Revenue Performance - Fourth quarter 2023 revenue was $3.5 billion, a 16.6% increase compared to $3.0 billion in Q4 2022[3] - Full year 2023 revenue reached $13.9 billion, an 8.4% increase from $12.8 billion in 2022[4] - Revenue for Q4 2023 was $3,501 million, a 16.6% increase from $3,001 million in Q4 2022[26] - Full year 2023 revenue reached $13,866 million, an 8.4% increase from $12,794 million in 2022[28] - The company reported a total of $4,974 million in wholesale revenue for North America for the year 2023, an 18.2% increase from $4,207 million in 2022[34] - Wholesale revenue in North America for Q4 2023 was $1,393 million, a 35.9% increase from $1,025 million in Q4 2022[33] - Parts & Services revenue for Q4 2023 was reported at $3,356 million, with a year-over-year growth of 18.7%[35] - Revenue growth at constant currency for Parts & Services was 16.0% in Q4 2023, while total revenue growth at constant currency was 14.0%[35] Profitability Metrics - Net income for Q4 2023 was $184 million, down from $193 million in Q4 2022, while adjusted net income increased by 7.9% to $226 million[4] - Full year 2023 net income was $0.94 billion, a decrease of 14.6% from $1.14 billion in 2022[5] - Operating income decreased to $277 million in Q4 2023, down 5.5% from $293 million in Q4 2022[26] - Full year 2023 operating income was $1,357 million, down 14.2% from $1,581 million in 2022[28] - Net income attributable to LKQ stockholders for Q4 2023 was $177 million, an 8.8% decrease from $194 million in Q4 2022[26] - Net income attributable to LKQ stockholders for the full year 2023 was $936 million, an 18.5% decrease from $1,149 million in 2022[28] - Basic earnings per share for Q4 2023 was $0.66, down 9.6% from $0.73 in Q4 2022[26] - Diluted earnings per share (EPS) from continuing operations attributable to LKQ stockholders for FY 2023 was $3.51, down from $4.11 in FY 2022[41] Cash Flow and Capital Management - Operating cash flow for 2023 was $1.4 billion, with free cash flow of $1.0 billion[7] - The company repurchased 0.7 million shares for $30 million in Q4 2023, totaling 0.8 million shares for $35 million in 2023[8] - The board declared a quarterly cash dividend of $0.30 per share, payable on March 28, 2024[9] - Free cash flow for FY 2023 was $998 million, slightly down from $1,028 million in FY 2022[44] - Forecasted free cash flow for FY 2024 is projected to be $1,000 million[46] Future Outlook - For 2024, the company anticipates organic revenue growth of 3.5% to 5.5% and adjusted diluted EPS of $3.90 to $4.20[13] - Forecasted net income from continuing operations attributable to LKQ stockholders for FY 2024 is projected to be between $918 million and $998 million[43] - Forecasted adjusted net income from continuing operations attributable to LKQ stockholders for FY 2024 is expected to range from $1,045 million to $1,125 million[43] Integration and Restructuring - The integration of Uni-Select is ongoing, with half of the FinishMaster locations converted ahead of schedule, expecting to exceed $55 million in synergies[11] - Restructuring and transaction-related expenses increased to $65 million in 2023 from $20 million in 2022[28] - Restructuring and transaction-related expenses for FY 2024 are expected to be $30 million[43] Balance Sheet Highlights - Total assets increased to $15,079 million as of December 31, 2023, up from $12,038 million in 2022, representing a growth of 25.4%[30] - Cash and cash equivalents at the end of the period were $299 million, up from $278 million at the beginning of the year, reflecting a net increase of $21 million[32] - The company’s retained earnings increased to $7,290 million as of December 31, 2023, compared to $6,656 million in 2022, marking a growth of 9.5%[30] - The total current liabilities rose to $3,318 million in 2023, up from $2,271 million in 2022, indicating a significant increase of 46.1%[30] - The company’s total stockholders' equity increased to $6,181 million in 2023, compared to $5,467 million in 2022, reflecting a growth of 13.0%[30] Segment Performance - Segment EBITDA for Q4 2023 reached $396 million, representing 11.3% of total revenue, compared to 12.4% in Q4 2022[36] - Segment EBITDA for the year ended December 31, 2023, was $1,759 million, which is 12.7% of total revenue[37] Other Notable Items - The company incurred $214 million in interest expense for the full year 2023, significantly up from $78 million in 2022[28] - The company experienced a decline in specialty revenue, which fell to $1,665 million in 2023, down 6.9% from $1,788 million in 2022[34] - The impact of currency fluctuations on Parts & Services revenue was a reduction of $76 million in Q4 2023[35] - The company noted adjustments related to the Uni-Select acquisition and the ongoing impacts of the Ukraine/Russia conflict[39] - Adjusted net income from continuing operations attributable to LKQ stockholders for Q4 2023 was $226 million, up 8.1% from $209 million in Q4 2022[41] - Amortization of acquired intangibles for FY 2024 is estimated at $144 million[43]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________ FORM 10-Q ____________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 000-50404 ____________________________ LKQ CORPORATION (Exact name o ...

