Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Interim Financial Statements
LKQ Corporation, a Delaware corporation, is a holding company and all operations are conducted by subsidiaries. When the terms "LKQ," the "Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries.
We have prepared the accompanying Unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") applicable to interim financial statements. Accordingly, certain information related to our significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.
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, 2025 filed with the SEC on February 19, 2026 ("2025 Form 10-K").
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." The ASU requires disclosure of specific expense categories within relevant income statement captions. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The ASU can be adopted prospectively or retrospectively and early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software." This ASU removes references to software development project stages to better align with current software development methods. Under the ASU, an entity will begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted. This ASU can be adopted either prospectively, retrospectively, or utilizing a modified transition approach. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements", which amends certain aspects of hedge accounting to more closely align with the economics of an entity’s risk management activities. The amendments include changes to the risk assessment for cash flow hedges, hedging forecasted interest payments on choose-your-rate debt instruments, cash flow hedges of nonfinancial forecasted transactions, net written options as hedging instruments and dual hedges of foreign currency denominated debt instruments. This update is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, though early adoption is permitted. This ASU is required to be adopted prospectively for all hedging relationships, with the option to adopt the amendments for hedging relationships that exist as of the adoption date. We expect the adoption of this standard will not materially impact our results of operations, financial position or cash flows.
Note 2. Business Combinations and Divestitures
We completed acquisitions of six businesses within our Europe segment, one business within our North America segment and one business within our Specialty segment, during the nine months ended September 30, 2026. Total acquisition date fair value of the consideration for these acquisitions was $116 million, composed primarily of $66 million of pre-existing loans and other receivables effectively settled upon acquisition, $37 million of cash paid (net of cash acquired) and $7 million of other purchase price obligations (non-interest bearing). During the nine months ended September 30, 2026, we recorded $49 million of goodwill related to these acquisitions, of which we expect an insignificant amount to be deductible for income tax purposes. In the period between the acquisition dates and September 30, 2026, these acquisitions generated revenue of $32 million and an operating loss of $10 million.
On May 12, 2026, we acquired all of the equity interests of a supplier, RSI North America, Inc. and Rock Solid Industries International (Pty) Ltd. ("RSI"), a leading manufacturer of modular stainless steel truck cap systems from facilities in the United States and South Africa. The purchase price was $66 million and consisted of the acquisition-date fair value of pre-existing loans and other receivables between LKQ and RSI that were effectively settled upon acquisition. The goodwill recorded for our acquisition of RSI, which is reported as part of our Specialty segment, represents the value of future technology and product development opportunities that are expected to enhance RSI's competitive position and support future growth, as well as the economic benefits attributable to LKQ's pre-existing relationship with RSI.
Our acquisitions are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair values at the dates of acquisition. The purchase price allocations for the acquisitions made during the nine months ended September 30, 2026 are preliminary as we are in the process of determining the following: 1) valuation amounts for certain receivables, inventories and fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the acquisition date fair value of certain liabilities assumed; and 4) the tax basis of the entities acquired. We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations. During the first nine months of 2026, the measurement period adjustments recorded for acquisitions completed in prior periods were not material.
The purchase price allocations for the acquisitions completed during the nine months ended September 30, 2026 are as follows (in millions):
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| Nine Months Ended September 30, 2026 | | | | | | |
| All Acquisitions | | | | | | |
| Receivables | $ | 8 | | | | | | | |
| Inventories | 16 | | | | | | | |
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| Property, plant and equipment | 27 | | | | | | | |
| Operating lease assets | 16 | | | | | | | |
| Goodwill | 49 | | | | | | | |
Other intangibles (1) | 48 | | | | | | | |
| Other noncurrent assets | 1 | | | | | | | |
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| Current liabilities assumed | (21) | | | | | | | |
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| Long-term operating lease liabilities, excluding current portion | (12) | | | | | | | |
| Debt assumed | (18) | | | | | | | |
| Other noncurrent liabilities assumed | (4) | | | | | | | |
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| Other purchase price obligations | (7) | | | | | | | |
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Settlement of pre-existing balances(2) | (66) | | | | | | | |
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| Cash used in acquisitions, net of cash acquired | $ | 37 | | | | | | | |
(1) The amount recorded for our acquisitions includes $18 million of developed technology (6 year weighted average useful life), $21 million of customer relationships (8.3 year weighted average useful life) and $9 million of trade names (9.1 year weighted average useful life).
(2) Amount primarily relates to the acquisition-date fair value of pre-existing loans and other receivables between LKQ and RSI that were effectively settled upon acquisition.
The fair value of our intangible assets is based on a number of inputs, including projections of future cash flows, assumed royalty rates and customer attrition rates, all of which are Level 3 inputs. The fair value of our property, plant and equipment is determined using inputs such as market comparables and current replacement or reproduction costs of the asset, adjusted for physical, functional and economic factors; these adjustments to arrive at fair value use unobservable inputs in which little or no market data exists, and therefore, these inputs are considered to be Level 3 inputs. See Note 14, "Fair Value Measurements" for further information regarding the tiers in the fair value hierarchy.
The primary objectives of our acquisitions completed during the nine months ended September 30, 2026 were to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and to expand into other product lines and businesses that may benefit from our operating strengths.
When we identify potential acquisitions, we attempt to target companies with a leading market presence, experienced management team and workforce, high synergies and/or that add critical capabilities with opportunity for future consolidation and growth. For certain of our acquisitions, we have identified cost savings and synergies as a result of integrating the company with our existing business that provide additional value to the combined entity. In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the effect of the businesses acquired during the nine months ended September 30, 2026 as though the businesses had been acquired as of January 1, 2025. The unaudited pro forma financial information is based upon accounting estimates and judgments that we believe are reasonable. The unaudited pro forma financial information includes the effect of purchase accounting adjustments, such as the adjustment of inventory acquired to fair value, adjustments to depreciation on acquired property, plant and equipment, adjustments to rent expense for above or below market leases, adjustments to amortization on acquired intangible assets, adjustments to interest expense, and the related tax effects. These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the periods presented or of future results. The unaudited pro forma financial information is as follows (in millions):
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
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| Revenue | $ | 3,319 | | | $ | 3,532 | | | $ | 10,225 | | | $ | 10,436 | |
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| (Loss) income from continuing operations | (25) | | | 174 | | | 173 | | | 510 | |
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The following table summarizes the significant non-cash investing and financing activities related to our acquisitions (in millions):
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| Nine Months Ended September 30, |
| 2026 | | 2025 |
Settlement of pre-existing balances (1) | $ | (66) | | | $ | — | |
(1) Amount primarily relates to the acquisition-date fair value of pre-existing loans and other receivables between LKQ and RSI that were effectively settled upon acquisition.
