SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(State or other jurisdiction of

incorporation or organization)

500 ~~WEST MADISON STREET,~~

~~SUITE~~West Madison Street,

Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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~~Accelerated Filer	x☒	Accelerated ~~filer~~Filer	¨ ☐
Non-accelerated ~~filer~~Filer	¨ ~~(Do not check if a smaller reporting company)~~ ☐	Smaller ~~reporting company~~Reporting Company	¨☐
Emerging ~~growth company~~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 ~~24, 2018,~~25, 2019, the registrant had ~~issued and~~ outstanding an aggregate of ~~318,202,654~~306,461,589 shares of Common Stock.

FINANCIAL INFORMATION

Item 1. Financial Statements

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue	$	3,147,773		$	3,122,378		$	9,496,249		$	8,873,893
Cost of goods sold	1,947,444			1,925,180			5,840,469			5,460,845
Gross margin	1,200,329			1,197,198			3,655,780			3,413,048
Selling, general and administrative expenses	892,124			879,150			2,687,024			2,472,085
Restructuring and acquisition related expenses	8,929			6,614			20,613			26,546
Impairment of net assets held for sale	(3,601		)	—			44,919			—
Depreciation and amortization	71,513			76,701			213,349			196,322
Operating income	231,364			234,733			689,875			718,095
Other expense (income):
Interest expense, net of interest income	31,976			40,860			103,949			107,647
Other income, net	(5,939		)	(6,959		)	(15,523		)	(9,414		)
Total other expense, net	26,037			33,901			88,426			98,233
Income from continuing operations before provision for income taxes	205,327			200,832			601,449			619,862
Provision for income taxes	57,747			46,068			165,122			156,427
Equity in earnings (losses) of unconsolidated subsidiaries	4,232			(20,284		)	(33,745		)	(18,326		)
Income from continuing operations	151,812			134,480			402,582			445,109
Net income from discontinued operations	781			—			1,179			—
Net income	152,593			134,480			403,761			445,109
Less: net (loss) income attributable to continuing noncontrolling interest	(46		)	378			2,321			1,040
Less: net income attributable to discontinued noncontrolling interest	376			—			568			—
Net income attributable to LKQ stockholders	$	152,263		$	134,102		$	400,872		$	444,069

Basic earnings per share: ⁽¹⁾
Income from continuing operations	$	0.49		$	0.42		$	1.29		$	1.42
Net income from discontinued operations	0.00			—			0.00			—
Net income	0.50			0.42			1.30			1.42
Less: net (loss) income attributable to continuing noncontrolling interest	(0.00		)	0.00			0.01			0.00
Less: net income attributable to discontinued noncontrolling interest	0.00			—			0.00			—
Net income attributable to LKQ stockholders	$	0.50		$	0.42		$	1.29		$	1.42

Diluted earnings per share:⁽¹⁾
Income from continuing operations	$	0.49		$	0.42		$	1.29		$	1.41
Net income from discontinued operations	0.00			—			0.00			—
Net income	0.50			0.42			1.29			1.41
Less: net (loss) income attributable to continuing noncontrolling interest	(0.00		)	0.00			0.01			0.00
Less: net income attributable to discontinued noncontrolling interest	0.00			—			0.00			—
Net income attributable to LKQ stockholders	$	0.49		$	0.42		$	1.28		$	1.41

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Revenue $ 3,122,378
$ 2,465,800
$ 8,873,893
$ 7,267,054
Cost of goods sold 1,925,180
1,508,924
5,460,845
4,415,076
Gross margin 1,197,198
956,876
3,413,048
2,851,978
Selling, general and administrative expenses ⁽¹⁾
879,150
695,978
2,472,085
2,003,065
Restructuring and acquisition related expenses 6,614
4,922
26,546
10,371
Depreciation and amortization 76,701
56,877
196,322
159,178
Operating income 234,733
199,099
718,095
679,364
Other expense (income):
Interest expense, net 40,860
25,222
107,647
73,806
Gains on bargain purchases —
(913 ) (328 ) (3,990 )
Other income, net (6,959 ) (3,107 ) (9,086 ) (6,884 )
Total other expense, net 33,901
21,202
98,233
62,932
Income from continuing operations before provision for income taxes 200,832
177,897
619,862
616,432
Provision for income taxes 46,068
58,189
156,427
206,206
Equity in (losses) earnings of unconsolidated subsidiaries (20,284 ) 2,673
(18,326 ) 3,878
Income from continuing operations 134,480
122,381
445,109
414,104
Net loss from discontinued operations —
—
—
(4,531 )
Net income 134,480
122,381
445,109
409,573
Less: net income attributable to noncontrolling interest 378
—
1,040
—
Net income attributable to LKQ stockholders $ 134,102
$ 122,381
$ 444,069
$ 409,573

Basic earnings per share: ⁽²⁾

Income from continuing operations $ 0.42
$ 0.40
$ 1.42
$ 1.34
Net loss from discontinued operations —
—
—
(0.01 )
Net income 0.42
0.40
1.42
1.33
Less: net income attributable to noncontrolling interest 0.00
—
0.00
—
Net income attributable to LKQ stockholders $ 0.42
$ 0.40
$ 1.42
$ 1.33

Diluted earnings per share:⁽²⁾

Income from continuing operations $ 0.42
$ 0.39
$ 1.41
$ 1.33
Net loss from discontinued operations —
—
—
(0.01 )
Net income 0.42
0.39
1.41
1.32
Less: net income attributable to noncontrolling interest 0.00
—
0.00
—
Net income attributable to LKQ stockholders $ 0.42
$ 0.39
$ 1.41
$ 1.32

⁽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.

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

Unaudited Condensed Consolidated Balance Sheets

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 318,197,309 and 309,126,386 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

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

Unaudited Condensed Consolidated Statements of Cash Flows

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

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

Comprehensive (Loss) Income

Unaudited Condensed Consolidated Statements of Cash Flows

LKQ Stockholders
Common Stock Additional Paid-In Capital
Retained
Earnings

Accumulated
Other
Comprehensive (Loss) Income
Noncontrolling Interest Total Stockholders' Equity

Shares
Issued
Amount
BALANCE, January 1, 2018 309,127
$ 3,091
$ 1,141,451
$ 3,124,103
$ (70,476 ) $ 8,484
$ 4,206,653
Net income —
—
—
444,069
—
1,040
445,109
Other comprehensive loss —
—
—
—
(69,660 ) —
(69,660 )
Stock issued in acquisitions 8,056
81
251,253
—
—
—
251,334
Vesting of restricted stock units, net of shares withheld for employee tax 600
6
(3,717 ) —
—
—
(3,711 )
Stock-based compensation expense —
—
17,544
—
—
—
17,544
Exercise of stock options 441
4
3,768
—
—
—
3,772
Shares withheld for net share settlement of stock option awards (27 ) —
(1,057 ) —
—
—
(1,057 )
Adoption of ASU 2018-02 (see Note 4) —
—
—
(5,345 ) 5,345
—
—
Capital contributions from, net of dividends to, noncontrolling interest shareholder —
—
—
—
—
3,182
3,182
Acquired noncontrolling interest —
—
—
—
—
44,250
44,250
BALANCE, September 30, 2018 318,197
$ 3,182
$ 1,409,242
$ 3,562,827
$ (134,791 ) $ 56,956
$ 4,897,416

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

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

Comprehensive (Loss) Income

Unaudited Condensed Consolidated Statements of Stockholders' Equity

Acquired noncontrolling interest ⁽¹⁾

Purchase of noncontrolling interest⁽²⁾

⁽¹⁾ The amount acquired during 2019 relates to discontinued operations. See Note 3, "Discontinued Operations," for further details.

⁽²⁾The amount recorded in 2019 relates to the purchase of noncontrolling interest unrelated to a business combination. Refer to "Stockholders' Equity" in Note 4, "Financial Statement Information" for further information.

Unaudited Condensed Consolidated Statements of Stockholders' Equity

Comprehensive (Loss) Income

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

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

	LKQ Stockholders
	Common Stock					Treasury Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Stockholders' Equity
	Shares		Amount			Shares		Amount			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Stockholders' Equity
BALANCE, January 1, 2019	318,418		$	3,184		(2,272	)	$	(60,000	)	$	1,415,188		$	3,598,876	$	(174,950	)	$	56,454		$	4,838,752
Net income	—		—			—		—			—			400,872		—			2,889			403,761
Other comprehensive loss	—		—			—		—			—					(85,796		)				(85,796		)
Purchase of treasury stock	—		—			(10,924	)	(291,813		)	—			—		—			—			(291,813		)
Vesting of restricted stock units, net of shares withheld for employee tax	684		7			—		—			(1,808		)	—		—			—			(1,801		)
Stock-based compensation expense	—		—			—		—			20,837			—		—			—			20,837
Exercise of stock options	606		6			—		—			5,462			—		—			—			5,468
Tax withholdings related to net share settlements of stock-based compensation awards	(110	)	(1		)	—		—			(3,533		)	—		—			—			(3,534		)
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—		—			—		—			—			—		—			(4,659		)	(4,659		)
Acquired noncontrolling interest ⁽¹⁾	—		—			—		—			—			—		—			10,365			10,365
Purchase of noncontrolling interest⁽²⁾	—		—			—		—			(8,764		)	—		—			(10,116		)	(18,880		)
BALANCE, September 30, 2019	319,598		$	3,196		(13,196	)	$	(351,813	)	$	1,427,382		$	3,999,748	$	(260,746	)	$	54,933		$	4,872,700

⁽¹⁾ The amount acquired during 2019 relates to discontinued operations. See Note 3, "Discontinued Operations," for further details.

Unaudited Condensed Consolidated Statements of Stockholders' Equity

Comprehensive (Loss) Income

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

Notes to Unaudited Condensed Consolidated Financial Statements

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

We have prepared the accompanying unaudited condensed consolidated financial statements 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 Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on ~~February 28,~~ March 1, 2019 ("2018 ~~("2017~~ Form 10-K").

Note 2. Business Combinations

During the nine months ended September 30, 2019, we completed 5 acquisitions, including 1 wholesale business and 1 self service business in North America, and 3 wholesale businesses in Europe. These acquisitions were not material to our results of operations or financial position as of and for the three and nine months ended September 30, 2019. Total acquisition date fair value of the consideration for our acquisitions for the nine months ended September 30, 2019 was $48 million, composed of $17 million of cash paid (net of cash acquired), $5 million for the estimated value of contingent payments to former owners (with maximum payments totaling $7 million), $1 million of other purchase price obligations (non-interest bearing), $21 million of notes payable, and $4 million of pre-existing balances considered to be effectively settled as a result of the acquisitions. In addition, we assumed $8 million of existing debt as of the acquisition dates.

On May 30, 2018, we acquired Stahlgruber GmbH ("Stahlgruber"), a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, Austria, Italy, Slovenia, and Croatia, ~~and~~ with further sales to Switzerland. Total acquisition date fair value of the consideration for our Stahlgruber acquisition was €1.2 billion ($1.4 billion), composed of €1.0 billion ($1.1 billion) of cash paid (net of cash acquired), and €215 million ($251 million) of newly issued shares of LKQ common stock. We financed the acquisition with the proceeds from €1.0 billion ($1.2 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. We recorded $915 million ($908 million in 2018 and $7 million of adjustments in the six months ended June 30, 2019) of goodwill related to our acquisition of Stahlgruber.

On May 3, 2018, the European Commission cleared the acquisition of Stahlgruber for the entire European Union, except with respect to the wholesale automotive parts business in the Czech Republic. The acquisition of ~~the~~Stahlgruber’s Czech Republic wholesale business ~~has been~~was referred to the Czech Republic competition authority for review. On May 10, 2019, the Czech Republic competition authority approved our acquisition of Stahlgruber’s Czech Republic wholesale business subject to the requirement that we divest certain of the acquired locations. We acquired Stahlgruber’s Czech Republic wholesale business on May 29, 2019 and decided to divest all of the acquired locations. We immediately classified the business as discontinued operations because the business was never integrated into our Europe segment; see Note 3, "Discontinued Operations" for further information. The Czech Republic wholesale business represents an immaterial portion of Stahlgruber's revenue and profitability.

~~We recorded $929 million of goodwill related~~ There was no additional consideration beyond the previously remitted amounts for the Stahlgruber transaction required to ~~our~~complete the acquisition of ~~Stahlgruber, of which we expect $292 million to be deductible for income tax purposes. In~~ the ~~period between the acquisition date and September 30, 2018, Stahlgruber, which is reported in our Europe reportable segment, generated revenue of $637 million and operating income of $34 million.~~Czech Republic wholesale business.

In addition to our acquisition of Stahlgruber, during the ~~nine months~~year ended ~~September 30,~~December 31, 2018, we completed acquisitions of ~~one~~4 wholesale ~~business~~businesses in North America and ~~seven~~9 wholesale businesses in Europe. Total acquisition date fair value of the consideration for these acquisitions was ~~$86~~$99 million, composed of ~~$76~~$85 million of cash paid (net of cash and restricted cash acquired), $7$11 million of notes payable, and $3 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $5 million). During the ~~nine months~~year ended ~~September 30,~~December 31, 2018, we recorded ~~$72~~$68 million of goodwill related to these acquisitions, of which we expect an immaterial amount to be deductible for income tax purposes. In the period between the acquisition dates and September 30, 2018, these acquisitions generated revenue of $19 million and operating income of $2 million.acquisitions.

During the year ended December 31, 2017, we completed 26 acquisitions including 6 wholesale businesses in North America, 16 wholesale businesses in Europe and 4 Specialty businesses. Our acquisitions in Europe included the acquisition of four aftermarket parts distribution businesses in Belgium in July 2017. Our Specialty acquisitions included the acquisition of the aftermarket business of Warn Industries, Inc. ("Warn"), a leading designer, manufacturer and marketer of high performance vehicle equipment and accessories, in November 2017.

Total acquisition date fair value of the consideration for our 2017 acquisitions was $542 million, composed of $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), $5 million of other purchase price obligations (non-interest bearing) and $20 million of notes payable. We typically fund our acquisitions using borrowings under our credit facilities or other financing arrangements. During the year ended December 31, 2017, we recorded $307 million of goodwill related to these acquisitions, of which we expect $21 million to be deductible for income tax purposes.

Our acquisitions are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair values at the dates of acquisition. The purchase price allocations for the acquisitions made during the nine months ended September 30, ~~2018~~2019 and the last three months of the year ended December 31, ~~2017~~2018 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 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~~During the ~~date of our preliminary allocation for Stahlgruber in the second~~third quarter of 2018 through September 30, 2018, we recorded adjustments based on our valuation procedures, primarily related to inventory and current liabilities that resulted in the allocation of $1 million of goodwill to acquired net assets. From the date of our preliminary allocations for our other acquisitions completed in the first half of 2018,2019, the measurement period adjustments recorded for acquisitions completed in prior periods were not material. The income statement effect of these measurement period adjustments ~~for our Stahlgruber acquisition and our other acquisitions completed in the first half of 2018~~ 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.~~

The purchase price allocations for the acquisitions completed during the ~~nine months ended September 30, 2018 and the~~ year ended December 31, ~~2017~~2018 are as follows (in thousands):

Other Acquisitions ⁽²⁾

All
Acquisitions⁽¹⁾

Other Acquisitions ⁽¹⁾

Gains on bargain purchases ⁽⁵⁾

Gains on bargain purchases ⁽³⁾

The fair value of our intangible assets is based on a number of inputs, including projections of future cash flows, discount rates, assumed royalty rates and customer attrition rates, all of which are Level 3 inputs. We used the relief-from-royalty method to value trade names, trademarks, software and other technology assets, and we used the multi-period excess earnings method to value customer relationships. The relief-from-royalty method assumes that the intangible asset has value to the extent that its owner is relieved of the obligation to pay royalties for the benefits received from the intangible asset. The multi-period excess earnings method is based on the present value of the incremental after-tax cash flows attributable only to the customer relationship after deducting contributory asset charges. 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 use unobservable inputs in which little or no market data exists, and therefore, these inputs are considered to be Level 3 inputs. See Note 12, "Fair Value Measurements" for further information regarding the tiers in the fair value hierarchy.

The acquisition of Stahlgruber ~~expands~~expanded LKQ's geographic presence in continental Europe and serves as an additional strategic hub for our European operations. In addition, ~~we believe~~ the acquisition of Stahlgruber ~~will~~should allow for continued improvement in procurement, logistics and infrastructure optimization. The primary objectives of our other acquisitions made during the nine months ended September 30, ~~2018~~2019 and the year ended December 31, ~~2017~~2018 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.~~

When we identify potential acquisitions, we attempt to target companies with a leading market presence, an experienced management team and workforce that provides 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 months ended September 30, ~~2018~~2019 as though the businesses had been acquired as of January 1, ~~2017,~~2018, and the businesses acquired during the year ended December 31, ~~2017~~2018 as though they had been acquired as of January 1, ~~2016.~~2017. We have excluded the May 29, 2019 acquisition of the Czech Republic wholesale business as the business was never integrated into our Europe segment. 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,
	2019			2018		2019		2018
Revenue, as reported	$	3,147,773		$	3,122,378	$	9,496,249	$	8,873,893
Revenue of purchased businesses for the period prior to acquisition:
Stahlgruber	—			—		—		815,405
Other acquisitions	—			33,708		16,481		133,545
Pro forma revenue	$	3,147,773		$	3,156,086	$	9,512,730	$	9,822,843

Income from continuing operations, as reported ⁽¹⁾	$	151,812		$	134,480	$	402,582	$	445,109
Income from continuing operations of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
Stahlgruber	4,368			5,624		10,484		14,114
Other acquisitions	314			1,863		2,161		4,780
Acquisition related expenses, net of tax ⁽²⁾	1,174			681		1,498		13,986
Pro forma income from continuing operations	157,668			142,648		416,725		477,989
Less: Net (loss) income attributable to continuing noncontrolling interest, as reported	(46		)	378		2,321		1,040
Less: Pro forma net income attributable to continuing noncontrolling interest	—			—		—		2,799
Pro forma net income from continuing operations attributable to LKQ stockholders ⁽³⁾	$	157,714		$	142,270	$	414,404	$	474,150

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Revenue, as reported $ 3,122,378
$ 2,465,800
$ 8,873,893
$ 7,267,054
Revenue of purchased businesses for the period prior to acquisition:
Stahlgruber —
473,326
815,405
1,289,083
Other acquisitions 6,641
83,893
51,132
387,844
Pro forma revenue $ 3,129,019
$ 3,023,019
$ 9,740,430
$ 8,943,981

Income from continuing operations, as reported ⁽¹⁾
$ 134,480
$ 122,381
$ 445,109
$ 414,104
Income from continuing operations of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:
Stahlgruber 5,054
6,061
14,114
5,298
Other acquisitions 161
3,478
1,588
17,014
Acquisition related expenses, net of tax ⁽²⁾
681
2,301
13,986
5,010
Pro forma income from continuing operations 140,376
134,221
474,797
441,426
Less: Pro forma net income attributable to noncontrolling interest —
888
2,799
2,157
Pro forma income from continuing operations attributable to LKQ stockholders $ 140,376
$ 133,333
$ 471,998
$ 439,269

Earnings per share from continuing operations, basic - as reported $ 0.42
$ 0.40
$ 1.42
$ 1.34
Effect of purchased businesses for the period prior to acquisition:
Stahlgruber 0.02
0.02
0.05
0.02
Other acquisitions 0.00
0.01
0.01
0.06
Acquisition related expenses, net of tax ⁽²⁾
0.00
0.01
0.04
0.02
Impact of share issuance from acquisition of Stahlgruber —
(0.01 ) (0.02 ) (0.03 )
Pro forma earnings per share from continuing operations, basic ⁽³⁾
0.44
0.42
1.49
1.39
Less: Pro forma net income attributable to noncontrolling interest —
0.00
0.01
0.01
Pro forma income from continuing operations attributable to LKQ stockholders $ 0.44
$ 0.42
$ 1.49
$ 1.39

Earnings per share from continuing operations, diluted - as reported $ 0.42
$ 0.39
$ 1.41
$ 1.33
Effect of purchased businesses for the period prior to acquisition:
Stahlgruber 0.02
0.02
0.04
0.02
Other acquisitions 0.00
0.01
0.01
0.05
Acquisition related expenses, net of tax ⁽²⁾
0.00
0.01
0.04
0.02
Impact of share issuance from acquisition of Stahlgruber —
(0.01 ) (0.02 ) (0.03 )
Pro forma earnings per share from continuing operations, diluted ⁽³⁾
0.44
0.42
1.49
1.39
Less: Pro forma net income attributable to noncontrolling interest —
0.00
0.01
0.01
Pro forma income from continuing operations attributable to LKQ stockholders $ 0.44
$ 0.42
$ 1.48
$ 1.38


(1)	~~Includes~~2018 amounts include interest expense for the period from April 9, 2018 through September 30, 2018 recorded on the senior notes issued in connection with our acquisition of Stahlgruber.


