UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

____________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 000-50404

____________________________

LKQ CORPORATION

(Exact name of registrant as specified in its charter)

____________________________

Delaware

36-4215970

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

500 West Madison Street,

Suite 2800

Chicago,

Illinois

60661

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (312) 621-1950

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

LKQ

NASDAQ

Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At October ~~29, 2021~~,27, 2022, the registrant had outstanding an aggregate of ~~291,491,183~~267,174,985 shares of Common Stock.

*****

TABLE OF CONTENTS


Item		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30 , 2022 and 2021	6
	Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30 , 2022 and 2021	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	51
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	53
SIGNATURES		54

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income

(In ~~thousands,~~millions, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue $ 3,296,611 $ 3,047,684 $ 9,902,511 $ 8,674,942
Cost of goods sold 1,953,219 1,849,142 5,849,696 5,251,520
Gross margin 1,343,392 1,198,542 4,052,815 3,423,422
Selling, general and administrative expenses 897,896 813,893 2,648,128 2,451,073
Restructuring and acquisition related expenses 2,525 20,495 15,479 52,415
Impairment of net assets held for sale and (gain) loss on disposal of businesses 822 (503) 240 1,733
Depreciation and amortization 63,995 68,655 194,692 199,897
Operating income 378,154 296,002 1,194,276 718,304
Other expense (income):
Interest expense, net of interest income 15,427 25,182 55,778 76,729
Loss on debt extinguishment — — 23,564 12,751
Other (income) expense, net (2,888) 2,492 (13,412) (9,304)
Total other expense, net 12,539 27,674 65,930 80,176
Income from continuing operations before provision for income taxes 365,615 268,328 1,128,346 638,128
Provision for income taxes 89,340 78,510 290,028 180,790
Equity in earnings of unconsolidated subsidiaries 7,731 4,113 17,028 1,980
Income from continuing operations 284,006 193,931 855,346 459,318
Net loss from discontinued operations — — — (638)
Net income 284,006 193,931 855,346 458,680
Less: net (loss) income attributable to continuing noncontrolling interest (49) 448 754 1,166
Less: net income attributable to discontinued noncontrolling interest — — — 103
Net income attributable to LKQ stockholders $ 284,055 $ 193,483 $ 854,592 $ 457,411
Basic earnings per share: (1)
Income from continuing operations $ 0.97 $ 0.64 $ 2.86 $ 1.51
Net loss from discontinued operations — — — (0.00)
Net income 0.97 0.64 2.86 1.50
Less: net (loss) income attributable to continuing noncontrolling interest (0.00) 0.00 0.00 0.00
Less: net income attributable to discontinued noncontrolling interest — — — 0.00
Net income attributable to LKQ stockholders $ 0.97 $ 0.64 $ 2.86 $ 1.50
Diluted earnings per share: (1)
Income from continuing operations $ 0.96 $ 0.64 $ 2.85 $ 1.51
Net loss from discontinued operations — — — (0.00)
Net income 0.96 0.64 2.85 1.50
Less: net (loss) income attributable to continuing noncontrolling interest (0.00) 0.00 0.00 0.00
Less: net income attributable to discontinued noncontrolling interest — — — 0.00
Net income attributable to LKQ stockholders $ 0.96 0.64 $ 2.85 $ 1.50


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	3,104	$	3,297	$	9,793	$	9,903
Cost of goods sold	1,828		1,953		5,793		5,850

Gross margin	1,276		1,344		4,000		4,053
Selling, general and administrative expenses	861		898		2,683		2,648
Restructuring and transaction related expenses	3		3		10		16
(Gain) on disposal of businesses and impairment of net assets held for sale	(4)		1		(159)		—
Depreciation and amortization	58		64		178		195

Operating income	358		378		1,288		1,194
Other expense (income):
Interest expense, net of interest income	17		16		46		56
Loss on debt extinguishment	—		—		—		24
Other income, net	(6)		(3)		(4)		(15)
Total other expense, net	11		13		42		65
Income from continuing operations before provision for income taxes	347		365		1,246		1,129
Provision for income taxes	88		89		304		290
Equity in earnings of unconsolidated subsidiaries	2		8		8		17
Income from continuing operations	261		284		950		856
Net income from discontinued operations	1		—		5		—
Net income	262		284		955		856
Less: net income attributable to continuing noncontrolling interest	—		—		—		1

Net income attributable to LKQ stockholders	$	262	$	284	$	955	$	855

Basic earnings per share: (1)
Income from continuing operations	$	0.95	$	0.97	$	3.39	$	2.86
Net income from discontinued operations	—		—		0.02		—
Net income	0.96		0.97		3.41		2.86
Less: net income attributable to continuing noncontrolling interest	—		—		—		—

Net income attributable to LKQ stockholders	$	0.96	$	0.97	$	3.41	$	2.86

Diluted earnings per share: (1)
Income from continuing operations	$	0.95	$	0.96	$	3.38	$	2.85
Net income from discontinued operations	—		—		0.02		—
Net income	0.95		0.96		3.40		2.85
Less: net income attributable to continuing noncontrolling interest	—		—		—		—

Net income attributable to LKQ stockholders	$	0.95	$	0.96	$	3.40	$	2.85

(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income

(In ~~thousands)~~millions)

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net income $ 284,006 $ 193,931 $ 855,346 $ 458,680
Less: net (loss) income attributable to continuing noncontrolling interest (49) 448 754 1,166
Less: net income attributable to discontinued noncontrolling interest — — — 103
Net income attributable to LKQ stockholders 284,055 193,483 854,592 457,411
Other comprehensive income (loss):
Foreign currency translation, net of tax (48,139) 70,178 (50,847) (2,453)
Net change in unrealized gains/losses on cash flow hedges, net of tax — 222 869 (7,130)
Net change in unrealized gains/losses on pension plans, net of tax 306 2,803 932 4,798
Other comprehensive income (loss) from unconsolidated subsidiaries 348 (3,162) (520) (4,052)
Other comprehensive income (loss) (47,485) 70,041 (49,566) (8,837)
Comprehensive income 236,521 263,972 805,780 449,843
Less: comprehensive (loss) income attributable to continuing noncontrolling interest (49) 448 754 1,166
Less: comprehensive income attributable to discontinued noncontrolling interest — — — 103
Comprehensive income attributable to LKQ stockholders $ 236,570 $ 263,524 $ 805,026 $ 448,574


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	262	$	284	$	955	$	856
Less: net income attributable to continuing noncontrolling interest	—		—		—		1

Net income attributable to LKQ stockholders	262		284		955		855

Other comprehensive loss:
Foreign currency translation, net of tax	(187)		(48)		(391)		(51)
Net change in unrealized gains/losses on cash flow hedges, net of tax	—		—		—		1
Net change in unrealized gains/losses on pension plans, net of tax	1		—		1		1
Other comprehensive income (loss) from unconsolidated subsidiaries	2		—		4		(1)
Other comprehensive loss	(184)		(48)		(386)		(50)

Comprehensive income	78		236		569		806
Less: comprehensive income attributable to continuing noncontrolling interest	—		—		—		1

Comprehensive income attributable to LKQ stockholders	$	78	$	236	$	569	$	805

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In ~~thousands,~~millions, except ~~share and~~ per share data)

September 30, December 31,
2021 2020
Assets
Current assets:
Cash and cash equivalents $ 402,703 $ 312,154
Receivables, net 1,185,004 1,073,389
Inventories 2,423,853 2,414,612
Prepaid expenses and other current assets 247,838 233,877
Total current assets 4,259,398 4,034,032
Property, plant and equipment, net 1,192,357 1,248,703
Operating lease assets, net 1,341,064 1,353,124
Intangible assets:
Goodwill 4,525,474 4,591,569
Other intangibles, net 755,426 814,219
Equity method investments 178,410 155,224
Other noncurrent assets 208,731 163,662
Total assets $ 12,460,860 $ 12,360,533
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,262,976 $ 932,406
Accrued expenses:
Accrued payroll-related liabilities 255,899 208,718
Refund liability 108,292 102,148
Other accrued expenses 332,046 334,890
Other current liabilities 123,105 130,021
Current portion of operating lease liabilities 203,126 221,811
Current portion of long-term obligations 36,815 58,497
Total current liabilities 2,322,259 1,988,491
Long-term operating lease liabilities, excluding current portion 1,188,984 1,197,963
Long-term obligations, excluding current portion 2,348,448 2,812,641
Deferred income taxes 280,850 291,421
Other noncurrent liabilities 378,385 374,640
Commitments and contingencies
Redeemable noncontrolling interest 24,077 24,077
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,553,252 shares issued and 292,243,742 shares outstanding at September 30, 2021; 320,867,602 shares issued and 303,553,000 shares outstanding at December 31, 2020 3,215 3,208
Additional paid-in capital 1,465,346 1,444,584
Retained earnings 5,630,632 4,776,040
Accumulated other comprehensive loss (148,575) (99,009)
Treasury stock, at cost; 29,309,510 shares at September 30, 2021 and 17,314,602 shares at December 31, 2020 (1,048,809) (469,105)
Total Company stockholders' equity 5,901,809 5,655,718
Noncontrolling interest 16,048 15,582
Total stockholders' equity 5,917,857 5,671,300
Total liabilities and stockholders' equity $ 12,460,860 $ 12,360,533


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	269	$	274
Receivables, net	1,051		1,073
Inventories	2,635		2,611

Prepaid expenses and other current assets	247		296

Total current assets	4,202		4,254
Property, plant and equipment, net	1,169		1,299
Operating lease assets, net	1,193		1,361
Goodwill	4,132		4,540
Other intangibles, net	626		746
Equity method investments	146		181
Other noncurrent assets	198		225
Total assets	$	11,666	$	12,606
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,356	$	1,176
Accrued expenses:
Accrued payroll-related liabilities	224		261
Refund liability	108		107

Other accrued expenses	309		271


Current portion of operating lease liabilities	181		203
Current portion of long-term obligations	50		35
Other current liabilities	123		112

Total current liabilities	2,351		2,165
Long-term operating lease liabilities, excluding current portion	1,066		1,209
Long-term obligations, excluding current portion	2,390		2,777
Deferred income taxes	246		279
Other noncurrent liabilities	312		365
Commitments and contingencies
Redeemable noncontrolling interest	24		24
Stockholders' equity:
Common stock, $0.01 par value, 1,000.0 shares authorized, 322.3 shares issued and 270.1 shares outstanding at September 30, 2022; 321.6 shares issued and 287.0 shares outstanding at December 31, 2021	3		3
Additional paid-in capital	1,499		1,474
Retained earnings	6,536		5,794
Accumulated other comprehensive loss	(539)		(153)
Treasury stock, at cost; 52.2 shares at September 30, 2022 and 34.6 shares at December 31, 2021	(2,237)		(1,346)
Total Company stockholders' equity	5,262		5,772
Noncontrolling interest	15		15
Total stockholders' equity	5,277		5,787
Total liabilities and stockholders' equity	$	11,666	$	12,606

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In ~~thousands)~~

Nine Months Ended
September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 855,346 $ 458,680
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 212,690 220,636
Stock-based compensation expense 24,989 22,851
Loss on debt extinguishment 23,564 12,751
Other (45,836) (10,320)
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net (133,767) (28,622)
Inventories (52,854) 535,348
Prepaid income taxes/income taxes payable (28,680) (22,510)
Accounts payable 378,170 (105,719)
Other operating assets and liabilities 128,406 51,546
Net cash provided by operating activities 1,362,028 1,134,641
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (132,705) (109,949)
Proceeds from disposals of property, plant and equipment 16,177 12,937
Acquisitions, net of cash acquired (66,771) (7,107)
Other investing activities, net (17,543) (2,314)
Net cash used in investing activities (200,842) (106,433)
CASH FLOWS FROM FINANCING ACTIVITIES:
Early-redemption premium (16,014) (9,498)
Repayment of Euro Notes (2026) (883,275) —
Repayment of U.S. Notes (2023) — (600,000)
Borrowings under revolving credit facilities 4,097,517 599,485
Repayments under revolving credit facilities (3,242,394) (949,381)
Repayments under term loans (323,750) (13,125)
Borrowings under receivables securitization facility — 111,300
Repayments under receivables securitization facility — (111,300)
Repayments of other debt, net (18,109) (74,822)
Settlement of derivative instruments, net (88,743) —
Purchase of treasury stock (574,585) (88,006)
Other financing activities, net (16,458) (15,436)
Net cash used in financing activities (1,065,811) (1,150,783)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (4,826) 9,100
Net increase (decrease) in cash, cash equivalents and restricted cash 90,549 (113,475)
Cash and cash equivalents of continuing operations, beginning of period (1)
312,154 528,387
Add: Cash and cash equivalents of discontinued operations, beginning of period — 6,470
Cash and cash equivalents of continuing and discontinued operations, beginning of period 312,154 534,857
Cash and cash equivalents, end of period $ 402,703 $ 421,382
(1) The balance as of January 1, 2020 included restricted cash of $5 million.
millions)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	955	$	856
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	197		212

(Gain) on disposal of businesses and impairment of net assets held for sale	(159)		—
Stock-based compensation expense	31		25
Loss on debt extinguishment	—		24
Other	(22)		(45)
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net	(118)		(134)
Inventories	(349)		(53)
Prepaid income taxes/income taxes payable	63		(29)
Accounts payable	378		378
Other operating assets and liabilities	34		128
Net cash provided by operating activities	1,010		1,362
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(148)		(133)
Proceeds from disposals of property, plant and equipment	5		16
Acquisitions, net of cash acquired	(4)		(67)
Proceeds from disposals of businesses	399		6

Other investing activities, net	(8)		(23)
Net cash provided by (used in) investing activities	244		(201)
CASH FLOWS FROM FINANCING ACTIVITIES:
Early-redemption premium	—		(16)
Repayment of Euro Notes (2026)	—		(883)
Borrowings under revolving credit facilities	1,323		4,098
Repayments under revolving credit facilities	(1,451)		(3,242)
Repayments under term loans	—		(324)



Borrowings (repayments) of other debt, net	9		(18)
Settlement of derivative instruments, net	—		(89)
Dividends paid to LKQ stockholders	(210)		—
Purchase of treasury stock	(872)		(575)
Other financing activities, net	(16)		(17)
Net cash used in financing activities	(1,217)		(1,066)
Effect of exchange rate changes on cash and cash equivalents	(42)		(4)


Net (decrease) increase in cash and cash equivalents	(5)		91
Cash and cash equivalents, beginning of period	274		312
Cash and cash equivalents, end of period	$	269	$	403

Supplemental disclosure of cash paid for:
Income taxes, net of refunds	$	250	$	337
Interest	$	38	$	53

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~

Nine Months Ended
September 30,
2021 2020
Supplemental disclosure of cash paid for:
Income taxes, net of refunds $ 337,149 $ 210,952
Interest 52,889 97,858
Supplemental disclosure of noncash investing and financing activities:
Leased assets obtained in exchange for finance lease liabilities $ 6,240 $ 14,716
Leased assets obtained in exchange for operating lease liabilities 177,948 138,774
Noncash property, plant and equipment and software intangible additions in accounts payable and other accrued expenses 11,241 8,339
Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions and disposals 4,214 4,593
Notes receivable and contingent consideration receivable acquired in connection with disposal of businesses — 8,549
Contingent consideration liabilities 2,135 3,045

~~The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In ~~thousands)~~

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, July 1, 2021 321,260 $ 3,212 (24,972) $ (829,768) $ 1,458,993 $ 5,346,577 $ (101,090) $ 16,085 $ 5,894,009
Net income — — — — — 284,055 — (49) 284,006
Other comprehensive loss — — — — — — (47,485) — (47,485)
Purchase of treasury stock — — (4,338) (219,041) — — — — (219,041)
Vesting of restricted stock units, net of shares withheld for employee tax 293 3 — — (1,843) — — — (1,840)
Stock-based compensation expense — — — — 8,196 — — — 8,196
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — (99) (99)
Disposition of subsidiary with noncontrolling interests — — — — — — — (145) (145)
Foreign currency translation adjustment on noncontrolling interest — — — — — — — 256 256
BALANCE, September 30, 2021 321,553 $ 3,215 (29,310) $ (1,048,809) $ 1,465,346 $ 5,630,632 $ (148,575) $ 16,048 $ 5,917,857
millions, except per share data)

LKQ Stockholders
Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity
Shares Amount Shares Amount
BALANCE, July 1, 2020 320,530 $ 3,205 (16,496) $ (439,819) $ 1,433,338 $ 4,401,545 $ (279,763) $ 29,435 $ 5,147,941
Net income — — — — — 193,483 — 448 193,931
Other comprehensive income — — — — — — 70,041 — 70,041
Vesting of restricted stock units, net of shares withheld for employee tax 300 3 — — (933) — — — (930)
Stock-based compensation expense — — — — 7,088 — — — 7,088
Dividends declared to noncontrolling interest shareholder — — — — — — — (2,485) (2,485)
BALANCE, September 30, 2020 320,830 $ 3,208 (16,496) $ (439,819) $ 1,439,493 $ 4,595,028 $ (209,722) $ 27,398 $ 5,415,586


	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 July 1, 2022	322.0	$	3	(45.4)	$	(1,894)	$	1,492	$	6,344	$	(355)	$	15	$	5,605
Net income	—	—		—	—		—		262		—		—		262
Other comprehensive loss	—	—		—	—		—		—		(184)		—		(184)
Purchase of treasury stock	—	—		(6.8)	(343)		—		—		—		—		(343)
Vesting of restricted stock units, net of shares withheld for employee tax	0.3	—		—	—		(1)		—		—		—		(1)
Stock-based compensation expense	—	—		—	—		8		—		—		—		8

Dividends declared to LKQ stockholders ($0.25 per share)	—	—		—	—		—		(70)		—		—		(70)




Balance as of September 30, 2022	322.3	$	3	(52.2)	$	(2,237)	$	1,499	$	6,536	$	(539)	$	15	$	5,277


	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 July 1, 2021	321.3	$	3	(25.0)	$	(830)	$	1,459	$	5,347	$	(101)	$	17	$	5,895
Net income	—	—		—	—		—		284		—		—		284
Other comprehensive loss	—	—		—	—		—		—		(48)		—		(48)
Purchase of treasury stock	—	—		(4.3)	(219)		—		—		—		—		(219)
Vesting of restricted stock units, net of shares withheld for employee tax	0.3	—		—	—		(2)		—		—		—		(2)
Stock-based compensation expense	—	—		—	—		8		—		—		—		8






Balance as of September 30, 2021	321.6	$	3	(29.3)	$	(1,049)	$	1,465	$	5,631	$	(149)	$	17	$	5,918

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In ~~thousands)~~

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, January 1, 2021 320,868 $ 3,208 (17,315) $ (469,105) $ 1,444,584 $ 4,776,040 $ (99,009) $ 15,582 $ 5,671,300
Net income — — — — — 854,592 — 754 855,346
Other comprehensive loss — — — — — — (49,566) — (49,566)
Purchase of treasury stock — — (11,995) (579,704) — — — — (579,704)
Vesting of restricted stock units, net of shares withheld for employee tax 685 7 — — (4,227) — — — (4,220)
Stock-based compensation expense — — — — 24,989 — — — 24,989
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — (241) (241)
Disposition of subsidiary with noncontrolling interests — — — — — — — (145) (145)
Foreign currency translation adjustment on noncontrolling interest — — — — — — — 98 98
BALANCE, September 30, 2021 321,553 $ 3,215 (29,310) $ (1,048,809) $ 1,465,346 $ 5,630,632 $ (148,575) $ 16,048 $ 5,917,857
millions, except per share data)

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, January 1, 2020 319,927 $ 3,199 (13,196) $ (351,813) $ 1,418,239 $ 4,140,136 $ (200,885) $ 39,704 $ 5,048,580
Net income — — — — — 457,411 — 1,269 458,680
Other comprehensive loss — — — — — — (8,837) — (8,837)
Purchase of treasury stock — — (3,300) (88,006) — — — — (88,006)
Vesting of restricted stock units, net of shares withheld for employee tax 791 8 — — (3,063) — — — (3,055)
Stock-based compensation expense — — — — 22,851 — — — 22,851
Exercise of stock options 112 1 — — 1,466 — — — 1,467
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — (2,171) (2,171)
Adoption of ASU 2016-13 — — — — — (2,519) — — (2,519)
Disposition of subsidiary with noncontrolling interests(1)
— — — — — — — (11,404) (11,404)
BALANCE, September 30, 2020 320,830 $ 3,208 (16,496) $ (439,819) $ 1,439,493 $ 4,595,028 $ (209,722) $ 27,398 $ 5,415,586


	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, 2022	321.6	$	3	(34.6)	$	(1,346)	$	1,474	$	5,794	$	(153)	$	15	$	5,787
Net income	—	—		—	—		—		955		—		—		955
Other comprehensive loss	—	—		—	—		—		—		(386)		—		(386)
Purchase of treasury stock	—	—		(17.6)	(891)		—		—		—		—		(891)
Vesting of restricted stock units, net of shares withheld for employee tax	0.7	—		—	—		(6)		—		—		—		(6)
Stock-based compensation expense	—	—		—	—		31		—		—		—		31

Dividends declared to LKQ stockholders ($0.75 per share)	—	—		—	—		—		(213)		—		—		(213)




Balance as of September 30, 2022	322.3	$	3	(52.2)	$	(2,237)	$	1,499	$	6,536	$	(539)	$	15	$	5,277

~~(1)~~
~~The amount disposed of during 2020 relates to discontinued operations. See Note 2, "Discontinued Operations," for further details.~~


	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, 2021	320.9	$	3	(17.3)	$	(469)	$	1,444	$	4,776	$	(99)	$	16	$	5,671
Net income	—	—		—	—		—		855		—		1		856
Other comprehensive loss	—	—		—	—		—		—		(50)		—		(50)
Purchase of treasury stock	—	—		(12.0)	(580)		—		—		—		—		(580)
Vesting of restricted stock units, net of shares withheld for employee tax	0.7	—		—	—		(4)		—		—		—		(4)
Stock-based compensation expense	—	—		—	—		25		—		—		—		25






Balance as of September 30, 2021	321.6	$	3	(29.3)	$	(1,049)	$	1,465	$	5,631	$	(149)	$	17	$	5,918

The accompanying notes are an integral part of the ~~unaudited condensed consolidated financial statements.~~Unaudited Condensed Consolidated Financial Statements.

LKQ CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Interim Financial Statements

~~The accompanying unaudited condensed consolidated financial statements represent the consolidation of~~

LKQ Corporation, a Delaware corporation, ~~and its subsidiaries. LKQ 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~~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~~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.

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, ~~2020~~2021 filed with the SEC on February ~~26,~~ 25, 2022 ("2021 ~~("2020~~ Form 10-K").

~~The coronavirus disease 2019 ("COVID-19") pandemic and~~

In the ~~resulting governmental actions taken to control~~current year, we changed the virus have impacted, and are expected to continue to impact, our business in 2020 and 2021. The effects include, but are not limited to, a reduction in demand for our products and services relative to 2019, liquidity challenges for certainpresentation of our ~~customers~~Unaudited Condensed Consolidated Financial Statements from thousands to millions and, ~~suppliers, and organizational changes, such~~ as ~~personnel reductions and route consolidation undertaken mostly in 2020, driven by cost actions~~a result, any necessary rounding adjustments have been made to mitigate the revenue decline. We have considered COVID-19 impacts in the preparation of our financial statements and footnotes. Specific disclosures are presented in the following footnotes as applicable.

The continuing impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the severity and duration of the pandemic and the related impact on the global economy, which are uncertain and cannot be predicted at this time, but may be material.prior year disclosed amounts.

~~Note 2. Discontinued Operations~~

On May 30, 2018, we acquired Stahlgruber GmbH ("Stahlgruber"), a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, Austria, Italy, Slovenia, and Croatia, with further sales to Switzerland. Prior to closing, on May 3, 2018, the European Commission cleared the acquisition of Stahlgruber for the entire European Union, except with respect to the wholesale automotive parts business in the Czech Republic. The acquisition of Stahlgruber’s Czech Republic wholesale business was referred to the Czech Republic competition authority for review. On May 10, 2019, the Czech Republic competition authority approved our acquisition of Stahlgruber’s Czech Republic wholesale business subject to the requirement that we divest certain of the acquired locations. We acquired Stahlgruber’s Czech Republic wholesale business on May 29, 2019 and decided to divest all of the acquired locations. We immediately classified the business as discontinued operations because the business was never integrated into our Europe segment.

We completed the sale of Stahlgruber's Czech Republic business on February 28, 2020, resulting in an immaterial loss on sale (presented in Net loss from discontinued operations in the Unaudited Condensed Consolidated Statements of Income). As part of the transaction, we purchased the 48.2% noncontrolling interest from the minority shareholder for a purchase price of €8 million, which included the issuance of €4 million of notes payable, and then immediately thereafter sold 100% of the business for a purchase price of €14 million, which included €7 million of notes receivable. This transaction resulted in a disposition of noncontrolling interest of $11 million. From January 1, 2020 through the date of sale, we recorded an immaterial amount of net income (excluding the loss on sale) from discontinued operations related to the business, of which an immaterial amount was attributable to the noncontrolling interest.

Note 3.2. Financial Statement Information

Allowance for Credit Losses

Receivables, net are reported net of an allowance for credit losses. Management evaluates the aging of customer receivable balances, the financial condition of our customers, historical trends, and macroeconomic factors to estimate the

amount of customer receivables that may not be collected in the future and records a provision it believes is appropriate. Our reserve for expected ~~lifetime~~ credit losses was ~~$63~~$51 million and ~~$70~~$53 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~Bad debt expense totaled $3~~The provision for credit losses was insignificant for both the three months ended September 30, 2022 and 2021 and $9 million and ~~$23~~$3 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Inventories

Inventories consist of the following (in ~~thousands)~~millions):


		September 30,		December 31,
		2021		2020			September 30, 2022		December 31, 2021
Aftermarket and refurbished products	Aftermarket and refurbished products	$	2,004,516	$	2,025,002	Aftermarket and refurbished products	$	2,167	$	2,168
Salvage and remanufactured products	Salvage and remanufactured products	388,769		368,815		Salvage and remanufactured products	423		406
Manufactured products	Manufactured products	30,568		20,795		Manufactured products	45		37
Total inventories	Total inventories	$	2,423,853	$	2,414,612	Total inventories	$	2,635	$	2,611

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods. As of September 30, ~~2021,~~2022, manufactured products inventory was composed of ~~$24~~$26 million of raw materials, $5$6 million of work in process, and $1$13 million of finished goods. As of December 31, ~~2020,~~2021, manufactured products inventory was composed of ~~$16~~$27 million of raw materials, $3$4 million of work in process, and $2$5 million of finished goods.

Divestitures

In March 2022, we entered into a definitive agreement to sell PGW Auto Glass (“PGW”), our aftermarket glass business within our Wholesale - North America segment, to a third party. The sale was completed in April 2022 for $361 million resulting in recognition of a $155 million pretax gain ($127 million after tax). 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).

Discontinued Operations

For the three months ended September 30, 2022, we recorded a $1 million benefit related to the settlement of a previously recorded use tax liability connected to a disposed business. For the nine months ended September 30, 2022, we recorded a $5 million benefit primarily related to the reassessment of a previously recorded valuation allowance on a deferred tax asset connected to a disposed business.

Intangible Assets

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. We performed our annual impairment test during the fourth quarter of ~~2020,~~2021, and we determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least ~~30%~~70%. The fair value estimates of our reporting units were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach. Goodwill impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment. We did not identify ~~a triggering event~~any indicators of impairment in ~~2021~~the first nine months of 2022 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

Investments in Unconsolidated Subsidiaries

~~Our investment~~

We account for our Investments in unconsolidated subsidiaries ~~was $178 million and $155 million as of September 30, 2021 and December 31, 2020, respectively.~~

~~Europe Segment~~

Our investment in unconsolidated subsidiaries in Europe was $155 million and $137 million as of September 30, 2021 and December 31, 2020, respectively. We recorded equity in earnings of $4 million and $13 million during the three and nine months ended September 30, 2021, respectively, and equity in earnings of $4 million and $5 million during the three and nine months ended September 30, 2020, respectively, mainly related to our investment in Mekonomen AB ("Mekonomen").

~~We are accounting for our 26.6% equity interest in Mekonomen~~ using the equity method of accounting, as our ~~investment gives~~investments give us the ability to exercise significant influence, but not control, over the investee.

The carrying value of our Investments in unconsolidated subsidiaries were as follows (in millions):


	Ownership as of September 30, 2022	September 30, 2022		December 31, 2021
MEKO AB(1)(2)	26.6%	$	134	$	145
Other(3)		12		36
Total		$	146	$	181

(1) As of September 30, ~~2021,~~2022, the fair value of our investment in MEKO AB ("Mekonomen") was $135 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value.

(2) As of September 30, 2022, our share of the book value of Mekonomen's net assets exceeded the book value of our investment ~~in Mekonomen~~ by $8 million; this difference is primarily related to Mekonomen's Accumulated Other Comprehensive Income balance as of our acquisition date in 2016. We ~~are recording~~record our equity in the net earnings of Mekonomen on a one quarter lag.

~~Mekonomen announced in March 2020 and February 2021, respectively, that the Mekonomen Board of Directors proposed no dividend payment in 2020 or 2021. The Level 1 fair value of our equity~~(3) In June 2022, we sold an investment in ~~the publicly traded Mekonomen common stock at September 30, 2021 was $271 million (using the Mekonomen share price of SEK 156 as of September 30, 2021) compared~~our Self Service segment resulting in a decrease to athe carrying value of ~~$144 million.~~

~~North America Segment~~

~~Our investment in unconsolidated subsidiaries in the North America segment was $24~~$22 million, and $19 million as of September 30, 2021 and December 31, 2020, respectively. We recorded equity in earnings of $3 million and $4 million during the three and nine months ended September 30, 2021, respectively, and equity in earnings ofrecognizing an ~~immaterial amount and equity in losses of $3 million during the three and nine months ended September 30, 2020, respectively, related to our North America equity method investments.~~insignificant gain upon sale.

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. These assurance-type warranties are not considered a separate performance obligation, and thus no transaction price is allocated to them. We record ~~the~~ warranty costs in Cost of goods sold in our Unaudited Condensed Consolidated Statements of Income. 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 Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.

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


	Warranty Reserve
Balance as of December 31, ~~2020~~2021	$	~~27,914~~30
Warranty expense	~~56,254~~56
Warranty claims	~~(53,239)~~(55)


Balance as of September 30, ~~2021~~2022	$	~~30,929~~31

Litigation and Related Contingencies

We have certain contingencies resulting from litigation, claims and other commitments and are subject to a variety of environmental and pollution control laws and regulations incident to the ordinary course of business. We currently expect that the resolution of such contingencies will not materially affect our financial position, results of operations or cash flows.

~~Government Assistance~~

During the three and nine months ended September 30, 2021 and 2020, we recorded financial assistance from foreign governments, primarily in the form of grants, as credits in the following amounts (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Cost of goods sold $ 163 $ 695 $ 526 $ 1,165
Selling, general and administrative expenses 884 11,754 15,121 43,928
Total government assistance $ 1,047 $ 12,449 $ 15,647 $ 45,093

~~For the~~
~~nine months ended~~ ~~September 30, 2021 and 2020, we received grants from European governments of $11 million and $38 million, respectively, with the remaining amounts related to Canada.~~

Financial assistance received from governments is recorded during the period in which we incur the costs that the assistance is intended to offset (and only if it is probable that we will meet the conditions required under the terms of the assistance).

~~Leases - Cash Flow Disclosure~~

The amount disclosed for Leased assets obtained in exchange for operating lease liabilities for the nine months ended September 30, 2020 in the supplemental disclosure of noncash investing and financing activities in the Unaudited Condensed Consolidated Statements of Cash Flows includes an immaterial correction of $81 million to address an omission of the impact of lease modifications and terminations.

Stockholders' Equity

Treasury Stock

~~As of June 30, 2021, our~~

Our Board of Directors ~~had~~has authorized a stock repurchase program under which we ~~were~~are able to purchase ~~up to $1.0 billion of~~ our common stock from time to time through October 25, 2022. On July 28, 2021, our Board of Directors authorized a $1.0 billion increase and a two year extension to our stock repurchase program, raising the aggregate authorization under the program to $2.0 billion and authorizing repurchases through October 25, 2024.time. Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. Repurchased shares are accounted for as treasury stock using the cost method. On May 10, 2022, our Board of Directors authorized a $500 million increase to our existing stock repurchase program to $2,500 million. On October 25, 2022, our Board of Directors authorized an additional $1,000 million increase to our existing stock repurchase program, raising the aggregate program authorization to $3,500 million, and extended the duration through October 25, 2025.

During the three and nine months ended September 30, 2022, we repurchased 6.8 million and 17.6 million shares of common stock, respectively, for an aggregate price of $343 million and $891 million, respectively. During the three and nine months ended September 30, 2021, we repurchased 4.3 million and 12.0 million shares of common stock, respectively, for an aggregate price of $219 million and $580 million, respectively. During the nine months ended September 30, 2020, we repurchased 3.3 million shares of common stock for an aggregate price of $88 million; we did not repurchase any shares during the three months ended September 30, 2020. As of September 30, ~~2021,~~2022, there was ~~$951~~$263 million of remaining capacity under our repurchase program.

Noncontrolling Interest

~~In February 2020, as part of the sale of Stahlgruber's Czech Republic business, we divested the~~

We present redeemable noncontrolling interest ~~of the business, which resulted in a net decrease~~on our balance sheet related to ~~Noncontrolling interest of $11 million in our unaudited condensed consolidated financial statements as of March 31, 2020. See Note 2, "Discontinued Operations," for further information.~~

~~In December 2019, we modified the shares of a noncontrolling interest of a subsidiary acquired in connection with the Stahlgruber acquisition and issued new~~ redeemable shares issued to ~~the~~a minority ~~shareholder.~~shareholder in conjunction with a previous acquisition. The ~~new~~ redeemable shares contain (i) a put option for all noncontrolling interest shares at a fixed price of $24 million (€21 million) for the minority shareholder exercisable in the fourth quarter of 2023, (ii) a call option for all noncontrolling interest shares at a fixed price of $26 million (€23 million) for ~~the Company~~us exercisable beginning in the first quarter of 2026 through the end of the fourth quarter of 2027, and (iii) a guaranteed dividend to be paid quarterly to the minority shareholder through the fourth quarter of 2023. The ~~new~~ redeemable shares do not provide the minority shareholder with rights to participate in the profits and losses of the subsidiary prior to the exercise date of the put option. As the put option is outside ~~the~~our control, ~~of the Company,~~ we recorded a $24 million Redeemable noncontrolling interest at the put option's redemption value outside of permanent equity on our Unaudited Condensed Consolidated Balance Sheets.

Recent Accounting Pronouncements

~~Recently Adopted Accounting Pronouncements~~

In the first quarter of 2021, we adopted ASU No. 2019-12, "Income Taxes" (Topic 740) ("ASU 2019-12"), which simplifies the accounting for income taxes and adds guidance to reduce complexity in certain areas. We adopted the standard in the first quarter using the prospective approach. The adoption of this accounting standard did not have a material impact on our unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In ~~March 2020,~~September 2022, the ~~FASB~~Financial Accounting Standards Board issued ~~ASU~~Accounting Standards Update No. ~~2020-04, "Reference Rate Reform (Topic 848)~~2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): ~~Facilitation~~Disclosure of ~~the Effects of Reference Rate Reform on Financial Reporting"~~Supplier Finance Program Obligations” ("ASU ~~2020-04"~~2022-04"), which ~~provides temporary optional guidance~~requires the buyer in a supplier finance program to ~~ease~~disclose certain information about their program, including key terms, balance sheet presentation of amounts, outstanding amounts at the ~~potential burden in accounting~~end of each period, and rollforwards of balances. ASU 2022-04 is effective for ~~reference rate reform. ASU 2020-04 provides optional expedients and exceptions~~fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods within those fiscal years, except for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transferthe disclosure of ~~debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the~~rollforward information, which is effective prospectively for fiscal years beginning ~~of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until~~after December ~~31, 2022.~~15, 2023. We are currently evaluating the impact ~~of this standard~~ASU 2022-04 will have on our ~~consolidated financial statements and related disclosures, and we have not yet elected an adoption date.~~Consolidated Financial Statements.

Note 4.3. Revenue Recognition

The majority of our revenue is derived from the sale of vehicle parts. We recognize revenue for the sale of products at the point in time when the ~~products are shipped to, delivered to or picked up by customers, which is the point when title~~performance obligation has been satisfied and control has transferred ~~and risk~~to the customer, which generally occurs upon shipment or delivery to a customer based on terms of ~~ownership has passed.~~the sale.

~~Sources of Revenue~~

1211

Sources of Revenue

We report our revenue in two categories: (i) parts and services and (ii) other. The following table sets forth our revenue by category, ~~with our parts and services revenue further~~ disaggregated by reportable segment (in ~~thousands)~~millions):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
North America $ 1,076,599 $ 1,007,001 $ 3,172,207 $ 3,007,169
Europe 1,519,682 1,479,174 4,544,749 4,043,473
Specialty 465,027 399,554 1,454,389 1,150,962
Parts and services 3,061,308 2,885,729 9,171,345 8,201,604
Other 235,303 161,955 731,166 473,338
Total revenue $ 3,296,611 $ 3,047,684 $ 9,902,511 $ 8,674,942


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Wholesale - North America	$	1,026	$	1,025	$	3,182	$	3,018
Europe	1,376		1,520		4,327		4,545
Specialty	452		465		1,424		1,454
Self Service	55		51		172		154
Parts and services	2,909		3,061		9,105		9,171
Wholesale - North America	82		87		271		263
Europe	4		5		18		20

Self Service	109		144		399		449
Other	195		236		688		732
Total revenue	$	3,104	$	3,297	$	9,793	$	9,903

Parts and Services

~~Our parts~~

Parts revenue is generated from the sale of vehicle products including replacement parts, components and systems used in the repair and maintenance of vehicles and specialty products and accessories to improve the performance, functionality and appearance of vehicles. 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.

For Wholesale - North America ~~our~~and Self Service, vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; ~~automotive glass products such as windshields; mirrors and~~mirrors; grilles; wheels; and large mechanical items such as engines and transmissions. InFor Europe, ~~our~~vehicle replacement products include a wide variety of small mechanical products such as brake pads, discs and sensors; clutches; electrical products such as spark plugs and batteries; steering and suspension products; filters; and oil and automotive fluids. InFor our Specialty operations, we serve ~~six~~seven product segments: truck and off-road; speed and performance; recreational vehicles; towing; wheels, tires and performance handling; marine; and miscellaneous accessories.

Our service-type warranties typically have service periods ranging from 6 months to 36 months. Proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period. The changes in deferred service-type warranty revenue are as follows (in ~~thousands)~~millions):


	Service-Type Warranties
Balance as of January 1, ~~2021~~2022	$	~~25,622~~32
Additional warranty revenue deferred	~~51,159~~44
Warranty revenue recognized	~~(45,034)~~(43)
Balance as of September 30, ~~2021~~2022	$	~~31,747~~33

Other Revenue

Revenue from other sources ~~includes~~include 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 ~~our~~ furnace operations. We derive scrap metal and other precious metals from several sources in both our Wholesale - North America and Self Service segments, including vehicles that have been used in ~~both~~ our ~~wholesale and self service~~ recycling operations and vehicles from original equipment manufacturers ("OEMs") and other entities that contract with us for secure disposal of "crush only" vehicles. Revenue from the sale of hulks in our ~~wholesale~~Wholesale - North America and ~~self service recycling operations~~Self Service segments is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap. ~~Some adjustments may occur when the customer weighs the scrap at their location, and revenue is adjusted accordingly.~~

Revenue by Geographic Area

See Note ~~14,~~13, "Segment and Geographic Information" for information related to our revenue by geographic region.

Variable Consideration

The amount of revenue ultimately received from the customer can vary due to variable consideration including returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items. ~~Under FASB Accounting Standards Codification Topic 606 ("ASC 606"),we are required to select~~We utilize the “expected value method” or the “most

likely amount” method in order to estimate variable ~~consideration. We utilize both methods in practice~~consideration, depending on the type of variable consideration, with contemplation of any expected reversals in revenue. We recorded a refund liability and return asset for expected returns of $108 million and ~~$59~~$58 million, respectively, as of September 30, ~~2021,~~2022, and ~~$102~~$107 million and ~~$57~~$58 million, respectively, as of December 31, ~~2020.~~2021. The refund liability is presented separately on the Unaudited Condensed Consolidated Balance Sheets within current liabilities while the return asset is presented within Prepaid expenses and other current assets. Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives that are recorded in Receivables, net on the Unaudited Condensed Consolidated Balance Sheets. We recorded a reserve for our variable consideration of ~~$131~~$120 million and ~~$127~~$144 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions. We consider these programs to be immaterial to our unaudited condensed consolidated financial statements.

Note 5.4. Restructuring and ~~Acquisition~~Transaction Related Expenses

~~2019~~

Global Restructuring ~~Program~~Programs

In ~~the second quarter of~~ 2019, we commenced a cost reduction initiative, covering all ~~three~~ of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. This program 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 and expect to incur 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.

During the three and nine months ended September 30, ~~2020,~~2022, we incurred restructuring expenses totaling $1 million and $6$2 million, respectively, ~~of restructuring expenses under this program,~~ primarily related to employee-related costs and facility exit costs ~~and employee-related costs in our Europe and North America segments.~~

~~The actions~~ under this program are substantially complete, and the expenses incurred during the three and nine months ended September 30, 2021 were immaterial. The total cumulative program costs incurred to date were $47 million, of which $31 million, $14 million and $1 million were in our Europe, North America and Specialty segments, respectively. As of September 30, 2021, the remaining expected costs and restructuring liabilities related to this program were immaterial.

~~2020 Global Restructuring Program~~

Beginning in the first quarter of 2020, we initiated a further restructuring program aimed at cost reductions across all our reportable segments through the elimination of underperforming assets and cost inefficiencies. These actions are incremental to those initiated as part of the 2019 Global Restructuring Program, and include 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 expanded this program during the second and third quarters of 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to our business from COVID-19.

these programs. During the three and nine months ended September 30, 2021, we recognized net restructuring expenses ~~of $1~~totaling $2 million and $7$9 million, respectively, which included employee-related costs, facility exit costs, and a $3 million gain in the first quarter from the sale of a building to be closed as part of the restructuring plan. During the three and nine months ended September 30, 2020, we recognized restructuring expenses totaling $10 million and $38 million, respectively, for employee-related costs, facility exit costs and inventory write-downs.closed. Of the cumulative program costs incurred to date, ~~$29~~$59 million, ~~$26~~$43 million, $2 million and $1$2 million related to our Europe, Wholesale - North America, ~~Europe~~Specialty and ~~Specialty~~Self Service segments, respectively. The actions under the 2019 Global Restructuring Program are substantially complete and the 2020 Global Restructuring Program is expected to be completed in 2023. We estimate total costs under the ~~program~~programs through ~~its~~their expected completion ~~date in 2023~~dates will be between ~~$60~~$108 million and ~~$70~~$115 million, of which approximately ~~$33~~$63 million, ~~$32~~$44 million, $2 million and $1$2 million will be incurred by our Europe, Wholesale - North America, Specialty and ~~Specialty~~Self Service segments, respectively; these segment amounts represent the approximate midpoints of the expected ranges of costs to be incurred by each segment.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, restructuring liabilities incurred related to ~~this program~~these programs totaled ~~$13~~$10 million and ~~$21~~$14 million, respectively, including ~~$10~~$6 million and ~~$17~~$9 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets)~~, and $2 million and $4 million, respectively, for employee termination costs (reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets)~~. Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed ~~through the third quarter~~as of ~~2021~~September 30, 2022 and after our planned exit date for facilities we expect to close in future periods; these liabilities do not reflect any estimated proceeds we may be able to achieve through subleasing the facilities.

Acquisition Integration Plans

~~During~~

We incurred $2 million of restructuring expenses for the ~~three and~~ nine months ended September 30, ~~2021, we incurred immaterial restructuring~~2022, primarily related to the integration of acquisitions completed in our Europe segment. We did not incur a significant amount of expenses for ~~our acquisition integration plans.~~the three months ended September 30, 2022. We expect to incur future expenses of up to $5 million to complete an integration plan related to 2021 acquisitions completed in our Specialty ~~segment during the nine months ended September 30, 2021.~~segment.

During the three and nine months ended September 30, ~~2020,~~2021, we ~~incurre~~d ~~$2 million~~ ~~and~~ ~~$8 million~~did not incur a significant amount of restructuring expenses ~~respectively,~~ for our acquisition integration plans. ~~These expenses were primarily related to the integ~~

~~ration of our operations in Belgium.~~

1 LKQ Europe Program

In ~~September~~ 2019, we announced a multi-year program called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business. Under the 1 LKQ Europe program, we ~~will reorganize~~are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. While certain projects were delayed in 2020 as a result of the COVID-19 pandemic, such as our procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe. We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by ~~2024.~~the end of 2025.

During the three and nine months ended September 30, 2022, we incurred $1 million of employee-related charges under our 1 LKQ Europe program. During the nine months ended September 30, 2021, we incurred $6 million of employee-related restructuring ~~charges under our 1 LKQ Europe program; costs incurred in~~charges. We did not incur a significant amount of expenses for the three months ended September 30, ~~2021 were immaterial.~~2021. We estimate that we will incur between $40 million and $50 million in total personnel and inventory-related restructuring charges through ~~2024~~2025 under the program. We may identify additional initiatives and projects under the 1 LKQ Europe program in future periods that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. As of September 30, ~~2021,~~2022, the restructuring liabilities related to this program were ~~immaterial.~~insignificant.

~~Acquisition~~

Transaction Related Expenses

~~We incurred immaterial acquisition related expenses in each of~~

During the three and nine months ended September 30, ~~2021.~~2022, we incurred $1 million and $5 million of transaction related expenses, respectively. During the three and nine months ended September 30, 2021, we incurred $1 million of transaction related expenses. These expenses included external costs such as legal, accounting and advisory fees related to completed and potential transactions.

During the three and nine months ended September 30, 2020, we incurred $8 million of acquisition related expenses, primarily related to the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.

Note 6.5. Stock-Based Compensation

~~In order~~

RSUs

The following table summarizes activity related to ~~attract and retain employees, non-employee directors, consultants, and other persons associated with us, we grant equity-based awards~~our restricted stock units ("RSUs") under the LKQ Corporation 1998 Equity Incentive Plan (the ~~“Equity~~"Equity Incentive ~~Plan”~~Plan"). We have granted restricted stock units ("RSUs"), stock options, and restricted stock under the Equity Incentive Plan. We expect to issue new or treasury shares of common stock to cover past and future equity grants.

~~RSUs~~

The RSUs we have issued vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs (other than PSUs, which are described below) contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case both conditions must be met before any RSUs vest. For all of the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant date. Each RSU converts into one share of LKQ common stock on the applicable vesting date. 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; 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 the Company’s common stock. The dividend equivalents are subject to the same vesting requirements, restrictions and forfeiture provisions as the original award.

~~The fair value of RSUs that vested during the nine months ended September 30, 2021 was $34 million; the fair value of RSUs vested is based on the market price of LKQ stock on the date vested.~~

~~The following table summarizes activity related to our RSUs under the Equity Incentive Plan~~ for the nine months ended September 30, ~~2021:~~2022 (in millions, except years and per share amounts):


		Number Outstanding	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) (1)			Number Outstanding	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1)
Unvested as of January 1, 2021		1,479,672	$	31.71
Unvested as of January 1, 2022								Unvested as of January 1, 2022	1.4	$	34.85
Granted (2)	Granted (2)	732,527	$	39.12				Granted (2)	0.7	$	49.04
Vested	Vested	(758,268)	$	32.86				Vested	(0.7)	$	37.03
Forfeited / Canceled	Forfeited / Canceled	(46,552)	$	34.39				Forfeited / Canceled	(0.1)	$	42.99
Unvested as of September 30, 2021		1,407,379	$	34.86
Expected to vest after September 30, 2021		1,215,271	$	34.89	2.9	$	61,152
Unvested as of September 30, 2022								Unvested as of September 30, 2022	1.3	$	40.89
Expected to vest after September 30, 2022								Expected to vest after September 30, 2022	1.1	$	41.23	2.8	$	52

(1) The aggregate intrinsic value of expected to vest RSUs represents the total pretax intrinsic value (the fair value of ~~the Company's~~LKQ's stock on the last day of ~~each~~the period multiplied by the number of units) that would have been received by the holders had all the expected to vest RSUs vested. This amount changes based on the market price of ~~the Company’s~~LKQ’s common stock.

(2) The weighted average grant date fair value of RSUs granted during the nine months ended September 30, ~~2020~~2021 was ~~$31.67.~~$39.12.

~~Starting in 2019, we granted performance-based three-year~~

The fair value of RSUs ~~("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan. As these awards are performance-based,~~that vested during the ~~exact number~~nine months ended September 30, 2022 was $36 million; the fair value of ~~shares to be paid out may be up to twice the grant amount, depending~~RSUs vested is based on the ~~Company's performance and the achievement~~market price of ~~certain performance metrics (adjusted earnings per share, average organic parts and services revenue growth, and average return on invested capital) over the applicable three year performance periods.~~

~~Outstanding unvested PSUs earn dividend equivalents at the same rate as dividends~~LKQ stock on the ~~Company’s common stock. The dividend equivalents are subject to the same vesting requirements, restrictions and forfeiture provisions as the original award.~~date vested.

PSUs

The following table summarizes activity related to our ~~PSUs~~performance-based RSUs ("PSUs") under the Equity Incentive Plan for the nine months ended September 30, ~~2021:~~2022 (in millions, except years and per share amounts):

Number
Outstanding Weighted
Average
Grant Date
Fair Value Weighted Average Remaining Contractual Term
(in years)
Aggregate Intrinsic Value
(in thousands) (1)
Unvested as of January 1, 2021 291,601 $ 29.98
Granted (2)
125,656 $ 38.31
Forfeited / Canceled (7,398) $ 31.25
Unvested as of September 30, 2021 409,859 $ 32.51
Expected to vest after September 30, 2021 403,290 $ 32.44 1.2 $ 20,294


	Number Outstanding	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1)
Unvested as of January 1, 2022	0.5	$	31.96
Granted (2)	0.1	$	48.95
Vested	(0.2)	$	27.74

Unvested as of September 30, 2022	0.4	$	38.84
Expected to vest after September 30, 2022	0.4	$	38.81	1.2	$	18

(1) The aggregate intrinsic value of expected to vest PSUs represents the total pretax intrinsic value (the fair value of ~~the Company's~~LKQ's stock on the last day of each period multiplied by the number of ~~units at target)~~units) that would have been received by the holders had all the expected to vest PSUs vested. This amount changes based on the market price of ~~the Company’s~~LKQ’s common stock and the achievement of the performance metrics relative to the established targets.

(2) Represents the number of PSUs at target payout. The weighted average grant date fair value of PSUs granted during the nine months ended September 30, ~~2020~~2021 was ~~$31.85.~~$38.31.

The fair value of PSUs that vested during the nine months ended September 30, 2022 was $8 million; the fair value of PSUs vested is based on the market price of LKQ stock on the date vested.

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $8 million and $31 million for the three and nine months ended September 30, 2022, respectively, and $8 million and $25 million for the three and nine months ended September 30, 2021, ~~respectively, and $7 million and $23 million for the three and nine months ended September 30, 2020,~~ respectively. As of September 30, ~~2021,~~2022, unrecognized compensation expense related to unvested RSUs and PSUs was ~~$50~~$51 million. Stock-based compensation expense related to these awards will be different to the extent that forfeitures are realized and performance under the PSUs differs from ~~target.~~current achievement estimates.

Note 7.6. Earnings Per Share

The following chart sets forth the computation of earnings per share (in ~~thousands,~~millions, except per share amounts):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Income from continuing operations $ 284,006 $ 193,931 $ 855,346 $ 459,318
Denominator for basic earnings per share—Weighted-average shares outstanding 294,026 304,271 299,184 304,837
Effect of dilutive securities:
RSUs 633 295 658 333
PSUs 226 — 164 —
Stock options — — — 1
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 294,885 304,566 300,006 305,171
Basic earnings per share from continuing operations $ 0.97 $ 0.64 $ 2.86 $ 1.51
Diluted earnings per share from continuing operations (1)
$ 0.96 $ 0.64 $ 2.85 $ 1.51


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income from continuing operations	$	261	$	284	$	950	$	856
Denominator for basic earnings per share—Weighted-average shares outstanding	273.8		294.0		280.2		299.2
Effect of dilutive securities:
RSUs	0.4		0.7		0.6		0.6
PSUs	0.4		0.2		0.4		0.2

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	274.6		294.9		281.2		300.0
Basic earnings per share from continuing operations	$	0.95	$	0.97	$	3.39	$	2.86
Diluted earnings per share from continuing operations (1)	$	0.95	$	0.96	$	3.38	$	2.85

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

The ~~following table sets forth the~~ number of ~~employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been~~ antidilutive securities was de minimis for ~~the three and nine months ended September 30, 2021 and 2020 (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Antidilutive securities:
RSUs — 717 39 847
all periods presented.

1715

Note 8.7. Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended
September 30, 2021
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized Gain (Loss)
on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive
Income (Loss)
BALANCE, July 1, 2021 $ (59,834) $ (99) $ (32,341) $ (8,816) $ (101,090)
Pretax loss (48,139) — — — (48,139)
Income tax effect — — — — —
Reclassification of unrealized loss — — 427 — 427
Reclassification of deferred income taxes — — (121) — (121)
Other comprehensive income from unconsolidated subsidiaries — — — 348 348
BALANCE, September 30, 2021 $ (107,973) $ (99) $ (32,035) $ (8,468) $ (148,575)


	Three Months Ended September 30, 2022
	Foreign Currency Translation		Unrealized Gain (Loss) on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of July 1, 2022	$	(325)	$	(24)	$	(6)	$	(355)
Pretax loss	(187)		—		—		(187)

Reclassification of unrealized loss	—		1		—		1


Other comprehensive income from unconsolidated subsidiaries	—		—		2		2
Balance as of September 30, 2022	$	(512)	$	(23)	$	(4)	$	(539)


	Three Months Ended September 30, 2021
	Foreign Currency Translation		Unrealized Gain (Loss) on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of July 1, 2021	$	(60)	$	(32)	$	(9)	$	(101)
Pretax loss	(48)		—		—		(48)





Balance as of September 30, 2021	$	(108)	$	(32)	$	(9)	$	(149)

Three Months Ended
September 30, 2020
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized Gain (Loss)
on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive Income
(Loss)
BALANCE, July 1, 2020 $ (243,524) $ (1,994) $ (29,939) $ (4,306) $ (279,763)
Pretax income (loss) 70,178 (19,865) (34) — 50,279
Income tax effect — 4,690 9 — 4,699
Reclassification of unrealized loss — 20,153 3,794 — 23,947
Reclassification of deferred income taxes — (4,756) (966) — (5,722)
Other comprehensive loss from unconsolidated subsidiaries — — — (3,162) (3,162)
BALANCE, September 30, 2020 $ (173,346) $ (1,772) $ (27,136) $ (7,468) $ (209,722)

Nine Months Ended
September 30, 2021
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized Gain (Loss)
on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive Income
(Loss)
BALANCE, January 1, 2021 $ (57,126) $ (968) $ (32,967) $ (7,948) $ (99,009)
Pretax (loss) income (50,847) 2,823 — — (48,024)
Income tax effect — (677) — — (677)
Reclassification of unrealized (gain) loss — (1,758) 1,301 — (457)
Reclassification of deferred income taxes — 481 (369) — 112
Other comprehensive loss from unconsolidated subsidiaries — — — (520) (520)
BALANCE, September 30, 2021 $ (107,973) $ (99) $ (32,035) $ (8,468) $ (148,575)


	Nine Months Ended September 30, 2022
	Foreign Currency Translation		Unrealized Gain (Loss) on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2022	$	(121)	$	(24)	$	(8)	$	(153)
Pretax loss	(395)		—		—		(395)

Reclassification of unrealized loss	—		1		—		1

Disposal of business	4		—		—		4
Other comprehensive income from unconsolidated subsidiaries	—		—		4		4
Balance as of September 30, 2022	$	(512)	$	(23)	$	(4)	$	(539)

1816

Nine Months Ended
September 30, 2020
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized Gain (Loss)
on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive Income
(Loss)
BALANCE, January 1, 2020 $ (170,893) $ 5,358 $ (31,934) $ (3,416) $ (200,885)
Pretax loss (3,219) (23,490) (34) — (26,743)
Income tax effect — 5,548 9 — 5,557
Reclassification of unrealized loss — 14,207 6,563 — 20,770
Reclassification of deferred income taxes — (3,395) (1,740) — (5,135)
Disposal of business 766 — — — 766
Other comprehensive loss from unconsolidated subsidiaries — — — (4,052) (4,052)
BALANCE, September 30, 2020 $ (173,346) $ (1,772) $ (27,136) $ (7,468) $ (209,722)


	Nine Months Ended September 30, 2021
	Foreign Currency Translation		Unrealized Gain (Loss) on Cash Flow Hedges		Unrealized Gain (Loss) on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2021	$	(57)	$	(1)	$	(33)	$	(8)	$	(99)
Pretax (loss) income	(51)		3		—		—		(48)
Income tax effect	—		(1)		—		—		(1)
Reclassification of unrealized (gain) loss	—		(2)		1		—		(1)
Reclassification of deferred income taxes	—		1		—		—		1

Other comprehensive loss from unconsolidated subsidiaries	—		—		—		(1)		(1)
Balance as of September 30, 2021	$	(108)	$	—	$	(32)	$	(9)	$	(149)

During the nine months ended September 30, 2021, net unrealized losses on interest rate swaps totaling $1 million were recorded to Interest expense, net of interest income in the Unaudited Condensed Consolidated Statements of Income. During the nine months ended September 30, 2021, net unrealized gains on cross currency swaps totaling $1 million were recorded to Interest expense, net of interest income in the Unaudited Condensed Consolidated Statements of Income. During the nine months ended September 30, 2021, net unrealized gains on cross currency swaps totaling $2 million were recorded to Other income, net in the Unaudited Condensed Consolidated Statements of Income; these amounts offset the impact of the remeasurement of the underlying transactions.

Net unrealized losses and gains related to our pension plans were ~~reclassified~~recorded to Other ~~(income) expense,~~income, net in ~~our~~the Unaudited Condensed Consolidated Statements of Income during each of the three and ~~nine months~~nine-month periods ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Our policy is to reclassify the income tax effect from Accumulated other comprehensive ~~loss~~income (loss) to the Provision for income taxes when the related gains and losses are released to the Unaudited Condensed Consolidated Statements of Income.

~~The amounts of unrealized gains and losses on our Cash Flow Hedges reclassified to our Unaudited Condensed Consolidated Statements of Income are as follows (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
Classification 2021 2020 2021 2020
Unrealized losses on interest rate swaps Interest expense, net of interest income $ — $ (2,538) $ (1,188) $ (1,011)
Unrealized gains on cross currency swaps Interest expense, net of interest income — 2,696 539 8,043
Unrealized (losses) gains on cross currency swaps (1)
Other (income) expense, net — (20,874) 1,973 (21,802)
Unrealized gains on foreign currency forward contracts (1)
Other (income) expense, net — 563 434 563
Total $ — $ (20,153) $ 1,758 $ (14,207)

~~(1)The amounts reclassified to Other (income) expense, net in our Unaudited Condensed Consolidated Statements of Income offset the impact of the remeasurement of the underlying transactions.~~

1917

Note 9.8. Long-Term Obligations

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


		September 30,		December 31,				September 30, 2022					December 31, 2021
		2021		2020			Maturity Date	Interest Rate			Amount		Interest Rate			Amount
Senior secured credit agreement:
Term loans payable		$	—	$	323,750
Senior Secured Credit Agreement:						Senior Secured Credit Agreement:

Revolving credit facilities	Revolving credit facilities	1,443,063		642,958		Revolving credit facilities	January 2024	2.99	%	(1)	$	1,621	1.10	%	(1)	$	1,887

Senior Notes:						Senior Notes:
Euro Notes (2024)	Euro Notes (2024)	579,000		610,800		Euro Notes (2024)	April 2024	3.88	%		490		3.88	%		569
Euro Notes (2026/28)		289,500		1,221,600
Notes payable through October 2030 at weighted average interest rates of 3.1% and 3.3%, respectively		23,551		24,526
Finance lease obligations at weighted average interest rates of 3.5% and 3.5%, respectively		51,891		57,336
Other debt at weighted average interest rates of 0.7% and 1.2%, respectively		11,497		15,706
Euro Notes (2028)						Euro Notes (2028)	April 2028	4.13	%		245		4.13	%		284

Notes payable						Notes payable	Various through October 2030	3.23	%	(1)	15		2.80	%	(1)	23
Finance lease obligations						Finance lease obligations		3.83	%	(1)	46		3.50	%	(1)	52
Other debt						Other debt		2.41	%	(1)	30		1.10	%	(1)	9
Total debt	Total debt	2,398,502		2,896,676		Total debt					2,447					2,824
Less: long-term debt issuance costs	Less: long-term debt issuance costs	(12,937)		(25,225)		Less: long-term debt issuance costs					(7)					(12)
Less: current debt issuance costs		(302)		(313)

Total debt, net of debt issuance costs	Total debt, net of debt issuance costs	2,385,263		2,871,138		Total debt, net of debt issuance costs					2,440					2,812
Less: current maturities, net of debt issuance costs	Less: current maturities, net of debt issuance costs	(36,815)		(58,497)		Less: current maturities, net of debt issuance costs					(50)					(35)
Long term debt, net of debt issuance costs	Long term debt, net of debt issuance costs	$	2,348,448	$	2,812,641	Long term debt, net of debt issuance costs					$	2,390				$	2,777

(1) Interest rate derived via a weighted average

Senior Secured Credit Agreement

On ~~June 11, 2020,~~November 23, 2021, LKQ Corporation and certain other subsidiaries of LKQ (collectively, the "Borrowers") entered into Amendment No. 46 to the Fourth Amended and Restated Credit Agreement dated January 29, 2016 (the "Credit Agreement"), which modified ~~the maximum permitted net leverage ratio through the quarter ended September 30, 2021. Prior~~certain interest rates to provide that (1) Loans denominated in euros shall bear interest at a rate per annum equal to the ~~amendment,~~Euro Interbank Offered Rate as administered by the ~~maximum permitted net leverage ratio was 4.00:1.00. After~~European Money Markets Institute (or a comparable or successor administrator approved by the ~~amendment,~~Administrative Agent) plus the ~~maximum permitted net leverage ratio became 4.25:1.00 for the quarter ended September 30, 2021. Beginning with the quarter ending December 31, 2021, the maximum permitted net leverage ratio reverts~~Applicable Rate, (2) Swingline Loans denominated in pounds sterling shall bear interest at a rate per annum equal to the ~~terms~~Sterling Overnight Index Average as administered by the Bank of England (or any successor administrator of the Sterling Overnight Index Average) (“SONIA”) plus the Applicable Rate, (3) Revolving Loans denominated in ~~effect prior~~pounds sterling shall bear interest at a rate per annum equal to SONIA plus an adjustment equal to 0.0326% per annum plus the Applicable Rate, and (4) Loans denominated in Swiss francs shall bear interest at a rate per annum equal to the ~~amendment. In~~Swiss Average Rate Overnight as administered by SIX Swiss Exchange AG (or any successor administrator of the ~~event that~~Swiss Average Rate Overnight) plus the ~~net leverage ratio is greater than 4.00:1.00,~~Applicable Rate. All other interest rates remain the ~~Company would be restricted from repurchasing its shares.~~ same.

We ~~can at any time elect~~also had the option to ~~cancel the modifications to the maximum permitted net leverage ratio and revert to the terms in effect prior to the amendment, subject to compliance with the 4.00:1.00 ratio. Amendment No. 4 to~~prepay outstanding amounts under the Credit Agreement ~~also made certain other immaterial modifications.~~

On December 14, 2020, we entered into Amendment No. 5 to the Credit Agreement; the amendment added as a borrower our subsidiary LKQ Europe GmbH, a Swiss limited liability company, and made certain other immaterial or clarifying modifications.

~~The total availability under the revolving credit facility's multicurrency component is~~ ~~$3.15 billion. Amounts outstanding under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, 2024.~~

without penalty. We were required to prepay the term loan by amounts equal to proceeds from the sale or disposition of certain assets if the proceeds were not reinvested within twelve months. ~~We also had the option to prepay outstanding amounts under the Credit Agreement without penalty.~~ During the second quarter of 2021, we exercised ~~this~~our option to prepay the outstanding amount on the term loan, and thus we did not have any term loan borrowings as of September 30, ~~2021.~~2022.

The Credit Agreement contains customary representations and warranties and customary covenants that provide limitations and conditions on our ability to enter into certain transactions. The Credit Agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio.

On April 18, 2022, S&P Global Ratings assigned LKQ an issuer credit rating of 'BBB-' with a stable outlook. This rating upgrade triggered the banks in our credit facility to release all collateral required under the Credit Agreement and suspend all collateral requirements.

Borrowings under the Credit Agreement bear interest at variable rates, which depend on the currency and duration of the borrowing elected, plus an applicable margin. The applicable margin is subject to change in increments of 0.25% depending on ~~our~~the net leverage ratio. Interest payments are due on the last day of the selected interest period or quarterly in arrears depending on the type of borrowing. Including the effect of the interest rate swap agreements described in Note 10, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at September 30, 2021 and December 31, 2020 were ~~1.1%~~ ~~and 1.7%, respectively.~~ We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters

of credit at an applicable rate based on our net leverage ratio, and a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.

The total capacity under the revolving credit facility's multicurrency component is $3,150 million. Of the total borrowings outstanding under the Credit Agreement, there ~~were~~were no current maturities as of September 30, ~~2021 and $18 million classified as current maturities as of~~2022 or December 31, ~~2020.~~2021. As of September 30, ~~2021,~~2022, there were letters of credit outstanding in the aggregate amount of $69 million. The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at September 30, ~~2021~~2022 was $~~1.6 billion~~1,460 million.

~~Related to the execution of Amendment No. 4 to the Fourth Amended and Restated Credit Agreement in June 2020, we incurred~~
~~$4 million of~~ ~~fees, the majority of which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement.~~

~~U.S. Notes (2023)~~

On January 10, 2020, we redeemed the $600 million aggregate principal amount of 4.75% senior notes due 2023 (the "U.S Notes (2023)") at a redemption price equal to 101.583% of the principal amount of the U.S. Notes (2023) plus accrued and unpaid interest thereon to, but not including, January 10, 2020. The total redemption payment was $614 million, including an early-redemption premium of $9 million and accrued and unpaid interest of $4 million. In the first quarter of 2020, we recorded a loss on debt extinguishment of $13 million on the Unaudited Condensed Consolidated Statements of Income related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

Euro Notes (2024)

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.

~~The Euro Notes (2024) bear interest at a rate of 3.875% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.~~

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 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.

On May 31, 2022, Moody's Investors Services upgraded the rating on LKQ Italia's senior unsecured notes to Baa3 with a stable outlook. This rating upgrade, combined with the upgrade to BBB- by S&P Global Ratings in April 2022, triggered a Covenant Suspension Event, and LKQ and its subsidiaries will no longer be required to comply with certain restrictive covenants.

Euro Notes (2026/~~28)~~2028)

On April 9, 2018, LKQ European Holdings B.V. ("LKQ Euro Holdings"), a wholly-owned subsidiary of LKQ Corporation, completed an offering of ~~€1.0 billion~~€1,000 million aggregate principal amount of senior notes. The offering consisted of €750 million senior notes due 2026 (the "Euro Notes (2026)") and €250 million senior notes due 2028 (the "Euro Notes (2028)" and, together with the Euro Notes (2026), the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933. The proceeds from the offering, together with borrowings under our senior secured credit facility, were used (i) to finance a portion of the consideration paid for the Stahlgruber acquisition, (ii) for

general corporate purposes and (iii) to pay related fees and expenses, including the refinancing of net financial debt. 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~~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.

~~The Euro Notes (2028) bear interest at a rate of 4.125% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.~~

Interest on the Euro Notes (2028) is payable in arrears on April 1 and October 1 of each year. The Euro Notes (2028) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2028) Subsidiaries (the "Euro Notes (2028) Guarantors").

The Euro Notes (2028) and the related guarantees are, respectively, LKQ Euro Holdings' and each Euro Notes (2028) ~~Guarantor’s~~Guarantor's senior unsecured obligations and will be subordinated to all of LKQ Euro Holdings' and the Euro Notes (2028) ~~Guarantors’~~Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Euro Notes (2028) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2028) to the extent of the assets of those subsidiaries. The Euro Notes (2028) have been listed on the Global Exchange Market of Euronext Dublin.

The Euro Notes (2028) 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 April 1, 2023, we may redeem some or all of the Euro Notes (2028) at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture. We may be required to make an offer to purchase the Euro Notes (2028) 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 (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.

~~Restricted Payments~~

~~Our~~On May 31, 2022, Moody's Investors Services upgraded the rating on LKQ Euro Holdings' senior ~~secured credit agreement~~unsecured notes to Baa3 with a stable outlook. This rating upgrade, combined with the upgrade to BBB- by S&P Global Ratings in April 2022, triggered a Covenant Suspension Event, and ~~our senior notes indentures contain limitations on payment of cash dividends or other distributions of assets. Delaware law also imposes restrictions on dividend payments. These restrictions~~LKQ and its subsidiaries will ~~not impact the payment of our dividend declared in October 2021 as disclosed in Note 15, “Subsequent Event”.~~

~~Receivables Securitization Facility~~

~~On December 20, 2018, we amended the terms of our receivables securitization facility~~no longer be required to comply with MUFG Bank, Ltd. ("MUFG") to: (i) extend the term of the facility to November 8, 2021; (ii) increase the maximum amount available to $110 million; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to MUFG for the benefit of conduit investors and/or financial institutions for cash proceeds. Effective July 30, 2021, we terminated the receivables securitization facility.

~~There was no outstanding balance as of December 31, 2020. Net receivables totaling $121 million were collateral for the investments under the receivables facility as of December 31, 2020.~~

restrictive covenants.

Note ~~10.~~9. 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 our current policies, we may use derivatives to manage our exposure to variable interest rates on our senior secured debt and changing foreign exchange rates for certain foreign currency denominated transactions. We do not hold or issue derivatives for trading purposes.

Cash Flow Hedges

Through June 30, 2021, we held interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement ~~with the objective of minimizing the impact of interest rate~~

~~fluctuations~~ and stabilizing cash flows. Under the terms of the interest rate swap agreements, we paid the fixed interest rate and received payment at a variable rate of interest based on LIBOR for the respective currency of each interest rate swap agreement’s notional amount. Changes in the fair value of the interest rate swap agreements were recorded in Accumulated other comprehensive income (loss) and were reclassified to Interest expense, net of interest income when the underlying interest payment impacted earnings.

~~At December 31, 2020, we held~~ cross currency swaps, which contained an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively converted variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. The interest rate swap agreements and cross currency swaps were ~~intended to minimize the impact~~settled as of ~~fluctuating exchange rates~~June 2021 and interest rates on the cash flows resulting from the related intercompany financing arrangements. Changes in the fair value of the derivative instruments were recorded in Accumulated other comprehensive income (loss) and were reclassified to Interest expense, net of interest income and Other (income) expense, net when the underlying transactions had an impact on earnings.

From time to time, we may hold foreign currency forward contracts related to certain foreign currency denominated intercompany transactions, with the objective of minimizing the impact of fluctuating exchange rates on these future cash flows. Under the terms of the foreign currency forward contracts, we will sell the foreign currency in exchange for U.S. dollars at a fixed rate on the maturity dates of the contracts. Changes in the fair value of the foreign currency forward contracts where we apply hedge accounting are recorded in Accumulated other comprehensive income (loss) and reclassified to Other (income) expense, net when the underlying transaction has an impact on earnings.

~~As of September 30, 2021, we held~~ no cash flow hedges ~~and~~remained outstanding as of September 30, 2022 and December 31, ~~2020, we held cash flow hedges with the following notional amounts and fair values (in thousands):~~

~~December 31, 2020~~

~~Interest rate swap agreements~~

~~USD denominated~~

~~480,000~~

~~Cross currency swap agreements~~

~~Euro denominated~~

€

~~340,000~~

~~Foreign currency forward contracts~~

~~SEK denominated~~

~~227,000~~

2021, respectively.

~~Other Accrued Expenses~~

~~Fair Value at December 31, 2020~~

~~Interest rate swap agreements~~

~~899~~

~~Cross currency swap agreements~~

~~56,328~~

~~Foreign currency forward contracts~~

~~1,350~~

~~Total cash flow hedges~~

~~58,577~~

While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis on our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would have no effect on our Unaudited Condensed Consolidated Balance Sheets at December 31, 2020.

The activity related to our previously matured cash flow hedges is included in Note 8,7, "Accumulated Other Comprehensive Income (Loss)."

~~The activity related to our cash flow hedges is~~ and presented in either operating activities or financing activities in our Unaudited Condensed Consolidated Statements of Cash Flows.

Other Derivative Instruments Not Designated as Hedges

~~To manage our foreign currency exposure on non-functional currency denominated borrowings, we entered into short term foreign currency forward contracts. As of September 30, 2021, we held no foreign currency forward contracts re~~lated to non-functional currency denominated borrowings. At December 31, 2020, the notional amounts of foreign currency forward contracts related to non-functional currency denominated borrowings were €142 million and £75 million.

We elected not to apply hedge accounting for these transactions, and therefore the contracts were adjusted to fair value through our results of operations as of each balance sheet date. The fair values of these short-term derivative instruments were recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets. The fair values of these contracts at December 31, 2020~~, along with the effect on our results of operations during the three and nine months ended September 30, 2021 and 2020, were immaterial.~~

We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability in the cash flows related to inventory purchases denominated in a non-functional currency. We have elected not to apply hedge accounting for these transactions. The notional amount and fair value of these contracts at September 30, ~~2021~~2022 and December 31, ~~2020~~,2021, along with the effect on our results of operations during the three and nine months ended September 30, 2022 and 2021, ~~and 2020,~~ were ~~immaterial.~~not material.

Note ~~11.~~10. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and nine months ended September 30, ~~2021,~~2022, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The tiers in the fair value hierarchy include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; 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 tables present 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 September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in ~~thousands)~~millions):


		Balance as of September 30, 2021		Fair Value Measurements as of September 30, 2021							Balance as of September 30, 2022		Fair Value Measurements as of September 30, 2022
				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance		$	85,934	$	—	$	85,934	$	—

Total Assets		$	85,934	$	—	$	85,934	$	—

Liabilities:	Liabilities:									Liabilities:
Contingent consideration liabilities	Contingent consideration liabilities	$	5,576	$	—	$	—	$	5,576	Contingent consideration liabilities	$	13	$	—	$	—	$	13

Deferred compensation liabilities	Deferred compensation liabilities	85,961		—		85,961		—		Deferred compensation liabilities	68		—		68		—

Total Liabilities	Total Liabilities	$	91,537	$	—	$	85,961	$	5,576	Total Liabilities	$	81	$	—	$	68	$	13

Balance as of December 31, 2020 Fair Value Measurements as of December 31, 2020
Level 1 Level 2 Level 3
Assets:
Cash surrender value of life insurance $ 72,250 $ — $ 72,250 $ —
Total Assets $ 72,250 $ — $ 72,250 $ —
Liabilities:
Contingent consideration liabilities $ 13,263 $ — $ — $ 13,263
Interest rate swaps 899 — 899 —
Deferred compensation liabilities 76,240 — 76,240 —
Cross currency swap agreements 56,328 — 56,328 —
Foreign currency forward contracts 5,190 — 5,190 —
Total Liabilities $ 151,920 $ — $ 138,657 $ 13,263


	Balance as of December 31, 2021		Fair Value Measurements as of December 31, 2021
			Level 1		Level 2		Level 3





Liabilities:
Contingent consideration liabilities	$	18	$	—	$	—	$	18
Deferred compensation liabilities	89		—		89		—
Total Liabilities	$	107	$	—	$	89	$	18

~~The cash surrender value of life insurance is included in Other noncurrent assets on our Unaudited Condensed Consolidated Balance Sheets.~~ The current portion of contingent consideration liabilities is included in Other current liabilities on ~~our~~the Unaudited Condensed Consolidated Balance Sheets; deferred compensation liabilities and the noncurrent portion of ~~deferred compensation liabilities and~~ contingent consideration liabilities isare included in Other noncurrent liabilities on ~~our~~the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. ~~The balance sheet classification of the interest rate swaps,~~

~~cross currency swap agreements, and foreign currency forward contracts is presented in Note 10, "Derivative Instruments and Hedging Activities."~~

Our Level 2 ~~assets and~~ liabilities are valued using inputs from third parties and market observable data. We obtain valuation data for the ~~cash surrender value of life insurance and~~ deferred compensation liabilities from third party sources, which ~~determine the net asset values for our accounts using~~use quoted market prices, investment allocations and reportable trades. We value our other derivative instruments using a third party valuation model that performs a discounted cash flow analysis based on the terms of the contracts and market observable inputs such as current and forward interest rates and current and forward foreign exchange rates.

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.

We also have equity investments recorded in Other noncurrent assets that are reported at fair value. We have used net asset value as a practical expedient to value these equity investments and thus they are excluded from the fair value hierarchy disclosure.

Financial Assets and Liabilities Not Measured at Fair Value

Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. Based on market conditions as of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair value of ~~our~~the credit agreement borrowings reasonably approximated the carrying values of ~~$1.4 billion~~$1,621 million and ~~$967~~$1,887 million, respectively. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair values of the Euro Notes (2024) were approximately ~~$625~~$479 million and ~~$662~~$605 million, respectively, compared to carrying values of ~~$579~~$490 million and ~~$611~~$569 million, respectively. As of ~~December 31, 2020, the fair value of the Euro Notes (2026) was $939 million compared to a carrying value of $916 million; as of~~ September 30, ~~2021, the Euro Notes (2026) were paid off. As of September 30, 2021~~2022 and December 31, ~~2020,~~2021, the fair values of the Euro Notes (2028) were ~~$311~~$229 million and ~~$332~~$301 million, respectively, compared to carrying values of ~~$290~~$245 million and ~~$305~~$284 million, respectively.

The fair value measurements of the borrowings under ~~our~~the credit agreement ~~and receivables facility~~ 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 September 30, ~~2021~~2022 and December 31, ~~2020~~2021 to assume these obligations. The fair values of ~~our~~the Euro Notes (2024) and Euro Notes ~~(2026/28)~~(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.

Note ~~12.~~11. Employee Benefit Plans

We have funded and unfunded defined benefit plans covering certain employee groups in the U.S. and various European countries. Local statutory requirements govern many of our European plans. The defined benefit plans are mostly closed to new participants and, in some cases, existing participants no longer accrue benefits.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the aggregate funded status of the defined benefit plans was a liability of ~~$145~~$112 million and ~~$153~~$131 million, respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans ~~included~~totaled $1 million and $4 million for the ~~following components~~three and nine months ended September 30, 2022, respectively, and $1 million and $4 million for the three and nine months ended September 30, 2021, respectively, and ~~2020 (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Service cost $ 921 $ 688 $ 2,749 $ 2,214
Interest cost 333 682 1,028 2,131
Expected return on plan assets (415) (411) (1,261) (1,551)
Amortization of actuarial loss 427 238 1,301 907
Settlement loss (1)
— 3,556 — 5,656
Net periodic benefit cost $ 1,266 $ 4,753 $ 3,817 $ 9,357

~~(1)Related~~primarily related to ~~the settlement of a U.S. plan in 2020.~~

~~For the three and nine months ended September 30, 2021 and 2020, the~~ service cost ~~component of net periodic benefit cost was classified~~which is recorded in Selling, general and administrative expenses ~~while~~on the ~~other components of net periodic benefit cost were classified in Other (income) expense, net in our~~ Unaudited Condensed Consolidated Statements of Income.

Note ~~13.~~12. 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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA, among other provisions, enacted a 15% corporate minimum tax effective for ~~excess~~taxable years beginning after December 31, 2022 and a 1% excise tax ~~benefits from stock-based payments. For~~on the ~~nine months ended September 30, 2020,~~repurchase of corporate stock after December 31, 2022. We do not currently expect the ~~effective~~corporate minimum tax ~~rate was increased 0.3% by unfavorable discrete items, primarily valuation allowances~~provisions of the IRA to have a material impact on ~~net operating loss carryforwards and deferred~~our financial results. The impact of the excise tax ~~adjustments as a result~~provisions will be dependent upon the volume of ~~statutory tax rate changes.~~any future stock repurchases.

Note ~~14.~~13. Segment and Geographic Information

We have 4four operating segments: Wholesale –- North America, Europe, Specialty and Self ~~Service. Our~~Service, each of which is presented as a reportable segment. Beginning in 2022, the Wholesale –- North America and Self Service operating ~~segments are aggregated into 1~~segment results were separated from the previous reportable segment, North America, ~~because they possess similar economic characteristics~~ and each of Wholesale - North America and Self Service is now a separate reportable segment. Segment results have ~~common products and services, customers, and methods of distribution. Our reportable~~been adjusted retrospectively to reflect this change.

The segments are organized based on a combination of geographic areas served and type of product lines offered. The ~~reportable~~ segments are managed separately as ~~each business serves~~the businesses serve different customers ~~(i.e. geographic in the case of North America~~ and ~~Europe and product type in the case of Specialty) and is~~are affected by different economic conditions. ~~Therefore, we present 3 reportable segments:~~Wholesale - North America ~~Europe~~ and ~~Specialty.~~Self Service have similar economic characteristics and have common products and services, customers and methods of distribution. We are reporting these operating segments separately to provide greater transparency to investors.

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


		North America		Europe		Specialty		Eliminations		Consolidated			Wholesale - North America		Europe		Specialty		Self Service		Eliminations		Consolidated
Three Months Ended September 30, 2022												Three Months Ended September 30, 2022
Revenue:												Revenue:
Third Party												Third Party	$	1,108	$	1,380	$	452	$	164	$	—	$	3,104
Intersegment												Intersegment	1		—		—		—		(1)		—
Total segment revenue												Total segment revenue	$	1,109	$	1,380	$	452	$	164	$	(1)	$	3,104
Segment EBITDA												Segment EBITDA	$	216	$	155	$	49	$	4	$	—	$	424
Depreciation and amortization (1)												Depreciation and amortization (1)	19		34		8		3		—		64
Three Months Ended September 30, 2021	Three Months Ended September 30, 2021											Three Months Ended September 30, 2021
Revenue:	Revenue:											Revenue:
Third Party	Third Party	$	1,306,310	$	1,525,274	$	465,027	$	—	$	3,296,611	Third Party	$	1,112	$	1,525	$	465	$	195	$	—	$	3,297
Intersegment	Intersegment	655		—		815		(1,470)		—		Intersegment	—		—		1		—		(1)		—
Total segment revenue	Total segment revenue	$	1,306,965	$	1,525,274	$	465,842	$	(1,470)	$	3,296,611	Total segment revenue	$	1,112	$	1,525	$	466	$	195	$	(1)	$	3,297
Segment EBITDA	Segment EBITDA	$	225,582	$	175,093	$	51,644	$	—	$	452,319	Segment EBITDA	$	190	$	175	$	52	$	36	$	—	$	453
Depreciation and amortization (1)	Depreciation and amortization (1)	24,022		38,752		7,576		—		70,350		Depreciation and amortization (1)	20		39		8		4		—		71
Three Months Ended September 30, 2020
Revenue:
Third Party		$	1,164,031	$	1,484,099	$	399,554	$	—	$	3,047,684
Intersegment		210		—		875		(1,085)		—
Total segment revenue		$	1,164,241	$	1,484,099	$	400,429	$	(1,085)	$	3,047,684
Segment EBITDA		$	204,957	$	136,165	$	48,340	$	—	$	389,462
Depreciation and amortization (1)		24,479		44,412		7,436		—		76,327


	Wholesale - North America		Europe		Specialty		Self Service		Eliminations		Consolidated
Nine Months Ended September 30, 2022
Revenue:
Third Party	$	3,453	$	4,345	$	1,424	$	571	$	—	$	9,793
Intersegment	1		—		2		—		(3)		—
Total segment revenue	$	3,454	$	4,345	$	1,426	$	571	$	(3)	$	9,793
Segment EBITDA	$	648	$	446	$	176	$	76	$	—	$	1,346
Depreciation and amortization (1)	56		107		23		11		—		197
Nine Months Ended September 30, 2021
Revenue:
Third Party	$	3,281	$	4,565	$	1,454	$	603	$	—	$	9,903
Intersegment	1		—		3		—		(4)		—
Total segment revenue	$	3,282	$	4,565	$	1,457	$	603	$	(4)	$	9,903
Segment EBITDA	$	603	$	484	$	193	$	148	$	—	$	1,428
Depreciation and amortization (1)	59		119		22		12		—		212

North America Europe Specialty Eliminations Consolidated
Nine Months Ended September 30, 2021
Revenue:
Third Party $ 3,882,734 $ 4,565,388 $ 1,454,389 $ — $ 9,902,511
Intersegment 1,618 — 2,671 (4,289) —
Total segment revenue $ 3,884,352 $ 4,565,388 $ 1,457,060 $ (4,289) $ 9,902,511
Segment EBITDA $ 750,935 $ 484,157 $ 192,525 $ — $ 1,427,617
Depreciation and amortization (1)
72,003 118,994 21,693 — 212,690
Nine Months Ended September 30, 2020
Revenue:
Third Party $ 3,465,102 $ 4,058,878 $ 1,150,962 $ — $ 8,674,942
Intersegment 729 — 2,923 (3,652) —
Total segment revenue $ 3,465,831 $ 4,058,878 $ 1,153,885 $ (3,652) $ 8,674,942
Segment EBITDA $ 565,949 $ 303,814 $ 132,805 $ — $ 1,002,568
Depreciation and amortization (1)
72,677 126,000 21,959 — 220,636

(1) Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and ~~acquisition~~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 ~~our~~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 EBITDA excluding restructuring and ~~acquisition~~transaction related expenses (which includes restructuring expenses recorded in Cost of goods sold); 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 ~~mark~~fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict and related sanctions (including provisions for and subsequent adjustments to ~~market adjustments;~~reserves for asset recoverability and ~~impairment charges.~~expenditures to support our employees and their families). EBITDA, which is the basis for Segment EBITDA, is calculated as net income ~~attributable to LKQ stockholders~~ excluding discontinued operations, ~~and discontinued noncontrolling interest,~~ depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	262	$	284	$	955	$	856
Less: net income attributable to continuing noncontrolling interest	—		—		—		1
Net income attributable to LKQ stockholders	262		284		955		855
Subtract:
Net income from discontinued operations	1		—		5		—
Net income from continuing operations attributable to LKQ stockholders	261		284		950		855
Add:
Depreciation and amortization	58		64		178		195
Depreciation and amortization - cost of goods sold	6		6		19		16
Depreciation and amortization - restructuring expenses (1)	—		1		—		1
Interest expense, net of interest income	17		16		46		56
Loss on debt extinguishment	—		—		—		24
Provision for income taxes	88		89		304		290
EBITDA	430		460		1,497		1,437
Subtract:
Equity in earnings of unconsolidated subsidiaries (2)	2		8		8		17
Equity investment fair value adjustments	—		2		(3)		8

Add:
Restructuring and transaction related expenses (1)	3		2		10		15




(Gain) on disposal of businesses and impairment of net assets held for sale (3)	(4)		1		(159)		—
Change in fair value of contingent consideration liabilities	—		—		—		1
Gains on previously held equity interests	(2)		—		(1)		—
Direct impacts of Ukraine/Russia conflict (4)	(1)		—		4		—
Segment EBITDA	$	424	$	453	$	1,346	$	1,428

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net income $ 284,006 $ 193,931 $ 855,346 $ 458,680
Less: net (loss) income attributable to continuing noncontrolling interest (49) 448 754 1,166
Less: net income attributable to discontinued noncontrolling interest — — — 103
Net income attributable to LKQ stockholders 284,055 193,483 854,592 457,411
Subtract:
Net loss from discontinued operations — — — (638)
Net income attributable to discontinued noncontrolling interest — — — (103)
Net income from continuing operations attributable to LKQ stockholders 284,055 193,483 854,592 458,152
Add:
Depreciation and amortization 63,995 68,655 194,692 199,897
Depreciation and amortization - cost of goods sold 5,947 7,067 17,211 16,162
Depreciation and amortization - restructuring expenses (1)
408 605 787 4,577
Interest expense, net of interest income 15,427 25,182 55,778 76,729
Loss on debt extinguishment — — 23,564 12,751
Provision for income taxes 89,340 78,510 290,028 180,790
EBITDA 459,172 373,502 1,436,652 949,058
Subtract:
Equity in earnings of unconsolidated subsidiaries (2)
7,731 4,113 17,028 1,980
Equity investment mark to market adjustments 2,445 — 8,245 —
Add:
Restructuring and acquisition related expenses (1)
2,117 19,890 14,692 47,838
Restructuring expenses - cost of goods sold — 833 (163) 6,494
Impairment of net assets held for sale and (gain) loss on disposal of businesses 822 (503) 240 1,733
Change in fair value of contingent consideration liabilities 384 (147) 1,469 (575)
Segment EBITDA $ 452,319 $ 389,462 $ 1,427,617 $ 1,002,568

(1) The sum of these two captions represents the total amount that is reported in Restructuring and ~~acquisition~~transaction related expenses in our Unaudited Condensed Consolidated Statements of Income. Refer to Note 5,4, "Restructuring and ~~Acquisition~~Transaction Related Expenses," for further information.

(2) Refer to "Investments in Unconsolidated Subsidiaries" in Note 3,2, "Financial Statement Information," for further information.

(3) Refer to "Divestitures" in Note 2, "Financial Statement Information," for further information.

(4) 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.

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

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Capital Expenditures
North America $ 22,654 $ 12,352 $ 52,806 $ 52,565
Europe 18,953 17,420 66,454 49,970
Specialty 3,244 2,876 13,445 7,414
Total capital expenditures $ 44,851 $ 32,648 $ 132,705 $ 109,949


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Capital Expenditures
Wholesale - North America	$	19	$	21	$	64	$	44
Europe	21		18		63		66
Specialty	4		3		12		13
Self Service	5		3		9		10
Total capital expenditures	$	49	$	45	$	148	$	133

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


							September 30, 2022		December 31, 2021
Receivables, net						Receivables, net
Wholesale - North America						Wholesale - North America	$	372	$	367
Europe						Europe	544		586
Specialty						Specialty	123		102
Self Service						Self Service	12		18
Total receivables, net						Total receivables, net	1,051		1,073
Inventories						Inventories
Wholesale - North America						Wholesale - North America	817		776
Europe						Europe	1,312		1,327
Specialty						Specialty	463		458
Self Service						Self Service	43		50
Total inventories						Total inventories	2,635		2,611
Property, plant and equipment, net						Property, plant and equipment, net
Wholesale - North America						Wholesale - North America	499		526
Europe						Europe	488		577
Specialty						Specialty	93		93
Self Service						Self Service	89		103
Total property, plant and equipment, net						Total property, plant and equipment, net	1,169		1,299
Operating lease assets, net						Operating lease assets, net
Wholesale - North America						Wholesale - North America	550		611
Europe						Europe	420		515
Specialty						Specialty	86		83
Self Service						Self Service	137		152
Total operating lease assets, net						Total operating lease assets, net	1,193		1,361

		September 30,		December 31,
		2021		2020
Receivables, net
North America		$	399,592	$	386,289
Europe		662,938		598,615
Specialty		122,474		88,485
Total receivables, net		1,185,004		1,073,389
Inventories
North America		799,790		810,798
Europe		1,262,088		1,302,649
Specialty		361,975		301,165
Total inventories		2,423,853		2,414,612
Property, plant and equipment, net
North America		572,191		583,985
Europe		533,296		583,439
Specialty		86,870		81,279
Total property, plant and equipment, net		1,192,357		1,248,703
Operating lease assets, net
North America		758,368		755,430
Europe		508,128		520,131
Specialty		74,568		77,563
Total operating lease assets, net		1,341,064		1,353,124
Equity method investments
North America		23,572		18,676
Europe		154,838		136,548
Total equity method investments		178,410		155,224

Other unallocated assets	Other unallocated assets	6,140,172		6,115,481		Other unallocated assets	5,618		6,262
Total assets	Total assets	$	12,460,860	$	12,360,533	Total assets	$	11,666	$	12,606

We report net receivables; inventories; net property,, plant and equipment; and net operating lease ~~assets; and equity method investments~~assets by segment as that information is used by the chief operating decision maker 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 ~~other intangibles.~~equity method investments.

Our largest countries of operation are the U.S., followed by the U.K. and Germany. Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, Poland, 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. 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 ~~thousands)~~millions):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue
United States $ 1,671,186 $ 1,463,063 $ 5,026,114 $ 4,327,563
United Kingdom 428,730 411,861 1,253,482 1,080,899
Germany 413,914 396,119 1,220,608 1,129,805
Other countries 782,781 776,641 2,402,307 2,136,675
Total revenue $ 3,296,611 $ 3,047,684 $ 9,902,511 $ 8,674,942


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue
United States	$	1,612	$	1,671	$	5,109	$	5,026
United Kingdom	375		428		1,193		1,253
Germany	369		414		1,145		1,221
Other countries	748		784		2,346		2,403
Total revenue	$	3,104	$	3,297	$	9,793	$	9,903

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

September 30, December 31,
2021 2020
Long-lived assets
United States $ 1,410,729 $ 1,419,113
Germany 331,326 360,184
United Kingdom 290,943 315,333
Other countries 500,423 507,197
Total long-lived assets $ 2,533,421 $ 2,601,827


	September 30, 2022		December 31, 2021
Long-lived assets
United States	$	1,379	$	1,487
Germany	270		329
United Kingdom	238		305
Other countries	475		539
Total long-lived assets	$	2,362	$	2,660

Note ~~15.~~14. Subsequent Event

On October ~~26, 2021, the~~25, 2022, our Board of Directors ~~of LKQ~~ declared a ~~cash dividend to stockholders. The~~ quarterly cash dividend of ~~$0.25~~$0.275 per share of common stock, ~~will be~~ payable on December ~~2, 2021~~1, 2022, to stockholders of record at the close of business on November ~~11, 2021.~~17, 2022.

3026

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements and information in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are made pursuant to the “safe harbor” provisions of such Act.

Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. Words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “believe,” “if,” “estimate,” “intend,” “project” and similar words or expressions are used to identify these forward-looking statements. These statements are subject to a number of risks, uncertainties, assumptions and other factors ~~including the unfavorable effects of COVID-19,~~ that may cause our actual results, performance or achievements to be materially different. All forward-looking statements are based on information available to us at the time the statements are made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by our forward-looking statements include factors discussed in our filings with the SEC, including those disclosed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2020~~2021 Form 10-K and in our ~~subsequent~~ Quarterly Reports on Form 10-Q (including this Quarterly Report).

Overview

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

Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by OEMs; new products produced by companies other than the OEMs, which are referred to as aftermarket products; recycled products obtained from salvage and total loss vehicles; recycled products that have been refurbished; and recycled products that have been remanufactured. We distribute a variety of products to collision and mechanical repair shops, including aftermarket collision and mechanical products; recycled collision and mechanical products; refurbished collision products such as wheels, bumper covers and lights; and remanufactured engines and transmissions. Collectively, we refer to the four sources that are not new OEM products as alternative parts.

We are a leading provider of alternative vehicle collision replacement products and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. We are also a leading provider of alternative vehicle replacement and maintenance products in Germany, the United Kingdom, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries. In addition to our wholesale operations, we operate self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles. We are also a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada.

We are organized into four operating segments: Wholesale –- North America; Europe; ~~Specialty~~Specialty; and Self ~~Service. We aggregate our~~Service, each of which is presented as a reportable segment. Beginning in 2022, the Wholesale –- North America and Self Service operating ~~segments into one~~segment results were separated from the previous reportable segment, North America, ~~resulting in three reportable segments:~~and each of Wholesale - North America ~~Europe~~ and ~~Specialty.~~Self Service is now a separate reportable segment. Segment results have been adjusted retrospectively to reflect this change.

Our operating results have fluctuated on a quarterly and annual basis in the past and can be expected to continue to fluctuate in the future as a result of a number of factors, some of which are beyond our control. Please refer to the factors referred to in Forward-Looking Statements above. Due to these factors and others, which may be unknown to us at this time, our operating results in future periods can be expected to fluctuate. Accordingly, our historical results of operations may not be indicative of future performance.

Acquisitions and Investments

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. Through 2018, our acquisition strategy was focused on consolidation to build scale in fragmented markets across North America and Europe. We targeted companies that were market leaders, expanded our geographic presence and enhanced our ability to provide a wide array of vehicle products through our distribution network. In the last few years, we have shifted our focus from larger transactions to tuck-in acquisitions that target high synergies and/or add critical capabilities. Additionally, we have made investments in various businesses to advance our strategic objectives. See "Investments in Unconsolidated

Subsidiaries" in Note 3,2, "Financial Statement Information," to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our investments.

Sources of Revenue

We report our revenue in two categories: (i) parts and services and (ii) other. Our parts revenue is generated from the sale of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty products and accessories used to improve the performance, functionality and appearance of vehicles. Our service revenue is generated primarily from the sale of service-type warranties, fees for admission to our self service yards, and diagnostic and repair services. Revenue from other sources includes scrap and other ~~metal~~metals (including precious metals - platinum, palladium and ~~rhodium)~~rhodium - contained in recycled parts such as catalytic converters) sales, bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold. See Note 4,3, "Revenue Recognition" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our sources of revenue.

Critical Accounting ~~Policies and~~ Estimates

The discussion and analysis of our financial condition and results of operations are based upon our ~~unaudited condensed consolidated financial statements,~~Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires usmanagement to make use of certain estimates ~~assumptions~~ and ~~judgments~~assumptions that affect the reported amounts of assets, liabilities, ~~revenue~~revenues and expenses, and related disclosure of contingent assets and liabilities. Our ~~2020~~2021 Form 10-K includes a summary of the critical accounting ~~policies and~~ estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting ~~policies and~~ estimates that have had a material impact on our reported amounts of assets, liabilities, ~~revenue~~revenues or expenses during the nine months ended September 30, ~~2021.~~2022.

~~Recently Issued Accounting Pronouncements~~

See "Recent Accounting Pronouncements" in Note 3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.

Financial Information by Geographic Area

See Note ~~14,~~13, "Segment and Geographic Information" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our revenue and long-lived assets by geographic region.

1 LKQ Europe Program

We have undertaken the 1 LKQ Europe program to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business. Under this multi-year program, we expect to recognize the following:

•Restructuring expenses -— Non-recurring costs resulting directly from the implementation of the 1 LKQ Europe program from which the business will derive no ongoing benefit. See Note ~~5, “Restructuring~~4, "Restructuring and ~~Acquisition~~Transaction Related Expenses” to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

•Transformation expenses -— Period costs incurred to execute the 1 LKQ Europe program that are expected to contribute to ongoing benefits to the business (e.g. non-capitalizable implementation costs related to a common ERP system). These expenses are recorded in Selling, general and administrative expenses.

•Transformation capital expenditures -— Capitalizable costs for long-lived assets, such as software and facilities, that directly relate to the execution of the 1 LKQ Europe program.

Costs related to the 1 LKQ Europe program incurred to date are reflected in Selling, general and administrative expenses, Restructuring and transaction related expenses and Purchases of property, plant and equipment in our ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Beginning in the second half of March 2020, management delayed certain projects under the 1 LKQ Europe program to reduce expenses and preserve capital in response to the COVID-19 pandemic. Based on our expectations in the second quarter of 2020 that the impacts on our business from COVID-19 had stabilized, we restarted the program in July 2020 with substantially the same initiatives and projects as prior to the pandemic. While certain projects were delayed as a result of the COVID-19 pandemic, such as our procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe. We have continued the project on schedule after the restart.

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

~~2024.~~ the end of 2025. During the three and nine months ended September 30, ~~2021~~2022 we incurred $6$6 million and ~~$26~~$20 million, respectively, in costs across all three categories noted above. We expect that costs of the program, reflecting all three categories noted above, will range between ~~$30~~$25 million and ~~$40~~$35 million in ~~2021~~2022 with an additional ~~$100~~$50 million to ~~$130~~$80 million ~~between 2022 and~~ in 2023 through the projected program completion date in ~~2024.~~2025. In the future, we may also identify additional initiatives and projects under the 1 LKQ Europe program that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. We expect the transformation and restructuring expenses will be entirely funded by ~~the improved~~ trade working capital initiatives across our Europe segment.

~~COVID-19 Impact~~

Ukraine/Russia Conflict

The Russian invasion of Ukraine and resulting global governmental response have impacted, and are expected to continue to impact, our business in 2022. Governmental sanctions imposed on ~~Our Operations~~

~~In late February 2020,~~Russia have restricted our ability to sell to and collect from customers based in Russia, and Russian military activity in Ukrainian territory has temporarily changed the ~~Italian government began placing restrictions on activity as a result~~way in which we operate in Ukraine. Many of our branches in Ukraine have remained open, although operating at less than full capacity, during the conflict, while others have closed temporarily. As military operations shifted to the eastern part of the ~~COVID-19 outbreak. Sales volumes fell as fewer cars~~country, we were onable to increase capacity in branches in the ~~road~~central and ~~less maintenance activity was performed. While~~western territory, including our ~~Italian operation is~~central warehouse in Kyiv. We expect to continue operating in this manner unless conditions change. To date, we have experienced an ~~important part~~immaterial negative impact from the consequences of ~~our European business,~~this conflict, and we do not expect it ~~represented approximately 10% of the segment’s revenue in 2019, and thus the disruption did not~~to have a material impact on ~~the Company. By mid-March, the COVID-19 impact began spreading across the rest~~our ongoing results of ~~the geographies where we operate at a very rapid pace. Governments adopted aggressive restrictions on the operation~~operations or cash flows. Our operations in Ukraine represent less than 1% of ~~non-essential businesses~~both our total annual revenue and ~~personal movement, which reduced miles driven~~total annual operating profit and ~~collisions. While~~comprised approximately $50 million of total assets as of September 30, 2022. In addition, LKQ revenue from customers in Russia represented less than 0.3% of our ~~businesses have been deemed essential~~total revenue in most jurisdictions in which we operate, the change in behavior driven by the COVID-19 restrictions negatively impacted our sales volume. Our organic parts and services revenue declined by 16.8%, 4.5% and 5.2%2021. As future developments in the second, third, and fourth quarters of 2020, respectively, relative to the comparable prior year periods. We showed improvement in the third quarter of 2020 as governments gradually lifted restrictions for non-essential businesses and personal movement; however, in the fourth quarter of 2020 revenue declined as certain jurisdictions put restrictions back into place. As anticipated, April 2020 experienced the most negative revenue impact, with organic parts and services revenue (on a per day basis) down 30.3% compared to the prior year period. As movement restrictions lessened in May and June 2020, we experienced organic parts and services revenue declines (on a per day basis) of 13.2% and 7.3%, respectively, compared to the prior year periods. However, the pace of improvement flattened into the third quarter of 2020 as the increasing level of COVID-19 cases, especially in the United States, slowed the recovery. During the third quarter of 2020, organic parts and services revenue declined by 4.5% compared to the prior year period, a small improvement from the June 2020 decline of 7.3% (on a per day basis). During the fourth quarter of 2020, organic parts and services revenue declined by 6.1% (on a per day basis) and gradually worsened during the quarter with a decline of 7.2% (on a per day basis) in December. During the first quarter of 2021, organic parts and services revenue increased by 2.2% (on a per day basis) despite the continued COVID-19 impact on economic activity in the U.S. and Europe. During the second quarter of 2021, organic parts and services revenue increased by 21.1% (on a per day basis) reflecting the low prior year comparable figure owing to COVID-19 and the gradual recovery in mobility. During the third quarter of 2021, the recovery continued with organic parts and services revenue increasing by 4.0%. Since the start of the pandemic, our revenue has been impacted to varying degrees depending on the segment, with North America experiencing the most negative impact due to the decrease in miles driven and collision activity. After seeing year over year decreases early in the pandemic, Specialty revenue has grown due to favorable trends in recreational vehicle activity. We expect consolidated parts and services revenue to grow organically in future periods, but the level of the year over year increase in revenue will depend on, among other factors, the extent of reopening activities across the geographies in which we operate, the pace of recovery in miles driven and access to inventory, which has been constrained with supply chain issues.

Our top priority is the health and safety of our employees, customers and the communities in which we operate. We are using all reasonable efforts to follow governmental instructions and safety guidelines with respect to the operations of our facilities. We implemented protocols across our business units designed to help ensure the health and safety of our employees, customers and communities including, but not limited to: restricting access to and enhancing cleaning and disinfecting protocols at our facilities; encouraging vaccination of our employees; use of personal protective equipment; adhering to social distancing guidelines; instituting remote work arrangements for many of our employees; and restricting travel. We are monitoring developments related to vaccination levels and governmental standards and have adjusted our practices where appropriate to comply with the latest guidance.

Recognizing the demand changes in the first quarter of 2020, we took action in all of our business units to reduce our cost structure. These actions included, but were not limited to, employee furloughs and reductions in force, decreases in hours and overtime, lowering compensation for salaried employees, a hiring freeze, elimination of temporary labor, route consolidation, deferral of projects, and temporary branch closures. In the second quarter of 2020, these cost actions contributed to a reduction of approximately 18% in quarterly selling, general and administrative expenses compared to our first quarter 2020 run rate. We estimate that the cost actions generated a $10 million benefit in cost of goods sold compared to our second quarter of 2019. Some of the savings from the cost actions were delayed as we paid out vacation balances in April and covered medical benefits for employees in the United States during their furlough period. From the third quarter of 2020 through the third quarter of 2021, we were able to sustain a portion of the cost benefits. If revenue continues to increase, we expect that some of the costs that were reduced as a result of COVID-19 will remain at a lower level; the management team has been implementing productivity initiatives to create lower cost structures going forward as seen in the third and fourth quarter of 2020 and year to date 2021 results.

We pursued certain financial assistance and relief programs that were available to us from governments in Europe and Canada, primarily in the form of grants to offset personnel expenses. During the nine months ended September 30, 2021, we qualified for $16 million of assistance. We received $52 million of government assistance in 2020, with the largest portion coming in the second quarter. We currently do not anticipate qualifying for significant additional assistance in the remainder of 2021.

The cost actions lagged the revenue impact in the first and second quarters of 2020, which meant there was a negative timing impact of COVID-19 on our profitability in those periods in addition to the negative effect from reduced revenue. By the third quarter, the cost actions were aligned with the revenue changes, and we generated higher Segment EBITDA dollars and margins than in the third quarter of 2019. In the fourth quarter of 2020 and first quarter of 2021, profitability remained higher than the prior year. In the second quarter of 2021, profitability continued to improve and was the highest in the company's history. In the third quarter of 2021, profitability remained higher than the prior year.

We also emphasized the preservation of capital in 2020 with a deferral of growth driven capital projects, reductions in inventory orders, more active monitoring of customer receivables and terms, income and value added tax payment deferrals (the majority of which were paid during the third quarter of 2020), and suspension of our share buyback program (which was reinstated during the fourth quarter of 2020). This focus was successful as we improved our liquidity position at December 31, 2020 by approximately $1.0 billion relative to March 31, 2020 while managing through the disruption caused by the pandemic. Beginning in late 2020 and continuing in 2021, we returned to our stated capital allocation strategy with an emphasis on internal investments in capital expenditures and inventory, tuck-in acquisitions and share repurchases.

In each quarter of 2020, we prepared forecasts of future revenues, profits and cash flows to use in multiple analyses, including the interim goodwill impairment test, other impairment tests of long-lived assets, assessments of the recoverability of inventory, determination of customer and supplier rebate balances, calculation of the annual effective tax rate and evaluations of the realizability of deferred tax assets. Actual results showed an improving trend, with profitability in the second, third and fourth quarters all exceeding our prior forecast prepared in the first quarter of 2020. We will continue to assess COVID-19 developments and the potential impacts on our business in 2021 and update the applicable analyses as necessary.

~~As the economic impact of the pandemic is dependent on variables that~~conflict are difficult to project and ~~in many cases are~~ outside of our control, it is possible that the estimates underlying our ~~analyses~~financials may change ~~materially~~significantly in future periods. This is particularly the case because it appears that the prevalence of the virus outbreak fluctuates depending on various factors, including the level of economic and social activity and vaccination status in a region.

~~See the Results of Operations and Liquidity sections for further detail on our year over year trends.~~

Key Performance Indicators

We believe that organic revenue growth, Segment EBITDA and free cash flow are key performance indicators for our business. Segment EBITDA is our key measure of segment profit or loss reviewed by our chief operating decision maker. Free cash flow is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles (“non-GAAP”).

•Organic revenue growth - We define organic revenue growth as total revenue growth from continuing operations excluding the effects of acquisitions and divestitures (i.e., revenue generated from the date of acquisition to the first anniversary of that acquisition, net of reduced revenue due to the disposal of businesses) and foreign currency movements (i.e., impact of translating revenue at ~~prior period~~different exchange rates). Organic revenue growth includes incremental sales from both existing and new (i.e., opened within the last twelve months) locations and is derived from expanding business with existing customers, securing new customers and offering additional products and services. We believe that organic revenue growth is a key performance indicator as this statistic measures our ability to serve and grow our customer base successfully.

•Segment EBITDA - ~~Refer to~~See Note ~~14,~~13, "Segment and Geographic ~~Information,”~~Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of the calculation of Segment EBITDA. We believe that Segment EBITDA provides useful information to evaluate our segment profitability by focusing on the indicators of ongoing operational results.

•Free Cash Flow - We calculate free cash flow as net cash provided by operating activities, less purchases of property, plant and equipment. Free cash flow provides insight into our liquidity and provides useful information to management and investors concerning ~~our~~ cash flow available to meet future debt service obligations and working capital requirements, to make strategic acquisitions, to repurchase stock, and to ~~repurchase stock.~~pay dividends.

These three key performance indicators are used as targets in determining incentive compensation at various levels of the organization, including senior management. By using these performance measures, we attempt to motivate a balanced

approach to the business that rewards growth, profitability and cash flow generation in a manner that enhances our long-term prospects.

Results of Operations—Consolidated

The following table sets forth statements of income data as a percentage of total revenue for the periods indicated:

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 59.2 % 60.7 % 59.1 % 60.5 %
Gross margin 40.8 % 39.3 % 40.9 % 39.5 %
Selling, general and administrative expenses 27.2 % 26.7 % 26.7 % 28.3 %
Restructuring and acquisition related expenses 0.1 % 0.7 % 0.2 % 0.6 %
Impairment of net assets held for sale and (gain) loss on disposal of businesses 0.0 % (0.0) % 0.0 % 0.0 %
Depreciation and amortization 1.9 % 2.3 % 2.0 % 2.3 %
Operating income 11.5 % 9.7 % 12.1 % 8.3 %
Total other expense, net 0.4 % 0.9 % 0.7 % 0.9 %
Income from continuing operations before provision for income taxes 11.1 % 8.8 % 11.4 % 7.4 %
Provision for income taxes 2.7 % 2.6 % 2.9 % 2.1 %
Equity in earnings of unconsolidated subsidiaries 0.2 % 0.1 % 0.2 % 0.0 %
Income from continuing operations 8.6 % 6.4 % 8.6 % 5.3 %
Net loss from discontinued operations — % — % — % (0.0) %
Net income 8.6 % 6.4 % 8.6 % 5.3 %
Less: net (loss) income attributable to continuing noncontrolling interest (0.0) % 0.0 % 0.0 % 0.0 %
Less: net income attributable to discontinued noncontrolling interest — % — % — % 0.0 %
Net income attributable to LKQ stockholders 8.6 % 6.3 % 8.6 % 5.3 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	58.9	%	59.2	%	59.1	%	59.1	%

Gross margin	41.1	%	40.8	%	40.9	%	40.9	%
Selling, general and administrative expenses	27.8	%	27.2	%	27.4	%	26.7	%
Restructuring and transaction related expenses	0.1	%	0.1	%	0.1	%	0.2	%
(Gain) on disposal of businesses and impairment of net assets held for sale	(0.1)	%	—	%	(1.6)	%	—	%
Depreciation and amortization	1.9	%	1.9	%	1.8	%	2.0	%
Operating income	11.5	%	11.5	%	13.2	%	12.1	%
Total other expense, net	0.4	%	0.4	%	0.4	%	0.7	%
Income from continuing operations before provision for income taxes	11.2	%	11.1	%	12.7	%	11.4	%
Provision for income taxes	2.8	%	2.7	%	3.1	%	2.9	%
Equity in earnings of unconsolidated subsidiaries	0.1	%	0.2	%	0.1	%	0.2	%
Income from continuing operations	8.4	%	8.6	%	9.7	%	8.6	%
Net income from discontinued operations	—	%	—	%	0.1	%	—	%
Net income	8.4	%	8.6	%	9.8	%	8.6	%
Less: net income attributable to continuing noncontrolling interest	—	%	—	%	—	%	—	%
Net income attributable to LKQ stockholders	8.4	%	8.6	%	9.7	%	8.6	%

Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Three Months Ended September 30, ~~2021~~2022 Compared to Three Months Ended September 30, ~~2020~~2021

~~Revenue.~~

Revenue

The following table summarizes the changes in revenue by category (in ~~thousands)~~millions):


		Three Months Ended
		September 30,				Percentage Change in Revenue									Three Months Ended September 30,				Percentage Change in Revenue
		2021		2020		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change			2022		2021		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	3,061,308	$	2,885,729	4.0	%	0.5	%	1.5	%	6.1	%	Parts & services revenue	$	2,909	$	3,061	4.8	%	(2.3)	%	(7.4)	%	(5.0)	%
Other revenue	Other revenue	235,303		161,955		45.1	%	0.1	%	0.1	%	45.3	%	Other revenue	195		236		(17.1)	%	—	%	(0.4)	%	(17.4)	%
Total revenue	Total revenue	$	3,296,611	$	3,047,684	6.2	%	0.5	%	1.5	%	8.2	%	Total revenue	$	3,104	$	3,297	3.2	%	(2.1)	%	(6.9)	%	(5.9)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.													Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The ~~increase~~decline in parts and services revenue of ~~6.1%~~5.0% represented ~~increases~~decreases in segment revenue of ~~16.4%~~9.4% in Europe and 2.8% in Specialty, ~~6.9%~~partially offset by increases of 7.2% in Self Service and 0.1% in Wholesale - North ~~America, and~~ ~~2.7%~~ ~~in Europe. Organic parts~~America. Parts and services revenue ~~growth~~increased by 4.8% organically, so the overall decrease was ~~4.0%, with varying growth rates by segment~~ ~~as recovery from the~~attributable to negative effects from fluctuations in foreign exchange rates of 7.4% and the ~~pandemic in 2020 differed across the individual countries and markets in which we operate.~~net reduction from divestitures of 2.3%. The ~~increase~~decrease in other revenue of ~~45.3%~~17.4% was primarily driven by a ~~$73~~decrease in organic revenue of $40 million, ~~organic increase, largely attributable to~~ of which our ~~North America segment.~~Self Service segment contributed a $35 million decrease. Refer to the discussion of our segment results of operations for factors contributing to the ~~change~~changes in revenue by segment during the third quarter of ~~2021~~2022 compared to the prior year period.

Cost of Goods Sold

Cost of goods sold decreased to 58.9% of revenue in the three months ended September 30, 2022 from 59.2% of revenue in the three months ended September 30, ~~2021 from 60.7% of revenue in the three months ended September 30, 2020.~~2021. The cost of goods sold decrease primarily reflects ~~impacts~~an impact of

~~1.2%, and~~ ~~0.2%~~ 0.7% in our ~~Europe and~~Wholesale - North America ~~segments, respectively.~~segment, partially offset by an increase of 0.5% in our Self Service segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended September 30, ~~2021~~2022 compared to the ~~same period of 2020.~~three months ended September 30, 2021.

Selling, General and Administrative ~~Expenses.~~ Expenses

Our selling, general and administrative ("SG&A") expenses as a percentage of revenue increased to 27.8% in the three months ended September 30, 2022 from 27.2% in the three months ended September 30, ~~2021 from 26.7%~~2021. The SG&A expense increase primarily reflects impacts of 0.3% in ~~the three months ended September 30, 2020. SG&A expenses increased over the prior year period as a result of (i) a~~ ~~0.4%~~ ~~increase attributable to~~ our ~~North America~~Self Service segment and ~~(ii) a~~ 0.2% ~~increase from~~ in our Europe segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021.

Restructuring and ~~Acquisition~~Transaction Related Expenses

The following table summarizes restructuring and ~~acquisition~~transaction related expenses for the periods indicated (in ~~thousands)~~millions):

Three Months Ended
September 30,
2021 2020 Change
Restructuring expenses $ 1,843 (1) $ 12,701 (2) $ (10,858)
Acquisition related expenses 682 (3) 7,794 (4) (7,112)
Restructuring and acquisition related expenses $ 2,525 $ 20,495 $ (17,970)


	Three Months Ended September 30,
	2022			2021			Change
Restructuring expenses	$	2	(1)	$	2	(2)	$	—
Transaction related expenses	1			1			—
Restructuring and transaction related expenses	$	3		$	3		$	—

(1)Restructuring expenses for the three months ended September 30, ~~2021~~2022 primarily consisted of ~~(i)~~ ~~$1 million related to our 2020 global restructuring program.~~

~~(2)Restructuring expenses for~~ ~~the~~ ~~three months ended~~ ~~September 30, 2020 primarily consisted of (i) $10 million related to our 2020 global restructuring program, (ii) $2 million related to integration costs from acquisitions, and (iii)~~ $1 million related to our ~~2019~~ global restructuring programs and $1 million related to our 1 LKQ Europe program.

~~(3)~~(2)~~Acquisition related~~Restructuring expenses for the three months ended September 30, 2021 primarily ~~relate to professional fees~~consisted of $2 million related to ~~completed and potential transactions.~~our global restructuring programs.

~~(4)Acquisition related expenses for the~~ ~~three months ended~~ ~~September 30, 2020 consisted of an $8 million adjustment for the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.~~

See Note 5,4, "Restructuring and ~~Acquisition~~Transaction Related Expenses" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our restructuring and acquisition integration plans.

(Gain) on Disposal of Businesses and Impairment of Net Assets Held for Sale ~~and (Gain) Loss on Disposal of Businesses.~~

~~For~~

During the three months ended September 30, ~~2021,~~2022, we recorded ~~immaterial impairment charges~~a $4 million pretax gain from the sale of a business within our Self Service segment. See "Divestitures" in Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on ~~net assets held~~Form 10-Q for ~~sale~~. ~~For the three months ended September 30, 2020, we recorded an immaterial adjustment to reduce a previously recorded loss~~further information on ~~disposal.~~our gain on disposal of businesses.

Depreciation and Amortization

The following table summarizes depreciation and amortization for the periods indicated (in ~~thousands)~~millions):


		Three Months Ended
		September 30,								Three Months Ended September 30,
		2021		2020		Change				2022		2021		Change
Depreciation	Depreciation	$	38,555	$	38,346	$	209	(1)	Depreciation	$	36	$	39	$	(3)	(1)
Amortization	Amortization	25,440		30,309		(4,869)		(2)	Amortization	22		25		(3)		(2)
Total depreciation and amortization	Total depreciation and amortization	$	63,995	$	68,655	$	(4,660)		Total depreciation and amortization	$	58	$	64	$	(6)

(1)~~Depreciation~~The decrease in depreciation expense ~~increased an immaterial amount due to capital expenditures and~~included (i) $2 million from foreign currency translation primarily related to ~~an increase~~a decrease in the euro and pound sterling ~~and euro exchange~~ rates ~~for~~during the three months ended September 30, ~~2021~~2022 compared to the prior year ~~period.~~period and (ii) $1 million related to the sale of PGW.

(2)The decrease in amortization expense included $4 million from foreign currency translation primarily ~~reflected~~related to a decrease of ~~$5 million~~ ~~related to~~in the customer relationship intangible assets recorded upon our acquisition of Stahlgruber as the accelerated amortization of the customer relationship intangible assets resulted in lower amortization expenseeuro and pound sterling rates during the three months ended September 30, ~~2021~~2022 compared to the prior year period.

Other Expense, ~~Net.~~Net

The following table summarizes the components of the change in other expense, net (in ~~thousands)~~millions):


Other expense, net for the three months ended September 30, 2020		$	27,674
						Other Expense, Net
Other expense, net for the three months ended September 30, 2021					Other expense, net for the three months ended September 30, 2021	$	13
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Interest expense, net of interest income	Interest expense, net of interest income	(9,755)		(1)	Interest expense, net of interest income	1		(1)

Other (income) expense, net		(5,380)		(2)
Other income, net					Other income, net	(3)		(2)
Net decrease	Net decrease	(15,135)			Net decrease	(2)
Other expense, net for the three months ended September 30, 2021		$	12,539
Other expense, net for the three months ended September 30, 2022					Other expense, net for the three months ended September 30, 2022	$	11

(1)~~The decrease in~~Net interest ~~is related~~expense increased primarily due to (i) a ~~$10~~$3 million ~~decrease~~ increase resulting from ~~lower outstanding debt and lower~~higher interest rates during the three months ended September 30, ~~2021~~2022 compared to the prior year ~~period.~~period and (ii) a $1 million increase from higher average borrowings in the current year, partially offset by (iii) a $2 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate.

(2)The ~~favorable variance~~increase in Other ~~(income) expense,~~income, net is primarily comprised of (i) an increase related t~~o (i)~~to a $4net $3 million ~~pension settlement loss recorded~~change in ~~the third quarter of 2020 based on the annuity purchase cost~~insurance proceeds, (ii) an increase related to ~~settle the obligations of our primary defined benefit plan in the U.S (the "U.S. Plan") and (ii)~~ a net $2 million ~~mark~~gain on previously held equity interests, partially offset by (iii) a decrease related to ~~market adjustment~~a net $2 million change in ~~2021~~our fair value adjustments for ~~appreciation in our~~ equity investments not accounted for under the equity ~~method,~~ ~~partially offset by (iii) several individually immaterial factors that had an unfavorable impact of~~ ~~$1 million~~ ~~in the aggregate.~~method.

Provision for Income Taxes

Our effective income tax rate for the three months ended September 30, ~~2021~~2022 was ~~24.4%~~25.2%, compared to ~~29.3%~~24.4% for the ~~comparable prior~~three months ended September 30, 2021. In the third quarter of 2022, we increased our estimate of the annual effective rate by 20 basis points, which resulted in a year ~~period, reflecting (i)~~to date adjustment to increase the provision. In the three months ended September 30, 2021, we reduced the annual effective rate by 50 basis points, which resulted in a ~~2.3% lower projected annual~~year to date adjustment to decrease the provision. The net change resulted in a higher effective tax rate in 2021, (ii) a 1.0% favorable revision in the third quarter of 2021 due to a reduction in our projected annual effective tax rate, and (iii) a 1.6% favorable variance related to discrete items (primarily related to excess tax benefits from stock-based payments in 2021 and increased valuation allowances on net operating loss carryforwards and deferred tax adjustments as a result of statutory tax rate changes in 2020). 2022. See Note ~~13,~~12, "Income Taxes" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Equity in Earnings of Unconsolidated ~~Subsidiaries.~~Subsidiaries

Equity in earnings of unconsolidated subsidiaries for the three months ended September 30, ~~2021 increased~~2022 decreased by $4$6 million primarily related to ~~improved~~a decline in year over year results reported by Mekonomen, which is our ~~North America investments.~~largest equity method investment, and the negative year over year effect resulting from the divestiture of a Self Service investment in the second quarter of 2022.

Foreign Currency ~~Impact.~~Impact

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the three months ended September 30, ~~2020~~,2021, the euro, pound sterling ~~Canadian dollar,~~and Czech koruna ~~and euro~~ rates used to translate the ~~2021~~2022 statements of income ~~increased~~decreased by ~~6.7%~~15%, ~~5.8%, 4.5%~~15% and ~~0.8%~~11%, respectively. The ~~positive~~negative translation effect of the change in foreign currencies against the U.S. dollar combined with the ~~favorable~~negative impact of realized and unrealized currency gains and losses for the three months ended September 30, ~~2021 to generate~~2022 resulted in a ~~positive $0.01~~negative $0.06 effect on diluted earnings per share relative to the prior year period.

~~Net (loss) Income Attributable to Continuing and Discontinued Noncontrolling Interest.~~ ~~Net income attributable to continuing noncontrolling interest for the three months ended September 30, 2021 decreased an~~ ~~immaterial amount compared to the three months ended September 30, 2020.~~

3732

Nine Months Ended September 30, ~~2021~~2022 Compared to Nine Months Ended September 30, ~~2020~~2021

~~Revenue.~~

Revenue

The following table summarizes the changes in revenue by category (in ~~thousands)~~millions):


		Nine Months Ended
		September 30,				Percentage Change in Revenue									Nine Months Ended September 30,				Percentage Change in Revenue
		2021		2020		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change			2022		2021		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	9,171,345	$	8,201,604	8.3	%	(0.1)	%	3.6	%	11.8	%	Parts & services revenue	$	9,105	$	9,171	5.1	%	(0.6)	%	(5.3)	%	(0.7)	%
Other revenue	Other revenue	731,166		473,338		54.1	%	0.0	%	0.3	%	54.5	%	Other revenue	688		732		(5.8)	%	0.2	%	(0.3)	%	(6.0)	%
Total revenue	Total revenue	$	9,902,511	$	8,674,942	10.8	%	(0.1)	%	3.5	%	14.2	%	Total revenue	$	9,793	$	9,903	4.3	%	(0.5)	%	(4.9)	%	(1.1)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.													Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The ~~growth~~decline in parts and services revenue of ~~11.8%~~0.7% represented ~~increases~~decreases in segment revenue of ~~26.4%~~ ~~in Specialty,~~ ~~12.4%~~4.8% in Europe and ~~5.5%~~2.1% in Specialty, partially offset by increases of 11.6% in Self Service and 5.4% in Wholesale - North America. ~~Organic parts~~Parts and services revenue ~~growth~~increased by 5.1% organically, so the overall decrease was ~~8.3%, which included a~~ ~~0.4%~~attributable to negative ~~effec~~teffects from ~~one fewer selling day~~fluctuations in foreign exchange rates of 5.3% and the ~~first nine months~~net reduction from divestitures of ~~2021, resulting in per day organic growth of~~ ~~8.7%~~ ~~as the negative pandemic effect in the first nine months of 2020 was more severe than in the current year.~~0.6%. The ~~increase~~decrease in other revenue of ~~54.5%~~6.0% was primarily driven by a ~~$256~~decrease in organic revenue of $43 million, ~~organic increase, largely~~ attributable to a $50 million decrease in our Self Service segment, partially offset by an $8 million increase in our Wholesale - North America segment. Refer to the discussion of our segment results of operations for factors contributing to the ~~change~~changes in revenue by segment during the ~~first~~ nine months ~~of 2021~~ended September 30, 2022 compared to the prior year period.

Cost of Goods Sold

Cost of goods sold ~~decreased to 59.1%~~as a percentage of revenue inremained at 59.1% for both the nine months ended September 30, ~~2021 from 60.5% of revenue in the nine months ended September 30, 2020. The cost~~2022 and 2021. Cost of goods sold ~~decrease~~ reflects ~~impacts~~an increase of ~~0.8%~~, ~~0.6%~~ ~~and~~ ~~0.2%~~0.5% in our ~~Europe, North America and Specialty segments, respectively,~~Self Service segment partially offset by a ~~0.2%~~ ~~increase in cost~~decrease of ~~goods sold~~0.2% attributable to ~~mix. The~~ mix ~~impact was caused by higher growth in the Specialty segment~~as a greater portion of sales are coming from Wholesale - North America which has ~~lower margins than~~higher margins. The remaining decrease is related to improvements in each of our ~~North America and Europe segments, causing an unfavorable effect on the gross margin percentage.~~other three segments. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the nine months ended September 30, ~~2021~~2022 compared to the ~~same period of 2020.~~nine months ended September 30, 2021.

Selling, General and Administrative ~~Expenses.~~ Expenses

Our SG&A expenses as a percentage of revenue ~~decreased~~increased to 27.4% in the nine months ended September 30, 2022 from 26.7% in the nine months ended September 30, ~~2021 from 28.3%~~2021. The SG&A expense increase primarily reflects impacts of 0.2% in ~~the nine months ended September 30, 2020. SG&A expenses decreased over the prior year period as a result~~each of ~~(i) a~~ ~~0.6%~~ ~~decrease attributable to our North America segment, (ii) a~~ ~~0.6%~~ ~~decrease from~~ our Europe, ~~segment, (iii) a~~ ~~0.1%~~ ~~decrease from our~~ Specialty, ~~segment~~ and ~~(iv) a~~ ~~0.2%~~ decrease in SG&A expenses attributable to mix. The mix impact was a result of the increased revenues in our Specialty segment, as the lower SG&A expense percentage for the Specialty segment made up a larger percentage of the consolidated results, which had a favorable effect on the SG&A expense percentage.Self Service segments. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020.~~2021.

Restructuring and ~~Acquisition~~Transaction Related Expenses

The following table summarizes restructuring and ~~acquisition~~transaction related expenses for the periods indicated (in ~~thousands)~~millions):

Nine Months Ended
September 30,
2021 2020 Change
Restructuring expenses $ 14,679 (1) $ 44,498 (2) $ (29,819)
Acquisition related expenses 800 (3) 7,917 (4) (7,117)
Restructuring and acquisition related expenses $ 15,479 $ 52,415 $ (36,936)


	Nine Months Ended September 30,
	2022			2021			Change
Restructuring expenses	$	5	(1)	$	15	(2)	$	(10)
Transaction related expenses	5		(3)	1			4
Restructuring and transaction related expenses	$	10		$	16		$	(6)

(1)Restructuring expenses for the nine months ended September 30, 2022 consisted of (i) $2 million related to our acquisition integration plans, (ii) $2 million related to our global restructuring programs and (iii) $1 million related to our 1 LKQ Europe program.

(2) Restructuring expenses for the nine months ended September 30, 2021 primarily consisted of (i) $7$9 million related to our ~~2020~~ global restructuring ~~program~~programs and (ii) $6$6 million related to our 1 LKQ Europe program.

~~(2) Restructuring expenses for the~~ ~~nine months ended~~ ~~September 30, 2020 primarily consisted of (i)~~ ~~$31 million~~ ~~related to our 2020 global restructuring program, (ii) $8 million related to integration costs from acquisitions, and (iii)~~ ~~$6 million~~ ~~related to our 2019 global restructuring program.~~

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(3) ~~Acquisition~~Transaction related expenses for the nine months ended September 30, ~~2021~~2022 primarily ~~relate~~related to ~~professional~~external costs such as legal, accounting and advisory fees ~~related to~~for completed and potential transactions.

~~(4) Acquisition related expenses for the nine months ended~~ ~~September 30, 2020~~ ~~primarily consisted of an $8 million adjustment for the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.~~

(Gain) on Disposal of Businesses and Impairment of Net Assets Held for Sale ~~and (Gain) Loss on Disposal of Businesses.~~

~~For both~~

During the nine months ended September 30, ~~2021 and 2020,~~2022, we recorded ~~immaterial losses~~a $159 million pretax gain from divestitures including $155 million ($127 million after tax) from the sale of PGW and $4 million from the sale of a business within our Self Service segment. See "Divestitures" in Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on ~~the~~Form 10-Q for further information on our gain on disposal of ~~businesses and impairment charges on net assets held for sale.~~businesses.

Depreciation and Amortization

The following table summarizes depreciation and amortization for the periods indicated (in ~~thousands)~~millions):


		Nine Months Ended
		September 30,								Nine Months Ended September 30,
		2021		2020		Change				2022		2021		Change
Depreciation	Depreciation	$	116,280	$	112,462	$	3,818	(1)	Depreciation	$	106	$	117	$	(11)	(1)
Amortization	Amortization	78,412		87,435		(9,023)		(2)	Amortization	72		78		(6)		(2)
Total depreciation and amortization	Total depreciation and amortization	$	194,692	$	199,897	$	(5,205)		Total depreciation and amortization	$	178	$	195	$	(17)

(1)The ~~increase~~decrease in depreciation expense ~~reflected (i) $3~~included $5 million from foreign currency translation primarily related to ~~an increase~~a decrease in the euro and pound sterling ~~exchange~~ rates ~~and (ii) $1 million due to capital expenditures in our North America and Europe segments~~ during the nine months ended September 30, ~~2021~~2022 compared to the prior year ~~period.~~period and $3 million related to divestiture of businesses (primarily PGW) with the remaining decrease due to individually immaterial factors.

(2)The decrease in amortization expense primarily reflected (i) ~~decreases~~a $6 million decrease from foreign exchange translation, primarily related to a decrease in the euro exchange rate and (ii) a decrease of ~~$11~~$4 million ~~and $2 million related~~related to the customer relationship intangible assets recorded upon our ~~acquisitions~~acquisition of Stahlgruber ~~and Rhiag, respectively,~~ as the accelerated amortization of the customer relationship intangible assets resulted in lower amortization expense during the nine months ended September 30, ~~2021~~2022 compared to the prior year period, partially offset by ~~(ii)~~(iii) a $4$2 million increase ~~from foreign currency translation, primarily~~ related to ansoftware amortization with the remaining increase ~~in the euro exchange rate during the nine months ended September 30, 2021 compared~~due to ~~the prior year period.~~individually immaterial factors.

Other Expense, ~~Net.~~Net

The following table summarizes the components of the change in other expense, net (in ~~thousands)~~millions):


Other expense, net for the nine months ended September 30, 2020		$	80,176
						Other Expense, Net
Other expense, net for the nine months ended September 30, 2021					Other expense, net for the nine months ended September 30, 2021	$	65
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Interest expense, net of interest income	Interest expense, net of interest income	(20,951)		(1)	Interest expense, net of interest income	(10)		(1)
Loss on debt extinguishment	Loss on debt extinguishment	10,813		(2)	Loss on debt extinguishment	(24)		(2)

Other (income) expense, net		(4,108)		(3)
Other income, net					Other income, net	11		(3)
Net decrease	Net decrease	(14,246)			Net decrease	(23)
Other expense, net for the nine months ended September 30, 2021		$	65,930
Other expense, net for the nine months ended September 30, 2022					Other expense, net for the nine months ended September 30, 2022	$	42

(1)~~The lower~~Net interest expense isdeclined primarily due to (i) a $5 million decrease from foreign exchange translation, primarily related to ~~(i)~~ a ~~$24~~decrease in the euro exchange rate and (ii) a $4 million decrease resulting from lower ~~outstanding debt and lower~~ interest rates during the nine months ended September 30, ~~2021~~2022 compared to the prior year ~~period, partially offset by (ii) a $3 million increase from foreign currency translation, primarily related to an increase in the euro exchange rate.~~period.

(2)The ~~$11~~$24 million ~~increase~~decrease in loss on debt extinguishment is due to the ~~$24 million~~ charge recorded in April 2021 related to the redemption of the Euro Notes (2026) ~~compared to a $13 million charge related to the redemption of the U.S. Notes (2023) in January 2020.~~.

(3)The ~~favorable variance~~decrease in Other ~~(income) expense,~~income, net is primarily comprised of (i) a decrease related to ~~(i) $8~~a $11 million of ~~mark to market~~change in our fair value adjustments ~~in 2021~~ for ~~appreciation in our~~ equity investments not accounted for under the equity method and (ii) $6a decrease related to a $5 million change in ~~pension settlement~~foreign currency gains and losses, partially offset by (iii) other individually insignificant increases which in the ~~prior year related to the U.S. Plan, partially offset by~~ ~~(iii)~~aggregate had a $6$5 million ~~reduction in~~ ~~proceeds related to insurance settlements compared to the prior year, (iv) unfavorable contingent payment~~favorable impact.

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~~liability adjustments of $2 million and (v) several individually immaterial factors that had an unfavorable impact of~~ ~~$2 million~~ ~~in the aggregate.~~

Provision for Income Taxes

Our effective income tax rate for the nine months ended September 30, ~~2021~~2022 was ~~25.7%~~24.4%, compared to ~~28.3%~~25.7% for the ~~comparable prior year period.~~nine months ended September 30, 2021. The ~~lower estimated annual~~decrease in the effective tax rate for ~~2021 is primarily attributable to~~ the ~~higher forecasted 2021 results of operations, as~~nine months ended September 30, 2022 compared to ~~the forecasts available during the comparable period in 2020, when COVID-19 pandemic economic disruptions were depressing forecasted 2020 results. For~~ the nine months ended September 30, 2021 ~~the effective tax rate~~ was ~~decreased~~ ~~0.1%~~ byattributable to net favorable discrete items of 1.1%, primarily ~~for excess tax benefits from stock-based payments. For~~related to the ~~nine months ended September 30, 2020,~~sale of PGW, and the ~~effective tax rate was increased 0.3% by unfavorable discrete items, primarily valuation allowances on net operating loss carryforwards and deferred tax adjustments as a result~~geographic distribution of ~~statutory tax rate changes.~~income. See Note ~~13,~~12, "Income Taxes" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Equity in Earnings of Unconsolidated ~~Subsidiaries.~~Subsidiaries

Equity in earnings of unconsolidated subsidiaries for the nine months ended September 30, ~~2021 increased~~2022 decreased by ~~$15~~$9 million primarily related to ~~improved~~a decline in year over year results reported by Mekonomen, which is our largest equity method investment, and ~~our North America investments, which generated income~~the negative year over year effect resulting from the divestiture of a Self Service investment in ~~2021 after posting losses in 2020.~~the second quarter of 2022.

Foreign Currency ~~Impact.~~Impact

We translate our statements of income at the average exchange rates in effect for the period. Relative to the ~~rate~~rates used during the nine months ended September 30, ~~2020,~~2021, the ~~Czech koruna,~~euro, pound sterling, ~~Canadian dollar~~ and ~~euro~~Czech koruna rates used to translate the ~~2021~~2022 statements of income ~~increased~~decreased by ~~9.2%~~11%, ~~9.0%~~9%, ~~8.1%~~ and ~~6.3%~~7%, re~~spectively.~~respectively. The ~~positive~~negative translation effect of the change in foreign currencies against the U.S. dollar combined with the ~~positive~~negative impact of realized and unrealized currency gains and losses for the nine months ended September 30, ~~2021~~2022 resulted in a ~~$0.02~~ ~~positive~~an $0.11 negative effect on diluted earnings per share relative to the prior year period.

~~Net Income Attributable to Continuing and Discontinued Noncontrolling Interest.~~ ~~Net income attributable to continuing noncontrolling interest for the nine months ended September 30, 2021~~ decreased an immaterial amount compared to the nine months ended September 30, 2020. Net income attributable to discontinued noncontrolling interest was immaterial for the nine months ended September 30, 2020 and related to the Stahlgruber Czech Republic wholesale business. See Note 2, "Discontinued Operations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on this business.

Results of Operations—Segment Reporting

We have four ~~operating~~reportable segments: Wholesale –- North America, Europe, Specialty and Self Service. Our Wholesale – North America and Self Service operating segments are aggregated into one reportable segment, North America, because they possess similar economic characteristics and have common products and services, customers, and methods of distribution. Therefore, we present three reportable segments: North America, Europe and Specialty.

We have presented the growth of our revenue and profitability in our operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our growth and profitability, consistent with how we evaluate our performance, as this statistic removes the translation impact of exchange rate fluctuations, which are outside of our control and do not reflect our operational performance. Constant currency revenue and Segment EBITDA results are calculated by translating prior year revenue and Segment EBITDA in local currency using the current year's currency conversion rate. This non-GAAP financial measure has important limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under US GAAP. Our use of this term may vary from the use of similarly-titled measures by other issuers due to potential inconsistencies in the method of calculation and differences due to items subject to interpretation. In addition, not all companies that report revenue or profitability on a constant currency basis calculate such measures in the same manner as we do, and accordingly, our calculations are not necessarily comparable to similarly-named measures of other companies and may not be appropriate measures for performance relative to other companies.

The following table presents our financial performance, including third party revenue, total revenue and Segment EBITDA, by reportable segment for the periods indicated (in ~~thousands)~~millions):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022		% of Total Segment Revenue		2021		% of Total Segment Revenue		2022		% of Total Segment Revenue		2021		% of Total Segment Revenue
Third Party Revenue
Wholesale - North America	$	1,108			$	1,112			$	3,453			$	3,281
Europe	1,380				1,525				4,345				4,565
Specialty	452				465				1,424				1,454
Self Service	164				195				571				603
Total third party revenue	$	3,104			$	3,297			$	9,793			$	9,903
Total Revenue
Wholesale - North America	$	1,109			$	1,112			$	3,454			$	3,282
Europe	1,380				1,525				4,345				4,565
Specialty	452				466				1,426				1,457
Self Service	164				195				571				603
Eliminations	(1)				(1)				(3)				(4)
Total revenue	$	3,104			$	3,297			$	9,793			$	9,903
Segment EBITDA
Wholesale - North America	$	216	19.4	%	$	190	17.1	%	$	648	18.7	%	$	603	18.4	%
Europe	155		11.3	%	175		11.5	%	446		10.3	%	484		10.6	%
Specialty	49		10.8	%	52		11.1	%	176		12.4	%	193		13.2	%
Self Service	4		2.6	%	36		18.4	%	76		13.3	%	148		24.6	%
Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding.

Three Months Ended September 30, Nine Months Ended September 30,
2021 % of Total Segment Revenue 2020 % of Total Segment Revenue 2021 % of Total Segment Revenue 2020 % of Total Segment Revenue
Third Party Revenue
North America $ 1,306,310 $ 1,164,031 $ 3,882,734 $ 3,465,102
Europe 1,525,274 1,484,099 4,565,388 4,058,878
Specialty 465,027 399,554 1,454,389 1,150,962
Total third party revenue $ 3,296,611 $ 3,047,684 $ 9,902,511 $ 8,674,942
Total Revenue
North America $ 1,306,965 $ 1,164,241 $ 3,884,352 $ 3,465,831
Europe 1,525,274 1,484,099 4,565,388 4,058,878
Specialty 465,842 400,429 1,457,060 1,153,885
Eliminations (1,470) (1,085) (4,289) (3,652)
Total revenue $ 3,296,611 $ 3,047,684 $ 9,902,511 $ 8,674,942
Segment EBITDA
North America $ 225,582 17.3 % $ 204,957 17.6 % $ 750,935 19.3 % $ 565,949 16.3 %
Europe 175,093 11.5 % 136,165 9.2 % 484,157 10.6 % 303,814 7.5 %
Specialty 51,644 11.1 % 48,340 12.1 % 192,525 13.2 % 132,805 11.5 %

The key measure of segment profit or loss reviewed by our chief operating decision maker, our Chief Executive Officer, is Segment EBITDA. 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 EBITDA excluding restructuring and ~~acquisition~~transaction related expenses (which includes restructuring expenses recorded in Cost of goods sold); 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 ~~mark~~fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict and related sanctions (including provisions for and subsequent adjustments to ~~market adjustments;~~reserves for asset recoverability and ~~impairment charges.~~expenditures to support our employees and their families). EBITDA, which is the basis for Segment EBITDA, is calculated as net income ~~attributable to LKQ stockholders~~ excluding discontinued operations, ~~and discontinued noncontrolling interest,~~ depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense. See Note ~~14,~~13, "Segment and Geographic Information" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to net income.

Three Months Ended September 30, ~~2021~~2022 Compared to Three Months Ended September 30, ~~2020~~2021

Wholesale - North America

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Wholesale - North America segment (in ~~thousands)~~millions):


		Three Months Ended September 30,				Percentage Change in Revenue										Three Months Ended September 30,				Percentage Change in Revenue
North America		2021		2020		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Wholesale - North America															Wholesale - North America	2022		2021		Organic			Acquisition and Divestiture			Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	1,076,599	$	1,007,001	5.9	%	(1)	0.6	%	0.4	%	6.9	%	Parts & services revenue	$	1,026	$	1,025	10.9	%	(1)	(10.6)	%	(3)	(0.2)	%	0.1	%
Other revenue	Other revenue	229,711		157,030		46.1	%	(2)	0.1	%	0.0	%	46.3	%	Other revenue	82		87		(4.4)	%	(2)	0.1	%		(0.2)	%	(4.5)	%
Total third party revenue	Total third party revenue	$	1,306,310	$	1,164,031	11.3	%		0.6	%	0.3	%	12.2	%	Total third party revenue	$	1,108	$	1,112	9.7	%		(9.8)	%		(0.2)	%	(0.2)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.														Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue increased ~~5.9%~~10.9% for the three months ended September 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation. Aftermarket collision parts volumes increased slightly year over year due to reduced pressures on our supply chain and were largely offset by decreases in collision and mechanical parts volumes from our salvage business.

(2)Other organic revenue decreased 4.4%, primarily related to (i) a $3 million decrease in revenue from scrap steel related to lower prices and (ii) a $2 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, partially offset by higher volumes.

(3)Acquisition and divestiture revenue was a net decrease of $109 million due to the divestiture of PGW in the second quarter of 2022. See "Divestitures" in Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the divestiture of PGW.

Segment EBITDA

Segment EBITDA increased $26 million, or 13.5%, in the three months ended September 30, 2022 compared to the prior year period, despite the $13 million negative year over year effect resulting from the divestiture of PGW in the second quarter of 2022. The primary drivers of the increase were higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel. In addition, certain charitable and incentive benefit contributions totaling $15 million in the three months ended September 30, 2021 were not repeated in the three months ended September 30, 2022. The overall increase was partially offset by decreases attributable to precious metals and scrap steel. We estimate that precious metals and scrap steel pricing had an unfavorable effect of $10 million, or 0.8%, on Segment EBITDA margin relative to the comparable prior year period.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Wholesale - North America segment:


Wholesale - North America	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2021	17.1	%
Increase (decrease) due to:
Change in gross margin	1.9	%	(1)
Change in segment operating expenses	0.2	%	(2)
Change in other income and expenses, net	0.2	%	(3)
Segment EBITDA for the three months ended September 30, 2022	19.4	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin of 1.9% was primarily driven by (i) productivity and price initiatives to offset inflation on product cost and inbound freight and (ii) a 0.8% mix benefit resulting from the PGW divestiture in the second quarter, partially offset by (iii) an unfavorable impact from a decrease in scrap steel and precious metals pricing.

(2)Segment operating expenses as a percentage of revenue decreased 0.2% due to (i) a 0.6% favorable impact from personnel expense due to non-recurring incentive compensation in 2021, (ii) a 0.4% favorable impact from lower charitable contributions, offset by (iii) a 0.4% unfavorable impact from higher professional fees, and (iv) a 0.4% unfavorable impact

of other operating expenses in the aggregate.

(3)Other income and expenses, net as a percentage of revenue was favorable by 0.2% mainly due to insurance proceeds.

Europe

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Europe segment (in millions):


	Three Months Ended September 30,				Percentage Change in Revenue
Europe	2022		2021		Organic			Acquisition and Divestiture		Foreign Exchange (2)		Total Change
Parts & services revenue	$	1,376	$	1,520	4.8	%	(1)	0.5	%	(14.7)	%	(9.4)	%
Other revenue	4		5		(11.6)	%		—	%	(15.3)	%	(27.0)	%
Total third party revenue	$	1,380	$	1,525	4.7	%		0.5	%	(14.7)	%	(9.5)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue for the three months ended September 30, 2022 increased by 4.8% (5.8% on a per day basis), primarily due to pricing initiatives across all geographies that have been implemented throughout 2022 to offset increased costs resulting from inflationary pressures. The organic revenue growth across most of our European operations was partially offset by 0.4% of an unfavorable effect on certain operations and product lines due to the Ukraine/Russia conflict.

(2)Compared to the prior year, exchange rates decreased our revenue growth by $224 million, or 14.7%, primarily due to the stronger U.S. dollar against the euro, pound sterling, and Czech koruna during the third quarter of 2022 relative to the prior year period.

Segment EBITDA

Segment EBITDA decreased $20 million, or 11.2%, in the three months ended September 30, 2022 compared to the prior year period. Our Europe Segment EBITDA included a negative year over year impact of $26 million related to the translation of local currency results into U.S. dollars at lower exchange rates than those experienced during the three months endedSeptember 30, 2021. On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA increased by $6 million, or 3.6%, compared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the three months ended September 30, 2022.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Europe segment:


Europe	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2021	11.5	%
Increase (decrease) due to:
Change in gross margin	0.1	%	(1)
Change in segment operating expenses	(0.3)	%	(2)

Segment EBITDA for the three months ended September 30, 2022	11.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin was primarily attributable to favorable impacts of net price increases and margin improvement initiatives undertaken to support profitable revenue growth despite inflationary pressures.

(2) The increase in segment operating expenses as a percentage of revenue reflects unfavorable impacts of (i) 0.4% from freight, vehicle, and fuel expenses due to inflationary pressures, (ii) 0.3% from increased personnel costs primarily due to inflationary pressures, partially offset by favorable impacts of (iii) 0.2% from lower professional expenses and (iv) several individually immaterial factors totaling 0.2% in the aggregate.

Specialty

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Specialty segment (in millions):


	Three Months Ended September 30,				Percentage Change in Revenue
Specialty	2022		2021		Organic (1)		Acquisition and Divestiture (2)		Foreign Exchange		Total Change
Parts & services revenue	$	452	$	465	(9.1)	%	6.6	%	(0.3)	%	(2.8)	%
Other revenue	—		—		—	%	—	%	—	%	—	%
Total third party revenue	$	452	$	465	(9.1)	%	6.6	%	(0.3)	%	(2.8)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue for the three months ended September 30, 2022 decreased by 9.1% due to the strong growth we experienced in the third quarter of 2021, when parts and services organic revenue growth was 13.7%; demand softness from lower new vehicle sales caused by supply chain challenges; and a decrease in drop shipment volumes.

(2)Acquisition related growth for the three months ended September 30, 2022 reflected revenue from our acquisitions of two Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

Segment EBITDA

Segment EBITDA decreased $3 million, or 5.0%, in the three months ended September 30, 2022 compared to the prior year period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:


Specialty	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2021	11.1	%
Increase (decrease) due to:
Change in gross margin	0.5	%	(1)
Change in segment operating expenses	(0.8)	%	(2)

Segment EBITDA for the three months ended September 30, 2022	10.8	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin primarily reflects (i) a 1.0% benefit from lower customer rebate accruals and (ii) other individually immaterial factors totaling 0.5%, partially offset by (iii) a 1.0% unfavorable impact from acquisitions.

(2) Theincrease in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.8% in personnel costs as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.6% in vehicle and fuel expenses primarily due to higher fuel costs, (iii) 0.4% in fixed facility expenses as a result of lower operating leverage due to the organic parts and services revenue decline and (iv) several individually immaterial factors that had an unfavorable impact of 0.5% in the aggregate, partially offset by favorable impacts of (v) 0.8% from operating expense synergies and leverage generated from the 2021 acquisitions, primarily Seawide, and (vi) 0.7% related to lower incentive compensation.

Self Service

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Self Service segment (in millions):


	Three Months Ended September 30,				Percentage Change in Revenue
Self Service	2022		2021		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	$	55	$	51	7.2	%	(1)	—	%	—	%	7.2	%
Other revenue	109		144		(24.8)	%	(2)	—	%	—	%	(24.8)	%
Total third party revenue	$	164	$	195	(16.3)	%		—	%	—	%	(16.3)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue increased 7.2% for the three months ended September 30, 2022 compared to the prior year period, primarily driven by pricing ~~and growth~~initiatives to mitigate significant increases in input costs resulting from recycled and remanufactured major mechanical parts. While mobility statistics have improved relative to 2020, aftermarket collision parts revenue was roughly flat year-over-year due to the availability constraints of parts caused by current year supply chain issues. Until these issues are resolved, we expect to see a negative effect on aftermarket fill rates across the sector that will impact revenue growth rates.greater competition for vehicles.

(2)The ~~$72~~24.8%, or $35 million, year over year ~~organic increase~~decrease in other revenue is ~~primarily~~ related to (i) a ~~$40~~$23 million ~~increase~~decrease in revenue from scrap steel ~~due~~related to ~~higher~~lower volumes and lower prices, (ii) a ~~$20 million increase in revenue from other scrap and cores primarily related to higher prices, and (iii) a~~ $13 million ~~increase~~decrease in revenue from precious metals (platinum, palladium, and rhodium) ~~primarily~~ due to ~~higher prices.~~lower prices and lower volumes, partially offset by (iii) a $1 million increase in revenue from other scrap (including aluminum) and cores.

Segment EBITDA

Segment EBITDA ~~increased $21~~decreased $32 million, or ~~10.1%~~88.0%, in the ~~third quarter of 2021~~three months ended September 30, 2022 compared to the prior year period. ~~This increase is attributable~~The decrease includes a $5 million decline due to ~~margin initiatives, rightsizing actions, favorable commodity prices, and improving revenue compared to the prior year. Increases in~~lower precious metals prices ~~contributed an estimated $10 million in Segment EBITDA improvement~~ relative to the ~~third quarter of 2020. Additionally,~~comparable prior year period. In addition, net sequential ~~increases~~changes in scrap steel prices in our ~~salvage and~~ self service operations had a $7$16 million ~~favorable~~unfavorable impact on Segment EBITDA during the three months ended September 30, ~~2021,~~2022, compared to a $5$4 million favorable impact during the three months ended September 30, ~~2020 resulting from net sequential increases in scrap steel prices.~~2021. This ~~favorable~~unfavorable impact for the three months ended September 30, ~~2021~~2022 resulted from the ~~increase~~decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle. We estimate that precious metals and scrap steel pricing had ~~a favorable~~an unfavorable effect of ~~0.2%~~12.4% on Segment EBITDA margin relative to the comparable prior year period.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Self Service segment:


Self Service	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2021	18.4	%
Increase (decrease) due to:
Change in gross margin	(9.5)	%	(1)
Change in segment operating expenses	(6.3)	%	(2)

Segment EBITDA for the three months ended September 30, 2022	2.6	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The decrease in gross margin reflects (i) an unfavorable impact of 9.9% resulting from movements in metals prices partially offset by (ii) a favorable impact due to increased prices for parts and services.

(2) The increase in segment operating expense as a percentage of revenue reflects (i) a negative leverage effect of 5.4% from decreases in metals revenue and (ii) other individually immaterial factors representing a 0.9% unfavorable impact in the aggregate.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Wholesale - North America

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Wholesale - North America segment (in millions):


	Nine Months Ended September 30,				Percentage Change in Revenue
Wholesale - North America	2022		2021		Organic			Acquisition and Divestiture			Foreign Exchange		Total Change
Parts & services revenue	$	3,182	$	3,018	11.7	%	(1)	(6.1)	%	(3)	(0.1)	%	5.4	%
Other revenue	271		263		3.2	%	(2)	0.6	%		(0.1)	%	3.6	%
Total third party revenue	$	3,453	$	3,281	11.0	%		(5.6)	%		(0.1)	%	5.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue increased 11.7% (11.2% on a per day basis) for the nine months ended September 30, 2022 compared to the prior year period, primarily driven by passing through input cost inflation. Aftermarket collision parts volumes decreased in the first nine months of the year due to ocean freight delays and supply chain challenges but showed year over year improvement in the third quarter. Increased volumes of collision parts from our salvage business partially offset the year to date aftermarket volume decline.

(2)Organic other revenue increased 3.2%, or $8 million, related to (i) a$19 million increase in revenue from other scrap (e.g., aluminum) and cores due tohigher prices as well as higher volumes, and (ii) a $2 million increase in revenue from scrap steel due to higher volumes, partially offset by (iii) a $13 million decrease in revenue from precious metals (platinum, palladium, and rhodium) primarily due to lower prices partially offset by higher volumes.

(3)Acquisition and divestiture revenue was a net decrease of $185 million primarily due to the divestiture of PGW in the second quarter of 2022. See "Divestitures" in Note 2, "Financial Statement Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the divestiture of PGW.

Segment EBITDA

Segment EBITDA increased $45 million, or 7.4%, for the nine months ended September 30, 2022 compared to the prior year, despite the $12 million negative year over year effect related to the PGW business, which we divested in the second quarter of 2022. The increase is attributable to higher prices on parts and productivity initiatives helping to offset inflationary pressures related to ocean freight, labor, supplies and fuel. The increase was partially offset by decreases attributable to precious metals and scrap steel. We estimate that precious metals and scrap steel pricing had an unfavorable effect of $32 million, or 0.9%, on Segment EBITDA margin relative to the comparable prior year period.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our North America segment:


North America		Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2020		17.6	%
Wholesale - North America					Wholesale - North America	Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2021					Segment EBITDA for the nine months ended September 30, 2021	18.4	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	0.5	%	(1)	Change in gross margin	0.3	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(1.0)	%	(2)	Change in segment operating expenses	—	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest		0.1	%
Segment EBITDA for the three months ended September 30, 2021		17.3	%
Segment EBITDA for the nine months ended September 30, 2022					Segment EBITDA for the nine months ended September 30, 2022	18.7	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)The increase in gross margin ~~primarily reflected favorable impacts~~ of ~~1.1%~~0.3% was driven by (i) productivity and price initiatives to offset inflation on product cost and inbound freight and (ii) a 0.5% mix benefit resulting from ~~our wholesale operations. While inflationary pressures have driven increases~~the PGW divestiture in ~~product and freight costs for our wholesale operations relative to~~ the prior year, we are adjusting prices dynamically to address input cost increases and market conditions such as inventory availability and demand, resulting in a net positive effect on gross margin in 2021. This wassecond quarter, partially offset by (iii) an unfavorable impact from a ~~negative impact of 0.4% from our self service operations. While nominal gross margin dollars improved, gross margin~~decrease in scrap steel and precious metals pricing.

(2)The segment operating expenses as a percentage of revenue ~~from self service declined~~were flat which reflects favorable impacts of (i) 0.2% related to personnel costs due to ~~higher car costs as well as a sequential dip in precious metal prices.~~

~~(2) The increase in segment operating expense as a percentage of revenue reflects (i) a 0.9% unfavorable impact from personnel expenses related to inflation and increased~~lower incentive compensation and (ii) ~~a 0.4% unfavorable impact~~0.2% from ~~a prior year gain on sale of property, and (iii) a 0.3% increase in~~lower charitable contributions, partially offset by (iii) a 0.3% unfavorable impact related to professional fees and (iv) ~~a favorable 0.3% impact from facility related expenses which are relatively fixed in nature, and (v) several~~other individually immaterial factors ~~that had~~representing a ~~0.3% favorable~~0.1% unfavorable impact in the aggregate.

Europe

~~Europe~~

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Europe segment (in ~~thousands)~~millions):

Three Months Ended
September 30, Percentage Change in Revenue
Europe 2021 2020
Organic (1)
Acquisition and Divestiture
Foreign Exchange (2)
Total Change
Parts & services revenue $ 1,519,682 $ 1,479,174 0.1 % (0.0) % 2.6 % 2.7 %
Other revenue 5,592 4,925 10.9 % — % 2.6 % 13.6 %
Total third party revenue $ 1,525,274 $ 1,484,099 0.2 % (0.0) % 2.6 % 2.8 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Nine Months Ended September 30,				Percentage Change in Revenue
Europe	2022		2021		Organic			Acquisition and Divestiture		Foreign Exchange (2)		Total Change
Parts & services revenue	$	4,327	$	4,545	5.3	%	(1)	0.4	%	(10.5)	%	(4.8)	%
Other revenue	18		20		(1.1)	%		—	%	(10.5)	%	(11.7)	%
Total third party revenue	$	4,345	$	4,565	5.2	%		0.4	%	(10.5)	%	(4.8)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue for the ~~three~~nine months ended September 30, ~~2021~~2022 increased by ~~0.1%~~5.3% (5.5% on a per day basis), ~~as not~~primarily due to pricing initiatives across all ~~regions were impacted~~geographies that have been implemented throughout 2022 to offset increased costs resulting from inflationary pressures. The organic revenue growth across most of our European operations was partially offset by ~~the pandemic at the same time~~0.4% of a negative effect on certain operations and product lines due to the same degree in 2020, and the easing of lockdown measures has varied across the continent in 2021. The flat overall growth rate is attributable to a relatively strong comparable period in 2020 in certain markets with pent up demand coming out of the lockdowns. Strong revenue growth in central and eastern Europe ("CEE") and Germany was offset by softness in Italy, which was down compared to the prior year period.Ukraine/Russia conflict.

(2)Compared to the prior year, exchange rates ~~increased~~decreased our revenue growth by ~~$39~~$478 million, or ~~2.6%~~10.5%, primarily due to the ~~weaker~~stronger U.S. dollar against the euro, pound sterling ~~euro,~~ and Czech koruna ~~during~~for the ~~third quarter of 2021~~nine months ended September 30, 2022 relative to the prior year period.

Segment EBITDA

. Segment EBITDA ~~increased $39~~decreased $38 million, or ~~28.6%~~7.8%, infor the ~~third quarter of 2021~~nine months ended September 30, 2022 compared to the prior year period. Our Europe Segment EBITDA included a ~~positive~~negative year over year impact of $4$52 million related to the translation of local currency results into U.S. dollars at ~~higher~~lower exchange rates than those experienced during the ~~third quarter of 2020.~~nine months ended September 30, 2021. On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA increased by ~~$35~~$14 million, or ~~25.6%~~3.0%, ~~compared~~compared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the ~~three~~nine months ended September 30, ~~2021.~~2022.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Europe segment:


Europe	Europe	Percentage of Total Segment Revenue			Europe	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2020		9.2	%
Segment EBITDA for the nine months ended September 30, 2021					Segment EBITDA for the nine months ended September 30, 2021	10.6	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	2.5	%	(1)	Change in gross margin	0.1	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(0.3)	%	(2)	Change in segment operating expenses	(0.3)	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest		0.2	%
Segment EBITDA for the three months ended September 30, 2021		11.5	%
Change in other expense, net					Change in other expense, net	(0.1)	%
Segment EBITDA for the nine months ended September 30, 2022					Segment EBITDA for the nine months ended September 30, 2022	10.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)The increase in gross margin was primarily attributable to favorable impacts of ~~2.5% as a result of~~ net price increases ~~implemented in response to inflationary pressures that are impacting product~~ and ~~freight costs and other~~ margin improvement initiatives ~~related~~undertaken to ~~procurement.~~support profitable revenue growth despite inflationary pressures.

(2)The increase in segment operating expenses as a percentage of revenue primarily reflects an unfavorable ~~impact~~impacts of (i) ~~0.8%~~0.3% from increased personnel costs primarily due to ~~government grants received in the prior year~~inflationary pressures, (ii) 0.3% from increased freight, vehicle, and fuel expenses due to ~~cover employee costs in countries such as the U.K.~~inflationary pressures and ~~Germany (a lesser amount was received in 2021)~~supply chain constraints, and ~~increased incentive compensation, partially offset by (ii) several~~(iii) other individually immaterial factors ~~that had~~representing a 0.3% favorable impact ~~of 0.5%~~ in the aggregate.

Specialty

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our Specialty segment (in ~~thousands)~~millions):


		Three Months Ended September 30,				Percentage Change in Revenue									Nine Months Ended September 30,				Percentage Change in Revenue
Specialty	Specialty	2021		2020		Organic (1)		Acquisition and Divestiture		Foreign Exchange		Total Change		Specialty	2022		2021		Organic (1)		Acquisition and Divestiture (2)		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	465,027	$	399,554	13.7	%	2.1	%	0.6	%	16.4	%	Parts & services revenue	$	1,424	$	1,454	(9.7)	%	7.9	%	(0.3)	%	(2.1)	%
Other revenue	Other revenue	—		—		—	%	—	%	—	%	—	%	Other revenue	—		—		—	%	—	%	—	%	—	%
Total third party revenue	Total third party revenue	$	465,027	$	399,554	13.7	%	2.1	%	0.6	%	16.4	%	Total third party revenue	$	1,424	$	1,454	(9.7)	%	7.9	%	(0.3)	%	(2.1)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.													Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)~~The~~Parts and services organic ~~increase was primarily~~revenue for the nine months ended September 30, 2022, decreased by 9.7% (10.2% on a per day basis) due to strong ~~demand~~comparative growth for ~~our products across all channels of~~ the ~~segment. We believe the~~nine months ended September 30, 2021, when parts and services organic revenue growth was ~~driven~~24.6%; demand softness from lower new vehicle sales caused by ~~our competitive advantage with our delivery service teams that enabled us to fulfill the strong demand owing to~~supply chain challenges; and a ~~stronger inventory position than our competitors.~~decrease in drop shipment volumes.

(2)Acquisition related growth for the nine months ended September 30, 2022 reflected revenue from our acquisitions of three Specialty businesses from the beginning of 2021 through the one-year anniversary of the acquisition dates.

Segment EBITDA

Segment EBITDA ~~increased $3~~decreased $17 million, or ~~6.8%~~8.5%, infor the ~~third quarter of 2021~~nine months ended September 30, 2022 compared to the prior year ~~third quarter.~~period primarily due to the organic revenue decline and the negative effect of inflation on overhead expenses.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:


Specialty	Specialty	Percentage of Total Segment Revenue			Specialty	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2020		12.1	%
Segment EBITDA for the nine months ended September 30, 2021					Segment EBITDA for the nine months ended September 30, 2021	13.2	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	(0.3)	%	(1)	Change in gross margin	0.5	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(0.6)	%	(2)	Change in segment operating expenses	(1.3)	%	(2)

Segment EBITDA for the three months ended September 30, 2021		11.1	%
Segment EBITDA for the nine months ended September 30, 2022					Segment EBITDA for the nine months ended September 30, 2022	12.4	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)The ~~decrease~~increase in gross margin primarily reflects (i) an unfavorable impact of 0.4% driven by inflation in the manufacturing part of the business, and (ii) several individually immaterial factors that had an impact of 0.2% in the aggregate, partially offset by (iii) a 0.3% change due to favorable product and channel mix as well as lower discounting to recover ~~increased~~higher input ~~costs.~~costs and lower customer rebate accruals, partially offset by a 1.0% unfavorable impact from acquisitions.

(2)The increase in segment operating expenses as a percentage of revenue primarily reflects unfavorable impacts of (i) 0.8% in personnel costs primarily as a result of wage inflation and lower operating leverage due to the organic parts and services revenue decline, (ii) 0.5% in vehicle and fuel expenses primarily due to higher fuel costs, (iii) 0.3% in fixed facility expenses as a result of lower operating leverage due to the organic parts and services revenue decline, and (iv) several individually immaterial factors that had an unfavorable impact of 0.4% ~~due to increased incentive compensation, and (ii) an unfavorable~~in the aggregate, partially offset by (v) a favorable impact of ~~0.2% due to duplicative costs related to~~0.7% from operating expense synergies and leverage generated from the 2021 acquisitions.

4443

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

~~North America~~Self Service

Third Party Revenue

The following table summarizes the changes in third party revenue by category in our ~~North America~~Self Service segment (in ~~thousands)~~millions):


		Nine Months Ended September 30,				Percentage Change in Revenue										Nine Months Ended September 30,				Percentage Change in Revenue
North America		2021		2020		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Self Service															Self Service	2022		2021		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	3,172,207	$	3,007,169	4.7	%	(1)	0.3	%	0.5	%	5.5	%	Parts & services revenue	$	172	$	154	11.6	%	(1)	—	%	—	%	11.6	%
Other revenue	Other revenue	710,527		457,933		55.1	%	(2)	0.0	%	0.0	%	55.2	%	Other revenue	399		449		(11.3)	%	(2)	—	%	—	%	(11.3)	%
Total third party revenue	Total third party revenue	$	3,882,734	$	3,465,102	11.4	%		0.3	%	0.4	%	12.1	%	Total third party revenue	$	571	$	603	(5.4)	%		—	%	—	%	(5.4)	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.														Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue increased ~~4.7% (5.3% on a per day basis) in~~11.6% for the nine months ended September 30, ~~2021~~2022 compared to the prior year ~~period. The growth was~~period, primarily driven by ~~an increase~~pricing initiatives to mitigate significant increases in ~~repairable claims related to the COVID-19 recovery as well as growth~~input costs resulting from major mechanical parts. Aftermarket collision parts revenue was roughly flat year-over-year due to availability constraints of aftermarket parts caused by current year supply chain issues. Until these issues are resolved, we expect to see a negative effect on aftermarket fill rates across the sector that will impact revenue growth rates.greater competition for vehicles.

(2)The ~~$252~~11.3%, or $50 million, year over year ~~organic increase~~decrease in other revenue is ~~primarily~~ related to (i) a ~~$107~~$51 million ~~increase in revenue from scrap steel due to higher prices, and (ii) a $99 million increase~~decrease in revenue from precious metals (platinum, palladium, and rhodium) ~~primarily~~ due to both lower prices and volumes, and (ii) a $13 million decrease in revenue from scrap steel related to lower volumes partially offset by higher prices, ~~and~~partially offset by (iii) a ~~$47~~$14 million increase in revenue from other scrap (including aluminum) and cores primarily related to higher prices.

Segment EBITDA

Segment EBITDA ~~increased $185~~decreased $72 million, or ~~32.7%~~48.8%, in the ~~first~~ nine months ~~of 2021 despite the impact of one fewer selling day~~ended September 30, 2022 compared to the prior year period. ~~This increase~~The decrease is primarily attributable to ~~higher precious metals and scrap steel~~unfavorable movements in commodity prices ~~margin initiatives, rightsizing actions and the favorable effect from the revenue recovery~~ compared to the prior ~~year when the COVID-19 impact was more severe. Increases~~year. Decreases in precious metals prices contributed an estimated ~~$70~~$32 million decline in Segment EBITDA ~~improvement~~ relative to the ~~first~~ nine months ~~of 2020. Additionally,~~ended September 30, 2021. In addition, net sequential ~~increases~~changes in scrap steel prices in our ~~salvage and~~ self service operations had ~~a $38~~an $11 million ~~favorable~~unfavorable impact on Segment EBITDA during the nine months ended September 30, ~~2021,~~2022, compared to a $5$25 million favorable impact during the nine months ended September 30, ~~2020. This favorable impact~~2021. The unfavorable impacts for the nine months ended September 30, ~~2021~~2022 resulted from the ~~increase~~decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle. We estimate that precious metals and scrap steel pricing had ~~a favorable~~an unfavorable effect of ~~1.9%~~10.4% on Segment EBITDA margin relative to the comparable prior year period.

~~The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our North America segment:~~

North America Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2020 16.3 %
Increase (decrease) due to:
Change in gross margin 1.5 % (1)
Change in segment operating expenses 1.6 % (2)
Change in other expense, net and net income attributable to continuing noncontrolling interest (0.2) %
Segment EBITDA for the nine months ended September 30, 2021 19.3 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin primarily reflected favorable impacts from our wholesale operations. Wholesale operations gross margin was favorable primarily due to the positive impact of higher precious metals and scrap steel prices, pricing initiatives and cost reductions from operational efficiencies and rightsizing efforts. Compared to the prior year, input costs for our wholesale operations have risen, with (i) inflationary pressures impacting product and freight costs in aftermarket and (ii) limited supply combined with heightened competition at auctions contributing to higher salvage costs. We are adjusting prices dynamically to address input cost increases and market conditions such as inventory availability and demand, and, in some cases, we experienced a margin benefit in 2021 as higher prices were enacted ahead of turning the higher cost inventory.

(2) The decrease in segment operating expense as a percentage of revenue on a per day basis reflects (i) a favorable impact of 1.0% from personnel expenses related to headcount reductions, operational efficiencies, and a positive leverage effect, mostly related to the increase in other revenue, partially offset by increased incentive compensation expense and inflationary increases, (ii) a positive leverage effect of 0.4% from facility expenses, which are largely fixed and (iii) several individually immaterial factors that had a favorable impact of 0.2% in the aggregate. As the market recovers and volumes increase, we expect to bring back necessary resources to support our operations; however, we expect permanent actions taken in 2020 will continue to provide a long-term favorable impact for the segment.

~~Europe~~

~~Third Party Revenue. The following table summarizes the changes in third party revenue by category in our Europe segment (in thousands):~~

Nine Months Ended
September 30, Percentage Change in Revenue
Europe 2021 2020 Organic
Acquisition and Divestiture (2)
Foreign Exchange (3)
Total Change
Parts & services revenue $ 4,544,749 $ 4,043,473 6.3 % (1) (0.7) % 6.8 % 12.4 %
Other revenue 20,639 15,405 25.6 % — % 8.4 % 34.0 %
Total third party revenue $ 4,565,388 $ 4,058,878 6.4 % (0.7) % 6.8 % 12.5 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1)~~Parts and services organic revenue for the nine months ended September 30, 2021 increased by 6.3% as the negative pandemic effect on volume in 2020 was more severe than in the current year. Not all regions were impacted by the pandemic at the same time and to the same degree in 2020, and the easing of lockdown measures has varied across the continent in 2021. These conditions created a different growth profile for each of our European businesses. While most of our businesses reported year over year growth, CEE and the U.K. reported the greatest increases for the first nine months.

~~(2)~~The decline for the nine months ended September 30, 2021 was primarily a result of the disposal of a non-core telecommunications operation in Germany in the second quarter of 2020 and three additional smaller disposals in 2021 and 2020.

~~(3)Compared to the prior year, exchange rates increased our revenue growth by~~ ~~$277 million, or~~ ~~6.8%, primarily due to the weaker U.S. dollar against the euro, pound sterling and Czech koruna during the first nine months of 2021 relative to the prior year period.~~

~~Segment EBITDA. Segment EBITDA increased~~ ~~$180 million, or~~ ~~59.4%, in the first nine months of 2021 compared to the prior year period. Our Europe Segment EBITDA included a positive year over year impact of~~ ~~$21 million~~ related to the translation of local currency results into U.S. dollars at higher exchange rates than those experienced during the first nine months of 2020. On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA increased by ~~$159 million, or 52.5%, com~~pared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the nine months ended September 30, 2021.

The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our ~~Europe~~Self Service segment:


Europe		Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2020		7.5	%
Self Service					Self Service	Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2021					Segment EBITDA for the nine months ended September 30, 2021	24.6	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	1.7	%	(1)	Change in gross margin	(8.2)	%	(1)
Change in segment operating expenses	Change in segment operating expenses	1.3	%	(2)	Change in segment operating expenses	(3.1)	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest		0.1	%
Segment EBITDA for the nine months ended September 30, 2021		10.6	%

Segment EBITDA for the nine months ended September 30, 2022					Segment EBITDA for the nine months ended September 30, 2022	13.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)The decrease in gross margin reflects (i) an unfavorable impact of 9.2% resulting from movements in metals prices partially offset by (ii) a favorable impact due to increased prices for parts and services.

(2)The increase in gross margin was primarily attributable to a favorable impact of 1.5% as a result of net price increases implemented in response to inflationary pressures that are impacting product and freight costs and other margin improvement initiatives related to procurement. Additionally, there was a 0.2% benefit from the disposal of non-core operations in 2020.

~~(2) The decrease in~~ segment operating ~~expenses~~expense as a percentage of revenue reflects ~~favorable impacts of~~ (i) 0.5% from bad debt expense due to customers' improved solvency and an increase in reserve in the prior year related to the COVID-19 pandemic, (ii) 0.4% from freight, vehicle and fuel expenses due to higher internet and mail order sales in the prior year, which have higher freight costs, and favorable leverage effect. Personnel costs were relatively flat compared to the prior year, as the unfavorable impact due to government grants received in the prior year to cover employee costs in countries such as the U.K. and Germany (a lesser amount was received in 2021) and increased incentive compensation were offset by a ~~favorable~~negative leverage effect of 2.7% from decreases in metals revenue and ~~headcount reductions. Several~~(ii) other individually immaterial factors ~~had~~representing a ~~favorable~~ 0.4% unfavorableimpact ~~of 0.4%~~ in the aggregate.

~~Specialty~~

~~Third Party Revenue. The following table summarizes the changes in third party revenue by category in our Specialty segment (in thousands):~~

Nine Months Ended
September 30, Percentage Change in Revenue
Specialty 2021 2020
Organic (1)
Acquisition and Divestiture Foreign Exchange Total Change
Parts & services revenue $ 1,454,389 $ 1,150,962 24.6 % 1.0 % 0.7 % 26.4 %
Other revenue — — — % — % — % — %
Total third party revenue $ 1,454,389 $ 1,150,962 24.6 % 1.0 % 0.7 % 26.4 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1)~~Parts and services organic revenue increased 24.6% for the first nine months of 2021 compared to the prior year period despite one fewer selling day. On a per day basis, organic revenue increased 25.3%. The organic increase was primarily due to strong demand for our products across all channels of our business. We believe the revenue growth was driven by our competitive advantage with our delivery service teams that enabled us to keep up with the strong demand and have more available inventory than our competitors.

~~Segment EBITDA. Segment EBITDA increased $60 million, or 45.0%, in the first nine months of 2021 compared to the prior year period.~~

~~The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:~~

Specialty Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2020 11.5 %
Increase (decrease) due to:
Change in gross margin 1.2 % (1)
Change in segment operating expenses 0.5 % (2)
Segment EBITDA for the nine months ended September 30, 2021 13.2 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1) The increase in gross margin primarily reflects favorable product and channel mix as well as lower discounting to recover increased input costs.~~

(2) The decrease in segment operating expenses as a percentage of revenue, which includes the operating leverage impact from the organic parts and services revenue growth of 24.6% compared to the prior year, reflects a favorable impact of (i) 0.5% in personnel costs, and (ii) several individually immaterial factors that had a favorable impact of 0.3% in the aggregate, partially offset by (iii) an unfavorable impact of 0.3% due to increased incentive compensation.

Liquidity and Capital Resources

The following table summarizes liquidity data as of the dates indicated (in ~~thousands)~~millions):


		September 30, 2021		December 31, 2020		September 30, 2020			September 30, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	402,703	$	312,154	$	421,382	Cash and cash equivalents	$	269	$	274
Total debt (1)	Total debt (1)	2,398,502		2,896,676		3,133,465		Total debt (1)	2,447		2,824
Current maturities (2)	Current maturities (2)	37,117		58,810		97,584		Current maturities (2)	50		35
Capacity under credit facilities (3)	Capacity under credit facilities (3)	3,150,000		3,260,000		3,260,000		Capacity under credit facilities (3)	3,150		3,150
Availability under credit facilities (3)	Availability under credit facilities (3)	1,637,753		2,546,081		2,270,953		Availability under credit facilities (3)	1,460		1,194
Total liquidity (cash and cash equivalents plus availability under credit facilities)	Total liquidity (cash and cash equivalents plus availability under credit facilities)	2,040,456		2,858,235		2,692,335		Total liquidity (cash and cash equivalents plus availability under credit facilities)	1,729		1,468

(1) Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of ~~$13 million, $26~~$7 million and ~~$27~~$12 million as of September 30, ~~2021,~~2022 and December 31, ~~2020 and September 30, 2020,~~2021, respectively).

(2) Debt amounts reflect the gross values to be repaid in the next 12 months (excluding debt issuance costs of immaterial amounts ~~amounts~~ as of September 30, ~~2021,~~2022 and December 31, ~~2020 and September 30, 2020)~~2021).

(3) Capacity under credit facilities includes our revolving credit facilities and ~~our receivables securitization facility (through July 30, 2021, at which time the facility was terminated). Availability~~availability under credit facilities is reduced by our outstanding letters of credit.

We assess our liquidity in terms of our ability to fund our operations and provide for expansion through both internal development and acquisitions. Our primary sources of liquidity are cash flows from operations and our credit facilities. We utilize our cash flows from operations to fund working capital and capital expenditures, with the excess amounts going towards funding acquisitions, paying down outstanding debt, paying dividends or repurchasing our common stock. As we have pursued acquisitions as part of our historical growth strategy, our cash flows from operations have not always been sufficient to cover our investing activities. To fund our acquisitions, we have accessed various forms of debt financing, including revolving credit facilities and senior ~~notes and a receivables securitization facility.~~notes.

As of September 30, ~~2021,~~2022, we had debt outstanding and additional available sources of financing as follows:

•Senior secured credit facilities maturing in January 2024, composed of ~~$3.15 billion~~$3,150 million in revolving credit ($~~1.4 billion~~1,621 million outstanding at September 30, ~~2021)~~2022), bearing interest at variable rates, with availability reduced by~~$69~~ $69 million of amounts outstanding under letters of credit

•Euro Notes (2024) totaling ~~$579~~$490 million (€500 million), maturing in April 2024 and bearing interest at a 3.875% fixed rate

•Euro Notes (2028) totaling ~~$290~~$245 million (€250 million) maturing in April 2028 and bearing interest at a 4.125% fixed rate

As of September 30, ~~2021,~~2022, we had approximately $~~1.6 billion~~1,460 million available under our credit facilities. Combined with ~~$403~~$269 million of cash and cash equivalents at September 30, ~~2021,~~2022, we had approximately $1,729 million i~~$2.0 billion~~ inn available liquidity, ~~a decrease~~an increase of ~~$818~~$261 million from our available liquidity as of December 31, ~~2020.~~2021.

On April 1, 2021, we redeemed the Euro Notes (2026) with proceeds from borrowings on our revolving credit facility and cash on hand, resulting in a decrease in available liquidity compared to December 31, 2020. Additionally, in the second quarter of 2021, we used free cash flow generated in our domestic operations and borrowings on our revolving credit facility to repay all of our term loan ($319 million). Also, we terminated our receivables securitization facility effective July 30, 2021. With these transactions, we reduced our overall liquidity by utilizing available capacity on the revolving credit facility and reducing the overall facility size. We believe our future cash flow needs can be supported by a smaller credit facility, so we redeemed the Euro Notes (2026) and eliminated the term loan using funds from the revolving credit facility, which in turn will lower our interest expense and non-usage fees.

We believe that our current liquidity and cash expected to be generated by operating activities in future periods will be sufficient to meet our current operating and capital requirements. ~~To support our liquidity position during the COVID-19 pandemic, we focused on preserving cash during the expected period of reduced demand.~~ Our action plan to strengthen our liquidity position included a deferral of growth driven capital projects, reductions in inventory orders, more active monitoring of customer receivables and terms, income and value added tax deferrals, and suspension of our share buyback program, in addition to the cost saving measures discussed in the "COVID-19 Impact on Our Operations" section above. Given our success in strengthening our liquidity position as of September 30, 2020, we recommenced our share buyback program during the fourth quarter of 2020. Our 20212022 plan includes spending to rebuild inventory levels, support growth driven capital projects, complete tuck-in acquisitions, and ~~complete strategic acquisitions.~~ ~~Beginning in the fourth quarter of 2021, we expanded our capital allocation strategy to include~~return stockholder value through the payment of dividends and repurchasing shares of our common stock. A summary of the dividend activity for our common stock for the nine months ended September 30, 2022 is as ~~an additional mechanism to return value to our stockholders.~~ follows:

Dividend Amount

Declaration Date

Record Date

Payment Date

$0.25

February 15, 2022

March 3, 2022

March 24, 2022

$0.25

April 26, 2022

May 19, 2022

June 2, 2022

$0.25

July 26, 2022

August 11, 2022

September 1, 2022

We believe that our future cash flow generation will permit us to continue paying dividends in future periods; however, the timing, amount and frequency of such future dividends will be subject to approval by our Board of Directors, and based on considerations of capital availability, ~~compliance with covenants within our credit facilities, senior note indentures,~~ and various other factors, many of which are outside of our control. Additionally, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the COVID-19 pandemic are reasonably likely to materially affect our liquidity and capital resources negatively in the future or alter our capital allocation strategy.

With ~~$2.0 billion~~$1,729 million of total liquidity as of September 30, ~~2021~~ 2022 and~~$37~~ $50 millionof current maturities, we have access to funds to meet our near term ~~commitments even if the pandemic effect extends longer than our current expectations.~~commitments. We have a surplus of current assets over current liabilities, which further reduces the risk of ~~short term~~short-term cash shortfalls.

Our total liquidity includes availability under our senior secured credit facility, which includes the two financial maintenance covenants presented below (our required debt covenants and our actual ratios with respect to those covenants as calculated per the credit agreement as of September 30, ~~2021)~~2022):


	Covenant Level	Ratio Achieved as of September 30, ~~2021~~2022
Maximum net leverage ratio	~~4.25:~~4.00 : 1.00	~~1.1~~1.3
Minimum interest coverage ratio	~~3.00:~~3.00 : 1.00	~~24.4~~31.1

The terms net leverage ratio and minimum interest coverage ratio used in the credit agreement are specifically calculated per the credit agreement and differ in specified ways from comparable US GAAP or common usage terms.

Our credit agreement contains customary covenants that impose limitations and conditions on our ability to enter into certain transactions. The credit agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio. During the second quarter of 2022, two ratings agencies, S&P Global Ratings and Moody's Investors Service, upgraded our issuer credit rating to an investment grade rating of 'BBB-' and 'Baa3', respectively, and rated our outlook as stable. With the assignment of an investment grade rating, we are no longer required to comply with certain restrictive covenants under the credit agreement. We were in compliance with all ~~restrictive~~applicable covenants under our credit agreement as of September 30, ~~2021.~~2022.

We amended our senior secured credit facility in June 2020 to increase the maximum net leverage ratio effective with our compliance certificate filed with respect to the second quarter of 2020; refer to "Senior Secured Credit Agreement" in Note 9, "Long-Term Obligations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the June 2020 amendment. With the amendment and strong cash flow generation ~~since the pandemic began, we believe that we have significantly reduced the risk of a covenant breach, including by reducing our net leverage ratio relative to the second quarter of 2020 in each successive quarter.~~

The indentures relating to our Euro Notes do not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds onunder the credit facility. The indentures do not prohibit amendments to the financial covenants under the credit facility as needed.

~~In the long term, while~~

While we believe that we have adequate capacity under our existing credit facilities, from time to time we may need to raise additional funds through public or private financing, strategic relationships or ~~other arrangements, such as (i)~~modification of our ~~November 2018 amendment to our senior secured~~existing credit ~~facility and (ii) the issuance of the Euro Notes (2026/28) in April 2018 related to the Stahlgruber acquisition.~~facilities. There can be no assurance that additional funding, or refinancing of our credit facilities, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants or higher interest costs. Our failure to raise capital if and when needed could have a material adverse impact on our business, operating results, and financial condition. Our current credit facility matures in January 2024, and we expect to refinance the facility prior to that date.

~~Beginning in 2019, a number of our European suppliers began participating in~~

We utilize a supply chain financing ~~initiative in select countries under~~arrangement, which ~~they may sell their accounts receivable to the participating financial institutions, allowing~~allows us to ~~extend~~improve our operating cash flows by extending payment ~~terms which in turn improves our operating~~ cash flows. The initiative allows our suppliers to monetize their receivables prior to their payment date, subject to payment of a discount. We expect more suppliers will begin participating in our European supply chain financing initiative in the fourth quarter of 2021.terms. Financial institutions participate in the supply chain financing initiative on an uncommitted basis and can cease purchasing receivables from our suppliers at any time. The initiative is at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. In the future, if the financial institutions ~~did~~do not continue to purchase receivables from our suppliers under the initiative, the participating vendors may need to renegotiate their payment terms with us, which in turn could cause our borrowings under our revolving credit facility to increase. All outstanding payments owed under the initiative to the participating financial institutions are recorded within Accounts payable in our Unaudited Condensed Consolidated Balance Sheets.

~~Borrowings under~~We have held interest rate swaps to hedge the variable rates on a portion of our credit agreement ~~accrue~~borrowings and currency swaps that contain an interest ~~at variable rates which are tied to the prime~~ rate ~~LIBOR or the Canadian Dollar Offered Rate ("CDOR"), depending~~swap component and a foreign currency forward contract component. As of September 30, 2022, we did not have any of these contracts outstanding. The weighted average interest rate on the currency and the duration of the borrowing, plus an applicable margin rate that is subject to change quarterly based on our reported leverage ratio. LIBOR will begin to be phased out on December 31, 2021 and will be replaced entirely by June 2023. Outstanding debtborrowings outstanding under our credit agreement was 3.0% at September 30, 2022. Including our senior notes, our overall weighted average interest rate on borrowings was 3.3% at September 30, 2022. Our borrowings in U.S. dollars continue to accrue interest at LIBOR until a replacement rate is specified, which constitutes the most significant of our LIBOR-based debt obligations, contains provisions that address the discontinuation of LIBOR and facilitate the adoption of an alternative rate of interest. We are working with our bank group on this transition and will migrateis expected to ~~the new benchmark rates when applicable.~~occur prior to June 2023. We do not expect the change in benchmark rates will have a material impact on our results of operations, financial position or liquidity.

We have held interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings, with the effect of fixing the interest rates on the respective notional amounts. In addition, from time to time, we hold currency swaps that contain an interest rate swap component and a foreign currency forward contract component that, when combined with related intercompany financing arrangements, effectively convert variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. These derivative transactions are described inSee Note ~~10, "Derivative Instruments and Hedging Activities"~~8, "Long-Term Obligations" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form ~~10-Q. As of September 30, 2021, we did not have any of these types of contracts outstanding,~~10-Q for information related to our borrowings and ~~the weighted average interest rate on borrowings outstanding under our credit agreement was~~ ~~1.1% at September 30, 2021. Including our senior notes, our overall weighted average interest rate on borrowings was 2.2% at September 30, 2021.~~related interest.

~~Cash interest payments were~~ ~~$53 million~~ for the nine months ended September 30, 2021, including interest payments on our Euro Notes (2024) and Euro Notes (2028) as well as the interest owed when we settled the Euro Notes (2026). Interest payments on our Euro Notes (2024) and Euro Notes (2028) are made in April and October.

We had outstanding credit agreement borrowings of ~~$1.4 billion~~$1,621 million and ~~$967~~$1,887 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Of these amounts, ~~there~~ ~~were~~there were no current maturities at ~~as of~~ September 30, ~~2021 and current maturities of~~ ~~$18 million~~ at2022 or December 31, ~~2020.~~2021.

5046

The scheduled maturities of long-term obligations outstanding at September 30, ~~2021~~2022 are as follows (in ~~thousands)~~millions):


Three months ending December 31, 2021 (1):		$	23,508

Three months ending December 31, 2022 (1)				Three months ending December 31, 2022 (1)	$	37
Years ending December 31:	Years ending December 31:			Years ending December 31:
2022		17,657
2023	2023	10,658		2023	20
2024	2024	2,030,283		2024	2,119
2025	2025	9,663		2025	9
2026				2026	3
Thereafter	Thereafter	306,733		Thereafter	259
Total debt (2)	Total debt (2)	$	2,398,502	Total debt (2)	$	2,447

(1) ~~Maturities of long-term~~Long-term obligations ~~due~~maturing by December 31, ~~2021 includes~~ ~~$20~~2022 include $34 million of short-term debt that may be extended beyond the current ~~due date.~~year ending December 31, 2022.

(2)The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of ~~$13~~$7 million as of September 30, ~~2021)~~2022).

As of September 30, ~~2021,~~2022, the Company had cash and cash equivalents o~~f $403~~of $269 million, of which ~~$332~~$210 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries, and that position has not changed following the enactment of the Tax Cuts and Jobs Act (the "Tax Act") and the related imposition of the transition tax on the deemed repatriation of historical earnings of foreign subsidiaries as of December 31, 2017.subsidiaries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives. Distributions of dividends from our foreign subsidiaries, if any, would be generally exempt from further U.S. taxation, either as a result of the 100% participation exemption under the Tax Cuts and Jobs Act, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income ~~(“GILTI”)~~ regime.

The procurement of inventory is the largest operating use of our funds. We normally pay for aftermarket product purchases on standard payment terms or at the time of shipment, depending on the manufacturer and the negotiated payment terms. We normally pay for salvage vehicles acquired at salvage auctions and under direct procurement arrangements at the time that we take possession of the vehicles.

The following table sets forth a summary of our aftermarket and manufactured inventory procurement for the three and nine months ended September 30, 2022 and 2021 ~~and 2020~~ (in ~~thousands)~~millions):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
North America $ 276,000 $ 270,600 $ 5,400 $ 798,100 $ 760,600 $ 37,500 (1)
Europe 961,600 940,400 21,200

2,860,900 2,491,600 369,300 (2)
Specialty 352,500 252,200 100,300 1,105,200 678,400 426,800 (3)
Total $ 1,590,100 $ 1,463,200 $ 126,900 $ 4,764,200 $ 3,930,600 $ 833,600


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Wholesale - North America	$	288	$	276	$	12	$	907	$	798	$	109	(1)
Europe	829		962		(133)		2,708		2,861		(153)		(2)
Specialty	322		352		(30)		1,031		1,105		(74)		(3)
Total	$	1,439	$	1,590	$	(151)	$	4,646	$	4,764	$	(118)

(1)Inventory purchases across the Wholesale - North America segment ~~have~~ increased in the nine months ended September 30, ~~2021~~2022 compared to the prior year period primarily due to required restocking to keep up with the ~~low base as we scaled back buying in recognition of~~ demand ~~changes in 2020. We are rebuilding~~for our inventory levels after decreases in 2020 due to the COVID-19 pandemic, however, they did not reach our desired levels in the first nine months of 2021 due to ocean freight driven delays in shipping and overall pandemic driven lower production volumes.products.

(2)The ~~increase~~decrease in inventory purchases in our Europe segment included ~~an increase~~a decrease of ~~$168~~$307 million attributable to the ~~increase~~decrease in the value of the euro, and to a lesser extent, the pound sterling in the nine months ended September 30, ~~2021~~2022 compared to the prior year period. On a constant currency basis, inventory purchases increased compared to ~~2020, primarily due to~~ the low base as we scaled back buying in recognition of demand changes in 2020. However, we did not reach our desired levels in the first nine months of 2021 due to ocean freight driven delays in shipping and overall pandemic driven lower production volumes.

~~(3)The increase in inventory purchases in the Specialty segment was primarily~~prior year period, due to required restocking to keep up with the ~~high~~ demand for our ~~products.~~products as well as purchases to improve availability for customers in certain regions.

(3)The decrease in inventory purchases in the Specialty segment compared to the prior year period was primarily due to matching inventory levels with demand. This was partially offset by inventory purchases made by companies acquired in the second half of 2021.

5147

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 % Change 2021 2020 % Change
North America wholesale salvage cars and trucks 61 57 7.0 % 174 165 5.5 %
Europe wholesale salvage cars and trucks 6 6 0.0 % 19 18 5.6 %
Self service and "crush only" cars 138 148 (6.8) % 414 434 (4.6) %

~~Salvage~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022	2021	% Change		2022	2021	% Change
Wholesale - North America salvage vehicles	63	61	3.3	%	188	174	8.0	%
Europe wholesale salvage vehicles	7	6	16.7	%	23	19	21.1	%
Self Service salvage vehicles	122	137	(10.9)	%	396	414	(4.3)	%

Wholesale - North America salvage purchases in 2022 increased relative to the prior year due to ~~reduced buying~~limitations in the prior year ~~to reflect lower demand during the COVID-19 pandemic.~~on vehicles at auctions. Self ~~service~~Service salvage vehicle purchases declined due to (i) increased competition in the market due to high costs of precious metals and scrap steel and (ii) fewer purchases due to the elimination of underperforming locations in accordance with the 2020 restructuring plan.

~~We expect to increase inventory~~ purchases in 2022 decreased due to ~~support the service~~increased market competition and ~~fill rate requirements~~decreased availability of our businesses based on the revenue trend and expectations for full year 2022, including normal seasonality, as supply chain challenges in 2021 deferred the inventory build to 2022 (although if supply chain challenges continue our ability to increase inventory purchases to the desired level could be affected). We expect to be able to operate effectively at a lower inventory balance than at the end of 2019, before the impacts of the pandemic.vehicles.

The following table summarizes the components of the ~~year-over-year increase~~year over year changes in cash provided by operating activities (in millions):

Net cash provided by operating activities for the nine months ended September 30, 2020 $ 1,135
Increase (decrease) due to:
Operating income 476 (1)
Cash paid for taxes (126) (2)
Cash paid for interest 45 (3)
Working capital accounts: (4)
Receivables, net (105)
Inventories (588)
Accounts payable 484
Other operating activities 41 (5)
Net cash provided by operating activities for the nine months ended September 30, 2021 $ 1,362

~~(1) Refer to the Consolidated Results of Operations section for further information on the increase in operating income.~~


	Operating Cash
Net cash provided by operating activities for the nine months ended September 30, 2021	$	1,362
Increase (decrease) due to:


Working capital accounts: (1)
Receivables, net	16
Inventories	(296)
Accounts payable	—
Other operating activities	(72)		(2)
Net cash provided by operating activities for the nine months ended September 30, 2022	$	1,010

~~(2)~~ (1)~~Cash payments related to income taxes increased for U.S. federal and state income taxes due to a projected increase in~~

~~pretax income and the timing of estimated tax payments.~~

~~(3) Decrease in cash payments for interest is due to lower outstanding borrowing and the payoff of the Euro Notes (2026) in April 2021.~~

~~(4)~~ Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and ~~collections~~collections can be timed differently from period to period.

•Receivables, net was a ~~$105~~$16 million ~~greater~~benefit to cash provided by operating activities year over year. This was driven by a $43 million inflow for our Europe segment and a $7 million inflow for our Specialty segment, both due to lesser overall cash outflows in 2022 as a result of collections and timing of sales. This was partially offset by a $34 million outflow ~~in 2021~~for our Wholesale - North America segment primarily due to ~~a significant~~an increase in ~~the~~organic revenue ~~for the nine months ended September 2021~~in 2022 compared to ~~the nine months ended September 2020,~~2021, which translated to higher receivables balances ~~and larger net outflows~~ in ~~the North America segment (of~~ ~~$49 million) and in the Europe segment (of~~ ~~$57 million~~).2022.

•Inventories represented ~~$588~~$296 million in incremental cash outflows in the first nine months of ~~2021~~2022 compared to the same period of ~~2020.The~~2021. The change is primarily attributable to ~~the reduction in~~increased inventory purchases ~~during 2020 as we scaled back buying~~ in the ~~recognition~~current year as a result of high input costs and volume increases due to strong demand ~~changes. Additionally, we expected~~and strategic inventory purchases to curb the impacts of supply chain constraints.

•Accounts payable produced a ~~larger~~similar cash ~~outflow~~inflow in the first nine months of 2022 compared to the same period of 2021 ~~as we worked~~on a consolidated basis. This was primarily attributable to ~~rebuild our inventory levels, but as described in the procurement section above, we were delayed in doing so.~~

~~Accounts payable produced $484~~Wholesale - North America which contributed a $234 million ~~in higher~~ cash ~~inflows primarily due to~~inflow driven by higher accounts payable balances ~~in the North America segment (of $199 million)~~ and ~~in the Specialty segment (of $23 million) due to~~ timing of payments ~~and~~partially offset by a lower cash inflow in ~~the~~our Europe segment ~~(of $261 million) compared to~~of $189 million and a cash outflow of $45 million from our Specialty segment.

(2) Primarily reflects the ~~prior year period, as a result~~aggregate effect of ~~timing of~~lower cash operating income and higher incentive compensation payments ~~and benefits from extended payment terms, including through our supply chain financing initiatives~~.

~~(5) Reflects a number of individually insignificant fluctuations in~~partially offset by lower cash paid for ~~other operating activities.~~taxes.

Net cash provided by investing activities totaled $244 million and net cash used in investing activities totaled ~~$201 million~~ ~~and $106~~$201 million during the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~Property, plant and equipment purchases~~Proceeds from the disposal of businesses (primarily PGW) were ~~$133~~$399 million during the nine months ended September 30, ~~2021~~2022. Property, plant and equipment purchases were $148 million in the nine months ended September 30, 2022 compared to ~~$110~~$133 million in the prior year period. We invested ~~$67~~$67 million of cash, net of cash acquired, in business acquisitions during the nine months ended September 30, ~~2021 compared to $7 million during the nine months ended September 30, 2020.~~2021.

The following table reconciles Net Cash Provided by Operating Activities to Free Cash Flow (in ~~thousands)~~millions):


		Nine Months Ended
		September 30,						Nine Months Ended September 30,
			2021		2020				2022		2021
Net cash provided by operating activities	Net cash provided by operating activities		$	1,362,028	$	1,134,641	Net cash provided by operating activities		$	1,010	$	1,362
Less: purchases of property, plant and equipment	Less: purchases of property, plant and equipment		132,705		109,949		Less: purchases of property, plant and equipment		148		133
Free cash flow	Free cash flow		$	1,229,323	$	1,024,692	Free cash flow		$	862	$	1,229

Net cash used in financing activities ~~totaled~~ ~~$1.1 billion~~ ~~and $1.2 billion~~increased by $151 million for the nine months ended September 30, ~~2021 and 2020, respectively. During the nine months ended September 30, 2021, net repayments of our borrowings totaled~~ ~~$370 million~~2022 compared to ~~$1.0 billion during~~ the ~~nine months ended September 30, 2020. The net repayments~~same period in 2021 ~~and 2020 include the redemption~~due primarily to increases in repurchases of ~~the €750 million Euro Notes (2026) and the $600 million U.S. Notes, respectively. We repurchased~~ ~~$575 million~~ ~~of our~~ common stock of $297 million and payment of dividends in 2022 of $210 million (no dividends were paid in the nine months ended September 30, ~~2021 (reflecting the cash outflow for transactions that settled~~2021) partially offset by a decrease in ~~the period), compared to $88 million in the nine months ended September 30, 2020. In 2021, we settled~~settlement of our cross currency swap and other foreign exchange forward contracts ~~with the counterparties for~~ ~~$89~~in 2021 of $89 million ~~due primarily~~ and lower net repayments on our borrowings of $251 million. Please refer to ~~strengthening in the Euro exchange rate relative~~Note 2, "Financial Statement Information" to the ~~contract rates.~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on repurchases of common stock.

We intend to continue to evaluate markets for potential growth through the internal development of distribution centers, processing and sales facilities, and warehouses, through further integration of our facilities, and through selected business acquisitions. Our future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of our internal development efforts and the success of those ~~efforts and costs.~~efforts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks arising from adverse changes in:

•foreign exchange rates;

•interest rates;

•commodity prices; and

•~~commodity prices.~~inflation

Foreign Exchange Rates

Foreign currency fluctuations may impact the financial results we report for the portions of our business that operate in functional currencies other than the U.S. dollar. Our operations outside of the U.S. represented ~~49.2%~~47.8% and ~~50.5%~~49.4% of our revenue during the nine months ended September 30, ~~2021~~2022 and the year ended December 31, ~~2020,~~2021, respectively. An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a ~~4.9%~~4.8% change in our consolidated revenue and a ~~3.4%~~2.9% change in our operating income for the nine months ended September 30, ~~2021.~~2022. See our Results of Operations discussion in Part I, Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the impact of fluctuations in exchange rates on our year over year results.

Additionally, we are exposed to foreign currency fluctuations with respect to the purchase of aftermarket products from foreign countries, primarily in Europe and Asia. To the extent that our inventory purchases are not denominated in the functional currency of the purchasing location, we are exposed to exchange rate fluctuations. In several of our operations, we purchase inventory from manufacturers in Taiwan in U.S. dollars, which exposes us to fluctuations in the relationship between the local functional currency and the U.S. dollar, as well as fluctuations between the U.S. dollar and the Taiwan dollar. We hedge our exposure to foreign currency fluctuations related to a portion of inventory purchases in our Europe operations, but the notional amount and fair value of these foreign currency forward contracts at September 30, ~~2021~~2022 were immaterial. WeWe do not

currently attempt to hedge foreign currency exposure related to our foreign currency denominated inventory purchases in our Wholesale - North America operations, and we may not be able to pass on any resulting price increases to our customers.

To the extent that we are exposed to foreign currency fluctuations related to non-functional currency denominated financing transactions, we may hedge the exposure through the use of foreign currency forward contracts. As of September 30, ~~2021, w~~e2022, we did not hold ~~foreig~~nforeign currency forward contracts related to non-functional currency denominated debt.

Other than with respect to a portion of our foreign currency denominated inventory purchases and, from time to time, certain financing transactions, we do not hold derivative contracts to hedge foreign currency risk. Our net investment in foreign operations is partially hedged by the foreign currency denominated borrowings we use to fund foreign acquisitions; however, our ability to use foreign currency denominated borrowings to finance our foreign operations may be limited based on local tax laws. We have elected not to hedge the foreign currency risk related to the interest payments on foreign third party borrowings as we generate cash flows in the local currencies that can be used to fund debt payments. As of September 30, 2022, we had

outstanding borrowings of €500 million under our Euro Notes (2024) and €250 million under our Euro Notes (2028), and €739 million and Swedish Krona ("SEK") 90 million under our revolving credit facilities. As of December 31, 2021, we had outstanding borrowings of €500 million under our Euro Notes (2024) and €250 million under our Euro Notes (2028), and ~~€903~~ €940 million andand SEK ~~175~~145 million ~~under ou~~r revolving credit facilities. As of December 31, 2020, we had outstanding borrowings of €500 million under our Euro Notes (2024), and €1.0 billion under our Euro Notes (2026/28); we had no foreign borrowings under our revolving credit facilities.

Interest Rates

Our results of operations are exposed to changes in interest rates primarily with respect to borrowings under our credit facilities, where interest rates are tied to the prime rate, LIBOR, Canadian Dollar Offered Rate, Euro interbank Offered Rate, SONIA, or ~~CDOR.~~Swiss Average Rate Overnight. Therefore, we implemented a policy to manage our exposure to variable interest rates on a portion of our outstanding variable rate debt instruments through the use of interest rate swap contracts. These contracts ~~convert~~converted a portion of our variable rate debt to fixed rate debt, matching the currency, effective dates and maturity dates to specific debt instruments. We ~~designate~~designated our interest rate swap contracts as cash flow hedges, and net interest payments or receipts from interest rate swap contracts are included as adjustments to interest expense.

We had none ofof our variable rate debt under our credit facilities at fixed rates at September 30, ~~2021 compared to 87% at~~2022 or December 31, ~~2020.~~2021. See Note 9,8, "Long-Term Obligations" and Note ~~10,~~9, "Derivative Instruments and Hedging Activities" to the ~~unaudited condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

At September 30, ~~2021,~~2022, we had approximately ~~$1.4 billion~~$1,621 million of variable rate debt that was not hedged. Using sensitivity analysis, a 100 basis point movement in interest rates would change interest expense by ~~$14~~$16 million over the next twelve months.

Commodity Prices

We are exposed to market risk related to price fluctuations in scrap metal and other metals (including precious metals, such as platinum, palladium, and ~~rhodium)~~rhodium, contained in some recycled parts, such as catalytic converters). Market prices of these metals affect the amount that we pay for our inventory and the revenue that we generate from sales of these metals. As both our revenue and costs are affected by the price fluctuations, we have a natural hedge against the changes. However, there is typically a lag between the effect on our revenue from metal price fluctuations and inventory cost changes, and there is no guarantee that the vehicle costs will decrease or increase at the same rate as the metals prices. Therefore, we can experience positive or negative gross margin effects in periods of rising or falling metals prices, particularly when such prices move rapidly. Additionally, if market prices were to change at a ~~greater~~higher or lower rate than our vehicle acquisition costs, we could experience a positive or negative effect on our operating margin. The average of scrap metal prices for the three months ended September 30, ~~2021~~2022 decreased ~~less than 1%~~by 29% over the average for the second quarter of ~~2021.~~2022. The average prices of platinum, rhodium, ~~palladium,~~ and ~~platinum~~palladium decreased by ~~32%~~14%, ~~17%~~13% and ~~13%~~9%, respectively, for the three months ended September 30, ~~2021~~2022 over the ~~averages~~average prices for the ~~second quarter of~~three months ended September 30, 2021.

Inflation

We are exposed to market risks related to inflation in product, labor, shipping, freight and general overhead costs. In 2022, inflation has increased to rates beyond recent history, and we have experienced rising costs. We have adjusted our prices and are driving productivity initiatives to mitigate the inflationary effects. If these pressures continue or increase in severity, we may not be able to fully offset such higher costs through price increases and productivity initiatives. Inflationary pressures in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenue if the selling prices of our products do not increase with these increased costs, we cannot identify cost efficiencies, or the higher prices impact demand.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, ~~2021,~~2022, the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of LKQ Corporation's management, including our Chief Executive Officer and our Chief Financial Officer, of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in providing reasonable assurance that information we are required to disclose in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

~~We are implementing a new Enterprise Resource Planning ("ERP") system across~~

There were no changes in our ~~European business units using a phased approach. As a result of this implementation, certain~~ internal ~~controls~~control over financial reporting during the quarter ended September 30, 2022 that have ~~been automated, modified,~~materially affected, or ~~implemented~~are reasonably likely to ~~address the new control environment associated with this ERP. While we believe this new system will strengthen~~materially affect, our ~~internal controls, there are inherent risks in implementing any new system, and we will continue to evaluate these control changes as part of our assessment of~~ internal control over financial reporting.

5551

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims and lawsuits incidental to our business. In the opinion of management, currently outstanding claims and suits will not, individually or in the aggregate, have a material adverse effect on our financial position, results of operations or cash flows. ~~There have been no material changes to the~~The legal proceeding below is an update from our legal proceedings previously disclosed in our ~~2020~~2021 Form 10-K and ~~reports~~report on Form 10-Q for the ~~quarters~~quarter ended ~~March 31, 2021 and~~ June 30, ~~2021 other than as follows:~~2022:

~~With respect~~

On August 18, 2022, our Specialty segment agreed to ~~certain matters previously disclosed in our reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, in July 2021, (i) Region 3 of~~pay the U.S. Environmental Protection Agency ("EPA") ~~initiated enforcement actions against eight of the Company's facilities by delivery~~$2.5 million as part of a ~~Notice of Potential Violations and (ii)~~settlement to resolve a long-standing dispute relating to certain aftermarket parts sold by the Company that the EPA alleged violated the Clean Air Act.

With respect to the July 7, 2022 penalty demand from Region 4 of the EPA ~~initiated enforcement actions against four of~~discussed in our report on Form 10-Q for the ~~Company's facilities by delivery of~~quarter ended June 30, 2022, we reached a Notice of Violation. On September 22, 2021, the Company and Region 3 finalized the Administrative Order on Consent concerning the matters alleged in the Notice of Potential Violations. On October 8, 2021, Region 3 published notice that it proposessettlement to ~~enter into~~pay a ~~Consent Agreement and Final Order with the Company, which proposes an aggregate~~ penalty in the amount of ~~$130,000 for~~$465,000 in connection with alleged violations of federal stormwater regulations. We will be required to pay this amount within 30 days of the ~~Clean Water Act.~~EPA executing Consent Agreement and Final Orders for each facility. On ~~October~~August 18, ~~2021, the Company~~2022, we received ~~draft Administrative Orders on Consent from Region 4 concerning the four facilities cited in the~~a Notice of Violation from Region 10 of the EPA regarding alleged violations of federal stormwater regulations at facilities in Idaho, Oregon, and Washington to which we timely responded. We have not received ~~in July. Region 4 has not yet provided potential penalty amounts.~~any response from the EPA. We do not ~~expect~~currently anticipate that any ~~proposed penalty~~expense or liability that we may incur as a result of these matters in the future will ~~have a~~be material ~~effect on our~~to the Company’s business or financial ~~position, results of operations or cash flows.~~condition.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations, and the trading price of our common stock. Please refer to our ~~2020~~2021 Form 10-K, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 filed with the SEC on May 4, 2022, for information concerning risks and uncertainties that could negatively impact us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

~~On October 25, 2018, our~~

Our Board of Directors has authorized a stock repurchase program under which we ~~may~~are able to purchase ~~up to $500 million of~~ our common stock from time to time through October 25, 2021. Repurchases under the program may be made at management's discretion in the open market, in privately negotiated transactions or pursuant to instruments or plans complying with Rule 10b5-1. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. ~~Delaware law imposes restrictions on stock repurchases.~~

On ~~October 25, 2019,~~May 10, 2022, our Board of Directors authorized ana $500 million increase to our existing stock repurchase program ~~under which the Company may purchase up~~ to ~~an additional $500 million of our common stock from time to time through~~$2,500 million. On October 25, ~~2022; this extended date also applied to the original repurchase program. With the increase, the Board of Directors had authorized a total of $1.0 billion of common stock repurchases.~~

~~On July 28, 2021,~~2022, our Board of Directors authorized an additional $1,000 million increase to our existing stock repurchase program, ~~under which~~raising the ~~Company may purchase up~~aggregate program authorization to ~~an additional $1.0 billion of our common stock from time to time~~$3,500 million, and extended the duration through October 25, ~~2024; this extended date also applies~~2025. Please refer to Note 2, "Financial Statement Information" for additional information on repurchases under the ~~original repurchase program, as previously extended. With the increase, the Board of Directors has authorized a total of $2.0 billion of common stock repurchases.~~program.

The following table summarizes our stock repurchases for the three months ended September 30, ~~2021~~2022 (in ~~thousands,~~millions, except per share data):

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2021 - July 31, 2021 2,501 $ 50.18 2,501 $ 1,044,737
August 1, 2021 - August 31, 2021 190 $ 51.03 190 $ 1,035,028
September 1, 2021 - September 30, 2021 1,647 $ 50.92 1,647 $ 951,191
Total 4,338 4,338


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1, 2022 - July 31, 2022	2.5	$	51.11	2.5	$	477
August 1, 2022 - August 31, 2022	1.3	$	54.22	1.3	$	411
September 1, 2022 - September 30, 2022	3.0	$	49.34	3.0	$	263
Total	6.8			6.8

5752

Item 6. Exhibits

~~Exhibits~~

~~(b) Exhibits~~


Exhibit						Description
10.1						Offer Letter dated as of September 14, 2022 from Dominick Zarcone to Varun Laroyia (incorporated herein by reference to Exhibit 10.1 to the Company's report on Form 8-K filed with the SEC on September 20, 2022).
10.2						Memorandum dated as of September 14, 2022 from Dominick Zarcone to Rick Galloway (incorporated herein by reference to Exhibit 10.2 to the Company's report on Form 8-K filed with the SEC on September 20, 2022).
10.3						Termination Agreement dated as of September 14, 2022 between LKQ Europe GMBH and Arnd Franz (incorporated herein by reference to Exhibit 10.3 to the Company's report on Form 8-K filed with the SEC on September 20, 2022).
10.4						Change of Control Agreement between LKQ Corporation and Rick Galloway dated as of September 15, 2022.
10.5						Form of Indemnification Agreement between Rick Galloway and LKQ Corporation.
31.1						Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL ~~and contained in Exhibit 101)~~document)

5853

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November ~~3, 2021.~~1, 2022.


			LKQ CORPORATION

			/s/ ~~Varun Laroyia~~Rick Galloway
			~~Varun Laroyia~~Rick Galloway
			~~Executive~~Senior Vice President and Chief Financial Officer
			(As duly authorized officer and Principal Financial Officer)

			/s/ Michael S. Clark
			Michael S. Clark
			Vice President - Finance and Controller
			(As duly authorized officer and Principal Accounting Officer)

5954


	Balance as of December 31, 2020		Fair Value Measurements as of December 31, 2020
			Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	72,250	$	—	$	72,250	$	—


Total Assets	$	72,250	$	—	$	72,250	$	—
Liabilities:
Contingent consideration liabilities	$	13,263	$	—	$	—	$	13,263
Interest rate swaps	899		—		899		—
Deferred compensation liabilities	76,240		—		76,240		—
Cross currency swap agreements	56,328		—		56,328		—
Foreign currency forward contracts	5,190		—		5,190		—
Total Liabilities	$	151,920	$	—	$	138,657	$	13,263


Net cash provided by operating activities for the nine months ended September 30, 2020	$	1,135
Increase (decrease) due to:
Operating income	476		(1)


Cash paid for taxes	(126)		(2)
Cash paid for interest	45		(3)
Working capital accounts: (4)
Receivables, net	(105)
Inventories	(588)
Accounts payable	484
Other operating activities	41		(5)
Net cash provided by operating activities for the nine months ended September 30, 2021	$	1,362