Divestitures
In September 2026, we entered into a definitive agreement to sell our Romanian operations within our Europe segment to Elit Kar OOD, an equity method investee in which we hold a 20% ownership interest, in exchange for a purchase price receivable, with no cash consideration at closing. We expect to close the transaction in the fourth quarter of 2026 subject to regulatory approvals and customary closing conditions. In connection with entering into this agreement, we concluded that this disposal group met the held for sale criteria and classified their assets and liabilities as held for sale. As of September 30, 2026, the assets and liabilities held for sale were not material and are presented within Prepaid expenses and other current assets and Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets, respectively. Upon classification as held for sale, we recorded a $23 million impairment charge to write down the carrying value of the net assets of our operations in Romania to its fair value less costs to sell, which is recorded within Impairment of net assets held for sale on the Unaudited Condensed Consolidated Statements of Income.
Note 3. Discontinued Operations
On August 25, 2025, we entered into a definitive agreement to sell our Self Service segment to an affiliate of Pacific Avenue Capital Partners, LLC for an enterprise value of $410 million, subject to customary purchase price adjustments. The sale was completed on September 30, 2025. On October 1, 2025, we received the pretax net proceeds from the sale and used these proceeds to repay approximately $390 million of revolving credit facility borrowings. Accordingly, interest expense attributable to the repaid borrowings has been included in discontinued operations for all periods presented. Additionally, general corporate overhead costs that were historically allocated to the Self Service segment remain within continuing operations for all periods presented.
In connection with the transaction, we also entered into a transition services agreement to provide certain post-close support services. These support services, most of which last for up to nine months or longer as deemed necessary from the closing date of the sale, are in the areas of human resources, tax, finance, information technology, and operations, among others.
The following table summarizes the comparative financial results of discontinued operations which are presented in Net (loss) income from discontinued operations in the Unaudited Condensed Consolidated Statements of Income (in millions):
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Revenue | $ | — | | | $ | 130 | | | $ | — | | | $ | 395 | |
| Cost of goods sold | — | | | 68 | | | — | | | 213 | |
| Gross margin | — | | | 62 | | | — | | | 182 | |
Gain on disposal of business (1) | — | | | — | | | (4) | | | — | |
Impairment of net assets held for sale (2) | — | | | 12 | | | — | | | 12 | |
| Selling, general and administrative expenses | — | | | 43 | | | — | | | 123 | |
| Depreciation and amortization | — | | | 2 | | | — | | | 9 | |
| Operating income | — | | | 5 | | | 4 | | | 38 | |
| Other expense (income): | | | | | | | |
| Interest expense | — | | | 5 | | | — | | | 15 | |
| Interest income and other income, net | — | | | — | | | — | | | (1) | |
| Total other expense, net | — | | | 5 | | | — | | | 14 | |
| Income from discontinued operations before provision for income taxes | — | | | — | | | 4 | | | 24 | |
| Provision (benefit) for income taxes | 2 | | | (2) | | | 2 | | | 4 | |
| Net (loss) income from discontinued operations | $ | (2) | | | $ | 2 | | | $ | 2 | | | $ | 20 | |
(1) During the nine months ended September 30, 2026, we recorded a gain upon finalizing the working capital adjustment for Self Service.
(2) During the nine months ended September 30, 2025, we recorded an impairment to write down the carrying value of Self Service to its fair value less costs to sell.
The following table summarizes the significant non-cash operating activities and capital expenditures of the Company’s discontinued operations related to the Self Service segment (in millions):
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| Nine Months Ended September 30, |
| 2026 | | 2025 |
| Depreciation and amortization | $ | — | | | $ | 9 | |
| Gain on disposal of business | (4) | | | — | |
| Impairment of net assets held for sale | — | | | 12 | |
| Purchases of property, plant and equipment | — | | | 5 | |
Note 4. Allowance for Credit Losses
Our allowance for credit losses was $49 million and $53 million as of September 30, 2026 and December 31, 2025, respectively. The provision for credit losses was $6 million and $7 million for the three months ended September 30, 2026 and 2025 and $32 million and $14 million for the nine months ended September 30, 2026 and 2025, respectively.
Note 5. Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. During our annual goodwill and indefinite-lived intangible assets impairment test performed in the fourth quarter of 2025, we determined the carrying value of our Specialty reporting unit exceeded the fair value estimate and an impairment charge was recorded. During the three months ended September 30, 2026, we identified a triggering event under Accounting Standards Codification ("ASC") 350 for our Specialty and Europe reporting units resulting from declining financial performance. The triggering event occurred due to both reporting units experiencing underperformance relative to our current year forecasts and reductions in expected future segment profitability with the Specialty reporting unit forecasting lower operating profitability as a result of, among other things, unfavorable customer and product mix shifts, higher fuel and freight costs, and unexpected declines in certain markets and our Europe reporting unit experiencing lower than expected demand and forecasting slower than previously anticipated revenue recovery from the operational challenges resulting from the ERP implementation in Germany. As a result, we performed interim quantitative goodwill impairment tests for our Specialty and Europe reporting units as of September 30, 2026.
Based on the results of the interim quantitative goodwill impairment tests, we determined that the carrying amount of the Specialty reporting unit was in excess of its fair value and recorded a goodwill impairment charge of $88 million, which was recorded in Impairment of goodwill on the Unaudited Condensed Consolidated Statements of Income. For our Europe reporting unit, the estimated fair value exceeded the respective carrying value by 20% and, accordingly, no goodwill impairment was recorded.
