UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________

FORM 10-Q

________________________



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

For the Quarterly Period Ended ~~September 30, 2015~~March 31, 2016



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

For the Transition Period from to

Commission File Number: 000-50404

________________________

LKQ CORPORATION

(Exact name of registrant as specified in its charter)

________________________



DELAWARE		36-4215970
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 WEST MADISON STREET, SUITE 2800, CHICAGO, IL		60661
(Address of principal executive offices)		(Zip Code)

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

________________________

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

At ~~October 23, 2015,~~April 22, 2016, the registrant had issued and outstanding an aggregate of ~~305,487,699~~306,679,077 shares of Common Stock.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands, except share and per share data)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands, except share and per share data)						LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands, except share and per share data)

	September 30,			December 31,			March 31,			December 31,
	2015			2014			2016			2015
Assets
Current Assets:
Cash and equivalents	$	137,086		$	114,605		$	229,220		$	87,397
Receivables, net	626,780			601,422			882,582			590,160
Inventory	1,464,627			1,433,847			1,782,797			1,556,552
Deferred income taxes	77,401			81,744
Prepaid expenses and other current assets	81,249			85,799			99,288			106,603
Total Current Assets	2,387,143			2,317,417			2,993,887			2,340,712
Property and Equipment, net	652,780			629,987			758,641			696,567
Intangible Assets:
Goodwill	2,348,092			2,288,895			3,075,293			2,319,246
Other intangibles, net	219,632			245,525			447,730			215,117
Other Assets	96,385			91,668			81,306			76,195
Total Assets	$	5,704,032		$	5,573,492		$	7,356,857		$	5,647,837
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	416,341		$	400,202		$	597,826		$	415,588
Accrued expenses:
Accrued payroll-related liabilities	95,014			86,016			78,459			86,527
Other accrued expenses	185,072			164,148			233,288			162,225
Other current liabilities	64,097			36,815			64,472			31,596
Current portion of long-term obligations	37,174			63,515			75,365			56,034
Total Current Liabilities	797,698			750,696			1,049,410			751,970
Long-Term Obligations, Excluding Current Portion	1,570,056			1,801,047			2,743,197			1,528,668
Deferred Income Taxes	175,310			181,662			179,404			127,239
Other Noncurrent Liabilities	124,255			119,430			150,437			125,278
Commitments and Contingencies
Stockholders’ Equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 305,473,459 and 303,452,655 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	3,054			3,035
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 306,521,927 and 305,574,384 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively							3,065			3,055
Additional paid-in capital	1,084,423			1,054,686			1,101,979			1,090,713
Retained earnings	2,031,324			1,703,161			2,234,116			2,126,384
Accumulated other comprehensive loss	(82,088		)	(40,225		)	(104,751		)	(105,470		)
Total Stockholders’ Equity	3,036,713			2,720,657			3,234,409			3,114,682
Total Liabilities and Stockholders’ Equity	$	5,704,032		$	5,573,492		$	7,356,857		$	5,647,837

See notes to unaudited condensed consolidated financial statements

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Income (In thousands, except per share data)

	Three Months Ended
	March 31,
	2016			2015
Revenue	$	1,921,476		$	1,773,912
Cost of goods sold	1,161,039			1,074,433
Gross margin	760,437			699,479
Facility and warehouse expenses	157,605			132,657
Distribution expenses	152,343			141,714
Selling, general and administrative expenses	218,318			203,241
Restructuring and acquisition related expenses	14,811			6,488
Depreciation and amortization	31,688			29,453
Operating income	185,672			185,926
Other expense (income):
Interest expense, net	14,592			14,906
Loss on debt extinguishment	26,650			—
Change in fair value of contingent consideration liabilities	73			151
Gains on foreign exchange contracts - acquisition related	(18,342		)	—
Other (income) expense, net	(2,962		)	1,768
Total other expense, net	20,011			16,825
Income before provision for income taxes	165,661			169,101
Provision for income taxes	57,567			60,098
Equity in earnings of unconsolidated subsidiaries	(362		)	(1,908		)
Net income	$	107,732		$	107,095
Earnings per share:
Basic	$	0.35		$	0.35
Diluted	$	0.35		$	0.35

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Revenue $ 1,831,732
$ 1,721,024
$ 5,443,714
$ 5,055,933
Cost of goods sold 1,118,953
1,056,613
3,307,512
3,068,579
Gross margin 712,779
664,411
2,136,202
1,987,354
Facility and warehouse expenses 143,918
133,330
412,954
387,995
Distribution expenses 158,768
148,572
450,521
432,445
Selling, general and administrative expenses 207,887
192,229
616,924
563,344
Restructuring and acquisition related expenses 4,578
3,594
12,729
12,816
Depreciation and amortization 30,883
30,498
90,118
87,136
Operating income 166,745
156,188
552,956
503,618
Other expense (income):
Interest expense, net 14,722
16,394
44,250
48,140
Loss on debt extinguishment —
—
—
324
Change in fair value of contingent consideration liabilities 89
12
365
(2,000 )
Other income, net (3,017 ) (18 ) (1,277 ) (1,021 )
Total other expense, net 11,794
16,388
43,338
45,443
Income before provision for income taxes 154,951
139,800
509,618
458,175
Provision for income taxes 52,475
47,564
177,255
155,926
Equity in earnings of unconsolidated subsidiaries (1,130 ) (721 ) (4,200 ) (1,199 )
Net income $ 101,346
$ 91,515
$ 328,163
$ 301,050
Earnings per share:
Basic $ 0.33
$ 0.30
$ 1.08
$ 1.00
Diluted $ 0.33
$ 0.30
$ 1.07
$ 0.98

Unaudited Condensed Consolidated Statements of Comprehensive Income (In thousands)

	Three Months Ended
	March 31,
	2016		2015
Net income	$	107,732	$	107,095
Other comprehensive income (loss):
Foreign currency translation	140		(54,810		)
Net change in unrecognized gains/losses on derivative instruments, net of tax	432		283
Net change in unrealized gains/losses on pension plans, net of tax	147		128
Total other comprehensive income (loss)	719		(54,399		)
Total comprehensive income	$	108,451	$	52,696

Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Net income $ 101,346
$ 91,515
$ 328,163
$ 301,050
Other comprehensive income (loss), net of tax:
Foreign currency translation (33,458 ) (39,329 ) (43,758 ) (24,013 )
Net change in unrecognized gains/losses on derivative instruments, net of tax 612
817
1,813
2,067
Net change in unrealized gains/losses on pension plan, net of tax (25 ) (30 ) 82
(97 )
Total other comprehensive loss (32,871 ) (38,542 ) (41,863 ) (22,043 )
Total comprehensive income $ 68,475
$ 52,973
$ 286,300
$ 279,007

See notes to unaudited condensed consolidated financial statements

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Cash Flows (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Cash Flows (In thousands)						LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Cash Flows (In thousands)

	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2015			2014			2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	328,163		$	301,050		$	107,732		$	107,095
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	94,688			90,647			33,166			30,669
Stock-based compensation expense	16,291			16,967			5,916			5,546
Excess tax benefit from stock-based payments	(13,672		)	(14,455		)	(4,637		)	(5,201		)
Loss on debt extinguishment							26,650			—
Gains on foreign exchange contracts - acquisition related							(18,342		)	—
Other	6,580			3,440			1,156			3,298
Changes in operating assets and liabilities, net of effects from acquisitions:
Receivables	(6,304		)	(69,680		)	(78,373		)	(62,329		)
Inventory	22,345			(55,266		)	18,973			43,823
Prepaid income taxes/income taxes payable	39,639			20,858			45,591			48,715
Accounts payable	(11,139		)	1,433			20,514			11,233
Other operating assets and liabilities	14,732			27,648			(28,139		)	(2,704		)
Net cash provided by operating activities	491,323			322,642			130,207			180,145
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(99,573		)	(100,191		)	(50,393		)	(26,096		)
Acquisitions, net of cash acquired	(157,357		)	(650,614		)	(603,735		)	(864		)
Proceeds from foreign exchange contracts							18,342			—
Other investing activities, net	3,174			934			10,762			(7,316		)
Net cash used in investing activities	(253,756		)	(749,871		)	(625,024		)	(34,276		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	7,534			6,520			3,202			1,318
Excess tax benefit from stock-based payments	13,672			14,455			4,637			5,201
Taxes paid related to net share settlements of stock-based compensation awards	(7,423		)	—			(2,281		)	(5,243		)
Debt issuance costs							(5,907		)	—
Borrowings under revolving credit facilities	282,421			1,299,821			1,143,217			85,030
Repayments under revolving credit facilities	(433,840		)	(808,039		)	(345,609		)	(155,073		)
Borrowings under term loans	—			11,250			338,478			—
Repayments under term loans	(16,875		)	(11,250		)	—			(5,625		)
Borrowings under receivables securitization facility	3,858			80,000			97,000			2,100
Repayments under receivables securitization facility	(8,958		)	—			(63,000		)	—
Repayments of other long-term debt	(50,843		)	(20,532		)
Borrowings (repayments) of other debt, net							12,850			(6,576		)
Repayment of Rhiag debt and related payments							(543,347		)	—
Payments of other obligations	(2,491		)	(41,934		)	(1,437		)	(1,544		)
Other financing activities, net	—			(6,881		)
Net cash (used in) provided by financing activities	(212,945		)	523,410
Net cash provided by (used in) financing activities							637,803			(80,412		)
Effect of exchange rate changes on cash and equivalents	(2,141		)	(2,023		)	(1,163		)	(4,570		)
Net increase in cash and equivalents	22,481			94,158			141,823			60,887
Cash and equivalents, beginning of period	114,605			150,488			87,397			114,605
Cash and equivalents, end of period	$	137,086		$	244,646		$	229,220		$	175,492
Supplemental disclosure of cash paid for:
Income taxes, net of refunds	$	138,192		$	135,447		$	7,715		$	10,999
Interest	35,430			38,399			19,320			6,937
Supplemental disclosure of noncash investing and financing activities:
Notes payable and other obligations, including notes issued and debt assumed in connection with business acquisitions	$	28,598		$	87,731
Contingent consideration liabilities	—			5,854
Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions							$	551,077		$	34
Noncash property and equipment additions	4,841			4,852			5,469			2,414

See notes to unaudited condensed consolidated financial statements

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Stockholders’ Equity (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Stockholders’ Equity (In thousands)																LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Stockholders’ Equity (In thousands)

	Common Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Total Stockholders’ Equity
	Shares Issued		Amount			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Shares Issued	Amount		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Total Stockholders’ Equity
BALANCE, January 1, 2015	303,453		$	3,035		$	1,054,686		$	1,703,161	$	(40,225	)	$	2,720,657
BALANCE, January 1, 2016																	305,574	$	3,055	$	1,090,713		$	2,126,384	$	(105,470	)	$	3,114,682
Net income	—		—			—			328,163		—			328,163			—	—		—			107,732		—			107,732
Other comprehensive loss	—		—			—			—		(41,863		)	(41,863		)
Other comprehensive income																	—	—		—			—		719			719
Restricted stock units vested, net of shares withheld for employee tax	840		8			(4,191		)	—		—			(4,183		)	488	5		(2,286		)	—		—			(2,281		)
Stock-based compensation expense	—		—			16,291			—		—			16,291			—	—		5,916			—		—			5,916
Exercise of stock options	1,324		13			8,216			—		—			8,229			460	5		3,197			—		—			3,202
Shares withheld for net share settlements of stock option awards	(144	)	(2		)	(3,934		)	—		—			(3,936		)
Excess tax benefit from stock-based payments	—		—			13,355			—		—			13,355			—	—		4,439			—		—			4,439
BALANCE, September 30, 2015	305,473		$	3,054		$	1,084,423		$	2,031,324	$	(82,088	)	$	3,036,713
BALANCE, March 31, 2016																	306,522	$	3,065	$	1,101,979		$	2,234,116	$	(104,751	)	$	3,234,409

See notes to unaudited condensed consolidated financial statements

LKQ CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements


Note 1.	Interim Financial Statements

The unaudited financial statements presented in this report represent the consolidation of LKQ Corporation, a Delaware corporation, and its subsidiaries. LKQ Corporation is a holding company and all operations are conducted by subsidiaries. When the terms "LKQ," "the Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries.

We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the 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.

Operating 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 most recent Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 filed with the SEC on ~~March 2, 2015.~~February 25, 2016.


Note 2.	~~Financial Statement Information~~Business Combinations

~~Revenue Recognition~~

On March 18, 2016, LKQ and its wholly-owned subsidiary LKQ Italia S.r.l. acquired Rhiag-Inter Auto Parts Italia S.p.A. ("Rhiag"), a distributor of aftermarket spare parts for passenger cars and commercial vehicles in Italy, Czech Republic, Slovakia, Switzerland, Hungary, Romania, Ukraine, Bulgaria, Poland and Spain. This acquisition expands LKQ's geographic presence in continental Europe, and we believe the acquisition will create potential purchasing synergies. Total acquisition date fair value of the consideration for our Rhiag acquisition was €534.2 million ($602.0 million), composed of €533.6 million ($601.4 million) of cash (net of cash acquired) and €0.6 million ($0.6 million) of intercompany balances considered to be effectively settled as part of the transaction. In addition, we assumed €488.8 million ($550.8 million) of existing Rhiag debt as of the acquisition date.

To fund the purchase price of the Rhiag acquisition, LKQ entered into foreign currency forward contracts in March 2016 to acquire a total of €588 million. The ~~majority~~rates locked in under the foreign currency forwards were favorable to the spot rate on the settlement date, and as a result, these derivative contracts generated a gain of $18.3 million during the three months ended March 31, 2016. The gain on the foreign currency forwards is recorded in Gains on foreign exchange contracts - acquisition related on our ~~revenue is derived from~~unaudited condensed consolidated statement of income for the sale of vehicle parts. Revenue is recognized when the products are shipped to, delivered to or picked up by customers and title has transferred, subject to an allowance for estimated returns, discounts and allowances that we estimate based upon historical information. three months ended March 31, 2016.

We recorded $739.7 million of goodwill related to our acquisition of Rhiag, which we do not expect to be deductible for income tax purposes. The timing of the acquisition did not allow for a ~~reserve~~full valuation to be completed, so most of the assets, including the intangibles and fixed assets, and the liabilities were preliminarily recorded at book value with the remaining purchase price allocated to goodwill. In the period between the acquisition date and March 31, 2016, Rhiag, which is reported in our Europe reportable segment, generated revenue of $33.9 million and an operating loss of $3.4 million, which included $6.2 million of acquisition related costs.

In addition to our acquisition of Rhiag, we acquired a wholesale business in Europe during the three months ended March 31, 2016. This acquisition was not material to our results of operations or financial position.

On April 21, 2016, LKQ acquired Pittsburgh Glass Works LLC (“PGW”), a leading global distributor and manufacturer of automotive glass products, for ~~estimated returns, discounts and allowances~~a purchase price of approximately ~~$31.4~~$660.3 million, net of cash acquired. PGW’s business comprises wholesale and ~~$31.3 million~~ at ~~September 30, 2015~~retail distribution services, automotive glass manufacturing, and ~~December 31, 2014, respectively.~~retailer alliance partnerships. The acquisition will expand our addressable market in North America and globally. Additionally, we believe the acquisition will create potential distribution synergies with our existing network. We ~~present taxes assessed by governmental authorities collected from customers on~~are in the process of completing the purchase accounting for this acquisition and as a ~~net basis. Therefore,~~result, we are unable to disclose the ~~taxes are excluded from revenue~~amounts recognized for each major class of assets acquired and liabilities assumed, or the pro forma effect of the acquisition on our ~~Unaudited Condensed Consolidated Statements~~results of ~~Income~~operations.

During 2015, we completed 18 acquisitions, including 4 wholesale businesses in North America, 12 wholesale businesses in Europe, a self service retail operation, and ~~are shown as~~ a current liability on our Unaudited Condensed Consolidated Balance Sheets until remitted. We recognize revenue from the sale of scrap metal, other metals, and cores when title has transferred, which typically occurs upon delivery to the customer.specialty vehicle aftermarket business. Our wholesale business acquisitions in North America included PartsChannel, Inc. ("Parts Channel"), an aftermarket collision parts distributor. The

~~Allowance for Doubtful Accounts~~

~~We recorded~~specialty aftermarket business acquired was The Coast Distribution System, Inc. ("Coast"), a ~~reserve~~supplier of replacement parts, supplies and accessories in North America for ~~uncollectible accounts~~the recreational vehicle and outdoor recreation markets. Our European acquisitions included 11 aftermarket parts distribution businesses in the Netherlands, 9 of ~~approximately~~ ~~$24.3 million~~which were former customers of and ~~$19.4 million~~ at ~~September 30, 2015~~distributors for our Netherlands subsidiary, Sator Beheer B.V. ("Sator") and ~~December 31, 2014, respectively.~~

~~Inventory~~

~~Inventory consists~~were acquired with the objective of expanding our distribution network in the ~~following (in thousands):~~

September 30, December 31,
2015 2014
Aftermarket and refurbished products $ 1,070,673
$ 1,022,549
Salvage and remanufactured products 393,954
411,298
$ 1,464,627
$ 1,433,847

Netherlands. Our other acquisitions completed during 2015 enabled us to expand our geographic presence. Total acquisition date fair value of the consideration for these acquisitions was $187.9 million, composed of $161.3 million of cash (net of cash acquired), $4.3 million of notes payable, $21.2 million of other purchase price obligations, and $1.1 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the year ended December 31, 2015, we recorded $92.2 million of goodwill related to these acquisitions and immaterial adjustments to preliminary ~~valuations of inventory for~~purchase price allocations related to certain of our 2014 ~~acquisitions contributed $74.8~~acquisitions. We expect $69.9 million of the ~~increase~~$92.2 million of goodwill recorded to be deductible for income tax purposes.

Our acquisitions are accounted for under the purchase method of accounting and are included in our ~~aftermarket~~unaudited condensed consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair market values at the dates of acquisition. The purchase price allocations for the acquisitions made during the three months ended March 31, 2016 and ~~refurbished products inventory~~the last nine months of 2015 are preliminary as we are in the process of determining the following: 1) valuation amounts for certain receivables, inventories and ~~$4.4 million of~~fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the ~~increase in our salvage and remanufactured products inventory during 2015. See Note 8, "Business Combinations" for further information on our acquisitions.~~

~~Intangible Assets~~

~~Intangible assets consist primarily of goodwill (the cost of purchased businesses in excess of the~~acquisition date fair value of certain liabilities assumed; and 4) the ~~identifiable net assets acquired)~~final estimation of the tax basis of the entities acquired. We have recorded preliminary estimates for certain of the items noted above and ~~other specifically identifiable intangible assets, such as trade names, trademarks, customer relationships, software and other technology related assets, and covenants~~will record adjustments, if any, to the preliminary amounts upon finalization of the valuations. During the first quarter of 2016, the measurement-period adjustments recorded for acquisitions completed in prior periods were not ~~to compete.~~material.

The ~~changes in~~preliminary purchase price allocations for the ~~carrying amount of goodwill by reportable segment~~acquisitions completed during the ~~nine~~three months ended March 31, 2016 and the ~~September 30,~~year endedDecember 31, 2015 are as follows (in thousands):

North America Europe Specialty Total
Balance as of January 1, 2015 $ 1,392,032
$ 616,819
$ 280,044
$ 2,288,895
Business acquisitions and adjustments to previously recorded goodwill 76,284
20,980
3,989
101,253
Exchange rate effects (14,730 ) (27,376 ) 50
(42,056 )
Balance as of September 30, 2015 $ 1,453,586
$ 610,423
$ 284,083
$ 2,348,092



	Three Months Ended									Year Ended
	March 31, 2016									December 31, 2015
	Rhiag			Other Acquisitions			Total			All Acquisitions
Receivables	$	233,776		$	561		$	234,337		$	29,628
Receivable reserves	(23,048		)	(18		)	(23,066		)	(3,926		)
Inventory	239,502			675			240,177			79,646
Prepaid expenses and other current assets	13,743			(13		)	13,730			3,337
Property and equipment	35,282			21			35,303			11,989
Goodwill	739,741			2,391			742,132			92,175
Other intangibles	238,555			—			238,555			9,926
Other assets	2,101			(411		)	1,690			5,166
Deferred income taxes	(51,514		)	(215		)	(51,729		)	4,102
Current liabilities assumed	(252,372		)	(438		)	(252,810		)	(39,191		)
Debt assumed	(550,843		)	—			(550,843		)	(2,365		)
Other noncurrent liabilities assumed	(22,916		)	—			(22,916		)	(2,651		)
Other purchase price obligations	—			—			—			(21,199		)
Notes issued	—			(234		)	(234		)	(4,296		)
Settlement of pre-existing balances	(591		)	—			(591		)	(1,073		)
Cash used in acquisitions, net of cash acquired	$	601,416		$	2,319		$	603,735		$	161,268

The ~~components~~primary objectives of our acquisitions made during the three months ended March 31, 2016 and the year ended December 31, 2015 were to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and to expand into other ~~intangibles are~~product lines and businesses that may benefit from our operating strengths. Our 2016 acquisition of Rhiag enabled us to expand our market presence in continental Europe. We believe that our Rhiag acquisition will allow for synergies within our European operations, most notably in procurement. These projected synergies contributed to the preliminary goodwill recorded on the Rhiag acquisition.

When we identify potential acquisitions, we attempt to target companies with a leading market presence, an experienced management team and workforce that provide a fit with our existing operations, and strong cash flows. For certain of our acquisitions, we have identified cost savings and synergies as ~~follows (in thousands):~~a result of integrating the company with our existing

September 30, 2015 December 31, 2014

Gross
Carrying
Amount

Accumulated
Amortization
Net
Gross
Carrying
Amount

Accumulated
Amortization
Net
Trade names and trademarks $ 171,165
$ (41,480 ) $ 129,685
$ 173,340
$ (35,538 ) $ 137,802
Customer relationships 92,780
(37,121 ) 55,659
92,972
(26,751 ) 66,221
Software and other technology related assets 44,465
(16,028 ) 28,437
44,640
(10,387 ) 34,253
Covenants not to compete 10,937
(5,086 ) 5,851
11,074
(3,825 ) 7,249
$ 319,347
$ (99,715 ) $ 219,632
$ 322,026
$ (76,501 ) $ 245,525

business that provide additional value to the combined entity. In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill.

~~Trade names and trademarks are amortized over a useful life ranging from~~ 10 to 30 ~~years on a straight-line basis. Customer relationships are amortized over~~The following pro forma summary presents the ~~expected period to be benefited (~~5 to 20 ~~years) on an accelerated basis. Software and other technology related assets are amortized on a straight-line basis over the expected period to be benefited (five~~ to ~~six~~ ~~years). Covenants not to compete are amortized over the lives~~effect of the ~~respective agreements, which range from~~ ~~one~~ to ~~five~~ ~~years, on a straight-line basis. Amortization expense for intangibles was~~ ~~$25.0 million~~ ~~and~~ ~~$24.4 million~~businesses acquired during the ~~nine~~three months ended ~~September 30,~~March 31, 2016 as though the businesses had been acquired as of January 1, 2015 and ~~2014, respectively. Estimated amortization expense for each~~the businesses acquired during the year ended December 31, 2015 as though they had been acquired as of January 1, 2014. The pro forma adjustments are based upon unaudited financial information of the ~~five years in the period ending December 31, 2019 is $33.2 million, $29.9 million, $27.4 million, $22.5 million and $17.8 million, respectively.~~

~~Warranty Reserve~~

~~Some of our salvage mechanical products are sold with a standard~~ ~~six~~ ~~month warranty against defects. Additionally, some of our remanufactured engines are sold with a standard~~ ~~three~~ year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products that is supported by certain of the suppliers of those products. We record the estimated warranty costs at the time of sale using historical warranty claim information to project future warranty claims activity. The changes in the warranty reserve are as followsacquired entities (in ~~thousands)~~thousands, except per share data):

Balance as of January 1, 2015 $ 14,881
Warranty expense 26,294
Warranty claims (23,517 )
Balance as of September 30, 2015 $ 17,658



	Three Months Ended
	March 31,
	2016		2015
Revenue, as reported	$	1,921,476	$	1,773,912
Revenue of purchased businesses for the period prior to acquisition:
Rhiag	213,376		235,302
Other acquisitions	168		94,334
Pro forma revenue	$	2,135,020	$	2,103,548

Net income, as reported	$	107,732	$	107,095
Net income of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
Rhiag	4,597		5,254
Other acquisitions	11		2,700
Acquisition related costs of acquisitions closed in quarter, net of tax	7,361		—
Pro forma net income	$	119,701	$	115,049

Earnings per share, basic—as reported	$	0.35	$	0.35
Effect of purchased businesses for the period prior to acquisition:
Rhiag	0.02		0.02
Other acquisitions	0.00		0.01
Acquisition related costs of acquisitions closed in quarter, net of tax	0.02		—
Pro forma earnings per share, basic ⁽¹⁾	$	0.39	$	0.38

Earnings per share, diluted—as reported	$	0.35	$	0.35
Effect of purchased businesses for the period prior to acquisition:
Rhiag	0.01		0.02
Other acquisitions	0.00		0.01
Acquisition related costs of acquisitions closed in quarter, net of tax	0.02		—
Pro forma earnings per share, diluted ⁽¹⁾	$	0.39	$	0.37

~~Investments in Unconsolidated Subsidiaries~~

As⁽¹⁾ The sum of ~~September 30, 2015~~, the ~~carrying~~individual earnings per share amounts may not equal the total due to rounding.

Unaudited pro forma supplemental information is based upon accounting estimates and judgments that we believe are reasonable. The unaudited pro forma supplemental information includes the effect of purchase accounting adjustments, such as the adjustment of inventory acquired to net realizable value, adjustments to depreciation on acquired property and equipment, adjustments to rent expense for above or below market leases, adjustments to amortization on acquired intangible assets, adjustments to interest expense, and the related tax effects. The timing of the acquisition did not allow for a full valuation to be completed, so most of the assets, including the intangibles and fixed assets, and the liabilities were preliminarily recorded at book value with the remaining purchase price allocated to goodwill. In the second quarter, we will adjust the Rhiag tangible and intangible asset values, as needed, and record the related amortization and depreciation expense. The pro forma impact of our ~~investments in unconsolidated subsidiaries was~~ ~~$11.0~~acquisitions reflects the elimination of acquisition related expenses, net of tax totaling $7.4 million~~; of this amount,~~ ~~$10.2 million~~ relates to our investment in ACM Parts Pty Ltd ("ACM Parts"). In August 2013, we entered into an agreement with Suncorp Group, a leading general insurance group in Australia and New Zealand, to develop ACM Parts, an alternative vehicle replacement parts business in those countries. We hold a ~~49%~~ ~~interest in the entity and are contributing our experience to help establish automotive parts recycling operations and to facilitate the procurement of aftermarket parts; Suncorp Group holds a~~ ~~51%~~ equity interest and is supplying salvage vehicles to the venture as well as assisting in establishing relationships with repair shops as customers. We are accounting for our interest in this subsidiary using the equity method of

accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee. During the nine months ended September 30, 2015, we increased our total investment in ACM Parts by $7.5 million, which is reflected in Other investing activities, net on the Unaudited Condensed Consolidated Statements of Cash Flows. Our total ownership interest in ACM Parts remains unchanged as a result of this additional investment. The total of our investment in ACM Parts and other unconsolidated subsidiaries is included within Other Assets on our Unaudited Condensed Consolidated Balance Sheets. Our equity in the net earnings of the investees for the three ~~and nine~~ months ended ~~September 30, 2015~~ ~~was~~March 31, 2016. Refer to Note 4, "Restructuring and Acquisition Related Expenses," for further information regarding our acquisition related expenses. These pro forma results are not ~~material.~~

~~Depreciation Expense~~

~~Included~~necessarily indicative of what would have occurred if the acquisitions had been in Cost of Goods Sold on the Unaudited Condensed Consolidated Statements of Income is depreciation expense associated with our refurbishing, remanufacturing, and furnace operations as well as our distribution centers.

~~Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"), which was amended in July 2015. This update outlines a new comprehensive revenue recognition model that supersedes most current revenue recognition guidance, and requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities adopting the standard have the option of using either a full retrospective or modified retrospective approach in the application of this guidance. ASU 2014-09 will be effectiveeffect for the Company during the first quarter of our fiscal year 2018. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. We are still evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

In April 2015, the FASB issued Accounting Standards Update 2015-03, "Interest-Imputation of Interest" ("ASU 2015-03"). This update simplifies the presentation of debt issuance costs on the financial statements by requiring companies to deduct debt issuance costs from the carrying value of their corresponding liability on the balance sheet, rather than presenting debt issuance costs as deferred charges. ASU 2015-03 will be effective for the Company during the first quarter of our fiscal year 2016. Early adoption is permitted. Entities must retrospectively apply this guidance within the balance sheet for all periods presented ~~in order to reflect the period-specific effects~~or of ~~this new guidance. We do not anticipate the adoption of this guidance will have a material impact on our financial position, results of operations, or cash flows.~~

In July 2015, the FASB issued Accounting Standards Update 2015-11, "Simplifying the Measurement of Inventory" ("ASU 2015-11"), which requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 will be effective for the Company during the first quarter of our fiscal year 2017 and must be applied on a prospective basis. Early adoption is permitted. We do not anticipate the adoption of this guidance will have a material impact on our financial position, results of operations, or cash flows.

In September 2015, the FASB issued Accounting Standards Update 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments" ("ASU 2015-16"), which requires an acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are identified as opposed to recognition as if the accounting had been completed as of the acquisition date. The ASU also requires disclosure regarding amounts that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date. ASU 2015-16 will be effective for the Company during the first quarter of our fiscal year 2016 and must be applied on a prospective basis. Early adoption is permitted for financial statements that have not been issued. We do not anticipate that the adoption of this guidance will have a material impact on our financial position, results of operations, or cash flows.future results.


Note 3.	~~Stock-Based Compensation~~Financial Statement Information

~~In order~~Revenue Recognition

The majority of our revenue is derived from the sale of vehicle parts. Revenue is recognized when the products are shipped to, ~~attract~~delivered to or picked up by customers and retain employees, non-employee directors, consultants, and other persons associated with us, we may grant qualified and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and performance units under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). We have granted RSUs, stock options, and restricted stock under the Equity Incentive Plan. We expect to issue new shares of common stock to cover past and future equity grants.

