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, 2017~~March 31, 2018



¨	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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



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

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

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

At ~~October 20, 2017,~~April 27, 2018, the registrant had issued and outstanding an aggregate of ~~309,044,161~~309,710,577 shares of Common Stock.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

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

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2018				2017
Revenue	$	2,465,800		$	2,207,343		$	7,267,054		$	6,433,625		$	2,720,764			$	2,342,843
Cost of goods sold	1,508,924			1,351,899			4,415,076			3,911,928			1,666,793				1,412,750
Gross margin	956,876			855,444			2,851,978			2,521,697			1,053,971				930,093
Facility and warehouse expenses	202,514			181,244			583,230			516,227
Distribution expenses	202,829			172,565			583,031			509,234
Selling, general and administrative expenses	290,635			258,332			836,804			726,736
Selling, general and administrative expenses ⁽¹⁾													766,891				642,817
Restructuring and acquisition related expenses	4,922			6,923			10,371			30,814			4,054				2,928
Depreciation and amortization	56,877			52,979			159,178			137,168			56,458				48,656
Operating income	199,099			183,401			679,364			601,518			226,568				235,692
Other expense (income):
Interest expense, net	25,222			24,761			73,806			64,002			28,515				23,988
Loss on debt extinguishment	—			—			—			26,650
Gains on foreign exchange contracts - acquisition related	—			—			—			(18,342		)
Gains on bargain purchases	(913		)	—			(3,990		)	—
Other income, net	(3,107		)	(1,010		)	(6,884		)	(4,361		)	(2,882		)		(1,046		)
Total other expense, net	21,202			23,751			62,932			67,949			25,633				22,942
Income from continuing operations before provision for income taxes	177,897			159,650			616,432			533,569			200,935				212,750
Provision for income taxes	58,189			49,835			206,206			173,225			49,584				72,155
Equity in earnings (loss) of unconsolidated subsidiaries	2,673			29			3,878			(519		)
Equity in earnings of unconsolidated subsidiaries													1,412				214
Income from continuing operations	122,381			109,844			414,104			359,825			152,763				140,809
Income (loss) from discontinued operations, net of tax	—			12,844			(4,531		)	17,819
Net loss from discontinued operations													—			��	(4,531		)
Net income	$	122,381		$	122,688		$	409,573		$	377,644		152,763				136,278
Basic earnings per share:
Less: net loss attributable to noncontrolling interest													(197		)		—
Net income attributable to LKQ stockholders													$	152,960			$	136,278

Basic earnings per share: ⁽²⁾
Income from continuing operations	$	0.40		$	0.36		$	1.34		$	1.17		$	0.49			$	0.46
Income (loss) from discontinued operations	—			0.04			(0.01		)	0.06
Net income ⁽¹⁾	$	0.40		$	0.40		$	1.33		$	1.23
Diluted earnings per share:
Net loss from discontinued operations													—				(0.01		)
Net income													0.49				0.44
Less: net loss attributable to noncontrolling interest													(0.00		)		—
Net income attributable to LKQ stockholders													$	0.49			$	0.44

Diluted earnings per share:⁽²⁾
Income from continuing operations	$	0.39		$	0.35		$	1.33		$	1.16		$	0.49			$	0.45
Income (loss) from discontinued operations	—			0.04			(0.01		)	0.06
Net income ⁽¹⁾	$	0.39		$	0.40		$	1.32		$	1.22
⁽¹⁾The sum of the individual earnings per share amounts may not equal the total due to rounding.
Net loss from discontinued operations													—				(0.01		)
Net income													0.49				0.44
Less: net loss attributable to noncontrolling interest													(0.00		)		—
Net income attributable to LKQ stockholders													$	0.49			$	0.44

⁽¹⁾Selling, general and administrative expenses contain facility and warehouses expenses and distribution expenses that

were previously shown separately.

⁽²⁾ The sum of the individual earnings per share amounts may not equal the total due to rounding.

Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income $ 122,381
$ 122,688
$ 409,573
$ 377,644
Other comprehensive income (loss):
Foreign currency translation 59,618
(12,317 ) 174,794
(85,434 )
Net change in unrecognized gains/losses on derivative instruments, net of tax (1,776 ) 3,059
457
(123 )
Net change in unrealized gains/losses on pension plans, net of tax (150 ) 94
(4,053 ) 361
Net change in other comprehensive loss from unconsolidated subsidiaries (1,034 ) —
(1,635 ) —
Total other comprehensive income (loss) 56,658
(9,164 ) 169,563
(85,196 )
Total comprehensive income $ 179,039
$ 113,524
$ 579,136
$ 292,448

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
September 30, December 31,
2017 2016
Assets
Current assets:
Cash and cash equivalents $ 275,077
$ 227,400
Receivables, net 1,021,728
860,549
Inventories 2,236,376
1,935,237
Prepaid expenses and other current assets 135,192
87,768
Assets of discontinued operations —
456,640
Total current assets 3,668,373
3,567,594
Property and equipment, net 867,972
811,576
Intangible assets:
Goodwill 3,392,363
3,054,769
Other intangibles, net 602,424
584,231
Equity method investments 199,246
183,467
Other assets 133,560
101,562
Total assets $ 8,863,938
$ 8,303,199
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 749,852
$ 633,773
Accrued expenses:
Accrued payroll-related liabilities 120,575
118,755
Other accrued expenses 253,241
209,101
Other current liabilities 51,783
37,943
Current portion of long-term obligations 126,887
66,109
Liabilities of discontinued operations —
145,104
Total current liabilities 1,302,338
1,210,785
Long-term obligations, excluding current portion 3,021,717
3,275,662
Deferred income taxes 241,544
199,657
Other noncurrent liabilities 257,302
174,146
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 309,018,211 and 307,544,759 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 3,090
3,075
Additional paid-in capital 1,135,627
1,116,690
Retained earnings 2,999,932
2,590,359
Accumulated other comprehensive loss (97,612 ) (267,175 )
Total stockholders’ equity 4,041,037
3,442,949
Total liabilities and stockholders’ equity $ 8,863,938
$ 8,303,199
The accompanying notes are an integral part of the condensed consolidated financial statements.

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 409,573
$ 377,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 166,508
150,370
Stock-based compensation expense 17,582
17,062
Loss on debt extinguishment —
26,650
Loss on sale of business 8,580
—
Gains on foreign exchange contracts - acquisition related —
(18,342 )
Other (11,982 ) 6,711
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net (75,444 ) (46,376 )
Inventories (97,584 ) 27,070
Prepaid income taxes/income taxes payable (928 ) 4,134
Accounts payable 42,175
(12,412 )
Other operating assets and liabilities (9,237 ) (8,360 )
Net cash provided by operating activities 449,243
524,151
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (135,537 ) (152,746 )
Acquisitions, net of cash acquired (252,667 ) (1,301,127 )
Proceeds from disposals of business/investment 301,297
10,304
Proceeds from foreign exchange contracts —
18,342
Other investing activities, net 2,750
537
Net cash used in investing activities (84,157 ) (1,424,690 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 6,465
7,525
Taxes paid related to net share settlements of stock-based compensation awards (5,095 ) (4,440 )
Debt issuance costs —
(16,404 )
Proceeds from issuance of Euro notes —
563,450
Borrowings under revolving credit facilities 424,976
1,961,702
Repayments under revolving credit facilities (770,884 ) (1,239,234 )
Borrowings under term loans —
338,478
Repayments under term loans (27,884 ) (9,461 )
Borrowings under receivables securitization facility 8,525
100,480
Repayments under receivables securitization facility (9,925 ) (66,500 )
Borrowings (repayments) of other debt, net 24,522
(2,362 )
Payments of Rhiag debt and related payments —
(543,347 )
Payments of other obligations (2,079 ) (1,405 )
Other financing activities, net 4,316
—
Net cash (used in) provided by financing activities (347,063 ) 1,088,482
Effect of exchange rate changes on cash and cash equivalents 22,538
(3,489 )
Net increase in cash and cash equivalents 40,561
184,454
Cash and cash equivalents of continuing operations, beginning of period 227,400
87,397
Add: Cash and cash equivalents of discontinued operations, beginning of period 7,116
—
Cash and cash equivalents of continuing and discontinued operations, beginning of period 234,516
87,397
Cash and cash equivalents of continuing and discontinued operations, end of period 275,077
271,851
Less: Cash and cash equivalents of discontinued operations, end of period —
13,826
Cash and cash equivalents, end of period $ 275,077
$ 258,025
Supplemental disclosure of cash paid for:
Income taxes, net of refunds $ 218,332
$ 184,719
Interest 57,519
65,888
Supplemental disclosure of noncash investing and financing activities:
Contingent consideration liabilities $ 6,234
$ —
Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions 52,576
560,955
Noncash property and equipment additions 4,918
1,617
Notes and other financing receivables in connection with disposals of business/investment 5,848
—

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

	Three Months Ended
	March 31,
	2018			2017
Net income	$	152,763		$	136,278
Less: net loss attributable to noncontrolling interest	(197		)	—
Net income attributable to LKQ stockholders	152,960			136,278

Other comprehensive income (loss):
Foreign currency translation, net of tax	48,485			21,579
Net change in unrealized gains/losses on cash flow hedges, net of tax	3,254			3,163
Net change in unrealized gains/losses on pension plans, net of tax	(621		)	(3,041		)
Net change in other comprehensive loss from unconsolidated subsidiaries	(605		)	(162		)
Other comprehensive income	50,513			21,539

Comprehensive income	203,276			157,817
Less: comprehensive loss attributable to noncontrolling interest	(197		)	—
Comprehensive income attributable to LKQ stockholders	$	203,473		$	157,817

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

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) Income

Total
Stockholders’
Equity

Shares
Issued
Amount
BALANCE, January 1, 2017 307,545
$ 3,075
$ 1,116,690
$ 2,590,359
$ (267,175 ) $ 3,442,949
Net income —
—
—
409,573
—
409,573
Other comprehensive income —
—
—
—
169,563
169,563
Restricted stock units vested, net of shares withheld for employee tax 736
7
(3,902 ) —
—
(3,895 )
Stock-based compensation expense —
—
17,582
—
—
17,582
Exercise of stock options 772
8
6,457
—
—
6,465
Tax withholdings related to net share settlements of stock-based compensation awards (35 ) —
(1,200 ) —
—
(1,200 )
BALANCE, September 30, 2017 309,018
$ 3,090
$ 1,135,627
$ 2,999,932
$ (97,612 ) $ 4,041,037

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

	March 31,			December 31,
	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	245,679		$	279,766
Receivables, net	1,211,788			1,027,106
Inventories	2,401,309			2,380,783
Prepaid expenses and other current assets	180,367			134,479
Total current assets	4,039,143			3,822,134
Property, plant and equipment, net	929,756			913,089
Intangible assets:
Goodwill	3,572,198			3,536,511
Other intangibles, net	740,804			743,769
Equity method investments	208,210			208,404
Other assets	146,067			142,965
Total assets	$	9,636,178		$	9,366,872
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	812,661		$	788,613
Accrued expenses:
Accrued payroll-related liabilities	112,140			143,424
Other accrued expenses	267,364			218,600
Refund liability	99,179			—
Other current liabilities	41,167			45,727
Current portion of long-term obligations	142,277			126,360
Total current liabilities	1,474,788			1,322,724
Long-term obligations, excluding current portion	3,170,788			3,277,620
Deferred income taxes	242,226			252,359
Other noncurrent liabilities	329,395			307,516
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 309,630,976 and 309,126,386 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	3,096			3,091
Additional paid-in capital	1,146,391			1,141,451
Retained earnings	3,271,718			3,124,103
Accumulated other comprehensive loss	(14,618		)	(70,476		)
Total Company stockholders' equity	4,406,587			4,198,169
Noncontrolling interest	12,394			8,484
Total stockholders' equity	4,418,981			4,206,653
Total liabilities and stockholders’ equity	$	9,636,178		$	9,366,872

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

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

	Three Months Ended
	March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	152,763		$	136,278
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	61,066			50,604
Stock-based compensation expense	5,982			7,285
Loss on sale of business	—			8,580
Other	(3,134		)	1,343
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net	(130,520		)	(108,893		)
Inventories	5,016			(745		)
Prepaid income taxes/income taxes payable	37,362			61,064
Accounts payable	23,924			24,449
Other operating assets and liabilities	(7,296		)	(7,672		)
Net cash provided by operating activities	145,163			172,293
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(62,189		)	(44,398		)
Acquisitions, net of cash acquired	(2,966		)	(77,056		)
Proceeds from disposals of business/investment	—			301,297
Other investing activities, net	534			1,314
Net cash (used in) provided by investing activities	(64,621		)	181,157
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	2,255			2,464
Taxes paid related to net share settlements of stock-based compensation awards	(3,292		)	(3,644		)
Debt issuance costs	(724		)	—
Borrowings under revolving credit facilities	201,669			45,239
Repayments under revolving credit facilities	(321,525		)	(389,313		)
Repayments under term loans	(4,405		)	(9,295		)
Repayments under receivables securitization facility	—			(150		)
Borrowings of other debt, net	4,409			23,313
Other financing activities, net	4,107			5,000
Net cash used in financing activities	(117,506		)	(326,386		)
Effect of exchange rate changes on cash and cash equivalents	2,877			3,034
Net (decrease) increase in cash and cash equivalents	(34,087		)	30,098
Cash and cash equivalents of continuing operations, beginning of period	279,766			227,400
Add: Cash and cash equivalents of discontinued operations, beginning of period	—			7,116
Cash and cash equivalents of continuing and discontinued operations, beginning of period	279,766			234,516
Cash and cash equivalents, end of period	$	245,679		$	264,614
Supplemental disclosure of cash paid for:
Income taxes, net of refunds	$	15,464		$	13,746
Interest	13,975			10,965
Supplemental disclosure of noncash investing and financing activities:
Noncash property, plant and equipment additions	$	4,199		$	2,936
Contingent consideration liabilities	34			10,969
Notes and other financing receivables in connection with disposals of business/investment	—			5,848

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

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

					LKQ Stockholders
	Common Stock				Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interest			Total Stockholders' Equity
	Shares Issued		Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interest			Total Stockholders' Equity
BALANCE, January 1, 2018	309,127		$	3,091	$	1,141,451		$	3,124,103		$	(70,476	)	$	8,484		$	4,206,653
Net income	—		—		—			152,960			—			(197		)	152,763
Other comprehensive income	—		—		—			—			50,513			—			50,513
Vesting of restricted stock units, net of shares withheld for employee tax	300		3		(2,399		)	—			—			—			(2,396		)
Stock-based compensation expense	—		—		5,982			—			—			—			5,982
Exercise of stock options	226		2		2,253			—			—			—			2,255
Shares withheld for net share settlement of stock option awards	(22	)	—		(896		)	—			—			—			(896		)
Adoption of ASU 2018-02 (see Note 4)	—		—		—			(5,345		)	5,345			—			—
Capital contributions from noncontrolling interest shareholder	—		—		—			—			—			4,107			4,107
BALANCE, March 31, 2018	309,631		$	3,096	$	1,146,391		$	3,271,718		$	(14,618	)	$	12,394		$	4,418,981

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

LKQ CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements


Note 1.	Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements ~~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, ~~2016~~2017 filed with the SEC on February ~~27, 2017.~~28, 2018 ("2017 Form 10-K").


~~Note 2.~~	~~Business Combinations~~

Note 2. Business Combinations

During the ~~nine~~three months ended ~~September 30,~~March 31, 2018, we completed one acquisition of a wholesale business in North America. This acquisition was not material to our results of operations or financial position as of and for the three months ended March 31, 2018.

During the year ended December 31, 2017, we completed 2126 acquisitions including 46 wholesale businesses in North America, 1416 wholesale businesses in Europe and 34 Specialty businesses. Our acquisitions in Europe included the acquisition of four aftermarket parts distribution businesses in Belgium in July 2017. Our acquisitions in Specialty included the acquisition of the aftermarket business of Warn Industries, Inc. ("Warn"), a leading designer, manufacturer and marketer of high performance vehicle ~~aftermarket businesses.~~ equipment and accessories, in November 2017.

Total acquisition date fair value of the consideration for ~~these~~our 2017 acquisitions was ~~$280~~$542 million, composed of ~~$250~~$510 million of cash paid (net of cash acquired), $6 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $19 million), $4$5 million of other purchase price obligations (non-interest bearing)~~, $19~~ and $20 million of notes ~~payable and $1 million settlement of pre-existing balances.~~payable. We typically fund our acquisitions using borrowings under our credit facilities or other financing arrangements. During the ~~nine months~~year ended ~~September 30,~~December 31, 2017, we recorded ~~$185~~$307 million of goodwill related to these acquisitions, of which we expect $20 million to be deductible for income tax purposes. In the period between the acquisition dates and September 30, 2017, these acquisitions generated revenue of $106 million and an operating loss of $2 million.

On March 18, 2016, LKQ 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 expanded LKQ's geographic presence in continental Europe, and we believe the acquisition will generate potential purchasing synergies. Total acquisition date fair value of the consideration for our Rhiag acquisition was €534 million ($602 million), composed of €534 million ($601 million) of cash paid (net of cash acquired) and €1 million ($1 million) of intercompany balances considered to be effectively settled as part of the transaction. In addition, we assumed €489 million ($551 million) of existing Rhiag debt as of the acquisition date. We recorded $591 million ($585 million in 2016 and $5 million in the three months ended March 31, 2017) of goodwill related to our acquisition of Rhiag, which we do not expect to be deductible for income tax purposes.

Related to the funding of 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 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 million during the year ended December 31, 2016. The gain on the foreign currency forwards was recorded in Gains on foreign exchange contracts - acquisition related on our Unaudited Condensed Consolidated Statement of Income for the year ended December 31, 2016.

On April 21, 2016, LKQ acquired Pittsburgh Glass Works LLC (“PGW”). At acquisition, PGW’s business comprised aftermarket automotive replacement glass distribution services and automotive glass manufacturing. The acquisition expanded our addressable market in North America. Additionally, we believe the acquisition will create potential distribution synergies with our existing network. Total acquisition date fair value of the consideration for our PGW acquisition was $662 million, consisting of cash paid (net of cash acquired). We recorded $208 million ($205 million in 2016 and $3 million in the six months ended June 30, 2017) of goodwill related to our acquisition of PGW, of which we expect $104$21 million to be deductible for income tax purposes.

On ~~October 4, 2016,~~December 10, 2017, we ~~acquired substantially all of the business assets of Andrew Page Limited~~entered into an agreement to acquire Stahlgruber GmbH ("~~Andrew Page"~~Stahlgruber"), a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, Austria, Czech Republic, Italy, Slovenia, and Croatia with further sales to Switzerland. This acquisition will expand LKQ's geographic presence in continental Europe and serve as an additional strategic hub for our European operations. In addition, we believe this acquisition will allow for continued improvement in procurement, logistics and infrastructure optimization. The enterprise value for the pending Stahlgruber acquisition is €1.5 billion, which will be financed with the proceeds from €1.0 billion of senior notes, the direct issuance to Stahlgruber's owner of 8,055,569 newly issued shares of LKQ common stock, and borrowings under our existing revolving credit facility. On May 3, 2018, the European Commission cleared the proposed acquisition for the entire European Union, except with respect to the wholesale automotive parts business in the ~~U.K., out of receivership.~~Czech Republic. The acquisition ~~is subject~~of the Czech Republic wholesale business has been referred to ~~regulatory approval by~~ the ~~Competition and Markets Authority ("CMA") in the U.K. On September 14, 2017, the CMA issued its provisional findings~~Czech competition authority for review. We anticipate that the acquisition was approved except that we may be required to divest up to 10 locations. The CMA's review is ongoing and we have been informed the deadline for the final decision is on or about November 6, 2017. Total acquisition date fair valueclosing of the ~~consideration for this acquisition was £16 million ($20 million). In connection~~transaction with respect to Stahlgruber's operations outside of the ~~acquisition, we recorded a gain on bargain purchase of $11 million ($8 million recorded in~~Czech Republic will occur during the ~~fourth~~second quarter of ~~2016~~2018. The Czech Republic wholesale business represents an immaterial portion of Stahlgruber's revenue and $3 million recorded in the nine months ended September 30, 2017), which is recorded on a separate line in our consolidated statement of income. We believe that we were able to acquire the net assets of Andrew Page for less than fair value as a result of (i) Andrew Page's financial difficulties that put the company into receivership prior to our acquisition and (ii) a motivated seller that desired to complete the sale in an expedient manner to ensure continuity of the business.

In addition to our acquisitions of Rhiag, PGW and Andrew Page, we acquired seven wholesale businesses in Europe and five wholesale businesses in North America during the year ended December 31, 2016. Total acquisition date fair value of the consideration for these acquisitions was $76 million, composed of $68 million of cash paid (net of cash acquired), $4 million of notes payable and $4 million of other purchase price obligations (non-interest bearing). During the year ended December 31, 2016, we recorded $52 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2015 acquisitions. We expect that substantially all of the goodwill recorded for these acquisitions will not be deductible for income tax purposes.profitability.

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~~three months ended ~~September 30, 2017~~March 31, 2018 and the last ~~three~~nine months of the year ended December 31, ~~2016~~2017 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.

~~From the date of our preliminary allocation for Rhiag in~~ During the first quarter of ~~2016 through March 31, 2017, we recorded adjustments based on our valuation procedures for our acquisition of Rhiag that resulted in~~2018, the allocation of $149 million of goodwill to acquired assets, primarily intangible assets and property and equipment; this amount includes a $5 million increase to goodwill recorded in 2017, primarily attributable to a decline in the value allocated to property and equipment. Additionally, from the date of our preliminary allocation for PGW in the second quarter of 2016 through June 30, 2017, we recorded adjustments based on our valuation procedures that resulted in a $24 million increase to goodwill recorded for our PGW acquisition, of which $3 million was recorded in 2017. These adjustments were primarily attributable to a decline in the value allocated to property and equipment, partially offset by an increase in the value allocated to deferred taxes. Finally, from the date of our preliminary allocations for our acquisitions completed in the first half of 2017 through September 30, 2017, we recorded adjustments based on our valuation procedures that resulted in a decrease to goodwill of $11 million. This decrease to goodwill was primarily a result of an increase in the value allocated to intangible assets and a decrease in our estimate of the acquisition date fair value of the contingent payment liability to the former owners. The income statement effect of these measurement period adjustments for our Rhiag and PGW acquisitions as well as our acquisitions completed in the first half of 2017 that would have been recorded in previous reporting periods if the adjustments had been recognized as of the acquisition dates was immaterial. The balance sheet impact and income statement effect of other measurement-period adjustments recorded for acquisitions completed in prior periods were ~~immaterial.~~not material.

The ~~preliminary~~ purchase price allocations for the acquisitions completed during the ~~nine months ended September 30, 2017 and the~~ year ended December 31, ~~2016~~2017 are as follows (in thousands):


	Nine Months Ended			Year Ended												Year Ended
	September 30, 2017			December 31, 2016												December, 31, 2017
	All Acquisitions⁽¹⁾			Rhiag			PGW ⁽²⁾			Other Acquisitions			Total			All Acquisitions⁽¹⁾
Receivables	$	53,509		$	230,670		$	136,523		$	13,216		$	380,409		$	73,782
Receivable reserves	(5,696		)	(28,242		)	(7,135		)	(794		)	(36,171		)	(7,032		)
Inventories ⁽³⁾⁽²⁾	121,484			239,529			169,159			62,223			470,911			150,342
Prepaid expenses and other current assets	(1,147		)	10,793			42,573			4,445			57,811			(295		)
Property and equipment	5,511			56,774			225,645			17,140			299,559
Property, plant and equipment																41,039
Goodwill	192,688			585,415			205,058			52,336			842,809			314,817
Other intangibles	31,149			429,360			37,954			2,537			469,851			181,216
Other assets ⁽⁴⁾	2,188			2,092			57,671			(133		)	59,630			3,257
Deferred income taxes	(1,676		)	(110,791		)	17,506			(1,000		)	(94,285		)	(65,087		)
Current liabilities assumed	(83,223		)	(239,665		)	(168,332		)	(42,290		)	(450,287		)	(111,484		)
Debt assumed	(29,900		)	(550,843		)	(4,027		)	(2,378		)	(557,248		)	(33,586		)
Other noncurrent liabilities assumed	(1,563		)	(23,085		)	(50,847		)	(103		)	(74,035		)	(1,917		)
Contingent consideration liabilities	(6,234		)	—			—			—			—			(6,234		)
Other purchase price obligations	(3,777		)	—			—			(6,698		)	(6,698		)	(5,074		)
Notes issued	(18,899		)	—			—			(4,087		)	(4,087		)	(20,187		)
Settlement of pre-existing balances	(620		)	(591		)	—			(32		)	(623		)	242
Gains on bargain purchases ⁽⁵⁾⁽³⁾	(3,990		)	—			—			(8,207		)	(8,207		)	(3,870		)
Settlement of other purchase price obligations (non-interest bearing)	2,863			—			—			—			—			3,159
Cash used in acquisitions, net of cash acquired	$	252,667		$	601,416		$	661,748		$	86,175		$	1,349,339		$	513,088


(1)	~~Includes~~The amounts recorded during the year ended December 31, 2017 include $6 million and $3$3 million of adjustments to reduce property, plant and equipment and other ~~current~~ assets for ~~Rhiag~~Rhiag-Inter Auto Parts Italia S.p.A. (“Rhiag”) and ~~PGW,~~Pittsburgh Glass Works LLC (“PGW”), respectively.


(2)	~~Includes both continuing and discontinued operations of PGW. See Note 3, "Discontinued Operations"~~The amount for ~~further information on~~ our ~~discontinued operations.~~2017 acquisitions includes a $4 million step-up adjustment related to our Warn acquisition.


(3)	~~The PGW inventory balance includes the impact of a~~ ~~$10 million~~ ~~step-up adjustment to report the inventory at its fair value.~~


~~(4)~~	~~The balance for PGW includes $24 million of investments in unconsolidated subsidiaries which relate to the discontinued portion of our PGW operations.~~

~~(5)~~

The amount recorded during the ~~nine months~~year ended ~~September 30,~~December 31, 2017 includes a $3$2 million increase to the gain on bargain purchase recorded for our Andrew Page acquisition as a result of changes to our estimate of the fair value of the net assets acquired. The remainder of the gain on bargain purchase recorded during the ~~nine months~~year ended ~~September 30,~~December 31, 2017 is an immaterial amount related to another acquisition in Europe completed in the second quarter of ~~2017, as the fair value of the net assets acquired exceeded the purchase price.~~2017.

The fair value of our intangible assets is based on a number of inputs including projections of future cash flows, assumed royalty rates and customer attrition rates, all of which are Level 3 inputs. The fair value of our property, plant and equipment is determined using inputs such as market comparables and current replacement or reproduction costs of the asset, adjusted for physical, functional and economic factors; these adjustments to arrive at fair value ~~are not observable~~use unobservable inputs in ~~the~~which little or no market data exists, and therefore, these inputs are considered to be Level 3 inputs.

~~Other noncurrent liabilities recorded~~ See Note 12, "Fair Value Measurements" for ~~our acquisitions of Rhiag and PGW includes a liability for certain pension and other post-retirement obligations we assumed with~~further information regarding the acquisitions. A portion of PGW's liability for pension and post-retirement obligations relates to the glass manufacturing operations business, which was classified as discontinued operations, and was recorded within Liabilities of discontinued operations on our consolidated balance sheet as of December 31, 2016; these amounts were includedtiers in the ~~net assets disposed of as part of the sale of the business, which occurred in the first quarter~~fair value hierarchy.

of 2017. Due to the immateriality of our pension plans for our continuing operations, we have not provided the detailed disclosures otherwise prescribed by the accounting guidance on pensions and other post-retirement obligations.