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


(3)	~~The sum~~Excludes our acquisition of the ~~individual earnings per share amounts may not equal the total due to rounding.~~Czech Republic wholesale business which is classified as discontinued operations.

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 6, "Restructuring and Acquisition Related Expenses," for further information regarding our acquisition related expenses. ~~The pro forma information also includes the impact of the common stock issued to Stahlgruber as if it were issued on January 1, 2017.~~ 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~~As described in Note 2, "Business Combinations," we classified the ~~sale of~~acquired Stahlgruber Czech Republic wholesale business as discontinued operations. We intend to divest 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,~~within the next year, and thus, the net of cash disposed of $15 million. 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 16, "Segment and Geographic Information" for further information regarding our segments.

In connection with the Stock and Asset Purchase 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 nine months ended September 30, 2017, as presented in Net loss from discontinued operationsassets are reflected on the Unaudited Condensed Consolidated ~~Statements~~Balance Sheet at the lower of ~~Income (in thousands):~~fair value less cost to sell or carrying value. As of September 30, 2019, the assets held for sale, liabilities held for sale, and noncontrolling interest are recorded within Prepaid expenses and other current assets, Other current liabilities, and Noncontrolling interest, respectively, on the Unaudited Condensed Consolidated Balance Sheet. As of the acquisition date, we acquired $5 million of cash and assumed $6 million of existing debt.

Nine Months Ended
September 30, 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) The Company elected to allocate interest expense to discontinued operations~~Fair value was based on the ~~expected debt~~estimated selling price, the inputs of which included projected market multiples and any reasonable offers. Due to ~~be repaid. Under this approach, allocated interest~~the uncertainties in the estimation process, it is possible that actual results could differ from ~~January 1, 2017 through~~ the ~~date of sale was $2 million. This expense was offset by foreign currency gains.~~

~~(2) In~~estimates used in the ~~first quarter of 2017, upon closing of~~Company's analysis. The inputs utilized in the ~~sale and write-off~~fair value estimate are classified as Level 3 within the fair value hierarchy. The fair value of the net assets ~~of the glass manufacturing business, we recorded~~was measured on a ~~pre-tax loss on sale~~non-recurring basis as 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 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.

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 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. All purchases from Vitro, including those outside of the Purchase and Supply Agreement, were $4 million and $22 million for the three and nine months ended~~ September 30, ~~2018, respectively, and were $10 million and $27 million for the three months ended September 30, 2017 and the period between the sale date of March 1, 2017 and September 30, 2017, respectively.~~2019.

Note 4. Financial Statement Information

Allowance for Doubtful Accounts

We have a reserve for uncollectible accounts, which was approximately ~~$63~~$50 million and ~~$58~~$57 million at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. ~~Our May 2018 acquisition of Stahlgruber contributed $3 million to our reserve for uncollectible accounts. See Note 2, "Business Combinations" for further information on our acquisitions.~~

Inventories

Inventories consist of the following (in thousands):



	September 30,		December 31,
	2019		2018
Aftermarket and refurbished products	$	2,117,275	$	2,309,458
Salvage and remanufactured products	438,845		503,199
Manufactured products	26,068		23,418
Total inventories	$	2,582,188	$	2,836,075

September 30, December 31,
2018 2017
Aftermarket and refurbished products $ 2,287,776
$ 1,877,653
Salvage and remanufactured products 484,761
487,108
Manufactured products 22,357
16,022
Total inventories $ 2,794,894
$ 2,380,783

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods. As of September 30, 2019, manufactured products inventory was composed of $17 million of raw materials, $3 million of work in process, and $6 million of finished goods. As of December 31, 2018, manufactured products inventory was composed of ~~$16~~$17 million of raw materials, $2 million of work in process, and $4 million of finished goods.

Net Assets Held for Sale

During the first six months of 2019, we committed to plans to sell certain businesses in our North America and Europe segments. As a result, these businesses were classified as net assets held for sale and were required to be adjusted to the lower of ~~December 31, 2017, manufactured products inventory was composed~~fair value less cost to sell or carrying value, resulting in impairment charges totaling $49 million through the six months ended June 30, 2019 (presented in Impairment of ~~$10~~net assets held for sale in the Unaudited Condensed Consolidated Statement of Income). In the third quarter of 2019, we completed the sales of 2 of these businesses, our aviation business in North America and a wholesale business in Bulgaria. The proceeds exceeded our prior fair value estimates, resulting in a net $4 million reduction of previously reported impairment charges for the three months ended September 30, 2019 and a net

$45 million impairment charge for the nine months ended September 30, 2019. The disposed businesses were immaterial, generating annualized revenue of approximately $55 million during the twelve-month period ended September 30, 2019.

Excluding the Stahlgruber Czech Republic wholesale business discussed in Note 3, "Discontinued Operations," as of September 30, 2019, there were $13 million of ~~raw materials, $2~~assets held for sale, including $3 million of ~~work in process,~~goodwill that was reclassified as held for sale related to our Europe segment, and $4 million of ~~finished goods.~~

~~Our May 2018 acquisition of Stahlgruber contributed $374 million to our aftermarket~~liabilities held for sale, which were recorded within Prepaid expenses and ~~refurbished products inventory. See Note 2, "Business Combinations" for further information on our acquisitions.~~

~~Property, Plant~~other current assets and ~~Equipment~~

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements that extend the useful life of the related asset are capitalized. As property, plant and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized. Construction in progress consists primarily of building and land improvements at our existing facilities. Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease and reasonably assured renewal periods, if shorter.

~~Our estimated useful lives are as follows:~~



~~Land improvements~~	~~10-20 years~~
~~Buildings and improvements~~	~~20-40 years~~
~~Machinery and equipment~~	~~3-20 years~~
~~Computer equipment and software~~	~~3-10 years~~
~~Vehicles and trailers~~	~~3-10 years~~
~~Furniture and fixtures~~	~~5-7 years~~

~~Property, plant and equipment consists of the following (in thousands):~~

September 30, December 31,
2018 2017
Land and improvements $ 189,404
$ 137,790
Buildings and improvements 373,607
233,078
Machinery and equipment 618,209
521,526
Computer equipment and software 142,719
133,753
Vehicles and trailers 177,778
161,269
Furniture and fixtures 52,595
31,794
Leasehold improvements 283,603
257,506
1,837,915
1,476,716
Less—Accumulated depreciation (691,086 ) (606,112 )
Construction in progress 54,174
42,485
Total property, plant and equipment, net $ 1,201,003
$ 913,089

~~The components of opening property, plant and equipment acquired as part of our acquisition of Stahlgruber in May 2018 are as follows (in thousands):~~

Gross Amount
Land and improvements $ 47,281
Buildings and improvements 125,649
Machinery and equipment 49,384
Computer equipment and software 3,760
Vehicles and trailers 643
Furniture and fixtures 28,535
Leasehold improvements 1,890
257,142
Construction in progress 3,519
Total property, plant and equipment $ 260,661

~~We record depreciation expense associated with our refurbishing, remanufacturing, manufacturing and furnace operations as well as our distribution centers in Cost of goods sold~~Other current liabilities, respectively, on the Unaudited Condensed Consolidated ~~Statements~~Balance Sheet. We expect the remaining assets held for sale to be disposed of ~~Income. All other depreciation expense is reported in Depreciation and amortization. Total depreciation expense~~during the next twelve months. The remaining assets held for sale generated annualized revenue of approximately $84 million during the ~~three and nine months~~twelve-month period ended September 30, ~~2018~~2019.

We are required to record net assets of our held for sale businesses at the lower of fair value less cost to sell or carrying value. Fair values were based on projected discounted cash flows and/or estimated selling prices. Management's assumptions for our discounted cash flow analysis of the businesses were based on projected revenues and profits, tax rates, capital expenditures, working capital requirements and discount rates. For businesses for which we utilized estimated selling prices to calculate the fair value, the inputs to our estimates included projected market multiples and any reasonable offers. Due to uncertainties in the estimation process, it is possible that actual results could differ from the estimates used in our analysis. The inputs utilized in the fair value estimates are classified as Level 3 within the fair value hierarchy. The fair values of the net assets were measured on a non-recurring basis as of September 30, 2019.

Investments in Unconsolidated Subsidiaries

Our investment in unconsolidated subsidiaries was ~~$39~~$144 million and ~~$115~~$179 million ~~respectively,~~as of September 30, 2019 and ~~$34~~December 31, 2018, respectively.

Europe Segment

Our investment in unconsolidated subsidiaries in Europe was $127 million and ~~$93~~$163 million as of September 30, 2019 and December 31, 2018, respectively. We recorded equity in earnings of $4 million and equity in losses of $35 million during the three and nine months ended September 30, ~~2017, respectively.~~

~~Intangible Assets~~

~~Intangible assets consist primarily~~2019, respectively, and equity in losses 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 for the nine months ended September 30, 2018 are as follows (in thousands):~~

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 1,073
1,002,277
(5,720 ) 997,630
Exchange rate effects (3,049 ) (55,901 ) 75
(58,875 )
Balance as of September 30, 2018 $ 1,707,378
$ 2,361,274
$ 406,614
$ 4,475,266

During the nine months ended September 30, 2018, we recorded $929 million of goodwill related to our acquisition of Stahlgruber. See Note 2, "Business Combinations" for further information on our acquisitions.

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

September 30, 2018 December 31, 2017
Intangible assets subject to amortization $ 872,072
$ 664,969
Indefinite-lived intangible assets
Trademarks 81,300
78,800
Total $ 953,372
$ 743,769

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

September 30, 2018 December 31, 2017

Gross
Carrying
Amount

Accumulated
Amortization
Net
Gross
Carrying
Amount

Accumulated
Amortization
Net
Trade names and trademarks $ 495,839
$ (88,805 ) $ 407,034
$ 327,332
$ (75,095 ) $ 252,237
Customer and supplier relationships 586,221
(223,085 ) 363,136
510,113
(167,532 ) 342,581
Software and other technology related assets 172,391
(73,760 ) 98,631
124,049
(59,081 ) 64,968
Covenants not to compete 13,488
(10,217 ) 3,271
14,981
(9,798 ) 5,183
Total $ 1,267,939
$ (395,867 ) $ 872,072
$ 976,475
$ (311,506 ) $ 664,969

~~The components of intangible assets acquired as part of our acquisitions in 2018 are as follows (in thousands):~~

Nine Months Ended
September 30, 2018
Stahlgruber Other Acquisitions Total
Trade names and trademarks $ 173,946
$ 2,895
$ 176,841
Customer and supplier relationships 78,239
8,194
86,433
Software and other technology related assets 33,344
92
33,436
Total $ 285,529
$ 11,181
$ 296,710

~~The weighted-average amortization periods for our intangible assets acquired during the nine months ended September 30, 2018 and the year ended December 31, 2017 are as follows (in years):~~

Nine Months Ended Year Ended
September 30, 2018 December 31, 2017
Stahlgruber Other Acquisitions Total All Acquisitions
Trade names and trademarks 19.9 20.0 19.9 11.2
Customer and supplier relationships 3.0 9.6 3.6 18.6
Software and other technology related assets 6.8 6.0 6.8 11.1
Covenants not to compete - - - 4.4
Total acquired finite-lived intangible assets 13.7 12.2 13.7 16.5

~~Our estimated useful lives for our 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~~	~~3-20 years~~
~~Software and other technology related assets~~	~~Straight-line~~	~~3-15 years~~
~~Covenants not to compete~~	~~Straight-line~~	~~2-5 years~~

~~Amortization expense for intangibles was $42~~$20 million and ~~$96~~$18 million during the three and nine months ended September 30, 2018, respectively, and $26 million and $74 million during the three and nine months ended September 30, 2017, respectively. Estimated amortization expense for each of the five years in the period ending December 31, 2022 is $40 million (for the remaining three months of 2018), $136 million, $104 million, $75 million and $62 million, respectively.

~~Investments in Unconsolidated Subsidiaries~~

~~Our investment~~related to our investments in unconsolidated subsidiaries ~~was $157 million and $208 million as of September 30, 2018 and December 31, 2017, respectively.~~ in our Europe segment, mainly related to our investment in Mekonomen AB ("Mekonomen").

On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen ~~AB ("Mekonomen")~~ for an aggregate purchase price of $181 million. ~~Headquartered~~In October 2018, we acquired an additional $48 million of equity in ~~Stockholm, Sweden,~~ Mekonomen ~~is the leading independent car parts and service chain in the Nordic region~~at a discounted share price as part of Europe, offering a range of products including spare parts and accessories for cars, and workshop services for consumers and businesses. As a result of the investment, we nominated two representatives for electionits rights issue, increasing our equity interest to ~~Mekonomen's board of directors; both representatives were subsequently elected to and continue to serve on the board of directors, including one as the chairman of the board.~~26.6%. 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, ~~2018, the book value of our investment in Mekonomen exceeded~~2019, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by ~~$64~~$5 million; this difference is primarily related to ~~goodwill and the fair value~~Mekonomen's Accumulated Other Comprehensive Income balance as of ~~other intangible assets.~~our acquisition date in 2016. We are recording our equity in the net earnings of Mekonomen on a one quarter lag. ~~We recorded equity losses of $20 million and $18 million during~~

During the three ~~and nine~~ months ended March 31, 2019 and September 30, 2018, ~~respectively, and equity in earnings~~we recognized other-than-temporary impairment charges of $3$40 million and $5$23 million, ~~during~~respectively, which represented the ~~three~~difference in the carrying value and ~~nine months ended September 30, 2017 related to~~the fair value of our investment in Mekonomen. The fair value of our investment in Mekonomen ~~including adjustments to convert~~was determined using the ~~results to GAAP~~Mekonomen share prices of SEK 65 and ~~to recognize the impact~~SEK 126 as of March 31, 2019 and September 30, 2018, respectively. The impairment charges are recorded in Equity in earnings (losses) of unconsolidated subsidiaries in our ~~purchase accounting adjustments.~~ Unaudited Condensed Consolidated Statements of Income.

In May 2018, ~~and May 2017,~~ we received a cash ~~dividends~~dividend of $8 million (SEK 67 million) ~~and $7 million (SEK 67 million), respectively,~~ related to our investment in Mekonomen.

~~On July 6, 2018,~~ Mekonomen announced in February 2019 that the ~~acquisition~~Mekonomen Board of ~~two automotive spare parts distributors~~Directors has proposed no dividend payment in ~~Denmark and Poland.~~2019. The ~~objective~~Level 1 fair value of ~~the acquisition is to strengthen Mekonomen's position~~our equity investment in the ~~sale~~publicly traded Mekonomen common stock at September 30, 2019 was $126 million (using the Mekonomen share price of ~~automotive spare parts~~SEK 83 as of September 30, 2019) compared to a carrying value of $115 million.

In 2018, we participated in ~~northern Europe and to establish~~ a ~~strong market position in Denmark and Poland, where Mekonomen has no current operations. The acquisition is partially being financed by a rights~~rights issue with preferential rights for Mekonomen's existing shareholders, who were given the right to subscribe for four new Mekonomen shares per seven existing owned shares at a discounted share price. ~~On October 5,~~As of September 30, 2018, we subscribed for our pro rata share in the rights issue giving us the right to acquire an additional $48 million of equity in Mekonomen at a discounted share price, retaining our 26.5% equity interest. We recorded a derivative instrument of $29 million in Other noncurrent assets on our Unaudited Condensed Consolidated Balance Sheets, which ~~represents~~represented our right to acquire Mekonomen shares at a discount. We ~~are measuring~~measured the derivative instrument at fair value, and we recorded a $3$3 million gain on our fair value remeasurement during the three months ended September 30, 2018; the gain iswas recorded in Other income, net onin the Unaudited Condensed Consolidated Statements of Income. ~~In the fourth quarter, we will record an $8~~

North America Segment

~~million loss related to the settlement of the derivative instrument~~

Our investment in ~~October 2018 due to a decrease~~unconsolidated subsidiaries in the ~~Mekonomen share price from the last day of the third quarter to the settlement date.~~

~~We evaluated our investment in Mekonomen for other-than-temporary impairment~~North America segment was $17 million and $16 million as of September 30, 2019 and December 31, 2018, respectively. The equity in earnings for the North America equity investments was immaterial during each of the three and concluded the decline in fair value was other-than-temporary due to a prolonged and significant stock price decrease. Therefore, we recognized an other-than-temporary impairment of $23 million, which represents the difference in the carrying value and the fair value of our investment in Mekonomen. The fair value of our investment in Mekonomen was determined using the Mekonomen share price as ofnine months ended September 30, ~~2018. The impairment charge is recorded in Equity in (losses) earnings of unconsolidated subsidiaries in our Unaudited Condensed Consolidated Statements of Income. Equity in losses~~2019 and earnings from our investment in Mekonomen are reported in the Europe segment. As a result of the impairment charge, the Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at September 30, 2018 approximated the carrying value of $134 million.2018.

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 them. We record the warranty costs in Cost of goods sold onin our Unaudited Condensed Consolidated Statements of Income. Our warranty reserve is calculated using historical claim information to project future warranty claims activity and is recorded within Other accrued expenses and Other noncurrent liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.

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



Balance as of December 31, 2018	$	23,262
Warranty expense	43,883
Warranty claims	(39,969		)
Balance as of September 30, 2019	$	27,176

Balance as of December 31, 2017 $ 23,151
Warranty expense 33,670
Warranty claims (31,980 )
Balance as of September 30, 2018 $ 24,841
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.

Stockholders' Equity

Treasury Stock

On October 25, 2018, our Board of Directors authorized a stock repurchase program under which we may purchase up to $500 million of our common stock from time to time through October 25, 2021. Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. Delaware law imposes restrictions on stock repurchases. During the nine months ended September 30, 2019, we repurchased 10.9 million shares of common stock for an aggregate price of $292 million. During 2018, we repurchased 2.3 million shares of common stock for an aggregate price of $60 million. As of September 30, 2019, there was $148 million of remaining capacity under our repurchase program. Repurchased shares are accounted for as treasury stock using the cost method.

On October 25, 2019, our Board of Directors authorized an increase to our existing stock repurchase program under which the Company may purchase up to an additional $500 million of our common stock from time to time through October 25, 2022; this extended date also applies to the original repurchase program. With the increase, the Board of Directors has authorized a total of $1.0 billion of common stock repurchases. As of the date of this filing, there was $648 million of remaining capacity under our repurchase program, with the additional $500 million authorization.

NoncontrollingInterest

In July 2019, we purchased substantially all of the noncontrolling interest of a subsidiary acquired in connection with the Stahlgruber acquisition for a purchase price of $19 million, which included the issuance of $14 million of notes payable. This purchase resulted in a net decrease to Noncontrolling interest of $10 million and a decrease to Additional paid-in capital of $9 million in our unaudited condensed consolidated financial statements as of September 30, 2019.

Recent Accounting Pronouncements

Adoption of New ~~Revenue~~Lease Standard

In ~~May 2014,~~February 2016, 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 the prior 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, which collectively with ASU 2014-09, represent the FASB Accounting Standards Codification Topic 606 (“ASC 606”). On January 1, 2018, we adopted ASC 606 for all contracts using the modified retrospective method, which means the historical periods are presented under the previous revenue standards with the cumulative net income effect being adjusted through retained earnings.

Most of the changes resulting from our adoption of ASC 606 were changes in presentation within the Unaudited Condensed Consolidated Balance Sheets and the Unaudited Condensed Consolidated Statements of Income. Therefore, while we made adjustments to certain opening balances on our January 1, 2018 balance sheet, we made no adjustments to opening retained earnings. We expect 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 required disclosures under ASC 606.

