LKQ CORP (LKQ) Business

ITEM 1. BUSINESS

OVERVIEW

LKQ Corporation ("LKQ," the "Company" or "we") is a global distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty aftermarket products and accessories to improve the performance, functionality and appearance of vehicles.

Buyers of vehicle replacement products have the option to purchase from primarily four sources: new products produced by original equipment manufacturers ("OEMs"); new products produced by companies other than the OEMs, which are referred to as aftermarket products; salvaged products taken from total loss vehicles; and reconditioned products that have been refurbished or remanufactured. Collectively, we refer to the three sources that are not new OEM products as alternative parts.

We sell a variety of alternative replacement and maintenance parts including collision parts, which are typically exterior components used in the collision repair process to restore a vehicle's appearance and safety, such as bumper covers, fenders, paint and related body repair products, and lights; hard parts, which are typically internal components that are either mechanical in nature, such as alternators, starters, and clutches, or functional components that are replaced as part of routine maintenance, such as brake pads, discs and sensors, filters and batteries; and major mechanical parts, such as engines and transmissions. We also sell specialty products and accessories, which are vehicle products that improve the performance, functionality and appearance of vehicles.

We are organized into three operating segments: North America (formerly known as ("f/k/a") Wholesale - North America); Europe; and Specialty, each of which is presented as a reportable segment. Refer to Note 12, "Revenue Recognition" and Note 26, "Segment and Geographic Information" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for financial information by reportable segment and by geographic region.

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Our North America segment is a leading provider of alternative vehicle collision replacement products, paint and related body repair products, and alternative vehicle mechanical replacement and maintenance products, with our sales, processing, and distribution facilities reaching most major markets in the United States ("U.S.") and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the United Kingdom ("U.K."), the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, France and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket products and accessories reaching most major markets in the U.S. and Canada.

On September 30, 2025, we completed the sale of our Self Service segment to an affiliate of Pacific Avenue Capital Partners, LLC. We have made certain reclassifications to the prior period financial information to reflect discontinued operations presentation as a result of the sale of our Self Service segment. Refer to Note 4, "Discontinued Operations and Divestitures" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

STRATEGY

Our mission is to be the leading global value-added and sustainable distributor of vehicle parts and accessories by offering our customers the most comprehensive, available and cost-effective selection of parts and service solutions while building strong partnerships with our employees and the communities in which we operate. To achieve this mission, our strategy focuses on executing three key initiatives:

Capitalizing on profitable growth opportunities

We are dedicated to building competitive advantages, widening the moats around each of our operating segments, and maintaining our leadership positions in the markets in which we operate. We focus on profitable growth and increasing free cash flow while maintaining a resilient, investment grade balance sheet. We foster an entrepreneurial and employee-centric culture that enables agility and innovation, empowering our businesses to succeed in the markets they serve with a compensation structure that is aligned with our strategy to deliver long-term total shareholder returns. To continuously enhance the quality of our portfolio, our growth strategy is driven by organic investments in automation, productivity improvements, talent development, and strategic acquisitions that are aligned with the ongoing evolution of the car parc.

Drive lean operating model globally

We are committed to generating sustainable returns on invested capital by driving operational excellence and lean management across our businesses. We continuously evaluate and pursue initiatives to improve operating efficiencies, enhance margins and leverage the intellectual capital opportunities that exist across our operating segments. Through targeted productivity efforts and a disciplined approach to cost management, we target specific performance metrics including free cash flow generation, organic growth and margins. Our current initiatives include optimizing working capital, enhancing margins through our inventory optimization efforts and reducing selling, general and administrative costs through streamlining our footprint and reducing complexity across our business.

Disciplined capital allocation and portfolio simplification

We are focused on maximizing return on invested capital through an efficient capital allocation strategy. We apply strict criteria, targeting accretive tuck-in acquisitions with high synergies that align with the core businesses and strategy. We proactively divest businesses that no longer align with our strategic vision, financial objectives or have limited long-term value potential, as demonstrated by our divestments of certain operations in Poland, Slovenia, and Bosnia in 2024 and our Self Service segment in 2025. Additionally, in 2025, aligning with our ongoing strategy to simplify our portfolio and concentrate on our core segments, we commenced a process to explore the potential sale of our Specialty segment. Finally, we maintain a prudent and disciplined financial policy that prioritizes returning cash to shareholders through share repurchases and dividends, while maintaining our investment grade credit rating.

