LKQ CORP

Previous wording

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related body repair products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. Our Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.

Current wording

Our Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related body repair products, and alternative vehicle mechanical replacement products, with our sales, processing, and distribution facilities reaching most major markets in the United States and Canada. Our Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the U.K., the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, and various other European countries. Our Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. Our Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.

Previous wording

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. Our current acquisition strategy focuses on acquisitions which are highly accretive, synergistic and/or add critical capabilities. Additionally, from time to time, we make investments in various businesses to advance our strategic objectives. See Note 2, "Business Combinations," and Note 6, "Equity Method Investments," to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our acquisitions and investments.

Current wording

Since our inception in 1998, we have pursued a growth strategy through both organic growth and acquisitions. Our current acquisition strategy focuses on highly accretive tuck-in acquisitions with significant synergies or critical capabilities and no large platform acquisitions are expected. Additionally, from time to time, we make investments in various businesses to advance our strategic objectives. See Note 2, "Business Combinations," and Note 7, "Equity Method Investments," to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our acquisitions and investments.

Previous wording

The discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our 2023 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the six months ended June 30, 2024.

Current wording

The discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our 2023 Form 10-K includes a summary of the critical accounting estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting estimates that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the nine months ended September 30, 2024.

Previous wording

We are executing on the various projects associated with the 1 LKQ Europe plan and expect to be completed by the end of 2027. During the three and six months ended June 30, 2024, we incurred $11 million and $19 million, respectively, in costs across all three categories noted above. We expect that costs of the plan, reflecting all three categories noted above, will range between $125 million to $155 million for 2024 through the projected plan completion date in 2027. In the future, we may also identify additional initiatives and projects under the 1 LKQ Europe plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. We expect the plan to continue to enable trade working capital and productivity initiatives that will help fund the plan cost.

Current wording

We are executing on the various projects associated with the 1 LKQ Europe plan and expect to be completed by the end of 2027. During the three and nine months ended September 30, 2024, we incurred $12 million and $31 million, respectively, in costs across all three categories noted above. We expect that costs of the plan, reflecting all three categories noted above, will range between $125 million to $155 million for 2024 through the projected plan completion date in 2027. In the future, we may also identify additional initiatives and projects under the 1 LKQ Europe plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives and projects. We expect the plan to continue to enable trade working capital and productivity initiatives that will help fund the plan cost.

Previous wording

The increase in parts and services revenue of 9.0% represented increases in segment revenue of 24.8% in Wholesale - North America and 5.2% in Specialty, partially offset by a decrease of 11.1% in Self Service. This overall increase was driven by an 11.8% increase due to the net impact of acquisitions and divestitures, partially offset by an organic parts and services revenue decrease of 2.1% (2.9% decrease on a per day basis) and a 0.6% decrease due to fluctuations in foreign exchange rates. The decrease in other revenue of 16.2% was primarily driven by a decrease in organic revenue of $31 million due to lower commodities prices and volumes compared to the prior year period, which resulted in a $28 million decrease in Self Service and a $3 million decrease in Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

The increase in parts and services revenue of 0.6% represented increases in segment revenue of 2.8% in Wholesale - North America and 1.8% in Europe, partially offset by decreases of 10.5% in Self Service and 8.5% in Specialty. This overall increase was driven by a 3.1% increase due to the net impact of acquisitions and divestitures and a 0.4% increase due to fluctuations in foreign exchange rates, partially offset by an organic parts and services revenue decrease of 2.8% (4.3% decrease on a per day basis). The decrease in other revenue of 2.2% was primarily driven by a decrease in organic revenue of $4 million due to lower commodities prices and volumes compared to the prior year period, which resulted in a $4 million decrease in Self Service and a $2 million decrease in Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

Cost of goods sold as a percentage of revenue increased to 61.2% of revenue for the three months ended June 30, 2024 from 59.0% of revenue for the three months ended June 30, 2023. Cost of goods sold reflects increases of 1.5% from Wholesale - North America, 0.6% from Europe, and 0.2% attributable to mix shift towards our lower margin segments, partially offset by a decrease of 0.3% from Self Service. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Cost of goods sold as a percentage of revenue increased to 61.2% of revenue for the three months ended September 30, 2024 from 61.0% of revenue for the three months ended September 30, 2023. Cost of goods sold reflects an increase of 0.7% from Wholesale - North America, partially offset by decreases of 0.3% from Self Service and 0.2% from Europe. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

SG&A expenses as a percentage of revenue decreased to 26.3% for the three months ended June 30, 2024 from 27.2% for the three months ended June 30, 2023. The year over year decrease in SG&A expense primarily reflects an impact of 0.9% related to Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

SG&A expenses as a percentage of revenue decreased to 27.1% for the three months ended September 30, 2024 from 27.5% for the three months ended September 30, 2023. The year over year decrease in SG&A expense primarily reflects impacts of 0.4% related to Wholesale - North America and 0.3% in Europe, partially offset by an increase of 0.2% from Specialty. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

(1)Restructuring expenses for the three months ended June 30, 2024 primarily consisted of (i) $37 million related to our 2024 Global Restructuring plan, (ii) $10 million related to our acquisition integration plans, (iii) $1 million related to our 1 LKQ Europe plan, and (iv) $1 million related to our 2022 Global Restructuring plan.