With the adoption of ASC 606, we reclassified certain amounts related to variable consideration. Under ASC 606, we are required to present a refund liability and a returns asset 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, and the changes in the returns assets are reported in Cost of goods sold on the Unaudited Condensed Consolidated Statements of Income. Prior to adoption, the change in the reserve for returns 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 as of September 30, 2018 and our Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 was as follows (in thousands):

Balance as of September 30, 2018
As Reported Amounts Without Adoption of ASC 606 Effect of Change Higher/(Lower)
Balance Sheet
Assets
Accounts receivable $ 1,255,876
$ 1,205,833
$ 50,043
Prepaid expenses and other current assets 200,944
144,255
56,689
Liabilities
Refund liability 106,732
—
106,732

For the three months ended September 30, 2018
As Reported Amounts Without Adoption of ASC 606 Effect of Change Higher/(Lower)
Income Statement
Revenue $ 3,122,378
$ 3,123,468
$ (1,090 )
Cost of goods sold 1,925,180
1,925,107
73
Selling, general and administrative expenses 879,150
880,313
(1,163 )

For the nine months ended September 30, 2018
As Reported Amounts Without Adoption of ASC 606 Effect of Change Higher/(Lower)
Income Statement
Revenue $ 8,873,893
$ 8,882,558
$ (8,665 )
Cost of goods sold 5,460,845
5,467,061
(6,216 )
Selling, general and administrative expenses 2,472,085
2,474,534
(2,449 )

We have not included a table of the impact of the balance sheet adjustments on the Unaudited Condensed Consolidated Statement of Cash Flows as the 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 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 September 30, 2018.

Under ASC 340, "Other Assets and Deferred Costs," we have elected to recognize incremental costs of 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 2018, we adopted ASU 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 upon adoption. Within our Unaudited Condensed Consolidating Statements of Cash Flows in Note 18, "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 upon adoption.

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 beginning after December 15, 2018; early adoption is permitted. As a result of the adoption of ASU 2018-02, we recorded a $5 million reclassification to increase Accumulated Other Comprehensive (Loss) Income and decrease Retained Earnings.

During the first quarter of 2018, we adopted ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"), which requires presentation of the current service cost component of net periodic benefit expense with other current compensation expenses for the related employees, and requires presentation of the remaining components of net periodic benefit expense, such as interest, expected return on plan assets, and amortization of actuarial gains and losses, outside of operating income. ASU 2017-07 also specifies that, on a prospective basis, only the service cost component is eligible for capitalization into inventory or other assets. While the income statement classification provisions of ASU 2017-07 are applicable on a retrospective basis, due to the immaterial impact to our Unaudited Condensed Consolidated Statements of Income in prior periods, we did not recast prior period income statement information and adopted the classification provisions on a prospective basis. The change in the capitalization provisions under ASU 2017-07 did not have a material impact on our unaudited condensed consolidated financial statements. See Note 13, "Employee Benefit Plans," for further disclosure on the components of net periodic benefit expense and classification of the components within our Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017.

During the third quarter of 2018, the FASB issued ASU No. 2018-15, "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU 2018-15"). This update requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 is effective for fiscal years and interim periods beginning after December 15, 2019; early adoption is permitted. We have adopted ASU 2018-15 in the third quarter of 2018 as we believe that our existing policy is consistent with the new guidance and thus no adjustments were required to be in compliance with this standard update.

~~Recently Issued Accounting Pronouncements~~

~~In February 2016, the FASB issued ASU~~ 2016-02, "Leases" ("ASU 2016-02"), which represents the FASB Accounting Standard Codification Topic 842 ("ASC 842"), to increase transparency and comparability by recognizing lease assets and lease liabilities on the ~~balance sheet~~Unaudited Condensed Consolidated Balance Sheets and disclosing key information about leasing arrangements. The main difference between ~~current GAAP~~the prior standard 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~~the prior standard.

We adopted the standard ~~requires that entities apply~~in the ~~effects~~first quarter of ~~these changes~~2019 using athe modified retrospective approach and took advantage of the transition package of practical expedients permitted within the new standard, which, ~~includes~~among other things, allows us to carryforward the historical lease classification. For leases with a ~~number~~term of ~~optional practical expedients. While~~12 months or less, we ~~are still~~elected the short-term lease exemption, which allowed us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the ~~process~~future. Additionally, we adopted the practical expedient to combine lease and non-lease components.

As of ~~quantifying~~January 1, 2019, we recorded both an operating lease asset and operating lease liability of $1.3 billion. The preexisting deferred rent liability balances from the ~~impact that~~historical straight-line treatment of operating leases was reclassified as a reduction of the lease asset upon adoption. The adoption of ~~ASU 2016-02 will have on our consolidated financial statements and related disclosures, we anticipate~~ the ~~adoption will~~standard did not materially affect our ~~consolidated balance sheet~~Unaudited Condensed Consolidated Statements of Income or Statements of Cash Flows as operating lease payments will still be an operating cash outflow and ~~disclosures, as the majority of our operating leases~~capital lease payments will still be ~~recorded on the balance sheet under ASU 2016-02. While we do~~a financing cash outflow. The new standard did 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~~liquidity. The standard will have no impact on our debt covenant compliance under our current agreements 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~~covenant calculations are based on the ~~implementation of the new software with an expectation to complete the implementation by the end of 2018.~~ prior lease accounting rules.

Other Recently Adopted Accounting Pronouncements

During the ~~second~~first quarter of 2019, we completed phase one of the software roll-out for our North America and Specialty operations. We are nearing completion of the phase one roll-out in our Europe operations as of the filing date of this Quarterly Report on Form 10-Q.

~~In August 2017, the FASB issued~~adopted ASU 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"). 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~~We adopted the 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~~The adoption of ASU 2017-12 did not have a material impact ~~of this standard~~ on our unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, "Disclosure ~~Framework-~~Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"), which removes, modifies, and adds certain disclosure requirements in ASC 820. ASU 2018-13 is effective for fiscal years and interim periods beginning after December 15, 2019; early adoption is permitted. We are in the process of evaluating the impact of this standard on our disclosures but do not currently believe that it will have a material impact.

In ~~August 2018,~~June 2016, the FASB issued ASU ~~No. 2018-14, "Disclosure Framework- Changes~~2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), and in November 2018 issued a subsequent amendment, ASU 2018-19, "Codification Improvements to ~~the Disclosure Requirements for Defined Benefit Plans"~~Topic 326, Financial Instruments - Credit Losses" ("ASU ~~2018-14"~~2018-19")~~, which removes, modifies,~~. ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and ~~adds~~ certain ~~disclosure requirements~~other instruments that are not measured at fair value through net income. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the contractual right to ~~ASC 715-20.~~receive cash. ASU ~~2018-14~~2016-13 and ASU 2018-19 should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. ASU 2016-13 is effective for ~~fiscal years and interim~~annual periods beginning after December 15, ~~2020; early~~2019, and interim periods therein. Early adoption is ~~permitted.~~permitted for annual periods beginning after December 15, 2018, and interim periods therein. We are ~~in the process of~~currently evaluating the impact of the adoption of this standard on our ~~disclosures.~~consolidated financial statements.

Note 5. Revenue Recognition

~~The core principle of ASC 606~~is 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 obligations 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~~We recognize revenue when the products are shipped to, delivered to or picked up by customers, ~~and~~which is the point when title has ~~transferred.~~

transferred and risk of ownership has passed.

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				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
North America	$	1,145,402	$	1,109,067	$	3,466,582	$	3,447,074
Europe	1,446,392		1,464,049		4,398,185		3,781,091
Specialty	394,204		388,865		1,157,023		1,151,172
Parts and services	2,985,998		2,961,981		9,021,790		8,379,337
Other	161,775		160,397		474,459		494,556
Total revenue	$	3,147,773	$	3,122,378	$	9,496,249	$	8,873,893

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
North America $ 1,109,067
$ 1,051,470
$ 3,447,074
$ 3,207,001
Europe 1,464,049
952,765
3,781,091
2,659,804
Specialty 388,865
329,522
1,151,172
1,005,776
Parts and services 2,961,981
2,333,757
8,379,337
6,872,581
Other 160,397
132,043
494,556
394,473
Total revenue $ 3,122,378
$ 2,465,800
$ 8,873,893
$ 7,267,054

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 (i) additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, ~~and~~(ii) fees for admission to our self service ~~yards.~~yards, and (iii) diagnostic and repair services.

In North America, our vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; automotive glass products such as windshields; mirrors and grilles; 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 our Specialty operations, 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 months to 36 months. Under FASB Accounting Standards Codification Topic 606 ("ASC ~~606,~~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 as of January 1, 2019	$	24,006
Additional warranty revenue deferred	32,118
Warranty revenue recognized	(29,469		)
Balance as of September 30, 2019	$	26,655

Balance as of January 1, 2018 $ 19,465
Additional warranty revenue deferred 28,889
Warranty revenue recognized (25,200 )
Balance as of September 30, 2018 $ 23,154

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~~original equipment manufacturers ("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 16, "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~~consideration, with contemplation of ~~variable~~

~~consideration are constrained to the extent that a significant reversal~~any expected reversals in ~~revenue is expected.~~revenue. We recorded a refund liability and return asset for expected returns of ~~$107~~$100 million and ~~$57~~

$54 million, respectively, as of September 30, ~~2018~~2019, and ~~a net reserve of $38~~$105 million and $56 million, respectively, as of December 31, ~~2017.~~2018. The refund liability is presented separately on the balance sheet within current liabilities while the return asset is presented within ~~prepaid~~Prepaid expenses and other current assets. Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives which are recorded in Receivables, net on the Unaudited Condensed Consolidated Balance Sheets. We recorded a reserve for our variable consideration of ~~$114~~$106 million and ~~$78~~$103 million as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions. We consider these programs to be immaterial to our unaudited condensed consolidated financial statements.

Note 6. Restructuring and Acquisition Related Expenses

Acquisition Related Expenses

Acquisition related expenses, which include external costs such as legal, accounting and advisory fees, ~~totaled $1~~were $2 million ~~and $17 million for~~in each of the three and nine months ended September 30, 2018, respectively. Our 2018 expenses primarily consisted of external costs related to our acquisition of Stahlgruber totaling $1 million and $15 million for the three and nine months ended September 30, 2018, respectively. The remaining acquisition related costs related to (i) completed acquisitions, (ii) pending acquisitions as of September 30, 2018, and (iii) potential acquisitions that were terminated. 2019.

Acquisition related expenses for the three and nine months ended September 30, ~~2017 totaled $3~~2018 were $1 million and $8$17 million, ~~respectively. Our 2017 expenses~~respectively, which included external costs primarily related to ~~completed acquisitions~~our May 2018 acquisition of Stahlgruber.

Acquisition Integration Plans

During the three and ~~acquisitions that were pending as of~~nine months ended September 30, ~~2017.~~2019, we incurred $7 million and $13 million of restructuring expenses, respectively, primarily related to our acquisition integration efforts in our Europe segment. These expenses included approximately $4 million and $7 million for the three and nine months ended September 30, 2019, respectively, related to the integration of our acquisition of Andrew Page Limited ("Andrew Page"). The $4 million recorded during the three months ended September 30, 2019 for Andrew Page was recorded within Cost of goods sold in the Unaudited Condensed Consolidated Statement of Income.

~~Acquisition Integration Plans and Restructuring~~

During the three and nine months ended September 30, 2018, we incurred $5 million and $10 million of restructuring expenses, respectively. Restructuring expenses for the three months ended September 30, 2018 primarily consisted of $4 million related to the integration of our acquisition of Andrew Page and $1 million related to our Specialty segment; restructuring expenses for the nine months ended September 30, 2018 primarily consisted of $8 million related to the integration of our acquisition of Andrew Page and $2 million related to our Specialty segment. These integration activities included the closure of duplicate facilities and termination of employees.

During each of the three and nine months ended September 30, 2017, we incurred $2 million of restructuring expenses, primarily related to the ongoing integration activities in our Specialty segment. Expenses incurred were primarily related to facility closures and the merger of existing facilities into larger distribution centers.

We expect to incur additional expenses related to the integration of certain of our acquisitions into our existing ~~operations in 2018 and 2019.~~operations. 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 currently expected to be ~~less than~~between $5 million and $10 million.

2019 Global Restructuring Program

In the second quarter of 2019, we began implementing a cost reduction initiative, covering all three of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. We have incurred and expect to incur costs for inventory write-downs, employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed earlier than the end of the previously estimated use lives.

During the three and nine months ended September 30, 2019, we incurred $18 million and $23 million, respectively, of restructuring expenses primarily related to inventory write-downs, facility exit costs, and employee-related costs. Of these expenses, $13 million, primarily related to Andrew Page branch consolidation and brand rationalization, was recorded within Cost of goods sold in the Unaudited Condensed Consolidated Statement of Income during each of the three and nine months ended September 30, 2019, and $4 million and $10 million, respectively, was recorded within Restructuring and acquisition related expenses. We currently expect to incur additional expenses between $15 million and $20 million through the end of 2020 to complete the program.

1 LKQ Europe Program

In September 2019, we announced a multi-year program called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business. Under the 1 LKQ Europe program, we will reorganize our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. We currently expect to incur between $45 million and $55 million in personnel and inventory related restructuring charges through 2024 as a result of executing the 1 LKQ Europe program. In future periods, we

may identify additional initiatives and projects under the 1 LKQ Europe program that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects.

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~~equity-based awards under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). We have granted ~~RSUs,~~restricted stock units ("RSUs"), stock options, and restricted stock under the Equity Incentive Plan. We expect to issue new or treasury shares of common stock to cover past and future equity grants.

RSUs

The RSUs we have issued vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs (other than PSUs, which are described below) contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case both conditions must be met before any RSUs vest. For 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; 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. Our 2019 annual grant of RSUs occurred in March 2019. In previous years, the annual grant occurred in mid-January.

Starting with our 2019 grants, participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards; if retirement occurs during the first year of the vesting period (for RSUs subject to a time-based vesting condition) or the first year of the performance period (for RSUs with a performance-based vesting condition), the participant vests in a prorated amount of the RSU grant based on the portion of the year employed. For our RSU grants prior to 2019, participants forfeit their unvested shares upon retirement.

The fair value of RSUs that vested during the nine months ended September 30, ~~2018~~2019 was ~~$27 million.~~

$20 million; the fair value of RSUs vested is based on the market price of LKQ stock on the date vested.

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the nine months ended September 30, ~~2018:~~2019:



	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, 2019	1,475,682		$	34.94
Granted	1,011,623		$	27.82
Vested	(753,276	)	$	32.31
Forfeited / Canceled	(70,851	)	$	33.56
Unvested as of September 30, 2019	1,663,178		$	31.86
Expected to vest after September 30, 2019	1,506,308		$	31.90	2.7	$	47,373

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, 2018 1,624,390
$ 29.94

Granted 601,802
$ 42.58

Vested (698,903 ) $ 30.07

Forfeited / Canceled (33,767 ) $ 33.28

Unvested as of September 30, 2018 1,493,522
$ 34.89

Expected to vest after September 30, 2018 1,344,519
$ 34.88
2.6 $ 42,581

~~(1)~~


(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.

In 2019, we granted performance-based three-year RSUs ("PSUs") to certain employees, including our executive officers, under our Equity Incentive Plan. As these awards are performance-based, the exact number of shares to be paid out may be up to twice the grant amount, depending on the Company's ~~stock~~performance and the achievement of certain performance metrics (adjusted earnings per share, average organic parts and services revenue growth, and average return on invested capital) over the ~~last day~~three year period ending December 31, 2021. In 2019, we also granted an immaterial amount of ~~each period multiplied by~~performance-based RSUs to employees that have different performance metrics than those described above.

The following table summarizes activity related to our PSUs under the ~~number of units) that would have been received by~~Equity Incentive Plan for the ~~holders had all RSUs vested. This amount changes based on the market price of the Company’s common stock.~~nine months ended September 30, 2019:



	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, 2019	—	$	—
Granted⁽²⁾	136,170	$	27.69
Unvested as of September 30, 2019	136,170	$	27.69
Expected to vest after September 30, 2019	136,170	$	27.69	2.5	$	4,283

(1)

The aggregate intrinsic value of expected to vest PSUs 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 at target) that would have been received by the holders had all PSUs vested. This amount changes based on the market price of the Company’s common stock and the achievement of the performance metrics relative to the established targets.


(2)	Represents the number of PSUs at target payout.

Stock Options

Stock options vest over periods of up to five years, subject to a continued service condition. Stock options expire either six years or ten years from the date they are granted. NoNaN options were granted during the nine months ended September 30, ~~2018. No~~2019. NaN options vested during the nine months ended September 30, ~~2018;~~2019; 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 months ended September 30, ~~2018:~~2019:



	Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) ⁽¹⁾
Balance as of January 1, 2019	1,051,494		$	10.15
Exercised	(605,591	)	$	9.03		$	12,085
Canceled	(8,055	)	$	18.45
Balance as of September 30, 2019	437,848		$	11.55	0.3	$	8,739
Exercisable as of September 30, 2019	437,848		$	11.55	0.3	$	8,739

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 (441,495 ) $ 8.54
$ 12,678
Canceled (509 ) $ 32.31

Balance as of September 30, 2018 1,296,069
$ 9.42
1.0 $ 28,862
Exercisable as of September 30, 2018 1,296,069
$ 9.42
1.0 $ 28,862

(1) The aggregate intrinsic value of outstanding and exercisable 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 aggregate intrinsic value of outstanding and exercisable 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.

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $7 million and $21 million for the three and nine months ended September 30, 2019, respectively, and $6 million and $18 million for the three and nine months ended September 30, 2018, ~~respectively, and $5 million and $18 million for the three and nine months ended September 30, 2017,~~ respectively. As of September 30, ~~2018,~~2019, unrecognized compensation expense related to unvested RSUs ~~is $40~~and PSUs was $44 million. Stock-based compensation expense related to these awards will be different to the extent that forfeitures are ~~realized.~~realized and performance under the PSUs differs from target.

