UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________ 
FORM 10-Q
________________________ 

		
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the Quarterly Period Ended June 30, 2015
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 registrant as specified in its charter)
________________________ 

			
DELAWARE	 	36-4215970	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
 	 	 	
500 WEST MADISON STREET,
SUITE 2800, CHICAGO, IL	 	60661	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (312) 621-1950
________________________ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

				
Large accelerated filer	x	Accelerated filer	¨	
Non-accelerated filer	¨   (Do not check if a smaller reporting company)	Smaller reporting company	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨     No  x
At July 24, 2015 , the registrant had issued and outstanding an aggregate of 304,922,348 shares of Common Stock.

	

PART I
FINANCIAL INFORMATION
Item 1.     Financial Statements

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)	
								
 	June 30,	 	December 31,	
 	2015	 	2014	
Assets	 	 	 	
Current Assets:	 	 	 	
Cash and equivalents	$	143,423		 	$	114,605		
Receivables, net	651,271		 	601,422		
Inventory	1,402,399		 	1,433,847		
Deferred income taxes	77,968		 	81,744		
Prepaid expenses and other current assets	97,560		 	85,799		
Total Current Assets	2,372,621		 	2,317,417		
Property and Equipment, net	650,053		 	629,987		
Intangible Assets:	 	 	 	
Goodwill	2,286,518		 	2,288,895		
Other intangibles, net	228,580		 	245,525		
Other Assets	96,770		 	91,668		
Total Assets	$	5,634,542		 	$	5,573,492		
Liabilities and Stockholders’ Equity	 	 	 	
Current Liabilities:	 	 	 	
Accounts payable	$	392,951		 	$	400,202		
Accrued expenses:	 	 	 	
Accrued payroll-related liabilities	69,327		 	86,016		
Other accrued expenses	183,423		 	164,148		
Other current liabilities	41,286		 	36,815		
Current portion of long-term obligations	39,378		 	63,515		
Total Current Liabilities	726,365		 	750,696		
Long-Term Obligations, Excluding Current Portion	1,652,064		 	1,801,047		
Deferred Income Taxes	178,523		 	181,662		
Other Noncurrent Liabilities	123,497		 	119,430		
Commitments and Contingencies		 		
Stockholders’ Equity:	 	 	 	
Common stock, $0.01 par value,1,000,000,000 shares authorized, 304,435,529 and 303,452,655 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	3,044		 	3,035		
Additional paid-in capital	1,070,288		 	1,054,686		
Retained earnings	1,929,978		 	1,703,161		
Accumulated other comprehensive loss	(49,217	)	 	(40,225	)	
Total Stockholders’ Equity	2,954,093		 	2,720,657		
Total Liabilities and Stockholders’ Equity	$	5,634,542		 	$	5,573,492		

See notes to unaudited condensed consolidated financial statements
2

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)	
																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Revenue	$	1,838,070		 	$	1,709,132		 	$	3,611,982		 	$	3,334,909		
Cost of goods sold	1,114,126		 	1,038,073		 	2,188,559		 	2,011,966		
Gross margin	723,944		 	671,059		 	1,423,423		 	1,322,943		
Facility and warehouse expenses	136,379		 	128,506		 	269,036		 	254,665		
Distribution expenses	150,039		 	146,544		 	291,753		 	283,873		
Selling, general and administrative expenses	205,796		 	186,585		 	409,037		 	371,115		
Restructuring and acquisition related expenses	1,663		 	5,901		 	8,151		 	9,222		
Depreciation and amortization	29,782		 	29,927		 	59,235		 	56,638		
Operating income	200,285		 	173,596		 	386,211		 	347,430		
Other expense (income):	 	 	 	 	 	 	 	
Interest expense, net	14,622		 	15,628		 	29,528		 	31,746		
Loss on debt extinguishment	—		 	—		 	—		 	324		
Change in fair value of contingent consideration liabilities	125		 	(790	)	 	276		 	(2,012	)	
Other (income) expense, net	(28	)	 	(907	)	 	1,740		 	(1,003	)	
Total other expense, net	14,719		 	13,931		 	31,544		 	29,055		
Income before provision for income taxes	185,566		 	159,665		 	354,667		 	318,375		
Provision for income taxes	64,682		 	54,341		 	124,780		 	108,362		
Equity in earnings of unconsolidated subsidiaries	(1,162	)	 	(442	)	 	(3,070	)	 	(478	)	
Net income	$	119,722		 	$	104,882		 	$	226,817		 	$	209,535		
Earnings per share:	 	 	 	 	 	 	 	
Basic	$	0.39		 	$	0.35		 	$	0.75		 	$	0.69		
Diluted	$	0.39		 	$	0.34		 	$	0.74		 	$	0.69		

Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)	
																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Net income	$	119,722		 	$	104,882		 	$	226,817		 	$	209,535		
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	
Foreign currency translation	44,510		 	15,879		 	(10,300	)	 	15,316		
Net change in unrecognized gains/losses on derivative instruments, net of tax	918		 	457		 	1,201		 	1,250		
Net change in unrealized gains/losses on pension plan, net of tax	(21	)	 	(30	)	 	107		 	(67	)	
Total other comprehensive income (loss)	45,407		 	16,306		 	(8,992	)	 	16,499		
Total comprehensive income	$	165,129		 	$	121,188		 	$	217,825		 	$	226,034		

See notes to unaudited condensed consolidated financial statements
3

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)	
								
 	Six Months Ended	
 	June 30,	
 	2015	 	2014	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	
Net income	$	226,817		 	$	209,535		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	
Depreciation and amortization	61,714		 	58,893		
Stock-based compensation expense	11,114		 	11,783		
Excess tax benefit from stock-based payments	(6,737	)	 	(9,747	)	
Other	5,880		 	1,645		
Changes in operating assets and liabilities, net of effects from acquisitions:	 	 	 	
Receivables	(48,995	)	 	(71,779	)	
Inventory	38,399		 	(40,773	)	
Prepaid income taxes/income taxes payable	21,052		 	9,653		
Accounts payable	(18,597	)	 	(20,549	)	
Other operating assets and liabilities	(7,948	)	 	3,543		
Net cash provided by operating activities	282,699		 	152,204		
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	
Purchases of property and equipment	(66,763	)	 	(67,331	)	
Acquisitions, net of cash acquired	(37,208	)	 	(635,332	)	
Other investing activities, net	(5,209	)	 	341		
Net cash used in investing activities	(109,180	)	 	(702,322	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	
Proceeds from exercise of stock options	3,288		 	4,207		
Excess tax benefit from stock-based payments	6,737		 	9,747		
Taxes paid related to net share settlements of stock-based compensation awards	(5,243	)	 	—		
Debt issuance costs	—		 	(3,715	)	
Borrowings under revolving credit facilities	199,621		 	1,160,461		
Repayments under revolving credit facilities	(294,276	)	 	(674,432	)	
Borrowings under term loans	—		 	11,250		
Repayments under term loans	(11,250	)	 	(5,625	)	
Borrowings under receivables securitization facility	2,100		 	80,000		
Repayments under receivables securitization facility	(1,758	)	 	—		
Repayments of other long-term debt	(42,090	)	 	(13,529	)	
Payments of other obligations	(2,050	)	 	(41,934	)	
Settlement of foreign currency forward contract	—		 	(19,959	)	
Net cash (used in) provided by financing activities	(144,921	)	 	506,471		
Effect of exchange rate changes on cash and equivalents	220		 	2,723		
Net increase (decrease) in cash and equivalents	28,818		 	(40,924	)	
Cash and equivalents, beginning of period	114,605		 	150,488		
Cash and equivalents, end of period	$	143,423		 	$	109,564		
Supplemental disclosure of cash paid for:	 	 	 	
Income taxes, net of refunds	$	102,747		 	$	98,938		
Interest	28,656		 	29,182		
Supplemental disclosure of noncash investing and financing activities:	 	 	 	
Notes payable and other obligations, including notes issued and debt assumed in connection with business acquisitions	$	4,366		 	$	87,983		
Contingent consideration liabilities	—		 	7,057		
Noncash property and equipment additions	4,387		 	4,177		

See notes to unaudited condensed consolidated financial statements
4

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)	
																							
 	Common Stock	 	Additional Paid-In Capital	 	Retained
Earnings	 	Accumulated
Other
Comprehensive
Loss	 	Total
Stockholders’
Equity	
 	Shares
Issued	 	Amount	 								
BALANCE, January 1, 2015	303,453		 	$	3,035		 	$	1,054,686		 	$	1,703,161		 	$	(40,225	)	 	$	2,720,657		
Net income	—		 	—		 	—		 	226,817		 	—		 	226,817		
Other comprehensive loss	—		 	—		 	—		 	—		 	(8,992	)	 	(8,992	)	
Restricted stock units vested, net of shares withheld for employee tax	422		 	4		 	(2,007	)	 	—		 	—		 	(2,003	)	
Stock-based compensation expense	—		 	—		 	11,114		 	—		 	—		 	11,114		
Exercise of stock options	705		 	7		 	3,976		 	—		 	—		 	3,983		
Shares withheld for net share settlements of stock option awards	(144	)	 	(2	)	 	(3,934	)	 	—		 	—		 	(3,936	)	
Excess tax benefit from stock-based payments	—		 	—		 	6,453		 	—		 	—		 	6,453		
BALANCE, June 30, 2015	304,436		 	$	3,044		 	$	1,070,288		 	$	1,929,978		 	$	(49,217	)	 	$	2,954,093		

See notes to unaudited condensed consolidated financial statements
5

LKQ CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1.	Interim Financial Statements	
The unaudited financial statements presented in this report represent the consolidation of LKQ Corporation, a Delaware corporation, and its subsidiaries. LKQ Corporation is a holding company and all operations are conducted by subsidiaries. When the terms "LKQ," "the Company," "we," "us," or "our" are used in this document, those terms refer to LKQ Corporation and its consolidated subsidiaries.
We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim financial statements. Accordingly, certain information related to our significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Operating results for interim periods are not necessarily indicative of the results that can be expected for any subsequent interim period or for a full year. These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 2, 2015.

Note 2.	Financial Statement Information	
Revenue Recognition
The majority of our revenue is derived from the sale of vehicle parts. Revenue is recognized when the products are shipped to, delivered to or picked up by customers and title has transferred, subject to an allowance for estimated returns, discounts and allowances that we estimate based upon historical information. We recorded a reserve for estimated returns, discounts and allowances of approximately $33.0 million and $31.3 million at June 30, 2015 and December 31, 2014 , respectively. We present taxes assessed by governmental authorities collected from customers on a net basis. Therefore, the taxes are excluded from revenue on our Unaudited Condensed Consolidated Statements of Income and are shown as a current liability on our Unaudited Condensed Consolidated Balance Sheets until remitted. We recognize revenue from the sale of scrap metal, other metals, and cores when title has transferred, which typically occurs upon delivery to the customer.
Allowance for Doubtful Accounts
We recorded a reserve for uncollectible accounts of approximately $21.1 million and $19.4 million at June 30, 2015 and December 31, 2014 , respectively.
Inventory
Inventory consists of the following (in thousands):

								
 	June 30,	 	December 31,	
 	2015	 	2014	
Aftermarket and refurbished products	$	1,013,084		 	$	1,022,549		
Salvage and remanufactured products	389,315		 	411,298		
 	$	1,402,399		 	$	1,433,847		
Intangible Assets
Intangible assets consist primarily of goodwill (the cost of purchased businesses in excess of the fair value of the identifiable net assets acquired) and other specifically identifiable intangible assets, such as trade names, trademarks, customer relationships, software and other technology related assets, and covenants not to compete.

6

The changes in the carrying amount of goodwill by reportable segment during the three months ended June 30, 2015 are as follows (in thousands):

																
 	North America	 	Europe	 	Specialty	 	Total	
Balance as of January 1, 2015	$	1,392,032		 	$	616,819		 	$	280,044		 	$	2,288,895		
Business acquisitions and adjustments to previously recorded goodwill	4,613		 	15,048		 	(1,016	)	 	18,645		
Exchange rate effects	(7,903	)	 	(13,104	)	 	(15	)	 	(21,022	)	
Balance as of June 30, 2015	$	1,388,742		 	$	618,763		 	$	279,013		 	$	2,286,518		
The components of other intangibles are as follows (in thousands):

																								
 	June 30, 2015	 	December 31, 2014	
 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net	
Trade names and trademarks	$	172,121		 	$	(39,571	)	 	$	132,550		 	$	173,340		 	$	(35,538	)	 	$	137,802		
Customer relationships	93,533		 	(33,977	)	 	59,556		 	92,972		 	(26,751	)	 	66,221		
Software and other technology related assets	44,290		 	(14,009	)	 	30,281		 	44,640		 	(10,387	)	 	34,253		
Covenants not to compete	10,766		 	(4,573	)	 	6,193		 	11,074		 	(3,825	)	 	7,249		
 	$	320,710		 	$	(92,130	)	 	$	228,580		 	$	322,026		 	$	(76,501	)	 	$	245,525		
Trade names and trademarks are amortized over a useful life ranging from 10 to 30 years on a straight-line basis. Customer relationships are amortized over the expected period to be benefited ( 5 to 20 years) on an accelerated basis. Software and other technology related assets are amortized on a straight-line basis over the expected period to be benefited ( five to six years). Covenants not to compete are amortized over the lives of the respective agreements, which range from one to five years, on a straight-line basis. Amortization expense for intangibles was $16.5 million and $15.8 million during the six months ended June 30, 2015 and 2014 , respectively. Estimated amortization expense for each of the 5 years in the period ending December 31, 2019 is $32.8 million , $29.8 million , $27.3 million , $22.4 million and $17.8 million , respectively.
Warranty Reserve
Some of our salvage mechanical products are sold with a standard six month warranty against defects. Additionally, some of our remanufactured engines are sold with a standard three year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products that is supported by certain of the suppliers of those products. We record the estimated warranty costs at the time of sale using historical warranty claim information to project future warranty claims activity. The changes in the warranty reserve are as follows (in thousands):

				
Balance as of January 1, 2015	$	14,881		
Warranty expense	16,686		
Warranty claims	(15,135	)	
Balance as of June 30, 2015	$	16,432		
Investments in Unconsolidated Subsidiaries
As of June 30, 2015 , the carrying value of our investments in unconsolidated subsidiaries was $12.5 million ; of this amount, $11.6 million relates to our investment in ACM Parts Pty Ltd ("ACM Parts"). In August 2013, we entered into an agreement with Suncorp Group, a leading general insurance group in Australia and New Zealand, to develop ACM Parts, an alternative vehicle replacement parts business in those countries. We hold a  49% interest in the entity and are contributing our experience to help establish automotive parts recycling operations and to facilitate the procurement of aftermarket parts; Suncorp Group holds a  51% equity interest and is supplying salvage vehicles to the venture as well as assisting in establishing relationships with repair shops as customers. We are accounting for our interest in this subsidiary using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee. During the six months ended June 30, 2015 , we increased our total investment in ACM Parts by $7.5 million , which is reflected in Other investing activities, net on the Unaudited Condensed Consolidated Statements of Cash Flows. Our total ownership interest in ACM Parts remains unchanged as a result of this additional investment. The total of our investment in ACM Parts and other

7

unconsolidated subsidiaries is included within Other Assets on our Unaudited Condensed Consolidated Balance Sheets. Our equity in the net earnings of the investees for the three and six months ended June 30, 2015 was not material.
Depreciation Expense
Included in Cost of Goods Sold on the Unaudited Condensed Consolidated Statements of Income is depreciation expense associated with our refurbishing, remanufacturing, and furnace operations as well as our distribution centers.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"), which was amended in July 2015. This update outlines a new comprehensive revenue recognition model that supersedes most current revenue recognition guidance, and requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities adopting the standard have the option of using either a full retrospective or modified retrospective approach in the application of this guidance. ASU 2014-09 will be effective for the Company during the first quarter of our fiscal year 2018. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. We are still evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.
In April 2015, the FASB issued Accounting Standards Update 2015-03, "Interest-Imputation of Interest " ("ASU 2015-03"). This update simplifies the presentation of debt issuance costs on the financial statements by requiring companies to reduce debt issuance costs from the carrying value of their corresponding liability on the balance sheet, rather than presenting debt issuance costs as deferred charges. ASU 2015-03 will be effective for the Company during the first quarter of our fiscal year 2016. Early adoption is permitted. Entities must retrospectively apply this guidance within the balance sheet for all periods presented in order to reflect the period-specific effects of this new guidance. We do not anticipate the adoption of this guidance will have a material impact on our financial position, results of operations, or cash flows.

Note 3.	Stock-Based Compensation	
In order to attract and retain employees, non-employee directors, consultants, and other persons associated with us, we may grant qualified and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and performance units under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). We have granted RSUs, stock options, and restricted stock under the Equity Incentive Plan. We expect to issue new shares of common stock to cover past and future equity grants.
RSUs
RSUs vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs contain either a time-based vesting condition or a combination of a performance-based vesting condition and a time-based vesting condition, in which case, both conditions must be met before any RSUs vest. For the RSUs containing a performance-based vesting condition, the Company must report positive diluted earnings per share, subject to certain adjustments, during any fiscal year period within  five  years following the grant date. Each RSU converts into one share of LKQ common stock on the applicable vesting date. The grant date fair value of RSUs is based on the market price of LKQ stock on the grant date.
During the six months ended June 30, 2015 , we granted  912,113 RSUs to employees. The fair value of RSUs that vested during the six months ended June 30, 2015 was $13.1 million .

8

The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the six months ended June 30, 2015 :

											
 	Number
Outstanding	 	Weighted
Average
Grant Date
Fair Value	 	Aggregate Intrinsic Value
   (in thousands) (1)	
Unvested as of January 1, 2015	2,151,232		 	$	20.97		 	$	60,493		
Granted	912,113		 	$	27.03		 	 	
Vested	(499,746	)	 	$	20.07		 	 	
Forfeited / Canceled	(31,503	)	 	$	23.26		 	 	
Unvested as of June 30, 2015	2,532,096		 	$	23.30		 	$	76,583		
Expected to vest after June 30, 2015	2,444,395		 	$	23.16		 	$	73,931		
(1) The aggregate intrinsic value of unvested and expected to vest RSUs represents the total pretax intrinsic value (the fair value of the Company's stock on the last day of each period multiplied by the number of units) that would have been received by the holders had all RSUs vested. This amount changes based on the market price of the Company’s common stock.
Stock Options
Stock options vest over periods of up to five years, subject to a continued service condition. Stock options expire either six or ten  years from the date they are granted. No options were granted during the six months ended June 30, 2015 .
The following table summarizes activity related to our stock options under the Equity Incentive Plan for the six months ended June 30, 2015 :

													
 	Number
Outstanding	 	Weighted
Average Exercise Price	 	Weighted Average Remaining Contractual Term
(in years)	 	Aggregate Intrinsic Value
   (in thousands) (1)	
Balance as of January 1, 2015	5,207,772		 	$	8.04		 	3.6	 	$	105,038		
Exercised	(704,640	)	 	$	5.65		 		 			
Forfeited / Canceled	(8,145	)	 	$	32.31		 		 			
Balance as of June 30, 2015	4,494,987		 	$	8.37		 	3.3	 	$	98,551		
Exercisable as of June 30, 2015	4,396,051		 	$	7.83		 	3.2	 	$	98,525		
Exercisable as of June 30, 2015 and expected to vest thereafter	4,485,213		 	$	8.31		 	3.3	 	$	98,551		
(1) The aggregate intrinsic value of outstanding, exercisable and expected to vest options represents the total pretax intrinsic value (the difference between the fair value of the Company's stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of January 1, 2015 and June 30, 2015, respectively. This amount changes based on the market price of the Company’s common stock.
The following table summarizes the components of pre-tax stock-based compensation expense (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
RSUs	$	5,528		 	$	4,795		 	$	10,948		 	$	10,191		
Stock options	40		 	696		 	166		 	1,500		
Restricted stock	—		 	46		 	—		 	92		
Total stock-based compensation expense	$	5,568		 	$	5,537		 	$	11,114		 	$	11,783		
As of June 30, 2015 , unrecognized compensation expense related to unvested RSUs and stock options is $41.0 million and $0.4 million , respectively, and is expected to be recognized over weighted-average periods of 3.3 years and 1.5 years,

9

respectively. Stock-based compensation expense related to these awards will be different to the extent the actual forfeiture rates are different from our estimated forfeiture rates.

