ( 14 ) — ( 14 )

Disposal of business 4 — — — 4

1 unchanged sentence

Balance as of December 31, 2022

$ ( 333 ) $ — $ 11 $ ( 1 ) $ ( 323 )

Pretax income (loss) 90 ( 12 ) ( 4 ) — 74

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Balance as of December 31, 2023

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

Pretax (loss) income ( 170 ) 7 ( 8 ) — ( 171 )

Income tax effect — ( 2 ) 1 — ( 1 )

Reclassification of unrealized gain — ( 4 ) — — ( 4 )

Reclassification of deferred income taxes — 1 — — 1

Disposal of business 2 — — — 2

Other comprehensive loss from unconsolidated subsidiaries — — — ( 4 ) ( 4 )

Balance as of December 31, 2024

$ ( 411 ) $ ( 9 ) $ ( 1 ) $ 4 $ ( 417 )

Net unrealized losses and gains related to our pension plans were reclassified to Interest income and other income, net in the Consolidated Statements of Income during each of the years ended December 31, 2024, 2023, and 2022.

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

As of December 31, 2023 and 2022, we had $ 411 million, including $ 70 million under the Uni-Select program, and $ 248 million of Accounts payable outstanding under the arrangements, respectively.

As of December 31, 2024 and 2023, we had $ 416 million and $ 411 million of Accounts payable outstanding under the arrangements, respectively.

A rollforward of obligations confirmed and paid during the year is as follows (in millions):

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance as of January 1, $ 411

Invoices confirmed during the year 871

Confirmed invoices paid during the year ( 840 )

Impact of foreign currency ( 26 )

Balance as of December 31, $ 416

Long-Term Obligations

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Revolving credit facilities January 2028 5.86 % (1)

Senior Secured Credit Agreement:

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

664 6.25 % (1)

Senior Unsecured Term Loan Agreement:

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Euro Notes (2028) April 2028 4.13 % 259 4.13 % 276

Euro Notes (2031) March 2031 4.13 % 777 — % —

Notes payable Various through October 2030 3.07 % (1)

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Other debt 4.58 % (1)

11 2.28 % (1)

Total debt 4,198 4,281

long-term debt issuance costs and unamortized bond discount ( 30 ) ( 6 )

Total debt, net of debt issuance costs and unamortized bond discount 4,251 2,656

long-term debt issuance costs and unamortized bond discounts ( 33 ) ( 30 )

Total debt, net of debt issuance costs and unamortized bond discounts 4,165 4,251

current maturities, net of debt issuance costs ( 38 ) ( 596 )

Long term debt, net of debt issuance costs and unamortized bond discount $ 3,655 $ 2,622

Long-term debt, net of debt issuance costs and unamortized bond discounts $ 4,127 $ 3,655

(1) Interest rate derived via a weighted average

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Total debt (2)

(1) Long-term obligations maturing by December 31, 2024 include $ 16 million of short-term debt that may be extended beyond the current year ending December 31, 2024.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discount of $ 30 million as of December 31, 2023).

LKQ CORPORATION AND SUBSIDIARIES

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(1) Long-term obligations maturing by December 31, 2025 include $ 1 million of short-term debt that may be extended beyond the current year ending December 31, 2025.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $ 33 million as of December 31, 2024).

Senior Unsecured Credit Agreement

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

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

On January 5, 2023, we and certain other subsidiaries of ours entered into a new credit agreement (the "Senior Unsecured Credit Agreement") which consists of (i) an unsecured revolving credit facility of up to a U.S.

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

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

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

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

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

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

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

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

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

1 unchanged sentence

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

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

Senior Secured Credit Agreement

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

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

Senior Unsecured Term Loan Credit Agreement

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

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

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

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

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

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

1 to the CAD Note which replaced CDOR with CORRA.

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

Notes (2028/2033)

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

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

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

Notes (2028), the "U.S.

Notes (2028/33)") in a private placement conducted pursuant to Rule 144A and Regulation S under the United States Securities Act of 1933.

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

Bank Trust Company, National Association, as trustee.

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unsecured Credit Agreement, the CAD Note, any other Credit Facility Debt or any Capital Markets Debt (as such terms are defined in the Indenture).