The primary objectives of our acquisitions made during ~~the nine months ended~~ ~~September 30,~~ 2017 ~~and the year ended~~ ~~December 31, 2016~~ were to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths. Certain 2017 acquisitions were completed to enable us to align our distribution model in the Benelux region. 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, and these projected synergies contributed to the goodwill recorded on the Rhiag acquisition. The aftermarket automotive glass distribution business of PGW ("PGW autoglass"), which is included within continuing operations, enabled us to enter into new product lines and increase the size of our addressable market. In addition, we believe that the acquisition of PGW autoglass will allow for distribution synergies with our existing network in North America, which contributed to the goodwill recorded on the 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 a result of integrating the company with our existing

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

The following pro forma summary presents the effect of the businesses acquired during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as though the businesses had been acquired as of January 1, ~~2016,~~2017, and the businesses acquired during the year ended December 31, ~~2016~~2017 as though they had been acquired as of January 1, ~~2015.~~2016. The pro forma adjustments are based upon unaudited financial information of the acquired entities (in thousands, except per share data):

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenue, as reported $ 2,465,800
$ 2,207,343
$ 7,267,054
$ 6,433,625
Revenue of purchased businesses for the period prior to acquisition:
Rhiag —
—
—
213,376
PGW ⁽¹⁾
—
—
—
102,540
Other acquisitions 18,664
177,210
195,550
572,076
Pro forma revenue $ 2,484,464
$ 2,384,553
$ 7,462,604
$ 7,321,617

Income from continuing operations, as reported $ 122,381
$ 109,844
$ 414,104
$ 359,825
Income (loss) from continuing operations of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
Rhiag —
59
—
(84 )
PGW ^(1),(2)
—
—
—
7,574
Other acquisitions 734
2,727
6,481
9,198
Acquisition related expenses, net of tax ⁽³⁾
2,184
328
4,801
10,483
Pro forma income from continuing operations $ 125,299
$ 112,958
$ 425,386
$ 386,996

Earnings per share from continuing operations, basic—as reported $ 0.40
$ 0.36
$ 1.34
$ 1.17
Effect of purchased businesses for the period prior to acquisition:
Rhiag —
0.00
—
(0.00)
PGW ^(1),(2)
—
—
—
0.02
Other acquisitions 0.00
0.01
0.02
0.03
Acquisition related expenses, net of tax⁽³⁾
0.01
0.00
0.02
0.03
Pro forma earnings per share from continuing operations, basic ⁽⁴⁾
$ 0.41
$ 0.37
$ 1.38
$ 1.26

Earnings per share from continuing operations, diluted—as reported $ 0.39
$ 0.35
$ 1.33
$ 1.16
Effect of purchased businesses for the period prior to acquisition:
Rhiag —
0.00
—
(0.00)
PGW ^(1),(2)
—
—
—
0.02
Other acquisitions 0.00
0.01
0.02
0.03
Acquisition related expenses, net of tax⁽³⁾
0.01
0.00
0.02
0.03
Pro forma earnings per share from continuing operations, diluted ⁽⁴⁾
$ 0.40
$ 0.36
$ 1.37
$ 1.25



	Three Months Ended
	March 31,
	2018		2017
Revenue, as reported	$	2,720,764	$	2,342,843
Revenue of purchased businesses for the period prior to acquisition:
All acquisitions	26		139,216
Pro forma revenue	$	2,720,790	$	2,482,059

Income from continuing operations, as reported	$	152,763	$	140,809
Income from continuing operations of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
All acquisitions	0		7,470
Acquisition related expenses, net of tax ⁽¹⁾	623		1,243
Pro forma income from continuing operations	$	153,386	$	149,522

Earnings per share from continuing operations, basic - as reported	$	0.49	$	0.46
Effect of purchased businesses for the period prior to acquisition:
All acquisitions	0.00		0.02
Acquisition related expenses, net of tax ⁽¹⁾	0.00		0.00
Pro forma earnings per share from continuing operations, basic ⁽²⁾	$	0.50	$	0.49

Earnings per share from continuing operations, diluted - as reported	$	0.49	$	0.45
Effect of purchased businesses for the period prior to acquisition:
All acquisitions	0.00		0.02
Acquisition related expenses, net of tax ⁽¹⁾	0.00		0.00
Pro forma earnings per share from continuing operations, diluted ⁽²⁾	$	0.49	$	0.48


(1)	~~PGW reflects the results for the continuing aftermarket automotive glass distribution business only.~~


~~(2)~~	~~Excludes $5 million of corporate costs from January 1, 2016 through April 21, 2016 that we do not expect to incur going forward as a result of the sale of the glass manufacturing business.~~


~~(3)~~	Includes expenses related to acquisitions closed in the period and excludes expenses for acquisitions not yet completed.


~~(4)~~(2)	The sum of the 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 fair value, adjustments to depreciation on acquired property, plant 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 pro forma impact of our acquisitions also reflects the elimination of acquisition related expenses, net of tax. Refer to Note 5,6, "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 3. Discontinued Operations

On March 1, 2017, LKQ completed the sale of the glass manufacturing business of its PGW subsidiary to a subsidiary of Vitro S.A.B. de C.V. ("Vitro") for a sales price of $301 million, including cash received of $316 million, net of cash disposed of $15 million. ~~In addition, we recorded a purchase price receivable of $4 million~~ ~~subject to post sale adjustments.~~Related to this transaction, the remaining portion of the Glass operating segment was combined with our Wholesale - North America operating segment, which is part of our North America reportable segment, in the first quarter of 2017. See Note ~~14,~~15, "Segment and Geographic Information" for further information regarding our segments.

~~Upon execution of~~

In connection with the Stock and Asset Purchase Agreement (the "Vitro Agreement") in December 2016, LKQ concluded that the glass manufacturing business met the criteria to be classified as held for sale in LKQ’s consolidated financial statements. As a result, the assets related to the glass manufacturing business were reflected on the Consolidated Balance Sheet at the lower of the net asset carrying value or fair value less cost to sell as of ~~December 31, 2016. The fair value of the assets was determined using the negotiated sale price as an indicator of fair value, which is considered a Level 2 input as it is observable in a non-active market.~~

~~As part of the Vitro~~ Agreement, the Company and Vitro entered into a twelve-month Transition Services Agreement commencing on the transaction date with two six-month renewal periods, a three-year Purchase and Supply Agreement, and an Intellectual Property Agreement.

The following table summarizes the operating results of the Company’s discontinued operations related to the sale described above for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017, ~~and 2016,~~ as presented in ~~“Income (loss)~~Net loss from discontinued operations ~~net of tax”~~ on the Unaudited Condensed Consolidated Statements of Income (in thousands):

Three Months Ended Nine Months Ended

September 30, ⁽¹⁾
September 30,
2016 2017 2016
Revenue $ 179,487
$ 111,130
$ 325,374
Cost of goods sold 151,519
100,084
281,275
Operating expenses 8,371
8,369
13,763
    Operating income 19,597
2,677
30,336
Interest and other (expense) income, net ⁽²⁾
(29 ) 1,204
(3,562 )
    Income from discontinued operations before provision for income taxes 19,568
3,881
26,774
Provision for income taxes ⁽³⁾
6,962
3,598
9,526
Equity in earnings (loss) of unconsolidated subsidiaries 238
(534 ) 571
    Income (loss) from discontinued operations, net of tax 12,844
(251 ) 17,819
Loss on sale of discontinued operations, net of tax ⁽⁴⁾
—
(4,280 ) —
     Net income (loss) from discontinued operations, net of tax $ 12,844
$ (4,531 ) $ 17,819



	Three Months Ended
	March 31, 2017
Revenue	$	111,130
Cost of goods sold	100,084
Selling, general and administrative expenses	8,369
Operating income	2,677
Interest and other income, net ⁽¹⁾	1,204
Income from discontinued operations before taxes	3,881
Provision for income taxes	3,598
Equity in loss of unconsolidated subsidiaries	(534		)
Loss from discontinued operations, net of tax	(251		)
Loss on sale of discontinued operations, net of tax ⁽²⁾	(4,280		)
Net loss from discontinued operations	$	(4,531	)

~~(1)~~

~~There were no discontinued operations for the three months ended September 30, 2017 as~~

(1) The Company elected to allocate interest expense to discontinued operations based on the expected debt to be repaid. Under this approach, allocated interest from January 1, 2017 through the date of sale was $2 million. This expense was offset by foreign currency gains.

(2) In the first quarter of 2017, upon closing of the sale and write-off of the net assets of the glass manufacturing business, we recorded a pre-tax loss on sale of $9 million, and a $4 million tax benefit. The incremental loss primarily reflects a $6 million payable for intercompany sales from the glass manufacturing business to the aftermarket automotive glass distribution business incurred prior to closing, which was paid by LKQ during the second quarter of 2017, and capital expenditures in 2017 that were not reimbursed by the buyer.

The glass manufacturing ~~business was sold on March 1, 2017.~~

~~(2)~~

~~The Company elected to allocate interest expense to discontinued operations based on the expected debt to be repaid. Under this approach, allocated interest from January 1, 2017 through the~~ ~~date of sale w~~as $2 million and from April 21, 2016 to September 30, 2016 was $4 million. The allocated interest from July 1, 2016 to September 30, 2016 was $2 million. The other expenses, net were foreign currency gains and losses.


~~(3)~~	~~The provision for income taxes for 2017 includes a return to provision adjustment related to international operations of the glass manufacturing business.~~

~~(4)~~

In the first quarter of 2017, upon closing of the sale and write-off of the net assets of the glass manufacturing business, we recorded a pre-tax loss on sale of $9 million, and a $4 million tax benefit. The incremental loss primarily reflects a $6 million payable for intercompany sales from the glass manufacturing business to the aftermarket automotive glass distribution business incurred prior to closing which was paid by LKQ during the second quarter of 2017 and capital expenditures in 2017 that were not reimbursed by the buyer. No adjustments to the loss on sale were recorded in the third quarter of 2017.

~~The glass manufacturing~~ business had $4 million of operating cash outflows, $4 million of investing cash outflows mainly consisting of capital expenditures, and $15 million of financing cash inflows made up of parent financing for the period from January 1, 2017 through March 1, 2017.~~The glass manufacturing business had~~ ~~$26 million~~ ~~of operating cash inflows,~~ ~~$18 million~~ ~~of investing cash outflows mainly consisting of capital expenditures, and~~ ~~$1 million~~ ~~of financing cash inflows made up of parent financing for the period from April 21, 2016 through September 30, 2016.~~

Pursuant to the Purchase and Supply Agreement, our aftermarket automotive glass distribution business will source various products from Vitro's glass manufacturing business annually for a ~~three year~~three-year period beginning on March 1, 2017. Between January 1, 2017 and the sale date of March 1, 2017, intercompany sales between the glass manufacturing business and the continuing aftermarket automotive glass distribution business of PGW, which were eliminated in consolidation, were $8 million. ~~Purchases under~~All purchases from Vitro, including those outside of the Purchase and Supply Agreement, ~~through September 30,~~for the three months ended March 31, 2018 and for the period between the sale date of March 1, 2017 and March 31, 2017, were ~~$27~~$10 million. and $4 million, respectively.


~~Note 4.~~	Note 4. Financial Statement Information

~~Revenue Recognition~~

The majority of our revenue is derived from 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. We recorded a reserve for estimated returns, discounts and allowances of approximately $42 million and ~~$38 million~~ at ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~, 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 have a reserve for uncollectible accounts, which was approximately ~~$56~~$63 million and ~~$46~~$58 million at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~,2017, respectively.

Inventories

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


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2018		2017
Aftermarket and refurbished products	$	1,769,539	$	1,540,257	$	1,915,537	$	1,877,653
Salvage and remanufactured products	466,837		394,980		469,648		487,108
Manufactured products					16,124		16,022
Total inventories	$	2,236,376	$	1,935,237	$	2,401,309	$	2,380,783

~~Our acquisitions completed during 2017 contributed $85 million of the increase in our aftermarket~~ Aftermarket and refurbished products ~~inventory~~ and ~~$36 million of the increase in our~~ salvage and remanufactured products ~~inventory. See Note 2, "Business Combinations"~~are primarily composed of finished goods. As of March 31, 2018, manufactured products inventory was composed of $9 million of raw materials, $2 million of work in process, and $5 million of finished goods. As of December 31, 2017, manufactured products inventory was composed of $10 million of raw materials, $2 million of work in process, and $4 million of finished goods.

Property, Plant and Equipment

We record depreciation expense associated with our refurbishing, remanufacturing, manufacturing and furnace operations as well as our distribution centers in Cost of goods sold on the Unaudited Condensed Consolidated Statements of Income. All other depreciation expense is reported in Depreciation and amortization. Total depreciation expense for ~~further information on our acquisitions.~~the three months ended March 31, 2018 and 2017 was $37 million and $27 million, respectively.

Intangible Assets

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

The changes in the carrying amount of goodwill by reportable segment ~~during~~for the ~~nine~~three months ended ~~September 30, 2017~~ ~~are as follows (in thousands):~~

North America ⁽¹⁾
Europe
Specialty ⁽¹⁾
Total
Balance as of January 1, 2017 $ 1,661,800
$ 1,099,976
$ 292,993
$ 3,054,769
Business acquisitions and adjustments to previously recorded goodwill 31,964
154,926
5,798
192,688
Exchange rate effects 8,858
136,487
(439 ) 144,906
Balance as of September 30, 2017 $ 1,702,622
$ 1,391,389
$ 298,352
$ 3,392,363


~~(1)~~	~~In the first quarter of 2017, we realigned a portion of our North America operations under our Specialty segment. Prior year amounts have been recast to reflect the shift in reporting structure.~~

~~The components of other intangibles acquired during the nine months ended~~ ~~September 30, 2017, are as follows (in thousands):~~

Gross Amount
All 2017 Acquisitions
Trade names and trademarks $ 15,189
Customer and supplier relationships 10,550
Software and other technology related assets 4,796
Covenants not to compete 614
$ 31,149

~~The components of other intangibles~~March 31, 2018 are as follows (in thousands):

September 30, 2017 December 31, 2016

Gross
Carrying
Amount

Accumulated
Amortization
Net
Gross
Carrying
Amount

Accumulated
Amortization
Net
Trade names and trademarks $ 328,914
$ (69,824 ) $ 259,090
$ 286,008
$ (51,104 ) $ 234,904
Customer and supplier relationships 441,182
(148,499 ) 292,683
395,284
(92,079 ) 303,205
Software and other technology related assets 101,646
(54,688 ) 46,958
77,329
(35,648 ) 41,681
Covenants not to compete 12,838
(9,145 ) 3,693
11,726
(7,285 ) 4,441
$ 884,580
$ (282,156 ) $ 602,424
$ 770,347
$ (186,116 ) $ 584,231



	North America			Europe		Specialty			Total
Balance as of January 1, 2018	$	1,709,354		$	1,414,898	$	412,259		$	3,536,511
Business acquisitions and adjustments to previously recorded goodwill	584			259		(4,977		)	(4,134		)
Exchange rate effects	(2,891		)	42,510		202			39,821
Balance as of March 31, 2018	$	1,707,047		$	1,457,667	$	407,484		$	3,572,198

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



	March 31, 2018		December 31, 2017
Intangible assets subject to amortization	$	658,704	$	664,969
Indefinite-lived intangible assets
Trademarks	81,300		78,800
Other indefinite-lived intangible assets	800		—
Total	$	740,804	$	743,769

The components of intangible assets subject to amortization are as follows (in thousands):



	March 31, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Trade names and trademarks	$	333,802	$	(79,437	)	$	254,365	$	327,332	$	(75,095	)	$	252,237
Customer and supplier relationships	520,386		(185,417		)	334,969		510,113		(167,532		)	342,581
Software and other technology related assets	129,851		(65,070		)	64,781		124,049		(59,081		)	64,968
Covenants not to compete	13,920		(9,331		)	4,589		14,981		(9,798		)	5,183
Total	$	997,959	$	(339,255	)	$	658,704	$	976,475	$	(311,506	)	$	664,969

Our estimated useful lives for our ~~finite lived~~finite-lived intangible assets are as follows:



	Method of Amortization	Useful Life
Trade names and trademarks	Straight-line	4-30 years
Customer and supplier relationships	Accelerated	~~4-20~~6-20 years
Software and other technology related assets	Straight-line	~~3-8~~3-15 years
Covenants not to compete	Straight-line	~~1-5~~2-5 years

Amortization expense for intangibles was ~~$26~~$24 million and ~~$74~~$23 million during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, ~~respectively, and $25 million and $58 million during the three and nine months ended September 30, 2016,~~ respectively. Estimated amortization expense for each of the five years ~~through~~in the period ending December 31, ~~2021~~2022 is ~~$26~~$75 million (for the remaining ~~three~~nine months of ~~2017)~~2018), ~~$89~~$85 million, ~~$74~~$72 million, ~~$59~~$60 million and ~~$49~~$51 million, ~~respectively.~~

~~Property and Equipment~~

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, and our distribution centers. Total

depreciation expense was $34 million and $93 million during the three and nine months ended September 30, 2017, respectively, and $30 million and $84 million during the three and nine months ended September 30, 2016, respectively.

Investments in Unconsolidated Subsidiaries

Our investment in unconsolidated subsidiaries was ~~$199~~$208 million at both March 31, 2018 and ~~$183 million as of September 30, 2017 and~~ December 31, ~~2016, respectively.~~2017. On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen AB ("Mekonomen") from AxMeko AB, an affiliate of Axel Johnson AB, for an aggregate purchase price of $181 million. Headquartered in Stockholm, Sweden, Mekonomen is the leading independent car parts and service chain in the Nordic region of Europe, offering a range of products including spare parts and accessories for cars, and workshop services for consumers and businesses. We are accounting for our interest in Mekonomen using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee. As of ~~September 30, 2017,~~March 31, 2018, the book value of our investment in Mekonomen exceeded our share of the book value of Mekonomen's net assets by ~~$123~~$125 million; this difference is primarily related to goodwill and the fair value of other intangible assets. We are ~~reporting~~recording our equity in the net earnings of Mekonomen on a one quarter ~~lag, and therefore we recorded no equity in earnings for this investment in 2016.~~lag. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, we recorded equity in earnings totaling $3$2 million and $5$0.3 million, respectively, related to our investment in Mekonomen, which represents our share of the results ~~from~~for the ~~investment date through June 30,~~three months ended December 31, 2017 and 2016, respectively, including adjustments to convert the results to US GAAP and to recognize the impact of our purchase accounting adjustments. In May 2017, we received a cash dividend of $7 million (SEK 67 million) related to our investment in Mekonomen. The ~~level~~Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at ~~September 30, 2017~~March 31, 2018 was ~~$216~~$163 million compared to a carrying value of ~~$193~~$202 million. We evaluated our investment in Mekonomen for other-than-temporary impairment and concluded the decline in fair value was not other-than-temporary.

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. These assurance-type warranties are not considered a separate performance obligation and thus, no transaction price is allocated to it. We record the ~~estimated~~ warranty costs ~~at the time~~in Cost of ~~sale~~goods sold on our Unaudited Condensed Consolidated Statements of Income. Our warranty reserve is calculated using historical ~~warranty~~ claim information to project future warranty claims ~~activity. Our warranty reserve~~activity and is recorded within Other accrued expenses and Other ~~Noncurrent Liabilities~~noncurrent liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.

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


Balance as of January 1, 2017	$	19,634
Balance as of December 31, 2017				$	23,151
Warranty expense	28,262			10,000
Warranty claims	(26,835		)	(9,294		)
Balance as of September 30, 2017	$	21,061
Balance as of March 31, 2018				$	23,857

Recent Accounting Pronouncements

Adoption of New Revenue Standard

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). 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. The FASB has issued several updates to ASU ~~2014-09.~~2014-09, which collectively with ASU 2014-09, ~~will be effective~~represent the FASB Accounting Standards Codification Topic 606 (“ASC 606”). On January 1, 2018, we adopted ASC 606 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 will continue to evaluate the potential effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures; however, we do not plan to early adopt. Entities adopting the standard have the option of using either a full retrospective or modified retrospective approach in the application of this guidance. We will be adopting the standardall contracts using the modified retrospective ~~approach~~method, which means the historical periods are presented under the previous revenue standards with athe cumulative net income effect ~~adjustment recognized~~being adjusted through retained earnings.

Most of the changes resulting from our adoption of ASC 606 were changes in presentation within the ~~opening balance~~Unaudited Condensed Consolidated Balance Sheets and the Unaudited Condensed Consolidated Statements of ~~retained earnings in the period of adoption. We are currently in the process of determining the necessary~~Income. Therefore, while we made adjustments to existing accounting policies, evaluating new disclosure requirements and identifying and implementing changes to business processes as deemed necessary to support recognition and disclosure under the new guidance. Basedcertain opening balances on our ~~preliminary assessment,~~January 1, 2018 balance sheet, we ~~do not~~made no adjustments to opening retained earnings. We expect ~~a significant~~the impact of the adoption of ASC 606 to be immaterial to our net income on an ongoing basis. See Note 5, "Revenue Recognition" for the ~~majority~~required disclosures under ASC 606.

With the adoption of ~~our revenue transactions as they generally consist of single performance obligations~~ASC 606, we reclassified certain amounts related to ~~transfer promised goods or services; however,~~variable consideration. Under ASC 606, we ~~do expect the new guidance will change the way we~~are required to present sales returns in our consolidated financial statements. We are still in the process of determining the magnitude of impact for this change, but expect to report sales returns on a gross basis on the balance sheet by presenting a refund liability and a ~~return~~returns asset ~~separately. We also expect an adjustment~~within the Unaudited Condensed Consolidated Balance Sheet, whereas in periods prior to adoption, we presented the estimated margin impact of expected returns as a contra-asset within accounts receivable. Additionally, under ASC 606, the changes in the refund liability are reported in revenue, onand the ~~income statement~~changes in the returns assets are reported in Cost of goods sold in the Unaudited Condensed Consolidated Statements of Income. Prior to adoption, the change in the reserve for ~~the gross up of~~ returns ~~reserve adjustments, which are currently recorded~~was generally reported as a net amount within revenue. As a result, the income statement presentation was adjusted concurrently with the balance sheet change beginning in 2018.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASC 606 was as follows (in thousands):



	Balance as of December 31, 2017		Adjustments Due to ASC 606		Balance as of January 1, 2018
Balance Sheet
Assets
Accounts receivable	$	1,027,106	$	38,511	$	1,065,617
Prepaid expenses and other current assets	134,479		44,508		178,987
Liabilities
Refund liability	—		83,019		83,019

The impact of the adoption of ASC 606 on our Unaudited Condensed Consolidated Balance Sheet and Unaudited Condensed Consolidated Statement of Income as of and for the three months ended March 31, 2018 was as follows (in thousands):

~~In July 2015,~~



	Balance as of March 31, 2018
	As Reported		Amounts Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Balance Sheet
Assets
Accounts receivable	$	1,211,788	$	1,165,618	$	46,170
Prepaid expenses and other current assets	180,367		127,358		53,009
Liabilities
Refund liability	99,179		—		99,179



	For the three months ended March 31, 2018
	As Reported		Amounts Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Income Statement
Revenue	$	2,720,764	$	2,728,712	$	(7,948	)
Cost of goods sold	1,666,793		1,674,173		(7,380		)
Selling, general and administrative expenses	766,891		767,459		(568		)

We have not included a table of the ~~FASB issued Accounting Standards Update 2015-11, "Simplifying~~impact of the ~~Measurement~~balance sheet adjustments on the Unaudited Condensed Consolidated Statement 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~~Cash Flows as the ~~estimated selling price~~adjustment will net to zero within the operating activities section of this statement.

Under ASC 606, we have elected not to adjust consideration for the effect of a significant financing component at contract inception if the period between the transfer of goods to the customer and payment received from the customer is one year or less. Generally, our payment terms are short term in ~~the ordinary course of business, less reasonably predictable~~nature, but in some instances we may offer extended terms to customers exceeding one year such that interest would be accrued with respect to those contracts. The interest that would be accrued related to these contracts is immaterial at March 31, 2018.

Under ASC 340, "Other Assets and Deferred Costs," we have elected to recognize incremental costs of ~~completion, disposal and transportation. We adopted ASU 2015-11 during~~obtaining a contract (commissions earned by our sales representatives on product sales) as an expense when incurred, as we believe the amortization period of the asset would be one year or less due to the short-term nature of our contracts.

Other Recently Adopted Accounting Pronouncements

During the first quarter of ~~2017 on a prospective basis. Effective January 1, 2017,~~2018, we ~~are recording our inventory at the lower of cost or net realizable value, including application of the concept in determining our inventory reserves, in accordance with~~adopted ASU ~~2015-11. The adoption of ASU 2015-11 did not have a material impact on our recorded inventory value.~~

~~In January 2016, the FASB issued Accounting Standards Update~~ No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which changes how entities will recognize, measure, present and make disclosures about certain financial assets and financial liabilities. The adoption of ASU 2016-01 did not have a significant impact on our financial position, results of operations, cash flows or disclosures.

During the first quarter of 2018, we adopted ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which includes guidance on classification for the following items: debt prepayment or debt extinguishment costs, settlement of zero coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and corporate-owned or bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and other separately identifiable cash flows where application of the predominance principle is prescribed. No adjustments were required in our Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2018. Within our Unaudited Condensed Consolidating Statements of Cash Flows in Note 16, "Condensed Consolidating Financial Information," we now present a new line item, Payments of deferred purchase price on receivables securitization, as a result of adopting ASU 2016-15; prior year cash flow information within this footnote has been recast to reflect the impact of adopting this accounting standard. Other than the addition of this new line item, there was no impact to our Unaudited Condensed Consolidating Statements of Cash Flows.

During the first quarter of 2018, we adopted ASU No. 2017-01 "Clarifying the Definition of a Business" (“ASU 2017-01”), which requires an evaluation of whether substantially all of the fair value of assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transaction does not qualify as a business. The guidance also requires an acquired business to include at least one substantive process and narrows the definition of outputs. The adoption of ASU 2017-01 did not have a material impact on our unaudited condensed consolidated financial statements.

During the first quarter of 2018, we adopted ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the reduction of the U.S. federal statutory income tax rate to 21% from 35% due to the enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). In addition, under ASU 2018-02, an entity is required to provide certain disclosures regarding stranded tax effects. ASU 2018-02 is effective for fiscal years and interim periods ~~within those years,~~ beginning after December 15, ~~2017;~~2018; early adoption is permitted. ~~The guidance requires~~As a result of the adoption onof ASU 2018-02, we recorded a ~~prospective basis. We are still evaluating the impact that ASU 2016-01 will have on our consolidated financial statements~~$5 million reclassification to increase Accumulated Other Comprehensive (Loss) Income and ~~related disclosures, but we do not expect to early adopt in 2017.~~decrease Retained Earnings.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ~~Accounting Standards Update~~ASU 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 current GAAP and ASU 2016-02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. ASU 2016-02 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. While we are still in the process of quantifying the impact that the adoption of ASU 2016-02 will have on our consolidated financial statements and related disclosures, we anticipate the adoption will materially affect our consolidated balance sheet and disclosures, as the majority of our operating leases will be recorded on the balance sheet under ASU 2016-02. While we do not anticipate the adoption of this accounting standard to have a material impact on our consolidated statements of income at this time, this conclusion may change as we finalize our assessment. In order to assist in our timely implementation of the new standard, we have purchased new software to track our leases. We have engaged a third party to assist with the implementation of the new software with an expectation to complete the implementation by the end of 2018.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), to add and clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 includes guidance on classification for the following items: debt prepayment or debt extinguishment costs, settlement of zero coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and corporate-owned or bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and other separately identifiable cash flows where application of the predominance principle is prescribed. ASU 2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017; early adoption is permitted. The guidance requires retrospective application to all periods presented unless it is impracticable to do so. We are still evaluating the impact that ASU

~~2016-15 will have on our consolidated financial statements and related disclosures. We do not expect adoption of this standard to have a significant impact on our cash flows.~~

~~In January~~ 2017, the FASB issued ~~Accounting Standards Update No. 2017-04, "Simplifying the Test for Goodwill Impairment" ("~~ASU 2017-04"), which simplifies the accounting for goodwill impairment by eliminating step 2 from the goodwill impairment test. Under the new guidance, if the carrying value of a reporting unit exceeds the fair value, an impairment loss will be recognized for the amount of that excess, limited to the goodwill allocated to that reporting unit. ASU 2017-04 is effective for fiscal years and any interim impairment tests for periods beginning after December 15, 2019; early adoption is permitted for entities with annual and interim impairment tests occurring after January 1, 2017, and we early adopted for the quarter ended June 30, 2017, although we have not performed an interim impairment test through September 30, 2017. The guidance requires adoption on a prospective basis. At this time, we do not expect adoption of this standard to have a significant impact on our financial position, results of operations, or cash flows.

