UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

____________________________


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

For the Quarterly Period Ended June 30, ~~2020~~2021


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

For the Transition Period from to

Commission File Number: 000-50404

____________________________

LKQ CORPORATION

(Exact name of registrant as specified in its charter)

____________________________

Delaware

36-4215970

(State or other jurisdiction of
incorporation or organization)

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

500 West Madison Street,

Suite 2800

Chicago,

Illinois

60661

(Address of principal executive offices)

(Zip Code)

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

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

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

LKQ

NASDAQ

Global Select Market

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

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

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


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

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

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

At July 30, ~~2020,~~2021, the registrant had outstanding an aggregate of ~~304,292,579~~293,875,364 shares of Common Stock.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue	Revenue	$	2,626,323	$	3,248,173	$	5,627,258	$	6,348,476	Revenue	$	3,435,114	$	2,626,323	$	6,605,900	$	5,627,258
Cost of goods sold	Cost of goods sold	1,615,319		2,000,986		3,402,378		3,893,025		Cost of goods sold	2,019,405		1,615,319		3,896,477		3,402,378

Gross margin	Gross margin	1,011,004		1,247,187		2,224,880		2,455,451		Gross margin	1,415,709		1,011,004		2,709,423		2,224,880
Selling, general and administrative expenses	Selling, general and administrative expenses	737,369		898,368		1,637,180		1,794,900		Selling, general and administrative expenses	901,667		737,369		1,750,232		1,637,180
Restructuring and acquisition related expenses	Restructuring and acquisition related expenses	24,950		8,377		31,920		11,684		Restructuring and acquisition related expenses	5,069		24,950		12,954		31,920
Loss on disposal of businesses and impairment of net assets held for sale		2,485		33,497		2,236		48,520
(Gain) loss on disposal of businesses and impairment of net assets held for sale										(Gain) loss on disposal of businesses and impairment of net assets held for sale	(597)		2,485		(582)		2,236
Depreciation and amortization	Depreciation and amortization	65,747		70,834		131,242		141,836		Depreciation and amortization	64,896		65,747		130,697		131,242

Operating income	Operating income	180,453		236,111		422,302		458,511		Operating income	444,674		180,453		816,122		422,302
Other expense (income):	Other expense (income):									Other expense (income):
Interest expense, net of interest income	Interest expense, net of interest income	25,616		35,884		51,547		71,973		Interest expense, net of interest income	16,172		25,616		40,351		51,547
Loss on debt extinguishment	Loss on debt extinguishment	—		—		12,751		—		Loss on debt extinguishment	23,564		0		23,564		12,751
Other income, net	Other income, net	(8,174)		(5,733)		(11,796)		(9,584)		Other income, net	(4,311)		(8,174)		(10,524)		(11,796)
Total other expense, net	Total other expense, net	17,442		30,151		52,502		62,389		Total other expense, net	35,425		17,442		53,391		52,502
Income from continuing operations before provision for income taxes	Income from continuing operations before provision for income taxes	163,011		205,960		369,800		396,122		Income from continuing operations before provision for income taxes	409,249		163,011		762,731		369,800
Provision for income taxes	Provision for income taxes	41,869		55,825		102,280		107,375		Provision for income taxes	107,719		41,869		200,688		102,280
Equity in (losses) earnings of unconsolidated subsidiaries		(2,649)		1,572		(2,133)		(37,977)
Equity in earnings (losses) of unconsolidated subsidiaries										Equity in earnings (losses) of unconsolidated subsidiaries	3,478		(2,649)		9,297		(2,133)
Income from continuing operations	Income from continuing operations	118,493		151,707		265,387		250,770		Income from continuing operations	305,008		118,493		571,340		265,387
Net income (loss) from discontinued operations	Net income (loss) from discontinued operations	277		398		(638)		398		Net income (loss) from discontinued operations	0		277		0		(638)
Net income	Net income	118,770		152,105		264,749		251,168		Net income	305,008		118,770		571,340		264,749
Less: net (loss) income attributable to continuing noncontrolling interest		(22)		1,352		718		2,367
Less: net income (loss) attributable to continuing noncontrolling interest										Less: net income (loss) attributable to continuing noncontrolling interest	384		(22)		803		718
Less: net income attributable to discontinued noncontrolling interest	Less: net income attributable to discontinued noncontrolling interest	—		192		103		192		Less: net income attributable to discontinued noncontrolling interest	0		0		0		103
Net income attributable to LKQ stockholders	Net income attributable to LKQ stockholders	$	118,792	$	150,561	$	263,928	$	248,609	Net income attributable to LKQ stockholders	$	304,624	$	118,792	$	570,537	$	263,928

Basic earnings per share: ⁽¹⁾	Basic earnings per share: ⁽¹⁾									Basic earnings per share: (1)
Income from continuing operations	Income from continuing operations	$	0.39	$	0.49	$	0.87	$	0.80	Income from continuing operations	$	1.01	$	0.39	$	1.89	$	0.87
Net income (loss) from discontinued operations	Net income (loss) from discontinued operations	0.00		0.00		(0.00)		0.00		Net income (loss) from discontinued operations	0		0.00		0		(0.00)
Net income	Net income	0.39		0.49		0.87		0.80		Net income	1.01		0.39		1.89		0.87
Less: net (loss) income attributable to continuing noncontrolling interest		(0.00)		0.00		0.00		0.01
Less: net income (loss) attributable to continuing noncontrolling interest										Less: net income (loss) attributable to continuing noncontrolling interest	0.00		(0.00)		0.00		0.00
Less: net income attributable to discontinued noncontrolling interest	Less: net income attributable to discontinued noncontrolling interest	—		0.00		0.00		0.00		Less: net income attributable to discontinued noncontrolling interest	0		0		0		0.00
Net income attributable to LKQ stockholders	Net income attributable to LKQ stockholders	$	0.39	$	0.48	$	0.86	$	0.79	Net income attributable to LKQ stockholders	$	1.01	$	0.39	$	1.89	$	0.86

Diluted earnings per share:⁽¹⁾	Diluted earnings per share:⁽¹⁾									Diluted earnings per share: (1)
Income from continuing operations	Income from continuing operations	$	0.39	$	0.49	$	0.87	$	0.80	Income from continuing operations	$	1.01	$	0.39	$	1.89	$	0.87
Net income (loss) from discontinued operations	Net income (loss) from discontinued operations	0.00		0.00		(0.00)		0.00		Net income (loss) from discontinued operations	0		0.00		0		(0.00)
Net income	Net income	0.39		0.49		0.87		0.80		Net income	1.01		0.39		1.89		0.87
Less: net (loss) income attributable to continuing noncontrolling interest		(0.00)		0.00		0.00		0.01
Less: net income (loss) attributable to continuing noncontrolling interest										Less: net income (loss) attributable to continuing noncontrolling interest	0.00		(0.00)		0.00		0.00
Less: net income attributable to discontinued noncontrolling interest	Less: net income attributable to discontinued noncontrolling interest	—		0.00		0.00		0.00		Less: net income attributable to discontinued noncontrolling interest	0		0		0		0.00
Net income attributable to LKQ stockholders	Net income attributable to LKQ stockholders	$	0.39	$	0.48	$	0.86	$	0.79	Net income attributable to LKQ stockholders	$	1.01	0.39		$	1.89	$	0.86

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

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income

(In thousands)


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	118,770	$	152,105	$	264,749	$	251,168	Net income	$	305,008	$	118,770	$	571,340	$	264,749
Less: net (loss) income attributable to continuing noncontrolling interest		(22)		1,352		718		2,367
Less: net income (loss) attributable to continuing noncontrolling interest										Less: net income (loss) attributable to continuing noncontrolling interest	384		(22)		803		718
Less: net income attributable to discontinued noncontrolling interest	Less: net income attributable to discontinued noncontrolling interest	—		192		103		192		Less: net income attributable to discontinued noncontrolling interest	0		0		0		103
Net income attributable to LKQ stockholders	Net income attributable to LKQ stockholders	118,792		150,561		263,928		248,609		Net income attributable to LKQ stockholders	304,624		118,792		570,537		263,928

Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation, net of tax	Foreign currency translation, net of tax	31,334		5,602		(72,631)		(4,293)		Foreign currency translation, net of tax	21,864		31,334		(2,708)		(72,631)
Net change in unrealized gains/losses on cash flow hedges, net of tax	Net change in unrealized gains/losses on cash flow hedges, net of tax	(31)		(5,650)		(7,352)		(8,387)		Net change in unrealized gains/losses on cash flow hedges, net of tax	211		(31)		869		(7,352)
Net change in unrealized gains/losses on pension plans, net of tax	Net change in unrealized gains/losses on pension plans, net of tax	1,875		28		1,995		219		Net change in unrealized gains/losses on pension plans, net of tax	313		1,875		626		1,995
Other comprehensive income (loss) from unconsolidated subsidiaries	Other comprehensive income (loss) from unconsolidated subsidiaries	962		2,321		(890)		(1,142)		Other comprehensive income (loss) from unconsolidated subsidiaries	2,644		962		(868)		(890)
Other comprehensive income (loss)	Other comprehensive income (loss)	34,140		2,301		(78,878)		(13,603)		Other comprehensive income (loss)	25,032		34,140		(2,081)		(78,878)

Comprehensive income	Comprehensive income	152,910		154,406		185,871		237,565		Comprehensive income	330,040		152,910		569,259		185,871
Less: comprehensive (loss) income attributable to continuing noncontrolling interest		(22)		1,352		718		2,367
Less: comprehensive income (loss) attributable to continuing noncontrolling interest										Less: comprehensive income (loss) attributable to continuing noncontrolling interest	384		(22)		803		718
Less: comprehensive income attributable to discontinued noncontrolling interest	Less: comprehensive income attributable to discontinued noncontrolling interest	—		192		103		192		Less: comprehensive income attributable to discontinued noncontrolling interest	0		0		0		103
Comprehensive income attributable to LKQ stockholders	Comprehensive income attributable to LKQ stockholders	$	152,932	$	152,862	$	185,050	$	235,006	Comprehensive income attributable to LKQ stockholders	$	329,656	$	152,932	$	568,456	$	185,050

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	476,426	$	523,020	Cash and cash equivalents	$	328,700	$	312,154
Receivables, net	Receivables, net	1,125,816		1,131,132		Receivables, net	1,225,735		1,073,389
Inventories	Inventories	2,288,293		2,772,777		Inventories	2,394,147		2,414,612
Prepaid expenses and other current assets	Prepaid expenses and other current assets	216,438		260,890		Prepaid expenses and other current assets	219,952		233,877

Total current assets	Total current assets	4,106,973		4,687,819		Total current assets	4,168,534		4,034,032
Property, plant and equipment, net	Property, plant and equipment, net	1,196,505		1,234,400		Property, plant and equipment, net	1,207,156		1,248,703
Operating lease assets, net	Operating lease assets, net	1,272,513		1,308,511		Operating lease assets, net	1,368,143		1,353,124
Intangible assets:	Intangible assets:					Intangible assets:
Goodwill	Goodwill	4,377,350		4,406,535		Goodwill	4,568,087		4,591,569
Other intangibles, net	Other intangibles, net	798,799		850,338		Other intangibles, net	768,471		814,219
Equity method investments	Equity method investments	136,673		139,243		Equity method investments	168,467		155,224
Other noncurrent assets	Other noncurrent assets	146,486		153,110		Other noncurrent assets	189,201		163,662
Total assets	Total assets	$	12,035,299	$	12,779,956	Total assets	$	12,438,059	$	12,360,533
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	756,846	$	942,795	Accounts payable	$	1,191,250	$	932,406
Accrued expenses:	Accrued expenses:					Accrued expenses:
Accrued payroll-related liabilities	Accrued payroll-related liabilities	179,470		179,203		Accrued payroll-related liabilities	214,288		208,718
Refund liability	Refund liability	103,679		97,314		Refund liability	106,331		102,148
Value added taxes payable		160,294		46,490

Other accrued expenses	Other accrued expenses	258,490		243,193		Other accrued expenses	363,891		334,890
Income taxes payable		114,202		26,959

Other current liabilities	Other current liabilities	67,410		94,664		Other current liabilities	110,500		130,021
Current portion of operating lease liabilities	Current portion of operating lease liabilities	216,177		221,527		Current portion of operating lease liabilities	201,071		221,811
Current portion of long-term obligations	Current portion of long-term obligations	93,200		326,367		Current portion of long-term obligations	90,825		58,497

Total current liabilities	Total current liabilities	1,949,768		2,178,512		Total current liabilities	2,278,156		1,988,491
Long-term operating lease liabilities, excluding current portion	Long-term operating lease liabilities, excluding current portion	1,112,230		1,137,597		Long-term operating lease liabilities, excluding current portion	1,215,279		1,197,963
Long-term obligations, excluding current portion	Long-term obligations, excluding current portion	3,157,725		3,715,389		Long-term obligations, excluding current portion	2,360,685		2,812,641
Deferred income taxes	Deferred income taxes	299,867		310,129		Deferred income taxes	285,426		291,421
Other noncurrent liabilities	Other noncurrent liabilities	343,691		365,672		Other noncurrent liabilities	380,427		374,640
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Redeemable noncontrolling interest	Redeemable noncontrolling interest	24,077		24,077		Redeemable noncontrolling interest	24,077		24,077
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 320,530,156 shares issued and 304,034,241 shares outstanding at June 30, 2020; 319,927,243 shares issued and 306,731,328 shares outstanding at December 31, 2019		3,205		3,199
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,260,012 shares issued and 296,287,913 shares outstanding at June 30, 2021; 320,867,602 shares issued and 303,553,000 shares outstanding at December 31, 2020						Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,260,012 shares issued and 296,287,913 shares outstanding at June 30, 2021; 320,867,602 shares issued and 303,553,000 shares outstanding at December 31, 2020	3,212		3,208
Additional paid-in capital	Additional paid-in capital	1,433,338		1,418,239		Additional paid-in capital	1,458,993		1,444,584
Retained earnings	Retained earnings	4,401,545		4,140,136		Retained earnings	5,346,577		4,776,040
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(279,763)		(200,885)		Accumulated other comprehensive loss	(101,090)		(99,009)
Treasury stock, at cost; 16,495,915 shares at June 30, 2020 and 13,195,915 shares at December 31, 2019		(439,819)		(351,813)
Treasury stock, at cost; 24,972,099 shares at June 30, 2021 and 17,314,602 shares at December 31, 2020						Treasury stock, at cost; 24,972,099 shares at June 30, 2021 and 17,314,602 shares at December 31, 2020	(829,768)		(469,105)
Total Company stockholders' equity	Total Company stockholders' equity	5,118,506		5,008,876		Total Company stockholders' equity	5,877,924		5,655,718
Noncontrolling interest	Noncontrolling interest	29,435		39,704		Noncontrolling interest	16,085		15,582
Total stockholders' equity	Total stockholders' equity	5,147,941		5,048,580		Total stockholders' equity	5,894,009		5,671,300
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	12,035,299	$	12,779,956	Total liabilities and stockholders' equity	$	12,438,059	$	12,360,533

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

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


		Six Months Ended							Six Months Ended
		June 30,							June 30,
		2020		2019			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	264,749	$	251,168	Net income	$	571,340	$	264,749
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	144,309		152,361		Depreciation and amortization	142,340		144,309
Impairment of equity method investments		—		39,551

Loss on disposal of businesses and impairment of net assets held for sale		2,236		48,520

Stock-based compensation expense	Stock-based compensation expense	15,763		13,659		Stock-based compensation expense	16,793		15,763
Loss on debt extinguishment	Loss on debt extinguishment	12,751		—		Loss on debt extinguishment	23,564		12,751
Other	Other	(3,554)		(3,516)		Other	(24,516)		(1,318)
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:	Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:					Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net	Receivables, net	(5,111)		(149,052)		Receivables, net	(161,334)		(5,111)
Inventories	Inventories	445,493		131,229		Inventories	7,284		445,493

Prepaid income taxes/income taxes payable	Prepaid income taxes/income taxes payable	84,125		25,967		Prepaid income taxes/income taxes payable	(18,800)		84,125
Accounts payable	Accounts payable	(172,140)		96,888		Accounts payable	284,472		(172,140)
Other operating assets and liabilities	Other operating assets and liabilities	124,431		31,629		Other operating assets and liabilities	91,947		124,431
Net cash provided by operating activities	Net cash provided by operating activities	913,052		638,404		Net cash provided by operating activities	933,090		913,052
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(77,301)		(101,268)		Purchases of property, plant and equipment	(87,854)		(77,301)
Proceeds from disposals of property, plant and equipment	Proceeds from disposals of property, plant and equipment	6,110		1,976		Proceeds from disposals of property, plant and equipment	11,820		6,110
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(5,465)		(14,767)		Acquisitions, net of cash acquired	(29,480)		(5,465)
Proceeds from disposal of businesses, net of cash sold		4,602		—

Other investing activities, net	Other investing activities, net	(3,917)		(2,711)		Other investing activities, net	(3,502)		685
Net cash used in investing activities	Net cash used in investing activities	(75,971)		(116,770)		Net cash used in investing activities	(109,016)		(75,971)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:

Early-redemption premium	Early-redemption premium	(9,498)		—		Early-redemption premium	(16,014)		(9,498)
Repayment of Euro Notes (2026)						Repayment of Euro Notes (2026)	(883,275)		0
Repayment of U.S. Notes (2023)	Repayment of U.S. Notes (2023)	(600,000)		—		Repayment of U.S. Notes (2023)	0		(600,000)
Borrowings under revolving credit facilities	Borrowings under revolving credit facilities	494,485		312,880		Borrowings under revolving credit facilities	3,613,568		494,485
Repayments under revolving credit facilities	Repayments under revolving credit facilities	(601,480)		(471,439)		Repayments under revolving credit facilities	(2,792,867)		(601,480)
Repayments under term loans	Repayments under term loans	(8,750)		(4,375)		Repayments under term loans	(323,750)		(8,750)
Borrowings under receivables securitization facility	Borrowings under receivables securitization facility	111,300		36,600		Borrowings under receivables securitization facility	0		111,300
Repayments under receivables securitization facility	Repayments under receivables securitization facility	(111,300)		(146,600)		Repayments under receivables securitization facility	0		(111,300)

Repayments of other debt, net		(66,073)		(8,367)
Borrowings (repayments) of other debt, net						Borrowings (repayments) of other debt, net	39,533		(66,073)
Settlement of derivative instruments, net						Settlement of derivative instruments, net	(88,743)		0
Purchase of treasury stock	Purchase of treasury stock	(88,006)		(190,762)		Purchase of treasury stock	(343,830)		(88,006)
Other financing activities, net	Other financing activities, net	(10,832)		75		Other financing activities, net	(13,329)		(10,832)
Net cash used in financing activities	Net cash used in financing activities	(890,154)		(471,988)		Net cash used in financing activities	(808,707)		(890,154)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,358)		(102)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,179		(5,358)
Net (decrease) increase in cash, cash equivalents and restricted cash		(58,431)		49,544
Cash, cash equivalents and restricted cash of continuing operations, beginning of period		528,387		337,250
Add: Cash, cash equivalents and restricted cash of discontinued operations, beginning of period		6,470		—
Cash, cash equivalents and restricted cash of continuing and discontinued operations, beginning of period		534,857		337,250
Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period		476,426		386,794
Less: Cash and cash equivalents of discontinued operations, end of period		—		5,372
Cash, cash equivalents and restricted cash, end of period		$	476,426	$	381,422
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	16,546		(58,431)
Cash, and cash equivalents of continuing operations, beginning of period (1)						Cash, and cash equivalents of continuing operations, beginning of period (1)	312,154		528,387
Add: Cash, and cash equivalents of discontinued operations, beginning of period						Add: Cash, and cash equivalents of discontinued operations, beginning of period	0		6,470
Cash, and cash equivalents of continuing and discontinued operations, beginning of period						Cash, and cash equivalents of continuing and discontinued operations, beginning of period	312,154		534,857
Cash, and cash equivalents, end of period						Cash, and cash equivalents, end of period	$	328,700	$	476,426

(1) The balance as of January 1, 2020 included restricted cash of $5 million.						(1) The balance as of January 1, 2020 included restricted cash of $5 million.

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

Six Months Ended
June 30,
2020 2019
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents $ 476,426 $ 375,967
Restricted cash included in Other noncurrent assets — 5,455
Cash, cash equivalents and restricted cash, end of period $ 476,426 $ 381,422
Supplemental disclosure of cash paid for:
Income taxes, net of refunds $ 24,452 $ 88,001
Interest 55,910 75,259
Supplemental disclosure of noncash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities $ 8,225 $ 7,568
Leased assets obtained in exchange for new operating lease liabilities 36,458 61,891
Noncash property, plant and equipment additions 7,200 14,227
Notes payable and other financing obligations, including notes issued, debt assumed and settlement of pre-existing balances in connection with business acquisitions and disposals 6,136 45,420
Notes receivable and contingent consideration receivable acquired in connection with disposal of businesses 8,549 —
Contingent consideration liabilities 3,045 5,377


	Six Months Ended
	June 30,
	2021		2020





Supplemental disclosure of cash paid for:
Income taxes, net of refunds	$	226,400	$	24,452
Interest	45,184		55,910
Supplemental disclosure of noncash investing and financing activities:
Leased assets obtained in exchange for finance lease liabilities	$	4,279	$	8,225
Leased assets obtained in exchange for operating lease liabilities	137,129		90,961
Noncash property, plant and equipment and software intangible additions in accounts payable and other accrued expenses	8,878		7,200
Notes payable and other financing obligations, including notes issued and debt assumed in connection with business acquisitions and disposals	2,556		6,136
Notes receivable and contingent consideration receivable acquired in connection with disposal of business	0		8,549
Contingent consideration liabilities	0		3,045

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) Income		Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
BALANCE, April 1, 2021	321,171	$	3,212	(18,801)	$	(526,084)	$	1,449,667	$	5,041,953	$	(126,122)	$	16,001	$	5,858,627
Net income	—	—		—	—		—		304,624		—		384		305,008
Other comprehensive income	—	—		—	—		—		—		25,032		—		25,032
Purchase of treasury stock	—	—		(6,171)	(303,684)		—		—		—		—		(303,684)
Vesting of restricted stock units, net of shares withheld for employee tax	89	0		—	—		325		—		—		—		325
Stock-based compensation expense	—	—		—	—		9,001		—		—		—		9,001

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—	—		—	—		—		—		—		(142)		(142)



Foreign currency translation adjustment on noncontrolling interest	—	—		—	—		—		—		—		(158)		(158)
BALANCE, June 30, 2021	321,260	$	3,212	(24,972)	$	(829,768)	$	1,458,993	$	5,346,577	$	(101,090)	$	16,085	$	5,894,009


	LKQ Stockholders
	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount














BALANCE, April 1, 2020	320,439	$	3,204	(16,496)	$	(439,819)	$	1,425,600	$	4,282,753	$	(313,903)	$	29,484	$	4,987,319
Net income (loss)	—	—		—	—		—		118,792		—		(22)		118,770
Other comprehensive income	—	—		—	—		—		—		34,140		—		34,140

Vesting of restricted stock units, net of shares withheld for employee tax	91	1		—	—		(57)		—		—		—		(56)
Stock-based compensation expense	—	—		—	—		7,795		—		—		—		7,795


Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—	—		—	—		—		—		—		(27)		(27)



BALANCE, June 30, 2020	320,530	$	3,205	(16,496)	$	(439,819)	$	1,433,338	$	4,401,545	$	(279,763)	$	29,435	$	5,147,941

LKQ Stockholders
Common Stock Treasury Stock Additional Paid-In Capital Retained
Earnings Accumulated
Other
Comprehensive (Loss) Income Noncontrolling Interest Total Stockholders' Equity
Shares Amount Shares Amount
BALANCE, April 1, 2019 318,889 $ 3,189 (4,915) $ (130,462) $ 1,420,685 $ 3,696,924 $ (190,854) $ 57,292 $ 4,856,774
Net income — — — — — 150,561 — 1,544 152,105
Other comprehensive income — — — — — — 2,301 — 2,301
Purchase of treasury stock — — (4,400) (120,300) — — — — (120,300)
Vesting of restricted stock units, net of shares withheld for employee tax 68 1 — — (78) — — — (77)
Stock-based compensation expense — — — — 7,986 — — — 7,986
Exercise of stock options 53 0 — — 536 — — — 536
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder — — — — — — — 162 162
Acquired noncontrolling interest — — — — — — — 10,261 10,261
BALANCE, June 30, 2019 319,010 $ 3,190 (9,315) $ (250,762) $ 1,429,129 $ 3,847,485 $ (188,553) $ 69,259 $ 4,909,748

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																																LKQ Stockholders
		Common Stock				Treasury Stock						Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss				Noncontrolling Interest			Total Stockholders' Equity		Common Stock					Treasury Stock				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest	Total Stockholders' Equity
		Shares	Amount		Shares	Amount																			Shares			Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders' Equity

BALANCE, January 1, 2020		319,927	$	3,199	(13,196)	$	(351,813)	$	1,418,239	$	4,140,136									$	(200,885)		$	39,704		$	5,048,580
BALANCE, January 1, 2021																		BALANCE, January 1, 2021	320,868			$	3,208		(17,315)			$	(469,105)	$	1,444,584	$	4,776,040	$	(99,009)	$	15,582	$	5,671,300
Net income	Net income	—	—		—	—		—		263,928		—		821		264,749		Net income	—			—			—			—		—		570,537		—		803		571,340
Other comprehensive loss	Other comprehensive loss	—	—		—	—		—		—		(78,878)		—		(78,878)		Other comprehensive loss	—			—			—			—		—		—		(2,081)		—		(2,081)
Purchase of treasury stock	Purchase of treasury stock	—	—		(3,300)	(88,006)		—		—		—		—		(88,006)		Purchase of treasury stock	—			—			(7,657)			(360,663)		—		—		—		—		(360,663)
Vesting of restricted stock units, net of shares withheld for employee tax	Vesting of restricted stock units, net of shares withheld for employee tax	491	5		—	—		(2,130)		—		—		—		(2,125)		Vesting of restricted stock units, net of shares withheld for employee tax	392			4			—			—		(2,384)		—		—		—		(2,380)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		15,763		—		—		—		15,763		Stock-based compensation expense	—			—			—			—		16,793		—		—		—		16,793
Exercise of stock options		112	1		—	—		1,466		—		—		—		1,467

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—	—		—	—		—		—		—		314		314		Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—			—			—			—		—		—		—		(142)		(142)
Adoption of ASU 2016-13 (see Note 3)		—	—		—	—		—		(2,519)		—		—		(2,519)
Disposition of subsidiary with noncontrolling interests⁽¹⁾		—	—		—	—		—		—		—		(11,404)		(11,404)

BALANCE, June 30, 2020		320,530	$	3,205	(16,496)	$	(439,819)	$	1,433,338	$	4,401,545	$	(279,763)	$	29,435	$	5,147,941
Foreign currency translation adjustment on noncontrolling interest																		Foreign currency translation adjustment on noncontrolling interest	—			—			—			—		—		—		—		(158)		(158)

BALANCE, June 30, 2021																		BALANCE, June 30, 2021	321,260			$	3,212		(24,972)			$	(829,768)	$	1,458,993	$	5,346,577	$	(101,090)	$	16,085	$	5,894,009


	LKQ Stockholders
	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount














BALANCE, January 1, 2020	319,927	$	3,199	(13,196)	$	(351,813)	$	1,418,239	$	4,140,136	$	(200,885)	$	39,704	$	5,048,580
Net income	—	—		—	—		—		263,928		—		821		264,749
Other comprehensive loss	—	—		—	—		—		—		(78,878)		—		(78,878)
Purchase of treasury stock	—	—		(3,300)	(88,006)		—		—		—		—		(88,006)
Vesting of restricted stock units, net of shares withheld for employee tax	491	5		—	—		(2,130)		—		—		—		(2,125)
Stock-based compensation expense	—	—		—	—		15,763		—		—		—		15,763
Exercise of stock options	112	1		—	—		1,466		—		—		—		1,467

Capital contributions from, net of dividends declared to, noncontrolling interest shareholder	—	—		—	—		—		—		—		314		314
Adoption of ASU 2016-13	—	—		—	—		—		(2,519)		—		—		(2,519)
Disposition of subsidiary with noncontrolling interests(1)	—	—		—	—		—		—		—		(11,404)		(11,404)

BALANCE, June 30, 2020	320,530	$	3,205	(16,496)	$	(439,819)	$	1,433,338	$	4,401,545	$	(279,763)	$	29,435	$	5,147,941

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


	~~LKQ Stockholders~~
	~~Common Stock~~				~~Treasury Stock~~						~~Additional Paid-In Capital~~		Retained Earnings		Accumulated Other Comprehensive Loss		~~Noncontrolling Interest~~	~~Total Stockholders' Equity~~
	~~Shares~~	~~Amount~~		~~Shares~~	~~Amount~~
~~BALANCE, 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~~	—	—		—	—		—		~~248,609~~		—		~~2,559~~		~~251,168~~
~~Other comprehensive loss~~	—	—		—	—		—		—		~~(13,603)~~		—		~~(13,603)~~
~~Purchase of treasury stock~~	—	—		~~(7,043)~~	~~(190,762)~~		—		—		—		—		~~(190,762)~~
~~Vesting of restricted stock units, net of shares withheld for employee tax~~	~~371~~	4		—	—		~~(1,158)~~		—		—		—		~~(1,154)~~
~~Stock-based compensation expense~~	—	—		—	—		~~13,659~~		—		—		—		~~13,659~~
~~Exercise of stock options~~	~~236~~	2		—	—		~~1,868~~		—		—		—		~~1,870~~
~~Tax withholdings related to net share settlements of stock-based compensation awards~~	~~(15)~~	—		—	—		~~(428)~~		—		—		—		~~(428)~~
~~Capital contributions from, net of dividends declared to, noncontrolling interest shareholder~~	—	—		—	—		—		—		—		~~(15)~~		~~(15)~~
~~Acquired noncontrolling interest~~	—	—		—	—		—		—		—		~~10,261~~		~~10,261~~
~~BALANCE, June 30, 2019~~	~~319,010~~	$	~~3,190~~	~~(9,315)~~	$	~~(250,762)~~	$	~~1,429,129~~	$	~~3,847,485~~	$	~~(188,553)~~	$	~~69,259~~	$	~~4,909,748~~

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

LKQ CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Interim Financial Statements

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.