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

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

Euro Notes (2024)

Euro Notes (2024) and Euro Notes (2031)

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

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

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

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

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

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

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

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

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

securities exchange and the Global Exchange Market of Euronext Dublin.

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

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

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

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

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

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

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

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

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

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

subsidiaries that in the future agrees to guarantee the Company’s obligations under the Senior Unsecured

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

Credit Agreement, the CAD Note, any other Credit Facility Debt or any Capital Markets Debt (both as defined in the Company’s preliminary prospectus supplement filed with the SEC on February 28, 2024).

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

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

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

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

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

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

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

In April 2024, the Euro Notes (2031) were approved for listing and registration on the Nasdaq.

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

Euro Notes (2026/2028)

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The Euro Notes (2026/28) are governed by the Indenture dated as of April 9, 2018 (the “Euro Notes (2026/28) Indenture”) among LKQ Euro Holdings, LKQ Corporation and certain of our subsidiaries (the “Euro Notes (2026/28) Subsidiaries”), the trustee, paying agent, transfer agent, and registrar.

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

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

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

On April 1, 2021, we redeemed the Euro Notes (2026).

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

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments and Hedging Activities

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We do not hold or issue derivatives for trading purposes.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments Designated as Cash Flow Hedges

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Notes (2028/33).

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

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

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

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 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) (there were no such hedges as of December 31, 2022):

As of December 31, 2024 and 2023, the notional amounts, balance sheet classification and fair values of our derivative instruments designated as cash flow hedges were as follows (in millions):

December 31, 2024

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

Interest rate swap agreements $ 400 Other accrued expenses $ —

Interest rate swap agreements 300 Other noncurrent liabilities ( 1 )

The activity related to our cash flow hedges is included in Note 17, "Accumulated Other Comprehensive Income (Loss)." As of December 31, 2023, we estimate that an insignificant amount of derivative gains (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Consolidated Statements of Income within the next 12 months.

The activity related to our previously matured cash flow hedges is included in Note 17, "Accumulated Other Comprehensive Income (Loss)" and presented in either operating activities or financing activities, as described above, in our Consolidated Statements of Cash Flows.

December 31, 2023

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

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

The activity related to our cash flow hedges is included in Note 16, "Accumulated Other Comprehensive Income (Loss)." As of December 31, 2024, we estimate that $ 2 million of derivative losses (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Consolidated Statements of Income within the next 12 months.

Derivative Instruments Not Designated as Hedges

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

We reported Gains on foreign exchange contracts - acquisition related on the Consolidated Statements of Income of $ 49 million for the year ended December 31, 2023.

We reported Gains on foreign exchange contracts - acquisition related on the

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income of $ 49 million for the year ended December 31, 2023.

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

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

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

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

The effect on our results of operations for these contracts during the years ended December 31, 2024, 2023, and 2022, were not material.

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

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

The notional amount and fair value of these contracts at December 31, 2023 and December 31, 2022, along with the effect on our results of operations during the years ended December 31, 2023,

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022, and 2021, were not material.

The notional amount and fair value of these contracts at December 31, 2024 and 2023, along with the effect on our results of operations during the years ended December 31, 2024, 2023, and 2022, 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 Consolidated Balance Sheets.

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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 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 December 31, 2023 and 2022 (in millions):

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 December 31, 2024 and 2023 (in millions):

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

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Total Liabilities $ — $ 1 $ 3 $ 4 $ — $ 2 $ 2 $ 4

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Assets and Liabilities Not Measured at Fair Value

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Notes (2028), U.S.

Notes (2033), Euro Notes (2024) and Euro Notes (2028) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.

Based on market conditions as of December 31, 2023, the fair value of the borrowings under the Senior Unsecured Credit Agreement and CAD Note reasonably approximated their carrying values of $ 1,414 million and $ 529 million, respectively.

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

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 December 31, 2024 and 2023, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $ 1,164 million and $ 1,414 million, respectively.

As of December 31, 2024 and 2023, the fair value of the borrowings under the CAD Note reasonably approximated the carrying values of $ 487 million and $ 529 million, respectively.