Management estimated the fair value of each reporting unit using both an income approach and a market approach. Under the income approach, management applied a discounted cash flow method reflecting discounted projected future (debt-free) cash flows, which were based on internal forecasts and other assumptions. Discount rates applied to the projected cash flows were based on the weighted average cost of capital for each reporting unit, which takes market participant assumptions into consideration and may include reporting-unit-specific risk premiums. Under the market approach, management utilized the guideline public company method, which analyzes market multiples (including revenue and/or earnings before interest, taxes, depreciation and amortization) for a group of comparable public companies, and used this market approach to validate the results of the income approach. The interim quantitative goodwill impairment tests utilized significant unobservable inputs, which are considered Level 3 inputs.
For the first nine months of 2026, we did not identify any triggering events or other indicators of impairment that necessitated any further interim test of goodwill impairment for our North America reporting unit.
Note 6. Equity Method Investments
The carrying value of our Equity method investments were as follows (in millions):
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| Segment | | Ownership as of September 30, 2026 | | September 30, 2026 | | December 31, 2025 |
MEKO AB (1) | Europe | | 26.6% | | $ | 113 | | | $ | 157 | |
| Other | | | | | 13 | | | 13 | |
| Total | | | | | $ | 126 | | | $ | 170 | |
(1) Equity in losses and earnings from our investment in MEKO AB ("Mekonomen") are reported on a one quarter lag and are excluded from the calculation of Segment EBITDA. As of September 30, 2026, the Level 1 fair value of our investment in Mekonomen was $103 million based on the quoted market price for Mekonomen's common stock using the same foreign exchange rate as the carrying value. During the three months ended September 30, 2026, the share price of Mekonomen fell below our carrying value and we evaluated this investment for other-than-temporary impairment, determining that the decline in fair value was not other-than-temporary. However, a prolonged decline in share price may cause us to recognize other-than-temporary impairments in our Unaudited Condensed Consolidated Statements of Income in a future period. During the three months ended March 31, 2026, we evaluated our investment in Mekonomen for impairment and concluded that events occurring during the quarter signaled the decline in fair value was other-than-temporary, specifically the change in financial condition, including the significant increase in their leverage ratio and discontinuation of their
dividend, in combination with the prolonged significant stock price decrease and operational underperformance due to difficult economic conditions. Therefore, we recognized an other-than-temporary impairment charge of $44 million, which represented the difference in the carrying value and the fair value of our investment in Mekonomen. The fair value of our investment in Mekonomen was determined using the Mekonomen share price of SEK 69 as of March 31, 2026. The impairment charges are recorded in Equity in (earnings) losses of unconsolidated subsidiaries in our Unaudited Condensed Consolidated Statements of Income.
Note 7. Revenue Recognition
Disaggregated Revenue
We report revenue in two categories: (i) parts and services and (ii) other.
Parts revenue is generated from the sale of alternative parts and vehicle products including collision parts, which are typically exterior components used in the collision repair process to restore a vehicle's appearance and safety; hard parts, which are typically internal components that are either mechanical in nature or functional components that are replaced as part of routine maintenance; major mechanical parts; and specialty products and accessories, which are vehicle products that improve the performance, functionality and appearance of vehicles. Services revenue includes additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, and diagnostic and repair services.
Other revenue includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from furnace operations; all of which are typically acquired as byproducts of our salvage operations. Revenue from the sale of hulks in our North America segment is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap.
The following table sets forth our revenue disaggregated by category and reportable segment (in millions):
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| North America | $ | 1,306 | | | $ | 1,343 | | | $ | 4,018 | | | $ | 4,041 | |
| Europe | 1,451 | | | 1,615 | | | 4,511 | | | 4,731 | |
| Specialty | 465 | | | 456 | | | 1,360 | | | 1,313 | |
| Parts and services | 3,222 | | | 3,414 | | | 9,889 | | | 10,085 | |
| North America | 95 | | | 80 | | | 289 | | | 236 | |
| Europe | 2 | | | 5 | | | 18 | | | 18 | |
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| Other | 97 | | | 85 | | | 307 | | | 254 | |
| Total revenue | $ | 3,319 | | | $ | 3,499 | | | $ | 10,196 | | | $ | 10,339 | |
Variable Consideration
Amounts related to variable consideration on our Unaudited Condensed Consolidated Balance Sheets are as follows (in millions):
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| | Classification | | September 30, 2026 | | December 31, 2025 |
| Return asset | | Prepaid expenses and other current assets | | $ | 65 | | | $ | 66 | |
| Refund liability | | Refund liability | | 120 | | | 122 | |
| Variable consideration reserve | | Receivables, net of allowance for credit losses | | 155 | | | 148 | |
Revenue by Geographic Area
Our net sales are attributed to geographic area based on the location of the selling operation. The following table sets forth our revenue by geographic area (in millions):
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Revenue | | | | | | | |
| United States | $ | 1,569 | | $ | 1,583 | | $ | 4,765 | | | $ | 4,728 | |
| Germany | 378 | | 474 | | 1,204 | | | 1,367 | |
| United Kingdom | 396 | | 432 | | 1,222 | | | 1,267 | |
| Other countries | 976 | | 1,010 | | 3,005 | | | 2,977 | |
| Total revenue | $ | 3,319 | | $ | 3,499 | | $ | 10,196 | | | $ | 10,339 | |
Note 8. Restructuring and Transaction Related Expenses
Strategic Restructuring and Transformation Initiatives
As part of executing our strategy to deliver profitable growth, drive a lean operating model and maximize returns on invested capital, we will, from time to time, engage in restructuring and business transformation initiatives. These initiatives can range in scope from broad changes such as centralizing and standardizing non-customer facing teams and divesting non-strategic assets, to targeted changes such as consolidating underutilized facilities and closing underperforming locations. Executing on these initiatives can take a few months to several years to fully implement depending on the scope and complexity of the initiative. Additionally, initiatives can change or expand based on the information obtained while executing on the initiative and when additional actions are identified. We anticipate we will incur approximately $85 million of total costs in 2026 and into early 2027 executing on the approved actions in connection with these initiatives.
The following table sets forth the expenses incurred related to our Strategic Restructuring and Transformation Initiatives (in millions):
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| | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | Expense Type | | 2026 | | 2025 (1) | | 2026 | | 2025 (1) |
| | Employee related costs | | $ | 4 | | | $ | 2 | | | $ | 28 | | | $ | 14 | |
| | Facility exit costs | | 13 | | | 3 | | | 26 | | | 8 | |
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| | Other costs, net | | 3 | | | 1 | | | 6 | | | 1 | |
| | Total | | $ | 20 | | | $ | 6 | | | $ | 60 | | | $ | 23 | |
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(1) Includes costs previously included in the 2024 Global Plan and 1 LKQ Europe Plan.