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, ~~2019~~2020 filed with the SEC onon February ~~27,~~ 26, 2021 ("2020 ~~("2019~~ Form 10-K").

The coronavirus disease 2019 ("COVID-19") pandemic and the resulting governmental actions taken to control the virus have impacted, and are expected to continue to impact, our business in 2020 and ~~into~~ 2021. The effects include, but are not limited to, a reduction in demand for our products and services relative to 2019, liquidity challenges for certain of our customers and suppliers, and organizational changes, such as personnel reductions and route consolidation undertaken mostly in 2020, driven by cost actions to mitigate the ~~actual and expected~~ revenue decline. We have considered COVID-19 impacts in the preparation of our financial statements and ~~footnotes as of and for the three and six months ended June 30, 2020.~~footnotes. Specific disclosures are presented in the following footnotes as applicable.

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

Note 2. Discontinued Operations

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

We completed the sale of Stahlgruber's Czech Republic business on February 28, 2020, resulting in aan immaterial loss on sale ~~of $1 million~~ (presented in Net (loss) income ~~(loss)~~ from discontinued operations in the Unaudited Condensed Consolidated Statements of Income). As part of the transaction, we purchased the 48.2% noncontrolling interest from the minority shareholder for a purchase price of €8 million, which included the issuance of €4 million of notes payable, and then ~~concurrently~~immediately thereafter sold 100% of the business for a purchase price of €14 million, which included €7 million of notes receivable. This transaction resulted in a disposition of noncontrolling interest of $11 million. From January 1, 2020 through the date of sale, we recorded an immaterial amount of net income (excluding the loss on sale) from discontinued operations related to the business, of which an immaterial amount was attributable to the noncontrolling interest. ~~During the three months ended June 30, 2020, we recorded an immaterial adjustment related to the loss on disposal of the business.~~

As of December 31, 2019, the assets held for sale, liabilities held for sale, and noncontrolling interest of Stahlgruber's Czech Republic business were recorded within Prepaid expenses and other current assets, Other current liabilities, and Noncontrolling interest, respectively, on the Unaudited Condensed Consolidated Balance Sheets.

Note 3. Financial Statement Information

Allowance for Credit Losses

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

amount of customer receivables that may not be collected in the future and records a provision it believes is appropriate. Our reserve for expected lifetime credit losses was ~~approximately~~$69 million and $70 million ~~and $53 million at~~as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Bad debt expense totaled ~~$24~~$1 million and $6$14 million for the three months ended June 30, 2021 and 2020, respectively, and $4 million and $24 million for the six months ended June 30, 2021 and 2020, ~~and June 30, 2019, respectivel~~y. The increase in our allowance for credit losses since December 31, 2019 is attributable to the $3 million effect of the adoption of ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") in the first quarter of 2020 (see the Recently Adopted Accounting Pronouncements section below for further details) and an increase in expected lifetime losses primarily attributable to the downturn in the global economy related to the effects of the COVID-19 pandemic.respectively.

Inventories

Inventories consist of the following (in thousands):


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Aftermarket and refurbished products	Aftermarket and refurbished products	$	1,895,922	$	2,297,895	Aftermarket and refurbished products	$	1,984,301	$	2,025,002
Salvage and remanufactured products	Salvage and remanufactured products	366,699		447,908		Salvage and remanufactured products	382,565		368,815
Manufactured products	Manufactured products	25,672		26,974		Manufactured products	27,281		20,795
Total inventories	Total inventories	$	2,288,293	$	2,772,777	Total inventories	$	2,394,147	$	2,414,612

Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods. As of June 30, 2021, manufactured products inventory was composed of $21 million of raw materials, $4 million of work in process, and $2 million of finished goods. As of December 31, 2020, manufactured products inventory was composed of ~~$18~~$16 million of raw materials, $3 million of work in process, and $4$2 million of finished goods. ~~As of December 31, 2019, manufactured products inventory was composed of $17 million of raw materials, $3 million of work in process, and $6 million of finished goods.~~

~~Net Assets Held for Sale~~

During 2019 and the first half of 2020, 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 fair value less cost to sell or carrying value, resulting in total impairment charges of $2 million for each of the three and six months ended June 30, 2020 and $33 million and $49 million for the three and six months ended June 30, 2019 (presented in Loss on disposal of businesses and impairment of net assets held for sale in the Unaudited Condensed Consolidated Statements of Income). Excluding the Stahlgruber Czech Republic wholesale business discussed in Note 2, "Discontinued Operations," as of December 31, 2019, there were $19 million of assets held for sale and $9 million of liabilities held for sale, which were recorded within Prepaid expenses and other current assets and Other current liabilities, respectively, on the Unaudited Condensed Consolidated Balance Sheet. As of June 30, 2020, assets and liabilities held for sale were immaterial.

In the second quarter of 2020, we completed the sale of one of these businesses, a non-core telecommunications operation in Germany, resulting in an immaterial loss on sale (presented in Loss on disposal of businesses and impairment of net assets held for sale in the Unaudited Condensed Consolidated Statements of Income). The disposed business was immaterial, generating annualized revenue of approximately $78 million during the twelve-month period ended May 31, 2020.

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 analyses 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 June 30, 2020.

Intangible Assets

Goodwill and indefinite-lived ~~intangibles~~intangible assets are tested for impairment at least ~~annually, and we~~annually. We performed our annual impairment ~~tests~~test during the fourth quarter of ~~2019.~~2020 and we determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least 30%. Goodwill impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment. ~~LKQ’s market capitalization declined by approximately 40%~~

between February 20, 2020, when the Company released its 2019 financial results, and March 31, 2020. While we believed that the decrease was driven by market reaction to COVID-19, the magnitude of the market capitalization decrease was deemed to be a triggering event requiring an interim test of goodwill impairment in the first quarter.

The fair value estimates of our reporting units were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach. At the time of our analysis, our projections for the interim impairment test assumed that the COVID-19 impact would be severe, with revenue down by as much as 50% in the second quarter of 2020 compared to our prior forecast used in the 2019 impairment analysis, but temporary, as revenue would improve gradually in the second half of 2020. We expected that cost mitigation actions and cash preservation measures would dampen the negative impact of the projected revenue decline.

Based on the interim test in the first quarter of 2020, we determined no impairments existed as all reporting units had a fair value estimate that exceeded the carrying value by at least 12%, the level at which our Europe reporting unit exceeded its carrying value.

We did not identify a triggering event in ~~the second quarter~~2021 that necessitated an interim test of goodwill impairment as LKQ’s market capitalization increased by approximately 28% between March 31 and June 30, 2020. Actual results for the second quarter were favorable relative to the forecast used in the first quarter interim test.

~~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 and finance lease right-of-use ("ROU")or indefinite-lived intangible assets and 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 the commencement date in determining the present value of future payments. We determine our incremental borrowing rate by analyzing yield curves with consideration of lease term, country and company specific factors. The 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 year 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 that 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 lives 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 ROU asset or 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.

In response to the COVID-19 global pandemic, we have secured rent relief from some of our lessors. The rent relief offered has most often been in the form of rent payment deferrals for one or more months to be paid back over a specified period of time ranging from one month to the remaining term of the lease. In accordance with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we are able to account for lease deferrals resulting directly from COVID-19 as if the enforceable rights and obligations for the deferrals existed in the respective contracts at lease inception as long as those concessions do not result in a substantial increase in our lease obligations. As a result, we have been able to apply the relief in most circumstances. Guidance from the FASB Staff Q&A provided methods to account for such rent deferrals, including the option to account for the lease as if no changes to the lease contract were made or to account for the deferred payments as variable lease payments. For the majority of our leases that were affected by rent relief actions, we elected to account for the deferrals as if no changes to the lease contract were made and continued to recognize lease expense, on a straight-line basis, during the deferral period. As of June 30, 2020, payment deferrals totaled $7 million and were recorded in Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets. Other concessions consisting of abated rent or discounted rent, without payback, from various landlords of $2 million resulted in reductions to Selling, general and administrative expenses in our Unaudited Condensed Consolidated Statements of Income.

impairment.

Investments in Unconsolidated Subsidiaries

Our investment in unconsolidated subsidiaries was ~~$137~~$168 million and ~~$139~~$155 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Europe Segment

Our investment in unconsolidated subsidiaries in Europe was ~~$121~~$147 million and ~~$122~~$137 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We recorded equity in earnings of $3 million and $9 million during the three and six months ended June 30, 2021, respectively, and equity in losses of an immaterial amount and equity in earnings of $1$1 million during the three and six months ended June 30, 2020, respectively, ~~and equity in earnings of $2 million and equity in losses of $38 million during the three and six months ended June 30, 2019, respectively,~~ mainly related to our investment in Mekonomen AB ("Mekonomen").

On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen for an aggregate purchase price of $181 million. In October 2018, we acquired an additional $48 million of equity in Mekonomen at a discounted share price as part of its rights issue, increasing our equity interest to 26.6%. We are accounting for our 26.6% equity 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 June 30, ~~2020,~~2021, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by $5$7 million; this difference is primarily related to Mekonomen's Accumulated Other Comprehensive Income balance as of our acquisition date in 2016. We are recording our equity in the net earnings of Mekonomen on a one quarter lag.

During the three months ended March 31, 2019, we recognized an other-than-temporary impairment charge of $40 million, which represented the difference between 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 of SEK 65 as of March 31, 2019. The impairment charge was recorded in Equity in (losses) earnings of unconsolidated subsidiaries in our Unaudited Condensed Consolidated Statements of Income.

Mekonomen announced in March 2020 and February 2021, respectively, that ~~it would not make a~~the Mekonomen Board of Directors proposed no dividend payment in ~~2020.~~2020 or 2021. The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at June 30, ~~2020~~2021 was ~~$99~~$245 million (using the Mekonomen share price of SEK 66141 as of June 30, ~~2020)~~2021) compared to a carrying value of ~~$111~~$137 million. We evaluated our investment in Mekonomen for other-than-temporary impairment and concluded the decline in fair value was not other-than-temporary; however, a prolonged, material impairment may cause us to account for the decline as an other-than-temporary impairment in a future period, resulting in a charge in our Unaudited Condensed Consolidated Statements of Income.

North America Segment

Our investment in unconsolidated subsidiaries in the North America segment was ~~$15~~$21 million and ~~$18~~$19 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We recorded equity in earnings of an immaterial amount for each of the three and six months ended June 30, 2021, and equity in losses of $3$3 million during both the three and six months ended June 30, 2020, ~~and equity in losses of $1 million and equity in earnings of an immaterial amount during the three and six months ended June 30, 2019, respectively,~~ related to our North America equity method investments.

Warranty Reserve

Some of our salvage mechanical products are sold with a standard six month warranty against defects. Additionally, some of our remanufactured engines are sold with a standard three or four year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products. These assurance-type warranties are not considered a separate performance obligation, and thus no transaction price is allocated to them. We record the warranty costs in Cost of goods sold in our Unaudited Condensed Consolidated Statements of Income. Our warranty reserve is calculated using historical claim information to project future warranty claims activity and is recorded within Other accrued expenses and Other noncurrent liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.

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


Balance as of December 31, ~~2019~~2020	$	~~25,441~~27,914
Warranty expense	~~30,610~~37,117
Warranty claims	~~(27,189)~~(35,238)
Balance as of June 30, ~~2020~~2021	$	~~28,862~~29,793

Litigation and Related Contingencies

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

Government Assistance

During the three and six months ended June 30, 2021 and 2020, we recorded ~~$33 million in~~ financial assistance from foreign governments, primarily in the form of grants, as credits in the following amounts (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Cost of goods sold	$	219	$	469	$	363	$	469
Selling, general and administrative expenses	5,393		32,174		14,238		32,174
Total government assistance	$	5,612	$	32,643	$	14,601	$	32,643

For the six months ended June 30, 2021 and 2020, we received grants from European governments of $11 million and $28 million, respectively, with the remaining amounts related to ~~offset personnel expenses in Europe and~~ Canada.

Financial assistance ~~to be~~ received from governments is recorded during the period in which we incur the costs ~~which~~that the assistance is intended to offset (and only if it is probable that we will meet the conditions required under the terms of the assistance). ~~Of the $33 million recorded during the second quarter, $1 million and $32 million were reductions to Cost of goods sold and Selling, general and administrative expenses, respectively,~~

Leases - Cash Flow Disclosure

The amount disclosed for Leased assets obtained in ~~our Unaudited Condensed Consolidated Statement of Income.~~

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted in the U.S. to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Similar legislation was enacted in many of the Company’s international jurisdictions. Tax m~~easures in these legislative actions did not have a material impact on the Company’s results of operations~~exchange for operating lease liabilities for the six months ended June 30, ~~2020. Those initiatives did provide~~2020 in the ~~Company with~~supplemental disclosure of noncash investing and financing activities in the opportunity to defer the timing of certain income, indirect and payroll tax payments in various jurisdictions. As of June 30, 2020, $160 million and $114 million were recorded in Value added taxes payable and Income taxes payable, respectively, on our Unaudited Condensed Consolidated ~~Balance Sheets, compared to $46 million and $27 million, respectively, as~~Statements of ~~December 31, 2019. Approximately $175~~Cash Flows includes an immaterial correction of $55 million to ~~$185 million~~address an omission of ~~payments otherwise due in~~ the ~~second quarter~~impact of ~~2020 were deferred, of which we estimate approximately $125 million to $135 million will be paid during the third quarter of 2020, with the remainder to be paid in the fourth quarter or later.~~lease modifications and terminations.

Stockholders' Equity

Treasury Stock

As of June 30, ~~2020,~~2021, our Board of Directors had authorized a stock repurchase program under which we may purchase up to $1.0 billion of our common stock from time to time through October 25, 2022. 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~~Repurchased shares are accounted for as treasury stock ~~repurchases.~~using the cost method.

During the three and six months ended June 30, 2021, we repurchased 6.2 million and 7.7 million shares of common stock, respectively, for an aggregate price of $304 million and $361 million, respectively, of which $17 million settled for cash in July. During the six months ended June 30, 2020, we repurchased 3.3 million shares of common stock for an aggregate price

of $88 million; we did not repurchase any shares during the three months ended June 30, 2020. ~~During the three and six months ended June 30, 2019, we repurchased 4.4 million and 7.0 million shares of common stock for an aggregate price of $120 million and $191 million, respectively.~~ As of June 30, ~~2020,~~2021, there was ~~$560~~$170 million of remaining capacity under our repurchase program. ~~Repurchased~~Subsequent to quarter end through July 23, 2021, we repurchased an additional 2.0 million shares ~~are accounted~~ for ~~as treasury~~$100 million.

On July 28, 2021, our Board of Directors authorized a $1.0 billion increase and a two year extension to our stock ~~using~~repurchase program, raising the ~~cost method.~~aggregate authorization under the program to $2.0 billion and authorizing repurchases through October 25, 2024.

Noncontrolling Interest

In February 2020, as part of the sale of Stahlgruber's Czech Republic business, we divested the noncontrolling interest of the business, which resulted in a net decrease to Noncontrolling interest of $11 million in our unaudited condensed consolidated financial statements as of March 31, 2020. See Note 2, "Discontinued Operations," for further information.

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

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~During~~In the first quarter of ~~2020,~~2021, we adopted ASU No. 2016-13 and ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" ("ASU 2018-19"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the prior “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 affects 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 receive cash. We applied ASU 2016-13 and ASU 2018-19 on a modified retrospective basis. As of January 1, 2020, we recorded a cumulative effect adjustment to retained earnings of $3 million.

During the first quarter of 2020, we adopted ASU No. 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"), which removes, modifies, and adds certain disclosure requirements in ASC 820. We adopted the provisions of ASU 2018-13 by applying a prospective approach. The adoption of ASU 2018-13 did not have a material impact on our unaudited condensed consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU~~ 2019-12, "Income Taxes" (Topic 740) ("ASU 2019-12"), which simplifies the accounting for income taxes and adds guidance to reduce complexity in certain areas. ~~ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early~~We adopted the standard in the first quarter using the prospective approach. The adoption ~~is permitted, including adoption in an interim period. We are currently evaluating the impact~~ of this accounting standard did not have a material impact on our unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until December 31, ~~2022, when the reference rate replacement activity is expected to have been completed.~~2022. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures, and we have not yet elected an adoption date.

Note 4. Revenue Recognition

The majority of our revenue is derived from the sale of vehicle parts. We recognize revenue when the products are shipped to, delivered to or picked up by customers, which is the point when title has 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						Six Months Ended							Three Months Ended				Six Months Ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
North America	North America	$	892,826	$	1,165,482	$	2,000,168	$	2,321,180	North America	$	1,077,171	$	892,826	$	2,095,608	$	2,000,168
Europe	Europe	1,206,330		1,510,952		2,564,299		2,951,793		Europe	1,569,697		1,206,330		3,025,067		2,564,299
Specialty	Specialty	404,002		410,263		751,408		762,819		Specialty	531,403		404,002		989,362		751,408
Parts and services	Parts and services	2,503,158		3,086,697		5,315,875		6,035,792		Parts and services	3,178,271		2,503,158		6,110,037		5,315,875
Other	Other	123,165		161,476		311,383		312,684		Other	256,843		123,165		495,863		311,383
Total revenue	Total revenue	$	2,626,323	$	3,248,173	$	5,627,258	$	6,348,476	Total revenue	$	3,435,114	$	2,626,323	$	6,605,900	$	5,627,258

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, (ii) fees for admission to our self service 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;~~recreational vehicles; 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"), proceeds~~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, ~~2020~~2021	$	~~27,067~~25,622
Additional warranty revenue deferred	~~20,845~~30,962
Warranty revenue recognized	~~(22,473)~~(26,966)
Balance as of June 30, ~~2020~~2021	$	~~25,439~~29,618

Other Revenue

Revenue from other sources includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations. We derive scrap metal and other precious metals from several sources, including vehicles that have been used in both our wholesale and self service recycling operations and from original equipment manufacturers ("OEMs") and other entities that contract with us for secure disposal of "crush only" vehicles. Revenue from the sale of hulks in our wholesale and self service recycling operations is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap. Some adjustments may occur when the customer weighs the scrap at their location, and revenue is adjusted accordingly.

Revenue by Geographic Area

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

Variable Consideration

The amount of revenue ultimately received from the customer can vary due to variable consideration including returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items. Under FASB Accounting Standards Codification Topic 606 ("ASC ~~606~~606"), we 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, with contemplation of any expected reversals in revenue. We recorded a refund liability and return asset for expected returns of ~~$104~~$106 million and ~~$58~~$59 million, respectively, as of June 30, ~~2020,~~2021, and ~~$97~~$102 million and ~~$52~~$57 million, respectively, as of December 31, ~~2019.~~2020. The refund liability is presented separately on the Unaudited Condensed Consolidated Balance Sheets within current liabilities while the return asset is presented within Prepaid expenses and other current assets. Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives that are recorded in Receivables, net on the Unaudited Condensed Consolidated Balance Sheets. We recorded a reserve for our variable consideration of ~~$72~~$102 million and ~~$108~~$127 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions. We consider these programs to be immaterial to our unaudited condensed consolidated financial statements.

Note 5. Restructuring and Acquisition Related Expenses

2019 Global Restructuring Program

In the second quarter of 2019, we ~~implemented~~commenced 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 of earlier than the end of the previously estimated useful lives.

During the three and six months ended June 30, 2020, we incurred $2 million and $5 million, respectively, of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs. ~~In the three months ended June 30, 2019,~~The program costs under the program totaled $5 million, primarily for employee severance. These costs were recorded within Restructuring and acquisition related expenses in the Unaudited Condensed Consolidated Statements of Incomeincurred during the three and six months ended June 30, 2020, primarily related to our Europe and ~~2019.~~North America segments.

The actions under this program are substantially complete, and the expenses incurred during the three and six months ended June 30, 2021 were immaterial. We ~~expect to incur between $2 million and $4 million of future costs through 2021 to complete the program, and~~ estimate that total program costs will be approximately ~~$45~~$46 million, ~~($37 million~~ ~~was~~

~~incurred during the year ended December 31, 2019). Of the cumulative program costs incurred to date, $27~~of which approximately $31 million, $14 million and $1 million ~~related to~~will be in our Europe, North America and Specialty segments, respectively. As of June 30, 2021, the remaining expected costs and restructuring liabilities related to this program were immaterial.

2020 Global Restructuring Program

Beginning in the first quarter of 2020, we initiated a further restructuring program aimed at cost reductions across all our reportable segments through the elimination of underperforming assets and cost inefficiencies. These actions are incremental to those initiated as part of the 2019 Global Restructuring Program, and include costs for inventory write-downs; employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed of earlier than the end of the previously estimated useful lives. We expanded this program during the second ~~quarter~~and third quarters of 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to our business from COVID-19.

During the three and six months ended June 30, 2021, we recognized restructuring expenses of $4 million and $6 million, respectively, which included employee-related costs, facility exit costs, and a $3 million gain in the first quarter from the sale of a building to be closed as part of the restructuring plan in the first half of 2021. During the three and six months ended June 30, 2020, we recognized restructuring expenses totaling $25 million and $27 million, respectively, for employee-related costs, facility exit costs and inventory write-downs. Of these expenses, $6 million resulted from inventory impairment charges related to facility consolidation actions and brand rationalizations and was recorded in Cost of goods sold in the Unaudited Condensed Consolidated Statement of Income for the three months ended June 30, 2020. Of the cumulative program costs incurred to date, ~~$17~~$28 million, ~~$10~~$26 million and $1 million related to our North America, Europe and Specialty segments, respectively. We estimate total costs under the program through its expected completion date in ~~2022~~2023 will be between $65 million and $75 million, of which approximately ~~$40~~$36 million, ~~$28~~$31 million, and $1$2 million will be incurred by our Europe, North America and Specialty segments, ~~respectively.~~respectively; these segment amounts represent the midpoints of the expected ranges of costs to be incurred by each segment.

As of June 30, 2021 and December 31, 2020, restructuring liabilities incurred related to this program totaled $17 million and $21 million, respectively, including $13 million and $17 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets), and $3 million and $4 million, respectively, for employee termination costs (reported in Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets). Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed through the second quarter of 2021 and after our planned exit date for facilities we expect to close in future periods; these liabilities do not reflect any estimated proceeds we may be able to achieve through subleasing the facilities.

Acquisition Integration Plans

During the three and six months ended June 30, 2021, we incurred immaterial restructuring expenses for our acquisition integration plans. We expect to incur future expenses of up to $5 million to complete an integration plan related to an acquisition completed in our Specialty segment in 2021.

During the three and six months ended June 30, 2020, we incurred $4 million and $5 million of restructuring expenses, respectively, for our acquisition integration plans. These expenses were primarily related to the integration of our operations in Belgium. ~~Future expenses to complete our existing integration plans are expected to be immaterial.~~

~~During the three and six months ended June 30, 2019, we incurred $3 million and~~ ~~$6 million~~ of restructuring expenses, respectively, related to our acquisition integration efforts. These expenses included approximately $1 million and $3 million for the three and six months ended June 30, 2019, respectively, related to the integration of our acquisition of Andrew Page Limited.

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. While certain projects were delayed in 2020 as a result of the COVID-19 pandemic, such as our procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe. We ~~continue~~completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to ~~expect to~~be completed by 2024.

During the six months ended June 30, 2021, we incurred $5 million of employee-related restructuring charges under our 1 LKQ Europe program; costs incurred in the three months ended June 30, 2021 were immaterial. We estimate that we will incur between $45 million and $55 million in total ~~personnel~~personnel and ~~inventory related~~inventory-related restructuring charges through 2024 ~~as a result of executing~~under the ~~1 LKQ Europe~~ program. ~~Certain projects were delayed in March 2020 in response to~~ the COVID-19 pandemic. Based on our expectations in the second quarter of 2020 that the impacts on our business from COVID-19 had stabilized, we restarted the program in July 2020 with substantially the same initiatives and projects as prior to the ~~pandemic, although we are evaluating the impact of the delay on our estimates of the related expenditures and timelines.~~ We may ~~also~~ identify additional initiatives and projects under the 1 LKQ Europe program in future periods that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. As of June 30, 2021, the restructuring liabilities related to this program were immaterial.

Note 6. Stock-Based Compensation

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

RSUs

The RSUs we have issued vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs (other than PSUs, which are described below) contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case both conditions must be met before any RSUs vest. For all of the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within five years following the grant

date. Each RSU converts into one share of LKQ common stock on the applicable vesting date. The grant date fair value of RSUs is based on the market price of LKQ stock on the grant date.

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

The fair value of RSUs that vested during the six months ended June 30, ~~2020~~2021 was ~~$17 million~~;$19 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 six months ended June 30, ~~2020:~~2021:

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, 2020 1,612,026 $ 31.72
Granted
887,907 $ 31.71
Vested (550,661) $ 30.94
Forfeited / Canceled (77,143) $ 32.81
Unvested as of June 30, 2020 1,872,129 $ 31.90
Expected to vest after June 30, 2020 1,660,511 $ 31.83 3.1 $ 43,505


	Number Outstanding	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) (1)
Unvested as of January 1, 2021	1,479,672	$	31.71
Granted (2)	725,478	$	39.02
Vested	(452,189)	$	32.10
Forfeited / Canceled	(29,950)	$	34.06
Unvested as of June 30, 2021	1,723,011	$	34.55
Expected to vest after June 30, 2021	1,539,272	$	34.78	3.1	$	75,763

(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 the expected to vest RSUs vested. This amount changes based on the market price of the Company’s common stock.

(2) The weighted average grant date fair value of RSUs granted during the six months ended June 30, 2020 was $31.71.