Third Quarter 2023 Earnings Call Presentation October 26, 2023 Forward Looking Statements and Non-GAAP Financial Measures Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. 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 o ...

LKQ Corporation (NASDAQ:LKQ) Q3 2023 Earnings Conference Call October 26, 2023 8:00 AM ET Company Participants Joe Boutross – Vice President-Investor Relations Nick Zarcone – President and Chief Executive Officer Rick Galloway – Senior Vice President and Chief Financial Officer Conference Call Participants Bret Jordan – Jefferies Craig Kennison – Baird Scott Stember – MKM Partners Gary Prestopino – Barrington Research Brian Butler – Stifel Daniel Imbro – Stephens Operator Thank you for joining the LKQ Corpo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________ FORM 10-Q ____________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 000-50404 ____________________________ LKQ CORPORATION (Exact name of reg ...

Second Quarter 2023 Earnings Call Presentation July 27, 2023 Forward Looking Statements and Non-GAAP Financial Measures Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. 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 ...

First Quarter 2023 Earnings Call Presentation April 27, 2023 Forward Looking Statements and Non-GAAP Financial Measures Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies. These statements are subject to a number of risks, uncertainties, assumptions and other factors. All forward-looking statements are based on information available to us at the time the statements are made. We undertake no obligatio ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides LKQ Corporation's unaudited condensed consolidated financial statements and detailed notes for the three months ended March 31, 2023 and 2022 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section details LKQ Corporation's unaudited condensed consolidated financial statements and accompanying notes for the specified interim periods [Unaudited Condensed Consolidated Statements of Income](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $3,349 | $3,348 | | Cost of goods sold | $1,977 | $1,991 | | Gross margin | $1,372 | $1,357 | | Operating income | $365 | $371 | | Income from continuing operations | $270 | $269 | | Net income | $270 | $273 | | Basic earnings per share | $1.01 | $0.96 | | Diluted earnings per share | $1.01 | $0.95 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net income | $270 | $273 | | Foreign currency translation, net of tax | $57 | $(54) | | Net change in unrealized gains/losses on cash flow hedges, net of tax | $(17) | — | | Other comprehensive income (loss) | $43 | $(53) | | Comprehensive income | $313 | $220 | [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | Metric | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------------- | :------------------------ | :--------------------------- | | Total current assets | $4,623 | $4,258 | | Property, plant and equipment, net | $1,265 | $1,236 | | Goodwill | $4,366 | $4,319 | | Total assets | $12,508 | $12,038 | | Total current liabilities | $2,412 | $2,271 | | Long-term obligations, excluding current portion | $2,684 | $2,622 | | Total liabilities and stockholders' equity | $12,508 | $12,038 | | Total Company stockholders' equity | $5,691 | $5,453 | | Total stockholders' equity | $5,705 | $5,467 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $223 | $409 | | Net cash used in investing activities | $(97) | $(63) | | Net cash used in financing activities | $(66) | $(278) | | Net increase in cash and cash equivalents | $64 | $53 | | Cash and cash equivalents, end of period | $342 | $327 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | Balance as of January 1, 2023 (Millions) | Balance as of March 31, 2023 (Millions) | | :------------------------------------------ | :--------------------------------------- | :-------------------------------------- | | Total Stockholders' Equity | $5,467 | $5,705 | | Net income | — | $270 | | Other comprehensive income | — | $43 | | Purchase of treasury stock | — | $(5) | | Dividends declared to LKQ stockholders | — | $(74) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Interim Financial Statements](index=8&type=section&id=Note%201.%20Interim%20Financial%20Statements) - The company adopted Accounting Standards Update No. 2022-04 (ASU 2022-04) on a retrospective basis in Q1 2023, requiring disclosure of supplier finance program obligations, with no material impact on financial statements[23](index=23&type=chunk) [Note 2. Discontinued Operations and Divestitures](index=8&type=section&id=Note%202.