Expenses incurred for the nine months ended September 30, 2026 were related to the closing of underperforming locations and the elimination of inefficient cost structures primarily in our Europe and North America segments.
Acquisition Integration Plans
After completing the acquisition of a business, we may incur costs related to integrating the acquired business into our current business structure and systems. These costs are typically incurred within a year from the acquisition date and vary in magnitude depending on the size and complexity of the related integration activities. There are no material Acquisition Integration Plans as of September 30, 2026. We incurred expenses totaling $1 million and $3 million for the three months ended September 30, 2026 and 2025, respectively, and we incurred expenses totaling $2 million and $4 million for the nine months ended September 30, 2026 and 2025, respectively.
Transaction Related Expenses
During the three months ended September 30, 2026 and 2025, we incurred expenses totaling $3 million and $5 million, respectively, and during the nine months ended September 30, 2026 and 2025, we incurred expenses totaling $9 million and $6 million, respectively, for legal, accounting and advisory services related to completed and potential transactions.
Note 9. Earnings Per Share
The following chart sets forth the computation of earnings per share (in millions, except per share amounts):
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| (Loss) income from continuing operations | $ | (25) | | | $ | 178 | | | $ | 186 | | | $ | 522 | |
| Denominator for basic earnings per share—Weighted-average shares outstanding | 252.9 | | | 257.1 | | | 254.3 | | | 258.1 | |
| Effect of dilutive securities: | | | | | | | |
| Restricted stock units ("RSUs") | — | | | 0.2 | | | 0.3 | | | 0.3 | |
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| Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding | 252.9 | | 257.3 | | 254.6 | | 258.4 |
| Basic (loss) earnings per share from continuing operations | $ | (0.09) | | | $ | 0.69 | | | $ | 0.73 | | | $ | 2.02 | |
Diluted (loss) earnings per share from continuing operations (1) | $ | (0.09) | | | $ | 0.69 | | | $ | 0.73 | | | $ | 2.02 | |
(1) Diluted earnings per share from continuing operations was computed using the treasury stock method for dilutive securities.
Note 10. Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) are as follows (in millions):
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| | Three Months Ended September 30, 2026 |
| | Foreign Currency Translation | | Unrealized Gain (Loss) on Cash Flow Hedges (1) | | Unrealized Gain (Loss) on Pension Plans | | Unrealized Gain (Loss) on Available for Sale Debt Securities | | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | | Accumulated Other Comprehensive Income (Loss) |
Balance as of July 1, 2026 | | $ | (171) | | | $ | (6) | | | $ | 10 | | | $ | — | | | $ | 1 | | | $ | (166) | |
| Pretax loss | | (28) | | | — | | | — | | | — | | | — | | | (28) | |
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| Reclassification of unrealized gain | | — | | | — | | | (1) | | | (3) | | | — | | | (4) | |
| Reclassification of deferred income taxes | | — | | | — | | | 1 | | | 1 | | | — | | | 2 | |
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| Other comprehensive income from unconsolidated subsidiaries | | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Balance as of September 30, 2026 | | $ | (199) | | | $ | (6) | | | $ | 10 | | | $ | (2) | | | $ | 3 | | | $ | (194) | |
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| | Three Months Ended September 30, 2025 |
| | Foreign Currency Translation | | Unrealized Gain (Loss) on Cash Flow Hedges (1) | | | | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | | Accumulated Other Comprehensive Income (Loss) |
Balance as of July 1, 2025 | | $ | (43) | | | $ | (8) | | | | | $ | — | | | $ | (51) | |
| Pretax loss | | (38) | | | — | | | | | — | | | (38) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other comprehensive income from unconsolidated subsidiaries | | — | | | — | | | | | 5 | | | 5 | |
Balance as of September 30, 2025 | | $ | (81) | | | $ | (8) | | | | | $ | 5 | | | $ | (84) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2026 |
| | Foreign Currency Translation | | Unrealized Gain (Loss) on Cash Flow Hedges (1) | | Unrealized Gain (Loss) on Pension Plans | | Unrealized Gain (Loss) on Available for Sale Debt Securities | | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | | Accumulated Other Comprehensive Income (Loss) |
Balance as of January 1, 2026 | | $ | (64) | | | $ | (7) | | | $ | 10 | | | $ | — | | | $ | 4 | | | $ | (57) | |
| Pretax loss | | (135) | | | — | | | — | | | — | | | — | | | (135) | |
| | | | | | | | | | | | |
| Reclassification of unrealized loss (gain) | | — | | | 1 | | | (1) | | | (3) | | | — | | | (3) | |
| Reclassification of deferred income taxes | | — | | | — | | | 1 | | | 1 | | | — | | | 2 | |
| | | | | | | | | | | | |
| Other comprehensive loss from unconsolidated subsidiaries | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Balance as of September 30, 2026 | | $ | (199) | | | $ | (6) | | | $ | 10 | | | $ | (2) | | | $ | 3 | | | $ | (194) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2025 |
| | Foreign Currency Translation | | Unrealized Gain (Loss) on Cash Flow Hedges (1) | | Unrealized Gain (Loss) on Pension Plans | | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | | Accumulated Other Comprehensive Income (Loss) |
Balance as of January 1, 2025 | | $ | (411) | | | $ | (9) | | | $ | (1) | | | $ | 4 | | | $ | (417) | |
| Pretax income | | 330 | | | 1 | | | — | | | — | | | 331 | |
| Income tax effect | | — | | | (1) | | | — | | | — | | | (1) | |
| Reclassification of unrealized loss | | — | | | 1 | | | — | | | — | | | 1 | |
| Reclassification of deferred income taxes | | — | | | — | | | 1 | | | — | | | 1 | |
| | | | | | | | | | |
| Other comprehensive income from unconsolidated subsidiaries | | — | | | — | | | — | | | 1 | | | 1 | |
Balance as of September 30, 2025 | | $ | (81) | | | $ | (8) | | | $ | — | | | $ | 5 | | | $ | (84) | |
(1) Balances primarily include the forward starting interest rate swaps to hedge the risk of changes in interest rates related to forecasted debt issuance to finance a portion of the Uni-Select Acquisition. These swaps will continue to be reclassified to Interest expense over the term of the 5.75% senior notes due June 2028 (the "U.S. Notes (2028)") and the 6.25% senior notes due June 2033 (the "U.S. Notes (2033)" and together with the U.S. Notes (2028), the "U.S. Notes (2028/2033)"). Please refer to Note 20, "Derivative Instruments and Hedging Activities" in our 2023 Form 10-K for further information.
