LKQ CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________
FORM
10-Q
____________________________
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the Quarterly Period Ended
June 30, 2025
OR
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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:
001-42002
____________________________
(Exact name of registrant as specified in its charter)
____________________________
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
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| (Address of principal executive offices) | (Zip Code) | |||||||||||||
Registrant’s telephone number, including area code: (
615
)
781-5200
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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The
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The
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________________________________________
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.
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☒ | Accelerated Filer |
☐
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Emerging Growth Company |
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| Non-accelerated Filer |
☐
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Smaller Reporting Company |
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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 17, 2025, the registrant had outstanding an aggregate of
257,293,192
shares of Common Stock.
1
*****
TABLE OF CONTENTS
| Item | Page | |||||||
| PART I | FINANCIAL INFORMATION | |||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II | OTHER INFORMATION | |||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
| SIGNATURES | ||||||||
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
(In millions, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ |
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$ |
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$ |
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$ |
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| Cost of goods sold |
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| Gross margin |
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| Selling, general and administrative expenses |
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| Restructuring and transaction related expenses |
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| Depreciation and amortization |
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| Operating income |
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| Other expense (income): | |||||||||||||||||||||||
| Interest expense |
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| Interest income and other income, net |
(
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(
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(
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(
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| Total other expense, net |
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| Income before provision for income taxes |
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| Provision for income taxes |
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| Equity in (earnings) losses of unconsolidated subsidiaries |
(
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(
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| Net income |
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| Less: net income attributable to noncontrolling interest |
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| Net income attributable to LKQ stockholders | $ |
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$ |
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$ |
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$ |
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| Basic earnings per share: | |||||||||||||||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Less: net income attributable to noncontrolling interest |
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| Net income attributable to LKQ stockholders | $ |
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$ |
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$ |
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$ |
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| Diluted earnings per share: | |||||||||||||||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Less: net income attributable to noncontrolling interest |
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| Net income attributable to LKQ stockholders | $ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
3
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income
(In millions)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Less: net income attributable to noncontrolling interest |
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| Net income attributable to LKQ stockholders |
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| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation, net of tax |
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(
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(
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| Net change in unrealized gains/losses on cash flow hedges, net of tax |
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| Net change in unrealized gains/losses on pension plans, net of tax |
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Other comprehensive (loss)
income from unconsolidated subsidiaries
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(
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(
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| Other comprehensive income (loss) |
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(
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(
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| Comprehensive income |
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| Less: comprehensive income attributable to noncontrolling interest |
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| Comprehensive income attributable to LKQ stockholders | $ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
4
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In millions, except per share data)
| June 30, 2025 | December 31, 2024 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ |
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$ |
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| Receivables, net of allowance for credit losses |
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| Inventories |
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| Prepaid expenses and other current assets |
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| Total current assets |
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| Property, plant and equipment, net |
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| Operating lease assets, net |
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| Goodwill |
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| Other intangibles, net |
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| Equity method investments |
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| Other noncurrent assets |
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| Total assets | $ |
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$ |
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| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ |
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$ |
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| Accrued expenses: | |||||||||||
| Accrued payroll-related liabilities |
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| Refund liability |
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| Other accrued expenses |
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| Current portion of operating lease liabilities |
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| Current portion of long-term obligations |
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| Other current liabilities |
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| Total current liabilities |
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| Long-term operating lease liabilities, excluding current portion |
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| Long-term obligations, excluding current portion |
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| Deferred income taxes |
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| Other noncurrent liabilities |
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| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
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Common stock, $
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| Additional paid-in capital |
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| Retained earnings |
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| Accumulated other comprehensive loss |
(
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(
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Treasury stock, at cost;
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(
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(
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| Total Company stockholders' equity |
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| Noncontrolling interest |
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| Total stockholders' equity |
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| Total liabilities and stockholders' equity | $ |
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$ |
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The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
5
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In millions)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ |
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$ |
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| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization |
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| Stock-based compensation expense |
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| Other |
(
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| Changes in operating assets and liabilities, net of effects from acquisitions and dispositions: | |||||||||||
| Receivables |
(
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(
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| Inventories |
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(
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| Other assets |
(
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(
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| Prepaid income taxes/income taxes payable |
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(
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| Accounts payable |
(
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| Other liabilities |
(
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| Operating lease assets and liabilities |
(
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| Net cash provided by operating activities |
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| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment |
(
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(
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| Acquisitions, net of cash acquired |
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(
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| Other investing activities, net |
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(
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| Net cash used in investing activities |
(
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(
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| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Borrowings under revolving credit facilities |
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| Repayments under revolving credit facilities |
(
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(
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| Repayments of other debt, net |
(
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(
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| Proceeds from issuance of Euro Notes (2031), net of unamortized bond discount |
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| Repayment of Euro Notes (2024) |
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(
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| Dividends paid to LKQ stockholders |
(
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(
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| Purchase of treasury stock |
(
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(
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| Other financing activities, net |
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(
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| Net cash used in financing activities |
(
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(
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| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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(
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| Net increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period
(1)
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Cash, cash equivalents and restricted cash, end of period
(1)
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$ |
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$ |
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| Supplemental disclosure of cash paid for: | |||||||||||
| Income taxes, net of refunds | $ |
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$ |
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| Interest |
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(1)
See Note 12, "Cash, Cash Equivalents and Restricted Cash" for further information on restricted cash.
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
6
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(In millions, except per share data)
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 as of April 1, 2025 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — | — | — | — |
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— |
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| Other comprehensive income | — | — | — | — | — | — |
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— |
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| Purchase of treasury stock | — | — |
(
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(
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— | — | — | — |
(
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| Stock-based compensation expense | — | — | — | — |
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— | — | — |
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| Dividends declared to LKQ stockholders ($0.30 per share) | — | — | — | — | — |
(
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— | — |
(
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| Acquisition of a subsidiary with noncontrolling interest | — | — | — | — | — | — | — |
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| Balance as of June 30, 2025 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 as of April 1, 2024 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — | — | — | — |
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— |
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| Other comprehensive loss | — | — | — | — | — | — |
(
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— |
(
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| Purchase of treasury stock | — | — |
(
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(
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— | — | — | — |
(
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| Vesting of restricted stock units, net of shares withheld for employee tax |
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— | — | — |
(
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— | — | — |
(
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| Stock-based compensation expense | — | — | — | — |
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— | — | — |
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| Dividends declared to LKQ stockholders ($0.30 per share) | — | — | — | — | — |
(
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— | — |
(
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| Purchase of noncontrolling interest | — | — | — | — |
(
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— | — | — |
(
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| Balance as of June 30, 2024 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
7
LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(In millions, except per share data)
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 as of January 1, 2025 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — | — | — | — |
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— |
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| Other comprehensive income | — | — | — | — | — | — |
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— |
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| Purchase of treasury stock | — | — |
(
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(
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— | — | — | — |
(
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| Vesting of restricted stock units, net of shares withheld for employee tax |
|
— | — | — |
(
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— | — | — |
(
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| Stock-based compensation expense | — | — | — | — |
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— | — | — |
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||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared to LKQ stockholders ($0.60 per share) | — | — | — | — | — |
(
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— | — |
(
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| Acquisition of a subsidiary with noncontrolling interest | — | — | — | — | — | — | — |
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| Balance as of June 30, 2025 |
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$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 as of January 1, 2024 |
|
$ |
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(
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$ |
(
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$ |
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$ |
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$ |
(
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$ |
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$ |
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| Net income | — | — | — | — | — |
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— |
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| Other comprehensive loss | — | — | — | — | — | — |
(
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— |
(
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||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — |
(
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(
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— | — | — | — |
(
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||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld for employee tax |
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— | — | — |
(
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— | — | — |
(
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||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — |
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— | — | — |
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||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared to LKQ stockholders ($0.60 per share) | — | — | — | — | — |
(
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— | — |
(
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||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — |
(
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— | — | — |
(
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||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 |
|
$ |
|
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
8
LKQ CORPORATION AND SUBSIDIARIES
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.
We have reclassified certain prior period amounts in the Unaudited Condensed Consolidated Statements of Cash Flows to conform to the current period presentation.
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, 2024 filed with the SEC on February 20, 2025 ("2024 Form 10-K").
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The ASU requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The ASU is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update 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.
Note 2.
Allowance for Credit Losses
Our allowance for credit losses was $
52
million and $
56
million as of June 30, 2025 and December 31, 2024, respectively. The provision for credit losses was
$
2
million and $
1
million for the three months ended June 30, 2025 and 2024 and $
7
million and $
4
million for the six months ended June 30, 2025 and 2024, respectively.
Note 3.
Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. We performed our annual impairment test during the fourth quarter of 2024, and determined no impairment existed as all of our reporting units had a fair value estimate which exceeded the carrying value by at least
10
%. 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. Goodwill and indefinite-lived intangible assets impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment. We did not identify any indicators of impairment in the first six months of 2025 that necessitated an interim test of goodwill impairment or indefinite-lived intangible assets impairment.
9
Note 4.
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 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.
For Wholesale - North America and Self Service, vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; mirrors; grilles; wheels; and large mechanical items such as engines and transmissions. For Europe, and to a lesser extent for Wholesale - North America, vehicle replacement 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. Additionally, in both our Wholesale - North America and Europe segments, we sell paint and paint related consumables for refinishing vehicles. For our Specialty operations, we serve seven product segments: truck and off-road; speed and performance; recreational vehicles ("RV"); towing; wheels, tires and performance handling; marine; and miscellaneous accessories.
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. We derive scrap metal and other precious metals from several sources in both our Wholesale - North America and Self Service segments, including vehicles that have been used in our recycling operations and vehicles 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 - North America and Self Service segments 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):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Wholesale - North America | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Europe |
|
|
|
|
|||||||||||||||||||
| Specialty |
|
|
|
|
|||||||||||||||||||
| Self Service |
|
|
|
|
|||||||||||||||||||
| Parts and services |
|
|
|
|
|||||||||||||||||||
| Wholesale - North America |
|
|
|
|
|||||||||||||||||||
| Europe |
|
|
|
|
|||||||||||||||||||
| Self Service |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total revenue | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Variable Consideration
Amounts related to variable consideration on our Unaudited Condensed Consolidated Balance Sheets are as follows (in millions):
| Classification | June 30, 2025 | December 31, 2024 | ||||||||||||||||||
| Return asset | Prepaid expenses and other current assets | $ |
|
$ |
|
|||||||||||||||
| Refund liability | Refund liability |
|
|
|||||||||||||||||
| Variable consideration reserve | Receivables, net of allowance for credit losses |
|
|
|||||||||||||||||
10
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):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| United States | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Germany |
|
|
|
|
|||||||||||||||||||
| United Kingdom |
|
|
|
|
|||||||||||||||||||
| Other countries |
|
|
|
|
|||||||||||||||||||
| Total revenue | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Note 5.
Restructuring and Transaction Related Expenses
From time to time, we initiate restructuring plans to integrate acquired businesses, to align our workforce with strategic business activities, or to improve efficiencies in our operations. Below is a summary of our current restructuring plans:
2024 Global Restructuring Plan
In the first quarter of 2024, we began a global restructuring initiative focused on enhancing profitability. This initiative includes exiting businesses and markets that do not align with our strategic objectives and executing on opportunities to reduce costs, streamline operations and consolidate facilities. As we continue to move forward with our plan, we have incurred and expect to incur impairments and other charges related to the disposal of long-lived assets, inventory, and other assets; costs for employee severance; lease termination charges and facility closure costs; and other contract termination charges. We expect that the largest portion of the activity will come from the Europe segment. In 2024, we divested our operations in Slovenia and Bosnia to third parties and, certain operations in Poland to MEKO AB, an equity method investment of which we own
26.6
%, and received a combination of cash and notes receivable. Our decision to exit these markets constituted a triggering event to evaluate certain long-lived assets for impairment, and as a result, we incurred impairment charges with the divestitures of Slovenia, Poland, and Bosnia. This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $
130
million and $
140
million.
1 LKQ Europe Plan
In 2019, we announced a multi-year plan 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 plan, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common Enterprise Resource Planning platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. This plan is scheduled to be substantially complete by the end of 2027 with an estimated total incurred cost of between $
30
million and $
40
million. In the future, we may identify additional initiatives under the plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives.
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 June 30, 2025.
11
The following table sets forth the expenses incurred related to our restructuring plans (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| Plan | Expense Type | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||
| 2024 Global Plan | Employee related costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Facility exit costs |
|
|
|
|
||||||||||||||||||||||||||||
|
Inventory related costs
(1)
|
|
|
|
|
||||||||||||||||||||||||||||
|
Asset impairments
(2)
|
|
|
|
|
||||||||||||||||||||||||||||
| Other (benefits) costs |
(
|
|
|
|
||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
| 2022 Global Plan | Employee related costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Facility exit costs |
|
|
|
|
||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
| 1 LKQ Europe Plan | Employee related costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Facility exit costs |
|
|
|
|
||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
| Acquisition Integration Plans | Employee related costs | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Facility exit costs |
|
|
|
|
||||||||||||||||||||||||||||
| Other (benefits) costs |
|
|
|
|
||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
| Total restructuring expenses | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||
(1)
Recorded to Cost of goods sold in the Unaudited Condensed Consolidated Statements of Income.
(2)
Related to impairment of assets in Property, plant and equipment, net and Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets.
The following table sets forth the cumulative plan costs by segment related to our restructuring plans (in millions):
| Cumulative Program Costs | ||||||||||||||||||||||||||||||||
| Wholesale - North America | Europe | Specialty | Self Service | Total | ||||||||||||||||||||||||||||
| 2024 Global Plan | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| 1 LKQ Europe Plan |
|
|
|
|
|
|||||||||||||||||||||||||||
Transaction Related Expenses
12
Note 6.
Earnings Per Share
The following chart sets forth the computation of earnings per share (in millions, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net Income | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Denominator for basic earnings per share—Weighted-average shares outstanding |
|
|
|
|
|||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Restricted stock units ("RSUs") |
|
|
|
|
|||||||||||||||||||
| Performance-based RSUs ("PSUs") |
|
|
|
|
|||||||||||||||||||
| Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding |
|
|
|
|
|||||||||||||||||||
| Basic earnings per share | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Diluted earnings per share
(1)
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
(1)
Diluted earnings per share was computed using the treasury stock method for dilutive securities.
Note 7.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) are as follows (in millions):
| Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||
| Foreign Currency Translation | Unrealized Gain (Loss) on Cash Flow Hedges | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||
|
Balance as of April 1, 2025
|
$ |
(
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||
|
Pretax
income
|
|
|
|
|
||||||||||||||||||||||
| Income tax effect |
|
(
|
|
(
|
||||||||||||||||||||||
| Reclassification of unrealized loss |
|
|
|
|
||||||||||||||||||||||
|
Other comprehensive
loss from unconsolidated subsidiaries
|
|
|
(
|
(
|
||||||||||||||||||||||
|
Balance as of June 30, 2025
|
$ |
(
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Foreign Currency Translation | Unrealized Gain (Loss) on Cash Flow Hedges | Unrealized Gain (Loss) on Pension Plans | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
| Balance as of April 1, 2024 | $ |
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||
| Pretax (loss) income |
(
|
|
|
|
(
|
|||||||||||||||||||||||||||
| Income tax effect |
|
(
|
|
|
(
|
|||||||||||||||||||||||||||
| Reclassification of unrealized gain |
|
(
|
|
|
(
|
|||||||||||||||||||||||||||
| Reclassification of deferred income taxes |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other comprehensive income from unconsolidated subsidiaries |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Balance as of June 30, 2024
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||
13
|
Six Months Ended June 30, 2025
|
||||||||||||||||||||||||||||||||
| Foreign Currency Translation | Unrealized Gain (Loss) on Cash Flow Hedges | Unrealized Gain (Loss) on Pension Plans | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
| Balance as of January 1, 2025 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
|
$ |
(
|
||||||||||||||||||||||
| Pretax income |
|
|
|
|
|
|||||||||||||||||||||||||||
| Income tax effect |
|
(
|
|
|
(
|
|||||||||||||||||||||||||||
| Reclassification of unrealized loss |
|
|
|
|
|
|||||||||||||||||||||||||||
| Reclassification of deferred income taxes |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other comprehensive loss from unconsolidated subsidiaries |
|
|
|
(
|
(
|
|||||||||||||||||||||||||||
|
Balance as of June 30, 2025
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||
|
Six Months Ended June 30, 2024
|
||||||||||||||||||||||||||||||||
| Foreign Currency Translation | Unrealized Gain (Loss) on Cash Flow Hedges | Unrealized Gain (Loss) on Pension Plans | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | $ |
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||
| Pretax (loss) income |
(
|
|
|
|
(
|
|||||||||||||||||||||||||||
| Income tax effect |
|
(
|
|
|
(
|
|||||||||||||||||||||||||||
| Reclassification of unrealized gain |
|
(
|
|
|
(
|
|||||||||||||||||||||||||||
| Reclassification of deferred income taxes |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Balance as of June 30, 2024
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
$ |
(
|
||||||||||||||||||||||
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 8.
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 June 30, 2025 and December 31, 2024, we had $
450
million
and $
416
million of Accounts payable outstanding under the arrangements, respectively.
14
Note 9.
