LKQ CORP 10-Q

Item 1. Financial Statements LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Income (In millions, except per share data) Three Months Ended March 31, 2026 2025 Revenue $ 3,469 $ 3,327 Cost of goods sold 2,138 2,014 Gross margin 1,331 1,313 Selling, general and administrative expenses 994 949 Restructuring and transaction related expenses 33 11 Depreciation and amortization 87 86 Operating income 217 267 Other expense (income): Interest expense 53 57 Interest income and other income, net ( 3 ) ( 10 ) Total other expense, net 50 47 Income from continuing operations before provision for income taxes 167 220 Provision for income taxes 44 61 Equity in losses of unconsolidated subsidiaries 46 1 Income from continuing operations 77 158 Net income from discontinued operations 2 11 Net income $ 79 $ 169 Basic earnings per share: Income from continuing operations $ 0.30 $ 0.61 Net income from discontinued operations 0.01 0.04 Net income $ 0.31 $ 0.65 Diluted earnings per share: Income from continuing operations $ 0.30 $ 0.61 Net income from discontinued operations 0.01 0.04 Net income $ 0.31 $ 0.65 The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 3 LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Comprehensive Income (In millions) Three Months Ended March 31, 2026 2025 Net income $ 79 $ 169 Other comprehensive (loss) income: Foreign currency translation, net of tax ( 71 ) 100 Net change in unrealized gains/losses on pension plans, net of tax — 1 Other comprehensive (loss) income from unconsolidated subsidiaries ( 5 ) 3 Other comprehensive (loss) income ( 76 ) 104 Comprehensive income $ 3 $ 273 The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 4 LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In millions, except per share data) March 31, 2026 December 31, 2025 Assets Current assets: Cash and cash equivalents $ 335 $ 319 Receivables, net of allowance for credit losses 1,456 1,204 Inventories 3,354 3,426 Prepaid expenses and other current assets 330 299 Total current assets 5,475 5,248 Property, plant and equipment, net 1,406 1,452 Operating lease assets, net 1,321 1,332 Goodwill 5,366 5,414 Other intangibles, net 1,032 1,072 Equity method investments 125 170 Other noncurrent assets 414 449 Total assets $ 15,139 $ 15,137 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,937 $ 2,108 Accrued expenses: Accrued payroll-related liabilities 214 190 Refund liability 126 122 Other accrued expenses 380 344 Current portion of operating lease liabilities 254 253 Current portion of long-term obligations 532 32 Other current liabilities 104 88 Total current liabilities 3,547 3,137 Long-term operating lease liabilities, excluding current portion 1,137 1,145 Long-term obligations, excluding current portion 3,313 3,631 Deferred income taxes 325 331 Other noncurrent liabilities 327 332 Commitments and contingencies Stockholders' equity: Common stock, $ 0.01 par value, 1,000.0 shares authorized, 324.2 shares issued and 255.2 shares outstanding at March 31, 2026; 324.0 shares issued and 255.0 shares outstanding at December 31, 2025 3 3 Additional paid-in capital 1,584 1,581 Retained earnings 7,960 7,958 Accumulated other comprehensive loss ( 133 ) ( 57 ) Treasury stock, at cost; 69.0 shares at March 31, 2026 and 69.0 shares at December 31, 2025 ( 2,948 ) ( 2,948 ) Total Company stockholders' equity 6,466 6,537 Noncontrolling interest 24 24 Total stockholders' equity 6,490 6,561 Total liabilities and stockholders' equity $ 15,139 $ 15,137 The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 5 LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Cash Flows (In millions) Three Months Ended March 31, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES (1) : Net income $ 79 $ 169 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 99 100 Impairment on Mekonomen equity method investment 44 — Stock-based compensation expense 9 8 Other 18 2 Changes in operating assets and liabilities, net of effects from acquisitions and dispositions: Receivables ( 271 ) ( 256 ) Inventories 42 ( 86 ) Other assets ( 23 ) ( 12 ) Prepaid income taxes/income taxes payable 15 38 Accounts payable ( 142 ) 8 Other liabilities 75 26 Operating lease assets and liabilities ( 1 ) — Net cash used in operating activities ( 56 ) ( 3 ) CASH FLOWS FROM INVESTING ACTIVITIES (1) : Purchases of property, plant and equipment ( 40 ) ( 54 ) Acquisitions, net of cash acquired ( 5 ) — Other investing activities, net 3 4 Net cash used in investing activities ( 42 ) ( 50 ) CASH FLOWS FROM FINANCING ACTIVITIES (1) : Borrowings under revolving credit facilities 385 392 Repayments under revolving credit facilities ( 175 ) ( 233 ) (Repayments) borrowings of other debt, net ( 8 ) 11 Dividends paid to LKQ stockholders ( 77 ) ( 78 ) Purchase of treasury stock ( 1 ) ( 40 ) Other financing activities, net ( 13 ) ( 12 ) Net cash provided by financing activities 111 40 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 6 ) 5 Net increase (decrease) in cash, cash equivalents and restricted cash 7 ( 8 ) Cash, cash equivalents and restricted cash of continuing operations, beginning of period (2) 332 239 Add: Cash and cash equivalents of discontinued operations, beginning of period — — Cash, cash equivalents and restricted cash of continuing and discontinued operations, beginning of period (2) 332 239 Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period (2) 339 231 Less: Cash and cash equivalents of discontinued operations, end of period — — Cash, cash equivalents and restricted cash, end of period (2) $ 339 $ 231 (1) Amounts presented contain results from both continuing and discontinued operations. Refer to Note 2, "Discontinued Operations" for further information regarding cash flows associated with the results of discontinued operations. (2) See Note 15, "Cash, Cash Equivalents and Restricted Cash" for further information on restricted cash. The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 6 LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Stockholders' Equity (In millions, except per share data) Three Months Ended March 31, 2026 LKQ Stockholders Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity Shares Amount Shares Amount Balance as of January 1, 2026 324.0 $ 3 ( 69.0 ) $ ( 2,948 ) $ 1,581 $ 7,958 $ ( 57 ) $ 24 $ 6,561 Net income — — — — — 79 — — 79 Other comprehensive loss — — — — — — ( 76 ) — ( 76 ) Vesting of restricted stock units, net of shares withheld for employee tax 0.2 — — — ( 6 ) — — — ( 6 ) Stock-based compensation expense — — — — 9 — — — 9 Dividends declared to LKQ stockholders ($0.30 per share) — — — — — ( 77 ) — — ( 77 ) Balance as of March 31, 2026 324.2 $ 3 ( 69.0 ) $ ( 2,948 ) $ 1,584 $ 7,960 $ ( 133 ) $ 24 $ 6,490 Three Months Ended March 31, 2025 LKQ Stockholders Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders' Equity Shares Amount Shares Amount Balance as of January 1, 2025 323.6 $ 3 ( 64.5 ) $ ( 2,787 ) $ 1,556 $ 7,662 $ ( 417 ) $ 15 $ 6,032 Net income — — — — — 169 — — 169 Other comprehensive income — — — — — — 104 — 104 Purchase of treasury stock — — ( 1.0 ) ( 40 ) — — — — ( 40 ) Vesting of restricted stock units, net of shares withheld for employee tax 0.2 — — — ( 6 ) — — — ( 6 ) Stock-based compensation expense — — — — 8 — — — 8 Dividends declared to LKQ stockholders ($0.30 per share) — — — — — ( 78 ) — — ( 78 ) Balance as of March 31, 2025 323.8 $ 3 ( 65.5 ) $ ( 2,827 ) $ 1,558 $ 7,753 $ ( 313 ) $ 15 $ 6,189 The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements. 7 LKQ CORPORATION AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Interim Financial Statements LKQ Corporation, a Delaware corporation, is a holding company and all operations are conducted by subsidiaries. When the terms "LKQ," the "Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries. We have prepared the accompanying Unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") applicable to interim financial statements. Accordingly, certain information related to our significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented. We have reclassified certain prior period amounts in the Unaudited Condensed Consolidated Statements of Income for the presentation of discontinued operations as a result of the sale of our Self Service segment in the prior year as discussed in Note 2, "Discontinued Operations." Results for interim periods are not necessarily indicative of the results that can be expected for any subsequent interim period or for a full year. These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 19, 2026 ("2025 Form 10-K"). Recent Accounting Pronouncements In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 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. In September 2025, the FASB issued ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software." This ASU removes references to software development project stages to better align with current software development methods. Under the ASU, an entity will begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted. This ASU can be adopted either prospectively, retrospectively, or utilizing a modified transition approach. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements. In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements", which amends certain aspects of hedge accounting to more closely align with the economics of an entity’s risk management activities. The amendments include changes to the risk assessment for cash flow hedges, hedging forecasted interest payments on choose-your-rate debt instruments, cash flow hedges of nonfinancial forecasted transactions, net written options as hedging instruments and dual hedges of foreign currency denominated debt instruments. This update is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, though early adoption is permitted. This ASU is required to be adopted prospectively for all hedging relationships, with the option to adopt the amendments for hedging relationships that exist as of the adoption date. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements. 8 Note 2. Discontinued Operations On August 25, 2025, we entered into a definitive agreement to sell our Self Service segment to an affiliate of Pacific Avenue Capital Partners, LLC for an enterprise value of $ 410 million, subject to customary purchase price adjustments. The sale was completed on September 30, 2025. On October 1, 2025, we received the pretax net pro ceeds from the sale and used these proceeds to repay approximately $ 390 million of revolving credit facility borrowings. Accordingly, interest expense attributable to the repaid borrowings has been included in discontinued operations for all periods presented . Additionally, general corporate overhead costs that were historically allocated to the Self Service segment remain within continuing operations for all periods presented. In connection with the transaction, we also entered into a transition services agreement to provide certain post-close support services. These support services, most of which last for up to nine months from the closing date of the sale, are in the areas of human resources, tax, finance, information technology, and operations, among others. The following table summarizes the comparative financial results of discontinued operations which are presented in Net income from discontinued operations in the Unaudited Condensed Consolidated Statements of Income (in millions): Three Months Ended March 31, 2026 2025 Revenue $ — $ 136 Cost of goods sold — 72 Gross margin — 64 Gain on disposal of business (1) ( 3 ) — Selling, general and administrative expenses — 40 Depreciation and amortization — 4 Operating income 3 20 Other expense (income): Interest expense — 5 Interest income and other income, net — ( 1 ) Total other expense, net — 4 Income from discontinued operations before provision for income taxes 3 16 Provision for income taxes 1 5 Net income from discontinued operations $ 2 $ 11 (1) During the three months ended March 31, 2026, we recorded a gain upon finalizing the working capital adjustment for Self Service. The following table summarizes the significant non-cash operating activities and capital expenditures of the Company’s discontinued operations related to the Self Service segment (in millions): Three Months Ended March 31, 2026 2025 Depreciation and amortization $ — $ 4 Gain on disposal of business ( 3 ) — Purchases of property, plant and equipment — 2 Note 3. Allowance for Credit Losses Our allowance for credit losses was $ 63 million and $ 53 million as of March 31, 2026 and December 31, 2025, respectively. The provision for credit losses was $ 16 million and $ 5 million for the three months ended March 31, 2026 and 2025, respectively. 9 Note 4. Intangible Assets Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. During our annual goodwill and indefinite-lived intangible assets impairment test performed in the fourth quarter of 2025 , we determined the carrying value of our Specialty reporting unit exceeded the fair value estimate and an impairment charge was recorded. In connection with our previously announced plan to explore a potential sale of our Specialty reporting unit, we determined that as of March 31, 2026 it was more likely than not, defined as a likelihood of more than 50 percent, though not probable, that the Specialty reporting unit will be sold which constitutes a triggering event. As such, we performed an interim impairment test for our Specialty reporting unit as of March 31, 2026. Based on the results of this interim goodwill impairment test, the Specialty reporting unit had a fair value estimate which exceeded the carrying value by 11 % and, therefore, no further impairment existed. We will continue to monitor each of our reporting units for any risk of future impairments. For our North America and Europe reporting units, we did not identify any triggering events or other indicators of impairment in the first three months of 2026 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment. Note 5. Equity Method Investments The carrying value of our Equity method investments were as follows (in millions): Segment Ownership as of March 31, 2026 March 31, 2026 December 31, 2025 MEKO AB (1) Europe 26.6 % $ 113 $ 157 Other 12 13 Total $ 125 $ 170 (1) Equity in losses and earnings from our investment in MEKO AB ("Mekonomen") are reported on a one quarter lag and are excluded from the calculation of Segment EBITDA. As of March 31, 2026, the Level 1 fair value of our investment in Mekonomen was $ 113 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value. We evaluated our investment in Mekonomen for impairment and concluded that events occurring in Q1 2026 signaled the decline in fair value was other-than-temporary, specifically the change in financial condition, including the significant increase in their leverage ratio and discontinuation of their dividend, in combination with the prolonged significant stock price decrease and operational underperformance due to difficult economic conditions. Therefore, we recognized an other-than-temporary impairment of $ 44 million, which represented the difference in the carrying value and the fair value of our investment in Mekonomen. The fair value of our investment in Mekonomen was determined using the Mekonomen share price of SEK 69 as of March 31, 2026. The impairment charges are recorded in Equity in losses of unconsolidated subsidiaries in our Unaudited Condensed Consolidated Statements of Income. As a result of the impairment charge in the first quarter, the Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at March 31, 2026 approximated the carrying value of $ 113 million. Note 6. Revenue Recognition Disaggregated Revenue We report revenue in two categories: (i) parts and services and (ii) other. Parts revenue is generated from the sale of alternative parts and vehicle products including collision parts, which are typically exterior components used in the collision repair process to restore a vehicle's appearance and safety; hard parts, which are typically internal components that are either mechanical in nature or functional components that are replaced as part of routine maintenance; major mechanical parts; and specialty products and accessories, which are vehicle products that improve the performance, functionality and appearance of vehicles. Services revenue includes additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, and diagnostic and repair services. Other revenue includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from furnace operations; all of which are typically acquired as byproducts of our salvage operations. Revenue from the sale of hulks in our North America segment is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap. 10 The following table sets forth our revenue disaggregated by category and reportable segment (in millions): Three Months Ended March 31, 2026 2025 North America $ 1,341 $ 1,336 Europe 1,613 1,515 Specialty 408 393 Parts and services 3,362 3,244 North America 99 76 Europe 8 7 Other 107 83 Total revenue $ 3,469 $ 3,327 Variable Consideration Amounts related to variable consideration on our Unaudited Condensed Consolidated Balance Sheets are as follows (in millions): Classification March 31, 2026 December 31, 2025 Return asset Prepaid expenses and other current assets $ 67 $ 66 Refund liability Refund liability 126 122 Variable consideration reserve Receivables, net of allowance for credit losses 103 148 Revenue by Geographic Area Our net sales are attributed to geographic area based on the location of the selling operation. The following table sets forth our revenue by geographic area (in millions): Three Months Ended March 31, 2026 2025 Revenue United States $ 1,569 $ 1,545 Germany 481 426 United Kingdom 427 417 Other countries 992 939 Total revenue $ 3,469 $ 3,327 11 Note 7. Restructuring and Transaction Related Expenses Strategic Restructuring and Transformation Initiatives As part of executing our strategy to deliver profitable growth, drive a lean operating model and maximize returns on invested capital, we will, from time to time, engage in restructuring and business transformation initiatives. These initiatives can range in scope from broad changes such as centralizing and standardizing non-customer facing teams and divesting non-strategic assets, to targeted changes such as consolidating underutilized facilities and closing underperforming locations. Executing on these initiatives can take a few months to several years to fully implement depending on the scope and complexity of the initiative. Additionally, initiatives can change or expand based on the information obtained while executing on the initiative and when additional actions are identified. We anticipate we will incur approximately $ 70 million of cost in 2026 executing on the approved actions in connection with this initiative. The following table sets forth the expenses incurred related to our Strategic Restructuring and Transformation Initiatives (in millions): Three Months Ended March 31, Expense Type 2026 2025 (1) Employee related costs $ 18 $ 7 Facility exit costs 10 2 Other costs 2 1 Total $ 30 $ 10 (1) Includes costs previously included in the 2024 Global Plan. Expenses incurred for the three months ended March 31, 2026 were related to the closing of underperforming locations and the elimination of inefficient cost structures primarily in our Europe segment. Acquisition Integration Plans 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. There are no material Acquisition Integration Plans as of March 31, 2026. We incurred expenses totaling $ 1 million for each of the three months ended March 31, 2026 and 2025. Transaction Related Expenses During the three months ended March 31, 2026 and 2025, we incurred expenses totaling $ 2 million and an insignificant amount, respectively, for legal, accounting and advisory services related to completed and potential transactions. Note 8. Earnings Per Share The following chart sets forth the computation of earnings per share (in millions, except per share amounts): Three Months Ended March 31, 2026 2025 Income from continuing operations $ 77 $ 158 Denominator for basic earnings per share—Weighted-average shares outstanding 255.4 259.1 Effect of dilutive securities: Restricted stock units ("RSUs") 0.5 0.5 Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 255.9 259.6 Basic earnings per share from continuing operations $ 0.30 $ 0.61 Diluted earnings per share from continuing operations (1) $ 0.30 $ 0.61 (1) Diluted earnings per share from continuing operations was computed using the treasury stock method for dilutive securities. 12 Note 9. Accumulated Other Comprehensive Income (Loss) The components of Accumulated Other Comprehensive Income (Loss) are as follows (in millions): Three Months Ended March 31, 2026 Foreign Currency Translation Unrealized Gain (Loss) on Cash Flow Hedges (1) Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss) Balance as of January 1, 2026 $ ( 64 ) $ ( 7 ) $ 10 $ 4 $ ( 57 ) Pretax loss ( 71 ) — — — ( 71 ) Other comprehensive loss from unconsolidated subsidiaries — — — ( 5 ) ( 5 ) Balance as of March 31, 2026 $ ( 135 ) $ ( 7 ) $ 10 $ ( 1 ) $ ( 133 ) Three Months Ended March 31, 2025 Foreign Currency Translation Unrealized Gain (Loss) on Cash Flow Hedges (1) Unrealized Gain (Loss) on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss) Balance as of January 1, 2025 $ ( 411 ) $ ( 9 ) $ ( 1 ) $ 4 $ ( 417 ) Pretax income 100 — — — 100 Reclassification of deferred income taxes — — 1 — 1 Other comprehensive income from unconsolidated subsidiaries — — — 3 3 Balance as of March 31, 2025 $ ( 311 ) $ ( 9 ) $ — $ 7 $ ( 313 ) (1) Balances primarily include the forward starting interest rate swaps to hedge the risk of changes in interest rates related to forecasted debt issuance to finance a portion of the Uni-Select Acquisition. These swaps will continue to be reclassified to Interest expense over the term of the 5.75% senior notes due June 2028 (the "U.S. Notes (2028)") and the 6.25% senior notes due June 2033 (the "U.S. Notes (2033)" and together with the U.S. Notes (2028), the "U.S. Notes (2028/2033)"). Please refer to Note 20, "Derivative Instruments and Hedging Activities" in our 2023 Form 10-K for further information. Our policy is to reclassify the income tax effect from Accumulated other comprehensive income (loss) to the Provision for income taxes when the related gains and losses are released to the Unaudited Condensed Consolidated Statements of Income. Note 10. Supply Chain Financing We utilize voluntary supply chain finance programs to support our efforts in negotiating payment term extensions with suppliers as a part of our goal to improve our operating cash flows. As of March 31, 2026 and December 31, 2025, we had $ 457 million and $ 481 million of Accounts payable outstanding under the arrangements, respectively. 13 Note 11. Long-Term Obligations Long-term obligations consist of the following (in millions): March 31, 2026 December 31, 2025 Maturity Date Interest Rate Amount Interest Rate Amount Senior Unsecured Credit Agreement: Term loan payable January 2027 5.14 % $ 500 5.19 % $ 500 Revolving credit facilities December 2030 5.48 % (1) 212 3.13 % (1) 1 Senior Unsecured Term Loan Agreement: Term loan payable March 2029 3.82 % 503 3.81 % 510 Unsecured Senior Notes: U.S. Notes (2028) June 2028 5.75 % 800 5.75 % 800 U.S. Notes (2033) June 2033 6.25 % 600 6.25 % 600 Euro Notes (2028) April 2028 4.13 % 289 4.13 % 294 Euro Notes (2031) March 2031 4.13 % 866 4.13 % 881 Finance lease obligations 5.52 % (1) 101 4.81 % (1) 106 Other debt Various through December 2030 3.76 % (1) 4 3.21 % (1) 3 Total debt 3,875 3,695 Less: long-term debt issuance costs and unamortized bond discounts ( 30 ) ( 32 ) Total debt, net of debt issuance costs and unamortized bond discounts 3,845 3,663 Less: current maturities, net of debt issuance costs ( 532 ) ( 32 ) Long-term debt, net of debt issuance costs and unamortized bond discounts $ 3,313 $ 3,631 (1) Interest rate derived via a weighted average. Cash paid for interest was $ 54 million and $ 60 million for the three months ended March 31, 2026 and 2025, respectively. Note 12. Derivative Instruments and Hedging Activities We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices. Under current policies, we may use derivatives to manage our exposure to variable interest rates on our debt and changing foreign exchange rates for certain foreign currency denominated transactions. We do not hold or issue derivatives for trading purposes. Derivative Instruments Designated as Cash Flow Hedges In February 2023, we entered into interest rate swap agreements to mitigate the risk of changing interest rates on our variable interest rate payments related to borrowings under our Senior Unsecured Credit Agreement. The agreements included a total $ 300 million notional amount that matured in February 2026. Changes in the fair value of the interest rate swaps were recorded in Accumulated other comprehensive loss and reclassified to Interest expense when the hedged interest payments affected earnings. The activity related to the interest rate swaps was classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows as the activity related to normal recurring settlements to match interest payments. As of March 31, 2026, there are no derivative instruments designated as cash flow hedges outstanding. All of our interest rate swap contracts were executed with counterparties that we believe are creditworthy, and we closely monitor the credit ratings of these counterparties. 14 As of December 31, 2025, 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, 2025 Notional Amount Balance Sheet Caption Fair Value - Asset / (Liability) Interest rate swap agreements $ 300 Other accrued expenses $ — The activity related to our cash flow hedges is included in Note 9, "Accumulated Other Comprehensive Income (Loss)." As of March 31, 2026, we estimate that $ 1 million of derivative losses (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Unaudited Condensed Consolidated Statements of Income within the next 12 months. Note 13. Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three months ended March 31, 2026, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The following table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of March 31, 2026 and December 31, 2025 (in millions): March 31, 2026 December 31, 2025 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Investments - debt securities $ 71 $ — $ — $ 71 $ 70 $ — $ — $ 70 Investments - equity securities 19 — — 19 19 — — 19 Total Assets $ 90 $ — $ — $ 90 $ 89 $ — $ — $ 89 Liabilities: Contingent consideration liabilities $ — $ — $ 1 $ 1 $ — $ — $ 3 $ 3 Total Liabilities $ — $ — $ 1 $ 1 $ — $ — $ 3 $ 3 Investments in debt and equity securities relate to our captive insurance subsidiary and are included in Other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. For contingent consideration liabilities, at both March 31, 2026 and December 31, 2025, the entire portion was current and was included in Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired business subsequent to the acquisition. 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. Financial Assets and Liabilities Not Measured at Fair Value Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. The fair value measurements of the borrowings under the credit agreement are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at March 31, 2026 and December 31, 2025 to assume these obligations. The fair values of the U.S. Notes (2028), the U.S. Notes (2033), the 4.13% senior notes due April 2028 (the "Euro Notes (2028)") and the 4.13% senior notes due March 2031 (the "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. 15 Based on market conditions as of March 31, 2026 and December 31, 2025, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $ 712 million and $ 501 million, respectively. As of March 31, 2026 and December 31, 2025, the fair value of the borrowings under the Senior Unsecured Term Loan Credit Agreement ("CAD Note") reasonably approximated the carrying values of $ 503 million and $ 510 million, respectively. The following table provides the carrying and fair value for our other financial instruments as of March 31, 2026 and December 31, 2025 (in millions): As of March 31, 2026 As of December 31, 2025 Carrying Value Fair Value Carrying Value Fair Value U.S. Notes (2028) $ 800 $ 814 $ 800 $ 827 U.S. Notes (2033) 600 618 600 642 Euro Notes (2028) 289 289 294 295 Euro Notes (2031) 866 860 881 902 Note 14. Income Taxes At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our interim earnings. We also record the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates, in the interim period in which they occur. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in state and foreign jurisdictions, permanent and temporary differences between book and taxable income, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. Our effective income tax rate for the three months ended March 31, 2026 was 26.4 %, compared to 27.8 % for the three months ended March 31, 2025. The decrease in the effective tax rate for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is primarily attributable to the 1.2 % year over year favorable impact of discrete items, mostly related to a return to provision adjustment. Net income taxes paid were $ 30 million and $ 31 million for the three months ended March 31, 2026 and 2025, respectively. Note 15. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of Cash and cash equivalents as reported on the Unaudited Condensed Consolidated Balance Sheets to Cash, cash equivalents and restricted cash shown in the Unaudited Condensed Consolidated Statements of Cash Flows (in millions): March 31, 2026 December 31, 2025 Cash and cash equivalents $ 335 $ 319 Restricted cash included in Other noncurrent assets (1) 4 13 Cash, cash equivalents and restricted cash $ 339 $ 332 (1) Represents cash held with our captive insurance subsidiary for payments on self-insured claims. 16 Note 16. Segment and Geographic Information We have three operating segments: North America; Europe; and Specialty, each of which are presented as a reportable segment. The segments are organized based on a combination of geographic regions served and the types of product lines offered. They are managed separately, as each business serves distinct customer bases and is impacted by different economic conditions. The following tables present our financial performance by reportable segment for the periods indicated (in millions): North America Europe Specialty Eliminations Consolidated Three Months Ended March 31, 2026 Revenue: Third Party $ 1,440 $ 1,621 $ 408 $ — $ 3,469 Intersegment — — 1 ( 1 ) — Total segment revenue $ 1,440 $ 1,621 $ 409 $ ( 1 ) $ 3,469 Less: (1) Cost of goods sold 828 1,001 310 Selling, general and administrative expenses 410 500 84 Other segment items (2) ( 1 ) ( 6 ) ( 3 ) Segment EBITDA $ 203 $ 126 $ 18 $ — $ 347 Total depreciation and amortization (3) $ 45 $ 46 $ 8 $ — $ 99 Three Months Ended March 31, 2025 Revenue: Third Party $ 1,412 $ 1,522 $ 393 $ — $ 3,327 Intersegment — — 1 ( 1 ) — Total segment revenue $ 1,412 $ 1,522 $ 394 $ ( 1 ) $ 3,327 Less: (1) Cost of goods sold 785 931 299 Selling, general and administrative expenses 414 459 76 Other segment items (2) ( 4 ) ( 9 ) ( 2 ) Segment EBITDA $ 217 $ 141 $ 21 $ — $ 379 Total depreciation and amortization (3) $ 49 $ 39 $ 8 $ — $ 96 (1) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker ("CODM"). Intersegment expenses are included within the amounts shown. (2) Amounts primarily represent other non operating income and expenses within each segment, as well as a reconciling item to remove depreciation - cost of goods sold, which is excluded from the calculation of Segment EBITDA. (3) Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and transaction related expenses. 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 excluding net income and loss attributable to noncontrolling interest; income and loss from discontinued operations; depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and transaction related expenses; change in fair value of contingent consideration liabilities; other gains and losses related to acquisitions, equity method investments, or divestitures; equity in losses and earnings of unconsolidated subsidiaries; equity investment fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict. 17 The table below provides a reconciliation of Net Income to Segment EBITDA (in millions): Three Months Ended March 31, 2026 2025 Net income $ 79 $ 169 Less: net income from discontinued operations 2 11 Income from continuing operations 77 158 Adjustments: Depreciation and amortization 99 96 Interest expense, net of interest income 48 52 Provision for income taxes 44 61 Equity in losses of unconsolidated subsidiaries (1) 46 1 Equity investment fair value adjustments — ( 1 ) Restructuring and transaction related expenses (2) 33 11 Direct impacts of Ukraine/Russia conflict (3) — 1 Segment EBITDA $ 347 $ 379 (1) See Note 5, "Equity Method Investments" for further information. (2) See Note 7, "Restructuring and Transaction Related Expenses" for further information. (3) Adjustments include provisions for and subsequent adjustments to reserves for asset recoverability (primarily receivables and inventory). The following table presents capital expenditures by reportable segment (in millions): Three Months Ended March 31, 2026 2025 Capital Expenditures North America $ 12 $ 22 Europe 26 27 Specialty 2 3 Total capital expenditures $ 40 $ 52 We re port net receivables; inventories; net property, plant and equipment; 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. 18 The following table presents assets by reportable segment (in millions): March 31, 2026 December 31, 2025 Receivables, net of allowance for credit losses North America $ 534 $ 495 Europe 722 552 Specialty 200 157 Total receivables, net of allowance for credit losses 1,456 1,204 Inventories North America 1,473 1,479 Europe 1,407 1,496 Specialty 474 451 Total inventories 3,354 3,426 Property, plant and equipment, net North America 638 651 Europe 666 695 Specialty 102 106 Total property, plant and equipment, net 1,406 1,452 Operating lease assets, net North America 644 641 Europe 535 544 Specialty 142 147 Total operating lease assets, net 1,321 1,332 Other unallocated assets 7,602 7,723 Total assets $ 15,139 $ 15,137 Our largest countries of operation are the U.S., followed by Germany and the United Kingdom ("U.K."). Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, France and other European countries. Our operations in other countries include wholesale operations in Canada, remanufacturing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, and administrative support functions in India. The following table sets forth our tangible long-lived assets by geographic area (in millions): March 31, 2026 December 31, 2025 Long-lived assets United States $ 1,301 $ 1,313 Germany 354 369 United Kingdom 310 321 Other countries 762 781 Total long-lived assets $ 2,727 $ 2,784 Note 17. Subsequent Event Securities Class Action Lawsuit On April 22, 2026, a purported stockholder of LKQ filed a putative class action against LKQ Corporation and certain of its officers. The complaint generally alleges that LKQ made certain materially false and misleading statements and omitted certain material information regarding LKQ’s acquisition and integration of Uni-Select Incorporated ("Uni-Select") and Uni-Select’s U.S. operating subsidiary FinishMaster, which artificially inflated the market price of LKQ common stock. The complaint seeks, among other things, unspecified compensatory damages. 19