InStarting in 2019, ~~and 2020,~~ 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 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 applicable three year performance periods.

The following table summarizes activity related to our PSUs under the Equity Incentive Plan for the six months ended June 30, ~~2020:~~2021:

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, 2020 136,170 $ 27.69
Granted⁽²⁾
164,152 $ 31.85
Forfeited / Canceled (7,375) $ 29.65
Unvested as of June 30, 2020 292,947 $ 29.97
Expected to vest after June 30, 2020 292,947 $ 29.97 2.0 $ 7,675


	Number Outstanding	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) (1)
Unvested as of January 1, 2021	291,601	$	29.98
Granted (2)	121,810	$	38.50
Forfeited / Canceled	(1,166)	$	30.26
Unvested as of June 30, 2021	412,245	$	32.50
Expected to vest after June 30, 2021	412,245	$	32.50	1.4	$	20,291

(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 the expected to vest 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 vested over periods~~ The weighted average grant date fair value of ~~up to five years, subject to a continued service condition. Stock options expired either six years or ten years from the date they were granted. No options were~~PSUs granted during the six months ended June 30, ~~2020. No options vested during the six months ended June 30, 2020.~~

~~The following table summarizes activity related to our stock options under the Equity Incentive Plan for the six months ended June 30, 2020:~~

Number
Outstanding Weighted
Average Exercise Price Weighted Average Remaining Contractual Term
(in years) Aggregate Intrinsic Value
(in thousands)
Balance as of January 1, 2020 114,594 $ 12.26
Exercised (112,472) $ 11.88 $ 2,629
Canceled (2,122) $ 32.31
Balance as of June 30, 2020 — $ — — $ —

~~All stock options were exercised or canceled as of March 31, 2020.~~2020 was $31.85.

Stock-Based Compensation Expense

Pre-tax stock-based compensation expense for RSUs and PSUs totaled $8$9 million and ~~$16~~$17 million the three and six months ended June 30, 2021, respectively, and $8 million and $16 million for the three and six months ended June 30, 2020, ~~respectively, and $8 million and $14 million for the three and six months ended June 30, 2019,~~ respectively. As of June 30, ~~2020,~~2021, unrecognized compensation expense related to unvested RSUs and PSUs was ~~$51 million~~.$58 million. Stock-based compensation expense related to these awards will be different to the extent that forfeitures areare realized and performance under the PSUs ~~differs~~differs from target.

Note 7. Earnings Per Share

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

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Income from continuing operations $ 118,493 $ 151,707 $ 265,387 $ 250,770
Denominator for basic earnings per share—Weighted-average shares outstanding 304,001 311,891 305,123 313,460
Effect of dilutive securities:
RSUs 189 315 352 364
PSUs — — — —
Stock options — 513 2 536
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding 304,190 312,719 305,477 314,360
Basic earnings per share from continuing operations $ 0.39 $ 0.49 $ 0.87 $ 0.80
Diluted earnings per share from continuing operations ⁽¹⁾
$ 0.39 $ 0.49 $ 0.87 $ 0.80


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Income from continuing operations	$	305,008	$	118,493	$	571,340	$	265,387
Denominator for basic earnings per share—Weighted-average shares outstanding	300,581		304,001		301,805		305,123
Effect of dilutive securities:
RSUs	712		189		670		352
PSUs	174		0		134		0
Stock options	0		0		0		2
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	301,467		304,190		302,609		305,477
Basic earnings per share from continuing operations	$	1.01	$	0.39	$	1.89	$	0.87
Diluted earnings per share from continuing operations (1)	$	1.01	$	0.39	$	1.89	$	0.87

(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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):


		Three Months Ended			Six Months Ended				Three Months Ended		Six Months Ended
		June 30,			June 30,				June 30,		June 30,
		2020	2019	2020	2019		2021	2020	2021	2020
Antidilutive securities:	Antidilutive securities:					Antidilutive securities:
RSUs	RSUs	1,444	559	913	579	RSUs	0	1,444	59	913
Stock options		—	32	—	32

Note 8. Accumulated Other Comprehensive Income (Loss)

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


		Three Months Ended																			Three Months Ended
		June 30, 2020																			June 30, 2021
		Foreign Currency Translation		Unrealized (Loss) Gain on Cash Flow Hedges		Unrealized (Loss) Gain on Pension Plans		Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries		Accumulated Other Comprehensive (Loss) Income			Foreign Currency Translation		Unrealized (Loss) Gain on Cash Flow Hedges		Unrealized (Loss) Gain on Pension Plans		Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries		Accumulated Other Comprehensive (Loss) Income
Beginning balance		$	(274,858)	$	(1,963)	$	(31,814)	$	(5,268)	$	(313,903)
BALANCE, April 1, 2021												BALANCE, April 1, 2021	$	(81,698)	$	(310)	$	(32,654)	$	(11,460)	$	(126,122)
Pretax income (loss)	Pretax income (loss)	30,663		(7,807)		—		—		22,856		Pretax income (loss)	21,864		(296)		0		0		21,568
Income tax effect	Income tax effect	—		1,842		—		—		1,842		Income tax effect	0		59		0		0		59
Reclassification of unrealized loss	Reclassification of unrealized loss	—		7,761		2,655		—		10,416		Reclassification of unrealized loss	0		585		437		0		1,022
Reclassification of deferred income taxes	Reclassification of deferred income taxes	—		(1,827)		(780)		—		(2,607)		Reclassification of deferred income taxes	0		(137)		(124)		0		(261)
Disposal of business		671		—		—		—		671

Other comprehensive income from unconsolidated subsidiaries	Other comprehensive income from unconsolidated subsidiaries	—		—		—		962		962		Other comprehensive income from unconsolidated subsidiaries	0		0		0		2,644		2,644
Ending balance		$	(243,524)	$	(1,994)	$	(29,939)	$	(4,306)	$	(279,763)
BALANCE, June 30, 2021												BALANCE, June 30, 2021	$	(59,834)	$	(99)	$	(32,341)	$	(8,816)	$	(101,090)

Three Months Ended
June 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 $ (187,492) $ 11,637 $ (7,884) $ (7,115) $ (190,854)
Pretax income (loss) 5,602 (9,418) — — (3,816)
Income tax effect — 2,230 — — 2,230
Reclassification of unrealized loss — 2,013 37 — 2,050
Reclassification of deferred income taxes — (475) (9) — (484)
Other comprehensive income from unconsolidated subsidiaries — — — 2,321 2,321
Ending balance $ (181,890) $ 5,987 $ (7,856) $ (4,794) $ (188,553)

1917


	Three Months Ended
	June 30, 2020
	Foreign Currency Translation		Unrealized (Loss) Gain on Cash Flow Hedges		Unrealized (Loss) Gain on Pension Plans		Other Comprehensive (Loss) Income from Unconsolidated Subsidiaries		Accumulated Other Comprehensive (Loss) Income
BALANCE, April 1, 2020	$	(274,858)	$	(1,963)	$	(31,814)	$	(5,268)	$	(313,903)
Pretax income (loss)	30,663		(7,807)		0		0		22,856
Income tax effect	0		1,842		0		0		1,842
Reclassification of unrealized loss	0		7,761		2,655		0		10,416
Reclassification of deferred income taxes	0		(1,827)		(780)		0		(2,607)
Disposal of business	671		0		0		0		671
Other comprehensive income from unconsolidated subsidiaries	0		0		0		962		962
BALANCE, June 30, 2020	$	(243,524)	$	(1,994)	$	(29,939)	$	(4,306)	$	(279,763)

Six Months Ended
June 30, 2020
Foreign
Currency
Translation Unrealized Gain (Loss)
on Cash Flow Hedges Unrealized (Loss) Gain
on Pension Plans Other Comprehensive Loss from Unconsolidated Subsidiaries Accumulated
Other
Comprehensive
(Loss) Income
Beginning balance $ (170,893) $ 5,358 $ (31,934) $ (3,416) $ (200,885)
Pretax loss (73,397) (3,625) — — (77,022)
Income tax effect — 858 — — 858
Reclassification of unrealized (gain) loss — (5,946) 2,769 — (3,177)
Reclassification of deferred income taxes — 1,361 (774) — 587
Disposal of business 766 — — — 766
Other comprehensive loss from unconsolidated subsidiaries — — — (890) (890)
Ending balance $ (243,524) $ (1,994) $ (29,939) $ (4,306) $ (279,763)


		Six Months Ended																			Six Months Ended
		June 30, 2019																			June 30, 2021
		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 (Loss) Gain on Cash Flow Hedges		Unrealized (Loss) Gain on Pension Plans		Other Comprehensive Loss from Unconsolidated Subsidiaries		Accumulated Other Comprehensive (Loss) Income
Beginning balance		$	(177,597)	$	14,374	$	(8,075)	$	(3,652)	$	(174,950)
BALANCE, January 1, 2021												BALANCE, January 1, 2021	$	(57,126)	$	(968)	$	(32,967)	$	(7,948)	$	(99,009)
Pretax (loss) income	Pretax (loss) income	(4,293)		6,175		—		—		1,882		Pretax (loss) income	(2,708)		2,823		0		0		115
Income tax effect	Income tax effect	—		(1,424)		—		—		(1,424)		Income tax effect	0		(677)		0		0		(677)
Reclassification of unrealized (gain) loss	Reclassification of unrealized (gain) loss	—		(17,175)		290		—		(16,885)		Reclassification of unrealized (gain) loss	0		(1,758)		874		0		(884)
Reclassification of deferred income taxes	Reclassification of deferred income taxes	—		4,037		(71)		—		3,966		Reclassification of deferred income taxes	0		481		(248)		0		233

Other comprehensive loss from unconsolidated subsidiaries	Other comprehensive loss from unconsolidated subsidiaries	—		—		—		(1,142)		(1,142)		Other comprehensive loss from unconsolidated subsidiaries	0		0		0		(868)		(868)
Ending balance		$	(181,890)	$	5,987	$	(7,856)	$	(4,794)	$	(188,553)
BALANCE, June 30, 2021												BALANCE, June 30, 2021	$	(59,834)	$	(99)	$	(32,341)	$	(8,816)	$	(101,090)


	Six Months Ended
	June 30, 2020
	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
BALANCE, January 1, 2020	$	(170,893)	$	5,358	$	(31,934)	$	(3,416)	$	(200,885)
Pretax loss	(73,397)		(3,625)		0		0		(77,022)
Income tax effect	0		858		0		0		858
Reclassification of unrealized (gain) loss	0		(5,946)		2,769		0		(3,177)
Reclassification of deferred income taxes	0		1,361		(774)		0		587
Disposal of business	766		0		0		0		766
Other comprehensive loss from unconsolidated subsidiaries	0		0		0		(890)		(890)
BALANCE, June 30, 2020	$	(243,524)	$	(1,994)	$	(29,939)	$	(4,306)	$	(279,763)

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


			Three Months Ended						Six Months Ended								Three Months Ended				Six Months Ended
			June 30,						June 30,								June 30,				June 30,
		Classification	2020		2019		2020		2019			Classification	2021		2020		2021		2020
Unrealized (losses) gains on interest rate swaps	Unrealized (losses) gains on interest rate swaps	Interest expense, net of interest income	$	(1,769)	$	1,763	$	1,527	$	3,455	Unrealized (losses) gains on interest rate swaps	Interest expense, net of interest income	$	(495)	$	(1,769)	$	(1,188)	$	1,527
Unrealized gains on cross currency swaps	Unrealized gains on cross currency swaps	Interest expense, net of interest income	2,796		4,319		5,347		8,649		Unrealized gains on cross currency swaps	Interest expense, net of interest income	0		2,796		539		5,347
Unrealized (losses) gains on cross currency swaps ⁽¹⁾	Unrealized (losses) gains on cross currency swaps ⁽¹⁾	Other income, net	(8,788)		(8,095)		(928)		5,071		Unrealized (losses) gains on cross currency swaps (1)	Other income, net	0		(8,788)		1,973		(928)
Unrealized (losses) gains on foreign currency forward contracts (1)											Unrealized (losses) gains on foreign currency forward contracts (1)	Other income, net	(90)		0		434		0
Total	Total		$	(7,761)	$	(2,013)	$	5,946	$	17,175	Total		$	(585)	$	(7,761)	$	1,758	$	5,946

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

Net unrealized losses and gains related to our pension plans were reclassified to Other income, net in our Unaudited Condensed Consolidated Statements of Income during each of the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

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

Note 9. Long-Term Obligations

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


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Senior secured credit agreement:	Senior secured credit agreement:					Senior secured credit agreement:
Term loans payable	Term loans payable	$	332,500	$	341,250	Term loans payable	$	0	$	323,750
Revolving credit facilities	Revolving credit facilities	1,138,928		1,268,008		Revolving credit facilities	1,434,898		642,958
U.S. Notes (2023)		—		600,000

Euro Notes (2024)	Euro Notes (2024)	561,700		560,650		Euro Notes (2024)	592,900		610,800
Euro Notes (2026/28)	Euro Notes (2026/28)	1,123,400		1,121,300		Euro Notes (2026/28)	296,450		1,221,600
Receivables securitization facility	Receivables securitization facility	—		—		Receivables securitization facility	0		0
Notes payable through October 2030 at weighted average interest rates of 3.1% and 3.2%, respectively		27,202		26,971
Finance lease obligations at weighted average interest rates of 3.9% and 4.1%, respectively		43,472		40,837
Other debt at weighted average interest rates of 1.3% and 1.8%, respectively		51,251		113,010
Notes payable through October 2030 at weighted average interest rates of 3.3% and 3.3%, respectively						Notes payable through October 2030 at weighted average interest rates of 3.3% and 3.3%, respectively	22,605		24,526
Finance lease obligations at weighted average interest rates of 3.5% and 3.5%, respectively						Finance lease obligations at weighted average interest rates of 3.5% and 3.5%, respectively	53,841		57,336
Other debt at weighted average interest rates of 0.8% and 1.2%, respectively						Other debt at weighted average interest rates of 0.8% and 1.2%, respectively	65,446		15,706
Total debt	Total debt	3,278,453		4,072,026		Total debt	2,466,140		2,896,676
Less: long-term debt issuance costs	Less: long-term debt issuance costs	(27,208)		(29,990)		Less: long-term debt issuance costs	(14,324)		(25,225)
Less: current debt issuance costs	Less: current debt issuance costs	(320)		(280)		Less: current debt issuance costs	(306)		(313)
Total debt, net of debt issuance costs	Total debt, net of debt issuance costs	3,250,925		4,041,756		Total debt, net of debt issuance costs	2,451,510		2,871,138
Less: current maturities, net of debt issuance costs	Less: current maturities, net of debt issuance costs	(93,200)		(326,367)		Less: current maturities, net of debt issuance costs	(90,825)		(58,497)
Long term debt, net of debt issuance costs	Long term debt, net of debt issuance costs	$	3,157,725	$	3,715,389	Long term debt, net of debt issuance costs	$	2,360,685	$	2,812,641

Senior Secured Credit Agreement

On June 11, 2020, LKQ Corporation and certain other subsidiaries of LKQ (collectively, the "Borrowers") entered into Amendment No. 4 to the Fourth Amended and Restated Credit Agreement dated January 29, 2016 (the "Credit Agreement"), which modifies the maximum permitted net leverage ratio through the quarter ending September 30, 2021. Prior to the amendment, the maximum permitted net leverage ratio was 4.00:1.00. After the amendment, the maximum permitted net leverage ratio isbecame (i) ~~5.00:1.00 for the quarters ending June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021, (ii)~~ 4.50:1.00 for the quarter ~~ending~~ended June 30, 2021 and ~~(iii)~~(ii) 4.25:1.00 for the quarter ending September 30, 2021. Beginning with the quarter ending December 31, 2021, the maximum permitted net leverage ratio reverts to the terms in effect prior to the amendment. In the event that the net leverage ratio is greater than 4.00:1.00, the Company would be restricted from repurchasing its shares. We can at any time elect to cancel the modifications to the maximum permitted net leverage ratio

and revert to the terms in effect prior to the amendment, subject to compliance with the 4.00:1.00 ratio. Amendment No. 4 to the Credit Agreement also made certain other immaterial modifications.

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

The total availability under the revolving credit facility's multicurrency component is ~~$3.15 billion.~~$3.15 billion. Amounts outstanding under the revolving credit facility are due and payable upon maturity of the Credit Agreement on January 29, 2024. ~~Term loan borrowings, which totaled $333 million as of June 30, 2020, are due and payable in quarterly installments equal to approximately~~ ~~$4 million~~ ~~on the last day of each fiscal quarter, with the remaining balance due and payable on January 29, 2024.~~

We ~~are~~were 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. During the second quarter, we exercised this option to prepay the outstanding amount on the term loan, and thus we did not have any term loan borrowings as of June 30, 2021.

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 10, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~1.5%~~1.1% and ~~1.6%~~1.7%, respectively. We also pay a commitment fee based

on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, and a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.

Of the total borrowings outstanding under the Credit Agreement, there were no current maturities as of June 30, 2021 and $18 million classified as current maturities ~~at both June 30, 2020 and~~as of December 31, ~~2019.~~2020. As of June 30, ~~2020,~~2021, there were letters of credit outstanding in the aggregate amount of ~~$70 million.~~$71 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 June 30, ~~2020~~2021 was ~~$1.9 billion.~~$1.6 billion.

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

U.S. Notes (2023)

~~In 2013,~~On January 10, 2020, we ~~issued~~redeemed the $600 million aggregate principal amount of 4.75% senior notes due 2023 (the ~~"U.S.~~"U.S Notes (2023)"). The U.S. Notes (2023) were 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) were registered under the Securities Act of 1933.

The U.S. Notes (2023) bore interest at a rate of 4.75% per year from the most recent payment date on which interest had been paid or provided for. Interest on the U.S. Notes (2023) was payable in arrears on May 15 and November 15 of each year. The U.S. Notes (2023) were fully and unconditionally guaranteed, jointly and severally, by the Guarantors.

The U.S. Notes (2023) and the related guarantees were, respectively, LKQ Corporation's and each Guarantor's senior unsecured obligations and were 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) were effectively subordinated to all of the liabilities of our subsidiaries that were not guaranteeing the U.S. Notes (2023) to the extent of the assets of those subsidiaries.

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

Euro Notes (2024)

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

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

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

The Euro Notes (2024) are redeemable, in whole or in part, at any time at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after January 1, 2024, we may redeem some or all of the Euro Notes (2024) at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. We may be required to make an offer to purchase the

Euro Notes (2024) upon the sale of certain assets, subject to certain exceptions, and upon a change of control. In addition, in the event of certain developments affecting taxation or under certain other circumstances which, in any case, require the payment of certain additional amounts, we may redeem the Euro Notes (2024) in whole, but not in part, at any time at a redemption price of 100% of the principal amount thereof plus accrued but unpaid interest, if any, and such certain additional amounts, if any, to the redemption date.

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"~~"Euro Notes (2026)") and €250 million senior notes due 2028 (the ~~"2028 notes"~~"Euro Notes (2028)" and, together with the ~~2026 notes,~~Euro Notes (2026), the "Euro Notes (2026/28)") in a private placement conducted pursuant to Regulation S and Rule 144A under the Securities Act of 1933. The proceeds from the offering, together with borrowings under our senior secured credit facility, were used (i) to ~~(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.

On April 1, 2021, we redeemed the 3.625% Euro Notes (2026) at a redemption price equal to 101.813% of the principal amount of the Euro Notes (2026) plus accrued and unpaid interest thereon to, but not including, April 1, 2021. The ~~2026 notes~~total redemption payment was $915 million (€777 million), including an early-redemption premium of $16 million (€14 million) and ~~2028~~accrued and unpaid interest of $16 million (€14 million). In the second quarter of 2021, we recorded a loss on debt extinguishment of $24 million related to the redemption due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

The Euro Notes (2028) notes bear interest at ~~rates~~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)~~(2028) is payable in arrears on April 1 and October 1 of each year. The Euro Notes ~~(2026/28)~~(2028) are fully and unconditionally guaranteed by LKQ Corporation and the Euro Notes ~~(2026/28)~~(2028) Subsidiaries (the "Euro Notes ~~(2026/28)~~(2028) Guarantors").

The Euro Notes ~~(2026/28)~~(2028) and the related guarantees are, respectively, LKQ Euro Holdings' and each Euro Notes ~~(2026/28)~~(2028) Guarantor’s senior unsecured obligations and will be subordinated to all of LKQ Euro Holdings' and the Euro Notes ~~(2026/28)~~(2028) Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Euro Notes ~~(2026/28)~~(2028) are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Euro Notes ~~(2026/28)~~(2028) to the extent of the assets of those subsidiaries. The Euro Notes ~~(2026/28)~~(2028) have been listed on the Global Exchange Market of Euronext Dublin.

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

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 December 20, 2018, we amended the terms of our receivables securitization facility with MUFG Bank, Ltd. ("MUFG") to: (i) extend the term of the facility to November 8, 2021; (ii) increase the maximum amount available to $110

million; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to MUFG for the benefit of conduit investors and/or financial institutions for cash proceeds. Upon payment of the receivables by customers, rather than remitting to 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 on our Unaudited Condensed Consolidated Balance Sheets, under which the receivables included in the program collateralize the amounts invested by 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 receivables totaling

$113 million

~~$104 million~~ and ~~$132~~$121 million were collateral for the investments under the receivables facility as of as June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

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) ~~London Interbank Offered Rate ("LIBOR")~~, 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.

There was no outstanding balance as of June 30, ~~2020~~2021 or December 31, ~~2019.~~2020. Effective July 30, 2021, we terminated the receivables securitization facility.

Note 10. Derivative Instruments and Hedging Activities

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

Cash Flow Hedges

~~We hold~~Through June 30, 2021, we held interest rate swap agreements to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows. Under the terms of the interest rate swap agreements, we ~~pay~~paid the fixed interest rate and ~~receive~~received payment at a variable rate of interest based on LIBOR for the respective currency of each interest rate swap agreement’s notional amount. Changes in the fair value of the interest rate swap agreements ~~are~~were recorded in Accumulated ~~Other Comprehensive Income (Loss)~~other comprehensive income (loss) and ~~are~~were reclassified to Interest expense, net of interest income when the underlying interest payment ~~has~~impacted earnings.

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

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

We hold cross currency swaps, which 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 impactAs of fluctuating exchange rates and interest rates on the cash flows resulting from the related intercompany financing arrangements. Changes in the fair value of the derivative instruments are recorded in Accumulated Other Comprehensive Income (Loss) and are reclassified to Interest expense, net of interest income and Other income, net when the underlying transactions have an impact on earnings. For certain of the swaps, the notional amount steps down by ~~€4 million~~ ~~quarterly, with the balance maturing at the end of the contract. Our cross currency swaps have maturity dates in October 2020 and January 2021.~~

~~The activity related to our~~June 30, 2021, we held no cash flow hedges, ~~is presented in operating activities in our Unaudited Condensed Consolidated Statements~~and as of ~~Cash Flows.~~

~~The~~December 31, 2020, we held cash flow hedges with the following ~~tables summarize the~~ notional amounts and fair values ~~of our designated cash flow hedges as of June 30, 2020 and December 31, 2019~~ (in thousands):

Notional Amount Fair Value at June 30, 2020 (USD)
June 30, 2020 Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated $ 480,000 $ — $ — $ 3,005 $ —
Cross currency swap agreements
USD/euro $ 458,689 2,717 — 24,559 —
Total cash flow hedges $ 2,717 $ — $ 27,564 $ —

2422

Notional Amount Fair Value at December 31, 2019 (USD)
December 31, 2019 Other Current Assets Other Noncurrent Assets Other Accrued Expenses Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated $ 480,000 $ — $ 3,262 $ — $ —
Cross currency swap agreements
USD/euro $ 466,621 2,975 181 970 23,349
Total cash flow hedges $ 2,975 $ 3,443 $ 970 $ 23,349

December 31, 2020

Interest rate swap agreements

USD denominated

480,000

Cross currency swap agreements

Euro denominated

€

340,000

Foreign currency forward contracts

SEK denominated

227,000


	Other Accrued Expenses
	Fair Value at December 31, 2020
Interest rate swap agreements	$	899
Cross currency swap agreements	56,328
Foreign currency forward contracts	1,350
Total cash flow hedges	$	58,577

While certain derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis on our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would ~~result in a decrease to Prepaid expenses and other current assets and Other accrued expenses~~have no effect on our Unaudited Condensed Consolidated Balance Sheets of $3 million and $1 million at June 30, 2020 and December 31, 2019, respectively. 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 $1 million at December 31, ~~2019; there would be 0 impact at June 30,~~ 2020.

The activity related to our cash flow hedges is included in Note 8, "Accumulated Other Comprehensive Income (Loss)." ~~As of June 30, 2020, we estimate that we will reclassify an immaterial amount of derivative losses (net of tax) from Accumulated Other Comprehensive Income (Loss)~~

The activity related to ~~Interest expense, net of interest income~~our cash flow hedges is presented in either operating activities or financing activities in our Unaudited Condensed Consolidated Statements of Income within the next 12 months. We estimate that we will also reclassify $2 million of derivative losses (net of tax) from Accumulated Other Comprehensive Income (Loss) to Other income, net in our Unaudited Condensed Consolidated Statements of Income within the next 12 months; the reclassification of derivative losses to Other income, net offsets the projected impact of the remeasurement of the underlying transactions.Cash Flows.

Other Derivative Instruments Not Designated as Hedges

~~We hold other short-term derivative instruments, including~~To manage our foreign currency exposure on non-functional currency denominated borrowings, we entered into short term foreign currency forward contracts. As of June 30, 2021, we held no foreign currency forward contracts ~~to manage our exposure to variability~~ related to ~~inventory purchases~~non-functional currency denominated ~~in a~~borrowings. At December 31, 2020, the notional amounts of foreign currency forward contracts related to non-functional ~~currency.~~ currency denominated borrowings were €142 million and £75 million.

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~~date. The fair values of these short-term derivative instruments are recorded in ~~volatility in~~either Prepaid expenses and other current assets or Other accrued expenses on our ~~earnings.~~Unaudited Condensed Consolidated Balance Sheets. The ~~notional amount and~~ fair ~~value~~values of these contracts at ~~June 30, 2020 and~~ December 31, ~~2019,~~2020, along with the effect on our results of operations during the three and six months ended June 30, 2021 and 2020, were immaterial.

We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability in the cash flows related to inventory purchases denominated in a non-functional currency. We have elected not to apply hedge accounting for these transactions. The notional amount and ~~2019,~~fair value of these contracts at June 30, 2021 and December 31, 2020, along with the effect on our results of operations during the three and six months ended June 30, 2021 and 2020, were immaterial.