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

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Euro Notes (2028) 259 261 276 276

Euro Notes (2031) 777 796 — —

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have leases primarily for facilities, vehicles, and equipment.

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Total lease liabilities $ 1,544 $ 1,470

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense are as follows (in millions):

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Net lease cost $ 529 $ 455 $ 403

The future minimum lease commitments under our leases at December 31, 2023 are as follows (in millions):

The future lease commitments under our leases at December 31, 2024 are as follows (in millions):

Years Ending December 31, Operating leases Finance leases (1)

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Thereafter 587 27 614

Future minimum lease payments 1,790 99 1,889

Future lease payments 1,838 124 1,962

Interest 394 24 418

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(1) Amounts are included in the scheduled maturities of long-term obligations in Note 18, "Long-Term Obligations".

As of December 31, 2023, minimum operating lease payments for leases that have not yet commence d totaled $ 140 million .

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, operating lease payments for leases that have not yet commence d totaled $ 41 million, which primarily includes the synthetic lease arrangements discussed below .

These operating leases will commence in the n ext 21 months with lease te rms of 3 to 15 years .

Most of these leases have not commenced because the assets are in the process of being constructed.

Synthetic Lease Arrangements

In the fourth quarter of 2024, we entered into two synthetic leases to finance the construction of salvage yard facilities, with an aggregate estimated cost of approximately $ 100 million.

These leases have an aggregate future lease commitment of approximately $ 35 million as of December 31, 2024.

The leases will commence upon completion of construction of the facilities which are expected to be in the later part of 2026.

Each lease term is five years after commencement.

At the end of the leases' terms, we will be required to purchase the facilities or, in the event that option is not elected, to request to extend the leases, or vacate the property and relocate.

Upon each lease commencement, the lease classification, right-of-use asset, and lease liability will be determined and recorded.

Each lease arrangement contains a residual value guarantee of 100 % of the total construction cost.

The synthetic leases contain covenants that are consistent with our Senior Unsecured Credit Agreement.

See Note 18, "Long-Term Obligations" for further information on our Senior Unsecured Credit Agreement.

Other information related to leases is as follows:

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Leased assets obtained in exchange for operating lease liabilities 384 310 159

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Includes leased assets obtained in exchange for operating lease liabilities as a result of the Uni-Select acquisition.

Refer to Note 3, "Business Combinations" for more information.

Employee Benefit Plans

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Funded Status

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Acquisitions and divestitures (1)

Actual return on plan assets 10 —

Employer contributions 7 5

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(1) 2023 activity relates to the Uni-Select acquisition.

Refer to Note 3, "Business Combinations" for more information.

(2) Includes amounts paid from plan assets as well as amounts paid from Company assets.

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Noncurrent liabilities ( 82 ) ( 83 )

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets (in millions):

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Aggregate fair value of plan assets 105 67

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the projected benefit obligation and aggregate fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets (in millions):

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4.3 % 3.1 % 2.8 %

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Our expected long-term return on plan assets is determined based on the asset allocation and estimate of future long-term returns by asset class.

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In some of the European and Canadian plans, a price inflation index is also an assumption in determining benefit obligations and net periodic benefit cost.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, the pretax amounts recognized in Accumulated other comprehensive loss consisted of $ 2 million of net actuarial gains for our defined benefit plans that have not yet been recognized in net periodic benefit cost.

Of this amount, we expect $ 1 million to be recognized as a component of net periodic benefit cost during the year ending December 31, 2024.

Of this amount, we expect an insignificant amount to be recognized as a component of net periodic benefit cost during the year ending December 31, 2025.

Fair Value of Plan Assets

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Balance at end of year $ 62 $ 66

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets for the defined benefit pension plans in Europe are invested primarily in insurance policies.

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the insurance company then funds the pension payments to the plan participants upon retirement.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employer Contributions and Estimated Future Benefit Payments

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Undistributed earnings of our foreign subsidiaries amounted to approximately $ 2,075 million at December 31, 2024.

Beginning in 2018, the Tax Act generally provided a 100 % participation exemption from further U.S.

Beginning in 2018, the Tax Cuts and Jobs Act generally provided a 100 % participation exemption from further U.S.

taxation of dividends received from 10-percent or more owned foreign corporations held by U.S.