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
	September 30,				September 30,
	2019		2018		2019		2018
Income from continuing operations	$	151,812	$	134,480	$	402,582	$	445,109
Denominator for basic earnings per share—Weighted-average shares outstanding	307,230		318,082		311,360		313,417
Effect of dilutive securities:
RSUs	293		333		341		452
PSUs	—		—		—		—
Stock options	437		987		503		1,082
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	307,960		319,402		312,204		314,951
Basic earnings per share from continuing operations	$	0.49	$	0.42	$	1.29	$	1.42
Diluted earnings per share from continuing operations ⁽¹⁾	$	0.49	$	0.42	$	1.29	$	1.41

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Income from continuing operations $ 134,480
$ 122,381
$ 445,109
$ 414,104
Denominator for basic earnings per share—Weighted-average shares outstanding 318,082
308,909
313,417
308,451
Effect of dilutive securities:
RSUs 333
485
452
501
Stock options 987
1,385
1,082
1,543
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 319,402
310,779
314,951
310,495
Basic earnings per share from continuing operations $ 0.42
$ 0.40
$ 1.42
$ 1.34
Diluted earnings per share from continuing operations $ 0.42
$ 0.39
$ 1.41
$ 1.33


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

The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):



	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
Antidilutive securities:
RSUs	942	375	700	317
Stock options	31	—	32	—

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Antidilutive securities:
RSUs 375
—
317
50
Stock options —
—
—
51

Note 9. Accumulated Other Comprehensive Income (Loss)

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



	Three Months Ended
	September 30, 2019
	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
Beginning balance	$	(181,890	)	$	5,987		$	(7,856	)	$	(4,794	)	$	(188,553	)
Pretax (loss) income	(69,440		)	28,594			(3,087		)	—			(43,933		)
Income tax effect	—			(6,739		)	782			—			(5,957		)
Reclassification of unrealized (gain) loss	—			(30,256		)	(61		)	—			(30,317		)
Reclassification of deferred income taxes	—			7,140			13			—			7,153
Disposal of business	(379		)	—			—			—			(379		)
Other comprehensive income from unconsolidated subsidiaries	—			—			—			1,240			1,240
Ending balance	$	(251,709	)	$	4,726		$	(10,209	)	$	(3,554	)	$	(260,746	)

Three Months Ended
September 30, 2018
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized (Loss) Gain on Pension Plans Other Comprehensive Income from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive (Loss) Income
Beginning balance $ (125,753 ) $ 19,684
$ (10,200 ) $ 208
$ (116,061 )
Pretax (loss) income (23,405 ) 7,681
1,217
—
(14,507 )
Income tax effect 2,454
(1,796 ) 41
—
699
Reclassification of unrealized (gain) loss —
(7,284 ) 21
—
(7,263 )
Reclassification of deferred income taxes —
1,703
(5 ) —
1,698
Other comprehensive income from unconsolidated subsidiaries —
—
—
643
643
Ending balance $ (146,704 ) $ 19,988
$ (8,926 ) $ 851
$ (134,791 )


	Three Months Ended															Three Months Ended
	September 30, 2017															September 30, 2018
	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			Foreign Currency Translation			Unrealized Gain (Loss) on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Other Comprehensive Income from Unconsolidated Subsidiaries		Accumulated Other Comprehensive (Loss) Income
Beginning balance	$	(157,353	)	$	10,324		$	(6,640	)	$	(601	)	$	(154,270	)	$	(125,753	)	$	19,684		$	(10,200	)	$	208	$	(116,061	)
Pretax income (loss)	63,769			(15,402		)	—			—			48,367
Pretax (loss) income																(23,405		)	7,681			1,217			—		(14,507		)
Income tax effect	(4,151		)	5,683			—			—			1,532			2,454			(1,796		)	41			—		699
Reclassification of unrealized loss (gain)	—			12,591			(200		)	—			12,391
Reclassification of unrealized (gain) loss																—			(7,284		)	21			—		(7,263		)
Reclassification of deferred income taxes	—			(4,648		)	50			—			(4,598		)	—			1,703			(5		)	—		1,698
Other comprehensive loss from unconsolidated subsidiaries	—			—			—			(1,034		)	(1,034		)
Other comprehensive income from unconsolidated subsidiaries																—			—			—			643		643
Ending balance	$	(97,735	)	$	8,548		$	(6,790	)	$	(1,635	)	$	(97,612	)	$	(146,704	)	$	19,988		$	(8,926	)	$	851	$	(134,791	)


	Nine Months Ended															Nine Months Ended
	September 30, 2018															September 30, 2019
	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 Gain (Loss) on Cash Flow Hedges			Unrealized (Loss) Gain on Pension Plans			Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries			Accumulated Other Comprehensive (Loss) Income
Beginning balance	$	(71,933	)	$	11,538		$	(8,772	)	$	(1,309	)	$	(70,476	)	$	(177,597	)	$	14,374		$	(8,075	)	$	(3,652	)	$	(174,950	)
Pretax (loss) income	(82,137		)	33,901			(102		)	—			(48,338		)	(73,733		)	34,769			(3,087		)	—			(42,051		)
Income tax effect	4,507			(7,926		)	(125		)	—			(3,544		)	—			(8,163		)	782			—			(7,381		)
Reclassification of unrealized (gain) loss	—			(26,117		)	97			—			(26,020		)	—			(47,431		)	229			—			(47,202		)
Reclassification of deferred income taxes	—			6,106			(24		)	—			6,082			—			11,177			(58		)	—			11,119
Disposal of business																(379		)	—			—			—			(379		)
Other comprehensive income from unconsolidated subsidiaries	—			—			—			2,160			2,160			—			—			—			98			98
Adoption of ASU 2018-02	2,859			2,486			—			—			5,345
Ending balance	$	(146,704	)	$	19,988		$	(8,926	)	$	851		$	(134,791	)	$	(251,709	)	$	4,726		$	(10,209	)	$	(3,554	)	$	(260,746	)


	Nine Months Ended															Nine Months Ended
	September 30, 2017															September 30, 2018
	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			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
Beginning balance	$	(272,529	)	$	8,091		$	(2,737	)	$	—		$	(267,175	)	$	(71,933	)	$	11,538		$	(8,772	)	$	(1,309	)	$	(70,476	)
Pretax income (loss)	177,434			(44,749		)	112			—			132,797
Pretax (loss) income																(82,137		)	33,901			(102		)	—			(48,338		)
Income tax effect	(4,151		)	16,463			(43		)	—			12,269			4,507			(7,926		)	(125		)	—			(3,544		)
Reclassification of unrealized loss (gain)	—			45,551			(921		)	—			44,630
Reclassification of unrealized (gain) loss																—			(26,117		)	97			—			(26,020		)
Reclassification of deferred income taxes	—			(16,808		)	235			—			(16,573		)	—			6,106			(24		)	—			6,082
Disposal of business, net	1,511			—			(3,436		)	—			(1,925		)
Other comprehensive loss from unconsolidated subsidiaries	—			—			—			(1,635		)	(1,635		)
Other comprehensive income from unconsolidated subsidiaries																—			—			—			2,160			2,160
Adoption of ASU 2018-02																2,859			2,486			—			—			5,345
Ending balance	$	(97,735	)	$	8,548		$	(6,790	)	$	(1,635	)	$	(97,612	)	$	(146,704	)	$	19,988		$	(8,926	)	$	851		$	(134,791	)

~~Net~~The amounts of unrealized gains and losses on our ~~interest rate swaps totaling $2 million and $5 million were~~Cash Flow Hedges reclassified to ~~Interest expense, net in~~ our Unaudited Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2018, respectively, compared to a loss of $1 million during the nine months ended September 30, 2017; the amount reclassified to Interest expense, net during the three months ended September 30, 2017 was immaterial. We also reclassified gains of $2 million to Interest expense, net related to the foreign currency forward component of our cross currency swaps during each of the three months ended September 30, 2018 and 2017, and gains of $6 million during each of the nine months ended September 30, 2018 and 2017. Alsoare as follows (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Unrealized gains on interest rate swaps ^{(1) (2)}	$	1,863	$	2,139	$	6,805	$	4,748
Unrealized gains on foreign currency forwards ^{(2) (3)}	3,667		2,131		10,829		6,287
Unrealized gains on cross currency swaps ⁽⁴⁾	24,726		3,014		29,797		15,082
Total	$	30,256	$	7,284	$	47,431	$	26,117

Net unrealized losses related to our ~~cross currency swaps, we~~pension plans were reclassified ~~gains of $3 million and $15 million~~ to Other income, net in our Unaudited Condensed Consolidated Statements of Income during each of the ~~three and~~ nine months ended September 30, ~~2018, respectively, compared~~2019 and 2018. Our policy is to ~~losses of $15 million and $50 million during~~reclassify the ~~three and nine months ended September 30, 2017; these gains and losses offset the impact of the remeasurement of the underlying contracts. The deferred~~ income ~~taxes related to our cash flow hedges were reclassified~~tax effect from Accumulated other comprehensive income (loss) to ~~provision~~the Provision for income ~~taxes.~~taxes when the related gains and losses are released to the Unaudited Condensed Consolidated Statements of Income.

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 allowed a reclassification from Accumulated other comprehensive income (loss) 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"). 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~~other comprehensive income (loss) and decrease Retained ~~Earnings. See Note 4, "Financial Statement Information" for further information regarding the adoption of ASU 2018-02.~~earnings.

Note 10. Long-Term Obligations

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



	September 30,			December 31,
	2019			2018
Senior secured credit agreement:
Term loans payable	$	343,438		$	350,000
Revolving credit facilities	1,145,781			1,387,177
U.S. Notes (2023)	600,000			600,000
Euro Notes (2024)	544,950			573,350
Euro Notes (2026/28)	1,089,900			1,146,700
Receivables securitization facility	—			110,000
Notes payable through October 2030 at weighted average interest rates of 2.9% and 2.0%, respectively	34,325			23,056
Finance lease obligations	39,113			39,966
Other debt at weighted average interest rates of 1.9% and 1.8%, respectively	99,215			117,448
Total debt	3,896,722			4,347,697
Less: long-term debt issuance costs	(31,184		)	(36,906		)
Less: current debt issuance costs	(283		)	(291		)
Total debt, net of debt issuance costs	3,865,255			4,310,500
Less: current maturities, net of debt issuance costs	(128,143		)	(121,826		)
Long term debt, net of debt issuance costs	$	3,737,112		$	4,188,674

September 30, December 31,
2018 2017
Senior secured credit agreement:
Term loans payable $ 590,000
$ 704,800
Revolving credit facilities 1,183,626
1,283,551
U.S. Notes (2023) 600,000
600,000
Euro Notes (2024) 580,200
600,150
Euro Notes (2026/28) 1,160,400
—
Receivables securitization facility 100,000
100,000
Notes payable through May 2027 at weighted average interest rates of 1.5% and 1.4%, respectively 38,641
29,146
Other long-term debt at weighted average interest rates of 2.2% and 1.7%, respectively 151,502
110,633
Total debt 4,404,369
3,428,280
Less: long-term debt issuance costs (31,251 ) (21,476 )
Less: current debt issuance costs (4,616 ) (2,824 )
Total debt, net of debt issuance costs 4,368,502
3,403,980
Less: current maturities, net of debt issuance costs (118,365 ) (126,360 )
Long term debt, net of debt issuance costs $ 4,250,137
$ 3,277,620

Senior Secured Credit Agreement

On ~~December 1, 2017,~~November 20, 2018, LKQ Corporation, LKQ Delaware LLP, and certain other subsidiaries (collectively, the "Borrowers") entered into Amendment No. 23 to the Fourth Amended and Restated Credit Agreement ("Credit Agreement"), which amended the 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, 2023; (2)~~ increase the total availability under the revolving credit facility's multicurrency component from ~~$2.45~~$2.75 billion to ~~$2.75~~$3.15 billion; ~~(3) increase~~(2) reduce the ~~permitted net~~margin on borrowings by 25 basis points at the September 30, 2018 leverage ratio, ~~thresholds, including a temporary step-up in~~and reduce the ~~allowable net~~number of leverage ~~ratio in~~pricing tiers; (3) extend the ~~case of permitted acquisitions;~~maturity date by one year to January 29, 2024; (4) ~~modify~~reduce the ~~applicable margins and fees in the pricing grid;~~unused facility fee depending on leverage category; (5) increase the capacity for incurring additional indebtedness under our receivables securitization facility; (6) increase the maximum borrowing limit of swingline loans and add the ability ~~of LKQ~~to borrow in British Pounds and ~~its subsidiaries to incur additional indebtedness;~~Euros; and ~~(6)~~(7) make other immaterial or clarifying modifications and ~~amendments. The increase in~~amendments to the ~~revolving credit facility's multicurrency component~~terms of ~~$300 million~~the Credit Agreement. Borrowings will ~~be used for general corporate purposes.~~continue to bear interest at variable rates.

Amounts under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, ~~2023.~~2024. Term loan borrowings, which totaled ~~$590~~$343 million as of September 30, ~~2018,~~2019, are due and payable in quarterly installments equal to $9$2 million on the last day of each of the first four fiscal quarters ending on or after March 31, 2019 and approximately $4 million on the last day of each fiscal quarter ~~ending on or after December 31, 2021,~~thereafter, with the remaining balance due and payable on January 29, ~~2023. During~~2024.

The increase in the ~~three months ended September 30, 2018, we prepaid our required quarterly installments through September 30, 2021.~~

revolving credit facility's multicurrency component of $400 million was used in part to pay down $240 million of the term loan (to the new $350 million amount that was outstanding as of the date of the amendment); the remainder will be used for general corporate purposes.

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 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 11, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at ~~both~~ September 30, ~~2018~~2019 and December 31, ~~2017 was 2.2%.~~2018 were 1.6% and 1.9%, respectively. We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of ~~0.025% 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, there were ~~no borrowings~~$15 million classified as current maturities at September 30, ~~2018~~2019 compared to ~~$18~~$9 million at December 31, ~~2017.~~2018. As of September 30, ~~2018,~~2019, there were letters of credit outstanding in the aggregate amount of ~~$65~~$69 million. The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at September 30, ~~2018~~2019 was ~~$1.5~~$1.9 billion.

Related to the execution of Amendment No. 23 to the Fourth Amended and Restated Credit Agreement in ~~December 2017,~~November 2018, we incurred $5$4 million of fees, the majority of which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the agreement.

In 2013, we issued $600 million aggregate principal amount of 4.75% senior notes due 2023 (the "U.S. Notes (2023)"). 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"), the trustee, paying agent, transfer agent and registrar. 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 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.

The U.S. Notes (2023) are redeemable, in whole or in part, at any time on or after May 15, 2018 at the respective redemption prices specified in the U.S. Notes (2023) Indenture, plus accrued and unpaid interest, if any. We may be required to make an offer to purchase the U.S. Notes (2023) upon the sale of certain assets, subject to certain exceptions, and upon a change of control.

On April 14, 2016, LKQ Italia Bondco S.p.A. (“("LKQ ~~Italia”~~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~~"Euro Notes (2024)”") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933. The proceeds from the offering were used to repay a portion of the revolver borrowings under the Credit Agreement and to pay related fees and expenses. The Euro Notes (2024) are governed by the Indenture dated as of April 14, 2016 (the ~~“Euro~~"Euro Notes (2024) ~~Indenture”~~Indenture") among LKQ Italia, LKQ Corporation and certain of our subsidiaries (the ~~“Euro~~"Euro Notes (2024) ~~Subsidiaries”~~Subsidiaries"), the trustee, and the paying agent, transfer agent, and registrar.

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

The Euro Notes (2024) and the related guarantees are, respectively, LKQ ~~Italia’s~~Italia's and each Euro Notes (2024) ~~Guarantor’s~~Guarantor's senior unsecured obligations and are subordinated to all of LKQ Italia's and the Euro Notes (2024) ~~Guarantors’~~Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Euro Notes (2024) are

effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes (2024) to the extent of the assets of those subsidiaries. The Euro Notes (2024) have been listed on the ExtraMOT, Professional Segment of the Borsa Italia S.p.A. securities exchange and the Global Exchange Market of Euronext Dublin.

The Euro Notes (2024) are redeemable, in whole or in part, at any time at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after January 1, 2024, we may redeem some or all of the Euro Notes (2024) at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. We may be required to make an offer to purchase the Euro Notes (2024) upon the sale of certain assets, subject to certain exceptions, and upon a change of control. In addition, in the event of certain developments affecting taxation or under certain other circumstances which, in any case, require the payment of certain additional amounts, we may redeem the Euro Notes (2024) in whole, but not in part, at any time at a redemption price of 100% of the principal amount thereof plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

Euro Notes (2026/28)

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, were or will be used to (i) finance a portion of the consideration paid for the Stahlgruber acquisition, (ii) for general corporate purposes and (iii) to pay related fees and expenses, including the refinancing of net financial debt. The Euro Notes (2026/28) are governed by the Indenture dated as of April 9, 2018 (the “Euro Notes (2026/28) Indenture”) among LKQ Euro Holdings, LKQ Corporation and certain of our subsidiaries (the “Euro Notes (2026/28) Subsidiaries”), the trustee, paying agent, transfer agent, and registrar.

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.~~year. 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 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. The Euro Notes (2026/28) have been listed on the Global Exchange Market of Euronext Dublin.

The Euro Notes (2026/28) are redeemable, in whole or in part, at any time at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after April 1, 2021, we may redeem some or all of the 2026 notes at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture. On or after April 1, 2023, we may redeem some or all of the 2028 notes at the applicable redemption prices set forth in the Euro Notes (2026/28) Indenture. We also may redeem up to 35% of 2026 notes and up to 35% of the 2028 notes before April 1, 2021 with the net cash proceeds from certain equity offerings. We may be required to make an offer to purchase the Euro Notes (2026/28) upon the sale of certain assets, subject to certain exceptions, and upon a change of control. In addition, in the event of certain developments affecting taxation or under certain other circumstances which, in any case, require the payment of certain additional amounts, we may redeem the Euro Notes (2026/28) in whole, but not in part, at any time at a redemption price of 100% of the principal amount thereof, plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

Related to the execution of the Euro Notes (2026/28) in April 2018, we incurred $16 million of fees, which were capitalized as an offset to Long-Term Obligations and are amortized over the term of the Euro Notes (2026/28).

Receivables Securitization Facility

On ~~November 29, 2016,~~December 20, 2018, we amended the terms of our receivables securitization facility with MUFG Bank, Ltd. ("MUFG") (formerly known as The Bank of Tokyo-Mitsubishi UFJ, ~~LTD. ("BTMU"~~Ltd.) to: (i) extend the term of the facility to November 8, ~~2019;~~2021; (ii) increase the maximum amount available to ~~$100~~$110 million; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to ~~BTMU~~MUFG 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~~MUFG 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 inon our Unaudited Condensed Consolidated Balance Sheets, under which the receivables included in the program collateralize the amounts invested by ~~BTMU,~~MUFG, the conduit investors and/or financial institutions (the "Purchasers"). The receivables are held by LKQ Receivables Finance Company, LLC ("LRFC"), a wholly owned bankruptcy-remote special purpose subsidiary of LKQ, and therefore, the receivables are available first to satisfy the creditors of LRFC, including the Purchasers. ~~Net~~While there were no borrowings on our receivables ~~totaling $127~~securitization facility as of September 30, 2019, $120 million ~~and $144 million~~of net receivables were available as collateral for the investment under the receivables facility, compared to $132 million as of ~~September 30, 2018 and~~ December 31, ~~2017, respectively.~~2018.

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~~Interbank Offered Rate ("LIBOR"), or (iii) base rates, and are payable monthly in arrears. The commercial paper 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. AsThe outstanding balance was $110 million as of December 31, 2018 and there was 0 outstanding balance as of September 30, ~~2018, the interest rate under the receivables facility was based on commercial paper rates and was 3.1%. The outstanding balances of $100 million as of both September 30, 2018 and~~2019. At December 31, ~~2017 were~~2018, we classified the outstanding balance 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 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~~Changes in the fair value of the interest rate swap agreements isare recorded in Accumulated Other Comprehensive Income (Loss) and isare reclassified to Interest expense, net of interest ~~expense~~income 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 September 30, 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~~Changes in the ~~changes in~~ fair value of the foreign currency forward contracts isare recorded in Accumulated Other Comprehensive Income (Loss) and reclassified to ~~other~~Other income, 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 isare recorded in Accumulated Other Comprehensive Income (Loss) and isare reclassified to ~~interest~~Interest expense, net of interest income when the underlying transactions have an impact on earnings.

In October 2018, we entered into two cross currency swap agreements for a total notional amount of $184 million (€160 million). Half of the notional amount ~~matures~~matured in October 2019 with the remainder in October 2020. The purpose of, and accounting offor, the swaps are similar to those described in the previous paragraph.

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

The following ~~table summarizes~~tables summarize the notional amounts and fair values of our designated cash flow hedges as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):


		Notional Amount				Fair Value at September 30, 2018 (USD)				Fair Value at December 31, 2017 (USD)					Notional Amount		Fair Value at September 30, 2019 (USD)
		September 30, 2018		December 31, 2017		Other Assets		Other Noncurrent Liabilities		Other Assets		Other Noncurrent Liabilities			September 30, 2019		Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Interest rate swap agreements	Interest rate swap agreements													Interest rate swap agreements
USD denominated		$	590,000	$	590,000	$	25,719	$	—	$	19,102	$	—		$	480,000	$	—	$	3,634	$	—	$	—
Cross currency swap agreements	Cross currency swap agreements													Cross currency swap agreements
USD/euro		$	394,649	$	406,546	10,881		49,212		5,504		61,492			$	562,418	4,678		5,766		53		14,544
Total cash flow hedges	Total cash flow hedges					$	36,600	$	49,212	$	24,606	$	61,492	Total cash flow hedges			$	4,678	$	9,400	$	53	$	14,544



	Notional Amount		Fair Value at December 31, 2018 (USD)
	December 31, 2018		Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated	$	480,000	$	—	$	14,967	$	—	$	—
Cross currency swap agreements
USD/euro	$	574,315	211		7,669		127		40,870
Total cash flow hedges			$	211	$	22,636	$	127	$	40,870

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 inon our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would result in a decrease to Other Noncurrent Assets and Other Noncurrent Liabilities on our Unaudited Condensed Consolidated Balance Sheets of ~~$19~~$6 million and ~~$12~~$14 million at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The activity related to our cash flow hedges is included in Note 9, "Accumulated Other Comprehensive Income (Loss)." Ineffectiveness related to our cash flow hedges was immaterial to our results of operations during each of the three and nine months ended September 30, 2018 and 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, ~~2018,~~2019, we estimate that $4$2 million of derivative 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

During the third quarter of 2018, we recorded the fair value of a derivative instrument of $29 million in Other assets on our Unaudited Condensed Consolidated Balance Sheets related to our right to acquire Mekonomen shares at a discount. We are measuring the derivative instrument at fair value, and we recorded a $3 million gain on our fair value remeasurement during the three months ended September 30, 2018; the gain is recorded in Other income, net on the Unaudited Condensed Consolidated Statements of Income. In the fourth quarter, we will record an $8 million loss related to the settlement of the derivative instrument in October 2018 due to a decrease in the Mekonomen share price from the last day of the third quarter to the settlement date. Refer to Note 4, "Financial Statement Information," for more information on the derivative instrument.