Note 11. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value

We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and six months ended June 30, ~~2020,~~2021, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value. The tiers in the fair value hierarchy include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

2523

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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):


		Balance as of June 30, 2020		Fair Value Measurements as of June 30, 2020														Balance as of June 30, 2021		Fair Value Measurements as of June 30, 2021
								Level 1			Level 2			Level 3			Balance as of June 30, 2021					Level 2	Level 3
Assets:	Assets:										Assets:
Cash surrender value of life insurance	Cash surrender value of life insurance	$	59,599	$	—	$	59,599		$	—	Cash surrender value of life insurance	$	86,706		$	0		$	86,706	$	0

Cross currency swap agreements		2,717		—		2,717			—

Total Assets	Total Assets	$	62,316	$	—	$	62,316		$	—	Total Assets	$	86,706		$	0		$	86,706	$	0
Liabilities:	Liabilities:										Liabilities:
Contingent consideration liabilities	Contingent consideration liabilities	$	11,914	$	—	$	—		$	11,914	Contingent consideration liabilities	$	3,056		$	0		$	0	$	3,056
Interest rate swaps		3,005		—		3,005			—

Deferred compensation liabilities	Deferred compensation liabilities	63,863		—		63,863			—		Deferred compensation liabilities	86,865			0			86,865		0
Cross currency swap agreements		24,559		—		24,559			—

Total Liabilities	Total Liabilities	$	103,341	$	—	$	91,427		$	11,914	Total Liabilities	$	89,921		$	0		$	86,865	$	3,056


		Balance as of December 31, 2019		Fair Value Measurements as of December 31, 2019														Balance as of December 31, 2020		Fair Value Measurements as of December 31, 2020
								Level 1			Level 2			Level 3			Balance as of December 31, 2020					Level 2	Level 3
Assets:	Assets:										Assets:
Cash surrender value of life insurance	Cash surrender value of life insurance	$	60,637	$	—	$	60,637		$	—	Cash surrender value of life insurance	$	72,250		$	0		$	72,250	$	0
Interest rate swaps		3,262		—		3,262			—
Cross currency swap agreements		3,156		—		3,156			—

Total Assets	Total Assets	$	67,055	$	—	$	67,055		$	—	Total Assets	$	72,250		$	0		$	72,250	$	0
Liabilities:	Liabilities:										Liabilities:
Contingent consideration liabilities	Contingent consideration liabilities	$	11,539	$	—	$	—		$	11,539	Contingent consideration liabilities	$	13,263		$	0		$	0	$	13,263
Interest rate swaps											Interest rate swaps	899			0			899		0
Deferred compensation liabilities	Deferred compensation liabilities	63,981		—		63,981			—		Deferred compensation liabilities	76,240			0			76,240		0
Cross currency swap agreements	Cross currency swap agreements	24,319		—		24,319			—		Cross currency swap agreements	56,328			0			56,328		0
Foreign currency forward contracts											Foreign currency forward contracts	5,190			0			5,190		0
Total Liabilities	Total Liabilities	$	99,839	$	—	$	88,300		$	11,539	Total Liabilities	$	151,920		$	0		$	138,657	$	13,263

The cash surrender value of life insurance is included in Other noncurrent assets on our Unaudited Condensed Consolidated Balance Sheets. The current portion of contingent consideration liabilities is included in Other current liabilities on our Unaudited Condensed Consolidated Balance Sheets; the noncurrent portion of deferred compensation liabilities and contingent consideration liabilities 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, and foreign currency forward contracts is presented in Note 10, "Derivative Instruments and Hedging Activities."

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

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

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

Financial Assets and Liabilities Not Measured at Fair Value

Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. Based on market conditions as of both June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of our credit agreement borrowings reasonably approximated the

carrying values of ~~$1.5~~$1.4 billion and ~~$1.6 billion,~~$967 million, respectively. As of June 30, ~~2020~~2021 and December 31, ~~2019~~2020, there were 0no outstanding borrowings under the receivables facility. As of ~~December 31, 2019, the fair value of the U.S. Notes (2023) was approximately $609 million compared to a carrying value of~~ ~~$600 million; as of~~ June 30, ~~2020, there were 0 outstanding borrowings on the U.S. Notes (2023). As of June 30, 2020~~2021 and December 31, ~~2019,~~2020, the fair values of the Euro Notes (2024) were approximately ~~$583~~$642 million and ~~$632~~$662 million, respectively, compared to carrying values of ~~$562~~$593 million and ~~$561~~$611 million, respectively. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair ~~value~~values of the Euro Notes (2026/28) ~~was~~were $319 million and $1.3 billion, respectively, compared to carrying values of $296 million and $1.2 billion, ~~at each date, compared to a carrying value of $1.1 billion at each date.~~respectively.

The fair value measurements of the borrowings under our credit agreement and receivables facility are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 to assume these obligations. The fair value of our U.S. Notes (2023) was classified as Level 1 within the fair value hierarchy since it was 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 12. Employee Benefit Plans

We have funded and unfunded defined benefit plans covering certain employee groups in the U.S. and various European countries. Local statutory requirements govern many of our European plans. The defined benefit plans are mostly closed to new participants and, in some cases, existing participants no longer accrue benefits. As of ~~each of~~ June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the aggregate funded status of the defined benefit plans was a liability of ~~$142~~$148 million and $153 million, respectively, and is reported in Other noncurrent liabilities and Accrued payroll-related liabilities on our Unaudited Condensed Consolidated Balance Sheets.

On June 28, 2019, we approved an amendment to terminate our primary defined benefit plan in the U.S. (the "U.S. Plan") and to freeze all related benefit accruals, effective June 30, 2019. 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 the date of distribution. During the quarter ended June 30, 2020, participants were able to elect lump-sum distributions. As a result of these elections and subsequent payments, we reclassified $2 million of unrealized loss from Accumulated Other Comprehensive Income to Other income, net in our Unaudited Condensed Consolidated Statements of Income as of June 30, 2020 to reflect the partial settlement of the plan. We expect to settle the remaining obligations under the plan by the end of 2020 through the purchase of annuity contracts. Actuarial valuations to support settlement entries will be completed upon the finalization of lump sum distributions during the third quarter of 2020 and then additionally in the fourth quarter upon the purchase of annuity contracts. We expect that these valuations will result in additional charges recognized through Other income, net, but are unable to quantify them at this time.

Net periodic benefit cost for our defined benefit plans included the following components for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Service cost	Service cost	$	856	$	1,074	$	1,526	$	1,661	Service cost	$	933	$	856	$	1,828	$	1,526
Interest cost	Interest cost	731		1,010		1,449		1,995		Interest cost	353		731		695		1,449
Expected return on plan assets	Expected return on plan assets	(662)		(560)		(1,140)		(1,340)		Expected return on plan assets	(423)		(662)		(846)		(1,140)

Amortization of actuarial loss	Amortization of actuarial loss	555		37		669		290		Amortization of actuarial loss	437		555		874		669

Settlement loss(1)	Settlement loss(1)	2,100		—		2,100		—		Settlement loss(1)	0		2,100		0		2,100
Net periodic benefit cost	Net periodic benefit cost	$	3,580	$	1,561	$	4,604	$	2,606	Net periodic benefit cost	$	1,300	$	3,580	$	2,551	$	4,604

(1)Related to the partial settlement of a U.S. plan in 2020.

For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the service cost component of net periodic benefit cost was classified in Selling, general and administrative expenses, while the other components of net periodic benefit cost were classified in Other income, net in our Unaudited Condensed Consolidated Statements of Income.

Note 13. Income Taxes

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

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

Our effective income tax rate for the six months ended June 30, ~~2020~~2021 was ~~27.7%~~26.3%, compared to ~~27.1%~~27.7% for the comparable prior year period. The ~~increase is attributable to a higher expected~~lower estimated annual effective tax rate for 2021 is primarily attributable to the higher forecasted 2021 results of operations, as compared to the forecasts available during the comparable period in 2020, ~~as a result of the estimated unfavorable impa~~when

~~ct of the~~

COVID-19 pandemic on the Company’s results of operations. The primary factor in the increase is the impact of lower available interest deductions in certain foreign jurisdictions due to legislative thin capitalization constraints, typically based on profitability.economic disruptions were depressing forecasted 2020 results. For the six months ended June 30, ~~2020,~~2021, the effective tax rate was ~~reduced 0.3%~~increased 0.1% by ~~favorable~~net unfavorable discrete items, primarily a deferred tax adjustment required as a result of a United Kingdom staged tax rate increase that will become effective April 1, 2023. Net discrete items for the six months ended June 30, 2020 reduced the effective tax rate by 0.3%, primarily due to excess tax benefits on stock-based compensation and deferred tax adjustments as a result of statutory tax rate changes. ~~Net discrete items for the six months ended June 30, 2019 added 0.1% to the effective tax rate. Ongoing uncertainties due to the impact of the COVID-19 p~~andemic on the Company’s operations for the remainder of 2020 may result in volatile effective tax rates driven generally by the level of profitability and changes in the mix of earnings across the Company’s jurisdictions.

Note 14. Segment and Geographic Information

We have 4 operating segments: Wholesale – North America, Europe, Specialty and Self Service. Our Wholesale – North America and Self Service operating segments are aggregated into 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 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 June 30, 2021
Revenue:
Third Party	$	1,327,050	$	1,576,661	$	531,403	$	0	$	3,435,114
Intersegment	644		0		876		(1,520)		0
Total segment revenue	$	1,327,694	$	1,576,661	$	532,279	$	(1,520)	$	3,435,114
Segment EBITDA	$	276,186	$	168,106	$	79,399	$	0	$	523,691
Depreciation and amortization (1)	23,721		39,984		7,038		0		70,743
Three Months Ended June 30, 2020
Revenue:
Third Party	$	1,011,136	$	1,211,185	$	404,002	$	0	$	2,626,323
Intersegment	259		0		872		(1,131)		0
Total segment revenue	$	1,011,395	$	1,211,185	$	404,874	$	(1,131)	$	2,626,323
Segment EBITDA	$	149,554	$	89,387	$	52,233	$	0	$	291,174
Depreciation and amortization (1)	25,050		40,493		7,387		0		72,930

North America Europe Specialty Eliminations Consolidated
Three Months Ended June 30, 2020
Revenue:
Third Party $ 1,011,136 $ 1,211,185 $ 404,002 $ — $ 2,626,323
Intersegment 259 — 872 (1,131) —
Total segment revenue $ 1,011,395 $ 1,211,185 $ 404,874 $ (1,131) $ 2,626,323
Segment EBITDA $ 149,554 $ 89,387 $ 52,233 $ — $ 291,174
Depreciation and amortization ⁽¹⁾
25,050 40,493 7,387 — 72,930
Three Months Ended June 30, 2019
Revenue:
Third Party $ 1,321,670 $ 1,516,240 $ 410,263 $ — $ 3,248,173
Intersegment 96 — 1,373 (1,469) —
Total segment revenue $ 1,321,766 $ 1,516,240 $ 411,636 $ (1,469) $ 3,248,173
Segment EBITDA $ 190,048 $ 116,281 $ 52,367 $ — $ 358,696
Depreciation and amortization ⁽¹⁾
22,425 46,774 6,955 — 76,154


		North America		Europe		Specialty		Eliminations		Consolidated			North America		Europe		Specialty		Eliminations		Consolidated
Six Months Ended June 30, 2021												Six Months Ended June 30, 2021
Revenue:												Revenue:
Third Party												Third Party	$	2,576,424	$	3,040,114	$	989,362	$	0	$	6,605,900
Intersegment												Intersegment	963		0		1,856		(2,819)		0
Total segment revenue												Total segment revenue	$	2,577,387	$	3,040,114	$	991,218	$	(2,819)	$	6,605,900
Segment EBITDA												Segment EBITDA	$	525,353	$	309,064	$	140,881	$	0	$	975,298
Depreciation and amortization (1)												Depreciation and amortization (1)	47,981		80,242		14,117		0		142,340
Six Months Ended June 30, 2020	Six Months Ended June 30, 2020											Six Months Ended June 30, 2020
Revenue:	Revenue:											Revenue:
Third Party	Third Party	$	2,301,071	$	2,574,779	$	751,408	$	—	$	5,627,258	Third Party	$	2,301,071	$	2,574,779	$	751,408	$	0	$	5,627,258
Intersegment	Intersegment	519		—		2,048		(2,567)		—		Intersegment	519		0		2,048		(2,567)		0
Total segment revenue	Total segment revenue	$	2,301,590	$	2,574,779	$	753,456	$	(2,567)	$	5,627,258	Total segment revenue	$	2,301,590	$	2,574,779	$	753,456	$	(2,567)	$	5,627,258
Segment EBITDA	Segment EBITDA	$	360,992	$	167,649	$	84,465	$	—	$	613,106	Segment EBITDA	$	360,992	$	167,649	$	84,465	$	0	$	613,106
Depreciation and amortization ⁽¹⁾	Depreciation and amortization ⁽¹⁾	48,198		81,588		14,523		—		144,309		Depreciation and amortization (1)	48,198		81,588		14,523		0		144,309
Six Months Ended June 30, 2019
Revenue:
Third Party		$	2,623,876	$	2,961,781	$	762,819	$	—	$	6,348,476
Intersegment		199		—		2,554		(2,753)		—
Total segment revenue		$	2,624,075	$	2,961,781	$	765,373	$	(2,753)	$	6,348,476
Segment EBITDA		$	366,684	$	221,579	$	90,326	$	—	$	678,589
Depreciation and amortization ⁽¹⁾		44,664		93,785		13,912		—		152,361

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

Restructuring and acquisition related expenses.

The key measure of segment profit or loss reviewed by our chief operating decision maker, ~~who is~~ our Chief Executive Officer, is Segment EBITDA. We use Segment EBITDA to compare profitability among our segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as EBITDA excluding restructuring and acquisition related expenses (which includes restructuring expenses recorded in Cost of goods sold),; change in fair value of contingent consideration ~~liabilities,~~liabilities; other gains and losses related to acquisitions, equity method investments, or ~~divestitures,~~divestitures; equity in losses and earnings of unconsolidated ~~subsidiaries,~~subsidiaries; equity investment mark to market adjustments; and impairment charges. EBITDA, which is the basis for Segment EBITDA, is calculated as net income ~~less net income (loss)~~ attributable to ~~continuing and discontinued noncontrolling interest,~~LKQ stockholders excluding discontinued operations and discontinued noncontrolling interest, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense.

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

Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net income $ 118,770 $ 152,105 $ 264,749 $ 251,168
Less: net (loss) income attributable to continuing noncontrolling interest (22) 1,352 718 2,367
Less: net income attributable to discontinued noncontrolling interest — 192 103 192
Net income attributable to LKQ stockholders 118,792 150,561 263,928 248,609
Subtract:
Net income (loss) from discontinued operations 277 398 (638) 398
Net income attributable to discontinued noncontrolling interest — (192) (103) (192)
Net income from continuing operations attributable to LKQ stockholders 118,515 150,355 264,669 248,403
Add:
Depreciation and amortization 65,747 70,834 131,242 141,836
Depreciation and amortization - cost of goods sold 4,010 5,320 9,095 10,525
Depreciation and amortization - restructuring expenses ⁽¹⁾
3,173 — 3,972 —
Interest expense, net of interest income 25,616 35,884 51,547 71,973
Loss on debt extinguishment — — 12,751 —
Provision for income taxes 41,869 55,825 102,280 107,375
EBITDA 258,930 318,218 575,556 580,112
Subtract:
Equity in (losses) earnings of unconsolidated subsidiaries ⁽²⁾
(2,649) 1,572 (2,133) (37,977)
Add:
Restructuring and acquisition related expenses ⁽¹⁾
21,777 8,377 27,948 11,684
Restructuring expenses - cost of goods sold 5,665 — 5,661 —
Loss on disposal of businesses and impairment of net assets held for sale ⁽³⁾
2,485 33,497 2,236 48,520
Change in fair value of contingent consideration liabilities (332) 176 (428) 296
Segment EBITDA $ 291,174 $ 358,696 $ 613,106 $ 678,589


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	305,008	$	118,770	$	571,340	$	264,749
Less: net income (loss) attributable to continuing noncontrolling interest	384		(22)		803		718
Less: net income attributable to discontinued noncontrolling interest	0		0		0		103
Net income attributable to LKQ stockholders	304,624		118,792		570,537		263,928
Subtract:
Net income (loss) from discontinued operations	0		277		0		(638)
Net income attributable to discontinued noncontrolling interest	0		0		0		(103)
Net income from continuing operations attributable to LKQ stockholders	304,624		118,515		570,537		264,669
Add:
Depreciation and amortization	64,896		65,747		130,697		131,242
Depreciation and amortization - cost of goods sold	5,649		4,010		11,264		9,095
Depreciation and amortization - restructuring expenses (1)	198		3,173		379		3,972
Interest expense, net of interest income	16,172		25,616		40,351		51,547
Loss on debt extinguishment	23,564		0		23,564		12,751
Provision for income taxes	107,719		41,869		200,688		102,280
EBITDA	522,822		258,930		977,480		575,556
Subtract:
Equity in earnings (losses) of unconsolidated subsidiaries (2)	3,478		(2,649)		9,297		(2,133)
Equity investment mark to market adjustments	1,061		0		5,800		0

Add:
Restructuring and acquisition related expenses (1)	4,871		21,777		12,575		27,948
Restructuring expenses - cost of goods sold	0		5,665		(163)		5,661



(Gain) loss on disposal of businesses and impairment of net assets held for sale	(597)		2,485		(582)		2,236
Change in fair value of contingent consideration liabilities	1,134		(332)		1,085		(428)
Segment EBITDA	$	523,691	$	291,174	$	975,298	$	613,106

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

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

~~(3) Refer to "Net Assets Held for Sale" in Note 3, "Financial Statement Information," for further information.~~

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


		Three Months Ended									Six Months Ended									Three Months Ended							Six Months Ended
				June 30,									June 30,									June 30,						June 30,
				2020			2019			2020			2019			2021			2020				2021			2020
Capital Expenditures	Capital Expenditures												Capital Expenditures
North America	North America	$	10,892		$	23,169		$	40,213		$	54,403	North America	$			$	10,892		$	30,152			$	40,213
Europe	Europe	19,502			21,840			32,550			41,417		Europe	21,203			19,502			47,501				32,550
Specialty	Specialty	2,369			3,243			4,538			5,448		Specialty	8,055			2,369			10,201				4,538
Total capital expenditures	Total capital expenditures	$	32,763		$	48,252		$	77,301		$	101,268	Total capital expenditures	$	46,075		$	32,763		$	87,854			$	77,301

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


		June 30,			December 31,			June 30,			December 31,
				2020				2019		2021			2020
Receivables, net	Receivables, net						Receivables, net
North America	North America	$	355,421		$	419,452	North America	$	403,761		$	386,289
Europe	Europe	629,355			636,216		Europe	669,432			598,615
Specialty	Specialty	141,040			75,464		Specialty	152,542			88,485
Total receivables, net	Total receivables, net	1,125,816			1,131,132		Total receivables, net	1,225,735			1,073,389
Inventories	Inventories						Inventories
North America	North America	829,049			991,062		North America	785,064			810,798
Europe	Europe	1,223,628			1,401,801		Europe	1,286,067			1,302,649
Specialty	Specialty	235,616			379,914		Specialty	323,016			301,165
Total inventories	Total inventories	2,288,293			2,772,777		Total inventories	2,394,147			2,414,612
Property, plant and equipment, net	Property, plant and equipment, net						Property, plant and equipment, net
North America	North America	587,230			610,573		North America	568,905			583,985
Europe	Europe	527,255			538,951		Europe	554,321			583,439
Specialty	Specialty	82,020			84,876		Specialty	83,930			81,279
Total property, plant and equipment, net	Total property, plant and equipment, net	1,196,505			1,234,400		Total property, plant and equipment, net	1,207,156			1,248,703
Operating lease assets, net	Operating lease assets, net						Operating lease assets, net
North America	North America	756,128			768,164		North America	772,614			755,430
Europe	Europe	434,221			457,035		Europe	521,703			520,131
Specialty	Specialty	82,164			83,312		Specialty	73,826			77,563
Total operating lease assets, net	Total operating lease assets, net	1,272,513			1,308,511		Total operating lease assets, net	1,368,143			1,353,124
Equity method investments	Equity method investments						Equity method investments
North America	North America	15,299			17,624		North America	21,255			18,676
Europe	Europe	121,374			121,619		Europe	147,212			136,548
Total equity method investments	Total equity method investments	136,673			139,243		Total equity method investments	168,467			155,224
Other unallocated assets	Other unallocated assets	6,015,499			6,193,893		Other unallocated assets	6,074,411			6,115,481
Total assets	Total assets	$	12,035,299		$	12,779,956	Total assets	$	12,438,059		$	12,360,533

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 ~~Germany~~the U.K. and ~~the U.K.~~Germany. Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, Poland, and other European countries. Our operations in other countries include wholesale operations in Canada, remanufacturing operations in Mexico, an aftermarket

parts freight consolidation warehouse in Taiwan, and administrative support functions in India. Our net sales are attributed to geographic area based on the location of the selling operation.

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


		Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue	Revenue									Revenue
United States	United States	$	1,330,543	$	1,613,417	$	2,864,489	$	3,155,443	United States	$	1,749,496	$	1,330,543	$	3,354,929	$	2,864,489
United Kingdom										United Kingdom	421,314		278,419		824,752		669,038
Germany	Germany	359,134		415,947		733,686		802,412		Germany	418,817		359,134		806,693		733,686
United Kingdom		278,419		409,765		669,038		822,578
Other countries	Other countries	658,227		809,044		1,360,045		1,568,043		Other countries	845,487		658,227		1,619,526		1,360,045
Total revenue	Total revenue	$	2,626,323	$	3,248,173	$	5,627,258	$	6,348,476	Total revenue	$	3,435,114	$	2,626,323	$	6,605,900	$	5,627,258

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

June 30, December 31,
2020 2019
Long-lived assets
United States $ 1,435,244 $ 1,467,701
Germany 340,681 340,995
United Kingdom 286,952 330,113
Other countries 406,141 404,102
Total long-lived assets $ 2,469,018 $ 2,542,911


	June 30,		December 31,
	2021		2020
Long-lived assets
United States	$	1,414,705	$	1,419,113
Germany	347,531		360,184
United Kingdom	304,395		315,333
Other countries	508,668		507,197
Total long-lived assets	$	2,575,299	$	2,601,827

3230

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

Forward-Looking Statements

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

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

You should not place undue reliance on our forward-looking statements. Actual events or results may differ materially from those expressed or implied in the forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by our forward-looking statements include factors discussed in our filings with the SEC, including those disclosed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2019~~2020 Form 10-K and in our subsequent Quarterly Reports on Form 10-Q (including this Quarterly Report).

Overview

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

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

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

We are organized into four operating segments: Wholesale – North America; Europe; Specialty 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. Through 2018, our acquisition strategy was focused on consolidation to build scale in fragmented markets across North America and Europe. We ~~have pursued acquisitions that we believe will help drive profitability, cash flow and stockholder value. We target~~targeted companies that ~~are~~were market leaders, ~~will expand~~expanded our geographic presence and ~~will enhance~~enhanced our ability to provide a wide array of vehicle products ~~to our customers~~ through our distribution network.

In the last few years, we have shifted our focus from larger transactions to tuck-in acquisitions that target high synergies and/or add critical capabilities. Additionally, we have made investments in various businesses to advance our strategic objectives. See "Investments in Unconsolidated

Subsidiaries" in Note 3, "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 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, and diagnostic and repair services. Revenue from other sources includes scrap and other metal (including precious metals - platinum, palladium and rhodium) sales, bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold. See Note 4, "Revenue Recognition" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our sources of revenue.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with 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 ~~2019~~2020 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. ~~Other than as described below, there~~There have been no changes to those critical accounting policies orand estimates that have had a material impact on our reported amounts of assets, liabilities, revenue or expenses during the six months ended June 30, ~~2020.~~

~~COVID-19 Projections and Assumptions~~

In the first and second quarters of 2020, we prepared forecasts of future revenues, profits and cash flows to use in multiple analyses, including the interim goodwill impairment test, other impairment tests of long-lived assets, assessments of the recoverability of inventory, determination of customer and supplier rebate balances, calculation of the annual effective tax rate and evaluations of the realizability of deferred tax assets. Our first quarter projections assumed that the COVID-19 impact would be severe, with revenue down in the second quarter of 2020 compared to our prior forecasts, but temporary, as revenue would improve gradually in the second half of 2020. We expected that cost mitigation actions would dampen the negative impact of the projected revenue decline but still result in a significant reduction in profitability in the second quarter of 2020. Actual results for the three months ended June 30, 2020 tracked in the same direction as our forecast, but the decline was significantly less severe than projected. Our updated forecasts for use in preparing the June 30 financial statements reflect a further recovery in revenue and profitability in the second half but with amounts still below the comparable prior year period. We expect to generate positive free cash flows in the second half of 2020 but at a lower level than the first half of the year.

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

~~Goodwill and Indefinite-Lived Intangibles Impairment~~

~~We are required to test goodwill and indefinite-lived intangibl~~e assets for impairment at least annually and between annual tests whenever events indicate that an impairment may exist. When testing goodwill for impairment, we are required to evaluate events and circumstances that may affect the performance of the reporting unit and the extent to which the events and circumstances may impact the future cash flows of the reporting unit to determine whether the fair value of the assets exceeds the carrying value. Developing the estimated future cash flows and fair value of the reporting unit requires management's judgment in projecting revenues and profits, allocation of shared corporate costs, tax rates, capital expenditures, working capital requirements, discount rates and market multiples. Many of the factors used in assessing fair value are outside the control of management, and it is reasonably likely that assumptions and estimates can change in future periods. If these assumptions or estimates change in the future, we may be required to record impairment charges for these assets. In response to changes in industry and market conditions, we may be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill.

Our goodwill impairment assessment is performed at the reporting unit level. A reporting unit is an operating segment, or a business one level below an operating segment (the "component" level), for which discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics. For the purpose of aggregating our components into reporting units, we review the long-term performance of Segment EBITDA. Additionally, we review qualitative factors such as type or class of customers, nature of products, distribution methods, inventory procurement methods, level of integration, and interdependency of

~~processes across components. Our assessment of the aggregation includes both qualitative and quantitative factors and is based on the facts and circumstances specific to the components.~~

We have four operating segments: Wholesale – North America, Europe, Specialty and Self Service. Each of these operating segments consists of multiple components that have discrete financial information available that is reviewed by segment management on a regular basis. We have evaluated these components and concluded that the components that compose each of the Wholesale – North America, Europe, Specialty, and Self Service operating segments are economically similar and thus were aggregated into those four separate reporting units for our interim goodwill impairment test in the first quarter of 2020.

Our goodwill would be considered impaired if the carrying value of a reporting unit exceeded its estimated fair value. The fair value estimates are established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach. We believe that using two methods to determine fair value limits the chances of an unrepresentative valuation. Discount rates, growth rates and cash flow projections are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. Impairment may result from, among other things, deterioration in the performance of our reporting units' businesses, increases in our cost of capital, adverse market conditions, and adverse changes in applicable laws or regulations, including modifications that restrict the activities of our reporting units' businesses. To assess the reasonableness of the fair value estimates, we compare the sum of the reporting units’ fair values to the Company’s market capitalization and calculate an implied control premium, which is then evaluated against recent market transactions in our industry, or in the case of our interim test against transactions during the 2008-2009 financial crisis. If we were required to recognize goodwill impairments, we would report those impairment losses as part of our operating results.

We determined no impairments existed on any of our four reporting units when we performed our interim goodwill impairment testing in the first quarter of 2020, as each of those reporting units had a fair value estimate that exceeded the carrying value by at least 12%, the level at which our Europe reporting unit exceeded its carrying value. We did not identify a triggering event in the second quarter that necessitated an interim test of goodwill impairment. See Note 3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our interim goodwill impairment test.

~~We review indefinite-lived intangible assets for impairment annually or on an interim basis if events or changes in circumstances indicate that the carrying value may not be recoverable. We determined that the effect of the uncertainty relating to the COVID-19 pandemic~~ on our forecasted results represented a change in circumstances indicating that the carrying value of the Warn trademark, which is our only indefinite-lived intangible asset, may not be recoverable. As a result, we performed a quantitative impairment test in the first quarter as of March 31, 2020 using the relief-from-royalty method and determined no impairment existed, as the trademark had a fair value estimate which exceeded the carrying value by approximately 9%. We did not identify a triggering event in the second quarter that necessitated an interim test of impairment.2021.