Current wording

(1)Restructuring expenses for the three months ended September 30, 2024 primarily consisted of (i) $14 million related to our 2024 Global Restructuring plan, (ii) $4 million related to our acquisition integration plans, and (iii) $1 million related to our 2022 Global Restructuring plan.

Previous wording

(1)Depreciation expense increased primarily related to an increase in capital expenditures in the last six months of 2023, which is impacting depreciation expense in 2024.

Current wording

(1)Depreciation expense increased primarily related to increased capital expenditures in the last three months of 2023 and acquisitions in our Wholesale - North America and Europe segments.

Previous wording

(1)Interest expense increased primarily due to (i) a $17 million increase from higher outstanding debt primarily related to the permanent financing for the Uni-Select Acquisition and (ii) a $3 million increase from higher interest rates in the second quarter of 2024 compared to the second quarter of 2023, partially offset by (iii) a $6 million decrease related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition in the second quarter of 2023.

Current wording

(1)Interest expense increased primarily due to a $4 million increase from higher outstanding debt in the current year period.

Previous wording

(3)The decrease in Interest income and other income, net is primarily comprised of a $6 million decrease in interest income, primarily related to interest income on the proceeds from the U.S. Notes (2028/33) that were invested in money market funds in 2023 and individually insignificant decreases which in the aggregate had a $2 million impact.

Current wording

(3)The decrease in Interest income and other income, net is primarily comprised of a $5 million decrease in interest income, primarily related to interest income on the proceeds from the U.S. Notes (2028/33) that were invested in money market funds in 2023 and individually insignificant decreases which in the aggregate had a $1 million impact.

Previous wording

Our effective income tax rate for the three months ended June 30, 2024 was 30.9%, compared to 28.0% for the three months ended June 30, 2023. The increase in the effective tax rate for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is primarily attributable to the 3.4% unfavorable impact of discrete items, mostly related to the 2024 Global Restructuring Plan impairments. Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information on the impairments.

Current wording

Our effective income tax rate for the three months ended September 30, 2024 was 25.0%, compared to 22.6% for the three months ended September 30, 2023. The increase in the effective tax rate for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 is mostly related to favorable discrete items in the prior year of 4.4%, primarily related to the Uni-Select Acquisition foreign exchange forward contract gain, exceeding the favorable discrete items of 2.4% in the current year. Refer to Note 14, "Derivative Instruments and Hedging Activities" for further information on the foreign exchange forward contracts.

Previous wording

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the six months ended June 30, 2023, the Czech koruna and Canadian dollar rates used to translate the 2024 statements of income decreased by 5.5% and 0.8%, respectively, while the pound sterling rate increased by 2.5% and the euro rate was flat. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net negative effect of $0.13 on diluted earnings per share relative to the prior year period primarily related to the $46 million pretax gain on the foreign exchange forward contracts in the first half of 2023 related to the Uni-Select Acquisition.

Current wording

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the three months ended September 30, 2023, the Czech koruna and Canadian dollar rates used to translate the 2024 statements of income decreased by 3.3% and 1.7%, respectively, while the pound sterling and euro rates increased by 2.7% and 1.0%, respectively. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net negative effect of $0.06 on diluted earnings per share relative to the prior year period primarily related to the gain on the foreign exchange forward contracts in the third quarter of 2023 related to the Uni-Select Acquisition, including the tax effects.

Previous wording

The increase in parts and services revenue of 10.5% represented increases in segment revenue of 24.3% in Wholesale - North America, 5.9% in Specialty, and 2.8% in Europe, partially offset by a decrease of 10.8% in Self Service. This overall increase was driven by an 11.7% increase due to the net impact of acquisitions and divestitures and a 0.1% increase due to fluctuations in foreign exchange rates, partially offset by an organic parts and services revenue decrease of 1.2%. The decrease in other revenue of 15.4% was primarily driven by a decrease in organic revenue of $61 million due to lower commodities prices and volumes compared to the prior year period, which resulted in a $54 million decrease in Self Service and a $7 million decrease in Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

The increase in parts and services revenue of 7.1% represented increases in segment revenue of 16.4% in Wholesale - North America, 2.4% in Europe, and 0.8% in Specialty, partially offset by a decrease of 10.7% in Self Service. This overall increase was driven by an 8.7% increase due to the net impact of acquisitions and divestitures and a 0.2% increase due to fluctuations in foreign exchange rates, partially offset by an organic parts and services revenue decrease of 1.8%. The decrease in other revenue of 11.5% was primarily driven by a decrease in organic revenue of $65 million due to lower commodities prices and volumes compared to the prior year period, which resulted in a $58 million decrease in Self Service and a $9 million decrease in Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in revenue by segment for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

Cost of goods sold as a percentage of revenue increased to 61.0% for the six months ended June 30, 2024 from 59.0% for the six months ended June 30, 2023. Cost of goods sold reflects increases of 1.5% from Wholesale - North America, 0.2% from Europe, 0.2% attributable to mix shift towards our lower margin segments and 0.2% attributable to restructuring, partially offset by a decrease of 0.2% from Self Service. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Cost of goods sold as a percentage of revenue increased to 61.0% for the nine months ended September 30, 2024 from 59.7% for the nine months ended September 30, 2023. Cost of goods sold primarily reflects an increase of 1.1% from Wholesale - North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold as a percentage of revenue by segment for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

SG&A expenses as a percentage of revenue decreased to 27.2% for the six months ended June 30, 2024 from 27.5% for the six months ended June 30, 2023. The year over year decrease in SG&A expense primarily reflects impacts of 0.8% related to Wholesale - North America, partially offset by an increase of 0.4% in Europe. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

SG&A expenses as a percentage of revenue decreased to 27.2% for the nine months ended September 30, 2024 from 27.5% for the nine months ended September 30, 2023. The year over year decrease in SG&A expense primarily reflects an impact of 0.6% related to Wholesale - North America, partially offset by an increase of 0.2% in Europe. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses as a percentage of revenue by segment for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

(1)Restructuring expenses for the six months ended June 30, 2024 primarily consisted of (i) $56 million related to our 2024 Global Restructuring plan, (ii) $16 million related to our acquisition integration plans, (iii) $3 million related to our 1 LKQ Europe plan, and (iv) $2 million related to our 2022 Global Restructuring plan.

Current wording

(1)Restructuring expenses for the nine months ended September 30, 2024 primarily consisted of (i) $70 million related to our 2024 Global Restructuring plan, (ii) $20 million related to our acquisition integration plans, (iii) $3 million related to our 1 LKQ Europe plan, and (iv) $3 million related to our 2022 Global Restructuring plan.

Previous wording

(2)Restructuring expenses for the six months ended June 30, 2023 primarily consisted of (i) $7 million related to our 2022 Global Restructuring plan, (ii) $2 million related to our acquisition integration plans, and (iii) $1 million related to our 1 LKQ Europe plan.

Current wording

(2)Restructuring expenses for the nine months ended September 30, 2023 primarily consisted of (i) $22 million related to our acquisition integration plans, (ii) $11 million related to our 2022 Global Restructuring plan, and (iii) $1 million related to our 1 LKQ Europe plan.

Previous wording

(3)Transaction related expenses for the three months ended June 30, 2023 primarily related to external costs such as legal, accounting and advisory fees related to completed and potential acquisitions (including Uni-Select transaction costs).

Current wording

(3)Transaction related expenses for the nine months ended September 30, 2023 primarily related to external costs such as legal, accounting and advisory fees related to completed and potential acquisitions (including Uni-Select transaction costs).

Previous wording

(1)Depreciation expense increased primarily related to an increase in capital expenditures in the last six months of 2023, which is impacting depreciation expense in 2024.

Current wording

(1)Depreciation expense increased primarily related to increased capital expenditures in the last three months of 2023 and acquisitions in our Wholesale - North America and Europe segments.

Previous wording

(1)Interest expense increased primarily due to (i) a $44 million increase from higher outstanding debt primarily related to the permanent financing for the Uni-Select Acquisition and (ii) a $7 million increase from higher interest rates in the first half of 2024, partially offset by (iii) a $9 million decrease related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition in the first half of 2023.

Current wording

(1)Interest expense increased primarily due to (i) a $48 million increase from higher outstanding debt primarily related to the permanent financing for the Uni-Select Acquisition and (ii) a $7 million increase from higher interest rates in the first nine months of 2024 compared to the prior year period, partially offset by (iii) a $9 million decrease related to amortization of pre-acquisition bridge loan financing costs related to the Uni-Select Acquisition in the first nine months of 2023.

Previous wording

(3)The decrease in Interest income and other income, net is primarily comprised of a $6 million decrease in interest income, primarily related to interest income on the proceeds from the U.S. Notes (2028/33) that were invested in money market funds in 2023 and a $5 million decrease from funds received to settle an eminent domain matter in 2023.