Our policy is to reclassify the income tax effect from Accumulated other comprehensive income (loss) to the Provision for income taxes when the related gains and losses are released to the Unaudited Condensed Consolidated Statements of Income.
Note 11. Supply Chain Financing
We utilize voluntary supply chain finance programs to support our efforts in negotiating payment term extensions with suppliers as a part of our goal to improve our operating cash flows. As of September 30, 2026 and December 31, 2025, we had $450 million and $481 million of Accounts payable outstanding under the arrangements, respectively.
Note 12. Long-Term Obligations
Long-term obligations consist of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2026 | | December 31, 2025 |
| | Maturity Date | | Interest Rate | | Amount | | Interest Rate | | Amount |
| Senior Unsecured Credit Agreement: | | | | | | | | | | |
Term loan payable (1) | | January 2027 | | — | % | | $ | — | | | 5.19 | % | | $ | 500 | |
| Revolving credit facilities | | December 2030 | | 5.24 | % | (2) | 580 | | | 3.13 | % | (2) | 1 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Senior Unsecured Term Loan Agreement: | | | | | | | | | | |
| Term loan payable | | March 2029 | | 3.83 | % | | 492 | | | 3.81 | % | | 510 | |
| | | | | | | | | | |
| Unsecured Senior Notes: | | | | | | | | | | |
| U.S. Notes (2028) | | June 2028 | | 5.75 | % | | 800 | | | 5.75 | % | | 800 | |
| U.S. Notes (2033) | | June 2033 | | 6.25 | % | | 600 | | | 6.25 | % | | 600 | |
| Euro Notes (2028) | | April 2028 | | 4.13 | % | | 283 | | | 4.13 | % | | 294 | |
| Euro Notes (2031) | | March 2031 | | 4.13 | % | | 850 | | | 4.13 | % | | 881 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Finance lease obligations | | | | 5.68 | % | (2) | 132 | | | 4.81 | % | (2) | 106 | |
| Other debt | | Various through December 2030 | | 26.39 | % | (2) (3) | 6 | | | 3.21 | % | (2) | 3 | |
| Total debt | | | | | | 3,743 | | | | | 3,695 | |
| Less: long-term debt issuance costs and unamortized bond discounts | | (26) | | | | | (32) | |
| | | | | | |
| Total debt, net of debt issuance costs and unamortized bond discounts | | 3,717 | | | | | 3,663 | |
| Less: current maturities, net of debt issuance costs | | (39) | | | | | (32) | |
| Long-term debt, net of debt issuance costs and unamortized bond discounts | | $ | 3,678 | | | | | $ | 3,631 | |
(1) On July 29, 2026, we prepaid the term loan payable under our Senior Unsecured Credit Agreement with borrowings from our revolving credit facilities.
(2) Interest rate derived via a weighted average.
(3) Increase in interest rate as of September 30, 2026 is due to the annualization effect of a short-term borrowing.
Cash paid for interest was $137 million and $163 million for the nine months ended September 30, 2026 and 2025, respectively.
Note 13. Derivative Instruments and Hedging Activities
We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices. Under current policies, we may use derivatives to manage our exposure to variable interest rates on our debt and changing foreign exchange rates for certain foreign currency denominated transactions. We do not hold or issue derivatives for trading purposes.
Derivative Instruments Designated as Cash Flow Hedges
In February 2023, we entered into interest rate swap agreements to mitigate the risk of changing interest rates on our variable interest rate payments related to borrowings under our Senior Unsecured Credit Agreement. The agreements included a total $300 million notional amount that matured in February 2026. Changes in the fair value of the interest rate swaps were recorded in Accumulated other comprehensive loss and reclassified to Interest expense when the hedged interest payments affected earnings. The activity related to the interest rate swaps was classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows as the activity related to normal recurring settlements to match interest payments. As of September 30, 2026, there are no derivative instruments designated as cash flow hedges outstanding.
All of our interest rate swap contracts were executed with counterparties that we believe are creditworthy, and we closely monitor the credit ratings of these counterparties.
As of December 31, 2025, the notional amounts, balance sheet classification and fair values of our derivative instruments designated as cash flow hedges were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | December 31, 2025 |
| | | | | | | | Notional Amount | | Balance Sheet Caption | | Fair Value - Asset / (Liability) |
| | | | | | | | | | | | |
| Interest rate swap agreements | | | | | | | | $ | 300 | | | Other accrued expenses | | $ | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The activity related to our cash flow hedges is included in Note 10, "Accumulated Other Comprehensive Income (Loss)." As of September 30, 2026, we estimate that $1 million of derivative losses (net of tax) included in Accumulated other comprehensive loss will be reclassified into our Unaudited Condensed Consolidated Statements of Income within the next 12 months.
Note 14. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value
We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the three and nine months ended September 30, 2026, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.
The following table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of September 30, 2026 and December 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2026 | | December 31, 2025 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Investments - debt securities | | $ | 73 | | | $ | — | | | $ | — | | | $ | 73 | | | $ | 70 | | | $ | — | | | $ | — | | | $ | 70 | |
| Investments - equity securities | | 21 | | | — | | | — | | | 21 | | | 19 | | | — | | | — | | | 19 | |
| Total Assets | | $ | 94 | | | $ | — | | | $ | — | | | $ | 94 | | | $ | 89 | | | $ | — | | | $ | — | | | $ | 89 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Contingent consideration liabilities | | $ | — | | | $ | — | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 3 | | | $ | 3 | |
| Total Liabilities | | $ | — | | | $ | — | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 3 | | | $ | 3 | |
Investments in debt and equity securities relate to our captive insurance subsidiary and are included in Other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. For contingent consideration liabilities, at both September 30, 2026 and December 31, 2025, the entire portion was current and was included in Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.
Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired business subsequent to the acquisition. The liabilities for these payments are classified as Level 3 liabilities because the related fair value measurement, which is determined using an income approach, includes significant inputs not observable in the market.
Financial Assets and Liabilities Not Measured at Fair Value
Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. The fair value measurements of the borrowings under the credit agreement are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at September 30, 2026 and December 31, 2025 to assume these obligations. The fair values of the U.S. Notes (2028), the U.S. Notes (2033), the 4.13% senior notes due April 2028 (the "Euro Notes (2028)") and the 4.13% senior notes due March 2031
(the "Euro Notes (2031)") are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.
Based on market conditions as of September 30, 2026 and December 31, 2025, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $580 million and $501 million, respectively. As of September 30, 2026 and December 31, 2025, the fair value of the borrowings under the Senior Unsecured Term Loan Credit Agreement ("CAD Note") reasonably approximated the carrying values of $492 million and $510 million, respectively.
The following table provides the carrying and fair value for our other financial instruments as of September 30, 2026 and December 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2026 | | As of December 31, 2025 |
| Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| U.S. Notes (2028) | $ | 800 | | | $ | 801 | | | $ | 800 | | | $ | 827 | |
| U.S. Notes (2033) | 600 | | | 592 | | | 600 | | | 642 | |
| Euro Notes (2028) | 283 | | | 282 | | | 294 | | | 295 | |
| Euro Notes (2031) | 850 | | | 830 | | | 881 | | | 902 | |
Note 15. Income Taxes
At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our interim earnings. We also record the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates, in the interim period in which they occur.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in state and foreign jurisdictions, permanent and temporary differences between book and taxable income, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes.
Our effective income tax rate for the nine months ended September 30, 2026 was 35.2%, compared to 24.8% for the nine months ended September 30, 2025. The increase in the effective tax rate for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 is attributable to a 1.3% unfavorable year over year impact from changes in the Company's geographic distribution of income and a 9.1% increase in the impact of discrete items. The increase in discrete items was primarily driven by the nondeductible portion of the goodwill impairment of the Specialty segment, totaling $84 million, recognized in the third quarter of 2026, which increased the effective tax rate by 6.7%.
Net income taxes paid were $158 million and $146 million for the nine months ended September 30, 2026 and 2025, respectively.
Note 16. Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of Cash and cash equivalents as reported on the Unaudited Condensed Consolidated Balance Sheets to Cash, cash equivalents and restricted cash shown in the Unaudited Condensed Consolidated Statements of Cash Flows (in millions):
| | | | | | | | | | | |
| |
| September 30, 2026 | | December 31, 2025 |
| Cash and cash equivalents | $ | 319 | | | $ | 319 | |
Restricted cash included in Other noncurrent assets (1) | 10 | | | 13 | |
| Cash, cash equivalents and restricted cash | $ | 329 | | | $ | 332 | |
(1) Represents cash held with our captive insurance subsidiary for payments on self-insured claims.
Note 17. Commitments and Contingencies
We are from time to time subject to various claims and lawsuits incidental to our business. Some of these claims may involve complex issues that are subject to substantial uncertainties. However, in the opinion of management, based on currently available information, we do not expect that any currently outstanding claims and lawsuits will, individually or in the aggregate, have a material adverse effect on our financial position, results of operations or cash flows.
On April 22, 2026, a purported stockholder of LKQ filed a putative class action (the “Securities Action”) in the United States District Court for the Middle District of Tennessee against LKQ Corporation and certain of its officers. The complaint generally alleges that LKQ made certain materially false and misleading statements and omitted certain material information regarding LKQ’s acquisition and integration of Uni-Select Incorporated ("Uni-Select") and Uni-Select’s U.S. operating subsidiary FinishMaster, which artificially inflated the market price of LKQ common stock. The complaint seeks, among other things, unspecified compensatory damages. On June 22, 2026, the court entered an order extending Defendants’ time to respond to the complaint until after a lead plaintiff has been appointed by the court. On October 7, 2026, the court appointed Nordea Investment Management AB ("Nordea") as the lead plaintiff and approved the selection of lead counsel. On October 27, 2026, the parties proposed a schedule for Nordea to file an amended complaint and for briefing on defendants’ anticipated motion to dismiss.
On May 26, 2026, a derivative action (“Derivative Action 1”) was filed in the United States District Court for the Middle District of Tennessee that largely mirrors the Securities Action but is filed by a purported shareholder on behalf of nominal defendant LKQ Corporation against certain current and former directors and officers, asserting both a federal securities claim and breach of fiduciary duty claims relating to the same alleged misconduct during the same purported class period as the Securities Action. Plaintiff seeks, on behalf of LKQ, unspecified monetary damages, disgorgement, and other relief. On June 10, 2026, Derivative Action 1 was reassigned to the judge who is presiding over the Securities Action. On July 24, 2026, Derivative Action 1 was stayed pending resolution of LKQ’s anticipated motion to dismiss the Securities Action.
On July 29, 2026, a second derivative action (“Derivative Action 2”) that largely mirrors Derivative Action 1 was filed in the United States District Court for the Middle District of Tennessee by another purported shareholder on behalf of nominal defendant LKQ Corporation against certain current and former directors and officers. On August 10, 2026, Derivative Action 2 was reassigned to the judge who is presiding over the Securities Action. On August 11, 2026, the Securities Action court, on its own accord, consolidated Derivative Actions 1 and 2 with the Securities Action. On September 14, 2026, the parties to Derivative Action 2 moved to deconsolidate the derivative actions from the Securities Action and to stay Derivative Action 2 pending resolution of LKQ’s anticipated motion to dismiss the Securities Action. That motion is currently pending.
On August 13, 2026, a third derivative action (“Derivative Action 3”) that largely mirrors Derivative Actions 1 and 2 was filed in the United States District Court for the District of Delaware by another purported shareholder on behalf of nominal defendant LKQ Corporation against certain current and former directors.