Recently Issued Accounting Pronouncements

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

Financial Information by Geographic Area

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

1 LKQ Europe 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 5, “Restructuring and Acquisition Related Expenses” to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

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

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

Costs related to the 1 LKQ Europe program incurred to date are reflected in Selling, general and administrative expenses, Restructuring 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 continue to expect that costs of the program, reflecting all three categories noted above, will range between $100 million and $125 million for the period from 2020 through 2021 with an additional $80 million to $100 million between ~~2022 and the original projected completion date of the project in 2024.~~ Beginning in the second half of March 2020, management delayed certain projects under the 1 LKQ Europe program to reduce expenses and preserve capital in response to the COVID-19 pandemic. Based on our expectations in the second quarter of 2020 that the impacts on our business from COVID-19 had stabilized, we restarted the program in July 2020 with substantially the same initiatives and projects as prior to the ~~pandemic, although we are evaluating the impact~~pandemic. While certain projects were delayed as a result of the ~~delay~~COVID-19 pandemic, such as our procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe. We have continued the project on ~~our estimates~~schedule after the restart. We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by

2024. During the three and six months ended June 30, 2021 we incurred $6 million and $20 million, respectively, in costs across all three categories noted above. We expect that costs of the ~~related expenditures~~program, reflecting all three categories noted above, will range between $50 million and ~~timelines. We~~$70 million in 2021 with an additional $80 million to $100 million between 2022 and the projected program completion date in 2024. In the future, we may also identify additional initiatives and projects under the 1 LKQ Europe program ~~in future periods~~ that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. We expect the transformation and restructuring expenses will be entirely funded by the improved trade working capital initiatives across our Europe segment.

COVID-19 Impact on Our Operations

In late February 2020, the Italian government began placing restrictions on activity as a result of the COVID-19 outbreak. Sales volumes fell as fewer cars were on the road and less maintenance activity was performed. While our Italian operation is an important part of our European business, it represented approximately 10% of the segment’s revenue in 2019, and thus the disruption did not have a material impact on the Company. By mid-March, the COVID-19 impact began spreading across the rest of the geographies where we operate at a very rapid pace. Governments adopted aggressive restrictions on the operation of non-essential businesses and personal movement, which reduced miles driven and collisions. While our businesses have been deemed essential in most jurisdictions in which we operate, the change in behavior driven by the COVID-19 restrictions negatively impacted our sales volume. Our organic parts and services revenue declined by 16.8%, 4.5% and 5.2% in the second, ~~quarter~~third, and fourth quarters of 2020, respectively, relative to the comparable prior ~~period, but~~year periods. We showed improvement ~~over~~in the third quarter of 2020 as governments gradually lifted restrictions for ~~nonessential~~non-essential businesses and personal ~~movement.~~movement; however, in the fourth quarter of 2020 revenue declined as certain jurisdictions put restrictions back into place. As anticipated, April 2020 experienced the most negative revenue impact, with organic parts and services revenue (on a per day basis) down 30.3%. compared to the prior year period. As movement restrictions lessened in May and June 2020, we experienced organic parts and services revenue declines (on a per day basis) ~~declines~~ of 13.2% and 7.3%, ~~respectively.~~respectively, compared to the prior year periods. However, the pace of improvement ~~has~~ flattened into ~~July~~the third quarter of 2020 as the increasing level of COVID-19 cases, especially in the United States, ~~appears to have~~ slowed the recovery. InDuring the third quarter of 2020, organic parts and services revenue declined by 4.5% compared to the prior year period, a small improvement from the June 2020 decline of 7.3% (on a per day basis). During the fourth quarter of 2020, organic parts and services revenue declined by 6.1% (on a per day basis) and gradually worsened during the quarter with a decline of 7.2% (on a per day basis) in December. During the first quarter of 2021, organic parts and services revenue increased by 2.2% (on a per day basis) despite the continued COVID-19 impact on economic activity in the U.S. and Europe. During the second ~~half~~quarter of ~~2020, we expect~~2021, organic parts and services revenue increased by 21.1% (on a per day basis) reflecting the low prior year comparable figure owing to COVID-19 and the gradual recovery in mobility. Our revenue has been impacted to varying degrees depending on the segment, with North America experiencing the most negative impact due to the decrease ~~on a~~in miles driven and collision activity. After seeing year over year ~~basis, but at a lower rate than reported for~~decreases early in the ~~first half. This expectation is based on the assumption that there will not be a recurrence~~pandemic, Specialty revenue has grown due to favorable trends in recreational vehicle activity. We expect consolidated revenue to continue recovering gradually in the second half of ~~2020~~2021. The level of the ~~extensive lockdown measures taken~~year over year increase in ~~March~~revenue will depend on the extent of reopening activities across the geographies in which we operate and ~~April. Such measures may materialize with~~ the ~~expansion~~pace of ~~economic and social activity~~recovery in ~~a region if the prevalence of the virus outbreak increases as a result thereof.~~miles driven.

Recognizing the demand changes in the first quarter of 2020, we took action in all of our business units to reduce our cost structure. These actions included, but were not limited to, employee furloughs and reductions in force, decreases in hours and overtime, lowering compensation for salaried employees, a hiring freeze, elimination of temporary labor, route consolidation, deferral of projects, and temporary branch closures. ~~These~~In the second quarter of 2020, these cost actions contributed to a reduction of approximately 18% ofin quarterly selling, general and administrative expenses compared to our first quarter 2020 run rate. We estimate that the cost actions generated ~~an additional~~a $10 million benefit in cost of goods ~~sold.~~sold compared to our second quarter of 2019. Some of the savings from the cost actions were delayed as we paid out vacation balances in April and covered medical benefits for employees in the United States during their furlough period. ~~We pursued certain financial assistance and relief programs that were available to us from governments in Europe and Canada, primarily in~~From the ~~form of grants to offset personnel expenses;~~third quarter 2020 through ~~June 30, 2020, we qualified for $33 million of assistance, and we estimate that we may qualify for additional assistance in the second half of 2020, but at a lower level than we received in~~ the second quarter 2021, we were able to sustain a portion of ~~2020. However, these actions lagged~~ the cost benefits. If revenue ~~impact, which meant there was a negative timing impact~~continues to increase during the remainder of ~~COVID-19 on our first half profitability in addition to the negative effect from reduced revenue. If our revenue increases in the second half of 2020 as projected,~~2021, we ~~still~~ expect that some of the costs that were reduced as a result of COVID-19 will remain at a lower level; the management team has been implementing productivity initiatives to create lower cost structures going ~~forward.~~ forward as seen in the third and fourth quarter of 2020 and first and second quarter of 2021 results.

We pursued certain financial assistance and relief programs that were available to us from governments in Europe and Canada, primarily in the form of grants to offset personnel expenses. During the six months ended June 30, 2021, we qualified for $15 million of assistance. We received $52 million of government assistance in 2020, with the largest portion coming in the second quarter. We currently do not anticipate qualifying for significant additional assistance in the remainder of 2021, but we still will receive some government assistance in England. This view may change in the future based on developments with COVID-19.

These cost actions lagged the revenue impact in the first and second quarters of 2020, which meant there was a negative timing impact of COVID-19 on our profitability in those periods in addition to the negative effect from reduced

revenue. By the third quarter, the cost actions were aligned with the revenue changes, and we generated higher Segment EBITDA dollars and margins than in the third quarter of 2019. In the fourth quarter of 2020 and first quarter of 2021, profitability remained higher than the prior year. In the second quarter of 2021, profitability continued to improve and was the highest in the company's history.

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

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

Our top ~~priorities~~priority is the health and safety of our employees, customers and the communities in which we operate. We are using ~~our best~~all reasonable efforts to follow ~~all~~ governmental instructions and safety guidelines with respect to the operations of our facilities. We ~~have~~ implemented protocols across our business units designed to help ensure the health and safety of our employees, customers and communities including, but not limited to: restricting access to and enhancing cleaning and disinfecting protocols ofat our facilities; use of personal ~~protection~~protective equipment; adhering to social distancing guidelines; instituting remote work arrangements for many of our employees; and restricting travel.

We are monitoring developments related to vaccination levels and governmental standards and have adjusted our practices where appropriate to comply with the latest guidance.

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

Key Performance Indicators

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

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

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

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

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

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

Results of Operations—Consolidated

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


		Three Months Ended						Six Months Ended								Three Months Ended				Six Months Ended
		June 30,						June 30,								June 30,				June 30,
		2020		2019		2020		2019			2021		2020			2021		2020
Revenue	Revenue	100.0	%	100.0	%	100.0	%	100.0	%	Revenue	100.0	%	100.0		%	100.0	%	100.0	%
Cost of goods sold	Cost of goods sold	61.5	%	61.6	%	60.5	%	61.3	%	Cost of goods sold	58.8	%	61.5		%	59.0	%	60.5	%

Gross margin	Gross margin	38.5	%	38.4	%	39.5	%	38.7	%	Gross margin	41.2	%	38.5		%	41.0	%	39.5	%
Selling, general and administrative expenses	Selling, general and administrative expenses	28.1	%	27.7	%	29.1	%	28.3	%	Selling, general and administrative expenses	26.2	%	28.1		%	26.5	%	29.1	%
Restructuring and acquisition related expenses	Restructuring and acquisition related expenses	0.9	%	0.3	%	0.6	%	0.2	%	Restructuring and acquisition related expenses	0.1	%	0.9		%	0.2	%	0.6	%
Loss on disposal of businesses and impairment of net assets held for sale		0.1	%	1.0	%	0.0	%	0.8	%
(Gain) loss on disposal of businesses and impairment of net assets held for sale										(Gain) loss on disposal of businesses and impairment of net assets held for sale	(0.0)	%	0.1		%	(0.0)	%	0.0	%
Depreciation and amortization	Depreciation and amortization	2.5	%	2.2	%	2.3	%	2.2	%	Depreciation and amortization	1.9	%	2.5		%	2.0	%	2.3	%
Operating income	Operating income	6.9	%	7.3	%	7.5	%	7.2	%	Operating income	12.9	%	6.9		%	12.4	%	7.5	%
Other expense, net		0.7	%	0.9	%	0.9	%	1.0	%
Total other expense, net										Total other expense, net	1.0	%	0.7		%	0.8	%	0.9	%
Income from continuing operations before provision for income taxes	Income from continuing operations before provision for income taxes	6.2	%	6.3	%	6.6	%	6.2	%	Income from continuing operations before provision for income taxes	11.9	%	6.2		%	11.5	%	6.6	%
Provision for income taxes	Provision for income taxes	1.6	%	1.7	%	1.8	%	1.7	%	Provision for income taxes	3.1	%	1.6		%	3.0	%	1.8	%
Equity in (losses) earnings of unconsolidated subsidiaries		(0.1)	%	0.0	%	(0.0)	%	(0.6)	%
Equity in earnings (losses) of unconsolidated subsidiaries										Equity in earnings (losses) of unconsolidated subsidiaries	0.1	%	(0.1)		%	0.1	%	(0.0)	%
Income from continuing operations	Income from continuing operations	4.5	%	4.7	%	4.7	%	4.0	%	Income from continuing operations	8.9	%	4.5		%	8.6	%	4.7	%
Net income (loss) from discontinued operations	Net income (loss) from discontinued operations	0.0	%	0.0	%	(0.0)	%	0.0	%	Net income (loss) from discontinued operations	—	%	0.0		%	—	%	(0.0)	%
Net income	Net income	4.5	%	4.7	%	4.7	%	4.0	%	Net income	8.9	%	4.5		%	8.6	%	4.7	%
Less: net (loss) income attributable to continuing noncontrolling interest		(0.0)	%	0.0	%	0.0	%	0.0	%
Less: net income (loss) attributable to continuing noncontrolling interest										Less: net income (loss) attributable to continuing noncontrolling interest	0.0	%	(0.0)		%	0.0	%	0.0	%
Less: net income attributable to discontinued noncontrolling interest	Less: net income attributable to discontinued noncontrolling interest	—	%	0.0	%	0.0	%	0.0	%	Less: net income attributable to discontinued noncontrolling interest	—	%	—		%	—	%	0.0	%
Net income attributable to LKQ stockholders	Net income attributable to LKQ stockholders	4.5	%	4.6	%	4.7	%	3.9	%	Net income attributable to LKQ stockholders	8.9	%	4.5		%	8.6	%	4.7	%
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 June 30, ~~2020~~2021 Compared to Three Months Ended June 30, ~~2019~~2020

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


		Three Months Ended																					Three Months Ended
		June 30,						Percentage Change in Revenue															June 30,					Percentage Change in Revenue
		2020		2019		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change			2021		2020		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	2,503,158	$	3,086,697	(16.8)	%	(0.5)	%	(1.5)	%	(18.9)	%	Parts & services revenue	$	3,178,271	$	2,503,158	21.9	%	(0.3)	%	5.4	%	27.0		%
Other revenue	Other revenue	123,165		161,476		(23.7)	%	0.1	%	(0.1)	%	(23.7)	%	Other revenue	256,843		123,165		108.0	%	0.0	%	0.5	%	108.5		%
Total revenue	Total revenue	$	2,626,323	$	3,248,173	(17.2)	%	(0.5)	%	(1.5)	%	(19.1)	%	Total revenue	$	3,435,114	$	2,626,323	25.9	%	(0.3)	%	5.2	%	30.8		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																									Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The ~~decline~~increase in parts and services revenue of ~~18.9%~~27.0% represented ~~decreases~~increases in segment revenue of ~~23.4%~~31.5% in ~~North America, 20.2%~~Specialty, 30.1% in Europe, and ~~1.5%~~20.6% in ~~Specialty.~~North America. Organic parts and services revenue ~~declined by 16.8%~~growth was 21.9% as the negative effect of the pandemic in the second quarter of 2020 ~~primarily related~~was more severe than in the current year. We expect to report organic growth in the ~~impact~~third quarter of ~~COVID-19 (refer~~2021, although at a lower rate than the second quarter, coming off a low base as the third quarter of 2020 continued to experience negative effects from the ~~"COVID-19 Impact on Our Operations" section above for further details).~~lockdown measures of 2020. The ~~decrease~~increase in other revenue of ~~23.7%~~108.5% was primarily driven by a ~~$38~~$133 million organic ~~decrease,~~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 second quarter of ~~2020~~2021 compared to the prior year period.

Cost of Goods Sold. Cost of goods sold decreased to 58.8% of revenue in the three months ended June 30, 2021 from 61.5% of revenue in the three months ended June 30, 2020 from 61.6% of revenue in the three months ended June 30, 2019. Cost of goods sold decreased 0.4% and 0.3% as a result of our Europe and North America segments, respectively, partially offset by a 0.4% increase in2020. The cost of goods sold ~~attributable to mix~~decrease reflects impacts of 1.5%, 0.7% and ~~an increase of 0.2% in our Specialty segment. The mix impact is a result of the decreased volumes~~0.3% in our North America, ~~segment primarily due to the COVID-19 pandemic, as the higher margin North America segment makes up a smaller~~

~~percentage of the consolidated results resulting in an unfavorable effect on the gross margin percentage. We~~ ~~recorded inventory write downs of roughly $3 million in each of our North America~~Europe and ~~Europe~~Specialty segments, ~~relate~~d to the restructuring plans described in Note 5, "Restructuring and Acquisition Related Expenses" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.respectively. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended June 30, ~~2020~~2021 compared to the same period of ~~2019.~~2020.

Selling, General and Administrative Expenses. Our selling, general and administrative ("SG&A") expenses as a percentage of revenue ~~increased~~decreased to 26.2% in the three months ended June 30, 2021 from 28.1% in the three months ended June 30, ~~2020 from 27.7% in the three months ended June 30, 2019. Our Europe and North America segments each had an increase in~~2020. SG&A expenses decreased over the prior year period as ~~a percentage of revenue of 0.5%, which were partially offset by (i) a 0.4% decrease in SG&A expenses attributable to mix and (ii) a decrease of 0.2% in our Specialty segment. The mix impact is~~ a result of ~~the decreased volumes in~~(i) a 1.1% decrease attributable to our North America segment ~~primarily due to the COVID-19 pandemic, as the higher SG&A expense percentage North America segment makes up~~and (ii) a ~~smaller percentage of the consolidated results, which has a favorable effect on the SG&A expense percentage.~~0.8% decrease from our Europe segment. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended June 30, ~~2020~~2021 compared to the ~~same period of 2019.~~three months ended June 30, 2020.

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

Three Months Ended
June 30,
2020 2019 Change
Restructuring expenses $ 24,851
⁽¹⁾
$ 8,212
⁽²⁾
$ 16,639
Acquisition related expenses 99 165 (66)
Total restructuring and acquisition related expenses $ 24,950 $ 8,377 $ 16,573


	Three Months Ended
	June 30,
	2021			2020			Change


Restructuring and acquisition related expenses	$	5,069	(1)	$	24,950	(2)	$	(19,881)

(1)Restructuring expenses for the three months ended June 30, 2021 primarily consisted of (i) $4 million related to our 2020 global restructuring program.

(2)Restructuring expenses for the three months ended June 30, 2020 primarily consisted of (i) $20 million related to our 2020 global restructuring program, (ii) $4 million related to integration costs from acquisitions, and (iii) $2 million related to our 2019 global restructuring program.

(2) Restructuring expenses for the three months ended June 30, 2019 primarily consisted of $5 million related to our 2019 global restructuring program and $3 million related to integration costs from acquisitions.

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

~~Loss on Disposal of Businesses and Impairment of Net Assets Held for Sale.~~ ~~For the three months ended June 30, 2020, we recorded a loss on the disposal of a business and impairment charges on net assets held for sale totaling $2 million, compared to a~~ ~~$33 million~~ impairment charge on net assets held for sale for the three months ended June 30, 2019. See "Net Assets Held for Sale" in Note 3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the loss on disposal and impairment charges.

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


		Three Months Ended										Three Months Ended
		June 30,										June 30,
		2020		2019		Change				2021		2020		Change
Depreciation	Depreciation	$	36,912	$	36,551	$	361		Depreciation	$	38,730	$	36,912	$	1,818	(1)
Amortization	Amortization	28,835		34,283		(5,448)		⁽¹⁾	Amortization	26,166		28,835		(2,669)		(2)
Total depreciation and amortization	Total depreciation and amortization	$	65,747	$	70,834	$	(5,087)		Total depreciation and amortization	$	64,896	$	65,747	$	(851)

(1)Depreciation expense increased by $2 million from foreign currency translation primarily related to an increase in the euro and pound sterling exchange rates during the three months ended June 30, 2021 compared to the prior year period.

(2)The decrease in amortization expense primarily reflected (i) decreases of $4 million and $1 million related to the customer relationship intangible assets recorded upon our acquisitions of Stahlgruber and Rhiag, respectively, as the accelerated amortization onof the customer relationship intangible assets resulted in lower amortization expense during the three months ended June 30, ~~2020~~2021 compared to the prior year period, partially offset by (ii) a $2 million increase from foreign currency translation, primarily related to an increase in the euro exchange rate during the three months ended June 30, 2021 compared to the prior year period.

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

~~Other expense, net for the three months ended June 30, 2019~~

~~30,151~~

~~Decrease due to:~~

~~Interest expense, net of interest income~~

~~(10,268)~~

⁽¹⁾

~~Other income, net~~

~~(2,441)~~

⁽²⁾

~~Net decrease~~

~~(12,709)~~

~~Other expense, net for the three months ended June 30, 2020~~

~~17,442~~


Other expense, net for the three months ended June 30, 2020	$	17,442
(Decrease) increase due to:
Interest expense, net of interest income	(9,444)		(1)


Loss on debt extinguishment	23,564		(2)
Other income, net	3,863		(3)
Net increase	17,983
Other expense, net for the three months ended June 30, 2021	$	35,425

(1)The decrease in interest is primarily related to (i) ~~a $7~~an $11 million decrease resulting from lower outstanding debt during the three months ended June 30, ~~2020~~2021 compared to the prior year period, ~~and (ii)~~partially offset by several individually immaterial factors that ~~decreased interest by $3~~had an unfavorable impact of $2 million in the ~~aggregate in 2020.~~aggregate.

(2)In April 2021, we recorded a loss on debt extinguishment of $24 million related to the redemption of the 2026 notes due to the early-redemption premium and the write-off of the unamortized debt issuance costs.

(3)The ~~increase~~unfavorable variance in ~~other~~Other income, net primarily ~~consisted of~~related to (i) $8 million of proceeds ~~received~~ in the second quarter of 2020 related to insurance settlements in our North America segment, partially offset by (ii) a $2 million pension settlement loss recorded in the second quarter of 2020, and (iii) several individually immaterial factors that ~~decreased other income by $3~~had a favorable impact of $2 million in the ~~aggregate in 2020.~~aggregate.

Provision for Income ~~Taxes.~~Taxes. Our effective income tax rate for the three months endedJune 30, ~~2020~~2021 was ~~25.7%~~26.3%, compared to ~~27.1%~~25.7% for the comparable prior year period. The ~~decreased rate is primarily attributable to an adjustment to the interim~~ tax ~~expense on earnings~~provision for the ~~three months ended March, 31, 2020~~prior year period was impacted by volatility of earnings projections as a result of the COVID-19 pandemic. The prior year rate was lowered in the second quarter as a result of a favorable revision ~~in the second quarter of 2020 of~~to our expected full year 2020 effective tax rate. Without such adjustment, the effective tax rate for the three months endedJune 30, 2020 would have been 28.2%. ~~The primary factor~~While we updated the expected full year 2021 effective tax rate in the ~~increase~~second quarter, the true-up benefit was smaller than experienced in the ~~full year estimated~~prior year. For the three months ended June 30, 2021, the effective tax rate ~~compared~~was increased 0.3% by unfavorable discrete items, primarily a deferred tax adjustment required as a result of a United Kingdom staged tax rate increase that will become effective April 1, 2023. See Note 13, "Income Taxes" to the ~~prior year period is the impact~~unaudited condensed consolidated financial statements in Part I, Item 1 of ~~lower available interest deductions in certain foreign jurisdictions due to legislative thin capitalization constraints, typically based~~this Quarterly Report on ~~profitability.~~ ~~Other discrete items in both comparative quarters were immaterial. Ongoing uncertainties due to the impact of the COVID-19 pandemic on the Company’s operations~~Form 10-Q for ~~the remainder of 2020 may result in volatile effective tax rates driven generally by the level of profitability and changes in the mix of earnings across the Company’s jurisdictions.~~further information.

Equity in ~~(Losses)~~ Earnings of Unconsolidated Subsidiaries. Equity in ~~(losses)~~ earnings of unconsolidated subsidiaries for the three months ended June 30, ~~2020 was unfavorable compared to the prior year~~2021 increased by $6 million primarily ~~due to losses~~ related to improved year over year results reported by Mekonomen, which is our largest equity method investment, and an immaterial ~~investment in our~~ North America ~~segment.~~investment, which incurred a loss in the second quarter of 2020.

Foreign Currency Impact. We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the three months ended June 30, ~~2019,~~2020, the Czech koruna, Canadian dollar, pound sterling and euro rates used to translate the ~~2020~~2021 statements of income ~~decreased~~increased by ~~6.9%~~15.5%, ~~3.4%~~12.8%, ~~3.4%~~12.6% and ~~2.0%~~9.4%, respectively. The ~~negative~~positive translation effect of the change in foreign currencies against the U.S. dollar ~~netted against~~combined with the ~~positive~~favorable impact of realized and unrealized currency gains and losses for the three months ended June 30, ~~2020, resulting in an immaterial negative~~2021 to generate a positive $0.01 effect on diluted earnings per share relative to the prior year period.

Net ~~(Loss)~~ Income Attributable to Continuing and Discontinued Noncontrolling Interest. Net ~~(loss)~~ income attributable to continuing noncontrolling interest for the three months ended June 30, ~~2020 decreased $1 million~~2021 increased an immaterial amount compared to the three months ended June 30, 2019 primarily due to the noncontrolling interest of subsidiaries acquired in connection with the Stahlgruber acquisition. Net income attributable to discontinued noncontrolling interest was immaterial for the three months ended June 30, 2019 and related to the Stahlgruber Czech Republic wholesale business. See Note 2, "Discontinued Operations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on this business.2020.

4037

Six Months Ended June 30, ~~2020~~2021 Compared to Six Months Ended June 30, ~~2019~~2020

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


		Six Months Ended																					Six Months Ended
		June 30,						Percentage Change in Revenue															June 30,					Percentage Change in Revenue
		2020		2019		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change			2021		2020		Organic		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	5,315,875	$	6,035,792	(10.3)	%	(0.2)	%	(1.4)	%	(11.9)	%	Parts & services revenue	$	6,110,037	$	5,315,875	10.6	%	(0.5)	%	4.8	%	14.9		%
Other revenue	Other revenue	311,383		312,684		(1.0)	%	0.7	%	(0.1)	%	(0.4)	%	Other revenue	495,863		311,383		58.8	%	0.0	%	0.4	%	59.2		%
Total revenue	Total revenue	$	5,627,258	$	6,348,476	(9.8)	%	(0.2)	%	(1.4)	%	(11.4)	%	Total revenue	$	6,605,900	$	5,627,258	13.3	%	(0.4)	%	4.5	%	17.4		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																									Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

The ~~decline~~growth in parts and services revenue of ~~11.9%~~14.9% represented ~~decreases~~increases in segment revenue of ~~13.8%~~31.7% in ~~North America, 13.1%~~Specialty, 18.0% in Europe, and ~~1.5%~~4.8% in ~~Specialty.~~North America. Organic parts and services revenue ~~declined by 10.3%~~growth was 10.6%, which included a 0.6% ~~positive~~negative effect from one ~~additional~~less selling day in the first half of ~~2020,~~2021, resulting in a per day organic ~~decline~~growth of ~~10.9%. The decline~~11.2% as the negative pandemic effect in the first half of 2020 ~~is primarily related~~was more severe than in the current year. We expect to report organic growth in the ~~impact~~third quarter of ~~COVID-19~~2021, although at a lower rate than the second quarter, coming off a low base as the third quarter of 2020 continued to experience negative effects from ~~March 2020 through June 2020 (refer to~~ the ~~"COVID-19 Impact on Our Operations" section above for further details).~~lockdown measures of 2020. The ~~decrease~~increase in other revenue of ~~0.4%~~59.2% was primarily driven by a $3$183 million organic ~~decrease,~~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 first ~~half~~six months of ~~2020~~2021 compared to the prior year period.

Cost of Goods Sold. Cost of goods sold decreased to 59.0% of revenue in the six months ended June 30, 2021 from 60.5% of revenue in the six months ended June 30, ~~2020 from 61.3% of revenue in the six months ended June 30, 2019. Cost~~2020. The cost of goods sold ~~decreased 0.9%~~decrease reflects impacts of 0.8%, 0.6% and 0.3% ~~as a result of~~in our North America, Europe and ~~Europe~~Specialty segments, respectively, partially offset by ana 0.3% increase in cost of ~~0.2%~~goods sold attributable to mix. The mix impact was a result of the decreased volumes in our ~~Specialty segment.~~North America segment primarily due to the COVID-19 pandemic, as the higher margin North America segment made up a smaller percentage of the consolidated results, causing an unfavorable effect on the gross margin percentage. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the six months ended June 30, ~~2020~~2021 compared to the ~~six months ended June 30, 2019.~~same period of 2020.

Selling, General and Administrative Expenses. Our SG&A expenses as a percentage of revenue ~~increased~~decreased to 26.5% in the six months ended June 30, 2021 from 29.1% in the six months ended June 30, ~~2020 from 28.3% in~~2020. SG&A expenses decreased over the ~~six months ended June 30, 2019. Our Europe and~~prior year period as a result of (i) a 1.2% decrease attributable to our North America ~~segments negatively affected SG&A expenses as~~segment, (ii) a ~~percentage of revenue by 0.8%~~1.0% decrease from our Europe segment, (iii) a 0.2% decrease from our Specialty segment and ~~0.3%, respectively, which were partially offset by~~(iv) a 0.2% decrease in SG&A expenses attributable to mix. The mix impact iswas a result of the ~~decreased volumes~~increased revenues in our ~~North America~~Specialty segment, ~~primarily due to the COVID-19 pandemic,~~ as the ~~higher~~lower SG&A expense percentage for the ~~North America~~Specialty segment ~~makes~~made up a ~~smaller~~larger percentage of the consolidated results, which ~~has~~had a favorable effect on the SG&A expense percentage. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the six months ended June 30, ~~2020~~2021 compared to the six months ended June 30, ~~2019.~~2020.

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

Six Months Ended
June 30,
2020 2019 Change
Restructuring expenses $ 31,797
⁽¹⁾
$ 11,198
⁽²⁾
$ 20,599
Acquisition related expenses 123 486 (363)
Total restructuring and acquisition related expenses $ 31,920 $ 11,684 $ 20,236


	Six Months Ended
	June 30,
	2021			2020			Change


Restructuring and acquisition related expenses	$	12,954	(1)	$	31,920	(2)	$	(18,966)

(1)Restructuring expenses for the six months ended June 30, 2021 primarily consisted of (i) $6 million related to our 2020 global restructuring program and (ii) $5 million related to our 1 LKQ Europe program.

(2) Restructuring expenses for the six months ended June 30, 2020 primarily consisted of (i) ~~$22~~$22 million related to our 2020 global restructuring program, (ii) $5 million related to integration costs from acquisitions, and (iii) $5$5 million related to our 2019 global restructuring program.

~~(2) Restructuring expenses for the~~
~~six months ended~~ ~~June 30, 2019 primarily consisted of $5 million related to our 2019 global restructuring program and $6 million related to integration costs from acquisitions.~~

~~Loss on Disposal of Businesses and Impairment of Net Assets Held for Sale.~~ ~~For the six months ended June 30, 2020, we recorded a net loss on the disposal of businesses and impairment charges on net assets held for sale totaling $2 million, compared to a~~ ~~$49 million~~ impairment charge on net assets held for sale for the six months ended June 30, 2019. See "Net Assets Held for Sale" in Note 3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the net loss on disposals and impairment charges.

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


		Six Months Ended										Six Months Ended
		June 30,										June 30,
		2020		2019		Change				2021		2020		Change
Depreciation	Depreciation	$	74,116	$	72,372	$	1,744	⁽¹⁾	Depreciation	$	77,725	$	74,116	$	3,609	(1)
Amortization	Amortization	57,126		69,464		(12,338)		⁽²⁾	Amortization	52,972		57,126		(4,154)		(2)
Total depreciation and amortization	Total depreciation and amortization	$	131,242	$	141,836	$	(10,594)		Total depreciation and amortization	$	130,697	$	131,242	$	(545)

(1)~~Depreciation~~The increase in depreciation expense ~~increased by~~ $2reflected (i) $3 million, from foreign currency translation primarily related to an increase in the euro and pound sterling exchange rates and (ii) $1 million due to capital expenditures in our North America segment. during the six months ended June 30, 2021 compared to the prior year period.

(2)The decrease in amortization expense primarily reflected (i) decreases of $8$6 million and $3$2 million related to the customer relationship intangible assets recorded upon our acquisitions of Stahlgruber and Rhiag, respectively, as the accelerated amortization onof the customer relationship intangible assets resulted in lower amortization expense during the six months ended June 30, ~~2020~~2021 compared to the prior year period, ~~and~~partially offset by (ii) a ~~decrease of $1~~$4 million ~~related to the impact of~~increase from foreign currency translation, ~~principally due~~primarily related to ~~a decrease~~an increase in the euro exchange rate during the six months ended June 30, ~~2020~~2021 compared to the prior year period.

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

~~Other expense, net for the six months ended June 30, 2019~~

~~62,389~~

~~(Decrease) increase due to:~~

~~Interest expense, net of interest income~~

~~(20,426)~~

⁽¹⁾

~~Loss on debt extinguishment~~

~~12,751~~

⁽²⁾

~~Other income, net~~

~~(2,212)~~

⁽³⁾

~~Net decrease~~

~~(9,887)~~

~~Other expense, net for the six months ended June 30, 2020~~

~~52,502~~


Other expense, net for the six months ended June 30, 2020	$	52,502
(Decrease) increase due to:
Interest expense, net of interest income	(11,196)		(1)
Loss on debt extinguishment	10,813		(2)

Other expense (income), net	1,272		(3)
Net increase	889
Other expense, net for the six months ended June 30, 2021	$	53,391

(1)The decrease in interest is primarily related to (i) a ~~$14~~$16 million decrease resulting from lower outstanding debt during the six months ended June 30, ~~2020~~2021 compared to the prior year period, partially offset by (ii) a $4$3 million ~~decrease from lower interest rates on borrowings under our senior secured credit agreement compared to the prior year period, and (iii) a $1 million decrease~~increase from foreign currency translation, ~~primarily~~primarily related to ~~a decrease~~an increase in the euro exchange rate during the six months ended June 30, ~~2020~~2021 compared to the prior year period.

(2)~~In January 2020, we recorded a~~The $11 million increase in loss on debt extinguishment is due to the $24 million charge recorded in April 2021 related to the redemption of the 2026 notes compared to a $13 million charge related to the redemption of the U.S. Notes (2023) ~~due to the early-redemption premium and the write-off of the unamortized debt issuance costs.~~in January 2020.

(3)The ~~increase~~unfavorable variance in ~~other~~Other income, net primarily ~~consisted of~~related to (i) a $5$6 million ~~increase~~reduction in proceeds related to insurance ~~settlement proceeds in our North America segment compared to the prior year period,~~settlements, and (ii) various factors totaling $3 million, partially offset by ~~(ii)~~(iii) $6 million mark to market adjustments in 2021 for appreciation in our equity investments not accounted for under the equity method, and (iv) a $2 million pension settlement loss recorded in the second quarter of ~~2020~~.2020.

Provision for Income Taxes. Our effective income tax rate for the six months ended June 30, ~~2020~~2021 was ~~27.7%~~26.3%, compared to ~~27.1%~~27.7% for the comparable prior year period. Th~~e increase is attributable to a higher expected~~The lower estimated annual effective tax rate for 2021 is primarily attributable to the higher forecasted 2021 results of operations, as compared to the forecasts available during the comparable period in 2020, ~~as a result of the estimated unfavorable impact of the~~when COVID-19 pandemic on the Company’s results of operations. The primary factor in the increase in the full year estimated rate is the impact of lower available interest deductions in certain foreign jurisdictions due to legislative thin capitalization constraints, typically based on profitability.economic disruptions were depressing forecasted 2020 results. For the six months ended June 30, ~~2020,~~2021, the effective tax rate was ~~reduced 0.3%~~increased 0.1% by ~~favorable~~net unfavorable discrete items, primarily a deferred tax adjustment required as a result of a United Kingdom staged tax rate increase that will become effective April 1, 2023. Net discrete items for the six months ended June 30, 2020 reduced the effective tax rate by 0.3%, primarily due to excess tax benefits on stock-based compensation and deferred tax adjustments as a result of statutory tax rate changes. ~~Net discrete items for the six months ended June 30, 2019 added 0.1% to the effective tax rate. Ongoing uncertainties due to the impact of the COVID-19~~ pandemic on the Company’s operations for the remainder of 2020 may result in volatile effective tax rates driven generally by the level of profitability and changes in the mix of earnings across the Company’s jurisdictions.

~~Equity in (Losses) Earnings of Unconsolidated Subsidiaries.~~ Equity in (losses) earnings of unconsolidated subsidiaries for the six months ended June 30, 2020 primarily related to an immaterial investment in our North America segment. During the first quarter of 2019, we recorded a $40 million other-than-temporary impairment related to our investment in Mekonomen. See ~~"Investments in Unconsolidated Subsidiaries" in~~ Note ~~3, "Financial Statement Information"~~13, "Income Taxes" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further ~~information on~~information.

Equity in Earnings (Losses) of Unconsolidated Subsidiaries. Equity in earnings of unconsolidated subsidiaries for the ~~impairment charge.~~six months ended June 30, 2021 increased by $11 million primarily related to improved year over year results reported by Mekonomen, which is our largest equity method investment.

Foreign Currency Impact. We translate our statements of income at the average exchange rates in effect for the period. Relative to the ~~rates~~rate used during the six months ended June 30, ~~2019,~~2020, the Czech koruna, pound sterling, ~~euro~~Canadian dollar and ~~Canadian dollar~~euro rates used to translate the ~~2020~~2021 statements of income ~~decreased~~increased by ~~4.8%~~11.2%, ~~2.6%~~10.2%, ~~2.4%~~9.4% and ~~2.2%~~9.3%, respectively. The ~~negative~~positive translation effect of the change in foreign currencies against the U.S. dollar combined with the ~~negative~~positive impact of realized and unrealized currency gains and losses for the six months ended June 30, ~~2020, resulting~~2021 resulted in a $0.01 ~~negative~~positive effect on diluted earnings per share relative to the prior year period.

Net Income (Loss) ~~Income~~ Attributable to Continuing and Discontinued Noncontrolling Interest. Net income (loss) ~~income~~ attributable to continuing noncontrolling interest for the six months ended June 30, ~~2020 decreased $2 million~~2021 increased an immaterial amount compared to the six months ended June 30, ~~2019 primarily due to the noncontrolling interest of subsidiaries acquired in connection with the Stahlgruber acquisition.~~2020. Net income attributable to discontinued noncontrolling interest was immaterial for the six months ended June 30, 2020 and ~~2019 and~~ related to the Stahlgruber Czech Republic wholesale business. See Note 3,2, "Discontinued Operations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on this business.

Results of Operations—Segment Reporting

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

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

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

Three Months Ended June 30, Six Months Ended June 30,
2020 % of Total Segment Revenue 2019 % of Total Segment Revenue 2020 % of Total Segment Revenue 2019 % of Total Segment Revenue
Third Party Revenue
North America $ 1,011,136 $ 1,321,670 $ 2,301,071 $ 2,623,876
Europe 1,211,185 1,516,240 2,574,779 2,961,781
Specialty 404,002 410,263 751,408 762,819
Total third party revenue $ 2,626,323 $ 3,248,173 $ 5,627,258 $ 6,348,476
Total Revenue
North America $ 1,011,395 $ 1,321,766 $ 2,301,590 $ 2,624,075
Europe 1,211,185 1,516,240 2,574,779 2,961,781
Specialty 404,874 411,636 753,456 765,373
Eliminations (1,131) (1,469) (2,567) (2,753)
Total revenue $ 2,626,323 $ 3,248,173 $ 5,627,258 $ 6,348,476
Segment EBITDA
North America $ 149,554 14.8 % $ 190,048 14.4 % $ 360,992 15.7 % $ 366,684 14.0 %
Europe 89,387 7.4 % 116,281 7.7 % 167,649 6.5 % 221,579 7.5 %
Specialty 52,233 12.9 % 52,367 12.7 % 84,465 11.2 % 90,326 11.8 %


	Three Months Ended June 30,								Six Months Ended June 30,
��	2021		% of Total Segment Revenue		2020		% of Total Segment Revenue		2021		% of Total Segment Revenue		2020		% of Total Segment Revenue
Third Party Revenue
North America	$	1,327,050			$	1,011,136			$	2,576,424			$	2,301,071
Europe	1,576,661				1,211,185				3,040,114				2,574,779
Specialty	531,403				404,002				989,362				751,408
Total third party revenue	$	3,435,114			$	2,626,323			$	6,605,900			$	5,627,258
Total Revenue
North America	$	1,327,694			$	1,011,395			$	2,577,387			$	2,301,590
Europe	1,576,661				1,211,185				3,040,114				2,574,779
Specialty	532,279				404,874				991,218				753,456
Eliminations	(1,520)				(1,131)				(2,819)				(2,567)
Total revenue	$	3,435,114			$	2,626,323			$	6,605,900			$	5,627,258
Segment EBITDA
North America	$	276,186	20.8	%	$	149,554	14.8	%	$	525,353	20.4	%	$	360,992	15.7	%
Europe	168,106		10.7	%	89,387		7.4	%	309,064		10.2	%	167,649		6.5	%
Specialty	79,399		14.9	%	52,233		12.9	%	140,881		14.2	%	84,465		11.2	%

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,~~liabilities; other gains and losses related to acquisitions, equity method investments, or ~~divestitures,~~divestitures; equity in losses and earnings of unconsolidated ~~subsidiaries,~~subsidiaries; equity investment mark to market adjustments; and impairment charges. EBITDA, which is the basis for Segment EBITDA, is calculated as net income ~~less net income (loss)~~ attributable to ~~continuing and discontinued noncontrolling interest,~~LKQ stockholders excluding discontinued operations and discontinued noncontrolling interest, depreciation, amortization, interest (which includes gains and losses on debt extinguishment) and income tax expense. See Note 14, "Segment and Geographic Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to net income.

Three Months Ended June 30, ~~2020~~2021 Compared to Three Months Ended June 30, ~~2019~~2020

North America

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


		Three Months Ended June 30,							Percentage Change in Revenue																Three Months Ended June 30,					Percentage Change in Revenue
North America	North America	2020		2019		Organic			Acquisition and Divestiture ⁽³⁾		Foreign Exchange		Total Change		North America	2021		2020		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	892,826	$	1,165,482	(22.5)	%	⁽¹⁾	(0.6)	%	(0.2)	%	(23.4)	%	Parts & services revenue	$	1,077,171	$	892,826	19.7	%	(1)	0.2	%	0.7	%	20.6		%
Other revenue	Other revenue	118,310		156,188		(24.4)	%	⁽²⁾	0.1	%	(0.0)	%	(24.3)	%	Other revenue	249,879		118,310		111.1	%	(2)	0.0	%	0.1	%	111.2		%
Total third party revenue	Total third party revenue	$	1,011,136	$	1,321,670	(22.7)	%		(0.5)	%	(0.2)	%	(23.5)	%	Total third party revenue	$	1,327,050	$	1,011,136	30.4	%		0.2	%	0.7	%	31.2		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																											Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts andand services organic revenue ~~declined 22.5% in the second quarter of 2020. The organic decline was impacted by collision and liability repairable auto claims, which, according to data from CCC Information Services, Inc. ("CCC"), were 41.7% lower~~increased 19.7% for the three months ended June 30, ~~2020~~2021 compared to the prior ~~year period.~~period. This ~~decrease~~is primarily driven by an increase in collision and liability related auto claims ~~activity was primarily due~~related to the COVID-19 ~~pandemic and had an adverse impact on sales volumes in our wholesale~~

~~operations. The volume decline in collision parts was partially offset by an outperformance of the claims trend attributable to share gains,~~recovery as well as growth from major mechanical ~~part sales and self service parts sales and admissions.~~parts.

(2)~~Other~~The $131 million year over year organic increase in other revenue ~~declined $38 million in the second quarter of 2020~~is primarily ~~driven by~~related to (i) a $22 million decrease in revenue from scrap steel due to both lower volumes and prices, (ii) a $22 million decrease in other scrap metals (e.g. aluminum) and fluids due to lower volumes, and (iii) a decrease in core revenue of $4 million due to lower volumes, partially offset by a $9$63 million increase in revenue from precious metals (platinum, palladium, and rhodium) primarily due to higher prices ~~compared~~and to ~~the prior year. The volume declines~~a lesser extent, increased volumes, (ii) a $44 million increase in ~~other~~ revenue ~~were~~from scrap steel due to ~~lower purchase~~higher prices and to a lesser extent,

increased volumes, and ~~throughput~~(iii) a $24 million increase in ~~our salvage and self service operations as a result of~~ ~~the COVID-19 pandemic.~~

~~(3)Acquisition related growth in the second quarter of 2020 reflected~~ revenue from ~~our acquisition of two wholesale businesses~~other scrap and ~~one self service business since the beginning of the second quarter of 2019 through the one-year anniversary of the acquisitions. Reduced revenue~~cores primarily related to higher prices as ~~a result of the disposal of our aviation business in the third quarter of 2019 more than offset the acquisition growth.~~well as increased volumes.

Segment ~~EBITDA.~~EBITDA. Segment EBITDA ~~decreased $40~~increased $127 million, or ~~21.3%~~84.7%, in the second quarter of ~~2020~~2021 compared to the prior year period. ~~The decline~~This increase is attributable to higher precious metals and scrap steel prices, margin initiatives, rightsizing actions and the favorable effect from the revenue recovery compared to the prior year when the COVID-19 impact was more severe. Increases in precious metals prices contributed an estimated $40 million in Segment EBITDA ~~was primarily due~~improvement relative to ~~volume declines as a result~~the second quarter of ~~the COVID-19 pandemic.~~2020. Additionally, net sequential ~~decreases~~increases in scrap steel prices in our salvage and self service operations had an ~~unfavorable~~$11 million favorable impact ~~of $6 million~~ on Segment EBITDA during the three months ended June 30, ~~2020,~~2021, compared to a $2$6 million unfavorable impact onduring the three months ended June 30, ~~2019.~~2020 resulting from net sequential decreases in scrap steel prices. This ~~unfavorable~~favorable impact for the three months ended June 30, ~~2020~~2021 resulted from the ~~decline~~increase in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

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


North America	North America	Percentage of Total Segment Revenue			North America	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended June 30, 2019		14.4	%
Segment EBITDA for the three months ended June 30, 2020					Segment EBITDA for the three months ended June 30, 2020	14.8	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	1.1	%	(1)	Change in gross margin	3.8	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(1.2)	%	(2)	Change in segment operating expenses	2.8	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest	Change in other expense, net and net income attributable to continuing noncontrolling interest	0.5	%	(3)	Change in other expense, net and net income attributable to continuing noncontrolling interest	(0.6)	%	(3)
Segment EBITDA for the three months ended June 30, 2020		14.8	%
Segment EBITDA for the three months ended June 30, 2021					Segment EBITDA for the three months ended June 30, 2021	20.8	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin primarily reflected favorable impacts of ~~0.9%~~3.4% from our wholesale operations and 0.5% from our self service operations. ~~The increase in wholesale~~Wholesale operations gross margin was favorable primarily ~~attributable~~due to the positive impact of higher precious metals and scrap steel prices, lower discounting and cost reductions from operational efficiencies and rightsizing ~~actions, higher prices of precious metals (platinum, palladium and rhodium), improved return rates, as well as favorable impacts from ongoing margin improvement initiatives compared~~efforts. Compared to the prior year, ~~period.~~input costs for our wholesale operations have risen, with (i) inflationary pressures impacting product and freight costs in aftermarket and (ii) limited supply combined with heightened competition at auctions contributing to higher salvage costs. We ~~expect downward pressure on our salvage~~are passing through price increases, and ~~self service margins~~we experienced a margin benefit in the second ~~half~~quarter of ~~2020~~2021 as the ~~number~~higher prices were enacted ahead of ~~cars available for purchase becomes more limited and purchase costs increas~~eturning the recent, higher cost inventory. The favorable gross margin impact from self service was primarily due to ~~the COVID-19 pandemic.~~higher precious metals and scrap steel prices.

(2) The ~~increase~~decrease in segment operating expense as a percentage of revenue reflects (i) a ~~negative~~1.3% favorable impact from personnel expenses due to a positive leverage effect, ~~of 1.5%~~mostly related to the increase in other revenue, which does not require significant additional headcount to support, and other personnel cost savings from headcount reductions were primarily offset by increased incentive compensation expense and inflationary increases, (ii) a 1.3% favorable impact from facility expenses ~~which are largely fixed. Additionally, incremental bad debt expense had an unfavorable impact of 0.4%~~ due to ~~the downturn in economic conditions caused by the COVID-19 pandemic. The impact was partially mitigated by cost~~a positive leverage effect and rightsizing actions, ~~to reduce personnel expenses, which generated~~and (iii) a 0.3% favorable impact ~~of 0.7% related~~due to ~~permanent and temporary headcount reductions, reduced hours, limitations~~improved collections on ~~travel, government grants in Canada and other one-time benefits.~~bad debt. As the market ~~recovers~~continues to recover and volumes increase, we expect to bring back necessary resources to support our operations; however, we expect ~~that certain~~ permanent actions taken ~~during the quarter~~in 2020 will continue to provide a long-term favorable impact for the segment.

(3) The ~~decrease~~unfavorable impact in other expense, net and net income attributable to continuing noncontrolling interest was primarily due to proceeds from business interruption insurance received in the second quarter of 2020 that had a year over year impact of 0.8%, which was partially offset by ~~an unfavorable~~a favorable impact ~~of 0.2%~~ from pension expense resulting from a pension settlement loss recorded in the second quarter of 2020.

Europe

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

Three Months Ended June 30, Percentage Change in Revenue
Europe 2020 2019
Organic ⁽¹⁾
Acquisition and Divestiture ⁽²⁾
Foreign Exchange ⁽³⁾
Total Change
Parts & services revenue $ 1,206,330 $ 1,510,952 (16.6) % (0.7) % (2.9) % (20.2) %
Other revenue 4,855 5,288 (4.9) % 0.0 % (3.3) % (8.2) %
Total third party revenue $ 1,211,185 $ 1,516,240 (16.6) % (0.7) % (2.9) % (20.1) %
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.


	Three Months Ended June 30,				Percentage Change in Revenue
Europe	2021		2020		Organic (1)		Acquisition and Divestiture (2)		Foreign Exchange (3)		Total Change
Parts & services revenue	$	1,569,697	$	1,206,330	20.7	%	(0.9)	%	10.3	%	30.1	%
Other revenue	6,964		4,855		31.7	%	—	%	11.7	%	43.4	%
Total third party revenue	$	1,576,661	$	1,211,185	20.7	%	(0.8)	%	10.3	%	30.2	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue ~~declined~~ ~~16.6% in~~for the ~~second quarter of 2020,~~ ~~mainly drive~~nthree months ended June 30, 2021 increased by ~~the COVID-19~~ ~~pandemic disruptions which adversely affected volumes in all of our European operations. On~~19.2% on a per day basis, ~~organic parts and services revenue improved sequentially during~~as the ~~quarter, improving from a year-over-year decrease of 28.9% during the month of April~~negative pandemic effect on volume in 2020 ~~to a decrease of 8.4%~~was more severe than in the ~~month of June 2020.~~current year. Not all regions were impacted by the pandemic at the same time and to the same degree ~~creating~~in 2020, and the easing of lockdown measures has varied across the continent in 2021. These conditions created a different growth profile for each of our European businesses. ~~Germany and the Netherlands recovered at a faster rate, with~~While all of our businesses reported year over year growth, the U.K. and Italy ~~lagging.~~reported the greatest increases for the quarter.

(2)~~Acquisition related growth in~~The decline for the second quarter of 2020 reflected revenue from our acquisition of one wholesale business since the beginning of the second quarter of 2019 through the one-year anniversary of the acquisition. Reduced revenue asthree months ended June 30, 2021 was primarily a result of the ~~disposals~~disposal of a non-core telecommunications operation in Germany in the second quarter of 2020 and ~~a wholesale business~~two additional smaller disposals in ~~Bulgaria in the third quarter of 2019~~ ~~more than offset the acquisition growth~~.2020.

(3)Compared to the prior year, exchange rates ~~decreased~~increased our revenue growth by ~~$44~~$124 million,, or ~~2.9%~~10.3%, primarily due to the ~~stronger~~weaker U.S. dollar against the euro, pound sterling and Czech koruna during the second quarter of ~~2020~~2021 relative to the prior year period.

Segment EBITDA. Segment EBITDA ~~decreased~~ ~~$27~~increased $79 million,, or ~~23.1%~~88.1%, in the second quarter of ~~2020~~2021 compared to the prior year period. Our Europe Segment EBITDA included a ~~negative~~positive year over year impact of $4$9 million related to the translation of local currency results into U.S. dollars at ~~lower~~higher exchange rates than those experienced during the second quarter of ~~2019.~~2020. On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA ~~decreased~~increased by ~~$23~~$69 million,, or ~~20.1%~~77.6%, compared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the three months ended June 30, ~~2020.~~2021.

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


Europe	Europe	Percentage of Total Segment Revenue			Europe	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended June 30, 2019		7.7	%
Increase (decrease) due to:
Segment EBITDA for the three months ended June 30, 2020					Segment EBITDA for the three months ended June 30, 2020	7.4	%
Increase due to:					Increase due to:
Change in gross margin	Change in gross margin	1.0	%	(1)	Change in gross margin	1.4	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(1.1)	%	(2)	Change in segment operating expenses	1.7	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest	Change in other expense, net and net income attributable to continuing noncontrolling interest	(0.1)	%		Change in other expense, net and net income attributable to continuing noncontrolling interest	0.1	%
Segment EBITDA for the three months ended June 30, 2020		7.4	%
Segment EBITDA for the three months ended June 30, 2021					Segment EBITDA for the three months ended June 30, 2021	10.7	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin was primarily attributable to favorable impacts of (i) ~~a 1.0% favorable impact across our operations principally~~1.2% as a result of net price increases and margin improvement initiatives supporting the pursuit of profitable revenue growth, and ~~decreased inventory write-downs.~~(ii) 0.2% from the disposal of non-core operations in 2020.

(2) The ~~increase~~decrease in segment operating ~~expense~~expenses as a percentage of revenue reflects ~~a negative~~favorable impacts of (i) 0.8% from bad debt expense due to customers' improved solvency and an increase in reserve in the prior year related to the COVID-19 pandemic, (ii) 0.7% from freight, vehicle and fuel expenses due to higher internet and mail order sales in the prior year, which have higher freight costs, and favorable leverage effect, of(iii) 0.3% favorable leverage effect from facility expenses, which are largely ~~fixed. Other~~fixed, and (iv) other individually immaterial factors that had an impact of 0.3% in the aggregate, partially offset by (v) an unfavorable ~~factors include incremental bad debt expense~~impact of ~~0.8%~~0.4% from personnel costs primarily due to ~~the downturn in economic conditions caused by~~ ~~the COVID-19 pandemic. Professional fees had an unfavorable~~

~~impact of 0.4%. These negative impacts were partially mitigated by actions to reduce personnel expenses, which generated a favorable impact of 0.5%. Roughly half of the benefit came from~~ government grants received in the prior year to cover employee costs in countries such as the U.K. and ~~Germany. Other personnel cost decreases resulted from permanent~~Germany (a lesser amount was received in 2021) and ~~temporary~~increased incentive compensation, partially offset by a favorable leverage effect and headcount reductions, limitations on travel, reduced hours and other one-time benefits. As the market recovers, volumes increase and government programs cease, we expect to bring back necessary resources to support our operations; however, we expect that certain permanent actions taken during the quarter will provide a long-term favorable impact for the segment.reductions.

Specialty

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


		Three Months Ended June 30,						Percentage Change in Revenue															Three Months Ended June 30,					Percentage Change in Revenue
Specialty	Specialty	2020		2019		Organic ⁽¹⁾		Acquisition and Divestiture		Foreign Exchange		Total Change		Specialty	2021		2020		Organic (1)		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	404,002	$	410,263	(1.4)	%	0.3	%	(0.4)	%	(1.5)	%	Parts & services revenue	$	531,403	$	404,002	30.1	%	0.4	%	1.1	%	31.5		%
Other revenue	Other revenue	—		—		—	%	—	%	—	%	—	%	Other revenue	—		—		—	%	—	%	—	%	—		%
Total third party revenue	Total third party revenue	$	404,002	$	410,263	(1.4)	%	0.3	%	(0.4)	%	(1.5)	%	Total third party revenue	$	531,403	$	404,002	30.1	%	0.4	%	1.1	%	31.5		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																									Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)~~Parts and services~~The organic ~~revenue declined~~ ~~1.4% in the second quarter of 2020, primarily due to the adverse effects on demand resulting from~~ ~~the COVID-19 pandemic. While down on a year over year basis, revenue held near the prior year level~~increase was primarily due to strong demand for ~~recreational vehicle~~our products across all channels of our business. We believe the revenue growth was driven by our competitive advantage with our delivery service teams that enabled us to keep up with the strong demand and ~~high drop ship fulfillment.~~have more available inventory than our competitors.

Segment EBITDA. Segment EBITDA ~~decreased~~ ~~$0.1~~increased $27 million,, or ~~0.3%~~52.0%, in the second quarter of ~~2020~~2021 compared to the prior year second quarter.

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


Specialty	Specialty	Percentage of Total Segment Revenue			Specialty	Percentage of Total Segment Revenue
Segment EBITDA for the three months ended June 30, 2019		12.7	%
(Decrease) increase due to:
Segment EBITDA for the three months ended June 30, 2020					Segment EBITDA for the three months ended June 30, 2020	12.9	%
Increase (decrease) due to:					Increase (decrease) due to:
Change in gross margin	Change in gross margin	(1.2)	%	(1)	Change in gross margin	2.2	%	(1)
Change in segment operating expenses	Change in segment operating expenses	1.5	%	(2)	Change in segment operating expenses	(0.2)	%	(2)

Segment EBITDA for the three months ended June 30, 2020		12.9	%
Segment EBITDA for the three months ended June 30, 2021					Segment EBITDA for the three months ended June 30, 2021	14.9	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The ~~decrease~~increase in gross margin primarily reflects ~~unfavorable impacts of (i)~~ ~~0.9%~~ ~~due to unfavorable~~favorable product and channel mix as well as lower discounting to recover increased input costs.