%20Discontinued%20Operations%20and%20Divestitures) - For the three months ended March 31, 2022, the company recorded a **$4 million benefit** to discontinued operations, primarily from reassessing a deferred tax asset related to its glass manufacturing business sold in 2017[24](index=24&type=chunk) - In April 2022, the company completed the sale of PGW Auto Glass, its aftermarket glass business, for **$361 million**[25](index=25&type=chunk) [Note 3. Uni-Select Acquisition](index=8&type=section&id=Note%203.%20Uni-Select%20Acquisition) - On February 26, 2023, LKQ Corporation agreed to acquire Uni-Select Inc. for **CAD 48.00 per share in cash**, totaling approximately **CAD 2.8 billion ($2.1 billion)**[26](index=26&type=chunk) - The acquisition is expected to close in the second half of 2023, subject to regulatory approvals, with LKQ intending to divest the GSF Car Parts segment[26](index=26&type=chunk)[28](index=28&type=chunk) - The company entered into foreign exchange contracts to reduce CAD foreign exchange rate risk, resulting in a **$23 million gain** reported in Q1 2023[29](index=29&type=chunk) - Financing arrangements include a **$2.1 billion senior unsecured bridge loan facility** (reduced to **$1.6 billion**) and a new **CAD 700 million unsecured term loan credit agreement**[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 4. Inventories](index=10&type=section&id=Note%204.%20Inventories) | Inventory Category | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :------------------------- | :------------------------ | :--------------------------- | | Aftermarket and refurbished products | $2,219 | $2,279 | | Salvage and remanufactured products | $464 | $427 | | Manufactured products | $50 | $46 | | Total inventories | $2,733 | $2,752 | [Note 5. Allowance for Credit Losses](index=11&type=section&id=Note%205.%20Allowance%20for%20Credit%20Losses) | Metric | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :------------------------ | :--------------------------- | | Allowance for credit losses | $58 | $54 | - The provision for credit losses was **$5 million** for the three months ended March 31, 2023, compared to **$8 million** for the same period in 2022[37](index=37&type=chunk) [Note 6. Noncontrolling Interest](index=11&type=section&id=Note%206.%20Noncontrolling%20Interest) - The company reported a **$24 million redeemable noncontrolling interest** as of March 31, 2023, related to redeemable shares from a previous acquisition[38](index=38&type=chunk) - The redeemable shares include a put option for the minority shareholder at a fixed price of **$24 million**, exercisable in Q4 2023[38](index=38&type=chunk) [Note 7. Intangible Assets](index=11&type=section&id=Note%207.%20Intangible%20Assets) - Goodwill and indefinite-lived intangible assets are tested for impairment at least annually; the last annual test in Q4 2022 found no impairment, and no indicators for an interim test were identified in Q1 2023[39](index=39&type=chunk) [Note 8. Equity Method Investments](index=11&type=section&id=Note%208.%20Equity%20Method%20Investments) | Investment | Segment | Ownership (Mar 31, 2023) | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :--------- | :------ | :----------------------- | :------------------------ | :--------------------------- | | MEKO AB | Europe | 26.6% | $143 | $129 | | Other | | | $13 | $12 | | Total | | | $156 | $141 | - The Level 1 fair value of the investment in MEKO AB was **$178 million** as of March 31, 2023[40](index=40&type=chunk) [Note 9. Warranty Reserve](index=11&type=section&id=Note%209.%20Warranty%20Reserve) | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Balance as of December 31, 2022 | $32 | | Warranty expense | $19 | | Warranty claims | $(19) | | Balance as of March 31, 2023 | $32 | [Note 10. Revenue Recognition](index=12&type=section&id=Note%2010.%20Revenue%20Recognition) | Revenue Category | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :----------------- | :------------------------------------------- | :------------------------------------------- | | Parts and services | $3,152 | $3,104 | | Other | $197 | $244 | | Total revenue | $3,349 | $3,348 | | Geographic Area | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :---------------- | :------------------------------------------- | :------------------------------------------- | | United States | $1,681 | $1,750 | | United Kingdom | $415 | $425 | | Germany | $416 | $386 | | Other countries | $837 | $787 | | Total revenue | $3,349 | $3,348 | [Note 11. Restructuring and Transaction Related Expenses](index=13&type=section&id=Note%2011.