On September 11, 2026, a fourth derivative action (“Derivative Action 4”) that largely mirrors Derivative Actions 1-3 was filed in the United States District Court for the Middle District of Tennessee by another purported shareholder on behalf of nominal defendant LKQ Corporation against certain current and former directors and officers. On September 25, 2026, Derivative Action 4 was reassigned to the judge who is presiding over the Securities Action. On September 28, 2026, LKQ moved to stay Derivative Action 4 pending resolution of LKQ’s anticipated motion to dismiss the Securities Action. On September 29, 2026, plaintiffs in Derivative Actions 1, 2 and 4 moved to consolidate those derivative actions.
On October 15, 2026, the court presiding over Derivative Actions 1, 2, and 4, on its own accord, transferred those actions to the United States District Court for the District of Delaware before it could issue a decision on LKQ’s motion to stay Derivative Action 4 or the consolidation motion filed by plaintiffs in Derivative Actions 1, 2 and 4. As such, both motions remain pending. On October 28, 2026, Derivative Actions 1, 2, and 4 were reassigned to the same judge who is presiding over Derivative Action 3.
At this time, the Company is unable to predict the outcome or reasonably estimate a range of loss, if any, that could result from an unfavorable outcome relating to the Securities Action, Derivative Action 1, Derivative Action 2, Derivative Action 3, or Derivative Action 4.
Note 18. Segment and Geographic Information
We have three operating segments: North America; Europe; and Specialty, each of which are presented as a reportable segment. The segments are organized based on a combination of geographic regions served and the types of product lines offered. They are managed separately, as each business serves distinct customer bases and is impacted by different economic conditions.
The following tables present our financial performance by reportable segment for the periods indicated (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Specialty | | Eliminations | | Consolidated |
| Three Months Ended September 30, 2026 | | | | | | | | | |
| Revenue: | | | | | | | | | |
| Third Party | $ | 1,401 | | | $ | 1,453 | | | $ | 465 | | | $ | — | | | $ | 3,319 | |
| Intersegment | 1 | | | — | | | — | | | (1) | | | — | |
| Total segment revenue | $ | 1,402 | | | $ | 1,453 | | | $ | 465 | | | $ | (1) | | | $ | 3,319 | |
| | | | | | | | | |
Less: (1) | | | | | | | | | |
| Cost of goods sold | 808 | | | 921 | | | 355 | | | | | |
| Selling, general and administrative expenses | 394 | | | 476 | | | 89 | | | | | |
Other segment items (2) | (3) | | | (12) | | | (4) | | | | | |
| Segment EBITDA | $ | 203 | | | $ | 68 | | | $ | 25 | | | $ | — | | | $ | 296 | |
Total depreciation and amortization (3) | $ | 47 | | | $ | 45 | | | $ | 11 | | | $ | — | | | $ | 103 | |
| | | | | | | | | |
| Three Months Ended September 30, 2025 | | | | | | | | | |
| Revenue: | | | | | | | | | |
| Third Party | $ | 1,423 | | | $ | 1,620 | | | $ | 456 | | | $ | — | | | $ | 3,499 | |
| Intersegment | — | | | — | | | 1 | | | (1) | | | — | |
| Total segment revenue | $ | 1,423 | | | $ | 1,620 | | | $ | 457 | | | $ | (1) | | | $ | 3,499 | |
| | | | | | | | | |
Less: (1) | | | | | | | | | |
| Cost of goods sold | 825 | | | 991 | | | 343 | | | | | |
| Selling, general and administrative expenses | 401 | | | 474 | | | 83 | | | | | |
Other segment items (2) | (2) | | | (7) | | | (3) | | | | | |
| Segment EBITDA | $ | 199 | | | $ | 162 | | | $ | 34 | | | $ | — | | | $ | 395 | |
Total depreciation and amortization (3) | $ | 49 | | | $ | 48 | | | $ | 8 | | | $ | — | | | $ | 105 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| North America | | Europe | | Specialty | | Eliminations | | Consolidated |
| Nine Months Ended September 30, 2026 | | | | | | | | | |
| Revenue: | | | | | | | | | |
| Third Party | $ | 4,307 | | | $ | 4,529 | | | $ | 1,360 | | | $ | — | | | $ | 10,196 | |
| Intersegment | 1 | | | — | | | 2 | | | (3) | | | — | |
| Total segment revenue | $ | 4,308 | | | $ | 4,529 | | | $ | 1,362 | | | $ | (3) | | | $ | 10,196 | |
| | | | | | | | | |
Less: (1) | | | | | | | | | |
| Cost of goods sold | 2,480 | | | 2,803 | | | 1,028 | | | | | |
| Selling, general and administrative expenses | 1,224 | | | 1,452 | | | 267 | | | | | |
Other segment items (2) | (9) | | | (29) | | | (9) | | | | | |
| Segment EBITDA | $ | 613 | | | $ | 303 | | | $ | 76 | | | $ | — | | | $ | 992 | |
Total depreciation and amortization (3) | $ | 138 | | | $ | 139 | | | $ | 28 | | | $ | — | | | $ | 305 | |
| | | | | | | | | |
| Nine Months Ended September 30, 2025 | | | | | | | | | |
| Revenue: | | | | | | | | | |
| Third Party | $ | 4,277 | | | $ | 4,749 | | | $ | 1,313 | | | $ | — | | | $ | 10,339 | |
| Intersegment | — | | | — | | | 3 | | | (3) | | | — | |
| Total segment revenue | $ | 4,277 | | | $ | 4,749 | | | $ | 1,316 | | | $ | (3) | | | $ | 10,339 | |
| | | | | | | | | |
Less: (1) | | | | | | | | | |
| Cost of goods sold | 2,433 | | | 2,910 | | | 989 | | | | | |
| Selling, general and administrative expenses | 1,217 | | | 1,407 | | | 241 | | | | | |
Other segment items (2) | (13) | | | (22) | | | (8) | | | | | |
| Segment EBITDA | $ | 640 | | | $ | 454 | | | $ | 94 | | | $ | — | | | $ | 1,188 | |
Total depreciation and amortization (3) | $ | 148 | | | $ | 131 | | | $ | 24 | | | $ | — | | | $ | 303 | |
(1) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker ("CODM"). Intersegment expenses are included within the amounts shown.
(2) Amounts primarily represent other non operating income and expenses within each segment, as well as reconciling items to remove depreciation - cost of goods sold and the direct impacts of the Ukraine/Russia conflict, which are excluded from the calculation of Segment EBITDA.
(3) Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and transaction related expenses.