In addition to the above, on January 26, 2026 our Board of Directors (the "Board") announced it has initiated a comprehensive review of strategic alternatives to enhance shareholder value. As part of the review, the Board is working with its advisors to evaluate our strategic alternatives, including a potential sale of the Company.

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BUSINESS TRANSFORMATION

As part of executing our strategy to deliver profitable growth, drive a lean operating model and maximize returns on invested capital, we will, from time to time, engage in restructuring and business transformation initiatives. These initiatives can range in scope from broad changes such as centralizing and standardizing non-customer facing teams and divesting non-strategic assets, to targeted changes such as, consolidating underutilized facilities and closing underperforming locations. Executing on these initiatives can take a few months to several years to fully implement depending on the scope and complexity of the initiative. Additionally, initiatives can change or expand based on the information obtained while executing on the initiative and when additional initiative activities are identified. See Note 13, "Restructuring and Transaction Related Expenses" to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information on restructuring charges related to these initiatives.

NORTH AMERICA SEGMENT

Our North America segment operates in the U.S., Canada, and Mexico. In the U.S. and Canada, we primarily sell aftermarket, salvage and reconditioned collision parts; aftermarket and salvage hard parts; and salvage and reconditioned major mechanical parts through our businesses, including Keystone and Bumper to Bumper (f/k/a Canadian Automotive Group), amongst others. We also, to a lesser extent, provide services for vehicles including mobile and remote diagnostics services and hybrid battery reconditioning and installation services through our businesses, including Elitek Vehicle Services and Green Bean Battery, amongst others. In Mexico, we remanufacture engines and transmissions for sale in the U.S.

Inventory

Our aftermarket products encompass items commonly prone to damage in a collision, including bumper covers, fenders, paint and paint related body repair products, and lights, as well as mechanical automotive parts and accessories. Our private label products include the Platinum Plus line which is marketed under the Keystone brand and the “Value Line” product category designed for value‑oriented, often self‑pay, consumers. Certain products receive certifications from the Certified Automotive Parts Association, an independent organization that evaluates the quality and performance of aftermarket parts relative to OEM collision replacement products. Our salvage products include both mechanical and collision parts, including engines; transmissions; door assemblies; sheet metal products such as trunk lids, fenders and hoods; lights; and bumper assemblies.

We prioritize procurement of products with the highest expected demand, based on factors such as historical vehicle sales by model and year, customer requests, and projected supply and demand trends. Because lead times for imported aftermarket products may extend to 40 days or more, sales volumes and inventory levels are key considerations in our procurement planning.

We source our aftermarket products from independent manufacturers and distributors located primarily in North America and Asia, with a significant concentration in Taiwan. In 2025, approximately 44% of our aftermarket purchases were made from our top six vendors, with our largest vendor accounting for approximately 13% of our annual inventory purchases for the North America segment. This concentration is largely attributable to our paint, body and equipment ("PBE") business, through which we established a strategic relationship with a key supplier of paint and related products. This partnership is expected to remain an important contributor to our paint‑related offerings. We believe we are among the largest customers of each of these suppliers. Outside of this group, no other supplier accounted for more than 4% of our aftermarket product purchases in 2025. Approximately 49% of our aftermarket products in 2025 were purchased from vendors located in the U.S.; however, we believe that most of these products were manufactured in Taiwan, Mexico, or other foreign countries. The remaining aftermarket products were purchased directly from manufacturers in Taiwan and other foreign countries.

We procure salvage products by dismantling total loss vehicles, which we typically acquire through regional salvage auctions. The availability and pricing of total loss vehicles used in our salvage products operations are influenced by several factors, including new vehicle production levels and the overall availability of total loss vehicles. We utilize a proprietary software application to analyze current inventory, historical demand, and recent average selling prices to help determine bid prices for available salvage vehicles.

Customers

We sell our products to wholesale customers, including collision and mechanical repair shops and new and used car dealerships, as well as to retail customers. These customers represent the primary source of revenue for the segment. While our distribution generally follows a two‑step model, our Bumper to Bumper business utilizes a combination of a two‑step model (direct sales to repair shop customers) and a three‑step model (sales to distributors who then sell to repair shop customers).

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Automobile insurance companies influence demand for our collision products. Although insurers do not purchase our products directly, they ultimately bear repair costs for insured vehicles above the deductible amount and therefore often influence the types of products used in repairs. The use of our alternative parts that offer comparable quality and performance to new OEM products provides insurers with direct benefits, including lower repair costs, reduced repair times and lower associated rental‑car expenses.