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, ~~2018~~2019 and December 31, ~~2017,~~2018, along with the effect on our results of operations during ~~each of~~ the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, were immaterial.

Note 12. Fair Value Measurements

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and nine months ended September 30, ~~2018,~~2019, 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, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):



	Balance as of December 31, 2018		Fair Value Measurements as of December 31, 2018
	Balance as of December 31, 2018		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	47,649	$	—	$	47,649	$	—
Interest rate swaps	14,967		—		14,967		—
Cross currency swap agreements	7,880		—		7,880		—
Total Assets	$	70,496	$	—	$	70,496	$	—
Liabilities:
Contingent consideration liabilities	$	5,209	$	—	$	—	$	5,209
Deferred compensation liabilities	48,984		—		48,984		—
Cross currency swap agreements	40,997		—		40,997		—
Total Liabilities	$	95,190	$	—	$	89,981	$	5,209

Balance as of December 31, 2017 Fair Value Measurements 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 ~~and the derivative instrument related to Mekonomen are both~~is included in Other noncurrent 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 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 cross currency swap agreements is presented in Note 11, "Derivative Instruments and Hedging Activities."

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

Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired business subsequent to the acquisition. The liabilities for these payments are classified as Level 3 liabilities because the related fair value measurement, which is determined using an income approach, includes significant inputs not observable in the market.

Financial Assets and Liabilities Not Measured at Fair Value

Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. Based on market conditions as of both September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the fair value of our credit agreement borrowings reasonably approximated the carrying values of ~~$1.8~~$1.5 billion and ~~$2.0~~$1.7 billion, respectively. In addition, based on market conditions, the fair ~~values~~value of the outstanding borrowings under the receivables facility reasonably approximated the carrying ~~values~~value of ~~$100~~$110 million at ~~both~~December 31, 2018; as of September 30, ~~2018 and December 31, 2017.~~2019, there were no outstanding borrowings under the receivables facility. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the fair values of the U.S. Notes (2023) were approximately ~~$601~~$609 million and ~~$615~~$574 million, respectively, compared to a carrying value of $600 ~~million.~~million at each date. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the fair values of the Euro Notes (2024) were approximately ~~$615~~$618 million and ~~$658~~$586 million compared to carrying values of ~~$580~~$545 million and ~~$600~~$573 million, respectively. As of September 30, 2019, the fair value of the Euro Notes (2026/28) was $1.2 billion compared to a carrying value of $1.1 billion; as of December 31, 2018, the fair value of the Euro Notes (2026/28) approximated the carrying value of ~~$1.2~~$1.1 billion.

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, ~~2018~~2019 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 values of our Euro Notes (2024) and Euro Notes (2026/28) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.

Note 13. Leases

We lease certain warehouses, distribution centers, retail stores, office space, land, vehicles and equipment.

We determine if an arrangement is a lease at inception. Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the implicit rate for most of our leases is not readily determinable, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Upon adoption of the new lease standard, we utilized the incremental borrowing rate as of the date of adoption. We determine our incremental borrowing rate by analyzing yield curves with consideration of lease term, and country and company specific factors. The operating lease ROU asset also includes any lease prepayments and excludes lease incentives.

Many of our leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 40 years or more. For each lease, we consider whether we are reasonably certain to exercise these options to extend. Other contracts may contain termination options which we assess to determine whether we are reasonably certain not to exercise those options. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Some of our lease agreements include rental payments adjusted periodically for inflation. Most of these adjustments are considered variable lease costs. Other variable lease costs consist of certain non-lease components that are disclosed as lease costs due to our election of the practical expedient to combine lease and non-lease components and include items such as variable payments for utilities, property taxes, common area maintenance, sales taxes, and insurance.

For leases with an initial term of 12 months or less, we have not recognized an operating lease ROU asset or operating lease liability on the Unaudited Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease terms.

We guarantee the residual values for the majority of our vehicles. The residual values decline over the lease terms to a defined percentage of original cost. In the event the lessor does not realize the residual value when a vehicle is sold, we would be responsible for a portion of the shortfall. Similarly, if the lessor realizes more than the residual value when a vehicle is sold, we would be paid the amount realized over the residual value. Had we terminated all of our operating leases subject to these guarantees at September 30, 2019, our portion of the guaranteed residual value would have totaled approximately $71 million.

Other than the residual value guarantees associated with our vehicles discussed above, we do not have any other material residual value guarantees or restrictive covenants.

The amounts recorded on the Unaudited Condensed Consolidated Balance Sheet as of September 30, 2019 related to our lease agreements are as follows (in thousands):



Leases	Classification	September 30, 2019

Assets
Operating lease assets, net	Operating lease assets, net	$	1,303,260
Finance lease assets, net	Property, plant and equipment, net	39,504
Total leased assets		$	1,342,764
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	225,572
Finance	Current portion of long-term obligations	10,361
Noncurrent
Operating	Long-term operating lease liabilities	1,129,423
Finance	Long-term obligations, excluding current portion	28,752
Total lease liabilities		$	1,394,108

The components of lease expense are as follows (in thousands):



		Three Months Ended			Nine Months Ended
Lease Cost	Classification	September 30, 2019			September 30, 2019

Operating lease cost	Cost of goods sold	$	7,265		$	16,977
Operating lease cost	Selling, general and administrative expenses	75,371			225,794
Short-term lease cost	Selling, general and administrative expenses	3,006			7,472
Variable lease cost	Selling, general and administrative expenses	20,521			71,711
Finance lease cost
Amortization of leased assets	Depreciation and amortization	2,675			7,897
Interest on lease liabilities	Interest expense, net of interest income	413			1,266
Sublease income	Other income, net	(782		)	(1,208		)
Net lease cost		$	108,469		$	329,909

The future minimum lease commitments under our noncancelable operating leases at December 31, 2018 were as follows (in thousands):



Years ending December 31:
2019	$	294,269
2020	256,172
2021	210,632
2022	158,763
2023	131,518
Thereafter	777,165
Future Minimum Lease Payments	$	1,828,519

The future minimum lease commitments under our leases at September 30, 2019 are as follows (in thousands):



	Operating leases		Finance leases ⁽¹⁾		Total
Three months ending December 31, 2019	$	76,438	$	2,904	$	79,342
Years ending December 31:
2020	283,138		10,528		293,666
2021	242,333		9,105		251,438
2022	192,731		6,731		199,462
2023	160,862		2,940		163,802
2024	132,269		2,615		134,884
Thereafter	758,111		15,657		773,768
Future minimum lease payments	1,845,882		50,480		1,896,362
Less: Interest	490,887		11,367		502,254
Present value of lease liabilities	$	1,354,995	$	39,113	$	1,394,108


(1)	Amounts are included in the scheduled maturities of long-term obligations in the “Liquidity and Capital Resources” section of Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q.

As of September 30, 2019, we have additional minimum operating lease payments for leases that have not yet commenced of $30 million. These operating leases will commence between October 1, 2019 and December 31, 2020 with lease terms of 1 to 20 years. Most of these leases have not commenced as the assets are in the process of being constructed. We have appropriately considered the build-to-suit and sale-leaseback guidance where appropriate on these leases. No significant build-to-suit or sale-leaseback transactions have been identified.

Other information related to leases was as follows:



Lease Term and Discount Rate	September 30, 2019

Weighted-average remaining lease term (years)
Operating leases	9.6
Finance leases	8.6
Weighted-average discount rate
Operating leases	5.4	%
Finance leases	4.5	%



	Nine Months Ended
Supplemental cash flows information (in thousands)	September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases	$	222,798
Financing cash outflows from finance leases	8,521
Leased assets obtained in exchange for new finance lease liabilities	9,639
Leased assets obtained in exchange for new operating lease liabilities	126,336

Note ~~13.~~14. Employee Benefit Plans

We have funded and unfunded defined benefit plans covering certain employee groups in the U.S. and various European countries. Local statutory requirements govern many of our European plans. The defined benefit plans are ~~generally frozen~~mostly closed to new participants and, in some cases, existing participants no longer accrue benefits. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the aggregate funded status of the defined benefit plans was a liability of $111 million and ~~$46~~$110 million, respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets. Of

On June 28, 2019, we approved an amendment to terminate our primary defined benefit plan in the ~~liability~~U.S. (the "U.S. Plan") and freeze all related benefit accruals, effective June 30, 2019. The distribution of the U.S. Plan assets pursuant to the termination will not be made until the plan termination satisfies all regulatory requirements, which is expected to be completed in 2020. U.S. Plan participants will receive their full accrued benefits from plan assets by electing either lump sum distributions or annuity contracts with a qualifying third-party annuity provider. The resulting settlement effect of the U.S. Plan termination will be determined based on prevailing market conditions, the lump sum offer participation rate of eligible participants, the actual lump sum distributions, and annuity purchase rates at ~~September 30, 2018, $75 million was related~~the date of distribution. As a result, we are currently unable to ~~our acquisition~~reasonably estimate either the timing or the final amount of ~~Stahlgruber~~such settlement charges. Based on ~~May 30, 2018.~~the valuation performed as of June 28, 2019, the U.S. Plan has an underfunded status of $3 million.

Net periodic benefit ~~expense~~cost for our defined benefit plans included the following components for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Service cost	$	551		$	628		$	2,212		$	1,612
Interest cost	959			996			2,954			2,442
Expected return on plan assets	(455		)	(720		)	(1,795		)	(2,220		)
Amortization of actuarial (gain) loss	(61		)	21			229			97
Net periodic benefit cost	$	994		$	925		$	3,600		$	1,931

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Service cost $ 628
$ 1,126
$ 1,612
$ 2,902
Interest cost 996
750
2,442
2,091
Expected return on plan assets (720 ) (507 ) (2,220 ) (1,059 )
Amortization of prior service credit —
(71 ) —
(201 )
Amortization of actuarial (gain) loss 21
(129 ) 97
(720 )
Net periodic benefit expense $ 925
$ 1,169
$ 1,931
$ 3,013

For the three and nine months ended September 30, 2019 and 2018, the service cost component of net periodic benefit ~~expense~~cost was classified in Selling, general and administrative expenses, while the other components of net periodic benefit ~~expense~~cost were classified in Other income, net in our Unaudited Condensed Consolidated Statements of Income. For the three and nine months ended September 30, 2017, all components of net periodic benefit expense were included in Selling, general, and administrative expenses in our Unaudited Condensed Consolidated Statements of Income.

During the nine months ended September 30, 2018, we contributed $12 million to our pension plans. We estimate that contributions to our pension plans during the last three months of 2018 will be $1 million.

~~Note 14. Commitments and Contingencies~~

~~Operating Leases~~

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

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

Three months ending December 31, 2018 $ 72,780
Years ending December 31:
2019 271,642
2020 226,936
2021 179,921
2022 144,700
2023 122,149
Thereafter 689,583
Future Minimum Lease Payments $ 1,707,711

~~Litigation and Related Contingencies~~

Note 15. 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 months ended September 30, ~~2018~~2019 was ~~25.2%~~27.5%, compared to ~~33.5%~~25.2% for the comparable prior year period. The ~~decrease~~increase 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 December 2017. Partially offsetting this decrease was a 1.0% increase in the effective income tax rate as a result of the Stahlgruber acquisition, including non-deductible interest and acquisition related expenses, as well as the higher effective tax rate in Germany. The effective tax rate also reflects the impact of ~~net~~a favorable discrete ~~items~~item of ~~approximately $12 million and $8~~$10 million for the nine months ended September 30, 2018, ~~and 2017, respectively. The net favorable discrete items are primarily composed of a $10 million favorable~~reflecting an adjustment to the Tax Act transition ~~tax for~~tax. The increase was also partially attributable to the ~~nine months ended September 30, 2018, as well as~~impact of a favorable discrete item of approximately $4 ~~million and $7~~ million for the nine months ended September 30, 2018, ~~and 2017, respectively,~~ for excess tax benefits from stock-based ~~payments.~~payments; there were $1 million of excess tax benefits from stock-based payments for the nine months ended September 30, 2019. The year over year change infor these discrete items ~~decreased~~increased the effective tax rate by ~~0.6%~~2.1% compared to the prior ~~year.~~

Our acquisition of Stahlgruber in May 2018 contributed $98 million of deferred tax liabilities relating to intangible assets; property, plant and equipment; and reserves, including pension and other post-retirement benefit obligations.

~~The Tax Act introduced broad and complex changes to~~year period, while remaining discrete items increased 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 nine-month period ended September 30, 2018, we recorded a $10 million favorable adjustment to the provisional amount recognized in 2017 related to the transition tax. We continue to gather the information necessary to finalize the 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~~by an immaterial amount compared to 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.~~prior year period.

Note 16. Segment and Geographic Information

We have ~~four~~4 operating segments: Wholesale – North America, Europe, Specialty and Self Service. Our Wholesale – North America and Self Service operating segments are aggregated into ~~one~~1 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~~3 reportable segments: North America, Europe and Specialty.

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

North America Europe Specialty Eliminations Consolidated
Three Months Ended September 30, 2018
Revenue:
Third Party $ 1,262,657
$ 1,470,856
$ 388,865
$ —
$ 3,122,378
Intersegment 142
—
1,196
(1,338 ) —
Total segment revenue $ 1,262,799
$ 1,470,856
$ 390,061
$ (1,338 ) $ 3,122,378
Segment EBITDA $ 154,049
$ 129,358
$ 42,937
$ —
$ 326,344
Depreciation and amortization ⁽¹⁾
22,151
52,139
7,183
—
81,473
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 ⁽¹⁾
22,104
32,326
5,472
—
59,902



	North America		Europe		Specialty		Eliminations			Consolidated
Three Months Ended September 30, 2019
Revenue:
Third Party	$	1,302,086	$	1,451,483	$	394,204	$	—		$	3,147,773
Intersegment	61		—		1,110		(1,171		)	—
Total segment revenue	$	1,302,147	$	1,451,483	$	395,314	$	(1,171	)	$	3,147,773
Segment EBITDA	$	166,310	$	124,712	$	45,464	$	—		$	336,486
Depreciation and amortization ⁽¹⁾	23,593		47,302		6,983		—			77,878
Three Months Ended September 30, 2018
Revenue:
Third Party	$	1,262,657	$	1,470,856	$	388,865	$	—		$	3,122,378
Intersegment	142		—		1,196		(1,338		)	—
Total segment revenue	$	1,262,799	$	1,470,856	$	390,061	$	(1,338	)	$	3,122,378
Segment EBITDA	$	154,049	$	129,358	$	42,937	$	—		$	326,344
Depreciation and amortization ⁽¹⁾	22,151		52,139		7,183		—			81,473


	North America		Europe		Specialty		Eliminations			Consolidated		North America		Europe		Specialty		Eliminations			Consolidated
Nine Months Ended September 30, 2019
Revenue:
Third Party												$	3,925,962	$	4,413,264	$	1,157,023	$	—		$	9,496,249
Intersegment												260		—		3,664		(3,924		)	—
Total segment revenue												$	3,926,222	$	4,413,264	$	1,160,687	$	(3,924	)	$	9,496,249
Segment EBITDA												$	532,994	$	346,291	$	135,790	$	—		$	1,015,075
Depreciation and amortization ⁽¹⁾												68,257		141,087		20,895		—			230,239
Nine Months Ended September 30, 2018
Revenue:
Third Party	$	3,927,282	$	3,795,439	$	1,151,172	$	—		$	8,873,893	$	3,927,282	$	3,795,439	$	1,151,172	$	—		$	8,873,893
Intersegment	526		—		3,554		(4,080		)	—		526		—		3,554		(4,080		)	—
Total segment revenue	$	3,927,808	$	3,795,439	$	1,154,726	$	(4,080	)	$	8,873,893	$	3,927,808	$	3,795,439	$	1,154,726	$	(4,080	)	$	8,873,893
Segment EBITDA	$	506,772	$	315,785	$	140,974	$	—		$	963,531	$	506,772	$	315,785	$	140,974	$	—		$	963,531
Depreciation and amortization ⁽¹⁾	64,985		124,697		21,295		—			210,977		64,985		124,697		21,295		—			210,977
Nine Months Ended September 30, 2017
Revenue:
Third Party	$	3,596,108	$	2,665,170	$	1,005,776	$	—		$	7,267,054
Intersegment	589		—		3,222		(3,811		)	—
Total segment revenue	$	3,596,697	$	2,665,170	$	1,008,998	$	(3,811	)	$	7,267,054
Segment EBITDA	$	502,494	$	241,537	$	119,133	$	—		$	863,164
Depreciation and amortization ⁽¹⁾	64,305		85,809		16,394		—			166,508

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

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 (which includes restructuring expenses recorded in Cost of goods sold), change in fair value of contingent consideration liabilities, other gains and losses related to acquisitions, equity method investments, or divestitures, ~~and~~ equity in losses and earnings of unconsolidated ~~subsidiaries.~~subsidiaries, and impairment charges. EBITDA, which is the basis for Segment EBITDA, is calculated as net income, ~~excluding~~less net income (loss) attributable to continuing and discontinued noncontrolling interest, excluding discontinued operations and discontinued noncontrolling interest, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

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



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net income	$	152,593		$	134,480		$	403,761		$	445,109
Less: net (loss) income attributable to continuing noncontrolling interest	(46		)	378			2,321			1,040
Less: net income attributable to discontinued noncontrolling interest	376			—			568			—
Net income attributable to LKQ stockholders	152,263			134,102			400,872			444,069
Subtract:
Net income from discontinued operations	781			—			1,179			—
Net income attributable to discontinued noncontrolling interest	(376		)	—			(568		)	—
Net income from continuing operations attributable to LKQ stockholders	151,858			134,102			400,261			444,069
Add:
Depreciation and amortization	71,513			76,701			213,349			196,322
Depreciation and amortization - cost of goods sold	5,223			4,772			15,748			14,655
Depreciation and amortization - restructuring expenses - cost of goods sold	168			—			168			—
Depreciation and amortization - restructuring expenses	974			—			974			—
Interest expense, net of interest income	31,976			40,860			103,949			107,647
Provision for income taxes	57,747			46,068			165,122			156,427
EBITDA	319,459			302,503			899,571			919,120
Subtract:
Equity in earnings (losses) of unconsolidated subsidiaries ⁽¹⁾	4,232			(20,284		)	(33,745		)	(18,326		)
Fair value gain on Mekonomen derivative instrument ⁽¹⁾	—			2,509			—			2,509
Gains on bargain purchase	—			—			—			328
Add:
Restructuring and acquisition related expenses ⁽²⁾	7,955			6,614			19,639			26,546
Restructuring expenses - cost of goods sold ⁽³⁾	17,130			—			17,130			—
Inventory step-up adjustment - acquisition related	—			—			—			403
Impairment of net assets held for sale ^{(4) (5)}	(3,601		)	—			44,919			2,438
Change in fair value of contingent consideration liabilities	(225		)	(548		)	71			(465		)
Segment EBITDA	$	336,486		$	326,344		$	1,015,075		$	963,531

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Net income $ 134,480
$ 122,381
$ 445,109
$ 409,573
Less: net income attributable to noncontrolling interest 378
—
1,040
—
Net income attributable to LKQ stockholders 134,102
122,381
444,069
409,573
Subtract:
Net loss from discontinued operations —
—
—
(4,531 )
Net income from continuing operations attributable to LKQ stockholders 134,102
122,381
444,069
414,104
Add:
Depreciation and amortization 76,701
56,877
196,322
159,178
Depreciation and amortization - cost of goods sold 4,772
3,025
14,655
7,330
Interest expense, net 40,860
25,222
107,647
73,806
Provision for income taxes 46,068
58,189
156,427
206,206
EBITDA 302,503
265,694
919,120
860,624
Subtract:
Equity in (losses) earnings of unconsolidated subsidiaries ⁽¹⁾
(20,284 ) 2,673
(18,326 ) 3,878
Fair value gain on Mekonomen derivative instrument ⁽¹⁾
2,509
—
2,509
—
Gains on bargain purchases ⁽²⁾
—
913
328
3,990
Add:
Restructuring and acquisition related expenses ⁽³⁾
6,614
4,922
26,546
10,371
Inventory step-up adjustment - acquisition related —
—
403
—
Impairment of net assets held for sale —
—
2,438
—
Change in fair value of contingent consideration liabilities (548 ) 5
(465 ) 37
Segment EBITDA $ 326,344
$ 267,035
$ 963,531
$ 863,164

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

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



	September 30,		December 31,
	2019		2018
Receivables, net
North America	$	405,218	$	411,818
Europe	705,031		649,174
Specialty	112,948		93,091
Total receivables, net	1,223,197		1,154,083
Inventories
North America	975,561		1,076,306
Europe	1,274,483		1,410,264
Specialty	332,144		349,505
Total inventories	2,582,188		2,836,075
Property, plant and equipment, net
North America	582,157		570,508
Europe	516,106		562,600
Specialty	85,925		87,054
Total property, plant and equipment, net	1,184,188		1,220,162
Operating lease assets, net ⁽¹⁾
North America	813,412		—
Europe	404,444		—
Specialty	85,404		—
Total operating lease assets, net	1,303,260		—
Equity method investments
North America	17,275		16,404
Europe⁽²⁾	126,734		162,765
Total equity method investments	144,009		179,169
Other unallocated assets	5,974,848		6,003,913
Total assets	$	12,411,690	$	11,393,402

September 30, December 31,
2018 2017
Receivables, net
North America $ 437,429
$ 379,666
Europe ⁽¹⁾
696,106
555,372
Specialty 122,341
92,068
Total receivables, net ⁽²⁾
1,255,876
1,027,106
Inventories
North America 1,058,310
1,076,393
Europe ⁽¹⁾
1,391,578
964,068
Specialty 345,006
340,322
Total inventories 2,794,894
2,380,783
Property, Plant and Equipment, net
North America 560,918
537,286
Europe ⁽¹⁾
554,550
293,539
Specialty 85,535
82,264
Total property, plant and equipment, net 1,201,003
913,089
Equity Method Investments
North America 16,075
336
Europe⁽³⁾
141,334
208,068
Total equity method investments 157,409
208,404
Other unallocated assets 6,176,154
4,837,490
Total assets $ 11,585,336
$ 9,366,872

We report net receivables; inventories; net property, plant and equipment; net operating lease assets; 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 and cash equivalents, prepaid and other current and noncurrent assets, goodwill and other intangibles.