Long-Term Obligations
Long-term obligations consist of the following (in millions):
|
June 30, 2025
|
December 31, 2024
|
|||||||||||||||||||||||||||||||
| Maturity Date | Interest Rate | Amount | Interest Rate | Amount | ||||||||||||||||||||||||||||
| Senior Unsecured Credit Agreement: | ||||||||||||||||||||||||||||||||
| Term loan payable | January 2027 |
|
% | $ |
|
|
% | $ |
|
|||||||||||||||||||||||
| Revolving credit facilities | January 2028 |
|
% |
(1)
|
|
|
% |
(1)
|
|
|||||||||||||||||||||||
| Senior Unsecured Term Loan Agreement: | ||||||||||||||||||||||||||||||||
| Term loan payable | July 2026 |
|
% |
|
|
% |
|
|||||||||||||||||||||||||
| Unsecured Senior Notes: | ||||||||||||||||||||||||||||||||
| U.S. Notes (2028) | June 2028 |
|
% |
|
|
% |
|
|||||||||||||||||||||||||
| U.S. Notes (2033) | June 2033 |
|
% |
|
|
% |
|
|||||||||||||||||||||||||
| Euro Notes (2028) | April 2028 |
|
% |
|
|
% |
|
|||||||||||||||||||||||||
| Euro Notes (2031) | March 2031 |
|
% |
|
|
% |
|
|||||||||||||||||||||||||
| Notes payable | Various through October 2030 |
|
% |
(1)
|
|
|
% |
(1)
|
|
|||||||||||||||||||||||
| Finance lease obligations |
|
% |
(1)
|
|
|
% |
(1)
|
|
||||||||||||||||||||||||
| Other debt |
|
% |
(1)
|
|
|
% |
(1)
|
|
||||||||||||||||||||||||
| Total debt |
|
|
||||||||||||||||||||||||||||||
| Less: long-term debt issuance costs and unamortized bond discounts |
(
|
(
|
||||||||||||||||||||||||||||||
| Total debt, net of debt issuance costs and unamortized bond discounts |
|
|
||||||||||||||||||||||||||||||
| Less: current maturities, net of debt issuance costs |
(
|
(
|
||||||||||||||||||||||||||||||
| Long-term debt, net of debt issuance costs and unamortized bond discounts | $ |
|
$ |
|
||||||||||||||||||||||||||||
(1)
Interest rate derived via a weighted average
Senior Unsecured Credit Agreement
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 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 March 2025, we entered into an interest rate swap agreement to mitigate the risk of changing interest rates on our variable interest rate payments related to borrowings under our Senior Unsecured Credit Agreement. Under the terms of the interest rate swap agreement, we pay the fixed interest rate and receive a variable interest rate based on term Secured Overnight Financing Rate ("SOFR") that matches a contractually specified rate under the Senior Unsecured Credit Agreement. The March 2025 agreement replaced the agreements that matured in February 2025 and include a total $
400
million notional amount maturing in November 2025 with a fixed interest rate of
4.11
%. Changes in the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss and reclassified to Interest expense when the hedged interest payments affect earnings.
15
The activity related to the interest rate swaps is classified in operating activities in our Unaudited Condensed Consolidated Statements of Cash Flows as the activity relates to normal recurring settlements to match interest payments.
All of our interest rate swap contracts have been executed with counterparties that we believe are creditworthy, and we closely monitor the credit ratings of these counterparties.
As of June 30, 2025 and December 31, 2024, the notional amounts, balance sheet classification and fair values of our derivative instruments designated as cash flow hedges were as follows (in millions):
|
June 30, 2025
|
||||||||||||||||||||
| Notional Amount | Balance Sheet Caption | Fair Value - Asset / (Liability) | ||||||||||||||||||
| Interest rate swap agreement | $ |
|
Prepaid expenses and other current assets | $ |
|
|||||||||||||||
| Interest rate swap agreements |
|
Other accrued expenses |
|
|||||||||||||||||
|
December 31, 2024
|
||||||||||||||||||||
| Notional Amount | Balance Sheet Caption | Fair Value - Asset / (Liability) | ||||||||||||||||||
| Interest rate swap agreements | $ |
|
Other accrued expenses | $ |
|
|||||||||||||||
| Interest rate swap agreements |
|
Other noncurrent liabilities |
(
|
|||||||||||||||||
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, 2025, 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.
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 June 30, 2025 and December 31, 2024 (in millions):
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments - debt securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Investments - equity securities |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Total Assets | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
| Contingent consideration liabilities |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||||||
16
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. The balance sheet classification of the interest rate swap agreements is presented in Note 10, "Derivative Instruments and Hedging Activities." For contingent consideration liabilities, the current portion is included in Other current liabilities and the noncurrent portion is included in Other noncurrent liabilities on the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.
We value derivative instruments using a third party valuation model that performs discounted cash flow analysis based on the terms of the contracts and market observable inputs such as current and forward interest rates and current and forward foreign exchange rates.
Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired business subsequent to the acquisition. The liabilities for these payments are classified as Level 3 liabilities because the related fair value measurement, which is determined using an income approach, includes significant inputs not observable in the market.
Financial Assets and Liabilities Not Measured at Fair Value
Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. 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 June 30, 2025 and December 31, 2024 to assume these obligations. The fair values of the 5.75% senior notes due June 2028 (the "U.S. Notes (2028)"), 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)"), 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 June 30, 2025 and December 31, 2024, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $
1,250
million and $
1,164
million, respectively. As of June 30, 2025 and December 31, 2024, the fair value of the borrowings under the Senior Unsecured Term Loan Credit Agreement ("CAD Note") reasonably approximated the carrying values of $
514
million
and
$
487
million, respectively.
The following table provides the carrying and fair value for our other financial instruments as of June 30, 2025 and December 31, 2024 (in millions):
|
As of June 30, 2025
|
As of December 31, 2024
|
||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| U.S. Notes (2028) | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| U.S. Notes (2033) |
|
|
|
|
|||||||||||||||||||
| Euro Notes (2028) |
|
|
|
|
|||||||||||||||||||
| Euro Notes (2031) |
|
|
|
|
|||||||||||||||||||
Note 12.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of Cash and cash equivalents as reported in 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):
| June 30, 2025 | December 31, 2024 | ||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
|||||||
|
Restricted cash included in Other noncurrent assets
(1)
|
|
|
|||||||||
| Cash, cash equivalents and restricted cash | $ |
|
$ |
|
|||||||
(1)
Represents cash held with our captive insurance subsidiary for payments on self-insured claims.
17
Note 13.
Segment and Geographic Information
We have
four
operating segments: Wholesale - North America; Europe; Specialty; and Self Service, each of which is presented as a reportable segment.
The segments are organized based on a combination of geographic areas served and type of product lines offered. The segments are managed separately as the businesses serve different customers and are affected by different economic conditions. Wholesale - North America and Self Service have similar economic characteristics and have common products and services, customers and methods of distribution. We are reporting these operating segments separately to provide greater transparency to investors.
The following tables present our financial performance by reportable segment for the periods indicated (in millions):
| Wholesale - North America | Europe | Specialty | Self Service | Eliminations | Consolidated | ||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Third Party | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Intersegment |
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total segment revenue | $ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Less:
(1)
|
|||||||||||||||||||||||||||||||||||
| Cost of goods sold |
|
|
|
|
|||||||||||||||||||||||||||||||
| Selling, general and administrative expenses |
|
|
|
|
|||||||||||||||||||||||||||||||
|
Other segment items
(2)
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||
| Segment EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Total depreciation and amortization
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Third Party | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Intersegment |
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total segment revenue | $ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Less:
(1)
|
|||||||||||||||||||||||||||||||||||
| Cost of goods sold |
|
|
|
|
|||||||||||||||||||||||||||||||
| Selling, general and administrative expenses |
|
|
|
|
|||||||||||||||||||||||||||||||
|
Other segment items
(2)
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||
| Segment EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Total depreciation and amortization
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
18
| Wholesale - North America | Europe | Specialty | Self Service | Eliminations | Consolidated | ||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Third Party | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Intersegment |
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total segment revenue | $ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Less:
(1)
|
|||||||||||||||||||||||||||||||||||
| Cost of goods sold |
|
|
|
|
|||||||||||||||||||||||||||||||
| Selling, general and administrative expenses |
|
|
|
|
|||||||||||||||||||||||||||||||
|
Other segment items
(2)
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||
| Segment EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Total depreciation and amortization
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Third Party | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Intersegment |
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||
| Total segment revenue | $ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Less:
(1)
|
|||||||||||||||||||||||||||||||||||
| Cost of goods sold |
|
|
|
|
|||||||||||||||||||||||||||||||
| Selling, general and administrative expenses |
|
|
|
|
|||||||||||||||||||||||||||||||
|
Other segment items
(2)
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||||||||
| Segment EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Total depreciation and amortization
(3)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
(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 restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" for additional information on the restructuring charges.