~~In May 2017, the FASB issued Accounting Standards Update No. 2017-09, "Scope of Modification Accounting"~~

("ASU 2017-09"), which provides guidance on changes to share based payment awards requiring application of modification accounting under FASB Accounting Standards Codification Topic 718, "Compensation - Stock Compensation." Under this ASU, modification accounting for awards will not be required if the fair value, vesting conditions, and classifications of awards both prior to and after the modification are the same. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017; early adoption is permitted with amendments resulting from the ASU applied prospectively to awards modified after the effective date. We early adopted for the quarter ended June 30, 2017; the adoption of ASU 2017-09 did not have a material impact on our consolidated financial statements and related disclosures.

~~In August 2017, the FASB issued Accounting Standards Update~~ No. 2017-12, "Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"), which amends the hedge accounting recognition and presentation requirements in

ASC 815 ("Derivatives and Hedging"). ~~The~~ ASU 2017-12 significantly alters the hedge accounting model by making it easier for an entity to achieve and maintain hedge accounting and provides for accounting that better reflects an entity's risk management activities. ASU 2017-12 is effective for fiscal years and interim periods beginning after December 15, 2018; early adoption is permitted. Entities will adopt the ~~ASU’s~~ provisions of ASU 2017-12 by applying a modified retrospective approach to existing hedging relationships as of the adoption date. At this time, we are still evaluating the impact of this standard on our financial statements.

Note 5. Revenue Recognition

The core principle of ASC 606is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes:


1.	Identifying contracts with customers,


2.	Identifying performance obligations within those contracts,


3.	Determining the transaction price,


4.	Allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and


5.	Recognizing revenue when or as each performance obligation is satisfied.

The majority of our revenue is derived from the sale of vehicle parts. Under both the previous revenue standards and ASC 606, we recognize revenue when the products are shipped to, delivered to or picked up by customers and title has transferred.

Sources of Revenue

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



	Three Months Ended
	March 31,
	2018		2017
North America	$	1,172,585	$	1,079,875
Europe	1,037,046		819,167
Specialty	350,674		313,899
Parts and services	2,560,305		2,212,941
Other	160,459		129,902
Total revenue	$	2,720,764	$	2,342,843

Parts and Services

Our parts revenue is generated from the sale of vehicle products including replacement parts, components and systems used in the repair and maintenance of vehicles and specialty products and accessories to improve the performance, functionality and appearance of vehicles. Services revenue includes additional services that are generally recorded concurrently with the related product sales, such as the sale of service-type warranties and fees for admission to our self service yards.

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

Our service-type warranties typically have service periods ranging from 6 to 36 months. Under ASC 606, proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period. The changes in deferred service-type warranty revenue are as follows (in thousands):




Balance January 1, 2018	$	19,465
Additional warranty revenue deferred	10,097
Warranty revenue recognized	(8,055		)
Balance March 31, 2018	$	21,507

Other Revenue

Revenue from other sources includes scrap sales, bulk sales to mechanical manufacturers (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. The sale of hulks in our wholesale and self service recycling operations represents one performance obligation, and revenue is recognized based on a price per weight when the customer (processor) collects the scrap. Some adjustments may occur when the customer weighs the scrap at their location, and revenue is adjusted accordingly. We constrain our estimate of consideration to be received to the extent that we believe there will be a significant reversal in revenue.

Revenue by Geographic Area

See Note 15, "Segment and Geographic Information" for information related to our revenue by geographic region.

Variable Consideration

The amount of revenue ultimately received from the customer can vary due to variable consideration which includes returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items. The previous revenue guidance required us to estimate the transaction price using a best estimate approach. Under ASC 606we are required to select the “expected value method” or the “most likely amount” method in order to estimate variable consideration. We utilize both methods in practice depending on the type of variable consideration. In addition, our estimates of variable

consideration are constrained to the extent that a significant reversal in revenue is expected. We recorded a refund liability and return asset for expected returns of $99 million and $53 million, respectively as of March 31, 2018 and a net reserve of $38 million as of December 31, 2017. The refund liability is presented separately on the balance sheet within liabilities while the return asset is presented within prepaid expenses and other current assets. Additionally, we recorded a reserve for our variable consideration of $44 million and $78 million as of March 31, 2018 and December 31, 2017, respectively. Variable consideration consists primarily of discounts, volume rebates, and other customer sales incentives which are recorded in Receivables, net on the Unaudited Condensed Consolidated Balance Sheets. While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions. We consider these programs to be immaterial to our consolidated financial statements.


~~Note 5.~~	~~Restructuring and Acquisition Related Expenses~~

Note 6. Restructuring and Acquisition Related Expenses

Acquisition Related Expenses

Acquisition related expenses, which include external costs such as legal, accounting and advisory fees, totaled $3$2 million and $8$3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, respectively. ~~Our 2017~~Acquisition related expenses for the three months ended March 31, 2018 consisted of external costs for (i) completed acquisitions, (ii) pending acquisitions as of March 31, 2018, including $1 million related to ~~completed acquisitions~~Stahlgruber, and (iii) potential acquisitions that were ~~pending as of September 30, 2017.~~ terminated.

Acquisition related expenses ~~incurred during~~for the three ~~and nine~~ months ended ~~September 30, 2016 totaled $3~~March 31, 2017 consisted of $1 million ~~and $18 million. Of our 2016 expenses, $11 million was~~of costs related to our acquisition of ~~Rhiag, $4~~Andrew Page, with the remaining $2 million ~~was related to our acquisition of PGW, and $3 million was~~ related to other completed acquisitions and acquisitions that were pending as of ~~September 30, 2016.~~March 31, 2017.

Acquisition Integration Plans and Restructuring

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2018, we incurred $2 million ~~and $2 million~~ of restructuring ~~expenses, respectively.~~expenses. Expenses incurred during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 were primarily ~~a result~~related to the integration of our acquisition of Andrew Page. This integration included the closure of duplicate facilities and termination of employees.

During the three months ended March 31, 2017, we incurred less than $1 million of restructuring expenses, primarily related to the ongoing integration activities in our Specialty ~~segment, which was formed in 2014 and subsequently expanded through acquisitions.~~segment. Expenses incurred were primarily related to facility closure and the merger of existing facilities into larger distribution centers.

During the three and nine months ended September 30, 2016, we incurred restructuring expenses of $4 million and $12 million, respectively. These expenses were primarily a result of the integration of our acquisition of Parts Channel into our existing North America 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, the merger of existing facilities into larger distribution centers, and the termination of employees.

We expect to incur additional expenses related to the integration of certain of our acquisitions into our existing operations in ~~2017.~~2018. 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 moving expenses. Future expenses to complete these integration plans are expected to be less than $5$15 million.


~~Note 6.~~	~~Stock-Based Compensation~~

Note 7. 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 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, 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 most of the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant ~~date.~~date; we have an immaterial amount of RSUs containing other performance-based vesting conditions. 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.

The fair value of RSUs that vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 was ~~$27~~$15 million.

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2018:


	Number Outstanding		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) ⁽¹⁾		Number Outstanding		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) ⁽¹⁾
Unvested as of January 1, 2017	1,873,737		$	27.58
Unvested as of January 1, 2018								1,624,390		$	29.94
Granted	743,926		$	31.77				562,380		$	43.35
Vested	(858,470	)	$	26.85				(359,863	)	$	29.00
Forfeited / Canceled	(146,769	)	$	31.15				(18,015	)	$	31.29
Unvested as of September 30, 2017	1,612,424		$	29.58
Expected to vest after September 30, 2017	1,555,391		$	29.56	2.7	$	55,979
Unvested as of March 31, 2018								1,808,892		$	34.28
Expected to vest after March 31, 2018								1,630,647		$	34.26	3.0	$	61,883


~~(1)~~	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 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.

(1)The aggregate intrinsic value of expected to vest RSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units) that would have been received by the holders had all RSUs vested. This amount changes based on the market price of the 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 date they are granted. No options were granted during the ~~nine~~three months ended ~~September 30, 2017. The total grant-date fair value of~~March 31, 2018. No options ~~that~~ vested during the ~~nine~~three months ended ~~September 30, 2017 was $1 million.~~March 31, 2018; all of our outstanding options are fully vested.

The following table summarizes activity related to our stock options under the Equity Incentive Plan for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2018:

Number
Outstanding

Weighted
Average Exercise Price

Weighted Average Remaining Contractual Term
(in years)

Aggregate Intrinsic Value
(in thousands) ⁽¹⁾
Balance as of January 1, 2017 2,623,217
$ 9.19

Exercised (772,157 ) $ 8.61
$ 18,256
Forfeited / Canceled (15,800 ) $ 24.12

Balance as of September 30, 2017 1,835,260
$ 9.31
1.8 $ 48,969
Exercisable as of September 30, 2017 1,835,260
$ 9.31
1.8 $ 48,969
Exercisable as of September 30, 2017 and expected to vest thereafter 1,835,260
$ 9.31
1.8 $ 48,969



	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) ⁽¹⁾
Balance as of January 1, 2018	1,738,073		$	9.20
Exercised	(226,260	)	$	9.97		$	7,123
Canceled	(509	)	$	32.31
Balance as of March 31, 2018	1,511,304		$	9.08	1.4	$	43,631
Exercisable as of March 31, 2018	1,511,304		$	9.08	1.4	$	43,631

~~(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 the last day of the period indicated. This amount changes based on the market price of the Company’s common stock.

(1) The ~~following table summarizes~~aggregate intrinsic value of outstanding and exercisable options represents the ~~components~~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 the last day of the period indicated. This amount changes based on the market price of the Company’s common stock.

Stock-Based Compensation Expense

Total pre-tax stock-based compensation expense for ~~our continuing operations (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
RSUs $ 5,139
$ 5,546
$ 17,576
$ 16,871
Stock options —
46
6
112
Total stock-based compensation expense $ 5,139
$ 5,592
$ 17,582
$ 16,983

RSUs totaled $6 million and $7 million for the three months ended March 31, 2018 and 2017, respectively. As of ~~September 30, 2017,~~March 31, 2018, unrecognized compensation expense related to unvested RSUs is ~~$37~~$51 million. Stock-based compensation expense related to these awards will be different to the extent that forfeitures are realized.


~~Note 7.~~	~~Earnings Per Share~~

Note 8. Earnings Per Share

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016		2018		2017
Income from continuing operations	$	122,381	$	109,844	$	414,104	$	359,825	$	152,763	$	140,809
Denominator for basic earnings per share—Weighted-average shares outstanding	308,909		307,190		308,451		306,690		309,517		308,028
Effect of dilutive securities:
RSUs	485		681		501		686		619		564
Stock options	1,385		2,165		1,543		2,295		1,211		1,708
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	310,779		310,036		310,495		309,671		311,347		310,300
Basic earnings per share from continuing operations	$	0.40	$	0.36	$	1.34	$	1.17	$	0.49	$	0.46
Diluted earnings per share from continuing operations	$	0.39	$	0.35	$	1.33	$	1.16	$	0.49	$	0.45

The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and~~ ~~2016~~ (in thousands):


	Three Months Ended		Nine Months Ended		Three Months Ended
	September 30,		September 30,		March 31,
	2017	2016	2017	2016	2018	2017
Antidilutive securities:
RSUs	—	—	50	76	—	147
Stock options	—	—	51	57	—	78


~~Note 8.~~	~~Accumulated Other Comprehensive Income (Loss)~~

Note 9. 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, 2017															March 31, 2018
	Foreign Currency Translation			Unrealized Gain (Loss) on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries			Accumulated Other Comprehensive (Loss) Income			Foreign Currency Translation			Unrealized (Loss) Gain on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Other Comprehensive Loss from Unconsolidated Subsidiaries			Accumulated Other Comprehensive (Loss) Income
Beginning balance	$	(157,353	)	$	10,324		$	(6,640	)	$	(601	)	$	(154,270	)	$	(71,933	)	$	11,538		$	(8,772	)	$	(1,309	)	$	(70,476	)
Pretax income (loss)	63,769			(15,402		)	—			—			48,367			48,435			(4,501		)	(629		)	—			43,305
Income tax effect	(4,151		)	5,683			—			—			1,532			50			1,053			8			—			1,111
Reclassification of unrealized loss (gain)	—			12,591			(200		)	—			12,391
Reclassification of unrealized loss																—			8,747			—			—			8,747
Reclassification of deferred income taxes	—			(4,648		)	50			—			(4,598		)	—			(2,045		)	—			—			(2,045		)
Other comprehensive (loss) income from unconsolidated subsidiaries	—			—			—			(1,034		)	(1,034		)
Other comprehensive loss from unconsolidated subsidiaries																—			—			—			(605		)	(605		)
Adoption of ASU 2018-02																2,859			2,486			—			—			5,345
Ending balance	$	(97,735	)	$	8,548		$	(6,790	)	$	(1,635	)	$	(97,612	)	$	(20,589	)	$	17,278		$	(9,393	)	$	(1,914	)	$	(14,618	)

Three Months Ended
September 30, 2016
Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges Unrealized (Loss) Gain
on Pension Plans Accumulated
Other
Comprehensive
(Loss) Income
Beginning balance $ (170,007 ) $ (4,114 ) $ (7,381 ) $ (181,502 )
Pretax (loss) income (12,317 ) 3,390
—
(8,927 )
Income tax effect —
(1,087 ) —
(1,087 )
Reclassification of unrealized loss —
1,124
125
1,249
Reclassification of deferred income taxes —
(368 ) (31 ) (399 )
Ending balance $ (182,324 ) $ (1,055 ) $ (7,287 ) $ (190,666 )

Nine Months Ended
September 30, 2017
Foreign
Currency
Translation Unrealized (Loss) Gain
on Cash Flow Hedges
Unrealized
(Loss) Gain
on Pension
Plans
Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive
(Loss) Income
Beginning balance $ (272,529 ) $ 8,091
$ (2,737 ) $ —
$ (267,175 )
Pretax (loss) income 177,434
(44,749 ) 112
—
132,797
Income tax effect (4,151 ) 16,463
(43 ) —
12,269
Reclassification of unrealized loss —
45,551
(921 ) —
44,630
Reclassification of deferred income taxes —
(16,808 ) 235
—
(16,573 )
Disposal of business 1,511
—
(3,436 ) —
(1,925 )
Other comprehensive (loss) income from unconsolidated subsidiaries —
—
—
(1,635 ) (1,635 )
Ending balance $ (97,735 ) $ 8,548
$ (6,790 )
$ (1,635 ) $ (97,612 )


	Nine Months Ended												Three Months Ended
	September 30, 2016												March 31, 2017
	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 Gain (Loss) on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Other Comprehensive Loss from Unconsolidated Subsidiaries			Accumulated Other Comprehensive (Loss) Income
Beginning balance	$	(96,890	)	$	(932	)	$	(7,648	)	$	(105,470	)	$	(272,529	)	$	8,091		$	(2,737	)	$	—		$	(267,175	)
Pretax loss	(85,434		)	(3,332		)	—			(88,766		)
Pretax income													20,068			832			836			—			21,736
Income tax effect	—			1,241			—			1,241			—			(356		)	(318		)	—			(674		)
Reclassification of unrealized loss	—			2,912			482			3,394
Reclassification of unrealized loss (gain)													—			4,257			(171		)	—			4,086
Reclassification of deferred income taxes	—			(944		)	(121		)	(1,065		)	—			(1,570		)	48			—			(1,522		)
Disposal of business, net													1,511			—			(3,436		)	—			(1,925		)
Other comprehensive (loss) income from unconsolidated subsidiaries													—			—			—			(162		)	(162		)
Ending balance	$	(182,324	)	$	(1,055	)	$	(7,287	)	$	(190,666	)	$	(250,950	)	$	11,254		$	(5,778	)	$	(162	)	$	(245,636	)

Net unrealized gains on our interest rate ~~swap contracts~~swaps totaling $2 million and $5net unrealized losses of $1 million were reclassified to ~~interest~~Interest expense, net in our Unaudited Condensed Consolidated Statements of Income during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, respectively. We also reclassified ~~losses~~gains of ~~$15~~$1 million and ~~$50~~$2 million to Interest expense, net related to our cross currency swaps during the three months ended March 31, 2018 and 2017, respectively. Also related to our cross currency swaps, we reclassified losses of $12 million and $5 million to Other income, net in our Unaudited Condensed Consolidated Statements of Income during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017, ~~respectively. During~~respectively; these gains and losses offset the ~~three and nine months ended September 30, 2016, unrealized losses on our interest rate swap contracts totaling $1 million and $3 million, respectively, were reclassified to interest expense.~~impact of the remeasurement of the underlying contracts. The deferred income taxes related to our cash flow hedges were reclassified from Accumulated other comprehensive income (loss) to provision for income taxes.

As a result of the adoption of ASU 2018-02 in the first quarter of 2018, we recorded a $5 million reclassification to increase Accumulated Other Comprehensive (Loss) Income and decrease Retained Earnings. See Note 4, "Financial Statement Information" for further information regarding the adoption of ASU 2018-02.


~~Note 9.~~	~~Long-Term Obligations~~

Note 10. Long-Term Obligations

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


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2018			2017
Senior secured credit agreement:
Term loans payable	$	704,800		$	732,684		$	700,395		$	704,800
Revolving credit facilities	1,041,754			1,358,220			1,172,140			1,283,551
Senior notes	600,000			600,000
Euro notes	590,700			525,850
U.S. Notes (2023)							600,000			600,000
Euro Notes (2024)							616,200			600,150
Receivables securitization facility	98,600			100,000			100,000			100,000
Notes payable through October 2025 at weighted average interest rates of 1.2% and 2.1%, respectively	44,830			11,808
Other long-term debt at weighted average interest rates of 2.4% and 2.4%, respectively	89,416			37,125
Notes payable through October 2025 at weighted average interest rates of 1.4% and 1.4%, respectively							29,413			29,146
Other long-term debt at weighted average interest rates of 1.9% and 1.7%, respectively							120,940			110,633
Total debt	3,170,100			3,365,687			3,339,088			3,428,280
Less: long-term debt issuance costs	(19,063		)	(21,611		)	(23,157		)	(21,476		)
Less: current debt issuance costs	(2,433		)	(2,305		)	(2,866		)	(2,824		)
Total debt, net of issuance costs	3,148,604			3,341,771
Total debt, net of debt issuance costs							3,313,065			3,403,980
Less: current maturities, net of debt issuance costs	(126,887		)	(66,109		)	(142,277		)	(126,360		)
Long term debt, net of debt issuance costs	$	3,021,717		$	3,275,662		$	3,170,788		$	3,277,620

Senior Secured Credit Agreement

On ~~January 29, 2016,~~December 1, 2017, LKQ Corporation, LKQ Delaware LLP, and certain other subsidiaries (collectively, the "Borrowers") entered into Amendment No. 2 to the Fourth Amended and Restated Credit Agreement ("Credit Agreement"), which amended the ~~Company’s Third~~Fourth Amended and Restated Credit Agreement dated January 29, 2016 by modifying certain terms to (1) extend the maturity date by approximately two years to January 29, ~~2021;~~2023; (2) increase the total availability under the ~~credit agreement from $2.3 billion to $3.2 billion (composed of $2.5 billion in the~~ revolving credit facility's multicurrency ~~component; and $750 million of term loans, which consist of term loans of approximately $500 million and €230 million);~~component from $2.45 billion to $2.75 billion; (3) increase ~~our~~the permitted net leverage ratio thresholds, including a temporary step-up in the allowable net leverage ratio in the case of permitted acquisitions; (4) modify the applicable margins and fees in the pricing grid; (5) increase the ability of LKQ and its subsidiaries to incur additional indebtedness; and ~~(4)~~(6) make other immaterial or clarifying modifications and ~~amendments to~~amendments. The increase in the ~~terms~~revolving credit facility's multicurrency component 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$300 million will be used for general corporate purposes.

On December 14, 2016, LKQ Corporation entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement under which the €230 million term loan was prepaid in full using proceeds from borrowings on the multicurrency revolving credit facility. Simultaneously, LKQ Corporation borrowed incremental U.S. dollar ("USD") term loans under the Credit Agreement, which were used to repay outstanding borrowings on the USD revolving credit facility. LKQ Corporation borrowed additional USD amounts on the revolving credit facility and entered into a cross currency swap transaction to exchange the borrowed USD for euro and transferred these amounts to LKQ Netherlands B.V. as an intercompany loan, which LKQ Netherlands B.V. used to repay the multicurrency revolving credit facility borrowings. These transactions had the effect of replacing the euro term loan with a USD term loan. Refer to Note 10, "Derivative Instruments and Hedging Activities" for additional information related to our cross currency swaps.

Amounts under the revolving credit facility are due and payable upon maturity of the ~~Fourth Amended and Restated~~ Credit Agreement on January 29, ~~2021. Amounts under the initial and additional term~~2023. Term loan borrowings, ~~were~~which totaled $700 million as of March 31, 2018, are due and payable in quarterly installments equal to ~~0.625%~~$4 million on the last day of ~~the original principal amount~~each fiscal quarter ending on ~~each of June 30, September 30, and December 31, 2016, and are due and payable in quarterly installments thereafter equal to 1.25% of the original principal amount beginning on~~or after March 31, ~~2017,~~2018 and prior to March 31, 2019 and $9 million on the last day of each fiscal quarter ending on or after March 31, 2019, with the remaining balance due and payable on ~~the maturity date of the Fourth Amended and Restated Credit Agreement.~~January 29, 2023.

We are 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 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 ~~10,~~11, "Derivative Instruments and Hedging Activities," the weighted average interest ~~rate~~rates on borrowings outstanding under the Credit Agreement at ~~September 30, 2017~~both March 31, 2018 and December 31, ~~2016 was 2.0% and 2.0%, respectively.~~2017 were 2.2%. 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 0.025% and 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, and a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.

Of the total borrowings outstanding under the Credit Agreement, ~~$37~~$22 million ~~was~~and $18 million were classified as current maturities at ~~both September 30, 2017~~March 31, 2018 and December 31, ~~2016.~~2017. As of ~~September 30, 2017,~~March 31, 2018, there were letters of credit outstanding in the aggregate amount of ~~$71~~$65 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, 2017~~March 31, 2018 was ~~$1.3~~$1.5 billion.

Related to the execution of Amendment No. 2 to the Fourth Amended and Restated Credit Agreement in ~~January 2016,~~December 2017, we incurred $6$5 million of fees, the majority of which ~~$5 million~~ were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement. The remaining $1 million of fees, together with $2 million of capitalized debt issuance costs related to our Third Amended and Restated Credit Agreement, were expensed during the year ended December 31, 2016 as a loss on debt extinguishment.

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

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

The U.S. Notes (2023) 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 U.S. Notes (2023) is payable in arrears on May 15 and November 15 of each year. The ~~first interest payment was made on November 15, 2013. The~~ U.S. Notes (2023) are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The U.S. Notes (2023) and the related guarantees are, respectively, LKQ Corporation's and each Guarantor's senior unsecured obligations and are subordinated to all of the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the U.S. Notes (2023) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the U.S. Notes (2023) to the extent of the assets of those subsidiaries.

~~Repayment of Rhiag Acquired Debt and Debt Related Liabilities~~

On March 24, 2016, LKQ Netherlands B.V., a wholly-owned subsidiary of LKQ Corporation, 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) $520 million (€465 million) for the principal of Rhiag senior note debt assumed with the acquisition, (ii) accrued interest of $8 million (€7 million) on the notes, (iii) the call premium of $24 million (€21 million) associated with early redemption of the notes and (iv) $5 million (€4 million) to terminate Rhiag’s outstanding interest rate swap related to the floating portion of the notes. The call premium is recorded as a loss on debt extinguishment in the Unaudited Condensed Consolidated Statements of Income.

Euro Notes (2024)

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

~~the Issuer,~~ LKQ Italia, LKQ Corporation and certain of our subsidiaries (the “Euro Notes (2024) Subsidiaries”), the trustee, and the paying agent, transfer agent, and registrar.

The Euro Notes (2024) bear interest at a rate of 3.875% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the Euro Notes (2024) is payable in arrears on April 1 and October 1 of each ~~year, beginning on October 1, 2016.~~year. The Euro Notes (2024) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2024) Subsidiaries (the "Euro Notes (2024) Guarantors").

The Euro Notes (2024) and the related guarantees are, respectively, ~~the Issuer’s~~LKQ Italia’s and each Euro Notes (2024) Guarantor’s senior unsecured obligations and are subordinated to all of ~~the Issuer's~~LKQ Italia's and the Euro Notes (2024) Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Euro Notes (2024) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2024) to the extent of the assets of those subsidiaries. The Euro Notes (2024) have been listed on the ExtraMOT, Professional Segment of the Borsa Italia S.p.A. securities exchange and the Global Exchange Market of the Irish Stock Exchange.

~~Related~~Euro Notes (2026/28) - Subsequent Event

On April 9, 2018, LKQ European Holdings B.V. ("LKQ Euro Holdings"), a wholly-owned subsidiary of LKQ Corporation, completed an offering of €1.0 billion aggregate principal amount of senior notes. The offering consisted of €750 million senior notes due 2026 (the "2026 notes") and €250 million senior notes due 2028 (the "2028 notes" and, together with the 2026 notes, the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933. The proceeds from the offering, together with borrowings under our senior secured credit facility, will be used to (i) finance a portion of the consideration payable for the pending Stahlgruber acquisition, (ii) for general corporate purposes and (iii) to pay related fees and expenses, including the refinancing of net financial debt. The Euro Notes (2026/28) are governed by the Indenture dated as of April 9, 2018 (the “Euro Notes (2026/28) Indenture”) among LKQ Euro Holdings, the Company and certain of the Company’s subsidiaries (the “Euro Notes (2026/28) Subsidiaries”), the trustee, paying agent, transfer agent, and registrar.

The 2026 notes and 2028 notes bear interest at a rate of 3.625% and 4.125%, respectively, per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the Euro Notes (2026/28) is payable in arrears on April 1 and October 1 of each year, beginning on October 1, 2018. The Euro Notes (2026/28) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes (2026/28) Subsidiaries (the "Euro Notes (2026/28) Guarantors").

The Euro Notes (2026/28) and the related guarantees are, respectively, LKQ Euro Holdings' and each Euro Notes (2026/28) Guarantor’s senior unsecured obligations and will be subordinated to all of LKQ Euro Holdings' and the Euro Notes (2026/28) Guarantors’ existing and future secured debt to the ~~execution~~extent of the assets securing that secured debt. In addition, the Euro Notes (2026/28) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2026/28) to the extent of the assets of those subsidiaries. We have agreed to use commercially reasonable efforts to cause the Euro Notes (2026/28) to be listed on the Global Exchange Market of Euronext Dublin as promptly as practicable after the issue date of the Euro Notes (2026/28) (and in ~~April 2016, we incurred $10 million of fees which were capitalized as an offset~~any event prior to ~~Long-Term Obligations and are amortized over~~May 24, 2018, the ~~term~~45th day following the issue date of the ~~offering.~~notes). In addition to other conventional redemption provisions, the Euro Notes (2026/28) are subject to a special mandatory redemption in the event that on or prior to October 6, 2018, (a) the Stahlgruber acquisition is not consummated or (b) the purchase and sale agreement governing the Stahlgruber acquisition is terminated. The special mandatory redemption price will be equal to 100% of the initial issue price of the notes, plus accrued and unpaid interest from the date of initial issuance (or, if after the October 1, 2018 interest payment date, from October 1, 2018) up to, but excluding, the special mandatory redemption date.

Receivables Securitization Facility

On November 29, 2016, we amended the terms of ~~the~~our receivables securitization facility with The Bank of Tokyo-Mitsubishi UFJ, LTD. ("BTMU") to: (i) extend the term of the facility to November 8, 2019; (ii) increase the maximum amount available to $100 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~~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.~~Purchasers. As of ~~September 30, 2017~~both March 31, 2018 and December 31, ~~2016, $132~~2017, $144 million ~~and $140 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~~The commercial paper ~~rates will be~~rate is 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, 2017,~~March 31, 2018, the interest rate under the receivables facility was based on commercial paper rates and was ~~2.1%~~2.7%. The outstanding balances of ~~$99 million and~~ $100 million as of ~~September 30, 2017~~both March 31, 2018 and December 31, ~~2016, respectively,~~2017, 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 10.~~	~~Derivative Instruments and Hedging Activities~~

Note 11. Derivative Instruments and Hedging Activities

We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices. Under our current policies, we 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

We hold interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows. Under the terms of the interest rate swap agreements, we 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 fair value of the 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 changes in the fair value of the interest rate swap agreements is reported in interest expense. Our interest rate swap contracts have maturity dates ranging from January to June 2021. As of March 31, 2018, we held interest rate swap contracts representing $590 million of U.S. dollar-denominated debt.

From time to time, we may hold foreign currency forward contracts related to certain foreign currency denominated intercompany transactions, with the objective of minimizing the impact of fluctuating exchange rates on these future cash flows. Under the terms of the foreign currency forward contracts, we will sell the foreign currency in exchange for U.S. dollars at a fixed rate on the maturity dates of the contracts. 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)~~net when the underlying transaction has an impact on earnings.

In 2016, we entered into three cross currency swap agreements for a total notional amount of $422 million (€400 million). The notional amount steps down by €15 million annually through 2020 with the remainder maturing in January 2021. These cross currency swaps contain an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively convert variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. The swaps are intended to minimize the impact of fluctuating exchange rates and interest rates on the cash flows resulting from the related intercompany financing arrangements. The effective portion of the changes in the fair value of the derivative instruments is recorded in Accumulated Other Comprehensive Income (Loss) and is reclassified to interest expense, ~~and other income (expense)~~net when the underlying transactions have an impact on earnings.

The following table summarizes the notional amounts and fair values of our designated cash flow hedges as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 (in thousands):


		Notional Amount				Fair Value at September 30, 2017 (USD)				Fair Value at December 31, 2016 (USD)					Notional Amount				Fair Value at March 31, 2018 (USD)				Fair Value at December 31, 2017 (USD)
		September 30, 2017		December 31, 2016		Other Assets		Other Noncurrent Liabilities		Other Assets		Other Noncurrent Liabilities			March 31, 2018		December 31, 2017		Other Assets		Other Noncurrent Liabilities		Other Assets		Other Noncurrent Liabilities
Interest rate swap agreements	Interest rate swap agreements													Interest rate swap agreements
USD denominated		$	590,000	$	590,000	$	15,054	$	—	$	16,421	$	—		$	590,000	$	590,000	$	24,253	$	—	$	19,102	$	—
Cross currency swap agreements	Cross currency swap agreements													Cross currency swap agreements
USD/euro		$	410,511	$	422,408	2,184		52,068		1,486		3,128			$	402,580	$	406,546	9,208		77,812		5,504		61,492
Total cash flow hedges	Total cash flow hedges					$	17,238	$	52,068	$	17,907	$	3,128	Total cash flow hedges					$	33,461	$	77,812	$	24,606	$	61,492

While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis in our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would ~~not have~~result in a ~~material effect~~decrease to Other Assets and Other Noncurrent Liabilities on our Unaudited Condensed Consolidated Balance Sheets of $17 million and $12 million at ~~September 30, 2017~~ or March 31, 2018 and December 31, ~~2016~~.2017, respectively.

The activity related to our cash flow hedges is included in Note 8,9, "Accumulated Other Comprehensive Income (Loss)." Ineffectiveness related to our cash flow hedges was immaterial to our results of operations during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 and ~~2016.~~2017. 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, 2017~~,March 31, 2018, we estimate that less than $1 million of derivative ~~losses~~gains (net of tax) included in Accumulated Other Comprehensive Income (Loss) will be reclassified into our Unaudited Condensed 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. 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, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, along with the effect on our results of operations during ~~each of~~ the three months ended March 31, 2018 and ~~nine month periods ended September 30,~~ 2017, ~~and 2016,~~ were immaterial.


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

Note 12. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value our financial assets and liabilities, and during the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2018, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The tiers in the fair value hierarchy include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs 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, 2017~~March 31, 2018 and December 31, ~~2016~~2017 (in thousands):

Balance as of September 30, 2017 Fair Value Measurements as of September 30, 2017
Level 1 Level 2 Level 3
Assets:
Cash surrender value of life insurance $ 44,134
$ —
$ 44,134
$ —
Interest rate swaps 17,238
—
17,238
—
Total Assets $ 61,372
$ —
$ 61,372
$ —
Liabilities:
Contingent consideration liabilities $ 6,903
$ —
$ —
$ 6,903
Deferred compensation liabilities 45,007
—
45,007
—
Foreign currency forward contracts 52,068
—
52,068
—
Total Liabilities $ 103,978
$ —
$ 97,075
$ 6,903


	Balance as of December 31, 2016		Fair Value Measurements as of December 31, 2016						Balance as of March 31, 2018		Fair Value Measurements as of March 31, 2018
	Balance as of December 31, 2016		Level 1		Level 2		Level 3		Balance as of March 31, 2018		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	36,131	$	—	$	36,131	$	—	$	46,196	$	—	$	46,196	$	—
Interest rate swaps	17,907		—		17,907		—		24,253		—		24,253		—
Cross currency swap agreements									9,208		—		9,208		—
Total Assets	$	54,038	$	—	$	54,038	$	—	$	79,657	$	—	$	79,657	$	—
Liabilities:
Contingent consideration liabilities	$	3,162	$	—	$	—	$	3,162	$	2,700	$	—	$	—	$	2,700
Deferred compensation liabilities	36,865		—		36,865		—		50,676		—		50,676		—
Foreign currency forward contracts	3,128		—		3,128		—
Cross currency swap agreements									77,812		—		77,812		—
Total Liabilities	$	43,155	$	—	$	39,993	$	3,162	$	131,188	$	—	$	128,488	$	2,700



	Balance as of December 31, 2017		Fair Value Measurements as of December 31, 2017
	Balance as of December 31, 2017		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	45,984	$	—	$	45,984	$	—
Interest rate swaps	19,102		—		19,102		—
Cross currency swap agreements	5,504		—		5,504		—
Total Assets	$	70,590	$	—	$	70,590	$	—
Liabilities:
Contingent consideration liabilities	$	2,636	$	—	$	—	$	2,636
Deferred compensation liabilities	47,199		—		47,199		—
Cross currency swap agreements	61,492		—		61,492		—
Total Liabilities	$	111,327	$	—	$	108,691	$	2,636

The cash surrender value of life insurance is included in Other ~~Assets~~assets on our Unaudited Condensed Consolidated Balance Sheets. The current portion of deferred compensation is included in Accrued payroll-related liabilities and the current portion of contingent consideration liabilities is included in Other current liabilities on our Unaudited Condensed Consolidated Balance Sheets; the noncurrent portion of these amounts is included in Other ~~Noncurrent Liabilities~~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 and ~~foreign~~cross currency ~~forward contracts~~swap agreements is presented in Note ~~10,~~11, "Derivative Instruments and Hedging ~~Activities~~.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 and current and forward foreign exchange rates.

Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired

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

Financial Assets and Liabilities Not Measured at Fair Value

Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. Based on market conditions as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~,2017, the fair value of our credit agreement borrowings reasonably approximated the

carrying ~~value~~values of ~~$1.7~~$1.9 billion and ~~$2.1~~$2.0 billion, respectively. In addition, based on market conditions, the fair values of the outstanding borrowings under the receivables facility reasonably approximated the carrying values of ~~$99 million and~~ $100 million at ~~September 30, 2017~~ ~~and~~ ~~December~~both March 31, ~~2016, respectively. As of~~ ~~September 30, 2017~~2018 and December 31, ~~2016,~~2017. As of March 31, 2018 and December 31, 2017, the fair values of the U.S. Notes (2023) were approximately ~~$620~~$602 million and ~~$599~~$615 million, respectively, compared to a carrying value of ~~$600 million~~.$600 million. As of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the fair values of the Euro Notes (2024) were approximately ~~$650~~$652 million and ~~$561~~$658 million compared to carrying values of ~~$591~~$616 million and ~~$526~~$600 million, respectively.

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, 2017~~March 31, 2018 to assume these obligations. The fair value of our U.S. Notes (2023) 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. The fair value of our Euro Notes (2024) is determined based upon observable market inputs including quoted market prices in a market that is not active, and therefore is classified as Level 2 within the fair value hierarchy.


~~Note 12.~~	~~Commitments and Contingencies~~

Note 13. Commitments and Contingencies

Operating Leases

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

In the second quarter of 2017, we entered into a lease for office space to be constructed for our field support center in Nashville, Tennessee. The commencement date is scheduled for the fourth quarter of 2018, with a lease term of 17 years and the option to renew and extend the lease for three consecutive renewal terms of five years each. Rent will escalate annually by 1.5% over the prior year's rent. Under the lease, we can exercise an early purchase option after the first year of the lease.

The future minimum lease commitments under these leases at ~~September 30, 2017~~March 31, 2018 are as follows (in thousands):


Three months ending December 31, 2017	$	61,817
Nine months ending December 31, 2018			$	186,038
Years ending December 31:
2018	221,493
2019	179,078		207,724
2020	143,199		171,530
2021	108,044		132,755
2022	85,547		107,405
2023			91,007
Thereafter	539,398		532,760
Future Minimum Lease Payments	$	1,338,576	$	1,429,219

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 13.~~	~~Income Taxes~~

Note 14. Income Taxes

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

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

Our effective income tax rate for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 was ~~33.5%~~24.7%, compared to ~~32.5%~~33.9% for the comparable prior year period. The ~~increase~~decrease was primarily attributable to the reduction of the U.S. federal statutory income tax rate from 35% to 21% as a result of the enactment of the Tax Act in ~~our~~December 2017. The effective tax rate ~~primarily reflected~~also reflects the impact of favorable discrete items of ~~$7 million and $11~~approximately $3 million for each of the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016, respectively,~~ for excess tax benefits from stock-based ~~payments; the year~~payments. The quarter over ~~year decrease~~quarter change in ~~the tax benefits resulted in an increase to~~these amounts increased the effective tax rate by 0.2% compared to the prior year.

The Tax Act introduced broad and complex changes to the U.S. tax code, including the aforementioned reduction in the U.S. corporate tax rate, a one-time transition tax on the historical unremitted earnings of foreign subsidiaries, and a new minimum tax on foreign earnings (Global Intangible Low-Taxed Income, “GILTI”). On December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the related accounting for provisional amounts under ASC 740, "Accounting for Income Taxes."

As a result of the Tax Act, in 2017, we recognized a provisional tax liability of $51 million related to the one-time transition tax on historical foreign earnings, payable over a period of eight years. We also recorded a provisional decrease to net U.S. deferred tax liabilities of $73 million. For a description of the impact of the Tax Act for the year ended December 31, 2017, refer to Note 13, "Income Taxes" of our financial statements as of and for the year ended December 31, 2017 included in the 2017 Form 10-K. During the three-month period ended March 31, 2018, there were no changes made to the provisional amounts recognized in 2017. We continue to gather the information necessary to finalize those provisional amounts. Our estimates could be affected as we gain a more thorough understanding of the Tax Act from additional guidance issued by the U.S. tax authorities. Changes to the provisional estimates of the tax effect of the Tax Act will be recorded as a discrete item in the interim period the amounts are considered complete.

The Company has included the estimated 2018 impact of the GILTI Tax as a period cost and included it as part of the estimated annual effective tax rate. The 2018 estimated annual effective tax rate also includes the impact of all other U.S. tax reform provisions that were effective on January 1, 2018. These estimates are subject to change as additional guidance on the tax reform provisions is issued.


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

Note 15. Segment and Geographic Information

We have four operating segments: Wholesale – North America, Europe, Specialty and Self Service. Our Wholesale – North America and Self Service operating segments are aggregated into one reportable segment, North America, because they possess similar economic characteristics and have common products and services, customers, and methods of distribution. 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 ⁽¹⁾
Europe
Specialty ⁽¹⁾
Eliminations Consolidated
Three Months Ended September 30, 2017
Revenue:
Third Party $ 1,181,756
$ 954,522
$ 329,522
$ —
$ 2,465,800
Intersegment 187
—
1,072
(1,259 ) —
Total segment revenue $ 1,181,943
$ 954,522
$ 330,594
$ (1,259 ) $ 2,465,800
Segment EBITDA $ 152,627
$ 79,294
$ 35,114
$ —
$ 267,035
Depreciation and amortization⁽²⁾
22,104
32,326
5,472
—
59,902
Three Months Ended September 30, 2016
Revenue:
Third Party $ 1,118,421
$ 770,219
$ 318,703
$ —
$ 2,207,343
Intersegment 200
—
969
(1,169 ) —
Total segment revenue $ 1,118,621
$ 770,219
$ 319,672
$ (1,169 ) $ 2,207,343
Segment EBITDA $ 139,738
$ 72,586
$ 34,115
$ —
$ 246,439
Depreciation and amortization⁽²⁾
21,499
27,792
5,745
—
55,036


	North America ⁽¹⁾		Europe		Specialty ⁽¹⁾		Eliminations			Consolidated		North America		Europe		Specialty		Eliminations			Consolidated
Nine Months Ended September 30, 2017
Three Months Ended March 31, 2018
Revenue:
Third Party	$	3,596,108	$	2,665,170	$	1,005,776	$	—		$	7,267,054	$	1,329,660	$	1,040,430	$	350,674	$	—		$	2,720,764
Intersegment	589		—		3,222		(3,811		)	—		183		—		1,118		(1,301		)	—
Total segment revenue	$	3,596,697	$	2,665,170	$	1,008,998	$	(3,811	)	$	7,267,054	$	1,329,843	$	1,040,430	$	351,792	$	(1,301	)	$	2,720,764
Segment EBITDA	$	502,494	$	241,537	$	119,133	$	—		$	863,164	$	177,713	$	75,534	$	41,969	$	—		$	295,216
Depreciation and amortization⁽²⁾⁽¹⁾	64,305		85,809		16,394		—			166,508		21,228		32,757		7,081		—			61,066
Nine Months Ended September 30, 2016
Three Months Ended March 31, 2017
Revenue:
Third Party	$	3,336,240	$	2,141,186	$	956,199	$	—		$	6,433,625	$	1,208,047	$	820,897	$	313,899	$	—		$	2,342,843
Intersegment	607		—		3,014		(3,621		)	—		193		—		1,035		(1,228		)	—
Total segment revenue	$	3,336,847	$	2,141,186	$	959,213	$	(3,621	)	$	6,433,625	$	1,208,240	$	820,897	$	314,934	$	(1,228	)	$	2,342,843
Segment EBITDA	$	451,504	$	220,066	$	111,083	$	—		$	782,653	$	176,135	$	78,694	$	35,441	$	—		$	290,270
Depreciation and amortization⁽²⁾⁽¹⁾	59,174		66,380		16,616		—			142,170		20,378		24,751		5,475		—			50,604


(1)	In the first quarter of 2017, we realigned a portion of our North America operations under our Specialty segment. Prior year results have been recast to reflect the shift in reporting structure in order to present segment results on a comparable basis.


~~(2)~~	Amounts presented include depreciation and amortization expense recorded within cost of goods sold.

related gains and losses and equity in earnings ~~(loss)~~ of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding noncontrolling interest, discontinued operations, depreciation, amortization, interest ~~(which includes loss on debt extinguishment)~~ and income tax expense.

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


	Three Months Ended				Nine Months Ended						Three Months Ended
	September 30,				September 30,						March 31,
	2017		2016		2017			2016			2018			2017
Net income	$	122,381	$	122,688	$	409,573		$	377,644		$	152,763		$	136,278
Less: net loss attributable to noncontrolling interest											(197		)	—
Net income attributable to LKQ stockholders											152,960			136,278
Subtract:
Income (loss) from discontinued operations, net of tax	—		12,844		(4,531		)	17,819
Income from continuing operations	122,381		109,844		414,104			359,825
Net loss from discontinued operations											—			(4,531		)
Net income from continuing operations attributable to LKQ stockholders											152,960			140,809
Add:
Depreciation and amortization	56,877		52,979		159,178			137,168			56,458			48,656
Depreciation and amortization - cost of goods sold	3,025		2,057		7,330			5,002			4,608			1,948
Interest expense, net	25,222		24,761		73,806			64,002			28,515			23,988
Loss on debt extinguishment	—		—		—			26,650
Provision for income taxes	58,189		49,835		206,206			173,225			49,584			72,155
EBITDA	265,694		239,476		860,624			765,872			292,125			287,556
Subtract:
Equity in earnings (loss) of unconsolidated subsidiaries	2,673		29		3,878			(519		)
Gains on foreign exchange contracts - acquisition related ⁽¹⁾	—		—		—			18,342
Gains on bargain purchases ⁽²⁾	913		—		3,990			—
Equity in earnings of unconsolidated subsidiaries											1,412			214
Add:
Restructuring and acquisition related expenses ⁽³⁾	4,922		6,923		10,371			30,814
Inventory step-up adjustment - acquisition related ⁽⁴⁾	—		12		—			3,614
Restructuring and acquisition related expenses ⁽¹⁾											4,054			2,928
Inventory step-up adjustment - acquisition related											403			—
Change in fair value of contingent consideration liabilities	5		57		37			176			46			—
Segment EBITDA	$	267,035	$	246,439	$	863,164		$	782,653		$	295,216		$	290,270


(1)	~~Reflects gains on foreign currency forwards used to fix the euro purchase price of Rhiag.~~ See Note ~~2, "Business Combinations," for further information.~~


~~(2)~~	~~Reflects the gains on bargain purchases related to our acquisitions of Andrew Page and a wholesale business in Europe. See Note 2, "Business Combinations," for further information.~~


~~(3)~~	~~See Note 5,~~6, "Restructuring and Acquisition Related Expenses," for further information.


~~(4)~~	~~Reflects the impact on Cost of Goods Sold of the step-up acquisition adjustment to record PGW inventory at its fair value.~~

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,
	2017		2016		2017		2016		2018		2017
Capital Expenditures
North America	$	31,021	$	24,420	$	69,934	$	68,271	$	29,662	$	16,760
Europe	12,119		16,554		55,253		57,105		28,815		20,458
Specialty	852		582		6,752		11,235		3,712		3,582
Discontinued operations	—		8,871		3,598		16,135		—		3,598
Total capital expenditures	$	43,992	$	50,427	$	135,537	$	152,746	$	62,189	$	44,398

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


	September 30,		December 31,		March 31,		December 31,
	2017		2016 ⁽¹⁾		2018		2017
Receivables, net
North America	$	380,463	$	351,681	$	448,973	$	379,666
Europe	551,862		443,281		622,592		555,372
Specialty	89,403		65,587		140,223		92,068
Total receivables, net(1)	1,021,728		860,549		1,211,788		1,027,106
Inventories
North America	1,021,386		915,244		1,053,322		1,076,393
Europe	929,006		718,729		998,617		964,068
Specialty	285,984		301,264		349,370		340,322
Total inventories	2,236,376		1,935,237		2,401,309		2,380,783
Property and Equipment, net
Property, Plant and Equipment, net
North America	524,738		505,925		542,453		537,286
Europe	286,364		247,910		304,048		293,539
Specialty	56,870		57,741		83,255		82,264
Total property and equipment, net	867,972		811,576
Total property, plant and equipment, net					929,756		913,089
Equity Method Investments
North America	336		336		336		336
Europe	198,910		183,131		207,874		208,068
Total equity method investments	199,246		183,467		208,210		208,404
Other unallocated assets	4,538,616		4,512,370		4,885,115		4,837,490
Total assets	$	8,863,938	$	8,303,199	$	9,636,178	$	9,366,872


(1)	InRefer to Note 4, "Financial Statement Information," for the ~~first quarter~~increase in total receivables, net compared to December 31, 2017 as a result of ~~2017, we realigned a portion~~the adoption of ~~our North America operations under our Specialty segment. Prior year amounts have been recast to reflect the shift in reporting structure.~~ASC 606.

We report net ~~receivables, inventories,~~receivables; inventories; net property, plant and ~~equipment,~~equipment; and equity method investments 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, other intangibles ~~assets of discontinued operations~~ and 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,~~ Italy, Czech Republic, ~~Switzerland,~~ Poland, ~~Hungary, Romania, Ukraine, Bulgaria,~~ Slovakia ~~Spain, Sweden, Norway~~ and ~~Germany.~~other European countries. 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, 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,
	2017		2016		2017		2016		2018		2017
Revenue
United States	$	1,395,495	$	1,336,851	$	4,268,600	$	3,997,525	$	1,560,027	$	1,417,040
United Kingdom	399,155		336,168		1,171,829		1,044,110		430,992		382,652
Other countries	671,150		534,324		1,826,625		1,391,990		729,745		543,151
Total revenue	$	2,465,800	$	2,207,343	$	7,267,054	$	6,433,625	$	2,720,764	$	2,342,843

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

September 30, December 31,
2017 2016
Long-lived Assets
United States $ 547,536
$ 531,425
United Kingdom 178,583
159,689
Other countries 141,853
120,462
Total long-lived assets $ 867,972
$ 811,576

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

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Aftermarket, other new and refurbished products $ 1,875,369
$ 1,670,960
$ 5,496,004
$ 4,809,775
Recycled, remanufactured and related products and services 458,388
424,876
1,376,577
1,290,488
Other 132,043
111,507
394,473
333,362
Total revenue $ 2,465,800
$ 2,207,343
$ 7,267,054
$ 6,433,625

Our North America reportable segment generates revenue from all of our product categories, while our Europe 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.



	March 31,		December 31,
	2018		2017
Long-lived Assets
United States	$	589,848	$	583,236
United Kingdom	186,347		178,021
Other countries	153,561		151,832
Total long-lived assets	$	929,756	$	913,089


~~Note 15.~~	~~Condensed Consolidating Financial Information~~

Note 16. Condensed Consolidating Financial Information

LKQ Corporation (the "Parent") issued, and the Guarantors have fully and unconditionally guaranteed, jointly and severally, the U.S. Notes (2023) 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 U.S. ~~Notes;~~Notes (2023); (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 U.S. Notes (2023) 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 U.S. ~~Notes;~~Notes (2023); (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 U.S. ~~Notes;~~Notes (2023); and (iv) upon legal defeasance, covenant defeasance or satisfaction and discharge of the U.S. Notes (2023) Indenture, as defined in the U.S. Notes (2023) 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 our 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 U.S. ~~Notes.~~Notes (2023). 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 our 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 Statements of Income (In thousands)

	For the Three Months Ended March 31, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	1,577,595		$	1,180,242		$	(37,073	)	$	2,720,764
Cost of goods sold	—			945,915			757,951			(37,073		)	1,666,793
Gross margin	—			631,680			422,291			—			1,053,971
Selling, general and administrative expenses	9,130			426,797			330,964			—			766,891
Restructuring and acquisition related expenses	—			330			3,724			—			4,054
Depreciation and amortization	29			24,338			32,091			—			56,458
Operating (loss) income	(9,159		)	180,215			55,512			—			226,568
Other expense (income):
Interest expense, net	18,008			212			10,295			—			28,515
Intercompany interest (income) expense, net	(15,400		)	9,680			5,720			—			—
Other (income) expense, net	(1,015		)	(5,882		)	4,015			—			(2,882		)
Total other expense, net	1,593			4,010			20,030			—			25,633
(Loss) income before (benefit) provision for income taxes	(10,752		)	176,205			35,482			—			200,935
(Benefit) provision for income taxes	(3,904		)	45,877			7,611			—			49,584
Equity in earnings of unconsolidated subsidiaries	—			—			1,412			—			1,412
Equity in earnings (loss) of subsidiaries	159,808			5,110			—			(164,918		)	—
Net income	152,960			135,438			29,283			(164,918		)	152,763
Less: net loss attributable to noncontrolling interest	—			—			(197		)	—			(197		)
Net income attributable to LKQ stockholders	$	152,960		$	135,438		$	29,480		$	(164,918	)	$	152,960

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, 2017															For the Three Months Ended March 31, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	1,433,742		$	1,069,682		$	(37,624	)	$	2,465,800		$	—		$	1,453,516		$	929,971		$	(40,644	)	$	2,342,843
Cost of goods sold	—			861,078			685,470			(37,624		)	1,508,924			—			863,375			590,019			(40,644		)	1,412,750
Gross margin	—			572,664			384,212			—			956,876			—			590,141			339,952			—			930,093
Facility and warehouse expenses	—			132,179			70,335			—			202,514
Distribution expenses	—			125,120			77,709			—			202,829
Selling, general and administrative expenses	7,861			137,627			145,147			—			290,635			9,183			385,528			248,106			—			642,817
Restructuring and acquisition related expenses	—			1,473			3,449			—			4,922			—			1,883			1,045			—			2,928
Depreciation and amortization	29			25,005			31,843			—			56,877			30			23,481			25,145			—			48,656
Operating (loss) income	(7,890		)	151,260			55,729			—			199,099			(9,213		)	179,249			65,656			—			235,692
Other expense (income):
Interest expense, net	16,232			57			8,933			—			25,222			16,180			198			7,610			—			23,988
Intercompany interest (income) expense, net	(2,389		)	(2,814		)	5,203			—			—			(5,672		)	1,019			4,653			—			—
Gains on bargain purchases	—			—			(913		)	—			(913		)
Other expense (income), net	32			(4,011		)	872			—			(3,107		)	291			(169		)	(1,168		)	—			(1,046		)
Total other expense (income), net	13,875			(6,768		)	14,095			—			21,202
Total other expense, net																10,799			1,048			11,095			—			22,942
(Loss) income from continuing operations before (benefit) provision for income taxes	(21,765		)	158,028			41,634			—			177,897			(20,012		)	178,201			54,561			—			212,750
(Benefit) provision for income taxes	(8,436		)	56,920			9,705			—			58,189			(7,437		)	70,038			9,554			—			72,155
Equity in earnings of unconsolidated subsidiaries	—			—			2,673			—			2,673
Equity in (loss) earnings of unconsolidated subsidiaries																(182		)	—			396			—			214
Equity in earnings of subsidiaries	135,710			6,674			—			(142,384		)	—			153,566			4,813			—			(158,379		)	—
Income from continuing operations																140,809			112,976			45,403			(158,379		)	140,809
Net (loss) income from discontinued operations																(4,531		)	(4,531		)	2,050			2,481			(4,531		)
Net income	$	122,381		$	107,782		$	34,602		$	(142,384	)	$	122,381		$	136,278		$	108,445		$	47,453		$	(155,898	)	$	136,278

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

	For the Three Months Ended March 31, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	152,960		$	135,438		$	29,283		$	(164,918	)	$	152,763
Less: net loss attributable to noncontrolling interest	—			—			(197		)	—			(197		)
Net income attributable to LKQ stockholders	152,960			135,438			29,480			(164,918		)	152,960

Other comprehensive income (loss):
Foreign currency translation, net of tax	48,485			(2,183		)	49,055			(46,872		)	48,485
Net change in unrealized gains/losses on cash flow hedges, net of tax	3,254			—			—			—			3,254
Net change in unrealized gains/losses on pension plans, net of tax	(621		)	(621		)	—			621			(621		)
Net change in other comprehensive loss from unconsolidated subsidiaries	(605		)	—			(605		)	605			(605		)
Other comprehensive income (loss)	50,513			(2,804		)	48,450			(45,646		)	50,513

Comprehensive income	203,473			132,634			77,733			(210,564		)	203,276
Less: comprehensive loss attributable to noncontrolling interest	—			—			(197		)	—			(197		)
Comprehensive income attributable to LKQ stockholders	$	203,473		$	132,634		$	77,930		$	(210,564	)	$	203,473

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

	For the Three Months Ended March 31, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	136,278		$	108,445		$	47,453		$	(155,898	)	$	136,278
Other comprehensive income (loss):
Foreign currency translation, net of tax	21,579			3,878			21,132			(25,010		)	21,579
Net change in unrealized gains/losses on cash flow hedges, net of tax	3,163			(133		)	—			133			3,163
Net change in unrealized gains/losses on pension plans, net of tax	(3,041		)	(2,805		)	(236		)	3,041			(3,041		)
Net change in other comprehensive loss from unconsolidated subsidiaries	(162		)	—			(162		)	162			(162		)
Other comprehensive income	21,539			940			20,734			(21,674		)	21,539
Total comprehensive income	$	157,817		$	109,385		$	68,187		$	(177,572	)	$	157,817

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Three Months Ended September 30, 2016
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 1,410,180
$ 868,990
$ (71,827 ) $ 2,207,343
Cost of goods sold —
865,072
558,654
(71,827 ) 1,351,899
Gross margin —
545,108
310,336
—
855,444
Facility and warehouse expenses —
122,237
59,007
—
181,244
Distribution expenses —
120,049
52,516
—
172,565
Selling, general and administrative expenses 8,095
133,611
116,626
—
258,332
Restructuring and acquisition related expenses —
5,777
1,146
—
6,923
Depreciation and amortization 32
24,880
28,067
—
52,979
Operating (loss) income (8,127 ) 138,554
52,974
—
183,401
Other expense (income):
Interest expense, net 15,825
610
8,326
—
24,761
Intercompany interest (income) expense, net (8,796 ) 5,030
3,766
—
—
Other expense (income), net 17
(3,122 ) 2,095
—
(1,010 )
Total other expense, net 7,046
2,518
14,187
—
23,751
(Loss) income from continuing operations before (benefit) provision for income taxes (15,173 ) 136,036
38,787
—
159,650
(Benefit) provision for income taxes (9,546 ) 50,168
9,213
—
49,835
Equity in earnings of unconsolidated subsidiaries —
13
16
—
29
Equity in earnings of subsidiaries 115,471
4,868
—
(120,339 ) —
Income from continuing operations 109,844
90,749
29,590
(120,339 ) 109,844
Income from discontinued operations, net of tax 12,844
12,844
6,206
(19,050 ) 12,844
Net income $ 122,688
$ 103,593
$ 35,796
$ (139,389 ) $ 122,688

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

	March 31, 2018
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	17,340	$	28,975	$	199,364	$	—		$	245,679
Receivables, net	843		372,264		838,681		—			1,211,788
Intercompany receivables, net	6,747		—		21,170		(27,917		)	—
Inventories	—		1,319,468		1,081,841		—			2,401,309
Prepaid expenses and other current assets	1,864		94,231		84,272		—			180,367
Total current assets	26,794		1,814,938		2,225,328		(27,917		)	4,039,143
Property, plant and equipment, net	904		569,829		359,023		—			929,756
Intangible assets:
Goodwill	—		2,005,814		1,566,384		—			3,572,198
Other intangibles, net	—		289,057		451,747		—			740,804
Investment in subsidiaries	5,355,015		105,772		—		(5,460,787		)	—
Intercompany notes receivable	1,143,818		32,777		—		(1,176,595		)	—
Equity method investments	—		336		207,874		—			208,210
Other assets	79,657		36,403		30,007		—			146,067
Total assets	$	6,606,188	$	4,854,926	$	4,840,363	$	(6,665,299	)	$	9,636,178
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,407	$	358,971	$	445,283	$	—		$	812,661
Intercompany payables, net	—		21,170		6,747		(27,917		)	—
Accrued expenses:
Accrued payroll-related liabilities	5,224		34,590		72,326		—			112,140
Other accrued expenses	12,360		101,274		153,730		—			267,364
Refund liability	—		54,270		44,909		—			99,179
Other current liabilities	6,224		19,255		15,688		—			41,167
Current portion of long-term obligations	20,863		1,912		119,502		—			142,277
Total current liabilities	53,078		591,442		858,185		(27,917		)	1,474,788
Long-term obligations, excluding current portion	1,956,376		7,341		1,207,071		—			3,170,788
Intercompany notes payable	—		657,601		518,994		(1,176,595		)	—
Deferred income taxes	13,345		115,736		113,145		—			242,226
Other noncurrent liabilities	176,802		102,559		50,034		—			329,395
Stockholders' equity:
Total Company stockholders’ equity	4,406,587		3,380,247		2,080,540		(5,460,787		)	4,406,587
Noncontrolling interest	—		—		12,394		—			12,394
Total stockholders’ equity	4,406,587		3,380,247		2,092,934		(5,460,787		)	4,418,981
Total liabilities and stockholders' equity	$	6,606,188	$	4,854,926	$	4,840,363	$	(6,665,299	)	$	9,636,178

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

	December 31, 2017
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	34,360	$	35,131	$	210,275	$	—		$	279,766
Receivables, net	—		290,958		736,148		—			1,027,106
Intercompany receivables, net	2,669		3,010		230		(5,909		)	—
Inventories	—		1,334,766		1,046,017		—			2,380,783
Prepaid expenses and other current assets	34,136		44,849		55,494		—			134,479
Total current assets	71,165		1,708,714		2,048,164		(5,909		)	3,822,134
Property, plant and equipment, net	910		563,262		348,917		—			913,089
Intangible assets:
Goodwill	—		2,010,209		1,526,302		—			3,536,511
Other intangibles, net	—		291,036		452,733		—			743,769
Investment in subsidiaries	5,952,687		102,931		—		(6,055,618		)	—
Intercompany notes receivable	1,156,550		782,638		—		(1,939,188		)	—
Equity method investments	—		336		208,068		—			208,404
Other assets	70,590		33,597		38,778		—			142,965
Total assets	$	7,251,902	$	5,492,723	$	4,622,962	$	(8,000,715	)	$	9,366,872
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,742	$	340,951	$	441,920	$	—		$	788,613
Intercompany payables, net	—		230		5,679		(5,909		)	—
Accrued expenses:
Accrued payroll-related liabilities	9,448		65,811		68,165		—			143,424
Other accrued expenses	5,219		95,900		117,481		—			218,600
Other current liabilities	282		27,066		18,379		—			45,727
Current portion of long-term obligations	16,468		1,912		107,980		—			126,360
Total current liabilities	37,159		531,870		759,604		(5,909		)	1,322,724
Long-term obligations, excluding current portion	2,095,826		7,372		1,174,422		—			3,277,620
Intercompany notes payable	750,000		677,708		511,480		(1,939,188		)	—
Deferred income taxes	12,402		116,021		123,936		—			252,359
Other noncurrent liabilities	158,346		101,189		47,981		—			307,516
Stockholders' equity:
Total Company stockholders’ equity	4,198,169		4,058,563		1,997,055		(6,055,618		)	4,198,169
Noncontrolling interest	—		—		8,484		—			8,484
Total stockholders’ equity	4,198,169		4,058,563		2,005,539		(6,055,618		)	4,206,653
Total liabilities and stockholders' equity	$	7,251,902	$	5,492,723	$	4,622,962	$	(8,000,715	)	$	9,366,872

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Nine Months Ended September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 4,374,693
$ 3,001,386
$ (109,025 ) $ 7,267,054
Cost of goods sold —
2,613,540
1,910,561
(109,025 ) 4,415,076
Gross margin —
1,761,153
1,090,825
—
2,851,978
Facility and warehouse expenses —
389,314
193,916
—
583,230
Distribution expenses —
367,134
215,897
—
583,031
Selling, general and administrative expenses 26,209
409,449
401,146
—
836,804
Restructuring and acquisition related expenses —
4,010
6,361
—
10,371
Depreciation and amortization 89
73,072
86,017
—
159,178
Operating (loss) income (26,298 ) 518,174
187,488
—
679,364
Other expense (income):
Interest expense, net 48,904
281
24,621
—
73,806
Intercompany interest (income) expense, net (10,221 ) (4,530 ) 14,751
—
—
Gains on bargain purchases —
—
(3,990 ) —
(3,990 )
Other expense (income), net 286
(8,247 ) 1,077
—
(6,884 )
Total other expense (income), net 38,969
(12,496 ) 36,459
—
62,932
(Loss) income from continuing operations before (benefit) provision for income taxes (65,267 ) 530,670
151,029
—
616,432
(Benefit) provision for income taxes (27,034 ) 200,321
32,919
—
206,206
Equity in earnings of unconsolidated subsidiaries —
—
3,878
—
3,878
Equity in earnings of subsidiaries 452,337
17,282
—
(469,619 ) —
Income from continuing operations 414,104
347,631
121,988
(469,619 ) 414,104
(Loss) income from discontinued operations, net of tax (4,531 ) (4,531 ) 2,050
2,481
(4,531 )
Net income $ 409,573
$ 343,100
$ 124,038
$ (467,138 ) $ 409,573

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

	For the Three Months Ended March 31, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	95,942		$	96,517		$	243		$	(47,539	)	$	145,163
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(163		)	(29,908		)	(32,118		)	—			(62,189		)
Investment and intercompany note activity with subsidiaries	24,333			—			—			(24,333		)	—
Acquisitions, net of cash acquired	—			(2,966		)	—			—			(2,966		)
Payments of deferred purchase price on receivables securitization	—			7,456			—			(7,456		)	—
Other investing activities, net	—			(145		)	679			—			534
Net cash provided by (used in) investing activities	24,170			(25,563		)	(31,439		)	(31,789		)	(64,621		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	2,255			—			—			—			2,255
Taxes paid related to net share settlements of stock-based compensation awards	(3,292		)	—			—			—			(3,292		)
Debt issuance costs	(724		)	—			—			—			(724		)
Borrowings under revolving credit facilities	161,000			—			40,669			—			201,669
Repayments under revolving credit facilities	(291,966		)	—			(29,559		)	—			(321,525		)
Repayments under term loans	(4,405		)	—			—			—			(4,405		)
(Repayments) borrowings of other debt, net	—			(30		)	4,439			—			4,409
Other financing activities, net	—			—			4,107			—			4,107
Investment and intercompany note activity with parent	—			(21,759		)	(2,574		)	24,333			—
Dividends	—			(54,995		)	—			54,995			—
Net cash (used in) provided by financing activities	(137,132		)	(76,784		)	17,082			79,328			(117,506		)
Effect of exchange rate changes on cash and cash equivalents	—			(326		)	3,203			—			2,877
Net decrease in cash and cash equivalents	(17,020		)	(6,156		)	(10,911		)	—			(34,087		)
Cash and cash equivalents, beginning of period	34,360			35,131			210,275			—			279,766
Cash and cash equivalents, end of period	$	17,340		$	28,975		$	199,364		$	—		$	245,679

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Nine Months Ended September 30, 2016
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 4,147,572
$ 2,424,379
$ (138,326 ) $ 6,433,625
Cost of goods sold —
2,512,742
1,537,512
(138,326 ) 3,911,928
Gross margin —
1,634,830
886,867
—
2,521,697
Facility and warehouse expenses —
354,877
161,350
—
516,227
Distribution expenses —
342,523
166,711
—
509,234
Selling, general and administrative expenses 27,361
389,252
310,123
—
726,736
Restructuring and acquisition related expenses —
16,895
13,919
—
30,814
Depreciation and amortization 101
68,877
68,190
—
137,168
Operating (loss) income (27,462 ) 462,406
166,574
—
601,518
Other expense (income):
Interest expense, net 44,067
444
19,491
—
64,002
Intercompany interest (income) expense, net (21,828 ) 13,996
7,832
—
—
Loss on debt extinguishment 2,894
—
23,756
—
26,650
Gains on foreign exchange contracts - acquisition related (18,342 ) —
—
—
(18,342 )
Other (income) expense, net (61 ) (7,464 ) 3,164
—
(4,361 )
Total other expense, net 6,730
6,976
54,243
—
67,949
(Loss) income from continuing operations before (benefit) provision for income taxes (34,192 ) 455,430
112,331
—
533,569
(Benefit) provision for income taxes (19,103 ) 168,296
24,032
—
173,225
Equity in (loss) earnings of unconsolidated subsidiaries (795 ) 32
244
—
(519 )
Equity in earnings of subsidiaries 375,709
15,270
—
(390,979 ) —
Income from continuing operations 359,825
302,436
88,543
(390,979 ) 359,825
Income from discontinued operations, net of tax 17,819
17,819
8,177
(25,996 ) 17,819
Net income $ 377,644
$ 320,255
$ 96,720
$ (416,975 ) $ 377,644

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Three Months Ended September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 122,381
$ 107,782
$ 34,602
$ (142,384 ) $ 122,381
Other comprehensive income (loss):
Foreign currency translation 59,618
3,590
62,734
(66,324 ) 59,618
Net change in unrecognized gains/losses on derivative instruments, net of tax (1,776 ) —
—
—
(1,776 )
Net change in unrealized gains/losses on pension plans, net of tax (150 ) —
(150 ) 150
(150 )
Net change in other comprehensive loss from unconsolidated subsidiaries (1,034 ) —
(1,034 ) 1,034
(1,034 )
Total other comprehensive income 56,658
3,590
61,550
(65,140 ) 56,658
Total comprehensive income $ 179,039
$ 111,372
$ 96,152
$ (207,524 ) $ 179,039

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Three Months Ended September 30, 2016
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 122,688
$ 103,593
$ 35,796
$ (139,389 ) $ 122,688
Other comprehensive (loss) income:
Foreign currency translation (12,317 ) (9,372 ) (11,450 ) 20,822
(12,317 )
Net change in unrecognized gains/losses on derivative instruments, net of tax 3,059
170
318
(488 ) 3,059
Net change in unrealized gains/losses on pension plans, net of tax 94
—
94
(94 ) 94
Total other comprehensive loss (9,164 ) (9,202 ) (11,038 ) 20,240
(9,164 )
Total comprehensive income $ 113,524
$ 94,391
$ 24,758
$ (119,149 ) $ 113,524

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Nine Months Ended September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 409,573
$ 343,100
$ 124,038
$ (467,138 ) $ 409,573
Other comprehensive income (loss):
Foreign currency translation 174,794
17,565
176,769
(194,334 ) 174,794
Net change in unrecognized gains/losses on derivative instruments, net of tax 457
(133 ) —
133
457
Net change in unrealized gains/losses on pension plans, net of tax (4,053 ) (3,253 ) (800 ) 4,053
(4,053 )
Net change in other comprehensive loss from unconsolidated subsidiaries (1,635 ) —
(1,635 ) 1,635
(1,635 )
Total other comprehensive income 169,563
14,179
174,334
(188,513 ) 169,563
Total comprehensive income $ 579,136
$ 357,279
$ 298,372
$ (655,651 ) $ 579,136

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Nine Months Ended September 30, 2016
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 377,644
$ 320,255
$ 96,720
$ (416,975 ) $ 377,644
Other comprehensive (loss) income:
Foreign currency translation (85,434 ) (27,343 ) (88,319 ) 115,662
(85,434 )
Net change in unrecognized gains/losses on derivative instruments, net of tax (123 ) 170
513
(683 ) (123 )
Net change in unrealized gains/losses on pension plans, net of tax 361
—
361
(361 ) 361
Total other comprehensive loss (85,196 ) (27,173 ) (87,445 ) 114,618
(85,196 )
Total comprehensive income $ 292,448
$ 293,082
$ 9,275
$ (302,357 ) $ 292,448

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

September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Assets
Current assets:
Cash and cash equivalents $ 20,286
$ 22,413
$ 232,378
$ —
$ 275,077
Receivables, net —
302,789
718,939
—
1,021,728
Intercompany receivables, net 3,463
—
12,110
(15,573 ) —
Inventories —
1,232,897
1,003,479
—
2,236,376
Prepaid expenses and other current assets 23,213
43,617
68,362
—
135,192
Total current assets 46,962
1,601,716
2,035,268
(15,573 ) 3,668,373
Property and equipment, net 658
548,598
318,716
—
867,972
Intangible assets:
Goodwill —
1,888,002
1,504,361
—
3,392,363
Other intangibles, net —
144,358
458,066
—
602,424
Investment in subsidiaries 5,505,206
99,089
—
(5,604,295 ) —
Intercompany notes receivable 1,173,923
771,962
—
(1,945,885 ) —
Equity method investments —
336
198,910
—
199,246
Other assets 62,566
33,894
38,292
(1,192 ) 133,560
Total assets $ 6,789,315
$ 5,087,955
$ 4,553,613
$ (7,566,945 ) $ 8,863,938
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 2,108
$ 298,832
$ 448,912
$ —
$ 749,852
Intercompany payables, net —
12,110
3,463
(15,573 ) —
Accrued expenses:
Accrued payroll-related liabilities 8,963
42,446
69,166
—
120,575
Other accrued expenses 12,209
97,493
143,539
—
253,241
Other current liabilities 283
24,547
26,953
—
51,783
Current portion of long-term obligations 36,397
1,868
88,622
—
126,887
Total current liabilities 59,960
477,296
780,655
(15,573 ) 1,302,338
Long-term obligations, excluding current portion 1,837,860
6,696
1,177,161
—
3,021,717
Intercompany notes payable 750,000
697,814
498,071
(1,945,885 ) —
Deferred income taxes —
118,169
124,567
(1,192 ) 241,544
Other noncurrent liabilities 100,458
113,371
43,473
—
257,302
Total stockholders’ equity 4,041,037
3,674,609
1,929,686
(5,604,295 ) 4,041,037
Total liabilities and stockholders' equity $ 6,789,315
$ 5,087,955
$ 4,553,613
$ (7,566,945 ) $ 8,863,938

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

December 31, 2016
Parent Guarantors Non-Guarantors Eliminations Consolidated
Assets
Current assets:
Cash and cash equivalents $ 33,030
$ 35,360
$ 159,010
$ —
$ 227,400
Receivables, net —
248,188
612,361
—
860,549
Intercompany receivables, net 2,805
11,237
8,837
(22,879 ) —
Inventories —
1,149,763
785,474
—
1,935,237
Prepaid expenses and other current assets 1,640
43,165
42,963
—
87,768
Assets of discontinued operations —
357,788
98,852
—
456,640
Total current assets 37,475
1,845,501
1,707,497
(22,879 ) 3,567,594
Property and equipment, net 239
527,705
283,632
—
811,576
Intangible assets:
Goodwill —
1,851,274
1,203,495
—
3,054,769
Other intangibles, net —
153,689
430,542
—
584,231
Investment in subsidiaries 5,067,297
242,032
—
(5,309,329 ) —
Intercompany notes receivable 1,510,534
800,283
—
(2,310,817 ) —
Equity method investments —
336
183,131
—
183,467
Other assets 59,726
25,177
—
22,347
(5,688 ) —
101,562
Total assets $ 6,675,271
$ 5,445,997
$ 3,830,644
$ (7,648,713 ) $ 8,303,199
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 1,309
$ 244,074
$ 388,390
$ —
$ 633,773
Intercompany payables, net 11,237
8,837
2,805
(22,879 ) —
Accrued expenses:
Accrued payroll-related liabilities 6,404
58,187
54,164
—
118,755
Other accrued expenses 5,502
94,287
109,312
—
209,101
Other current liabilities 4,283
18,456
15,204
—
37,943
Current portion of long-term obligations 37,710
1,097
27,302
—
66,109
Liabilities of discontinued operations —
110,890
34,214
—
145,104
Total current liabilities 66,445
535,828
631,391
(22,879 ) 1,210,785
Long-term obligations, excluding current portion 2,371,578
8,356
895,728
—
3,275,662
Intercompany notes payable 750,000
1,074,218
486,599
(2,310,817 ) —
Deferred income taxes —
95,765
109,580
(5,688 ) 199,657
Other noncurrent liabilities 44,299
90,722
39,125
—
174,146
Total stockholders’ equity 3,442,949
3,641,108
1,668,221
(5,309,329 ) 3,442,949
Total liabilities and stockholders' equity $ 6,675,271
$ 5,445,997
$ 3,830,644
$ (7,648,713 ) $ 8,303,199

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
For the Nine Months Ended September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 227,314
$ 388,509
$ 108,095
$ (274,675 ) $ 449,243
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (509 ) (70,292 ) (64,736 ) —
(135,537 )
Investment and intercompany note activity with subsidiaries 296,561
—
—
(296,561 ) —
Acquisitions, net of cash acquired —
(79,496 ) (173,171 ) —
(252,667 )
Proceeds from disposals of business/investment —
305,740
(4,443 ) —
301,297
Other investing activities, net —
900
1,850
—
2,750
Net cash provided by (used in) investing activities 296,052
156,852
(240,500 ) (296,561 ) (84,157 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 6,465
—
—
—
6,465
Taxes paid related to net share settlements of stock-based compensation awards (5,095 ) —
—
—
(5,095 )
Borrowings under revolving credit facilities 187,000
—
237,976
—
424,976
Repayments under revolving credit facilities (694,896 ) —
(75,988 ) —
(770,884 )
Repayments under term loans (27,884 ) —
—
—
(27,884 )
Borrowings under receivables securitization facility —
—
8,525
—
8,525
Repayments under receivables securitization facility —
—
(9,925 ) —
(9,925 )
(Repayments) borrowings of other debt, net (1,700 ) (1,238 ) 27,460
—
24,522
Payments of other obligations —
(1,336 ) (743 ) —
(2,079 )
Other financing activities, net —
5,000
(684 ) —
4,316
Investment and intercompany note activity with parent —
(286,530 ) (10,031 ) 296,561
—
Dividends —
(274,675 ) —
274,675
—
Net cash (used in) provided by financing activities (536,110 ) (558,779 ) 176,590
571,236
(347,063 )
Effect of exchange rate changes on cash and cash equivalents —
322
22,216
—
22,538
Net (decrease) increase in cash and cash equivalents (12,744 ) (13,096 ) 66,401
—
40,561
Cash and cash equivalents of continuing operations, beginning of period 33,030
35,360
159,010
—
227,400
Add: Cash and cash equivalents of discontinued operations, beginning of period —
149
6,967
—
7,116
Cash and cash equivalents of continuing and discontinued operations, beginning of period 33,030
35,509
165,977
—
234,516
Cash and cash equivalents, end of period $ 20,286
$ 22,413
$ 232,378
$ —

$ 275,077

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

	For the Nine Months Ended September 30, 2016															For the Three Months Ended March 31, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	240,495		$	404,164		$	119,623		$	(240,131	)	$	524,151		$	118,537		$	106,243		$	35,789		$	(88,276	)	$	172,293
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(36		)	(89,917		)	(62,793		)	—			(152,746		)
Purchases of property, plant and equipment																—			(18,226		)	(26,172		)	—			(44,398		)
Investment and intercompany note activity with subsidiaries	(1,285,939		)	—			—			1,285,939			—			249,828			—			—			(249,828		)	—
Acquisitions, net of cash acquired	—			(666,052		)	(635,075		)	—			(1,301,127		)	—			(74,937		)	(2,119		)	—			(77,056		)
Proceeds from disposals of business/investment	—			—			10,304			—			10,304			—			305,740			(4,443		)	—			301,297
Proceeds from foreign exchange contracts	18,342			—			—			—			18,342
Payments of deferred purchase price on receivables securitization ⁽¹⁾																—			6,362			—			(6,362		)	—
Other investing activities, net	—			(452		)	989			—			537			—			1,008			306			—			1,314
Net cash used in investing activities	(1,267,633		)	(756,421		)	(686,575		)	1,285,939			(1,424,690		)
Net cash provided by (used in) investing activities																249,828			219,947			(32,428		)	(256,190		)	181,157
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	7,525			—			—			—			7,525			2,464			—			—			—			2,464
Taxes paid related to net share settlements of stock-based compensation awards	(4,440		)	—			—			—			(4,440		)	(3,644		)	—			—			—			(3,644		)
Debt issuance costs	(7,079		)	—			(9,325		)	—			(16,404		)
Proceeds from issuance of Euro notes	—			—			563,450			—			563,450
Borrowings under revolving credit facilities	1,304,000			—			657,702			—			1,961,702			10,000			—			35,239			—			45,239
Repayments under revolving credit facilities	(344,000		)	—			(895,234		)	—			(1,239,234		)	(376,966		)	—			(12,347		)	—			(389,313		)
Borrowings under term loans	89,317			—			249,161			—			338,478
Repayments under term loans	(6,247		)	—			(3,214		)	—			(9,461		)	(9,295		)	—			—			—			(9,295		)
Borrowings under receivables securitization facility	—			—			100,480			—			100,480
Repayments under receivables securitization facility	—			—			(66,500		)	—			(66,500		)	—			—			(150		)	—			(150		)
Repayments of other debt, net	—			(2,270		)	(92		)	—			(2,362		)
Payments of Rhiag debt and related payments	—			—			(543,347		)	—			(543,347		)
Payments of other obligations	—			(1,405		)	—			—			(1,405		)
(Repayments) borrowings of other debt, net																(1,698		)	(1,099		)	26,110			—			23,313
Other financing activities, net																—			5,000			—			—			5,000
Investment and intercompany note activity with parent	—			612,961			672,978			(1,285,939		)	—			—			(246,463		)	(3,365		)	249,828			—
Dividends	—			(240,131		)	—			240,131			—			—			(94,638		)	—			94,638			—
Net cash provided by financing activities	1,039,076			369,155			726,059			(1,045,808		)	1,088,482
Net cash (used in) provided by financing activities																(379,139		)	(337,200		)	45,487			344,466			(326,386		)
Effect of exchange rate changes on cash and cash equivalents	—			3			(3,492		)	—			(3,489		)	—			30			3,004			—			3,034
Net increase in cash and cash equivalents	11,938			16,901			155,615			—			184,454
Net (decrease) increase in cash and cash equivalents																(10,774		)	(10,980		)	51,852			—			30,098
Cash and cash equivalents of continuing operations, beginning of period	17,616			13,432			56,349			—			87,397			33,030			35,360			159,010			—			227,400
Cash and cash equivalents of continuing and discontinued operations, end of period	29,554			30,333			211,964			—			271,851
Less: Cash and cash equivalents of discontinued operations, end of period	—			13,332			494			—			13,826
Add: Cash and cash equivalents of discontinued operations, beginning of period																—			149			6,967			—			7,116
Cash and cash equivalents of continuing and discontinued operations, beginning of period																33,030			35,509			165,977			—			234,516
Cash and cash equivalents, end of period	$	29,554		$	17,001		$	211,470		$	—		$	258,025		$	22,256		$	24,529		$	217,829		$	—		$	264,614

⁽¹⁾ Reflects the impact of adopting ASU 2016-15

Forward-Looking Statements

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

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

You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by our forward-looking statements include factors discussed in our filings with the SEC, including those disclosed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~Annual Report on~~2017 Form 10-K ~~for the year ended December 31, 2016~~ and in our subsequent Quarterly Reports on Form 10-Q (including this Quarterly Report).


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

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

Overview

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

Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by original equipment manufacturers ("OEMs"); new products produced by companies other than the OEMs, which are 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.~~engines and transmissions. Collectively, we refer to ~~these~~the four sources that are not new OEM products as alternative parts.

We are a leading provider of alternative vehicle collision replacement products and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. We are also a leading provider of alternative vehicle replacement and maintenance products in ~~the United Kingdom, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Switzerland and other Eastern European countries.~~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. We are also a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada.

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

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

Acquisitions and Investments

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

During the three months ended March 31, 2018, we completed one acquisition of a wholesale business in North America.

On July 3, 2017, we acquired four ~~aftermarket~~ parts distribution businesses in Belgium. The objective of these acquisitions iswas to transform the existing three-step distribution model in Belgium to a two-step distribution model to align with our Netherlands operations.

On November 1, 2017, we acquired the aftermarket business of Warn, a leading designer, manufacturer and marketer of high performance vehicle equipment and accessories. We expect the acquisition of Warn to expand LKQ's presence in the specialty market and create viable points of entry into related markets.

In addition to the ~~4 aftermarket~~ parts distribution businesses acquired in Belgium and the acquisition of Warn, during the ~~nine months~~year ended ~~September 30,~~December 31, 2017, we completed 1721 acquisitions, including 46 wholesale businesses in North America, 1012 wholesale businesses in Europe and 3 Specialty ~~vehicle~~ aftermarket businesses.

On ~~March 18, 2016, LKQ acquired Rhiag,~~December 10, 2017, we entered into an agreement to acquire Stahlgruber GmbH ("Stahlgruber"), a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and ~~commercial vehicles~~accessories with operations in ~~Italy,~~Germany, Austria, Czech Republic, ~~Switzerland, Hungary, Romania, Ukraine, Bulgaria, Slovakia, Poland~~Italy, Slovenia, and ~~Spain.~~Croatia with further sales to Switzerland. This acquisition ~~expanded~~will expand LKQ's geographic presence in continental Europe and serve as an additional strategic hub for our European operations. In addition, we believe ~~the~~this acquisition will ~~generate potential~~allow for continued improvement in procurement, ~~synergies in our Europe segment.~~

logistics and infrastructure optimization. On April 21, 2016, LKQ acquired PGW, a leading global distributor and manufacturer of automotive glass products. PGW’s business comprised aftermarket automotive replacement glass distribution services ("PGW autoglass") and automotive glass manufacturing. On March 1, 2017, we soldMay 3, 2018, the ~~automotive glass manufacturing component of PGW. Unless otherwise noted,~~European Commission cleared the ~~discussion related to PGW throughout Part I, Item 2 of this quarterly report on Form 10-Q refers to PGW autoglass, which is included within continuing operations. See Note 3, "Discontinued Operations"~~proposed acquisition for the entire European Union, except with respect to the ~~unaudited condensed consolidated financial statements~~wholesale automotive parts business in ~~Item 1 of this Quarterly Report on Form 10-Q for further information related to our discontinued operations.~~the Czech Republic. The acquisition of ~~PGW autoglass expanded our addressable market in North America. Additionally, we believe~~ the ~~acquisition will create potential distribution synergies with our existing network.~~

~~In October 2016, we acquired substantially all~~Czech Republic wholesale business has been referred to the Czech competition authority for review. We anticipate that the closing of the ~~business assets~~transaction with respect to Stahlgruber's operations outside of ~~Andrew Page, a distributor~~the Czech Republic will occur during the second quarter of ~~aftermarket automotive parts in the United Kingdom.~~2018. The acquisition is subject to regulatory approval by the CMA in the U.K. On September 14, 2017, the CMA issued its provisional findings that the acquisition was approved except that we may be required to divest up to 10 locations. The CMA's review is ongoing and we have been informed the deadline for the final decision is on or about November 6, 2017.

~~In addition to our acquisitions of Rhiag, PGW, and Andrew Page, we acquired seven wholesale businesses in Europe and five~~Czech Republic wholesale business ~~in North America during the year ended December 31, 2016.~~

~~On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen, the leading independent car parts~~represents an immaterial portion of Stahlgruber's revenue and service chain in the Nordic region of Europe, offering a wide range of quality products including spare parts and accessories for cars, and workshop services for consumers and businesses. We are accounting for our interest in Mekonomen using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee.profitability.

See Note 2, "Business Combinations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our acquisitions.

Sources of Revenue

We report our revenue in two categories: (i) parts and services and (ii) other. Our parts revenue is generated from the sale of vehicle products including ~~(i) aftermarket, other new~~replacement parts, components and ~~refurbished~~systems used in the repair and maintenance of vehicles and specialty products and ~~(ii) recycled, remanufactured~~accessories to improve the performance, functionality and ~~related products.~~appearance of vehicles. Our service revenue is generated primarily from the sale of ~~extended~~service-type warranties, fees for admission to our self service yards, and processing fees related to the secure disposal of vehicles. ~~During the nine months ended September 30, 2017, parts and services revenue represented approximately 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. In our North America segment, our vehicle replacement products include sheet metal crash parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; automotive glass products such as windshields; mirrors and grills; wheels; and large mechanical items such as engines and transmissions. In our Europe segment, 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. 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 in North America. 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 to 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 new OEM product prices, product availability, quality, demand, the age and mileage of the vehicle from which the part was obtained (in the case of recycled products), 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 three years 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 months ended September 30, 2017, revenue~~Revenue from other sources ~~represented approximately 5% of our consolidated sales. These other sources include~~includes scrap sales, bulk sales to mechanical manufacturers (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~~ See Note 5, "Revenue Recognition" to the ~~purchasing, warehousing and distribution~~unaudited condensed consolidated financial statements in Part I, Item 1 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~~this Quarterly Report on Form 10-Q 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~~additional information related to our ~~refurbishing operations.~~sources of revenue.

~~For recycled products, our cost of goods sold includes the price we pay for the salvage vehicle~~Selling, General 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 10% and 15% 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.

Included in our cost of goods sold for remanufactured products is 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.

Administrative Expenses

~~Our~~In our 2017 Form 10-K, we reported the following categories of operating expenses: (i) facility and warehouse ~~expenses primarily include~~expenses; (ii) distribution expenses; and (iii) selling, general and administrative expenses. To better reflect the changing profile of our ~~costs~~business, and to ~~operate~~align our ~~aftermarket warehouses, salvage yards~~financial statement presentation with other automotive parts and ~~self service retail facilities. These costs include personnel~~distribution companies, beginning with this Quarterly Report on Form 10-Q, these three categories are consolidated into one line item: selling, general and administrative expenses.

Other than the consolidation of these financial statement line items and the change due to the adoption of ASU 2014-09 as discussed in Note 4, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, there have been no changes to the classification of revenue or 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, and 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 account for the vast majority 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~~continue to include: personnel costs offor employees in selling, general and administrative functions; costs to operate our selling locations, corporate offices and ~~field~~back office support ~~center, which provide management, treasury, accounting, legal, payroll, business development, human resources~~centers; costs to transport our products from our facilities to our customers; and ~~information systems functions. General~~other selling, general and administrative expenses, ~~include wages, benefits, stock-based compensation~~such as professional fees, supplies, and ~~other incentive compensation for corporate, regional and administrative personnel; information systems support and maintenance expenses; and accounting, legal and other professional fees.~~advertising expenses.

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 repairs. Our specialty vehicle operations typically generate greater revenue and earnings in the first half of the year, when vehicle owners tend to install this equipment. ~~We expect our~~Our aftermarket glass operations totypically generate greater revenue and earnings in the second and third quarters, when the demand for automotive replacement glass increases after the winter weather.

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 of America ("GAAP"). 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~~2017 Form 10-K ~~for the fiscal year ended~~ ~~December 31, 2016, which we filed with the SEC on February 27, 2017,~~ 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, 2017~~March 31, 2018.

Recently Issued Accounting Pronouncements

See ~~“Recent~~"Recent Accounting ~~Pronouncements”~~Pronouncements" in Note 4, "Financial Statement ~~Information~~"Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.

Financial Information by Geographic Area

See Note ~~14,~~15, "Segment and Geographic Information" to the unaudited condensed consolidated financial statements in Part I, Item I1 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,
	2017		2016		2017		2016		2018		2017
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	61.2	%	61.2	%	60.8	%	60.8	%	61.3	%	60.3	%
Gross margin	38.8	%	38.8	%	39.2	%	39.2	%	38.7	%	39.7	%
Facility and warehouse expenses	8.2	%	8.2	%	8.0	%	8.0	%
Distribution expenses	8.2	%	7.8	%	8.0	%	7.9	%
Selling, general and administrative expenses	11.8	%	11.7	%	11.5	%	11.3	%	28.2	%	27.4	%
Restructuring and acquisition related expenses	0.2	%	0.3	%	0.1	%	0.5	%	0.1	%	0.1	%
Depreciation and amortization	2.3	%	2.4	%	2.2	%	2.1	%	2.1	%	2.1	%
Operating income	8.1	%	8.3	%	9.3	%	9.3	%	8.3	%	10.1	%
Other expense, net	0.9	%	1.1	%	0.9	%	1.1	%	0.9	%	1.0	%
Income from continuing operations before provision for income taxes	7.2	%	7.2	%	8.5	%	8.3	%	7.4	%	9.1	%
Provision for income taxes	2.4	%	2.3	%	2.8	%	2.7	%	1.8	%	3.1	%
Equity in earnings (loss) of unconsolidated subsidiaries	0.1	%	0.0	%	0.1	%	(0.0	)%
Equity in earnings of unconsolidated subsidiaries									0.1	%	0.0	%
Income from continuing operations	5.0	%	5.0	%	5.7	%	5.6	%	5.6	%	6.0	%
Loss (income) from discontinued operations	0.0	%	0.6	%	(0.1	)%	0.3	%
Net loss from discontinued operations									0.0	%	(0.2	)%
Net income	5.0	%	5.6	%	5.6	%	5.9	%	5.6	%	5.8	%
Less: net loss attributable to noncontrolling interest									(0.0	)%	—	%
Net income attributable to LKQ stockholders									5.6	%	5.8	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Three Months Ended~~September 30, 2017~~ March 31, 2018 Compared to Three Months Ended~~September 30, 2016~~ March 31, 2017

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
	2017		2016		Organic		Acquisition		Foreign Exchange		Total Change		2018		2017		Organic		Acquisition		Foreign Exchange		Total Change
Parts & services revenue	$	2,333,757	$	2,095,836	3.2	%	6.8	%	1.3	%	11.4	%	$	2,560,305	$	2,212,941	3.7	%	6.6	%	5.4	%	15.7	%
Other revenue	132,043		111,507		17.5	%	0.9	%	0.1	%	18.4	%	160,459		129,902		22.4	%	0.9	%	0.2	%	23.5	%
Total revenue	$	2,465,800	$	2,207,343	4.0	%	6.5	%	1.2	%	11.7	%	$	2,720,764	$	2,342,843	4.7	%	6.3	%	5.1	%	16.1	%
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 ~~11.4%~~15.7% represented increases in segment revenue of ~~4.3%~~8.6% in North America, ~~23.8%~~26.6% in Europe and ~~3.4%~~11.7% in Specialty. The increase in other revenue of ~~18.4%~~23.5% primarily consisted of a ~~$19~~$29 million organic increase in other revenue, which was largely attributable to our North America segment. Refer to the discussion of our segment results of operations for factors contributing to the change in revenue by segment during the ~~third~~first quarter of ~~2017~~2018 compared to the prior year period. The adoption of ASC 606 negatively impacted organic growth by 0.4% in parts and services; for details regarding the impact of adopting ASC 606, refer to Note 4, "Financial Statement Information."

Cost of Goods Sold. ~~As a percentage of revenue, cost~~Cost of goods sold ~~remained flat at 61.2% for~~increased to 61.3% of revenue in the three months ended ~~September 30, 2017 and 2016.~~March 31, 2018 from 60.3% of revenue in the comparable prior year quarter. Cost of goods sold ~~included a number of individually insignificant fluctuations~~increased 0.6% and 0.5% as a ~~percentage of revenue across all~~result of our North America and Europe segments, ~~that netted to no year over year change.~~respectively. 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, 2017~~March 31, 2018 compared to the three months ended ~~September 30, 2016.~~March 31, 2017.

~~Facility~~Selling, General and ~~Warehouse Expenses~~Administrative Expenses. ~~. As a percentage of revenue, facility~~Our selling, general and ~~warehouse~~administrative ("SG&A") expenses ~~remained flat at 8.2% for the three months ended September 30, 2017 and 2016. Facility and warehouse expenses included a number of individually insignificant fluctuations~~ as a percentage of revenue ~~across all of our segments that netted~~increased to ~~no year over year change.~~

~~Distribution Expenses.~~ ~~As a percentage of revenue, distribution expenses for~~28.2% in the three months ended ~~September 30, 2017 increased to 8.2%~~March 31, 2018 from ~~7.8%~~27.4% in the ~~same period of 2016,~~three months ended March 31, 2017, primarily as a result of ~~our Europe operations.~~(i) a 0.4% increase in personnel costs excluding prior year nonrecurring items related to shared PGW corporate costs, and (ii) a 0.2% increase in freight expenses. Refer to the discussion of our segment results of operations for factors contributing to the ~~change~~changes in ~~distribution expenses for our Europe segment during the third quarter of 2017 compared to the prior year period.~~

~~Selling, General and Administrative Expenses.~~ As a percentage of revenue, selling, general and administrative ("SG&A") expenses for the three months ended September 30, 2017 increased to 11.8% from 11.7% in the same period of 2016. The increase in SG&A expenses primarily reflected a 0.2% unfavorable mix impact, as we generated a higher proportion of our revenue in our Europe segment, which has higher SG&A expenses as a percentage of ~~revenue. This increase in SG&A expenses was partially offset~~revenue by ~~a 0.2% decrease attributable~~segment for the three months ended March 31, 2018 compared to ~~our North America segment, primarily as a result of PGW corporate expenses that we are no longer incurring after~~ the ~~sale of the glass manufacturing business.~~three months ended March 31, 2017.

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,
	2017			2016			Change			2018			2017			Change
Restructuring expenses	$	1,545	⁽¹⁾	$	4,249	⁽²⁾	$	(2,704	)	$	2,037	⁽¹⁾	$	315		$	1,722
Acquisition related expenses	3,377		⁽³⁾	2,674		⁽⁴⁾	703			2,017		⁽²⁾	2,613		⁽³⁾	(596		)
Total restructuring and acquisition related expenses	$	4,922		$	6,923		$	(2,001	)	$	4,054		$	2,928		$	1,126


(1)	Restructuring expenses for the three months ended ~~September 30, 2017 consisted of $1 million for each of our Europe and Specialty segments,~~March 31, 2018 primarily related to the integration of ~~acquired businesses in these segments. These~~our acquisition of Andrew Page. This integration ~~activities~~ included the closure of duplicate facilities and termination of employees.

(2)

~~Restructuring~~Acquisition related expenses for the ~~quarter~~three months ended ~~September 30, 2016~~March 31, 2018 included $2$1 million of costs for ~~each~~our pending acquisition of ~~our Specialty~~Stahlgruber. The remaining acquisition related costs for the three months ended March 31, 2018 consisted of external costs for completed acquisitions; pending acquisitions as of March 31, 2018; and ~~North America segments. These costs~~potential acquisitions that were ~~primarily related to the closure of duplicate facilities and termination of employees in connection with the integration of recent acquisitions into our existing business.~~terminated.

(3)

Acquisition related expenses for the first quarter ~~ended September 30,~~of 2017 included $2 million ~~of costs for our acquisition of Andrew Page, primarily~~ related to ~~legal and other professional fees associated with the ongoing CMA review. The remaining acquisition related costs for the quarter ended September 30, 2017 consisted of external costs for completed~~our North America acquisitions, ~~and acquisitions that were pending as of September 30, 2017.~~


~~(4)~~	~~Acquisition related expenses for the quarter ended September 30, 2016~~ primarily related to acquisitions that were ~~pending~~not completed as of ~~September 30, 2016.~~March 31, 2017, and $1 million related to our Europe acquisitions.

See Note 5,6, "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):


	Three Months Ended							Three Months Ended
	September 30,							March 31,
	2017		2016		Change			2018		2017		Change
Depreciation	$	31,179	$	27,939	$	3,240	⁽¹⁾	$	32,265	$	25,393	$	6,872	⁽¹⁾
Amortization	25,698		25,040		658		⁽²⁾	24,193		23,263		930
Total depreciation and amortization	$	56,877	$	52,979	$	3,898		$	56,458	$	48,656	$	7,802

(1)

The ~~increase~~increase in depreciation expense primarily reflected $1an increase of $6 million in our Europe segment, composed of (i) a $4 million increase in our Eastern Europe operations, primarily due to a $3 million measurement period adjustment that reduced depreciation expense ~~for property and equipment~~ recorded in the first quarter of 2017 related to our valuation procedures for our acquisition of ~~Andrew Page. The remaining~~Rhiag, and (ii) a $2 million increase ~~in depreciation expense was~~related to the impact of foreign currency translation, primarily ~~a result of our Europe and North America segments~~ due to ~~property and equipment recorded for acquisitions as well as capital expenditures.~~


~~(2)~~	~~The increase in amortization expense was primarily related to our Europe segment as a result of an increase~~increases in the euro and pound sterling exchange ~~rate for~~rates during the ~~third quarter~~first three months of ~~2017~~2018 compared to the prior year period.

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

Other expense, net for the three months ended September 30, 2016 $ 23,751

Increase (decrease) due to:
Interest expense, net 461

Gain on bargain purchase (913 )
⁽¹⁾
Other income, net (2,097 )
Net decrease (2,549 )
Other expense, net for the three months ended September 30, 2017 $ 21,202



Other expense, net for the three months ended March 31, 2017	$	22,942
Increase (decrease) due to:
Interest expense, net	4,527			⁽¹⁾
Other income, net	(1,836		)
Net increase	2,691
Other expense, net for the three months ended March 31, 2018	$	25,633

(1)

~~In October 2016, we acquired Andrew Page out~~Additional interest primarily related to (i) higher interest rates on borrowings under our senior secured credit agreement compared to the prior year quarter, (ii) higher outstanding debt during the first quarter of ~~receivership. We recorded~~2018 compared to the prior year period, and (iii) a ~~gain on bargain purchase~~$1 million impact of ~~$8 million~~foreign currency translation, primarily related to an increase in the ~~fourth quarter of 2016, as~~euro exchange rate during the ~~fair value of the net assets acquired exceeded the purchase price. During the~~first three months ~~ended September 30, 2017, we increased~~of 2018 compared to the ~~gain on bargain purchase for this acquisition by $1 million as a result of changes to our estimate of the fair value of net assets acquired.~~prior year period.

Provision for Income Taxes. Our effective income tax rate was ~~32.7%~~24.7% for the three months ended ~~September 30, 2017,~~March 31, 2018, compared to ~~31.2%~~33.9% for the three months ended ~~September 30, 2016.~~March 31, 2017. The ~~increase~~decrease was primarily attributable to the reduction of the U.S. federal statutory income tax rate from 35% to 21% as a result of the enactment of the Tax Act in ~~the~~December 2017. The effective tax rate ~~primarily reflected~~also reflects the impact of favorable discrete items of $2approximately $3 million ~~and $5 million~~ for each of the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, for excess tax benefits from stock-based payments. The ~~year~~quarter over ~~year~~quarter change in these amounts increased the effective tax rate by ~~2.3%~~0.2% compared to the prior ~~year period. Partially offsetting this increase was a decrease to our effective tax rate as a result of changes in our expected geographic blend of earnings.~~year.

Equity in Earnings ~~(Loss)~~ of Unconsolidated Subsidiaries.Equity in earnings of unconsolidated subsidiaries for the three months ended ~~September 30, 2017~~March 31, 2018 primarily related to our investment in Mekonomen. We are recording our equity in the net earnings of Mekonomen on a one quarter lag, therefore, the equity in earnings related to Mekonomen for the three months ended March 31, 2017 included one month of activity as we acquired our equity interest in Mekonomen on December 1, 2016.

Foreign Currency ~~Impact~~Impact.. We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the ~~third quarter of 2016,~~first three months ended March 31, 2017, the Czech koruna, euro, pound sterling and Canadian dollar rates used to translate the ~~2017~~2018 statements of income increased by ~~5.3%~~22.7%, 15.4%, 12.3% and ~~4.1%~~4.6%, ~~respectively, while the pound sterling rate was relatively flat compared to the third quarter of the prior year.~~respectively. The translation effect of the change in these currencies against the U.S. dollar and realized and unrealized currency losses for the third quarter of 2017 did not have a significant effect on diluted earnings per share from continuing operations relative to the prior year.

~~Income from Discontinued Operations, net of tax~~. Income from discontinued operations, net of tax totaled $13 million for the three months ended September 30, 2016 and represented the automotive glass manufacturing business of PGW, which we acquired in April 2016. We sold this business on March 1, 2017, and thus there was no income from discontinued operations for the three months ended September 30, 2017.

~~Nine Months Ended~~ ~~September 30, 2017~~ ~~Compared to Nine Months Ended~~ ~~September 30, 2016~~

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

Nine Months Ended
September 30, Percentage Change in Revenue
2017 2016 Organic Acquisition Foreign Exchange Total Change
Parts & services revenue $ 6,872,581
$ 6,100,263
3.8 % 10.1 % (1.3 )% 12.7 %
Other revenue 394,473
333,362
17.9 % 0.5 % (0.1 )% 18.3 %
Total revenue $ 7,267,054
$ 6,433,625
4.5 % 9.6 % (1.2 )% 13.0 %
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 12.7% represented increases in segment revenue of 6.7% in North America, 24.4% in Europe, and 5.2% in Specialty. The increase in other revenue of 18.3% primarily consisted of a $60 million organic increase in other revenue, which was largely attributable to our North America segment. Refer to the discussion of our segment results of operations for factors contributing to the change in revenue during the nine months ended September 30, 2017 compared to the prior year period.

~~Cost of Goods Sold~~. Cost of goods sold remained flat at 60.8% of revenue for the nine months ended September 30, 2017 and 2016. Cost of goods sold decreased 0.4% as a result of our North America segment, primarily related to our salvage operations. Offsetting this decrease were roughly equal increases in cost of goods sold in our Specialty and Europe segments. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

~~Facility and Warehouse Expenses. As a percentage of revenue, facility and warehouse expenses remained flat at~~ ~~8.0%~~ for the nine months ended September 30, 2017 and 2016. Facility and warehouse expenses included a number of individually insignificant fluctuations as a percentage of revenue across all of our segments that netted to no year over year change.

~~Distribution Expenses.~~ As a percentage of revenue, distribution expenses increased to 8.0% in the nine months ended September 30, 2017 from 7.9% in the comparable prior year period. The increase reflected a number of individually insignificant fluctuations in distribution expense as a percentage of revenue across all of our segments.

~~Selling, General and Administrative Expenses.~~ SG&A expenses for the nine months ended September 30, 2017 increased to 11.5% from 11.3% in the comparable prior year period, primarily as a result of our Europe segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

~~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,
2017 2016 Change
Restructuring expenses $ 2,241
⁽¹⁾
$ 12,436
⁽²⁾
$ (10,195 )
Acquisition related expenses 8,130
⁽³⁾
18,378
⁽⁴⁾
(10,248 )
Total restructuring and acquisition related expenses $ 10,371
$ 30,814
$ (20,443 )


~~(1)~~	Restructuring expenses of $1 million in each of our Specialty and Europe segments for the nine months ended September 30, 2017 were primarily related to the integration of acquired businesses in these segments. These integration activities included the closure of duplicate facilities and termination of employees.


~~(2)~~	Restructuring expenses of $8 million, $3 million and $1 million for the nine months ended September 30, 2016 related to the integration of acquired businesses in our Specialty, North America and Europe segments, respectively. These integration activities included the closure of duplicate facilities and termination of employees.

~~(3)~~

Acquisition related expenses for the nine months ended September 30, 2017 included $4 million of costs for our acquisition of Andrew Page, primarily related to legal and other professional fees associated with the ongoing CMA review. The remaining acquisition related costs for the nine months ended September 30, 2017 consisted of external costs for completed acquisitions and acquisitions that were pending as of September 30, 2017.


~~(4)~~	Acquisition related expenses for the nine months ended September 30, 2016 reflected $11 million and $4 million related to the acquisitions of Rhiag and PGW, respectively. The remaining expense was related to other completed acquisitions and acquisitions that were pending as of September 30, 2016.

See Note 5, "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
September 30,
2017 2016 Change
Depreciation $ 85,547
$ 78,977
$ 6,570
⁽¹⁾
Amortization 73,631
58,191
15,440
⁽²⁾
Total depreciation and amortization $ 159,178
$ 137,168
$ 22,010


~~(1)~~	The increase in depreciation expense primarily reflected $4 million and $1 million of incremental depreciation expense for property and equipment recorded for our acquisitions of Andrew Page and Rhiag, respectively.


~~(2)~~	~~The increase primarily reflected incremental amortization expense of $11 million and $2 million related to intangibles recorded for our acquisitions of Rhiag and PGW, respectively.~~

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

Other expense, net for the nine months ended September 30, 2016 $ 67,949

Increase (decrease) due to:
Interest expense, net 9,804
⁽¹⁾
Loss on debt extinguishment (26,650 )
⁽²⁾
Gains on foreign exchange contracts - acquisition related 18,342
⁽³⁾
Gains on bargain purchases (3,990 )
⁽⁴⁾
Other expense, net (2,523 )
Net decrease (5,017 )
Other expense, net for the nine months ended September 30, 2017 $ 62,932


~~(1)~~	~~Additional interest primarily related to borrowings used to fund our acquisitions of Rhiag and PGW.~~


~~(2)~~	During the first quarter of 2016, we incurred a $24 million loss on debt extinguishment as a result of our early payment of Rhiag debt assumed as part of the acquisition, and we incurred a $3 million loss on debt extinguishment as a result of our January 2016 amendment to our senior secured credit agreement.


~~(3)~~	~~In March 2016, we entered into~~ foreign currency forward contracts to acquire a total of €588 million used to fund the purchase price of the Rhiag acquisition. The rates under the foreign currency forwards were favorable to the spot rate on the date the funds were drawn to complete the acquisition, and as a result, these derivatives contracts generated a gain of $18 million.

~~(4)~~

In October 2016, we acquired Andrew Page out of receivership. We recorded a gain on bargain purchase of $8 million in the fourth quarter of 2016, as the fair value of the net assets acquired exceeded the purchase price. During the nine months ended September 30, 2017, we increased the gain on bargain purchase for this acquisition by $3 million as a result of changes to our estimate of the fair value of net assets acquired. We also recorded a gain on bargain purchase for another acquisition in Europe completed in the second quarter of 2017, as the fair value of the net assets acquired exceeded the purchase price.

~~Provision for Income Taxes~~. Our effective income tax rate was 33.5% for the nine months ended September 30, 2017, compared to 32.5% for the nine months ended September 30, 2016. The increase in our effective tax rate primarily reflected the impact of favorable discrete items of $7 million and $11 million for the nine months ended September 30, 2017 and 2016, respectively, for excess tax benefits from stock-based payments. The year over year change in these amounts increased the effective tax rate by 1.0% compared to the prior year. Excluding the impact of discrete items, our annual effective tax rate has been close to 35% over the last three years. The tax rate will fluctuate from year to year based on the geographic mix of earnings and changes in tax laws, but absent significant movements in either of these factors, we expect our annual effective rate to hold near 35%.

~~Equity in Earnings (Loss) of Unconsolidated Subsidiaries.~~ ~~Equity in earnings of unconsolidated subsidiaries for the nine months ended September 30, 2017 primarily related to our investment in Mekonomen.~~

~~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 nine months ended September 30, 2016, the pound sterling rate used to translate the 2017 statements of income declined by 8.4%, while the Canadian dollar rate increased by 1.1% compared to the first nine months of the prior year; the euro rate was relatively flat compared to the first nine months of the prior year. The translation effect of the change in these currencies against the U.S. dollar and realized and unrealized currency losses for the first ~~nine~~three months of ~~2017~~2018 resulted in a $0.02 ~~negative~~positive effect on diluted earnings per share from continuing operations relative to the prior ~~year.~~year first quarter.

~~Income~~Net Loss from Discontinued ~~Operations, net of tax~~Operations. . During the ~~nine~~three months ended ~~September 30,~~March 31, 2017, we recorded a net loss from discontinued operations ~~net of tax~~ totaling $5 ~~million, of which $4 million was for the loss on sale of~~million; we had no discontinued operations ~~compared to income from discontinued operations, net of tax totaling $18 million for~~in the ~~nine months ended September 30, 2016.~~current year period. Discontinued operations for 2017 ~~and 2016~~ represents the automotive glass manufacturing business of PGW, which we ~~acquired in April 2016 and~~ sold on March 1, 2017.

Net Loss Attributable to Noncontrolling Interest. During the three months ended March 31, 2018, we allocated a loss of $0.2 million to the noncontrolling interest of an immaterial subsidiary; we reported no income or loss attributable to the noncontrolling interest in the prior year period.

Results of Operations—Segment Reporting

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

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

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



	Three Months Ended March 31,
	2018			% of Total Segment Revenue	2017			% of Total Segment Revenue
Third Party Revenue
North America	$	1,329,660			$	1,208,047
Europe	1,040,430				820,897
Specialty	350,674				313,899
Total third party revenue	$	2,720,764			$	2,342,843
Total Revenue
North America	$	1,329,843			$	1,208,240
Europe	1,040,430				820,897
Specialty	351,792				314,934
Eliminations	(1,301		)		(1,228		)
Total revenue	$	2,720,764			$	2,342,843
Segment EBITDA
North America	$	177,713		13.4%	$	176,135		14.6%
Europe	75,534			7.3%	78,694			9.6%
Specialty	41,969			11.9%	35,441			11.3%

Three Months Ended September 30, Nine Months Ended September 30,
2017 % of Total Segment Revenue
2016 ⁽¹⁾
% of Total Segment Revenue 2017 % of Total Segment Revenue
2016 ⁽¹⁾
% of Total Segment Revenue
Third Party Revenue
North America $ 1,181,756
$ 1,118,421
$ 3,596,108
$ 3,336,240

Europe 954,522
770,219
2,665,170
2,141,186

Specialty 329,522
318,703
1,005,776
956,199

Total third party revenue $ 2,465,800
$ 2,207,343
$ 7,267,054
$ 6,433,625

Total Revenue
North America $ 1,181,943
$ 1,118,621
$ 3,596,697
$ 3,336,847

Europe 954,522
770,219
2,665,170
2,141,186

Specialty 330,594
319,672
1,008,998
959,213

Eliminations (1,259 ) (1,169 ) (3,811 ) (3,621 )
Total revenue $ 2,465,800
$ 2,207,343
$ 7,267,054
$ 6,433,625

Segment EBITDA
North America $ 152,627
12.9% $ 139,738
12.5% $ 502,494
14.0% $ 451,504
13.5%
Europe 79,294
8.3% 72,586
9.4% 241,537
9.1% 220,066
10.3%
Specialty 35,114
10.6% 34,115
10.7% 119,133
11.8% 111,083
11.6%


~~(1)~~	In the first quarter of 2017, we realigned a portion of our North America operations under our Specialty segment. Prior year results have been recast to reflect the shift in reporting structure in order to present segment results on a comparable basis.

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 general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities, other acquisition related gains and losses and equity in earnings ~~(loss)~~ of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding noncontrolling interest, discontinued operations, depreciation, amortization, interest ~~(which includes loss on debt extinguishment)~~ and income tax expense. See Note ~~14,~~15, "Segment and Geographic ~~Information"~~Information" to the unaudited condensed consolidated financial statements in Part I, Item I1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to ~~Net Income.~~net income.

Three Months Ended~~September 30, 2017~~ March 31, 2018 Compared to Three Months Ended~~September 30, 2016~~ March 31, 2017

North America

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


	Three Months Ended September 30,				Percentage Change in Revenue									Three Months Ended March 31,				Percentage Change in Revenue
North America	2017		2016		Organic			Acquisition ⁽³⁾		Foreign Exchange ⁽⁴⁾		Total Change		2018		2017		Organic				Acquisition ⁽³⁾		Foreign Exchange		Total Change
Parts & services revenue	$	1,051,470	$	1,007,801	2.5	%	⁽¹⁾	1.6	%	0.2	%	4.3	%	$	1,172,585	$	1,079,875	6.5	%	⁽¹	⁾	1.8	%	0.3	%	8.6	%
Other revenue	130,286		110,620		17.1	%	⁽²⁾	0.6	%	0.1	%	17.8	%	157,075		128,172		21.8	%	⁽²	⁾	0.6	%	0.1	%	22.6	%
Total third party revenue	$	1,181,756	$	1,118,421	3.9	%		1.5	%	0.2	%	5.7	%	$	1,329,660	$	1,208,047	8.1	%			1.6	%	0.3	%	10.1	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

Organic growth in parts and services revenue was largely attributable to increased sales volumes in our wholesale operations, primarily driven by (i) severe winter weather conditions in ~~our salvage operations. Within our salvage operations,~~ the ~~favorable volume impact, which was primarily~~first quarter of 2018 compared to mild winter weather conditions in the prior year period, and (ii) to a lesser extent, incremental sales related to ~~mechanical parts, was a result~~an agreement signed in December 2017 for the distribution of ~~refinements to our buying algorithms. Also, an emphasis on inventorying more parts off of each car purchased contributed to an increase in the number of parts sold per vehicle.~~batteries.

~~Organic revenue growth for our North America segment on a per day basis was 4.0% as there was one fewer selling day in the third quarter of 2017 compared to the prior year period.~~


(2)	The ~~$20~~$29 million increase in other revenue primarily related to (i) a $15 million increase in revenue from scrap steel and other metals primarily due to higher prices and, to a lesser extent, increased volumes, year over year and (ii) a $5 million increase in revenue from metals found in catalytic converters (platinum, palladium, and rhodium) primarily due to higher prices year over year.


~~(3)~~	Acquisition related growth in the third quarter of 2017 reflected revenue from our acquisition of nine wholesale businesses from the beginning of the third quarter of 2016 up to the one-year anniversary of the acquisition dates.


~~(4)~~	Compared to the prior year, exchange rates increased our revenue growth by 0.2%, primarily due to the strengthening of the Canadian dollar against the U.S. dollar in the third quarter of 2017 compared to the prior year third quarter.

~~Segment EBITDA~~. Segment EBITDA increased $13 million, or 9.2%, in the third quarter of 2017 compared to the prior year third quarter. Sequential increases in scrap steel prices in our salvage and self service operations benefited gross margins and had a favorable impact of $2 million on North America Segment EBITDA and approximately half a penny positive effect on diluted earnings per share. This favorable impact resulted from the increase in scrap steel prices between the date we purchased a car, which influences the price we pay for a car, and the date we scrapped a car, which influences the price we receive for scrapping a car.

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

North America Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2016 12.5 %
Increase (decrease) due to:
Change in gross margin 0.2 % (1)
Change in segment operating expenses 0.1 % (2)
Change in other expenses 0.1 %
Segment EBITDA for the three months ended September 30, 2017 12.9 %
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 reflected a 1.0% favorable impact related to our salvage operations, primarily attributable to raising revenue per car by a greater rate than car costs. Revenue per car improved due to higher volumes of parts sold per car, which was a result of refinements to our buying algorithms, an emphasis on inventorying more parts off of each car purchased, and an increase in the number of days we hold each car before it is scrapped. This improvement was partially offset by an unfavorable impact of 1.0% on North America gross margin attributable to our aftermarket operations. Within our aftermarket operations, we experienced declines in gross margin primarily as a result of higher input costs from suppliers as well as decreases in net prices caused by higher customer discounts. The remaining change in gross margin was attributable to individually insignificant fluctuations in gross margin across our other North America operations.

~~(2)~~

The decrease in segment operating expenses as a percentage of revenue primarily reflected a decrease of 0.4% in segment operating costs attributable to shared PGW corporate expenses incurred during the third quarter of 2016; these costs, which were primarily SG&A costs, ceased being incurred upon the closing of the sale of the glass manufacturing business on March 1, 2017. Partially offsetting this decrease was an increase of 0.3% attributable to a number of individually insignificant increases in distribution costs, including vehicle, freight and fuel expenses, as a percentage of revenue.

~~Europe~~

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

Three Months Ended September 30, Percentage Change in Revenue
Europe 2017 2016
Organic ⁽¹⁾

Acquisition ⁽²⁾

Foreign Exchange⁽³⁾
Total Change
Parts & services revenue $ 952,765
$ 769,332
4.4 % 16.5 % 3.0 % 23.8 %
Other revenue 1,757
887
65.6 % 30.3 % 2.2 % 98.1%
Total third party revenue $ 954,522
$ 770,219
4.5 % 16.5 % 3.0 % 23.9 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1)~~

Parts and services organic revenue growth is mainly attributable to our Eastern Europe and, to a lesser extent, U.K. operations as a result of growth from both existing locations and new branches. In Eastern Europe and the U.K., we added 36 and 5 branches, respectively, since the third quarter of 2016, and organic revenue growth includes revenue from those locations. Revenue at our existing locations grew primarily as a result of increased volumes. Organic revenue growth for our Europe segment on a per day basis was 5.6%, as there was one fewer selling day in the third quarter of 2017 compared to the prior year period.


~~(2)~~	Acquisition related growth for the third quarter of 2017 included $47 million, or 6.1%, from our acquisition of Andrew Page. The remainder of our acquired revenue growth included revenue from our acquisitions of 20 wholesale businesses in our Europe segment since the beginning of the third quarter of 2016 through the one-year anniversary of the acquisitions.


~~(3)~~	Compared to the prior year, exchange rates increased our revenue growth by $23 million, or 3.0%, primarily due to the strengthening of the euro against the U.S. dollar in the third quarter of 2017 relative to the third quarter of 2016.

~~Segment EBITDA.~~ Segment EBITDA increased $7 million, or 9.2%, in the third quarter of 2017 compared to the prior year third quarter. Our Europe Segment EBITDA includes a positive year over year impact of $3 million related to the translation of local currency results into U.S. dollars at higher exchange rates than those experienced during 2016. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA increased by $4 million, or 5.8%, compared to the third quarter of the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations - Consolidated section above for further detail regarding foreign currency impact on our results for the quarter ended September 30, 2017.

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

Europe Percentage of Total Segment Revenue
Segment EBITDA for the three months ended September 30, 2016 9.4 %
Increase (decrease) due to:
Change in gross margin 0.2 % (1)
Change in segment operating expenses (1.4 )% (2)
Change in other expense, net 0.1 %
Segment EBITDA for the three months ended September 30, 2017 8.3 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Rhiag is reflected in the full quarterly results for both 2016 and 2017, and therefore, the mix impacts on gross margin and operating expenses related to this acquisition (refer to the nine months discussion) are no longer a factor in the changes.

~~(1)~~

The increase in gross margin was primarily due to (i) a 0.6% increase related to our Benelux operations as a result of increases in private label sales and (ii) a 0.3% favorable impact related to an increase in supplier rebates as a result of centralized procurement for our Europe segment. Partially offsetting these gross margin improvements was (i) a 0.6% unfavorable impact due to our U.K. operations, primarily as a result of incremental costs related to the Tamworth distribution facility and (ii) a 0.3% unfavorable impact due to our Rhiag operations, primarily as a result of acquisitions completed during the second and third quarters of 2017, which have lower gross margins than our other

~~Rhiag operations. The remaining change in gross margin was attributable to individually insignificant fluctuations in gross margin across our other Europe operations.~~

~~(2)~~

The increase in segment operating expenses as a percentage of revenue was primarily due to a 0.7% increase as a result of the acquisition of Andrew Page, which has higher operating expenses as a percentage of revenue than our other Europe operations. While we have closed the Andrew Page acquisition and are consolidating its results, we are not permitted to integrate this acquisition with our existing U.K. operations until we receive final approval from the CMA. Segment operating expenses as a percentage of revenue increased 0.6% as a result of increased personnel costs in our Benelux operations, primarily related to distribution.

~~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 2017 2016
Organic ⁽¹⁾
Acquisition Foreign Exchange Total Change
Parts & services revenue $ 329,522
$ 318,703
2.7 % 0.2 % 0.5 % 3.4 %
Other revenue —
—
— % — % — % — %
Total third party revenue $ 329,522
$ 318,703
2.7 % 0.2 % 0.5 % 3.4 %
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 & services revenue was primarily driven by increased sales volumes of Truck, Towing and RV parts sales. This organic growth was fueled by favorable economic conditions in most of our primary selling regions, as well as favorable trends in light truck and RV unit sales. Organic revenue growth for our Specialty segment on a per day basis was 4.4%, as there was one fewer selling day in the third quarter of 2017 compared to the prior year period.

~~Segment EBITDA.~~ ~~Segment EBITDA increased $1 million, or 2.9%, in the third quarter of 2017 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, 2016 10.7 %
Increase (decrease) due to:
Change in gross margin 0.1 % (1)
Change in segment operating expenses 0.1 % (2)
Change in other expense, net (0.3 )% (3)
Segment EBITDA for the three months ended September 30, 2017 10.6 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


~~(1)~~	~~The increase in gross margin reflected a favorable impact of 0.6% due to customer and product mix, partially offset by a 0.6% unfavorable impact primarily related to decreased volume rebates.~~


~~(2)~~	The decrease in segment operating expenses reflected favorable facilities and warehouse expenses of 0.3% primarily related to the integration of Coast facilities, partially offset by a 0.2% unfavorable impact from selling and marketing expenses primarily due to the timing of advertising expenses.


~~(3)~~	~~The change in other expense, net primarily reflected foreign exchange losses and decreases in other miscellaneous income compared to the prior year period.~~

~~Nine Months Ended~~ ~~September 30, 2017~~ ~~Compared to Nine Months Ended~~ ~~September 30, 2016~~

~~North America~~

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

Nine Months Ended September 30, Percentage Change in Revenue
North America 2017 2016 Organic
Acquisition ⁽³⁾
Foreign Exchange Total Change
Parts & services revenue $ 3,207,001
$ 3,006,066
2.4 %
⁽¹⁾
4.2 % 0.1 % 6.7 %
Other revenue 389,107
330,174
17.6 %
⁽²⁾
0.3 % (0.0 )% 17.8 %
Total third party revenue $ 3,596,108
$ 3,336,240
3.9 % 3.8 % 0.1 % 7.8 %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

~~(1)~~

Organic growth in parts and services revenue was largely attributable to increased sales volumes in our wholesale operations, primarily in our salvage operations. Within our salvage operations, the favorable volume impact, which was primarily related to mechanical parts, was a result of refinements to our buying algorithms. Also, an emphasis on inventorying more parts off of each car purchased contributed to the increase in the number of parts sold per vehicle. Similar to the prior year, we experienced mild winter weather conditions in sections of North America. While we were able to increase parts and services revenue over the prior year, we believe the weather conditions contributed to a lower growth rate than was generated in prior years. Organic revenue growth for our North America segment on a per day basis was 2.9% as there was one fewer selling day in the first nine months of 2017 compared to the prior year period.

~~(2)~~

~~The $59 million increase in other revenue primarily related to (i) a $43~~$20 million increase in revenue from scrap steel and other metals primarily related to higher prices and, to a lesser extent, increased volumes, year over year and (ii) an ~~$18~~$8 million increase in revenue from metals found in catalytic converters (platinum, palladium, and rhodium) primarily due to higher prices and, to a lesser extent, increased volumes, year over year.


(3)	Acquisition related growth in the first ~~nine months~~quarter of ~~2017 included $92 million, or 2.8%, from our PGW autoglass acquisition. The remainder of our acquired revenue growth~~2018 reflected revenue from our acquisition of ~~nine~~seven wholesale businesses from the beginning of ~~2016~~the first quarter of 2017 up to the one-year anniversary of the acquisition dates.

Segment EBITDA. Segment EBITDA increased ~~$51~~$2 million, or ~~11.3%~~0.9%, in the first ~~nine months~~quarter of ~~2017~~2018 compared to the prior year ~~period.~~first quarter. Sequential increases in scrap steel prices in our salvage and self service operations ~~benefited gross margins and~~ had a favorable impact of ~~$12~~$13 million on North America Segment EBITDA, ~~and approximately a $0.03~~of which $7 million was incremental to the positive ~~effect~~impact on ~~diluted earnings per share.~~the first quarter of 2017. This favorable impact resulted from the increase in scrap steel prices between the date we purchased a ~~car,~~vehicle, which influences the price we pay for a ~~car,~~vehicle, and the date we scrapped a ~~car,~~vehicle, which influences the price we receive for scrapping a ~~car.~~vehicle.

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


North America	Percentage of Total Segment Revenue			Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2016	13.5	%
Increase (decrease) due to:
Segment EBITDA for the three months ended March 31, 2017				14.6	%
(Decrease) increase due to:
Change in gross margin	0.7	%	(1)	(1.1	)%	(1)
Change in segment operating expenses	(0.3	)%	(2)	(0.4	)%	(2)
Change in other expenses	0.1	%
Segment EBITDA for the nine months ended September 30, 2017	14.0	%
Change in other expense, net				0.3	%	(3)
Segment EBITDA for the three months ended March 31, 2018				13.4	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

The ~~improvement~~decrease in gross margin reflected ~~a 1.2% favorable impact~~unfavorable impacts of 0.7% and 0.3% from our aftermarket and self service operations, respectively. The decrease in ~~our salvage operations,~~aftermarket gross margin is primarily attributable to ~~raising revenue per car by~~(i) higher input costs from suppliers, as net selling prices did not increase to match the increase in input costs, and (ii) a ~~greater rate than car costs. Revenue per car improved due~~shift in our sales toward lower margin products compared to the prior year first quarter. The decrease in self service gross margin is primarily attributable to higher ~~volumes of parts sold per~~ car ~~which was~~costs as a result of ~~refinements~~increases in scrap prices. While higher car costs can produce more gross margin dollars, these cars tend to ~~our buying algorithms, an emphasis~~have a dilutive effect on ~~inventorying more~~the gross margin percentage as parts ~~off of each~~revenue will typically increase at a lesser rate than the rise in average car purchased, and an increase in the number of days we hold each car before it is scrapped. This improvement was partially offset by an unfavorable impact of 0.7% attributable to our aftermarket operations. Within our aftermarketcost.

operations, we experienced a decline in gross margin primarily as a result of higher input costs from suppliers as well as decreases in net prices caused by higher customer discounts, partially offset by a 0.3% favorable impact on North America gross margin as a result of our procurement initiatives in our aftermarket operations, which reduced our product costs.


(2)	The increase in segment operating expenses as a percentage of revenue reflected (i) a 0.4% and 0.2% increase in freight and vehicle expenses, respectively, primarily ~~reflected an increase~~due to higher use of ~~0.2%~~third party freight and increased vehicle

rental leases to handle incremental volumes, (ii) a 0.3% increase in personnel costs primarily due to increased wages, overtime and third party labor costs to manage the increase in sales volumes, partially offset by (iii) a 0.5% decrease in personnel costs primarily attributable to shared PGW corporate personnel expenses incurred during the first quarter of 2017; these shared costs ceased being incurred upon the closing of the sale of the glass manufacturing business on March 1, 2017.


(3)	The decrease in ~~facility and warehouse costs attributable~~other expense, net was primarily due to a ~~number~~nonrecurring asset write-off recorded in the first quarter of ~~individually insignificant increases in facility and warehouse costs as a percentage of revenue.~~2017.

Europe

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


	Nine Months Ended September 30,				Percentage Change in Revenue								Three Months Ended March 31,				Percentage Change in Revenue
Europe	2017		2016		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange⁽³⁾		Total Change		2018		2017		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change
Parts & services revenue	$	2,659,804	$	2,137,998	5.3	%	22.9	%	(3.8	)%	24.4	%	$	1,037,046	$	819,167	1.2	%	11.3	%	14.1	%	26.6	%
Other revenue	5,366		3,188		49.5	%	24.8	%	(6.0	)%	68.3	%	3,384		1,730		66.6	%	18.1	%	10.9	%	95.6	%
Total third party revenue	$	2,665,170	$	2,141,186	5.4	%	22.9	%	(3.8	)%	24.5	%	$	1,040,430	$	820,897	1.3	%	11.3	%	14.1	%	26.7	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

Parts and services revenue grew organically across ~~all of~~ our aftermarket ~~business units~~businesses in Europe from both existing locations and new branches. ~~In Eastern Europe and the U.K., we added 56 and 16 branches, respectively, since the beginning of the prior year, and organic revenue growth includes revenue from those locations.~~ Revenue at our existing locations grew primarily as a result of increased ~~volumes.~~volumes in our Benelux operations as a result of favorable weather conditions and favorable market conditions. In Eastern Europe, we added 41 branches since the beginning of the first quarter of 2017, and organic revenue growth included revenue from those locations. Organic revenue growth ~~for~~in our ~~Europe segment on a per day basis~~U.K. operations was ~~5.7%, as there was one fewer selling day in the first nine months of 2017~~essentially flat compared to the prior year ~~period.~~primarily due to replenishment issues and related stock availability at our national distribution center and branches that led to some temporary service issues, which had an unfavorable impact on revenue. Also, harsh winter weather, which closed certain branches for a couple of days, and the timing of the Easter holiday, had a negative impact on revenue.

(2)

Acquisition related growth for the ~~first nine~~three months ~~of 2017~~ended March 31, 2018 included ~~$216~~$35 million, or ~~10.1%~~4.3%, and $31 million, or 3.8%, from our ~~acquisition~~acquisitions of ~~Rhiag~~aftermarket parts distribution businesses in Belgium and ~~$140 million, or 6.5%, from our acquisition of Andrew Page.~~Poland, respectively. The remainder of our acquired revenue growth included revenue from our acquisitions of 2211 wholesale businesses in our Europe segment since the beginning of ~~2016~~2017 through the one-year anniversary of the acquisitions.


(3)	Compared to the prior year, exchange rates ~~reduced~~increased our revenue growth by ~~$82~~$116 million, or ~~3.8%~~14.1%, primarily due to the ~~stronger~~weaker U.S. dollar against the euro, pound sterling inand Czech koruna during the first ~~nine~~three months of ~~2017~~2018 relative to the ~~prior year period.~~comparable period of 2017.

Segment ~~EBITDA.~~EBITDA. Segment EBITDA ~~increased $21~~decreased $3 million or ~~9.8%, for~~4.0% in the ~~nine months ended September 30, 2017~~first quarter of 2018 compared to the ~~prior year period.~~first quarter of 2017. Our Europe Segment EBITDA included a ~~negative~~positive year over year impact of $9$12 million related to the translation of local currency results into U.S. dollars at ~~lower~~higher exchange rates than those experienced during ~~2016.~~2017. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA ~~increased~~decreased by ~~$30~~$15 million, or ~~13.9%~~18.9%, compared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations - Consolidated section above for further detail regarding foreign currency impact on our results for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018.

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


Europe	Percentage of Total Segment Revenue			Percentage of Total Segment Revenue
Segment EBITDA for the nine months ended September 30, 2016	10.3	%
(Decrease) increase due to:
Segment EBITDA for the three months ended March 31, 2017				9.6	%
Decrease due to:
Change in gross margin	(0.4	)%	(1)	(1.1	)%	(1)
Change in segment operating expenses	(1.0	)%	(2)	(1.2	)%	(2)
Change in other expense, net	0.2	%
Segment EBITDA for the nine months ended September 30, 2017	9.1	%
Segment EBITDA for the three months ended March 31, 2018				7.3	%
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 was due to (i) a ~~0.4%~~1.6% decrease due to our U.K. operations primarily as a result of ~~incremental~~the national distribution center operational issues noted in the revenue discussion above that led to increased labor costs to manually stock and receive product and higher customer incentives, (ii) a 0.5% net decrease due to mix related to our acquisition of an aftermarket parts distribution business in Poland during the ~~Tamworth~~third quarter of 2017, partially offset by (iii) a 0.7% increase in gross margin in our Benelux operations primarily due to increased private label sales, which have higher gross margins, and the ongoing move from a three-step to a two-step distribution ~~facility, (ii)~~model and (iv) a ~~0.3% unfavorable mix~~0.4% increase due to a favorable impact related to an increase in supplier rebates as a result of ~~generating a higher proportion of~~centralized procurement for our ~~revenue from our Rhiag operations, which have lower gross margins than our~~Europe segment.

other Europe operations, and (iii) a 0.3% unfavorable impact due to our Rhiag operations, primarily related to an increase in customer rebates, partially offset by (iv) a 0.3% increase in gross margin due to our Benelux operations primarily due to increased private label sales, which have higher gross margins, and (iv) a 0.2% favorable impact related to an increase in supplier rebates as a result of centralized procurement for our Europe segment. The remaining change in gross margin was attributable to individually insignificant fluctuations in gross margin across our other Europe operations.

(2)

The increase in segment operating expenses as a percentage of revenue reflected (i) an increase of ~~0.7%~~0.9% in ~~operating~~personnel expenses due to increased headcount as ~~a result of the acquisition of Andrew Page, which has higher operating expenses as a percentage of revenue than our other Europe operations~~new branches were opened and, ~~(ii) an increase of 0.4% in operating expenses~~ in our Benelux operations, the transition from a three-step to two-step distribution model, which has higher SG&A costs but higher gross margins, (ii) a 0.2% increase in professional fees for new information technology projects and other system enhancements, and (iii) a 0.2% increase in facility expenses primarily due to ~~increased personnel costs related to distribution, partially offset by (iii) a 0.3% favorable mix impact due to~~repairs and maintenance expenses in our ~~acquisition~~U.K. operations and the expansion of ~~Rhiag, which has lower operating expenses as a percentage of revenue than our other Europe operations. The remaining increase~~branches in ~~segment operating expenses reflected a number of individually insignificant fluctuations in operating expenses as a percentage of revenue.~~Eastern Europe.

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	2017		2016		Organic ⁽¹⁾		Acquisition		Foreign Exchange		Total Change		2018		2017		Organic ⁽¹⁾		Acquisition ⁽²⁾		Foreign Exchange		Total Change
Parts & services revenue	$	1,005,776	$	956,199	5.0%		0.1%		0.1	%	5.2	%	$	350,674	$	313,899	0.3	%	11.0	%	0.4	%	11.7	%
Other revenue	—		—		—	%	—	%	—	%	—	%	—		—		—	%	—	%	—	%	—	%
Total third party revenue	$	1,005,776	$	956,199	5.0	%	0.1	%	0.1	%	5.2	%	$	350,674	$	313,899	0.3	%	11.0	%	0.4	%	11.7	%
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 was driven by increased sales volumes of Truck, Towing and RV parts sales. This organic growth was fueled by favorable economic conditions in most of our primary selling regions, as well as increased sales volumes of light trucks and RVs. Organic revenue growth for our Specialty segment on a per day basis was 5.5%, as there was one fewer selling day in the first nine months of 2017essentially flat compared to the prior year, ~~period.~~primarily due to volume. Parts and services revenue was negatively impacted by unfavorable weather conditions experienced across most of the U.S. throughout the first quarter of 2018. Unlike our other segments, which typically benefit from inclement weather conditions, sales in our Specialty operations were negatively impacted during such weather, both on the demand side for our RV focused products and our ability to distribute in certain markets. Further contributing to the low organic revenue growth was the effect of implementing customer and product mix rationalization decisions to improve gross margin.


(2)	Acquisition related growth in 2018 included $34 million, or 10.8%, from our acquisition of Warn. The remainder of our acquired revenue growth reflected an immaterial amount of acquired revenue from our acquisitions of three wholesale businesses from the beginning of 2017 up to the one-year anniversary of the acquisition dates.

Segment ~~EBITDA.~~ EBITDA. Segment EBITDA increased $8$7 million, or ~~7.2%~~18.4%, ~~for~~in the ~~nine months ended September 30, 2017~~first quarter of 2018 compared to the prior year ~~period.~~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, 2016	11.6	%
(Decrease) increase due to:
Segment EBITDA for the three months ended March 31, 2017				11.3	%
Increase (decrease) due to:
Change in gross margin	(1.0	)%	(1)	1.8	%	(1)
Change in segment operating expenses	1.4	%	(2)	(1.0	)%	(2)
Change in other expense, net	(0.2	)%		(0.2	)%
Segment EBITDA for the nine months ended September 30, 2017	11.8	%
Segment EBITDA for the three months ended March 31, 2018				11.9	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)

The ~~decline~~increase in gross margin ~~primarily reflected~~reflects favorable impacts of (i) 0.9% from our acquisition of Warn, which has a higher gross margin than our existing Specialty operations, (ii) 0.7% favorable impact from our initiatives to improve gross margin, which had an unfavorable impact on revenue as noted above, but benefited gross margin, and (iii) 0.4% ~~decrease~~lower product costs due to ~~higher overhead costs~~strategic purchase efforts in ~~inventory,~~the fourth quarter of 2017, which ~~is driven~~are being recognized over a turn in inventory. These favorable effects are partially offset by ~~warehouse costs for two new distribution centers~~several individually immaterial factors that became fully functional in 2016, (ii) a 0.3% decrease in overall supplier discounts as the first half of 2016 was more favorably impacted by higher volume purchase discounts from the initial stocking of the two new distribution centers, and (iii) a 0.3%had an unfavorable impact ~~related to product mix.~~of 0.2% in the aggregate.

(2)

The ~~decrease~~increase in segment operating expenses ~~reflected favorable facilities~~reflects unfavorable impacts of (i) 0.4% in personnel costs primarily as a result of a negative leverage effect, as personnel costs in our sales and marketing and warehouse ~~expenses~~functions grew at a greater rate than organic revenue in the quarter, (ii) a 0.2% nonrecurring gain we recognized in the first quarter of ~~0.8% primarily related to the integration of Coast facilities. Selling, general~~2017 when we sold an exited facility, (iii) 0.2% unfavorable vehicle and ~~administrative~~fuel expenses ~~were favorable by 0.4%~~ primarily due to ~~the ability to achieve sales growth with~~increased fuel prices, and (iv) 0.2% from our acquisition of Warn, which has higher operating expenses as a ~~consistent headcount and the realization~~percentage of ~~integration synergies. Distribution expenses were favorable by 0.2%, which also reflected Coast integration synergies through the shift from use of third party carriers to shipments through the~~revenue than our existing Specialty ~~distribution network.~~operations.

Liquidity and Capital Resources

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


	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2018		December 31, 2017		March 31, 2017
Cash and equivalents	$	275,077	$	227,400	$	258,025
Cash and cash equivalents							$	245,679	$	279,766	$	264,614
Total debt ⁽¹⁾	3,170,100		3,365,687		3,289,924		3,339,088		3,428,280		3,048,183
Current maturities ⁽²⁾	129,320		68,414		77,311		145,143		129,184		94,302
Capacity under credit facilities ⁽³⁾	2,550,000		2,550,000		2,547,000		2,850,000		2,850,000		2,550,000
Availability under credit facilities ⁽³⁾	1,338,264		1,019,112		1,177,082		1,512,671		1,395,081		1,359,806
Total liquidity (cash and equivalents plus availability under credit facilities)	1,613,341		1,246,512		1,435,107
Total liquidity (cash and cash equivalents plus availability under credit facilities)							1,758,350		1,674,847		1,624,420


(1)	Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of ~~$21~~$26 million, $24 million and ~~$26~~$23 million as of ~~September 30, 2017,~~March 31, 2018, December 31, ~~2016~~2017 and ~~September 30, 2016,~~March 31, 2017, respectively).


(2)	Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of $2$3 million, $2$3 million and $2 million as of ~~September 30, 2017,~~March 31, 2018, December 31, ~~2016~~2017 and ~~September 30, 2016,~~March 31, 2017, respectively).


(3)	Capacity under credit facilities includes our revolving credit facilities and our receivables securitization facility. Availability under credit facilities is reduced by our 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 revolving credit facilities, senior notes and aour receivables securitization facility.

As of ~~September 30, 2017,~~March 31, 2018, we had debt outstanding and additional available sources of financing as follows:

Senior secured credit facilities maturing in January ~~2021,~~2023, composed of term loans totaling $750 million ($~~705~~700 million outstanding at ~~September 30, 2017)~~March 31, 2018) and ~~$2.5~~$2.75 billion in revolving credit ($~~1.0~~1.17 billion outstanding at ~~September 30, 2017)~~March 31, 2018), bearing interest at variable rates (although a portion of this debt is hedged through interest rate swap contracts), reduced by ~~$71~~$65 million of amounts outstanding under letters of credit

U.S. Notes (2023) totaling $600 million, maturing in May 2023 and bearing interest at a 4.75% fixed rate

Euro Notes (2024) totaling ~~$591~~$616 million (€500 million), maturing in April 2024 and bearing interest at a 3.875% fixed rate

Receivables securitization facility with availability up to $100 million ($99100 million outstanding as of ~~September 30, 2017)~~March 31, 2018), maturing in November 2019 and bearing interest at variable commercial paper rates

From time to time, we may undertake financing transactions to increase our available liquidity, such as the issuance of senior notes in April 2018 related to the pending Stahlgruber acquisition and our ~~January 2016~~December 2017 amendment to our senior secured credit ~~facilities,~~facilities. Given the ~~issuance~~long-term nature of ~~€500 million of Euro Notes~~our expected investment in ~~April 2016, and~~Stahlgruber, combined with favorable interest rates, we decided to fund the ~~November 2016 amendment to our receivables securitization facility. Our financing structure, which includes our senior secured credit facilities,~~acquisition primarily through long-term, fixed rate notes. In total, we issued €1.0 billion in senior notes, consisting of €750 million 3.625% notes due 2026 and ~~receivables securitization facility,~~€250 million 4.125% notes due 2028. We believe this approach provides financial flexibility to execute our long-term growth ~~strategy.~~strategy while maintaining 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.

The enterprise value for the pending Stahlgruber acquisition is €1.5 billion, which will be financed with the proceeds from the €1.0 billion of senior notes mentioned above, the direct issuance to Stahlgruber's owner of 8,055,569 newly issued shares of LKQ common stock, and borrowings under our existing revolving credit facility.

As of ~~September 30, 2017,~~March 31, 2018, we had approximately ~~$1.3~~$1.5 billion available under our credit facilities. Combined with approximately ~~$275~~$246 million of cash and cash equivalents at ~~September 30, 2017,~~March 31, 2018, we had approximately ~~$1.6~~$1.8 billion in available

liquidity, an increase of ~~$367~~$84 million over our available liquidity as of December 31, ~~2016. The increase in available liquidity in 2017 is primarily attributable to the net proceeds from the sale of the glass manufacturing business in March for $301 million.~~2017.

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 have adequate capacity, from time to time we may need to raise additional funds through public or private financing, strategic relationships or other ~~arrangements.~~arrangements, as noted above regarding the pending Stahlgruber transaction. 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 the LIBOR or ~~CDOR,~~the Canadian Dollar Offered Rate ("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 a portion of our credit agreement borrowings, with the effect of fixing the interest rates on the respective notional amounts. In addition, in 2016, we entered into cross currency swaps that contain an interest rate swap component and a foreign currency forward contract component that, when combined with related intercompany financing arrangements, effectively convert variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. These derivative transactions are described in Note ~~10,~~11, "Derivative Instruments and Hedging Activities" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. After giving effect to these contracts, the weighted average interest rate on borrowings outstanding under our credit agreement at ~~September 30, 2017~~March 31, 2018 was ~~2.0%~~2.2%. Including our senior notes and the borrowings on our receivables securitization program, our overall weighted average interest rate on borrowings was ~~2.9%~~3.0% at ~~September 30, 2017.~~March 31, 2018.

Cash interest payments were ~~$58~~$14 million for the ~~nine~~three months ended ~~September 30, 2017, including $25 million in semi-annual interest payments as a result of our U.S. Notes and our Euro Notes. Cash interest~~March 31, 2018, but these payments will increase by approximately $26 million in the ~~fourth~~second quarter of ~~2017~~2018 as a result of ~~these~~our semi-annual interest ~~payments.~~payments on our U.S. Notes (2023) and our Euro Notes (2024). Interest payments on our U.S. Notes (2023) are made in May and November, and interest payments on our Euro Notes (2024) are scheduled for April and October. Beginning in the fourth quarter of 2018, we will also

make semi-annual interest payments of $23 million on our Euro Notes (2026/28). Interest payments on our Euro Notes (2026/28) are made in April and October.

We had outstanding credit agreement borrowings of ~~$1.7~~$1.9 billion and ~~$2.1~~$2.0 billion at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. Of these amounts, ~~$37~~$22 million ~~was~~and $18 million were classified as current maturities at ~~both September 30, 2017~~March 31, 2018 and December 31, ~~2016.~~2017, respectively.

The scheduled maturities of long-term obligations outstanding at ~~September 30, 2017~~March 31, 2018 are as follows (in thousands):


Three months ending December 31, 2017	$	91,515
Nine months ending December 31, 2018			$	133,401
Years ending December 31:
2018	66,438
2019	143,417		146,721
2020	41,258		40,595
2021	1,628,154		38,288
2022	1,332		36,978
2023			2,319,736
Thereafter	1,197,986		623,369
Total debt⁽¹⁾	$	3,170,100	$	3,339,088


(1)	The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of ~~$21~~$26 million as of ~~September 30, 2017)~~March 31, 2018).

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, 2017.~~March 31, 2018.

As of ~~September 30, 2017,~~March 31, 2018, the Company had cash and cash equivalents of ~~$275~~$246 million, of which ~~$240~~$207 million was held by foreign subsidiaries. ~~We consider~~In general it has been our practice and intention to permanently reinvest the undistributed earnings of ~~these~~our foreign subsidiaries, ~~to be indefinitely reinvested,~~ and ~~accordingly, no provision for U.S. income taxes~~that position has ~~been provided thereon. Should these earnings be repatriated in~~not changed following the ~~future, in~~enactment of the ~~form~~Tax Act and the related imposition of the transition tax. Distributions of dividends from our foreign subsidiaries will be generally exempt from further U.S. taxation, either as a result of the new 100% participation exemption under the Tax Act, or ~~otherwise, we would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and potential withholding taxes payable~~due to the ~~various~~previous taxation of foreign ~~countries.~~earnings under the transition tax. We are still evaluating whether the Tax Act will affect the Company’s existing policy to indefinitely reinvest unremitted foreign earnings.

We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without resorting to repatriation of foreign earnings.

As a result of the Tax Act, we expect to have significantly lower income tax payments in 2018 due to the lower tax rate and the immediate deduction of capital expenditures, partially offset by the first payment with respect to the transition tax.

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 and manufactured inventory procurement for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in thousands):


	Three Months Ended						Nine Months Ended							Three Months Ended
	September 30,						September 30,							March 31,
	2017		2016		Change		2017		2016		Change			2018		2017		Change
North America	$	338,600	$	298,100	$	40,500	$	997,700	$	866,400	$	131,300	⁽¹⁾	$	358,800	$	265,800	$	93,000	⁽¹⁾
Europe	637,700		596,107		41,593		1,701,200		1,464,207		236,993		⁽²⁾	667,100		527,400		139,700		⁽²⁾
Specialty	244,800		222,659		22,141		739,800		722,059		17,741		⁽³⁾	274,000		231,900		42,100		⁽³⁾
Total	$	1,221,100	$	1,116,866	$	104,234	$	3,438,700	$	3,052,666	$	386,034		$	1,299,900	$	1,025,100	$	274,800

(1)

In North America, aftermarket purchases during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 increased ~~primarily as a result of~~compared to the comparable prior year period to support growth across our acquisition of PGW autoglass in April 2016, which added incremental purchases of $72 million in the first nine months of 2017. The remaining increase is primarily due to stocking up on inventory as a result of our procurement initiatives. Prior year amounts have been recast to include purchases from PGW autoglass.operations.

(2)

In our Europe segment, the increase in purchases during the ~~nine~~three months ended ~~September 30, 2017 is~~March 31, 2018 was primarily ~~related~~driven by (i) a $59 million increase in purchases at our Benelux operations, of which $19 million was attributable to ~~our acquisition of Rhiag in March 2016, which added~~ incremental inventory purchases ~~of $145 million~~ in the first ~~nine months~~quarter of ~~2017. Purchases for~~2018 as a result of our ~~U.K. operations increased~~acquisitions of aftermarket parts distribution businesses in Belgium in the ~~nine months ended September 30,~~third quarter of 2017, ~~compared~~and (ii) a $57 million increase primarily attributable to our Eastern Europe operations, of which $27 million was due to incremental inventory purchases in the ~~prior year period primarily~~first quarter of 2018 as a result of our acquisition of ~~Andrew Page~~an aftermarket parts distribution business in ~~October 2016, which added incremental~~Poland in 2018; the remaining increase was primarily due to to branch expansion in Eastern Europe. The increase in inventory purchases ~~of $107 million~~is also driven by the increase in the ~~first nine months~~value of ~~2017, partially offset by~~ the ~~devaluation of the~~euro and pound sterling in the ~~nine months~~first quarter of ~~2017~~2018 compared to the ~~prior year period.~~first quarter of 2017.

(3)

~~The increase in~~ Specialty ~~aftermarket~~inventory purchases increased during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to the first ~~nine~~three months of ~~2016 is primarily due~~2017 to ~~increased sales volumes for Truck, Towing~~support growth in our operations. Additionally, the acquisition of Warn in November 2017 added incremental purchases of $16 million, which includes purchases of aftermarket inventory and ~~RV parts.~~raw materials used in the manufacturing of specialty products.

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 % Change 2017 2016 % Change
North America Wholesale salvage cars and trucks 74
70
5.7 % 226
214
5.6 %
⁽¹⁾
Europe Wholesale salvage cars and trucks 6
5
20.0 % 18
17
5.9 %
Self service and "crush only" cars 138
132
4.5 % 412
395
4.3 %
⁽²⁾



	Three Months Ended
	March 31,
	2018	2017	% Change
North America wholesale salvage cars and trucks	73	75	(2.7	)%
Europe wholesale salvage cars and trucks	8	7	14.3	%
Self service and "crush only" cars	141	133	6.0	%	⁽¹⁾

(1) With the increase in scrap prices compared to the prior year period, we have increased the number of self service and "crush only" vehicles purchased.

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



Net cash provided by operating activities for the three months ended March 31, 2017	$	172
Increase (decrease) due to:⁽¹⁾
Discontinued operations	4			⁽²⁾
Operating income	(9		)	⁽³⁾
Non-cash depreciation and amortization expense	10			⁽⁴⁾
Cash paid for taxes	(2		)
Cash paid for interest	(3		)
Working capital accounts: ⁽⁵⁾
Accounts receivable	(39		)
Inventory	1
Accounts payable	19
Other operating activities	(8		)	⁽⁶⁾
Net cash provided by operating activities for the three months ended March 31, 2018	$	145

(1)

~~The number of salvage cars and trucks purchased during~~Other than discontinued operations, the ~~three and nine months ended September 30, 2017 increased primarily due~~amounts presented represent increases (decreases) in operating cash flows attributable to ~~a decision to increase the number of salvage cars and trucks dismantled compared to the prior year periods.~~our continuing operations only.


(2)	~~With~~In the ~~increase~~first quarter of 2017, our glass manufacturing business generated operating cash outflows of $4 million. We disposed of this business on March 1, 2017, and therefore, the discontinued operations had no impact on our current year operating cash flows.


(3)	Refer to the Results of Operations - Consolidated section for further information on the decrease in ~~scrap prices~~operating income.


(4)	Non-cash depreciation and amortization expense increased compared to the prior year period as discussed in the Results of Operations - Consolidated section.


(5)	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 ~~have increased~~expect that the net change in these working capital items will generally be a cash outflow as we expect to grow our business each year.


(6)	Reflects a number of ~~self service and "crush only" vehicles purchased.~~individually insignificant fluctuations in cash paid for other operating activities.

Net cash provided by operating activities totaled $449 million for the nine months ended September 30, 2017, compared to $524 million during the nine months ended September 30, 2016. During the first three months of 2017, our glass manufacturing business used $4 million of cash for operating activities compared to $26 million of cash provided by operating activities in the first nine months of 2016; these operating cash flows are nonrecurring as we closed the sale of this business on March 1, 2017.

The remaining change in cash provided by operating activities was attributable to our continuing operations. During the nine months ended September 30, 2017, our operating income increased by $78 million compared to the nine months ended September 30, 2016, due to both acquisition related growth and organic growth. The increase in operating income was negatively impacted by non-cash depreciation and amortization expense, which increased by $25 million compared to the prior year period, primarily as a result of our Rhiag acquisition. Cash paid for taxes increased by $34 million during the first nine

months of 2017 compared to the prior year period as a result of growth in the business, primarily related to our Rhiag acquisition. Cash paid for interest decreased by $8 million in 2017 primarily as a result of the timing of interest payments on our Euro Notes (payment occurred in the third quarter of 2016 compared to the fourth quarter of 2017). Cash provided by operating activities decreased during the nine months ended September 30, 2017 as a result of a $4 million inventory step-up adjustment recorded in the first nine months of 2016 related to our acquisition of PGW autoglass; we had no such adjustment in the current year period. Cash provided by operating activities increased during the nine months ended September 30, 2017 as a result of a cash dividend related to our equity method investment in Mekonomen, of which $2 million was classified within operating activities.

Cash outflows for our primary working capital accounts (receivables, inventory and payables) from our continuing operations totaled $129 million during the nine months ended September 30, 2017 compared to $29 million during the comparable period in 2016. During the first nine months of 2017, cash outflows for inventory were $93 million compared to cash inflows of $27 million in the prior year period. The period over period increase in cash outflows for inventory was primarily related to our North America and Europe segments. Cash outflows for receivables increased an additional $13 million over the prior year period; the increase in cash outflows was primarily attributable to our North America and Specialty segments, partially offset by a decrease in cash outflows for receivables in our Europe segment. The increases in these cash outflows was partially offset by a net increase in cash inflows from accounts payable of $33 million over the prior year period; the increase in cash inflows for accounts payable was primarily related to our North America segment, partially offset by a decrease in cash inflows for accounts payable in our Europe segment. 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 expect to grow our business each year. Other operating assets and liabilities represented a $12 million larger cash outflow in 2017 than the comparable period in 2016; the largest components of the change related to growth in prepaid expenses for our Europe segment.

Net cash used in investing activities totaled ~~$84~~$65 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, compared to ~~$1.4 billion~~$181 million of cash provided by investing activities during the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. We received proceeds from the sale of our glass manufacturing business totaling $301 million during the three months ended March 31, 2017; no such proceeds were received in 2018. We invested ~~$253~~$3 million of cash, net of cash acquired, in business acquisitions during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$1.3 billion in~~$77 million during the ~~first nine~~three months of 2016, which included $601 million for our Rhiag acquisition and $662 million for our PGW acquisition. In the first quarter of 2017, we received proceeds from the sale of our glass manufacturing business totaling $301 million. In the first half of 2016, we entered into foreign currency contracts to fund the purchase price of the Rhiag acquisition, which generated $18 million of gains; we had no such contracts in the current year period.ended March 31, 2017. Property, plant and equipment purchases were ~~$136~~$62 million in the ~~nine months ended September 30, 2017~~first quarter of 2018 compared to ~~$153~~$44 million in the ~~comparable period in 2016.~~prior year. The period over period ~~decrease~~increase in cash outflows for purchases of property, plant and equipment was primarily related to our ~~discontinued operations, Specialty~~North America and Europe ~~segments. Cash provided~~segments, partially offset by ~~other investing activities increased during the nine months ended September 30, 2017 primarily as~~ a ~~result of a cash dividend~~decrease related to our ~~equity method investment~~discontinued operations (reflecting non-reoccurring expenditures in ~~Mekonomen, of which $5 million was classified within investing activities.~~2017).

Net cash used in financing activities totaled ~~$347~~$118 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, compared to ~~$1.1 billion provided by financing activities~~$326 million during the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, net repayments under our credit facilities totaled ~~$375~~$124 million ~~as we used the proceeds from the sale of our glass manufacturing business and cash flows from operations~~compared to repay outstanding revolver borrowings; in the first nine months of 2016, we had net borrowings of $1.1 billion primarily to fund our acquisitions. In April 2016, we issued the Euro Notes generating proceeds of $563 million. The proceeds from the Euro Notes were used to repay a portion of the borrowings on the revolving credit facility. Additionally, we repaid $543$354 million ~~of Rhiag acquired debt and debt related liabilities~~ during the first nine months of 2016. In connection with our January 2016 amendment of our credit facilities and our April 2016 issuance of the Euro Notes, we paid $16 million of debt issuance costs during the ninethree months ended September 30, 2016; no such costs were incurred in the current year period. There were $25 million of cash proceeds from other debt in the first nine months of 2017, compared to $2 million of cash repayments of other debt in the first nine months of 2016.March 31, 2017.

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.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

foreign exchange rates;

interest rates; and

commodity prices.

Foreign Exchange Rates

Foreign currency fluctuations may impact the financial results we report for the portions of our business that operate in functional currencies other than the U.S. dollar. Our operations outside of the U.S. represented ~~41.3%~~42.7% and ~~39.1%~~41.8% of our revenue during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and the year ended December 31, ~~2016,~~2017, respectively. An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a ~~4.1%~~4.3% change in our consolidated revenue and a ~~3.0%~~2.6% change in our operating income for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2018. See our Results of Operations discussion in Part I, Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the impact of fluctuations in exchange rates on our year over year results.

Additionally, we are exposed to foreign currency fluctuations with respect to the purchase of aftermarket products from foreign countries, primarily in Europe and Asia. To the extent that our inventory purchases are not denominated in the functional currency of the purchasing location, we are exposed to exchange rate fluctuations. In several of our operations, we purchase inventory from manufacturers in Taiwan in U.S. dollars, which exposes us to fluctuations in the relationship between the local functional currency and the U.S. dollar, as well as fluctuations between the U.S. dollar and the Taiwan dollar. We hedge our exposure to foreign currency fluctuations related to a portion of inventory purchases in our Europe operations, but the notional amount and fair value of these foreign currency forward contracts at ~~September 30, 2017~~March 31, 2018 were immaterial. We do not currently attempt to hedge foreign currency exposure related to our foreign currency denominated inventory purchases in our North America operations, and we may not be able to pass on any price increases to our customers.

Other than with respect to a portion of our foreign currency denominated inventory purchases, we do not hold derivative contracts to hedge foreign currency risk. Our net investment in foreign operations is partially hedged by the foreign currency denominated borrowings we use to fund foreign acquisitions; however, our ability to use foreign currency denominated borrowings to finance our foreign operations may be limited based on local tax laws. We have elected not to hedge the foreign currency risk related to the interest payments on foreign borrowings as we generate cash flows in the local currencies that can be used to fund debt payments. As of ~~September 30, 2017,~~March 31, 2018, we had outstanding borrowings of ~~€500~~€500 million under our Euro Notes (2024), and ~~£118~~£123 million, CAD€143 million, CAD $130 million, ~~SEK~~ ~~272 million,~~ and ~~€138~~SEK 250 million under our revolving credit facilities. We expect the interest payments on our €1.0 billion Euro Notes (2026/28) to be funded primarily by cash flows generated by Stahlgruber after the transaction closes.

Interest Rates

Our results of operations are exposed to changes in interest rates primarily with respect to borrowings under our credit facilities, where interest rates are tied to the prime rate, LIBOR 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~~(Wells Fargo Bank, N.A.; Bank of America, N.A.; Citizens, N.A.; Fifth Third Bank; HSBC Bank USA, N.A.; and Banco Bilbao Vizcaya Argentaria, S.A.).

As of ~~September 30, 2017,~~March 31, 2018, we held ten interest rate swap contracts representing a total of $590 million of U.S. 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 January 2021 through June ~~2021~~.2021. As of ~~September 30, 2017,~~March 31, 2018, the fair value of the interest rate swap contracts was an asset of ~~$15 million~~.$24 million. The values of such contracts are subject to changes in interest rates.

In addition to these interest rate swaps, as of ~~September 30, 2017~~March 31, 2018 we held three cross currency swap agreements for a total notional amount of ~~$411~~$403 million (€~~389~~381 million) with maturity dates in January ~~2021~~.2021. These cross currency swaps contain an interest rate swap component and a foreign currency forward contract component that, combined with related intercompany financing arrangements, effectively convert variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. The swaps are intended to eliminate uncertainty in cash flows in U.S. dollars and euros in connection with intercompany financing arrangements. The cross currency swaps were also executed with banks we believe are

creditworthy ~~(Wells~~(Wells Fargo Bank, N.A.; Bank of America, N.A.; and The Bank of Tokyo-Mitsubishi UFJ, Ltd.). As of ~~September 30, 2017,~~

March 31, 2018, the fair value of the interest rate swap components of the cross currency swaps was an asset of $2$9 million, and the fair value of the foreign currency forward components was a liability of ~~$52~~$78 million. The values of these contracts are subject to changes in interest rates and foreign currency exchange rates.

In total, we had ~~54%~~50% of our variable rate debt under our credit facilities at fixed rates at ~~September 30, 2017~~March 31, 2018 compared to 48% at December 31, ~~2016.~~2017. See Note 9,10, "Long-Term Obligations" and Note ~~10,~~11, "Derivative Instruments and Hedging Activities" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

At ~~September 30, 2017,~~March 31, 2018, we had ~~$845 million~~approximately $1.0 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 $8$10 million over the next twelve months.

Commodity Prices

We are exposed to market risk related to price fluctuations in scrap metal and other metals. Market prices of these metals affect the amount that we pay for our inventory and the revenue that we generate from sales of these metals. As both our revenue and costs are affected by the price fluctuations, we have a natural hedge against the changes. However, there is typically a lag between the effect on our revenue from metal price fluctuations and inventory cost changes, and there is no guarantee that the vehicle costs will decrease or increase at the same rate as the metals prices. Therefore, we can experience positive or negative gross margin effects in periods of rising or falling metals prices, particularly when such prices move rapidly. Additionally, if market prices were to change at a greater rate than our vehicle acquisition costs, we could experience a positive or negative effect on our operating margin. The average of scrap metal prices for the three months ended ~~September 30, 2017~~March 31, 2018 has increased ~~37.4%~~20.6% over the average for the fourth quarter of ~~2016.~~

2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September 30, 2017~~March 31, 2018, 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, 2017~~March 31, 2018 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

~~The Office~~We are from time to time subject to various claims and lawsuits incidental to our business. In the opinion of management, currently outstanding claims and suits will not, individually or in the ~~District Attorney~~aggregate, have a material adverse effect on our financial position, results of Harris County, Texas had been investigating since 2009 a possible violation of the Texas Clean Water Act in connection with alleged discharges of petroleum products at two of our facilities in Texas. In May 2017, we made a payment of $0.1 million payment to Harris County to resolve this matter, and in September 2017, the matter was dismissed.operations or cash flows.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations, and the trading price of our common stock. Please refer to our ~~2016~~2017 Annual Report on Form 10-K, filed with the SEC on February ~~27, 2017, and our Quarterly Reports on Form 10-Q filed subsequent to the Annual Report on Form 10-K,~~28, 2018, for information concerning risks and uncertainties that could negatively impact us.

Item 6. Exhibits

Exhibits

(b) Exhibits



~~10.1~~ 4.1	~~Offer Letter to Varun Laroyia~~Indenture dated ~~September 5, 2017~~as of April 9, 2018 among LKQ European Holdings B.V., as Issuer, LKQ Corporation, certain subsidiaries of LKQ Corporation, the trustee, paying agent, transfer agent, and registrar (incorporated herein by reference to Exhibit ~~10.1~~4.1 to the Company's report on Form 8-K filed with the SEC on ~~September 6, 2017)~~April 12, 2018).
~~10.2~~ 4.2	~~Service Agreement between Euro Car Parts Limited and Sukhpal Singh Ahluwalia~~Supplemental Indenture dated as of ~~September 7, 2017 (incorporated herein by reference to Exhibit 10.1 to the Company's report on Form 8-K filed with the SEC on September 13, 2017).~~ April 6, 2018 among LKQ Corporation, as Issuer, certain subsidiaries of LKQ Corporation, as Guarantors, and U.S. Bank National Association, as Trustee.
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 the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~October 27, 2017~~.May 7, 2018.



	LKQ CORPORATION

	/s/ ~~VARUN LAROYIA~~Varun Laroyia
	Varun Laroyia
	Executive Vice President and Chief Financial Officer
	(As duly authorized officer and Principal Financial Officer)

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



	Three Months Ended			Nine Months Ended
	September 30, ⁽¹⁾			September 30,
	2016			2017			2016
Revenue	$	179,487		$	111,130		$	325,374
Cost of goods sold	151,519			100,084			281,275
Operating expenses	8,371			8,369			13,763
Operating income	19,597			2,677			30,336
Interest and other (expense) income, net ⁽²⁾	(29		)	1,204			(3,562		)
Income from discontinued operations before provision for income taxes	19,568			3,881			26,774
Provision for income taxes ⁽³⁾	6,962			3,598			9,526
Equity in earnings (loss) of unconsolidated subsidiaries	238			(534		)	571
Income (loss) from discontinued operations, net of tax	12,844			(251		)	17,819
Loss on sale of discontinued operations, net of tax ⁽⁴⁾	—			(4,280		)	—
Net income (loss) from discontinued operations, net of tax	$	12,844		$	(4,531	)	$	17,819



	Gross Amount
	All 2017 Acquisitions
Trade names and trademarks	$	15,189
Customer and supplier relationships	10,550
Software and other technology related assets	4,796
Covenants not to compete	614
	$	31,149



	Balance as of September 30, 2017		Fair Value Measurements as of September 30, 2017
	Balance as of September 30, 2017		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	44,134	$	—	$	44,134	$	—
Interest rate swaps	17,238		—		17,238		—
Total Assets	$	61,372	$	—	$	61,372	$	—
Liabilities:
Contingent consideration liabilities	$	6,903	$	—	$	—	$	6,903
Deferred compensation liabilities	45,007		—		45,007		—
Foreign currency forward contracts	52,068		—		52,068		—
Total Liabilities	$	103,978	$	—	$	97,075	$	6,903