Note 4.	Long-Term Obligations	
Long-Term Obligations consist of the following (in thousands):

								
 	June 30,	 	December 31,	
 	2015	 	2014	
Senior secured credit agreement:	 	 	 	
Term loans payable	$	421,875		 	$	433,125		
Revolving credit facilities	541,462		 	663,912		
Senior notes	600,000		 	600,000		
Receivables securitization facility	95,242		 	94,900		
Notes payable through November 2019 at weighted average interest rates of 1.1% and 1.0%, respectively	15,478		 	45,891		
Other long-term debt at weighted average interest rates of 3.6% and 3.1%, respectively	17,385		 	26,734		
 	1,691,442		 	1,864,562		
Less current maturities	(39,378	)	 	(63,515	)	
 	$	1,652,064		 	$	1,801,047		
Senior Secured Credit Agreement
On March 27, 2014, LKQ Corporation, LKQ Delaware LLP, and certain other subsidiaries (collectively, the "Borrowers") entered into a third amended and restated credit agreement (the "Credit Agreement"). Total availability under the Credit Agreement is $2.3 billion (composed of $1.69 billion in the revolving credit facility's multicurrency component, $165 million in the revolving credit facility's U.S. dollar only component, and $450 million of term loans). The Credit Agreement allows the Company to increase the amount of the revolving credit facility or obtain incremental term loans up to the greater of $400 million or the amount that may be borrowed while maintaining a senior secured leverage ratio of less than or equal to 2.50 to 1.00 , subject to the agreement of the lenders.
Amounts under the revolving credit facilities are due and payable upon maturity of the Credit Agreement on May 3, 2019. Term loan borrowings are due and payable in quarterly installments equal to 1.25% of the original principal amount beginning on June 30, 2014 with the remaining balance due and payable on the maturity date of the Credit Agreement. We are required to prepay the term loan by amounts equal to proceeds from the sale or disposition of certain assets if the proceeds are not reinvested within twelve months. We also have the option to prepay outstanding amounts under the Credit Agreement without penalty.
The Credit Agreement contains customary representations and warranties, and contains customary covenants that provide limitations and conditions on our ability to enter into certain transactions. The Credit Agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio.
Borrowings under the Credit Agreement bear interest at variable rates, which depend on the currency and duration of the borrowing elected, plus an applicable margin. The applicable margin is subject to change in increments of 0.25% depending on our net leverage ratio. Interest payments are due on the last day of the selected interest period or quarterly in arrears depending on the type of borrowing. Including the effect of the interest rate swap agreements described in Note 5, "Derivative Instruments and Hedging Activities," the weighted average interest rates on borrowings outstanding under the Credit Agreement at June 30, 2015 and December 31, 2014 were 2.11% and 2.10% , respectively. We also pay a commitment fee based on the average daily unused amount of the revolving credit facilities. The commitment fee is subject to change in increments of 0.05% depending on our net leverage ratio. In addition, we pay a participation commission on outstanding letters of credit at an applicable rate based on our net leverage ratio, as well as a fronting fee of 0.125% to the issuing bank, which are due quarterly in arrears.
Of the total borrowings outstanding under the Credit Agreement, $22.5 million was classified as current maturities at both June 30, 2015 and December 31, 2014 . As of June 30, 2015 , there were letters of credit outstanding in the aggregate amount of $71.5 million . The amounts available under the revolving credit facilities are reduced by the amounts outstanding under letters of credit, and thus availability under the revolving credit facilities at June 30, 2015 was $1.2 billion .

10

Related to the execution of the Credit Agreement in March 2014, we incurred $3.7 million of fees, of which $3.4 million were capitalized within Other Assets on our Unaudited Condensed Consolidated Balance Sheet and are amortized over the term of the agreement. The remaining $0.3 million of fees were expensed during the three months ended March 31, 2014 as a loss on debt extinguishment.
Senior Notes
In April 2014, LKQ Corporation completed an offer to exchange $600 million aggregate principal amount of registered 4.75% Senior Notes due 2023 (the "Notes") for notes previously issued through a private placement. The Notes are governed by the original Indenture dated as of May 9, 2013 among LKQ Corporation, certain of our subsidiaries (the "Guarantors") and U.S. Bank National Association, as trustee. The Notes are substantially identical to those previously issued through the private placement, except the Notes are registered under the Securities Act of 1933.
The Notes bear interest at a rate of 4.75% per year from the most recent payment date on which interest has been paid or provided for. Interest on the Notes is payable in arrears on May 15 and November 15 of each year. The first interest payment was made on November 15, 2013. The Notes are fully and unconditionally guaranteed, jointly and severally, by the Guarantors.
The Notes and the guarantees are, respectively, LKQ Corporation's and each Guarantor's senior unsecured obligations. The Notes are subordinated to all of LKQ Corporation's and the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Notes are effectively subordinated to all of the liabilities of our subsidiaries that are not guaranteeing the Notes to the extent of the assets of those subsidiaries.
Receivables Securitization Facility
On September 29, 2014, LKQ Corporation amended the terms of the receivables securitization facility with The Bank of Tokyo-Mitsubishi UFJ, LTD. ("BTMU ") to: (i) extend the term of the facility to October 2, 2017; (ii) increase the maximum amount available to $97 million ; and (iii) make other clarifying and updating changes. Under the facility, LKQ sells an ownership interest in certain receivables, related collections and security interests to BTMU for the benefit of conduit investors and/or financial institutions for cash proceeds. Upon payment of the receivables by customers, rather than remitting to BTMU the amounts collected, LKQ retains such collections as proceeds for the sale of new receivables generated by certain of the ongoing operations of the Company.
The sale of the ownership interest in the receivables is accounted for as a secured borrowing in our Unaudited Condensed Consolidated Balance Sheets, under which the receivables included in the program collateralize the amounts invested by BTMU, the conduit investors and/or financial institutions (the "Purchasers"). The receivables are held by LKQ Receivables Finance Company, LLC ("LRFC"), a wholly owned bankruptcy-remote special purpose subsidiary of LKQ, and therefore, the receivables are available first to satisfy the creditors of LRFC, including the investors. As of June 30, 2015 and December 31, 2014 , $130.1 million and $129.5 million , respectively, of net receivables were collateral for the investment under the receivables facility.
Under the receivables facility, we pay variable interest rates plus a margin on the outstanding amounts invested by the Purchasers. The variable rates are based on (i) commercial paper rates, (ii) the London InterBank Offered Rate ("LIBOR"), or (iii) base rates, and are payable monthly in arrears. Commercial paper rates will be the applicable variable rate unless conduit investors are not available to invest in the receivables at commercial paper rates. In such case, financial institutions will invest at the LIBOR rate or at base rates. We also pay a commitment fee on the excess of the investment maximum over the average daily outstanding investment, payable monthly in arrears. As of June 30, 2015 , the interest rate under the receivables facility was based on commercial paper rates and was 0.94% . The outstanding balances of $95.2 million and $94.9 million as of June 30, 2015 and December 31, 2014 , respectively, were classified as long-term on the Unaudited Condensed Consolidated Balance Sheets because we have the ability and intent to refinance these borrowings on a long-term basis.

Note 5.	Derivative Instruments and Hedging Activities	
We are exposed to market risks, including the effect of changes in interest rates, foreign currency exchange rates and commodity prices. Under our current policies, we use derivatives to manage our exposure to variable interest rates on our senior secured debt, changing foreign exchange rates for certain foreign currency denominated transactions and changes in metals prices. We do not hold or issue derivatives for trading purposes.
Cash Flow Hedges
At June 30, 2015 , we had interest rate swap agreements in place to hedge a portion of the variable interest rate risk on our variable rate borrowings under our Credit Agreement, with the objective of minimizing the impact of interest rate fluctuations and stabilizing cash flows. Under the terms of the interest rate swap agreements, we pay the fixed interest rate and

11

receive payment at a variable rate of interest based on LIBOR or the Canadian Dealer Offered Rate (“CDOR”) for the respective currency of each interest rate swap agreement’s notional amount. The effective portion of changes in the fair value of the interest rate swap agreements is recorded in Accumulated Other Comprehensive Income (Loss) and is reclassified to interest expense when the underlying interest payment has an impact on earnings. The ineffective portion of changes in the fair value of the interest rate swap agreements is reported in interest expense. Our interest rate swap contracts have maturity dates ranging from 2015 through 2016.
From time to time, we may hold foreign currency forward contracts related to certain foreign currency denominated intercompany transactions, with the objective of minimizing the impact of changing exchange rates on these future cash flows, as well as minimizing the impact of fluctuating exchange rates on our results of operations through the respective dates of settlement. Under the terms of the foreign currency forward contracts, we will sell the foreign currency in exchange for U.S. dollars at a fixed rate on the maturity dates of the contracts. The effective portion of the changes in fair value of the foreign currency forward contracts is recorded in Accumulated Other Comprehensive Income (Loss) and reclassified to other income (expense) when the underlying transaction has an impact on earnings.
The following table summarizes the notional amounts and fair values of our designated cash flow hedges as of June 30, 2015 and December 31, 2014 (in thousands):

																									
 	 	Notional Amount	 	Fair Value at June 30, 2015 (USD)	 	Fair Value at December 31, 2014 (USD)	
 	 	June 30, 2015	 	December 31, 2014	 	Other Accrued Expenses	 	Other Noncurrent Liabilities	 	Other Accrued Expenses	 	Other Noncurrent Liabilities	
Interest rate swap agreements	 	 	 	 	 	 	 	 	
USD denominated	 	$	420,000		 	$	420,000		 	$	1,043		 	$	1,564		 	$	2,691		 	$	1,615		
GBP denominated	 	£	50,000		 	£	50,000		 	—		 	687		 	—		 	893		
CAD denominated	 	C$	25,000		 	C$	25,000		 	83		 	—		 	—		 	19		
Total cash flow hedges	 	$	1,126		 	$	2,251		 	$	2,691		 	$	2,527		
 
While our derivative instruments executed with the same counterparty are subject to master netting arrangements, we present our cash flow hedge derivative instruments on a gross basis in our Unaudited Condensed Consolidated Balance Sheets. The impact of netting the fair values of these contracts would not have a material effect on our Unaudited Condensed Consolidated Balance Sheets at June 30, 2015 or December 31, 2014 .
The activity related to our cash flow hedges is included in Note 12, "Accumulated Other Comprehensive Income (Loss) ." Ineffectiveness related to our cash flow hedges was immaterial to our results of operations during the three and six months ended June 30, 2015 and June 30, 2014 . We do not expect future ineffectiveness related to our cash flow hedges to have a material effect on our results of operations.
As of June 30, 2015 , we estimate that $2.0 million of derivative losses (net of tax) included in Accumulated Other Comprehensive Loss will be reclassified into our consolidated statements of income within the next 12 months.
Other Derivative Instruments
We hold other short-term derivative instruments, including foreign currency forward contracts, to manage our exposure to variability related to inventory purchases and intercompany financing transactions denominated in a non-functional currency, as well as commodity forward contracts to manage our exposure to fluctuations in precious metals prices. We have elected not to apply hedge accounting for these transactions, and therefore the contracts are adjusted to fair value through our results of operations as of each balance sheet date, which could result in volatility in our earnings. The notional amount and fair value of these contracts at June 30, 2015 and December 31, 2014 , along with the effect on our results of operations during each of the six month periods ended June 30, 2015 and June 30, 2014 , were immaterial.

Note 6.	Fair Value Measurements	
Financial Assets and Liabilities Measured at Fair Value
We use the market and income approaches to value our financial assets and liabilities, and during the six months ended June 30, 2015 , 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

12

are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of June 30, 2015 and December 31, 2014 (in thousands):

																
 	Balance as of June 30, 2015	 	Fair Value Measurements as of June 30, 2015	
			Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	
Cash surrender value of life insurance	$	30,963		 	$	—		 	$	30,963		 	$	—		
Total Assets	$	30,963		 	$	—		 	$	30,963		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Contingent consideration liabilities	$	5,191		 	$	—		 	$	—		 	$	5,191		
Deferred compensation liabilities	30,126		 	—		 	30,126		 	—		
Interest rate swaps	3,377		 	—		 	3,377		 	—		
Total Liabilities	$	38,694		 	$	—		 	$	33,503		 	$	5,191		

																
 	Balance as of December 31, 2014	 	Fair Value Measurements as of December 31, 2014	
 			Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	
Cash surrender value of life insurance	$	28,242		 	$	—		 	$	28,242		 	$	—		
Total Assets	$	28,242		 	$	—		 	$	28,242		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Contingent consideration liabilities	$	7,295		 	$	—		 	$	—		 	$	7,295		
Deferred compensation liabilities	27,580		 	—		 	27,580		 	—		
Interest rate swaps	5,218		 	—		 	5,218		 	—		
Total Liabilities	$	40,093		 	$	—		 	$	32,798		 	$	7,295		
The cash surrender value of life insurance and deferred compensation liabilities are included in Other Assets and Other Noncurrent Liabilities, respectively, on our Unaudited Condensed Consolidated Balance Sheets. The current portion of contingent consideration liabilities is included in Other Current Liabilities and the noncurrent portion is included in Other Noncurrent Liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments. The balance sheet classification of the interest rate swaps is presented in Note 5, "Derivative Instruments and Hedging Activities ."
Our Level 2 assets and liabilities are valued using inputs from third parties and market observable data. We obtain valuation data for the cash surrender value of life insurance and deferred compensation liabilities from third party sources, which determine the net asset values for our accounts using quoted market prices, investment allocations and reportable trades. We value our derivative instruments using a third party valuation model that performs a discounted cash flow analysis based on the terms of the contracts and market observable inputs such as current and forward interest rates.
Our contingent consideration liabilities are related to our business acquisitions as further described in Note 8, "Business Combinations ." 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. These unobservable inputs include internally-developed assumptions of the probabilities of achieving specified targets, which are used to determine the resulting cash flows and the applicable discount rate. Our Level 3 fair value measurements are established and updated quarterly by our corporate accounting department using current information about these key assumptions, with the input and oversight of our operational and executive management teams. We evaluate the performance of the business during the period compared to our previous expectations, along with any changes to our future projections, and update the estimated cash flows accordingly. In addition, we consider changes to our cost of capital and changes to the probability of achieving the earnout payment targets when updating our discount rate on a quarterly basis.

13

The significant unobservable inputs used in the fair value measurements of our Level 3 contingent consideration liabilities were as follows:

						
 	June 30,	 	December 31,	
 	2015	 	2014	
Unobservable Input	(Weighted Average)	
Probability of achieving payout targets	73.6	%	 	79.1	%	
Discount rate	7.5	%	 	7.5	%	
A decrease in the assessed probabilities of achieving the targets or an increase in the discount rate, in isolation, would result in a lower fair value measurement. Changes in the values of the liabilities are recorded in Change in Fair Value of Contingent Consideration Liabilities within Other Expense (Income) on our Unaudited Condensed Consolidated Statements of Income.
Changes in the fair value of our contingent consideration obligations are as follows (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Beginning Balance	$	5,561		 	$	57,091		 	$	7,295		 	$	55,653		
Contingent consideration liabilities recorded for business acquisitions	—		 	2,740		 	—		 	7,057		
Payments	(538	)	 	(50,299	)	 	(2,205	)	 	(52,305	)	
Increase (decrease) in fair value included in earnings	125		 	(790	)	 	276		 	(2,012	)	
Exchange rate effects	43		 	20		 	(175	)	 	369		
Ending Balance	$	5,191		 	$	8,762		 	$	5,191		 	$	8,762		
The purchase price for our 2011 acquisition of Euro Car Parts Holdings Limited ("ECP") included contingent payments depending on the achievement of certain annual performance targets. The performance target for 2013 was exceeded, and therefore, we settled the liability related to the 2013 performance period for the maximum amount of £30 million during the three months ended June 30, 2014 through a cash payment of  $44.8 million  ( £26.9 million ) and the issuance of notes for  $5.1 million  ( £3.1 million ).
Of the amounts included in earnings for the  three and six months ended   June 30, 2015 ,  $0.1 million  and  $0.3 million  of losses, respectively, were related to contingent consideration obligations outstanding as of June 30, 2015 . Of the amounts included in earnings for the  three and six months ended June 30, 2014 ,  $0.3 million   losses were related to contingent consideration obligations outstanding as of June 30, 2015 .
The changes in the fair value of contingent consideration obligations included in earnings during the respective periods in  2015  and  2014  reflect the quarterly reassessment of each obligation's fair value, including an analysis of the significant inputs used in the valuation, as well as the accretion of the present value discount.
Financial Assets and Liabilities Not Measured at Fair Value
Our debt is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. Based on market conditions as of June 30, 2015 and December 31, 2014 , the fair value of our credit agreement borrowings reasonably approximated the carrying value of $963 million and $1.1 billion , respectively. In addition, based on market conditions, the fair value of the outstanding borrowings under the receivables facility reasonably approximated the carrying value of $95 million at June 30, 2015 and December 31, 2014 . As of June 30, 2015 and December 31, 2014 , the fair value of our senior notes was approximately $573 million and $569 million , respectively, compared to a carrying value of $600 million .
The fair value measurements of the borrowings under our credit agreement and receivables facility are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at June 30, 2015 to assume these obligations. The fair value of our senior notes is classified as Level 1 within the fair value hierarchy since it is determined based upon observable market inputs including quoted market prices in an active market.

14

		
Note 7.	Commitments and Contingencies	
Operating Leases
We are obligated under noncancelable operating leases for corporate office space, warehouse and distribution facilities, trucks and certain equipment.
The future minimum lease commitments under these leases at June 30, 2015 are as follows (in thousands):

				
Six months ending December 31, 2015	$	74,040		
Years ending December 31:	 	
2016	134,413		
2017	113,676		
2018	92,979		
2019	73,985		
2020	60,918		
Thereafter	218,777		
Future Minimum Lease Payments	$	768,788		
Litigation and Related Contingencies
We have certain contingencies resulting from litigation, claims and other commitments and are subject to a variety of environmental and pollution control laws and regulations incident to the ordinary course of business. We currently expect that the resolution of such contingencies will not materially affect our financial position, results of operations or cash flows.