(3)
Amounts presented include depreciation and amortization expense recorded within Cost of goods sold and Restructuring and transaction related expenses.
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 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.
19
The table below provides a reconciliation of Net Income to Segment EBITDA (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Less: net income attributable to noncontrolling interest |
|
|
|
|
|||||||||||||||||||
| Net income attributable to LKQ stockholders |
|
|
|
|
|||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization |
|
|
|
|
|||||||||||||||||||
| Interest expense, net of interest income |
|
|
|
|
|||||||||||||||||||
| Provision for income taxes |
|
|
|
|
|||||||||||||||||||
| Equity in (earnings) losses of unconsolidated subsidiaries |
(
|
(
|
|
|
|||||||||||||||||||
| Equity investment fair value adjustments |
|
|
(
|
|
|||||||||||||||||||
|
Restructuring and transaction related expenses
(1)
|
|
|
|
|
|||||||||||||||||||
|
Restructuring expenses - cost of goods sold
(1)
|
|
|
|
|
|||||||||||||||||||
|
Direct impacts of Ukraine/Russia conflict
(2)
|
|
|
|
|
|||||||||||||||||||
| Segment EBITDA | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
(1)
See Note 5, "Restructuring and Transaction Related Expenses" for further information.
(2)
Adjustments include provisions for and subsequent adjustments to reserves for asset recoverability (primarily receivables and inventory).
The following table presents capital expenditures by reportable segment (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||
|
Wholesale - North America
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Europe |
|
|
|
|
|||||||||||||||||||
| Specialty |
|
|
|
|
|||||||||||||||||||
| Self Service |
|
|
|
|
|||||||||||||||||||
| Total capital expenditures | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
We re
port 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):
20
| June 30, 2025 | December 31, 2024 | ||||||||||
| Receivables, net of allowance for credit losses | |||||||||||
|
Wholesale - North America
|
$ |
|
$ |
|
|||||||
| Europe |
|
|
|||||||||
| Specialty |
|
|
|||||||||
| Self Service |
|
|
|||||||||
| Total receivables, net of allowance for credit losses |
|
|
|||||||||
| Inventories | |||||||||||
|
Wholesale - North America
|
|
|
|||||||||
| Europe |
|
|
|||||||||
| Specialty |
|
|
|||||||||
| Self Service |
|
|
|||||||||
| Total inventories |
|
|
|||||||||
| Property, plant and equipment, net | |||||||||||
|
Wholesale - North America
|
|
|
|||||||||
| Europe |
|
|
|||||||||
| Specialty |
|
|
|||||||||
| Self Service |
|
|
|||||||||
| Total property, plant and equipment, net |
|
|
|||||||||
| Operating lease assets, net | |||||||||||
|
Wholesale - North America
|
|
|
|||||||||
| Europe |
|
|
|||||||||
| Specialty |
|
|
|||||||||
| Self Service |
|
|
|||||||||
| Total operating lease assets, net |
|
|
|||||||||
| Other unallocated assets |
|
|
|||||||||
| Total assets | $ |
|
$ |
|
|||||||
Our largest countries of operation are the U.S., followed by Germany and the 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):
| June 30, 2025 | December 31, 2024 | ||||||||||
|
Long-lived assets
|
|||||||||||
| United States | $ |
|
$ |
|
|||||||
| Germany |
|
|
|||||||||
| United Kingdom |
|
|
|||||||||
| Other countries |
|
|
|||||||||
| Total long-lived assets | $ |
|
$ |
|
|||||||
Note 14.
Subsequent Event
On July 4, 2025, new U.S tax legislation was signed into law, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), which includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA includes the acceleration of fixed asset depreciation, modifications to the capitalization of domestic research and development expenses, modifications to the limitations to the deductibility of interest expense, and modifications to certain international provisions. These new provisions take effect starting in 2025 through 2027. We are currently evaluating the impact of this new tax legislation.
21
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 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 2024 Form 10-K and our 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 aftermarket 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 organized into four operating segments: Wholesale - North America; Europe; Specialty; and Self Service, each of which is presented as a reportable segment.
Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and body repair related products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, France and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. Our Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.
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.
22
Acquisitions and Investments
Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. Our current acquisition strategy focuses on highly accretive tuck-in acquisitions with significant synergies or critical capabilities and no large platform acquisitions are expected. Additionally, from time to time, we make investments in various businesses to advance our strategic objectives.
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 used 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 sales of scrap and other metals (including precious metals - platinum, palladium and rhodium - contained in recycled parts such as catalytic converters), 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 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 management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our 2024 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the six months ended June 30, 2025.
Recently Issued Accounting Pronouncements
See "Recent Accounting Pronouncements" in Note 1, "Interim Financial Statements" 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 4, "Revenue Recognition" and Note 13, "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.
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 CODM. 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 different 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.
23
•
Segment EBITDA
- See Note 13, "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 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 cash flow available to meet future debt service obligations and working capital requirements, make strategic acquisitions, repurchase stock, and pay dividends.
These three key performance indicators are used as targets 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of goods sold | 61.2 | % | 61.2 | % | 60.7 | % | 61.0 | % | |||||||||||||||
| Gross margin | 38.8 | % | 38.8 | % | 39.3 | % | 39.0 | % | |||||||||||||||
| Selling, general and administrative expenses | 27.4 | % | 26.3 | % | 28.0 | % | 27.2 | % | |||||||||||||||
| Restructuring and transaction related expenses | 0.2 | % | 1.3 | % | 0.3 | % | 1.1 | % | |||||||||||||||
| Depreciation and amortization | 2.6 | % | 2.4 | % | 2.6 | % | 2.4 | % | |||||||||||||||
| Operating income | 8.6 | % | 8.8 | % | 8.4 | % | 8.3 | % | |||||||||||||||
| Total other expense, net | 1.4 | % | 1.7 | % | 1.5 | % | 1.6 | % | |||||||||||||||
| Income before provision for income taxes | 7.1 | % | 7.2 | % | 7.0 | % | 6.7 | % | |||||||||||||||
| Provision for income taxes | 1.9 | % | 2.2 | % | 1.9 | % | 2.1 | % | |||||||||||||||
| Equity in (earnings) losses of unconsolidated subsidiaries | — | % | — | % | — | % | — | % | |||||||||||||||
| Net income | 5.3 | % | 5.0 | % | 5.1 | % | 4.6 | % | |||||||||||||||
| Less: net income attributable to noncontrolling interest | — | % | — | % | — | % | — | % | |||||||||||||||
| Net income attributable to LKQ stockholders | 5.3 | % | 5.0 | % | 5.1 | % | 4.6 | % | |||||||||||||||
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Revenue
The following table summarizes the changes in revenue by category (in millions):
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Parts & services revenue | $ | 3,477 | $ | 3,552 | $ | (75) | |||||||||||
| Other revenue | 165 | 159 | 6 | ||||||||||||||
| Total revenue | $ | 3,642 | $ | 3,711 | $ | (69) | |||||||||||
24
The decrease in parts and services revenue of $75 million, or 2.1%, represented decreases in segment revenue of $36 million, or 2.6%, in Wholesale - North America, $32 million, or 1.9%, in Europe, $5 million, or 9.8%, in Self Service, and $2 million, or 0.4%, in Specialty. This overall decrease was driven by an organic parts and services revenue decrease of $122 million, or 3.4% (2.7% decrease on a per day basis), and a $34 million, or 1.0%, decrease due to the net impact of acquisitions and divestitures, partially offset by an $82 million, or 2.3%, increase due to fluctuations in foreign exchange rates.
Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Cost of Goods Sold
Cost of goods sold decreased by $40 million, or 1.8%, to $2,230 million for the three months ended June 30, 2025. Cost of goods sold primarily reflects decreases of $32 million from Europe, $4 million from Self Service, and $3 million from Wholesale - North America. Cost of goods sold as a percentage of revenue remained flat at 61.2% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Cost of goods sold as a percentage of revenue primarily reflects an increase of 0.4% from Wholesale - North America, partially offset by a decrease of 0.3% from Europe. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Selling, General and Administrative Expenses
Our Selling, general and administrative ("SG&A") expenses
increased by $22 million, or 2.3%, to $998 million for the three months ended June 30, 2025. The year over year increase in SG&A expense primarily reflects increases of $18 million from Europe, $3 million from Specialty and $1 million from Wholesale - North America.