~~RSUs~~

~~RSUs vest over periods of up to~~ ~~five~~ ~~years,~~title has transferred, subject to an allowance for estimated returns, discounts and allowances that we estimate based upon historical information. We recorded a ~~continued service condition. Currently outstanding RSUs contain either a time-based vesting condition or a combination~~reserve for estimated returns, discounts and allowances of ~~a performance-based vesting condition~~approximately $37.8 million and a time-based vesting condition, in which case, both conditions must be met before any RSUs vest. For the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within ~~five~~$32.8 million ~~years following the grant date. Each RSU converts into~~at ~~one~~March 31, 2016 ~~share of LKQ common stock on the applicable vesting date. The grant date fair value of RSUs is based on the market price of LKQ stock on the grant date.~~

~~During the nine months ended~~and ~~September 30,~~December 31, 2015, ~~we granted~~respectively. We present taxes assessed by governmental authorities collected from customers on a net basis. Therefore, the taxes are excluded from revenue on our Unaudited Condensed Consolidated Statements of Income and are shown as a current liability on our Unaudited Condensed Consolidated Balance Sheets until remitted. We recognize revenue from the sale of scrap metal, other metals, and cores when title has transferred, which typically occurs upon delivery to the customer.

Allowance for Doubtful Accounts

We recorded a reserve for uncollectible accounts of approximately $47.0 million and ~~915,386~~$24.6 million ~~RSUs to employees.~~at March 31, 2016 and December 31, 2015, respectively. The ~~fair value~~acquisition of ~~RSUs that vested during the nine months ended~~ ~~September 30, 2015~~ ~~was~~ ~~$28.2~~Rhiag in March 2016 contributed $23.0 million.

~~The following table summarizes activity related~~ to our ~~RSUs under the Equity Incentive Plan~~reserve for ~~the nine months ended September 30, 2015:~~

Number
Outstanding

Weighted
Average
Grant Date
Fair Value

Aggregate Intrinsic Value
(in thousands) ⁽¹⁾
Unvested as of January 1, 2015 2,151,232
$ 20.97
$ 60,493
Granted 915,386
$ 27.04

Vested (994,130 ) $ 19.87

Forfeited / Canceled (81,563 ) $ 24.54

Unvested as of September 30, 2015 1,990,925
$ 24.16
$ 56,463
Expected to vest after September 30, 2015 1,935,514
$ 24.08
$ 54,891

⁽¹⁾uncollectible accounts at March 31, 2016~~The aggregate intrinsic value of unvested and expected to vest RSUs represents the total pretax intrinsic value (the fair value of the Company's stock~~. See Note 2, "Business Combinations" for further information on the last day of each period multiplied by the number of units) that would have been received by the holders had all RSUs vested. This amount changes based on the market price of the Company’s common stock.our acquisitions.

~~Stock Options~~Inventory

Stock options vest over periods of up to five years, subject to a continued service condition. Stock options expire either six or ten years from the date they are granted. No options were granted during the nine months ended September 30, 2015.

~~The following table summarizes activity related to our stock options under the Equity Incentive Plan for the nine months ended September 30, 2015:~~

Number
Outstanding

Weighted
Average Exercise Price

Weighted Average Remaining Contractual Term
(in years)

Aggregate Intrinsic Value
(in thousands) ⁽¹⁾
Balance as of January 1, 2015 5,207,772
$ 8.04
3.6 $ 105,038
Exercised (1,324,150 ) $ 6.21

Forfeited / Canceled (13,599 ) $ 28.13

Balance as of September 30, 2015 3,870,023
$ 8.59
3.1 $ 76,891
Exercisable as of September 30, 2015 3,775,341
$ 7.99
3.1 $ 76,891
Exercisable as of September 30, 2015 and expected to vest thereafter 3,860,555
$ 8.53
3.1 $ 76,891

⁽¹⁾ The aggregate intrinsic value of outstanding, exercisable and expected to vest options represents the total pretax intrinsic value (the difference between the fair value of the Company's stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of January 1, 2015 and September 30, 2015, respectively. This amount changes based on the market price of the Company’s common stock.

~~The following table summarizes the components of pre-tax stock-based compensation expense (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
RSUs $ 5,119
$ 4,434
$ 16,067
$ 14,625
Stock options 58
703
224
2,203
Restricted stock —
47
—
139
Total stock-based compensation expense $ 5,177
$ 5,184
$ 16,291
$ 16,967

As of September 30, 2015, unrecognized compensation expense related to unvested RSUs and stock options is $35.6 million and $0.3 million, respectively, and is expected to be recognized over weighted-average periods of 3.1 years and 1.3 years, respectively. Stock-based compensation expense related to these awards will be different to the extent the actual forfeiture rates are different from our estimated forfeiture rates.


~~Note 4.~~	~~Long-Term Obligations~~

~~Long-Term Obligations consist~~Inventory consists of the following (in thousands):

September 30, December 31,
2015 2014
Senior secured credit agreement:
Term loans payable $ 416,250
$ 433,125
Revolving credit facilities 475,308
663,912
Senior notes 600,000
600,000
Receivables securitization facility 89,800
94,900
Notes payable through November 2019 at weighted average interest rates of 1.1% and 1.0%, respectively 13,875
45,891
Other long-term debt at weighted average interest rates of 4.2% and 3.1%, respectively 11,997
26,734
1,607,230
1,864,562
Less current maturities (37,174 ) (63,515 )
$ 1,570,056
$ 1,801,047



	March 31,		December 31,
	2016		2015
Aftermarket and refurbished products	$	1,374,368	$	1,146,162
Salvage and remanufactured products	408,429		410,390
Total inventory	$	1,782,797	$	1,556,552

~~Senior Secured Credit Agreement~~Our acquisitions completed during 2016, including the March 18, 2016 acquisition of Rhiag, and adjustments to preliminary valuations of inventory for certain of our 2015 acquisitions contributed $239.5 million to our aftermarket and refurbished products inventory and $0.7 million to our salvage and remanufactured products inventory. See Note 2, "Business Combinations" for further information on our acquisitions.

~~On March 27, 2014, LKQ Corporation, LKQ Delaware LLP,~~Intangible Assets

Intangible assets consist primarily of goodwill (the cost of purchased businesses in excess of the fair value of the identifiable net assets acquired) and ~~certain~~ other ~~subsidiaries (collectively, the "Borrowers") entered into a third amended~~specifically identifiable intangible assets, such as trade names, trademarks, customer and ~~restated credit agreement (the "Credit Agreement"). Total availability under the Credit Agreement is $2.3 billion (composed of $1.69 billion~~supplier relationships, software and other technology related assets, and covenants not to compete.

The changes in the ~~revolving credit facility's multicurrency component, $165 million in~~carrying amount of goodwill by reportable segment during the ~~revolving credit facility's U.S. dollar only component, and $450~~three months ended March 31, 2016 are as follows (in thousands):



	North America		Europe		Specialty			Total
Balance as of January 1, 2016	$	1,445,850	$	594,482	$	278,914		$	2,319,246
Business acquisitions and adjustments to previously recorded goodwill	555		742,023		(446		)	742,132
Exchange rate effects	6,127		8,137		(349		)	13,915
Balance as of March 31, 2016	$	1,452,532	$	1,344,642	$	278,119		$	3,075,293

During the three months ended March 31, 2016, we recorded $739.7 million of ~~term loans).~~goodwill related to our acquisition of Rhiag. The ~~Credit Agreement allows~~goodwill recorded for the ~~Company to increase~~Rhiag acquisition is preliminary, as we are still in process of completing our valuation of assets acquired and liabilities assumed. See Note 2, "Business Combinations" for further information on our acquisitions.

The components of other intangibles are as follows (in thousands):



	March 31, 2016							December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Trade names and trademarks	$	216,027	$	(45,803	)	$	170,224	$	172,219	$	(43,458	)	$	128,761
Customer and supplier relationships	287,857		(45,013		)	242,844		95,508		(41,007		)	54,501
Software and other technology related assets	50,437		(20,388		)	30,049		44,500		(17,844		)	26,656
Covenants not to compete	10,696		(6,083		)	4,613		10,774		(5,575		)	5,199
	$	565,017	$	(117,287	)	$	447,730	$	323,001	$	(107,884	)	$	215,117

During the ~~amount~~three months ended March 31, 2016, we recorded intangible assets resulting from our acquisition of Rhiag, which included $190.5 million of customer relationships, $43.3 million of trade names, and $4.8 million of software and other technology related assets; the ~~revolving credit facility or obtain incremental term loans up~~remaining intangible assets recorded in connection with our acquisition of Rhiag were not material. The intangible assets recorded for the Rhiag acquisition represent the existing intangible assets on Rhiag's balance sheet prior to the ~~greater~~acquisition, as we are still in process of ~~$400 million or~~completing our valuation for the ~~amount that may be borrowed while maintaining a senior secured leverage ratio of less than or equal to 2.50 to 1.00, subject to the agreement of the lenders.~~

Amounts under the revolving credit facilities are due and payable upon maturity of the Credit Agreement on May 3, 2019. Term loan borrowings are due and payable in quarterly installments equal to 1.25% of the original principal amount beginning on June 30, 2014 with the remaining balance due and payable on the maturity date of the Credit Agreement. We are required to prepay the term loan by amounts equal to proceeds from the sale or disposition of certainintangible assets ~~if the proceeds are not reinvested within twelve months. We also have the option to prepay outstanding amounts under the Credit Agreement without penalty.~~

~~The Credit Agreement contains customary representations and warranties, and contains customary covenants that provide limitations and conditions~~acquired. See Note 2, "Business Combinations" for further information on our ~~ability~~acquisitions.

Trade names and trademarks are amortized over a useful life ranging from 4 to ~~enter into certain transactions. The Credit Agreement also contains financial~~30 years on a straight-line basis. Customer and ~~affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio.~~

Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at September 30, 2015 and December 31, 2014 were 2.12% and 2.10%, respectively. We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, as well as a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.

Of the total borrowings outstanding under the Credit Agreement, $22.5 million was classified as current maturities at both September 30, 2015 and December 31, 2014. As of September 30, 2015, there were letters of credit outstanding in the aggregate amount of $71.4 million. The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at September 30, 2015 was $1.3 billion.

Related to the execution of the Credit Agreement in March 2014, we incurred $3.7 million of fees, of which $3.4 million were capitalized within Other Assets on our Unaudited Condensed Consolidated Balance Sheet andsupplier relationships are amortized over the ~~term~~expected period to be benefited (4 to 20 years) on an accelerated basis. Software and other technology related assets are amortized on a straight-line basis over the expected period to be benefited (three to six years). Covenants not to compete are amortized over the lives of the ~~agreement.~~respective agreements, which range from one to five years, on a straight-line basis. Amortization expense for intangible assets was $8.9 million and $8.3 million during the three months ended March 31, 2016 and 2015, respectively. Estimated amortization expense for each of the five years in the period ending December 31, 2020 is $48.0 million, $56.6 million, $48.0 million, $43.3 million and $28.6 million, respectively.

Warranty Reserve

Some of our salvage mechanical products are sold with a standard six month warranty against defects. Additionally, some of our remanufactured engines are sold with a standard three year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products. We record the estimated warranty costs at the time of sale using historical warranty claim information to project future warranty claims activity. The ~~remaining $0.3~~changes in the warranty reserve are as follows (in thousands):



Balance as of January 1, 2016	$	17,363
Warranty expense	8,804
Warranty claims	(7,451		)
Balance as of March 31, 2016	$	18,716

Investments in Unconsolidated Subsidiaries

In February 2016, we sold our investment in ACM Parts Pty Ltd. Our investment in unconsolidated subsidiaries and our equity in the net earnings of the investees was not material as of and for the three months ended March 31, 2016.

Depreciation Expense

Included in Cost of Goods Sold on the Unaudited Condensed Consolidated Statements of Income is depreciation expense associated with our refurbishing, remanufacturing, and furnace operations as well as our distribution centers. Depreciation expense was $24.3 million and $22.4 million during the three months ended March 31, 2016 and 2015, respectively.

Recent Accounting Pronouncements

to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities adopting the standard have the option of using either a full retrospective or modified retrospective approach in the application of this guidance. ASU 2014-09 will be effective for the Company during the first quarter of our fiscal year 2018. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. We are still evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

In September 2015, the FASB issued Accounting Standards Update 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments" ("ASU 2015-16"), which requires an acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are identified as opposed to recognition as if the accounting had been completed as of the acquisition date. The ASU also requires disclosure regarding amounts that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date. ASU 2015-16 is effective for the Company during the first quarter of our fiscal year 2016 and is being applied on a prospective basis. The measurement-period adjustments for our acquisitions and the related impact on earnings of any amounts that would have been recorded in previous periods are disclosed in Note 2, "Business Combinations."

In February 2016, the FASB issued Accounting Standards Update 2016-02, "Leases" ("ASU 2016-02"), to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The standard requires that entities apply the effects of these changes using a modified retrospective approach, which includes a number of optional practical expedients. We are still evaluating the impact that ASU 2016-02 will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" (“ASU 2016-09”), to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is currently assessing the impact that this standard will have upon adoption.


Note 4.	Restructuring and Acquisition Related Expenses

Acquisition Related Expenses

Acquisition related expenses, which include external costs such as legal, accounting, and advisory fees, ~~were expensed~~totaled $12.7 million for the three months ended March 31, 2016. Of our 2016 expenses, $10.7 million was related to our acquisition of Rhiag, $1.8 million related to our definitive agreement to acquire PGW, and $0.2 million was related to other completed and potential acquisitions. Acquisition related expenses incurred during the three months ended March 31, 2015 totaled $0.5 million, primarily related to our 2015 acquisitions of the Netherlands distributors.

Acquisition Integration Plans

During the three months ended March 31, 2016, we incurred $2.1 million of restructuring expenses. Expenses incurred during the three months ended March 31, 2016 were primarily a result of the integration of our acquisition of Parts Channel into our existing North American wholesale business and the integration of our Coast acquisition into our existing Specialty business. Expenses incurred were primarily related to facility closure and relocation costs for duplicate facilities and the termination of employees.

During the three months ended March 31, 2015, we incurred $6.0 million of restructuring expenses. These expenses were primarily a result of the integration of our October 2014 asacquisition of Stag Parkway Holding Company, a ~~loss on debt extinguishment.~~supplier of parts for recreational vehicles, into our Specialty business. Expenses incurred were primarily related to facility closure and relocation costs for duplicate facilities, and the termination of employees in connection with the consolidation of overlapping facilities with our existing business.

~~Senior Notes~~

~~In April 2014, LKQ Corporation completed an offer~~We expect to ~~exchange $600 million aggregate principal amount~~incur expenses related to the integration of registered 4.75% Senior Notes due 2023 (the "Notes") for notes previously issued through a private placement. The Notes are governed by the original Indenture dated as of May 9, 2013 among LKQ Corporation, certain of our ~~subsidiaries (the "Guarantors")~~other acquisitions into our existing operations throughout 2016. These integration activities are expected to include the closure of duplicate facilities, rationalization of personnel in connection with the consolidation of overlapping facilities with our existing business, and ~~U.S. Bank National Association, as trustee. The Notes~~moving expenses. Future expenses to complete these integration plans are ~~substantially identical~~expected to ~~those previously issued through the private placement, except the Notes are registered under the Securities Act~~be approximately $9.0 million; this amount excludes any potential future restructuring expense related to our acquisitions of ~~1933.~~

~~The Notes bear interest at a rate of~~ ~~4.75%~~ ~~per year from the most recent payment date on which interest has been paid or provided for. Interest on the Notes is payable in arrears on May 15~~Rhiag and ~~November 15 of each year. The first interest payment was made on November 15, 2013. The Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.~~PGW.

The Notes and the guarantees are, respectively, LKQ Corporation's and each Guarantor's senior unsecured obligations. The Notes are subordinated to all of LKQ Corporation's and the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Notes are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Notes to the extent of the assets of those subsidiaries.

~~Receivables Securitization Facility~~

On September 29, 2014, LKQ Corporation amended the terms of the receivables securitization facility with The Bank of Tokyo-Mitsubishi UFJ, LTD. ("BTMU") to: (i) extend the term of the facility to October 2, 2017; (ii) increase the maximum amount available to $97 million; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to BTMU for the benefit of conduit investors and/or financial institutions for cash proceeds. Upon payment of the receivables by customers, rather than remitting to BTMU the amounts collected, LKQ retains such collections as proceeds for the sale of new receivables generated by certain of the ongoing operations of the Company.

The sale of the ownership interest in the receivables is accounted for as a secured borrowing in our Unaudited Condensed Consolidated Balance Sheets, under which the receivables included in the program collateralize the amounts invested by BTMU, the conduit investors and/or financial institutions (the "Purchasers"). The receivables are held by LKQ Receivables Finance Company, LLC ("LRFC"), a wholly owned bankruptcy-remote special purpose subsidiary of LKQ, and therefore, the receivables are available first to satisfy the creditors of LRFC, including the investors. As of ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014, $128.3 million and~~ ~~$129.5 million, respectively, of net receivables were collateral for the investment under the receivables facility.~~

Under the receivables facility, we pay variable interest rates plus a margin on the outstanding amounts invested by the Purchasers. The variable rates are based on (i) commercial paper rates, (ii) the London InterBank Offered Rate ("LIBOR"), or (iii) base rates, and are payable monthly in arrears. Commercial paper rates will be the applicable variable rate unless conduit investors are not available to invest in the receivables at commercial paper rates. In such case, financial institutions will invest at the LIBOR rate or at base rates. We also pay a commitment fee on the excess of the investment maximum over the average daily outstanding investment, payable monthly in arrears. As of ~~September 30, 2015, the interest rate under the receivables facility was based on commercial paper rates and was 0.98%. The outstanding balances of~~ ~~$89.8 million~~ ~~and $94.9 million as of~~ ~~September 30, 2015~~ and December 31, 2014, respectively, were classified as long-term on the Unaudited Condensed Consolidated Balance Sheets because we have the ability and intent to refinance these borrowings on a long-term basis.


Note 5.	~~Derivative Instruments and Hedging Activities~~Stock-Based Compensation

In order to attract and retain employees, non-employee directors, consultants, and other persons associated with us, we may grant qualified and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and performance units under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). We ~~are exposed~~have granted RSUs, stock options, and restricted stock under the Equity Incentive Plan. We expect to ~~market risks, including the effect~~issue new shares of ~~changes in interest rates, foreign currency exchange rates~~common stock to cover past and commodity prices. Under our current policies, we use derivatives to manage our exposure to variable interest rates on our senior secured debt, changing foreign exchange rates for certain foreign currency denominated transactions and changes in metals prices. We do not hold or issue derivatives for trading purposes.future equity grants.

~~Cash Flow Hedges~~RSUs

AtRSUs vest over periods of up to ~~September 30, 2015~~five years, subject to a continued service condition. Currently outstanding RSUs contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case, both conditions must be met before any RSUs vest. For the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant date. Each RSU converts into one share of LKQ common stock on the applicable vesting date. The grant date fair value of RSUs is based on the market price of LKQ stock on the grant date.

During the three months ended March 31, 2016, we ~~had interest rate swap agreements in place~~granted 745,810 RSUs to ~~hedge a portion~~employees. The fair value of RSUs that vested during the three months ended March 31, 2016 was $15.1 million.

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the three months ended March 31, 2016:



	Number Outstanding		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands) ⁽¹⁾
Unvested as of January 1, 2016	1,981,292		$	24.19	$	58,706
Granted	745,810		$	27.88
Vested	(574,496	)	$	20.85
Forfeited / Canceled	(20,192	)	$	26.39
Unvested as of March 31, 2016	2,132,414		$	26.35	$	68,088
Expected to vest after March 31, 2016	2,061,532		$	26.32	$	65,825

⁽¹⁾The aggregate intrinsic value of unvested and expected to vest RSUs represents the total pretax intrinsic value (the fair value of the ~~variable interest rate risk~~Company's stock on ~~our variable rate borrowings under our Credit Agreement, with~~ the ~~objective~~last day of ~~minimizing~~each period multiplied by the ~~impact~~number of ~~interest rate fluctuations and stabilizing cash flows. Under~~units) that would have been received by the ~~terms~~holders had all RSUs vested. This amount changes based on the market price of the ~~interest rate swap agreements, we pay~~Company’s common stock.

Stock Options

Stock options vest over periods of up to five years, subject to a continued service condition. Stock options expire either six or ten years from the ~~fixed interest rate and receive payment at a variable rate of interest based on LIBOR or~~date they are granted. No options were granted during the ~~Canadian Dealer Offered Rate (“CDOR”)~~three months ended March 31, 2016.

The following table summarizes activity related to our stock options under the Equity Incentive Plan for the ~~respective currency~~three months ended March 31, 2016:



	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) ⁽¹⁾
Balance as of January 1, 2016	3,765,952		$	8.63	2.9	$	79,317
Exercised	(459,610	)	$	6.96
Forfeited / Canceled	(4,782	)	$	31.38
Balance as of March 31, 2016	3,301,560		$	8.83	2.8	$	76,288
Exercisable as of March 31, 2016	3,214,006		$	8.19	2.8	$	76,288
Exercisable as of March 31, 2016 and expected to vest thereafter	3,292,805		$	8.77	2.8	$	76,288

⁽¹⁾ The aggregate intrinsic value of ~~each interest rate swap agreement’s notional amount. The effective portion of changes in~~outstanding, exercisable and expected to vest options represents the total pretax intrinsic value (the difference between the fair value of the ~~interest rate swap agreements is recorded in Accumulated Other Comprehensive Income (Loss)~~Company's stock on the last day of each period and ~~is reclassified to interest expense when~~the

exercise price, multiplied by the ~~underlying interest payment has an impact on earnings. The ineffective portion~~number of ~~changes in~~options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of January 1, 2016 and March 31, 2016, respectively. This amount changes based on the market price of the ~~interest rate swap agreements is reported in interest expense. Our interest rate swap contracts have maturity dates ranging from 2015 through 2016.~~Company’s common stock.

From time to time, we may hold foreign currency forward contracts related to certain foreign currency denominated intercompany transactions, with the objective of minimizing the impact of changing exchange rates on these future cash flows, as well as minimizing the impact of fluctuating exchange rates on our results of operations through the respective dates of settlement. Under the terms of the foreign currency forward contracts, we will sell the foreign currency in exchange for U.S. dollars at a fixed rate on the maturity dates of the contracts. The effective portion of the changes in fair value of the foreign currency forward contracts is recorded in Accumulated Other Comprehensive Income (Loss) and reclassified to other income (expense) when the underlying transaction has an impact on earnings.

The following table summarizes the ~~notional amounts and fair values~~components of ~~our designated cash flow hedges as of~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014~~pre-tax stock-based compensation expense (in thousands):

Notional Amount Fair Value at September 30, 2015 (USD) Fair Value at December 31, 2014 (USD)
September 30, 2015 December 31, 2014 Other Accrued Expenses Other Noncurrent Liabilities Other Accrued Expenses Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated $ 420,000
$ 420,000
$ 140
$ 1,519
$ 2,691
$ 1,615
GBP denominated £ 50,000
£ 50,000
—
653
—
893
CAD denominated C$ 25,000
C$ 25,000
62
—
—
19
Total cash flow hedges $ 202
$ 2,172
$ 2,691
$ 2,527

While our derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis in our Unaudited Condensed Consolidated Balance Sheets. The impact



	Three Months Ended
	March 31,
	2016		2015
RSUs	$	5,879	$	5,420
Stock options	37		126
Total stock-based compensation expense	$	5,916	$	5,546

As of ~~netting the fair values of these contracts would not have a material effect on our Unaudited Condensed Consolidated Balance Sheets at~~ ~~September 30, 2015~~ or ~~December~~March 31, ~~2014~~.

~~The activity~~2016, unrecognized compensation expense related to ~~our cash flow hedges~~unvested RSUs and stock options is ~~included in~~ ~~Note 12, "Accumulated Other Comprehensive Income (Loss)." Ineffectiveness~~$44.3 million and $0.2 million, respectively, and is expected to be recognized over weighted-average periods of 3.4 years and 0.8 years, respectively. Stock-based compensation expense related to ~~our cash flow hedges was immaterial to our results of operations during the three and nine months ended~~ ~~September 30, 2015~~ ~~and~~ ~~September 30, 2014. We do not expect future ineffectiveness related to our cash flow hedges to have a material effect on our results of operations.~~

~~As of~~ ~~September 30, 2015, we estimate that~~ ~~$1.5 million~~ ~~of derivative losses (net of tax) included in Accumulated Other Comprehensive Loss~~these awards will be ~~reclassified into~~different to the extent the actual forfeiture rates are different from our ~~consolidated statements of income within the next~~ 12 ~~months.~~

~~Other Derivative Instruments~~

We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability related to inventory purchases and intercompany financing transactions denominated in a non-functional currency, as well as commodity forward contracts to manage our exposure to fluctuations in precious metals prices. We have elected not 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, which could result in volatility in our earnings. The notional amount and fair

~~value of these contracts at~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014, along with the effect on our results of operations during each of the nine month periods ended~~ ~~September 30, 2015~~ ~~and~~ ~~September 30, 2014, were immaterial.~~estimated forfeiture rates.


Note 6.	~~Fair Value Measurements~~Earnings Per Share

~~Financial Assets and Liabilities Measured at Fair Value~~The following chart sets forth the computation of earnings per share (in thousands, except per share amounts):



	Three Months Ended
	March 31,
	2016		2015
Net Income	$	107,732	$	107,095
Denominator for basic earnings per share—Weighted-average shares outstanding	306,157		304,003
Effect of dilutive securities:
RSUs	521		668
Stock options	1,691		2,290
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	308,369		306,961
Earnings per share, basic	$	0.35	$	0.35
Earnings per share, diluted	$	0.35	$	0.35

~~We use~~The following table sets forth the ~~market and income approaches to value our financial assets and liabilities, and during~~number of employee stock-based compensation awards outstanding but not included in the ~~nine~~computation of diluted earnings per share because their effect would have been antidilutive for the three months ended ~~September 30, 2015~~, 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 unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of ~~September 30, 2015~~March 31, 2016 and ~~December 31, 2014~~2015 (in thousands):

Balance as of September 30, 2015 Fair Value Measurements as of September 30, 2015
Level 1 Level 2 Level 3
Assets:
Cash surrender value of life insurance $ 28,787
$ —
$ 28,787
$ —
Total Assets $ 28,787
$ —
$ 28,787
$ —
Liabilities:
Contingent consideration liabilities $ 4,548
$ —
$ —
$ 4,548
Deferred compensation liabilities 28,388
—
28,388
—
Interest rate swaps 2,374
—
2,374
—
Total Liabilities $ 35,310
$ —
$ 30,762
$ 4,548



	Three Months Ended
	March 31,
	2016	2015
Antidilutive securities:
RSUs	225	336
Stock options	88	100

Balance as of December 31, 2014 Fair Value Measurements as of December 31, 2014
Level 1 Level 2 Level 3
Assets:
Cash surrender value of life insurance $ 28,242
$ —
$ 28,242
$ —
Total Assets $ 28,242
$ —
$ 28,242
$ —
Liabilities:
Contingent consideration liabilities $ 7,295
$ —
$ —
$ 7,295
Deferred compensation liabilities 27,580
—
27,580
—
Interest rate swaps 5,218
—
5,218
—
Total Liabilities $ 40,093
$ —
$ 32,798
$ 7,295

The cash surrender value of life insurance is included in Other Assets on our Unaudited Condensed Consolidated Balance Sheets. The current portion of deferred compensation and contingent consideration liabilities is included in Other Current Liabilities, and the noncurrent portion is included in Other Noncurrent Liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. The balance sheet classification of the interest rate swaps is presented in ~~Note 5, "Derivative Instruments and Hedging Activities~~."

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

~~Our contingent consideration liabilities are related to our business acquisitions as further described in~~ ~~Note 8, "Business Combinations~~." 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. These unobservable inputs include internally-developed


Note 7.	Accumulated Other Comprehensive Income (Loss)

~~assumptions~~The components of the probabilities of achieving specified targets, which are used to determine the resulting cash flows and the applicable discount rate. Our Level 3 fair value measurements are established and updated quarterly by our corporate accounting department using current information about these key assumptions, with the input and oversight of our operational and executive management teams. We evaluate the performance of the business during the period compared to our previous expectations, along with any changes to our future projections, and update the estimated cash flows accordingly. In addition, we consider changes to our cost of capital and changes to the probability of achieving the earnout payment targets when updating our discount rate on a quarterly basis.

~~The significant unobservable inputs used in the fair value measurements of our Level 3 contingent consideration liabilities were as follows:~~

September 30, December 31,
2015 2014
Unobservable Input (Weighted Average)
Probability of achieving payout targets 75.9 % 79.1 %
Discount rate 7.5 % 7.5 %

A decrease in the assessed probabilities of achieving the targets or an increase in the discount rate, in isolation, would result in a lower fair value measurement. Changes in the values of the liabilities are recorded in Change in Fair Value of Contingent Consideration Liabilities withinAccumulated Other ~~Expense (Income) on our Unaudited Condensed Consolidated Statements of Income.~~

~~Changes in the fair value of our contingent consideration obligations~~Comprehensive Income (Loss) are as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Beginning Balance $ 5,191
$ 8,762
$ 7,295
$ 55,653
Contingent consideration liabilities recorded for business acquisitions —
(1,203 ) —
5,854
Payments (610 ) —
(2,815 ) (52,305 )
Increase (decrease) in fair value included in earnings 89
12
365
(2,000 )
Exchange rate effects (122 ) (270 ) (297 ) 99
Ending Balance $ 4,548
$ 7,301
$ 4,548
$ 7,301



	Three Months Ended												Three Months Ended
	March 31, 2016												March 31, 2015
	Foreign Currency Translation			Unrealized (Loss) Gain on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Accumulated Other Comprehensive (Loss) Income			Foreign Currency Translation			Unrealized (Loss) Gain on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plan			Accumulated Other Comprehensive (Loss) Income
Beginning balance	$	(96,890	)	$	(932	)	$	(7,648	)	$	(105,470	)	$	(27,073	)	$	(3,401	)	$	(9,751	)	$	(40,225	)
Pretax income (loss)	140			(165		)	—			(25		)	(54,810		)	(1,074		)	—			(55,884		)
Income tax effect	—			49			—			49			—			370			—			370
Reclassification of unrealized loss	—			807			196			1,003			—			1,522			170			1,692
Reclassification of deferred income taxes	—			(259		)	(49		)	(308		)	—			(535		)	(42		)	(577		)
Ending Balance	$	(96,750	)	$	(500	)	$	(7,501	)	$	(104,751	)	$	(81,883	)	$	(3,118	)	$	(9,623	)	$	(94,624	)

~~The purchase price for~~Unrealized losses on our ~~2011 acquisition~~interest rate swap contracts totaling $0.8 million and $1.5 million were reclassified to interest expense in our Unaudited Condensed Consolidated Statements of Euro Car Parts Holdings Limited ("ECP") included contingent payments depending on the achievement of certain annual performance targets. The performance target for 2013 was exceeded, and therefore, we settled the liability related to the 2013 performance period for the maximum amount of £30 millionIncome during the three months ended ~~June 30, 2014 through a cash payment of $44.8 million (£26.9 million)~~March 31, 2016 and ~~the issuance of notes for $5.1 million (£3.1 million).~~

~~Of the amounts included in earnings for the three and nine months ended September 30,~~ 2015, ~~$0.1 million and $0.2 million of losses, respectively, were~~respectively. The deferred income taxes related to ~~contingent consideration obligations outstanding as of September 30, 2015. Of the amounts included in earnings for the nine months ended September 30, 2014, $0.2 million of losses~~our cash flow hedges were ~~related~~reclassified from Accumulated Other Comprehensive Income to contingent consideration obligations outstanding as of September 30, 2015; substantially all of the losses included in earnings for the three months ended September 30, 2014 related to contingent consideration obligations outstanding as of September 30, 2015.