Our largest countries of operation are the U.S., followed by the U.K. and Germany. ~~Our other~~Additional European operations are located in the Netherlands, ~~Belgium,~~ Italy, Czech Republic, ~~Austria,~~Belgium, Poland, Slovakia, Austria, and other European countries. Our operations in other countries include 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
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
United States	$	1,579,691	$	1,535,557	$	4,735,134	$	4,716,927
United Kingdom	394,621		408,474		1,217,199		1,294,155
Germany	394,115		415,748		1,196,527		564,698
Other countries	779,346		762,599		2,347,389		2,298,113
Total revenue	$	3,147,773	$	3,122,378	$	9,496,249	$	8,873,893

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Revenue
United States $ 1,535,557
$ 1,395,495
$ 4,716,927
$ 4,268,600
United Kingdom 408,474
399,155
1,294,155
1,171,829
Germany 415,748
549
564,698
862
Other countries 762,599
670,601
2,298,113
1,825,763
Total revenue $ 3,122,378
$ 2,465,800
$ 8,873,893
$ 7,267,054

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



	September 30,		December 31,
	2019		2018
Long-lived assets⁽¹⁾
United States	$	1,485,843	$	620,125
Germany	295,570		217,476
United Kingdom	306,611		165,145
Other countries	399,424		217,416
Total long-lived assets	$	2,487,448	$	1,220,162

~~Note 17. Subsequent Event~~

On October 25, 2018, we announced that our Board of Directors authorized a stock repurchase program under which we may purchase up to $500 million of our common stock from time to time through October 25, 2021. Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time.

Note ~~18.~~17. 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 (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 (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 (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 (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 September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 1,550,301
$ 1,609,525
$ (37,448 ) $ 3,122,378
Cost of goods sold —
934,913
1,027,715
(37,448 ) 1,925,180
Gross margin —

615,388

581,810

—
1,197,198
Selling, general and administrative expenses 6,725
434,965
437,460
—
879,150
Restructuring and acquisition related expenses —
1,638
4,976
—
6,614
Depreciation and amortization 34
25,238
51,429
—
76,701
Operating (loss) income (6,759 )
153,547

87,945

—
234,733
Other expense (income):
Interest expense (income), net 16,191
(193 ) 24,862
—
40,860
Intercompany interest (income) expense, net (15,121 ) 10,014
5,107
—
—
Other income, net (178 ) (3,514 ) (3,267 ) —
(6,959 )
Total other expense, net 892

6,307

26,702

—
33,901
(Loss) income before (benefit) provision for income taxes (7,651 )
147,240

61,243

—
200,832
(Benefit) provision for income taxes (12,008 ) 41,875
16,201
—
46,068
Equity in losses of unconsolidated subsidiaries —
(156 ) (20,128 ) —
(20,284 )
Equity in earnings of subsidiaries 129,745
4,467
—
(134,212 ) —
Net income 134,102
109,676
24,914
(134,212 ) 134,480
Less: net income attributable to noncontrolling interest —
—
378
—
378
Net income attributable to LKQ stockholders $ 134,102

$ 109,676

$ 24,536

$ (134,212 )
$ 134,102

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

	For the Three Months Ended September 30, 2019
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	1,593,983		$	1,593,245		$	(39,455	)	$	3,147,773
Cost of goods sold	—			954,366			1,032,533			(39,455		)	1,947,444
Gross margin	—			639,617			560,712			—			1,200,329
Selling, general and administrative expenses	15,015			442,554			434,555			—			892,124
Restructuring and acquisition related expenses	—			426			8,503			—			8,929
Impairment of net assets held for sale	—			(2,339		)	(1,262		)	—			(3,601		)
Depreciation and amortization	285			25,893			45,335			—			71,513
Operating (loss) income	(15,300		)	173,083			73,581			—			231,364
Other expense (income):
Interest expense, net of interest income	12,895			(166		)	19,247			—			31,976
Intercompany interest (income) expense, net	(14,899		)	7,923			6,976			—			—
Other income, net	(929		)	(4,645		)	(365		)	—			(5,939		)
Total other (income) expense, net	(2,933		)	3,112			25,858			—			26,037
(Loss) income from continuing operations before (benefit) provision for income taxes	(12,367		)	169,971			47,723			—			205,327
(Benefit) provision for income taxes	(2,268		)	42,515			17,500			—			57,747
Equity in earnings of unconsolidated subsidiaries	—			393			3,839			—			4,232
Equity in earnings of subsidiaries	161,581			4,098			—			(165,679		)	—
Income from continuing operations	151,482			131,947			34,062			(165,679		)	151,812
Net income from discontinued operations	781			—			781			(781		)	781
Net income	152,263			131,947			34,843			(166,460		)	152,593
Less: net loss attributable to continuing noncontrolling interest	—			—			(46		)	—			(46		)
Less: net income attributable to discontinued noncontrolling interest	—			—			376			—			376
Net income attributable to LKQ stockholders	$	152,263		$	131,947		$	34,513		$	(166,460	)	$	152,263

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Three Months Ended September 30, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 1,433,742
$ 1,069,682
$ (37,624 ) $ 2,465,800
Cost of goods sold —
861,078
685,470
(37,624 ) 1,508,924
Gross margin —

572,664

384,212

—

956,876
Selling, general and administrative expenses 7,861
394,926
293,191
—
695,978
Restructuring and acquisition related expenses —
1,473
3,449
—
4,922
Depreciation and amortization 29
25,005
31,843
—
56,877
Operating (loss) income (7,890 )
151,260

55,729

—

199,099
Other expense (income):
Interest expense, net 16,232
57
8,933
—
25,222
Intercompany interest (income) expense, net (2,389 ) (2,814 ) 5,203
—
—
Gain on bargain purchase —
—
(913 ) —
(913 )
Other expense (income), net 32
(4,011 ) 872
—
(3,107 )
Total other expense (income), net 13,875

(6,768 )
14,095

—

21,202
(Loss) income before (benefit) provision for income taxes (21,765 )
158,028

41,634

—
177,897
(Benefit) provision for income taxes (8,436 ) 56,920
9,705
—
58,189
Equity in earnings of unconsolidated subsidiaries —
—
2,673
—
2,673
Equity in earnings of subsidiaries 135,710
6,674
—
(142,384 ) —
Net income $ 122,381

$ 107,782

$ 34,602

$ (142,384 ) $ 122,381

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

	For the Three Months Ended September 30, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	1,550,301		$	1,609,525		$	(37,448	)	$	3,122,378
Cost of goods sold	—			934,913			1,027,715			(37,448		)	1,925,180
Gross margin	—			615,388			581,810			—			1,197,198
Selling, general and administrative expenses	6,725			434,965			437,460			—			879,150
Restructuring and acquisition related expenses	—			1,638			4,976			—			6,614
Depreciation and amortization	34			25,238			51,429			—			76,701
Operating (loss) income	(6,759		)	153,547			87,945			—			234,733
Other expense (income):
Interest expense, net of interest income	16,191			(193		)	24,862			—			40,860
Intercompany interest (income) expense, net	(15,121		)	10,014			5,107			—			—
Other income, net	(178		)	(3,514		)	(3,267		)	—			(6,959		)
Total other expense, net	892			6,307			26,702			—			33,901
(Loss) income before (benefit) provision for income taxes	(7,651		)	147,240			61,243			—			200,832
(Benefit) provision for income taxes	(12,008		)	41,875			16,201			—			46,068
Equity in losses of unconsolidated subsidiaries	—			(156		)	(20,128		)	—			(20,284		)
Equity in earnings of subsidiaries	129,745			4,467			—			(134,212		)	—
Net income	134,102			109,676			24,914			(134,212		)	134,480
Less: net income attributable to noncontrolling interest	—			—			378			—			378
Net income attributable to LKQ stockholders	$	134,102		$	109,676		$	24,536		$	(134,212	)	$	134,102

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)
For the Nine Months Ended September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Revenue $ —
$ 4,768,292
$ 4,216,417
$ (110,816 ) $ 8,873,893
Cost of goods sold —
2,869,499
2,702,162
(110,816 ) 5,460,845
Gross margin —

1,898,793

1,514,255

—
3,413,048
Selling, general and administrative expenses 25,538
1,292,455
1,154,092
—
2,472,085
Restructuring and acquisition related expenses —
1,968
24,578
—
26,546
Depreciation and amortization 84
74,102
122,136
—
196,322
Operating (loss) income (25,622 )
530,268

213,449

—
718,095
Other expense (income):
Interest expense (income), net 52,004
(94 ) 55,737
—
107,647
Intercompany interest (income) expense, net (45,927 ) 29,559
16,368
—
—
Gains on bargain purchases —
—
(328 ) —
(328 )
Other (income) expense, net (1,076 ) (13,793 ) 5,783
—
(9,086 )
Total other expense, net 5,001

15,672

77,560

—
98,233
(Loss) income before (benefit) provision for income taxes (30,623 ) 514,596
135,889

—
619,862
(Benefit) provision for income taxes (19,656 ) 141,295
34,788
—
156,427
Equity in losses of unconsolidated subsidiaries —
(156 ) (18,170 ) —
(18,326 )
Equity in earnings of subsidiaries 455,036
14,028
—
(469,064 ) —
Net income 444,069

387,173

82,931

(469,064 ) 445,109
Less: net income attributable to noncontrolling interest —
—
1,040
—
1,040
Net income attributable to LKQ stockholders $ 444,069

$ 387,173

$ 81,891

$ (469,064 ) $ 444,069

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

	For the Nine Months Ended September 30, 2019
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	4,774,588		$	4,836,439		$	(114,778	)	$	9,496,249
Cost of goods sold	—			2,850,011			3,105,236			(114,778		)	5,840,469
Gross margin	—			1,924,577			1,731,203			—			3,655,780
Selling, general and administrative expenses	36,744			1,301,827			1,348,453			—			2,687,024
Restructuring and acquisition related expenses	—			5,063			15,550			—			20,613
Impairment of net assets held for sale	—			39,355			5,564			—			44,919
Depreciation and amortization	377			76,142			136,830			—			213,349
Operating (loss) income	(37,121		)	502,190			224,806			—			689,875
Other expense (income):
Interest expense, net of interest income	39,517			(285		)	64,717			—			103,949
Intercompany interest (income) expense, net	(44,748		)	25,583			19,165			—			—
Other (income) expense, net	(914		)	(16,818		)	2,209			—			(15,523		)
Total other (income) expense, net	(6,145		)	8,480			86,091			—			88,426
(Loss) income from continuing operations before (benefit) provision for income taxes	(30,976		)	493,710			138,715			—			601,449
(Benefit) provision for income taxes	(7,306		)	128,936			43,492			—			165,122
Equity in earnings (losses) of unconsolidated subsidiaries	—			871			(34,616		)	—			(33,745		)
Equity in earnings of subsidiaries	423,363			13,210			—			(436,573		)	—
Income from continuing operations	399,693			378,855			60,607			(436,573		)	402,582
Net income from discontinued operations	1,179			—			1,179			(1,179		)	1,179
Net income	400,872			378,855			61,786			(437,752		)	403,761
Less: net income attributable to continuing noncontrolling interest	—			—			2,321			—			2,321
Less: net income attributable to discontinued noncontrolling interest	—			—			568			—			568
Net income attributable to LKQ stockholders	$	400,872		$	378,855		$	58,897		$	(437,752	)	$	400,872

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
Selling, general and administrative expenses 26,209
1,165,897
810,959
—
2,003,065
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
Net (loss) income from discontinued operations (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 Income (In thousands)

	For the Nine Months Ended September 30, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	—		$	4,768,292		$	4,216,417		$	(110,816	)	$	8,873,893
Cost of goods sold	—			2,869,499			2,702,162			(110,816		)	5,460,845
Gross margin	—			1,898,793			1,514,255			—			3,413,048
Selling, general and administrative expenses	25,538			1,292,455			1,154,092			—			2,472,085
Restructuring and acquisition related expenses	—			1,968			24,578			—			26,546
Depreciation and amortization	84			74,102			122,136			—			196,322
Operating (loss) income	(25,622		)	530,268			213,449			—			718,095
Other expense (income):
Interest expense, net of interest income	52,004			(94		)	55,737			—			107,647
Intercompany interest (income) expense, net	(45,927		)	29,559			16,368			—			—
Other (income) expense, net	(1,076		)	(13,793		)	5,455			—			(9,414		)
Total other expense, net	5,001			15,672			77,560			—			98,233
(Loss) income before (benefit) provision for income taxes	(30,623		)	514,596			135,889			—			619,862
(Benefit) provision for income taxes	(19,656		)	141,295			34,788			—			156,427
Equity in losses of unconsolidated subsidiaries	—			(156		)	(18,170		)	—			(18,326		)
Equity in earnings of subsidiaries	455,036			14,028			—			(469,064		)	—
Net income	444,069			387,173			82,931			(469,064		)	445,109
Less: net income attributable to noncontrolling interest	—			—			1,040			—			1,040
Net income attributable to LKQ stockholders	$	444,069		$	387,173		$	81,891		$	(469,064	)	$	444,069

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Three Months Ended September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 134,102
$ 109,676
$ 24,914
$ (134,212 ) $ 134,480
Less: net income attributable to noncontrolling interest —
—
378
—
378
Net income attributable to LKQ stockholders 134,102
109,676
24,536
(134,212 ) 134,102

Other comprehensive (loss) income:
Foreign currency translation, net of tax (20,951 ) 1,686
(23,901 ) 22,215
(20,951 )
Net change in unrealized gains/losses on cash flow hedges, net of tax 304
—
—
—
304
Net change in unrealized gains/losses on pension plans, net of tax 1,274
1,246
28
(1,274 ) 1,274
Net change in other comprehensive income from unconsolidated subsidiaries 643
—
643
(643 ) 643
Other comprehensive (loss) income (18,730 ) 2,932
(23,230 ) 20,298
(18,730 )

Comprehensive income 115,372
112,608
1,684
(113,914 ) 115,750
Less: comprehensive income attributable to noncontrolling interest —
—
378
—
378
Comprehensive income attributable to LKQ stockholders $ 115,372
$ 112,608
$ 1,306
$ (113,914 ) $ 115,372

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

	For the Three Months Ended September 30, 2019
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	152,263		$	131,947		$	34,843		$	(166,460	)	$	152,593
Less: net loss attributable to continuing noncontrolling interest	—			—			(46		)	—			(46		)
Less: net income attributable to discontinued noncontrolling interest	—			—			376			—			376
Net income attributable to LKQ stockholders	152,263			131,947			34,513			(166,460		)	152,263

Other comprehensive (loss) income:
Foreign currency translation, net of tax	(69,819		)	(1,429		)	(69,520		)	70,949			(69,819		)
Net change in unrealized gains/losses on cash flow hedges, net of tax	(1,261		)	—			—			—			(1,261		)
Net change in unrealized gains/losses on pension plans, net of tax	(2,353		)	(2,385		)	32			2,353			(2,353		)
Net change in other comprehensive income from unconsolidated subsidiaries	1,240			—			1,240			(1,240		)	1,240
Other comprehensive loss	(72,193		)	(3,814		)	(68,248		)	72,062			(72,193		)

Comprehensive income (loss)	80,070			128,133			(33,405		)	(94,398		)	80,400
Less: comprehensive loss attributable to continuing noncontrolling interest	—			—			(46		)	—			(46		)
Less: comprehensive income attributable to discontinued noncontrolling interest	—			—			376			—			376
Comprehensive income (loss) attributable to LKQ stockholders	$	80,070		$	128,133		$	(33,735	)	$	(94,398	)	$	80,070

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, net of tax 59,618
3,590
62,734
(66,324 ) 59,618
Net change in unrecognized gains/losses on cash flow hedges, 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, 2018
	Parent			Guarantors		Non-Guarantors			Eliminations			Consolidated
Net income	$	134,102		$	109,676	$	24,914		$	(134,212	)	$	134,480
Less: net income attributable to continuing noncontrolling interest	—			—		378			—			378
Net income attributable to LKQ stockholders	134,102			109,676		24,536			(134,212		)	134,102

Other comprehensive (loss) income:
Foreign currency translation, net of tax	(20,951		)	1,686		(23,901		)	22,215			(20,951		)
Net change in unrealized gains/losses on cash flow hedges, net of tax	304			—		—			—			304
Net change in unrealized gains/losses on pension plans, net of tax	1,274			1,246		28			(1,274		)	1,274
Net change in other comprehensive income from unconsolidated subsidiaries	643			—		643			(643		)	643
Other comprehensive (loss) income	(18,730		)	2,932		(23,230		)	20,298			(18,730		)

Comprehensive income	115,372			112,608		1,684			(113,914		)	115,750
Less: comprehensive income attributable to continuing noncontrolling interest	—			—		378			—			378
Comprehensive income attributable to LKQ stockholders	$	115,372		$	112,608	$	1,306		$	(113,914	)	$	115,372

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)
For the Nine Months Ended September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net income $ 444,069
$ 387,173
$ 82,931
$ (469,064 ) $ 445,109
Less: net income attributable to noncontrolling interest —
—
1,040
—
1,040
Net income attributable to LKQ stockholders 444,069
387,173
81,891
(469,064 ) 444,069

Other comprehensive (loss) income:
Foreign currency translation, net of tax (77,630 ) (2,800 ) (81,456 ) 84,256
(77,630 )
Net change in unrealized gains/losses on cash flow hedges, net of tax 5,964
—
—
—
5,964
Net change in unrealized gains/losses on pension plans, net of tax (154 ) (239 ) 85
154
(154 )
Net change in other comprehensive income from unconsolidated subsidiaries 2,160
—
2,160
(2,160 ) 2,160
Other comprehensive loss (69,660 ) (3,039 ) (79,211 ) 82,250
(69,660 )

Comprehensive income 374,409
384,134
3,720
(386,814 ) 375,449
Less: comprehensive income attributable to noncontrolling interest —
—
1,040
—
1,040
Comprehensive income attributable to LKQ stockholders $ 374,409
$ 384,134
$ 2,680
$ (386,814 ) $ 374,409