SG&A expenses as a percentage of revenue increased to 27.4% for the three months ended June 30, 2025 from 26.3% for the three months ended June 30, 2024. SG&A expenses as a percentage of revenue primarily reflects increases
of 0.8% from Europe and 0.2% from Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Restructuring and Transaction Related Expenses
Restructuring and transaction related expenses decreased by $41 million, primarily due to a $31 million decrease in restructuring expenses related to our 2024 Global Restructuring plan and a $10 million decrease in restructuring expenses related to our Acquisition Integration plans.
Provision for Income Taxes
Our effective income tax rate for the three months ended June 30, 2025 was 26.3%, compared to 30.9% for the three months ended June 30, 2024. The decrease in the effective tax rate for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 is primarily attributable to the 5.2% year over year favorable impact of discrete items, mostly related to the favorable tax effects of the reversal of a tax assessment in the current year and the nonrecurring unfavorable tax effects of the Global Restructuring Plan impairments in the prior year. See Note 5, "Restructuring and Transaction Related Expenses" for further information on the impairments.
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, 2024, the pound sterling, Czech koruna and euro rates used to translate the three months ended June 30, 2025 statements of income increased by 5.8%, 5.6% and 5.3%, respectively, while the Canadian dollar rate decreased by 1.1%. Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net positive effect of $0.03 on diluted earnings per share relative to the prior year period.
25
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Revenue
The following table summarizes the changes in revenue by category (in millions):
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Parts & services revenue | $ | 6,772 | $ | 7,087 | $ | (315) | |||||||||||
| Other revenue | 333 | 327 | 6 | ||||||||||||||
| Total revenue | $ | 7,105 | $ | 7,414 | $ | (309) | |||||||||||
The decrease in parts and services revenue of $315 million, or 4.4%, represented decreases in segment revenue of $154 million, or
4.7% in Europe, $122 million, or 4.3%, in Wholesale - North America, $31 million, or 3.4%, in Specialty and $8 million, or 7.8%, in Self Service. This overall decrease was driven by an organic parts and services revenue decrease of $273 million, or 3.9% (2.9% decrease on a per day basis), and a $66 million, or 0.9%, decrease due to the net impact of acquisitions and divestitures, partially offset by a $26 million, or 0.4%, increase due to fluctuations in foreign exchange rates.
Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.
Cost of Goods Sold
Cost of goods sold decreased by $205 million, or 4.5%, to $4,316 million for the six months ended June 30, 2025. Cost of goods sold primarily reflects decreases of $122 million from Europe, $55 million from Wholesale - North America, $19 million
from Specialty, and $9 million from Self Service. Cost of goods sold as a percentage of revenue decreased to 60.7% for the six months ended June 30, 2025 from 61.0% for the six months ended June 30, 2024. Cost of goods sold as a percentage of revenue primarily reflects a decrease of 0.4% from Europe, partially offset by an increase of 0.2% from Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.
Selling, General and Administrative Expenses
Our SG&A expenses decreased by $33 million, or 1.6%, to $1,987 million for the six months ended June 30, 2025. The year over year decrease in SG&A expense primarily reflects decreases
of $16 million from Europe and $15 million from Wholesale - North America.
SG&A expenses as a percentage of revenue increased to 28.0% for the six months ended June 30, 2025 from 27.2% for the six months ended June 30, 2024. SG&A expenses as a percentage of revenue primarily reflects increases of 0.4% from Europe and 0.3% from Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.
Restructuring and Transaction Related Expenses
Restructuring and transaction related expenses decreased by $60 million, primarily due to a $40 million decrease in restructuring expenses related to our 2024 Global Restructuring plan and a $15 million decrease in restructuring expenses related to our Acquisition Integration plans.
Provision for Income Taxes
Our effective income tax rate for the six months ended June 30, 2025 was 27.0%, compared to 30.8% for the six months ended June 30, 2024. The decrease in the effective tax rate for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is primarily attributable to the 4.3% year over year favorable impact of discrete items, mostly related to the nonrecurring unfavorable tax effects of the Global Restructuring Plan impairments in the prior year. See Note 5, "Restructuring and Transaction Related Expenses" for further information on the impairments.
26
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 six months ended June 30, 2024, the pound sterling, Czech koruna and euro rates used to translate the six months ended June 30, 2025 statements of income increased by 2.6%, 1.4% and 1.1%, respectively, while the Canadian dollar rate decreased by 3.6%. Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net positive effect of $0.02 on diluted earnings per share relative to the prior year period.
Results of Operations—Segment Reporting
We have four reportable segments: Wholesale - North America; Europe; Specialty; and Self Service.
The following table presents our financial performance, including third party revenue, total revenue and Segment EBITDA, by reportable segment for the periods indicated (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | ||||||||||||||||||||||||||||||||||||||||
| Third Party Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
|
Wholesale - North America
|
$ | 1,442 | $ | 1,473 | $ | 2,854 | $ | 2,973 | |||||||||||||||||||||||||||||||||||||||
| Europe | 1,607 | 1,639 | 3,129 | 3,283 | |||||||||||||||||||||||||||||||||||||||||||
| Specialty | 464 | 466 | 857 | 888 | |||||||||||||||||||||||||||||||||||||||||||
|
Self Service
|
129 | 133 | 265 | 270 | |||||||||||||||||||||||||||||||||||||||||||
| Total third party revenue | $ | 3,642 | $ | 3,711 | $ | 7,105 | $ | 7,414 | |||||||||||||||||||||||||||||||||||||||
| Total Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
|
Wholesale - North America
|
$ | 1,442 | $ | 1,474 | $ | 2,854 | $ | 2,974 | |||||||||||||||||||||||||||||||||||||||
| Europe | 1,607 | 1,639 | 3,129 | 3,283 | |||||||||||||||||||||||||||||||||||||||||||
| Specialty | 465 | 466 | 859 | 889 | |||||||||||||||||||||||||||||||||||||||||||
|
Self Service
|
129 | 133 | 265 | 270 | |||||||||||||||||||||||||||||||||||||||||||
| Eliminations | (1) | (1) | (2) | (2) | |||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,642 | $ | 3,711 | $ | 7,105 | $ | 7,414 | |||||||||||||||||||||||||||||||||||||||
| Segment EBITDA | |||||||||||||||||||||||||||||||||||||||||||||||
|
Wholesale - North America
|
$ | 227 | 15.8 | % | $ | 256 | 17.3 | % | $ | 449 | 15.7 | % | $ | 500 | 16.8 | % | |||||||||||||||||||||||||||||||
| Europe | 151 | 9.4 | % | 174 | 10.6 | % | 292 | 9.3 | % | 317 | 9.7 | % | |||||||||||||||||||||||||||||||||||
| Specialty | 39 | 8.5 | % | 41 | 8.9 | % | 60 | 7.0 | % | 68 | 7.7 | % | |||||||||||||||||||||||||||||||||||
|
Self Service
|
13 | 10.0 | % | 13 | 9.9 | % | 33 | 12.3 | % | 29 | 10.9 | % | |||||||||||||||||||||||||||||||||||
| Note: In the table above, the percentages of total segment revenue may not recalculate due to rounding. | |||||||||||||||||||||||||||||||||||||||||||||||
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 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. See Note 13, "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.
27
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Wholesale - North America
The following table provides a reconciliation of Revenue to Segment EBITDA in our Wholesale - North America segment (in millions):
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Wholesale - North America | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 1,362 | $ | 1,398 | $ | (36) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 80 | 75 | 5 | |||||||||||||||||||||||||||||
| Intersegment revenue | — | 1 | (1) | |||||||||||||||||||||||||||||
| Total segment revenue | 1,442 | 1,474 | (32) | |||||||||||||||||||||||||||||
| Cost of goods sold | 823 | 826 | (3) | |||||||||||||||||||||||||||||
| Gross margin | 619 | 42.9 | % | 648 | 43.9 | % | (29) |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 398 | 27.5 | % | 397 | 27.0 | % | 1 |
(3)
|
||||||||||||||||||||||||
|
Less: Other segment items
(4)
|
(6) | (5) | (1) | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 227 | 15.8 | % | $ | 256 | 17.3 | % | $ | (29) | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $36 million, or 2.6%, to $1,362 million for the three months ended June 30, 2025. This decrease was primarily due to a parts and services organic revenue decrease of $36 million, or 2.6% (2.2% on a per day basis), driven primarily by lower volumes in our paint, body and equipment business from increased competition and lower repairable claims, partially offset by pricing initiatives and targeted actions to increase market penetration.
(2)
Gross margin decreased by $29 million, or 4.4%, to $619 million for the three months ended June 30, 2025. This decrease was driven by lower revenue as described above as well as unfavorable customer mix not fully offset by price increases due to market competition.
(3)
SG&A expenses remained relatively flat to $398 million for the three months ended June 30, 2025, primarily due to (i) $5 million from increased vehicle costs, and (ii) other individually immaterial factors representing a $1 million unfavorable impact in the aggregate, partially offset by (iii) $5 million from decreased professional fees.