The changes in the fair value of contingent consideration obligations included in earnings during the respective periods in 2015 and 2014 reflect the quarterly reassessment of each obligation's fair value, including an analysis of the significant inputs used in the valuation, as well as the accretion of the present value discount.

~~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~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014, the fair value of our credit agreement borrowings reasonably approximated the carrying value of~~ ~~$892 million~~ ~~and~~ ~~$1.1 billion~~, respectively. In addition, based on market conditions, the fair value of the outstanding borrowings under the receivables facility reasonably approximated the carrying value of $90 million and $95 million at ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014, respectively. As of~~ ~~September 30, 2015~~ ~~and December 31, 2014, the~~

~~fair value of our senior notes was approximately~~ ~~$583 million~~ ~~and $569 million, respectively, compared to a carrying value of~~ ~~$600 million~~.

The fair value measurements of the borrowings under our credit agreement and receivables facility are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at ~~September 30, 2015~~ to assume these obligations. The fair value of our senior notes is classified as Level 1 within the fair value hierarchy since it is determined based upon observable market inputs including quoted market prices in an active market.income tax expense.


Note 7.8.	~~Commitments and Contingencies~~Long-Term Obligations

~~Operating Leases~~Long-Term Obligations consist of the following (in thousands):



	March 31,			December 31,
	2016			2015
Senior secured credit agreement:
Term loans payable	$	761,707		$	410,625
Revolving credit facilities	1,291,622			480,481
Senior notes	600,000			600,000
Receivables securitization facility	97,000			63,000
Notes payable through October 2025 at weighted average interest rates of 1.7% and 2.2%, respectively	18,622			16,104
Other long-term debt at weighted average interest rates of 1.8% and 2.4%, respectively	67,749			29,485
Total debt	2,836,700			1,599,695
Less: long-term debt issuance costs	(17,098		)	(13,533		)
Less: current debt issuance cost	(1,040		)	(1,460		)
Total debt, net of issuance costs	2,818,562			1,584,702
Less: current maturities, net of debt issuance costs	(75,365		)	(56,034		)
Long term debt, net of debt issuance costs	$	2,743,197		$	1,528,668

Senior Secured Credit Agreement

On January 29, 2016, LKQ Corporation, LKQ Delaware LLP, and certain other subsidiaries (collectively, the "Borrowers") entered into the Fourth Amended and Restated Credit Agreement ("Credit Agreement"), which amended the Company’s Third Amended and Restated Credit Agreement by modifying certain terms to (1) extend the maturity date by approximately two years to January 29, 2021; (2) increase the total availability under the credit agreement from $2.3 billion to $3.2 billion (composed of $2.45 billion in the revolving credit facility's multicurrency component; and $750 million of term loans, which consist of a term loan of approximately $500 million and a €230 million term loan); (3) increase our ability to incur additional indebtedness; and (4) make other immaterial or clarifying modifications and amendments to the terms of the Third Amended and Restated Credit Agreement. The additional term loan borrowing was used to repay outstanding revolver

borrowings and the amount outstanding under our receivables securitization facility, and to pay fees and expenses relating to the amendment and restatement. The remaining additional term loan borrowing was used to fund the Rhiag acquisition.

Amounts under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, 2021. Amounts under the initial and additional term loan borrowings will be due and payable in quarterly installments equal to 0.625% of the original principal amount on each of June 30, September 30, and December 31, 2016, and quarterly installments thereafter equal to 1.25% of the original principal amount beginning on March 31, 2017, with the remaining balance due and payable on the maturity date of the Credit Agreement.

We are ~~obligated~~required to prepay the term loan by amounts equal to proceeds from the sale or disposition of certain assets if the proceeds are not reinvested within twelve months. We also have the option to prepay outstanding amounts under ~~noncancelable operating leases~~the Credit Agreement without penalty.

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

Borrowings under the Credit Agreement bear interest at variable rates, which depend on the currency and duration of the borrowing elected, plus an applicable margin. The applicable margin is subject to change in increments of 0.25% depending on our net leverage ratio. Interest payments are due on the last day of the selected interest period or quarterly in arrears depending on the type of borrowing. Including the effect of the interest rate swap agreements described in Note 9, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at March 31, 2016 and December 31, 2015 were 2.0% and 1.8%, respectively. We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, as well as a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.

Of the total borrowings outstanding under the Credit Agreement, $23.8 million and $22.5 million were classified as current maturities at March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016, there were letters of credit outstanding in the aggregate amount of $65.8 million. The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at March 31, 2016 was $1.1 billion.

Related to the execution of the Credit Agreement in January 2016, we incurred $5.9 million of fees, of which $4.8 million were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement. The remaining $1.1 million of fees, together with $1.8 million of capitalized debt issuance costs related to our Third Amended and Restated Credit Agreement, were expensed during the three months ended March 31, 2016 as a loss on debt extinguishment.

Senior Notes

In April 2014, LKQ Corporation completed an offer to exchange $600 million aggregate principal amount of registered 4.75% Senior Notes due 2023 (the "Notes") for ~~corporate office space, warehouse~~notes previously issued through a private placement. The Notes are governed by the Indenture dated as of May 9, 2013 among LKQ Corporation, certain of our subsidiaries (the "Guarantors") and ~~distribution facilities, trucks~~U.S. Bank National Association, as trustee. The Notes are substantially identical to those previously issued through the private placement, except the Notes are registered under the Securities Act of 1933.

The Notes bear interest at a rate of 4.75% per year from the most recent payment date on which interest has been paid or provided for. Interest on the Notes is payable in arrears on May 15 and November 15 of each year. The first interest payment was made on November 15, 2013. The Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

Euro Notes

On April 14, 2016, LKQ Italia Bondco S.p.A. (the “Issuer”), an indirect, wholly-owned subsidiary of LKQ Corporation, completed an offering of €500 million aggregate principal amount of senior notes due April 1, 2024 (the “Euro Notes”) in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933. The proceeds from the offering were used to repay revolver borrowings under the Credit Agreement and to pay related fees and expenses. The Euro Notes are governed by the Indenture dated as of April 14, 2016 (the “Indenture”) among the Issuer, the

Company and certain ~~equipment.~~of the Company’s subsidiaries (the “Euro Notes Guarantors”), the trustee, and the paying agent, transfer agent, and registrar.

The Euro Notes bear interest at a rate of 3.875% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the Euro Notes is payable in arrears on April 1 and October 1 of each year, beginning on October 1, 2016. The Euro Notes are fully and unconditionally guaranteed by the Euro Notes Guarantors.

The Euro Notes and the guarantees will be the Issuer’s and each Euro Notes Guarantor’s senior unsecured obligations and will be subordinated to all of the Euro Notes Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Euro Notes will be effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes to the extent of the assets of those subsidiaries. Pursuant to the Indenture, we have agreed to take all actions that may legally be taken in order to cause two of our Italian subsidiaries and two of our Czech subsidiaries, each of which are subsidiaries of the Rhiag group we recently acquired, to become Euro Notes Guarantors within 60 days after the issue date of the Euro Notes. The Euro Notes have been listed on the ExtraMOT, Professional Segment of the Borsa Italia S.p.A. securities exchange and we have agreed to use commercially reasonable efforts to maintain such listing and to also cause the Euro Notes to be listed on the Global Exchange Market of the Irish Stock Exchange as promptly as practicable after the issue date of the Euro Notes.

Receivables Securitization Facility

On September 29, 2014, we amended the terms of the receivables securitization facility with The Bank of Tokyo-Mitsubishi UFJ, LTD. ("BTMU") to: (i) extend the term of the facility to October 2, 2017; (ii) increase the maximum amount available to $97 million; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to BTMU for the benefit of conduit investors and/or financial institutions for cash proceeds. Upon payment of the receivables by customers, rather than remitting to BTMU the amounts collected, LKQ retains such collections as proceeds for the sale of new receivables generated by certain of the ongoing operations of the Company.

The ~~future minimum lease commitments~~sale of the ownership interest in the receivables is accounted for as a secured borrowing in our Unaudited Condensed Consolidated Balance Sheets, under ~~these leases at~~which the receivables included in the program collateralize the amounts invested by BTMU, the conduit investors and/or financial institutions (the "Purchasers"). The receivables are held by LKQ Receivables Finance Company, LLC ("LRFC"), a wholly owned bankruptcy-remote special purpose subsidiary of LKQ, and therefore, the receivables are available first to satisfy the creditors of LRFC, including the investors. As of ~~September 30,~~March 31, 2016 and December 31, 2015, $140.8 million and $136.1 million, respectively, of net receivables were collateral for the investment under the receivables facility.

Under the receivables facility, we pay variable interest rates plus a margin on the outstanding amounts invested by the Purchasers. The variable rates are ~~as follows (in thousands):~~

Three months ending December 31, 2015 $ 40,241
Years ending December 31:
2016 146,774
2017 124,121
2018 102,397
2019 82,568
2020 66,396
Thereafter 232,894
Future Minimum Lease Payments $ 795,391

~~Litigation and Related Contingencies~~

~~We have certain contingencies resulting from litigation, claims and other commitments~~based on (i) commercial paper rates, (ii) the London InterBank Offered Rate ("LIBOR"), or (iii) base rates, and are ~~subject~~payable monthly in arrears. Commercial paper rates will be the applicable variable rate unless conduit investors are not available to invest in the receivables at commercial paper rates. In such case, financial institutions will invest at the LIBOR rate or at base rates. We also pay a ~~variety~~commitment fee on the excess of ~~environmental~~the investment maximum over the average daily outstanding investment, payable monthly in arrears. As of March 31, 2016, the interest rate under the receivables facility was based on commercial paper rates and ~~pollution control laws~~was 1.3%. The outstanding balances of $97.0 million and ~~regulations incident~~$63.0 million as of March 31, 2016 and December 31, 2015, respectively, were classified as long-term on the Unaudited Condensed Consolidated Balance Sheets because we have the ability and intent to refinance these borrowings on a long-term basis.

Repayment of Rhiag Acquired Debt and Debt Related Liabilities

On March 24, 2016, LKQ Netherlands B.V., a wholly-owned subsidiary of ours, borrowed €508 million under our multi-currency revolving credit facility to repay the Rhiag acquired debt and debt related liabilities. The borrowed funds were passed through an intercompany note to Rhiag and then were used to pay (i) $519.6 million (€465.0 million) for the principal of Rhiag senior note debt assumed with the acquisition, (ii) accrued interest of $8.0 million (€7.1 million) on the notes, (iii) the call premium of $23.8 million (€21.2 million) associated with early redemption of the notes and (iv) $4.9 million (€4.4 million) to terminate Rhiag’s outstanding interest rate swap related to the ~~ordinary course~~floating portion of ~~business. We currently expect that~~ the ~~resolution~~notes. The call premium is recorded as a loss on debt extinguishment in the Unaudited Condensed Consolidated Statements of ~~such contingencies will not materially affect our financial position, results~~Income. In April 2016, the proceeds from the Euro Notes were used to settle the intercompany note with LKQ Netherlands B.V. and then to repay a portion of ~~operations or cash flows.~~the borrowings on the revolving credit facility.


Note 8.9.	~~Business Combinations~~Derivative Instruments and Hedging Activities

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

Cash Flow Hedges

At ~~September 30, 2015~~March 31, 2016, we ~~completed 17 acquisitions, including 4 wholesale businesses~~had interest rate swap agreements in ~~North America, 11 wholesale businesses in Europe,~~place to hedge a self service retail operation, and a specialty vehicle aftermarket business. Our wholesale business acquisitions in North America included PartsChannel, Inc. ("Parts Channel"), an aftermarket collision parts distributor. The specialty aftermarket business acquired was The Coast Distribution System, Inc. ("Coast"), a supplierportion of ~~replacement parts, supplies and accessories in North America for~~ the recreational vehicle and outdoor recreation markets. Our European acquisitions included 11 aftermarket parts distribution businesses in the Netherlands, 9 of which were former customers of and distributors forvariable interest rate risk on our ~~Netherlands subsidiary, Sator Beheer B.V. ("Sator"), and were acquired~~variable rate borrowings under our Credit Agreement, with the objective of ~~expanding our distribution network~~reducing the impact of interest rate fluctuations and stabilizing cash flows. Under the terms of the interest rate swap agreements, we pay the fixed interest rate and receive payment at a variable rate of interest based on LIBOR for the respective currency of each interest rate swap agreement’s notional amount. The effective portion of changes in the ~~Netherlands. Our other acquisitions completed during the nine months ended~~ ~~September 30, 2015~~ ~~enabled us to expand our geographic presence. Total acquisition date~~ fair value of the ~~consideration for these acquisitions was $184.5 million, composed~~interest rate swap agreements is recorded in Accumulated Other Comprehensive Income (Loss) and is reclassified to interest expense when the underlying interest payment has an impact on earnings. The ineffective portion of ~~$157.2 million of cash (net of cash acquired), $4.1 million of notes payable, $22.1 million of other purchase price obligations, and $1.1 million of pre-existing balances between us and~~changes in the ~~acquired entities considered to be effectively settled as a result of the acquisitions. During the nine months ended~~ ~~September 30, 2015~~, we recorded $101.3 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2014 acquisitions. We expect $69.9 million of the $101.3 million of goodwill recorded to be deductible for income tax purposes. In the period between the acquisition dates and ~~September 30, 2015, these acquisitions generated revenue of $83.4 million and net income of $2.0 million.~~

On January 3, 2014, we completed our acquisition of Keystone Automotive Holdings, Inc. ("Keystone Specialty"), which is a leading distributor and marketer of specialty vehicle aftermarket equipment and accessories in North America. Total acquisition date fair value of the ~~consideration for our Keystone Specialty acquisition was $471.9 million, composed~~interest rate swap agreements is reported in interest expense. Our interest rate swap contracts have maturity dates ranging from 2016 through 2021.

In the first quarter of ~~$427.1~~2016, we entered into interest rate swap contracts representing a total of $440 million of ~~cash (net of cash acquired), $31.5 million of notes payable~~U.S. dollar-denominated debt. The new swaps entered into in 2016 mature in January 2021, and ~~$13.4 million of other purchase price obligations~~convert floating to fixed interest rates.

~~(non-interest bearing). We recorded $237.7 million of goodwill~~From time to time, we may hold foreign currency forward contracts related to ~~our acquisition of Keystone Specialty, which we do not expect to be deductible for income tax purposes.~~

~~In addition to our acquisition of Keystone Specialty, we made 22 acquisitions during~~ ~~2014~~, including 9 wholesale businesses in North America, 9 wholesale businesses in Europe, 2 self service retail operations, and 2 specialty vehicle aftermarket businesses. Our European acquisitions included ~~seven~~ ~~aftermarket parts distribution businesses in the Netherlands,~~ ~~five~~ ~~of which were customers of and distributors for our Netherlands subsidiary, Sator. Our European acquisitions were completed~~certain foreign currency denominated intercompany transactions, with the objective of ~~aligning~~reducing the impact of changing exchange rates on these future cash flows, as well as reducing the impact of fluctuating exchange rates on our ~~Netherlands and U.K. distribution models; our other acquisitions completed during~~results of operations through the ~~year endedDecember 31, 2014~~ ~~enabled us to expand~~respective dates of settlement. Under the terms of the foreign currency forward contracts, we will sell the foreign currency in ~~existing markets, introduce new product lines, and enter new markets. Total acquisition date~~exchange for U.S. dollars at a fixed rate on the maturity dates of the contracts. The effective portion of the changes in fair value of the ~~consideration for these additional acquisitions was $359.1 million, composed of $334.3 million of cash (net of cash acquired), $13.5 million of notes payable, $0.3 million of~~foreign currency forward contracts is recorded in Accumulated Other Comprehensive Income (Loss) and reclassified to other ~~purchase price obligations (non-interest bearing), $5.9 million for~~income (expense) when the ~~estimated value of contingent payments to former owners (with maximum potential payments totaling $8.3 million),~~underlying transaction has an impact on earnings.

The following table summarizes the notional amounts and $5.1 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the year ended December 31, 2014, we recorded $178.0 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certainfair values of our ~~2013 acquisitions. We expect $44.2 million~~designated cash flow hedges as of ~~the $178.0 million of goodwill recorded to be deductible for income tax purposes.~~

Our acquisitions are accounted for under the purchase method of accounting and are included in our unaudited condensed consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair market values at the dates of acquisition. The purchase price allocations for the acquisitions made during the nine months ended ~~September 30, 2015~~March 31, 2016 and ~~the last three months of~~ ~~2014~~ are preliminary as we are in the process of determining the following: 1) valuation amounts for certain receivables, inventories and fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the acquisition date fair value of certain liabilities assumed; and 4) the final estimation of the tax basis of the entities acquired. We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations.

~~The preliminary purchase price allocations for the acquisitions completed during the nine months ended September 30, 2015 and the~~ ~~year ended~~December 31, ~~2014~~2015 ~~are as follows~~ (in thousands):



	Notional Amount				Fair Value at March 31, 2016 (USD)						Fair Value at December 31, 2015 (USD)
	March 31, 2016		December 31, 2015		Other Assets		Other Accrued Expenses		Other Noncurrent Liabilities		Other Accrued Expenses
Interest rate swap agreements
USD denominated	$	610,000	$	170,000	$	1,800	$	760	$	1,364	$	858
GBP denominated	£	50,000	£	50,000	—		350		—		465
CAD denominated	C$	—	C$	25,000	—		—		—		24
Total cash flow hedges					$	1,800	$	1,110	$	1,364	$	1,347

Nine Months Ended Year Ended
September 30, 2015 December 31, 2014
All Acquisitions
Keystone
Specialty
Other Acquisitions Total
Receivables $ 35,870
$ 48,473
$ 75,330
$ 123,803
Receivable reserves (1,167 ) (7,748 ) (7,383 ) (15,131 )
Inventory 79,234
150,696
123,815
274,511
Income taxes receivable —
14,096
—
14,096
Prepaid expenses and other current assets 3,352
8,085
4,050
12,135
Property and equipment 8,671
38,080
27,026
65,106
Goodwill 101,253
237,729
177,974
415,703
Other intangibles 3,456
78,110
51,135
129,245
Other assets 3,748
6,159
2,793
8,952
Deferred income taxes 2,243
(26,591 ) 313
(26,278 )
Current liabilities assumed (48,918 ) (63,513 ) (52,961 ) (116,474 )
Debt assumed (2,373 ) —
(32,441 ) (32,441 )
Other noncurrent liabilities assumed (832 ) (11,675 ) (10,573 ) (22,248 )
Contingent consideration liabilities —
—
(5,854 ) (5,854 )
Other purchase price obligations (22,077 ) (13,351 ) (333 ) (13,684 )
Notes issued (4,148 ) (31,500 ) (13,535 ) (45,035 )
Settlement of pre-existing balances (1,073 ) —
(5,052 ) (5,052 )
Cash used in acquisitions, net of cash acquired $ 157,239
$ 427,050
$ 334,304
$ 761,354
While our derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis in our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would not have a material effect on our Unaudited Condensed Consolidated Balance Sheets at March 31, 2016 or December 31, 2015.

The ~~primary reason for~~activity related to our ~~acquisitions made~~cash flow hedges is included in Note 7, "Accumulated Other Comprehensive Income (Loss)." Ineffectiveness related to our cash flow hedges was immaterial to our results of operations during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and March 31, 2015. We do not expect future ineffectiveness related to our cash flow hedges to have a material effect on our results of operations.

As of March 31, 2016, we estimate that $0.5 million of derivative losses (net of tax) included in Accumulated Other Comprehensive Loss will be reclassified into our consolidated statements of income within the next ~~year endedDecember 31, 2014~~12 ~~was~~months.

Other Derivative Instruments

We hold other short-term derivative instruments, including foreign currency forward contracts, to ~~create economic~~manage our exposure to variability related to inventory purchases and intercompany financing transactions denominated in a non-functional

currency. We have elected not to apply hedge accounting for these transactions, and therefore the contracts are adjusted to fair value ~~for~~through our ~~stockholders by enhancing our position~~results of operations as ~~a leading source for alternative collision and mechanical repair products and expanding into other product lines and businesses that may benefit~~

~~from our operating strengths. Our acquisition~~ of Keystone Specialty allows us to enter into new product lines and increase the size of our addressable market. In addition, we believe that the acquisition creates logistics and administrative cost synergies as well as cross-selling opportunities,each balance sheet date, which ~~contributed to the goodwill recorded on the Keystone Specialty acquisition.Other acquisitions completed during 2014 and 2015 enabled us to expand our distribution network in the Netherlands and expand our geographic presence.~~

When we identify potential acquisitions, we attempt to target companies with a leading market share, an experienced management team and workforce that provide a fit with our existing operations, and strong cash flows. For certain of our acquisitions, we have identified cost savings and synergies as a result of integrating the company with our existing business that provide additional value to the combined entity. In many cases, acquiring companies with these characteristics willcould result in ~~purchase prices that include a significant~~volatility in our earnings. The notional amount and fair value of ~~goodwill.~~

~~The following pro forma summary presents the effect of the businesses acquired during the nine months ended~~these contracts at ~~September 30, 2015~~ ~~as though the businesses had been acquired as of~~ ~~January 1, 2014~~March 31, 2016 and ~~the businesses acquired during the year ended~~ December 31, ~~2014~~2015, ~~including~~along with the ~~Keystone Specialty acquisition~~effect on ~~January 3, 2014, as though they had been acquired as~~our results of ~~January 1, 2013. The pro forma adjustments are based upon unaudited financial information~~operations during each of the ~~acquired entities (in thousands, except per share data):~~three month periods ended

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Revenue, as reported $ 1,831,732
$ 1,721,024
$ 5,443,714
$ 5,055,933
Revenue of purchased businesses for the period prior to acquisition:
Keystone Specialty —
—
—
3,443
Other acquisitions 28,065
176,693
209,834
582,344
Pro forma revenue $ 1,859,797
$ 1,897,717
$ 5,653,548
$ 5,641,720

Net income, as reported $ 101,346
$ 91,515
$ 328,163
$ 301,050
Net income of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
Keystone Specialty —
144
—
497
Other acquisitions (288 ) 6,841
5,501
17,872
Pro forma net income $ 101,058
$ 98,500
$ 333,664
$ 319,419

Earnings per share, basic—as reported $ 0.33
$ 0.30
$ 1.08
$ 1.00
Effect of purchased businesses for the period prior to acquisition:
Keystone Specialty —
0.00
—
0.00
Other acquisitions (0.00 ) 0.02
0.02
0.06
Pro forma earnings per share, basic ⁽¹⁾
$ 0.33
$ 0.32
$ 1.10
$ 1.06

Earnings per share, diluted—as reported $ 0.33
$ 0.30
$ 1.07
$ 0.98
Effect of purchased businesses for the period prior to acquisition:
Keystone Specialty —
0.00
—
0.00
Other acquisitions (0.00 ) 0.02
0.02
0.06
Pro forma earnings per share, diluted ⁽¹⁾
$ 0.33
$ 0.32
$ 1.09
$ 1.04
March 31, 2016 and March 31, 2015, were immaterial.

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

September 30, 2014, primarily related to our May 2014 acquisitions of five aftermarket parts distribution businesses in the Netherlands. Refer to Note 9, "Restructuring and Acquisition Related Expenses," for further information regarding our acquisition related expenses. These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the periods presented or of future results.


~~Note 9.~~	~~Restructuring and Acquisition Related Expenses~~

~~Acquisition Related Expenses~~

Acquisition related expenses, which include external costs such as legal, accounting and advisory fees, totaled $1.2 million and $2.4 million for the three and nine months ended September 30, 2015, respectively. Expenses incurred during the three and nine months ended September 30, 2014 totaled $1.3 million and $3.2 million, respectively. Of our 2015 expenses, $1.5 million was related to the acquisitions of eleven aftermarket distribution businesses in the Netherlands during the first nine months of 2015, $0.3 million was related to our acquisition of Coast, and $0.6 million was related to other completed and potential acquisitions. The expenses incurred in the first nine months of 2014 were primarily related to our acquisitions of nine aftermarket distribution businesses in the Netherlands, as well as other potential acquisitions.

~~Acquisition Integration Plans~~

~~During the three and nine months ended~~ ~~September 30, 2015, we incurred $3.4 million and $10.3 million of restructuring expenses, respectively. Expenses incurred during the three and nine months ended~~ ~~September 30, 2015~~ were primarily a result of the integration of our acquisition of Parts Channel into our existing North American wholesale business and our October 2014 acquisition and integration of a supplier of parts for recreational vehicles into our Specialty business.

During the three and nine months ended September 30, 2014, we incurred $2.3 million and $9.6 million of restructuring expenses, respectively. These expenses were primarily a result of the integration of Keystone Specialty into our existing business. These integration activities included the closure of duplicate facilities, termination of employees in connection with the consolidation of overlapping facilities with our existing business, moving expenses, and other third party services directly related to the acquisition.

We expect to incur additional expenses related to the integration of certain of our acquisitions into our existing operations throughout the fourth quarter of 2015 and into 2016. These integration activities are expected to include the closure of duplicate facilities, termination of employees in connection with the consolidation of overlapping facilities with our existing business, and moving expenses. Future expenses to complete these integration plans are expected to be less than $9.0 million.


Note 10.	~~Earnings Per Share~~Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to value our financial assets and liabilities, and during the three months ended March 31, 2016, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The ~~following chart sets forth~~tiers in the ~~computation of earnings per share (in thousands, except per share amounts):~~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 unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Net Income $ 101,346
$ 91,515
$ 328,163
$ 301,050
Denominator for basic earnings per share—Weighted-average shares outstanding 305,059
302,724
304,453
302,058
Effect of dilutive securities:
RSUs 603
658
678
804
Stock options 2,066
2,817
2,195
2,988
Restricted stock —
7
—
7
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 307,728
306,206
307,326
305,857
Earnings per share, basic $ 0.33
$ 0.30
$ 1.08
$ 1.00
Earnings per share, diluted $ 0.33
$ 0.30
$ 1.07
$ 0.98

The following ~~table sets forth~~tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the ~~number~~fair value hierarchy of ~~employee stock-based compensation awards outstanding but not included in~~ the ~~computation~~valuation inputs we utilized to determine such fair value as of ~~diluted earnings per share because their effect would have been antidilutive for the three and nine months ended~~ ~~September 30, 2015~~March 31, 2016 and ~~2014~~December 31, 2015 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Antidilutive securities:
RSUs 272
389
306
265
Stock options 95
115
97
120



	Balance as of March 31, 2016		Fair Value Measurements as of March 31, 2016
	Balance as of March 31, 2016		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	31,634	$	—	$	31,634	$	—
Interest rate swaps	1,800		—		1,800		—
Total Assets	$	33,434	$	—	$	33,434	$	—
Liabilities:
Contingent consideration liabilities	$	3,079	$	—	$	—	$	3,079
Deferred compensation liabilities	32,526		—		32,526		—
Interest rate swaps	2,474		—		2,474		—
Total Liabilities	$	38,079	$	—	$	35,000	$	3,079



	Balance as of December 31, 2015		Fair Value Measurements as of December 31, 2015
	Balance as of December 31, 2015		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	29,782	$	—	$	29,782	$	—
Total Assets	$	29,782	$	—	$	29,782	$	—
Liabilities:
Contingent consideration liabilities	$	4,584	$	—	$	—	$	4,584
Deferred compensation liabilities	30,336		—		30,336		—
Interest rate swaps	1,347		—		1,347		—
Total Liabilities	$	36,267	$	—	$	31,683	$	4,584

The cash surrender value of life insurance is included in Other Assets on our Unaudited Condensed Consolidated Balance Sheets. The current portion of deferred compensation and contingent consideration liabilities is included in Other Current Liabilities, and the noncurrent portion is included in Other Noncurrent Liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. The balance sheet classification of the interest rate swaps is presented in Note 9, "Derivative Instruments and Hedging Activities."

Our contingent consideration liabilities are related to our business acquisitions as further described in Note 2, "Business Combinations." 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. These liabilities are not considered material.

Changes in the fair value of our contingent consideration obligations are as follows (in thousands):



	Three Months Ended
	March 31,
	2016			2015
Balance as of January 1	$	4,584		$	7,295
Payments	(1,667		)	(1,667		)
Increase in fair value included in earnings	73			151
Exchange rate effects	89			(218		)
Balance as of March 31	$	3,079		$	5,561

Of the amounts included in earnings for the three months ended March 31, 2016 and 2015, $0.1 million and $0.2 million of losses, respectively, were related to contingent consideration obligations outstanding as of March 31, 2016. Changes in the values of the liabilities are recorded in Change in Fair Value of Contingent Consideration Liabilities within Other Expense (Income) on our Unaudited Condensed Consolidated Statements of Income.

The changes in the fair value of contingent consideration obligations included in earnings during the respective periods in 2016 and 2015 reflect the quarterly reassessment of each obligation's fair value, including an analysis of the significant inputs used in the valuation, as well as the accretion of the present value discount.

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 March 31, 2016 and December 31, 2015, the fair values of our credit agreement borrowings reasonably approximated the carrying values of $2.1 billion and $891.1 million, respectively. In addition, based on market conditions, the fair value of the outstanding borrowings under the receivables facility reasonably approximated the carrying value of $97.0 million and $63.0 million at March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016 and December 31, 2015, the fair value of the Notes was approximately $576 million and $567 million, respectively, compared to a carrying value of $600 million.

The fair value measurements of the borrowings under our credit agreement and receivables facility are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at March 31, 2016 to assume these obligations. The fair value of our senior notes is classified as Level 1 within the fair value hierarchy since it is determined based upon observable market inputs including quoted market prices in an active market.


Note 11.	Commitments and Contingencies

Operating Leases

We are obligated under noncancelable operating leases for corporate office space, warehouse and distribution facilities, trucks and certain equipment.