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

	For the Nine Months Ended September 30, 2019
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	400,872		$	378,855		$	61,786		$	(437,752	)	$	403,761
Less: net income attributable to continuing noncontrolling interest	—			—			2,321			—			2,321
Less: net income attributable to discontinued noncontrolling interest	—			—			568			—			568
Net income attributable to LKQ stockholders	400,872			378,855			58,897			(437,752		)	400,872

Other comprehensive (loss) income:
Foreign currency translation, net of tax	(74,112		)	3,107			(74,900		)	71,793			(74,112		)
Net change in unrealized gains/losses on cash flow hedges, net of tax	(9,648		)	—			—			—			(9,648		)
Net change in unrealized gains/losses on pension plans, net of tax	(2,134		)	(2,399		)	265			2,134			(2,134		)
Net change in other comprehensive income from unconsolidated subsidiaries	98			—			98			(98		)	98
Other comprehensive (loss) income	(85,796		)	708			(74,537		)	73,829			(85,796		)

Comprehensive income (loss)	315,076			379,563			(12,751		)	(363,923		)	317,965
Less: comprehensive income attributable to continuing noncontrolling interest	—			—			2,321			—			2,321
Less: comprehensive income attributable to discontinued noncontrolling interest	—			—			568			—			568
Comprehensive income (loss) attributable to LKQ stockholders	$	315,076		$	379,563		$	(15,640	)	$	(363,923	)	$	315,076

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, net of tax 174,794
17,565
176,769
(194,334 ) 174,794
Net change in unrecognized gains/losses on cash flow hedges, 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, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net income	$	444,069		$	387,173		$	82,931		$	(469,064	)	$	445,109
Less: net income attributable to continuing noncontrolling interest	—			—			1,040			—			1,040
Net income attributable to LKQ stockholders	444,069			387,173			81,891			(469,064		)	444,069

Other comprehensive (loss) income:
Foreign currency translation, net of tax	(77,630		)	(2,800		)	(81,456		)	84,256			(77,630		)
Net change in unrealized gains/losses on cash flow hedges, net of tax	5,964			—			—			—			5,964
Net change in unrealized gains/losses on pension plans, net of tax	(154		)	(239		)	85			154			(154		)
Net change in other comprehensive income from unconsolidated subsidiaries	2,160			—			2,160			(2,160		)	2,160
Other comprehensive loss	(69,660		)	(3,039		)	(79,211		)	82,250			(69,660		)

Comprehensive income	374,409			384,134			3,720			(386,814		)	375,449
Less: comprehensive income attributable to continuing noncontrolling interest	—			—			1,040			—			1,040
Comprehensive income attributable to LKQ stockholders	$	374,409		$	384,134		$	2,680		$	(386,814	)	$	374,409

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)
September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Assets
Current assets:
Cash and cash equivalents $ 48,265
$ 31,082
$ 261,999
$ —
$ 341,346
Receivables, net 341
366,781
888,754
—
1,255,876
Intercompany receivables, net 7,173
—
20,573
(27,746 ) —
Inventories —
1,323,201
1,471,693
—
2,794,894
Prepaid expenses and other current assets 15,452
94,787
90,705
—
200,944
Total current assets 71,231
1,815,851
2,733,724
(27,746 ) 4,593,060
Property, plant and equipment, net 845
589,898
610,260
—
1,201,003
Intangible assets:
Goodwill —
2,005,560
2,469,706
—
4,475,266
Other intangibles, net 286
280,229
672,857
—
953,372
Investment in subsidiaries 5,351,986
114,721
—
(5,466,707 ) —
Intercompany notes receivable 1,067,356
14,958
—
(1,082,314 ) —
Equity method investments —
16,075
141,334
—
157,409
Other assets 90,293
38,434
76,499
—
205,226
Total assets $ 6,581,997
$ 4,875,726
$ 6,704,380
$ (6,576,767 ) $ 11,585,336
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 2,615
$ 345,660
$ 593,472
$ —
$ 941,747
Intercompany payables, net —
20,573
7,173
(27,746 ) —
Accrued expenses:
Accrued payroll-related liabilities 7,169
48,463
97,904
—
153,536
Other accrued expenses 12,656
106,543
239,013
—
358,212
Refund liability —
54,554
52,178
—
106,732
Other current liabilities 283
18,210
38,595
—
57,088
Current portion of long-term obligations —
2,317
116,048
—
118,365
Total current liabilities 22,723
596,320
1,144,383
(27,746 ) 1,735,680
Long-term obligations, excluding current portion 1,569,387
14,027
2,666,723
—
4,250,137
Intercompany notes payable —
617,389
464,925
(1,082,314 ) —
Deferred income taxes 9,715
115,924
199,898
—
325,537
Other noncurrent liabilities 139,712
98,133
138,721
—
376,566
Stockholders' equity:
Total Company stockholders’ equity 4,840,460
3,433,933
2,032,774
(5,466,707 ) 4,840,460
Noncontrolling interest —
—
56,956
—
56,956
Total stockholders’ equity 4,840,460
3,433,933
2,089,730
(5,466,707 ) 4,897,416
Total liabilities and stockholders' equity $ 6,581,997
$ 4,875,726
$ 6,704,380
$ (6,576,767 ) $ 11,585,336

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

	September 30, 2019
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	141,555	$	31,533	$	260,303	$	—		$	433,391
Receivables, net	—		337,543		885,654		—			1,223,197
Intercompany receivables, net	9,473		—		27,939		(37,412		)	—
Inventories	—		1,228,576		1,353,612		—			2,582,188
Prepaid expenses and other current assets	6,347		95,389		143,346		—			245,082
Total current assets	157,375		1,693,041		2,670,854		(37,412		)	4,483,858
Property, plant and equipment, net	459		612,127		571,602		—			1,184,188
Operating lease assets, net	3,754		854,956		444,550		—			1,303,260
Intangible assets:
Goodwill	—		2,001,356		2,308,466		—			4,309,822
Other intangibles, net	629		254,255		582,388		—			837,272
Investment in subsidiaries	5,250,321		127,820		—		(5,378,141		)	—
Intercompany notes receivable	1,118,688		108,071		—		(1,226,759		)	—
Equity method investments	—		17,275		126,734		—			144,009
Other noncurrent assets	65,679		40,503		43,099		—			149,281
Total assets	$	6,596,905	$	5,709,404	$	6,747,693	$	(6,642,312	)	$	12,411,690
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,802	$	346,907	$	648,165	$	—		$	997,874
Intercompany payables, net	—		27,939		9,473		(37,412		)	—
Accrued expenses:
Accrued payroll-related liabilities	6,911		55,803		99,438		—			162,152
Refund liability	—		49,526		50,801		—			100,327
Other accrued expenses	14,965		115,571		196,098		—			326,634
Other current liabilities	5,520		22,723		85,106		—			113,349
Current portion of operating lease liabilities	217		131,719		93,636		—			225,572
Current portion of long-term obligations	15,029		2,936		110,178		—			128,143
Total current liabilities	45,444		753,124		1,292,895		(37,412		)	2,054,051
Long-term operating lease liabilities, excluding current portion	3,943		756,450		369,030		—			1,129,423
Long-term obligations, excluding current portion	1,613,249		15,533		2,108,330		—			3,737,112
Intercompany notes payable	—		537,341		689,418		(1,226,759		)	—
Deferred income taxes	5,032		139,482		151,685		—			296,199
Other noncurrent liabilities	111,470		82,835		127,900		—			322,205
Stockholders' equity:
Total Company stockholders' equity	4,817,767		3,424,639		1,953,502		(5,378,141		)	4,817,767
Noncontrolling interest	—		—		54,933		—			54,933
Total stockholders' equity	4,817,767		3,424,639		2,008,435		(5,378,141		)	4,872,700
Total liabilities and stockholders' equity	$	6,596,905	$	5,709,404	$	6,747,693	$	(6,642,312	)	$	12,411,690

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 Balance Sheets (In thousands)

	December 31, 2018
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	25,633	$	29,285	$	276,843	$	—		$	331,761
Receivables, net	310		316,726		837,047		—			1,154,083
Intercompany receivables, net	6,978		—		12,880		(19,858		)	—
Inventories	—		1,343,612		1,492,463		—			2,836,075
Prepaid expenses and other current assets	18,611		99,356		81,063		—			199,030
Total current assets	51,532		1,788,979		2,700,296		(19,858		)	4,520,949
Property, plant and equipment, net	1,547		600,054		618,561		—			1,220,162
Intangible assets:
Goodwill	—		1,973,364		2,408,094		—			4,381,458
Other intangibles, net	260		272,451		656,041		—			928,752
Investment in subsidiaries	5,224,006		111,826		—		(5,335,832		)	—
Intercompany notes receivable	1,220,582		10,515		—		(1,231,097		)	—
Equity method investments	—		16,404		162,765		—			179,169
Other noncurrent assets	70,283		40,548		52,081		—			162,912
Total assets	$	6,568,210	$	4,814,141	$	6,597,838	$	(6,586,787	)	$	11,393,402
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,454	$	343,116	$	596,828	$	—		$	942,398
Intercompany payables, net	—		12,880		6,978		(19,858		)	—
Accrued expenses:
Accrued payroll-related liabilities	6,652		70,267		95,086		—			172,005
Refund liability	—		50,899		53,686		—			104,585
Other accrued expenses	5,454		105,672		177,299		—			288,425
Other current liabilities	283		17,860		42,966		—			61,109
Current portion of long-term obligations	8,459		2,932		110,435		—			121,826
Total current liabilities	23,302		603,626		1,083,278		(19,858		)	1,690,348
Long-term obligations, excluding current portion	1,628,677		13,532		2,546,465		—			4,188,674
Intercompany notes payable	—		597,283		633,814		(1,231,097		)	—
Deferred income taxes	8,045		135,355		168,034		—			311,434
Other noncurrent liabilities	125,888		99,147		139,159		—			364,194
Stockholders' equity:
Total Company stockholders' equity	4,782,298		3,365,198		1,970,634		(5,335,832		)	4,782,298
Noncontrolling interest	—		—		56,454		—			56,454
Total stockholders' equity	4,782,298		3,365,198		2,027,088		(5,335,832		)	4,838,752
Total liabilities and stockholders' equity	$	6,568,210	$	4,814,141	$	6,597,838	$	(6,586,787	)	$	11,393,402

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)
For the Nine Months Ended September 30, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 334,226
$ 142,626
$ 97,506
$ (53,191 ) $ 521,167
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (315 ) (93,063 ) (78,385 ) —
(171,763 )
Investment and intercompany note activity with subsidiaries 73,096
—
—
(73,096 ) —
Return of investment in subsidiaries 152,443
—
—
(152,443 ) —
Acquisitions, net of cash acquired —
(2,888 ) (1,203,179 ) —
(1,206,067 )
Investments in unconsolidated subsidiaries —
(11,066 ) —
—
(11,066 )
Receipts of deferred purchase price on receivables under factoring arrangements —
224,753
9,410
(224,753 ) 9,410
Other investing activities, net 887
2,162
4,921
—
7,970
Net cash provided by (used in) investing activities 226,111
119,898
(1,267,233 ) (450,292 ) (1,371,516 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 3,772
—
—
—
3,772
Taxes paid related to net share settlements of stock-based compensation awards (4,768 ) —
—
—
(4,768 )
Debt issuance costs (1,354 ) —
(15,584 ) —
(16,938 )
Proceeds from issuance of Euro Notes (2026/28) —
—
1,232,100
—
1,232,100
Borrowings under revolving credit facilities 304,000
—
721,496
—
1,025,496
Repayments under revolving credit facilities (732,897 ) —
(377,138 ) —
(1,110,035 )
Repayments under term loans (114,800 ) —
—
—
(114,800 )
(Repayments) borrowings of other debt, net (385 ) 101
(38,411 ) —
(38,695 )
Other financing activities, net —
—
3,182
—
3,182
Investment and intercompany note activity with parent —
(62,763 ) (10,333 ) 73,096
—
Dividends —
(203,448 ) (226,939 ) 430,387
—
Net cash (used in) provided by financing activities (546,432 ) (266,110 ) 1,288,373
503,483
979,314
Effect of exchange rate changes on cash and cash equivalents —
(463 ) (66,922 ) —
(67,385 )
Net increase (decrease) in cash and cash equivalents 13,905
(4,049 ) 51,724
—
61,580
Cash and cash equivalents, beginning of period 34,360
35,131
210,275
—
279,766
Cash and cash equivalents, end of period $ 48,265
$ 31,082
$ 261,999
$ —
$ 341,346

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

	For the Nine Months Ended September 30, 2019
	Parent			Guarantors			Non-Guarantors⁽¹⁾			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	404,790		$	196,160		$	451,224		$	(87,003	)	$	965,171
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(563		)	(86,713		)	(78,275		)	—			(165,551		)
Investment and intercompany note activity with subsidiaries	33,838			—			—			(33,838		)	—
Acquisitions, net of cash acquired	—			(10,118		)	(4,399		)	—			(14,517		)
Proceeds from disposal of businesses, net	—			19,682			(177		)	—			19,505
Investments in unconsolidated subsidiaries	—			(2,550		)	(4,344		)	—			(6,894		)
Receipts of deferred purchase price on receivables under factoring arrangements	—			264,998			—			(264,998		)	—
Other investing activities, net	966			2,318			4,084			—			7,368
Net cash provided by (used in) investing activities	34,241			187,617			(83,111		)	(298,836		)	(160,089		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock	(291,813		)	—			—			—			(291,813		)
Borrowings under revolving credit facilities	216,000			—			174,275			—			390,275
Repayments under revolving credit facilities	(220,896		)	—			(392,862		)	—			(613,758		)
Repayments under term loans	(6,563		)	—			—			—			(6,563		)
Borrowings under receivables securitization facility	—			—			36,600			—			36,600
Repayments under receivables securitization facility	—			—			(146,600		)	—			(146,600		)
Payment of notes issued from acquisitions	(19,123		)	—			—			—			(19,123		)
Repayments of other debt, net	(747		)	(908		)	(29,932		)	—			(31,587		)
Other financing activities, net	33			—			(7,158		)	—			(7,125		)
Investment and intercompany note activity with parent	—			(29,242		)	(4,596		)	33,838			—
Dividends	—			(352,001		)	—			352,001			—
Net cash used in financing activities	(323,109		)	(382,151		)	(370,273		)	385,839			(689,694		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			622			(10,324		)	—			(9,702		)
Net increase (decrease) in cash, cash equivalents and restricted cash	115,922			2,248			(12,484		)	—			105,686
Cash, cash equivalents and restricted cash of continuing operations, beginning of period	25,633			29,285			282,332			—			337,250
Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period	141,555			31,533			269,848			—			442,936
Less: Cash and cash equivalents of discontinued operations, end of period	—			—			4,328			—			4,328
Cash, cash equivalents and restricted cash, end of period	$	141,555		$	31,533		$	265,520		$	—		$	438,608

Unaudited Condensed Consolidating Statements of Cash Flows

Receipts of deferred purchase price on receivables under factoring arrangements ⁽¹⁾

⁽¹⁾~~Reflects~~Restricted cash is only included in the ~~impact~~unaudited condensed consolidating financial statements of ~~adopting ASU 2016-15~~the Non-Guarantors.

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

	For the Nine Months Ended September 30, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities	$	334,226		$	142,626		$	97,506		$	(53,191	)	$	521,167
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(315		)	(93,063		)	(78,385		)	—			(171,763		)
Investment and intercompany note activity with subsidiaries	73,096			—			—			(73,096		)	—
Return of investment in subsidiaries	152,443			—			—			(152,443		)	—
Acquisitions, net of cash acquired	—			(2,888		)	(1,203,179		)	—			(1,206,067		)
Investments in unconsolidated subsidiaries	—			(11,066		)	—			—			(11,066		)
Receipts of deferred purchase price on receivables under factoring arrangements	—			224,753			9,410			(224,753		)	9,410
Other investing activities, net	887			2,162			4,921			—			7,970
Net cash provided by (used in) investing activities	226,111			119,898			(1,267,233		)	(450,292		)	(1,371,516		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs	(1,354		)	—			(15,584		)	—			(16,938		)
Proceeds from issuance of Euro Notes (2026/28)	—			—			1,232,100			—			1,232,100
Borrowings under revolving credit facilities	304,000			—			721,496			—			1,025,496
Repayments under revolving credit facilities	(732,897		)	—			(377,138		)	—			(1,110,035		)
Repayments under term loans	(114,800		)	—			—			—			(114,800		)
(Repayments) borrowings of other debt, net	(385		)	101			(38,411		)	—			(38,695		)
Other financing activities, net	(996		)	—			3,182			—			2,186
Investment and intercompany note activity with parent	—			(62,763		)	(10,333		)	73,096			—
Dividends	—			(203,448		)	(226,939		)	430,387			—
Net cash (used in) provided by financing activities	(546,432		)	(266,110		)	1,288,373			503,483			979,314
Effect of exchange rate changes on cash and cash equivalents	—			(463		)	(66,922		)	—			(67,385		)
Net increase (decrease) in cash and cash equivalents	13,905			(4,049		)	51,724			—			61,580
Cash and cash equivalents, beginning of period	34,360			35,131			210,275			—			279,766
Cash and cash equivalents, end of period	$	48,265		$	31,082		$	261,999		$	—		$	341,346

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"~~“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 ~~2017~~2018 Form 10-K 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

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

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

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

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

Acquisitions and Investments

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. 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~~nine months ended September 30, ~~2018,~~2019, we ~~acquired~~completed five acquisitions, including one wholesale business and one self service business in North America, and three wholesale businesses in Europe.

On May 30, 2018, we acquired Stahlgruber, a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, ~~Eastern Europe,~~Austria, Italy, Slovenia, and Croatia with further sales to Switzerland. This acquisition ~~expands~~expanded LKQ's geographic presence in continental Europe and serves as an additional strategic hub for our European operations. In addition, ~~we believe~~ this acquisition ~~will~~should allow for continued improvement in procurement, logistics and infrastructure optimization. On May 3, 2018, the European Commission cleared the acquisition for the entire European Union, except with respect to the wholesale automotive parts business in the Czech Republic. The acquisition of the Czech Republic wholesale business has been referred to the Czech Republic competition authority for review. The Czech Republic wholesale business represents an immaterial portion of Stahlgruber's revenue and profitability.

On July 3, 2017, we acquired four parts distribution businesses in Belgium. The objective of these acquisitions was 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 ~~parts distribution businesses acquired in Belgium and the~~Stahlgruber acquisition, ~~of Warn,~~ during the year ended December 31, ~~2017,~~2018, we ~~completed 21 acquisitions, including 6 wholesale~~acquired various smaller businesses inacross our North America ~~12 wholesale businesses~~and Europe segments.

On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen, the leading independent car parts and service chain in the Nordic region of Europe, offering a wide range of quality products including spare parts and ~~3 Specialty aftermarket~~accessories for cars, and workshop services for consumers and businesses. We acquired additional shares in the fourth quarter of 2018, increasing our equity interest to 26.6%. 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.

See Note 2, "Business ~~Combinations"~~Combinations," and "Investments in Unconsolidated Subsidiaries" 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 for additional information related to our ~~acquisitions.~~acquisitions and investments.

Sources of Revenue

We report our revenue in two categories: (i) parts and services and (ii) other. Our parts revenue is generated from the sale of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty products and accessories to improve the performance, functionality and appearance of vehicles. Our service revenue is generated primarily from the sale of service-type warranties, fees for admission to our self service yards, diagnostic and repair services, and processing fees related to the secure disposal of vehicles. 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. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold. See Note 5, "Revenue Recognition" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our sources of revenue.