During the process of a sale, our sales staff can supply either aftermarket, salvaged or reconditioned parts to meet customer demand. Additionally, certain customers have access to a full suite of e‑commerce tools designed to improve order accuracy, reduce return rates and integrate more effectively with customer workflows. Through these tools, customers can search, price and order products directly within their own operating systems.

Our salvage operations generate scrap metal and other materials that we sell to metals recyclers. Vehicles that have been dismantled for salvage products and "crush only" end-of-life vehicles acquired from other companies are typically crushed using equipment on site. In other cases, we will hire mobile crushing equipment to crush the vehicles before they are transported to shredders and scrap metal processors. Damaged and unusable wheel cores are melted in our aluminum furnace and sold to consumers of aluminum ingots and sows for use in the production of various automotive products. We also sell the precious metals recovered from certain recycled parts, such as catalytic converters.

Distribution

We believe our North America segment operates the largest distribution network of alternative vehicle parts and accessories serving the vehicle collision and mechanical repair markets in North America. Our network of warehouses and cross‑dock facilities enables us to maintain high service levels for local repair shops and to provide industry‑leading fulfillment rates supported by our nationwide footprint.

We operate a fleet of trucks and vans that deliver multiple product types on shared routes, which helps reduce distribution costs, enhance customer service, and lower environmental impacts. Our delivery fleet uses third‑party software to optimize routing and monitor delivery progress. This software integrates with each of our wholesale systems, providing a single interface that allows our management team to coordinate deliveries to customers regardless of product line or operating system.

Our local presence supports a responsive and predictable customer experience, including the ability to deliver daily when required and to use consistent drivers for each route. Our sales force and local delivery personnel cultivate and maintain key relationships with repair shops, which benefit from access to the broad product assortment made possible by our regional inventory network.

Competition

We consider all suppliers of vehicle collision and mechanical products to be competitors, including aftermarket suppliers, recycling businesses, refurbishing operations, parts remanufacturers, OEMs and internet‑based suppliers. We compete with alternative parts distributors utilizing our nationwide distribution system, the breadth, depth and availability of our product lines, our customer service and relationships with insurance companies, and, to a lesser extent, price. We compete with OEMs primarily on the basis of price and, to a lesser extent, service and product quality.

Information Technology Systems

Across our aftermarket operations, we use a third‑party enterprise management system along with other third‑party software packages to support and enhance our online business‑to‑business platforms, including OrderKeystone.com and Keyless, while Bumper to Bumper continues to operate on its existing, separate enterprise management system.

Our wholesale salvage product locations in North America use LKQX, an internally-developed, proprietary enterprise management system. Operating on a single platform across most of our wholesale salvage product operations streamlines the sales process, supports standard operating procedures, strengthens training efficiency and employee mobility, and facilitates access to our national inventory database, management reporting, and data storage. LKQX also enables electronic part-exchange capabilities with select recyclers and supports brokered sales to fulfill customer orders for items not in stock.

In addition, we utilize other third party software solutions, including a data warehouse and an integrated budgeting system, to centralize information and enable more advanced analytics and reporting.

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EUROPE SEGMENT

Our Europe segment operates in approximately 20 countries throughout continental Europe and the U.K. In these countries, we primarily sell aftermarket hard parts through our various businesses such as LKQ Euro Car Parts, LKQ Rhiag Group, and LKQ Stahlgruber, among others. In certain countries, we also sell, to a lesser extent, aftermarket and salvaged collision products, salvaged and reconditioned hard parts, and provide certain repair services.

Inventory

Our aftermarket hard part offerings consist mainly of parts used in the repair of vehicles between 3 and 15 years old. We also offer a number of private label products under our Optimal, ERA, and MPM Oils brands. Our top‑selling products include brake pads, discs and sensors, clutches, electrical components such as spark plugs and batteries, steering and suspension parts, filters, oil and automotive fluids, and paint and paint related consumables. We maintain an inventory of more than 900,000 SKUs, with parts for common passenger vehicles representing the largest category. We remain focused on simplifying our business by optimizing our product assortment. Current initiatives include evaluating product mix and market demand for common passenger vehicle parts to identify opportunities for streamlining, such as reducing the number of SKUs offered, consolidating suppliers, and increasing private‑label penetration. We have evaluated approximately 87% of our passenger vehicle portfolio and started implementation actions on this population. The remainder of the passenger vehicle portfolio review is on track to be finished in 2026 with further implementation actions to follow.