The future minimum lease commitments under these leases at March 31, 2016 are as follows (in thousands):



Nine months ending December 31, 2016	$	132,950
Years ending December 31:
2017	150,877
2018	125,921
2019	101,707
2020	83,547
2021	61,165
Thereafter	255,301
Future Minimum Lease Payments	$	911,468

Litigation and Related Contingencies

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


Note 12.	Income Taxes

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

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

Our effective income tax rate for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 was 34.8%, ~~which was consistent~~compared with ~~our full~~35.5% for the comparable prior year ~~2014 effective tax rate of 34.7% as our estimate of the geographic distribution of pretax income for 2015 is similar to the actual 2014 allocation. Our~~period. The lower effective income tax rate for the ~~nine~~three months ended ~~September 30, 2014 was 34.0%, which reflected~~March 31, 2016 reflects our ~~estimate at the time that~~expected geographic distribution of income, with a slightly larger proportion of our ~~international operations would constitute a greater percentage of the consolidated pretax~~pre-tax income ~~than was actually realized~~expected to be earned in the ~~full year results. We adjusted~~typically lower tax rate international jurisdictions. In addition, the tax ~~rate in~~provision for the ~~fourth~~first quarter of ~~2014~~2015 included unfavorable discrete items of $0.7 million primarily attributable to ~~recognize~~U.S. state deferred tax adjustments; discrete items for the ~~actual geographic allocation.~~


~~Note 12.~~	~~Accumulated Other Comprehensive Income (Loss)~~

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

Three Months Ended Three Months Ended
September 30, 2015 September 30, 2014
Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges Unrealized (Loss) Gain
on Pension Plan Accumulated
Other
Comprehensive
(Loss) Income Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges Unrealized Gain (Loss) on Pension Plan Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance $ (37,373 ) $ (2,200 ) $ (9,644 ) $ (49,217 ) $ 40,222
$ (4,346 ) $ 634
$ 36,510
Pretax (loss)income (33,458 ) (575 ) —
(34,033 ) (39,329 ) (186 ) —
(39,515 )
Income tax effect —
185
—
185
—
(7 ) —
(7 )
Reclassification of unrealized gain(loss) —
1,542
(34 ) 1,508
—
1,554
(39 ) 1,515
Reclassification of deferred income taxes —
(540 ) 9
(531 ) —
(544 ) 9
(535 )
Ending Balance $ (70,831 ) $ (1,588 ) $ (9,669 ) $ (82,088 ) $ 893
$ (3,529 ) $ 604
$ (2,032 )

Nine Months Ended Nine Months Ended
September 30, 2015 September 30, 2014
Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges Unrealized (Loss) Gain
on Pension Plan Accumulated
Other
Comprehensive
(Loss) Income Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges Unrealized Gain (Loss) on Pension Plan Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance $ (27,073 ) $ (3,401 ) $ (9,751 ) $ (40,225 ) $ 24,906
$ (5,596 ) $ 701
$ 20,011
Pretax (loss) income (43,758 ) (1,814 ) —
(45,572 ) (24,013 ) (362 ) —
(24,375 )
Income tax effect —
624
—
624
—
39
—
39
Reclassification of unrealized gain(loss) —
4,627
109
4,736
—
3,647
(129 ) 3,518
Reclassification of deferred income taxes —
(1,624 ) (27 ) (1,651 ) —
(1,257 ) 32
(1,225 )
Ending Balance $ (70,831 ) $ (1,588 ) $ (9,669 ) $ (82,088 ) $ 893
$ (3,529 ) $ 604
$ (2,032 )
three months ended March 31, 2016 were immaterial.

~~Unrealized losses on our interest rate swap contracts totaling $1.5 million and $4.6 million were reclassified to interest expense in our~~ ~~Unaudited Condensed~~ ~~Consolidated Statements of Income during the three and nine months ended~~ ~~September 30, 2015~~, respectively. During the three and nine months ended September 30, 2014, unrealized losses of $1.6 million and $4.6 million, respectively, related to our interest rate swaps were reclassified to interest expense. The remaining reclassification of unrealized gains during the three and nine months ended September 30, 2014 related to our foreign currency forward contracts and was recorded to other income in our ~~Unaudited Condensed~~ Consolidated Statements of Income. These gains offset the remeasurement of certain of our intercompany balances. The deferred income taxes related to our cash flow hedges were reclassified from Accumulated Other Comprehensive Income to income tax expense.


Note 13.	Segment and Geographic Information

We have four operating segments: Wholesale – North America; Europe; Specialty; and Self ~~Service; and Specialty.~~Service. Our Wholesale – North America and Self Service operating segments are aggregated into one reportable segment, North America, because they possess similar economic characteristics and have common products and services, customers, and methods of distribution. Our reportable segments are organized based on a combination of geographic areas served and type of product lines offered. The reportable segments are managed separately as each business serves different customers (i.e. geographic in the case of North America and Europe and product type in the case of Specialty) and is affected by different economic conditions. Therefore, we present three reportable segments: North America, Europe and Specialty.

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

North America Europe Specialty Eliminations Consolidated
Three Months Ended September 30, 2015
Revenue:
Third Party $ 1,037,130
$ 511,146
$ 283,456
$ —
$ 1,831,732
Intersegment 160
—
850
(1,010 ) —
Total segment revenue $ 1,037,290
$ 511,146
$ 284,306
$ (1,010 ) $ 1,831,732
Segment EBITDA $ 128,506
$ 52,733
$ 26,075
$ —
$ 207,314
Depreciation and amortization⁽¹⁾
17,918
9,478
5,578
—
32,974
Three Months Ended September 30, 2014
Revenue:
Third Party $ 1,024,835
$ 495,776
$ 200,413
$ —
$ 1,721,024
Intersegment 132
—
594
(726 ) —
Total segment revenue $ 1,024,967
$ 495,776
$ 201,007
$ (726 ) $ 1,721,024
Segment EBITDA $ 131,851
$ 41,726
$ 17,977
$ —
$ 191,554
Depreciation and amortization⁽¹⁾
18,029
9,411
4,314
—
31,754


	North America		Europe		Specialty		Eliminations			Consolidated		North America		Europe		Specialty		Eliminations			Consolidated
Nine Months Ended September 30, 2015
Three Months Ended March 31, 2016
Revenue:
Third Party	$	3,127,988	$	1,508,325	$	807,401	$	—		$	5,443,714	$	1,087,363	$	546,751	$	287,362	$	—		$	1,921,476
Intersegment	626		70		2,457		(3,153		)	—		214		10		951		(1,175		)	—
Total segment revenue	$	3,128,614	$	1,508,395	$	809,858	$	(3,153	)	$	5,443,714	$	1,087,577	$	546,761	$	288,313	$	(1,175	)	$	1,921,476
Segment EBITDA	$	416,774	$	153,199	$	91,677	$	—		$	661,650	$	147,375	$	57,498	$	31,738	$	—		$	236,611
Depreciation and amortization⁽¹⁾	52,432		26,533		15,723		—			94,688		17,515		10,308		5,343		—			33,166
Nine Months Ended September 30, 2014
Three Months Ended March 31, 2015
Revenue:
Third Party	$	3,080,090	$	1,380,663	$	595,180	$	—		$	5,055,933	$	1,046,079	$	487,346	$	240,487	$	—		$	1,773,912
Intersegment	266		—		1,250		(1,516		)	—		94		—		735		(829		)	—
Total segment revenue	$	3,080,356	$	1,380,663	$	596,430	$	(1,516	)	$	5,055,933	$	1,046,173	$	487,346	$	241,222	$	(829	)	$	1,773,912
Segment EBITDA	$	415,139	$	128,826	$	64,137	$	—		$	608,102	$	149,388	$	46,523	$	25,404	$	—		$	221,315
Depreciation and amortization⁽¹⁾	52,682		24,868		13,097		—			90,647		17,265		8,351		5,053		—			30,669

⁽¹⁾ Amounts presented include depreciation and amortization expense recorded within cost of goods sold.

on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities, other acquisition related gains and losses and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. Loss on debt extinguishment is considered a component of interest in calculating ~~EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.~~EBITDA.

The table below provides a reconciliation from Segment EBITDA to Net Income (in thousands):


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2015			2014			2015			2014			2016			2015
Segment EBITDA	$	207,314		$	191,554		$	661,650		$	608,102		$	236,611		$	221,315
Deduct:
Restructuring and acquisition related expenses ⁽¹⁾	4,578			3,594			12,729			12,816			14,811			6,488
Change in fair value of contingent consideration liabilities ⁽²⁾	89			12			365			(2,000		)	73			151
Add:
Equity in earnings of unconsolidated subsidiaries	(1,130		)	(721		)	(4,200		)	(1,199		)	(362		)	(1,908		)
Gains on foreign exchange contracts - acquisition related ⁽³⁾													18,342			—
EBITDA	201,517			187,227			644,356			596,087			$	239,707		$	212,768
Depreciation and amortization - cost of goods sold	2,091			1,256			4,570			3,511			1,478			1,216
Depreciation and amortization	30,883			30,498			90,118			87,136			31,688			29,453
Interest expense, net	14,722			16,394			44,250			48,140			14,592			14,906
Loss on debt extinguishment	—			—			—			324			26,650			—
Provision for income taxes	52,475			47,564			177,255			155,926			57,567			60,098
Net income	$	101,346		$	91,515		$	328,163		$	301,050		$	107,732		$	107,095

⁽¹⁾See Note 9,4, "Restructuring and Acquisition Related Expenses," for further information.

⁽²⁾See Note 6,10, "Fair Value Measurements," for further information on our contingent consideration liabilities.

21⁽³⁾Reflects gain on foreign currency forwards used to fix the Euro purchase price of Rhiag.

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2015		2014		2015		2014		2016		2015
Capital Expenditures
North America	$	11,615	$	20,986	$	41,762	$	61,262	$	22,783	$	15,403
Europe	16,966		8,652		47,138		32,927		19,107		7,869
Specialty	4,229		3,222		10,673		6,002		8,503		2,824
	$	32,810	$	32,860	$	99,573	$	100,191	$	50,393	$	26,096

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


	September 30,		December 31,		March 31,		December 31,
	2015		2014		2016		2015
Receivables, net
North America	$	322,954	$	322,713	$	338,326	$	314,743
Europe	222,445		227,987
Europe ⁽¹⁾					440,650		215,710
Specialty	81,381		50,722		103,606		59,707
Total receivables, net	626,780		601,422		882,582		590,160
Inventory
North America	808,679		826,429		822,103		847,787
Europe(1)	402,830		402,488		641,288		427,323
Specialty	253,118		204,930		319,406		281,442
Total inventory	1,464,627		1,433,847		1,782,797		1,556,552
Property and Equipment, net
North America	450,748		456,288		477,019		467,961
Europe	152,881		128,309
Europe ⁽¹⁾					222,976		175,455
Specialty	49,151		45,390		58,646		53,151
Total property and equipment, net	652,780		629,987		758,641		696,567
Other unallocated assets	2,959,845		2,908,236		3,932,837		2,804,558
Total assets	$	5,704,032	$	5,573,492	$	7,356,857	$	5,647,837

⁽¹⁾The increase in Europe assets primarily relates to the Rhiag acquisition (see "Note 2, "Business Combinations" for further detail).

We report net receivables, inventories, and net property and equipment 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, prepaid and other current and noncurrent assets, goodwill, intangibles and deferred income taxes.

The majority of our operations are conducted in the U.S. Our European operations are located in the U.K., the Netherlands, Belgium, France, Sweden, and Norway. As part of the Rhiag acquisition we expanded our operations into Italy, Czech Republic, Switzerland, Hungary, Romania, Ukraine, Bulgaria, Slovakia, Poland and Spain. Our operations in other countries include recycled and aftermarket operations in Canada, engine remanufacturing and bumper refurbishing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, ~~other alternative parts operations in Guatemala,~~ and administrative support functions in India. Our net sales are attributed to geographic area based on the location of the selling operation.

The following table sets forth our revenue by geographic area (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2015		2014		2015		2014		2016		2015
Revenue
United States	$	1,229,958	$	1,126,468	$	3,653,326	$	3,369,636	$	1,284,967	$	1,194,944
United Kingdom	358,925		349,012		1,049,596		1,003,889		349,676		343,607
Other countries	242,849		245,544		740,792		682,408		286,833		235,361
	$	1,831,732	$	1,721,024	$	5,443,714	$	5,055,933	$	1,921,476	$	1,773,912

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


	September 30,		December 31,		March 31,		December 31,
	2015		2014		2016		2015
Long-lived Assets
United States	$	471,549	$	469,450	$	506,481	$	493,300
United Kingdom	118,357		92,813		149,104		138,546
Other countries	62,874		67,724		103,056		64,721
	$	652,780	$	629,987	$	758,641	$	696,567

The following table sets forth our revenue by product category (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2015		2014		2015		2014		2016		2015
Aftermarket, other new and refurbished products	$	1,307,399	$	1,171,706	$	3,850,038	$	3,445,376	$	1,387,736	$	1,246,471
Recycled, remanufactured and related products and services	401,292		371,632		1,207,917		1,108,376		430,589		398,445
Other	123,041		177,686		385,759		502,181		103,151		128,996
	$	1,831,732	$	1,721,024	$	5,443,714	$	5,055,933	$	1,921,476	$	1,773,912

Our North American reportable segment generates revenue from all of our product categories, while our European and Specialty segments generate revenue primarily from the sale of aftermarket products. Revenue from other sources includes scrap sales, bulk sales to mechanical remanufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations.


Note 14.	Condensed Consolidating Financial Information

LKQ Corporation (the "Parent") issued, and ~~certain of its 100% owned subsidiaries (the "Guarantors")~~the Guarantors have fully and unconditionally guaranteed, jointly and severally, the ~~Company's~~ Notes due on May 15, 2023. A Guarantor's guarantee will be unconditionally and automatically released and discharged upon the occurrence of any of the following events: (i) a transfer (including as a result of consolidation or merger) by the Guarantor to any person that is not a Guarantor of all or substantially all assets and properties of such Guarantor, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; (ii) a transfer (including as a result of consolidation or merger) to any person that is not a Guarantor of the equity interests of a Guarantor or issuance by a Guarantor of its equity interests such that the Guarantor ceases to be a subsidiary, as defined in the Indenture, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; (iii) the release of the Guarantor from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; and (iv) upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture, as defined in the Indenture.

Presented below are the unaudited condensed consolidating financial statements of the Parent, the Guarantors, the non-guarantor subsidiaries (the "Non-Guarantors"), and the elimination entries necessary to present the Company's financial

statements on a consolidated basis as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934 resulting from the guarantees of the Notes. Investments in consolidated subsidiaries have been presented under the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, intercompany balances, and intercompany revenue and expenses. The unaudited condensed consolidating financial statements below have been prepared from the Company's financial information on the same basis of accounting as the unaudited condensed consolidated financial statements, and may not necessarily be indicative of the financial position, results of operations or cash flows had the Parent, Guarantors and Non-Guarantors operated as independent entities.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)
September 30, 2015
Parent Guarantors Non-Guarantors Eliminations Consolidated
Assets
Current Assets:
Cash and equivalents $ 17,679
$ 37,014
$ 82,393
$ —
$ 137,086
Receivables, net —
246,035
380,745
—
626,780
Intercompany receivables, net 3,470
—
11,354
(14,824 ) —
Inventory —
992,340
472,287
—
1,464,627
Deferred income taxes 3,123
71,356
2,922
—
77,401
Prepaid expenses and other current assets 548
40,005
40,696
—
81,249
Total Current Assets 24,820
1,386,750
990,397
(14,824 ) 2,387,143
Property and Equipment, net 377
472,864
179,539
—
652,780
Intangible Assets:
Goodwill —
1,650,053
698,039
—
2,348,092
Other intangibles, net —
141,644
77,988
—
219,632
Investment in Subsidiaries 3,385,478
288,999
—
(3,674,477 ) —
Intercompany Notes Receivable 651,424
27,252
—
(678,676 ) —
Other Assets 47,593
28,937
22,894
(3,039 ) 96,385
Total Assets $ 4,109,692
$ 3,996,499
$ 1,968,857
$ (4,371,016 ) $ 5,704,032
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable $ 1,414
$ 206,446
$ 208,481
$ —
$ 416,341
Intercompany payables, net —
11,354
3,470
(14,824 ) —
Accrued expenses:
Accrued payroll-related liabilities 6,448
56,682
31,884
—
95,014
Other accrued expenses 13,183
85,727
86,162
—
185,072
Other current liabilities 1,396
37,358
25,343
—
64,097
Current portion of long-term obligations 22,650
1,905
12,619
—
37,174
Total Current Liabilities 45,091
399,472
367,959
(14,824 ) 797,698
Long-Term Obligations, Excluding Current Portion 995,450
4,643
569,963
—
1,570,056
Intercompany Notes Payable —
635,594
43,082
(678,676 ) —
Deferred Income Taxes —
163,107
15,242
(3,039 ) 175,310
Other Noncurrent Liabilities 32,438
67,430
24,387
—
124,255
Stockholders’ Equity 3,036,713
2,726,253
948,224
(3,674,477 ) 3,036,713
Total Liabilities and Stockholders' Equity $ 4,109,692
$ 3,996,499
$ 1,968,857
$ (4,371,016 ) $ 5,704,032

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Balance Sheets (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Balance Sheets (In thousands)											LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Balance Sheets (In thousands)

	December 31, 2014											March 31, 2016
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current Assets:
Cash and equivalents	$	14,930	$	32,103	$	67,572	$	—		$	114,605	$	43,999	$	13,907	$	171,314	$	—		$	229,220
Receivables, net	145		217,542		383,735		—			601,422		345		272,075		610,162		—			882,582
Intercompany receivables, net	1,360		—		8,048		(9,408		)	—		2,695		—		5,585		(8,280		)	—
Inventory	—		964,477		469,370		—			1,433,847		—		1,067,784		715,013		—			1,782,797
Deferred income taxes	4,064		62,850		10,215		4,615			81,744
Prepaid expenses and other current assets	20,640		36,553		28,606		—			85,799		1,283		44,324		53,681		—			99,288
Total Current Assets	41,139		1,313,525		967,546		(4,793		)	2,317,417		48,322		1,398,090		1,555,755		(8,280		)	2,993,887
Property and Equipment, net	494		470,791		158,702		—			629,987		304		507,853		250,484		—			758,641
Intangible Assets:
Goodwill	—		1,563,796		725,099		—			2,288,895		—		1,640,904		1,434,389		—			3,075,293
Other intangibles, net	—		155,819		89,706		—			245,525		—		136,639		311,091		—			447,730
Investment in Subsidiaries	3,216,039		279,967		—		(3,496,006		)	—		4,200,443		293,960		—		(4,494,403		)	—
Intercompany Notes Receivable	667,949		23,449		—		(691,398		)	—		611,585		32,158		—		(643,743		)	—
Other Assets	49,601		24,457		20,481		(2,871		)	91,668		39,104		27,306		20,568		(5,672		)	81,306
Total Assets	$	3,975,222	$	3,831,804	$	1,961,534	$	(4,195,068	)	$	5,573,492	$	4,899,758	$	4,036,910	$	3,572,287	$	(5,152,098	)	$	7,356,857
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	682	$	182,607	$	216,913	$	—		$	400,202	$	2,482	$	253,466	341,878		$	—		$	597,826
Intercompany payables, net	—		8,048		1,360		(9,408		)	—		—		5,585		2,695		(8,280		)	—
Accrued expenses:
Accrued payroll-related liabilities	8,075		48,850		29,091		—			86,016		3,269		24,875		50,315		—			78,459
Other accrued expenses	8,061		83,857		72,230		—			164,148		15,885		77,709		139,694		—			233,288
Other current liabilities	283		16,197		15,720		4,615			36,815		23,464		16,802		24,206		—			64,472
Current portion of long-term obligations	55,172		4,599		3,744		—			63,515		16,284		1,540		57,541		—			75,365
Total Current Liabilities	72,273		344,158		339,058		(4,793		)	750,696		61,384		379,977		616,329		(8,280		)	1,049,410
Long-Term Obligations, Excluding Current Portion	1,150,624		6,561		643,862		—			1,801,047		1,567,271		6,425		1,169,501		—			2,743,197
Intercompany Notes Payable	—		649,824		41,574		(691,398		)	—		—		595,382		48,361		(643,743		)	—
Deferred Income Taxes	—		156,727		27,806		(2,871		)	181,662		—		113,789		71,287		(5,672		)	179,404
Other Noncurrent Liabilities	31,668		60,213		27,549		—			119,430		36,694		73,953		39,790		—			150,437
Stockholders’ Equity	2,720,657		2,614,321		881,685		(3,496,006		)	2,720,657		3,234,409		2,867,384		1,627,019		(4,494,403		)	3,234,409
Total Liabilities and Stockholders’ Equity	$	3,975,222	$	3,831,804	$	1,961,534	$	(4,195,068	)	$	5,573,492
Total Liabilities and Stockholders' Equity												$	4,899,758	$	4,036,910	$	3,572,287	$	(5,152,098	)	$	7,356,857

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Three Months Ended September 30, 2015
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 1,263,397
$ 595,769
$ (27,434 ) $ 1,831,732
Cost of goods sold —
773,957
372,430
(27,434 ) 1,118,953
Gross margin —
489,440
223,339
—
712,779
Facility and warehouse expenses —
106,090
37,828
—
143,918
Distribution expenses —
105,519
53,249
—
158,768
Selling, general and administrative expenses 8,484
124,678
74,725
—
207,887
Restructuring and acquisition related expenses —
3,754
824
—
4,578
Depreciation and amortization 38
21,133
9,712
—
30,883
Operating (loss) income (8,522 ) 128,266
47,001
—
166,745
Other expense (income):
Interest expense, net 12,049
460
2,213
—
14,722
Intercompany interest (income) expense, net (10,146 ) 7,183
2,963
—
—
Change in fair value of contingent consideration liabilities —
56
33
—
89
Other expense (income), net 8
(2,497 ) (528 ) —
(3,017 )
Total other expense, net 1,911
5,202
4,681
—
11,794
(Loss) income before (benefit) provision for income taxes (10,433 ) 123,064
42,320
—
154,951
(Benefit) provision for income taxes (4,012 ) 48,089
8,398
—
52,475
Equity in earnings of unconsolidated subsidiaries —
17
(1,147 ) —
(1,130 )
Equity in earnings of subsidiaries 107,767
6,328
—
(114,095 ) —
Net income $ 101,346
$ 81,320
$ 32,775
$ (114,095 ) $ 101,346

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Balance Sheets (In thousands)

	December 31, 2015
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current Assets:
Cash and equivalents	$	17,616	$	13,432	$	56,349	$	—		$	87,397
Receivables, net	—		214,502		375,658		—			590,160
Intercompany receivables, net	3		—		13,544		(13,547		)	—
Inventory	—		1,060,834		495,718		—			1,556,552
Prepaid expenses and other current assets	15,254		44,810		46,539		—			106,603
Total Current Assets	32,873		1,333,578		987,808		(13,547		)	2,340,712
Property and Equipment, net	339		494,658		201,570		—			696,567
Intangible Assets:
Goodwill	—		1,640,745		678,501		—			2,319,246
Other intangibles, net	—		141,537		73,580		—			215,117
Investment in Subsidiaries	3,456,837		285,284		—		(3,742,121		)	—
Intercompany Notes Receivable	630,717		61,764		—		(692,481		)	—
Other Assets	35,649		28,184		18,218		(5,856		)	76,195
Total Assets	$	4,156,415	$	3,985,750	$	1,959,677	$	(4,454,005	)	$	5,647,837
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	681	$	229,519	$	185,388	$	—		$	415,588
Intercompany payables, net	—		13,544		3		(13,547		)	—
Accrued expenses:
Accrued payroll-related liabilities	4,395		48,698		33,434		—			86,527
Other accrued expenses	5,399		80,886		75,940		—			162,225
Other current liabilities	284		15,953		15,359		—			31,596
Current portion of long-term obligations	21,041		1,425		33,568		—			56,034
Total Current Liabilities	31,800		390,025		343,692		(13,547		)	751,970
Long-Term Obligations, Excluding Current Portion	976,353		7,487		544,828		—			1,528,668
Intercompany Notes Payable	—		615,488		76,993		(692,481		)	—
Deferred Income Taxes	—		113,905		19,190		(5,856		)	127,239
Other Noncurrent Liabilities	33,580		70,109		21,589		—			125,278
Stockholders’ Equity	3,114,682		2,788,736		953,385		(3,742,121		)	3,114,682
Total Liabilities and Stockholders’ Equity	$	4,156,415	$	3,985,750	$	1,959,677	$	(4,454,005	)	$	5,647,837

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)															LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)

	For the Three Months Ended September 30, 2014															For the Three Months Ended March 31, 2016
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	1,165,794		$	588,852		$	(33,622	)	$	1,721,024		$	—		$	1,318,167		$	635,637		$	(32,328	)	$	1,921,476
Cost of goods sold	—			709,985			380,250			(33,622		)	1,056,613			—			795,240			398,127			(32,328		)	1,161,039
Gross margin	—			455,809			208,602			—			664,411			—			522,927			237,510			—			760,437
Facility and warehouse expenses	—			95,619			37,711			—			133,330			—			115,210			42,395			—			157,605
Distribution expenses	—			98,457			50,115			—			148,572			—			104,154			48,189			—			152,343
Selling, general and administrative expenses	5,178			114,926			72,125			—			192,229			10,379			126,668			81,271			—			218,318
Restructuring and acquisition related expenses	—			882			2,712			—			3,594			—			4,036			10,775			—			14,811
Depreciation and amortization	50			19,592			10,856			—			30,498			36			20,544			11,108			—			31,688
Operating (loss) income	(5,228		)	126,333			35,083			—			156,188			(10,415		)	152,315			43,772			—			185,672
Other expense (income):
Interest expense, net	12,338			71			3,985			—			16,394			12,117			143			2,332			—			14,592
Intercompany interest (income) expense, net	(12,638		)	6,207			6,431			—			—			(10,677		)	6,590			4,087			—			—
Loss on debt extinguishment																2,894			—			23,756			—			26,650
Change in fair value of contingent consideration liabilities	—			54			(42		)	—			12			—			34			39			—			73
Other expense (income), net	155			(1,164		)	991			—			(18		)
Total other expense, net	(145		)	5,168			11,365			—			16,388
(Loss) income before (benefit) provision for income taxes	(5,083		)	121,165			23,718			—			139,800
(Benefit) provision for income taxes	(1,363		)	43,986			4,941			—			47,564
Gains on foreign exchange contracts - acquisition related																(18,342		)	—			—			—			(18,342		)
Other income, net																(111		)	(2,834		)	(17		)	��			(2,962		)
Total other (income) expense, net																(14,119		)	3,933			30,197			—			20,011
Income before provision for income taxes																3,704			148,382			13,575			—			165,661
Provision for income taxes																1,423			53,445			2,699			—			57,567
Equity in earnings of unconsolidated subsidiaries	—			20			(741		)	—			(721		)	(795		)	5			428			—			(362		)
Equity in earnings of subsidiaries	95,235			6,151			—			(101,386		)	—			106,246			11,942			—			(118,188		)	—
Net income	$	91,515		$	83,350		$	18,036		$	(101,386	)	$	91,515		$	107,732		$	106,884		$	11,304		$	(118,188	)	$	107,732

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Nine Months Ended September 30, 2015
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 3,758,846
$ 1,778,456
$ (93,588 ) $ 5,443,714
Cost of goods sold —
2,284,786
1,116,314
(93,588 ) 3,307,512
Gross margin —
1,474,060
662,142
—
2,136,202
Facility and warehouse expenses —
304,140
108,814
—
412,954
Distribution expenses —
304,264
146,257
—
450,521
Selling, general and administrative expenses 24,876
366,298
225,750
—
616,924
Restructuring and acquisition related expenses —
10,999
1,730
—
12,729
Depreciation and amortization 117
60,897
29,104
—
90,118
Operating (loss) income (24,993 ) 427,462
150,487
—
552,956
Other expense (income):
Interest expense, net 36,604
331
7,315
—
44,250
Intercompany interest (income) expense, net (31,347 ) 21,498
9,849
—
—
Change in fair value of contingent consideration liabilities —
166
199
—
365
Other expense (income), net 35
(5,448 ) 4,136
—
(1,277 )
Total other expense, net 5,292
16,547
21,499
—
43,338
(Loss) income before (benefit) provision for income taxes (30,285 ) 410,915
128,988
—
509,618
(Benefit) provision for income taxes (12,061 ) 163,361
25,955
—
177,255
Equity in earnings of unconsolidated subsidiaries —
47
(4,247 ) —
(4,200 )
Equity in earnings of subsidiaries 346,387
20,923
—
(367,310 ) —
Net income $ 328,163
$ 268,524
$ 98,786
$ (367,310 ) $ 328,163

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)															LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Income (In thousands)

	For the Nine Months Ended September 30, 2014															For the Three Months Ended March 31, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	3,486,098		$	1,665,247		$	(95,412	)	$	5,055,933		$	—		$	1,225,908		$	582,943		$	(34,939	)	$	1,773,912
Cost of goods sold	—			2,107,866			1,056,125			(95,412		)	3,068,579			—			740,803			368,569			(34,939		)	1,074,433
Gross margin	—			1,378,232			609,122			—			1,987,354			—			485,105			214,374			—			699,479
Facility and warehouse expenses	—			281,805			106,190			—			387,995			—			97,761			34,896			—			132,657
Distribution expenses	—			291,187			141,258			—			432,445			—			95,992			45,722			—			141,714
Selling, general and administrative expenses	20,188			342,038			201,118			—			563,344			7,631			121,662			73,948			—			203,241
Restructuring and acquisition related expenses	—			7,366			5,450			—			12,816			—			6,060			428			—			6,488
Depreciation and amortization	168			58,556			28,412			—			87,136			40			19,891			9,522			—			29,453
Operating (loss) income	(20,356		)	397,280			126,694			—			503,618			(7,671		)	143,739			49,858			—			185,926
Other expense (income):
Interest expense, net	38,583			186			9,371			—			48,140			12,314			43			2,549			—			14,906
Intercompany interest (income) expense, net	(35,828		)	16,279			19,549			—			—			(10,823		)	7,259			3,564			—			—
Loss on debt extinguishment	324			—			—			—			324
Change in fair value of contingent consideration liabilities	—			(2,183		)	183			—			(2,000		)	—			55			96			—			151
Other expense (income), net	81			(4,542		)	3,440			—			(1,021		)	25			(1,790		)	3,533			—			1,768
Total other expense, net	3,160			9,740			32,543			—			45,443			1,516			5,567			9,742			—			16,825
(Loss) income before (benefit) provision for income taxes	(23,516		)	387,540			94,151			—			458,175			(9,187		)	138,172			40,116			—			169,101
(Benefit) provision for income taxes	(8,665		)	144,725			19,866			—			155,926			(3,755		)	55,777			8,076			—			60,098
Equity in earnings of unconsolidated subsidiaries	—			35			(1,234		)	—			(1,199		)	—			11			(1,919		)	—			(1,908		)
Equity in earnings of subsidiaries	315,901			24,528			—			(340,429		)	—			112,527			7,260			—			(119,787		)	—
Net income	$	301,050		$	267,378		$	73,051		$	(340,429	)	$	301,050		$	107,095		$	89,666		$	30,121		$	(119,787	)	$	107,095

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)															LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)

	For the Three Months Ended September 30, 2015															For the Three Months Ended March 31, 2016
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent		Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	101,346		$	81,320		$	32,775		$	(114,095	)	$	101,346		$	107,732	$	106,884		$	11,304		$	(118,188	)	$	107,732
Other comprehensive (loss) income, net of tax:
Other comprehensive income (loss):
Foreign currency translation	(33,458		)	(11,459		)	(32,073		)	43,532			(33,458		)	140		(2,855		)	(3,039		)	5,894			140
Net change in unrecognized gains/losses on derivative instruments, net of tax	612			—			14			(14		)	612			432		—			96			(96		)	432
Net change in unrealized gains/losses on pension plan, net of tax	(25		)	—			(25		)	25			(25		)	147		—			147			(147		)	147
Total other comprehensive loss	(32,871		)	(11,459		)	(32,084		)	43,543			(32,871		)
Total other comprehensive income (loss)																719		(2,855		)	(2,796		)	5,651			719
Total comprehensive income	$	68,475		$	69,861		$	691		$	(70,552	)	$	68,475		$	108,451	$	104,029		$	8,508		$	(112,537	)	$	108,451

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income (Loss)
(In thousands)
For the Three Months Ended September 30, 2014
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 91,515
$ 83,350
$ 18,036
$ (101,386 ) $ 91,515
Other comprehensive (loss) income, net of tax:
Foreign currency translation (39,329 ) (14,554 ) (37,922 ) 52,476
(39,329 )
Net change in unrecognized gains/losses on derivative instruments, net of tax 817
—
(229 ) 229
817
Change in unrealized gain on pension plan, net of tax (30 ) —
(30 ) 30
(30 )
Total other comprehensive loss (38,542 ) (14,554 ) (38,181 ) 52,735
(38,542 )
Total comprehensive income (loss) $ 52,973
$ 68,796
$ (20,145 ) $ (48,651 ) $ 52,973

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Nine Months Ended September 30, 2015
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 328,163
$ 268,524
$ 98,786
$ (367,310 ) $ 328,163
Other comprehensive (loss) income, net of tax:
Foreign currency translation (43,758 ) (12,697 ) (40,656 ) 53,353
(43,758 )
Net change in unrecognized gains/losses on derivative instruments, net of tax 1,813
—
143
(143 ) 1,813
Net change in unrealized gains/losses on pension plan, net of tax 82
—
82
(82 ) 82
Total other comprehensive loss (41,863 ) (12,697 ) (40,431 ) 53,128
(41,863 )
Total comprehensive income $ 286,300
$ 255,827
$ 58,355
$ (314,182 ) $ 286,300

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)	LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)															LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Comprehensive Income (In thousands)

	For the Nine Months Ended September 30, 2014															For the Three Months Ended March 31, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	301,050		$	267,378		$	73,051		$	(340,429	)	$	301,050		$	107,095		$	89,666		$	30,121		$	(119,787	)	$	107,095
Other comprehensive (loss) income, net of tax:
Other comprehensive (loss) income:
Foreign currency translation	(24,013		)	(7,034		)	(22,610		)	29,644			(24,013		)	(54,810		)	(14,372		)	(52,799		)	67,171			(54,810		)
Net change in unrecognized gains/losses on derivative instruments, net of tax	2,067			—			(48		)	48			2,067			283			—			(62		)	62			283
Change in unrealized gain on pension plan, net of tax	(97		)	—			(97		)	97			(97		)	128			—			128			(128		)	128
Total other comprehensive loss	(22,043		)	(7,034		)	(22,755		)	29,789			(22,043		)	(54,399		)	(14,372		)	(52,733		)	67,105			(54,399		)
Total comprehensive income	$	279,007		$	260,344		$	50,296		$	(310,640	)	$	279,007
Total comprehensive income (loss)																$	52,696		$	75,294		$	(22,612	)	$	(52,682	)	$	52,696

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
For the Nine Months Ended September 30, 2015
Parent Guarantors Non-Guarantors Eliminations Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 243,988
$ 329,740
$ 136,686
$ (219,091 ) $ 491,323
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3 ) (49,023 ) (50,547 ) —
(99,573 )
Investment and intercompany note activity with subsidiaries (66,644 ) —
—
66,644
—
Acquisitions, net of cash acquired —
(120,766 ) (36,591 ) —
(157,357 )
Other investing activities, net —
8,832
(5,658 ) —
3,174
Net cash used in investing activities (66,647 ) (160,957 ) (92,796 ) 66,644
(253,756 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 7,534
—
—
—
7,534
Excess tax benefit from stock-based payments 13,672
—
—
—
13,672
Taxes paid related to net share settlements of stock-based compensation awards (7,423 ) —
—
—
(7,423 )
Borrowings under revolving credit facilities 207,000
—
75,421
—
282,421
Repayments under revolving credit facilities (347,000 ) —
(86,840 ) —
(433,840 )
Repayments under term loans (16,875 ) —
—
—
(16,875 )
Borrowings under receivables securitization facility —
—
3,858
—
3,858
Repayments under receivables securitization facility —
—
(8,958 ) —
(8,958 )
Repayments of other long-term debt (31,500 ) (5,962 ) (13,381 ) —
(50,843 )
Payments of other obligations —
(1,596 ) (895 ) —
(2,491 )
Investment and intercompany note activity with parent —
62,540
4,104
(66,644 ) —
Dividends —
(219,091 ) —
219,091
—
Net cash used in financing activities (174,592 ) (164,109 ) (26,691 ) 152,447
(212,945 )
Effect of exchange rate changes on cash and equivalents —
237
(2,378 ) —
(2,141 )
Net increase in cash and equivalents 2,749
4,911
14,821
—
22,481
Cash and equivalents, beginning of period 14,930
32,103
67,572
—
114,605
Cash and equivalents, end of period $ 17,679
$ 37,014
$ 82,393
$ —
$ 137,086

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
For the Nine Months Ended September 30, 2014
Parent Guarantors Non-Guarantors Eliminations Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 264,870
$ 361,218
$ (43,793 ) $ (259,653 ) $ 322,642
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (37 ) (59,387 ) (40,767 ) —
(100,191 )
Investment and intercompany note activity with subsidiaries (197,714 ) (607 ) —
198,321
—
Acquisitions, net of cash acquired —
(520,721 ) (129,893 ) —
(650,614 )
Other investing activities, net —
618
316
—
934
Net cash used in investing activities (197,751 ) (580,097 ) (170,344 ) 198,321
(749,871 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 6,520
—
—
—
6,520
Excess tax benefit from stock-based payments 14,455
—
—
—
14,455
Borrowings under revolving credit facilities 693,000
—
606,821
—
1,299,821
Repayments under revolving credit facilities (693,000 ) —
(115,039 ) —
(808,039 )
Borrowings under term loans 11,250
—
—
—
11,250
Repayments under term loans (11,250 ) —
—
—
(11,250 )
Borrowings under receivables securitization facility —
—
80,000
—
80,000
Repayments of other long-term debt (1,920 ) (2,104 ) (16,508 ) —
(20,532 )
Payments of other obligations —
(407 ) (41,527 ) —
(41,934 )
Other financing activities, net (18,669 ) 12,340
(552 ) —
(6,881 )
Investment and intercompany note activity with parent —
481,951
(283,630 ) (198,321 ) —
Dividends —
(259,653 ) —
259,653
—
Net cash provided by financing activities 386
232,127
229,565
61,332
523,410
Effect of exchange rate changes on cash and equivalents —
(86 ) (1,937 ) —
(2,023 )
Net increase in cash and equivalents 67,505
13,162
13,491
—
94,158
Cash and equivalents, beginning of period 77,926
13,693
58,869
—
150,488
Cash and equivalents, end of period $ 145,431
$ 26,855
$ 72,360
$ —
$ 244,646

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Cash Flows (In thousands)

	For the Three Months Ended March 31, 2016
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	65,092		$	77,907		$	13,437		$	(26,229	)	$	130,207
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	—			(29,710		)	(20,683		)	—			(50,393		)
Investment and intercompany note activity with subsidiaries	(646,019		)	—			—			646,019			—
Acquisitions, net of cash acquired	—			—			(603,735		)	—			(603,735		)
Proceeds from foreign exchange contracts	18,342			—			—			—			18,342
Other investing activities, net	—			188			10,574			—			10,762
Net cash used in investing activities	(627,677		)	(29,522		)	(613,844		)	646,019			(625,024		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	3,202			—			—			—			3,202
Excess tax benefit from stock-based payments	4,637			—			—			—			4,637
Taxes paid related to net share settlements of stock-based compensation awards	(2,281		)	—			—			—			(2,281		)
Debt issuance costs	(5,907		)	—			—			—			(5,907		)
Borrowings under revolving credit facilities	544,000			—			599,217			—			1,143,217
Repayments under revolving credit facilities	(44,000		)	—			(301,609		)	—			(345,609		)
Borrowings under term loans	89,317			—			249,161			—			338,478
Borrowings under receivables securitization facility	—			—			97,000			—			97,000
Repayments under receivables securitization facility	—			—			(63,000		)	—			(63,000		)
(Repayments) borrowings of other debt, net	—			(946		)	13,796			—			12,850
Repayment of Rhiag debt and related payments	—			—			(543,347		)	—			(543,347		)
Payments of other obligations	—			(1,437		)	—			—			(1,437		)
Investment and intercompany note activity with parent	—			(20,106		)	666,125			(646,019		)	—
Dividends	—			(25,069		)	(1,160		)	26,229			—
Net cash provided by (used in) financing activities	588,968			(47,558		)	716,183			(619,790		)	637,803
Effect of exchange rate changes on cash and equivalents	—			(352		)	(811		)	—			(1,163		)
Net increase in cash and equivalents	26,383			475			114,965			—			141,823
Cash and equivalents, beginning of period	17,616			13,432			56,349			—			87,397
Cash and equivalents, end of period	$	43,999		$	13,907		$	171,314		$	—		$	229,220

LKQ CORPORATION AND SUBSIDIARIES Unaudited Condensed Consolidating Statements of Cash Flows (In thousands)

	For the Three Months Ended March 31, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	110,976		$	105,119		$	33,305		$	(69,255	)	$	180,145
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(4		)	(17,731		)	(8,361		)	—			(26,096		)
Investment and intercompany note activity with subsidiaries	18,167			—			—			(18,167		)	—
Acquisitions, net of cash acquired	—			(764		)	(100		)	—			(864		)
Other investing activities, net	—			74			(7,390		)	—			(7,316		)
Net cash provided by (used in) investing activities	18,163			(18,421		)	(15,851		)	(18,167		)	(34,276		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	1,318			—			—			—			1,318
Excess tax benefit from stock-based payments	5,201			—			—			—			5,201
Taxes paid related to net share settlements of stock-based compensation awards	(5,243		)	—			—			—			(5,243		)
Borrowings under revolving credit facilities	38,000			—			47,030			—			85,030
Repayments under revolving credit facilities	(118,000		)	—			(37,073		)	—			(155,073		)
Borrowings under term loans	—			—			—			—			—
Repayments under term loans	(5,625		)	—			—			—			(5,625		)
Borrowings under receivables securitization facility	—			—			2,100			—			2,100
Repayments of other debt, net	(44		)	(504		)	(6,028		)	—			(6,576		)
Payments of other obligations	—			(1,544		)	—			—			(1,544		)
Investment and intercompany note activity with parent	—			(18,779		)	612			18,167			—
Dividends	—			(69,255		)	—			69,255			—
Net cash (used in) provided by financing activities	(84,393		)	(90,082		)	6,641			87,422			(80,412		)
Effect of exchange rate changes on cash and equivalents	—			169			(4,739		)	—			(4,570		)
Net increase (decrease) in cash and equivalents	44,746			(3,215		)	19,356			—			60,887
Cash and equivalents, beginning of period	14,930			32,103			67,572			—			114,605
Cash and equivalents, end of period	$	59,676		$	28,888		$	86,928		$	—		$	175,492

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements. 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. We have based these forward-looking statements on our current expectations and projections about future events. However, these forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different. These factors include, among other things, those described under Risk Factors in Item 1A of our ~~2014~~2015 Annual Report on Form 10-K, filed with the SEC on ~~March 2, 2015,~~February 25, 2016, as supplemented in subsequent filings, including this Quarterly Report on Form 10-Q.

Other matters set forth in this Quarterly Report may also cause our actual future results to differ materially from these forward-looking statements. We cannot assure you that our expectations will prove to be correct. In addition, all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements mentioned above. You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


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

Overview

We ~~provide~~are a global distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, as well as specialty vehicle products and accessories.

Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by original equipment manufacturers ("OEMs"); new products produced by companies other than the OEMs, which are sometimes referred to as aftermarket products; recycled products obtained from salvage vehicles; used products that have been refurbished; and used 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. Collectively, we refer to these products as alternative parts because they are not new OEM products.

We are the nation’s largest provider of alternative vehicle collision replacement products and a leading provider of alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. We are also a leading provider of alternative vehicle replacement and maintenance products in the United Kingdom, ~~and~~ the Benelux region of(Belgium, Netherlands, and Luxembourg), Italy, Czech Republic and Switzerland in continental Europe. In addition to our wholesale operations, we operate self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles. ~~In 2014, we expanded our product offering to include~~We are also a leading distributor of specialty vehicle aftermarket equipment and accessories ~~through~~reaching most major markets in the ~~acquisition of Keystone Specialty.~~U.S and Canada.

We are organized into four operating segments: Wholesale - North America; Europe; Specialty; and Self ~~Service; and Specialty.~~Service. We aggregate our Wholesale - North America and Self Service operating segments into one reportable segment, North America, resulting in three reportable segments: North America, Europe and Specialty.

Our revenue, cost of goods sold, and 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 discussed in Forward-Looking Statements above. Due to these factors and others, which may be unknown to us at this time, our operating results in future periods can be expected to fluctuate. Accordingly, our historical results of operations may not be indicative of future performance.

Acquisitions and Investments

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. We have pursued acquisitions that we believe will help drive profitability, cash flow and stockholder value. Our principal focus for acquisitions is companies that are market leaders, will expand our geographic presence and enhance our ability to provide a wide array of automotive products to our customers through our distribution network.

On April 21, 2016, LKQ acquired Pittsburgh Glass Works LLC (“PGW”), a leading global distributor and manufacturer of automotive glass products. PGW’s business comprises wholesale and retail distribution services, automotive glass manufacturing, and retailer alliance partnerships. The acquisition will expand our addressable market in North America and globally. Additionally, we believe the acquisition will create potential distribution synergies with our existing network.

During the ~~nine months~~year ended ~~September 30,~~December 31, 2015, we ~~made 17~~completed 18 acquisitions, including 4 wholesale businesses in North America and 1112 wholesale businesses in Europe, a self service retail operation, and a specialty vehicle aftermarket business. Our wholesale business acquisitions in North America included PartsChannel, Inc. ("Parts ~~Channel,~~Channel"), an aftermarket collision parts distributor. The specialty aftermarket business acquired was The Coast Distribution System, Inc. ("Coast"), a supplier of replacement parts, supplies and accessories for the ~~recreational vehicle~~RV and outdoor recreation markets. Our European acquisitions included 11 aftermarket parts distribution

businesses in the Netherlands, 9 of which were former customers of and distributors for our Netherlands subsidiary, Sator, and were acquired with the objective of expanding our distribution network in the Netherlands. Our other acquisitions completed ~~during the nine months ended September 30,~~in 2015 enabled us to expand our geographic presence.

On January 3, 2014 we completed our acquisition of Keystone Specialty, which is a leading distributor and marketer of specialty vehicle aftermarket equipment and accessories in North America serving the following six product segments: truck and off-road; speed and performance; recreational vehicle; towing; wheels, tires and performance handling; and miscellaneous accessories. Our acquisition of Keystone Specialty allowed us to enter into new product lines and increased the size of our addressable market. In addition, we believe that the acquisition creates logistics and administrative cost synergies and potential cross-selling opportunities.

In addition to our acquisition of Keystone Specialty in 2014, we made 22 acquisitions, including 9 wholesale businesses in North America, 9 wholesale businesses in Europe, 2 self service retail operations, and 2 specialty vehicle aftermarket businesses. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were customers of and distributors for our Netherlands subsidiary, Sator. In the Netherlands, we are converting our existing distribution model to more closely align it with the distribution model of our U.K. operations. The objective of the realignment is to allow us to sell directly to the end repair shop customer rather than through a local wholesale distributor. We expect the realignment to improve margins, customer service, and fulfillment rates. It should also position us in the long term to introduce additional product categories, such as collision and specialty vehicle. The other acquisitions completed during 2014 enabled us to expand in existing markets, introduce new product lines, and enter new markets.

See Note 8,2, "Business Combinations" 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 acquisitions.

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 and related services including (i) aftermarket, other new and refurbished products and (ii) recycled, remanufactured and related ~~products.~~products and services. Our service revenue is generated primarily from the sale of extended warranties, fees for admission to our self service yards, and processing fees related to the secure disposal of vehicles. During the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016, parts and services revenue represented approximately ~~93%~~95% of our consolidated revenue.

The majority of our parts and services revenue is generated from the sale of vehicle replacement products to collision and mechanical repair shops. ~~Our~~In North America, our vehicle replacement products include sheet metal crash parts such as doors, hoods, and fenders; bumper covers; ~~engines;~~mirrors and grills; head and tail lamps; wheels; and ~~wheels.~~large mechanical items such as engines and transmissions. In Europe, our products include a wide variety of small mechanical products such as filters, belts and hoses, spark plugs, alternators and water pumps, batteries, suspension and brake parts, clutches, and oil and lubricants. The demand for these products is influenced by several factors, including the number of vehicles in operation, the number of miles being driven, the frequency and severity of vehicle accidents, the age profile of vehicles in accidents, seasonal weather patterns and local weather conditions and the availability and pricing of new OEM ~~parts, seasonal weather patterns and local weather conditions. Additionally,~~parts. With respect to collision related products, automobile insurers exert significant influence over collision repair shops as to how an insured vehicle is repaired and the cost level of the products used in the repair process. Accordingly, we consider automobile insurers to be key demand drivers of our vehicle replacement products. While they are not our direct customers, we do provide insurance carriers services in an effort to promote the increased usage of alternative replacement products in the repair process. Such services include the review of vehicle repair order estimates, direct quotation services to insurance company adjusters and an aftermarket parts quality and service assurance program. We neither charge a fee to the insurance carriers for these services nor adjust our pricing of products for our customers when we perform these services for insurance carriers. There is no standard price for many of our vehicle replacement products, but rather a pricing structure that varies from day to day based upon such factors as product availability, quality, demand, new OEM product prices, the age and mileage of the vehicle from which ~~the~~a recycled part was obtained, competitor pricing and our product cost.

Our revenue from aftermarket, other new and refurbished products also includes revenue generated from the sale of specialty aftermarket vehicle equipment and accessories. These products are primarily sold to a large customer base of specialty vehicle retailers and equipment installers, including mostly independent, single-site operators. Specialty vehicle aftermarket products are typically installed on vehicles within the first year of ownership to enhance functionality, performance or aesthetics. As a result, the demand for these products is influenced by new and used vehicle sales and the overall economic health of vehicle owners, which may be affected by general business conditions, interest rates, inflation, consumer debt levels and other matters that influence consumer confidence and spending. The prices for our specialty vehicle products are based on manufacturers' suggested retail prices, with discounts applied based on prevailing market conditions, customer volumes and promotions that we may offer from time to time.

For the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016, revenue from other sources represented approximately 7%5% of our consolidated sales. These other sources include scrap sales, bulk sales to mechanical remanufacturers (including cores), and sales of aluminum ingots and sows from our furnace operations. We derive scrap metal from several sources, including vehicles that have been used in both our wholesale and self service recycling operations and from OEMs and other entities that contract

with us for secure disposal of "crush only" vehicles. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold.

Cost of Goods Sold

Our cost of goods sold for aftermarket products includes the price we pay for the parts, freight, and overhead costs related to the purchasing, warehousing and distribution of our inventory, including labor, facility and equipment costs and depreciation. Our aftermarket products are acquired from a number of vendors. Our cost of goods sold for refurbished products includes the price we pay for cores, freight, and costs to refurbish the parts, including direct and indirect labor, facility and equipment costs, depreciation and other overhead related to our refurbishing operations.

Our cost of goods sold for recycled products includes the price we pay for the salvage vehicle and, where applicable, auction, towing and storage fees. Prices for salvage vehicles may be impacted by a variety of factors, including the number of buyers competing to purchase the vehicles, the demand and pricing trends for used vehicles, the number of vehicles designated as “total losses” by insurance companies, the production level of new vehicles (which provides the source from which salvage vehicles ultimately come), the age of vehicles at auction and the status of laws regulating bidders or exporters of salvage vehicles. From time to time, we may also adjust our buying strategy to target vehicles with different attributes (for example, age, level of damage, and revenue potential). Due to changes relating to these factors, we have seen the prices we pay for salvage vehicles fluctuate over time. Our cost of goods sold also includes labor and other costs we incur to acquire and dismantle such vehicles. Our labor and labor-related costs related to acquisition and dismantling generally account for between 8%9% and ~~10%~~11% of our cost of goods sold for vehicles we dismantle. The acquisition and dismantling of salvage vehicles is a manual process and, as a result, energy costs are not material. Our cost of goods sold for remanufactured products includes the price we pay for cores; freight; and costs to remanufacture the products, including direct and indirect labor, facility and equipment costs, depreciation and other overhead related to our remanufacturing operations.

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-year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products that is supported by certain of the suppliers of those products. We record the estimated warranty costs at the time of sale using historical warranty claims information to project future warranty claims activity and related expenses.

Other revenue is primarily generated from the hulks and unusable parts of the vehicles we acquire for our wholesale and self service recycled product operations, and therefore, the costs of these sales include the proportionate share of the price we pay for the salvage vehicles as well as the applicable auction, storage and towing fees and internal costs to purchase and dismantle the vehicles. Our cost of goods sold for other revenue will fluctuate based on the prices paid for salvage vehicles, which may be impacted by a variety of factors as discussed above.

Expenses

Our facility and warehouse expenses primarily include our costs to operate our aftermarket ~~selling~~ warehouses, salvage yards and self service retail facilities. These costs include personnel expenses such as wages, incentive compensation and employee benefits for plant management and facility and warehouse personnel, as well as rent for our facilities and related utilities, property taxes, repairs and maintenance. The costs included in facility and warehouse expenses do not relate to inventory processing or conversion activities and, as such, are classified below the gross margin line on our Unaudited Condensed Consolidated Statements of Income.

Our distribution expenses primarily include our costs to prepare and deliver our products to our customers. Included in our distribution expense category are personnel costs such as wages, employee benefits and incentive compensation for drivers; third party freight costs; fuel; and expenses related to our delivery and transfer trucks, including vehicle leases, repairs and maintenance and insurance.

Our selling and marketing expenses primarily include salary, commission and other incentive compensation expenses for sales personnel; advertising, promotion and marketing costs; credit card fees; telephone and other communication expenses; and bad debt expense. Personnel costs generally account for between 75% and 80% of our selling and marketing expenses. Most of our sales personnel are paid on a commission basis. The number and quality of our sales force is critical to our ability to respond to our customers’ needs and increase our sales volume. Our objective is to continually evaluate our sales force, develop and implement training programs, and utilize appropriate measurements to assess our selling effectiveness.

Our general and administrative expenses primarily include the costs of our corporate offices and field support center, which provide management, treasury, accounting, legal, payroll, business development, human resources and information systems functions. General and administrative expenses include wages, benefits, stock-based compensation and other incentive

compensation for corporate, regional and administrative personnel; information systems support and maintenance expenses; and accounting, legal and other professional fees.

Seasonality

Our operating results are subject to quarterly variations based on a variety of factors, influenced primarily by seasonal changes in weather patterns. During the winter months, we tend to have higher demand for our vehicle replacement products because there are more weather related accidents, which generate repairs. We expect our specialty vehicle operations to generate greater revenue and earnings in the first half of the year, when vehicle owners tend to install this equipment.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014~~2015, which we filed with the SEC on ~~March 2, 2015,~~February 25, 2016, includes a summary of the critical accounting policies and estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies or estimates that have had a material impact on our reported amounts of assets, liabilities, revenue or expenses during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016. However, we have evaluated our goodwill for impairment as of an interim date as described below.

Goodwill Impairment

We are required to test our goodwill for impairment at least annually or whenever events or circumstances indicate that impairment may have occurred. ~~Through the nine months ended~~ ~~September 30,~~In 2015,, our North American operating margins have been negatively affected by the decline in scrap steel and other metals prices, which began in the fourth quarter of 2014. Our Self Service reporting unit has been most impacted by the change in scrap steel prices as the sale of crushed car bodies comprises a relatively large percentage of its sales. It is anticipated that scrap steel prices will continue to have a negative impact on operating margins during 2016. Given the decrease in scrap steel prices throughout 2015 and projected softness in 2016 and the corresponding negative effect on our current and expected results, we performed ~~an interim~~the step one goodwill impairment test for ~~the~~our Self Service reporting ~~unit. Based on~~unit; the ~~step one~~results of our analysis performed for the Self Service reporting unit, no impairment adjustment is required. Our forecasts assume scrap steel prices will continue at their current depressed level through all of 2016 before returning to our seven year historical average price of approximately $200 per ton in 2018. Based on this forecast, the impairment test indicated that the fair value of the Self Service reporting unit ~~determined using both market and income approaches,~~ exceeded ~~the reporting unit’s~~its carrying value by approximately 11%. ~~Declines in expected future cash flows (which are driven by scrap steel and other metals prices), reduction in terminal value growth rates, or an increase~~In 2016, we will continue to monitor the ~~risk-adjusted discount rate used to estimate the fair value~~performance of ~~the~~our Self Service reporting unit as changes to our forecasts may result in the determination that an impairment adjustment is required. ~~The~~As of the quarter ended March 31, 2016, the forecasts utilized in our 2015 Self Service annual impairment test ~~of our goodwill impairment on all of our reporting units will be performed during the fourth quarter of 2015.~~remain unchanged.

Recently Issued Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 2,3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.

Financial Information by Geographic Area

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

Results of Operations—Consolidated

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2015		2014		2015		2014		2016		2015
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	61.1	%	61.4	%	60.8	%	60.7	%	60.4	%	60.6	%
Gross margin	38.9	%	38.6	%	39.2	%	39.3	%	39.6	%	39.4	%
Facility and warehouse expenses	7.9	%	7.7	%	7.6	%	7.7	%	8.2	%	7.5	%
Distribution expenses	8.7	%	8.6	%	8.3	%	8.6	%	7.9	%	8.0	%
Selling, general and administrative expenses	11.3	%	11.2	%	11.3	%	11.1	%	11.4	%	11.5	%
Restructuring and acquisition related expenses	0.2	%	0.2	%	0.2	%	0.3	%	0.8	%	0.4	%
Depreciation and amortization	1.7	%	1.8	%	1.7	%	1.7	%	1.6	%	1.7	%
Operating income	9.1	%	9.1	%	10.2	%	10.0	%	9.7	%	10.5	%
Other expense, net	0.6	%	1.0	%	0.8	%	0.9	%	1.0	%	0.9	%
Income before provision for income taxes	8.5	%	8.1	%	9.4	%	9.1	%	8.6	%	9.5	%
Provision for income taxes	2.9	%	2.8	%	3.3	%	3.1	%	3.0	%	3.4	%
Equity in earnings of unconsolidated subsidiaries	(0.1	)%	(0.0	)%	(0.1	)%	(0.0	)%	(0.0	)%	(0.1	)%
Net income	5.5	%	5.3	%	6.0	%	6.0	%	5.6	%	6.0	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Three Months Ended ~~September 30, 2015~~March 31, 2016 Compared to Three Months Ended ~~September 30, 2014~~March 31, 2015

Revenue. The following table summarizes the changes in revenue by category (in thousands):


	Three Months Ended												Three Months Ended
	September 30,				Percentage Change in Revenue								March 31,				Percentage Change in Revenue
	2015		2014		Organic		Acquisition		Foreign Exchange		Total Change		2016		2015		Organic		Acquisition		Foreign Exchange		Total Change
Parts & services revenue	$	1,708,691	$	1,543,337	6.8	%	8.1	%	(4.2	)%	10.7	%	$	1,818,325	$	1,644,916	6.3	%	6.0	%	(1.8	)%	10.5	%
Other revenue	123,041		177,687		(33.7	)%	3.4	%	(0.4	)%	(30.8	)%	103,151		128,996		(25.1	)%	5.3	%	(0.2	)%	(20.0	)%
Total revenue	$	1,831,732	$	1,721,024	2.6	%	7.6	%	(3.8	)%	6.4	%	$	1,921,476	$	1,773,912	4.1	%	6.0	%	(1.7	)%	8.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The change in parts and services revenue of 10.5% represents increases of 7.3% in North America, 12.3% in Europe, and 19.5% in Specialty. The decline in other revenue of 20.0% primarily reflects the decline in the price of scrap steel and other metals. Refer to the discussion of our segment results of operations for factors contributing to revenue changes during the ~~third~~first quarter of ~~2015~~2016 compared to the prior ~~year period.~~year.

Cost of Goods Sold. ~~Our cost~~Cost of goods sold decreased to ~~61.1%~~60.4% of revenue in the ~~third~~first quarter of ~~2015~~2016 from ~~61.4%~~60.6% of revenue in the comparable prior year quarter. The ~~decline~~change in cost of goods sold of 0.2% as a percentage of revenue represents a 0.3% decrease attributable to our Europe segment and a 0.1% decrease attributable to North America, offset by a 0.2% negative mix effect as a result of generating more revenue in our Specialty segment, which has lower gross margins than our North America and Europe segments. The decrease in cost of goods sold as a percentage of revenue ~~was primarily attributable to~~in our Europe operations reflects gross margin improvement in our ~~European~~U.K. and ~~North America~~Benelux operations, ~~of 0.7% and 0.2%, respectively. These margin improvements were~~partially offset by ~~an unfavorable effect of 0.4% due to product mix and by an increase of 0.2%~~lower gross margins from our Rhiag acquisition. The decrease in ~~the~~ cost of goods sold as a percentage of ~~our Specialty operations. The growth of our Specialty business,~~revenue in North America was primarily ~~resulting from our 2014 acquisition of a supplier of parts for recreational vehicles, was responsible for most of the mix effect, as this business yields lower~~due to improvements in self service gross margins ~~than our North American and European segments.~~partially offset by a decline in salvage gross margins. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended ~~September 30, 2015~~March 31, 2016 compared to the three months ended ~~September 30, 2014~~March 31, 2015.

Facility and Warehouse Expenses. As a percentage of revenue, facility and warehouse expenses for the three months ended ~~September 30, 2015~~March 31, 2016 increased to ~~7.9%~~8.2% from ~~7.7%~~7.5% in the ~~prior year third quarter, primarily due to an increase in expenses as a percentage~~same period of ~~revenue in our North American operations.~~2015. Compared to the prior year ~~third~~first quarter, we experienced a 0.2% negative impact on operating leverage due to a decrease in other revenue, primarily as a result of declining

prices offor scrap steel and other metals. ~~Excluding the impact~~The change in facilities and warehouse expense also reflects (i) a 0.3% increase as a percentage of ~~the decline~~revenue in ~~scrap~~our North America operations primarily as a result of a realignment of plant manager responsibilities, which shifted these expenses from selling, general and ~~other metal prices of 0.2%,~~administrative expenses to facility and warehouse expenses ~~would have been flat compared to~~during the ~~prior year third quarter.~~first quarter of 2016 and (ii) a 0.2% increase as a percentage of revenue in our Europe operations for branch openings and the addition of facility costs for the new Tamworth, England distribution center.

Distribution Expenses. As a percentage of revenue, distribution expenses ~~increased~~decreased to ~~8.7%~~7.9% in the ~~third~~first quarter of ~~2015~~2016 from ~~8.6%~~8.0% in the comparable prior year quarter. ~~Excluding the impact of a loss~~The decline in ~~operating leverage of 0.3% related to declining other revenue (scrap~~scrap steel and other ~~metals revenue have lower distribution costs than parts sales), distribution expenses improved by 0.2%~~metal prices during the first quarter of 2016 compared to the prior year ~~quarter. The~~period resulted in an unfavorable impact of 0.2% on distribution expenses as a percentage of revenue. Offsetting this impact was a 0.3% improvement ~~reflects fuel cost savings~~in distribution expenses as a percentage of ~~0.3%~~revenue primarily resulting from ~~lower average prices.~~favorable fuel prices across all of our segments.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses for the three months ended ~~September 30, 2015~~March 31, 2016 ~~increased~~decreased to ~~11.3%~~11.4% of revenue from ~~11.2%~~11.5% of revenue in the prior year ~~third~~first quarter. ~~Compared to the prior year third quarter, other revenue decreased as a result of declining~~The decline in prices of scrap steel and other metals ~~which negatively impacted our operating leverage and increased our~~discussed above had a 0.2% negative impact on selling, general and administrative expenses ~~by 0.2% of revenue. This negative impact was partially offset by improvement of 0.1%~~as a percentage of revenue ~~from~~during the first quarter of 2016 compared to the prior year period. Offsetting this unfavorable impact were favorable impacts within selling, general and administrative expenses including (i) a 0.2% improvement as a percentage of revenue in our Specialty segment due to realization of integration synergies and a decline in advertising program expenses, and (ii) a favorable impact of 0.2% within North America resulting from the realignment of plant manager responsibilities, which shifted these expenses from selling, general and administrative expenses to facility and warehouse expenses as ~~a result of acquisition integration synergies.~~described above.

Restructuring and Acquisition Related Expenses. The following table summarizes restructuring and acquisition related expenses for the periods indicated (in thousands):


	Three Months Ended									Three Months Ended
	September 30,									March 31,
	2015			2014			Change			2016			2015			Change
Restructuring expenses	$	3,382	⁽¹⁾	$	2,280	⁽²⁾	$	1,102		$	2,136	⁽¹⁾	$	5,964	⁽²⁾	$	(3,828	)
Acquisition related expenses	1,196		⁽³⁾	1,314		⁽⁴⁾	(118		)	12,675		⁽³⁾	524		⁽⁴⁾	12,151
Total restructuring and acquisition related expenses	$	4,578		$	3,594		$	984		$	14,811		$	6,488		$	8,323

(1)

Restructuring expenses of $1.4 million and $0.7 million for the ~~third~~ quarter ~~of 2015~~ended March 31, 2016 were primarily related to the integration of acquired businesses in our Specialty and North America ~~and Specialty segments.~~segments, respectively. These integration activities included the closure of duplicate facilities and termination of ~~employees in connection with the integration of recent acquisitions into our existing business.~~employees.

(2)

Restructuring ~~expenses~~expense for the ~~third~~ quarter ended March 31, 2015 included $5.9 million of ~~2014 included $1.6 million~~expense related to the integration of ~~certain~~acquired businesses in our Specialty segment. These integration activities included the closure of ~~our other acquisitions into our existing business~~duplicate facilities and ~~$0.7 million of restructuring expenses related to the integration of our January 2014 Keystone Specialty acquisition. Our restructuring expenses included severance for~~ termination of ~~overlapping headcount, moving expenses, and excess facility costs, such as lease reserves and other lease termination costs.~~employees.

(3)

Acquisition related expenses for the ~~third~~ quarter ~~of 2015~~ended March 31, 2016 included ~~$0.5~~$10.7 million for our ~~acquisitions~~acquisition of ~~four aftermarket parts distribution businesses in the Netherlands, $0.3~~Rhiag, $1.8 million for the acquisition of PGW, and $0.2 million of external costs related to other potential ~~acquisitions, and $0.4 million related our North America and Specialty acquisitions during the third quarter of 2015.~~acquisitions.


(4)	Acquisition related expenses for the ~~third~~first quarter of ~~2014~~2015 included $0.4 million ~~for~~and $0.1 million of external costs related to our acquisitions ~~of seven aftermarket parts distribution businesses~~ in ~~the Netherlands~~our Europe and ~~$0.8 million for potential acquisitions.~~North America segments, respectively.

See Note 9,4, "Restructuring and Acquisition Related ~~Expenses~~"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 integration plans.

Depreciation and Amortization. The following table summarizes depreciation and amortization for the periods indicated (in thousands):

Three Months Ended
September 30,
2015 2014 Change
Depreciation $ 22,569
$ 21,806
$ 763
⁽¹⁾
Amortization 8,314
8,692
(378 )
⁽²⁾
Total depreciation and amortization $ 30,883
$ 30,498
$ 385


~~(1)~~	The increase in depreciation expenses was due to increased levels of property and equipment to support our acquisition and organic related growth. The increase was partially offset by a decline in depreciation of $0.8 million attributable to the impact of foreign exchange rates.


~~(2)~~	~~Compared to the third quarter of 2014, amortization expense declined by $0.4 million related primarily to the impact of foreign exchange rates.~~

~~Other Expense, Net.~~ ~~The following table summarizes the components of the quarter-over-quarter decrease in other expense, net (in thousands):~~

Other expense, net for the three months ended September 30, 2014 $ 16,388

(Decrease) increase due to:
Interest expense, net (1,672 )
⁽¹⁾
Change in fair value of contingent consideration liabilities 77
⁽²⁾
Other income, net (2,999 )
⁽³⁾
Net decrease (4,594 )
Other expense, net for the three months ended September 30, 2015 $ 11,794

~~(1)~~

Approximately $1.0 million of the decrease was due to lower outstanding debt levels compared to the prior year period. The higher outstanding debt levels in the prior period were primarily related to borrowings used to finance the Keystone Specialty acquisition in January 2014. The remaining change was due to lower interest rates on borrowings under our senior secured credit agreement compared to the prior year quarter.

~~(2)~~

During the three months ended September 30, 2015, we recorded losses of $0.1 million as a result of fair value adjustments to our contingent consideration liabilities, which is comparable with the prior year quarter. See Note 6, "Fair Value Measurements" 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 contingent payment arrangements.

~~(3)~~

The impact of foreign currency transaction gains and losses was a net $1.5 million favorable impact to the prior year period. This impact includes unrealized and realized gains and losses on foreign currency transactions and unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of inventory. The remaining increase in other income included a $0.8 million increase in customer finance fees and $0.7 million increase in other income.

~~Provision for Income Taxes~~. Our effective income tax rate was 33.9% for the three months ended September 30, 2015, compared to 34.0% for the three months ended September 30, 2014. The tax rate for the three months ended September 30, 2015 includes the favorable impact of $1.2 million attributable to the quarterly update of our expected full-year geographic distribution of income and resulting projected effective tax rate of 34.8%.

~~Equity in Earnings of Unconsolidated Subsidiaries.~~ During the third quarter of 2015, we recorded net operating losses from our equity method investments totaling $1.1 million, compared to $0.7 million of net operating losses in the third quarter of 2014.

~~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 third quarter of 2014, the pound sterling, euro and Canadian dollar rates used to translate the 2015 statements of income declined by 7.2%, 16.1%, and 16.8%, respectively. Despite the decline in rates, the translation effect of the decline of these currencies against the U.S. dollar and realized and unrealized currency losses in the quarter resulted in about a half penny effect on diluted earnings per share relative to the prior year period.

~~Nine Months Ended~~ ~~September 30, 2015~~ ~~Compared to Nine Months Ended~~ ~~September 30, 2014~~

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

Nine Months Ended
September 30, Percentage Change in Revenue
2015 2014 Organic Acquisition Foreign Exchange Total Change
Parts & services revenue $ 5,057,955
$ 4,553,752
7.3 % 7.9 % (4.1 )% 11.1 %
Other revenue 385,759
502,181
(24.3 )% 1.5 % (0.4 )% (23.2 )%
Total revenue $ 5,443,714
$ 5,055,933
4.1 % 7.3 % (3.7 )% 7.7 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~Refer to the discussion of our segment results of operations for factors contributing to revenue changes during the nine months ended September 30, 2015 compared to the prior year period.~~

~~Cost of Goods Sold~~. Our cost of goods sold increased to 60.8% of revenue in the nine months ended September 30, 2015 from 60.7% of revenue in the comparable prior year period. A negative mix effect accounted for 0.4% of the increase in cost of goods sold, primarily resulting from growth of our Specialty business from our October 2014 acquisition of a supplier of parts for recreational vehicles, as this business yields lower gross margins than our North American and European segments. This mix effect is offset by a 0.3% decline in costs of goods sold in our European operations, as a result of internalizing gross margin from our 2014 acquisitions of seven Netherlands distributors. Refer to the discussion of our segment results of operations for factors contributing to the change in cost of goods sold as a percentage of revenue by segment for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

~~Facility and Warehouse Expenses~~. As a percentage of revenue, facility and warehouse expenses for the nine months ended September 30, 2015 decreased to 7.6% from 7.7% in the comparable prior year period. The improvement is being lessened by a 0.2% loss of operating leverage due to a decrease in other revenue, primarily as a result of declining prices of scrap steel and other metals. Excluding this impact, the facility and warehouse expenses would have improved 0.3% reflecting a positive mix effect of 0.2% as a greater proportion of revenue was generated from our Specialty segment. Compared to our North American operations, Specialty stores a greater portion of inventory at their regional distribution centers, the costs of which are capitalized into inventory and expensed through cost of goods sold. In our North American wholesale operations, most of the inventory sold by our local operations is stored on site rather than in distribution centers, and the related facility and warehouse expenses of the local operations are recorded in this line item.

~~Distribution Expenses.~~ As a percentage of revenue, distribution expenses decreased to 8.3% in the nine months ended September 30, 2015 from 8.6% in the comparable prior year period. Excluding the impact of a 0.2% loss in operating leverage due to a decrease in other revenue related to the declining prices of scrap steel and other metals, distribution expenses would have decreased 0.5% from the comparable period in the prior year. The reduction in expense is primarily the result of a 0.4% decline in fuel costs as a result of favorable fuel pricing.

~~Selling, General and Administrative Expenses.~~ ~~As a percentage of revenue, our selling, general and administrative expenses for the nine months ended~~ ~~September 30, 2015~~ increased to 11.3% of revenue from 11.1% of revenue in the prior year period. Compared to the prior year period, other revenue decreased as a result of declining prices of scrap steel and other metals, which negatively impacted our operating leverage and increased our selling, general and administrative expenses by 0.2% of revenue. Our European segment was responsible for an additional increase in selling, general and administrative expenses of 0.2% of revenue as a result of greater expenditures for our sales force and general and administrative personnel. These unfavorable effects were partially offset by a 0.2% improvement as a percentage of revenue from our Specialty segment as a result of acquisition integration synergies.

~~Restructuring and Acquisition Related Expenses. The following table summarizes restructuring and acquisition related expenses for the periods indicated (in thousands):~~

Nine Months Ended
September 30,
2015 2014 Change
Restructuring expenses $ 10,283
⁽¹⁾
$ 9,640
⁽²⁾
$ 643
Acquisition related expenses 2,446
⁽³⁾
3,176
⁽⁴⁾
(730 )
Total restructuring and acquisition related expenses $ 12,729
$ 12,816
$ (87 )

~~(1)~~

Restructuring expenses through the nine months ended September 30, 2015 primarily related to our October 2014 acquisition of a supplier of parts for recreational vehicles in addition to the July 2015 acquisition of Parts Channel. These integration activities included the closure of duplicate facilities and termination of employees in connection with the integration of the acquisitions into our existing business.

~~(2)~~

Restructuring expenses through the nine months ended September 30, 2014 included $5.8 million of restructuring expenses related to the integration of our January 2014 Keystone Specialty acquisition and $3.8 million of restructuring expenses related to the integration of certain of our other acquisitions into our existing business. Our restructuring expenses included severance for termination of overlapping headcount, excess facility costs, such as lease reserves and lease termination costs, and moving costs.


~~(3)~~	Acquisition related expenses through the nine months ended September 30, 2015 included $1.5 million of external costs related to our acquisitions of eleven aftermarket parts distribution businesses in the Netherlands through the third quarter of 2015. The remaining acquisition related expenses are primarily related to potential acquisitions.


~~(4)~~	Acquisition related expenses through the nine months ended September 30, 2014 included external costs primarily related to our acquisitions of seven aftermarket parts distribution businesses in the Netherlands through the third quarter of 2014.

~~See~~ ~~Note 9, "Restructuring and Acquisition 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 integration plans.~~

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


	Nine Months Ended							Three Months Ended
	September 30,							March 31,
	2015		2014		Change			2016		2015		Change
Depreciation	$	65,126	$	62,549	$	2,577	⁽¹⁾	$	22,787	$	21,182	$	1,605	⁽¹⁾
Amortization	24,992		24,587		405		⁽²⁾	8,901		8,271		630		⁽²⁾
Total depreciation and amortization	$	90,118	$	87,136	$	2,982		$	31,688	$	29,453	$	2,235


(1)	The increase in depreciation expense was a result of increased levels of property and equipment to support our acquisition and organic related growth, partially offset by a decline of ~~$2.5~~$0.4 million attributable to the impact of foreign exchange rates.

(2)

The increase in amortization expense ~~is a result of~~reflects net increases in amortization ~~of intangible assets~~expense for intangibles recorded related to our 2015 and 2016 acquisitions ~~completed since the beginning of the prior year. We recognized $29.1~~partially offset by $0.1 million ~~of intangibles related~~decline due to our October 2014 acquisitions of two Specialty businesses. As we amortize customer relationship intangibles on an accelerated basis, amortization expense will be relatively higher in the initial post-acquisition years. Partially offsetting this increase was a decline in amortization of $1.3 million related to the impact of foreign exchange rates.

Other Expense, Net. The following table summarizes the components of the ~~year-over-year~~quarter-over-quarter increase in other expense, net (in thousands):


Other expense, net for the nine months ended September 30, 2014		$	45,443
Other expense, net for the three months ended March 31, 2015						Other expense, net for the three months ended March 31, 2015	$	16,825
(Decrease) increase due to:	(Decrease) increase due to:					(Decrease) increase due to:
Interest expense, net	Interest expense, net	(3,890		)	⁽¹⁾	Interest expense, net	(314		)
Loss on debt extinguishment	Loss on debt extinguishment	(324		)	⁽²⁾	Loss on debt extinguishment	26,650			⁽¹⁾
Change in fair value of contingent consideration liabilities	Change in fair value of contingent consideration liabilities	2,365			⁽³⁾	Change in fair value of contingent consideration liabilities	(78		)
Gains on foreign exchange contracts - acquisition related						Gains on foreign exchange contracts - acquisition related	(18,342		)	⁽²⁾
Other income, net	Other income, net	(256		)	⁽⁴⁾	Other income, net	(4,730		)	⁽³⁾
Net decrease		(2,105		)
Other expense, net for the nine months ended September 30, 2015		$	43,338
Net increase						Net increase	3,186
Other expense, net for the three months ended March 31, 2016						Other expense, net for the three months ended March 31, 2016	$	20,011

(1)

Approximately half of the reduction in interest expense, net is due to lower interest rates on borrowings under our senior secured credit agreement compared to the prior year period, with the remainder of the decline attributable to lower outstanding borrowings. The higher outstanding debt levels in the prior year were primarily related to borrowings used to finance the Keystone Specialty acquisition in January 2014.


~~(2)~~	During the ~~nine months ended September 30, 2014,~~first quarter of 2016, we incurred a ~~$0.3~~$23.8 million loss on debt extinguishment as a result of our ~~March 2014~~early payment of Rhiag debt assumed as part of the acquisition, and we incurred a $2.9 million loss on debt extinguishment as a result of our January 2016 amendment to our senior secured credit agreement. ~~We did not incur~~


(2)	In March 2016, we entered into foreign currency forward contracts to acquire a ~~similar charge during~~total of €588 million used to fund the ~~current year period.~~purchase price of the Rhiag acquisition. The rates under the foreign currency forwards were favorable to the spot rate on March 17, 2016, and as a result, these derivative contracts generated a gain of $18.3 million.

(3)

~~During~~The change in Other income, net primarily reflects the ~~nine months ended September 30, 2015, we recorded~~impact of foreign currency transaction gains and losses, ~~of $0.4~~which was a net $3.9 million ~~as a result of fair value adjustments to our contingent consideration liabilities,~~favorable impact compared to ~~gains of $2.0 million in~~ the prior year period. ~~See Note 6, "Fair Value Measurements" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report~~This impact includes unrealized and realized gains and losses on ~~Form 10-Q for further information on our contingent payment arrangements.~~

~~(4)~~

~~The increase in other income, net reflects an increase in customer finance fees of $0.9 million. Offsetting this other income was a net unfavorable impact of $0.7 million due to greater~~ foreign currency ~~transaction losses, including the impact of~~transactions and unrealized mark-to-market gains and losses on foreign currency forward contracts used to hedge the purchase of inventory in our U.K. operations.

inventory and, to a lesser extent, unrealized and realized gains and losses on foreign currency transactions for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

Provision for Income Taxes. Our effective income tax rate was 34.8% for the ~~nine~~three months ended ~~September 30, 2015, which was consistent with our full year 2014 effective tax rate of 34.7% as our estimate of~~March 31, 2016, compared to 35.5% for the ~~geographic distribution of pretax income for 2015 is similar to the actual 2014 allocation. Our~~three months ended March 31, 2015. The lower effective income tax rate for the ~~nine~~three months ended ~~September 30, 2014 was 34.0%, which reflected~~March 31, 2016 reflects our ~~estimate at~~expected geographic distribution of income, with a slightly larger proportion of our pre-tax income expected to be earned in the ~~time that our~~typically lower tax rate international ~~operations would constitute a greater percentage of the consolidated pretax income than was actually realized in thefull year results. We adjusted~~jurisdictions. In addition, the tax ~~rate in~~provision for the ~~fourth~~first quarter of ~~2014~~2015 included unfavorable discrete items of $0.7 million primarily attributable to ~~recognize~~U.S. state deferred tax adjustments; discrete items for the ~~actual geographic allocation.~~three months ended March 31, 2016 were immaterial.

Equity in Earnings of Unconsolidated Subsidiaries. ~~During the nine months ended September 30, 2015,~~In February 2016, we ~~recorded an impairment charge of $1.0 million~~divested our interest in ~~our equity method investment in a U.K. venture. No tax benefit was recognized related to this charge. Our share of net operating losses in~~ACM Parts. Income from our other equity method investments ~~totaled $3.2 million through~~in the ~~third~~ quarter ~~2015 compared to $1.2 million during the prior year period.~~was nominal.

Foreign Currency Impact. We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used ~~through~~during the ~~third~~first quarter of ~~2014,~~2015, the pound sterling, euro and Canadian dollar rates used to translate the ~~2015~~2016 statements of income declined by ~~8.2%~~5.5%, ~~17.7%~~2.2%, and ~~13.1%, respectively.~~9.7%. The translation effect of the decline of these currencies against the U.S. dollar and realized and unrealized currency losses infor the ~~quarter~~year resulted in ~~an approximately $0.03~~less than a penny negative effect on diluted earnings per share relative to the prior ~~year period.~~year.

Results of Operations—Segment Reporting

We evaluate growth 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. Constant currency Segment EBITDA results are calculated by translating prior year Segment EBITDA in local currency using the current year's currency conversion rate. This non-GAAP 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 GAAP. Our use of this term may vary from the use of similarly-titled measures by other ~~issuers~~companies due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

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


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2015			% of Total Segment Revenue	2014			% of Total Segment Revenue	2015			% of Total Segment Revenue	2014			% of Total Segment Revenue	2016			% of Total Segment Revenue	2015			% of Total Segment Revenue
Third Party Revenue
North America	$	1,037,130			$	1,024,835			$	3,127,988			$	3,080,090			$	1,087,363			$	1,046,079
Europe	511,146				495,776				1,508,325				1,380,663				546,751				487,346
Specialty	283,456				200,413				807,401				595,180				287,362				240,487
Total third party revenue	$	1,831,732			$	1,721,024			$	5,443,714			$	5,055,933			$	1,921,476			$	1,773,912
Total Revenue
North America	$	1,037,290			$	1,024,967			$	3,128,614			$	3,080,356			$	1,087,577			$	1,046,173
Europe	511,146				495,776				1,508,395				1,380,663				546,761				487,346
Specialty	284,306				201,007				809,858				596,430				288,313				241,222
Eliminations	(1,010		)		(726		)		(3,153		)		(1,516		)		(1,175		)		(829		)
Total revenue	$	1,831,732			$	1,721,024			$	5,443,714			$	5,055,933			$	1,921,476			$	1,773,912
Segment EBITDA
North America	$	128,506		12.4%	$	131,851		12.9%	$	416,774		13.3%	$	415,139		13.5%	$	147,375		13.6%	$	149,388		14.3%
Europe	52,733			10.3%	41,726			8.4%	153,199			10.2%	128,826			9.3%	57,498			10.5%	46,523			9.5%
Specialty	26,075			9.2%	17,977			8.9%	91,677			11.3%	64,137			10.8%	31,738			11.0%	25,404			10.5%
Total Segment EBITDA	$	207,314		11.3%	$	191,554		11.1%	$	661,650		12.2%	$	608,102		12.0%	$	236,611		12.3%	$	221,315		12.5%

The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities, other acquisition related gains and losses and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. Loss on debt extinguishment is considered a component of interest in calculating ~~EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.~~EBITDA. See Note 13, "Segment and Geographic ~~Information~~"Information" to the unaudited condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to Net Income.

Three Months Ended ~~September 30, 2015~~March 31, 2016 Compared to Three Months Ended ~~September 30, 2014~~March 31, 2015

North America

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


	Three Months Ended September 30,				Percentage Change in Revenue									Three Months Ended March 31,				Percentage Change in Revenue
North America	2015		2014		Organic			Acquisition ⁽¹⁾		Foreign Exchange		Total Change		2016		2015		Organic			Acquisition ⁽³⁾		Foreign Exchange ⁽⁴⁾		Total Change
Parts & services revenue	$	914,956	$	847,626	5.9	%	⁽²⁾	3.3	%	(1.3	)%	7.9	%	$	985,256	$	918,333	4.9	%	⁽¹⁾	3.1	%	(0.7	)%	7.3	%
Other revenue	122,174		177,209		(33.9	)%	⁽³⁾	3.2	%	(0.4	)%	(31.1	)%	102,107		127,746		(25.1	)%	⁽²⁾	5.2	%	(0.2	)%	(20.1	)%
Total revenue	$	1,037,130	$	1,024,835	(1.0	)%		3.3	%	(1.1	)%	1.2	%
Total third party revenue														$	1,087,363	$	1,046,079	1.2	%		3.4	%	(0.6	)%	3.9	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


(1)	~~Acquisition related revenue growth reflects the impact of six wholesale businesses and one self service retail operation acquired since the beginning of the third quarter of 2014.~~

~~(2)~~

Approximately 60% of our organic growth in parts and services revenue was ~~due~~attributable to increased sales ~~volume~~volumes in our wholesale operations ~~with~~ theresulting from improved fill rates and in-stock rates, as well as increased purchasing levels, which contributed to a greater volume of parts available for sale. The remainder of our organic growth ~~resulting from higher prices. In~~in parts and services revenue was primarily due to increased prices in our salvage operations ~~we shifted~~as a result of shifting our salvage vehicle purchasing to higher quality vehicles, ~~beginning in the prior year third quarter,~~ which increased the average revenue per part sold. ~~The~~Organic revenue growth ~~from pricing also reflects, to a lesser extent, increased net prices to customers~~ in ~~our aftermarket product lines.~~

parts and services was negatively affected by milder winter weather conditions in North America in the first quarter of 2016.

~~(3)~~(2)

~~Approximately $51~~The $26 million decline in other revenue primarily consisted of ~~the $60~~a $32 million organic decline in other revenue, ~~was a result~~partially offset by $7 million of ~~lower~~acquisition related growth. Lower prices received from the sale of scrap and other ~~metals.~~metals resulted in a $39 million organic decline in other revenue. This was primarily due to lower prices from the sale of crushed auto bodies, which fluctuate based on steel prices. ~~Lower sales volumes were responsible for the remaining decline,~~Partially offsetting this unfavorable price impact was a favorable volume impact, primarily due to ~~fewer~~more vehicles being processed relative to the prior year ~~third quarter. In August, we sold~~period.


(3)	The acquired revenue growth reflects the impact of four wholesale businesses and one self service retail operation acquired since the beginning of 2015 up to the one year anniversary of the acquisition date.

(4)

Compared to the prior year, exchange rates reduced our ~~precious metals processing business. We will continue~~revenue growth by 0.6%, primarily due to ~~generate revenue from~~ the ~~precious metals~~strengthening of the U.S. dollar against the Canadian dollar in the ~~catalytic converters removed from salvage vehicles, but~~first quarter 2016 compared to the ~~other metals business, which represented $21 million in revenue through September 30, 2015, will not generate revenue going forward.~~prior year first quarter.

Segment EBITDA. Segment EBITDA decreased ~~$3.3~~$2.0 million, or ~~2.5%~~1.3%, in the ~~third~~first quarter of ~~2015~~2016 compared to the prior year ~~third~~first quarter. The decline in scrap steel ~~and other metals~~ prices as described in the revenue section above had a negative ~~quarter over quarter~~ impact of ~~$7.2~~$1.8 million on North ~~American~~America Segment EBITDA and less than half a ~~$0.02~~penny negative effect on diluted earnings per share ~~relative~~during the first quarter of 2016 based on the fluctuation in scrap steel prices from the purchase date of the car to the ~~prior year period.~~

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

North America Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2014 12.9 %
Increase (decrease) due to:
Change in gross margin 0.3 % (1)
Change in segment operating expenses (1.0 )% (2)
Change in other income, net 0.2 %
Segment EBITDA for the three months ended September 30, 2015 12.4 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	The increase in gross margin reflects a 0.3% improvement in gross margin primarily as a result of a 0.2% favorable mix impact resulting from more revenue being derived from our wholesale operations, which relative to our self service operations have higher gross margin percentages during periods when scrap and other metal prices decline.

~~(2)~~

The decrease in segment operating expenses was primarily the result of the negative impact on operating leverage caused by the decline in other revenue as a result of lower scrap steel and metal prices. In periods of falling scrap and other revenue, we do not experience a commensurate decline in operating expenses as we have few variable costs associated with the sale of scrap and other metals. Excluding the 1.3% impact of the decline in other revenue due to lower scrap and other metal prices, segment operating expenses improved by 0.3%, which is primarily the result of a 0.4% decline in fuel costs due to favorable fuel pricing compared to the prior year quarter.

~~Europe~~

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

Three Months Ended September 30, Percentage Change in Revenue
Europe 2015 2014
Organic ⁽¹⁾

Acquisition ⁽²⁾

Foreign Exchange ⁽³⁾
Total Change
Parts & services revenue $ 510,279
$ 495,300
7.2 % 5.7 % (9.9 )% 3.0 %
Other revenue 867
476
21.3 % 67.8 % (6.9 )% 82.2 %
Total revenue $ 511,146
$ 495,776
7.2 % 5.8 % (9.9 )% 3.1 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	In our U.K. operations, parts and services revenue grew organically by 10.1%, while in our continental European operations, parts and services revenue grew 0.3%, resulting in net organic revenue growth of 7.2% over the prior year.

Our organic revenue growth in the U.K., which resulted from higher sales volumes, was composed of a 6.2% increase in revenue from stores open more than 12 months and a 3.9% increase from revenue generated by 33 branch openings since the beginning of the prior year third quarter through the one year anniversary of their respective opening dates.


~~(2)~~	Includes $21.9 million from our acquisitions of 13 distribution companies in the Netherlands completed since the beginning of the prior year third quarter through the one year anniversary of acquisition.

~~(3)~~

Compared to the prior year, exchange rates reduced our revenue growth by $49 million, or 9.9%, primarily due to the strengthening U.S. dollar against both the pound sterling and euro relative to the third quarter of 2014. Based on exchange rates through October 2015 and projections for the remainder of the year, we expect there will be a negative effect on revenue growth for the remainder of 2015 as a result of foreign currency exchange movements.

~~Segment EBITDA.~~ Segment EBITDA increased $11.0 million, or 26.4%, in the third quarter of 2015 compared to the prior year third quarter. Our European Segment EBITDA includes a negative quarter over quarter impact of $3.7 million related to the translation of local currency results into U.S. dollars at lower exchange rates than those experienced in the third quarter of 2014. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA increased by $14.7 million, or 35%, compared to the prior year third quarter. Our European Segment EBITDA for the third quarter of 2015 also reflects foreign exchange transaction gains of $1.0 million over the prior year quarter. 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 third quarter of 2015.

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

Europe Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2014 8.4 %
Increase due to:
Change in gross margin 2.6 % (1)
Change in segment operating expenses (0.9 )% (2)
Change in other income, net 0.2 %
Segment EBITDA for the three months ended September 30, 2015 10.3 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1)~~

The increase in gross margin reflects improvement of 1.3% in our continental European operations resulting from (i) a non-recurring decrease in gross margins in 2014 caused by the acquisitions of seven of our distributor customers and (ii) internalizing of the incremental gross margin generated by our acquired distributors. Also, gross margins in our U.K. operations improved by 1.2% as a result of a reduction in the net price paid for the purchase of aftermarket products.

~~(2)~~

The increase in segment operating expenses primarily reflects higher selling, general and administrative expenses in our UK operations as a result of higher personnel costs to support the growth of the business, including our e-commerce development. Our facility costs have a net immaterial effect as (i) increases in the UK operation as a result of additional space requirements in advance of the opening of a new distribution center expected in 2016 offset (ii) decreases in our continental Europe operations due to realization of synergies with personnel expenses as a result of our acquisitions.