~~Selling, General~~Critical Accounting Policies and ~~Administrative Expenses~~Estimates

~~In our 2017 Form 10-K,~~On January 1, 2019, we ~~reported~~adopted ASU 2016-02, which represents FASB ASC 842. We adopted the ~~following categories~~new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application with no restatement of comparative periods. The most significant impact was the recognition of lease assets and liabilities for operating ~~expenses: (i) facility and warehouse expenses; (ii) distribution expenses; and (iii) selling, general and administrative expenses. To better reflect the changing profile~~leases. Refer to “Recent Accounting Pronouncements–Adoption of our business, and to align our financial statement presentation with other automotive parts and distribution companies, beginning with our Quarterly Report on Form 10-Q for the three months ended March 31, 2018, these three categories have been 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~~New Lease Standard” in Note 4, "Financial Statement ~~Information"~~Information” and Note 13, "Leases” 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 on our Unaudited Condensed Consolidated Statements of Income. Our selling, general and administrative expenses continue to include: personnel costs for employees in selling, general and administrative functions; costs to operate our selling locations, corporate offices and back office support centers; costs to transport our products from our facilities to our customers; and other selling, general and administrative expenses, such as professional fees, supplies, and 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. Our aftermarket glass operations typically 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~~additional information.

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").~~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 ~~2017~~2018 Form 10-K includes a summary of the critical accounting policies and estimates we believe are the most important to aid in understanding our financial results. ~~There~~Other than the adoption of ASU 2016-02 described above, 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 months ended September 30, ~~2018~~.2019.

Recently Issued Accounting Pronouncements

See "Recent Accounting Pronouncements" 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 for information related to new accounting standards.

Financial Information by Geographic Area

See Note 16, "Segment and Geographic ~~Information~~"Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our revenue and long-lived assets by geographic region.

1 LKQ Europe Program

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

Restructuring expenses - Non-recurring costs resulting directly from the implementation of the 1 LKQ Europe program from which the business will derive no ongoing benefit. See Note 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 details.

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

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

Costs related to the 1 LKQ Europe program incurred to date are reflected in Selling, general and administrative expenses and Purchases of property, plant and equipment in our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. We expect that future costs of the program, reflecting all three categories noted above, will range between $135 million and $160 million for the period from 2019 through 2021 with an additional $80 million to $100 million between 2022 and the projected completion date of the project in 2024.

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				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	61.7	%	61.2	%	61.5	%	60.8	%	61.9	%	61.7	%	61.5	%	61.5	%
Gross margin	38.3	%	38.8	%	38.5	%	39.2	%	38.1	%	38.3	%	38.5	%	38.5	%
Selling, general and administrative expenses	28.2	%	28.2	%	27.9	%	27.6	%	28.3	%	28.2	%	28.3	%	27.9	%
Restructuring and acquisition related expenses	0.2	%	0.2	%	0.3	%	0.1	%	0.3	%	0.2	%	0.2	%	0.3	%
Impairment of net assets held for sale									(0.1	)%	—		0.5	%	—
Depreciation and amortization	2.5	%	2.3	%	2.2	%	2.2	%	2.3	%	2.5	%	2.2	%	2.2	%
Operating income	7.5	%	8.1	%	8.1	%	9.3	%	7.4	%	7.5	%	7.3	%	8.1	%
Other expense, net	1.1	%	0.9	%	1.1	%	0.9	%	0.8	%	1.1	%	0.9	%	1.1	%
Income from continuing operations before provision for income taxes	6.4	%	7.2	%	7.0	%	8.5	%	6.5	%	6.4	%	6.3	%	7.0	%
Provision for income taxes	1.5	%	2.4	%	1.8	%	2.8	%	1.8	%	1.5	%	1.7	%	1.8	%
Equity in (losses) earnings of unconsolidated subsidiaries	(0.6	)%	0.1	%	(0.2	)%	0.1	%
Equity in earnings (losses) of unconsolidated subsidiaries									0.1	%	(0.6	)%	(0.4	)%	(0.2	)%
Income from continuing operations	4.3	%	5.0	%	5.0	%	5.7	%	4.8	%	4.3	%	4.2	%	5.0	%
Net loss from discontinued operations	—	%	—	%	—	%	(0.1	)%
Net income from discontinued operations									0.0	%	—		0.0	%	—
Net income	4.3	%	5.0	%	5.0	%	5.6	%	4.8	%	4.3	%	4.3	%	5.0	%
Less: net income attributable to noncontrolling interest	0.0	%	—	%	0.0	%	—	%
Less: net (loss) income attributable to continuing noncontrolling interest									(0.0	)%	0.0	%	0.0	%	0.0	%
Less: net income attributable to discontinued noncontrolling interest									0.0	%	—		0.0	%	—
Net income attributable to LKQ stockholders	4.3	%	5.0	%	5.0	%	5.6	%	4.8	%	4.3	%	4.2	%	5.0	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

Three Months Ended September 30, ~~2018~~2019 Compared to Three Months Ended September 30, ~~2017~~2018

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

The ~~change~~growth in parts and services revenue of ~~26.9%~~0.8% represented increases in segment revenue of ~~5.5%~~3.3% in North America ~~53.7%~~and 1.4% in ~~Europe~~Specialty and ~~18.0%~~a decrease of segment revenue of 1.2% in ~~Specialty.~~Europe. Organic parts and services revenue grew by 2.3%, which included a 1.4% positive effect from one additional selling day in the third quarter of 2019, resulting in an organic growth of 0.9% on a per day basis. The increase in other revenue of ~~21.5%~~0.9% was primarily driven by a ~~$25~~$2 million ~~organic~~acquisition increase, 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 quarter of ~~2018~~2019 compared to the prior year period.

Cost of Goods Sold. Cost of goods sold increased to 61.9% of revenue in the three months ended September 30, 2019 from 61.7% of revenue in the three months ended September 30, ~~2018 from 61.2% of revenue in the comparable prior year quarter. The increase in cost~~2018. Cost of goods sold increased 0.5% primarily due to inventory write-downs in our Europe segment as ~~a percentage~~part of ~~revenue was primarily~~our restructuring programs and 0.2% related to ~~(i)~~other individually immaterial factors, partially offset by a ~~0.2% increase from~~0.5% improvement in gross margin in our North America ~~segment and (ii)~~segment. We recorded a ~~0.2% increase attributable to mix. With~~$17 million reduction of inventory in our ~~Stahlgruber acquisition, the lower margin~~ Europe segment ~~makes up a larger percentage~~related to U.K. branch consolidation and brand rationalization initiated as part of our restructuring programs. See Note 6, "Restructuring and Acquisition Related Expenses" to the unaudited condensed consolidated ~~results and has a dilutive effect~~financial statements in Part I, Item 1 of this Quarterly Report on ~~the gross margin percentage.~~Form 10-Q for further information on our restructuring plans. 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, ~~2018~~2019 compared to the three months ended September 30, ~~2017.~~2018.

Selling, General and Administrative Expenses. Our selling, general and administrative ("SG&A") expenses as a percentage of revenue ~~remained at~~increased to 28.3% in the three months ended September 30, 2019 from 28.2% ~~for~~in the three months ended September 30, 2018, ~~the same as the prior year period,~~primarily as a result of a 0.2% increase ~~in SG&A expenses attributable~~from our North America segment, partially offset by a 0.2% decrease ~~attributable to~~from our ~~Europe segment, which was primarily related to our acquisition of Stahlgruber.~~Specialty segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended September 30, ~~2018~~2019 compared to the three months ended September 30, ~~2017.~~2018.

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

See Note 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.

Impairment of Net Assets Held for Sale. We recorded a $4 million net reversal of impairment charges on net assets held for sale in the third quarter of 2019 as the proceeds from our sales of two businesses exceeded our prior fair value estimates, resulting in a net reduction of previously reported impairment charges in the quarter. The net reversal of impairment charges was primarily attributable to our North America segment. See "Net Assets Held for Sale" 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 for further information on the net reversal of impairment charges.

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

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

Provision for Income Taxes. Our effective income tax rate for the three months ended September 30, 2019 was 28.1%, compared to 22.9% for the comparable prior year period. The increase was primarily attributable to the impact of a favorable discrete item of $10 million for the three months ended September 30, 2018, compared to 32.7% for the three months ended September 30, 2017. The 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 December 2017. Partially offsetting this decrease was a 1.0% increase in the effective income tax rate as a result of the Stahlgruber acquisition, including non-deductible interest and acquisition related expenses, as well as the higher effective tax rate in Germany. We expect 0.6% of the increase to our effective tax rate to be non-recurring, as it relates to one-time financing and acquisition related costs for Stahlgruber. The effective tax rate also reflects the impact of favorable discrete items including (i) a $10 million favorablereflecting an adjustment to the Tax Act transition ~~tax for~~tax. The increase was also partially attributable to the ~~three months ended September 30, 2018 and (ii) approximately $1 million and~~impact of an unfavorable adjustment of $2 million for the three months ended September 30, ~~2018 and 2017, respectively, for excess tax benefits from stock-based payments. The quarter over quarter change~~2019 due to an increase in ~~these discrete items decreased the effective~~our annual estimated tax rate ~~by 4.3% compared to the prior year.~~ as a result of a shift in our projected geographic blend of earnings.

Equity in Earnings (Losses) ~~Earnings~~ of Unconsolidated Subsidiaries. Equity in earnings (losses) ~~earnings~~ of unconsolidated subsidiaries for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 primarily related to our investment in Mekonomen. During the three

months ended September 30, 2018, we recorded a $23 million other-than-temporary impairment related to our investment in Mekonomen. See "Investments in Unconsolidated Subsidiaries" 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 for further information on the impairment charge. The impairment charge is excluded from our calculation of Segment EBITDA. See Note 16, "Segment and Geographic Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for our reconciliation of Net Income to Segment EBITDA.

Foreign Currency Impact. We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the three months ended September 30, ~~2017,~~2018, the ~~Canadian dollar, euro, and~~ pound sterling, Czech koruna, and euro rates used to translate the ~~2018~~2019 statements of income decreased by ~~4.1%~~5.4%, ~~1.0%~~4.4%, and ~~0.5%~~4.4%, ~~respectively, and the Czech koruna rate increased by 0.3%, compared to the prior year period.~~respectively. The negative translation effect of the change in foreign currencies against the U.S. dollar ~~and~~netted against the positive impact of realized and unrealized currency gains and losses for the three months ended September 30, ~~2018 resulted~~2019, resulting in ~~a negative effect of less than half a penny~~an immaterial impact on diluted earnings per share ~~from continuing operations~~ relative to the prior year ~~third quarter.~~period.

Net (Loss) Income Attributable to Continuing and Discontinued Noncontrolling Interest. Net (loss) income attributable to continuing noncontrolling interest for the three months ended September 30, 2019 decreased an immaterial amount compared to the three months ended September 30, 2018 primarily ~~related~~due to the noncontrolling interest of ~~subsidiaries acquired in connection with~~an immaterial subsidiary. Net income attributable to discontinued noncontrolling interest was immaterial for the three months ended September 30, 2019 and related to the Stahlgruber ~~acquisition. We reported no income or loss attributable~~Czech Republic wholesale business. See Note 3, "Discontinued Operations" to the ~~noncontrolling interest~~unaudited condensed consolidated financial statements in ~~the prior year period.~~Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on this business.

Nine Months Ended September 30, ~~2018~~2019 Compared to Nine Months Ended September 30, ~~2017~~2018

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

The ~~change~~growth in parts and services revenue of ~~21.9%~~7.7% represented increases in segment revenue of ~~7.5%~~16.3% in Europe (driven by the Stahlgruber acquisition), 0.6% in North America ~~42.2% in Europe~~ and ~~14.5%~~0.5% in Specialty. The ~~increase~~decrease in other revenue of ~~25.4%~~4.1% was primarily driven by a ~~$94~~$25 million organic ~~increase,~~decrease, 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 first nine months ~~ended September 30, 2018~~of 2019 compared to the prior year period.



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

500 ~~WEST MADISON STREET,~~ ~~SUITE~~West Madison Street,	Suite 2800 ~~CHICAGO, IL~~
Chicago	Illinois	60661
(Address of principal executive offices)		(Zip Code)

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

Notes issued in connection with purchase of noncontrolling interest	14,196	—
Contingent consideration liabilities	5,377	3,107


	Nine Months Ended									Year Ended			Year Ended
	September 30, 2018									December, 31, 2017			December 31, 2018
	Stahlgruber			Other Acquisitions ⁽²⁾			Total			All Acquisitions⁽¹⁾			Stahlgruber			Other Acquisitions ⁽¹⁾			Total
Receivables	$	140,979		$	15,369		$	156,348		$	73,782		$	144,826		$	19,171		$	163,997
Receivable reserves	(2,818		)	(875		)	(3,693		)	(7,032		)	(2,818		)	(918		)	(3,736		)
Inventories ⁽³⁾	374,056			12,240			386,296			150,342			380,238			14,021			394,259
Prepaid expenses and other current assets	9,537			1,806			11,343			(295		)	10,970			1,851			12,821
Property, plant and equipment	260,661			6,089			266,750			41,039			271,292			5,711			277,003
Goodwill	929,376			68,254			997,630			314,817			908,253			64,637			972,890
Other intangibles	285,529			16,315			301,844			181,216			285,255			35,159			320,414
Other assets	16,625			37			16,662			3,257
Other noncurrent assets													16,625			37			16,662
Deferred income taxes	(97,805		)	(716		)	(98,521		)	(65,087		)	(78,130		)	(5,285		)	(83,415		)
Current liabilities assumed	(343,221		)	(20,662		)	(363,883		)	(111,484		)	(346,788		)	(20,116		)	(366,904		)
Debt assumed	(65,852		)	(4,410		)	(70,262		)	(33,586		)	(79,925		)	(4,875		)	(84,800		)
Other noncurrent liabilities assumed ⁽⁴⁾⁽²⁾	(81,689		)	(9,993		)	(91,682		)	(1,917		)	(80,824		)	(10,306		)	(91,130		)
Noncontrolling interest	(44,250		)	—			(44,250		)	—			(44,110		)	—			(44,110		)
Contingent consideration liabilities	—			(3,107		)	(3,107		)	(6,234		)	—			(3,107		)	(3,107		)
Other purchase price obligations	(2,349		)	3,853			1,504			(5,074		)	(6,084		)	3,623			(2,461		)
Stock issued	(251,334		)	—			(251,334		)	—			(251,334		)	—			(251,334		)
Notes issued	—			(6,948		)	(6,948		)	(20,187		)	—			(11,347		)	(11,347		)
Settlement of pre-existing balances	—			—			—			242
Gains on bargain purchases ⁽⁵⁾	—			(328		)	(328		)	(3,870		)
Gains on bargain purchases ⁽³⁾													—			(2,418		)	(2,418		)
Settlement of other purchase price obligations (non-interest bearing)	—			1,698			1,698			3,159			—			1,711			1,711
Cash used in acquisitions, net of cash acquired	$	1,127,445		$	78,622		$	1,206,067		$	513,088
Cash used in acquisitions, net of cash and restricted cash acquired													$	1,127,446		$	87,549		$	1,214,995



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



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


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


~~(2)~~	~~The amounts recorded during the nine months ended September 30,~~ 2018 include a $5 million adjustment to increase other intangibles related to our acquisition of Warn ~~acquisition~~Industries, Inc. in 2017 and $4 million of adjustments to reduce other purchase price obligations related to other 2017 acquisitions.


~~(3)~~	~~The amounts for our 2017 acquisitions include a $4 million step-up adjustment related to our Warn acquisition.~~


~~(4)~~(2)	The amount recorded for our acquisition of Stahlgruber includes a ~~$75~~$79 million liability for certain pension obligations. ~~See Note 13, "Employee Benefit Plans" for information related to our defined benefit plans.~~




	Gross Amount
Land and improvements	$	47,281
Buildings and improvements	125,649
Machinery and equipment	49,384
Computer equipment and software	3,760
Vehicles and trailers	643
Furniture and fixtures	28,535
Leasehold improvements	1,890
	257,142
Construction in progress	3,519
Total property, plant and equipment	$	260,661



	September 30, 2018		December 31, 2017
Intangible assets subject to amortization	$	872,072	$	664,969
Indefinite-lived intangible assets
Trademarks	81,300		78,800
Total	$	953,372	$	743,769



	September 30, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Trade names and trademarks	$	495,839	$	(88,805	)	$	407,034	$	327,332	$	(75,095	)	$	252,237
Customer and supplier relationships	586,221		(223,085		)	363,136		510,113		(167,532		)	342,581
Software and other technology related assets	172,391		(73,760		)	98,631		124,049		(59,081		)	64,968
Covenants not to compete	13,488		(10,217		)	3,271		14,981		(9,798		)	5,183
Total	$	1,267,939	$	(395,867	)	$	872,072	$	976,475	$	(311,506	)	$	664,969



Balance as of December 31, 2017	$	23,151
Warranty expense	33,670
Warranty claims	(31,980		)
Balance as of September 30, 2018	$	24,841



	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



	Balance as of September 30, 2018
	As Reported		Amounts Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Balance Sheet
Assets
Accounts receivable	$	1,255,876	$	1,205,833	$	50,043
Prepaid expenses and other current assets	200,944		144,255		56,689
Liabilities
Refund liability	106,732		—		106,732



Balance as of January 1, 2018	$	19,465
Additional warranty revenue deferred	28,889
Warranty revenue recognized	(25,200		)
Balance as of September 30, 2018	$	23,154


(1)	Inclusive of our interest rate swap agreements and the interest rate swap component of our cross currency swaps.


(2)	Amounts reclassified to Interest expense, net of interest income in our Unaudited Condensed Consolidated Statements of Income.


(3)	Related to the foreign currency forward component of our cross currency swaps.


(4)	Amounts reclassified to Other income, net in our Unaudited Condensed Consolidated Statements of Income. These gains and losses offset the impact of the remeasurement of the underlying contracts.


	Balance as of September 30, 2018		Fair Value Measurements as of September 30, 2018						Balance as of September 30, 2019		Fair Value Measurements as of September 30, 2019
	Balance as of September 30, 2018		Level 1		Level 2		Level 3		Balance as of September 30, 2019		Level 1		Level 2		Level 3
Assets:
Cash surrender value of life insurance	$	53,691	$	—	$	53,691	$	—	$	56,278	$	—	$	56,278	$	—
Rights to acquire Mekonomen shares	28,683		—		28,683		—
Interest rate swaps	25,719		—		25,719		—		3,634		—		3,634		—
Cross currency swap agreements	10,881		—		10,881		—		10,444		—		10,444		—
Total Assets	$	118,974	$	—	$	118,974	$	—	$	70,356	$	—	$	70,356	$	—
Liabilities:
Contingent consideration liabilities	$	5,243	$	—	$	—	$	5,243	$	9,873	$	—	$	—	$	9,873
Deferred compensation liabilities	54,419		—		54,419		—		59,846		—		59,846		—
Cross currency swap agreements	49,212		—		49,212		—		14,597		—		14,597		—
Total Liabilities	$	108,874	$	—	$	103,631	$	5,243	$	84,316	$	—	$	74,443	$	9,873



Three months ending December 31, 2018	$	72,780
Years ending December 31:
2019	271,642
2020	226,936
2021	179,921
2022	144,700
2023	122,149
Thereafter	689,583
Future Minimum Lease Payments	$	1,707,711


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


(1)	~~See~~Refer to "Investments in Unconsolidated Subsidiaries" in Note 4, "Financial Statement Information," for further information.


(2)	~~Reflects the gains on bargain purchases~~Excludes $1 million of depreciation expense that is reported in Restructuring and acquisition related toexpenses in our ~~acquisitions~~Unaudited Condensed Consolidated Statements of ~~a wholesale business in Europe and Andrew Page. See Note 2, "Business Combinations," for further information.~~


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


(3)	Refer to Note 6, "Restructuring and Acquisition Related Expenses," for further information.


(1)	~~The increase in assets for the Europe segment is primarily attributable to the Stahlgruber acquisition.~~ Refer to Note ~~2, “Business Combinations,”~~13, "Leases," for further ~~detail on the opening balance sheet amounts.~~information.


(2)	Refer to ~~Note 4, "Financial Statement Information," for the increase~~"Investments in ~~total receivables, net compared to December 31, 2017 as a result of the adoption of ASC 606.~~


~~(3)~~	~~Refer to~~Unconsolidated Subsidiaries" in Note 4, "Financial Statement Information," for further information.


(1)	The increase in long-lived assets is primarily related to the net operating lease assets added as a result of the adoption of the new lease accounting standard. Refer to Note 13, "Leases," for further information.


(1)	Restructuring expenses for the three months ended September 30, 2019 primarily consisted of (i) $4 million related to our 2019 global restructuring program, and (ii) $3 million related to integration costs from acquisitions.


~~(3)~~(4)	Acquisition related expenses for the quarter ended September 30, 2018 included $1 million of costs related to our acquisition of Stahlgruber.

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

Global Select Market