Note 8.	Business Combinations	
During the six months ended June 30, 2015 , we completed ten acquisitions, including three wholesale businesses in North America and seven wholesale businesses in Europe. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were former customers of and distributors for our Netherlands subsidiary, Sator Beheer B.V. ("Sator"), and were acquired with the objective of expanding our distribution network in the Netherlands. Our other acquisitions completed during the six months ended June 30, 2015 enabled us to expand our geographic presence. Total acquisition date fair value of the consideration for these acquisitions was $40.2 million , composed of $37.2 million of cash (net of cash acquired), $2.1 million of notes payable, and $0.9 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the six months ended June 30, 2015 , we recorded $18.6 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2014 acquisitions. We expect $4.7 million of the $18.6 million of goodwill recorded to be deductible for income tax purposes. As the acquisitions completed during the six months ended June 30, 2015 are immaterial to our business, we have omitted the detailed disclosures for these acquisitions prescribed by the accounting guidance on business combinations.
In July 2015, we completed the acquisitions of Parts Channel, Inc., an aftermarket collision parts distributor, as well as two  aftermarket distributors in the Netherlands and a self service retail operation in the U.S. The preliminary aggregate cash purchase price for these acquisitions was approximately $75 million , net of cash acquired. We are in the process of completing the purchase accounting for our July 2015 acquisitions, and as a result, we are unable to disclose the amounts recognized for each major class of assets acquired and liabilities assumed, or the pro forma effect of the acquisitions on our results of operations in the U.S.
On January 3, 2014 , we completed our acquisition of Keystone Automotive Holdings, Inc. ("Keystone Specialty"), which is a leading distributor and marketer of specialty vehicle aftermarket equipment and accessories in North America. Total acquisition date fair value of the consideration for our Keystone Specialty acquisition was $471.9 million , composed of $427.1 million of cash (net of cash acquired), $31.5 million of notes payable and $13.4 million of other purchase price obligations (non-interest bearing). We recorded $237.7 million of goodwill related to our acquisition of Keystone Specialty, which we do not expect to be deductible for income tax purposes.
In addition to our acquisition of Keystone Specialty, we made 22 acquisitions during 2014 , including nine wholesale businesses in North America, nine wholesale businesses in Europe, two self service retail operations, and two specialty vehicle aftermarket businesses. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were customers of and distributors for our Netherlands subsidiary, Sator. Our European acquisitions were completed with the objective of aligning our Netherlands and U.K. distribution models; our other acquisitions completed

15

during the year ended December 31, 2014 enabled us to expand existing markets, introduce new product lines, and enter new markets. Total acquisition date fair value of the consideration for these additional acquisitions was $359.1 million , composed of $334.3 million of cash (net of cash acquired), $13.5 million of notes payable, $0.3 million of other purchase price obligations (non-interest bearing), $5.9 million for the estimated value of contingent payments to former owners (with maximum potential payments totaling $8.3 million ), and $5.1 million of pre-existing balances between us and the acquired entities considered to be effectively settled as a result of the acquisitions. During the year ended December 31, 2014 , we recorded $178.0 million of goodwill related to these acquisitions and immaterial adjustments to preliminary purchase price allocations related to certain of our 2013 acquisitions. We expect $44.2 million of the $178.0 million of goodwill recorded to be deductible for income tax purposes.
Our acquisitions are accounted for under the purchase method of accounting and are included in our unaudited condensed consolidated financial statements from the dates of acquisition. The purchase prices were allocated to the net assets acquired based upon estimated fair market values at the dates of acquisition. The purchase price allocations for the acquisitions made during the  six months ended   June 30, 2015  and the last six months of  2014  are preliminary as we are in the process of determining the following: 1) valuation amounts for certain receivables, inventories and fixed assets acquired; 2) valuation amounts for certain intangible assets acquired; 3) the acquisition date fair value of certain liabilities assumed; and 4) the final estimation of the tax basis of the entities acquired. We have recorded preliminary estimates for certain of the items noted above and will record adjustments, if any, to the preliminary amounts upon finalization of the valuations.
The preliminary purchase price allocations for the acquisitions completed during the year ended December 31, 2014 are as follows (in thousands):

													
 	 	Year Ended	
 	 	December 31, 2014	
 	 	Keystone
Specialty	 	Other Acquisitions	 	Total	
Receivables	 	$	48,473		 	$	75,330		 	$	123,803		
Receivable reserves	 	(7,748	)	 	(7,383	)	 	(15,131	)	
Inventory	 	150,696		 	123,815		 	274,511		
Income taxes receivable	 	14,096		 	—		 	14,096		
Prepaid expenses and other current assets	 	8,085		 	4,050		 	12,135		
Property and equipment	 	38,080		 	27,026		 	65,106		
Goodwill	 	237,729		 	177,974		 	415,703		
Other intangibles	 	78,110		 	51,135		 	129,245		
Other assets	 	6,159		 	2,793		 	8,952		
Deferred income taxes	 	(26,591	)	 	313		 	(26,278	)	
Current liabilities assumed	 	(63,513	)	 	(52,961	)	 	(116,474	)	
Debt assumed	 	—		 	(32,441	)	 	(32,441	)	
Other noncurrent liabilities assumed	 	(11,675	)	 	(10,573	)	 	(22,248	)	
Contingent consideration liabilities	 	—		 	(5,854	)	 	(5,854	)	
Other purchase price obligations	 	(13,351	)	 	(333	)	 	(13,684	)	
Notes issued	 	(31,500	)	 	(13,535	)	 	(45,035	)	
Settlement of pre-existing balances	 	—		 	(5,052	)	 	(5,052	)	
Cash used in acquisitions, net of cash acquired	 	$	427,050		 	$	334,304		 	$	761,354		
The primary reason for our acquisitions made during the six months ended June 30, 2015 and the year ended December 31, 2014 was to create economic value for our stockholders by enhancing our position as a leading source for alternative collision and mechanical repair products and expanding into other product lines and businesses that may benefit from our operating strengths. Our acquisition of Keystone Specialty allows us to enter into new product lines and increase the size of our addressable market. In addition, we believe that the acquisition creates logistics and administrative cost synergies as well as cross-selling opportunities, which contributed to the goodwill recorded on the Keystone Specialty acquisition. Other acquisitions completed during 2014 and 2015 enabled us to expand our distribution network in the Netherlands, and expand our geographic presence.
When we identify potential acquisitions, we attempt to target companies with a leading market share, an experienced management team and workforce that provide a fit with our existing operations, and strong cash flows. For certain of our

16

acquisitions, we have identified cost savings and synergies as a result of integrating the company with our existing business that provide additional value to the combined entity. In many cases, acquiring companies with these characteristics will result in purchase prices that include a significant amount of goodwill.
The following pro forma summary presents the effect of the businesses acquired during the six months ended June 30, 2015 as though the businesses had been acquired as of January 1, 2014 and the businesses acquired during the year ended December 31, 2014 , including the Keystone Specialty acquisition on January 3, 2014, as though they had been acquired as of January 1, 2013 . The pro forma adjustments are based upon unaudited financial information of the acquired entities (in thousands, except per share data):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Revenue, as reported	$	1,838,070		 	$	1,709,132		 	$	3,611,982		 	$	3,334,909		
Revenue of purchased businesses for the period prior to acquisition:	 	 	 	 	 	 	 	
Keystone Specialty	—		 	—		 	—		 	3,443		
Other acquisitions	6,726		 	132,610		 	28,193		 	278,764		
Pro forma revenue	$	1,844,796		 	$	1,841,742		 	$	3,640,175		 	$	3,617,116		
 	 	 	 	 	 	 	 	
Net income, as reported	$	119,722		 	$	104,882		 	$	226,817		 	$	209,535		
Net income of purchased businesses for the period prior to acquisition, and pro forma purchase accounting adjustments:	 	 	 	 	 	 	 	
Keystone Specialty	—		 	144		 	—		 	408		
Other acquisitions	921		 	6,255		 	2,620		 	8,906		
Pro forma net income	$	120,643		 	$	111,281		 	$	229,437		 	$	218,849		
 	 	 	 	 	 	 	 	
Earnings per share, basic—as reported	$	0.39		 	$	0.35		 	$	0.75		 	$	0.69		
Effect of purchased businesses for the period prior to acquisition:	 	 	 	 	 	 	 	
Keystone Specialty	—		 	0.00		 	—		 	0.00		
Other acquisitions	0.00		 	0.02		 	0.01		 	0.03		
Pro forma earnings per share, basic (1)  	$	0.40		 	$	0.37		 	$	0.75		 	$	0.73		
 	 	 	 	 	 	 	 	
Earnings per share, diluted—as reported	$	0.39		 	$	0.34		 	$	0.74		 	$	0.69		
Effect of purchased businesses for the period prior to acquisition:	 	 	 	 	 	 	 	
Keystone Specialty	—		 	0.00		 	—		 	0.00		
Other acquisitions	0.00		 	0.02		 	0.01		 	0.03		
Pro forma earnings per share, diluted (1)  	$	0.39		 	$	0.36		 	$	0.75		 	$	0.72		

(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.
Unaudited pro forma supplemental information is based upon accounting estimates and judgments that we believe are reasonable. The unaudited pro forma supplemental information includes the effect of purchase accounting adjustments, such as the adjustment of inventory acquired to net realizable value, adjustments to depreciation on acquired property and equipment, adjustments to rent expense for above or below market leases, adjustments to amortization on acquired intangible assets, adjustments to interest expense, and the related tax effects. Additionally, the pro forma impact of our Keystone Specialty acquisition reflects the elimination of acquisition related expenses totaling $0.2 million for the six months ended June 30, 2014 , which do not have a continuing impact on our operating results. Refer to Note 9, "Restructuring and Acquisition Related Expenses," for further information regarding our acquisition related expenses. These pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the periods presented or of future results.

17

		
Note 9.	Restructuring and Acquisition Related Expenses	
Acquisition Related Expenses
Acquisition related expenses, which include external costs such as legal, accounting and advisory fees, totaled $0.7 million and $1.3 million for the three and six months ended June 30, 2015 , respectively. Expenses incurred during the three and six months ended June 30, 2014 totaled $1.7 million and $1.9 million , respectively. Of our 2015 expenses, $1.0 million was related to the acquisitions of seven aftermarket distribution businesses in the Netherlands during the first half of 2015 and $0.3 million was related to potential acquisitions. The expenses incurred in the first half of 2014 were primarily related to our acquisitions of five aftermarket distribution businesses in the Netherlands.
Acquisition Integration Plans
During the three and six months ended June 30, 2015 , we incurred $0.9 million and $6.9 million of restructuring expenses, respectively. Expenses incurred during the three and six months ended June 30, 2015 were primarily a result of the integration of our October 2014 acquisition of a supplier of parts for recreational vehicles into our Specialty business.
During the three and six months ended June 30, 2014 , we incurred $4.2 million and $7.4 million of restructuring expenses, respectively. Expenses incurred during the six months ended June 30, 2014 were primarily a result of the integration of our acquisition of Keystone Specialty into our existing business. These integration activities included the closure of duplicate facilities, termination of employees in connection with the consolidation of overlapping facilities with our existing business, moving expenses, and other third party services directly related to our acquisitions.
We expect to incur additional expenses related to the integration of certain of our acquisitions into our existing operations throughout 2015. These integration activities are expected to include the closure of duplicate facilities, termination of employees in connection with the consolidation of overlapping facilities with our existing business, and moving expenses. Future expenses to complete these integration plans are expected to be less than $5.0 million .

Note 10.	Earnings Per Share	
The following chart sets forth the computation of earnings per share (in thousands, except per share amounts):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Net Income	$	119,722		 	$	104,882		 	$	226,817		 	$	209,535		
Denominator for basic earnings per share—Weighted-average shares outstanding	304,286		 	302,030		 	304,145		 	301,719		
Effect of dilutive securities:	 	 	 	 	 	 	 	
RSUs	732		 	821		 	700		 	876		
Stock options	2,229		 	2,981		 	2,260		 	3,074		
Restricted stock	—		 	5		 	—		 	8		
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding	307,247		 	305,837		 	307,105		 	305,677		
Earnings per share, basic	$	0.39		 	$	0.35		 	$	0.75		 	$	0.69		
Earnings per share, diluted	$	0.39		 	$	0.34		 	$	0.74		 	$	0.69		
The following table sets forth the number of employee stock-based compensation awards outstanding but not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and six months ended June 30, 2015 and 2014 (in thousands):

												
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Antidilutive securities:	 	 	 	 	 	 	 	
RSUs	310		 	405		 	323		 	203		
Stock options	98		 	117		 	99		 	122		

18

		
Note 11.	Income Taxes	
At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our interim earnings. We also record the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates, in the interim period in which they occur.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in state and foreign jurisdictions, permanent and temporary differences between book and taxable income, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes.    
Our effective income tax rate for the  six months ended   June 30, 2015  was  35.2%  compared with  34.0%  for the comparable prior year period. The higher effective income tax rate for the  six months ended   June 30, 2015  is primarily a result of our expected geographic distribution of income, as we expect a smaller proportion of our annual pretax income will be earned in the typically lower tax rate international jurisdictions. In addition, the tax provision for the first six months of 2015 includes unfavorable discrete items of $0.3 million primarily as a result of U.S. state deferred tax adjustments, compared to $0.1 million of unfavorable discrete items during the prior year period.

Note 12.	Accumulated Other Comprehensive Income (Loss)	
The components of Accumulated Other Comprehensive Income (Loss) are as follows (in thousands):

																																	
 	 	Three Months Ended	 	Three Months Ended	
 	 	June 30, 2015	 	June 30, 2014	
 	 	Foreign
Currency
Translation	 	Unrealized (Loss) Gain
on Cash Flow Hedges	 	Unrealized (Loss) Gain
on Pension Plan	 	Accumulated
Other
Comprehensive
(Loss) Income	 	Foreign
Currency
Translation	 	Unrealized (Loss) Gain
on Cash Flow Hedges	 	Unrealized Gain (Loss) on Pension Plan	 	Accumulated
Other
Comprehensive
Income (Loss)	
Beginning balance	 	$	(81,883	)	 	$	(3,118	)	 	$	(9,623	)	 	$	(94,624	)	 	$	24,343		 	$	(4,803	)	 	$	664		 	$	20,204		
Pretax income (loss)	 	44,510		 	(166	)	 	—		 	44,344		 	15,879		 	466		 	—		 	16,345		
Income tax effect	 	—		 	69		 	—		 	69		 	—		 	(122	)	 	—		 	(122	)	
Reclassification of unrealized gain (loss)	 	—		 	1,564		 	(27	)	 	1,537		 	—		 	133		 	(43	)	 	90		
Reclassification of deferred income taxes	 	—		 	(549	)	 	6		 	(543	)	 	—		 	(20	)	 	13		 	(7	)	
Ending Balance	 	$	(37,373	)	 	$	(2,200	)	 	$	(9,644	)	 	$	(49,217	)	 	$	40,222		 	$	(4,346	)	 	$	634		 	$	36,510		

																																	
 	 	Six Months Ended	 	Six Months Ended	
 	 	June 30, 2015	 	June 30, 2014	
 	 	Foreign
Currency
Translation	 	Unrealized (Loss) Gain
on Cash Flow Hedges	 	Unrealized (Loss) Gain
on Pension Plan	 	Accumulated
Other
Comprehensive
(Loss) Income	 	Foreign
Currency
Translation	 	Unrealized (Loss) Gain
on Cash Flow Hedges	 	Unrealized Gain (Loss) on Pension Plan	 	Accumulated
Other
Comprehensive
Income (Loss)	
Beginning balance	 	$	(27,073	)	 	$	(3,401	)	 	$	(9,751	)	 	$	(40,225	)	 	$	24,906		 	$	(5,596	)	 	$	701		 	$	20,011		
Pretax (loss) income	 	(10,300	)	 	(1,239	)	 	—		 	(11,539	)	 	15,316		 	(176	)	 	—		 	15,140		
Income tax effect	 	—		 	439		 	—		 	439		 	—		 	46		 	—		 	46		
Reclassification of unrealized gain (loss)	 	—		 	3,085		 	143		 	3,228		 	—		 	2,093		 	(90	)	 	2,003		
Reclassification of deferred income taxes	 	—		 	(1,084	)	 	(36	)	 	(1,120	)	 	—		 	(713	)	 	23		 	(690	)	
Ending Balance	 	$	(37,373	)	 	$	(2,200	)	 	$	(9,644	)	 	$	(49,217	)	 	$	40,222		 	$	(4,346	)	 	$	634		 	$	36,510		

19

Unrealized losses on our interest rate swap contracts totaling $1.6 million and $3.1 million were reclassified to interest expense in our Unaudited Condensed Consolidated Statements of Income during the three and six months ended June 30, 2015 , respectively. During the three and six months ended June 30, 2014 , unrealized losses of $1.6 million and $3.1 million , respectively related to our interest rate swaps were reclassified to interest expense. The remaining reclassification of unrealized gains during the three and six months ended June 30, 2014 related to our foreign currency forward contracts and was recorded to other income in our our Unaudited Condensed Consolidated Statements of Income. These gains offset the remeasurement of certain of our intercompany balances. The deferred income taxes related to our cash flow hedges were reclassified from Accumulated Other Comprehensive Income to income tax expense.

Note 13.	Segment and Geographic Information	
We have four operating segments: Wholesale – North America; Wholesale – Europe; Self Service; and Specialty. Our Wholesale – North America and Self Service operating segments are aggregated into one reportable segment, North America, because they possess similar economic characteristics and have common products and services, customers, and methods of distribution. Therefore, we present three reportable segments: North America, Europe and Specialty.
The following tables present our financial performance by reportable segment for the periods indicated (in thousands):

																				
 	North America	 	Europe	 	Specialty	 	Eliminations	 	Consolidated	
Three Months Ended June 30, 2015	 	 	 	 	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	
Third Party	$	1,044,779		 	$	509,833		 	$	283,458		 	$	—		 	$	1,838,070		
Intersegment	372		 	70		 	872		 	(1,314	)	 	—		
Total segment revenue	$	1,045,151		 	$	509,903		 	$	284,330		 	$	(1,314	)	 	$	1,838,070		
Segment EBITDA	$	138,880		 	$	53,943		 	$	40,198		 	$	—		 	$	233,021		
Depreciation and amortization	17,249		 	8,704		 	5,092		 	—		 	31,045		
Three Months Ended June 30, 2014	 	 	 	 	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	
Third Party	$	1,025,989		 	$	465,173		 	$	217,970		 	$	—		 	$	1,709,132		
Intersegment	101		 	—		 	430		 	(531	)	 	—		
Total segment revenue	$	1,026,090		 	$	465,173		 	$	218,400		 	$	(531	)	 	$	1,709,132		
Segment EBITDA	$	137,150		 	$	45,945		 	$	28,356		 	$	—		 	$	211,451		
Depreciation and amortization	17,508		 	8,491		 	5,048		 	—		 	31,047		

																				
 	North America	 	Europe	 	Specialty	 	Eliminations	 	Consolidated	
Six Months Ended June 30, 2015	 	 	 	 	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	
Third Party	$	2,090,858		 	$	997,179		 	$	523,945		 	$	—		 	$	3,611,982		
Intersegment	466		 	70		 	1,607		 	(2,143	)	 	—		
Total segment revenue	$	2,091,324		 	$	997,249		 	$	525,552		 	$	(2,143	)	 	$	3,611,982		
Segment EBITDA	$	288,268		 	$	100,466		 	$	65,602		 	$	—		 	$	454,336		
Depreciation and amortization	34,515		 	17,055		 	10,144		 	—		 	61,714		
Six Months Ended June 30, 2014	 	 	 	 	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	
Third Party	$	2,055,255		 	$	884,887		 	$	394,767		 	$	—		 	$	3,334,909		
Intersegment	134		 	—		 	656		 	(790	)	 	—		
Total segment revenue	$	2,055,389		 	$	884,887		 	$	395,423		 	$	(790	)	 	$	3,334,909		
Segment EBITDA	$	283,288		 	$	87,100		 	$	46,160		 	$	—		 	$	416,548		
Depreciation and amortization	34,653		 	15,457		 	8,783		 	—		 	58,893		

The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based

20

on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. Loss on debt extinguishment is considered a component of interest in calculating EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization.
The table below provides a reconciliation from Segment EBITDA to Net Income (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Segment EBITDA	$	233,021		 	$	211,451		 	$	454,336		 	$	416,548		
Deduct:	 	 	 	 	 	 	 	
Restructuring and acquisition related expenses (1)	1,663		 	5,901		 	8,151		 	9,222		
Change in fair value of contingent consideration liabilities (2)	125		 	(790	)	 	276		 	(2,012	)	
Add:	 	 	 	 	 	 	 	
Equity in earnings of unconsolidated subsidiaries	(1,162	)	 	(442	)	 	(3,070	)	 	(478	)	
EBITDA	230,071		 	205,898		 	442,839		 	408,860		
Depreciation and amortization	31,045		 	31,047		 	61,714		 	58,893		
Interest expense, net	14,622		 	15,628		 	29,528		 	31,746		
Loss on debt extinguishment	—		 	—		 	—		 	324		
Provision for income taxes	64,682		 	54,341		 	124,780		 	108,362		
Net income	$	119,722		 	$	104,882		 	$	226,817		 	$	209,535		

(1)  See Note 9, "Restructuring and Acquisition Related Expenses," for further information.
(2)  See Note 6, "Fair Value Measurements," for further information on our contingent consideration liabilities.