~~Specialty~~

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

Three Months Ended September 30, Percentage Change in Revenue
Specialty 2015 2014
Organic ⁽¹⁾

Acquisition ⁽²⁾

Foreign Exchange ⁽³⁾
Total Change
Parts & services revenue $ 283,456
$ 200,413
10.0%
33.9%
(2.5%)
41.4%
Other revenue —
—
— % — % — % — %
Total revenue $ 283,456
$ 200,413
10.0%
33.9%
(2.5%)
41.4%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	~~The growth in organic revenue was primarily due to increased sales volumes as a result of favorable economic conditions.~~


~~(2)~~	~~The acquisition related growth reflects the impact of two Specialty businesses acquired in the fourth quarter of 2014 in addition to the acquisition of Coast on August 19, 2015.~~


~~(3)~~	Compared to the prior year, exchange rates reduced our revenue growth by 2.5%, primarily due to the strengthening U.S. dollar against the Canadian dollar in the third quarter of 2015 compared to the third quarter of 2014.

~~Segment EBITDA.~~ ~~Segment EBITDA increased $8.1 million, or 45.0%, in the third quarter of 2015 compared to the prior year third quarter.~~

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

Specialty Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2014 8.9 %
(Decrease) increase due to:
Change in gross margin (1.2 )% (1)
Change in segment operating expenses 1.5 % (2)
Segment EBITDA for the three months ended September 30, 2015 9.2 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	The decline in gross margin reflects a 1.0% increase in inventory costs, 0.3% of which we believe are temporary as we complete our integration plans and an unfavorable margin impact of 0.5% due to unfavorable customer pricing. These negative effects on gross margin were partially offset by a favorable mix effect of 0.4% resulting from a shift toward higher margin product lines.

~~(2)~~

Reflects a reduction in selling, general and administrative expenses as a percentage of revenue of 1.3% primarily as a result of integration synergies. Distribution expenses also declined 0.7% due to (i) favorable fuel pricing compared to the prior year third quarter of 0.5%, (ii) logistics synergies as we leverage our North American distribution network for the delivery of specialty products of 0.1%, and (iii) favorable headcount related expenses of 0.3% offset by (iv) higher freight costs of 0.2% driven by higher use of third-party freight to handle increased volumes as well as sales related to our October 2014 acquisition of a supplier of parts for recreational vehicles, which are all shipped via third party carriers. Facility and warehouse expenses increased 0.5% resulting from higher personnel expenses with higher headcount needed to support distribution center volume.

~~Nine Months Ended~~ ~~September 30, 2015~~ ~~Compared to Nine Months Ended~~ ~~September 30, 2014~~

~~North America~~

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

Nine Months Ended September 30, Percentage Change in Revenue
North America 2015 2014 Organic
Acquisition ⁽¹⁾
Foreign Exchange Total Change
Parts & services revenue $ 2,745,448
$ 2,579,598
5.6 %
⁽²⁾
1.9 % (1.0 )% 6.4 %
Other revenue 382,540
500,492
(24.5 )%
⁽³⁾
1.3 % (0.3 )% (23.6 )%
Total revenue $ 3,127,988
$ 3,080,090
0.7 % 1.8 % (0.9 )% 1.6 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	The acquisition growth in parts and services revenue reflects the impact of 13 wholesale businesses and 3 self service retail operations acquired since the beginning of 2014 up to the one year anniversary of the acquisition date.

~~(2)~~

Approximately half of our organic growth in parts and services revenue was due to increased net pricing in our wholesale operations. In the third quarter of 2014, we shifted our salvage vehicle purchasing to higher quality vehicles, which increased the average revenue per part sold during through the third quarter of 2015. In our aftermarket operations, we increased our net prices to customers compared to the comparable period in the prior year. The remainder of our organic growth in parts and services revenue was primarily due to increased sales volumes in our salvage operations.

~~(3)~~

Approximately $100 million of the $122 million organic decline in other revenue was a result of lower prices received from the sale of scrap and other metals. This was primarily due to lower prices from the sale of crushed auto bodies, which fluctuate based on steel prices. Lower sales volumes were responsible for the remaining decline, primarily due to fewer vehicles processed relative to the prior year period.

~~Segment EBITDA~~. Segment EBITDA increased $1.6 million, or 0.4%, through the third quarter of 2015 compared to the comparative period in the prior year. The decline in scrap steel and other metals prices as described in the revenue section above had a negative year over year impact of $22.0 million on North American Segment EBITDA and a $0.05 negative effect on diluted earnings per share relative to the prior year period.

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


North America	Percentage of Total Segment Revenue			Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2014	13.5	%
Segment EBITDA for the three months ended March 31, 2015				14.3	%
Increase (decrease) due to:
Change in gross margin	0.2	%	(1)	0.1	%	(1)
Change in segment operating expenses	(0.4	)%	(2)	(1.0	)%	(2)
Segment EBITDA for the nine months ended September 30, 2015	13.3	%
Change in other expense, net				0.2	%
Segment EBITDA for the three months ended March 31, 2016				13.6	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

The improvement in gross margin reflects a ~~0.1%~~0.5% favorable impact from our ~~aftermarket product lines and a 0.1% favorable mix~~self service operations, partially offset by an unfavorable impact ~~due to more revenue derived~~of 0.4% from our ~~wholesale~~salvage operations. ~~In our aftermarket products, we improved our gross margin through increases in net prices to our customers. Despite the continued decline in scrap and other metal prices,~~Gross margins inat our self service operations have ~~stayed consistent year over year, resulting from~~improved as a result of the continued effort to ~~purchase higher quality cars that will yield more parts revenue per vehicle~~reduce car costs to offset the loss in scrap and other metal revenue. Salvage gross margins fell as we continued to implement our strategy of purchasing higher quality vehicles, as these higher quality vehicles generate higher parts revenue and gross margin dollars, but lower gross margin percent.

(2)

The decline in ~~segment~~Segment EBITDA margin related to operating expenses was primarily the result of ~~the~~a 1.1% negative impact on operating leverage caused by the decrease in other revenue related to the declining prices of scrap steel and other metals. In periods of falling scrap revenue, we do not experience a commensurate decline in operating expenses, as we have few variable costs associated with the sale of scrap and other metals. ~~Excluding the 0.9% impact of the decline~~This increase in ~~scrap steel and other metals on other revenue,~~ segment operating expenses ~~improved~~as a percentage of revenue was partially offset by ~~0.5%, which is primarily the result of~~ a ~~0.4% decline in distribution expenses due to a reduction~~0.2% improvement in fuel ~~costs.~~costs as a percentage of revenue.

Europe

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


	Nine Months Ended September 30,				Percentage Change in Revenue								Three Months Ended March 31,				Percentage Change in Revenue
Europe	2015		2014		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change		2016		2015		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change
Parts & services revenue	$	1,505,106	$	1,378,975	10.2	%	9.7	%	(10.8	)%	9.1	%	$	545,707	$	486,096	6.9	%	9.9	%	(4.5	)%	12.3	%
Other revenue	3,219		1,688		25.5	%	73.4	%	(8.2	)%	90.7	%	1,044		1,250		(22.4	)%	10.3	%	(4.4	)%	(16.4	)%
Total revenue	$	1,508,325	$	1,380,663	10.3	%	9.7	%	(10.7	)%	9.2	%
Total third party revenue													$	546,751	$	487,346	6.7	%	10.0	%	(4.5	)%	12.3	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

In our U.K. operations, parts and services revenue grew organically by ~~12.7%~~7.4%, while in our ~~continental European~~Benelux region operations, parts and services revenue grew organically by ~~3.6%, resulting in net organic revenue growth of 10.2% over the prior year.~~6.2%. Our organic revenue growth in the U.K., operations, which primarily resulted from higher sales volumes, was composed of a ~~7.8%~~5.8% increase in revenue from stores open more than 12 months and a 5%1.5% increase from revenue generated by 5311 branch openings since the beginning of the prior year through the one year anniversary of their respective opening dates. Organic revenue growth in parts and services in our ~~continental European~~U.K. operations was negatively affected by milder winter weather conditions in the U.K. in the first quarter of 2016. Organic revenue growth in our Benelux operations was primarily due to higher sales volumes as a result of the ~~opening~~introduction of a new ~~warehouse location in France in 2014~~product lines and, to a lesser extent, growth in our French and Belgian ~~market.~~markets.

(2)

Acquisition related growth ~~primarily~~for the first quarter of 2016 includes ~~$111.6~~ $33.7 million from our ~~acquisitions~~acquisition of 18Rhiag, with the remainder from revenue generated between January 1, 2016 and the one year anniversary of acquisition related to 11 distribution companies in the Netherlands ~~completed~~and two salvage businesses in Sweden that were acquired since the beginning of ~~2014 through the one year anniversary of acquisition.~~2015.

(3)

Compared to the prior year, exchange rates reduced our revenue growth by ~~$148.4~~$21.9 million, or ~~10.8%~~4.5%, primarily due to the strengthening of the U.S. dollar against both the pound sterling and euro relative to the first ~~three quarters~~quarter of 2014. Based on exchange rates through October 2015 and projections for the remainder of the year, we expect there will be a negative effect on revenue growth for the remainder of 2015 as a result of foreign currency exchange movements.2015.

Segment EBITDA. Segment EBITDA increased ~~$24.4~~$11.0 million, or ~~18.9%~~23.6%, ~~through~~in the ~~third~~first quarter of ~~2015~~2016 compared to the ~~comparative period in the~~ prior ~~year.~~year first quarter. Our ~~European~~Europe Segment EBITDA includes a negative year over year impact of ~~$13.2~~$2.3 million related to the translation of local currency results into U.S. dollars at lower exchange rates than those experienced ~~through the third quarter of 2014.~~during 2015. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA increased by ~~$37.6~~$13.3 million, or ~~29.1%~~28.6%, compared to the prior year third quarter. Our European Segment EBITDA through the third quarter of 2015 also reflects an increase in foreign exchange transaction losses of $0.6 million as compared to the prior year period.year. Refer to the Foreign Currency Impact discussion within the Results of Operations - Consolidated section above for further detail regarding foreign currency impact on our results for the ~~nine~~three months ended ~~September 30, 2015.~~

March 31, 2016. The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our ~~European~~Europe segment:


Europe	Percentage of Total Segment Revenue			Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2014	9.3	%
Increase (decrease) due to:
Segment EBITDA for the three months ended March 31, 2015				9.5	%
Increase/ (decrease) due to:
Change in gross margin	1.2	%	(1)	1.1	%	(1)
Change in segment operating expenses	(0.3	)%	(2)	(0.7	)%	(2)
Change in other expenses	(0.1	)%
Segment EBITDA for the nine months ended September 30, 2015	10.2	%
Change in other expense, net				0.5	%	(3)
Segment EBITDA for the three months ended March 31, 2016				10.5	%
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 of 1.1% reflects improvement of ~~0.4% in~~0.6% related to our UKU.K. operations, primarily as a result of a reduction in ~~direct~~product costs and an increase in supplier rebates, and 0.7% inrelated to our ~~continental European~~Benelux operations ~~as a result of internalizing incremental gross margin from our 2014 acquisitions of seven Netherlands distributors.~~

primarily as a result of internalizing incremental gross margin from our 2015 acquisitions of 11 Netherlands distributors and the introduction of new product lines with higher margins than our existing product line sales. The increase in gross margin from our U.K. and Benelux operations was partially offset by a 0.2% decline in gross margin due to the acquisition of Rhiag, which has lower gross margins than our other Europe operations.

(2)

The ~~decline~~increase in segment operating expenses as percentage of revenue reflects ~~higher~~(i) an increase in facility and warehouse expenses of 0.8% primarily from our U.K. operations due to increases from opening seven new branches and four new hubs since the prior year first quarter as well as the addition of facility costs for the new Tamworth distribution facility, and (ii) a 0.2% increase in selling, general and administrative expenses primarily related to higher advertising costs to support our e-commerce business. Partially offsetting these increases was a benefit of ~~0.7%~~0.2% from the acquisition of Rhiag, which has lower operating expenses as a percentage of revenue than our existing Europe operations.

(3)

The 0.5% decrease in ~~our UK operations as~~other expense, net is a result of ~~higher personnel costs~~gains on foreign currency forward contracts used to ~~support~~manage the ~~growth of the business, including~~foreign currency exposure on inventory purchases in our ~~e-commerce business. Distribution costs improved over to the prior year period by 0.3% due to internalizing previously outsourced delivery expenses as well as lower fuel costs.~~U.K. operations.

Specialty

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


	Nine Months Ended September 30,				Percentage Change in Revenue								Three Months Ended March 31,				Percentage Change in Revenue
Specialty	2015		2014		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change		2016		2015		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change
Parts & services revenue	$	807,401	$	595,180	7.7%		30.0%		(2.0%)		35.7%		$	287,362	$	240,487	10.8	%	9.4	%	(0.8	)%	19.5	%
Other revenue	—		—		—	%	—	%	—	%	—	%	—		—		—	%	—	%	—	%	—	%
Total revenue	$	807,401	$	595,180	7.7%		30.0%		(2.0%)		35.7%
Total third party revenue													$	287,362	$	240,487	10.8	%	9.4	%	(0.8	)%	19.5	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

Organic growth in Specialty parts and services revenue reflects an increase in service levels in various regions of North America as we add delivery capacity to our integrated distribution network to allow us to realize synergies associated with the integration of Coast. In addition, we continue to see growth from favorable macro trends and economic conditions, which has increased ~~sales volumes~~consumer discretionary spending on automotive and RV parts and accessories, as well as a ~~result of favorable economic conditions.~~boost from milder winter weather in 2016.


(2)	Acquisition related growth reflects the impact of ~~two Specialty businesses acquired in the fourth quarter of 2014 in addition to~~ the acquisition of Coast on August 19, 2015.


(3)	Compared to the prior year, exchange rates reduced our revenue growth by 2%0.8%, primarily due to the strengthening of the U.S. dollar against the Canadian dollar ~~through~~in the ~~third~~first quarter ~~of 2015~~2016 compared to the ~~comparative period in the~~ prior ~~year.~~year first quarter.

Segment EBITDA. Segment EBITDA increased ~~$27.5~~$6.3 million, or ~~42.9%~~24.9%, ~~through~~in the ~~third~~first quarter of ~~2015~~2016 compared to the ~~same period in the~~ prior ~~year.~~

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


Specialty	Percentage of Total Segment Revenue			Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2014	10.8	%
(Decrease) increase due to:
Segment EBITDA for the three months ended March 31, 2015				10.5	%
Increase due to:
Change in gross margin	(0.8	)%	(1)	0.2	%	(1)
Change in segment operating expenses	1.3	%	(2)	0.2	%	(2)
Segment EBITDA for the nine months ended September 30, 2015	11.3	%
Change in other expense, net				0.1	%
Segment EBITDA for the three months ended March 31, 2016				11.0	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

Our acquisition of a supplier of parts for recreational vehicles completed in the fourth quarter of 2014 resulted in a 0.6% decline in gross margin compared to the same period in the prior year. Compared to our existing Specialty business, this acquisition realizes lower gross margins than our other specialty product sales. The ~~remaining decline~~improvement in gross margin reflects ~~an increase of 0.7%~~(i) a 0.4% decrease in inventory costs, ~~most~~which were higher in the prior year as a result of ~~which we expect to be temporary as~~acquisition integration ~~plans are completed, offset by 0.5% for~~activities, (ii) a 0.2% favorable ~~product~~ mix effect resulting from a shift toward higher ~~margin product lines, particularly truck and off road products due to improved economic conditions.~~

margin products, particularly truck and off road products, partially offset by (iii) a 0.3% net negative impact from the timing of recognizing certain credits in comparison to the prior year quarter.

(2)

~~The decline in operating expenses reflects~~

Reflects a 1.0% reduction in selling, general and administrative expenses as a percentage of revenue ~~of 0.8%~~ primarily ~~as a result~~related to the 0.5% decline in personnel costs for the realization of integration ~~synergies. Distribution~~synergies and a 0.3% decline in advertising program expenses ~~decreased 0.8% due to~~. These positive effects were partially offset by (i) ~~favorable fuel pricing compared to the same period~~an increase in ~~the prior year~~facilities and warehouse expense of 0.7%~~, ii) logistics synergies as we leverage~~ from the addition of two distribution facilities in late 2015 and the higher cost of Coast facilities in comparison to our ~~North American~~existing business and (ii) an increase in distribution ~~network for the delivery~~expense of ~~specialty products of 0.6%, offset by (iii)~~0.2% primarily related to higher freight costs ~~of 0.6% driven by higher use of third-party freight~~for shipment from Coast warehouses, which continue to ~~handle increased volumes as well as sales related to our October 2014 acquisition of a supplier of parts for recreational vehicles, which are all~~be shipped via third party ~~carriers. We expect to realize additional integration synergies during the remainder~~carriers instead of 2015 and into the first half of 2016 as we continue to rationalize our facilities within this segment. Offsetting these decreases was an increase in facility and warehouse expenses of 0.3% as a result of higher headcount due to increased volumes inthrough our distribution ~~centers.~~network as integration continues.

~~2015~~2016 Outlook

We estimate that full year ~~2015~~2016 adjusted net income and adjusted diluted earnings per share, excluding the impact of any restructuring and acquisition related expenses, ~~and~~amortization expense related to acquired intangibles, any gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities) and loss on debt extinguishment, will be in the range of ~~$428~~$545 million to ~~$442~~$575 million and ~~$1.39~~$1.76 to ~~$1.44,~~$1.86, respectively.

Liquidity and Capital Resources

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


	September 30, 2015		December 31, 2014		September 30, 2014		March 31, 2016		December 31, 2015		March 31, 2015
Cash and equivalents	$	137,086	$	114,605	$	244,646	$	229,220	$	87,397	$	175,492
Total debt(1)	1,607,230		1,864,562		1,898,041		2,836,700		1,599,695		1,734,635
Net debt (total debt less cash and equivalents)	1,470,144		1,749,957		1,653,395		2,607,480		1,512,298		1,559,143
Current maturities	37,174		63,515		72,908		76,405		57,494		62,303
Capacity under credit facilities ⁽¹⁾⁽²⁾	1,947,000		1,947,000		1,947,000		2,547,000		1,947,000		1,947,000
Availability under credit facilities ⁽¹⁾⁽²⁾	1,310,517		1,127,810		1,113,276		1,092,589		1,337,653		1,231,500
Total liquidity (cash and equivalents plus availability under credit facilities)	1,447,603		1,242,415		1,357,922		1,321,809		1,425,050		1,406,992

⁽¹⁾Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of $18.1 million, $15.0 million, and $17.5 million as of March 31, 2016, December 31, 2015 and March 31, 2015, respectively).

⁽²⁾ Includes our revolving credit facilities, our receivables securitization facility, and letters of credit.

We assess our liquidity in terms of our ability to fund our operations and provide for expansion through both internal development and acquisitions. Our primary sources of liquidity are cash flows from operations and our credit facilities. We utilize our cash flows from operations to fund working capital and capital expenditures, with the excess amounts going towards funding acquisitions or paying down outstanding debt. As we have pursued acquisitions as part of our 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 our January 2016 amendment to our senior secured credit facilities, our receivables securitization facility and the issuance of €500 million of senior notes ~~and receivables securitization facility.~~in April 2016 by LKQ Italia Bondco S.p.A., an indirect, wholly-owned subsidiary of LKQ Corporation.

As of ~~September 30, 2015~~March 31, 2016, we had debt outstanding and additional available sources of financing as follows:

Senior secured credit facilities maturing in ~~May 2019,~~January 2021, composed of ~~$450~~a term loan of $500 million inand a €230 million term loan ($762 million of term loans ~~($416 million~~ outstanding at ~~September 30, 2015)~~March 31, 2016) and ~~$1.85~~$2.45 billion in revolving credit ($~~475 million~~1.29 billion outstanding at ~~September 30, 2015)~~March 31, 2016), bearing interest at variable rates (although a portion of this debt is hedged through interest rate swap contracts)

Senior notes totaling $600 million, maturing in May 2023 and bearing interest at a 4.75% fixed rate

Receivables securitization facility with availability up to $97 million ($9097 million outstanding as of ~~September 30, 2015~~March 31, 2016), maturing in October 2017 and bearing interest at variable commercial paper rates

From time to time, we may undertake financing transactions to increase our available liquidity, such as our ~~March 2014~~January 2016 amendment to our senior secured credit facilities and ~~our September 2014 amendment to our receivables securitization facility. Our financing structure, which includes our senior secured credit facilities,~~the issuance of €500 million of senior notes in April 2016. The Rhiag acquisition was the catalyst for the April 2016 issuance of €500 million of senior notes. Given that Rhiag is a long term asset, we considered alternative financing options and ~~receivables securitization facility,~~decided to fund a portion of this acquisition through the issuance of long term notes. Additionally, the interest rates on Rhiag's acquired debt ranged between 6.45% and 7.25%. With the issuance of the €500 million of senior notes at a rate of 3.875%, we were able to replace Rhiag's borrowings with long term financing at favorable rates. This refinancing also provides financial flexibility to execute our long-term growth ~~strategy.~~strategy by freeing up availability under our revolver. If we see an attractive acquisition opportunity, we have the ability to use our revolver to move quickly and have certainty of ~~funding up to the amount of our then-available liquidity.~~funding.

As of ~~September 30, 2015,~~March 31, 2016, we had approximately ~~$1.3~~$1.1 billion available under our credit facilities. Combined with approximately ~~$137~~$229 million of cash and equivalents at ~~September 30, 2015,~~March 31, 2016, we had approximately ~~$1.4~~$1.3 billion in available liquidity, ~~an increase~~a decrease of ~~$205~~$103 million over our available liquidity as of December 31, ~~2014.~~ 2015. In April 2016, we borrowed an additional $635 million on our revolver and used approximately $37.4 million of cash on hand in order to fund the purchase price of PGW. After giving effect to the Euro Notes issuance and borrowings to fund the PGW acquisition in April 2016, we had approximately $1.0 billion available under our credit facilities.

We believe that our current liquidity and cash expected to be generated by operating activities in future periods will be sufficient to meet our current operating and capital requirements, although such sources may not be sufficient for future acquisitions depending on their size. While we believe that we currently have adequate capacity, from time to time we may need to raise additional funds through public or private financing, strategic relationships or other arrangements. There can be no assurance that additional funding, or refinancing of our credit facilities, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants or higher interest costs. Our failure to raise capital if and when needed could have a material adverse impact on our business, operating results, and financial condition.

Borrowings under the credit agreement accrue interest at variable rates which are tied to LIBOR or CDOR, depending on the currency and the duration of the borrowing, plus an applicable margin rate which is subject to change quarterly based on our reported leverage ratio. We hold interest rate swaps to hedge the variable rates on our credit agreement borrowings (as described in Note 5,9, "Derivative Instruments and Hedging Activities" to the unaudited condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q), with the effect of fixing the interest rates on the respective notional amounts. After giving effect to these interest rate swap contracts, the weighted average interest rate on borrowings outstanding under our credit ~~agreement~~facilities at ~~September 30, 2015~~March 31, 2016 was ~~2.12%~~2.0%. Including our senior notes and the borrowings on our receivables securitization program, our overall weighted average interest rate on borrowings was ~~3.05%~~2.6% at ~~September 30, 2015.~~ March 31, 2016. The applicable margin rate on our credit facilities borrowings will increase from 150 to 175 basis points effective with the closing of the PGW acquisition.

Cash interest payments were ~~$35.4~~$19.3 million for the ~~nine~~three months ended ~~September 30, 2015, including a~~March 31, 2016, which included $8.0 million of interest paid on Rhiag's acquired debt and payments totaling $4.9 million to settle the acquired Rhiag interest rate swap. These payments will increase by $14.2 million in the second quarter of 2016 as a result of our semi-annual interest ~~payment~~payments in May and November related to our senior ~~notes. The semi-annual~~notes as well as for the interest ~~payments~~incurred on ~~our senior notes are made in May~~the additional borrowings to fund the Rhiag and ~~November each year, and began in November 2013.~~PGW acquisitions. We had outstanding credit agreement borrowings of $2.1 billion and $0.9 billion ~~and $1.1 billion~~ at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. Of these amounts, $23.8 million and $22.5 million ~~was~~were classified as current maturities at ~~both September 30, 2015~~March 31, 2016 and December 31, ~~2014. We~~2015 respectively. Under the terms of the January 2016 amendment, we have scheduled repayments of ~~$5.6~~$3.1 million for the fiscal quarters ending on June 30, 2016, September 30, 2016 and December 31, 2016, and $6.2 million each fiscal quarter onthereafter through the maturity of the USD term loan ~~through its~~ maturity in ~~May 2019, but~~January 2021. We also have scheduled repayments of €1.4 million for the fiscal quarters ending on June 30, 2016, September 30, 2016 and December 31, 2016, and €2.9 million each fiscal quarter thereafter through the maturity of the Euro term loan in January 2021. We have no other significant principal payments on our credit facilities scheduled prior to the maturity of the receivables securitization program in October 2017. In addition to the repayments under our credit facilities, we will make payments on notes payable and other debt totaling ~~$14.7~~$52.4 million in the next 12 months, the majority of which is for payments on notes payable issued in connection with acquisitions.

Our credit agreement contains customary covenants that provide limitations and conditions on our ability to enter into certain transactions. The credit agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio. We were in compliance with all restrictive covenants under our credit agreement as of ~~September 30, 2015.~~March 31, 2016.

As of ~~September 30, 2015,~~March 31, 2016, the Company had cash of ~~$137~~$229 million, of which ~~$87~~$177 million was held by foreign subsidiaries. We consider the undistributed earnings of these foreign subsidiaries to be indefinitely reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. Should these earnings be repatriated in the future, in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and

potential withholding taxes payable to the various foreign countries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without ~~resort~~resorting to repatriation of foreign earnings.

The procurement of inventory is the largest operating use of our funds. We normally pay for aftermarket product purchases at the time of shipment or on standard payment terms, 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 inventory procurement for the three ~~and nine~~ months ended ~~September 30,~~March 31, ~~2015~~2016 and ~~2014~~2015 (in thousands):


	Three Months Ended						Nine Months Ended							Three Months Ended
	September 30,						September 30,							March 31,
	2015		2014		Change		2015		2014		Change			2016		2015		Change
North America	$	251,200	$	229,000	$	22,200	$	740,800	$	725,000	$	15,800	⁽¹⁾	$	260,200	$	232,000	$	28,200	⁽¹⁾
Europe	306,412		290,588		15,824		830,976		799,870		31,106		⁽²⁾	299,200		270,800		28,400		⁽²⁾
Specialty	189,710		145,357		44,353		564,176		440,085		124,091		⁽³⁾	262,300		187,600		74,700		⁽³⁾
Total	$	747,322	$	664,945	$	82,377	$	2,135,952	$	1,964,955	$	170,997		$	821,700	$	690,400	$	131,300

(1)

In North America, weinventory purchases increased in the first quarter of 2016 primarily as a result of our July 2015 acquisition of Parts Channel coupled with lower purchase levels in Q1 2015, due to accelerated ~~our aftermarket inventory~~ purchases in the fourth quarter of 2014 in anticipation of potential labor issues at West Coast ports in the U.S., leading to growth in the year-end inventory balance. As a result, our aftermarket inventory purchases in the first half of 2015 fell below 2014 levels. During the third quarter, we increased our aftermarket inventory purchases above the prior year levels as a result of an increase in sales and the depletion of the inventory acquired in the fourth quarter of 2014. For the nine months ended September 30, 2015, our North American purchases were $15.8 million higher than the prior year period.United States.

(2)

In our ~~European~~Europe segment, the increase in purchases was primarily due to our ~~acquisitions~~acquisition of ~~the Netherlands distributors~~Rhiag in ~~2014 and the first nine months~~March of ~~2015 contributed~~2016, which added incremental inventory purchases of ~~$4.9 million and $41.6 million during~~$20.7 million. Purchases for our U.K. operations increased in the ~~three and nine months ended September 30, 2015, respectively; however,~~first quarter of 2016 compared to the ~~greater purchase levels resulting from these acquisitions~~prior period primarily as a result of opening four new hubs since the prior year first quarter. These increases were partially offset by the devaluation of the pound sterling and euro compared to the prior year period.

(3)

The ~~increases~~increase in Specialty aftermarket purchases of $74.7 million in the first quarter of 2016 compared to the first quarter of 2015 was due to accelerated inventory purchases ~~of $44.4 million and $124.1 million~~to stock two new distribution centers which opened during the ~~three and nine months ended September 30,~~first quarter of 2016. Our August 2015 ~~respectively, were related to our October 2014~~ acquisition of ~~a supplier of parts for recreational vehicles as well as overall growth~~Coast also contributed to the increase in purchases compared to the ~~Specialty business.~~prior year period.

The following table sets forth a summary of our global salvage and self service procurement for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and~~ ~~2014~~(in thousands):


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 30,				September 30,					March 31,
	2015	2014	% Change		2015	2014	% Change			2016	2015	% Change
Wholesale salvage cars and trucks	71,000	72,000	(1.4	)%	216,000	215,000	0.5	%
North America Wholesale salvage cars and trucks										72	70	2.9	%
Europe Wholesale salvage cars and trucks										6	6	—	%
Self service and "crush only" cars	128,000	134,000	(4.5	)%	359,000	397,000	(9.6	)%	⁽¹⁾	125	100	25.0	%	⁽¹⁾


(1)	Compared to the the prior year ~~periods~~period, we ~~reduced~~increased our purchases of lower cost self service and "crush only" cars as prices ~~demanded~~ for vehicles have come down in certain markets ~~exceeded our acceptable cost given~~due to the decline in the prices of scrap and other ~~metals.~~metals, allowing us to purchase higher quality vehicles at favorable prices.

Net cash provided by operating activities totaled ~~$491.3~~$130.2 million for the ~~nine~~three months ended ~~September 30, 2015~~,March 31, 2016, compared to ~~$322.6~~$180.1 million during the ~~nine~~three months ended ~~September 30, 2014~~.March 31, 2015. During the first ~~nine~~three months of ~~2015,~~2016, our EBITDA, excluding $18.3 million in gains on foreign currency forwards that are reflected in investing activities, increased by ~~$48.3~~$8.6 million compared to the first ~~nine~~three months of ~~2014,~~2015, due to both acquisition related growth and organic growth.

Cash ~~inflows~~outflows for our primary working capital accounts (receivables, inventory and payables) totaled $5$38.9 million during the ~~nine~~three months ended ~~September 30, 2015~~,March 31, 2016, compared to a ~~$123.5~~$7.3 million cash outflow during the comparable period in 2014. As discussed above, we increased our North American aftermarket inventory purchases in the fourth quarter of 2014 in anticipation of port issues in the U.S., which resulted in higher inventory balances at the end of 2014. Additionally, our North American operations experienced higher sales volumes in the first nine months of 2015 compared to the prior year period. As a result, we reflected net cash inflows from inventory in the first nine months of 2015 compared to cash outflows for inventory in the first nine months of 2014. Our European operations maintained relatively higher receivables balances throughout the current year period as a result of stronger year-over-year sales in the fourth quarter of 2014; this resulted in lower growth in receivables balances, and therefore lower cash outflows for receivables in the current year period.2015. 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 and can be influenced by factors outside of our control. However, we expect that the net change in these working capital items will generally be a cash outflow as we grow our business each year. Cash inflows related to inventory were $24.9 million lower in 2016 than the first quarter of 2015 when we experienced a larger than normal

change, resulting from an acceleration of inventory purchases in the fourth quarter of 2014 in anticipation of port issues in the U.S. and the subsequent reduction of inventory levels in the first quarter of 2015. Cash outflows related to receivables were $16.0 million higher in 2016 than the first quarter of 2015. The increase in accounts receivable is primarily related to our Specialty operations, which experienced larger growth in receivables balances during the first quarter of 2016 than the prior year period from organic and acquisition revenue growth; the remaining increase related to our U.K. operations as a result of higher sales.