(2) The increase in ~~the second quarter~~segment operating expenses as a percentage of ~~2020 and~~revenue reflects (i) an unfavorable impact of 0.4% due to increased incentive compensation, partially offset by (ii) several individually immaterial factors that had ~~an unfavorable impact of 0.3% in the aggregate.~~

~~(2) The increase in segment operating expenses reflects~~ a favorable impact of ~~(i)~~ ~~2.5%~~ ~~in personnel costs primarily due to reduced headcount and reduced hours, partially offset by unfavorable impacts of (ii)~~ ~~0.5%~~ ~~in freight, vehicle and fuel expenses due to an increased use of third party freight, (iii)~~ 0.2% in ~~e-commerce fees due to sales channel mix, and (iv)~~ ~~several individually immaterial factors that had an unfavorable impact of 0.3% in~~ the ~~aggregate~~.

aggregate.

4744

Six Months Ended June 30, ~~2020~~2021 Compared to Six Months Ended June 30, ~~2019~~2020

North America

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


		Six Months Ended June 30,							Percentage Change in Revenue																Six Months Ended June 30,					Percentage Change in Revenue
North America	North America	2020		2019		Organic			Acquisition and Divestiture ⁽³⁾		Foreign Exchange		Total Change		North America	2021		2020		Organic			Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	2,000,168	$	2,321,180	(13.4)	%	⁽¹⁾	(0.3)	%	(0.2)	%	(13.8)	%	Parts & services revenue	$	2,095,608	$	2,000,168	4.1	%	(1)	0.1	%	0.5	%	4.8		%
Other revenue	Other revenue	300,903		302,696		(1.3)	%	⁽²⁾	0.8	%	(0.0)	%	(0.6)	%	Other revenue	480,816		300,903		59.7	%	(2)	0.0	%	0.1	%	59.8		%
Total third party revenue	Total third party revenue	$	2,301,071	$	2,623,876	(12.0)	%		(0.2)	%	(0.1)	%	(12.3)	%	Total third party revenue	$	2,576,424	$	2,301,071	11.4	%		0.1	%	0.5	%	12.0		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																											Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue ~~declined despite one additional selling~~increased 4.1% (4.9% on a per day basis) in the ~~first half of 2020~~six months ended June 30, 2021 compared to the prior year period. ~~On a per day basis, organic revenue declined 14.0%. The organic decline was impacted~~This growth is primarily driven by an increase in collision and liability ~~repairable~~related auto claims ~~which, according to data from CCC, were 26.0% lower for the~~ ~~six months ended~~ ~~June 30, 2020 compared to the prior year period. This decrease in claims activity was primarily due~~related to the COVID-19 ~~pandemic and had an adverse impact on sales volumes in our wholesale operations.~~ ~~The volume decline in collision parts was partially offset by~~ ~~an outperformance of~~recovery during the ~~claims trend attributable to share gains, mechanical part sales and self service parts sales and admissions~~. Prior to the pandemic, parts and services organic revenue in North America was slightly less than the same period in the prior year, declining 1.1% through February 2020, principally due to (i) the termination in the fourthsecond quarter of 2019 of an agreement signed in December 2017 for the distribution of batteries which had an unfavorable impact of 0.8% through February 2020 compared to the prior year period, and, (ii) to a lesser extent, milder winter weather conditions compared to the prior year period. During the period of March 2020 through June 2020, parts and services organic revenue declined ~~20.2%~~ ~~on a per day basis compared to the prior year period primarily due to volume effects caused by the COVID-19 pandemic (collision and liability repairable auto claims were down approximately 41.7%~~ ~~in the second quarter of 2020 according to data from CCC).~~2021.

(2)The $2$180 million year over year organic ~~decrease~~increase in other revenue is primarily related to (i) a $27 million decrease in revenue from other scrap metals (e.g. aluminum) and fluids due to lower volumes, (ii) a $26 million decrease in revenue from scrap steel primarily due to lower year over year prices, and (iii) a decrease in core revenue of $7 million due to ~~lower volumes, partially offset by a $56~~an $86 million increase in revenue from precious metals (platinum, palladium, and rhodium) primarily due to higher prices, ~~compared to the prior year.~~ ~~The volume declines~~(ii) a $67 million increase in ~~other~~ revenue ~~were~~from scrap steel due to ~~lower purchase volumes~~higher prices, and ~~throughput~~(iii) a $27 million increase in ~~our salvage and self service operations as a result of~~ ~~the COVID-19 pandemic.~~

~~(3)Acquisition related growth in the first half of 2020 reflected~~ revenue from ~~our acquisition of three wholesale businesses~~other scrap and ~~one self service business since the beginning of 2019 through the one-year anniversary of the acquisitions. Reduced revenue as~~cores primarily related to higher prices and to a ~~result of the disposal of our aviation business in the third quarter of 2019~~ ~~more than offset the acquisition growth.~~lesser extent, increased volumes.

Segment EBITDA. Segment EBITDA ~~decreased~~ $6increased $164 million,, or ~~1.6%~~45.5%, in the first half of ~~2020, though there was~~2021 despite the impact of one ~~additional~~fewer selling day compared to the prior year period. ~~Sequential decreases~~This increase is attributable to higher precious metals and scrap steel prices, margin initiatives, rightsizing actions and the favorable effect from the revenue recovery compared to the prior year when the COVID-19 impact was more severe. Increases in precious metals prices contributed an estimated $60 million in Segment EBITDA improvement relative to the first half of 2020. Additionally, net sequential increases in scrap steel prices in our salvage and self service operations had ~~an immaterial~~a $31 million favorable impact on ~~North America~~ Segment EBITDA during the six months ended June 30, ~~2020,~~2021, compared to ~~a $7 million unfavorable~~an immaterial favorable impact onduring the six months ended June 30, ~~2019.~~2020 resulting from net sequential increases in scrap steel prices. This favorable impact for the six months ended June 30, ~~2020~~2021 resulted from the increase in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

4845

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


North America	North America	Percentage of Total Segment Revenue			North America	Percentage of Total Segment Revenue
Segment EBITDA for the six months ended June 30, 2019		14.0	%
Segment EBITDA for the six months ended June 30, 2020					Segment EBITDA for the six months ended June 30, 2020	15.7	%
Increase (decrease) due to:	Increase (decrease) due to:				Increase (decrease) due to:
Change in gross margin	Change in gross margin	2.3	%	(1)	Change in gross margin	2.1	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(0.6)	%	(2)	Change in segment operating expenses	2.9	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest	Change in other expense, net and net income attributable to continuing noncontrolling interest	0.1	%	(3)	Change in other expense, net and net income attributable to continuing noncontrolling interest	(0.3)	%	(3)
Segment EBITDA for the six months ended June 30, 2020		15.7	%
Segment EBITDA for the six months ended June 30, 2021					Segment EBITDA for the six months ended June 30, 2021	20.4	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin primarily reflected favorable impacts of ~~1.6%~~2.1% from our wholesale ~~operations and 0.5% from our self service~~ operations. ~~The increase in wholesale~~Wholesale operations gross margin was favorable primarily ~~attributable~~due to athe positive impact ~~from~~of higher ~~prices of~~ precious metals ~~(platinum, palladium~~ and ~~rhodium)~~scrap steel prices, lower discounting and ~~improved return rates, as well as favorable impacts~~cost reductions from ~~ongoing~~operational efficiencies and rightsizing ~~activities and margin improvement initiatives compared~~efforts. Compared to the prior year, ~~period. The increase~~input costs for our wholesale operations have risen, with (i) inflationary pressures impacting product and freight costs in ~~self service gross margin was primarily attributable~~aftermarket and (ii) limited supply combined with heightened competition at auctions contributing to higher ~~prices of precious metals.~~ salvage costs. We ~~expect downward pressure on~~are passing through price increases to our ~~salvage~~customers to protect our margins, and ~~self service margins~~we experienced a margin benefit in the ~~second~~first half of ~~2020~~2021 as the ~~number~~higher prices were enacted ahead of ~~cars available for purchase becomes more limited and purchase costs increase due to~~turning the ~~COVID-19 pandemic.~~recent, higher cost inventory.

(2) The ~~increase~~decrease in segment operating expense as a percentage of revenue on a per day basis reflects (i) a ~~negative~~favorable impact of 2.0% from personnel expenses related to headcount reductions, operational efficiencies, and a positive leverage effect, mostly related to the increase in other revenue, partially offset by increased incentive compensation expense and inflationary increases, (ii) a positive leverage effect of ~~0.7%~~0.5% from facility expenses, which are largely ~~fixed. The impact was partially mitigated by cost actions to reduce personnel expenses, which generated~~fixed and (iii) a 0.3% favorable impact ~~of 0.2% related~~from bad debt due to ~~permanent and temporary headcount reductions, reduced hours, limitations on travel, government grants in Canada and other one-time benefits.~~ improved collections. As the market recovers and volumes increase, we expect to bring back necessary resources to support our ~~operations,~~operations; however, we expect ~~that certain~~ permanent actions taken ~~during the quarter~~in 2020 will continue to provide a long-term favorable impact for the segment.

(3) The ~~decrease~~unfavorable impact in other expense, net and net income attributable to continuing noncontrolling interest of 0.3% was primarily ~~due~~related to higher insurance proceeds ~~from business interruption insurance that had a year over year impact of 0.2%, which was partially offset by an unfavorable impact of 0.1% from pension expense~~ ~~resulting from a~~ ~~pension settlement loss recorded~~received in the ~~second quarter~~first half of 2020.

Europe

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


		Six Months Ended June 30,						Percentage Change in Revenue															Six Months Ended June 30,					Percentage Change in Revenue
Europe	Europe	2020		2019		Organic ⁽¹⁾		Acquisition and Divestiture ⁽²⁾		Foreign Exchange ⁽³⁾		Total Change		Europe	2021		2020		Organic (1)		Acquisition and Divestiture (2)		Foreign Exchange (3)		Total Change
Parts & services revenue	Parts & services revenue	$	2,564,299	$	2,951,793	(10.1)	%	(0.3)	%	(2.7)	%	(13.1)	%	Parts & services revenue	$	3,025,067	$	2,564,299	9.9	%	(1.2)	%	9.2	%	18.0		%
Other revenue	Other revenue	10,480		9,988		8.2	%	—	%	(3.2)	%	4.9	%	Other revenue	15,047		10,480		32.5	%	—	%	11.1	%	43.6		%
Total third party revenue	Total third party revenue	$	2,574,779	$	2,961,781	(10.1)	%	(0.3)	%	(2.7)	%	(13.1)	%	Total third party revenue	$	3,040,114	$	2,574,779	10.0	%	(1.2)	%	9.3	%	18.1		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																									Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)~~The parts~~Parts and services organic revenue ~~change~~for the six months ended June 30, 2021 increased by 9.9% as the negative pandemic effect on volume in 2020 was more severe than in the current year. Not all regions were impacted by the pandemic at the same time and to the same degree in 2020, and the easing of lockdown measures has varied across the continent in 2021. These conditions created a different growth profile for each of our European businesses. While all of our businesses reported year over year growth, the U.K. and Italy reported the greatest increases for the first ~~half of 2020 was affected by having one additional selling day, on average, due to the different selling days in each market compa~~half.red to the first half of 2019. On a per day basis, organic parts and services revenue decreased 10.6%, mainly driven by the COVID-19 pandemic disruptions in all of our European operations. Prior to the pandemic, organic revenue in Europe was slightly greater than the same period in the prior year, increasing 0.3% through February, principally driven by the Central and Eastern European region, and to a lesser extent, Germany. During the period of March 2020 through June 2020, organic revenue declined 15.8% on a per day basis compared to the prior year period primarily due to volume effects caused by the COVID-19 pandemic.

(2)~~Acquisition related growth in~~The decline for the ~~first half of 2020 reflected revenue from our acquisition of three wholesale businesses since the beginning of 2019 through the one-year anniversary of the acquisitions. Reduced revenue as~~six months ended June 30, 2021 was primarily a result of the ~~disposals~~disposal of a non-core telecommunications operation in Germany in the second quarter of 2020 and ~~a wholesale business~~two additional smaller disposals in ~~Bulgaria in the third quarter of 2019~~ 2020.

~~more than offset the acquisition growth~~
.

(3)Compared to the prior year, exchange rates ~~decreased~~increased our revenue growth by ~~$80~~$238 million,, or ~~2.7%~~9.3%, primarily due to the ~~stronger~~weaker U.S. dollar against the euro, pound sterling and Czech koruna during the first half of ~~2020~~2021 relative to the prior year period.

Segment EBITDA. Segment EBITDA ~~decreased~~ ~~$54~~increased $141 million,, or ~~24.3%~~84.4%, in the first half of ~~2020~~2021 compared to the prior year period. Our Europe Segment EBITDA included a ~~negative~~positive year over year impact of $6$17 million related to the translation of local currency results into U.S. dollars at ~~lower~~higher exchange rates than those experienced during the first half of ~~2019.~~2020. On a constant currency basis (i.e., excluding the translation impact), Segment EBITDA ~~decreased~~increased by ~~$48~~$125 million,, or ~~21.5%~~74.3%, compared to the prior year. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the six months ended June 30, ~~2020.~~2021.

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


Europe	Europe	Percentage of Total Segment Revenue			Europe	Percentage of Total Segment Revenue
Segment EBITDA for the six months ended June 30, 2019		7.5	%
Increase (decrease) due to:
Segment EBITDA for the six months ended June 30, 2020					Segment EBITDA for the six months ended June 30, 2020	6.5	%
Increase due to:					Increase due to:
Change in gross margin	Change in gross margin	0.7	%	(1)	Change in gross margin	1.3	%	(1)
Change in segment operating expenses	Change in segment operating expenses	(1.7)	%	(2)	Change in segment operating expenses	2.2	%	(2)
Change in other expense, net and net income attributable to continuing noncontrolling interest	Change in other expense, net and net income attributable to continuing noncontrolling interest	0.1	%		Change in other expense, net and net income attributable to continuing noncontrolling interest	0.1	%
Segment EBITDA for the six months ended June 30, 2020		6.5	%
Segment EBITDA for the six months ended June 30, 2021					Segment EBITDA for the six months ended June 30, 2021	10.2	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The increase in gross margin was primarily attributable to ~~a 0.7%~~ favorable ~~impact across almost all our operations principally~~impacts of (i) 1.0% as a result of net price increases and margin improvement initiatives supporting the pursuit of profitable revenue ~~growth.~~growth, and (ii) 0.3% from the disposal of non-core operations in 2020.

(2) The ~~increase~~decrease in segment operating expenses as a percentage of revenue reflects ~~unfavorable~~favorable impacts of (i) ~~0.6%~~0.7% from bad debt expense due to customers' improved solvency and an increase in reserve in the ~~downturn in economic conditions caused by t~~heprior year related to the COVID-19 ~~pandemic,~~pandemic, (ii) ~~0.3% from professional fees, (iii) 0.2%~~0.5% from freight, ~~expense~~vehicle and fuel expenses due to higher internet and mail order sales in the prior year, which have higher freight costs, favorable leverage effect, and cost savings from restructuring activities primarily due to ~~an increase in drop shipments handled by third party carriers, (iv) 0.2%~~exiting facilities and route consolidation, (iii) 0.3% from ~~facility expenses~~personnel costs primarily due to ~~negative~~a favorable leverage ~~from lower revenue, (v) a 0.2% increase~~effect, headcount reductions, and limited travel expenses, partially offset by government grants received in ~~non-recurring~~the prior year to cover employee costs ~~for personnel matters~~in countries such as the U.K. and ~~a loan guarantee~~Germany (a lesser amount was received in 2021) and ~~(vi) several~~increased incentive compensation, and (iv) other individually immaterial factors that had an ~~unfavorable~~ impact of ~~0.2%~~0.7% in the aggregate.

Specialty

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


		Six Months Ended June 30,						Percentage Change in Revenue															Six Months Ended June 30,					Percentage Change in Revenue
Specialty	Specialty	2020		2019		Organic ⁽¹⁾		Acquisition and Divestiture		Foreign Exchange		Total Change		Specialty	2021		2020		Organic (1)		Acquisition and Divestiture		Foreign Exchange		Total Change
Parts & services revenue	Parts & services revenue	$	751,408	$	762,819	(1.4)	%	0.2	%	(0.2)	%	(1.5)	%	Parts & services revenue	$	989,362	$	751,408	30.5	%	0.4	%	0.8	%	31.7		%
Other revenue	Other revenue	—		—		—	%	—	%	—	%	—	%	Other revenue	—		—		—	%	—	%	—	%	—		%
Total third party revenue	Total third party revenue	$	751,408	$	762,819	(1.4)	%	0.2	%	(0.2)	%	(1.5)	%	Total third party revenue	$	989,362	$	751,408	30.5	%	0.4	%	0.8	%	31.7		%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.																									Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1)Parts and services organic revenue ~~declined despite one additional selling day in~~increased 30.5% for the first half of ~~2020~~2021 compared to the prior year ~~period.~~period despite one fewer selling day. On a per day basis, organic revenue ~~declined 2.2%~~increased 31.5%. The organic ~~decline~~increase was primarily due to the adverse effects on demand resulting from the COVID-19 pandemic. Prior to the pandemic, organic revenue in Specialty was greater than the same period in the prior year, increasing 4.3% through February, and in line with our expectations. During the period of March 2020 through June 2020, organic revenue declined 4.9% on a per day basis

~~compared to the prior year period primarily due to volume effects caused by the COVID-19 pandemic. While down on a year over year basis, revenue held near the prior year level~~ due to strong demand for ~~recreational vehicle~~our products across all channels of our business. We believe the revenue growth was driven by our competitive advantage with our delivery service teams that enabled us to keep up with the strong demand and ~~high drop ship fulfillment.~~have more available inventory than our competitors.

Segment EBITDA. Segment EBITDA ~~decreased~~ $6increased $56 million,, or ~~6.5%~~66.8%, in the first half of ~~2020~~2021 compared to the prior

year period.

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


Specialty	Specialty	Percentage of Total Segment Revenue			Specialty	Percentage of Total Segment Revenue
Segment EBITDA for the six months ended June 30, 2019		11.8	%
(Decrease) increase due to:
Segment EBITDA for the six months ended June 30, 2020					Segment EBITDA for the six months ended June 30, 2020	11.2	%
Increase due to:					Increase due to:
Change in gross margin	Change in gross margin	(1.2)	%	(1)	Change in gross margin	1.9	%	(1)
Change in segment operating expenses	Change in segment operating expenses	0.6	%	(2)	Change in segment operating expenses	1.1	%	(2)

Segment EBITDA for the six months ended June 30, 2020		11.2	%
Segment EBITDA for the six months ended June 30, 2021					Segment EBITDA for the six months ended June 30, 2021	14.2	%
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.								Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.

(1) The ~~decrease~~increase in gross margin primarily reflects ~~unfavorable impacts of (i) 1.0% due to unfavorable~~favorable product and channel mix as well as lower discounting to recover increased input costs.

(2) The decrease in segment operating expenses as a percentage of revenue, which includes the operating leverage impact from the organic parts and services revenue growth of 30.5% compared to the prior year, reflects a favorable impact of (i) 0.6% in personnel costs due to cost reductions in the ~~first~~second half of 2020, partially offset by increased incentive compensation, and (ii) several individually immaterial factors that had ~~an unfavorable impact of 0.2% in the aggregate.~~

~~(2) The decrease in segment operating expenses reflects~~ a favorable impact of ~~(i) 1.4%~~0.7% in ~~personnel costs due to reduced headcount and reduced hours,~~the aggregate, partially offset by ~~(ii)~~(iii) a 0.2% unfavorable impact in freight, vehicle and fuel expenses due to an increased use of third party freight ~~and (iii) several individually immaterial factors that had an unfavorable impact of 0.6% in the aggregate.~~due to customer mix.

Liquidity and Capital Resources

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


		June 30, 2020		December 31, 2019		June 30, 2019			June 30, 2021		December 31, 2020		June 30, 2020
Cash and cash equivalents	Cash and cash equivalents	$	476,426	$	523,020	$	375,967	Cash and cash equivalents	$	328,700	$	312,154	$	476,426
Total debt ⁽¹⁾	Total debt ⁽¹⁾	3,278,453		4,072,026		4,086,298		Total debt (1)	2,466,140		2,896,676		3,278,453
Current maturities ⁽²⁾	Current maturities ⁽²⁾	93,520		326,648		132,927		Current maturities (2)	91,131		58,810		93,520
Capacity under credit facilities ⁽³⁾	Capacity under credit facilities ⁽³⁾	3,260,000		3,260,000		3,260,000		Capacity under credit facilities (3)	3,260,000		3,260,000		3,260,000
Availability under credit facilities ⁽³⁾	Availability under credit facilities ⁽³⁾	2,050,884		1,922,671		1,962,487		Availability under credit facilities (3)	1,753,766		2,546,081		2,050,884
Total liquidity (cash and cash equivalents plus availability under credit facilities)	Total liquidity (cash and cash equivalents plus availability under credit facilities)	2,527,310		2,445,691		2,338,454		Total liquidity (cash and cash equivalents plus availability under credit facilities)	2,082,466		2,858,235		2,527,310

(1) Debt amounts reflect the gross values to be repaid (excluding debt issuance costs of ~~$28~~$15 million ~~$30~~, $26 million and ~~$34~~$28 million as of June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, respectively).

(2) Debt amounts reflect the gross values to be repaid (excluding ~~immaterial amounts of~~ debt issuance costs of immaterial amounts as of June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019)~~2020).

(3) Capacity under credit facilities includes our revolving credit facilities and our receivables securitization facility. Availability under credit facilities is reduced by our outstanding letters of credit. Capacity was reduced by $110 million to $3.15 billion with the July 30, 2021 termination of the receivables securitization facility.

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

As of June 30, ~~2020,~~2021, we had debt outstanding and additional available sources of financing as follows:

•Senior secured credit facilities maturing in January 2024, composed of ~~term loans totaling $350 million ($333 million outstanding at June 30, 2020) and~~ $3.15 billion in revolving credit ($~~1.1~~1.4 billion outstanding at June 30, ~~2020)~~2021), bearing interest at variable rates, ~~(although a portion~~and term loans totaling $350 million (repaid in full as of ~~the outstanding debt is hedged through interest rate swap contracts),~~June 30, 2021) with availability reduced by ~~$70~~$71 million of amounts outstanding under letters of credit

•Euro Notes (2024) totaling ~~$562~~$593 million (€500 million), maturing in April 2024 and bearing interest at a 3.875% fixed rate

•~~Euro~~2028 Notes ~~(2026/28)~~ totaling ~~$1.1 billion~~$296 million (€~~1.0 billion), consisting of (i) €750 million maturing in April 2026 and bearing interest at a 3.625% fixed rate, and (ii) €250 million~~250 million) maturing in April 2028 and bearing interest at a 4.125% fixed rate

•Receivables securitization facility with availability up to $110 million (no outstanding balance as of June 30, ~~2020)~~2021), maturing in November 2021 and bearing interest at variable commercial paper rates (facility terminated effective July 30, 2021)

As of June 30, ~~2020,~~2021, we had approximately ~~$2.1~~$1.8 billion available under our credit facilities. Combined with ~~approximately $476~~$329 million of cash and cash equivalents at June 30, ~~2020,~~2021, we had approximately ~~$2.5~~$2.1 billion in available liquidity, ~~an increase~~a decrease of ~~$82~~$776 million from our available liquidity as of December 31, ~~2019.~~2020. On April 1, 2021, we redeemed the Euro Notes (2026) with proceeds from borrowings on our revolving credit facility and cash on hand, resulting in a decrease in available liquidity compared to December 31, 2020. Additionally, in the second quarter of 2021, we used free cash flow generated in our domestic operations and borrowings on our revolving credit facility to repay all of our term loan ($319 million). As of June 30, 2021, we have $282 million of debt drawn in North America on our credit facilities. With these second quarter transactions, we reduced our overall liquidity by utilizing available capacity on the revolving credit facility. We believe our future cash flow needs can be supported by a smaller credit facility, so we redeemed the Euro Notes (2026) and eliminated the term loan using funds from the revolving credit facility, which in turn will lower our interest expense and non-usage fees.

We believe that our current liquidity and cash expected to be generated by operating activities in future periods will be sufficient to meet our current operating and capital requirements. To support our liquidity position during the COVID-19 pandemic, we ~~are~~ focused on preserving cash during the expected period of reduced demand. Our action plan to strengthen our ~~current~~liquidity position ~~includes~~included a deferral of growth driven capital projects, reductions in inventory orders, more active monitoring of customer receivables and terms, income and value added tax deferrals, and suspension of our share buyback program, in addition to the cost saving measures discussed in the "COVID-19 Impact on Our Operations" section above. Given our success in strengthening our liquidity position as of September 30, 2020, we recommenced our share buyback program during the fourth quarter of 2020. Our 2021 plan includes spending to rebuild inventory levels, support growth driven capital projects, and complete strategic acquisitions. However, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the COVID-19 pandemic are reasonably likely to materially affect our liquidity and capital resources negatively in the future.

With ~~$2.5~~$2.1 billion of total liquidity as of June 30, ~~2020~~ 2021 and ~~$94~~$91 millionof current maturities, we have access to funds to meet our near term commitments even if the pandemic effect extends longer than our current expectations. We have a surplus of current assets over current liabilities, which further reduces the risk of short term cash shortfalls.

Our capital preservation plans delivered the desired results as we repaid approximately $552 million in borrowings from free cash flows generated in the second quarter. Our total liquidity increased by $666 million since March 31, 2020, which we believe puts us in a solid position to manage through the pandemic. We expect the cash flow benefits to moderate in the second half of 2020 as we experience cash outflows for income and other taxes that were deferred in the first half of the year, and increase our inventory levels to support the improving revenue trend. However, we expect to be able to operate effectively at a lower inventory balance than at the end of 2019 and to begin to generate benefits to working capital through supply chain financing programs.

Our total liquidity includes availability under our senior secured credit facility, which includes the two financial maintenance covenants presented below (our required debt covenants and our actual ratios with respect to those covenants as calculated per the credit agreement as of June 30, ~~2020)~~2021):


	Covenant Level	Ratio Achieved as of June 30, ~~2020~~2021
Maximum net leverage ratio	~~5.00:~~4.50:1.00	~~2.2~~1.2
Minimum interest coverage ratio	3.00:1.00	~~11.7~~20.8

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

Our credit agreement contains customary covenants that impose limitations and conditions on our ability to enter into certain transactions. The credit agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio. We were in compliance with all restrictive covenants under our credit agreement as of June 30, 2021.

We amended our senior secured credit facility in June 2020 to increase the maximum net leverage ratio effective with our compliance certificate filed inwith respect to the second quarter of 2020; refer to "Senior Secured Credit Agreement" in Note 9, "Long-Term Obligations" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the June 2020 amendment. We entered into the amendment out of an abundance of caution to reduce the risk of breaching the net leverage covenant if the pandemic had a severe and extended effect on profitability. Our internal models suggested that we would be able to meet our payment obligations during the pandemic, but there was a risk that we might exceed the maximum 4.0x net leverage ratio in the event a severe downside scenario developed. With the amendment and strong cash flow generation since

the ~~better than forecasted performance in the second quarter,~~pandemic began, we believe that we have significantly reduced the risk of a

covenant ~~breach. We were able to reduce~~breach, including by reducing our net leverage ratio inrelative to the second quarter ~~relative to the first quarter despite the negative impact on profitability caused by COVID-19.~~of 2020 in each successive quarter.