(4)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on restructuring charges.
Europe
The following table provides a reconciliation of Revenue to Segment EBITDA in our Europe segment (in millions):
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Europe | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 1,601 | $ | 1,633 | $ | (32) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 6 | 6 | — | |||||||||||||||||||||||||||||
| Total segment revenue | 1,607 | 1,639 | (32) | |||||||||||||||||||||||||||||
| Cost of goods sold | 988 | 1,020 | (32) | |||||||||||||||||||||||||||||
| Gross margin | 619 | 38.5 | % | 619 | 37.8 | % | — |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 474 | 29.5 | % | 456 | 27.8 | % | 18 |
(3)
|
||||||||||||||||||||||||
|
Less: Other segment items
(4)
|
(6) | (11) | 5 | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 151 | 9.4 | % | $ | 174 | 10.6 | % | $ | (23) | ||||||||||||||||||||||
28
(1)
Parts and services revenue decreased by $32 million, or 1.9%, to $1,601 million for the three months ended June 30, 2025. This decrease was primarily due to (i) a parts and services organic revenue decrease of $81 million, or 4.9% (3.8% on a per day basis), driven by decreased volumes due to difficult economic conditions, heightened competition in certain markets, temporary operational challenges, and a negative effect from one fewer selling days, and (ii) an acquisition and divestiture decrease of $36 million, or 2.2%, primarily related to the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, partially offset by (iii) the effect of an exchange rate increase of $85 million, or 5.2%, primarily due to the weaker U.S. dollar against the euro and pound sterling, and to a lesser extent, the Czech koruna.
(2)
Gross margin was flat at $619 million, as the decrease resulting from lower organic growth was offset by net procurement savings contributing to an increase in gross margin percentage of 0.7% compared to the prior year period.
(3)
SG&A expenses increased by $18 million, or 4.3%, to $474 million for the three months ended June 30, 2025. The increase in SG&A expense is primarily due to (i) a $25 million unfavorable foreign exchange impact from a weakening U.S. dollar, (ii) a $12 million non-recurring benefit from a reduction in personnel related accruals in the prior year that were previously recorded as a result of union related negotiations, partially offset by (iii) a $9 million favorable impact from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, and (iv) other individually immaterial factors representing a $10 million favorable impact in the aggregate, including cost savings from restructuring and other productivity initiatives.
(4)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on restructuring charges.
Specialty
The following table provides a reconciliation of Revenue to Segment EBITDA in our Specialty segment (in millions):
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Specialty | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 464 | $ | 466 | $ | (2) |
(1)
|
|||||||||||||||||||||||||
| Intersegment revenue | 1 | — | 1 | |||||||||||||||||||||||||||||
| Total segment revenue | 465 | 466 | (1) | |||||||||||||||||||||||||||||
| Cost of goods sold | 347 | 348 | (1) | |||||||||||||||||||||||||||||
| Gross margin | 118 | 25.4 | % | 118 | 25.4 | % | — | |||||||||||||||||||||||||
| Selling, general and administrative expenses | 82 | 17.6 | % | 79 | 17.0 | % | 3 | |||||||||||||||||||||||||
|
Less: Other segment items
(2)
|
(3) | (2) | (1) | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 39 | 8.5 | % | $ | 41 | 8.9 | % | $ | (2) | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $2 million, or 0.4%, to $464 million for the three months ended June 30, 2025. This was primarily due to a parts and services organic revenue decrease of $1 million, or 0.3% driven by
demand softness in the RV product line resulting from reduced unit retail sales for RVs, partially offset by growth in our marine product line.
(2)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.
29
Self Service
The following table provides a reconciliation of Revenue to Segment EBITDA in our Self Service segment (in millions):
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Self Service | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 50 | $ | 55 | $ | (5) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 79 | 78 | 1 | |||||||||||||||||||||||||||||
| Total segment revenue | 129 | 133 | (4) | |||||||||||||||||||||||||||||
| Cost of goods sold | 73 | 77 | (4) | |||||||||||||||||||||||||||||
| Gross margin | 56 | 43.5 | % | 56 | 42.3 | % | — |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 44 | 33.8 | % | 44 | 32.6 | % | — | |||||||||||||||||||||||||
|
Less: Other segment items
(3)
|
(1) | (1) | — | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 13 | 10.0 | % | $ | 13 | 9.9 | % | $ | — | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $5 million, or 9.8%, to $50 million for the three months ended June 30, 2025. This was primarily due to a parts and services organic revenue decrease of $4 million, or 6.9% (5.9% on a per day basis), driven by lower parts volumes from a reduced number of customer admissions.
(2)
Gross margin was flat at $56 million as the decrease resulting from lower revenue was offset by favorable movements in commodity prices.
(3)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
Wholesale - North America
The following table provides a reconciliation of Revenue to Segment EBITDA in our Wholesale - North America segment (in millions):
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Wholesale - North America | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 2,698 | $ | 2,820 | $ | (122) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 156 | 153 | 3 | |||||||||||||||||||||||||||||
| Intersegment revenue | — | 1 | (1) | |||||||||||||||||||||||||||||
| Total segment revenue | 2,854 | 2,974 | (120) | |||||||||||||||||||||||||||||
| Cost of goods sold | 1,608 | 1,663 | (55) | |||||||||||||||||||||||||||||
| Gross margin | 1,246 | 43.7 | % | 1,311 | 44.1 | % | (65) |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 808 | 28.3 | % | 823 | 27.7 | % | (15) |
(3)
|
||||||||||||||||||||||||
|
Less: Other segment items
(4)
|
(11) | (12) | 1 | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 449 | 15.7 | % | $ | 500 | 16.8 | % | $ | (51) | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $122 million, or 4.3%, to $2,698 million for the six months ended June 30, 2025. This decrease was primarily due to a parts and services organic revenue decrease of $112 million, or 4.0% (3.1% on a per day basis), due to a reduction in repairable claims, and having one fewer selling days in the current year, partially offset by targeted actions to increase market penetration. Additionally, revenue decreased due to a negative exchange rate effect of $17 million, or 0.6%, primarily due to the stronger U.S. dollar against the Canadian dollar.
30
(2)
Gross margin decreased by $65 million, or 5.0%, to $1,246 million
for the six months ended June 30, 2025. This decrease was driven by lower revenue as described above as well as unfavorable customer mix not fully offset by price increases due to market competition.
(3)
SG&A expenses decreased by $15 million, or 1.8%, to $808 million for the six months ended June 30, 2025. The decrease in SG&A expense is primarily due to (i) $24 million from decreased personnel costs due to cost savings initiatives which were partially offset by inflationary pressures, and (ii) other individually immaterial factors representing a $9 million favorable impact in the aggregate, partially offset by (iii) $12 million from increased vehicle costs, and (iv) $6 million from increased facility costs due to increased rent.
(4)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on restructuring charges.
Europe
The following table provides a reconciliation of Revenue to Segment EBITDA in our Europe segment (in millions):
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Europe | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 3,116 | $ | 3,270 | $ | (154) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 13 | 13 | — | |||||||||||||||||||||||||||||
| Total segment revenue | 3,129 | 3,283 | (154) | |||||||||||||||||||||||||||||
| Cost of goods sold | 1,919 | 2,041 | (122) | |||||||||||||||||||||||||||||
| Gross margin | 1,210 | 38.7 | % | 1,242 | 37.8 | % | (32) |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 933 | 29.8 | % | 949 | 28.9 | % | (16) |
(3)
|
||||||||||||||||||||||||
|
Less: Other segment items
(4)
|
(15) | (24) | 9 | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 292 | 9.3 | % | $ | 317 | 9.7 | % | $ | (25) | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $154 million, or 4.7%, to $3,116 million for the six months ended June 30, 2025. This decrease was primarily due to (i) a parts and services organic revenue decrease of $126 million, or 3.9% (2.8% on a per day basis), driven by decreased volumes due to difficult economic conditions, heightened competition in certain markets, temporary operational challenges, and a negative effect from one fewer selling days, and (ii) an acquisition and divestiture decrease of $72 million, or 2.2%, primarily related to the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, partially offset by (iii) the effect of an exchange rate increase of $45 million, or 1.4%, primarily due to the weaker U.S. dollar against the pound sterling and euro, and to a lesser extent, the Czech koruna.
(2)
Gross margin decreased by $32 million, or 2.6%, to $1,210 million for the six months ended June 30, 2025. The decrease was primarily attributable to decreased revenue, partially offset by a $12 million reduction in cost of goods sold primarily related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan in the prior year period. These restructuring expenses are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" and Note 13, "Segment and Geographic Information" for further information. The increase in gross margin as a percentage of total segment revenue was primarily driven by a benefit from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024 and lower restructuring expense in the current year as described above.