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subsidiaries.

Further, the 2017 transition tax reduced a majority of the previous outside basis differences in our foreign subsidiaries, and most of any new differences arising have extensive interaction with the GILTI regime discussed above.

Based on a review of our global financing and capital expenditure requirements as of December 31, 2024, we continue to plan to permanently reinvest the undistributed earnings of our international subsidiaries.

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tax regime, it remains impractical to estimate the amount of deferred taxes potentially payable were such earnings to be repatriated.

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

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

The corporate minimum tax provisions of the IRA did not have a material impact on our financial results.

The impact of the excise tax provisions will be dependent upon the volume of any future stock repurchases, and there was no excise tax due on our 2023 share repurchases.

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

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

While we do not currently expect 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.

We have evaluated the developments and do not anticipate any material impact on our financial position, results of operations, or cash flows.

LKQ CORPORATION AND SUBSIDIARIES

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We have net operating loss carryforwards, primarily for certain international tax jurisdictions, the tax benefits of which totaled approximately $ 38 million and $ 53 million at December 31, 2024 and 2023, respectively.

The $ 34 million increase in net operating loss carryforwards is primarily related to the inclusion of historical loss carryforwards from the acquisition of Uni-Select.

At December 31, 2023 and 2022, we had tax credit carryforwards for certain U.S.

state jurisdictions, the tax benefits of which totaled less than $ 1 million at both dates.

As of December 31, 2023 and 2022, we had interest deduction carryforwards in Italy and Germany, the tax benefits of which totaled $ 32 million and $ 28 million, respectively.

The $ 15 million decrease in net operating loss carryforwards is primarily related to the sale of certain European entities.

At December 31, 2024 and 2023, we had tax credit carryforwards for U.S.

and certain U.S.

state jurisdictions, the tax benefits of which totaled approximately $ 3 million and less than $ 1 million, respectively.

As of December 31, 2024 and 2023, we had interest deduction carryforwards in Italy the tax benefits of which totaled $ 30 million and $ 32 million, respectively.

As of December 31, 2024 and 2023, we had capital loss carryforwards, the tax benefit of which totaled an insignificant amount at both periods.

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net operating loss carryforwards and capital loss carryforwards.

The $ 20 million net increase in valuation allowances was primarily attributable to net operating loss carryforwards and U.S.

capital loss carryforward activity.

The $ 13 million net decrease in valuation allowances was primarily attributable to the change in the net operating loss carryforward previously noted.

LKQ CORPORATION AND SUBSIDIARIES

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The majority of the net operating losses will generally carry forward until 2034 to 2043.

The interest deduction carryforwards in Italy and Germany do not expire.

The interest deduction carryforwards in Italy do not expire.

capital losses can be carried back three years and forward for five years.

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Additions for acquired tax positions — 6 —

Additions based on tax positions related to the current year 10 — —

Additions based on tax positions related to prior years 15 3 2

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Balance at December 31, $ 28 $ 8 $ 5

Included in the balance of unrecognized tax benefits above as of December 31, 2023, 2022 and 2021, are approximately $ 8 million, $ 5 million and $ 4 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The balance of unrecognized tax benefits at December 31, 2023, 2022 and 2021, includes an insignificant amount of tax benefits that, if recognized, would result in adjustments to deferred taxes.

During the twelve months beginning January 1, 2025, it is reasonably possible that we will reduce unrecognized tax benefits by $ 17 million, none of which would impact our effective tax rate.

Included in the balance of unrecognized tax benefits above as of December 31, 2024, 2023 and 2022, are approximately $ 10 million, $ 8 million and $ 5 million, respectively that, if recognized, would affect the effective tax rate.

The balance of unrecognized tax benefits at December 31, 2024 includes $ 18 million, and at both December 31, 2023 and 2022, an insignificant amount of tax benefits that, if recognized, would result in adjustments to deferred taxes.

We recognize interest and penalties accrued related to unrecognized tax benefits as income tax expense.

During the years ended December 31, 2023, 2022 and 2021, we had accumulated interest and penalties of $ 1 million, attributable to the unrecognized tax benefits noted above.

During the years ended December 31, 2023, 2022 and 2021, we recorded $ 1 million or less of interest and penalties through the income tax provision, prior to any reversals for lapses in the statutes of limitations.

During the twelve months beginning January 1, 2024, it is reasonably possible that we will reduce unrecognized tax benefits by $ 3 million, most of which would impact our effective tax rate.

As of the years ended December 31, 2024, 2023 and 2022, we had accumulated interest and penalties of $ 1 million, attributable to the unrecognized tax benefits noted above.

During the years ended December 31, 2024, 2023 and 2022, we recorded $ 1 million or less of interest and penalties through the income tax provision, prior to any reversals for lapses in the statutes of limitations and settlements.

The Company and/or its subsidiaries file income tax returns in the U.S.

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Adjustments from examinations, if any, are not expected to have a material effect on our Consolidated Financial Statements.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of Cash and cash equivalents as reported in the Consolidated Balance Sheets to Cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows (in millions):

December 31, 2024 December 31, 2023

Cash and cash equivalents $ 234 $ 299

Restricted cash included in Other noncurrent assets (1)

Cash, cash equivalents and restricted cash $ 239 $ 299

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

Segment and Geographic Information

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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We are reporting these operating segments separately to provide greater transparency to investors.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present our financial performance by reportable segment for the periods indicated (in millions):

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Total segment revenue $ 5,763 $ 6,407 $ 1,657 $ 532 $ ( 4 ) $ 14,355

Cost of goods sold 3,252 3,953 1,238 305

Selling, general and administrative expenses 1,567 1,855 315 179

Other segment items (2)

( 15 ) ( 35 ) ( 9 ) ( 2 )

Segment EBITDA $ 959 $ 634 $ 113 $ 50 $ — $ 1,756

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Total segment revenue $ 5,282 $ 6,323 $ 1,668 $ 597 $ ( 4 ) $ 13,866

Cost of goods sold 2,796 3,886 1,238 375

Selling, general and administrative expenses 1,535 1,842 305 188

Other segment items (2)

( 24 ) ( 19 ) ( 9 ) ( 2 )

Segment EBITDA $ 975 $ 614 $ 134 $ 36 $ — $ 1,759

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Total segment revenue $ 4,556 $ 5,735 $ 1,791 $ 715 $ ( 3 ) $ 12,794

Cost of goods sold 2,347 3,520 1,270 437

Selling, general and administrative expenses 1,372 1,651 325 196

Other segment items (2)

( 15 ) ( 21 ) ( 3 ) ( 1 )

Segment EBITDA $ 852 $ 585 $ 199 $ 83 $ — $ 1,719

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$ 75 $ 145 $ 30 $ 14 $ — $ 264

(1) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.

Intersegment expenses are included within the amounts shown.

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Amounts primarily represent other non operating income and expenses within each segment, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA.

See Note 13, "Restructuring and Transaction Related Expenses" for additional information on the restructuring charges.

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

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

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

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

The CODM uses Segment EBITDA to compare profitability among the segments and evaluate business strategies.

Segment EBITDA includes revenue and expenses that are controllable by the segment.

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

We calculate Segment EBITDA as Net Income attributable to LKQ stockholders excluding discontinued operations;

depreciation, amortization;

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

income and loss from discontinued operations;

depreciation;

amortization;

gains and losses on debt extinguishment;

income tax expense;

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

restructuring and transaction related expenses;

change in fair value of contingent consideration liabilities;

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impairment charges;

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and direct impacts of the Ukraine/Russia conflict.

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

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Net income from continuing operations attributable to LKQ stockholders 690 942 1,143

Adjustments - continuing operations attributable to LKQ stockholders:

Depreciation and amortization 406 319 264

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Gain on disposal of businesses (4)

Change in fair value of contingent consideration liabilities — — 1

Gains on previously held equity interests — ( 3 ) ( 1 )

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Total capital expenditures $ 311 $ 358 $ 222

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Total assets $ 14,955 $ 15,079

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

We report net receivables;

net property, plant and equipment;

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

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

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

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, Poland, and other European countries.

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

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

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

LKQ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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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-K

Item 8. Financial Statements and Supplementary Data