%20Restructuring%20and%20Transaction%20Related%20Expenses) | Expense Type | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total restructuring expenses | $8 | — | | Transaction related expenses | $10 | $3 | | Restructuring and transaction related expenses | $18 | $3 | - Restructuring expenses in Q1 2023 primarily included **$5 million** for global restructuring plans, **$2 million** for acquisition integration, and **$1 million** for the 1 LKQ Europe plan[123](index=123&type=chunk) - Transaction related expenses in Q1 2023 and Q1 2022 were mainly external legal, accounting, and advisory fees for completed and potential acquisitions, including Uni-Select costs in 2023[123](index=123&type=chunk) [Note 12. Stock-Based Compensation](index=15&type=section&id=Note%2012.%20Stock-Based%20Compensation) | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Pre-tax stock-based compensation expense | $10 | $13 | - As of March 31, 2023, unrecognized compensation expense related to unvested RSUs and PSUs was **$71 million**[58](index=58&type=chunk) [Note 13. Earnings Per Share](index=16&type=section&id=Note%2013.%20Earnings%20Per%20Share) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Income from continuing operations | $270 | $269 | | Weighted-average shares outstanding (basic) | 267.4 | 285.7 | | Basic earnings per share from continuing operations | $1.01 | $0.94 | | Diluted earnings per share from continuing operations | $1.01 | $0.94 | [Note 14. Accumulated Other Comprehensive Loss](index=16&type=section&id=Note%2014.%20Accumulated%20Other%20Comprehensive%20Loss) | Component | Balance as of January 1, 2023 (Millions) | Balance as of March 31, 2023 (Millions) | | :-------------------------------- | :--------------------------------------- | :-------------------------------------- | | Foreign Currency Translation | $(333) | $(276) | | Unrealized Gain (Loss) on Cash Flow Hedges | — | $(17) | | Unrealized Gain on Pension Plans | $11 | $11 | | Other Comprehensive Income (Loss) from Unconsolidated Subsidiaries | $(1) | $2 | | Accumulated Other Comprehensive Loss | $(323) | $(280) | [Note 15. Supply Chain Financing](index=17&type=section&id=Note%2015.%20Supply%20Chain%20Financing) - As of March 31, 2023, the company had **$240 million** of Accounts payable outstanding under its voluntary supply chain finance programs, down from **$248 million** at December 31, 2022[62](index=62&type=chunk) [Note 16. Long-Term Obligations](index=17&type=section&id=Note%2016.%20Long-Term%20Obligations) | Debt Type | March 31, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------------- | :------------------------ | :--------------------------- | | Term loans payable | $500 | — | | Revolving credit facilities | $1,335 | $1,786 | | Euro Notes (2024) | $542 | $535 | | Euro Notes (2028) | $271 | $268 | | Total debt | $2,740 | $2,662 | - On January 5, 2023, the company entered into a new Senior Unsecured Credit Agreement, establishing a **$2.0 billion unsecured revolving credit facility** and a **$500 million unsecured term loan facility**, replacing the prior Senior Secured Credit Agreement[64](index=64&type=chunk)[66](index=66&type=chunk) - The weighted average interest rate on total borrowings was **4.7%** at March 31, 2023[167](index=167&type=chunk) [Note 17. Derivative Instruments and Hedging Activities](index=18&type=section&id=Note%2017.%20Derivative%20Instruments%20and%20Hedging%20Activities) - In February 2023, the company entered into interest rate swap agreements with a total notional amount of **$700 million** to mitigate variable interest rate risk on borrowings under its Senior Unsecured Credit Agreement[70](index=70&type=chunk) - In March 2023, forward-starting interest rate swaps with a total notional amount of **$1.2 billion** were entered into to hedge interest rate risk related to forecasted debt issuance for the Uni-Select Acquisition[71](index=71&type=chunk) - Foreign exchange contracts related to the Uni-Select Acquisition purchase price resulted in a **$23 million gain** in Q1 2023[74](index=74&type=chunk) [Note 18. Fair Value Measurements](index=19&type=section&id=Note%2018.%20Fair%20Value%20Measurements) | Financial Instrument | Fair Value - Asset (Millions) (Mar 31, 2023) | Fair Value - Liability (Millions) (Mar 31, 2023) | | :------------------------- | :------------------------------------------- | :----------------------------------------------- | | Foreign currency forward contracts (Level 2) | $23 | — | | Contingent consideration liabilities (Level 3) | — | $7 | | Interest rate swaps (Level 2) | — | $22 | - The fair value of Senior Unsecured Credit Agreement borrowings approximated its carrying value of **$1,835 million** as of March 31, 2023[81](index=81&type=chunk) [Note 19. Employee Benefit Plans](index=20&type=section&id=Note%2019.%20Employee%20Benefit%20Plans) - The aggregate funded status of defined benefit plans was a **$72 million liability** as of both March 31, 2023, and December 31, 2022[85](index=85&type=chunk) [Note 20. Income Taxes](index=21&type=section&id=Note%2020.