(3)
SG&A expenses decreased by $16 million, or 1.7%, to $933 million for the six months ended June 30, 2025. The decrease in SG&A expense is primarily due to favorable impacts of (i) $20 million from the divestiture of certain operations in Poland, Slovenia and Bosnia in 2024, (ii) $10 million of lower freight, vehicle and fuel cost, and (iii) other individually immaterial factors representing a $6 million favorable impact in the aggregate, partially offset by (iv) a $13 million unfavorable foreign exchange impact from a weakening U.S. dollar, and (v) a $7 million unfavorable impact in professional fees related to several strategic central and regional information technology initiatives.
(4)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold and restructuring - cost of goods sold, which are excluded from the calculation of Segment EBITDA. See Note 5, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on restructuring charges.
31
Specialty
The following table provides a reconciliation of Revenue to Segment EBITDA in our Specialty segment (in millions):
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Specialty | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 857 | $ | 888 | $ | (31) |
(1)
|
|||||||||||||||||||||||||
| Intersegment revenue | 2 | 1 | 1 | |||||||||||||||||||||||||||||
| Total segment revenue | 859 | 889 | (30) | |||||||||||||||||||||||||||||
| Cost of goods sold | 646 | 665 | (19) | |||||||||||||||||||||||||||||
| Gross margin | 213 | 24.9 | % | 224 | 25.2 | % | (11) |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 158 | 18.4 | % | 160 | 18.0 | % | (2) | |||||||||||||||||||||||||
|
Less: Other segment items
(3)
|
(5) | (4) | (1) | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 60 | 7.0 | % | $ | 68 | 7.7 | % | $ | (8) | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $31 million, or 3.4%, to $857 million for the six months ended June 30, 2025. This was primarily due to a parts and services organic revenue decrease of $28 million, or 3.2% (2.4% on a per day basis), driven by
demand softness in the automotive and RV product lines resulting from declining consumer sentiment and reduced unit retail sales for RVs.
(2)
Gross margin decreased by $11 million, or 4.8%, to $213 million for the six months ended June 30, 2025. This decrease was primarily driven by decreases in parts and services revenue and unfavorable sales mix with lower volumes on higher margin product lines.
(3)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.
Self Service
The following table provides a reconciliation of Revenue to Segment EBITDA in our Self Service segment (in millions):
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Self Service | 2025 | % of Total Segment Revenue | 2024 | % of Total Segment Revenue | $ Change | |||||||||||||||||||||||||||
| Parts & services revenue | $ | 101 | $ | 109 | $ | (8) |
(1)
|
|||||||||||||||||||||||||
| Other revenue | 164 | 161 | 3 | |||||||||||||||||||||||||||||
| Total segment revenue | 265 | 270 | (5) | |||||||||||||||||||||||||||||
| Cost of goods sold | 145 | 154 | (9) | |||||||||||||||||||||||||||||
| Gross margin | 120 | 45.3 | % | 116 | 43.1 | % | 4 |
(2)
|
||||||||||||||||||||||||
| Selling, general and administrative expenses | 88 | 33.2 | % | 88 | 32.4 | % | — | |||||||||||||||||||||||||
|
Less: Other segment items
(3)
|
(1) | (1) | — | |||||||||||||||||||||||||||||
| Segment EBITDA | $ | 33 | 12.3 | % | $ | 29 | 10.9 | % | $ | 4 | ||||||||||||||||||||||
(1)
Parts and services revenue decreased by $8 million, or 7.8%, to $101 million for the six months ended June 30, 2025. This was primarily due to a parts and services organic revenue decrease of $7 million, or 6.2% (5.7% on a per day basis), driven by lower parts volumes from a reduced number of customer admissions.
(2)
Gross margin increased by $4 million, or 3.1%, to $120 million for the six months ended June 30, 2025. The increase is attributable to favorable movements in commodity prices and improvements in vehicle procurement costs which more than offset the decrease in revenue.
(3)
Amounts primarily represent other non operating income and expenses, as well as reconciling items to remove depreciation - cost of goods sold, which are excluded from the calculation of Segment EBITDA.
32
Liquidity and Capital Resources
We assess our liquidity and capital resources 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 revolving credit facilities. We utilize our cash flows from operations to fund working capital and capital expenditures, with the excess amounts going towards paying dividends, repurchasing our common stock, paying down outstanding debt, or funding acquisitions. 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 acq
uisitions, we have accessed various forms of debt financing, including revolving credit facilities, term loans, and senior notes. We currently believe we have sufficient access to capital markets to support our future growth objectives.
The following table summarizes liquidity data as of the dates indicated (in millions):
| June 30, 2025 | December 31, 2024 | ||||||||||
| Capacity under revolving credit facilities | $ | 2,000 | $ | 2,000 | |||||||
| Less: Revolving credit facilities borrowings | 750 | 664 | |||||||||
| Less: Letters of credit | 114 | 114 | |||||||||
| Availability under credit revolving facilities | 1,136 | 1,222 | |||||||||
| Add: Cash and cash equivalents | 289 | 234 | |||||||||
| Total liquidity | $ | 1,425 | $ | 1,456 | |||||||
We had
$1,136 million
available under
our revolving credit facilities as of
June 30, 2025
. Combined with $289 million of cash and cash equivalents at June 30, 2025, we had $1,425 million i
n available liquidity, a decrease of $31 million from our
available liquidity as of December 31, 2024, primarily as a result of increasing our revolving credit facilities borrowings by
$86 million.
On May 2, 2025, we entered into Amendment No. 2 to the Senior Unsecured Credit Agreement which extended the maturity date of the unsecured term loan facility from January 5, 2026 to January 5, 2027 as well as certain other immaterial modifications. See 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 regarding total debt outstanding.
We believe that our current liquidity, cash expected to be generated by operating activities in future periods and access to capital markets will be sufficient to meet our current operating and capital requirements. Our capital allocation strategy includes spending to support growth driven capital projects, return stockholder value through the payment of dividends and repurchasing shares of our common stock, completing highly synergistic tuck-in acquisitions and debt repayment.
A summary of the dividend activity for our common stock for the
six months ended
June 30, 2025 is as follows:
| Dividend Amount | Declaration Date | Record Date | Payment Date | |||||||||||||||||
| $0.30 | February 18, 2025 | March 13, 2025 | March 27, 2025 | |||||||||||||||||
| $0.30 | April 22, 2025 | May 15, 2025 | May 29, 2025 | |||||||||||||||||
On July 22, 2025, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on August 28, 2025, to stockholders of record at the close of business on August 14, 2025.
We believe that our future cash flow generation will permit us to continue paying dividends in future periods; however, the timing, amount and frequency of such future dividends will be subject to approval by our Board of Directors, and based on considerations of capital availability, and various other factors, many of which are outside of our control.
With $1,425 million of total liquidity as of June 30, 2025 and $34 million of current maturities, we have access to funds to meet our near term commitments.
We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.
33
O
ur Senior Unsecured Credit Agreement and our CAD Note both include two financial maintenance covenants: a maximum total leverage ratio and minimum interest coverage ratio. The terms maximum total leverage ratio and minimum interest coverage ratio are specifically calculated per both the Senior Unsecured Credit Agreement and CAD Note, and differ in specified ways from comparable GAAP or common usage terms. We were in compliance with all applicable covenants under both our Senior Unsecured Credit Agreement and CAD Note as of June 30, 2025. The required debt covenants per both the Senior Unsecured Credit Agreement and CAD Note and our actual ratios with respect to those covenants are as follows as of June 30, 2025:
| Covenant Level |
Ratio Achieved as of June 30, 2025
|
||||||||||
| Maximum total leverage ratio | 4.00 : 1.00 | 2.6 | |||||||||
| Minimum interest coverage ratio | 3.00 : 1.00 | 7.3 | |||||||||
The indentures relating to our U.S. Notes and Euro Notes d
o not include financial maintenance covenants, and the indentures will not restrict our ability to draw funds under the Senior Unsecured Credit Agreement. The indentures do not prohibit amendments to the financial covenants under the Senior Unsecured Credit Agreement and CAD Note as needed.
While we believe that we have adequate capacity under our existing revolving credit facilities to finance our current operations, from time to time we may need to raise additional funds through public or private financing, strategic relationships or modification of our existing Senior Unsecured Credit Agreement to finance additional investments or to refinance existing debt obligations. There can be no assurance that additional funding, or refinancing of our Senior Unsecured Credit Agreement, 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.
We hold interest rate swaps to hedge the variable rates on a portion of our credit agreement borrowings. After giving effect to these contracts outstanding, the
weighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was 5.6% at June 30, 2025. Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was
5.2%
at June 30, 2025.