For the nine months ended September 30, 2026 and 2025, the Company's CODM was Justin Jude, Chief Executive Officer. See Note 19, "Subsequent Event" regarding changes to the CODM and Chief Executive Officer effective on October 23, 2026.
The key measure of segment profit or loss reviewed by our CODM, our Chief Executive Officer, is Segment EBITDA. The CODM uses Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net Income and Loss excluding net income and loss attributable to noncontrolling interest; income and loss from discontinued operations; depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and transaction related expenses; change in fair value of contingent consideration liabilities; other gains and losses related to acquisitions, equity method investments, or divestitures; equity in losses and earnings of unconsolidated subsidiaries; equity investment fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict.
The table below provides a reconciliation of Net Income (Loss) to Segment EBITDA (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Net (loss) income | $ | (27) | | | $ | 180 | | | $ | 188 | | | $ | 542 | |
| Less: net (loss) income attributable to continuing noncontrolling interest | (1) | | | — | | | (1) | | | 1 | |
| Net (loss) income attributable to LKQ stockholders | (26) | | | 180 | | | 189 | | | 541 | |
| Less: net (loss) income from discontinued operations | (2) | | | 2 | | | 2 | | | 20 | |
| Net (loss) income from continuing operations attributable to LKQ stockholders | (24) | | | 178 | | | 187 | | | 521 | |
| Adjustments: | | | | | | | |
| | | | | | | |
| Depreciation and amortization | 103 | | | 105 | | | 305 | | | 303 | |
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| Interest expense, net of interest income | 53 | | | 53 | | | 153 | | | 158 | |
| | | | | | | |
| Provision for income taxes | 32 | | | 45 | | | 124 | | | 173 | |
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Equity in (earnings) losses of unconsolidated subsidiaries (1) | (2) | | | — | | | 42 | | | — | |
| | | | | | | |
| Equity investment fair value adjustments | (1) | | | — | | | (1) | | | (1) | |
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Restructuring and transaction related expenses (2) | 20 | | | 14 | | | 67 | | | 33 | |
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Impairment of goodwill (3) | 88 | | | — | | | 88 | | | — | |
Impairment of net assets held for sale (4) | 23 | | | — | | | 23 | | | — | |
| | | | | | | |
Direct impacts of Ukraine/Russia conflict (5) | 4 | | | — | | | 4 | | | 1 | |
| Segment EBITDA | $ | 296 | | | $ | 395 | | | $ | 992 | | | $ | 1,188 | |
(1) See Note 6, "Equity Method Investments" for further information.
(2) Excludes amounts related to Restructuring - Depreciation expense. See Note 8, "Restructuring and Transaction Related Expenses" for further information on restructuring activities.
(3) See Note 5, "Intangible Assets" for further information.
(4) See Note 2, "Business Combinations and Divestitures" for further information.
(5) Amounts primarily include inventory write-downs and property, plant, and equipment impairment charges for operations impacted by the Ukraine/Russia conflict.
The following table presents capital expenditures by reportable segment (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Capital Expenditures | | | | | | | |
North America | $ | 18 | | | $ | 20 | | | $ | 54 | | | $ | 58 | |
| Europe | 15 | | | 26 | | | 64 | | | 85 | |
| Specialty | 6 | | | 5 | | | 12 | | | 12 | |
| Total capital expenditures | $ | 39 | | | $ | 51 | | | $ | 130 | | | $ | 155 | |
We report net receivables; inventories; net property, plant and equipment; and net operating lease assets by segment as that information is used by the CODM in assessing segment performance. These assets provide a measure for the operating capital employed in each segment. Unallocated assets include cash and cash equivalents, prepaid expenses and other current and noncurrent assets, goodwill, other intangibles, and equity method investments.
The following table presents assets by reportable segment (in millions):
| | | | | | | | | | | |
| September 30, 2026 | | December 31, 2025 |
| Receivables, net of allowance for credit losses | | | |
North America | $ | 536 | | | $ | 495 | |
| Europe | 675 | | | 552 | |
| Specialty | 143 | | | 157 | |
| Total receivables, net of allowance for credit losses | 1,354 | | | 1,204 | |
| Inventories | | | |
North America | 1,403 | | | 1,479 | |
| Europe | 1,411 | | | 1,496 | |
| Specialty | 448 | | | 451 | |
| Total inventories | 3,262 | | | 3,426 | |
| Property, plant and equipment, net | | | |
North America | 649 | | | 651 | |
| Europe | 624 | | | 695 | |
| Specialty | 123 | | | 106 | |
| Total property, plant and equipment, net | 1,396 | | | 1,452 | |
| Operating lease assets, net | | | |
North America | 611 | | | 641 | |
| Europe | 528 | | | 544 | |
| Specialty | 144 | | | 147 | |
| Total operating lease assets, net | 1,283 | | | 1,332 | |
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| | | |
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| Other unallocated assets | 7,487 | | | 7,723 | |
| Total assets | $ | 14,782 | | | $ | 15,137 | |
Our largest countries of operation are the U.S., followed by Germany and the United Kingdom ("U.K."). Additional European operations are located in the Netherlands, Italy, Czech Republic, Belgium, Austria, Slovakia, France 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. The following table sets forth our tangible long-lived assets by geographic area (in millions):
| | | | | | | | | | | |
| September 30, 2026 | | December 31, 2025 |
Long-lived assets | | | |
| United States | $ | 1,302 | | | $ | 1,313 | |
| Germany | 338 | | | 369 | |
| United Kingdom | 292 | | | 321 | |
| Other countries | 747 | | | 781 | |
| Total long-lived assets | $ | 2,679 | | | $ | 2,784 | |
Note 19. Subsequent Event
On October 23, 2026, Justin Jude departed from his position as President and Chief Executive Officer of the Company and Salvatore A. Abbate was appointed as President and Chief Executive Officer with an effective date of December 15, 2026. Until Mr. Abbate assumes the role of President and Chief Executive Officer, the Company has established an interim Office of the Chief Executive Officer to provide ongoing leadership continuity, consisting of John Mendel, Chairman of the Board, and Sue Gove, Chair of LKQ’s Audit Committee. Rick Galloway, Senior Vice President and Chief Financial Officer, will serve as the Company's Principal Executive Officer and CODM during such time.