The following table presents capital expenditures, which includes additions to property and equipment, by reportable segment (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Capital Expenditures	 	 	 	 	 	 	 	
North America	$	14,744		 	$	21,355		 	$	30,147		 	$	40,276		
Europe	22,303		 	10,824		 	30,172		 	24,275		
Specialty	3,620		 	1,436		 	6,444		 	2,780		
 	$	40,667		 	$	33,615		 	$	66,763		 	$	67,331		

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

								
 	June 30,	 	December 31,	
 	2015	 	2014	
Receivables, net	 	 	 	
North America	$	330,322		 	$	322,713		
Europe	234,842		 	227,987		
Specialty	86,107		 	50,722		
Total receivables, net	651,271		 	601,422		
Inventory	 	 	 	
North America	791,840		 	826,429		
Europe	386,611		 	402,488		
Specialty	223,948		 	204,930		
Total inventory	1,402,399		 	1,433,847		
Property and Equipment, net	 	 	 	
North America	454,733		 	456,288		
Europe	147,773		 	128,309		
Specialty	47,547		 	45,390		
Total property and equipment, net	650,053		 	629,987		
Other unallocated assets	2,930,819		 	2,908,236		
Total assets	$	5,634,542		 	$	5,573,492		
We report net receivables, inventories, and net property and equipment by segment as that information is used by the chief operating decision maker in assessing segment performance. These assets provide a measure for the operating capital employed in each segment. Unallocated assets include cash, prepaid and other current and noncurrent assets, goodwill, intangibles and deferred income taxes.
The majority of our operations are conducted in the U.S. Our European operations are located in the U.K., the Netherlands, Belgium, France, Sweden, and Norway. Our operations in other countries include recycled and aftermarket operations in Canada, engine remanufacturing and bumper refurbishing operations in Mexico, an aftermarket parts freight consolidation warehouse in Taiwan, other alternative parts operations in Guatemala, and administrative support functions in India. Our net sales are attributed to geographic area based on the location of the selling operation.
The following table sets forth our revenue by geographic area (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Revenue	 	 	 	 	 	 	 	
United States	$	1,228,424		 	$	1,135,298		 	$	2,423,369		 	$	2,243,168		
United Kingdom	347,064		 	337,931		 	690,671		 	654,877		
Other countries	262,582		 	235,903		 	497,942		 	436,864		
 	$	1,838,070		 	$	1,709,132		 	$	3,611,982		 	$	3,334,909		

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

								
 	June 30,	 	December 31,	
 	2015	 	2014	
Long-lived Assets	 	 	 	
United States	$	472,737		 	$	469,450		
United Kingdom	113,022		 	92,813		
Other countries	64,294		 	67,724		
 	$	650,053		 	$	629,987		

The following table sets forth our revenue by product category (in thousands):

																
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Aftermarket, other new and refurbished products	$	1,296,168		 	$	1,169,021		 	$	2,542,639		 	$	2,273,670		
Recycled, remanufactured and related products and services	408,180		 	371,840		 	806,625		 	736,744		
Other	133,722		 	168,271		 	262,718		 	324,495		
 	$	1,838,070		 	$	1,709,132		 	$	3,611,982		 	$	3,334,909		
Our North American reportable segment generates revenue from all of our product categories, while our European and Specialty segments generate revenue primarily from the sale of aftermarket products. Revenue from other sources includes scrap sales, bulk sales to mechanical remanufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations.

Note 14.	Condensed Consolidating Financial Information	
LKQ Corporation (the "Parent") issued, and certain of its 100% owned subsidiaries (the "Guarantors") have fully and unconditionally guaranteed, jointly and severally, the Company's Notes due on May 15, 2023. A Guarantor's guarantee will be unconditionally and automatically released and discharged upon the occurrence of any of the following events: (i) a transfer (including as a result of consolidation or merger) by the Guarantor to any person that is not a Guarantor of all or substantially all assets and properties of such Guarantor, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; (ii) a transfer (including as a result of consolidation or merger) to any person that is not a Guarantor of the equity interests of a Guarantor or issuance by a Guarantor of its equity interests such that the Guarantor ceases to be a subsidiary, as defined in the Indenture, provided the Guarantor is also released from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; (iii) the release of the Guarantor from its obligations with respect to indebtedness under the Credit Agreement or other indebtedness of ours, which obligation gave rise to the guarantee of the Notes; and (iv) upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture, as defined in the Indenture.
Presented below are the unaudited condensed consolidating financial statements of the Parent, the Guarantors, the non-guarantor subsidiaries (the "Non-Guarantors"), and the elimination entries necessary to present the Company's financial statements on a consolidated basis as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934 resulting from the guarantees of the Notes. Investments in consolidated subsidiaries have been presented under the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, intercompany balances, and intercompany revenue and expenses. The unaudited condensed consolidating financial statements below have been prepared from the Company's financial information on the same basis of accounting as the unaudited condensed consolidated financial statements, and may not necessarily be indicative of the financial position, results of operations or cash flows had the Parent, Guarantors and Non-Guarantors operated as independent entities.

23

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)	
																				
 	June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Assets	 	 	 	 	 	 	 	 	 	
Current Assets:	 	 	 	 	 	 	 	 	 	
Cash and equivalents	$	45,801		 	$	28,715		 	$	68,907		 	$	—		 	$	143,423		
Receivables, net	—		 	261,226		 	390,045		 	—		 	651,271		
Intercompany receivables, net	3,038		 	—		 	14,813		 	(17,851	)	 	—		
Inventory	—		 	946,939		 	455,460		 	—		 	1,402,399		
Deferred income taxes	3,456		 	71,356		 	3,156		 	—		 	77,968		
Prepaid expenses and other current assets	10,241		 	38,864		 	48,455		 	—		 	97,560		
Total Current Assets	62,536		 	1,347,100		 	980,836		 	(17,851	)	 	2,372,621		
Property and Equipment, net	415		 	473,999		 	175,639		 	—		 	650,053		
Intangible Assets:	 	 	 	 	 	 	 	 	 	
Goodwill	—		 	1,567,993		 	718,525		 	—		 	2,286,518		
Other intangibles, net	—		 	146,056		 	82,524		 	—		 	228,580		
Investment in Subsidiaries	3,338,540		 	293,779		 	—		 	(3,632,319	)	 	—		
Intercompany Notes Receivable	627,948		 	23,579		 	—		 	(651,527	)	 	—		
Other Assets	50,613		 	23,392		 	25,820		 	(3,055	)	 	96,770		
Total Assets	$	4,080,052		 	$	3,875,898		 	$	1,983,344		 	$	(4,304,752	)	 	$	5,634,542		
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	 	 	
Accounts payable	$	1,381		 	$	178,731		 	$	212,839		 	$	—		 	$	392,951		
Intercompany payables, net	—		 	14,813		 	3,038		 	(17,851	)	 	—		
Accrued expenses:	 	 	 	 	 	 	 	 	 	
Accrued payroll-related liabilities	5,413		 	36,590		 	27,324		 	—		 	69,327		
Other accrued expenses	5,679		 	87,394		 	90,350		 	—		 	183,423		
Other current liabilities	283		 	16,788		 	24,215		 	—		 	41,286		
Current portion of long-term obligations	23,661		 	4,209		 	11,508		 	—		 	39,378		
Total Current Liabilities	36,417		 	338,525		 	369,274		 	(17,851	)	 	726,365		
Long-Term Obligations, Excluding Current Portion	1,056,375		 	6,705		 	588,984		 	—		 	1,652,064		
Intercompany Notes Payable	—		 	611,085		 	40,442		 	(651,527	)	 	—		
Deferred Income Taxes	—		 	165,144		 	16,434		 	(3,055	)	 	178,523		
Other Noncurrent Liabilities	33,167		 	65,271		 	25,059		 	—		 	123,497		
Stockholders’ Equity	2,954,093		 	2,689,168		 	943,151		 	(3,632,319	)	 	2,954,093		
Total Liabilities and Stockholders' Equity	$	4,080,052		 	$	3,875,898		 	$	1,983,344		 	$	(4,304,752	)	 	$	5,634,542		

24

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Balance Sheets
(In thousands)	
																				
 	December 31, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Assets	 	 	 	 	 	 	 	 	 	
Current Assets:	 	 	 	 	 	 	 	 	 	
Cash and equivalents	$	14,930		 	$	32,103		 	$	67,572		 	$	—		 	$	114,605		
Receivables, net	145		 	217,542		 	383,735		 	—		 	601,422		
Intercompany receivables, net	1,360		 	—		 	8,048		 	(9,408	)	 	—		
Inventory	—		 	964,477		 	469,370		 	—		 	1,433,847		
Deferred income taxes	4,064		 	62,850		 	10,215		 	4,615		 	81,744		
Prepaid expenses and other current assets	20,640		 	36,553		 	28,606		 	—		 	85,799		
Total Current Assets	41,139		 	1,313,525		 	967,546		 	(4,793	)	 	2,317,417		
Property and Equipment, net	494		 	470,791		 	158,702		 	—		 	629,987		
Intangible Assets:	 	 	 	 	 	 	 	 	 	
Goodwill	—		 	1,563,796		 	725,099		 	—		 	2,288,895		
Other intangibles, net	—		 	155,819		 	89,706		 	—		 	245,525		
Investment in Subsidiaries	3,216,039		 	279,967		 	—		 	(3,496,006	)	 	—		
Intercompany Notes Receivable	667,949		 	23,449		 	—		 	(691,398	)	 	—		
Other Assets	49,601		 	24,457		 	20,481		 	(2,871	)	 	91,668		
Total Assets	$	3,975,222		 	$	3,831,804		 	$	1,961,534		 	$	(4,195,068	)	 	$	5,573,492		
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	 	 	
Accounts payable	$	682		 	$	182,607		 	$	216,913		 	$	—		 	$	400,202		
Intercompany payables, net	—		 	8,048		 	1,360		 	(9,408	)	 	—		
Accrued expenses:	 	 	 	 	 	 	 	 	 	
Accrued payroll-related liabilities	8,075		 	48,850		 	29,091		 	—		 	86,016		
Other accrued expenses	8,061		 	83,857		 	72,230		 	—		 	164,148		
Other current liabilities	283		 	16,197		 	15,720		 	4,615		 	36,815		
Current portion of long-term obligations	55,172		 	4,599		 	3,744		 	—		 	63,515		
Total Current Liabilities	72,273		 	344,158		 	339,058		 	(4,793	)	 	750,696		
Long-Term Obligations, Excluding Current Portion	1,150,624		 	6,561		 	643,862		 	—		 	1,801,047		
Intercompany Notes Payable	—		 	649,824		 	41,574		 	(691,398	)	 	—		
Deferred Income Taxes	—		 	156,727		 	27,806		 	(2,871	)	 	181,662		
Other Noncurrent Liabilities	31,668		 	60,213		 	27,549		 	—		 	119,430		
Stockholders’ Equity	2,720,657		 	2,614,321		 	881,685		 	(3,496,006	)	 	2,720,657		
Total Liabilities and Stockholders’ Equity	$	3,975,222		 	$	3,831,804		 	$	1,961,534		 	$	(4,195,068	)	 	$	5,573,492		

25

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)	
																				
 	For the Three Months Ended June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Revenue	$	—		 	$	1,269,541		 	$	599,744		 	$	(31,215	)	 	$	1,838,070		
Cost of goods sold	—		 	770,026		 	375,315		 	(31,215	)	 	1,114,126		
Gross margin	—		 	499,515		 	224,429		 	—		 	723,944		
Facility and warehouse expenses	—		 	100,289		 	36,090		 	—		 	136,379		
Distribution expenses	—		 	102,753		 	47,286		 	—		 	150,039		
Selling, general and administrative expenses	8,761		 	119,958		 	77,077		 	—		 	205,796		
Restructuring and acquisition related expenses	—		 	1,185		 	478		 	—		 	1,663		
Depreciation and amortization	39		 	19,873		 	9,870		 	—		 	29,782		
Operating (loss) income	(8,800	)	 	155,457		 	53,628		 	—		 	200,285		
Other expense (income):	 	 	 	 	 	 	 	 	 	
Interest expense (income), net	12,241		 	(172	)	 	2,553		 	—		 	14,622		
Intercompany interest (income) expense, net	(10,378	)	 	7,056		 	3,322		 	—		 	—		
Change in fair value of contingent consideration liabilities	—		 	55		 	70		 	—		 	125		
Other expense (income), net	2		 	(1,161	)	 	1,131		 	—		 	(28	)	
Total other expense, net	1,865		 	5,778		 	7,076		 	—		 	14,719		
(Loss) income before (benefit) provision for income taxes	(10,665	)	 	149,679		 	46,552		 	—		 	185,566		
(Benefit) provision for income taxes	(4,294	)	 	59,495		 	9,481		 	—		 	64,682		
Equity in earnings of unconsolidated subsidiaries	—		 	19		 	(1,181	)	 	—		 	(1,162	)	
Equity in earnings of subsidiaries	126,093		 	7,335		 	—		 	(133,428	)	 	—		
Net income	$	119,722		 	$	97,538		 	$	35,890		 	$	(133,428	)	 	$	119,722		

26

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)	
																				
 	For the Three Months Ended June 30, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Revenue	$	—		 	$	1,179,984		 	$	561,876		 	$	(32,728	)	 	$	1,709,132		
Cost of goods sold	—		 	717,251		 	353,550		 	(32,728	)	 	1,038,073		
Gross margin	—		 	462,733		 	208,326		 	—		 	671,059		
Facility and warehouse expenses	—		 	93,086		 	35,420		 	—		 	128,506		
Distribution expenses	—		 	97,846		 	48,698		 	—		 	146,544		
Selling, general and administrative expenses	7,099		 	113,029		 	66,457		 	—		 	186,585		
Restructuring and acquisition related expenses	—		 	3,496		 	2,405		 	—		 	5,901		
Depreciation and amortization	59		 	20,296		 	9,572		 	—		 	29,927		
Operating (loss) income	(7,158	)	 	134,980		 	45,774		 	—		 	173,596		
Other expense (income):	 	 	 	 	 	 	 	 	 	
Interest expense, net	12,576		 	44		 	3,008		 	—		 	15,628		
Intercompany interest (income) expense, net	(10,866	)	 	4,051		 	6,815		 	—		 	—		
Change in fair value of contingent consideration liabilities	—		 	(847	)	 	57		 	—		 	(790	)	
Other (income) expense, net	(59	)	 	(1,617	)	 	769		 	—		 	(907	)	
Total other expense, net	1,651		 	1,631		 	10,649		 	—		 	13,931		
(Loss) income before (benefit) provision for income taxes	(8,809	)	 	133,349		 	35,125		 	—		 	159,665		
(Benefit) provision for income taxes	(3,687	)	 	50,518		 	7,510		 	—		 	54,341		
Equity in earnings of unconsolidated subsidiaries	—		 	15		 	(457	)	 	—		 	(442	)	
Equity in earnings of subsidiaries	110,004		 	9,631		 	—		 	(119,635	)	 	—		
Net income	$	104,882		 	$	92,477		 	$	27,158		 	$	(119,635	)	 	$	104,882		

27

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)	
																				
 	For the Six Months Ended June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Revenue	$	—		 	$	2,495,449		 	$	1,182,687		 	$	(66,154	)	 	$	3,611,982		
Cost of goods sold	—		 	1,510,829		 	743,884		 	(66,154	)	 	2,188,559		
Gross margin	—		 	984,620		 	438,803		 	—		 	1,423,423		
Facility and warehouse expenses	—		 	198,050		 	70,986		 	—		 	269,036		
Distribution expenses	—		 	198,745		 	93,008		 	—		 	291,753		
Selling, general and administrative expenses	16,392		 	241,620		 	151,025		 	—		 	409,037		
Restructuring and acquisition related expenses	—		 	7,245		 	906		 	—		 	8,151		
Depreciation and amortization	79		 	39,764		 	19,392		 	—		 	59,235		
Operating (loss) income	(16,471	)	 	299,196		 	103,486		 	—		 	386,211		
Other expense (income):	 	 	 	 	 	 	 	 	 	
Interest expense (income), net	24,555		 	(129	)	 	5,102		 	—		 	29,528		
Intercompany interest (income) expense, net	(21,201	)	 	14,315		 	6,886		 	—		 	—		
Change in fair value of contingent consideration liabilities	—		 	110		 	166		 	—		 	276		
Other expense (income), net	27		 	(2,951	)	 	4,664		 	—		 	1,740		
Total other expense, net	3,381		 	11,345		 	16,818		 	—		 	31,544		
(Loss) income before (benefit) provision for income taxes	(19,852	)	 	287,851		 	86,668		 	—		 	354,667		
(Benefit) provision for income taxes	(8,049	)	 	115,272		 	17,557		 	—		 	124,780		
Equity in earnings of unconsolidated subsidiaries	—		 	30		 	(3,100	)	 	—		 	(3,070	)	
Equity in earnings of subsidiaries	238,620		 	14,595		 	—		 	(253,215	)	 	—		
Net income	$	226,817		 	$	187,204		 	$	66,011		 	$	(253,215	)	 	$	226,817		

28

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Income
(In thousands)	
																				
 	For the Six Months Ended June 30, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Revenue	$	—		 	$	2,320,304		 	$	1,076,395		 	$	(61,790	)	 	$	3,334,909		
Cost of goods sold	—		 	1,397,881		 	675,875		 	(61,790	)	 	2,011,966		
Gross margin	—		 	922,423		 	400,520		 	—		 	1,322,943		
Facility and warehouse expenses	—		 	186,186		 	68,479		 	—		 	254,665		
Distribution expenses	—		 	192,730		 	91,143		 	—		 	283,873		
Selling, general and administrative expenses	15,010		 	227,112		 	128,993		 	—		 	371,115		
Restructuring and acquisition related expenses	—		 	6,484		 	2,738		 	—		 	9,222		
Depreciation and amortization	118		 	38,964		 	17,556		 	—		 	56,638		
Operating (loss) income	(15,128	)	 	270,947		 	91,611		 	—		 	347,430		
Other expense (income):	 	 	 	 	 	 	 	 	 	
Interest expense, net	26,245		 	115		 	5,386		 	—		 	31,746		
Intercompany interest (income) expense, net	(23,190	)	 	10,072		 	13,118		 	—		 	—		
Loss on debt extinguishment	324		 	—		 	—		 	—		 	324		
Change in fair value of contingent consideration liabilities	—		 	(2,237	)	 	225		 	—		 	(2,012	)	
Other (income) expense, net	(74	)	 	(3,378	)	 	2,449		 	—		 	(1,003	)	
Total other expense, net	3,305		 	4,572		 	21,178		 	—		 	29,055		
(Loss) income before (benefit) provision for income taxes	(18,433	)	 	266,375		 	70,433		 	—		 	318,375		
(Benefit) provision for income taxes	(7,302	)	 	100,739		 	14,925		 	—		 	108,362		
Equity in earnings of unconsolidated subsidiaries	—		 	15		 	(493	)	 	—		 	(478	)	
Equity in earnings of subsidiaries	220,666		 	18,377		 	—		 	(239,043	)	 	—		
Net income	$	209,535		 	$	184,028		 	$	55,015		 	$	(239,043	)	 	$	209,535		

29

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)	
																				
 	For the Three Months Ended June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Net income	$	119,722		 	$	97,538		 	$	35,890		 	$	(133,428	)	 	$	119,722		
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	 	 	
Foreign currency translation	44,510		 	13,134		 	44,216		 	(57,350	)	 	44,510		
Net change in unrecognized gains/losses on derivative instruments, net of tax	918		 	—		 	191		 	(191	)	 	918		
Net change in unrealized gains/losses on pension plan, net of tax	(21	)	 	—		 	(21	)	 	21		 	(21	)	
Total other comprehensive income	45,407		 	13,134		 	44,386		 	(57,520	)	 	45,407		
Total comprehensive income	$	165,129		 	$	110,672		 	$	80,276		 	$	(190,948	)	 	$	165,129		

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)	
																				
 	For the Three Months Ended June 30, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Net income	$	104,882		 	$	92,477		 	$	27,158		 	$	(119,635	)	 	$	104,882		
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	 	 	
Foreign currency translation	15,879		 	7,598		 	14,891		 	(22,489	)	 	15,879		
Net change in unrecognized gains/losses on derivative instruments, net of tax	457		 	—		 	296		 	(296	)	 	457		
Change in unrealized gain on pension plan, net of tax	(30	)	 	—		 	(30	)	 	30		 	(30	)	
Total other comprehensive income	16,306		 	7,598		 	15,157		 	(22,755	)	 	16,306		
Total comprehensive income	$	121,188		 	$	100,075		 	$	42,315		 	$	(142,390	)	 	$	121,188		

30

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)	
																				
 	For the Six Months Ended June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Net income	$	226,817		 	$	187,204		 	$	66,011		 	$	(253,215	)	 	$	226,817		
Other comprehensive (loss) income, net of tax:	 	 	 	 	 	 	 	 	 	
Foreign currency translation	(10,300	)	 	(1,238	)	 	(8,583	)	 	9,821		 	(10,300	)	
Net change in unrecognized gains/losses on derivative instruments, net of tax	1,201		 	—		 	129		 	(129	)	 	1,201		
Net change in unrealized gains/losses on pension plan, net of tax	107		 	—		 	107		 	(107	)	 	107		
Total other comprehensive loss	(8,992	)	 	(1,238	)	 	(8,347	)	 	9,585		 	(8,992	)	
Total comprehensive income	$	217,825		 	$	185,966		 	$	57,664		 	$	(243,630	)	 	$	217,825		

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Comprehensive Income
(In thousands)	
																				
 	For the Six Months Ended June 30, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
Net income	$	209,535		 	$	184,028		 	$	55,015		 	$	(239,043	)	 	$	209,535		
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	 	 	
Foreign currency translation	15,316		 	7,520		 	15,312		 	(22,832	)	 	15,316		
Net change in unrecognized gains/losses on derivative instruments, net of tax	1,250		 	—		 	181		 	(181	)	 	1,250		
Change in unrealized gain on pension plan, net of tax	(67	)	 	—		 	(67	)	 	67		 	(67	)	
Total other comprehensive income	16,499		 	7,520		 	15,426		 	(22,946	)	 	16,499		
Total comprehensive income	$	226,034		 	$	191,548		 	$	70,441		 	$	(261,989	)	 	$	226,034		

31

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)	
																				
 	For the Six Months Ended June 30, 2015	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	$	121,024		 	$	188,713		 	$	89,630		 	$	(116,668	)	 	$	282,699		
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Purchases of property and equipment	(3	)	 	(34,791	)	 	(31,969	)	 	—		 	(66,763	)	
Investment and intercompany note activity with subsidiaries	30,818		 	—		 	—		 	(30,818	)	 	—		
Acquisitions, net of cash acquired	—		 	(6,583	)	 	(30,625	)	 	—		 	(37,208	)	
Other investing activities, net	—		 	585		 	(5,794	)	 	—		 	(5,209	)	
Net cash provided by (used in) investing activities	30,815		 	(40,789	)	 	(68,388	)	 	(30,818	)	 	(109,180	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Proceeds from exercise of stock options	3,288		 	—		 	—		 	—		 	3,288		
Excess tax benefit from stock-based payments	6,737		 	—		 	—		 	—		 	6,737		
Taxes paid related to net share settlements of stock-based compensation awards	(5,243	)	 	—		 	—		 	—		 	(5,243	)	
Borrowings under revolving credit facilities	132,000		 	—		 	67,621		 	—		 	199,621		
Repayments under revolving credit facilities	(215,000	)	 	—		 	(79,276	)	 	—		 	(294,276	)	
Repayments under term loans	(11,250	)	 	—		 	—		 	—		 	(11,250	)	
Borrowings under receivables securitization facility	—		 	—		 	2,100		 	—		 	2,100		
Repayments under receivables securitization facility	—		 	—		 	(1,758	)	 	—		 	(1,758	)	
Repayments of other long-term debt	(31,500	)	 	(596	)	 	(9,994	)	 	—		 	(42,090	)	
Payments of other obligations	—		 	(2,050	)	 	—		 	—		 	(2,050	)	
Investment and intercompany note activity with parent	—		 	(32,051	)	 	1,233		 	30,818		 	—		
Dividends	—		 	(116,668	)	 	—		 	116,668		 	—		
Net cash used in financing activities	(120,968	)	 	(151,365	)	 	(20,074	)	 	147,486		 	(144,921	)	
Effect of exchange rate changes on cash and equivalents	—		 	53		 	167		 	—		 	220		
Net increase (decrease) in cash and equivalents	30,871		 	(3,388	)	 	1,335		 	—		 	28,818		
Cash and equivalents, beginning of period	14,930		 	32,103		 	67,572		 	—		 	114,605		
Cash and equivalents, end of period	$	45,801		 	$	28,715		 	$	68,907		 	$	—		 	$	143,423		

32

LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidating Statements of Cash Flows
(In thousands)	
																				
 	For the Six Months Ended June 30, 2014	
 	Parent	 	Guarantors	 	Non-Guarantors	 	Eliminations	 	Consolidated	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	$	149,099		 	$	213,507		 	$	(60,182	)	 	$	(150,220	)	 	$	152,204		
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Purchases of property and equipment	(32	)	 	(39,338	)	 	(27,961	)	 	—		 	(67,331	)	
Investment and intercompany note activity with subsidiaries	(213,812	)	 	(607	)	 	—		 	214,419		 	—		
Acquisitions, net of cash acquired	—		 	(518,736	)	 	(116,596	)	 	—		 	(635,332	)	
Other investing activities, net	—		 	420		 	(79	)	 	—		 	341		
Net cash used in investing activities	(213,844	)	 	(558,261	)	 	(144,636	)	 	214,419		 	(702,322	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	
Proceeds from exercise of stock options	4,207		 	—		 	—		 	—		 	4,207		
Excess tax benefit from stock-based payments	9,747		 	—		 	—		 	—		 	9,747		
Debt issuance costs	(3,640	)	 	—		 	(75	)	 	—		 	(3,715	)	
Borrowings under revolving credit facilities	633,000		 	—		 	527,461		 	—		 	1,160,461		
Repayments under revolving credit facilities	(625,000	)	 	—		 	(49,432	)	 	—		 	(674,432	)	
Borrowings under term loans	11,250		 	—		 	—		 	—		 	11,250		
Repayments under term loans	(5,625	)	 	—		 	—		 	—		 	(5,625	)	
Borrowings under receivables securitization facility	—		 	—		 	80,000		 	—		 	80,000		
Repayments of other long-term debt	(1,920	)	 	(1,592	)	 	(10,017	)	 	—		 	(13,529	)	
Payments of other obligations	—		 	(407	)	 	(41,527	)	 	—		 	(41,934	)	
Settlement of foreign currency forward contract	(19,959	)	 	—		 	—		 	—		 	(19,959	)	
Investment and intercompany note activity with parent	—		 	497,100		 	(282,681	)	 	(214,419	)	 	—		
Dividends	—		 	(150,220	)	 	—		 	150,220		 	—		
Net cash provided by financing activities	2,060		 	344,881		 	223,729		 	(64,199	)	 	506,471		
Effect of exchange rate changes on cash and equivalents	—		 	(142	)	 	2,865		 	—		 	2,723		
Net (decrease) increase in cash and equivalents	(62,685	)	 	(15	)	 	21,776		 	—		 	(40,924	)	
Cash and equivalents, beginning of period	77,926		 	13,693		 	58,869		 	—		 	150,488		
Cash and equivalents, end of period	$	15,241		 	$	13,678		 	$	80,645		 	$	—		 	$	109,564		

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Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. 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. We have based these forward-looking statements on our current expectations and projections about future events. However, these forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different. These factors include, among other things, those described under Risk Factors in Item 1A of our 2014 Annual Report on Form 10-K, filed with the SEC on March 2, 2015, as supplemented in subsequent filings, including this Quarterly Report on Form 10-Q.
Other matters set forth in this Quarterly Report may also cause our actual future results to differ materially from these forward-looking statements. We cannot assure you that our expectations will prove to be correct. In addition, all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements mentioned above. You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	
Overview
We provide replacement parts, components and systems used in the repair and maintenance of vehicles, as well as specialty vehicle products and accessories.
Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by original equipment manufacturers ("OEMs"), which are commonly known as OEM products; new products produced by companies other than the OEMs, which are sometimes referred to as aftermarket products; recycled products obtained from salvage vehicles; used products that have been refurbished; and used 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. Collectively, we refer to these products as alternative parts because they are not new OEM products.
We are the nation’s largest provider of alternative vehicle collision replacement products and a leading provider of alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. We are also a leading provider of alternative vehicle replacement and maintenance products in the United Kingdom and the Benelux region of continental Europe. In addition to our wholesale operations, we operate self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles. In 2014, we expanded our product offering to include specialty vehicle aftermarket equipment and accessories through the acquisition of Keystone Specialty.
We are organized into four operating segments: Wholesale - North America; Wholesale - Europe; Self Service; and Specialty. We aggregate our Wholesale - North America and Self Service operating segments into one reportable segment, North America, resulting in three reportable segments: North America, Europe and Specialty.
Our revenue, cost of goods sold, and 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 discussed in Forward-Looking Statements above. Due to these factors and others, which may be unknown to us at this time, our operating results in future periods can be expected to fluctuate. Accordingly, our historical results of operations may not be indicative of future performance.
Acquisitions and Investments
Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. We have pursued acquisitions that we believe will help drive profitability, cash flow and stockholder value. Our principal focus for acquisitions is companies that are market leaders, will expand our geographic presence and enhance our ability to provide a wide array of automotive products to our customers through our distribution network.
During the six months ended June 30, 2015 , we made ten acquisitions, including three wholesale businesses in North America and seven wholesale businesses in Europe. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were former customers of and distributors for our Netherlands subsidiary, Sator,

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and were acquired with the objective of expanding our distribution network in the Netherlands. Our other acquisitions completed during the six months ended June 30, 2015 enabled us to expand our geographic presence.
In July 2015, we completed the acquisition of Parts Channel Inc., an aftermarket collision parts distributor, as well as the acquisitions of two aftermarket distributors in the Netherlands and a self service retail operation in the U.S.
During the year ended December 31, 2014 , we completed 23 acquisitions, including our January 2014 acquisition of Keystone Specialty. Keystone Specialty is a leading distributor and marketer of specialty vehicle aftermarket equipment and accessories in North America serving the following six product segments: truck and off-road; speed and performance; recreational vehicle; towing; wheels, tires and performance handling; and miscellaneous accessories. Our acquisition of Keystone Specialty allowed us to enter into new product lines and increased the size of our addressable market. In addition, we believe that the acquisition creates logistics and administrative cost synergies and potential cross-selling opportunities.
In addition to our acquisition of Keystone Specialty, we acquired nine wholesale businesses in North America, nine wholesale businesses in Europe, two self service retail operations, and two specialty vehicle aftermarket businesses. Our European acquisitions included seven aftermarket parts distribution businesses in the Netherlands, five of which were customers of and distributors for our Netherlands subsidiary, Sator. In the Netherlands, we are converting our existing distribution model to more closely align it with the distribution model of our U.K. operations. The objective of the realignment is to allow us to sell directly to the end repair shop customer rather than through a local wholesale distributor. We expect the realignment to improve margins, customer service, and fulfillment rates. It should also position us in the long term to introduce additional product categories, such as collision and specialty vehicle. The other acquisitions completed during 2014 enabled us to expand existing markets, introduce new product lines, and enter new markets.
See Note 8, "Business Combinations " 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 acquisitions.
Sources of Revenue
We report our revenue in two categories: (i) parts and services and (ii) other. Our parts and services revenue is generated from the sale of vehicle products and related services including (i) aftermarket, other new and refurbished products and (ii) recycled, remanufactured and related products and services. During the six months ended June 30, 2015 , parts and services revenue represented approximately 93% of our consolidated revenue.
The majority of our parts and services revenue is generated from the sale of vehicle replacement products to collision and mechanical repair shops. Our vehicle replacement products include sheet metal crash parts such as doors, hoods, and fenders; bumper covers; engines; head and tail lamps; and wheels. The demand for these products is influenced by several factors, including the number of vehicles in operation, the number of miles being driven, the frequency and severity of vehicle accidents, the age profile of vehicles in accidents, the availability and pricing of new OEM parts, seasonal weather patterns and local weather conditions. Additionally, automobile insurers exert significant influence over collision repair shops as to how an insured vehicle is repaired and the cost level of the products used in the repair process. Accordingly, we consider automobile insurers to be key demand drivers of our vehicle replacement products. While they are not our direct customers, we do provide insurance carriers services in an effort to promote the increased usage of alternative replacement products in the repair process. Such services include the review of vehicle repair order estimates, direct quotation services to insurance company adjusters and an aftermarket parts quality and service assurance program. We neither charge a fee to the insurance carriers for these services nor adjust our pricing of products for our customers when we perform these services for insurance carriers. There is no standard price for many of our vehicle replacement products, but rather a pricing structure that varies from day to day based upon such factors as product availability, quality, demand, new OEM product prices, the age and mileage of the vehicle from which the part was obtained, competitor pricing and our product cost.
Our revenue from aftermarket, other new and refurbished products also includes revenue generated from the sale of specialty aftermarket vehicle equipment and accessories. These products are primarily sold to a large customer base of specialty vehicle retailers and equipment installers, including mostly independent, single-site operators. Specialty vehicle aftermarket products are typically installed on vehicles within the first year of ownership to enhance functionality, performance or aesthetics. As a result, the demand for these products is influenced by new and used vehicle sales and the overall economic health of vehicle owners, which may be affected by general business conditions, interest rates, inflation, consumer debt levels and other matters that influence consumer confidence and spending. The prices for our specialty vehicle products are based on manufacturers' suggested retail prices, with discounts applied based on prevailing market conditions, customer volumes and promotions that we may offer from time to time.
For the six months ended June 30, 2015 , revenue from other sources represented approximately 7% of our consolidated sales. These other sources include scrap sales, bulk sales to mechanical remanufacturers (including cores), and sales of aluminum ingots and sows from our furnace operations. We derive scrap metal from several sources, including vehicles

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that have been used in both our wholesale and self service recycling operations and from OEMs and other entities that contract with us for secure disposal of "crush only" vehicles. Other revenue will vary from period to period based on fluctuations in commodity prices and the volume of materials sold.
Cost of Goods Sold
Our cost of goods sold for aftermarket products includes the price we pay for the parts, freight, and overhead costs related to the purchasing, warehousing and distribution of our inventory, including labor, facility and equipment costs and depreciation. Our aftermarket products are acquired from a number of vendors. Our cost of goods sold for refurbished products includes the price we pay for cores, freight, and costs to refurbish the parts, including direct and indirect labor, facility and equipment costs, depreciation and other overhead related to our refurbishing operations.
Our cost of goods sold for recycled products includes the price we pay for the salvage vehicle and, where applicable, auction, towing and storage fees. Prices for salvage vehicles may be impacted by a variety of factors, including the number of buyers competing to purchase the vehicles, the demand and pricing trends for used vehicles, the number of vehicles designated as “total losses” by insurance companies, the production level of new vehicles (which provides the source from which salvage vehicles ultimately come), the age of vehicles at auction and the status of laws regulating bidders or exporters of salvage vehicles. From time to time, we may also adjust our buying strategy to target vehicles with different attributes (for example, age, level of damage, and revenue potential). Due to changes relating to these factors, we have seen the prices we pay for salvage vehicles fluctuate over time. Our cost of goods sold also includes labor and other costs we incur to acquire and dismantle such vehicles. Our labor and labor-related costs related to acquisition and dismantling generally account for between 12% and 14% of our cost of goods sold for vehicles we dismantle. The acquisition and dismantling of salvage vehicles is a manual process and, as a result, energy costs are not material. Our cost of goods sold for remanufactured products includes the price we pay for cores; freight; and costs to remanufacture the products, including direct and indirect labor, facility and equipment costs, depreciation and other overhead related to our remanufacturing operations.
Some of our salvage mechanical products are sold with a standard six-month warranty against defects. Additionally, some of our remanufactured engines are sold with a standard three-year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products that is supported by certain of the suppliers of those products. We record the estimated warranty costs at the time of sale using historical warranty claims information to project future warranty claims activity and related expenses.
Other revenue is primarily generated from the hulks and unusable parts of the vehicles we acquire for our wholesale and self service recycled product operations, and therefore, the costs of these sales include the proportionate share of the price we pay for the salvage vehicles as well as the applicable auction, storage and towing fees and internal costs to purchase and dismantle the vehicles. Our cost of goods sold for other revenue will fluctuate based on the prices paid for salvage vehicles, which may be impacted by a variety of factors as discussed above.

Expenses
Our facility and warehouse expenses primarily include our costs to operate our aftermarket selling warehouses, salvage yards and self service retail facilities. These costs include personnel expenses such as wages, incentive compensation and employee benefits for plant management and facility and warehouse personnel, as well as rent for our facilities and related utilities, property taxes, repairs and maintenance. The costs included in facility and warehouse expenses do not relate to inventory processing or conversion activities and, as such, are classified below the gross margin line on our Unaudited Condensed Consolidated Statements of Income.
Our distribution expenses primarily include our costs to prepare and deliver our products to our customers. Included in our distribution expense category are personnel costs such as wages, employee benefits and incentive compensation for drivers; third party freight costs; fuel; and expenses related to our delivery and transfer trucks, including vehicle leases, repairs and maintenance and insurance.
Our selling and marketing expenses primarily include salary, commission and other incentive compensation expenses for sales personnel; advertising, promotion and marketing costs; credit card fees; telephone and other communication expenses; and bad debt expense. Personnel costs generally account for between 75% and 80% of our selling and marketing expenses. Most of our sales personnel are paid on a commission basis. The number and quality of our sales force is critical to our ability to respond to our customers’ needs and increase our sales volume. Our objective is to continually evaluate our sales force, develop and implement training programs, and utilize appropriate measurements to assess our selling effectiveness.
Our general and administrative expenses primarily include the costs of our corporate offices and field support center, which provide management, treasury, accounting, legal, payroll, business development, human resources and information systems functions. General and administrative expenses include wages, benefits, stock-based compensation and other incentive

36

compensation for corporate, regional and administrative personnel; information systems support and maintenance expenses; and accounting, legal and other professional fees.
Seasonality
Our operating results are subject to quarterly variations based on a variety of factors, influenced primarily by seasonal changes in weather patterns. During the winter months, we tend to have higher demand for our vehicle replacement products because there are more weather related accidents, which generate repairs. We expect our specialty vehicle operations to generate greater revenue and earnings in the first half of the year, when vehicle owners tend to install this equipment.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 , which we filed with the SEC on March 2, 2015, includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue or expenses during the six months ended  June 30, 2015 .
Recently Issued Accounting Pronouncements
See “Recent Accounting Pronouncements” in Note 2, "Financial Statement Information " to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.
Financial Information by Geographic Area
See Note 13, "Segment and Geographic Information " to the unaudited condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for information related to our revenue and long-lived assets by geographic region.
Results of Operations—Consolidated
The following table sets forth statements of income data as a percentage of total revenue for the periods indicated:

												
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	2015	 	2014	
Revenue	100.0	 %	 	100.0	 %	 	100.0	 %	 	100.0	 %	
Cost of goods sold	60.6	 %	 	60.7	 %	 	60.6	 %	 	60.3	 %	
Gross margin	39.4	 %	 	39.3	 %	 	39.4	 %	 	39.7	 %	
Facility and warehouse expenses	7.4	 %	 	7.5	 %	 	7.4	 %	 	7.6	 %	
Distribution expenses	8.2	 %	 	8.6	 %	 	8.1	 %	 	8.5	 %	
Selling, general and administrative expenses	11.2	 %	 	10.9	 %	 	11.3	 %	 	11.1	 %	
Restructuring and acquisition related expenses	0.1	 %	 	0.3	 %	 	0.2	 %	 	0.3	 %	
Depreciation and amortization	1.6	 %	 	1.8	 %	 	1.6	 %	 	1.7	 %	
Operating income	10.9	 %	 	10.2	 %	 	10.7	 %	 	10.4	 %	
Other expense, net	0.8	 %	 	0.8	 %	 	0.9	 %	 	0.9	 %	
Income before provision for income taxes	10.1	 %	 	9.3	 %	 	9.8	 %	 	9.5	 %	
Provision for income taxes	3.5	 %	 	3.2	 %	 	3.5	 %	 	3.2	 %	
Equity in earnings of unconsolidated subsidiaries	(0.1	)%	 	(0.0	)%	 	(0.1	)%	 	(0.0	 )%	
Net income	6.5	 %	 	6.1	 %	 	6.3	 %	 	6.3	 %	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	

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Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
Revenue. The following table summarizes the changes in revenue by category (in thousands):

																				
 	Three Months Ended	 	 	 	 	 	 	 	 	
 	June 30,	 	Percentage Change in Revenue	
 	2015	 	2014	 	Organic	 	Acquisition	 	Foreign Exchange	 	Total Change	
Parts & services revenue	$	1,704,348		 	$	1,540,861		 	7.5	 %	 	7.4	%	 	(4.3	)%	 	10.6	 %	
Other revenue	133,722		 	168,271		 	(20.6	)%	 	0.4	%	 	(0.4	)%	 	(20.5	)%	
Total revenue	$	1,838,070		 	$	1,709,132		 	4.7	 %	 	6.7	%	 	(3.9	)%	 	7.5	 %	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
Refer to the discussion of our segment results of operations for factors contributing to revenue changes during the second quarter of 2015 compared to the prior year period.
Cost of Goods Sold . Our cost of goods sold decreased to 60.6% of revenue in the second quarter of 2015 from 60.7% of revenue in the comparable prior year quarter. The decline in cost of goods sold as a percentage of revenue was primarily attributable to gross margin improvement in our North American (0.3%) and European (0.2%) operations. Partially offsetting these margin improvements was a negative mix effect of 0.3%. The growth of our Specialty business, primarily resulting from our 2014 acquisition of a supplier of parts for recreational vehicles, was responsible for most of the mix effect, as this business yields lower gross margins than our North American and European segments. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 .
Facility and Warehouse Expenses . As a percentage of revenue, facility and warehouse expenses for the three months ended June 30, 2015 decreased to 7.4% from 7.5% in the prior year second quarter. The decline in facility and warehouse expenses as a percentage of revenue was primarily due to mix effects, as a greater proportion of revenue was generated by our Specialty and European segments in 2015. Compared to our North American operations, these segments store a greater portion of inventory at their regional distribution centers, the costs of which are capitalized into inventory and expensed through cost of goods sold. In our North American wholesale operations, most of the inventory sold by our local operations is stored on site rather than in distribution centers, and the related facility and warehouse expenses of the local operations are recorded in this line item.
Distribution Expenses. As a percentage of revenue, distribution expenses decreased to 8.2% in the second quarter of 2015 from 8.6% in the comparable prior year quarter, primarily due to favorable fuel prices. Of the 0.3% decline in distribution expenses as a percentage of revenue related to favorable fuel pricing, 0.2% was attributable to our North American segment and the remaining 0.1% was attributable to our Specialty and European segments.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses for the three months ended June 30, 2015 increased to 11.2% of revenue from 10.9% of revenue in the prior year second quarter. This increase is primarily related to an increase in our sales force and general and administrative personnel in our European segment due to higher personnel expenses in our U.K. operations as a percentage of revenue.
Restructuring and Acquisition Related Expenses . The following table summarizes restructuring and acquisition related expenses for the periods indicated (in thousands):

												
 	Three Months Ended	 	 	
 	June 30,	 	 	
 	2015	 	2014	 	Change	
Restructuring expenses	$	937		(1)  	$	4,236		(2)  	$	(3,299	)	
Acquisition related expenses	726		(3)  	1,665		(4)  	(939	)	
Total restructuring and acquisition related expenses	$	1,663		 	$	5,901		 	$	(4,238	)	
		
(1)	Primarily related to the integration of acquired businesses in our Specialty segment. These integration activities included the closure of duplicate facilities and termination of employees in connection with the integration of the acquisitions into our existing business.	

38

		
(2)	Includes $2.6 million of restructuring expenses related to the integration of our January 2014 Keystone Specialty acquisition and $1.6 million of restructuring expenses related to the integration of certain of our other acquisitions into our existing business. Our restructuring expenses included severance for termination of overlapping headcount, moving expenses, and excess facility costs, such as lease reserves and other lease termination costs.	
		
(3)	Primarily related to our acquisitions of six aftermarket parts distribution businesses in the Netherlands during the second quarter of 2015.	
		
(4)	Includes external costs primarily related to our acquisitions of five aftermarket parts distribution businesses in the Netherlands in the second quarter of 2014.	
See Note 9, "Restructuring and Acquisition Related Expenses " to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our restructuring and integration plans.
Depreciation and Amortization . The following table summarizes depreciation and amortization for the periods indicated (in thousands):

													
 	Three Months Ended	 	 	 	
 	June 30,	 	 	 	
 	2015	 	2014	 	Change	 	
Depreciation	$	21,557		 	$	21,613		 	$	(56	)	(1)  	
Amortization	8,225		 	8,314		 	(89	)	(2)  	
Total depreciation and amortization	$	29,782		 	$	29,927		 	$	(145	)	 	
		
(1)	Reflects a decline in depreciation of $0.9 million attributable to the impact of foreign exchange rates, partially offset by depreciation related to increased levels of property and equipment to support our acquisition and organic related growth.	
		
(2)	Reflects a decline in amortization of $0.5 million related to the impact of foreign exchange rates. This was partially offset by amortization of intangible assets related to our acquisitions completed since the second quarter of 2014, including amortization related to $29.1 million of intangibles recognized on our October 2014 acquisitions of two Specialty businesses. As we amortize customer relationship intangibles on an accelerated basis, amortization expense will be relatively higher in the initial post-acquisition years.	
Other Expense, Net. The following table summarizes the components of the year-over-year increase in other expense, net (in thousands):

						
Other expense, net for the three months ended June 30, 2014	$	13,931		 	
(Decrease) increase due to:	 	 	
Interest expense, net	(1,006	)	(1)  	
Change in fair value of contingent consideration liabilities	915		(2)  	
Other income, net	879		(3)  	
Net increase	788		 	
Other expense, net for the three months ended June 30, 2015	$	14,719		 	
		
(1)	Due to lower outstanding debt levels compared to the prior year period. The higher outstanding debt levels in the prior year were primarily related to borrowings used to finance the Keystone Specialty acquisition in January 2014.	
		
(2)	During the three months ended June 30, 2015, we recorded losses of $0.1 million as a result of fair value adjustments to our contingent consideration liabilities, compared to gains of $0.8 million in the prior year quarter. See Note 6, "Fair Value Measurements " to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our contingent payment arrangements.	
		
(3)	The impact of foreign currency transaction gains and losses was $0.4 million and $0.2 million unfavorable to the prior year period in our North American and European operations, respectively. This impact includes unrealized and realized gains and losses on foreign currency transactions and unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of inventory.	

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Provision for Income Taxes . Our effective income tax rate was 34.9% for the three months ended June 30, 2015 , compared to 34.0% for the three months ended June 30, 2014 . The higher effective income tax rate for the three months ended June 30, 2015 is primarily a result of our expected geographic distribution of income. Compared to the prior year period, we anticipate a smaller proportion of our pre-tax income will be earned in the typically lower tax rate international jurisdictions. The effect of the shift in our geographic distribution of income was partially offset by favorable discrete items of $0.4 million recognized in the three months ended June 30, 2015, primarily as a result of U.S. state deferred tax adjustments.
Equity in Earnings of Unconsolidated Subsidiaries. During the second quarter of 2015, we recorded net operating losses from our equity method investments totaling $1.2 million, compared to $0.4 million of net operating losses in the second quarter of 2014.
Foreign Currency Impact . We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used for the second quarter of 2014, the pound sterling, euro and Canadian dollar rates used to translate the 2015 statements of income declined by 8.9%, 19.3%, and 11.3%, respectively. The translation effect of the decline of these currencies against the U.S. dollar and realized and unrealized currency losses in the quarter resulted in an approximately $0.02 negative effect on diluted earnings per share relative to the prior year period.
Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
Revenue. The following table summarizes the changes in revenue by category (in thousands):

																				
 	Six Months Ended	 	 	 	 	 	 	 	 	
 	June 30,	 	Percentage Change in Revenue	
 	2015	 	2014	 	Organic	 	Acquisition	 	Foreign Exchange	 	Total Change	
Parts & services revenue	$	3,349,264		 	$	3,010,414		 	7.5	 %	 	7.8	%	 	(4.0	)%	 	11.3	 %	
Other revenue	262,718		 	324,495		 	(19.2	)%	 	0.5	%	 	(0.3	)%	 	(19.0	)%	
Total revenue	$	3,611,982		 	$	3,334,909		 	4.9	 %	 	7.1	%	 	(3.7	)%	 	8.3	 %	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
Refer to the discussion of our segment results of operations for factors contributing to revenue changes during the six months ended June 30, 2015 compared to the prior year period.
Cost of Goods Sold . Our cost of goods sold increased to 60.6% of revenue in the six months ended June 30, 2015 from 60.3% of revenue in the comparable prior year period. A negative mix effect accounted for 0.4% of the increase in cost of goods sold, primarily resulting from growth of our Specialty business from our 2014 acquisition of a supplier of parts for recreational vehicles, as this business yields lower gross margins than our North American and European segments. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 .
Facility and Warehouse Expenses . As a percentage of revenue, facility and warehouse expenses for the six months ended June 30, 2015 decreased to 7.4% from 7.6% in the prior year period. The decline in facility and warehouse expenses as a percentage of revenue was primarily due to mix effects, as a greater proportion of revenue was generated by our Specialty and European segments in 2015. Compared to our North American operations, these segments store a greater portion of inventory at their regional distribution centers, the costs of which are capitalized into inventory and expensed through cost of goods sold. In our North American wholesale operations, most of the inventory sold by our local operations is stored on site rather than in distribution centers, and the related facility and warehouse expenses of the local operations are recorded in this line item.
Distribution Expenses. As a percentage of revenue, distribution expenses decreased to 8.1% in the six months ended June 30, 2015 from 8.5% in the comparable prior year period, primarily due to favorable fuel prices. Of the 0.4% decline in distribution expenses as a percentage of revenue related to favorable fuel pricing, 0.3% was attributable to our North American segment and the remaining 0.1% was attributable to our Specialty and European segments.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses for the six months ended June 30, 2015 increased to 11.3% of revenue from 11.1% of revenue in the prior year period. The increase in these expenses as a percentage of revenue is primarily a result of greater expenditures for our sales force and general and administrative personnel in our European segment, including an approximately equal impact from the acquisitions of our Netherlands distributors and greater expenditures in our U.K. operations.

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

												
 	Six Months Ended	 	 	
 	June 30,	 	 	
 	2015	 	2014	 	Change	
Restructuring expenses	$	6,901		(1)  	$	7,359		(2)  	$	(458	)	
Acquisition related expenses	1,250		(3)  	1,863		(4)  	(613	)	
Total restructuring and acquisition related expenses	$	8,151		 	$	9,222		 	$	(1,071	)	
		
(1)	Primarily related to the integration of acquired businesses in our Specialty segment. These integration activities included the closure of duplicate facilities and termination of employees in connection with the integration of the acquisitions into our existing business.	
		
(2)	Includes $5.4 million of restructuring expenses related to the integration of our January 2014 Keystone Specialty acquisition and $1.9 million of restructuring expenses related to the integration of certain of our other acquisitions into our existing business. Our restructuring expenses included severance for termination of overlapping headcount, excess facility costs, such as lease reserves and other lease termination costs, and moving costs.	
		
(3)	Includes $0.9 million of external costs related to our acquisitions of seven aftermarket parts distribution businesses in the Netherlands during the first half of 2015. The remaining restructuring expenses are external costs primarily related to potential acquisitions.	
		
(4)	Includes external costs primarily related to our acquisitions of five aftermarket parts distribution businesses in the Netherlands in the second quarter of 2014.	
See Note 9, "Restructuring and Acquisition Related Expenses " to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our restructuring and integration plans.
Depreciation and Amortization . The following table summarizes depreciation and amortization for the periods indicated (in thousands):

													
 	Six Months Ended	 	 	 	
 	June 30,	 	 	 	
 	2015	 	2014	 	Change	 	
Depreciation	$	42,739		 	$	40,882		 	$	1,857		(1)  	
Amortization	16,496		 	15,756		 	740		(2)  	
Total depreciation and amortization	$	59,235		 	$	56,638		 	$	2,597		 	
		
(1)	Increase in depreciation expense is a result of increased levels of property and equipment to support our acquisition and organic related growth, partially offset by a decline of $1.7 million attributable to the impact of foreign exchange rates.	
		
(2)	Increase in amortization expense is a result of amortization of intangible assets related to our acquisitions completed since the beginning of the prior year. We recognized $29.1 million of intangibles related to our October 2014 acquisitions of two Specialty businesses. As we amortize customer relationship intangibles on an accelerated basis, amortization expense will be relatively higher in the initial post-acquisition years. Partially offsetting this increase was a decline in amortization of $0.9 million related to the impact of foreign exchange rates.	
Other Expense, Net. The following table summarizes the components of the year-over-year increase in other expense, net (in thousands):

41

	
						
Other expense, net for the six months ended June 30, 2014	$	29,055		 	
(Decrease) increase due to:	 	 	
Interest expense, net	(2,218	)	(1)  	
Loss on debt extinguishment	(324	)	(2)  	
Change in fair value of contingent consideration liabilities	2,288		(3)  	
Other (income) expense, net	2,743		(4)  	
Net increase	2,489		 	
Other expense, net for the six months ended June 30, 2015	$	31,544		 	
		
(1)	Approximately half of the reduction in interest expense, net is due to lower interest rates on borrowings under our senior secured credit agreement compared to the prior year period, with the remainder of the decline attributable to lower outstanding borrowings. The higher outstanding debt levels in the prior year were primarily related to borrowings used to finance the Keystone Specialty acquisition in January 2014.	
		
(2)	During the six months ended June 30, 2014, we incurred a $0.3 million loss on debt extinguishment as a result of our March 2014 amendment to our senior secured credit agreement. We did not incur a similar charge during the current year period.	
		
(3)	During the six months ended June 30, 2015, we recorded losses of $0.3 million as a result of fair value adjustments to our contingent consideration liabilities, compared to gains of $2.0 million in the prior year period. See Note 6, "Fair Value Measurements " to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our contingent payment arrangements.	
		
(4)	Primarily due to $1.6 million and $0.8 million of greater foreign currency transaction losses in our European and North American operations, respectively, including the impact of unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of inventory and, to a lesser extent, unrealized and realized gains and losses on foreign currency transactions for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.	
Provision for Income Taxes . Our effective income tax rate was 35.2% for the six months ended June 30, 2015 , compared to 34.0% for the six months ended June 30, 2014 . The higher effective income tax rate for the six months ended June 30, 2015 is primarily a result of our expected geographic distribution of income. Compared to the prior year period, we anticipate a smaller proportion of our pre-tax income will be earned in the typically lower tax rate international jurisdictions. In addition, the tax provision for the six months ended June 30, 2015 includes unfavorable discrete items of $0.3 million primarily as a result of U.S. state deferred tax adjustments, compared to $0.1 million of unfavorable discrete items during the prior year period.
Equity in Earnings of Unconsolidated Subsidiaries. During the six months ended June 30, 2015, we recorded an impairment charge of $1.0 million in our equity method investment in a U.K. venture. No tax benefit was recognized related to this charge. Net operating losses in our other equity method investments totaled $2.1 million for the first half of 2015.
Foreign Currency Impact . We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used for the first half of 2014, the pound sterling, euro and Canadian dollar rates used to translate the 2015 statements of income declined by 8.7%, 18.5%, and 11.2%, respectively. The translation effect of the decline of these currencies against the U.S. dollar and realized and unrealized currency losses in the quarter resulted in an approximately $0.03 negative effect on diluted earnings per share relative to the prior year period.

Results of Operations—Segment Reporting
We have four operating segments: Wholesale – North America; Wholesale – Europe; Self Service; and Specialty. Our Wholesale – North America and Self Service operating segments are aggregated into one reportable segment, North America, because they possess similar economic characteristics and have common products and services, customers, and methods of distribution. Therefore, we present three reportable segments: North America, Europe and Specialty.
We evaluate growth and profitability in our operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our growth and profitability, consistent with how we evaluate our performance. Constant currency Segment EBITDA results are calculated by translating prior year Segment EBITDA in local currency using the current year's currency conversion rate. This non-GAAP measure has important limitations as an analytical tool and should not be considered in isolation or as a substitute

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for an analysis of our results as reported under GAAP. Our use of this term may vary from the use of similarly-titled measures by other issuers due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
The following table presents our financial performance, including third party revenue, total revenue and Segment EBITDA, by reportable segment for the periods indicated (in thousands):

	
																								
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	% of Total Segment Revenue	 	2014	 	% of Total Segment Revenue	 	2015	 	% of Total Segment Revenue	 	2014	 	% of Total Segment Revenue	
Third Party Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
North America	$	1,044,779		 	 	 	$	1,025,989		 	 	 	$	2,090,858		 	 	 	$	2,055,255		 	 	
Europe	509,833		 	 	 	465,173		 	 	 	997,179		 	 	 	884,887		 	 	
Specialty	283,458		 	 	 	217,970		 	 	 	523,945		 	 	 	394,767		 	 	
Total third party revenue	$	1,838,070		 	 	 	$	1,709,132		 	 	 	$	3,611,982		 	 	 	$	3,334,909		 	 	
Total Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
North America	$	1,045,151		 	 	 	$	1,026,090		 	 	 	$	2,091,324		 	 	 	$	2,055,389		 	 	
Europe	509,903		 	 	 	465,173		 	 	 	997,249		 	 	 	884,887		 	 	
Specialty	284,330		 	 	 	218,400		 	 	 	525,552		 	 	 	395,423		 	 	
Eliminations	(1,314	)	 	 	 	(531	)	 	 	 	(2,143	)	 	 	 	(790	)	 	 	
Total revenue	$	1,838,070		 	 	 	$	1,709,132		 	 	 	$	3,611,982		 	 	 	$	3,334,909		 	 	
Segment EBITDA	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
North America	$	138,880		 	13.3%	 	$	137,150		 	13.4%	 	$	288,268		 	13.8%	 	$	283,288		 	13.8%	
Europe	53,943		 	10.6%	 	45,945		 	9.9%	 	100,466		 	10.1%	 	87,100		 	9.8%	
Specialty	40,198		 	14.1%	 	28,356		 	13.0%	 	65,602		 	12.5%	 	46,160		 	11.7%	
Total Segment EBITDA	$	233,021		 	12.7%	 	$	211,451		 	12.4%	 	$	454,336		 	12.6%	 	$	416,548		 	12.5%	
The key measure of segment profit or loss reviewed by our chief operating decision maker, who is our Chief Executive Officer, is Segment EBITDA. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. Segment EBITDA is calculated as EBITDA excluding restructuring and acquisition related expenses, change in fair value of contingent consideration liabilities and equity in earnings of unconsolidated subsidiaries. EBITDA, which is the basis for Segment EBITDA, is calculated as net income excluding depreciation, amortization, interest (including loss on debt extinguishment) and taxes. Loss on debt extinguishment is considered a component of interest in calculating EBITDA, as the write-off of debt issuance costs is similar to the treatment of debt issuance cost amortization. See Note 13, "Segment and Geographic Information " to the unaudited condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to Net Income.
Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014
North America
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our North American segment (in thousands):

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 	Three Months Ended June 30,	 	Percentage Change in Revenue	
North America	2015	 	2014	 	Organic	 	Acquisition (1)	 	Foreign Exchange	 	Total Change	
Parts & services revenue	$	912,159		 	$	858,193		 	6.3	 %	(2)  	0.9	%	 	(0.9	)%	 	6.3	 %	
Other revenue	132,620		 	167,796		 	(20.7	)%	(3)  	0.1	%	 	(0.4	)%	 	(21.0	)%	
Total revenue	$	1,044,779		 	$	1,025,989		 	1.9	 %	 	0.8	%	 	(0.8	)%	 	1.8	 %	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Reflects the impact of 10 wholesale businesses and one self service retail operation acquired since the beginning of the second quarter of 2014.	
		
(2)	Approximately half of our organic growth in parts and services revenue was due to increased net pricing in our wholesale operations. In the third quarter of 2014, we shifted our salvage vehicle purchasing to higher quality vehicles, which increased the average revenue per part sold during the second quarter of 2015. In our aftermarket operations, we increased our net prices to customers compared to the prior year second quarter. The remainder of our organic growth in parts and services revenue was primarily due to increased sales volumes, mostly in our salvage operations.	
		
(3)	Approximately $29 million of the $35 million organic decline in other revenue was a result of lower prices received from the sale of scrap and other metals. This was primarily due to lower prices from the sale of crushed auto bodies, which fluctuate based on steel prices. Lower sales volumes were responsible for the remaining decline, primarily due to fewer vehicles processed relative to the prior year second quarter.	
Segment EBITDA . Segment EBITDA increased $1.7 million, or 1.3%, in the second quarter of 2015 compared to the prior year second quarter. The decline in steel prices as described in the revenue section above had a negative year over year impact of $5.7 million on North American Segment EBITDA and a $0.01 negative effect on diluted earnings per share relative to the prior year period.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our North American segment:

					
North America	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the three months ended June 30, 2014	 	13.4	 %	 	
Increase (decrease) due to:	 	 	 	
Change in gross margin	 	0.4	 %	(1)	
Change in segment operating expenses	 	(0.5	)%	(2)	
Change in other income	 	(0.1	)%	 	
Segment EBITDA for the three months ended June 30, 2015	 	13.3	 %	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Primarily attributable to favorable mix impact (0.3%) resulting from more revenue being derived from our wholesale operations, which relative to our self service operations have higher gross margin percentages during periods when scrap prices decline. Our aftermarket operations contributed 0.3% of the improvement in gross margin as a result of increasing our net prices to our customers. Partially offsetting these amounts was a negative gross margin impact of 0.2% caused by a narrowing spread between the prices received for scrap and other metals and the cost of the scrap component of the cars that we crushed.	
		
(2)	Primarily a result of the negative impact on operating leverage caused by the decline in scrap revenue as a result of lower scrap prices (0.7%), partially offset by a 0.4% improvement in fuel costs as a result of favorable pricing compared to the prior year second quarter. In periods of falling scrap revenue, we do not experience a commensurate decline in operating expenses as we have few variable costs associated with the sale of scrap.	
Europe
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our European segment (in thousands):

44

	
																				
 	Three Months Ended June 30,	 	Percentage Change in Revenue	
Europe	2015	 	2014	 	Organic (1)	 	Acquisition (2)	 	Foreign Exchange (3)	 	Total Change	
Parts & services revenue	$	508,731		 	$	464,698		 	10.1	%	 	11.1	%	 	(11.7	)%	 	9.5	%	
Other revenue	1,102		 	475		 	32.6	%	 	108.3	%	 	(8.9	)%	 	132.1	%	
Total revenue	$	509,833		 	$	465,173		 	10.1	%	 	11.2	%	 	(11.7	)%	 	9.6	%	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	In our U.K. operations, parts and services revenue grew organically by 11.6%, while in our continental European operations, parts and services revenue grew 6.2%, resulting in net organic revenue growth of 10.1% over the prior year. Our organic revenue growth in the U.K., which resulted from higher sales volumes, was composed of a 7.1% increase in revenue from stores open more than 12 months and a 4.5% increase from revenue generated by 38 branch openings since the beginning of the prior year second quarter through the one year anniversary of their respective opening dates. Organic revenue growth in our continental European operations was primarily due to the opening of a new warehouse location in France in 2014 and, to a lesser extent, growth in our Belgian market.	
		
(2)	Includes $44.4 million from our acquisitions of 14 distribution companies in the Netherlands completed since the beginning of the prior year second quarter through the one year anniversary of acquisition.	
		
(3)	Compared to the prior year, exchange rates reduced our revenue growth by $54.3 million, or 11.7% , primarily due to the strengthening U.S. dollar against both the pound sterling and euro relative to the second quarter of 2014. Based on exchange rates through July 2015 and projections for the remainder of the year, we expect there will be a negative effect on revenue growth for the remainder of 2015 as a result of foreign currency exchange movements.	
Segment EBITDA. Segment EBITDA increased $8.0 million, or 17.4%, in the second quarter of 2015 compared to the prior year second quarter. Our European Segment EBITDA includes a negative year over year impact of $5.2 million related to the translation of local currency results into U.S. dollars at lower exchange rates than those experienced in the second quarter of 2014. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA increased by $13.2 million, or 29%, compared to the prior year second quarter. Our European Segment EBITDA for the second quarter of 2015 also reflects an increase in foreign exchange transaction losses of $0.2 million as compared to the prior year quarter. Refer to the Foreign Currency Impact discussion within the Results of Operations - Consolidated section above for further detail regarding foreign currency impact on our results for the second quarter of 2015.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our European segment:

					
Europe	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the three months ended June 30, 2014	 	9.9	%	 	
Increase due to:	 	 	 	
Change in gross margin	 	0.7	%	(1)	
Change in segment operating expenses	 	0.0	%	(2)	
Change in other expenses	 	0.0	%	 	
Segment EBITDA for the three months ended June 30, 2015	 	10.6	%	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Reflects gross margin improvement of 0.4% in our continental European operations, primarily as a result of internalizing incremental gross margin from our 2014 acquisitions of seven Netherlands distributors, and gross margin improvement of 0.3% in our U.K. operations, primarily as a result of a reduction in the net price paid for the purchase of aftermarket products.	
		
(2)	Reflects the offsetting effects of (i) a decline in distribution expenses as a percentage of revenue in our U.K. operations (0.7%) as a result of internalizing previously outsourced delivery expenses as well as lower fuel costs, (ii) lower facility and warehouse expenses in our continental Europe operations (0.5%) due to the realization of synergies within personnel expenses, (iii) an increase in selling, general and administrative personnel expenses in our U.K. operations (0.7%) to support growth of the business, and (iv) an increase in selling, general and administrative personnel	

45

expenses in our continental Europe operations (0.4%) related to the 2014 and 2015 acquisitions of our Netherlands distributors, which have higher selling, general and administrative expenses than our legacy business.
Specialty
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our Specialty segment (in thousands):

																				
 	Three Months Ended June 30,	 	Percentage Change in Revenue	
Specialty	2015	 	2014	 	Organic (1)	 	Acquisition (2)	 	Foreign Exchange (3)	 	Total Change	
Parts & services revenue	$	283,458		 	$	217,970		 	6.6%		 	25.3%		 	(1.9%)		 	30.0%		
Other revenue	—		 	—		 	—	%	 	—	%	 	—	%	 	—	%	
Total revenue	$	283,458		 	$	217,970		 	6.6%		 	25.3%		 	(1.9%)		 	30.0%		
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Primarily due to increased sales volumes as a result of favorable economic conditions.	
		
(2)	Reflects the impact of two Specialty businesses acquired in the fourth quarter of 2014.	
		
(3)	Compared to the prior year, exchange rates reduced our revenue growth by 1.9%, primarily due to the strengthening U.S. dollar against the Canadian dollar in the second quarter of 2015 compared to the second quarter of 2014.	
Segment EBITDA. Segment EBITDA increased $11.8 million, or 41.8%, in the second quarter of 2015 compared to the prior year second quarter.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:

					
Specialty	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the three months ended June 30, 2014	 	13.0	 %	 	
(Decrease) increase due to:	 	 	 	
Change in gross margin	 	(0.1	)%	(1)	
Change in segment operating expenses	 	1.2	 %	(2)	
Segment EBITDA for the three months ended June 30, 2015	 	14.1	 %	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Our acquisition of a supplier of parts for recreational vehicles completed in the fourth quarter of 2014 resulted in a 0.7% decline in gross margin compared to the prior year second quarter. Compared to our existing Specialty business, this acquisition realizes lower gross margins than our other specialty product sales. Partially offsetting this decrease were gross margin improvements attributable primarily to a sales mix shift toward higher margin product lines, particularly truck and off road products due to improved economic conditions.	
		
(2)	Reflects a reduction in selling, general and administrative expenses as a percentage of revenue (0.7%) primarily as a result of integration synergies, as well as a reduction in distribution expenses (0.5%). The reduction in distribution expenses as a percentage of revenue was primarily attributable to favorable fuel pricing compared to the prior year second quarter (0.6%) and logistics synergies as we leverage our North American distribution network for the delivery of specialty products (0.5%). These reductions in distribution expenses were partially offset by higher freight costs (0.7%) driven by higher use of third-party freight to handle increased volumes as well as sales related to our October 2014 acquisition of a supplier of parts for recreational vehicles, which are all shipped via third party carriers.	
Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014
North America
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our North American segment (in thousands):

46

	
																				
 	Six Months Ended June 30,	 	Percentage Change in Revenue	
North America	2015	 	2014	 	Organic	 	Acquisition (1)	 	Foreign Exchange	 	Total Change	
Parts & services revenue	$	1,830,492		 	$	1,731,972		 	5.4	 %	(2)  	1.1	%	 	(0.9	)%	 	5.7	 %	
Other revenue	260,366		 	323,283		 	(19.4	)%	(3)  	0.2	%	 	(0.3	)%	 	(19.5	)%	
Total revenue	$	2,090,858		 	$	2,055,255		 	1.5	 %	 	1.0	%	 	(0.8	)%	 	1.7	 %	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Reflects the impact of 13 wholesale businesses and two self service retail operations acquired since the beginning of 2014.	
		
(2)	Approximately two-thirds of our organic growth in parts and services revenue was due to increased net pricing in our wholesale operations. In the third quarter of 2014, we shifted our salvage vehicle purchasing to higher quality vehicles, which increased the average revenue per part sold during the first half of 2015. In our aftermarket operations, we increased our net prices to customers compared to the first half of the prior year. The remainder of our organic growth in parts and services revenue was primarily due to increased sales volumes, mostly in our salvage operations.	
		
(3)	Approximately $49 million of the $63 million organic decline in other revenue was a result of lower prices received from the sale of scrap and other metals. This was primarily due to lower prices from the sale of crushed auto bodies, which fluctuate based on steel prices. Lower sales volumes were responsible for the remaining decline, primarily due to fewer vehicles processed relative to the prior year period.	
Segment EBITDA . Segment EBITDA increased $5.0 million, or 1.8%, in the first half of 2015 compared to the comparative period in the prior year. The decline in steel prices as described in the revenue section above had a negative year over year impact of $14.8 million on North American Segment EBITDA and a $0.03 negative effect on diluted earnings per share relative to the prior year period.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our North American segment:

					
North America	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the six months ended June 30, 2014	 	13.8	 %	 	
Increase (decrease) due to:	 	 	 	
Change in gross margin	 	0.1	 %	(1)	
Change in segment operating expenses	 	(0.0	 )%	(2)	
Change in other income	 	(0.1	)%	 	
Segment EBITDA for the six months ended June 30, 2015	 	13.8	 %	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	The improvement in gross margin reflects a 0.3% favorable impact from our aftermarket product lines, partially offset by a 0.1% negative effect in each of our wholesale and self service salvage operations. In our aftermarket products, we improved our gross margin by increasing our net prices to our customers. The decline in our salvage gross margins is a result of a shift in purchasing strategy to higher cost vehicles that we believe will generate greater parts revenue dollars but lower gross margin percentages. Gross margins in our self service operations were negatively affected by lower scrap recoveries on salvage vehicles as a result of falling scrap prices.	
		
(2)	Reflects the negative impact on operating leverage caused by the decline in scrap revenue as a result of lower scrap prices (0.6%). In periods of falling scrap revenue, we do not experience a commensurate decline in operating expenses as we have few variable costs associated with the sale of scrap. The impact of lower scrap revenue was partially offset by a 0.4% improvement in fuel costs as a result of favorable pricing compared to the prior year period as well as a 0.2% improvement in our selling, general and administrative expenses as a result of improved leverage of our sales force and general and administrative personnel.	
Europe
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our European segment (in thousands):

47

	
																				
 	Six Months Ended June 30,	 	Percentage Change in Revenue	
Europe	2015	 	2014	 	Organic (1)	 	Acquisition (2)	 	Foreign Exchange (3)	 	Total Change	
Parts & services revenue	$	994,827		 	$	883,675		 	12.0	%	 	11.9	%	 	(11.2	)%	 	12.6	%	
Other revenue	2,352		 	1,212		 	27.2	%	 	75.6	%	 	(8.7	)%	 	94.1	%	
Total revenue	$	997,179		 	$	884,887		 	12.0	%	 	11.9	%	 	(11.2	)%	 	12.7	%	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	In our U.K. operations, parts and services revenue grew organically by 14.1%, while in our continental European operations, parts and services revenue grew organically by 5.8%, resulting in net organic revenue growth of 12.0% over the prior year. Our organic revenue growth in the U.K., which resulted from higher sales volumes, was composed of an 8.6% increase in revenue from stores open more than 12 months and a 5.5% increase from revenue generated by 49 branch openings since the beginning of the prior year through the one year anniversary of their respective opening dates. Organic revenue growth in our continental European operations was primarily due to the opening of a new warehouse location in France in 2014 and, to a lesser extent, growth in our Belgian market.	
		
(2)	Includes $89.7 million from our acquisitions of 14 distribution companies in the Netherlands completed since the beginning of 2014 through the one year anniversary of acquisition.	
		
(3)	Compared to the prior year, exchange rates reduced our revenue growth by $99.4 million, or 11.2% , primarily due to the strengthening U.S. dollar against both the pound sterling and euro relative to the first half of 2014. Based on exchange rates through July 2015 and projections for the remainder of the year, we expect there will be a negative effect on revenue growth for the remainder of 2015 as a result of foreign currency exchange movements.	
Segment EBITDA. Segment EBITDA increased $13.4 million, or 15.4%, in the first half of 2015 compared to the comparative period in the prior year. Our European Segment EBITDA includes a negative year over year impact of $9.5 million related to the translation of local currency results into U.S. dollars at lower exchange rates than those experienced in the first half of 2014. On a constant currency basis (i.e. excluding the translation impact), Segment EBITDA increased by $22.9 million, or 26%, compared to the first half of 2014. Our European Segment EBITDA for the first half of 2015 also reflects an increase in foreign exchange transaction losses of $1.6 million as compared to the prior year period. Refer to the Foreign Currency Impact discussion within the Results of Operations - Consolidated section above for further detail regarding foreign currency impact on our results for the first half of 2015.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our European segment:

					
Europe	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the six months ended June 30, 2014	 	9.8	 %	 	
Increase (decrease) due to:	 	 	 	
Change in gross margin	 	0.5	 %	(1)	
Change in segment operating expenses	 	0.0	 %	(2)	
Change in other expenses	 	(0.2	)%	(3)	
Segment EBITDA for the six months ended June 30, 2015	 	10.1	 %	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Primarily attributable to improvement in our continental European gross margins as a result of internalizing the incremental gross margin from our acquisitions of seven Netherlands distributors (0.4%).	
		
(2)	Reflects the offsetting effects of (i) a decline in distribution expenses as a percentage of revenue in our U.K. operations (0.5%) as a result of internalizing previously outsourced delivery expenses as well as lower fuel costs, (ii) lower facility and warehouse expenses in our continental Europe operations (0.4%) due to the realization of synergies within personnel expenses, (iii) an increase in personnel expenses within selling, general and administrative expenses (0.5%) related to the 2014 and 2015 acquisitions of our Netherlands distributors, which have higher selling, general and administrative expenses than our legacy business, and (iv) an increase in selling, general and administrative expenses in our U.K. operations (0.4%) due to increased personnel expenses to support growth of the business.	

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(3)	Primarily due to $1.6 million of greater foreign currency transaction losses, including the impact of unrealized mark-to-market losses on foreign currency forward contracts used to hedge the purchase of inventory and, to a lesser extent, unrealized and realized gains and losses on foreign currency transactions for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  	
Specialty
Third Party Revenue . The following table summarizes the changes in third party revenue by category in our Specialty segment (in thousands):

																				
 	Six Months Ended June 30,	 	Percentage Change in Revenue	
Specialty	2015	 	2014	 	Organic (1)	 	Acquisition (2)	 	Foreign Exchange (3)	 	Total Change	
Parts & services revenue	$	523,945		 	$	394,767		 	6.5%		 	28.0%		 	(1.7%)		 	32.7%		
Other revenue	—		 	—		 	—	%	 	—	%	 	—	%	 	—	%	
Total revenue	$	523,945		 	$	394,767		 	6.5%		 	28.0%		 	(1.7%)		 	32.7%		
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Primarily due to increased sales volumes as a result of favorable economic conditions.	
		
(2)	Reflects the impact of two Specialty businesses acquired in the fourth quarter of 2014.	
		
(3)	Compared to the prior year, exchange rates reduced our revenue growth by 1.7%, primarily due to the strengthening U.S. dollar against the Canadian dollar in the first half of 2015 compared to the first half of 2014.	
Segment EBITDA. Segment EBITDA increased $19.4 million, or 42.1%, in the first half of 2015 compared to the comparative period in the prior year.
The following table summarizes the changes in Segment EBITDA as a percentage of revenue in our Specialty segment:

					
Specialty	 	Percentage of Total Segment Revenue	 	
Segment EBITDA for the six months ended June 30, 2014	 	11.7	 %	 	
(Decrease) increase due to:	 	 	 	
Change in gross margin	 	(0.4	)%	(1)	
Change in segment operating expenses	 	1.2	 %	(2)	
Segment EBITDA for the six months ended June 30, 2015	 	12.5	 %	 	
Note: In the table above, the sum of the individual percentages may not equal the total due to rounding.	
		
(1)	Primarily due to the impact of our acquisition of a supplier of parts for recreational vehicles completed in the fourth quarter of 2014 (0.8%). Compared to our existing Specialty business, this acquisition realizes lower gross margins than our other specialty product sales. Partially offsetting this decrease were gross margin improvements attributable primarily to a sales mix shift toward higher margin product lines, particularly truck and off road products due to improved economic conditions.	
		
(2)	Reflects a reduction in distribution expenses (0.9%) as well as a reduction in selling, general and administrative expenses as a percentage of revenue (0.6%) primarily as a result of integration synergies. The reduction in distribution expenses as a percentage of revenue was primarily attributable to favorable fuel pricing compared to the first half of the prior year (0.8%) and logistics synergies as we leverage our North American distribution network for the delivery of specialty products (0.9%). These reductions in distribution expenses were partially offset by higher freight costs (0.7%) driven by higher use of third-party freight to handle increased volumes as well as sales related to our October 2014 acquisition of a supplier of parts for recreational vehicles, which are all shipped via third party carriers. Partially offsetting these decreases was a 0.2% increase in facility and warehouse expenses as a percentage of revenue resulting from the acquisitions completed in the fourth quarter of 2014, which generate greater facility and warehouse expenses as a percentage of revenue than our existing Specialty business. We expect to realize additional integration synergies during the remainder of 2015 and into the first half of 2016 as we continue to rationalize our facilities within this segment.	

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2015 Outlook
We estimate that full year 2015 net income and diluted earnings per share, excluding the impact of any restructuring and acquisition related expenses, and any gains or losses related to acquisitions or divestitures (including changes in the fair value of contingent consideration liabilities) and loss on debt extinguishment, will be in the range of $425 million to $445 million and $1.38 to $1.45, respectively.
Liquidity and Capital Resources
The following table summarizes liquidity data as of the dates indicated (in thousands):

												
 	June 30, 2015	 	December 31, 2014	 	June 30, 2014	
Cash and equivalents	$	143,423		 	$	114,605		 	$	109,564		
Total debt	1,691,442		 	1,864,562		 	1,951,324		
Net debt (total debt less cash and equivalents)	1,548,019		 	1,749,957		 	1,841,760		
Current maturities	39,378		 	63,515		 	71,487		
Capacity under credit facilities (1)	1,947,000		 	1,947,000		 	1,930,000		
Availability under credit facilities (1)	1,238,780		 	1,127,810		 	1,058,337		
Total liquidity (cash and equivalents plus availability under credit facilities)	1,382,203		 	1,242,415		 	1,167,901		
(1) Includes our revolving credit facilities and our receivables securitization facility.
We assess our liquidity in terms of our ability to fund our operations and provide for expansion through both internal development and acquisitions. Our primary sources of liquidity are cash flows from operations and our credit facilities. We utilize our cash flows from operations to fund working capital and capital expenditures, with the excess amounts going towards funding acquisitions or paying down outstanding debt. As we have pursued acquisitions as part of our growth strategy, our cash flows from operations have not always been sufficient to cover our investing activities. To fund our acquisitions, we have accessed various forms of debt financing, including our senior secured credit facilities, senior notes, and receivables securitization facility.
As of June 30, 2015 , we had debt outstanding and additional available sources of financing as follows:
		
•	Senior secured credit facilities maturing in May 2019, composed of $450 million in term loans ( $422 million outstanding at June 30, 2015 ) and $1.85 billion in revolving credit ( $541 million outstanding at June 30, 2015 ), bearing interest at variable rates (although a portion of this debt is hedged through interest rate swap contracts)	
		
•	Senior notes totaling $600 million , maturing in May 2023 and bearing interest at a 4.75% fixed rate	
		
•	Receivables securitization facility with availability up to $97 million ( $95 million outstanding as of June 30, 2015 ), maturing in October 2017 and bearing interest at variable commercial paper rates	
    
From time to time, we may undertake financing transactions to increase our available liquidity, such as our March 2014 amendment to our senior secured credit facilities and our September 2014 amendment to our receivables securitization facility. Our financing structure, which includes our senior secured credit facilities, senior notes, and receivables securitization facility, provides financial flexibility to execute our long-term growth strategy. If we see an attractive acquisition opportunity, we have the ability to move quickly and have certainty of funding up to the amount of our then-available liquidity.
As of  June 30, 2015 , we had approximately $1.2 billion  available under our credit facilities. Combined with approximately  $143 million  of cash and equivalents at  June 30, 2015 , we had approximately  $1.4 billion  in available liquidity, an increase of $140 million over our available liquidity as of December 31, 2014. We believe that our current liquidity and cash expected to be generated by operating activities in future periods will be sufficient to meet our current operating and capital requirements, although such sources may not be sufficient for future acquisitions depending on their size. While we believe that we currently have adequate capacity, from time to time we may need to raise additional funds through public or private financing, strategic relationships or other arrangements. There can be no assurance that additional funding, or refinancing of our credit facilities, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants or higher interest costs. Our failure to raise capital if and when needed could have a material adverse impact on our business, operating results, and financial condition.

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Borrowings under the credit agreement accrue interest at variable rates which are tied to LIBOR or CDOR, depending on the currency and the duration of the borrowing, plus an applicable margin rate which is subject to change quarterly based on our reported leverage ratio. We hold interest rate swaps to hedge the variable rates on our credit agreement borrowings (as described in Note 5, "Derivative Instruments and Hedging Activities " to the unaudited condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q), with the effect of fixing the interest rates on the respective notional amounts. After giving effect to these interest rate swap contracts, the weighted average interest rate on borrowings outstanding under our credit agreement at June 30, 2015 was 2.11% . Including our senior notes and the borrowings on our receivables securitization program, our overall weighted average interest rate on borrowings was 3.00% at June 30, 2015 . Cash interest payments were $28.7 million for the six months ended June 30, 2015 , including a $14.2 million semi-annual interest payment related to our senior notes. The semi-annual interest payments on our senior notes are made in May and November each year, and began in November 2013. We had outstanding credit agreement borrowings of $1.0 billion and $1.1 billion at June 30, 2015 and December 31, 2014 , respectively. Of these amounts, $22.5 million was classified as current maturities at both June 30, 2015 and December 31, 2014 . We have scheduled repayments of $5.6 million each quarter on the term loan through its maturity in May 2019, but no other significant principal payments on our credit facilities prior to the maturity of the receivables securitization program in October 2017. In addition to the repayments under our credit facilities, we will make payments on notes payable and other debt totaling $16.9 million in the next 12 months, the majority of which is for payments on notes payable issued in connection with acquisitions.
Our credit agreement contains customary covenants that provide limitations and conditions on our ability to enter into certain transactions. The credit agreement also contains financial and affirmative covenants, including limitations on our net leverage ratio and a minimum interest coverage ratio. We were in compliance with all restrictive covenants under our credit agreement as of June 30, 2015 .
As of  June 30, 2015 , the Company had cash of $143 million , of which $87 million was held by foreign subsidiaries. We consider the undistributed earnings of these foreign subsidiaries to be indefinitely reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. Should these earnings be repatriated in the future, in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and potential withholding taxes payable to the various foreign countries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without resort to repatriation of foreign earnings.
The procurement of inventory is the largest operating use of our funds. We normally pay for aftermarket product purchases at the time of shipment or on standard payment terms, depending on the manufacturer and the negotiated payment terms. We normally pay for salvage vehicles acquired at salvage auctions and under direct procurement arrangements at the time that we take possession of the vehicles.
The following table sets forth a summary of our inventory procurement for the three and six months ended June 30, 2015 and 2014 :

																						
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
 	2015	 	2014	 	% Change	 	2015	 	2014	 	% Change	
Aftermarket inventory purchases (millions)	$	698.2		 	$	654.0		 	6.8	 %	 	$	1,388.6		 	$	1,300.9		 	6.7	 %	
Wholesale salvage cars and trucks	75,000		 	71,000		 	5.6	 %	 	145,000		 	143,000		 	1.4	 %	
Self service and "crush only" cars	131,000		 	143,000		 	(8.4	)%	 	231,000		 	263,000		 	(12.2	)%	
Aftermarket inventory purchases during the three and six months ended June 30, 2015 included incremental purchases of $37.5 million and $79.7 million in our Specialty segment, primarily related to our October 2014 acquisition of a supplier of parts for recreational vehicles as well as overall growth in the Specialty business. In our European segment, our acquisitions of the Netherlands distributors in 2014 and the first half of 2015 contributed incremental inventory purchases of $10.1 million and $29.9 million during the three and six months ended June 30, 2015 , respectively; however, the greater purchase levels resulting from these acquisitions were offset by the devaluation of the pound sterling since the end of the prior year period. In North America, we accelerated our aftermarket inventory purchases in the fourth quarter of 2014 in anticipation of potential labor issues at West Coast ports in the U.S., leading to growth in the year-end inventory balance. As a result, our aftermarket inventory purchases in the first quarter of 2015 fell below 2014 levels. While we increased our aftermarket inventory purchases above the prior year levels in the second quarter, on a year-to-date basis, our North American purchases were $6.4 million lower than the prior year period. Compared to the prior year second quarter, we reduced our purchases of lower cost self service and "crush only" cars as prices demanded for vehicles in certain markets exceeded our acceptable cost given the prices of scrap and other metals.

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Net cash provided by operating activities totaled $282.7 million for the six months ended June 30, 2015 , compared to $152.2 million during the six months ended June 30, 2014 . During the first six months of 2015, our EBITDA increased by $37.8 million compared to the first six months of 2014, due to both acquisition related growth and organic growth. Cash outflows for our primary working capital accounts (receivables, inventory and payables) totaled $29.2 million  during the six months ended June 30, 2015 , compared to $133.1 million  during the comparable period in 2014. As discussed above, we increased our North American aftermarket inventory purchases in the fourth quarter of 2014 in anticipation of port issues in the U.S., which resulted in higher inventory balances at the end of 2014. Additionally, our U.K. operations experienced higher sales volumes and opened fewer branches during the first half of 2015 compared to the prior year period, requiring fewer purchases. As a result, we reflected net cash inflows from inventory in the first half of 2015 compared to cash outflows for inventory in the first half of 2014. Our European operations maintained relatively higher receivables balances throughout the current year period as a result of stronger year-over-year sales in the fourth quarter of 2014; this resulted in lower growth in receivables balances, and therefore lower cash outflows for receivables in the current year period. Cash flows related to our primary working capital accounts can be volatile as purchases, payments and collections can be timed differently from period to period and can be influenced by factors outside of our control. However, we expect that the net change in these working capital items will generally be a cash outflow as we grow our business each year.
Net cash used in investing activities totaled $109.2 million for the six months ended June 30, 2015 , compared to $702.3 million during the six months ended June 30, 2014 . We invested $37.2 million of cash, net of cash acquired, in business acquisitions during the six months ended June 30, 2015 compared to $635.3 million for business acquisitions in the comparable period in 2014 , which included $427.1 million for our Keystone Specialty acquisition. Property and equipment purchases were $66.8 million in the six months ended June 30, 2015 compared to $67.3 million in the comparable period in 2014 . During the six months ended June 30, 2015 , we paid $7.5 million to increase our investment in ACM Parts; during the six months ended June 30, 2014 , we paid $2.2 million for investments in unconsolidated subsidiaries.
Net cash used in financing activities totaled $144.9 million for the six months ended June 30, 2015 , compared to $506.5 million in net cash provided by financing activities during the six months ended June 30, 2014 . During the six months ended June 30, 2015 , net repayments under our credit facilities were $105.5 million compared to net borrowings of $571.7 million during the six months ended June 30, 2014 . Compared to the prior year period, our cash investment in acquisitions was lower, and therefore, we used the excess cash generated by operations to repay outstanding amounts under our revolving credit facilities.The greater borrowings during the first half of 2014 reflect $370 million of revolver borrowings and $80 million of borrowings under our receivables facility used to finance the acquisition of Keystone Specialty. Our March 2014 amendment of our credit facilities generated $11.3 million in additional term loan borrowings, which were used to pay $3.7 million in debt issuance costs related to the amendment, as well as to repay outstanding revolver borrowings. In the six months ended June 30, 2015 , we paid $5.2 million for taxes related to net share settlements of stock-based compensation awards; no such payments occurred in 2014. During the first half of 2014, we made a payment of $44.8 million ($39.5 million included in financing cash flows and $5.3 million included in operating cash flows) for the final earnout period under the contingent payment agreement related to our 2011 ECP acquisition. Cash generated from exercises of stock options provided $3.3 million and  $4.2 million in the  six months ended June 30, 2015 and June 30, 2014 , respectively. The excess tax benefit from share-based payment arrangements reduced income taxes payable by $6.7 million  and  $9.7 million  in the  six months ended June 30, 2015 and June 30, 2014 , respectively. During the first half of 2014, we paid $20.0 million related to the settlement of a foreign currency forward contract; no such payment occurred during the half of 2015.
We intend to continue to evaluate markets for potential growth through the internal development of distribution centers, processing and sales facilities, and warehouses, through further integration of our facilities, and through selected business acquisitions. Our future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of our internal development efforts and the success of those efforts, the costs and timing of expansion of our sales and marketing activities, and the costs and timing of future business acquisitions.
2015 Outlook
We estimate that our capital expenditures for 2015, excluding business acquisitions, will be between $150 million and $180 million. We expect to use these funds for several major facility expansions, improvement of current facilities, real estate acquisitions and systems development projects. We anticipate that net cash provided by operating activities for 2015 will be approximately $450 million.
		
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	
Our results of operations are exposed to changes in interest rates primarily with respect to borrowings under our credit facilities, where interest rates are tied to the prime rate, LIBOR or CDOR. Therefore, we implemented a policy to manage our exposure to variable interest rates on a portion of our outstanding variable rate debt instruments through the use of interest rate swap contracts. These contracts convert a portion of our variable rate debt to fixed rate debt, matching the currency, effective

52

dates and maturity dates to specific debt instruments. Net interest payments or receipts from interest rate swap contracts are included as adjustments to interest expense. All of our interest rate swap contracts have been executed with banks that we believe are creditworthy (Wells Fargo Bank, N.A., Bank of America, N.A. and RBS Citizens, N.A.).
As of June 30, 2015 , we held six interest rate swap contracts representing a total of $420 million of U.S. dollar-denominated notional amount debt, £50 million of pound sterling-denominated notional amount debt, and CAD $25 million of Canadian dollar-denominated notional amount debt. Our interest rate swap contracts are designated as cash flow hedges and modify the variable rate nature of that portion of our variable rate debt. These swaps have maturity dates ranging from October 2015 through December 2016. In total, we had 54% of our variable rate debt under our credit facilities at fixed rates at June 30, 2015 compared to 47% at December 31, 2014, which reflects a decrease in borrowings in the first half of 2015. As of June 30, 2015 , the fair market value of these swap contracts was a net liability of $3.4 million . The values of such contracts are subject to changes in interest rates.
At June 30, 2015 , we had $540 million of variable rate debt that was not hedged. Using sensitivity analysis, a 100 basis point movement in interest rates would change interest expense by $5.4 million over the next twelve months.
The proceeds of our May 2013 senior notes offering were used to finance our euro-denominated acquisition of Sator, as well as to repay a portion of our pound sterling-denominated revolver borrowings held by our European operations. In connection with these transactions, we entered into euro-denominated and pound sterling-denominated intercompany notes, which incurred transaction gains and losses from fluctuations in the U.S. dollar against these currencies. To mitigate these fluctuations, we entered into foreign currency forward contracts. The gains or losses from the remeasurement of these contracts were recorded to earnings to offset the remeasurement of the related notes. These foreign currency forward contracts were settled as of December 31, 2014. While there are no such forward contracts outstanding as of June 30, 2015, we may enter into additional foreign currency forward contracts from time to time to mitigate the impact of fluctuations in exchange rates on similar intercompany financing transactions.
Additionally, we are exposed to currency fluctuations with respect to the purchase of aftermarket products from foreign countries. The majority of our foreign inventory purchases are from manufacturers based in Taiwan. While our transactions with manufacturers based in Taiwan are conducted in U.S. dollars, changes in the relationship between the U.S. dollar and the Taiwan dollar might impact the purchase price of aftermarket products. Our aftermarket operations in Canada, which also purchase inventory from Taiwan in U.S. dollars, are further subject to changes in the relationship between the U.S. dollar and the Canadian dollar. Our aftermarket operations in the U.K. also source a portion of their inventory from Taiwan, as well as from other European countries and China, resulting in exposure to changes in the relationship of the pound sterling against the euro and the U.S. dollar. We hedge our exposure to foreign currency fluctuations for certain of our purchases in our European operations, but the notional amount and fair value of these foreign currency forward contracts at June 30, 2015 were immaterial. We do not currently attempt to hedge our foreign currency exposure related to our foreign currency denominated inventory purchases in our North American operations, and we may not be able to pass on any price increases to our customers.
Foreign currency fluctuations may also impact the financial results we report for the portions of our business that operate in functional currencies other than the U.S. dollar. Our operations in Europe and other countries represented 32.9% of our revenue during the six months ended June 30, 2015 . An increase or decrease in the strength of the U.S. dollar against these currencies by 10% would result in a 3% change in our consolidated revenue and operating income for the six months ended June 30, 2015 .
Other than with respect to our intercompany transactions denominated in euro and pound sterling and a portion of our foreign currency denominated inventory purchases in the U.K., we do not hold derivative contracts to hedge foreign currency risk. Our net investment in foreign operations is partially hedged by the foreign currency denominated borrowings we use to fund foreign acquisitions. Additionally, we have elected not to hedge the foreign currency risk related to the interest payments on these borrowings as we generate Canadian dollar, pound sterling and euro cash flows that can be used to fund debt payments. As of June 30, 2015 , we had amounts outstanding under our revolving credit facilities of €251.4 million, £63.3 million, and CAD $130.4 million.
We are also exposed to market risk related to price fluctuations in scrap metal and other metals. Market prices of these metals affect the amount that we pay for our inventory as well as the revenue that we generate from sales of these metals. As both our revenue and costs are affected by the price fluctuations, we have a natural hedge against the changes. However, there is typically a lag between the effect on our revenue from metal price fluctuations and inventory cost changes. Therefore, we can experience positive or negative gross margin effects in periods of rising or falling metals prices, particularly when such prices move rapidly. If market prices were to fall at a greater rate than our vehicle acquisition costs, we could experience a decline in gross margin. Scrap metal and other metal prices stabilized in the second quarter of 2015; however, scrap prices have decreased 25% since the fourth quarter of 2014. As of June 30, 2015 , we held short-term metals forward contracts to mitigate a portion of our exposure to fluctuations in metals prices specifically related to our precious metals refining and reclamation business. The notional amount and fair value of these forward contracts at June 30, 2015 were immaterial.

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Item 4.     Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2015 , the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of LKQ Corporation's management, including our Chief Executive Officer and our Chief Financial Officer, of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in providing reasonable assurance that information we are required to disclose in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended  June 30, 2015  that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION
Item 1.     Legal Proceedings
None.

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 2014 Annual Report on Form 10-K, filed with the SEC on March 2, 2015, as supplemented in subsequent filings, for information concerning the risks and uncertainties that could negatively impact us. The following represents changes and/or additions to the risks and uncertainties previously disclosed in such reports.
We face intense competition from local, national, international, and internet-based vehicle products providers, and this competition could negatively affect our business.
The vehicle replacement products industry is highly competitive and is served by numerous suppliers of OEM, recycled, aftermarket, refurbished and remanufactured products. Within each of these categories of suppliers, there are local owner-operated companies, larger regional suppliers, national and international providers, and internet-based suppliers. Providers of vehicle replacement products that have traditionally sold only certain categories of such products may decide to expand their product offerings into other categories of vehicle replacement products, which may further increase competition. Some of our current and potential competitors may have more operational expertise; greater financial, technical, manufacturing, distribution, and other resources; longer operating histories; lower cost structures; and better relationships in the insurance and vehicle repair industries or with consumers, than we do. In certain regions of the U.S., local vehicle recycling companies have formed cooperative efforts to compete in the wholesale recycled products industry. Similarly in Europe, some local companies are part of cooperative efforts to compete in the aftermarket parts industry. As a result of these factors, our competitors may be able to provide products that we are unable to supply, provide their products at lower costs, or supply products to customers that we are unable to serve.
We believe that a majority of collision parts by dollar amount are supplied by OEMs, with the balance being supplied by distributors like us. The OEMs are therefore in a position to exert pricing pressure in the marketplace. We compete with the OEMs primarily on price and to a lesser extent on service and quality. From time to time, OEMs have experimented with reducing prices on specific products to match the lower prices of alternative products and with other initiatives that may disrupt our sales. If such price reductions and other initiatives were to become widespread, it could have a material adverse impact on our business.
Development problems with and business interruptions to our distribution centers or other facilities may affect our operations and/or the availability and distribution of merchandise, which may negatively affect our business.
We develop complex distribution systems that rely on automation and related software. The development of our warehouses and distribution systems may not occur as expected, may cost more than planned, and may take longer to implement than expected, any of which could adversely affect our business.
Destructive weather, terrorist activities, war, systems malfunctions, hacking or similar attempts to interfere with the operations of our systems, or other disasters or adverse occurrences may result in the closure of our distribution centers or other facilities or may adversely affect our ability to deliver inventory through our system on a timely basis. This may affect our ability to timely provide products to our customers, resulting in lost sales or a potential loss of customer loyalty. Some of our merchandise is imported from other countries and these goods could become difficult or impossible to bring into the United States or into the other countries in which we operate, and we may not be able to obtain such merchandise from other sources at similar prices. Such a disruption in revenue could potentially have a negative impact on our results of operations and financial condition.

Item 5.     Other Information
None.

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Item 6.     Exhibits
Exhibits
(b) Exhibits

		
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
101.INS	XBRL Instance Document	
101.SCH	XBRL Taxonomy Extension Schema Document	
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	

56

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on  August 3, 2015 .

	
		
 	LKQ CORPORATION	
 	 	
 	/s/ DOMINICK ZARCONE	
 	Dominick Zarcone	
 	Executive Vice President and Chief Financial Officer	
 	(As duly authorized officer and Principal Financial Officer)	
 	 	
 	/s/ MICHAEL S. CLARK	
 	Michael S. Clark	
 	Vice President — Finance and Controller	
 	(As duly authorized officer and Principal Accounting Officer)	

57

Exhibit 31.1

CERTIFICATION
I, Robert L. Wagman, certify that:
1. I have reviewed this annual report on Form 10-Q of LKQ Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
August 3, 2015

	
		
/s/ ROBERT L. WAGMAN	 	
Robert L. Wagman	 	
President and Chief Executive Officer	 	

Exhibit 31.2

CERTIFICATION
I, Dominick Zarcone, certify that:
1. I have reviewed this annual report on Form 10-Q of LKQ Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
August 3, 2015

	
		
/ S / DOMINICK ZARCONE	 	
Dominick Zarcone	 	
Executive Vice President and Chief Financial Officer	 	

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of LKQ Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, as President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
		
(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: August 3, 2015

	
		
 	/ S / ROBERT L. WAGMAN	
 	Robert L. Wagman	
 	President and Chief Executive Officer	

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of LKQ Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, as Executive Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
		
(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: August 3, 2015

	
		
 	/ S / DOMINICK ZARCONE	
 	Dominick Zarcone	
 	Executive Vice President and Chief Financial Officer