Last10K.com

Lkq Corp (LKQ) SEC Filing 10-Q Quarterly report for the period ending Tuesday, June 30, 2020

Lkq Corp

CIK: 1065696 Ticker: LKQ
Exhibit 99.1
lkqpressreleaseimage11.jpg


LKQ CORPORATION ANNOUNCES RESULTS FOR SECOND QUARTER 2020


Second quarter 2020 revenue of $2.6 billion (down 19.1% year-over-year)
Parts and services organic revenue declined 16.8%
Implemented targeted cost actions contributing to sequential expense reduction
Net income1 of $119 million (down 21.2%); adjusted net income of $161 million (down 20.9%)
Diluted EPS1 of $0.39 (down 18.8%); adjusted diluted EPS of $0.53 (down 18.5%)
Second quarter 2020 operating cash flow of $718 million (up 56%); free cash flow of $686 million (up 66%)
Reduced borrowings by $552 million; year-to-date debt paydown of $782 million
Net leverage down to 2.2x EBITDA
Liquidity up to $2.5 billion as of June 30, 2020

Chicago, IL (July 30, 2020) -- LKQ Corporation (Nasdaq: LKQ) today reported second quarter 2020 results consistent with the Company’s previously announced second quarter business update on June 15, 2020. Relative to the start of the second quarter, the full quarter results reflect improved revenue trends, operational and balance sheet productivity and continued debt reduction.
COVID-19 Update
“The momentum we gained in April and May continued through June, and we finished the quarter solidly,” noted Dominick Zarcone, President and Chief Executive Officer. “During the quarter, we delivered on our key initiatives of driving higher levels of cash flow and driving higher EBITDA margins. Operating cash flows were $718 million, a 56% increase over the same period in 2019. Additionally, despite the decline in revenue, our North American team delivered Segment EBITDA margin of 14.8%. Our European segment demonstrated continuous improvements from a revenue and margin perspective each month as we migrated through the quarter. I am particularly pleased with the performance of our Specialty segment, which saw only a slight decline in organic revenue of 1.4%, well above our expectations.”
Mr. Zarcone further commented, “The operating environment continues to evolve, and while the Company's second quarter performance exceeded our expectations at the beginning of the quarter, there remains a high degree of uncertainty about the ongoing rate and shape of the COVID-19 recovery. As a result, the Company is not providing new fiscal 2020 guidance at this time. That said, our teams across the globe are committed to effective operational execution and protecting our business in this uncharted environment as they have thus far. Importantly, despite these headwinds, our long-term strategic and financial objectives, and capital allocation priorities, are unchanged.”



1 References to Net income and Diluted earnings per share, and the corresponding adjusted figures, in this release reflect amounts from continuing operations attributable to LKQ stockholders.


The following information was filed by Lkq Corp (LKQ) on Thursday, July 30, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________ 
FORM 10-Q
____________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
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,Illinois60661
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (312) 621-1950
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareLKQNASDAQ Global Select Market
________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 
At July 30, 2020, the registrant had outstanding an aggregate of 304,292,579 shares of Common Stock.

1


PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months EndedSix Months Ended
June 30,June 30,
 2020201920202019
Revenue$2,626,323  $3,248,173  $5,627,258  $6,348,476  
Cost of goods sold1,615,319  2,000,986  3,402,378  3,893,025  
Gross margin1,011,004  1,247,187  2,224,880  2,455,451  
Selling, general and administrative expenses737,369  898,368  1,637,180  1,794,900  
Restructuring and acquisition related expenses24,950  8,377  31,920  11,684  
Loss on disposal of businesses and impairment of net assets held for sale2,485  33,497  2,236  48,520  
Depreciation and amortization65,747  70,834  131,242  141,836  
Operating income180,453  236,111  422,302  458,511  
Other expense (income):
Interest expense, net of interest income25,616  35,884  51,547  71,973  
Loss on debt extinguishment—  —  12,751  —  
Other income, net(8,174) (5,733) (11,796) (9,584) 
Total other expense, net17,442  30,151  52,502  62,389  
Income from continuing operations before provision for income taxes163,011  205,960  369,800  396,122  
Provision for income taxes41,869  55,825  102,280  107,375  
Equity in (losses) earnings of unconsolidated subsidiaries(2,649) 1,572  (2,133) (37,977) 
Income from continuing operations118,493  151,707  265,387  250,770  
Net income (loss) from discontinued operations277  398  (638) 398  
Net income118,770  152,105  264,749  251,168  
Less: net (loss) income attributable to continuing noncontrolling interest(22) 1,352  718  2,367  
Less: net income attributable to discontinued noncontrolling interest—  192  103  192  
Net income attributable to LKQ stockholders$118,792  $150,561  $263,928  $248,609  
Basic earnings per share: (1)
Income from continuing operations$0.39  $0.49  $0.87  $0.80  
Net income (loss) from discontinued operations0.00  0.00  (0.00) 0.00  
Net income0.39  0.49  0.87  0.80  
Less: net (loss) income attributable to continuing noncontrolling interest(0.00) 0.00  0.00  0.01  
Less: net income attributable to discontinued noncontrolling interest—  0.00  0.00  0.00  
Net income attributable to LKQ stockholders$0.39  $0.48  $0.86  $0.79  
Diluted earnings per share: (1)
Income from continuing operations$0.39  $0.49  $0.87  $0.80  
Net income (loss) from discontinued operations0.00  0.00  (0.00) 0.00  
Net income0.39  0.49  0.87  0.80  
Less: net (loss) income attributable to continuing noncontrolling interest(0.00) 0.00  0.00  0.01  
Less: net income attributable to discontinued noncontrolling interest—  0.00  0.00  0.00  
Net income attributable to LKQ stockholders$0.39  $0.48  $0.86  $0.79  
(1) The sum of the individual earnings per share amounts may not equal the total due to rounding.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2




LKQ CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)
Three Months EndedSix Months Ended
June 30,June 30,
 2020201920202019
Net income$118,770  $152,105  $264,749  $251,168  
Less: net (loss) income attributable to continuing noncontrolling interest(22) 1,352  718  2,367  
Less: net income attributable to discontinued noncontrolling interest—  192  103  192  
Net income attributable to LKQ stockholders118,792  150,561  263,928  248,609  
Other comprehensive income (loss):
Foreign currency translation, net of tax31,334  5,602  (72,631) (4,293) 
Net change in unrealized gains/losses on cash flow hedges, net of tax
(31) (5,650) (7,352) (8,387) 
Net change in unrealized gains/losses on pension plans, net of tax
1,875  28  1,995  219  
Other comprehensive income (loss) from unconsolidated subsidiaries962  2,321  (890) (1,142) 
Other comprehensive income (loss)34,140  2,301  (78,878) (13,603) 
Comprehensive income152,910  154,406  185,871  237,565  
Less: comprehensive (loss) income attributable to continuing noncontrolling interest
(22) 1,352  718  2,367  
Less: comprehensive income attributable to discontinued noncontrolling interest
—  192  103  192  
Comprehensive income attributable to LKQ stockholders
$152,932  $152,862  $185,050  $235,006  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3



LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30,December 31,
20202019
Assets
Current assets:
Cash and cash equivalents$476,426  $523,020  
Receivables, net1,125,816  1,131,132  
Inventories2,288,293  2,772,777  
Prepaid expenses and other current assets216,438  260,890  
Total current assets4,106,973  4,687,819  
Property, plant and equipment, net1,196,505  1,234,400  
Operating lease assets, net1,272,513  1,308,511  
Intangible assets:
Goodwill4,377,350  4,406,535  
Other intangibles, net798,799  850,338  
Equity method investments136,673  139,243  
Other noncurrent assets146,486  153,110  
Total assets$12,035,299  $12,779,956  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$756,846  $942,795  
Accrued expenses:
Accrued payroll-related liabilities179,470  179,203  
Refund liability103,679  97,314  
Value added taxes payable160,294  46,490  
Other accrued expenses258,490  243,193  
Income taxes payable114,202  26,959  
Other current liabilities67,410  94,664  
Current portion of operating lease liabilities216,177  221,527  
Current portion of long-term obligations93,200  326,367  
Total current liabilities1,949,768  2,178,512  
Long-term operating lease liabilities, excluding current portion1,112,230  1,137,597  
Long-term obligations, excluding current portion3,157,725  3,715,389  
Deferred income taxes299,867  310,129  
Other noncurrent liabilities343,691  365,672  
Commitments and contingencies
Redeemable noncontrolling interest24,077  24,077  
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 320,530,156 shares issued and 304,034,241 shares outstanding at June 30, 2020; 319,927,243 shares issued and 306,731,328 shares outstanding at December 31, 2019
3,205  3,199  
Additional paid-in capital1,433,338  1,418,239  
Retained earnings4,401,545  4,140,136  
Accumulated other comprehensive loss(279,763) (200,885) 
Treasury stock, at cost; 16,495,915 shares at June 30, 2020 and 13,195,915 shares at December 31, 2019
(439,819) (351,813) 
Total Company stockholders' equity5,118,506  5,008,876  
Noncontrolling interest29,435  39,704  
Total stockholders' equity5,147,941  5,048,580  
Total liabilities and stockholders' equity$12,035,299  $12,779,956  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4




LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$264,749  $251,168  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization144,309  152,361  
Impairment of equity method investments—  39,551  
Loss on disposal of businesses and impairment of net assets held for sale2,236  48,520  
Stock-based compensation expense15,763  13,659  
Loss on debt extinguishment12,751  —  
Other(3,554) (3,516) 
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Receivables, net(5,111) (149,052) 
Inventories445,493  131,229  
Prepaid income taxes/income taxes payable84,125  25,967  
Accounts payable(172,140) 96,888  
Other operating assets and liabilities124,431  31,629  
Net cash provided by operating activities913,052  638,404  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment(77,301) (101,268) 
Proceeds from disposals of property, plant and equipment6,110  1,976  
Acquisitions, net of cash acquired(5,465) (14,767) 
Proceeds from disposal of businesses, net of cash sold4,602  —  
Other investing activities, net(3,917) (2,711) 
Net cash used in investing activities(75,971) (116,770) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Early-redemption premium(9,498) —  
Repayment of U.S. Notes (2023)(600,000) —  
Borrowings under revolving credit facilities494,485  312,880  
Repayments under revolving credit facilities(601,480) (471,439) 
Repayments under term loans(8,750) (4,375) 
Borrowings under receivables securitization facility111,300  36,600  
Repayments under receivables securitization facility(111,300) (146,600) 
Repayments of other debt, net(66,073) (8,367) 
Purchase of treasury stock(88,006) (190,762) 
Other financing activities, net(10,832) 75  
Net cash used in financing activities(890,154) (471,988) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5,358) (102) 
Net (decrease) increase in cash, cash equivalents and restricted cash(58,431) 49,544  
Cash, cash equivalents and restricted cash of continuing operations, beginning of period
528,387  337,250  
Add: Cash, cash equivalents and restricted cash of discontinued operations, beginning of period
6,470  —  
Cash, cash equivalents and restricted cash of continuing and discontinued operations, beginning of period
534,857  337,250  
Cash, cash equivalents and restricted cash of continuing and discontinued operations, end of period
476,426  386,794  
Less: Cash and cash equivalents of discontinued operations, end of period
—  5,372  
Cash, cash equivalents and restricted cash, end of period$476,426  $381,422  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5



Six Months Ended
June 30,
20202019
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$476,426  $375,967  
Restricted cash included in Other noncurrent assets—  5,455  
Cash, cash equivalents and restricted cash, end of period$476,426  $381,422  
Supplemental disclosure of cash paid for:
Income taxes, net of refunds$24,452  $88,001  
Interest55,910  75,259  
Supplemental disclosure of noncash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities$8,225  $7,568  
Leased assets obtained in exchange for new operating lease liabilities36,458  61,891  
Noncash property, plant and equipment additions7,200  14,227  
Notes payable and other financing obligations, including notes issued, debt assumed and settlement of pre-existing balances in connection with business acquisitions and disposals
6,136  45,420  
Notes receivable and contingent consideration receivable acquired in connection with disposal of businesses
8,549  —  
Contingent consideration liabilities3,045  5,377  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6




LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(In thousands)
LKQ Stockholders
 Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated
Other
Comprehensive (Loss) Income
Noncontrolling InterestTotal Stockholders' Equity
 SharesAmountSharesAmount
BALANCE, April 1, 2020
320,439  $3,204  (16,496) $(439,819) $1,425,600  $4,282,753  $(313,903) $29,484  $4,987,319  
Net income (loss)
—  —  —  —  —  118,792  —  (22) 118,770  
Other comprehensive income
—  —  —  —  —  —  34,140  —  34,140  
Vesting of restricted stock units, net of shares withheld for employee tax
91   —  —  (57) —  —  —  (56) 
Stock-based compensation expense
—  —  —  —  7,795  —  —  —  7,795  
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder
—  —  —  —  —  —  —  (27) (27) 
BALANCE, June 30, 2020
320,530  $3,205  (16,496) $(439,819) $1,433,338  $4,401,545  $(279,763) $29,435  $5,147,941  



LKQ Stockholders
 Common StockTreasury StockAdditional Paid-In CapitalRetained
Earnings
Accumulated
Other
Comprehensive (Loss) Income
Noncontrolling InterestTotal Stockholders' Equity
 SharesAmountSharesAmount
BALANCE, April 1, 2019
318,889  $3,189  (4,915) $(130,462) $1,420,685  $3,696,924  $(190,854) $57,292  $4,856,774  
Net income
—  —  —  —  —  150,561  —  1,544  152,105  
Other comprehensive income
—  —  —  —  —  —  2,301  —  2,301  
Purchase of treasury stock
—  —  (4,400) (120,300) —  —  —  —  (120,300) 
Vesting of restricted stock units, net of shares withheld for employee tax
68   —  —  (78) —  —  —  (77) 
Stock-based compensation expense
—  —  —  —  7,986  —  —  —  7,986  
Exercise of stock options
53   —  —  536  —  —  —  536  
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder
—  —  —  —  —  —  —  162  162  
Acquired noncontrolling interest
—  —  —  —  —  —  —  10,261  10,261  
BALANCE, June 30, 2019
319,010  $3,190  (9,315) $(250,762) $1,429,129  $3,847,485  $(188,553) $69,259  $4,909,748  













The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7




LKQ CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(In thousands)
LKQ Stockholders
 Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated
Other
Comprehensive Loss
Noncontrolling InterestTotal Stockholders' Equity
 SharesAmountSharesAmount
BALANCE, January 1, 2020
319,927  $3,199  (13,196) $(351,813) $1,418,239  $4,140,136  $(200,885) $39,704  $5,048,580  
Net income
—  —  —  —  —  263,928  —  821  264,749  
Other comprehensive loss
—  —  —  —  —  —  (78,878) —  (78,878) 
Purchase of treasury stock
—  —  (3,300) (88,006) —  —  —  —  (88,006) 
Vesting of restricted stock units, net of shares withheld for employee tax
491   —  —  (2,130) —  —  —  (2,125) 
Stock-based compensation expense
—  —  —  —  15,763  —  —  —  15,763  
Exercise of stock options
112   —  —  1,466  —  —  —  1,467  
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder
—  —  —  —  —  —  —  314  314  
Adoption of ASU 2016-13 (see Note 3)
—  —  —  —  —  (2,519) —  —  (2,519) 
Disposition of subsidiary with noncontrolling interests(1)
—  —  —  —  —  —  —  (11,404) (11,404) 
BALANCE, June 30, 2020
320,530  $3,205  (16,496) $(439,819) $1,433,338  $4,401,545  $(279,763) $29,435  $5,147,941  
(1) The amount disposed of in 2020 relates to discontinued operations. See Note 2, "Discontinued Operations," for further information.


LKQ Stockholders
 Common StockTreasury StockAdditional Paid-In CapitalRetained
Earnings
Accumulated
Other
Comprehensive Loss
Noncontrolling InterestTotal Stockholders' Equity
 SharesAmountSharesAmount
BALANCE, January 1, 2019
318,418  $3,184  (2,272) $(60,000) $1,415,188  $3,598,876  $(174,950) $56,454  $4,838,752  
Net income
—  —  —  —  —  248,609  —  2,559  251,168  
Other comprehensive loss
—  —  —  —  —  —  (13,603) —  (13,603) 
Purchase of treasury stock
—  —  (7,043) (190,762) —  —  —  —  (190,762) 
Vesting of restricted stock units, net of shares withheld for employee tax
371   —  —  (1,158) —  —  —  (1,154) 
Stock-based compensation expense
—  —  —  —  13,659  —  —  —  13,659  
Exercise of stock options
236   —  —  1,868  —  —  —  1,870  
Tax withholdings related to net share settlements of stock-based compensation awards

(15) —  —  —  (428) —  —  —  (428) 
Capital contributions from, net of dividends declared to, noncontrolling interest shareholder
—  —  —  —  —  —  —  (15) (15) 
Acquired noncontrolling interest
—  —  —  —  —  —  —  10,261  10,261  
BALANCE, June 30, 2019
319,010  $3,190  (9,315) $(250,762) $1,429,129  $3,847,485  $(188,553) $69,259  $4,909,748  

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8



LKQ CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements 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 ("GAAP") have been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include only normally recurring adjustments) necessary to fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Results for interim periods are not necessarily indicative of the results that can be expected for any subsequent interim period or for a full year. These interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 27, 2020 ("2019 Form 10-K").
The coronavirus disease 2019 ("COVID-19") pandemic and the resulting governmental actions taken to control the virus have impacted, and are expected to continue to impact, our business in 2020 and into 2021. The effects include, but are not limited to, a reduction in demand for our products and services, liquidity challenges for certain of our customers and suppliers, and organizational changes, such as personnel reductions and route consolidation, driven by cost actions to mitigate the actual and expected revenue decline. We have considered COVID-19 impacts in the preparation of our financial statements and footnotes as of and for the three and six months ended June 30, 2020. Specific disclosures are presented in the following footnotes as applicable.
The ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the severity and duration of the pandemic and the related impact on the global economy, which are uncertain and cannot be predicted at this time.

Note 2. Discontinued Operations
On May 30, 2018, we acquired Stahlgruber GmbH ("Stahlgruber"), a leading European wholesale distributor of aftermarket spare parts for passenger cars, tools, capital equipment and accessories with operations in Germany, Austria, Italy, Slovenia, and Croatia, with further sales to Switzerland. Prior to closing, on May 3, 2018, the European Commission cleared the acquisition of Stahlgruber for the entire European Union, except with respect to the wholesale automotive parts business in the Czech Republic. The acquisition of Stahlgruber’s Czech Republic wholesale business was referred to the Czech Republic competition authority for review. On May 10, 2019, the Czech Republic competition authority approved our acquisition of Stahlgruber’s Czech Republic wholesale business subject to the requirement that we divest certain of the acquired locations. We acquired Stahlgruber’s Czech Republic wholesale business on May 29, 2019 and decided to divest all of the acquired locations. We immediately classified the business as discontinued operations because the business was never integrated into our Europe segment.
We completed the sale of Stahlgruber's Czech Republic business on February 28, 2020, resulting in a loss on sale of $1 million (presented in Net income (loss) from discontinued operations in the Unaudited Condensed Consolidated Statements of Income). As part of the transaction, we purchased the 48.2% noncontrolling interest from the minority shareholder for a purchase price of €8 million, which included the issuance of €4 million of notes payable, and then concurrently sold 100% of the business for a purchase price of €14 million, which included €7 million of notes receivable. This transaction resulted in a disposition of noncontrolling interest of $11 million. From January 1, 2020 through the date of sale, we recorded an immaterial amount of net income (excluding the loss on sale) from discontinued operations related to the business, of which an immaterial amount was attributable to the noncontrolling interest. During the three months ended June 30, 2020, we recorded an immaterial adjustment related to the loss on disposal of the business.
As of December 31, 2019, the assets held for sale, liabilities held for sale, and noncontrolling interest of Stahlgruber's Czech Republic business were recorded within Prepaid expenses and other current assets, Other current liabilities, and Noncontrolling interest, respectively, on the Unaudited Condensed Consolidated Balance Sheets.

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Note 3. Financial Statement Information
Allowance for Credit Losses
Management evaluates the aging of customer receivable balances, the financial condition of our customers, historical trends, and macroeconomic factors to estimate the amount of customer receivables that may not be collected in the future and records a provision it believes is appropriate. Our reserve for expected lifetime credit losses was approximately $70 million and $53 million at June 30, 2020 and December 31, 2019, respectively. Bad debt expense totaled $24 million and $6 million for the six months ended June 30, 2020 and June 30, 2019, respectively. The increase in our allowance for credit losses since December 31, 2019 is attributable to the $3 million effect of the adoption of ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") in the first quarter of 2020 (see the Recently Adopted Accounting Pronouncements section below for further details) and an increase in expected lifetime losses primarily attributable to the downturn in the global economy related to the effects of the COVID-19 pandemic.
Inventories
Inventories consist of the following (in thousands):
June 30,December 31,
20202019
Aftermarket and refurbished products$1,895,922  $2,297,895  
Salvage and remanufactured products366,699  447,908  
Manufactured products25,672  26,974  
Total inventories $2,288,293  $2,772,777  
Aftermarket and refurbished products and salvage and remanufactured products are primarily composed of finished goods. As of June 30, 2020, manufactured products inventory was composed of $18 million of raw materials, $3 million of work in process, and $4 million of finished goods. As of December 31, 2019, manufactured products inventory was composed of $17 million of raw materials, $3 million of work in process, and $6 million of finished goods.
Net Assets Held for Sale
During 2019 and the first half of 2020, we committed to plans to sell certain businesses in our North America and Europe segments. As a result, these businesses were classified as net assets held for sale and were required to be adjusted to the lower of fair value less cost to sell or carrying value, resulting in total impairment charges of $2 million for each of the three and six months ended June 30, 2020 and $33 million and $49 million for the three and six months ended June 30, 2019 (presented in Loss on disposal of businesses and impairment of net assets held for sale in the Unaudited Condensed Consolidated Statements of Income). Excluding the Stahlgruber Czech Republic wholesale business discussed in Note 2, "Discontinued Operations," as of December 31, 2019, there were $19 million of assets held for sale and $9 million of liabilities held for sale, which were recorded within Prepaid expenses and other current assets and Other current liabilities, respectively, on the Unaudited Condensed Consolidated Balance Sheet. As of June 30, 2020, assets and liabilities held for sale were immaterial.
In the second quarter of 2020, we completed the sale of one of these businesses, a non-core telecommunications operation in Germany, resulting in an immaterial loss on sale (presented in Loss on disposal of businesses and impairment of net assets held for sale in the Unaudited Condensed Consolidated Statements of Income). The disposed business was immaterial, generating annualized revenue of approximately $78 million during the twelve-month period ended May 31, 2020.
We are required to record net assets of our held for sale businesses at the lower of fair value less cost to sell or carrying value. Fair values were based on projected discounted cash flows and/or estimated selling prices. Management's assumptions for our discounted cash flow analyses of the businesses were based on projected revenues and profits, tax rates, capital expenditures, working capital requirements and discount rates. For businesses for which we utilized estimated selling prices to calculate the fair value, the inputs to our estimates included projected market multiples and any reasonable offers. Due to uncertainties in the estimation process, it is possible that actual results could differ from the estimates used in our analysis. The inputs utilized in the fair value estimates are classified as Level 3 within the fair value hierarchy. The fair values of the net assets were measured on a non-recurring basis as of June 30, 2020.
Intangible Assets
Goodwill and indefinite-lived intangibles are tested for impairment at least annually, and we performed our annual impairment tests during the fourth quarter of 2019. Goodwill impairment testing may also be performed on an interim basis when events or circumstances arise that may lead to impairment. LKQ’s market capitalization declined by approximately 40%
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between February 20, 2020, when the Company released its 2019 financial results, and March 31, 2020. While we believed that the decrease was driven by market reaction to COVID-19, the magnitude of the market capitalization decrease was deemed to be a triggering event requiring an interim test of goodwill impairment in the first quarter.
The fair value estimates of our reporting units were established using weightings of the results of a discounted cash flow methodology and a comparative market multiples approach. At the time of our analysis, our projections for the interim impairment test assumed that the COVID-19 impact would be severe, with revenue down by as much as 50% in the second quarter of 2020 compared to our prior forecast used in the 2019 impairment analysis, but temporary, as revenue would improve gradually in the second half of 2020. We expected that cost mitigation actions and cash preservation measures would dampen the negative impact of the projected revenue decline.
Based on the interim test in the first quarter of 2020, we determined no impairments existed as all reporting units had a fair value estimate that exceeded the carrying value by at least 12%, the level at which our Europe reporting unit exceeded its carrying value.
We did not identify a triggering event in the second quarter that necessitated an interim test of goodwill impairment, as LKQ’s market capitalization increased by approximately 28% between March 31 and June 30, 2020. Actual results for the second quarter were favorable relative to the forecast used in the first quarter interim test.
Leases
We lease certain warehouses, distribution centers, retail stores, office space, land, vehicles and equipment. We determine if an arrangement is a lease at inception. Operating and finance lease right-of-use ("ROU") assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the implicit rate for most of our leases is not readily determinable, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We determine our incremental borrowing rate by analyzing yield curves with consideration of lease term, country and company specific factors. The ROU asset also includes any lease prepayments and excludes lease incentives.
Many of our leases include one or more options to renew, with renewal terms that can extend the lease term from 1 year to 40 years or more. For each lease, we consider whether we are reasonably certain to exercise these options to extend. Other contracts may contain termination options that we assess to determine whether we are reasonably certain not to exercise those options. Certain leases also include options to purchase the leased property. The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Some of our lease agreements include rental payments adjusted periodically for inflation. Most of these adjustments are considered variable lease costs. Other variable lease costs consist of certain non-lease components that are disclosed as lease costs due to our election of the practical expedient to combine lease and non-lease components and include items such as variable payments for utilities, property taxes, common area maintenance, sales taxes, and insurance.
For leases with an initial term of 12 months or less, we have not recognized an ROU asset or lease liability on the Unaudited Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease terms.
In response to the COVID-19 global pandemic, we have secured rent relief from some of our lessors. The rent relief offered has most often been in the form of rent payment deferrals for one or more months to be paid back over a specified period of time ranging from one month to the remaining term of the lease. In accordance with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we are able to account for lease deferrals resulting directly from COVID-19 as if the enforceable rights and obligations for the deferrals existed in the respective contracts at lease inception as long as those concessions do not result in a substantial increase in our lease obligations. As a result, we have been able to apply the relief in most circumstances. Guidance from the FASB Staff Q&A provided methods to account for such rent deferrals, including the option to account for the lease as if no changes to the lease contract were made or to account for the deferred payments as variable lease payments. For the majority of our leases that were affected by rent relief actions, we elected to account for the deferrals as if no changes to the lease contract were made and continued to recognize lease expense, on a straight-line basis, during the deferral period. As of June 30, 2020, payment deferrals totaled $7 million and were recorded in Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets. Other concessions consisting of abated rent or discounted rent, without payback, from various landlords of $2 million resulted in reductions to Selling, general and administrative expenses in our Unaudited Condensed Consolidated Statements of Income.


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Investments in Unconsolidated Subsidiaries
Our investment in unconsolidated subsidiaries was $137 million and $139 million as of June 30, 2020 and December 31, 2019, respectively.
Europe Segment
Our investment in unconsolidated subsidiaries in Europe was $121 million and $122 million as of June 30, 2020 and December 31, 2019, respectively. We recorded equity in losses of an immaterial amount and equity in earnings of $1 million during the three and six months ended June 30, 2020, respectively, and equity in earnings of $2 million and equity in losses of $38 million during the three and six months ended June 30, 2019, respectively, mainly related to our investment in Mekonomen AB ("Mekonomen"). 
On December 1, 2016, we acquired a 26.5% equity interest in Mekonomen for an aggregate purchase price of $181 million. In October 2018, we acquired an additional $48 million of equity in Mekonomen at a discounted share price as part of its rights issue, increasing our equity interest to 26.6%. We are accounting for our interest in Mekonomen using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee. As of June 30, 2020, our share of the book value of Mekonomen's net assets exceeded the book value of our investment in Mekonomen by $5 million; this difference is primarily related to Mekonomen's Accumulated Other Comprehensive Income balance as of our acquisition date in 2016. We are recording our equity in the net earnings of Mekonomen on a one quarter lag.
During the three months ended March 31, 2019, we recognized an other-than-temporary impairment charge of $40 million, which represented the difference between the carrying value and the fair value of our investment in Mekonomen. The fair value of our investment in Mekonomen was determined using the Mekonomen share price of SEK 65 as of March 31, 2019. The impairment charge was recorded in Equity in (losses) earnings of unconsolidated subsidiaries in our Unaudited Condensed Consolidated Statements of Income.
Mekonomen announced in March 2020 that it would not make a dividend payment in 2020. The Level 1 fair value of our equity investment in the publicly traded Mekonomen common stock at June 30, 2020 was $99 million (using the Mekonomen share price of SEK 66 as of June 30, 2020) compared to a carrying value of $111 million. We evaluated our investment in Mekonomen for other-than-temporary impairment and concluded the decline in fair value was not other-than-temporary; however, a prolonged, material impairment may cause us to account for the decline as an other-than-temporary impairment in a future period, resulting in a charge in our Unaudited Condensed Consolidated Statements of Income.  
North America Segment
Our investment in unconsolidated subsidiaries in the North America segment was $15 million and $18 million as of June 30, 2020 and December 31, 2019, respectively. We recorded equity in losses of $3 million during both the three and six months ended June 30, 2020, and equity in losses of $1 million and equity in earnings of an immaterial amount during the three and six months ended June 30, 2019, respectively, related to our North America equity method investments.
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 or four year warranty against defects. We also provide a limited lifetime warranty for certain of our aftermarket products. These assurance-type warranties are not considered a separate performance obligation, and thus no transaction price is allocated to them. We record the warranty costs in Cost of goods sold in our Unaudited Condensed Consolidated Statements of Income. Our warranty reserve is calculated using historical claim information to project future warranty claims activity and is recorded within Other accrued expenses and Other noncurrent liabilities on our Unaudited Condensed Consolidated Balance Sheets based on the expected timing of the related payments.
The changes in the warranty reserve are as follows (in thousands):
Balance as of December 31, 2019$25,441  
Warranty expense30,610  
Warranty claims(27,189) 
Balance as of June 30, 2020$28,862  
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.
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Government Assistance
During the three months ended June 30, 2020, we recorded $33 million in financial assistance from foreign governments, primarily in the form of grants to offset personnel expenses in Europe and Canada. Financial assistance to be received from governments is recorded during the period in which we incur the costs which the assistance is intended to offset (and only if it is probable that we will meet the conditions required under the terms of the assistance). Of the $33 million recorded during the second quarter, $1 million and $32 million were reductions to Cost of goods sold and Selling, general and administrative expenses, respectively, in our Unaudited Condensed Consolidated Statement of Income.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted in the U.S. to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Similar legislation was enacted in many of the Company’s international jurisdictions. Tax measures in these legislative actions did not have a material impact on the Company’s results of operations for the six months ended June 30, 2020. Those initiatives did provide the Company with the opportunity to defer the timing of certain income, indirect and payroll tax payments in various jurisdictions. As of June 30, 2020, $160 million and $114 million were recorded in Value added taxes payable and Income taxes payable, respectively, on our Unaudited Condensed Consolidated Balance Sheets, compared to $46 million and $27 million, respectively, as of December 31, 2019. Approximately $175 million to $185 million of payments otherwise due in the second quarter of 2020 were deferred, of which we estimate approximately $125 million to $135 million will be paid during the third quarter of 2020, with the remainder to be paid in the fourth quarter or later.
Stockholders' Equity
Treasury Stock
As of June 30, 2020, our Board of Directors had authorized a stock repurchase program under which we may purchase up to $1.0 billion of our common stock from time to time through October 25, 2022. Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. The repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. Delaware law imposes restrictions on stock repurchases.
During the six months ended June 30, 2020, we repurchased 3.3 million shares of common stock for an aggregate price of $88 million; we did not repurchase any shares during the three months ended June 30, 2020. During the three and six months ended June 30, 2019, we repurchased 4.4 million and 7.0 million shares of common stock for an aggregate price of $120 million and $191 million, respectively. As of June 30, 2020, there was $560 million of remaining capacity under our repurchase program. Repurchased shares are accounted for as treasury stock using the cost method.
Noncontrolling Interest
In February 2020, as part of the sale of Stahlgruber's Czech Republic business, we divested the noncontrolling interest of the business, which resulted in a net decrease to Noncontrolling interest of $11 million in our unaudited condensed consolidated financial statements as of March 31, 2020. See Note 2, "Discontinued Operations," for further information.
In December 2019, we modified the shares representing a noncontrolling interest in a subsidiary acquired in connection with the Stahlgruber acquisition and issued new redeemable shares to the minority shareholder. The new redeemable shares contain (i) a put option for all noncontrolling interest shares at a fixed price of $24 million (€21 million) exercisable by the minority shareholder in the fourth quarter of 2023, (ii) a call option for all noncontrolling interest shares at a fixed price of $26 million (€23 million) exercisable by the Company beginning in the first quarter of 2026 through the end of the fourth quarter of 2027, and (iii) a guaranteed dividend to be paid quarterly to the minority shareholder through the fourth quarter of 2023. The new redeemable shares do not provide the minority shareholder with rights to participate in the profits and losses of the subsidiary prior to the exercise date of the put option. As the put option is outside the control of the Company, we recorded a $24 million Redeemable noncontrolling interest at the put option's exercise value outside of permanent equity on our Unaudited Condensed Consolidated Balance Sheets.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements 
During the first quarter of 2020, we adopted ASU No. 2016-13 and ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" ("ASU 2018-19"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the prior “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the
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contractual right to receive cash. We applied ASU 2016-13 and ASU 2018-19 on a modified retrospective basis. As of January 1, 2020, we recorded a cumulative effect adjustment to retained earnings of $3 million.
During the first quarter of 2020, we adopted ASU No. 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"), which removes, modifies, and adds certain disclosure requirements in ASC 820. We adopted the provisions of ASU 2018-13 by applying a prospective approach. The adoption of ASU 2018-13 did not have a material impact on our unaudited condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, "Income Taxes" (Topic 740) ("ASU 2019-12"), which simplifies the accounting for income taxes and adds guidance to reduce complexity in certain areas. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of this standard on our consolidated financial statements. 
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e. as early as the first quarter 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have been completed. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures, and we have not yet elected an adoption date.

Note 4. Revenue Recognition
The majority of our revenue is derived from the sale of vehicle parts. We recognize revenue when the products are shipped to, delivered to or picked up by customers, which is the point when title has transferred and risk of ownership has passed.
Sources of Revenue
We report our revenue in two categories: (i) parts and services and (ii) other. The following table sets forth our revenue by category, with our parts and services revenue further disaggregated by reportable segment (in thousands):
Three Months EndedSix Months Ended
June 30,June 30,
 2020201920202019
North America$892,826  $1,165,482  $2,000,168  $2,321,180  
Europe1,206,330  1,510,952  2,564,299  2,951,793  
Specialty404,002  410,263  751,408  762,819  
Parts and services2,503,158  3,086,697  5,315,875  6,035,792  
Other123,165  161,476  311,383  312,684  
Total revenue$2,626,323  $3,248,173  $5,627,258  $6,348,476  

Parts and Services
Our parts revenue is generated from the sale of vehicle products including replacement parts, components and systems used in the repair and maintenance of vehicles and specialty products and accessories to improve the performance, functionality and appearance of vehicles. Services revenue includes (i) additional services that are generally billed concurrently with the related product sales, such as the sale of service-type warranties, (ii) fees for admission to our self service yards, and (iii) diagnostic and repair services.
In North America, our vehicle replacement products include sheet metal collision parts such as doors, hoods, and fenders; bumper covers; head and tail lamps; automotive glass products such as windshields; mirrors and grilles; wheels; and large mechanical items such as engines and transmissions. In Europe, our products include a wide variety of small mechanical products such as brake pads, discs and sensors; clutches; electrical products such as spark plugs and batteries; steering and
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suspension products; filters; and oil and automotive fluids. In our Specialty operations, we serve six product segments: truck and off-road; speed and performance; RV; towing; wheels, tires and performance handling; and miscellaneous accessories. 
Our service-type warranties typically have service periods ranging from 6 months to 36 months. Under FASB Accounting Standards Codification Topic 606 ("ASC 606"), proceeds from these service-type warranties are deferred at contract inception and amortized on a straight-line basis to revenue over the contract period. The changes in deferred service-type warranty revenue are as follows (in thousands):
Balance as of January 1, 2020$27,067  
Additional warranty revenue deferred20,845  
Warranty revenue recognized(22,473) 
Balance as of June 30, 2020$25,439  

Other Revenue
Revenue from other sources includes sales of scrap and precious metals (platinum, palladium, and rhodium), bulk sales to mechanical manufacturers (including cores) and sales of aluminum ingots and sows from our furnace operations. We derive scrap metal and other precious metals from several sources, including vehicles that have been used in both our wholesale and self service recycling operations and from original equipment manufacturers ("OEMs") and other entities that contract with us for secure disposal of "crush only" vehicles. Revenue from the sale of hulks in our wholesale and self service recycling operations is recognized based on a price per ton of delivered material when the customer (processor) collects the scrap. Some adjustments may occur when the customer weighs the scrap at their location, and revenue is adjusted accordingly.
Revenue by Geographic Area
See Note 14, "Segment and Geographic Information" for information related to our revenue by geographic region.
Variable Consideration
The amount of revenue ultimately received from the customer can vary due to variable consideration including returns, discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, or other similar items. Under ASC 606 we are required to select the “expected value method” or the “most likely amount” method in order to estimate variable consideration. We utilize both methods in practice depending on the type of variable consideration, with contemplation of any expected reversals in revenue. We recorded a refund liability and return asset for expected returns of $104 million and $58 million, respectively, as of June 30, 2020, and $97 million and $52 million, respectively, as of December 31, 2019. The refund liability is presented separately on the Unaudited Condensed Consolidated Balance Sheets within current liabilities while the return asset is presented within Prepaid expenses and other current assets. Other types of variable consideration consist primarily of discounts, volume rebates, and other customer sales incentives that are recorded in Receivables, net on the Unaudited Condensed Consolidated Balance Sheets. We recorded a reserve for our variable consideration of $72 million and $108 million as of June 30, 2020 and December 31, 2019, respectively. While other customer incentive programs exist, we characterize them as material rights in the context of our sales transactions. We consider these programs to be immaterial to our unaudited condensed consolidated financial statements.

Note 5. Restructuring and Acquisition Related Expenses
2019 Global Restructuring Program
In the second quarter of 2019, we implemented a cost reduction initiative, covering all three of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. We have incurred and expect to incur costs for inventory write-downs; employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed of earlier than the end of the previously estimated useful lives.
During the three and six months ended June 30, 2020, we incurred $2 million and $5 million, respectively, of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs. In the three months ended June 30, 2019, costs under the program totaled $5 million, primarily for employee severance. These costs were recorded within Restructuring and acquisition related expenses in the Unaudited Condensed Consolidated Statements of Income during the three and six months ended June 30, 2020 and 2019. We expect to incur between $2 million and $4 million of future costs through 2021 to complete the program, and total program costs will be approximately $45 million ($37 million was
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incurred during the year ended December 31, 2019). Of the cumulative program costs incurred to date, $27 million, $14 million and $1 million related to our Europe, North America and Specialty segments, respectively.
2020 Global Restructuring Program
Beginning in the first quarter of 2020, we initiated a further restructuring program aimed at cost reductions across all our reportable segments through the elimination of underperforming assets and cost inefficiencies. These actions are incremental to those initiated as part of the 2019 Global Restructuring Program, and include costs for inventory write-downs; employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed of earlier than the end of the previously estimated useful lives. We expanded this program during the second quarter as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to our business from COVID-19.
During the three and six months ended June 30, 2020, we recognized restructuring expenses totaling $25 million and $27 million, respectively, for employee-related costs, facility exit costs and inventory write-downs. Of these expenses, $6 million resulted from inventory impairment charges related to facility consolidation actions and brand rationalizations and was recorded in Cost of goods sold in the Unaudited Condensed Consolidated Statement of Income for the three months ended June 30, 2020. Of the cumulative program costs incurred to date, $17 million, $10 million and $1 million related to our North America, Europe and Specialty segments, respectively. We estimate total costs under the program through its expected completion date in 2022 will be between $65 million and $75 million, of which approximately $40 million, $28 million, and $1 million will be incurred by our Europe, North America and Specialty segments, respectively.
Acquisition Integration Plans
During the three and six months ended June 30, 2020, we incurred $4 million and $5 million of restructuring expenses, respectively, for our acquisition integration plans. These expenses were primarily related to the integration of our operations in Belgium. Future expenses to complete our existing integration plans are expected to be immaterial.
During the three and six months ended June 30, 2019, we incurred $3 million and $6 million of restructuring expenses, respectively, related to our acquisition integration efforts. These expenses included approximately $1 million and $3 million for the three and six months ended June 30, 2019, respectively, related to the integration of our acquisition of Andrew Page Limited.
1 LKQ Europe Program
In September 2019, we announced a multi-year program called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business. Under the 1 LKQ Europe program, we will reorganize our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. We continue to expect to incur between $45 million and $55 million in total personnel and inventory related restructuring charges through 2024 as a result of executing the 1 LKQ Europe program. Certain projects were delayed in March 2020 in response to the COVID-19 pandemic. Based on our expectations in the second quarter of 2020 that the impacts on our business from COVID-19 had stabilized, we restarted the program in July 2020 with substantially the same initiatives and projects as prior to the pandemic, although we are evaluating the impact of the delay on our estimates of the related expenditures and timelines. We may also identify additional initiatives and projects under the 1 LKQ Europe program in future periods that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects.

Note 6. Stock-Based Compensation
In order to attract and retain employees, non-employee directors, consultants, and other persons associated with us, we grant equity-based awards under the LKQ Corporation 1998 Equity Incentive Plan (the “Equity Incentive Plan”). We have granted restricted stock units ("RSUs"), stock options, and restricted stock under the Equity Incentive Plan. We expect to issue new or treasury shares of common stock to cover past and future equity grants.
RSUs
The RSUs we have issued vest over periods of up to five years, subject to a continued service condition. Currently outstanding RSUs (other than PSUs, which are described below) 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 all of 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
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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.
Starting with our 2019 grants, participants who are eligible for retirement (defined as a voluntary separation of service from the Company after the participant has attained at least 60 years of age and completed at least five years of service) will continue to vest in their awards following retirement; if retirement occurs during the first year of the vesting period (for RSUs subject to a time-based vesting condition) or the first year of the performance period (for RSUs with a performance-based vesting condition), the participant vests in a prorated amount of the RSU grant based on the portion of the year employed. For our RSU grants prior to 2019, participants forfeit their unvested shares upon retirement.
The fair value of RSUs that vested during the six months ended June 30, 2020 was $17 million; the fair value of RSUs vested is based on the market price of LKQ stock on the date vested.
The following table summarizes activity related to our RSUs under the Equity Incentive Plan for the six months ended June 30, 2020:
Number
Outstanding
Weighted
Average
Grant Date
Fair Value
Weighted Average Remaining Contractual Term
(in years)
Aggregate Intrinsic Value
   (in thousands) (1)
Unvested as of January 1, 20201,612,026  $31.72  
Granted
887,907  $31.71  
Vested(550,661)