%20Income%20Taxes) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Effective income tax rate | 26.1% | 25.0% | - The increase in the effective tax rate is primarily due to the geographic distribution of income and higher non-deductible transaction costs related to the Uni-Select Acquisition[89](index=89&type=chunk) - The company does not expect the corporate minimum tax provisions of the Inflation Reduction Act of 2022 to have a material impact on its financial results[90](index=90&type=chunk) [Note 21. Segment and Geographic Information](index=21&type=section&id=Note%2021.%20Segment%20and%20Geographic%20Information) - The company operates in four reportable segments: Wholesale - North America, Europe, Specialty, and Self Service[91](index=91&type=chunk) | Segment | Segment EBITDA (Millions) (Q1 2023) | Segment EBITDA (Millions) (Q1 2022) | | :------------------------ | :---------------------------------- | :---------------------------------- | | Wholesale - North America | $252 | $218 | | Europe | $151 | $131 | | Specialty | $31 | $58 | | Self Service | $22 | $40 | | Consolidated | $456 | $447 | | Geographic Area | Long-lived assets (Millions) (Mar 31, 2023) | Long-lived assets (Millions) (Dec 31, 2022) | | :---------------- | :------------------------------------------ | :------------------------------------------ | | United States | $1,386 | $1,371 | | Germany | $302 | $290 | | United Kingdom | $263 | $256 | | Other countries | $563 | $546 | | Total | $2,514 | $2,463 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses LKQ Corporation's financial condition, operational results, liquidity, capital resources, and key business factors [Overview](index=25&type=section&id=Overview) - LKQ Corporation is a global distributor of vehicle replacement parts and specialty vehicle aftermarket products, focusing on alternative parts for collision and mechanical repair shops[103](index=103&type=chunk)[104](index=104&type=chunk) - The company is organized into four operating segments: Wholesale - North America, Europe, Specialty, and Self Service[105](index=105&type=chunk) [Acquisitions and Investments](index=26&type=section&id=Acquisitions%20and%20Investments) - The company has shifted its acquisition strategy from consolidation to targeting high synergies and critical capabilities, with the pending Uni-Select Acquisition being a key example[108](index=108&type=chunk) [Sources of Revenue](index=26&type=section&id=Sources%20of%20Revenue) - Revenue is reported in two categories: 'parts and services' (vehicle products, warranties, diagnostic/repair services) and 'other' (scrap, precious metals, bulk sales)[109](index=109&type=chunk) - Revenue from 'other' sources fluctuates based on commodity prices and the volume of materials sold[109](index=109&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) - There have been no material changes to the company's critical accounting estimates during the three months ended March 31, 2023[110](index=110&type=chunk) [Financial Information by Geographic Area](index=26&type=section&id=Financial%20Information%20by%20Geographic%20Area) - Detailed information regarding revenue and long-lived assets by geographic region is provided in Note 10 and Note 21 of the financial statements[111](index=111&type=chunk) [1 LKQ Europe Program](index=26&type=section&id=1%20LKQ%20Europe%20Program) - The multi-year '1 LKQ Europe' program aims to centralize and standardize key functions in the Europe segment, involving restructuring expenses, transformation expenses, and transformation capital expenditures[112](index=112&type=chunk) - Costs for the program from 2023 through its projected completion in 2025 are estimated to range between **$50 million and $80 million**, expected to be entirely funded by trade working capital initiatives[114](index=114&type=chunk) [Ukraine/Russia Conflict](index=27&type=section&id=Ukraine/Russia%20Conflict) - The conflict has restricted sales in Russia and Belarus and impacted operations in Ukraine, but the company does not expect a material impact on its ongoing results of operations or cash flows, as Ukraine operations represented less than **1% of total annual revenue and operating profit** for fiscal year 2022[115](index=115&type=chunk) [Key Performance Indicators](index=27&type=section&id=Key%20Performance%20Indicators) - The company identifies organic revenue growth, Segment EBITDA, and free cash flow as key performance indicators used for incentive compensation, aiming to motivate a balanced approach to growth, profitability, and cash flow generation[116](index=116&type=chunk)[117](index=117&type=chunk) [Results of Operations—Consolidated](index=28&type=section&id=Results%20of%20Operations%E2%80%94Consolidated) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $3,349M | $3,348M | | Gross margin | 41.0% | 40.5% | | Operating income | $365M | $371M | | Net income | $270M | $273M | | Interest expense | $36M | $16M | - Consolidated revenue remained flat year-over-year at **$3,349 million**, with parts and services revenue increasing **1.5%** and other revenue decreasing **19.2%**[119](index=119&type=chunk)[120](index=120&type=chunk) - Interest expense increased by **$20 million**, primarily due to higher interest rates and amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition[125](index=125&type=chunk) - The effective income tax rate increased to **26.1%** from **25.0%**, mainly due to the geographic distribution of income and higher non-deductible transaction costs from the Uni-Select Acquisition[126](index=126&type=chunk) [Results of Operations—Segment Reporting](index=30&type=section&id=Results%20of%20Operations%E2%80%94Segment%20Reporting) | Segment | Segment EBITDA (Millions) (Q1 2023) | Segment EBITDA (Millions) (Q1 2022) | % Change | | :------------------------ | :---------------------------------- | :---------------------------------- | :------- | | Wholesale - North America | $252 | $218 | +15.6% | | Europe | $151 | $131 | +14.8% | | Specialty | $31 | $58 | -46.3% | | Self Service | $22 | $40 | -43.5% | [Wholesale - North America](index=32&type=section&id=Wholesale%20-%20North%20America) | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | Total Change (%) | | :------------------------ | :----------------- | :----------------- | :--------------- | | Total third party revenue | $1,229 | $1,201 | +2.3% | | Parts & services organic revenue growth | +14.4% | | | | Other revenue change | -14.7% | | | - Parts and services organic revenue increased **14.4%** due to pricing initiatives, net volume increase, and the continued rollout of State Farm's aftermarket parts program[136](index=136&type=chunk) - Segment EBITDA increased **15.6%** to **$252 million**, despite a **$16 million negative impact** from the PGW business divestiture, driven by higher parts prices, improved aftermarket volumes, and lower freight costs[137](index=137&type=chunk) [Europe](index=33&type=section&id=Europe) | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | Total Change (%) | | :------------------------ | :----------------- | :----------------- | :--------------- | | Total third party revenue | $1,555 | $1,488 | +4.5% | | Parts & services organic revenue growth | +9.7% | | | | Foreign exchange impact on revenue | -5.9% | | | - Segment EBITDA increased **14.8%** to **$151 million**, or **21.3% on a constant currency basis**, driven by organic revenue growth and margin expansion from favorable leverage effects and productivity initiatives[144](index=144&type=chunk) [Specialty](index=34&type=section&id=Specialty) | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | Total Change (%) | | :------------------------ | :----------------- | :----------------- | :--------------- | | Total third party revenue | $396 | $460 | -14.0% | | Parts & services organic revenue change | -13.5% | | | - The organic revenue decline of **13.5%** was primarily due to demand softness in the recreational vehicle (RV) product line[148](index=148&type=chunk) - Segment EBITDA decreased **46.3%** to **$31 million**, primarily due to the organic revenue decline and negative leverage effect on overhead expenses[148](index=148&type=chunk) [Self Service](index=34&type=section&id=Self%20Service) | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | Total Change (%) | | :------------------------ | :----------------- | :----------------- | :--------------- | | Total third party revenue | $169 | $199 | -14.8% | | Parts & services organic revenue growth | +4.9% | | | | Other organic revenue change | -14.5% | | | - Other organic revenue decreased by **$20 million**, primarily due to lower prices for precious metals and scrap steel[154](index=154&type=chunk) - Segment EBITDA decreased **43.5%** to **$22 million**, driven by unfavorable movements in commodity prices and gross margin compression from higher vehicle procurement costs[152](index=152&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | March 31, 2023 (Millions) | December 31, 2022 (Adjusted Millions) | | :------------------------------------------ | :------------------------ | :------------------------------------ | | Cash and cash equivalents | $342 | $278 | | Availability under credit facilities | $591 | $1,295 | | Total liquidity | $933 | $1,573 | | Metric | Three Months Ended March 31, 2023 (Millions) | Three Months Ended March 31, 2022 (Millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $223 | $409 | | Purchases of property, plant and equipment | $70 | $59 | | Free cash flow | $153 | $350 | - The decrease in net cash provided by operating activities was primarily due to lower cash inflows from accounts payable (**$287 million decrease**) and higher interest payments[174](index=174&type=chunk) - The company was in compliance with all applicable covenants under its Senior Unsecured Credit Agreement as of March 31, 2023, with a total leverage ratio of **1.6** (covenant 4.00:1.00) and an interest coverage ratio of **19.9** (covenant 3.00:1.00)[164](index=164&type=chunk) - Financing for the Uni-Select Acquisition includes a **$1.6 billion bridge loan facility** and a **CAD 700 million delayed draw term loan**[162](index=162&type=chunk) - A quarterly cash dividend of **$0.275 per share** was declared on February 21, 2023, payable on March 30, 2023[159](index=159&type=chunk) - The company repurchased **0.1 million shares** of common stock in January 2023 at an average price of **$54.20 per share**, with **$1,106 million** remaining under the current authorization[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details LKQ Corporation's exposure to market risks, including foreign exchange, interest rates, commodity prices, and inflation, and outlines risk management strategies [Foreign Exchange Rates](index=41&type=section&id=Foreign%20Exchange%20Rates) - The company is exposed to foreign currency fluctuations, with operations outside the U.S. representing **49.8% of Q1 2023 revenue**[179](index=179&type=chunk) - A **10% increase or decrease** in the U.S. dollar's strength against other currencies would result in a **5.0% change in consolidated revenue** and a **3.6% change in operating income** for Q1 2023[179](index=179&type=chunk) - Derivatives, including foreign currency forward contracts, are used to hedge some foreign currency exposures, such as for a portion of inventory purchases and the Uni-Select Acquisition[180](index=180&type=chunk)[181](index=181&type=chunk) [Interest Rates](index=42&type=section&id=Interest%20Rates) - The company is exposed to changes in interest rates primarily on its variable-rate debt under credit facilities, which are tied to rates like SOFR[183](index=183&type=chunk) - Interest rate swap contracts are used to manage this exposure by converting a portion of variable-rate debt to fixed rates[183](index=183&type=chunk) - As of March 31, 2023, approximately **$1,135 million of variable rate debt was unhedged**; a **100 basis point movement** in interest rates would change interest expense by **$11 million** over the next twelve months[186](index=186&type=chunk) [Commodity Prices](index=42&type=section&id=Commodity%20Prices) - The company is exposed to market risk from price fluctuations in scrap metal and precious metals (platinum, palladium, rhodium), which affect both inventory costs and revenue[187](index=187&type=chunk) - While there is a natural hedge, lags and rapid price movements can lead to positive or negative gross margin effects[187](index=187&type=chunk) - For Q1 2023 compared to Q1 2022, average prices of rhodium, palladium, and platinum decreased by **44%**, **37%**, and **4%** respectively; scrap metal prices increased by **33%** over Q4 2022[187](index=187&type=chunk) [Inflation](index=42&type=section&id=Inflation) - The company is exposed to inflation in product, labor, shipping, freight, and general overhead costs, which increased in 2022 and continued into 2023[188](index=188&type=chunk) - Mitigation efforts include price adjustments and productivity initiatives, but sustained or increased inflationary pressures could adversely affect gross margins and SG&A expenses if not fully offset[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section assesses the effectiveness of LKQ Corporation's disclosure controls and procedures and reports on internal control changes [Evaluation of Disclosure Controls and Procedures](index=43&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate reporting[190](index=190&type=chunk) [Changes in Internal Control over Financial Reporting](index=43&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[191](index=191&type=chunk) [PART II OTHER INFORMATION](index=44&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security sales, and required exhibits [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an update on legal proceedings, including a recent settlement with the U.S. Environmental Protection Agency - The company reached a settlement with Region 4 of the U.S. Environmental Protection Agency (EPA) to pay a penalty of **$465,000** for alleged violations of federal stormwater regulations, which was paid on February 28, 2023[194](index=194&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the company's Annual Report on Form 10-K for a comprehensive discussion of risks and uncertainties - Readers are directed to the company's 2022 Form 10-K for information concerning risks and uncertainties that could negatively impact the business[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase program and the activity during the quarter - The Board of Directors