In 2025, our largest supplier accounted for 7% of aftermarket inventory purchases within our Europe segment, and no other supplier represented more than 5% of purchases. During the year, 93% of our products were sourced from companies located in Europe, and 74% and 17% of our total inventory purchases were denominated in euros and pounds sterling, respectively.

We procure salvaged products from dismantling total loss vehicles, which we typically acquire from insurance companies and auctions. These vehicles are either transferred to our dismantling facilities for processing or sold to third‑party dismantlers.

Customers

We primarily operate a two‑step distribution model in Europe, under which we sell directly to repair shop customers. Certain businesses in Italy, the Netherlands, Germany, Switzerland and Hungary also operate elements of a three‑step model, in which we sell to distributors who then sell to repair shop customers. In our two‑step operations, we sell the majority of our products to commercial customers, primarily professional repairers, including independent mechanical repair shops and collision repair shops. In our three‑step operations, we sell products to wholesale distributors or jobbers. In addition to sales to repair shops and wholesale distributors, we generate a portion of our revenue from sales to retail customers through e‑commerce platforms and point‑of‑sale transactions at branch locations.

Demand for collision related products, which are an overall smaller component of revenue for this segment, are influenced by insurance companies. Although insurance companies are not direct customers, they ultimately bear the repair costs for insured vehicles above the deductible amount and therefore often influence the types of products used in repairs.

Distribution

We believe our Europe segment operations represent the broadest and largest footprint in the European aftermarket industry and include a distribution network that exceeds those of our principal competitors. We operate a distribution model which utilizes a combination of large distribution centers, regional hubs and branch sales locations to fulfill customer demand. Our larger distribution centers are located in Tamworth, England; Sulzbach‑Rosenberg, Germany; and Berkel en Rodenrijs, the Netherlands; and regularly replenish the smaller branches and hubs through our distribution network via our fleet of trucks and vans or through common carriers.

Competition

We consider all suppliers of replacement repair products to be competitors, including other alternative parts suppliers as well as OEMs and their dealer networks. We face significant competition across many of our markets, where even smaller participants can compete effectively on price and service, and OEMs benefit from consumer brand loyalty while also remaining competitive on price, service, and product availability. We believe we differentiate ourselves from other alternative parts suppliers through the scale of our distribution network, the efficiency of our inventory management systems, and our proprietary technology, which together enable us to deliver products quickly, reliably, and at competitive prices.

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Information Technology Systems

Across our aftermarket operations, we utilize various information technology ("IT") systems that support the diverse needs of our markets. These systems are designed to manage a broad set of functions, including customer ordering, inventory management, budgeting, analytics, warehouse and logistics activities, data warehousing, and financial reporting. Several of our IT platforms can interface directly with the systems used by our repair shop customers, enabling them to identify and order the appropriate parts required for their repairs.

Similarly, across our salvage operations, we utilize IT systems to facilitate vehicle acquisition. These systems allocate cars obtained from insurance companies to our salvage operations. Once cars are dismantled, the parts are entered into the system as available for sale stock. These systems also then sync with estimating systems at repair shops to allow for the selection and quotation of parts necessary to complete a repair.

As part of our broader integration efforts, we are executing a multi-year plan to develop and deploy a European-wide Enterprise Resource Planning ("ERP") system. This plan has already reduced, and is expected to continue reducing, the number of IT systems we operate.

SPECIALTY SEGMENT

Our Specialty segment is a leading distributor and marketer of specialty vehicle aftermarket products and accessories in the U.S. and Canada. We primarily sell aftermarket parts and accessories under seven key product categories: recreational vehicle ("RV"); truck and off-road; towing; speed and performance; wheels and tires; marine; and miscellaneous accessories through our brands such as TrailFX, Fabtech, Fab Fours, and Warn. Additionally, in 2025, aligning with our ongoing strategy to simplify our portfolio and concentrate on our core segments, we commenced a process to explore the potential sale of our Specialty segment.

Inventory

We source the specialty vehicle aftermarket products and accessories we distribute, as well as the raw materials used in our manufacturing operations, from suppliers located primarily in the U.S., Canada, and China. Our top-selling products include RV appliances and air conditioners; towing hitches; truck bed covers; vehicle protection products; marine electronics; cargo management products; wheels, tires, and suspension components; winches; hoists; and bumpers.

Our suppliers are generally small to medium‑sized independent businesses that concentrate on specific product categories or market niches. As a result of this highly fragmented supplier base, our supplier concentration within this segment is limited. In 2025, approximately 19% of our specialty vehicle aftermarket purchases were made from our top three suppliers, with our largest supplier accounting for approximately 10% of our annual inventory purchases. No other supplier represented more than 4% of our purchases during 2025.

Customers

Our customers are principally small, independent businesses that rely on us to provide a broad range of products, rapid delivery, marketing support and technical assistance. In addition to these traditional customers, we also sell to several large online retailers of parts and accessories.

We promote our products through a range of marketing programs, including (i) catalogs, advertising, sponsorships and promotional activities, (ii) product‑level marketing and merchandising support, and (iii) online and digital marketing initiatives. We also stage in‑person and/or virtual trade shows across the U.S., which provide opportunities to increase sales by showcasing new and innovative products from our vendors to our customers.

Customers can place orders for our products through our ekeystone.com, viantp.com and SeaWideB2B.com platforms, as well as through our mobile application. These platforms allow customers to match products to specific vehicle makes and models, review product information such as images and attributes, and search inventory availability before placing orders. In addition, these platforms can generate incremental sales opportunities by suggesting complementary products based on customer inquiries.

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Distribution

Our Specialty segment operates under a hub‑and‑spoke distribution model that enables the movement of products from our primary distribution centers to our non‑inventory‑stocking cross‑dock locations. Several of these cross docks are co‑located with our North America operations, providing distribution points to key regional markets and creating synergies with our existing infrastructure. We believe this model enhances the value we provide to customers by supporting a broader product offering and a more efficient distribution process.

We utilize our delivery routes to manage both deliveries and returns directly to and from customers across all 48 continental United States and 9 Canadian provinces, and we also ship products globally to customers in other countries. Our delivery fleet uses third‑party software to optimize routing and monitor the progress of delivery vehicles.

Competition

Industry participants have a variety of supply options. Vendors may deliver products through warehouse distributors and mail order catalog businesses, or directly to retailers and/or consumers. We view all distributors of specialty vehicle aftermarket equipment and accessories as our competitors. We believe we differentiate ourselves from other specialty vehicle aftermarket parts and equipment distributors primarily through our broad product selection, which encompasses both widely used and hard-to-find products, our national distribution network, our efficient inventory management systems, and the quality of our service. We compete on the basis of product breadth and depth, rapid and reliable delivery, marketing initiatives, support services, and price.

Information Technology Systems

Most of our Specialty operations use an internally developed inventory management and order entry system that integrates with third party software solutions supporting accounting, transaction processing, inventory and warehouse management, data analytics, and reporting. Leveraging an internally developed platform allows us to implement real-time updates, enhancements, and new capabilities that align with the business's evolving operational needs.

HUMAN CAPITAL

At LKQ, our team members are at the heart of everything we do. As of December 31, 2025, we employ approximately 44,000 people globally, of which approximately 17,000 are based in North America, 25,000 based in Europe and 2,000 based in Asia. Of our employees in North America, approximately 1,000 are represented by unions. Outside of North America, we have government-mandated collective bargaining agreements and union contracts in certain countries, particularly in Europe where approximately 7,000 of our employees are represented by unions and/or works councils.

Health and Safety

We are dedicated to ensuring a safe and secure work environment for all team members, where risks are minimized, and safety is a shared priority. Our proactive approach includes implementing a range of programs and practices aimed at preventing accidents and fostering a culture of safety throughout our organization.

Employee Empowerment

We strive to create an environment where creativity thrives, and team members are empowered to make decisions that are best for their teams and the business. One example of this practice is our global employee engagement survey, which provides an opportunity for us to listen to our organization, understand what we are doing well, and identify areas for improvement. As a result of feedback from this survey, we launched the Inspired to Thrive global initiative, which reinforces our commitment to fostering an inclusive culture where every team member feels valued, respected, and empowered to contribute their unique perspectives and talents. This initiative is built on five pillars: (i) holistic well-being; (ii) financial empowerment; (iii) inclusive culture; (iv) professional growth; and (v) community engagement. Each of these pillars is supported by robust programs that enable our team members to lead fulfilling lives both in and outside of the workplace. Through this initiative, we prioritize the well-being, development, and engagement of our workforce, recognizing that an inclusive environment drives both innovation and success.

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Commitment to Values and Ethics

Our Code of Ethics empowers our team members to make principled decisions in every aspect of their work. Covering essential topics such as the responsible use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and the safeguarding of confidential information, our Code of Ethics reflects our dedication to maintaining a high level of integrity. Additionally, our global Speak Up Program provides a secure, anonymous channel for reporting complaints related to potential violations of our Code of Ethics, policies, laws, or safety practices.