Under the Senior Unsecured Credit Agreement, our borrowings bear interest at SOFR plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread. Under the CAD Note, the interest rate may be (i) a forward-looking term rate based on the Canadian Overnight Repo Rate Average for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread. See 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 related to our borrowings and related interest. The interest rate swaps 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.
We had outstanding borrowin
gs under our revolving credit facilities and term loans payable of $1,764 million
and
$1,651 million
at June 30, 2025 and December 31, 2024, respectively. Of these amounts,
t
here wer
e no current maturities
at
June 30, 2025 or December 31, 2024.
The scheduled maturities of long-term obligations outstanding at June 30, 2025 are as follows (in millions):
| Amount | |||||
|
Six months ending December 31, 2025
|
$ | 22 | |||
| Years ending December 31: | |||||
|
2026
(1)
|
543 | ||||
| 2027 | 521 | ||||
| 2028 | 1,860 | ||||
| 2029 | 10 | ||||
| Thereafter | 1,504 | ||||
|
Total debt
(2)
|
$ | 4,460 | |||
(1)
Includes $514 million related to our Senior Unsecured Term Loan Agreement due July 2026, which we intend to extend or refinance on or before the scheduled maturity.
(2)
The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $31 million as of June 30, 2025).
34
As of June 30, 2025, the Company had cash and cash equivalents of $289 million, of which $246 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries. 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 Cuts and Jobs Act enacted in 2017, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income 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.
As part of our effort to improve our operating cash flows, we may negotiate payment term extensions with suppliers. These efforts are supported by our supply chain finance programs. See Note 8, "Supply Chain Financing" 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 supply chain financing arrangements.
For the six months ended June 30, 2025, net cash provided by operating activities totaled $293 million compared to $466 million for the same period of 2024. Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and collections can be timed differently from period to period. Inventories represented $57 million in incremental cash inflows for the six months ended June 30, 2025 compared to the same period of 2024. Accounts payable produced $245 million in incremental cash outflows for the six months ended June 30, 2025 compared to the same period of 2024.
For the six months ended June 30, 2025, net cash used in investing activities totaled $99 million compared to $178 million for the same period of 2024. We invested $30 million of cash in business acquisitions during the six months ended June 30, 2024. There were no significant business acquisitions during the six months ended June 30, 2025. Property, plant and equipment purchases were $107 million in the six months ended June 30, 2025 compared to $146 million in the prior year period.
The following table reconciles Net Cash Provided by Operating Activities to Free Cash Flow (in millions):
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 293 | $ | 466 | |||||||
| Less: purchases of property, plant and equipment | 107 | 146 | |||||||||
| Free cash flow | $ | 186 | $ | 320 | |||||||
For the six months ended June 30, 2025, net cash used in financing activities totaled $169 million compared to $276 million for the same period in 2024. Cash outflows for share repurchases were $79 million and dividends paid were $156 million for the six months ended June 30, 2025 compared to $155 million for share repurchases and $161 million for dividends paid for the same period of 2024. Net debt borrowings (net of unamortized bond discounts) were $59 million for the six months ended June 30, 2025 compared to $80 million for the same period of 2024.
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.
Summarized Guarantor Financial Information
Our U.S. Notes (2028/2033) and Euro Notes (2031) are guaranteed on a senior, unsecured basis by certain of our subsidiaries (each, a “subsidiary guarantor” and, together with LKQ, the “Obligor Group”), which are listed in Exhibit 22.1 in Part IV, Item 15 of our 2024 Form 10-K. The guarantees are full and unconditional, joint and several, and subject to certain conditions for release. See Note 18, "Long-Term Obligations" in Item 8 of Part II of our 2024 Form 10-K for information related to the Euro Notes (2031) and U.S. Notes (2028/2033).
35
Holders of the notes have a direct claim only against the Obligor Group. The following summarized financial information is presented for the Obligor Group on a combined basis after elimination of intercompany transactions and balances within the Obligor Group and equity in the earnings from and investments in any non-guarantor subsidiary.
Summarized Statements of Income (in millions)
|
Six Months Ended
June 30, 2025
|
Fiscal Year Ended
December 31, 2024
|
||||||||||
|
Revenue
|
$ | 3,477 | $ | 6,968 | |||||||
| Cost of goods sold | 2,089 | 4,192 | |||||||||
|
Gross margin
(1)
|
1,388 | 2,776 | |||||||||
| Income from continuing operations | 200 | 428 | |||||||||
| Net income | $ | 200 | $ | 428 | |||||||
(1)
Guarantor subsidiaries recorded $27 million and $53 million of net sales to and $107 million and $205 million of purchases from non-guarantor subsidiaries for the six months ended June 30, 2025 and fiscal year ended December 31, 2024, respectively.
Summarized Balance Sheets (in millions)
| June 30, 2025 | December 31, 2024 | ||||||||||
| Current assets | $ | 2,469 | $ | 2,321 | |||||||
| Noncurrent assets | 5,670 | 5,722 | |||||||||
|
Current liabilities
(1)
|
1,264 | 1,206 | |||||||||
| Noncurrent liabilities | 4,218 | 4,163 | |||||||||
(1)
Current liabilities for guarantor subsidiaries included $328 million and $219 million of short-term notes payable to non-guarantor subsidiaries as of June 30, 2025 and December 31, 2024, respectively.
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, commodity prices and inflation. There have been no material changes to our market risks from what was disclosed in Item 7A of Part II of our 2024 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2025, 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 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 was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
36
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
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 lawsuits will not, individually or in the aggregate, have a material adverse 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 2024 Form 10-K, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2025 filed with the SEC on April 24, 2025, for information concerning risks and uncertainties that could negatively impact us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Board of Directors has authorized a stock repurchase program under which we are able to purchase our common stock from time to time. 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. Our current program authorization extends through October 25, 2026.
The following table summarizes our stock repurchases for the three months ended June 30, 2025 (in millions, except per share data):
| Period | Total Number of Shares Purchased |
Average Price Paid per Share
(1)
|
Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||||||||||||||||
| April 1, 2025 - April 30, 2025 | 0.3 | $ | 39.99 | 0.3 | $ | 1,663 | ||||||||||||||||||||
| May 1, 2025 - May 31, 2025 | 0.3 | $ | 40.60 | 0.3 | $ | 1,650 | ||||||||||||||||||||
| June 1, 2025 - June 30, 2025 | 0.4 | $ | 38.38 | 0.4 | $ | 1,636 | ||||||||||||||||||||
| Total | 1.0 | 1.0 | ||||||||||||||||||||||||
(1)
Average price paid per share excludes the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the fiscal quarter ended June 30, 2025,
none
of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
37
Item 6. Exhibits
| Exhibit | Description | |||||||
| Amendment No. 2 to the Credit Agreement, dated as of May 2, 2025, 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 May 5, 2025). | ||||||||
| Amendment No. 2 dated as of June 20, 2025 to the Term Loan Credit Agreement, dated as of March 27, 2023, by and among LKQ Corporation as borrower, certain financial institutions, as lenders, and Wells Fargo Bank, National Association, as administrative agent. | ||||||||
| Amendment No. 3 dated as of June 20, 2025 to the Credit Agreement, dated as of January 5, 2023, 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. | ||||||||
| First Amendment to Cooperation Agreement, dated as of May 14, 2025, by and among LKQ Corporation, Ancora Catalyst Institutional, LP, Engine Capital, LP, and the other parties thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s report on Form 8-K filed with the SEC on May 14, 2025). | ||||||||
| 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. | ||||||||
| 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. | ||||||||
| 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. | ||||||||
| 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 (embedded within the Inline XBRL document) | |||||||
38
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 July 24, 2025.
| LKQ CORPORATION | |||||
| /s/ Rick Galloway | |||||
|
Rick Galloway
|
|||||
| Senior Vice President and Chief Financial Officer | |||||
| (As duly authorized officer and Principal Financial Officer) | |||||
| /s/ Todd G. Cunningham | |||||
|
Todd G. Cunningham
|
|||||
| Vice President - Finance and Controller | |||||
| (As duly authorized officer and Principal Accounting Officer) | |||||
39
TABLE OF CONTENTS
Part IItem 1. Financial StatementsNote 1. Interim Financial StatementsNote 2. Allowance For Credit LossesNote 3. Intangible AssetsNote 4. Revenue RecognitionNote 5. Restructuring and Transaction Related ExpensesNote 6. Earnings Per ShareNote 7. Accumulated Other Comprehensive Income (loss)Note 8. Supply Chain FinancingNote 9. Long-term ObligationsNote 10. Derivative Instruments and Hedging ActivitiesNote 11. Fair Value MeasurementsNote 12. Cash, Cash Equivalents and Restricted CashNote 13. Segment and Geographic InformationNote 14. Subsequent EventItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits