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 ~~June 30, 2023~~March 31, 2024


☐			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~~001-42002

____________________________

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

The Nasdaq Global Select Market

4.125% Notes due 2031

LKQ31

The 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

☐

Emerging Growth Company

☐

Non-accelerated Filer

☐

Smaller Reporting 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 ~~July 21, 2023,~~April 16, 2024, the registrant had outstanding an aggregate of ~~267,556,377~~266,775,849 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 Six~~ Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~	4
	Unaudited Condensed Consolidated Balance Sheets as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30~~March 31 , ~~2023~~2024 and ~~2022~~2023	6
	Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three ~~and Six~~ Months Ended ~~June 30~~March 31 , ~~2023~~2024 and ~~2022~~2023	7
	Notes to Unaudited Condensed Consolidated Financial Statements	98
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2823
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5039
Item 4.	Controls and Procedures	5239
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	5340
Item 1A.	Risk Factors	5340
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5340
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	5340
Item 6.	Exhibits	5441
SIGNATURES		5542

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income

(In millions, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Revenue $ 3,448 $ 3,341 $ 6,797 $ 6,689
Cost of goods sold 2,034 1,974 4,011 3,965
Gross margin 1,414 1,367 2,786 2,724
Selling, general and administrative expenses 938 898 1,869 1,822
Restructuring and transaction related expenses 8 4 26 7
Gain on disposal of businesses (1)
— (155) — (155)
Depreciation and amortization 61 61 119 120
Operating income 407 559 772 930
Other expense (income):
Interest expense 52 16 88 32
Gains on foreign exchange contracts - acquisition related (2)
(23) — (46) —
Interest income and other income, net (11) — (20) (1)
Total other expense, net 18 16 22 31
Income from continuing operations before provision for income taxes 389 543 750 899
Provision for income taxes 109 127 203 216
Equity in earnings of unconsolidated subsidiaries 2 4 5 6
Income from continuing operations 282 420 552 689
Net income from discontinued operations — — — 4
Net income 282 420 552 693
Less: net income attributable to continuing noncontrolling interest 1 — 1 —
Net income attributable to LKQ stockholders $ 281 $ 420 $ 551 $ 693
Basic earnings per share: (3)
Income from continuing operations $ 1.05 $ 1.49 $ 2.06 $ 2.43
Net income from discontinued operations — — — 0.02
Net income 1.05 1.49 2.06 2.45
Less: net income attributable to continuing noncontrolling interest — — — —
Net income attributable to LKQ stockholders $ 1.05 $ 1.49 $ 2.06 $ 2.44
Diluted earnings per share: (3)
Income from continuing operations $ 1.05 $ 1.49 $ 2.06 $ 2.42
Net income from discontinued operations — — — 0.02
Net income 1.05 1.49 2.06 2.44
Less: net income attributable to continuing noncontrolling interest — — — —
Net income attributable to LKQ stockholders $ 1.05 $ 1.49 $ 2.06 $ 2.44


	Three Months Ended March 31,
	2024		2023
Revenue	$	3,703	$	3,349
Cost of goods sold	2,251		1,977

Gross margin	1,452		1,372
Selling, general and administrative expenses	1,044		931
Restructuring and transaction related expenses	30		18

Depreciation and amortization	89		58

Operating income	289		365
Other expense (income):
Interest expense	64		36
Gains on foreign exchange contracts - acquisition related (1)	—		(23)
Interest income and other income, net	(6)		(9)
Total other expense, net	58		4
Income before provision for income taxes	231		361
Provision for income taxes	71		94
Equity in (losses) earnings of unconsolidated subsidiaries	(2)		3


Net income	$	158	$	270




Earnings per share:
Basic	$	0.59	$	1.01
Diluted	$	0.59	$	1.01

(1) ~~Related to the sale of PGW Auto Glass ("PGW"). Refer to Note 2, "Discontinued Operations and Divestitures" for further information.~~

~~(2)~~ Related to the Uni-Select Inc. ("Uni-Select") acquisition. Refer to Note ~~3, "Uni-Select Acquisition"~~2, "Business Combinations" and Note ~~17,~~13, "Derivative Instruments and Hedging Activities" for further information.

~~(3)~~ ~~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.

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income

(In millions)

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Net income $ 282 $ 420 $ 552 $ 693
Less: net income attributable to continuing noncontrolling interest 1 — 1 —
Net income attributable to LKQ stockholders 281 420 551 693
Other comprehensive income (loss):
Foreign currency translation, net of tax 34 (150) 91 (204)
Net change in unrealized gains/losses on cash flow hedges, net of tax 10 — (7) —
Other comprehensive income from unconsolidated subsidiaries 1 1 4 2
Other comprehensive income (loss) 45 (149) 88 (202)
Comprehensive income 327 271 640 491
Less: comprehensive income attributable to continuing noncontrolling interest 1 — 1 —
Comprehensive income attributable to LKQ stockholders $ 326 $ 271 $ 639 $ 491


	Three Months Ended March 31,
	2024		2023
Net income	$	158	$	270




Other comprehensive income (loss):
Foreign currency translation, net of tax	(57)		57
Net change in unrealized gains/losses on cash flow hedges, net of tax	4		(17)

Other comprehensive (loss) income from unconsolidated subsidiaries	(5)		3
Other comprehensive (loss) income	(58)		43

Comprehensive income	$	100	$	313

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In millions, except per share data)

June 30, 2023 December 31, 2022
Assets
Current assets:
Cash and cash equivalents $ 1,904 $ 278
Receivables, net of allowance for credit losses 1,257 998
Inventories 2,681 2,752
Prepaid expenses and other current assets 314 230
Total current assets 6,156 4,258
Property, plant and equipment, net 1,298 1,236
Operating lease assets, net 1,277 1,227
Goodwill 4,400 4,319
Other intangibles, net 648 653
Equity method investments 155 141
Other noncurrent assets 221 204
Total assets $ 14,155 $ 12,038
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,475 $ 1,339
Accrued expenses:
Accrued payroll-related liabilities 200 218
Refund liability 120 109
Other accrued expenses 343 294
Current portion of operating lease liabilities 199 188
Current portion of long-term obligations 579 34
Other current liabilities 112 89
Total current liabilities 3,028 2,271
Long-term operating lease liabilities, excluding current portion 1,131 1,091
Long-term obligations, excluding current portion 3,421 2,622
Deferred income taxes 300 280
Other noncurrent liabilities 283 283
Commitments and contingencies
Redeemable noncontrolling interest 24 24
Stockholders' equity:
Common stock, $0.01 par value, 1,000.0 shares authorized, 322.9 shares issued and 267.7 shares outstanding at June 30, 2023; 322.4 shares issued and 267.3 shares outstanding at December 31, 2022 3 3
Additional paid-in capital 1,520 1,506
Retained earnings 7,059 6,656
Accumulated other comprehensive loss (235) (323)
Treasury stock, at cost; 55.2 shares at June 30, 2023 and 55.1 shares at December 31, 2022 (2,394) (2,389)
Total Company stockholders' equity 5,953 5,453
Noncontrolling interest 15 14
Total stockholders' equity 5,968 5,467
Total liabilities and stockholders' equity $ 14,155 $ 12,038


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	344	$	299
Receivables, net of allowance for credit losses	1,392		1,165
Inventories	3,123		3,121

Prepaid expenses and other current assets	343		283

Total current assets	5,202		4,868
Property, plant and equipment, net	1,493		1,516
Operating lease assets, net	1,314		1,336
Goodwill	5,526		5,600
Other intangibles, net	1,271		1,313
Equity method investments	163		159
Other noncurrent assets	301		287
Total assets	$	15,270	$	15,079
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,840	$	1,648
Accrued expenses:
Accrued payroll-related liabilities	242		260
Refund liability	137		132

Other accrued expenses	354		309


Current portion of operating lease liabilities	226		224
Current portion of long-term obligations	88		596
Other current liabilities	172		149

Total current liabilities	3,059		3,318
Long-term operating lease liabilities, excluding current portion	1,138		1,163
Long-term obligations, excluding current portion	4,161		3,655
Deferred income taxes	426		448
Other noncurrent liabilities	313		314
Commitments and contingencies

Stockholders' equity:
Common stock, $0.01 par value, 1,000.0 shares authorized, 323.5 shares issued and 267.0 shares outstanding at March 31, 2024; 323.1 shares issued and 267.2 shares outstanding at December 31, 2023	3		3
Additional paid-in capital	1,541		1,538
Retained earnings	7,367		7,290
Accumulated other comprehensive loss	(298)		(240)
Treasury stock, at cost; 56.5 shares at March 31, 2024 and 55.9 shares at December 31, 2023	(2,454)		(2,424)
Total Company stockholders' equity	6,159		6,167
Noncontrolling interest	14		14
Total stockholders' equity	6,173		6,181
Total liabilities and stockholders' equity	$	15,270	$	15,079

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

552

693

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

135

133

Gain on disposal of businesses

—

(155)

Stock-based compensation expense

Gains on foreign exchange contracts - acquisition related

(46)

—

Gains on foreign exchange contracts - acquisition related

Other

(9)

Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:

Receivables

(223)

(186)

Inventories

132

(259)

Inventories

Prepaid income taxes/income taxes payable

(5)

Accounts payable

104

412

Accounts payable

Other operating assets and liabilities

(3)

Net cash provided by operating activities

703

737

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(136)

(99)

Proceeds from disposals of property, plant and equipment

Purchases of property, plant and equipment

Acquisitions, net of cash acquired

(52)

(5)

Proceeds from disposals of businesses

—

372

Acquisitions, net of cash acquired

Other investing activities, net

(3)

(6)

Net cash (used in) provided by investing activities

(185)

265

Other investing activities, net

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt issuance costs

(30)

—

Proceeds from issuance of U.S. Notes (2028/33), net of unamortized bond discount

1,394

—

Debt issuance costs

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

Repayment of Euro Notes (2024)

Borrowings under revolving credit facilities

1,693

808

Repayments under revolving credit facilities

(2,267)

(1,117)

Repayments under revolving credit facilities

Borrowings under term loans

500

—

(Repayments) borrowings of other debt, net

(16)

Settlement of derivative instruments

(13)

—

Borrowings of other debt, net

Dividends paid to LKQ stockholders

(148)

(142)

Purchase of treasury stock

(8)

(528)

Purchase of treasury stock

Other financing activities, net

(6)

(14)

Net cash provided by (used in) financing activities

1,099

(985)

Other financing activities, net

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

(26)

Net increase (decrease) in cash and cash equivalents

1,626

(9)

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

278

274

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

1,904

265

Supplemental disclosure of cash paid for:

Income taxes, net of refunds

184

145

Income taxes, net of refunds

Interest

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In 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 as of April 1, 2023 322.8 $ 3 (55.2) $ (2,394) $ 1,510 $ 6,852 $ (280) $ 14 $ 5,705
Net income — — — — — 281 — 1 282
Other comprehensive income — — — — — — 45 — 45
Vesting of restricted stock units, net of shares withheld for employee tax 0.1 — — — — — — — —
Stock-based compensation expense — — — — 10 — — — 10
Dividends declared to LKQ stockholders ($0.275 per share) — — — — — (74) — — (74)
Balance as of June 30, 2023 322.9 $ 3 (55.2) $ (2,394) $ 1,520 $ 7,059 $ (235) $ 15 $ 5,968


	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, 2024	323.1	$	3	(55.9)	$	(2,424)	$	1,538	$	7,290	$	(240)	$	14	$	6,181
Net income	—	—		—	—		—		158		—		—		158
Other comprehensive loss	—	—		—	—		—		—		(58)		—		(58)
Purchase of treasury stock	—	—		(0.6)	(30)		—		—		—		—		(30)
Vesting of restricted stock units, net of shares withheld for employee tax	0.4	—		—	—		(5)		—		—		—		(5)
Stock-based compensation expense	—	—		—	—		8		—		—		—		8

Dividends declared to LKQ stockholders ($0.30 per share)	—	—		—	—		—		(81)		—		—		(81)




Balance as of March 31, 2024	323.5	$	3	(56.5)	$	(2,454)	$	1,541	$	7,367	$	(298)	$	14	$	6,173

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 April 1, 2022 322.0 $ 3 (37.3) $ (1,490) $ 1,482 $ 5,995 $ (206) $ 15 $ 5,799
Net income — — — — — 420 — — 420
Other comprehensive loss — — — — — — (149) — (149)
Purchase of treasury stock — — (8.1) (404) — — — — (404)
Stock-based compensation expense — — — — 10 — — — 10
Dividends declared to LKQ stockholders ($0.25 per share) — — — — — (71) — — (71)
Balance as of June 30, 2022 322.0 $ 3 (45.4) $ (1,894) $ 1,492 $ 6,344 $ (355) $ 15 $ 5,605


	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, 2023	322.4	$	3	(55.1)	$	(2,389)	$	1,506	$	6,656	$	(323)	$	14	$	5,467
Net income	—	—		—	—		—		270		—		—		270
Other comprehensive income	—	—		—	—		—		—		43		—		43
Purchase of treasury stock	—	—		(0.1)	(5)		—		—		—		—		(5)
Vesting of restricted stock units, net of shares withheld for employee tax	0.4	—		—	—		(6)		—		—		—		(6)
Stock-based compensation expense	—	—		—	—		10		—		—		—		10

Dividends declared to LKQ stockholders ($0.275 per share)	—	—		—	—		—		(74)		—		—		(74)




Balance as of March 31, 2023	322.8	$	3	(55.2)	$	(2,394)	$	1,510	$	6,852	$	(280)	$	14	$	5,705

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

LKQ CORPORATION AND SUBSIDIARIES

~~Unaudited Condensed Consolidated Statements of Stockholders' Equity~~

~~(In 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 as of January 1, 2023 322.4 $ 3 (55.1) $ (2,389) $ 1,506 $ 6,656 $ (323) $ 14 $ 5,467
Net income — — — — — 551 — 1 552
Other comprehensive income — — — — — — 88 — 88
Purchase of treasury stock — — (0.1) (5) — — — — (5)
Vesting of restricted stock units, net of shares withheld for employee tax 0.5 — — — (6) — — — (6)
Stock-based compensation expense — — — — 20 — — — 20
Dividends declared to LKQ stockholders ($0.55 per share) — — — — — (148) — — (148)
Balance as of June 30, 2023 322.9 $ 3 (55.2) $ (2,394) $ 1,520 $ 7,059 $ (235) $ 15 $ 5,968

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 — — — — — 693 — — 693
Other comprehensive loss — — — — — — (202) — (202)
Purchase of treasury stock — — (10.8) (548) — — — — (548)
Vesting of restricted stock units, net of shares withheld for employee tax 0.4 — — — (5) — — — (5)
Stock-based compensation expense — — — — 23 — — — 23
Dividends declared to LKQ stockholders ($0.50 per share) — — — — — (143) — — (143)
Balance as of June 30, 2022 322.0 $ 3 (45.4) $ (1,894) $ 1,492 $ 6,344 $ (355) $ 15 $ 5,605

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

~~LKQ CORPORATION AND SUBSIDIARIES~~

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Interim Financial Statements

LKQ Corporation, a Delaware corporation, is a holding company and all operations are conducted by subsidiaries. When the terms "LKQ," "the Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries.

We have prepared the accompanying Unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") applicable to interim financial statements. Accordingly, certain information related to our significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.

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

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, ~~2022~~2023 filed with the SEC on February ~~23,~~ 22, 2024 ("2023 ~~("2022~~ Form 10-K").

~~Interest income on the Unaudited Condensed Consolidated Statements of Income was updated to conform with the 2022 Form 10-K presentation.~~Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

During the first quarter of 2023, we adopted Accounting Standards Update No. 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” ("ASU 2022-04"), which requires the buyer in a supplier finance program to disclose certain information about its program, including key terms, balance sheet presentation of amounts, outstanding amounts at the end of each period, and rollforwards of balances. We adopted the provisions of ASU 2022-04 on a retrospective basis (see Note ~~15,~~11, "Supply Chain Financing"), except for the disclosure of rollforward information, which ~~is effective~~will be adopted prospectively in our Annual Report on Form 10-K for ~~fiscal years beginning after~~the year ending December ~~15, 2023.~~31, 2024 as required. The adoption of ASU 2022-04 did not have a material impact on our unaudited condensed consolidated financial statements.

~~Note 2. Discontinued Operations and Divestitures~~

~~Glass Manufacturing Business~~

~~For the six months ended June 30, 2022, we recorded to discontinued operations a$4 millionbenefit primarily related to the reassessment of a previously recorded valuation allowance on a deferred tax asset related to our glass manufacturing business sold in 2017.~~

~~Other Divestitures (Not Classified in Discontinued Operations)~~Recently Issued Accounting Pronouncements

In ~~April 2022,~~November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The ASU requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The ASU will be effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

Note 2. Business Combinations

During the three months ended March 31, 2024, we completed ~~the sale~~acquisitions of ~~PGW, our aftermarket glass~~one business within our Wholesale - North America segment and one business within our Europe segment. These acquisitions were not material to our financial position or results of operations as of and for the three months ended March 31, 2024. Additionally, in January 2024, we paid $23 million (€21 million) to a ~~third party for $361 million resulting~~minority shareholder to settle a put option exercised on redeemable shares issued in ~~recognition~~conjunction with a previous acquisition. This payment was presented within Other financing activities, net in financing activities in our Unaudited Condensed Consolidated Statements of ~~a $155 million pretax gain ($127 million after tax).~~Cash Flows.

~~Note 3. Uni-Select Acquisition~~

On February 26, 2023, we entered into ~~an arrangement agreement in order to implement~~ a plan of arrangement ~~(the "Arrangement") under the provisions of the Québec Business Corporations Act pursuant~~ to ~~which we will~~ acquire all of Uni-Select's issued and outstanding ~~shares~~shares. On August 1, 2023, we completed the acquisition of Uni-Select for an aggregate consideration paid of approximately Canadian dollar (“CAD”) ~~48.00 per share in cash, representing a total enterprise value of approximately CAD~~ 2.8 billion ($2.1 ~~billion at the June 30, 2023 exchange rate) (the "Uni-Select Acquisition")~~billion). Uni-Select is a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster segment, in the automotive aftermarket parts business in Canada through its Canadian Automotive Group segment and in the United Kingdom (“U.K.”) through its GSF Car Parts segment. The Uni-Select Acquisition will complement our existing North American paint distribution operations and provides a scaled position in the Canadian mechanical parts space, with opportunity for future consolidation and growth. During the second quarter of 2023, we received the required approvals

from Uni-Select's shareholders, the Superior Court of Québec and regulators in the United States and Canada with respect to the Arrangement. On July 21, 2023, the U.K.'s Competition and Markets Authority issued its Phase 1 decision on the Arrangement, and in response we submitted proposed undertakings relating to the divestiture of Uni-Select’s GSF Car Parts business in the U.K. As a result of the satisfaction or waiver of all the closing conditions relating to required regulatory approvals on July 26, 2023, Uni-Select and LKQ Corporation will proceed with the remaining procedures necessary to give effect to the Arrangement. Subject to the satisfaction or waiver of the remaining closing conditions pursuant to its terms, the Arrangement is currently anticipated to be completed on or around August 1, 2023, and we plan to divest the GSF Car Parts business soon thereafter. The remaining businesses will be reported within our Wholesale - North America segment. See Note 11, "Restructuring and Transaction Related Expenses" for information related to transaction expenses related to the Uni-Select Acquisition.

In order to reduce the risk related to changes in CAD foreign exchange rates for the CAD purchase price, ~~between signing and closing,~~ we entered into foreign exchange contracts. These foreign exchange contracts dodid not qualify for hedge accounting, and therefore the changes in fair value ~~are~~were reported in Gains on foreign exchange contracts - acquisition related in the Unaudited Condensed Consolidated Statements of Income. AsWe reported Gains on foreign exchange contracts - acquisition related of ~~June 30, 2023, we reported an asset of $46 million with corresponding gains of $23 million and $46~~$23 million for the three ~~and six~~ months ended ~~June 30, 2023, respectively. We intend to settle these~~March 31, 2023. These foreign exchange contracts ~~upon the~~were settled in July 2023 ahead of closing of the Uni-Select ~~Acquisition.~~Acquisition, resulting in total payments received of $49 million. See Note ~~17,~~13, "Derivative Instruments and Hedging Activities" for information related to these foreign exchange contracts.

In connection with the Uni-Select Acquisition, we entered into a senior unsecured bridge loan facility to obtain committed financing for the purchase price. The bridge loan facility was terminated in the second quarter of 2023 after arranging the permanent financing as discussed below. We incurred $9 million in upfront fees related to the bridge loan facility and amortized $6 million~~and$9 million of these upfront fees (reported in Interest expense) during the three and six months ended June 30, 2023, respectively.~~

~~For the permanent financing, on March 27, 2023, we entered into a new term loan credit agreement ("CAD Note") which establishes an unsecured term loan facility of up~~In addition to CAD 700 million scheduled to mature three years from the date of funding. Proceeds from the CAD Note may only be used (i) to finance a portion of the aggregate cash consideration for the Uni-Select Acquisition, (ii) to refinance certain outstanding debtour acquisition of Uni-Select, we completed acquisitions of three businesses within our Wholesale - North America segment, four businesses within our Europe segment and ~~(iii) to pay fees, costs and expenses related to the Uni-Select Acquisition. The CAD Note is expected to fund~~ one business ~~day prior to~~in our Specialty segment, during the consummation of the Uni-Select Acquisition transaction and includes a non-usage fee that will be incurred through the date the proceeds are drawn on the facility. There were no borrowings against the CAD Note as of June 30, 2023. We issued a borrowing request on July 26, 2023 for the full amount in anticipation of closing early Augustyear ended December 31, 2023.

The ~~CAD Note contains customary covenants~~purchase price allocations for ~~an unsecured term loan for a company that has debt ratings that~~these acquisitions are ~~investment grade, such as requirements~~preliminary and are subject to ~~comply with a total leverage ratio and interest coverage ratio, each calculated in accordance with~~change during the ~~terms~~measurement periods, which is not to exceed 12 months from the close of the ~~CAD Note,~~acquisitions. During the three months ended March 31, 2024, there have been no significant adjustments to the preliminary purchase price allocations from those disclosed in our December 31, 2023 Consolidated Financial Statements. At this time, we are in the process of finalizing the purchase price allocations, which includes finalizing the following: 1) valuation amounts for certain receivables, inventories and ~~limits on~~fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the ~~Company’s~~acquisition date fair value of certain liabilities assumed; and ~~its subsidiaries’ ability to incur liens and indebtedness.~~4) the tax basis of the entities acquired.

Unaudited Pro Forma Financial Information

The ~~interest rate applicable to~~following unaudited pro forma financial information presents the ~~CAD Note may be (i) a forward-looking term rate based on~~effect of the ~~Canadian Dollar Offer Rate for an interest period chosen by~~businesses acquired during the ~~Company of one or~~ three months ended March 31, 2024 as though the businesses had been acquired as of January 1, 2023, and the businesses acquired during the year ended December 31, 2023 as though they had been acquired as of January 1, 2022. The unaudited pro forma financial information is based upon accounting estimates and judgments that we believe are reasonable. The unaudited pro forma financial information includes the effect of purchase accounting adjustments, such as the adjustment of inventory acquired to fair value, adjustments to depreciation on acquired property, plant and equipment, adjustments to rent expense for above or ~~(ii)~~below market leases, adjustments to amortization on acquired intangible assets, adjustments to interest expense, and the ~~Canadian Prime Rate (as defined~~related tax effects. These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the ~~CAD Note), plus in each case a spread based on the Company’s debt rating and total leverage ratio.~~periods presented or of future results. The unaudited pro forma financial information is as follows (in millions):

Additionally, on May 24, 2023, we completed an offering of $1,400 million aggregate principal amount of senior unsecured notes, consisting of $800 million senior notes due 2028 (the "U.S. Notes (2028)") and $600 million senior notes due 2033 (the "U.S. Notes (2033)" and together with the U.S. Notes (2028), the "U.S. Notes (2028/33)"). The net proceeds from the offering of the U.S. Notes (2028/33) will be used, together with borrowings under our CAD note, (i) to finance a portion of the consideration payable for the Uni-Select Acquisition, including repaying existing Uni-Select indebtedness, (ii) to pay associated fees and expenses, including fees and expenses incurred in connection with the offering, and (iii) for general corporate purposes. As of June 30, 2023, we recorded the net proceeds received of $1,385 million to Cash and cash equivalents on the Unaudited Condensed Consolidated Balance Sheets as there are no restrictions on usage of the funds. The proceeds were invested in money market funds, and the interest income partially offsets the carrying cost of the U.S. Notes (2028/33).


	Three Months Ended March 31,
	2024		2023




Revenue	$	3,703	$	3,759








Net income	158		235

The ~~U.S. Notes (2028)~~pro forma impact of our acquisitions also reflects the elimination of acquisition related expenses (net of tax) of $10 million and ~~U.S. Notes (2033) bear interest at rates~~gains on foreign exchange contracts - acquisition related of ~~5.75%~~$23 million for the three months ended March 31, 2023. Refer to Note 8, "Restructuring and ~~6.25%, respectively, per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. See Note 16, "Long-Term Obligations"~~Transaction Related Expenses" for ~~additional~~further information regarding our acquisition related ~~to the offering of the Notes.~~expenses.

109

To hedge the movement of market interest rates for the senior notes prior to the issuance date, we entered into forward-starting interest rate swaps to lock interest rates for the five and ten year senior notes. These forward-starting interest rate swaps were settled following the issuance of the U.S. Notes (2028/33). See Note ~~17, "Derivative Instruments and Hedging Activities" for information related to these interest rate instruments.~~

We anticipate funding the remainder of the purchase price with borrowings under our revolving credit facility and/or cash on hand. We initiated borrowings on our revolving credit facility for approximately $150 million on July 26, 2023 in anticipation of closing early August 2023.

~~Note 4.~~3. Inventories

We classify our inventory into the following categories: (i) aftermarket and refurbished products, (ii) salvage and remanufactured products, and (iii) manufactured products.

Inventories consist of the following (in millions):


		June 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Aftermarket and refurbished products	Aftermarket and refurbished products	$	2,133	$	2,279
Salvage and remanufactured products	Salvage and remanufactured products	493		427
Manufactured products	Manufactured products	55		46
Total inventories	Total inventories	$	2,681	$	2,752

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods. As of ~~June 30, 2023,~~March 31, 2024, manufactured products inventory was composed of ~~$32~~$24 million of raw materials, $7 million of work in process, and ~~$16~~$23 million of finished goods. As of December 31, ~~2022,~~2023, manufactured products inventory was composed of $26 million of raw materials, $5$7 million of work in process, and ~~$15~~$22 million of finished goods.

Note 5.4. Allowance for Credit Losses

Our allowance for credit losses was ~~$52~~$58 million and ~~$54~~$61 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. The provision for credit losses was $1$3 million and $5 million for ~~both~~ the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022 and $6 million and $9 million for the six months ended June 30, 2023 and 2022,~~ respectively.

~~Note 6. Noncontrolling Interest~~

We present redeemable noncontrolling interest on our balance sheet related to redeemable shares issued to a minority shareholder in conjunction with a previous acquisition. The 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 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 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 our control, 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.

Note 7.5. 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 ~~2022,~~2023, and determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least ~~40%~~20%. 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 and indefinite-lived intangible assets impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment. We did not identify any indicators of impairment in the first ~~six~~three months of ~~2023~~2024 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.

Note 8.6. Equity Method Investments

The carrying value of our Equity method investments were as follows (in millions):


		Segment	Ownership as of June 30, 2023	June 30, 2023		December 31, 2022
MEKO AB(1)(2)		Europe	26.6%	$	141	$	129
	Segment							Segment	Ownership as of March 31, 2024	March 31, 2024	December 31, 2023
MEKO AB (1)
Other	Other			14		12
Total	Total			$	155	$	141

(1) As of ~~June 30, 2023,~~March 31, 2024, the Level 1 fair value of our investment in MEKO AB ("Mekonomen") was ~~$161~~$178 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 June 30, 2023, our~~ Our share of the book value of Mekonomen's net assets exceeded the book value of our investment by $9$10 million; this difference is primarily related to Mekonomen's Accumulated Other Comprehensive Income balance as of our acquisition date in 2016. We record our equity in the net earnings of Mekonomen on a one quarter lag.

~~Note 9. 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.

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


	~~Warranty Reserve~~
~~Balance as of December 31, 2022~~	$	32
~~Warranty expense~~	43
~~Warranty claims~~	~~(41)~~


~~Balance as of June 30, 2023~~	$	34

Note ~~10.~~7. Revenue Recognition

Disaggregated Revenue

We report revenue in two categories: (i) parts and services and (ii) other.

Parts revenue is generated from the sale of 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 and Self Service, vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; mirrors; grilles; wheels; and large mechanical items such as engines and transmissions. For Europe, and to a lesser extent for Wholesale - North America, 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. Additionally, in both our Wholesale - North America and Europe segments, we sell paint and paint related consumables for refinishing vehicles. For our Specialty operations, we serve seven product segments: truck and off-road; speed and performance; recreational vehicles; towing; wheels, tires and performance handling; marine; and miscellaneous accessories.

Other revenue includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from furnace operations. 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 our 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 - North America and Self Service segments is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap.

The following table sets forth our revenue disaggregated by category and reportable segment (in millions):


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Wholesale - North America	Wholesale - North America	$	1,121	$	1,050	$	2,269	$	2,156
Wholesale - North America
Wholesale - North America
Europe
Europe
Europe	Europe	1,633		1,470		3,181		2,951
Specialty	Specialty	442		512		838		972
Specialty
Specialty
Self Service
Self Service
Self Service	Self Service	63		60		123		117
Parts and services	Parts and services	3,259		3,092		6,411		6,196
Parts and services
Parts and services
Wholesale - North America	Wholesale - North America	78		94		159		189
Wholesale - North America
Wholesale - North America
Europe
Europe
Europe	Europe	5		7		12		14

Self Service	Self Service	106		148		215		290

Self Service

Self Service
Other
Other
Other	Other	189		249		386		493
Total revenue	Total revenue	$	3,448	$	3,341	$	6,797	$	6,689
Total revenue
Total revenue

Variable Consideration

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

Classification

June 30, 2023

December 31, 2022

Classification

March 31, 2024

December 31, 2023

Return asset

Prepaid expenses and other current assets

Refund liability

120

109

Variable consideration reserve

Receivables, net of allowance for credit losses

127

136

Revenue by Geographic Area

Our net sales are attributed to geographic area based on the location of the selling operation. The following table sets forth our revenue by geographic area (in millions):


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Revenue	Revenue
Revenue
Revenue
United States
United States
United States	United States	$	1,690	$	1,747	$	3,371	$	3,497
Germany	Germany	436		390		852		776
Germany
Germany
United Kingdom
United Kingdom
United Kingdom	United Kingdom	422		393		837		818
Other countries	Other countries	900		811		1,737		1,598
Other countries
Other countries
Total revenue	Total revenue	$	3,448	$	3,341	$	6,797	$	6,689
Total revenue
Total revenue

Note ~~11.~~8. Restructuring and Transaction Related Expenses

From time to time, we initiate restructuring plans to integrate acquired businesses, to align our workforce with strategic business activities, or to improve efficiencies in our operations. Below is a summary of our current restructuring plans:

2024 Global Restructuring Plan

In the first quarter of 2024, we began a global restructuring initiative focused on enhancing profitability. The largest portion of the activity will come from the Europe segment and will include exiting certain businesses or markets which do not align with our strategic objectives. Initially, this includes exiting markets located in Bosnia and Slovenia. In April 2024, we entered into agreements to divest our operations in Slovenia, which closed in April 2024, and Bosnia, which we expect to close in the third quarter of 2024 subject to regulatory approval. Our decision to exit these and other markets constituted a triggering event to evaluate certain long-lived assets for impairment, and as a result, we incurred and expect to incur impairment charges as we move forward with the plans to exit Bosnia, Slovenia and any other identified markets. In addition to these impairment charges, we will incur charges to write-down or dispose of long-lived assets, inventory and other assets; for employee severance; and to terminate leases. This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $55 million and $75 million. In the future, we may identify additional initiatives under the plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives.

2022 Global Restructuring Plan

In the fourth quarter of 2022, we began a restructuring initiative covering all of our reportable segments designed to reduce costs, streamline operations, consolidate facilities and implement other strategic changes to the overall organization. We have incurred and expect to incur costs primarily for employee severance, inventory or other asset write-downs, and exiting facilities. This plan is scheduled to be substantially complete by the end of 2024 with an estimated total incurred cost of between ~~$25~~$28 million and $35 million.

1 LKQ Europe Plan

In 2019, we announced a multi-year plan 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 plan, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common ~~ERP~~Enterprise Resource Planning platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2027 with a total incurred cost of between $30 million and $40 million.

~~2019/2020 Global Restructuring Plan~~

In 2019, we commenced a cost reduction initiative, covering all of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. This plan was expanded in 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19. We have incurred 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. This plan is expected to be completed in 2023 with a total incurred cost of between $106 million to $115 million.

Acquisition Integration Plans

As we complete the acquisition of a business, we may incur costs related to integrating the acquired business into our current business structure and systems. These costs are typically incurred within a year from the acquisition date and vary in magnitude depending on the size and complexity of the related integration activities. We expect to incur ~~an insignificant amount~~additional expenses of ~~future expenses~~between$5 million and $15 million by the end of 2024 to substantially complete ~~any open~~the integration ~~plans.~~plan related to the Uni-Select Acquisition in our Wholesale - North America segment.

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


			Three Months Ended March 31,
			Three Months Ended March 31,
			Three Months Ended March 31,
Plan
Plan
Plan

			Three Months Ended June 30,				Six Months Ended June 30,
Plan		Expense Type	2023		2022		2023		2022
2024 Global Plan

2024 Global Plan

2024 Global Plan
		Asset impairments (2)
		Asset impairments (2)
		Asset impairments (2)
		Other costs
		Other costs
		Other costs
		Total
		Total
		Total

2022 Global Plan	2022 Global Plan	Employee related costs	$	—	$	—	$	2	$	—

2022 Global Plan

2022 Global Plan
		Facility exit costs
		Facility exit costs
		Facility exit costs

		Other costs

		Other costs

		Other costs
		Total
		Total
		Total
		Facility exit costs	1		—		3		—

		Other costs	1		—		2		—
		Total	$	2	$	—	$	7	$	—

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

		Total	$	—	$	1	$	—	$	1

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

		Total	$	—	$	—	$	1	$	—

Acquisition Integration Plans		Employee related costs	$	—	$	2	$	—	$	2

1 LKQ Europe Plan
		Facility exit costs	—		—		2		—

		Total	$	—	$	2	$	2	$	2

1 LKQ Europe Plan
		Facility exit costs
		Facility exit costs
		Facility exit costs

		Total

		Total

		Total

Acquisition Integration Plans

Acquisition Integration Plans

Acquisition Integration Plans
		Facility exit costs
		Facility exit costs
		Facility exit costs

		Other costs

		Other costs

		Other costs
		Total
		Total
		Total

Total restructuring expenses	Total restructuring expenses		$	2	$	3	$	10	$	3

Total restructuring expenses

Total restructuring expenses

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

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

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

Cumulative Program Costs
Wholesale - North America Europe Specialty Self Service Total
2022 Global Plan $ 1 $ 12 $ 3 $ 1 $ 17
2019/2020 Global Plan 43 59 2 2 106
1 LKQ Europe Plan — 8 — — 8

~~The following table sets forth the liabilities recorded related to our restructuring plans (in millions):~~

2022 Global Plan 2019/20 Global Plan 1 LKQ Europe Plan
June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022
Employee related costs (1)
$ — $ 3 $ — $ 1 $ 1 $ 1
Facility exit costs (2)
3 1 3 6 — —
Other costs — — 2 2 — —
Total $ 3 $ 4 $ 5 $ 9 $ 1 $ 1

~~(1)~~ ~~Reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.~~

~~(2)~~ ~~Reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets.~~


	Cumulative Program Costs
	Wholesale - North America		Europe		Specialty		Self Service		Total
2024 Global Plan	$	—	$	27	$	—	$	—	$	27
2022 Global Plan	2		17		4		3		26

1 LKQ Europe Plan	—		12		—		—		12

Transaction Related Expenses

~~The following table sets forth~~During the ~~transaction related~~three months ended March 31, 2024 and 2023, we incurred expenses ~~incurred (in millions):~~

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Professional fees (1)
$ 6 $ 1 $ 16 $ 4
Transaction related expenses $ 6 $ 1 $ 16 $ 4

~~(1)~~ ~~Included external costs such as~~totaling $2 million and $10 million, respectively for legal, accounting and advisory ~~fees~~services related to completed and potential ~~transactions (including Uni-Select transaction costs in 2023).~~

~~Note 12. Stock-Based Compensation~~

~~RSUs~~

The following table summarizes activity related to our restricted stock units ("RSUs") under the LKQ Corporation 1998 Equity Incentive Plan (the "Equity Incentive Plan") for the six months ended June 30, 2023 (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(1)
Unvested as of January 1, 2023 1.3 $ 41.02
Granted (2)
0.5 $ 57.00
Vested (0.4) $ 42.07
Unvested as of June 30, 2023 1.4 $ 47.31
Expected to vest after June 30, 2023 1.2 $ 47.75 2.9 $ 71

~~(1)~~ The aggregate intrinsic value of expected to vest RSUs represents the total pretax intrinsic value (the fair value of LKQ's stock on the last day of 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 LKQ’s common stock.transactions.

~~(2)~~ ~~The weighted average grant date fair value of RSUs granted during the six months ended June 30, 2022 was $49.00.~~

~~The fair value of RSUs that vested during the six months ended June 30, 2023 was $21 million; the fair value of RSUs vested is based on the market price of LKQ stock on the date vested.~~

~~PSUs~~

The following table summarizes activity related to our performance-based RSUs ("PSUs") under the Equity Incentive Plan for the six months ended June 30, 2023 (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(1)
Unvested as of January 1, 2023 0.5 $ 37.87
Granted (2)
0.1 $ 56.99
Vested (0.2) $ 32.28
Unvested as of June 30, 2023 0.4 $ 47.51
Expected to vest after June 30, 2023 0.3 $ 46.85 1.4 $ 18

~~(1)~~The aggregate intrinsic value of expected to vest PSUs represents the total pretax intrinsic value (the fair value of LKQ's stock on the last day of each period multiplied by the number of 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 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 six months ended June 30, 2022 was $48.92.~~

~~The fair value of PSUs that vested during the six months ended June 30, 2023 was $12 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 $10 million and $20 million for the three and six months ended June 30, 2023, respectively, and $10 million and $23 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, unrecognized compensation expense related to unvested RSUs and PSUs was $62 million. Stock-based compensation expense related to these awards will be different to the extent that forfeitures are realized and performance under the PSUs dif~~fers from current achievement estimates.~~

1613

Note ~~13.~~9. Earnings Per Share

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

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Income from continuing operations $ 282 $ 420 $ 552 $ 689
Denominator for basic earnings per share—Weighted-average shares outstanding 267.6 281.4 267.5 283.5
Effect of dilutive securities:
RSUs 0.4 0.5 0.6 0.7
PSUs 0.2 0.4 0.2 0.3
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 268.2 282.3 268.3 284.5
Basic earnings per share from continuing operations $ 1.05 $ 1.49 $ 2.06 $ 2.43
Diluted earnings per share from continuing operations (1)
$ 1.05 $ 1.49 $ 2.06 $ 2.42


	Three Months Ended March 31,
	2024		2023
Net income	$	158	$	270
Denominator for basic earnings per share—Weighted-average shares outstanding	267.1		267.4
Effect of dilutive securities:
Restricted stock units ("RSUs")	0.5		0.7
Performance-based RSUs ("PSUs")	0.1		0.2

Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	267.7		268.3
Basic earnings per share	$	0.59	$	1.01
Diluted earnings per share (1)	$	0.59	$	1.01

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

~~The number of antidilutive securities was insignificant for all periods presented.~~

Note ~~14.~~10. Accumulated Other Comprehensive ~~Loss~~Income (Loss)

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

Three Months Ended June 30, 2023
Foreign Currency Translation Unrealized Gain (Loss) on Cash Flow Hedges Unrealized Gain on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)
Balance as of April 1, 2023 $ (276) $ (17) $ 11 $ 2 $ (280)
Pretax income 34 14 — — 48
Income tax effect — (3) — — (3)
Reclassification of unrealized gain — (1) — — (1)
Other comprehensive income from unconsolidated subsidiaries — — — 1 1
Balance as of June 30, 2023 $ (242) $ (7) $ 11 $ 3 $ (235)


	Three Months Ended March 31, 2024
	Foreign Currency Translation		Unrealized Gain (Loss) on Cash Flow Hedges		Unrealized Gain on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2024	$	(243)	$	(11)	$	6	$	8	$	(240)
Pretax (loss) income	(57)		6		—		—		(51)
Income tax effect	—		(1)		—		—		(1)
Reclassification of unrealized gain	—		(1)		—		—		(1)


Other comprehensive loss from unconsolidated subsidiaries	—		—		—		(5)		(5)
Balance as of March 31, 2024	$	(300)	$	(7)	$	6	$	3	$	(298)

Three Months Ended June 30, 2022
Foreign Currency Translation Unrealized Loss on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)
Balance as of April 1, 2022 $ (175) $ (24) $ (7) $ (206)
Pretax loss (154) — — (154)
Disposal of business 4 — — 4
Other comprehensive income from unconsolidated subsidiaries — — 1 1
Balance as of June 30, 2022 $ (325) $ (24) $ (6) $ (355)

Six Months Ended June 30, 2023
Foreign Currency Translation Unrealized Gain (Loss) on Cash Flow Hedges Unrealized Gain on Pension Plans Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2023 $ (333) $ — $ 11 $ (1) $ (323)
Pretax income (loss) 91 (8) — — 83
Income tax effect — 2 — — 2
Reclassification of unrealized gain — (1) — — (1)
Other comprehensive income from unconsolidated subsidiaries — — — 4 4
Balance as of June 30, 2023 $ (242) $ (7) $ 11 $ 3 $ (235)

Six Months Ended June 30, 2022
Foreign Currency Translation Unrealized 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 (208) — — (208)
Disposal of business 4 — — 4
Other comprehensive income from unconsolidated subsidiaries — — 2 2
Balance as of June 30, 2022 $ (325) $ (24) $ (6) $ (355)


	Three Months Ended March 31, 2023
	Foreign Currency Translation		Unrealized Gain (Loss) on Cash Flow Hedges		Unrealized Gain on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of January 1, 2023	$	(333)	$	—	$	11	$	(1)	$	(323)
Pretax income (loss)	57		(22)		—		—		35
Income tax effect	—		5		—		—		5



Other comprehensive income from unconsolidated subsidiaries	—		—		—		3		3
Balance as of March 31, 2023	$	(276)	$	(17)	$	11	$	2	$	(280)

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

Note ~~15.~~11. Supply Chain Financing

We utilize voluntary supply chain finance programs to support our efforts in negotiating payment term extensions with suppliers as part of our effort to improve our operating cash flows. These programs provide participating suppliers the opportunity to sell their LKQ receivables to financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the agreement between the suppliers and financial institutions. The financial institutions participate in the supply chain financing initiative on an uncommitted basis and can cease purchasing receivables from our suppliers at any time. Our obligation to our suppliers, including amount due and payment date, are not impacted by the supplier’s decision to sell amounts under these agreements. Our payment terms to the financial institutions, including the timing and amount of payments, are unchanged from the original supplier invoice. All outstanding payments owed under the supply chain finance programs with the participating financial institutions are recorded within Accounts payable inon our Unaudited Condensed Consolidated Balance Sheets. As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had ~~$264~~$422 million and ~~$248~~$411 million of Accounts payable outstanding under the arrangements, respectively.

Note ~~16.~~12. Long-Term Obligations

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


				March 31, 2024														March 31, 2024			December 31, 2023
		Maturity Date													Maturity Date	Interest Rate	Amount		Interest Rate	Amount
Senior Unsecured Credit Agreement:
Term loan payable
Term loan payable
Term loan payable
Revolving credit facilities

					June 30, 2023					December 31, 2022
			Maturity Date		Interest Rate			Amount		Interest Rate			Amount
Senior Unsecured Credit Agreement:
Term loans payable			January 2026		6.45	%		$	500	—	%		$	—
Revolving credit facilities			January 2028		5.37	%	(1)	1,226		—	%		—

Senior Secured Credit Agreement:
Revolving credit facilities			January 2024		—	%		—		4.24	%	(1)	1,786

Senior Notes:
Senior Unsecured Term Loan Agreement:

Senior Unsecured Term Loan Agreement:

Senior Unsecured Term Loan Agreement:
Term loan payable
Term loan payable
Term loan payable

Unsecured Senior Notes:
Unsecured Senior Notes:
Unsecured Senior Notes:
U.S. Notes (2028)
U.S. Notes (2028)
U.S. Notes (2028)	U.S. Notes (2028)		June 2028		5.75	%		800		—	%		—
U.S. Notes (2033)	U.S. Notes (2033)		June 2033		6.25	%		600		—	%		—
Euro Notes (2024)	Euro Notes (2024)		April 2024		3.88	%		545		3.88	%		535
Euro Notes (2028)	Euro Notes (2028)		April 2028		4.13	%		273		4.13	%		268
Euro Notes (2031)

Notes payable
Notes payable
Notes payable	Notes payable		Various through October 2030		3.62	%	(1)	14		3.25	%	(1)	16
Finance lease obligations	Finance lease obligations				4.42	%	(1)	66		3.69	%	(1)	48
Other debt	Other debt				2.14	%	(1)	6		2.28	%	(1)	9
Total debt	Total debt							4,030					2,662
Less: long-term debt issuance costs and unamortized bond discount	Less: long-term debt issuance costs and unamortized bond discount							(30)					(6)

Total debt, net of debt issuance costs and unamortized bond discount	Total debt, net of debt issuance costs and unamortized bond discount							4,000					2,656
Total debt, net of debt issuance costs and unamortized bond discount
Total debt, net of debt issuance costs and unamortized bond discount
Less: current maturities, net of debt issuance costs	Less: current maturities, net of debt issuance costs							(579)					(34)
Long term debt, net of debt issuance costs and unamortized bond discount	Long term debt, net of debt issuance costs and unamortized bond discount							$	3,421				$	2,622

(1) Interest rate derived via a weighted average

Senior Unsecured Credit Agreement

~~On January 5, 2023, we and certain other subsidiaries of ours entered into a new credit agreement (the “Senior~~Our Senior Unsecured Credit ~~Agreement”) which establishes:~~Agreement consists of (i) an unsecured revolving credit facility of up to a U.S. Dollar equivalent of $2.0 billion, which includes a $150 million sublimit for the issuance of letters of credit and a $150 million sublimit for swing line loans and (ii) an unsecured term loan facility of up to $500 million. Borrowings under the agreement bear interest at the Secured Overnight Financing Rate (i.e. "SOFR") plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a ~~spread. The maturity date of~~spread based on the ~~term loan is January 5, 2026~~Company's debt rating and may be extended by one additional year. The term loan has no required amortization payments prior to its maturity date. The maturity date for the revolving credit facility is January 5, 2028, and may be extended by up to two additional years in one year increments.

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

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

1915

Senior ~~Secured~~Unsecured Term Loan Credit Agreement

~~In connection with entering into the~~The Senior Unsecured Term Loan Credit Agreement ~~noted above, Wells Fargo Bank, National Association~~("CAD Note") established an unsecured term loan facility of up to CAD 700 million maturing in July 2026. The variable interest rate applicable to the CAD Note may be (i) a forward-looking term rate based on the Canadian Dollar Offer Rate for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread based on the Company’s debt rating and ~~the various lending parties terminated the Prior Credit Agreement and each amendment thereto resulting in an immaterial loss on extinguishment of debt.~~total leverage ratio.

Unsecured Senior Notes

On ~~May 24, 2023, as part of the financing for the Uni-Select Acquisition, we~~March 13, 2024, LKQ Corporation, together with its indirect, wholly-owned subsidiary, LKQ Dutch Bond B.V., a private company with limited liability, completed an offering and sale of ~~$1,400~~€750 million aggregate principal amount of ~~senior unsecured notes, consisting of $800 million senior notes~~its 4.125% Notes due 2028 and $600 million senior notes due 2033 in a private placement conducted pursuant to Rule 144A and Regulation S under the United States Securities Act of 1933. See Note 3, "Uni-Select Acquisition" for additional information on the acquisition and the U.S.March 13, 2031 (“Euro Notes ~~(2028/33)~~(2031)”).

The ~~U.S.~~Euro Notes ~~(2028/33) are governed by~~(2031) bear interest at a rate of 4.125% per year. Interest on the ~~Indenture, dated as of May 24, 2023 (the "Indenture"), among the Company, certain of the Company's subsidiaries (the "Guarantors") and U.S. Bank Trust Company, National Association, as trustee.~~Euro Notes (2031) is payable annually on each March 13, commencing on March 13, 2025. The ~~U.S.~~Euro Notes ~~(2028/33)~~(2031) will be initially fully and unconditionally guaranteed on a senior unsecured basis (the “Guarantees”) by the Company and each of ~~our~~its wholly owned ~~domestic~~U.S. subsidiaries that are guarantors under our Senior Unsecured Credit Agreement ~~dated as of January 5, 2023, or the~~and our CAD ~~Note and~~Note. The Euro Notes (2031) will also be guaranteed by each of ~~our domestic~~the Company’s U.S. subsidiaries that in the future agrees to guarantee the Company’s obligations under the Senior Unsecured Credit Agreement, the CAD Note, any other Credit Facility Debt or any Capital Markets Debt ~~(as such terms are~~(both as defined in the ~~Indenture).~~

~~Each subsidiary guarantee will rank equally in right of payment~~Company’s preliminary prospectus supplement filed with ~~all existing and future liabilities of~~ the applicable subsidiary guarantor that are not subordinated. Each subsidiary guarantee will effectively rank junior to any secured indebtedness of its respective subsidiary guarantor to the extent of the lesser of the amount of such secured indebtedness and the value of the assets securing such indebtedness. Under the terms of any subsidiary guarantee, holders of the U.S. Notes (2028/33) will not be required to exercise their remedies against us before they proceed directly against the subsidiary guarantors.SEC on February 28, 2024).

Prior to ~~May 15, 2028 in the case of the U.S. Notes (2028) or March 15, 2033 in the case of the U.S. Notes (2033) (each such date a~~December 13, 2030 (the "Par Call Date"), ~~we may redeem~~ the ~~U.S.~~Euro Notes ~~(2028) or U.S. Notes (2033), as applicable, at our option,~~(2031) are redeemable, in whole or in part, at any time and from time to time, at a redemption price (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater ~~of (i)~~of: (1)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming ~~in each case,~~ that ~~such U.S.~~the Euro Notes ~~(2028/33)~~(2031) matured on ~~their applicable~~the Par Call Date) on an annual (ACTUAL/ACTUAL (ICMA)) basis at a ~~semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at~~rate equal to the ~~Treasury~~Comparable Government Bond Rate (as defined in the Indenture, dated March 13, 2024 (the "Euro Notes (2031) Indenture")) plus 4030 basis points, ~~in the case of the U.S. Notes (2028) or 45 basis points in the case of the U.S. Notes (2033),~~ less (b) interest accrued to the date of redemption; and ~~(ii)~~(2) 100% of the principal amount of the ~~U.S.~~Euro Notes ~~(2028/33)~~(2031) to be redeemed; plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. On or after the ~~applicable~~ Par Call Date, we may redeem the ~~U.S.~~Euro Notes ~~(2028/33) of the applicable series,~~(2031), in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the ~~U.S.~~Euro Notes ~~(2028/33)~~(2031) being redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date. If the Uni-Select Acquisition is not consummated or the Arrangement is terminated, in each case, on or prior to November 27, 2023 (subject to extension to February 26, 2024 if certain regulatory approvals are not received by November 27, 2023, or such later date to which the “Outside Date” (as defined in the Arrangement as in effect on May 24, 2023) may be extended in accordance with the terms of the Arrangement), then we will be required to redeem the U.S. Notes (2033), in whole and not in part, at a redemption price of 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption.

~~In connection~~The Euro Notes (2031) and the Guarantees have been registered under the United States Securities Act of 1933 under the Registration Statement on Form S-3 (File No. 333-277267) filed by the Company with the SEC on February 22, 2024, as supplemented by the prospectus supplement filed by the Company with the SEC on March 1, 2024. Subsequently, the Euro Notes (2031) were approved for listing and registration on the Nasdaq.

Related to the offering and sale of the ~~U.S.~~Euro Notes ~~(2028/33),~~(2031) in March 2024, we ~~entered into a Registration Rights Agreement, dated~~incurred $7 million of fees, which were capitalized as ~~of May 24, 2023 (the "Registration Rights Agreement"), with~~an offset to Long-Term Obligations and are amortized over the ~~Guarantors and BofA Securities, Inc. and Wells Fargo Securities, LLC, as representatives~~term of the ~~initial purchasers~~Euro Notes (2031).

We used the net proceeds from this offering to (i) pay outstanding indebtedness, including all of the U.S. Notes (2028/33) identified therein. Under the Registration Rights Agreement the Company and the Guarantors have agreed to (i) file a registration statement on an appropriate registration form with respect to a registered offer to exchange each series of U.S. Notes (2028/33) and related guarantees for new notes of such series (the “Exchange Notes”) and new related guarantees, which will have terms substantially identical in all material respects to the applicable series of U.S. Notes (2028/33) (except that the Exchange Notes will not contain terms with respect to transfer restrictions and Additional Interest (as defined below)) and (ii) cause such exchange offer registration statement to be declared effective under the Securities Act within 330 days after the issue date of the U.S. Notes (2028/33). A "Registration Default" will be deemed to occur if (x) we have not exchanged Exchange Notes for all U.S. Notes (2028/33) validly tendered in accordance with the terms of an exchange offer within 365 days after the issue date of the U.S. Notes (2028/33); (y) if required, we have not had a shelf registration statement declared effective under the Securities Act within 270 days after the date, if any, on which we became obligated to file the shelf registration statement pursuant to the registration rights agreement; or (z) if applicable, a shelf registration statement covering resales of the notes has been declared effective and such shelf registration statement ceases

to be effective or the prospectus contained therein ceases to be usable at any time during the effectiveness period and such failure to remain effective or usable exists for more than 90 days (whether or not consecutive) in any 12-month period (subject to certain exceptions); additional interest ("Additional Interest") will accrue on theoutstanding €500 million aggregate principal amount of the ~~applicable U.S.~~3.875% senior notes due 2024 (the “Euro Notes ~~(2028/33) which have not been registered and/or exchanged at~~ (2024)”) issued by the Company’s indirect wholly-owned subsidiary, LKQ Italia Bondco di LKQ Italia Bondco GP S.r.l e C.S.A.P.A. (f/k/a ~~rate~~LKQ Italia Bondco S.p.A.) (the “Redemption”), and (ii) pay accrued interest and related fees, premiums and expenses. The Euro Notes (2031) are governed by the Euro Notes (2031) Indenture, dated as of 0.25% per annum during the 90-day period beginning on the day immediately following the occurrence of any Registration Default, which rate will, after such 90-day period, increase to a maximum of 0.50% per annum thereafter commencing on the day immediately following such Registration Default.March 13, 2024.

Interest on the U.S. Notes (2028/33) is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. Interest on our ~~3.88% senior notes due April 2024 (the "Euro Notes (2024)") and our~~ 4.13% senior notes due April 2028 (the "Euro Notes (2028)") ~~are~~is payable in arrears on April 1 and October 1 of each year.

Note ~~17.~~13. Derivative Instruments and Hedging Activities

We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices. Under current policies, we may use derivatives to manage our exposure to variable interest rates on our debt and changing foreign exchange rates for certain foreign currency denominated transactions. We do not hold or issue derivatives for trading purposes.

Derivative Instruments Designated as Cash Flow Hedges

In February 2023, we entered into interest rate swap agreements to mitigate the risk of changing interest rates on our variable interest rate payments related to borrowings under our Senior Unsecured Credit Agreement. Under the terms of the interest rate swap agreements, we pay the fixed interest rate and receive a variable interest rate based on term SOFR that matches a contractually specified rate under the Senior Unsecured Credit Agreement. The agreements include a total $400 million notional amount maturing in February 2025 with a weighted average fixed interest rate of 4.63% and a total $300 million notional amount maturing in February 2026 with a weighted average fixed interest rate of 4.23%. Changes in the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss and reclassified to Interest expense when the hedged interest payments affect earnings. The activity related to the interest rate swaps is classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows as the activity relates to normal recurring settlements to match interest payments.

In March 2023, we entered into forward starting interest rate swaps to hedge the risk of changes in interest rates related to forecasted debt issuance to finance a portion of the Uni-Select Acquisition. These swaps were settled in May 2023 ~~after~~upon issuance of the U.S. Notes (2028/33), resulting in total payments of $13 million. ~~See Note 16, "Long-Term Obligations" for additional information related to the offering of the U.S. Notes (2028/33).~~ Changes in the fair value of the interest rate swaps were recorded in Accumulated other comprehensive loss and the fair value at the termination date ~~will be~~is being reclassified to Interest expense over the term of the debt. Payments made to settle the forward starting interest swaps were classified in financing activities in our Unaudited Condensed Consolidated Statements of Cash Flows as these payments were related to the forecasted debt issuance.

All of our interest rate swap contracts have been executed with counterparties that we believe are creditworthy, and we closely monitor the credit ratings of these counterparties.

As of ~~June 30,~~March 31, 2024 and December 31, 2023, the notional amounts, balance sheet classification and fair values of our derivative instruments designated as cash flow hedges were as follows (in millions) ~~(there were no such hedges as of December 31, 2022)~~:

Notional Amount Balance Sheet Caption Fair Value - Asset / (Liability)
Interest rate swap agreements $ 700 Other noncurrent assets $ 4


	March 31, 2024
	Notional Amount		Balance Sheet Caption	Fair Value - Asset / (Liability)
Interest rate swap agreements	$	400	Prepaid expenses and other current assets	$	1
Interest rate swap agreements	300		Other noncurrent assets	2


	December 31, 2023
		Notional Amount		Balance Sheet Caption	Fair Value - Asset / (Liability)
Interest rate swap agreements		$	700	Other noncurrent liabilities	$	(2)

The activity related to our cash flow hedges is included in Note ~~14,~~10, "Accumulated Other Comprehensive ~~Loss.~~Income (Loss)." As of ~~June 30, 2023,~~March 31, 2024, we estimate that $3$1 million of derivative gains (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Unaudited Condensed Consolidated Statements of Income within the next 12 months.

Derivative Instruments Not Designated as Hedges

To manage the foreign currency exposure related to the Uni-Select Acquisition purchase price (denominated in CAD), we entered into foreign exchange contracts in March 2023 to purchase CAD 1.6 billion for approximately $1.2 billion. These contracts ~~are set to expire on September 29, 2023. These contracts do~~did not qualify for hedge accounting, and therefore, the contracts ~~are~~were adjusted to fair value through the results of operations as of each balance sheet date. As of June 30, 2023, the fair value of these foreign exchange contracts was $46 million and is recorded within Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets, with corresponding amounts recorded toWe reported Gains on foreign exchange contracts - acquisition related ~~on the Unaudited Condensed Consolidated Statements~~ of ~~Income of $23 million~~ ~~and $46~~$23 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023. These contracts were settled in July 2023 ~~respectively.~~resulting in total payments received of $49 million.

To manage our foreign currency exposure on other non-functional currency denominated intercompany loans, we entered into short-term foreign currency forward contracts in 2023. We have not elected to apply hedge accounting for these transactions, and therefore the contracts are adjusted to fair value through our results of operations as of each balance sheet date. The fair values of these short-term derivative instruments that remained outstanding as of March 31, 2024 were recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets and were not material at March 31, 2024 and December 31, 2023.

Additionally, we hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability in the cash flows related to inventory purchases denominated in a non-functional currency. We have not elected ~~not~~ to apply hedge accounting for these transactions. The notional amount and fair value of these contracts at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, along with the effect on our results of operations during the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ were not material. The fair values of these contracts were recorded in either Prepaid expenses and other current assets or Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets.

Gross vs. Net Presentation for Derivative Instruments

While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge and other derivative instruments on a gross basis inon our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would result in an immaterial decrease to Prepaid expenses and other current assets and Other accrued expenses on our Unaudited Condensed Consolidated Balance Sheets at ~~June 30,~~March 31, 2024 and December 31, 2023.

Note ~~18.~~14. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three ~~and six~~ months ended ~~June 30, 2023,~~March 31, 2024, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The tiers in the fair value hierarchy include: 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~~table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of March 31, 2024 and December 31, 2023 (in millions):

June 30, 2023

December 31, 2022

March 31, 2024

December 31, 2023

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets:

Foreign currency forward contracts (Level 2)

—

Interest rate swaps (Level 2)

—

Interest rate swaps

Investments - debt securities

Investments - equity securities

Total Assets

—

Liabilities:

Contingent consideration liabilities (Level 3)

Interest rate swaps

Contingent consideration liabilities

Total Liabilities

Investments in debt and equity securities relate to our captive insurance subsidiary and are included in Other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. The balance sheet classification of the interest rate swap agreements is presented in Note 13, "Derivative Instruments and Hedging Activities." For contingent consideration liabilities, the current portion is included in Other current liabilities and the noncurrent portion is included in Other noncurrent liabilities on the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. ~~The balance sheet classification of the interest rate swap agreements and foreign currency forward contracts is presented in Note 17, "Derivative Instruments and Hedging Activities."~~

We value derivative instruments using a third party valuation model that performs 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.

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 June 30, 2023, the fair value of the Senior Unsecured Credit Agreement borrowings reasonably approximated the carrying value of $1,726 million.~~As of December 31, 2022, the fair value of the Prior Credit Agreement borrowings reasonably approximated the carrying value of $1,786 million. As of June 30, 2023, the fair values of the U.S. Notes (2028) and U.S. Notes (2033) were approximately ~~$795 million~~ and $600 million, respectively, compared to carrying values of $800 million and $600 million, respectively. As of June 30, 2023 and December 31, 2022, the fair values of the Euro Notes (2024) were approximately ~~$544 million~~ ~~and $535 million, respectively, compared to carrying values of $545 million and $535 million, respectively. As of June 30, 2023 and December 31, 2022, the fair values of the Euro Notes (2028) were~~ ~~$267 million~~ ~~and $254 million, respectively, compared to carrying values of $273 million and $268 million, respectively.~~

The fair value measurements of the borrowings under the credit ~~agreements~~agreement are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 to assume these obligations. The fair values of the U.S. Notes (2028), U.S. Notes (2033), Euro Notes (2024), Euro Notes (2028) and Euro Notes ~~(2028)~~(2031) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.

~~We have immaterial equity investments recorded in Other noncurrent assets in which we have elected to use net asset value~~Based on market conditions as ~~a practical expedient to value~~of March 31, 2024 and ~~thus they are excluded from~~December 31, 2023, the fair value ~~hierarchy disclosure. We have deferred compensation liabilities which are recorded in Other noncurrent liabilities on~~of the ~~Unaudited Condensed Consolidated Balance Sheets. These liabilities are determined based on~~borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of ~~investments in participants' phantom accounts, which is not a fair value measurement,~~$1,140 million and ~~thus the liabilities are not included in~~$1,414 million, respectively. As of March 31, 2024 and December 31, 2023, the fair value ~~hierarchy disclosure.~~of the borrowings under the CAD Note reasonably approximated the carrying values of $517 million and $529 million, respectively.

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


	As of March 31, 2024				As of December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value



U.S. Notes (2028)	$	800	$	815	$	800	$	820
U.S. Notes (2033)	600		624		600		628
Euro Notes (2024)	—		—		552		552
Euro Notes (2028)	270		271		276		276
Euro Notes (2031)	809		820		—		—

Note ~~19.~~15. Employee Benefit Plans

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

As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the aggregate funded status of the defined benefit plans was a net liability of ~~$73~~$80 million and ~~$72~~$83 million, respectively, and is reported in Other noncurrent assets, Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Net periodic benefit cost for our defined benefit plans were insignificant for each of the ~~three and six-month~~three-month periods ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023. The service cost component is recorded in Selling, general and administrative ("SG&A") expenses, while the other components are recorded to Interest income and other income, net on the Unaudited Condensed Consolidated Statements of Income.

Note ~~20.~~16. Income Taxes

At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our interim earnings. We also record the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates, in the interim period in which they occur.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in state and foreign jurisdictions, permanent and temporary differences between book and taxable income, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes.

Our effective income tax rate for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 was ~~27.1%~~30.7%, compared to ~~24.1%~~26.1% for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. The increase in the effective tax rate for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the ~~six~~three months ended ~~June 30, 2022 is~~March 31, 2023 was primarily attributable ~~to: (i) net favorable~~to the 4.4% unfavorable impact of discrete items, ~~representing a 1.2% rate benefit in the prior year, primarily~~mostly related to the ~~sale of PGW in~~2024 Global Restructuring Plan impairments. Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information on the second quarter of 2022, (ii) unfavorable rate effects, including non-deductible transaction costs and negative impacts on foreign tax credit availability, of 0.5% caused by Uni-Select related transaction activity, and (iii) geographic distribution of income favoring higher rate jurisdictions in 2023.impairments.

~~On August 16, 2022,~~The OECD released a framework, referred to as Pillar Two, to implement a global minimum corporate tax rate of 15% on certain multinational enterprises. Certain countries have enacted legislation to adopt the ~~Inflation Reduction Act of 2022 (“IRA”) was signed into law in~~Pillar Two framework while several countries are considering or still announcing changes to their tax laws to implement the ~~United States. The IRA, among other provisions, enacted a 15% corporate~~ minimum tax ~~effective for taxable years beginning after December 31, 2022 and a 1% excise tax on the repurchase of corporate stock after December 31, 2022. We~~directive. While we do not currently ~~expect the corporate minimum tax provisions of the IRA~~estimate Pillar Two to have a material impact on our ~~financial results. The impact of~~effective tax rate, our analysis will continue as the ~~excise tax provisions will be dependent upon the volume of any future stock repurchases.~~OECD continues to release additional guidance and countries implement legislation.

Note ~~21.~~17. Segment and Geographic Information

We have four operating segments: Wholesale - North ~~America, Europe, Specialty,~~America; Europe; Specialty; and Self Service, each of which is presented as a reportable segment.

The segments are organized based on a combination of geographic areas served and type of product lines offered. The segments are managed separately as the businesses serve different customers and are affected by different economic conditions. Wholesale - North America and 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 millions):

Wholesale - North America Europe Specialty Self Service Eliminations Consolidated
Three Months Ended June 30, 2023
Revenue:
Third Party $ 1,199 $ 1,638 $ 442 $ 169 $ — $ 3,448
Intersegment — — 1 — (1) —
Total segment revenue $ 1,199 $ 1,638 $ 443 $ 169 $ (1) $ 3,448
Segment EBITDA $ 248 $ 188 $ 42 $ 7 $ — $ 485
Total depreciation and amortization (1)
20 39 8 3 — 70
Three Months Ended June 30, 2022
Revenue:
Third Party $ 1,144 $ 1,477 $ 512 $ 208 $ — $ 3,341
Intersegment — — 1 — (1) —
Total segment revenue $ 1,144 $ 1,477 $ 513 $ 208 $ (1) $ 3,341
Segment EBITDA $ 214 $ 160 $ 69 $ 32 $ — $ 475
Total depreciation and amortization (1)
18 39 7 4 — 68


		Wholesale - North America		Europe		Specialty		Self Service		Eliminations		Consolidated
Six Months Ended June 30, 2023
	Wholesale - North America													Wholesale - North America	Europe	Specialty	Self Service	Eliminations	Consolidated
Three Months Ended March 31, 2024
Revenue:	Revenue:
Revenue:
Revenue:
Third Party
Third Party
Third Party	Third Party	$	2,428	$	3,193	$	838	$	338	$	—	$	6,797
Intersegment	Intersegment	—		—		2		—		(2)		—
Total segment revenue	Total segment revenue	$	2,428	$	3,193	$	840	$	338	$	(2)	$	6,797
Segment EBITDA	Segment EBITDA	$	500	$	339	$	73	$	29	$	—	$	941
Total depreciation and amortization (1)	Total depreciation and amortization (1)	39		73		16		7		—		135
Six Months Ended June 30, 2022
Three Months Ended March 31, 2023
Revenue:	Revenue:
Revenue:
Revenue:
Third Party
Third Party
Third Party	Third Party	$	2,345	$	2,965	$	972	$	407	$	—	$	6,689
Intersegment	Intersegment	—		—		2		—		(2)		—
Total segment revenue	Total segment revenue	$	2,345	$	2,965	$	974	$	407	$	(2)	$	6,689
Segment EBITDA	Segment EBITDA	$	432	$	291	$	127	$	72	$	—	$	922
Total depreciation and amortization (1)	Total depreciation and amortization (1)	37		73		15		8		—		133

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

The key measure of segment profit or loss reviewed by our chief operating decision maker, our Chief Executive Officer, is Segment EBITDA. We use Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net Income excluding net income and loss attributable to ~~LKQ stockholders excluding~~noncontrolling interest; income and loss from discontinued operations; ~~depreciation,~~depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and 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 fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict and related ~~sanctions (including provisions for and subsequent adjustments to reserves for asset recoverability and expenditures to support our employees and their families).~~

sanctions.

2520

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

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Net income $ 282 $ 420 $ 552 $ 693
Less: net income attributable to continuing noncontrolling interest 1 — 1 —
Net income attributable to LKQ stockholders 281 420 551 693
Less: net income from discontinued operations — — — 4
Net income from continuing operations attributable to LKQ stockholders 281 420 551 689
Adjustments - continuing operations attributable to LKQ stockholders:
Depreciation and amortization 70 68 135 133
Interest expense, net of interest income 42 14 75 29
Loss on debt extinguishment — — 1 —
Provision for income taxes 109 127 203 216
Equity in earnings of unconsolidated subsidiaries (1)
(2) (4) (5) (6)
Gains on foreign exchange contracts - acquisition related (2)
(23) — (46) —
Equity investment fair value adjustments — 2 1 3
Restructuring and transaction related expenses (3)
8 4 26 7
Gain on disposal of businesses (4)
— (155) — (155)
Losses on previously held equity interests — — — 1
Direct impacts of Ukraine/Russia conflict (5)
— (1) — 5
Segment EBITDA $ 485 $ 475 $ 941 $ 922


	Three Months Ended March 31,
	2024		2023
Net income	$	158	$	270




Adjustments:

Depreciation and amortization	100		65



Interest expense, net of interest income	61		33
Loss on debt extinguishment	—		1
Provision for income taxes	71		94


Equity in losses (earnings) of unconsolidated subsidiaries (1)	2		(3)
Gains on foreign exchange contracts - acquisition related (2)	—		(23)
Equity investment fair value adjustments	—		1


Restructuring and transaction related expenses (3)	30		18
Restructuring expenses - cost of goods sold (3)	8		—







Segment EBITDA	$	430	$	456

(1) Refer to Note 8,6, "Equity Method Investments" for further information.

(2) Refer to Note ~~3, "Uni-Select Acquisition"~~2, "Business Combinations" and Note ~~17,~~13, "Derivative Instruments and Hedging Activities" for further information.

(3) Refer to Note ~~11,~~8, "Restructuring and Transaction Related Expenses" for further information.

~~(4)~~ ~~Refer to "Other Divestitures (Not Classified in Discontinued Operations)" inNote 2, "Discontinued Operations and Divestitures" for further information.~~

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

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


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
		Three Months Ended March 31,

		Three Months Ended March 31,

2024
2024
Capital Expenditures
Capital Expenditures
Capital Expenditures	Capital Expenditures
Wholesale - North America	Wholesale - North America	$	16	$	16	$	36	$	45
Wholesale - North America
Wholesale - North America
Europe
Europe
Europe	Europe	23		19		56		42
Specialty	Specialty	5		4		18		8
Specialty
Specialty
Self Service
Self Service
Self Service	Self Service	22		1		26		4
Total capital expenditures	Total capital expenditures	$	66	$	40	$	136	$	99
Total capital expenditures
Total capital expenditures

2621

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


		June 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Receivables, net of allowance for credit losses	Receivables, net of allowance for credit losses
Wholesale - North America
Wholesale - North America
Wholesale - North America	Wholesale - North America	$	399	$	351
Europe	Europe	700		547
Specialty	Specialty	147		92
Self Service	Self Service	11		8
Total receivables, net of allowance for credit losses	Total receivables, net of allowance for credit losses	1,257		998
Inventories	Inventories
Wholesale - North America	Wholesale - North America	857		822
Wholesale - North America
Wholesale - North America
Europe	Europe	1,381		1,418
Specialty	Specialty	390		469
Self Service	Self Service	53		43
Total inventories	Total inventories	2,681		2,752
Property, plant and equipment, net	Property, plant and equipment, net
Wholesale - North America	Wholesale - North America	502		505
Wholesale - North America
Wholesale - North America
Europe	Europe	587		547
Specialty	Specialty	101		94
Self Service	Self Service	108		90
Total property, plant and equipment, net	Total property, plant and equipment, net	1,298		1,236
Operating lease assets, net	Operating lease assets, net
Wholesale - North America
Wholesale - North America
Wholesale - North America	Wholesale - North America	566		541
Europe	Europe	484		466
Specialty	Specialty	85		85
Self Service	Self Service	142		135
Total operating lease assets, net	Total operating lease assets, net	1,277		1,227

Other unallocated assets	Other unallocated assets	7,642		5,825

Other unallocated assets

Other unallocated assets
Total assets	Total assets	$	14,155	$	12,038

We report net receivables; inventories; net property, plant and equipment; and net operating lease assets by segment as that information is used by the chief operating decision maker in assessing segment performance. These assets provide a measure for the operating capital employed in each segment. Unallocated assets include cash and cash equivalents, prepaid expenses and other current and noncurrent assets, goodwill, other intangibles and equity method investments.

Our largest countries of operation are the U.S., followed by Germany and the United Kingdom ("U.K."). Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, Poland, and other European countries. As a result of the Uni-Select Acquisition, we further expanded our wholesale operations in Canada. Our operations in other countries include ~~wholesale operations in Canada,~~ remanufacturing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, and administrative support functions in India.

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


		June 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Long-lived assets	Long-lived assets
United States
United States
United States	United States	$	1,420	$	1,371
Germany	Germany	309		290
United Kingdom	United Kingdom	272		256
Other countries	Other countries	574		546
Total long-lived assets	Total long-lived assets	$	2,575	$	2,463

2722

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 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 ~~2022~~2023 Form 10-K and our Quarterly Reports on Form 10-Q (including this Quarterly Report).

Overview

~~We are~~LKQ, a member of the Standard & Poor's 500 Stock Index, is a global distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty ~~vehicle~~ aftermarket 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 organized into four operating segments: Wholesale - North ~~America, Europe, Specialty,~~America; Europe; Specialty; and Self Service, each of which is presented as a reportable segment.

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. Our Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.

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.

2823

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 to acquisitions that target high synergies and/or add critical capabilities, including the ~~pending~~ Uni-Select Acquisition completed in August 2023 that ~~will complement~~complements our existing North American paint distribution operations and ~~will provide~~provides a scaled position in the Canadian mechanical parts space, with opportunity for future consolidation and growth. Additionally, we have made investments in various businesses to advance our strategic objectives. See Note ~~3, "Uni-Select Acquisition,~~2, "Business Combinations," and Note 8,6, "Equity Method Investments," to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our acquisitions and 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 metals (including precious metals - platinum, palladium and 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 ~~10,~~7, "Revenue Recognition" to the 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 Estimates

The discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our ~~2022~~2023 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024.

Recently Issued Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 1, "Interim Financial Statements" 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 ~~10,~~7, "Revenue Recognition" and Note ~~21,~~17, "Segment and Geographic 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 our revenue and long-lived assets by geographic region.

1 LKQ Europe Plan

We have undertaken the 1 LKQ Europe plan 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 plan, we expect to recognize the following:

•Restructuring expenses — Non-recurring costs resulting directly from the implementation of the 1 LKQ Europe plan from which the business will derive no ongoing benefit. See Note ~~11,~~8, "Restructuring and Transaction Related Expenses” to the 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 plan that are expected to contribute to ongoing benefits to the business (e.g. non-capitalizable implementation costs related to a common ERP platform). These expenses are recorded in SG&A 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 plan.

Costs related to the 1 LKQ Europe plan are reflected in SG&A expenses, Restructuring and transaction related expenses and Purchases of property, plant and equipment in our Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of~~ 2027. We extended the completion date from 2025 to 2027 based on a detailed project review, after which we concluded that the common ERP system implementation would require additional time to allow for operational process reengineering to support further standardization across the segment. The extended implementation schedule and incremental process reengineering work will help to minimize potential business disruptions but will increase the overall cost estimate by $85 million. We expect to achieve additional cost benefits through expanded application of shared services and productivity improvements along with working capital reductions related to inventory rationalization. We are ~~currently realizing a portion of~~executing on the ~~benefits of~~various projects associated with the 1 LKQ Europe plan and expect to ~~achieve further margin expansion during~~be completed by the ~~implementation period.~~end of 2027. During the three ~~and six~~ months ended ~~June 30, 2023,~~ March 31, 2024, we incurred $7$8 million ~~and $13 million, respectively,~~ in costs across all three categories noted above. We expect that costs of the plan, reflecting all three categories noted above, will range between ~~$125~~$125 million to ~~$155~~$155 million for ~~2023~~2024 through the projected plan completion date in 2027. In the future, we may also identify additional initiatives and projects under the 1 LKQ Europe plan 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 ~~project~~plan to continue to enable trade working capital and productivity initiatives that will help fund the ~~project~~plan cost.

~~Ukraine/Russia Conflict~~

The Russian invasion of Ukraine and resulting global governmental response impacted our business in 2022, and are expected to continue to impact our business in 2023. Governmental sanctions imposed on Russia have restricted our ability to sell to and collect from customers based in Russia and Belarus, and Russian military activity in Ukrainian territory has temporarily changed the 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. We expect to continue operating in this manner unless conditions change. We currently do not expect the conflict to have a material impact on our ongoing results of operations or cash flows. Our operations in Ukraine represented less than 1% of both our total annual revenue and total annual operating profit for fiscal year 2022 and comprised approximately $75 million of total assets as of June 30, 2023. In addition, LKQ revenue from customers in Russia and Belarus represented less than 0.3% of our total revenue in 2021. As future developments in the conflict are difficult to predict and outside of our control, it is possible that estimates underlying our financial statements may change significantly in future periods.

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 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 - See Note ~~21,~~17, "Segment and Geographic 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 cash flow available to meet future debt service obligations and working capital requirements, make strategic acquisitions, repurchase stock, and 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 March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Revenue	Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Revenue
Revenue
Cost of goods sold
Cost of goods sold
Cost of goods sold	Cost of goods sold	59.0	%	59.1	%	59.0	%	59.3	%

Gross margin	Gross margin	41.0	%	40.9	%	41.0	%	40.7	%

Gross margin

Gross margin
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	27.2	%	26.8	%	27.5	%	27.2	%
Restructuring and transaction related expenses	Restructuring and transaction related expenses	0.2	%	0.1	%	0.4	%	0.1	%
Gain on disposal of businesses		—	%	(4.6)	%	—	%	(2.3)	%
Restructuring and transaction related expenses
Restructuring and transaction related expenses

Depreciation and amortization

Depreciation and amortization

Depreciation and amortization	Depreciation and amortization	1.8	%	1.8	%	1.7	%	1.8	%
Operating income	Operating income	11.8	%	16.7	%	11.4	%	13.9	%
Operating income
Operating income
Total other expense, net	Total other expense, net	0.5	%	0.5	%	0.3	%	0.5	%
Income from continuing operations before provision for income taxes		11.3	%	16.3	%	11.0	%	13.4	%
Total other expense, net
Total other expense, net
Income before provision for income taxes
Income before provision for income taxes
Income before provision for income taxes
Provision for income taxes	Provision for income taxes	3.2	%	3.8	%	3.0	%	3.2	%
Equity in earnings of unconsolidated subsidiaries		—	%	0.1	%	0.1	%	0.1	%
Income from continuing operations		8.2	%	12.6	%	8.1	%	10.3	%
Net income from discontinued operations		—	%	—	%	—	%	0.1	%
Provision for income taxes
Provision for income taxes
Equity in (losses) earnings of unconsolidated subsidiaries
Equity in (losses) earnings of unconsolidated subsidiaries
Equity in (losses) earnings of unconsolidated subsidiaries

Net income	Net income	8.2	%	12.6	%	8.1	%	10.4	%
Less: net income attributable to continuing noncontrolling interest		—	%	—	%	—	%	—	%
Net income attributable to LKQ stockholders		8.1	%	12.6	%	8.1	%	10.4	%

Net income

Net income

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

Three Months Ended ~~June 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~June 30, 2022~~March 31, 2023

Revenue

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


		Three Months Ended June 30,				Percentage Change in Revenue
		2023		2022		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change
	Three Months Ended March 31,																				Three Months Ended March 31,								Percentage Change in Revenue
	2024																	2024					2023					Organic						Acquisition and Divestiture					Foreign Exchange					Total Change
Parts & services revenue	Parts & services revenue	$	3,259	$	3,092	4.8	%	—	%	0.6	%	5.4	%	Parts & services revenue	$	3,535	$		$	3,152		(0.3)		(0.3)		%				11.6		%			0.8		%			12.1		%
Other revenue	Other revenue	189		249		(19.4)	%	(4.3)	%	(0.2)	%	(23.9)	%	Other revenue	168		197			197			(15.1)		(15.1)		%				0.5		%			—		%			(14.6)		%
Total revenue	Total revenue	$	3,448	$	3,341	3.0	%	(0.4)	%	0.5	%	3.2	%	Total revenue	$	3,703	$		$	3,349		(1.1)		(1.1)		%				10.9		%			0.8		%			10.6		%
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 in parts and services revenue of ~~5.4%~~12.1% represented increases in segment revenue of ~~11.1% in Europe, 6.7%~~23.8% in Wholesale - North America, 5.7% in Europe, and ~~4.7%~~6.7% in ~~Self Service,~~Specialty, partially offset by a decrease of ~~13.5%~~10.5% in ~~Specialty.~~Self Service. This overall increase was driven by ~~organic parts~~an 11.6% increase due to the net impact of acquisitions and ~~services revenue growth of 4.8% (5.4% on a per day basis)~~divestitures and a ~~0.6%~~0.8% increase due to fluctuations in foreign exchange ~~rates.~~rates, partially offset by an organic parts and services revenue decrease of 0.3% (0.5% increase on a per day basis). The decrease in other revenue of ~~23.9%~~14.6% was primarily driven by a decrease in organic revenue of ~~$48~~$30 million due to unfavorable movements in precious metals ~~and scrap steel prices~~ compared to the prior year period, ~~primarily attributable to~~which resulted in a ~~$32~~$26 million decrease in ~~our~~ Self Service ~~segment~~ and a ~~$15~~$4 million decrease in ~~our~~ Wholesale - North ~~America segment.~~America. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022.~~March 31, 2023.

Cost of Goods Sold

Cost of goods sold as a percentage of revenue ~~decreased~~ increasedto ~~59.0%~~60.8% of revenue infor the three months ended ~~June 30, 2023~~March 31, 2024 from ~~59.1%~~59.0% of revenue infor the three months ended ~~June 30, 2022.~~March 31, 2023. Cost of goods sold reflects ~~decreases~~increases of ~~0.5% related to improved gross margin in our~~1.4% from Wholesale - North America, ~~segment and~~ 0.3% attributable to mix ~~primarily due to a decline in revenue in~~shift towards our lower margin segments and 0.2% from Specialty, ~~segment,~~ partially offset by ~~increases~~a decrease of ~~0.5% from our Specialty segment and~~ 0.3% from ~~our Self Service segment.~~Europe. 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 ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022.~~March 31, 2023.

Selling, General and Administrative Expenses

~~Our~~ SG&A expenses as a percentage of revenue increased to ~~27.2% in~~28.2% for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~26.8% in~~27.8% for the three months ended ~~June 30, 2022.~~March 31, 2023. The year over year increase in SG&A expense ~~increase~~ primarily reflects impacts of ~~0.4% related to mix~~0.8% in Europe and ~~0.3% in our~~0.2% from Self Service, ~~segment,~~ partially offset by a ~~0.2%~~ decrease ~~in our Europe segment.~~of 0.6% related to Wholesale - North America. 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 ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022.~~March 31, 2023.

Restructuring and Transaction Related Expenses

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


		Three Months Ended June 30,
		2023			2022			Change
	Three Months Ended March 31,
		2024
		2024
		2024								2023	Change
Restructuring expenses	Restructuring expenses	$	2	(1)	$	3	(2)	$	(1)
Transaction related expenses	Transaction related expenses	6		(3)	1		(3)	5
Restructuring and transaction related expenses	Restructuring and transaction related expenses	$	8		$	4		$	4

(1)Restructuring expenses for the three months ended ~~June 30, 2023~~March 31, 2024 primarily consisted of (i) $19 million related to our 2024 Global Restructuring plan, (ii) $6 million related to our acquisition integration plans, (iii) $2 million related to our ~~global restructuring plans.~~1 LKQ Europe plan, and (iv) $1 million related to our 2022 Global Restructuring plan.

(2)Restructuring expenses for the three months ended ~~June 30, 2022~~March 31, 2023 primarily consisted of (i) $5 million related to our 2022 Global Restructuring plan, (ii) $2 million related to our acquisition integration plans, and ~~(ii)~~(iii) $1 million related to our ~~global restructuring plans.~~1 LKQ Europe plan.

(3)Transaction related expenses for the three months ended ~~June 30,~~March 31, 2024 and 2023 ~~and June 30, 2022~~ primarily related to external costs such as legal, accounting and advisory fees related to completed and potential acquisitions (including Uni-Select transaction costs in 2023).

See Note ~~11,~~8, "Restructuring and Transaction Related Expenses" to the 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~~

During the three months ended June 30, 2022, we recorded a $155 million pretax gain ($127 million after tax) from the sale of PGW. See "Other Divestitures (Not Classified in Discontinued Operations)" in Note 2, "Discontinued Operations and Divestitures" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our gain on disposal of businesses.

Depreciation and Amortization

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

Three Months Ended June 30,
2023 2022 Change
Depreciation $ 38 $ 34 $ 4 (1)
Amortization 23 27 (4) (2)
Depreciation and amortization $ 61 $ 61 $ —


	Three Months Ended March 31,
	2024		2023		Change
Depreciation	$	44	$	36	$	8	(1)
Amortization	45		22		23		(2)
Depreciation and amortization	$	89	$	58	$	31

(1)~~The increase in depreciation~~Depreciation expense increased primarily related to an increase in capital expenditures ~~primarily~~ in ~~our Europe segment.~~the last nine months of 2023, which is impacting depreciation expense in 2024.

(2)~~The decrease~~Amortization expense increased primarily due to an increase in ~~amortization expense primarily related~~Wholesale - North America due to ~~a $3 million decrease related to software amortization.~~our acquisition of Uni-Select in August 2023.

Total Other Expense, Net

The following table summarizes Total other expense, net for the periods indicated (in millions):


		Three Months Ended June 30,
		2023		2022		Change
	Three Months Ended March 31,
		2024
		2024
		2024
Interest expense	Interest expense	$	52	$	16	$	36	(1)
Gains on foreign exchange contracts - acquisition related (2)		(23)		—		(23)
Interest expense
Interest expense										$	64		$	36		$	28		(1)
Gains on foreign exchange contracts - acquisition related									Gains on foreign exchange contracts - acquisition related	—			(23)			23			(2)
Interest income and other income, net	Interest income and other income, net	(11)		—		(11)		(3)	Interest income and other income, net	(6)		(9)		(9)	3			3		(3)	(3)
Total other expense, net	Total other expense, net	$	18	$	16	$	2

(1)Interest expense increased primarily due to (i) a ~~$20~~$27 million increase from higher outstanding debt primarily related to the permanent financing for the Uni-Select Acquisition and (ii) a $4 million increase from higher interest rates in the ~~second~~first quarter of ~~2023, (ii)~~2024, partially offset by (iii) a $6$3 million ~~increase~~decrease related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition ~~and (iii) a $9 million increase from higher outstanding debt primarily related to~~in the ~~issuance~~first quarter of ~~the U.S. Notes (2028/33).~~2023.

(2)Related to the Uni-Select Acquisition. See Note ~~3, "Uni-Select Acquisition"~~2, "Business Combinations" and Note ~~17,~~13, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

(3)The ~~increase~~decrease in Interest income and other income, net is primarily comprised of (i) a $9$5 million ~~increase~~decrease from funds received to settle an eminent domain matter in interest income, primarily related to interest income on the proceeds from the U.S. notes (2028/33) that were invested in money market funds and (ii) a $3 million increase related to a change in our fair value adjustments for equity investments not accounted for under the equity method,2023, partially offset by ~~(iii)~~(ii) individually insignificant increases which in the aggregate had a $1$2 million ~~decrease from the change in foreign currency gains and losses.~~impact.

Provision for Income Taxes

Our effective income tax rate for the three months ended ~~June 30, 2023~~March 31, 2024 was ~~28.0%~~30.7%, compared to ~~23.4%~~26.1% for the three months ended ~~June 30, 2022.~~March 31, 2023. The increase in the effective tax rate for the three months ended ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022~~March 31, 2023 is primarily attributable ~~to: (i) net favorable~~to the 4.4% unfavorable impact of discrete items, ~~representing a 2.0% rate benefit in the prior year, primarily~~mostly related to the ~~sale of PGW in~~2024 Global Restructuring Plan impairments. Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information on the second quarter of 2022, (ii) net unfavorable discrete items which impacted the rate by 0.7% in 2023, (iii) unfavorable rate effects, including non-deductible transaction costs and negative impacts on foreign tax credit availability, of 0.5% caused by Uni-Select related transaction activity, and (iv) geographic distribution of income favoring higher rate jurisdictions in 2023.impairments.

See Note ~~20,~~16, "Income Taxes" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Equity in (Losses) Earnings of Unconsolidated Subsidiaries

Equity in (losses) earnings of unconsolidated subsidiaries for the three months ended ~~June 30, 2023~~March 31, 2024 decreased by $2$5 million primarily related to ~~the negative year over year effect resulting from the divestiture of~~ a ~~Self Service investment in the second quarter of 2022 and a decline~~decrease in year over year results reported by Mekonomen, which is our largest equity method investment.

Foreign Currency 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 ~~June 30, 2022,~~March 31, 2023, the ~~Czech koruna~~pound sterling, euro and ~~euro~~Canadian dollar rates used to translate the ~~2023~~2024 statements of income increased by ~~6.9%~~4.3%, 1.2% and ~~2.3%~~0.3%, respectively, while the ~~pound sterling rate was flat and the Canadian dollar~~Czech koruna rate decreased by ~~4.9%~~4.0%. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net ~~positive~~negative effect of ~~$0.05~~$0.06 on diluted earnings per share ~~for~~relative to the ~~three months ended June 30, 2023, mostly~~prior year period primarily related to the $23 million pretax gain on ~~the~~ foreign exchange ~~forward~~ contract in the first quarter of 2023 related to the Uni-Select acquisition.

~~Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022~~

~~Revenue~~

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

Six Months Ended June 30, Percentage Change in Revenue
2023 2022 Organic Acquisition and Divestiture Foreign Exchange Total Change
Parts & services revenue $ 6,411 $ 6,196 6.4 % (1.7) % (1.2) % 3.5 %
Other revenue 386 493 (16.7) % (4.6) % (0.3) % (21.6) %
Total revenue $ 6,797 $ 6,689 4.7 % (1.9) % (1.1) % 1.6 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The increase in parts and services revenue of 3.5% represented increases in segment revenue of 7.8% in Europe, 5.2% in Wholesale - North America, and 4.8% in Self Service, partially offset by a decrease of 13.7% in Specialty. This overall increase was driven by organic parts and services revenue growth of 6.4%, partially offset by a 1.7% net reduction from acquisitions and divestitures and a 1.2% decrease due to fluctuations in foreign exchange rates. The decrease in other revenue of 21.6% was primarily driven by a decrease in organic revenue of $82 million due to unfavorable movements in precious metals and scrap steel prices compared to the prior year period, primarily attributable to a $52 million decrease in our Self Service segment and a $29 million decrease in our Wholesale - North America segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

~~Cost of Goods Sold~~

Cost of goods sold as a percentage of revenue decreased to 59.0% in the six months ended June 30, 2023 from 59.3% in the six months ended June 30, 2022. Cost of goods sold reflects decreases of 0.6% related to improved gross margin in our Wholesale - North America segment and 0.2% attributable to mix primarily due to a decline in revenue in our Specialty segment, partially offset by increases of 0.4% from our Specialty segment and 0.2% from 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 six months ended June 30, 2023 compared to the six months ended June 30, 2022.

~~Selling, General and Administrative Expenses~~

Our SG&A expenses as a percentage of revenue increased to 27.5% in the six months ended June 30, 2023 from 27.2% in the six months ended June 30, 2022. The SG&A expense increase primarily reflects impacts of 0.3% related to mix and 0.2% in our Self Service segment, partially offset by a 0.4% decrease 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 six months ended June 30, 2023 compared to the six months ended June 30, 2022.

~~Restructuring and Transaction Related Expenses~~

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

Six Months Ended June 30,
2023 2022 Change
Restructuring expenses $ 10 (1) $ 3 (2) $ 7
Transaction related expenses 16 (3) 4 (3) 12
Restructuring and transaction related expenses $ 26 $ 7 $ 19

~~(1)~~Restructuring expenses for the six months ended June 30, 2023 primarily consisted of (i) $7 million related to our global restructuring plans, (ii) $2 million related to our acquisition integration plans and (iii) $1 million related to our 1 LKQ Europe plan.

~~(2)~~Restructuring expenses for the six months ended June 30, 2022 primarily consisted of (i) $2 million related to our acquisition integration plans and (ii) $1 million related to our global restructuring plans.

~~(3)~~Transaction related expenses for the six months ended June 30, 2023 and June 30, 2022 primarily related to external costs such as legal, accounting and advisory fees related to completed and potential acquisitions (including Uni-Select transaction costs in 2023).

See Note 11, "Restructuring and Transaction Related Expenses" to the 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~~

During the six months ended June 30, 2022, we recorded a $155 million pretax gain ($127 million after tax) from the sale of PGW. See "Other Divestitures (Not Classified in Discontinued Operations)" in Note 2, "Discontinued Operations and Divestitures" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our gain on disposal of businesses.

~~Depreciation and Amortization~~

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

Six Months Ended June 30,
2023 2022 Change
Depreciation $ 74 $ 70 $ 4 (1)
Amortization 45 50 (5) (2)
Depreciation and amortization $ 119 $ 120 $ (1)

~~(1)Depreciation expense increased primarily related to an increase in capital expenditures, primarily in our Europe segment.~~

~~(2)~~Amortization expense decreased primarily due to a $3 million decrease related to software amortization and amortization from acquired intangibles with the remaining decrease due to individually immaterial factors.

~~Total Other Expense, Net~~

~~The following table summarizes Total other expense, net for the periods indicated (in millions):~~

Six Months Ended June 30,
2023 2022 Change
Interest expense $ 88 $ 32 $ 56 (1)
Gains on foreign exchange contracts - acquisition related (2)
(46) — (46)
Interest income and other income, net (20) (1) (19) (3)
Total other expense, net $ 22 $ 31 $ (9)

~~(1)~~Interest expense increased primarily due to (i) a $37 million increase from higher interest rates in the first half of 2023, (ii) a $9 million increase related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition, and (iii) a $9 million increase from higher outstanding debt primarily related to the issuance of the U.S. Notes (2028/33).

~~(2)~~Related to the Uni-Select Acquisition. See Note 3, "Uni-Select Acquisition" and Note 17, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

~~(3)~~The increase in Interest income and other income, net is primarily comprised of (i) a $11 million increase related to interest income, mostly related to the proceeds from the U.S. Notes (2028/33) that were invested in money market funds, (ii) a $5 million increase from funds received to settle an eminent domain matter in 2023, (iii) a $2 million change in our fair value adjustments for equity investments not accounted for under the equity method, and (iv) individually insignificant increases which in the aggregate had a $1 million impact.

~~Provision for Income Taxes~~

Our effective income tax rate for the six months ended June 30, 2023 was 27.1%, compared to 24.1% for the six months ended June 30, 2022. The increase in the effective tax rate for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 is primarily attributable to: (i) net favorable discrete items representing a 1.2% rate benefit in the prior year, primarily related to the sale of PGW in the second quarter of 2022, (ii) unfavorable rate effects, including non-deductible transaction costs and negative impacts on foreign tax credit availability, of 0.5% caused by Uni-Select related transaction activity, and (iii) geographic distribution of income favoring higher rate jurisdictions in 2023.

~~See Note 20, "Income Taxes" to the 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~~

Equity in earnings of unconsolidated subsidiaries for the six months ended June 30, 2023 decreased by $1 million primarily related to a decline in year over year results reported by Mekonomen, which is our largest equity method investment.

~~Foreign Currency Impact~~

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the six months ended June 30, 2022, the pound sterling and euro rates used to translate the 2023 statements of income decreased by5.0% and 1.1%, respectively. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net positive effect of $0.10 on diluted earnings per share for the six months ended June 30, 2023, mostly related to the $46 million pretax gain on the foreign exchange forward contract related to the Uni-Select acquisition.

Results of Operations—Segment Reporting

We have four reportable segments: Wholesale - North ~~America, Europe, Specialty~~America; Europe; Specialty; and Self Service.

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 millions):


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended June 30,								Six Months Ended June 30,
		2023		% of Total Segment Revenue		2022		% of Total Segment Revenue		2023		% of Total Segment Revenue		2022		% of Total Segment Revenue
Third Party Revenue	Third Party Revenue
Third Party Revenue
Third Party Revenue
Wholesale - North America
Wholesale - North America
Wholesale - North America	Wholesale - North America	$	1,199			$	1,144			$	2,428			$	2,345
Europe	Europe	1,638				1,477				3,193				2,965
Europe
Europe
Specialty
Specialty
Specialty	Specialty	442				512				838				972
Self Service	Self Service	169				208				338				407
Self Service
Self Service
Total third party revenue
Total third party revenue
Total third party revenue	Total third party revenue	$	3,448			$	3,341			$	6,797			$	6,689
Total Revenue	Total Revenue
Total Revenue
Total Revenue
Wholesale - North America
Wholesale - North America
Wholesale - North America	Wholesale - North America	$	1,199			$	1,144			$	2,428			$	2,345
Europe	Europe	1,638				1,477				3,193				2,965
Europe
Europe
Specialty
Specialty
Specialty	Specialty	443				513				840				974
Self Service	Self Service	169				208				338				407
Self Service
Self Service
Eliminations
Eliminations
Eliminations	Eliminations	(1)				(1)				(2)				(2)
Total revenue	Total revenue	$	3,448			$	3,341			$	6,797			$	6,689
Total revenue
Total revenue
Segment EBITDA
Segment EBITDA
Segment EBITDA	Segment EBITDA
Wholesale - North America	Wholesale - North America	$	248	20.6	%	$	214	18.7	%	$	500	20.6	%	$	432	18.4	%
Wholesale - North America
Wholesale - North America
Europe
Europe
Europe	Europe	188		11.5	%	160		10.8	%	339		10.6	%	291		9.8	%
Specialty	Specialty	42		9.5	%	69		13.4	%	73		8.7	%	127		13.1	%
Specialty
Specialty
Self Service
Self Service
Self Service	Self Service	7		4.1	%	32		15.3	%	29		8.7	%	72		17.6	%
Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding.
Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding.
Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding.

The key measure of segment profit or loss reviewed by our chief operating decision maker, our Chief Executive Officer, is Segment EBITDA. We use Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net income excluding net income and loss attributable to ~~LKQ stockholders excluding~~noncontrolling interest; income and loss from discontinued operations; ~~depreciation,~~depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and 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 fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict and related ~~sanctions (including provisions for and subsequent adjustments to reserves for asset recoverability and expenditures to support our employees and their families).~~sanctions. See Note ~~21,~~17, "Segment and Geographic Information" to the 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.

3729

Three Months Ended ~~June 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~June 30, 2022~~March 31, 2023

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):


		Three Months Ended June 30,				Percentage Change in Revenue
	Three Months Ended March 31,																					Three Months Ended March 31,										Percentage Change in Revenue
Wholesale - North America	Wholesale - North America	2023		2022		Organic			Acquisition and Divestiture			Foreign Exchange		Total Change		Wholesale - North America	2024			2023					Organic								Acquisition and Divestiture						Foreign Exchange						Total Change
Parts & services revenue	Parts & services revenue	$	1,121	$	1,050	8.3	%	(1)	(1.3)	%	(3)	(0.3)	%	6.7	%	Parts & services revenue	$	1,422	$	$	1,148		(3.3)			(3.3)		%	(1)		27.1		%	(3)		—	%					23.8	%
Other revenue	Other revenue	78		94		(16.5)	%	(2)	0.1	%		(0.3)	%	(16.7)	%	Other revenue	78		81		81			(4.9)			(4.9)		%	(2)		1.1		%				—		%				(3.8)		%
Total third party revenue	Total third party revenue	$	1,199	$	1,144	6.3	%		(1.2)	%		(0.3)	%	4.7	%	Total third party revenue	$	1,500	$	$	1,229		(3.4)			(3.4)		%						25.4	%					—	%					22.0	%
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 8.3%~~decreased 3.3% for the three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period, primarily driven by ~~pricing initiatives~~decreased aftermarket collision volumes which ~~focused on offsetting inflation on input costs and a net volume increase. Aftermarket collision parts volumes increased year over year due~~were negatively impacted by lower repairable claims, which we believe is primarily attributable to reduced pressures on our supply chain, with the improved aftermarket inventory availability contributing to a year over year decrease in recycled parts volumes. Aftermarket collision parts volumes also grew as a result of the continued rollout of State Farm's aftermarket parts program, which began on a trial basis in June 2022 and has subsequently been expanded.comparatively warmer weather.

(2)Other organic revenue decreased ~~16.5%~~4.9%, or ~~$15~~$4 million, year orover year primarily related to (i) ~~an $11~~a $10 milliondecrease in revenue from precious metals ~~(platinum, palladium, and rhodium)~~ due ~~to lower prices, (ii) a $3 milliondecrease in revenue from scrap steel related~~ to lower prices, partially offset by ~~higher volumes and (iii)~~(ii) a $2$5 million ~~decrease~~increase in revenue from other scrap (e.g., aluminum) and cores due to ~~lower~~higher prices ~~partially offset by~~and volumes and (iii) a $1 million increase in revenue from scrap steel due to higher volumes.

(3)Acquisition and divestiture parts and services revenue was ~~a net decrease~~an increase of ~~$15~~$312 million, or 27.1%, primarily due to the ~~divestiture~~acquisition of ~~our PGW aftermarket glass business~~Uni-Select in the ~~second~~third quarter of ~~2022.~~2023. See~~"Other Divestitures (Not Classified in Discontinued Operations)" in~~ Note 2, ~~"Discontinued Operations and Divestitures"~~"Business Combinations" 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~~acquisition of ~~PGW.~~Uni-Select.

Segment EBITDA

Segment EBITDA ~~increased~~ ~~$34~~decreased $8 million, or 3.1%, ~~or 15.4%, in~~for the three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period, ~~despite the $3 million negative year over year effect~~which includes a positive impact related to the ~~PGW business, which we divested~~acquisition of Uni-Select in the ~~second~~third quarter of ~~2022.~~2023 (Uni-Select increases Segment EBITDA dollars but dilutes the Segment EBITDA percentage). The ~~increase~~decrease is primarily attributable to ~~higher prices on parts, improved~~lower aftermarket volumes, ~~productivity initiatives helping to offset~~a decrease in salvage margins and continued inflationary ~~pressures related to product cost, and lower freight costs. The increase was partially offset by a net decrease attributable to precious metals and scrap steel prices.~~pressures. We estimate that precious metals and scrap steel prices had a net unfavorable effect of $7 million, or 0.4%, 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 Wholesale - North America segment:


Wholesale - North America	Wholesale - North America	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended June 30, 2022		18.7	%
Segment EBITDA for the three months ended March 31, 2023
Segment EBITDA for the three months ended March 31, 2023
Segment EBITDA for the three months ended March 31, 2023
Increase (decrease) due to:	Increase (decrease) due to:
Increase (decrease) due to:
Increase (decrease) due to:

Change in gross margin

Change in gross margin

Change in gross margin	Change in gross margin	1.5	%	(1)		(5.3)	%	(1)
Change in segment operating expenses	Change in segment operating expenses	0.4	%	(2)	Change in segment operating expenses		1.5		%	(2)

Segment EBITDA for the three months ended June 30, 2023		20.6	%
Change in other income and expenses, net					Change in other income and expenses, net		(0.4)		%	(3)
Segment EBITDA for the three months ended March 31, 2024
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 ~~increase~~decrease in gross margin of ~~1.5%~~5.3% was ~~primarily~~ driven by ~~(i)~~the dilutive nature of the acquisition of Uni-Select, which changed the segment's product mix to reflect a ~~0.9% benefit from~~greater percentage of paint, body and equipment and maintenance product lines. These product lines have a lower ~~inbound freight costs, (ii) a 0.2% mix benefit resulting from~~gross margin structure than our other wholesale product lines. The year over year effect will be noted through the ~~PGW divestiture~~third quarter, after which the impact will be annualized. Additionally, gross margin was negatively affected by decreases in salvage margins tied to softening salvage revenue and the ~~second quarter~~effects of ~~2022, and (iii) a 0.4% benefit from other factors, including pricing and productivity initiatives to offset inflationary pressures related to product cost.~~higher car costs.

(2) The decrease in segment operating expenses as a percentage of revenue primarily reflects favorable impacts of (i) ~~a favorable impact of 0.8%~~0.6% from higher charitable contributions in the prior year period, (ii) 0.5% from decreased freight, vehicle, and fuel costs ~~partially offset by (ii)~~and (iii) 0.4% from ~~higher personnel costs primarily driven by inflation in salaries and wages and increased travel expenses.~~lower incentive compensation.

~~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 June 30, Percentage Change in Revenue
Europe 2023 2022 Organic Acquisition and Divestiture
Foreign Exchange (2)
Total Change
Parts & services revenue $ 1,633 $ 1,470 8.5 % (1) 0.9 % 1.6 % 11.1 %
Other revenue 5 7 (24.1) % (0.2) % (1.9) % (26.2) %
Total third party revenue $ 1,638 $ 1,477 8.4 % 0.9 % 1.6 % 10.9 %
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 June~~ 30 2023 increased by 8.5% (9.8% on a per day basis), primarily driven by pricing initiatives across all geographies to offset increased costs resulting from inflationary pressures and to a lesser extent, higher volumes.

~~(2)~~Exchange rates increased our revenue growth by $24 million, or 1.6%, primarily due to the weaker U.S. dollar against the euro and Czech koruna for the three months ended June 30, 2023 relative to the prior year period.

~~Segment EBITDA~~

~~Segment EBITDA increased $28 million, or 18.0%, in the three months ended~~ ~~June 30, 2023~~ ~~compared to the prior year period.~~ ~~On a constant currency basis (i.e., excluding translation impact), Segment EBITDA~~ ~~increased by $27 million, or 17.4%, co~~mpared to the prior year period. The increase in dollar terms is attributable to organic revenue growth of $124 million and margin expansion from favorable leverage effects and productivity initiatives. 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 June 30, 2023.

~~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 June 30, 2022 10.8 %
Increase (decrease) due to:
Change in gross margin 0.2 % (1)
Change in segment operating expenses 0.5 % (2)
Change in other expense, net (0.1) %

Segment EBITDA for the three months ended June 30, 2023 11.5 %
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 customer price increases and other margin improvement initiatives to offset increased costs resulting from inflationary pressures.

~~(2)~~ The decrease in segment operating expenses as a percentage of revenue reflects favorable impacts of (i) 0.3% from personnel costs due to improved leverage on higher revenues and productivity initiatives, (ii) 0.3% from freight costs due to favorable pricing in the current year, partially offset by (iii) other individually immaterial factors representing a 0.1% unfavorable impact 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 June 30, Percentage Change in Revenue
Specialty 2023 2022
Organic (1)
Acquisition and Divestiture Foreign Exchange Total Change
Parts & services revenue $ 442 $ 512 (12.9) % (0.2) % (0.5) % (13.5) %
Other revenue — — — % — % — % — %
Total third party revenue $ 442 $ 512 (12.9) % (0.2) % (0.5) % (13.5) %
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 June 30, 2023 decreased by 12.9% primarily due to demand softness in the recreational vehicle ("RV") product line, as RV unit retail sales and wholesale shipments have declined year over year.

~~Segment EBITDA~~

Segment EBITDA decreased $27 million, or 38.8%, in the three months ended June 30, 2023 compared to the prior year period primarily due to the organic revenue decline and the negative leverage effect 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 June 30, 2022 13.4 %
Increase (decrease) due to:
Change in gross margin (3.7) % (1)
Change in segment operating expenses (0.2) % (2)
Segment EBITDA for the three months ended June 30, 2023 9.5 %
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 primarily was driven by (i) product channel mix toward lower margin auto and marine products and (ii) increased competitive pricing due to broader availability of inventory among competitors in the market.

~~(2)~~ ~~The increase in segment operating expenses as a percentage of revenue was due to a negative leverage effect as operating expenses decreased at a lower rate than the decline in organic revenue.~~

~~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 June 30, Percentage Change in Revenue
Self Service 2023 2022 Organic
Acquisition and Divestiture (3)
Foreign Exchange Total Change
Parts & services revenue $ 63 $ 60 4.7 % (1) — % — % 4.7 %
Other revenue 106 148 (20.9) % (2) (7.3) % — % (28.3) %
Total third party revenue $ 169 $ 208 (13.6) % (5.2) % — % (18.8) %
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 increased 4.7% for the three months ended June 30, 2023 compared to the prior year period, primarily driven by pricing initiatives which focused on offsetting inflation on input costs resulting from greater competition for vehicles.

~~(2)~~Other organic revenue decreased 20.9%, or $32 million, year over year due to (i) a $21 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, (ii) a $12 million decrease in revenue from scrap steel related to lower prices and slightly lower volumes, partially offset by (iii) a $1 million increase in revenue from other scrap (including aluminum) and cores primarily due to higher volumes partially offset by lower prices.

(3)~~Acquisition and divestiture revenue was a decrease of $11 million, or 5.2% due to the divestiture of a business in the third quarter of 2022.~~

~~Segment EBITDA~~

Segment EBITDA decreased $25 million, or 78.5%, in the three months ended June 30, 2023 compared to the prior year period. The decrease is driven by the decline in revenue due to unfavorable movements in commodity prices compared to the prior year period and gross margin compression as vehicle procurement costs have decreased at a lesser rate than commodity prices. In addition, decreases in precious metals prices contributed an estimated $15 million decline in Segment EBITDA relative to the three months ended June 30, 2022. During the three months ended June 30, 2023, scrap steel prices had an $2 million unfavorable impact on Segment EBITDA, compared to a $3 million favorable impact during the three months ended June 30, 2022. The unfavorable impacts for the three months ended June 30, 2023 resulted from the 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.

~~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 June 30, 2022 15.3 %
Increase (decrease) due to:
Change in gross margin (6.0) % (1)
Change in segment operating expenses (5.1) % (2)
Change in other expense, net (0.1) %
Segment EBITDA for the three months ended June 30, 2023 4.1 %
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 primarily reflects (i) an unfavorable impact of 3.7% resulting from movements in metals prices and (ii) an unfavorable impact resulting from vehicle procurement costs decreasing at a lesser rate than commodity prices.

~~(2)~~ The increase in segment operating expenses as a percentage of revenue reflects (i) a negative leverage effect of 6.2% from decreases in metals revenue partially offset by (ii) other individually immaterial factors representing a 1.1% favorable impact in the aggregate.

~~Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022~~

~~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):~~

Six Months Ended June 30, Percentage Change in Revenue
Wholesale - North America 2023 2022 Organic Acquisition and Divestiture Foreign Exchange Total Change
Parts & services revenue $ 2,269 $ 2,156 11.4 % (1) (5.9) % (3) (0.3) % 5.2 %
Other revenue 159 189 (15.4) % (2) — % (0.3) % (15.7) %
Total third party revenue $ 2,428 $ 2,345 9.3 % (5.4) % (0.3) % 3.5 %
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 increased 11.4% for the six months ended June 30, 2023 compared to the prior year period, primarily driven by pricing initiatives which focused on offsetting inflation on input costs and a net volume increase. Aftermarket collision parts volumes increased year over year due to reduced pressures on our supply chain, with the improved aftermarket inventory availability contributing to a year over year decrease in recycled parts volumes. Aftermarket collision parts volumes also grew as a result of the continued rollout of State Farm's aftermarket parts program, which began on a trial basis in June 2022 and has subsequently been expanded.

~~(2)Other organic revenue decreased 15.4%, or $29 million,~~primarily related to (i) a $23 million decrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, (ii) a $4 million decrease in revenue from scrap steel related to lower prices, partially offset by higher volumes and (iii) a~~$3 million decrease in revenue from other scrap (e.g., aluminum) and cores due to lower prices, partially offset by higher volumes.~~

~~(3)Acquisition and divestiture revenue was a net decrease of $128 million primarily due to the divestiture of our PGW aftermarket glass business in the second quarter of 2022. See~~"Other Divestitures (Not Classified in Discontinued Operations)" in Note 2, "Discontinued Operations and Divestitures" 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 $68 million, or 15.5%, in the six months ended June 30, 2023 compared to the prior year period, despite the $19 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, improved aftermarket volumes, productivity initiatives helping to offset inflationary pressures related to product cost, and lower freight costs. The increase was partially offset by a net decrease attributable to precious metals and scrap steel. We estimate that precious metals and scrap steel pricing had a net unfavorable ~~effect of $15 million, or 0.4%, 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:~~

Wholesale - North America Percentage of Total Segment Revenue
Segment EBITDA for the six months ended June 30, 2022 18.4 %
Increase (decrease) due to:
Change in gross margin 1.7 % (1)
Change in segment operating expenses 0.2 % (2)
Change in other income and expenses, net 0.3 % (3)
Segment EBITDA for the six months ended June 30, 2023 20.6 %
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 1.7% was driven by (i) a 0.9% benefit from lower inbound freight costs, (ii) a 0.4% mix benefit resulting from the PGW divestiture in the second quarter of 2022, and (iii) a 0.4% benefit from other factors, including pricing and productivity initiatives to offset inflationary pressures related to product cost.

~~(2)~~The decrease in segment operating expenses as a percentage of revenue reflects the favorable impact of (i) 0.8% from decreased freight, vehicle, and fuel costs, partially offset by (ii) 0.4% from higher charitable contributions, and (iii) other individually immaterial factors representing a 0.2% unfavorable impact in the aggregate.

~~(3)The favorable~~ impact in other income and expenses, net was primarily related to funds received to settle an eminent domain matter in 2023.

Europe

Third Party Revenue

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

Six Months Ended June 30, Percentage Change in Revenue
Europe 2023 2022 Organic Acquisition and Divestiture
Foreign Exchange (2)
Total Change
Parts & services revenue $ 3,181 $ 2,951 9.1 % (1) 0.8 % (2.2) % 7.8 %
Other revenue 12 14 (12.7) % — % (5.0) % (17.6) %
Total third party revenue $ 3,193 $ 2,965 9.0 % 0.8 % (2.2) % 7.7 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Three Months Ended March 31,				Percentage Change in Revenue
Europe	2024		2023		Organic			Acquisition and Divestiture (2)		Foreign Exchange (3)		Total Change
Parts & services revenue	$	1,637	$	1,548	2.7	%	(1)	1.4	%	1.7	%	5.7	%
Other revenue	7		7		8.9	%		—	%	1.3	%	10.3	%
Total third party revenue	$	1,644	$	1,555	2.7	%		1.4	%	1.7	%	5.7	%
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 ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 increased by ~~9.1%~~2.7% (4.4% on a per day basis), primarily driven by increased volumes and, to a lesser extent, pricing initiatives ~~across all geographies~~ to offset increased costs resulting from inflationary ~~pressures and to a lesser extent, higher volumes.~~pressures.

(2)Acquisition and divestiture revenue was an increase of $21 million, or 1.4%, related to our acquisition of five wholesale businesses from the beginning of 2023 through the one-year anniversary of the acquisition dates.

(3)Exchange rates ~~decreased~~increased our revenue growth by ~~$64~~$26 million, or ~~2.2%~~1.7%, primarily due to the ~~stronger~~weaker U.S. dollar against the euro and pound sterling, partially offset by the Czech koruna for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 relative to the prior year period.

Segment EBITDA

Segment EBITDA ~~increased $48~~decreased $8 million, or ~~16.6%~~5.3%, infor the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period. On a constant currency basis (i.e., excluding translation impact), Segment EBITDA ~~increased~~decreased by ~~$56~~$11 million, or ~~19.1%~~7.2%, ~~compared~~compared to the prior year period. The ~~increase~~decrease in dollar terms is mainly attributable to the negative impact of higher operating expenses primarily related to increased personnel costs that more than offset the effects of organic revenue growth of ~~$268 million and margin expansion from favorable leverage effects and productivity initiatives.~~$42 million. 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 ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024.

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 six months ended June 30, 2022 9.8 %
Increase (decrease) due to:
Change in gross margin 0.1 % (1)
Change in segment operating expenses 0.8 % (2)
Segment EBITDA for the six months ended June 30, 2023 10.6 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


Europe	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended March 31, 2023	9.7	%
Increase (decrease) due to:
Change in gross margin	0.1	%	(1)
Segment EBITDA adjustment: restructuring expense - cost of goods sold	0.5	%	(1)
Change in segment operating expenses	(1.6)	%	(2)

Segment EBITDA for the three months ended March 31, 2024	8.7	%
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 was primarily attributable to favorable ~~impacts of year to date customer price increases~~pricing, procurement, and ~~other margin improvement~~productivity initiatives to offset ~~increased costs resulting~~difficult macro-economic conditions arising from inflationary pressures. Additionally, reported gross margin includes a 0.5% reduction related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan. These costs are excluded from the calculation of Segment EBITDA. See Note 8, "Restructuring and Transaction Related Expenses" and Note 17, "Segment and Geographic Information" for further information.

(2)The ~~decrease~~increase in segment operating expenses as a percentage of revenue reflects ~~favorable~~unfavorable impacts of (i) ~~0.5%~~1.2% from increased personnel costs mainly due to ~~improved leverage on higher revenues~~wage inflation in Germany and ~~productivity~~Benelux, (ii) 0.3% from professional fees related to several strategic central and regional information technology initiatives, (iii) 0.2% from increased outbound freight and ~~(ii)~~logistics costs, and (iv) other individually immaterial factors representing a ~~0.5% favorable~~0.4% unfavorable impact in the aggregate, partially offset by ~~(iii) an unfavorable~~(v) a favorable impact of ~~0.2%~~0.5% due to ~~higher facility~~lower energy and utilities costs ~~primarily due~~compared to ~~inflationary pressures.~~the prior year period across all geographies.

Specialty

Third Party Revenue

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

Six Months Ended June 30, Percentage Change in Revenue
Specialty 2023 2022
Organic (1)
Acquisition and Divestiture Foreign Exchange Total Change
Parts & services revenue $ 838 $ 972 (13.2) % (0.1) % (0.5) % (13.7) %
Other revenue — — — % — % — % — %
Total third party revenue $ 838 $ 972 (13.2) % (0.1) % (0.5) % (13.7) %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Three Months Ended March 31,				Percentage Change in Revenue
Specialty	2024		2023		Organic (1)		Acquisition and Divestiture (2)		Foreign Exchange		Total Change
Parts & services revenue	$	422	$	396	(1.4)	%	8.1	%	—	%	6.7	%
Other revenue	—		—		—	%	—	%	—	%	—	%
Total third party revenue	$	422	$	396	(1.4)	%	8.1	%	—	%	6.7	%
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 ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024 decreased by ~~13.2%~~1.4% primarily due to demand softness in the RVrecreational vehicle ("RV") product line, as RV unit retail sales ~~and wholesale shipments~~ have declined year over year.

(2)Acquisition and divestiture revenue was a net increase of $32 million, or 8.1%, primarily related to our acquisition of one Specialty business in 2023.

Segment EBITDA

Segment EBITDA decreased ~~$54~~$4 million, or ~~42.2%~~13.2%, infor the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period primarily due to the organic revenue decline and the ~~negative effect of inflation on overhead expenses.~~decline in gross margin as explained below.

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 six months ended June 30, 2022 13.1 %
Increase (decrease) due to:
Change in gross margin (3.5) % (1)
Change in segment operating expenses (0.9) % (2)
Segment EBITDA for the six months ended June 30, 2023 8.7 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


Specialty	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended March 31, 2023	7.9	%
Increase (decrease) due to:
Change in gross margin	(1.7)	%	(1)
Change in segment operating expenses	0.1	%	(2)
Change in other income and expenses, net	0.1	%
Segment EBITDA for the three months ended March 31, 2024	6.4	%
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 primarily was driven by ~~(i) product channel mix toward lower margin auto and marine products and (ii) increased competitive pricing due~~higher discounts to ~~broader availability of inventory among competitors in the market.~~help maintain sales volume.

(2) The ~~increase~~decrease in segment operating expenses as a percentage of revenue was due to individually immaterial factors representing a negative leverage effect as operating expenses decreased at a lower rate than the decline in organic revenue. The major contributing expense category was facility expenses (0.3%) with all other operating expense categories0.1% favorable impact in the ~~aggregate contributing to the remaining 0.6%.~~aggregate.

Self Service

Third Party Revenue

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

Six Months Ended June 30, Percentage Change in Revenue
Self Service 2023 2022 Organic
Acquisition and Divestiture (3)
Foreign Exchange Total Change
Parts & services revenue $ 123 $ 117 4.8 % (1) — % — % 4.8 %
Other revenue 215 290 (17.8) % (2) (7.8) % — % (25.6) %
Total third party revenue $ 338 $ 407 (11.3) % (5.6) % — % (16.9) %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Three Months Ended March 31,				Percentage Change in Revenue
Self Service	2024		2023		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	$	54	$	60	(10.5)	%	(1)	—	%	—	%	(10.5)	%
Other revenue	83		109		(24.2)	%	(2)	—	%	—	%	(24.1)	%
Total third party revenue	$	137	$	169	(19.3)	%		—	%	—	%	(19.3)	%
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 4.8%~~decreased 10.5% for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period, primarily driven by ~~pricing initiatives~~lower retail volumes from reduced admissions, which ~~focused on offsetting inflation on input costs resulting from greater competition for vehicles.~~were impacted by adverse weather conditions (primarily in California).

(2)Other organic revenue decreased ~~17.8%~~24.2%, or ~~$52~~$26 million, year over year primarily due to (i) ~~a $38 milliondecrease in revenue from precious metals (platinum, palladium, and rhodium) due to lower prices, (ii)~~ a $17 million decrease in revenue from ~~scrap steel related~~precious metals due to lower prices and ~~slightly~~ lower volumes ~~partially offset by (iii)~~and (ii) a $3$9 million ~~increase~~decrease in revenue from ~~other~~ scrap ~~(including aluminum) and cores~~steel primarily related to ~~higher~~lower volumes ~~partially offset by~~and slightly lower prices.

~~(3)Acquisition and divestiture revenue was a decrease of $23 million, or 5.6% due to the divestiture of a business in the third quarter of 2022.~~

Segment EBITDA

Segment EBITDA decreased ~~$43~~$6 million ~~or 59.1%, in~~for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period. The decrease is driven by the decline in revenue due to unfavorable movements in commodity prices and lower volumes compared to the prior year period, ~~and gross margin compression as~~partially offset by improved vehicle procurement costs ~~have decreased at a lesser rate than commodity prices. In addition, decreases~~and improvements in operational productivity. Decreases in precious metals prices contributed an estimated ~~$30~~$8 million decline in Segment EBITDA relative to the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. Net sequential changes in scrap steel prices ~~partially offset~~had a negative year over year effect as the ~~impact of~~favorability in the ~~decline~~current year was lower than in ~~precious metals prices.~~the prior year. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, scrap steel prices had ~~an $9~~a $4 million favorableimpact on Segment EBITDA, compared to ~~a $5~~an $11 million favorable impact during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. The favorable impacts for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 resulted from the increase 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.

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 six months ended June 30, 2022 17.6 %
Increase (decrease) due to:
Change in gross margin (3.9) % (1)
Change in segment operating expenses (5.0) % (2)
Segment EBITDA for the six months ended June 30, 2023 8.7 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


Self Service	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended March 31, 2023	13.2	%
Increase (decrease) due to:
Change in gross margin	2.6	%	(1)
Change in segment operating expenses	(4.1)	%	(2)
Change in other income and expenses, net	0.1	%

Segment EBITDA for the three months ended March 31, 2024	11.7	%
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 ~~reflects an unfavorable impact resulting from~~is attributable to improvements in vehicle procurement costs, ~~decreasing at a lesser rate~~which more than ~~commodity~~offset the negative effects from lower commodities prices.

(2)The increase in segment operating expenses as a percentage of revenue reflects (i) a negative leverage effect of ~~5.3%~~5.2% from decreases in metals revenue, partially offset by (ii) other individually immaterial factors representing a ~~0.3%~~1.1% favorableimpact in the aggregate.

Liquidity and Capital Resources

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

Adjusted(7)
Adjusted(5)
June 30, 2023 June 30, 2023 December 31, 2022 December 31, 2022
Cash and cash equivalents $ 519 $ 1,904 (3) $ 278 $ 278
Total debt 2,645 (4) 4,030 (4) 2,662 (6) 2,662 (4)
Current maturities (1)
579 579 34 34
Capacity under credit facilities (2)
2,000 2,000 2,000 3,150
Availability under credit facilities (2)
700 700 645 1,295
Total liquidity (cash and cash equivalents plus availability under credit facilities) 1,219 2,604 (3) 923 1,573

~~(1)~~ ~~Debt amounts reflect the gross values to be repaid in the next 12 months (excluding immaterial amounts of debt issuance~~ ~~costs~~ ~~as of June 30, 2023 and December 31, 2022).~~

~~(2)~~ ~~Capacity under credit facilities includes our revolving credit facilities, and availability under credit facilities is reduced by our outstanding letters of credit.~~

~~(3)~~ ~~Includes $1,385 million of net proceeds from the issuance of senior notes related to the Uni-Select Acquisition.~~

~~(4)~~ ~~Debt amounts reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discount of $30 million and$6 million as of June 30, 2023 and December 31, 2022, respectively).~~

~~(5)~~ Amounts presented represent the termination of the Prior Credit Agreement and inclusion of the Senior Unsecured Credit Agreement as if both were in effect as of December 31, 2022. See Note 16, "Long-Term Obligations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

~~(6)~~ ~~Debt amount presented above reflects the gross values to be repaid (excluding debt issuance costs of~~ ~~$13 million~~ ~~as of December 31, 2022).~~

~~(7)~~ Amounts presented exclude $1,385 million of cash balances internally designated to be used in conjunction with completing the Uni-Select Acquisition and the corresponding impact on total debt. See Note 3, "Uni-Select Acquisition" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

We assess our liquidity and capital resources 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 revolving 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, term loans, and senior notes. We currently believe we have sufficient access to capital markets to support our future growth objectives.

AsThe following table summarizes liquidity data as of ~~June 30, 2023, we had debt outstanding and additional available sources of financing as follows:~~the dates indicated (in millions):

•~~Senior unsecured credit facilities, composed of term loans totaling $500 million (all of which was outstanding at June 30, 2023) and~~ ~~$2,000 million~~ in available revolving credit ($1,226 million outstanding at June 30, 2023), bearing interest at variable rates, with availability reduced by $74 million of amounts outstanding under letters of credit

•~~U.S. Notes (2028) totaling $800 million, maturing in June 2028 and bearing interest at a 5.75% fixed rate~~

•~~U.S. Notes (2033) totaling $600 million, maturing in June 2033 and bearing interest at a 6.25% fixed rate with a special mandatory redemption clause.~~ See Note 16, "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 related to the special mandatory redemption clause.

•~~Euro Notes (2024) totaling $545 million (€500 million), maturing in April 2024 and bearing interest at a 3.875% fixed rate~~

•~~Euro Notes (2028) totaling $273 million (€250 million), maturing in April 2028 and bearing interest at a 4.125% fixed rate~~


	March 31, 2024		December 31, 2023
Capacity under revolving credit facilities	$	2,000	$	2,000
Less: Revolving credit facilities borrowings	640		914
Less: Letters of credit	114		110
Availability under credit revolving facilities	1,246		976
Add: Cash and cash equivalents	344		299
Total liquidity	$	1,590	$	1,275

We had ~~approximately~~ $~~700~~1,246 million available under our revolving credit facilities in place as of ~~June 30, 2023~~March 31, 2024. Combined with ~~$1,904~~$344 millionof cash and cash equivalents at ~~June 30, 2023,~~March 31, 2024, we had ~~approximately $2,604~~$1,590 million in available liquidity, an increase of ~~$1,031~~$315 million from our available liquidity as of December 31, ~~2022,~~2023, primarily as a result of ~~the net~~reducing our revolving credit facilities borrowings by $274 million with proceeds ~~received~~ from the ~~issuance of the U.S. Notes (2028/33) reserved for completing the Uni-Select transaction and held~~senior notes offering in ~~a money market account, partially offset by reducing our overall credit facility capacity by $650 millionafter entering into the~~ ~~Senior Unsecured Credit Agreement~~March 2024. ~~Excluding the cash balances~~ ~~internally designated to be used in conjunction with completing the Uni-Select Acquisition, we had $519 millionof cash and cash equivalents at June 30, 2023 bringing available liquidity to approximately $1,219 million, a decrease of $354 million from our available liquidity as of~~ ~~December 31, 2022 primarily due to the reduction in the size of our overall credit facility by $650 million in January.~~

~~The Uni-Select Acquisition is expected to close on or around August 1, 2023.~~ As of March 31, 2024 we had $4,287 million~~June 30, 2023, we have~~total debt outstanding and $88 millioncurrent debt, including the following ~~arrangements in place to finance the transaction:~~senior debt (in millions):


		March 31, 2024
	Maturity Date	Interest Rate			Amount Outstanding
Senior Unsecured Credit Agreement:
Term loan payable	January 2026	6.81	%		$	500
Revolving credit facilities	January 2028	6.58	%	(1)	640

Senior Unsecured Term Loan Agreement:
Term loan payable (CAD 700 million)	July 2026	6.67	%		517

Unsecured Senior Notes:
U.S. Notes (2028)	June 2028	5.75	%		800
U.S. Notes (2033)	June 2033	6.25	%		600

Euro Notes (2028) (€250 million)	April 2028	4.13	%		270
Euro Notes (2031) (€750 million)	March 2031	4.13	%		809

(1) Interest rate derived via a weighted average

•~~Gross~~In March 2024, we completed an offering of €750 million aggregate principal amount of the 4.125% Euro Notes (2031). We used the net proceeds from the ~~issuance of senior unsecured notes of $1,400 million consisting of U.S. Notes (2028) of $800 million~~offering and ~~U.S. Notes (2033) of $600 million;~~

•~~Canadian dollar delayed draw term loan of up~~cash on hand to ~~CAD 700 million scheduled to mature three years from the date of funding (i.e. the business day prior to the acquisition closing date), bearing interest at variable rates.~~ ~~We issued a borrowing request on July 26, 2023 for the full amount in anticipation of closing early August 2023;~~ ~~and~~

•~~We anticipate funding the remainder~~pay outstanding indebtedness, including all of the ~~purchase price with~~outstanding €500 million aggregate principal amount of the 3.875% Euro Notes (2024) as well as Euro revolver borrowings, under our revolving credit facility and/or cash on hand. We initiated borrowings on our revolving credit facility for approximately $150 million on July 26, 2023 in anticipation of closing early August 2023.and pay accrued interest and related fees, premiums and expenses.

4634

We believe that our current liquidity, cash expected to be generated by operating activities in future periods and access to capital markets will be sufficient to meet our current operating and capital requirements. ~~However, as noted, we have accessed additional financing sources to fund the Uni-Select transaction.~~ Our capital allocation strategy includes spending to support growth driven capital projects, complete synergistic acquisitions, and 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 ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 is as follows:

Dividend Amount

Declaration Date

Record Date

Payment Date

$~~0.275~~0.30

February ~~21, 2023~~20, 2024

March ~~16, 2023~~14, 2024

March ~~30, 2023~~28, 2024

~~$0.275~~

~~April 25, 2023~~

~~May 18, 2023~~

~~June 1, 2023~~

On ~~July 25, 2023,~~April 22, 2024, our Board of Directors declared a quarterly cash dividend of ~~$0.275~~$0.30 per share of common stock, payable on ~~August 31, 2023,~~May 30, 2024, to stockholders of record at the close of business on ~~August 17, 2023.~~May 16, 2024.

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, and various other factors, many of which are outside of our control.

With ~~$2,604~~$1,590 million of total liquidity ~~($1,219 million adjusted for the cash balances reserved for the Uni-Select Acquisition)~~ as of ~~June 30, 2023~~March 31, 2024 and ~~$579~~$88 million of current maturities, we have access to funds to meet our near term commitments. We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.

~~Our total liquidity inclu~~O~~des availability under our~~ur Senior Unsecured Credit Agreement ~~which includes~~and our CAD Note both include two financial maintenance covenants: a maximum total leverage ratio and minimum interest coverage ratio. The terms maximum total leverage ratio and minimum interest coverage ratio are specifically calculated per both the Senior Unsecured Credit Agreement and CAD Note, and differ in specified ways from comparable US GAAP or common usage terms. We were in compliance with all applicable covenants under both our Senior Unsecured Credit Agreement and CAD Note as of ~~June 30, 2023.~~March 31, 2024. The required debt covenants per both the Senior Unsecured Credit Agreement and CAD Note and our actual ratios with respect to those covenants are as follows as of ~~June 30, 2023:~~

March 31, 2024:


	Covenant Level	Ratio Achieved as of ~~June 30, 2023~~March 31, 2024
Maximum total leverage ratio	4.00 : 1.00	2.3
Minimum interest coverage ratio	3.00 : 1.00	~~15.4~~7.4

The total leverage ratio increased from 1.6 as of March 31, 2023 as we added debt from the U.S. Notes (2028/33) without any EBITDA from the Uni-Select transaction, which will be included after closing the acquisition. The spread applied to the interest rate on our credit facility borrowings ~~will increase~~increased in the third quarter of 2023 and remained the same through the first quarter of 2024 as a result of the total leverage ratio rising above 2.0.

The indentures relating to our U.S. Notes and Euro Notes do not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds under the Senior Unsecured Credit Agreement. The indentures do not prohibit amendments to the financial covenants under the ~~credit facility~~Senior Unsecured Credit Agreement and CAD Note as needed.

While we believe that we have adequate capacity under our existing revolving credit facilities to finance our current operations, from time to time we may need to raise additional funds through public or private financing, strategic relationships or modification of our existing ~~credit facilities such as~~Senior Unsecured Credit Agreement to finance ~~the Uni-Select Acquisition and~~additional investments or to ~~likely~~ refinance ~~the Euro Notes (2024).~~existing debt obligations. There can be no assurance that additional funding, or refinancing of our ~~credit facilities,~~Senior Unsecured Credit Agreement, 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.

As part of our effort to improve our operating cash flows, we may negotiate payment term extensions with suppliers. These efforts are supported by our supply chain finance programs. See Note ~~15,~~11, "Supply Chain Financing" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our supply chain financing arrangements.

4735

We hold interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings. After giving effect to these contracts outstanding, the weighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was ~~5.4%~~6.1% at ~~June 30, 2023.~~March 31, 2024. Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was ~~5.3%~~5.6% at ~~June 30, 2023.~~March 31, 2024. Under the Senior Unsecured Credit Agreement, our borrowings bear interest at Secured Overnight Financing Rate (i.e. ~~SOFR)~~"SOFR") plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread. Under the CAD Note, the interest rate may be (i) a forward-looking term rate based on the Canadian Dollar Offer Rate for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread. See Note ~~16,~~12, "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 related to our borrowings and related interest. The interest rate swaps are described in Note ~~17,~~13, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We had outstanding ~~credit agreement~~ borrowings ~~(including both~~under our revolving credit facilities and term loans ~~and revolving credit facilities)~~payable of ~~$1,726~~$1,657 million and $~~1,786~~1,943 million at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. Of these amounts, there were no current maturities at ~~June 30, 2023~~March 31, 2024 or December 31, ~~2022.~~ ~~Current maturities include the 3.875% €500 millionEuro Notes (2024) due on April 1, 2024, which we intend to refinance through the issuance of a new debt instrument prior to the scheduled maturity.~~2023.

The scheduled maturities of long-term obligations outstanding at ~~June 30, 2023~~March 31, 2024 are as follows (in millions):


		Amount
Six months ending December 31, 2023 (1)		$	22
	Amount			Amount
Nine months ending December 31, 2024 (1)
Years ending December 31:	Years ending December 31:
2024		571
2025
2025
2025	2025	13
2026	2026	507
2027	2027	6
2028
Thereafter	Thereafter	2,911
Total debt (2)	Total debt (2)	$	4,030

(1)Long-term obligations maturing by December 31, ~~2023~~2024 include $8$55 million of short-term debt that may be extended beyond the current year ending December 31, ~~2023.~~2024.

(2)The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discount of ~~$30~~$38 million as of ~~June 30, 2023)~~March 31, 2024).

As of ~~June 30, 2023,~~March 31, 2024, the Company had cash and cash equivalents of ~~$1,904~~$344 million, of which ~~$378~~$243 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign 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 enacted in 2017, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income 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 six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 Change 2023 2022 Change
Wholesale - North America $ 263 $ 302 $ (39) $ 536 $ 619 $ (83) (1)
Europe 914 924 (10)

1,834 1,879 (45) (2)
Specialty 309 306 3 560 709 (149) (3)
Total $ 1,486 $ 1,532 $ (46) $ 2,930 $ 3,207 $ (277)


	Three Months Ended March 31,
	2024		2023		Change
Wholesale - North America	$	522	$	273	$	249	(1)
Europe	957		920		37		(2)
Specialty	336		251		85		(3)
Total	$	1,815	$	1,444	$	371

(1)Inventory purchases across the Wholesale - North America segment ~~decreased~~increased in the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period primarily due to ~~restocking efforts in~~ the ~~prior year to rebuild inventory levels.~~acquisition of Uni-Select.

(2)The ~~decrease~~increase in inventory purchases in our Europe segment included ~~a decrease~~an increase of ~~$39~~$18 million attributable to the ~~decrease~~increase in the value of the pound sterling and ~~to a lesser extent, the~~ euro in the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the prior year period.

(3)The ~~decrease~~increase in inventory purchases in the Specialty segment compared to the prior year period was primarily due to ~~matching~~decreased inventory purchases in the prior year period to align inventory levels with demand.

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
		2023	2022	% Change		2023	2022	% Change
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Wholesale - North America salvage vehicles
Wholesale - North America salvage vehicles
Wholesale - North America salvage vehicles	Wholesale - North America salvage vehicles	65	65	—	%	129	125	3.2	%
Europe wholesale salvage vehicles	Europe wholesale salvage vehicles	7	8	(12.5)	%	15	16	(6.3)	%
Europe wholesale salvage vehicles
Europe wholesale salvage vehicles
Self Service salvage vehicles	Self Service salvage vehicles	143	139	2.9	%	280	274	2.2	%
Self Service salvage vehicles
Self Service salvage vehicles

Wholesale - North America salvage purchases in ~~2023 increased~~2024 decreased relative to the prior year period due to ~~improved availability~~working down the backlog caused by ramped up purchasing in the fourth quarter of ~~vehicles at auctions.~~2023. Self Service salvage purchases in 2024 decreased relative to the prior year period due to a focus on reducing car cost.

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

Operating Cash

Net cash provided by operating activities for the six months ended June 30, 2022

737

Operating Cash

Net cash provided by operating activities for the three months ended March 31, 2023

Increase (decrease) due to:

Working capital accounts: (1)

Receivables

(37)

Inventories

391

Inventories

Accounts payable

(308)

Other operating activities

(80)

(2)

Net cash provided by operating activities for the six months ended June 30, 2023

703

Other operating activities

(46)

(2)

Net cash provided by operating activities for the three months ended March 31, 2024

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

•~~Receivables was a $37~~Inventories represented $109 million~~greater outflow~~ in ~~2022 primarily~~incremental cash outflows in the first three months of 2024 compared to the same period of 2023, including $53 million in our Specialty segment due to ~~an increase~~the benefit in ~~organic revenue in 2023 compared~~the prior year period of decreasing inventory purchasing levels to ~~2022, which translated to higher receivables balances and to larger net outflows~~align with softening demand, $44 million in our Europe segment, ~~of $40 million. We had~~and $21 million in our Wholesale - North America segment, partially offset by our Self Service segment which contributed a ~~smaller~~$9 million lower cash ~~outflow in the Specialty segment of $4 million compared to the prior period due to lower revenue.~~outflow.

•~~Inventories represented $391~~Accounts payable produced $198 million in incremental cash inflows in the first ~~six~~three months of ~~2023~~2024 compared to the same period of ~~2022, including $236 million~~2023 on a consolidated basis. This was primarily attributable to higher cash inflows in our Europe segment of $129 million and ~~$78~~$68 million in our Wholesale - North America segment both of which are primarily due to ~~higher purchasing levels in the prior period due to restocking efforts to rebuild inventory levels and easing~~timing of ~~supply chain constraints, and $77 million in our Specialty segment inventory due to decreasing inventory purchasing levels to align with softening demand.~~

•Accounts payable produced $308 million in lower cash inflows in the first six months of 2023 compared to the same period of 2022 on a consolidated basis. This was primarily attributable to lower cash inflows in our Wholesale - North America segment of $209 million (partly related to accelerated vendor payments in late 2021 to ensure priority access to inventory) and in our Europe segment of $112 million primarily attributable to increased inventory purchases in the prior year as noted above which were in accounts payable at the end of December 2022, partially offset by our Specialty segment which contributed a $13 million lower cash outflow.payments.

(2) Primarily reflects the aggregate effect of lower cash earnings and higher interest payments (primarily due to higher interest ~~rates)~~rates and ~~higher~~additional borrowings for the Uni-Select Acquisition), partially offset by lower cash paid for taxes during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to the same period of ~~2022.~~2023.

Net cash used in investing activities totaled ~~$185~~$88 million and ~~net cash provided by investing activities totaled $265~~$97 million during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Proceeds from the disposal of businesses (primarily PGW) were $372 million during the six months ended June 30, 2022 (no such proceeds were received in 2023). Property, plant and equipment purchases were $136 million in the six months ended June 30, 2023 compared to $99 million in the prior year

~~period, driven by capital projects in our Self Service, Europe and Specialty segments.~~ We invested ~~$52~~$17 million and $5$25 million of cash in business acquisitions during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, respectively. Property, plant and ~~2022, respectively.~~equipment purchases were $66 million in the three months ended March 31, 2024 compared to $70 million in the prior year period.

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






		Six Months Ended June 30,
			2023		2022
Net cash provided by operating activities	Net cash provided by operating activities		$	703	$	737
Net cash provided by operating activities
Net cash provided by operating activities
Less: purchases of property, plant and equipment
Less: purchases of property, plant and equipment
Less: purchases of property, plant and equipment	Less: purchases of property, plant and equipment		136		99
Free cash flow	Free cash flow		$	567	$	638
Free cash flow
Free cash flow

For the ~~six~~three months ended ~~June 30, 2023, net cash provided by financing activities totaled $1,099 million compared to~~March 31, 2024, net cash used in financing activities ~~of $985~~totaled $113 million compared to $66 million for the same period in ~~2022. The increase is primarily due~~2023. Cash outflows for share repurchases were $30 million and dividends paid were $81 million for the three months ended March 31, 2024 compared to ~~proceeds~~$8 million for share repurchases and $74 million for dividends paid for the same period of 2023. Net debt borrowings (net of unamortized bond discount) were $35 million for the three months ended March 31, 2024 compared to $41 million for the same period of $1,394 million from the issuance of the U.S. Notes (2028/33), decreases in repurchases of common stock of $520 million, and lower net repayments on our debt of $211 million. Please refer to "Unregistered Sales of Equity Securities and Use of Proceeds" in Part II, Item 2 of this Quarterly Report on Form 10-Q for additional information on repurchases of common stock.2023.

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.

Summarized Guarantor Financial Information

Our U.S. Notes (2028/2033) and Euro Notes (2031) currently are guaranteed on a senior, unsecured basis by certain of our subsidiaries (each, a “subsidiary guarantor” and, together with LKQ, the “Obligor Group”), which are listed on the Company's Registration Statement on Form S-3 (File No. 333-277267) filed with the SEC on February 22, 2024. The guarantees are full and unconditional, joint and several, and subject to certain conditions for release. See Note 12, "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 related to the Euro Notes (2031) and Note 19, "Long-Term Obligations" in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023 for information related to the U.S. Notes (2028/2033).

Holders of the notes have a direct claim only against the Obligor Group. The following summarized financial information is presented for the Obligor Group on a combined basis after elimination of intercompany transactions and balances within the Obligor Group and equity in the earnings from and investments in any non-guarantor subsidiary.

Summarized Statements of Income (in millions)


	Three Months Ended March 31, 2024		Fiscal Year Ended December 31, 2023 (2)
Revenue	$	1,826	$	6,954
Cost of goods sold	1,086		4,079
Gross margin (1)	740		2,875
Income from continuing operations	111		602
Net income	$	111	$	589

(1)Guarantor subsidiaries recorded $14 million and $53 million of net sales to and $52 million and $203 million of purchases from non-guarantor subsidiaries for the three months ended March 31, 2024 and fiscal year ended December 31, 2023, respectively.

(2)Information reflects the current Obligor Group listed on Form S-3 (File No. 333-277267) filed with the SEC on February 22, 2024.

Summarized Balance Sheets (in millions)


	March 31, 2024		December 31, 2023 (1)
Current assets	$	2,314	$	2,167

Noncurrent assets	5,677		5,699
Current liabilities	1,070		925
Noncurrent liabilities	4,008		4,031

(1)Information reflects the current Obligor Group listed on Form S-3 (File No. 333-277267) filed with the SEC on February 22, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

•in foreign exchange ~~rates;~~

•rates, interest ~~rates;~~

•rates, commodity ~~prices;~~prices and

•inflation.

~~Foreign Exchange Rates~~

~~Foreign currency fluctuations may impact the financial results we report for the portions~~ There have been no material changes to our market risks from what was disclosed in Item 7A of Part II of our ~~business that operate in functional currencies other than the U.S. dollar. Our operations outside of the U.S. represented 50.4% and 48.2% of our revenue during the six months ended June 30, 2023 and~~Annual Report on Form 10-K for the year ended December 31, 2022, respectively. An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a 5.0% change in our consolidated revenue and a 3.9% change in our operating income for the six months ended June 30, 2023. 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 June 30, 2023 were immaterial. We 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 transactions, we may hedge the exposure through the use of foreign currency forward contracts. In March 2023, we entered into foreign currency forward contracts related to the Uni-Select Acquisition. See Note 3, "Uni-Select Acquisition" and Note 17, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

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 June 30, 2023, we had outstanding borrowings of €500 million under our Euro Notes (2024) and €250 million under our Euro Notes (2028), and €675 million and Swedish Krona ("SEK") 65 million under our revolving credit facilities. As of December 31, 2022, we had outstanding borrowings of €500 million under our Euro Notes (2024) and €250 million under our Euro Notes (2028), and €748 million and SEK 75 million 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 SOFR, prime rate, Canadian Dollar Offered Rate, Euro Interbank Offered Rate, SONIA, or 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 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 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 of our variable rate debt under our credit facilities at fixed rates at December 31, 2022. However, in February 2023, we entered into two sets of interest rate swap agreements to hedge the variable rates on a portion of our credit agreement borrowings. See Note 16, "Long-Term Obligations" and Note 17, "Derivative Instruments and Hedging Activities" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

At June 30, 2023, we had approximately $1,026 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 $10 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, 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 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 June 30, 2023 decreased by 5% over the average for the first quarter of 2023. The average prices of rhodium and palladium decreased by 61% and 34%, respectively, while platinum increased by 6% for the three months ended June 30, 2023 compared to the average prices for the three months ended June 30, 2022.

~~Inflation~~

We are exposed to market risks related to inflation in product, labor, shipping, freight and general overhead costs. In 2022, and continuing into 2023, inflation increased to rates beyond recent history, and we experienced rising costs. We adjusted our prices and drove 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 SG&A 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 ~~June 30, 2023,~~March 31, 2024, 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

There ~~were~~was no ~~changes~~change in ~~our~~the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter ~~ended June 30, 2023~~ that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

5239

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.

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 ~~2022~~2023 Form 10-K for information concerning risks and uncertainties that could negatively impact us.

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

Our Board of Directors has authorized a stock repurchase program under which we are able to purchase up to $3,500 million of our common stock from time to ~~time.~~time through the scheduled duration of the program on October 25, 2025. 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. Our current program authorization extends through October 25, 2025 and has approximately $1,106 million of program authorized spend remaining as of June 30, 2023. We did not repurchase any shares during

The following table summarizes our stock repurchases for the three months ended ~~June 30, 2023.~~March 31, 2024 (in 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 Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
January 1, 2024 - January 31, 2024	0.3	$	47.43	0.3	$	1,063
February 1, 2024 - February 29, 2024	0.3	$	48.41	0.3	$	1,046
March 1, 2024 - March 31, 2024	—	$	—	—	$	1,046
Total	0.6			0.6

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers

During the fiscal quarter ended ~~June 30, 2023,~~March 31, 2024, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

5340

Item 6. Exhibits


Exhibit						Description
4.1						*Supplemental Indenture dated as of February 15, 2024 among LKQ Corporation, as Issuer, certain subsidiaries of LKQ Corporation, as Guarantors, and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.21 to the Company’s report on Form 10-K filed with the SEC on February 22, 2024).
4.2						Indenture, dated as of ~~May 24, 2023~~March 13, 2024, among LKQ Dutch Bond B.V., as Issuer, LKQ Corporation, as ~~Issuer,~~a guarantor, the ~~Guarantors, and~~other guarantors identified therein, U.S. Bank Trust Company, National Association, as ~~Trustee~~trustee, registrar and transfer agent, and Elavon Financial Services DAC, as paying agent (incorporated herein by reference to Exhibit 4.1 to the Company’s report on Form 8-K filed with the SEC on ~~May 26, 2023)~~March 14, 2024).
~~10.1~~4.3						~~Registration Rights Agreement~~Supplemental Indenture, dated as of ~~May 24, 2023~~March 13, 2024, among LKQ Dutch Bond B.V., as Issuer, LKQ Corporation, as ~~Issuer,~~a guarantor, the ~~Guarantors, BofA Securities, Inc.~~other guarantors identified therein, U.S. Bank Trust Company, National Association, as trustee, registrar and ~~Wells Fargo Securities, LLC,~~transfer agent, and Elavon Financial Services DAC, as ~~representatives of the initial purchasers named therein~~paying agent (incorporated herein by reference to Exhibit ~~10.1~~4.2 to the Company’s report on Form 8-K filed with the SEC on ~~May 26, 2023)~~March 14, 2024).
4.4						Form of 4.125% Note due 2031 (included in Exhibit 4.3).
10.1						Form of LKQ Corporation Deferred Restricted Stock Unit Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.7 to the Company’s report on Form 10-K filed with the SEC on February 22, 2024).
10.2						Change of Control Agreement between LKQ Corporation and Andy Hamilton dated as of January 1, 2024 (incorporated herein by reference to Exhibit 10.23 to the Company’s report on Form 10-K filed with the SEC on February 22, 2024).
10.3						Change of Control Agreement between LKQ Corporation and John R. Meyne dated as of January 1, 2024 (incorporated herein by reference to Exhibit 10.24 to the Company’s report on Form 10-K filed with the SEC on February 22, 2024).
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 (embedded within the Inline XBRL document)

*Certain of the schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). LKQ agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.

5441

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 ~~July 27, 2023.~~April 23, 2024.


			LKQ CORPORATION

			/s/ Rick Galloway
			Rick Galloway
			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)

5542


	2022 Global Plan				2019/20 Global Plan				1 LKQ Europe Plan
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Employee related costs (1)	$	—	$	3	$	—	$	1	$	1	$	1
Facility exit costs (2)	3		1		3		6		—		—
Other costs	—		—		2		2		—		—
Total	$	3	$	4	$	5	$	9	$	1	$	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, 2023	1.3	$	41.02
Granted (2)	0.5	$	57.00
Vested	(0.4)	$	42.07

Unvested as of June 30, 2023	1.4	$	47.31
Expected to vest after June 30, 2023	1.2	$	47.75	2.9	$	71


	Three Months Ended June 30, 2023
	Foreign Currency Translation		Unrealized Gain (Loss) on Cash Flow Hedges		Unrealized Gain on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of April 1, 2023	$	(276)	$	(17)	$	11	$	2	$	(280)
Pretax income	34		14		—		—		48
Income tax effect	—		(3)		—		—		(3)
Reclassification of unrealized gain	—		(1)		—		—		(1)


Other comprehensive income from unconsolidated subsidiaries	—		—		—		1		1
Balance as of June 30, 2023	$	(242)	$	(7)	$	11	$	3	$	(235)


	Three Months Ended June 30, 2022
	Foreign Currency Translation		Unrealized Loss on Pension Plans		Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries		Accumulated Other Comprehensive Income (Loss)
Balance as of April 1, 2022	$	(175)	$	(24)	$	(7)	$	(206)
Pretax loss	(154)		—		—		(154)



Disposal of business	4		—		—		4
Other comprehensive income from unconsolidated subsidiaries	—		—		1		1
Balance as of June 30, 2022	$	(325)	$	(24)	$	(6)	$	(355)


Wholesale - North America	Percentage of Total Segment Revenue
Segment EBITDA for the six months ended June 30, 2022	18.4	%
Increase (decrease) due to:
Change in gross margin	1.7	%	(1)
Change in segment operating expenses	0.2	%	(2)
Change in other income and expenses, net	0.3	%	(3)
Segment EBITDA for the six months ended June 30, 2023	20.6	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Adjusted(7)						Adjusted(5)
	June 30, 2023			June 30, 2023			December 31, 2022			December 31, 2022
Cash and cash equivalents	$	519		$	1,904	(3)	$	278		$	278
Total debt	2,645		(4)	4,030		(4)	2,662		(6)	2,662		(4)
Current maturities (1)	579			579			34			34
Capacity under credit facilities (2)	2,000			2,000			2,000			3,150
Availability under credit facilities (2)	700			700			645			1,295
Total liquidity (cash and cash equivalents plus availability under credit facilities)	1,219			2,604		(3)	923			1,573