INTELLECTUAL PROPERTY

We own and have the right to use various intellectual property, including intellectual property acquired as a result of past acquisitions. In addition to trade names, trademarks and patents, we also have technology-based intellectual property that has been both internally developed and obtained through license agreements and acquisitions. We do not believe that our business is materially dependent on any single item of intellectual property, or any single group of related intellectual property, owned or licensed, nor would the expiration of any particular item or related group of intellectual property, or the termination of any particular intellectual property license agreement, materially affect our business. See the risk factor "Intellectual property claims relating to aftermarket products could adversely affect our business." in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the risks related to intellectual property.

REGULATION

Our operations and properties are subject to laws and regulations relating to the protection of the environment in the U.S. and the other countries in which we operate. We may be affected by tariffs and other import laws and restrictions because we import into the U.S. a significant number of products for sale and distribution. Our business processes and operations are subject to laws and regulations relating to privacy and data protection. Some jurisdictions have enacted laws to restrict or prohibit the sale of alternative vehicle parts. We have thousands of employees located in the U.S. and many other countries and are subject to labor and employment laws in numerous jurisdictions. See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for further information regarding the effects of environmental laws and regulations on us, importation risks, privacy and data protection risks, regulatory restrictions on the sale of our products, and labor and employment risks.

SEASONALITY

Our operating results are subject to quarterly variations based on a variety of factors, including, but not limited to, seasonal weather patterns and events. For our North America segment, we tend to see higher demand for our collision related products during periods of inclement weather, which creates a higher likelihood of increased collision frequency and repairable claims. For our Europe segment, many of our aftermarket service-related products are impacted by weather patterns. For example, during periods of extreme cold, our Europe segment historically witnesses an increase in battery demand. Our Specialty segment sells parts for RV and marine products, and as a result, we tend to see higher demand for our products during periods of warmer weather due to an increased level of outdoor leisure activity.

SUSTAINABILITY MATTERS

Profitably Delivering Sustainable Solutions

Our mission statement of being a leading global value-added and sustainable distributor of vehicle parts and accessories is supported by our recycling expertise and efforts as well as our hard parts, aftermarket collision, paint, and diagnostics businesses across our North American and European operations.

LKQ purchases end-of-life vehicles and removes certain components for reuse in the repair of vehicles which helps reduce the use of raw materials and contributes to a circular economy. Once the parts are removed from purchased vehicles, some of the remaining valuable materials are collected and repurposed for use in the manufacturing of new basic materials such as steel, aluminum, plastic, and rubber. Additionally, we extract fluids, some of which are recycled or utilized in our own operations, such as fuel to run our own on- and off-site fleet, and washer fluid.

Our recycling and remanufacturing efforts preserve natural resources, reduce the demand for scarce landfill space, and help decrease air and water pollution, the latter attributed to the avoidance of new manufacturing activities that would otherwise be required.

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People-led Performance

Part of LKQ’s mission is to build strong partnerships with our employees and the communities in which we operate. Along those lines, we strive to create a culture of respect and inclusivity and encourage everyone to be their authentic selves. We are committed to maintaining a physically and psychologically safe and inclusive environment, free from bullying and harassment, in alignment with our core values. And in furtherance of our mission, we established the LKQ Community Foundation, which is committed to supporting charitable organizations that help the communities where our employees live and LKQ operates.

Strong Governance and Ethical Practices

Our Board refreshment process has resulted in over half of our current Board being added since May 2024, and currently, 22% of our Board is comprised of persons from underrepresented groups. Additionally, eight of our nine directors are independent.

We have adopted “proxy access,” which permits an eligible stockholder to nominate and include in our proxy materials director nominees (subject to the terms set forth in our Bylaws). We also have majority voting for the election of our directors, requiring a director who fails to receive a majority vote to tender his or her resignation to the Board.

Our Board adopted a revised Code of Ethics in 2024, which covers a variety of topics, including the use of company assets, bribery and corruption, conflicts of interest, discrimination, harassment, health and safety, privacy and data protection, and the safeguarding of confidential information, and reporting Code of Ethics violations. It is available in 17 languages through our website.

More information on our Sustainability initiatives can be found in our most recent Sustainability Report on our website. The Sustainability Report is not incorporated by reference and should not be considered part of this Annual Report on Form 10-K.