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

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

From time to time, we may undertake financing transactions to increase our available liquidity, such as (i) our November 2018 amendment to our senior secured credit facility and (ii) the issuance of the Euro Notes (2026/28) in April 2018 related to the Stahlgruber acquisition. Given the long-term nature of our investment in Stahlgruber, combined with favorable interest rates, we decided to fund the acquisition primarily through long-term, fixed rate notes. We believe this approach provides financial flexibility to execute our long-term growth strategy while maintaining availability under our revolver. If we see an attractive acquisition opportunity, we have the ability to use our revolver to move quickly and have certainty of funding up to the amount of our then-available liquidity.

Beginning in 2019, a number of our European suppliers began participating in a supply chain financing ~~programs~~initiative in select countries under which they may sell their accounts receivable to the participating financial institutions, allowing us to extend payment ~~terms.~~terms which in turn improves our operating cash flows. The initiative allows our suppliers to monetize their receivables prior to their payment date, subject to payment of a discount. We expect more suppliers towill begin participating in our European supply chain financing ~~programs~~initiative in the second half of ~~2020.~~2021. Financial institutions participate in the supply chain financing ~~programs~~initiative on an uncommitted basis and can cease purchasing receivables from our suppliers at any time. ~~These programs are~~The initiative is at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. In the future, if the financial institutions did not continue to purchase receivables from our suppliers under ~~these programs,~~the initiative, the participating vendors may ~~have a~~ need to renegotiate their payment terms with us, which in turn could cause our borrowings under our revolving credit facility to increase. All outstanding payments owed under the ~~programs~~initiative to the participating financial institutions are recorded within Accounts payable in our Unaudited Condensed Consolidated Balance Sheets.

Borrowings under the credit agreement accrue interest at variable rates which are tied to the prime rate, LIBOR or the Canadian Dollar Offered Rate ("CDOR"), depending on the currency and the duration of the borrowing, plus an applicable margin rate that is subject to change quarterly based on our reported leverage ratio. We ~~hold~~have held interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings, with the effect of fixing the interest rates on the respective notional amounts. In addition, from time to time, we hold ~~cross~~ currency swaps that contain an interest rate swap component and a foreign currency forward contract component that, when combined with related intercompany financing arrangements, effectively convert variable rate U.S. dollar-denominated borrowings into fixed rate euro-denominated borrowings. These derivative transactions are described in Note 10, "Derivative Instruments and Hedging Activities" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. ~~After giving effect to~~As of June 30, 2021, we did not have any of these types of contracts outstanding, and the weighted average interest rate on borrowings outstanding under our credit agreement was 1.1% at June 30, ~~2020 was 1.5%.~~2021. Including our senior notes, our overall weighted average interest rate on borrowings was ~~2.7%~~2.2% at June 30, ~~2020.~~2021.

After 2021, it is unclear whether banks will continue to provide LIBOR submissions to the administrator of ~~LIBOR, and~~LIBOR. At this time, no consensus ~~currently~~ exists as to ~~what benchmark rate or~~which reference rates may become accepted alternatives to LIBOR, although the Alternative Reference Rates Committee, a group of market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended alternative to LIBOR. On November 30, 2020, ICE Benchmark Administration, the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. We cannot currently predict the effect of the discontinuation of, or other changes to, LIBOR or any establishment of alternative reference rates in the United States, the European Union or elsewhere on the global capital markets. The uncertainty regarding the future of LIBOR, as well as the transition from LIBOR to any alternative reference rate or rates, could have adverse impacts on our variable rate obligations that currently use LIBOR as a benchmark rate. We are in the process of evaluating our financing obligations and other contracts that refer to LIBOR. Outstanding debt under our Credit Agreement, which constitutes the most significant of our LIBOR-based debt obligations, contains provisions that address the potential discontinuation of LIBOR and facilitate the adoption of an alternative rate of interest. We do not believe that the discontinuation of LIBOR, or its replacement with an alternative reference rate or rates such as the SOFR, will have a material impact on our results of operations, financial position or liquidity.

Cash interest payments were ~~$56~~$45 million for the six months ended June 30, ~~2020, including $31~~2021; these payments increased by $39 million in the second quarter compared to the first quarter of 2021 as a result of our semi-annual interest payments on our Euro Notes (2024) and Euro Notes ~~(2026/2028)~~(2028) as well as the interest owed when we settled the Euro Notes (2026). Interest payments on our Euro Notes (2024) and Euro Notes ~~(2026/28)~~(2028) are made in April and October.

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We had outstanding credit agreement borrowings of ~~$1.5~~$1.4 billion and ~~$1.6 billion~~$967 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Of these amounts, ~~$18 million was classified as~~there were no current maturities ~~at both~~as of June 30, ~~2020~~2021 and maturities of $18 million at December 31, ~~2019.~~2020.

The scheduled maturities of long-term obligations ~~inclusive of finance lease obligations,~~ outstanding at June 30, ~~2020~~2021 are as follows (in thousands):


Six months ending December 31, 2020 ⁽¹⁾:		$	76,152
Six months ending December 31, 2021 (1):				Six months ending December 31, 2021 (1):	$	81,018
Years ending December 31:	Years ending December 31:			Years ending December 31:
2021		31,840
2022	2022	28,780		2022	17,379
2023	2023	22,671		2023	9,006
2024	2024	1,975,701		2024	2,035,307
2025				2025	9,446
Thereafter	Thereafter	1,143,309		Thereafter	313,984
Total debt ⁽²⁾	Total debt ⁽²⁾	$	3,278,453	Total debt (2)	$	2,466,140

(1) Maturities of long-term obligations due by December 31, ~~2020~~2021 includes ~~$54~~$74 million of short-term debt that may be extended beyond the current due date.

(2) The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs of ~~$28~~$15 million as of June 30, ~~2020)~~2021).

Our credit agreement contains customary covenants that provide limitations and conditions on our ability to enter into certain transactions. The credit agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio. We were in compliance with all restrictive covenants under our credit agreement as of June 30, 2020.

As of June 30, ~~2020,~~2021, the Company had cash and cash equivalents of ~~$476~~$329 million, of which ~~$347~~$248 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries, and that position has not changed following the enactment of the Tax Cuts and Jobs Act ~~of 2017~~ (the "Tax Act") and the related imposition of the transition ~~tax.~~tax on the deemed repatriation of historical earnings of foreign subsidiaries as of December 31, 2017. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives. Distributions of dividends from our foreign subsidiaries, if any, would be generally exempt from further U.S. taxation, either as a result of the 100% participation exemption under the Tax Act, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income regime, a regime of taxation on foreign subsidiary earnings. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives.(“GILTI”) regime.

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

The following table sets forth a summary of our aftermarket and manufactured inventory procurement for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):


		Three Months Ended										Six Months Ended												Three Months Ended					Six Months Ended
		June 30,										June 30,												June 30,					June 30,
		2020		2019		Change		2020		2019		Change ⁽¹⁾				2021		2020		Change		2021		2020		Change
North America	North America	$	161,300	$	343,300	$	(182,000)	$	490,000	$	679,400	$	(189,400)		North America	$	262,100	$	161,300	$	100,800	$	522,100	$	490,000	$	32,100	(1)
Europe	Europe	683,400		982,900		(299,500)		1,551,200		1,921,600		(370,400)		⁽²⁾	Europe	1,005,700		683,400		322,300		1,899,300		1,551,200		348,100		(2)
Specialty	Specialty	118,900		287,100		(168,200)		426,200		537,700		(111,500)			Specialty	361,400		118,900		242,500		752,700		426,200		326,500		(3)
Total	Total	$	963,600	$	1,613,300	$	(649,700)	$	2,467,400	$	3,138,700	$	(671,300)		Total	$	1,629,200	$	963,600	$	665,600	$	3,174,100	$	2,467,400	$	706,700

(1)Inventory purchases across ~~all segments~~the North America segment have ~~decreased~~increased in the six months ended June 30, 2021 compared to the prior year period due to ~~a slowdown~~the low base as we scaled back buying in recognition of demand changes in 2020. We are rebuilding our inventory levels after decreases in 2020 due to the COVID-19 pandemic, however, they did not reach our desired levels in the first half of 2021 due to ocean freight driven delays in shipping and overall pandemic driven lower production volumes.

(2)The increase in inventory purchases ~~beginning~~ in ~~March 2020 as a response to~~our Europe segment included an increase of ~~the COVID-19 pa~~$147 million~~ndemic.~~

~~(2)Europe inventory purchases were affected by a decrease of $47 million~~ attributable to the ~~decrease~~increase in the value of the euro, and to a lesser extent, the pound sterling in the six months ended June 30, ~~2020~~2021 compared to the prior year period. On a constant currency basis, inventory purchases increased compared to 2020, primarily due to the low base as we scaled back buying in recognition of demand changes in 2020. However, we did not reach our desired levels in the first half of 2021 due to ocean freight driven delays in shipping and overall pandemic driven lower production volumes.

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(3)The increase in inventory purchases in the Specialty segment was primarily due to required restocking to keep up with the high demand for our products.

The following table sets forth a summary of our global wholesale salvage and self service procurement for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):


		Three Months Ended						Six Months Ended								Three Months Ended			Six Months Ended
		June 30,						June 30,								June 30,			June 30,
		2020	2019	% Change		2020	2019	% Change			2021	2020	% Change		2021	2020	% Change
North America wholesale salvage cars and trucks	North America wholesale salvage cars and trucks	36	78	(53.8)	%	108	152	(28.9)	%	North America wholesale salvage cars and trucks	63	36	75.0	%	113	108	4.6	%
Europe wholesale salvage cars and trucks	Europe wholesale salvage cars and trucks	5	6	(16.7)	%	12	14	(14.3)	%	Europe wholesale salvage cars and trucks	6	5	20.0	%	13	12	8.3	%
Self service and "crush only" cars	Self service and "crush only" cars	137	165	(17.0)	%	286	304	(5.9)	%	Self service and "crush only" cars	141	137	2.9	%	277	286	(3.1)	%

~~Salva~~geSalvage purchases ~~decreased~~increased relative to the prior year ~~as we~~due to reduced buying in the prior year to reflect lower demand during the COVID-19 ~~pandemic. Purchasing began to increase as the quarter progressed and revenue increased.~~pandemic. Self service ~~car~~vehicle purchases declined due to ~~supply constraints as certain outlets, such as city impound lots, were unavailable for a portion~~(i) increased competition in the market due to rising costs of precious metals and scrap steel and (ii) fewer purchases due to the ~~quarter and individuals held onto cars longer during~~elimination of underperforming locations in accordance with the ~~lockdown measures. Purchases increased towards~~2020 restructuring plan.

We expect to increase inventory purchases in the ~~end~~remainder of ~~June, and buying conditions are expected~~2021 compared to ~~be better in~~ the second half of 2020 to support the ~~year.~~service and fill rate requirements of our businesses based on the revenue trend and expectations for full year 2021, including normal seasonality, as our inventory levels in 2020 decreased due to the COVID-19 pandemic. However, we expect to be able to operate effectively at a lower inventory balance than at the end of 2019, before the impacts of the pandemic.

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


~~Net cash provided by operating activities for the six months ended June 30, 2019~~	$	~~638~~
~~(Decrease) increase due to:~~
~~Operating income~~	~~(36)~~		⁽¹⁾
~~Non-cash depreciation and amortization expense~~	~~(8)~~
~~Loss on disposal of businesses and impairment of net assets held for sale~~	~~(46)~~		⁽²⁾
~~Cash paid for taxes~~	64		⁽³⁾
~~Cash paid for interest~~	19
~~Working capital accounts:~~ ⁽⁴⁾
~~Receivables, net~~	~~144~~
~~Inventories~~	~~314~~
~~Accounts payable~~	~~(269)~~
~~Other operating activities~~	93		⁽⁵⁾
~~Net cash provided by operating activities for the six months ended June 30, 2020~~	$	~~913~~


Net cash provided by operating activities for the six months ended June 30, 2020	$	913
Increase (decrease) due to:
Operating income	394		(1)


Cash paid for taxes	(202)		(2)
Cash paid for interest	11
Working capital accounts: (3)
Receivables, net	(156)
Inventories	(438)
Accounts payable	456
Other operating activities	(45)		(4)
Net cash provided by operating activities for the six months ended June 30, 2021	$	933

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

(2) ~~Refer~~Cash payments related to ~~"Net Assets Held~~income taxes increased for ~~Sale"~~U.S. federal and state income taxes due to a projected increase in ~~Note 3, "Financial Statement Information" to~~

pretax income and the ~~unaudited condensed consolidated financial statements in Part I, Item 1~~timing of ~~this Quarterly Report on Form 10-Q for information on the net impairment activity recorded in the six months ended June 30, 2020 and June 30, 2019.~~estimated tax payments.

(3) Refer to "Government Assistance" in Note 3, "Financial Statement Information" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the deferral of certain income, indirect and payroll tax payments in various jurisdictions as a result of ~~the CARES Act and other government programs.~~

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

Receivables, net ~~was~~was a ~~$144~~$156 million greater ~~inflow~~outflow in ~~2020~~2021 primarily due to ~~greater~~a significant increase in June 2021 revenue compared to June 2020, which translated to higher receivables balances and larger net outflows in the North America segment (of $79 million) and in the Europe segment (of $81 million). We had a cash ~~conversion~~inflow in the Specialty segment (of $4 million).

Inventories represented $438 million in incremental cash outflows in the first six months of ~~accounts receivable balances~~2021 compared to the same period of 2020.The change is primarily attributable to the reduction in inventory purchases during 2020 as we scaled back buying in the recognition of demand changes. Additionally, we expected a larger cash outflow in the first half of ~~2020~~2021 as we worked to rebuild our inventory levels, but as described in the ~~Europe segment (of $88 million) and~~procurement section above, we were delayed in doing so. We now anticipate that the ~~North America segment (of $79 million) and~~inventory build will take place over the ~~lower revenues due to~~balance of the ~~COVID-19 pandemic.~~

Inventories represented $314 million in incremental cash inflows in the first half of 2020 as a result of inventory decreases in the (i) North America segment of $129 million, (ii) Specialty segment of $122 million and (iii) Europe Segment of $63 million, due to a slowdown in inventory purchases starting in March 2020 due to the COVID-19 pandemic.year.

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Accounts payable produced ~~$269~~$456 million in higher cash ~~outflows~~inflows primarily due to ~~lower~~higher accounts payable balances in the North America segment (of ~~$189~~$161 million) and in the Specialty segment (of $24 million) due to timing of payments, and in the Europe segment (of ~~$69 million)~~$271 million) compared to the prior year period, as a result of ~~a slowdown in inventory purchases starting in March 2020 due to the COVID-19 pandemic.~~timing of payments and benefits of extended payment terms, including through our supply chain financing initiatives.

~~(5)~~(4) Cash flows from other operating activities ~~increased $84~~decreased $45 million, asprimarily due to a ~~result~~$54 million decrease related to the timing of value added tax payables ~~due~~payments compared to ~~government assistance programs to defer payments into~~ the ~~second half of 2020 and into 2021. The remaining amount reflects~~prior year partially offset by a number of individually insignificant fluctuations in ~~cash paid for~~ other operating activities.

Net cash used in investing activities totaled $109 million and $76 million ~~and $117 million for~~during the six months ended June 30, 2021 and 2020, respectively. Property, plant and ~~2019, respectively.~~equipment purchases were $88 million during the six months ended June 30, 2021 compared to $77 million in the prior year period. We invested $5$29 million of cash, net of cash acquired, in business acquisitions during the six months ended June 30, ~~2020~~2021 compared to ~~$15~~$5 million during the six months ended June 30, 2019. Property, plant and equipment purchases were $77 million in the first half of 2020 compared to $101 million in the prior year period. The period over period decrease in cash outflows for purchases of property, plant and equipment was due to decreased capital spending across the business as a result of ~~the COVID-19 pandemic.~~2020. We received $5$18 million of net proceeds from divestitures of businesses held for sale ~~during~~and property, plant and equipment in the six months ended June 30, ~~2020; there were~~ ~~no proceeds from divestitures of businesses held for sale during~~2021, compared to $11 million in the ~~six months ended June 30, 2019.~~prior year period.

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


		Six Months Ended					Six Months Ended
		June 30,					June 30,
		2020		2019			2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	913,052	$	638,404	Net cash provided by operating activities	$	933,090	$	913,052
Less: purchases of property, plant and equipment	Less: purchases of property, plant and equipment	77,301		101,268		Less: purchases of property, plant and equipment	87,854		77,301
Free cash flow	Free cash flow	$	835,751	$	537,136	Free cash flow	$	845,236	$	835,751

Net cash used in financing activities totaled ~~$890~~$809 million and ~~$472~~$890 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. During the six months ended June 30, ~~2020,~~2021, net repayments of our borrowings totaled ~~$782~~$347 million compared to ~~$281~~$782 million during the six months ended June 30, ~~2019.~~2020. The ~~period over period increase in~~ net repayments in 2021and 2020 include the redemption of ~~our borrowings includes~~the €750 million Euro Notes (2026) and the $600 million ~~repayment of our~~ U.S. Notes, ~~(2023) in January 2020.~~respectively. We repurchased ~~$88~~$344 million of our common stock in the six months ended June 30, ~~2020,~~2021 (reflecting the cash outflow for transactions that settled in the period), compared to ~~$191~~$88 million in the six months ended June 30, ~~2019.~~2020. In 2021, we settled our cross currency swap and other foreign exchange forward contracts with the counterparties for $89 million due primarily to strengthening in the Euro exchange rate relative to the contract rates.

~~Although our efforts are currently scaled back due to the COVID-19 pandemic, we~~We intend to continue to evaluate markets for potential growth through the internal development of distribution centers, processing and sales facilities, and warehouses, through further integration of our facilities, and through selected business acquisitions. Our future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of our internal development efforts and the success of those efforts ~~the costs~~ and ~~timing of expansion of our sales and marketing activities, and the costs and timing of future business acquisitions.~~

costs.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

•foreign exchange rates;

•interest rates; and

•commodity prices.

Foreign Exchange Rates

Foreign currency fluctuations may impact the financial results we report for the portions of our business that operate in functional currencies other than the U.S. dollar. Our operations outside of the U.S. represented ~~49.1%~~49.2% and ~~50.3%~~50.5% of our revenue during the six months ended June 30, ~~2020~~2021 and the year ended December 31, ~~2019,~~2020, respectively. An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a 4.9% change in our consolidated revenue and a ~~2.2%~~3.1% change in our operating income for the six months ended June 30, ~~2020.~~2021. See our Results of Operations discussion in Part I, Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the impact of fluctuations in exchange rates on our year over year results.

Additionally, we are exposed to foreign currency fluctuations with respect to the purchase of aftermarket products from foreign countries, primarily in Europe and Asia. To the extent that our inventory purchases are not denominated in the

functional currency of the purchasing location, we are exposed to exchange rate fluctuations. In several of our operations, we purchase inventory from manufacturers in Taiwan in U.S. dollars, which exposes us to fluctuations in the relationship between

the local functional currency and the U.S. dollar, as well as fluctuations between the U.S. dollar and the Taiwan dollar. We hedge our exposure to foreign currency fluctuations related to a portion of inventory purchases in our Europe operations, but the notional amount and fair value of these foreign currency forward contracts at June 30, ~~2020~~2021 were immaterial. We do not currently attempt to hedge foreign currency exposure related to our foreign currency denominated inventory purchases in our North America operations, and we may not be able to pass on any resulting price increases to our customers.

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

Other than with respect to a portion of our foreign currency denominated inventory purchases and, from time to time, certain financing transactions, we do not hold derivative contracts to hedge foreign currency risk. Our net investment in foreign operations is partially hedged by the foreign currency denominated borrowings we use to fund foreign acquisitions; however, our ability to use foreign currency denominated borrowings to finance our foreign operations may be limited based on local tax laws. We have elected not to hedge the foreign currency risk related to the interest payments on foreign third party borrowings as we generate cash flows in the local currencies that can be used to fund debt payments. As of June 30, 2021, we had outstanding borrowings of €500 million under our Euro Notes (2024) and €250 million under our Euro Notes (2028), and €954 million and SEK 185 million under our revolving credit facilities. As of December 31, 2020, we had outstanding borrowings of €500 million under our Euro Notes (2024), and €1.0 billion under our Euro Notes (2026/28)~~, and £133 million, €184 million, CAD $130 million, and SEK 265 million~~; we had no foreign borrowings under our revolving credit facilities. As of December 31, 2019, we had outstanding borrowings of €500 million under our Euro Notes (2024), €1.0 billion under our Euro Notes (2026/28), and £208 million, €229 million, CAD $130 million, and SEK 270 million under our revolving credit facilities.

Interest Rates

Our results of operations are exposed to changes in interest rates primarily with respect to borrowings under our credit facilities, where interest rates are tied to the prime rate, LIBOR or CDOR. Therefore, we implemented a policy to manage our exposure to variable interest rates on a portion of our outstanding variable rate debt instruments through the use of interest rate swap contracts. These contracts convert a portion of our variable rate debt to fixed rate debt, matching the currency, effective dates and maturity dates to specific debt instruments. ~~Net~~We designate our interest rate swap contracts as cash flow hedges, and net interest payments or receipts from interest rate swap contracts are included as adjustments to interest expense. All of our interest rate swap contracts have been executed with banks that we believe are creditworthy (Wells Fargo Bank, N.A.; Bank of America, N.A.; Citizens, N.A.; HSBC Bank USA, N.A.; and Banco Bilbao Vizcaya Argentaria, S.A.).

As of June 30, 2020, we held eight interest rate swap contracts representing a total of $480 million of U.S. dollar-denominated notional amount debt. Our interest rate swap contracts are designated as cash flow hedges and modify the variable rate nature of that portion of our variable rate debt. These swaps have maturity dates in January 2021 and June 2021. As of June 30, 2020, the fair value of the interest rate swap contracts was a liability of $3 million. The values of such contracts are subject to changes in interest rates.

In addition to these interest rate swaps, as of June 30, 2020, we held four cross currency swap agreements for a total notional amount of $459 million (€428 million) with maturity dates in October 2020 and 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 reduce uncertainty in cash flows in U.S. dollars and euros in connection with intercompany financing arrangements. The cross currency swaps were also executed with banks we believe are creditworthy (Wells Fargo Bank, N.A.; Bank of America, N.A.; and MUFG). As of June 30, 2020, the fair value of the interest rate swap components of the cross currency swaps was a liability of $4 million, and the fair values of the foreign currency forward components were an asset of $3 million and a liability of $21 million. The values of these contracts are subject to changes in interest rates and foreign currency exchange rates.

~~In total, we~~We had ~~64%~~none of our variable rate debt under our credit facilities at fixed rates at June 30, ~~2020~~2021 compared to ~~59%~~87% at December 31, ~~2019.~~2020. See Note 9, "Long-Term Obligations" and Note 10, "Derivative Instruments and Hedging Activities" to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

At June 30, ~~2020,~~2021, we had approximately ~~$533 million~~$1.5 billion of variable rate debt that was not hedged. Using sensitivity analysis, a 100 basis point movement in interest rates would change interest expense by $5$15 million over the next twelve months.

Commodity Prices

We are exposed to market risk related to price fluctuations in scrap metal and other metals (including precious metals such as platinum, palladium and rhodium). Market prices of these metals affect the amount that we pay for our inventory and the revenue that we generate from sales of these metals. As both our revenue and costs are affected by the price fluctuations, we have a natural hedge against the changes. However, there is typically a lag between the effect on our revenue from metal price fluctuations and inventory cost changes, and there is no guarantee that the vehicle costs will decrease or increase at the same rate as the metals prices. Therefore, we can experience positive or negative gross margin effects in periods of rising or falling

metals prices, particularly when such prices move rapidly. Additionally, if market prices were to change at a greater rate than our vehicle acquisition costs, we could experience a positive or negative effect on our operating margin. The average of scrap metal prices for the three months ended June 30, ~~2020 decreased 16%~~2021 increased 18% over the average for the first quarter of ~~2020.~~2021. The average prices of rhodium and platinum decreased by 2% and 1% for the three months ended June 30, 2021, and the price of palladium increased by 16%, over the averages for the first quarter of 2021.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, ~~2020,~~2021, the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of LKQ Corporation's management, including our Chief Executive Officer and our Chief Financial Officer, of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in providing reasonable assurance that information we are required to disclose in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

On June 2, 2020, we received a notice from the U.S. Environmental Protection Agency ("EPA") regarding alleged violations associated with our NPDES stormwater permit at certain of our facilities in Massachusetts. We are in negotiations with the EPA to resolve this matter, which may involve the payment of a civil penalty. Any penalty that is likely to be imposed is not expected to have a material effect on our financial position, results of operations or cash flows.

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

In July 2021, (i) Region 3 of the U.S. Environmental Protection Agency ("EPA") initiated enforcement actions against eight of the Company's facilities by delivery of a Notice of Potential Violations and (ii) Region 4 of the EPA initiated enforcement actions against four of the Company's facilities by delivery of a Notice of Violation. The EPA has not communicated any potential penalty amounts that it may seek with respect to these facilities. We do not expect that any proposed penalty will have a material effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations, and the trading price of our common stock. Please refer to our ~~2019~~2020 Form 10-K ~~and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020 filed with the SEC on May 7, 2020,~~ for information concerning risks and uncertainties that could negatively impact us.

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

Issuer Purchases of Equity Securities

On October 25, 2018, our 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 at management's discretion in the open market, in privately negotiated transactions or pursuant to instruments or plans complying with Rule 10b5-1. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. Delaware law imposes restrictions on stock repurchases.

On October 25, 2019, 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 had authorized a total of $1.0 billion of common stock repurchases.

On July 28, 2021, our Board of Directors authorized an increase to our existing stock repurchase program under which the Company may purchase up to an additional $1.0 billion of our common stock from time to time through October 25, 2024; this extended date also applies to the original repurchase program. With the increase, the Board of Directors has authorized a total of $2.0 billion of common stock repurchases.

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


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2021 - April 30, 2021	100	$	46.78	100	$	469,238
May 1, 2021 - May 31, 2021	2,348	$	49.68	2,348	$	352,573
June 1, 2021 - June 30, 2021	3,723	$	48.97	3,723	$	170,232
Total	6,171			6,171

6056

Item 6. Exhibits

Exhibits

(b) Exhibits


~~4.1~~			Amendment No. 4 dated as of June 11, 2020 to the Fourth Amended and Restated Credit Agreement, which is Exhibit A to the Amendment and Restatement Agreement dated as of January 29, 2016 by and among LKQ Corporation and certain additional subsidiaries of LKQ Corporation, as borrowers, certain financial institutions, as lenders, and Wells Fargo Bank, National Association, as administrative agent (incorporated herein by reference to Exhibit 4.1 to the Company's report on Form 8-K filed with the SEC on June 16, 2020).
~~10.1~~			~~Services Agreement dated as of June 1, 2020 between LKQ Europe GmbH, an indirect wholly-owned subsidiary of LKQ Corporation, and Arnd Franz.~~
31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

6157

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 4, ~~2020~~.2021.


			LKQ CORPORATION

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

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

6258


	Number Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Balance as of January 1, 2020	114,594	$	12.26
Exercised	(112,472)	$	11.88		$	2,629
Canceled	(2,122)	$	32.31
Balance as of June 30, 2020	—	$	—	—	$	—


	Notional Amount		Fair Value at June 30, 2020 (USD)
	June 30, 2020		Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated	$	480,000	$	—	$	—	$	3,005	$	—
Cross currency swap agreements
USD/euro	$	458,689	2,717		—		24,559		—
Total cash flow hedges					$	2,717	$	—	$	27,564	$	—


	Notional Amount		Fair Value at December 31, 2019 (USD)
	December 31, 2019		Other Current Assets		Other Noncurrent Assets		Other Accrued Expenses		Other Noncurrent Liabilities
Interest rate swap agreements
USD denominated	$	480,000	$	—	$	3,262	$	—	$	—
Cross currency swap agreements
USD/euro	$	466,621	2,975		181		970		23,349
Total cash flow hedges					$	2,975	$	3,443	$	970	$	23,349