authorized a stock repurchase program extending through October 25, 2025[196](index=196&type=chunk) | Period | Total Number of Shares Purchased (Millions) | Average Price Paid per Share | | :-------------------------- | :---------------------------------------- | :--------------------------- | | January 1, 2023 - January 31, 2023 | 0.1 | $54.20 | | February 1, 2023 - February 28, 2023 | — | — | | March 1, 2023 - March 31, 2023 | — | — | | Total | 0.1 | | - As of March 31, 2023, approximately **$1,106 million** remained available under the stock repurchase program authorization[197](index=197&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including various agreements and certifications - Exhibits include the Arrangement Agreement for the Uni-Select acquisition, Credit Agreement, Term Loan Credit Agreement, and certifications from the CEO and CFO[198](index=198&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the official signatures of the authorized officers of LKQ Corporation, certifying the filing of the report - The report was signed on April 27, 2023, by Rick Galloway, Senior Vice President and Chief Financial Officer, and Michael S. Clark, Vice President - Finance and Controller[201](index=201&type=chunk)[202](index=202&type=chunk)

LKQ Corporation (NASDAQ:LKQ) Q1 2023 Earnings Conference Call April 27, 2023 8:00 AM ET Company Participants Joe Boutross - Vice President, Investor Relations Nick Zarcone - President & Chief Executive Officer Rick Galloway - Senior Vice President & Chief Financial Officer Conference Call Participants Daniel Imbro - Stephens Bret Jordan - Jefferies Brian Butler - Stifel Scott Stember – ROTH MKM Craig Kennison - Baird Operator Good morning. My name is Rob and I'll be your conference operator today. At this t ...

LKQ Corporation Acquisition of Uni-Select, Inc. Conference Call Summary Company and Industry Overview - **Company**: LKQ Corporation (NASDAQ:LKQ) - **Acquisition Target**: Uni-Select, Inc. - **Industry**: Automotive aftermarket parts distribution Key Points and Arguments 1. **Acquisition Details**: LKQ has signed a definitive agreement to acquire Uni-Select for C$48 per share, representing a 19% premium over Uni-Select's closing price prior to the announcement [8][9][10] 2. **Valuation Metrics**: The acquisition is valued at approximately 9.7x 2023 EBITDA on a U.S. GAAP basis, factoring in anticipated synergies [8] 3. **Financial Benefits**: Expected cost savings of US$55 million within three years post-acquisition, with the transaction being EPS accretive in the first year [8][9] 4. **Leverage Impact**: The acquisition will initially increase LKQ's leverage ratio to about 2.4x, with plans to reduce it below 2x within 18 months [9][21] 5. **Regulatory Approvals**: The acquisition requires approval from Uni-Select shareholders, Canadian court, and regulatory bodies in three countries [9] 6. **Uni-Select Overview**: Uni-Select generated approximately $1.7 billion in revenue in 2022, with three main business segments: FinishMaster, Canadian Automotive Group (CAG), and GSF [10][11] 7. **Strategic Fit**: The acquisition aligns with LKQ's mission to be a leading global distributor of vehicle parts, enhancing service capabilities and product offerings [7][11] 8. **Integration Plans**: Minimal integration risk is anticipated, with a focus on operational excellence and leveraging existing LKQ capabilities [12][19] 9. **Market Growth**: CAG is expected to grow at a rate of 2% to 4% over the next decade, with opportunities for expansion in the Canadian market [28][33] 10. **Synergy Capture Timeline**: Anticipated synergies of $15 million to $20 million in year one, with the majority captured by the end of year two [31] Additional Important Insights 1. **Divestiture of UK Business**: LKQ plans to sell Uni-Select's UK operations to comply with antitrust regulations, with no buyers currently lined up [9][39] 2. **Supplier Overlap**: There is a significant overlap between Uni-Select's suppliers and LKQ's European operations, which is expected to enhance procurement synergies [36] 3. **Distribution Strategy**: CAG is transitioning towards a more direct distribution model, with a focus on expanding its two-step distribution approach [42] 4. **Market Position**: FinishMaster is recognized as a leading paint distributor in North America, which will complement LKQ's existing operations [18][46] 5. **Long-term Financial Strategy**: LKQ remains committed to maintaining its investment-grade credit rating and will prioritize debt repayment post-acquisition [21][49] This summary encapsulates the key points discussed during the conference call regarding LKQ Corporation's acquisition of Uni-Select, highlighting the strategic rationale, financial implications, and operational plans associated with the transaction.