Other operating assets and liabilities represented a $25.5 million greater cash outflow in 2016 than the first quarter of 2015; the largest component of the change relates to the timing of payroll payments in North America, which represented a $19.7 million incremental outflow in 2016. We expect this timing difference to reverse over the remainder of the year as the number of work days to be accrued at December 31, 2016 will be similar to the 2015 amount. Cash paid for interest increased by $12.4 million in 2016 as a result of payments for interest on the assumed Rhiag debt upon redemption in addition to payments to terminate Rhiag interest rate swaps.

Net cash used in investing activities totaled ~~$253.8~~$625.0 million for the ~~nine~~three months ended ~~September 30, 2015~~,March 31, 2016, compared to ~~$749.9~~$34.3 million during the ~~nine~~three months ended ~~September 30, 2014~~.March 31, 2015. We invested ~~$157.4~~$603.7 million of cash, net of cash acquired, in business acquisitions during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016, which included $601.4 million for our Rhiag acquisition, compared to ~~$650.6~~$0.9 million for business acquisitions in the comparable period in ~~2014, which included $427.1 million for our Keystone Specialty acquisition.~~2015. Property and equipment purchases were ~~$99.6~~$50.4 million in the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 compared to ~~$100.2~~$26.1 million in the comparable period in ~~2014~~.2015. In the first quarter of 2016, we entered into foreign currency contracts to fund the purchase price of the Rhiag acquisition, which generated $18.3 million of gains; we had no such contracts in the prior year period. During the ~~nine~~three months ended ~~September 30, 2015~~,March 31, 2016, cash provided by other investing activities, net was ~~$3.2~~$10.8 million ~~as a result~~primarily from proceeds on the sale of ~~disposals of fixed assets with the proceeds totaling $10.9 million, which was primarily offset by a $7.5 million payment to increase~~ our ~~investment~~interest in ~~ACM Parts. During the nine months ended~~ ~~September 30, 2014, we paid $2.2 million for investments in unconsolidated subsidiaries.~~our Australian joint venture.

Net ~~cash used in financing activities totaled~~ ~~$212.9 million~~ ~~for the nine months ended~~ ~~September 30, 2015, compared to~~ ~~$523.4 million~~ ~~in net~~ cash provided by financing activities totaled $637.8 million for the three months ended March 31, 2016, compared to $80.4 million in net cash used by financing activities during the ~~nine~~three months ended ~~September 30, 2014~~.March 31, 2015. During the ~~nine~~three months ended ~~September 30, 2015~~,March 31, 2016, net ~~repayments~~borrowings under our credit facilities were ~~$173.4 million~~$1.2 billion compared to net ~~borrowings~~repayments of ~~$571.8~~$73.6 million during the ~~nine~~three months ended ~~September 30, 2014. Compared to the prior year period, our cash investment~~March 31, 2015. The increase in ~~acquisitions was lower, and therefore, we used the excess cash generated by operations to repay outstanding amounts under our revolving credit facilities. The greater~~ borrowings during the first ~~nine months~~quarter of ~~2014 reflect $370 million of revolver borrowings and $80 million~~2016 is primarily the result of borrowings under our ~~receivables~~multi-currency revolving credit facility ~~used~~in order to ~~finance~~fund the acquisition of ~~Keystone Specialty.~~Rhiag and repay $543.3 million of Rhiag acquired debt and debt related liabilities. Our ~~March 2014~~January 2016 amendment of our credit facilities generated ~~$11.3~~$338.5 million in additional term loan borrowings, a portion of which ~~were~~was used ~~to pay $3.7 million in debt issuance costs related to the amendment, as well as~~ to repay outstanding revolver borrowings. ~~In the nine months ended~~ ~~September 30, 2015~~, we paid $7.4 million for taxes related to net share settlements of stock-based compensation awards; no such payments occurred in 2014. During the first nine months of 2014, we made a payment of $44.8 million ($39.5 million included in financing cash flows and $5.3 million included in operating cash flows) for the final earnout period under the contingent payment agreement related to our 2011 ECP acquisition. Cash generated from exercises of stock options provided $7.5 million and $6.5 million in the nine months ended ~~September 30, 2015~~ ~~and~~ ~~September 30, 2014, respectively. The excess tax benefit from share-based payment arrangements reduced income taxes payable by $13.7 million and $14.5 million in the nine months ended~~ ~~September 30, 2015~~ ~~and~~ ~~September 30, 2014~~,

respectively. During the first nine months of 2014, we paid $20.0 million related to the settlement of a foreign currency forward contract; no such payment occurred during the first nine months of 2015.

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, the costs and timing of expansion of our sales and marketing activities, and the costs and timing of future business acquisitions.

~~2015~~2016 Outlook

We estimate that our capital expenditures for ~~2015,~~2016, excluding business acquisitions, will be between ~~$135~~$200 million and ~~$150~~$225 million. We expect to use these funds for the development of a new distribution center in the U.K., several major facility expansions, improvement of current facilities, real estate acquisitions and systems development projects. We anticipate that net cash provided by operating activities for ~~2015~~2016 will be between ~~$525~~$575 million and ~~$550~~$625 million.

Off-Balance Sheet Arrangements and Future Commitments

As of the quarter ended March 31, 2016, there was a material change to our outstanding contractual obligations table within our 2015 Annual Report on Form 10-K related to our acquisition of Rhiag. During the first quarter, we incurred an additional $1.2 billion of debt to finance the acquisition. See Note 8, "Long-Term Obligations” in Part I, Item 1 of this quarterly report on Form 10-Q for additional details. There were no other material changes to our outstanding contractual obligations table.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Our results of operations are exposed to changes in interest rates primarily with respect to borrowings under our credit facilities, where interest rates are tied to the prime rate, LIBOR or CDOR. Therefore, we implemented a policy to manage our exposure to variable interest rates on a portion of our outstanding variable rate debt instruments through the use of interest rate swap contracts. These contracts convert a portion of our variable rate debt to fixed rate debt, matching the currency, effective dates and maturity dates to specific debt instruments. Net interest payments or receipts from interest rate swap contracts are included as adjustments to interest expense. All of our interest rate swap contracts have been executed with banks that we

believe are creditworthy (Wells Fargo Bank, N.A., Bank of America, N.A., RBS Citizens, N.A., Fifth Third Bank and ~~RBS Citizens,~~HSBC Bank USA, N.A.).

As of ~~September 30, 2015,~~March 31, 2016, we held ~~six~~12 interest rate swap contracts representing a total of ~~$420~~$610 million of U.S. dollar-denominated notional amount debt, and £50 million of pound sterling-denominated ~~notional amount debt, and CAD $25 million of Canadian dollar-denominated~~ notional amount debt. Our interest rate swap contracts are designated as cash flow hedges and modify the variable rate nature of that portion of our variable rate debt. These swaps have maturity dates ranging from October ~~2015~~2016 through ~~December 2016. On October 15, 2015 an interest rate swap contract for $250 million of U.S. dollar denominated notional amount debt expired. Excluding this swap contract,~~January 2021.

In total, we ~~have 30%~~had 27% of our variable rate debt under our credit facilities at fixed rates at ~~September 30, 2015~~March 31, 2016 compared to ~~47%~~29% at December 31, ~~2014.~~2015. The fair market value of our ~~remaining~~ swap contracts was a net liability of ~~$2.2~~$0.7 million. The values of such contracts are subject to changes in interest rates.

At ~~September 30, 2015, excluding the expired contract,~~March 31, 2016, we had ~~$717 million~~$1.6 billion of variable rate debt that was not hedged. Using sensitivity analysis, a 100 basis point movement in interest rates would change interest expense by ~~$7.2~~$15.9 million over the next twelve months.

The proceeds of our May 2013 senior notes offering were used to finance our euro-denominated acquisition of Sator, as well as to repay a portion of our pound sterling-denominated revolver borrowings held by our European operations. In connection with these transactions, we entered into euro-denominated and pound sterling-denominated intercompany notes, which incurred transaction gains and losses from fluctuations in the U.S. dollar against these currencies. To mitigate these fluctuations, we entered into foreign currency forward contracts. The gains or losses from the remeasurement of these contracts were recorded to earnings to offset the remeasurement of the related notes. These foreign currency forward contracts were settled as of December 31, 2014. While there are no such forward contracts outstanding as of September 30, 2015, we may enter into additional foreign currency forward contracts from time to time to mitigate the impact of fluctuations in exchange rates on similar intercompany financing transactions.

Additionally, we are exposed to currency fluctuations with respect to the purchase of aftermarket products from foreign countries. The majority of our foreign inventory purchases are from manufacturers based in Taiwan. While our transactions with manufacturers based in Taiwan are conducted in U.S. dollars, changes in the relationship between the U.S. dollar and the Taiwan dollar might impact the purchase price of aftermarket products. Our aftermarket operations in Canada, which also purchase inventory from Taiwan in U.S. dollars, are further subject to changes in the relationship between the U.S. dollar and the Canadian dollar. Our aftermarket operations in the U.K. ~~also~~ source a portion of their inventory from Taiwan ~~as well as~~and from other European countries and China, resulting in exposure to changes in the relationship of the pound sterling against the euro and the U.S. dollar. Our aftermarket operations in continental Europe source a portion of their inventory from the Czech Republic as well as Taiwan, resulting in exposure to changes in the relationship of the euro against the Czech koruna and the U.S. dollar. We hedge our exposure to foreign currency fluctuations for certain of our purchases in our European operations, but the notional amount and fair value of these foreign currency forward contracts at ~~September 30, 2015~~March 31, 2016 were immaterial. We do not currently attempt to hedge our foreign currency exposure related to our foreign currency denominated inventory purchases in our North American operations, and we may not be able to pass on any price increases to our customers.

Foreign currency fluctuations may also impact the financial results we report for the portions of our business that operate in functional currencies other than the U.S. dollar. Our operations in Europe and other countries represented ~~32.9%~~33.1% of our revenue during the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016. An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a 3% change in our consolidated revenue and operating income for the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016.

Other than with respect to ~~our intercompany transactions denominated in euro and pound sterling and~~ a portion of our foreign currency denominated inventory purchases in the U.K., and continental Europe, 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. Additionally, we have elected not to hedge the foreign currency risk related to the interest payments on these borrowings as we generate Canadian dollar, pound sterling and euro cash flows that can be used to fund debt payments. As of ~~September 30, 2015,~~March 31, 2016, we had amounts outstanding under our revolving credit facilities of ~~€251.9~~€525.5 million, ~~£63.3~~£58.3 million, and CAD $130.4 million.

We are also exposed to market risk related to price fluctuations in scrap metal and other metals. Market prices of these metals affect the amount that we pay for our inventory as well as 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 car~~vehicle costs will decrease at the same rate as the metal 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. If market prices were to fall at a greater rate than our vehicle acquisition costs, we could experience a decline in operating margin. Scrap metal ~~and other metal~~ prices ~~declined in the third quarter of 2015 and~~ have ~~decreased 39%~~increased 13% since the fourth quarter of 2014. As of September 30, 2015, we held short-term metals forward contracts to mitigate a portion of our exposure to fluctuations in metals prices specifically related to our precious metals refining and reclamation business. The notional amount and fair value of these forward contracts at September 30, 2015 were immaterial.2015.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September 30, 2015~~March 31, 2016, 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 no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2015~~March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None.

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 ~~2014~~2015 Annual Report on Form 10-K, filed with the SEC on ~~March 2, 2015,~~February 25, 2016, as supplemented in subsequent filings, for information concerning the risks and uncertainties that could negatively impact us. The following represents changes and/or additions to the risks and uncertainties previously disclosed in such reports. The following risk factors are not necessarily listed in order of importance.

Our operating results and financial condition have been and could continue to be adversely affected by the economic and political conditions in the U.S. and elsewhere.

Changes in economic and political conditions in the U.S. and other countries in which we are located or do business could have a material effect on our company. Changes in such conditions have, in some periods, resulted in fewer miles driven, fewer accident claims, and a reduction of vehicle repairs, all of which could negatively affect our business. The number of new vehicles produced and sold by manufacturers affects our business. A decrease in the number of vehicles on the road results in a decrease in accidents requiring repairs. Moreover, we supply vehicle glass directly to vehicle manufacturers, and a decrease in the number of vehicles produced would result in a decrease in the demand for our glass products.

Our sales are also impacted by changes to the economic health of vehicle owners. The economic health of vehicle owners is affected by many factors, including, among others, general business conditions, interest rates, inflation, consumer debt levels, the availability of consumer credit, taxation, fuel prices, unemployment trends and other matters that influence consumer confidence and spending. Many of these factors are outside of our control. If any of these conditions worsen, our business, results of operations, financial condition and cash flows could be adversely affected.

In addition, economic conditions, including decreased access to credit, may result in financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable events for our customers, suppliers, logistics and other service providers and financial institutions that are counterparties to our credit facilities and interest rate swap transactions. These unfavorable events affecting our business partners could have an adverse effect on our business, results of operations, financial condition and cash flows.

We have a substantial business presence in Europe, including a significant presence in the United Kingdom. The United Kingdom is considering withdrawing from the European Union. If such withdrawal occurred, it could impact our European business as a result of fluctuations in exchange rates, more difficult access to markets, disruptions in the movement of goods and services between countries, a decrease of economic activity in Europe, and political or social unrest.

We may not be able to successfully acquire new businesses or integrate acquisitions, which could cause our business to suffer.

We may not be able to successfully complete potential strategic acquisitions if we cannot reach agreement on acceptable terms, if we do not obtain antitrust or other regulatory approvals on applicable terms, or for other reasons. Moreover, we may not be able to identify a sufficient number of acquisition candidates at reasonable prices to maintain our growth objectives. Also, over time, we will likely seek to make acquisitions that are relatively larger as we grow. Larger acquisition candidates may attract additional competitive buyers, which could increase our cost or could cause us to lose such acquisitions.

If we buy a company or a division of a company, we may experience difficulty integrating that company's or division's personnel and operations, which could negatively affect our operating results. In addition:

•the key personnel of the acquired company may decide not to work for us;

customers of the acquired company may decide not to purchase products from us;

suppliers of the acquired company may decide not to sell products to us;

we may experience business disruptions as a result of information technology systems conversions;

we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, and financial reporting;

we may be held liable for environmental, tax or other risks and liabilities as a result of our acquisitions, some of which we may not have discovered during our due diligence;

we may intentionally assume the liabilities of the companies we acquire, which could result in material adverse effects

on our business;

our existing business may be disrupted or receive insufficient management attention;

we may not be able to realize the cost savings or other financial benefits we anticipated, either in the amount or in the time frame that we expect; and

we may incur debt or issue equity securities to pay for any future acquisition, the issuance of which could involve the imposition of restrictive covenants or be dilutive to our existing stockholders.

We operate in foreign jurisdictions, which exposes us to foreign exchange and other risks.

We have operations in North America, Europe, Taiwan and China, and we may expand our operations in the countries in which we do business and into other countries. Our foreign operations expose us to additional risks associated with international business, which could have an adverse effect on our business, results of operations and/or financial condition, including import and export requirements and compliance with anti-corruption laws, such as the U.K. Bribery Act 2010 and the Foreign Corrupt Practices Act. We also incur costs in currencies, other than our functional currencies, in the countries in which we operate. We are thus subject to foreign exchange exposure to the extent that we operate in different currencies, as well as exposure to foreign tax and other foreign and domestic laws. In addition, certain countries in which we operate have a higher level of political instability and criminal activity relative to the U.S. that could affect our operations and the ability to maintain our supply of products.

We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business.

As of March 31, 2016, on an as adjusted basis to give effect to borrowings under our Senior Secured Credit Facilities in connection with the acquisition of PGW, and the offering of the Euro Notes and the application of proceeds therefrom, we would have had approximately $3.5 billion aggregate principal amount of secured debt outstanding and would have had approximately $1.1 billion of availability under the Senior Secured Credit Facilities (without giving effect to approximately $65.8 million of letters of credit outstanding). In addition, we would have had approximately $1.2 billion aggregate principal amount of unsecured debt outstanding comprising $600 million aggregate principal amount of the Notes and €500 million ($569 million) aggregate principal amount of the Euro Notes.

Our significant amount of debt and our debt service obligations could limit our ability to satisfy our obligations, limit our ability to operate our business and impair our competitive position.

For example, our debt and our debt service obligations could:

increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are and will continue to be at variable rates of interest;

require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures or other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and industry;

place us at a disadvantage compared to competitors that may have proportionately less debt;

limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements; and

increase our cost of borrowing.

In addition, if we or our subsidiaries incur additional debt, the risks associated with our substantial leverage and the ability to service such debt would increase.

Our senior notes do not impose any limitations on our ability to incur additional debt or protect against certain other types of transactions.

Although we are subject to our senior secured credit facilities for so long as they remain in effect, the indenture governing the U.S. Notes and the indenture governing the Euro Notes do not restrict the future incurrence of unsecured indebtedness, guarantees or other obligations. The indentures contain certain limitations on our ability to incur liens on assets and engage in sale and leaseback transactions. However, these limitations are subject to important exceptions. In addition, the indentures do not contain many other restrictions, including certain restrictions contained in our senior secured credit facilities, including, without limitation, investments or prepaying subordinated indebtedness or engaging in transactions with our affiliates.

Our senior secured credit facilities will permit, subject to specified conditions and limitations, the incurrence of a significant amount of additional indebtedness. As of March 31, 2016, on an as adjusted basis after giving effect to the PGW

acquisition and the offering of the Euro Notes and the application of the proceeds therefrom, we would have been able to incur an additional $1.1 billion of indebtedness under our revolving credit facility (without giving effect to approximately $65.8 million of outstanding letters of credit). If we or our subsidiaries incur additional debt, the risks associated with our substantial leverage and the ability to service such debt would increase.

Our future capital needs may require that we seek to refinance our debt or obtain additional debt or equity financing, events that could have a negative effect on our business.

We may need to raise additional funds in the future to, among other things, refinance existing debt, fund our existing operations, improve or expand our operations, respond to competitive pressures, or make acquisitions. From time to time, we may raise additional funds through public or private financing, strategic alliances, or other arrangements. Funds may not be available or available on terms acceptable to us as a result of different factors, including but not limited to turmoil in the credit markets that results in the tightening of credit conditions and current or future regulations applicable to the financial institutions from whom we seek financing. If adequate funds are not available on acceptable terms, we may be unable to meet our business or strategic objectives or compete effectively. If we raise additional funds by issuing equity securities, stockholders may experience dilution of their ownership interests, and the newly issued securities may have rights superior to those of the common stock. If we raise additional funds by issuing debt, we may be subject to higher borrowing costs and further limitations on our operations. If we refinance or restructure our debt, we may incur charges to write off the unamortized portion of deferred debt issuance costs from a previous financing, or we may incur charges related to hedge ineffectiveness from our interest rate swap obligations. In addition, there are restrictions in the indenture that governs the U.S. Notes on our ability to refinance such notes prior to 2018. There are also restrictions in the indenture that governs the Euro Notes on our ability to refinance such notes prior to 2024. If we fail to raise capital when needed, our business may be negatively affected.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Certain borrowings under our senior secured credit facilities and the borrowing under our accounts receivable securitization facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. Moreover, changes in market interest rates could affect the trading value of the notes. Assuming all revolving loans were fully drawn and no interest rate swaps were in place, each one percentage point change in interest rates would result in a $25.5 million change in annual cash interest expense under our senior secured credit facilities and our accounts receivable securitization facility.

Repayment of our indebtedness, including our senior notes, is dependent on cash flow generated by our subsidiaries.

We are a holding company and repayment of our senior notes will be dependent upon cash flow generated by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the notes, our subsidiaries do not have any obligation to pay amounts due on the notes or to make funds available for that purpose. Our subsidiaries may not be able to, or be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indentures governing the notes limit the ability of our subsidiaries to restrict the payment of dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

The right to receive payments on our senior notes is effectively junior to those lenders who have a security interest in our assets.

Our obligations under our senior notes and our guarantors’ obligations under their guarantees of the notes are unsecured, but our and each co-borrower’s obligations under our senior secured credit facilities and each guarantor’s obligations under their respective guarantees of the senior secured credit facilities are secured by a security interest in substantially all of our domestic tangible and intangible assets, including the stock of most of our wholly-owned United States subsidiaries and the stock of certain of our non-United States subsidiaries. If we are declared bankrupt or insolvent, or if we default under our senior secured credit facilities, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged assets to the exclusion of holders of our notes, even if an event of default exists under the applicable indenture governing the notes. Furthermore, if the lenders foreclose and sell the pledged equity interests in any subsidiary guarantor under our notes, then that guarantor will be released from its guarantee of the notes automatically and immediately upon such sale. In any such event, because the notes are not secured by any of our assets or the equity interests in subsidiary guarantors, it is possible that there would be no assets remaining from which claims by holders of the notes could be satisfied or, if any assets remained, they might be insufficient to satisfy claims fully. As of March 31, 2016, on an as adjusted basis to give effect to

borrowings under our senior secured credit facilities in connection with the acquisition of PGW and the offering of the Euro Notes and the application of proceeds therefrom, we would have had approximately $3.5 billion aggregate principal amount of secured debt outstanding and we would have had approximately $1.1 billion of availability under the senior secured credit facilities (without giving effect to approximately $65.8 million of letters of credit outstanding).

United States federal and state statutes allow courts, under specific circumstances, to void our senior notes and the guarantees, subordinate claims in respect of our senior notes and the guarantees, and require noteholders to return payments received from us or the guarantors.

Our direct and indirect domestic subsidiaries that are obligors under the senior secured credit facilities guarantee the obligations under our senior notes. In addition, certain subsidiaries of the issuer of the Euro Notes will guarantee the obligations under the Euro Notes. The issuance of our senior notes and the issuance of the guarantees by the guarantors may be subject to review under state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which bankruptcy is not involved, were commenced at some future date by, or on behalf of, our unpaid creditors or the unpaid creditors of a guarantor. Under the federal bankruptcy laws of the United States and comparable provisions of state fraudulent transfer laws, a court may avoid or otherwise decline to enforce the notes, or a guarantor’s guarantee, or may subordinate the notes, or such guarantee to our or the applicable guarantor’s existing and future indebtedness. While the relevant laws may vary from jurisdiction to jurisdiction, a court might do so if it found that when indebtedness under the notes was issued, or when the applicable guarantor entered into its guarantee, or, in some jurisdictions, when payments became due under the notes, or such guarantee, the issuer or the applicable guarantor received less than reasonably equivalent value or fair consideration and:

was insolvent or rendered insolvent by reason of such incurrence;

was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or

intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

A court would likely find that we or a guarantor did not receive reasonably equivalent value or fair consideration for the notes or such guarantee if we or such guarantor did not substantially benefit directly or indirectly from the issuance of the notes. Thus, if the guarantees were legally challenged, any guarantee could be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than reasonably equivalent value or fair consideration. If a court were to void the issuance of the notes or any guarantee, a holder of the notes would no longer have any claim against us or the applicable guarantor. In the event of a finding that a fraudulent transfer or conveyance occurred, a holder of the notes may not receive any repayment on the notes. Further, the avoidance of the notes could result in an event of default with respect to our and our subsidiaries’ other debt, which could result in acceleration of that debt. The measures of insolvency for purposes of these fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an issuer or a guarantor, as applicable, would be considered insolvent if:

the sum of its debts, including contingent liabilities, was greater than the fair value of its assets;

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

it could not pay its debts as they become due.

A court might also void the notes, or a guarantee, without regard to the above factors, if the court found that the notes were incurred or issued or the applicable guarantor entered into its guarantee with actual intent to hinder, delay or defraud its creditors. We cannot give any assurance as to what standard a court would apply in determining whether we or the guarantors were solvent at the relevant time or that a court would agree with our conclusions in this regard, or, regardless of the standard that a court uses, that it would not determine that we or a guarantor were indeed insolvent on that date; that any payments to the holders of the notes (including under the guarantees) did not constitute preferences, fraudulent transfers or conveyances on other grounds; or that the issuance of the notes and the guarantees would not be subordinated to our or any guarantor’s other debt. In addition, any payment by us or a guarantor pursuant to the notes, or its guarantee, could be avoided and required to be returned to us or such guarantor or to a fund for the benefit of our or such guarantor’s creditors, and accordingly the court might direct holders of the notes to repay any amounts already received from us or such guarantor. Among other things, under U.S. bankruptcy law, any payment by us pursuant to the notes or by a guarantor under a guarantee made at a time we or such guarantor were found to be insolvent could be voided and required to be returned to us or such guarantor or to a fund for the benefit of our or such guarantor’s creditors if such payment is made to an insider within a one-year period prior to a bankruptcy filing or within 90 days for any outside party and such payment would give such insider or outsider party more than such party would have received in a distribution under the Bankruptcy Code in a hypothetical Chapter 7 case. Although each guarantee contains a “savings clause” intended to limit the subsidiary guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its subsidiary guarantee to be a fraudulent transfer, this provision may not

be effective as a legal matter to protect any subsidiary guarantees from being avoided under fraudulent transfer law. In that regard, in Official Committee of Unsecured Creditors ofTOUSA, Inc. v Citicorp North America, Inc., the United States Bankruptcy Court in the Southern District of Florida held that a savings clause similar to the savings clause included in our indentures was unenforceable. As a result, the subsidiary guarantees were found to be fraudulent conveyances. The United States Court of Appeals for the Eleventh Circuit subsequently affirmed the liability findings of the Bankruptcy Court without ruling directly on the enforceability of savings clauses generally. If the decision of the bankruptcy court in TOUSA were followed by other courts, the risk that the guarantees would be deemed fraudulent conveyances would be significantly increased.

To the extent a court avoids the notes or any of the guarantees as fraudulent transfers or holds the notes or any of the guarantees unenforceable for any other reason, the holders of the notes would cease to have any direct claim against us or the applicable guarantor. If a court were to take this action, our or the applicable guarantor’s assets would be applied first to satisfy our or the applicable guarantor’s other liabilities, if any, and might not be applied to the payment of the notes. Sufficient funds to repay the notes may not be available from other sources, including the remaining guarantors, if any. In addition, the Euro Notes and the guarantees may be subject to avoidance under the laws of other foreign jurisdictions, including Italy and the Czech Republic, to the extent that we or any of the guarantors (as applicable) were to be the subject of an insolvency or related proceeding in such jurisdiction(s).

Our credit ratings may not reflect all risks associated with an investment in our senior notes.

Credit rating agencies rate our debt securities on factors that include our results of operations, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. The rating agencies can upgrade or downgrade our current rating or place us on a watch list for possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a watch list for possible future downgrading would likely increase our cost of financing, limit our access to the capital markets and have an adverse effect on the market price of our securities, including our senior notes.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits

(b) Exhibits



3.1	Amended and Restated Bylaws of LKQ Corporation, as amended as of March 7, 2016 (incorporated herein by reference to Exhibit 3.1 to the Company's report on Form 8-K filed with the SEC on March 10, 2016).
4.1	Amendment and Restatement Agreement dated as of January 29, 2016 by and among LKQ Corporation, LKQ Delaware LLP, and certain additional subsidiaries of LKQ Corporation, as borrowers, certain financial institutions, as lenders, and Wells Fargo Bank, National Association, as administrative agent (incorporated herein by reference to Exhibit 4.1 to the Company's report on Form 8-K filed with the SEC on February 2, 2016).
10.1	Agreement and Plan of Merger dated as of February 26, 2016 among LKQ Corporation, Pirate Merger Sub LLC, an indirect wholly-owned subsidiary of LKQ Corporation, KPGW Holding Company, LLC (“KPGW”), and the equity holders of KPGW.
10.2	Form of LKQ Corporation Executive Officer Management Incentive Plan Award Memorandum (incorporated herein by reference to Exhibit 10.1 to the Company's report on Form 8-K filed with the SEC on March 10, 2016).
10.3	Form of LKQ Corporation Executive Officer Long Term Incentive Plan Award Memorandum (incorporated herein by reference to Exhibit 10.2 to the Company's report on Form 8-K filed with the SEC on March 10, 2016).
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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of 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 ~~October 30, 2015~~April 29, 2016.



	LKQ CORPORATION

	/s/ DOMINICK ZARCONE
	Dominick Zarcone
	Executive 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)

6053



Balance as of January 1, 2015	$	14,881
Warranty expense	26,294
Warranty claims	(23,517		)
Balance as of September 30, 2015	$	17,658



	Notional Amount				Fair Value at September 30, 2015 (USD)				Fair Value at December 31, 2014 (USD)
	September 30, 2015		December 31, 2014		Other Accrued Expenses		Other Noncurrent Liabilities		Other Accrued Expenses		Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated	$	420,000	$	420,000	$	140	$	1,519	$	2,691	$	1,615
GBP denominated	£	50,000	£	50,000	—		653		—		893
CAD denominated	C$	25,000	C$	25,000	62		—		—		19
Total cash flow hedges					$	202	$	2,172	$	2,691	$	2,527



	Balance as of September 30, 2015		Fair Value Measurements as of September 30, 2015
	Balance as of September 30, 2015		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	28,787	$	—	$	28,787	$	—
Total Assets	$	28,787	$	—	$	28,787	$	—
Liabilities:
Contingent consideration liabilities	$	4,548	$	—	$	—	$	4,548
Deferred compensation liabilities	28,388		—		28,388		—
Interest rate swaps	2,374		—		2,374		—
Total Liabilities	$	35,310	$	—	$	30,762	$	4,548



	Balance as of December 31, 2014		Fair Value Measurements as of December 31, 2014
	Balance as of December 31, 2014		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	28,242	$	—	$	28,242	$	—
Total Assets	$	28,242	$	—	$	28,242	$	—
Liabilities:
Contingent consideration liabilities	$	7,295	$	—	$	—	$	7,295
Deferred compensation liabilities	27,580		—		27,580		—
Interest rate swaps	5,218		—		5,218		—
Total Liabilities	$	40,093	$	—	$	32,798	$	7,295



Three months ending December 31, 2015	$	40,241
Years ending December 31:
2016	146,774
2017	124,121
2018	102,397
2019	82,568
2020	66,396
Thereafter	232,894
Future Minimum Lease Payments	$	795,391