Current wording

(3)The decrease in Interest income and other income, net is primarily comprised of (i) an $11 million decrease in interest income, primarily related to interest income on the proceeds from the U.S. Notes (2028/33) that were invested in money market funds in 2023, (ii) a $5 million decrease from funds received to settle an eminent domain matter in 2023, and (iii) individually insignificant decreases which in the aggregate had a $1 million impact.

Previous wording

Our effective income tax rate for the six months ended June 30, 2024 was 30.8%, compared to 27.1% for the six months ended June 30, 2023. The increase in the effective tax rate for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily attributable to the 3.9% unfavorable impact of discrete items, mostly related to the 2024 Global Restructuring Plan impairments. Refer to Note 8, "Restructuring and Transaction Related Expenses" for further information on the impairments.

Current wording

Our effective income tax rate for the nine months ended September 30, 2024 was 28.8%, compared to 25.9% for the nine months ended September 30, 2023. The increase in the effective tax rate for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is primarily attributable to a 2.9% year over year unfavorable impact of discrete items, mostly related to the unfavorable tax effects of the 2024 Global Restructuring Plan impairments in the current year and the favorable tax effects from the Uni-Select Acquisition foreign exchange forward contract gain in the prior year. Refer to Note 9, "Restructuring and Transaction Related Expenses" for further information on the impairments and Note 14, "Derivative Instruments and Hedging Activities" for further information on the foreign exchange forward contracts.

Previous wording

Equity in earnings of unconsolidated subsidiaries for the six months ended June 30, 2024 decreased by $5 million compared to the six months ended June 30, 2023, primarily related to a decrease in year over year results reported by Mekonomen, which is our largest equity method investment.

Current wording

Equity in earnings of unconsolidated subsidiaries for the nine months ended September 30, 2024 decreased by $6 million compared to the nine months ended September 30, 2023, primarily related to a decrease in year over year results reported by Mekonomen, which is our largest equity method investment.

Previous wording

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the three months ended June 30, 2023, the Czech koruna, Canadian dollar and euro rates used to translate the 2024 statements of income decreased by 6.7%, 1.9% and 1.1%, respectively, while the pound sterling rate increased by 0.8%. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net negative effect of $0.07 on diluted earnings per share relative to the prior year period primarily related to the $23 million pretax gain on the foreign exchange forward contracts in the second quarter of 2023 related to the Uni-Select Acquisition.

Current wording

We translate our statements of income at the average exchange rates in effect for the period. Relative to the rates used during the nine months ended September 30, 2023, the Czech koruna and Canadian dollar rates used to translate the 2024 statements of income decreased by 4.6% and 1.1%, respectively, while the pound sterling and euro rates increased by 2.6% and 0.4%, respectively. Realized and unrealized currency gains and losses (including the effects of hedge instruments) combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net negative effect of $0.19 on diluted earnings per share relative to the prior year period primarily related to the $49 million pretax gain on the foreign exchange forward contracts in the first nine months of 2023 related to the Uni-Select Acquisition.

Previous wording

(1)Parts and services organic revenue decreased 4.3% for the six months ended June 30, 2024 compared to the prior year period, primarily driven by decreased aftermarket collision volumes which were negatively impacted by lower repairable claims, which we believe are primarily attributable to difficult economic conditions, comparatively warmer weather in the first quarter of 2024 which reduced backlog at body shops going into the second quarter of 2024 and, to a lesser extent, inventory availability issues due to delays in inbound deliveries.

Current wording

(1)Parts and services organic revenue decreased 6.1% (7.5% on a per day basis) for the three months ended September 30, 2024 compared to the prior year period. This decline was primarily driven by a reduction in paint revenue, related to increased competition, and a decrease in aftermarket collision volumes. The latter was negatively impacted by fewer repairable claims, which we believe are mostly attributable to difficult economic conditions and, to a lesser extent, inventory availability issues due to delays in inbound deliveries. Additionally, adverse weather conditions caused by hurricane Helene led to temporary operational closures in the southeast region, which had a small but negative impact on revenue towards the end of September 2024.

Previous wording

(3)Acquisition and divestiture parts and services revenue was an increase of $338 million, or 30.2%, primarily due to the acquisition of Uni-Select in the third quarter of 2023. See Note 2, "Business Combinations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the acquisition of Uni-Select.

Current wording

(3)Acquisition and divestiture parts and services revenue was an increase of $119 million, or 9.1%, primarily due to the acquisition of Uni-Select in the third quarter of 2023. See Note 2, "Business Combinations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the acquisition of Uni-Select.

Previous wording

Segment EBITDA dollars were flat for the six months ended June 30, 2024 compared to the prior year period, which includes a positive impact related to the acquisition of Uni-Select in the third quarter of 2023 (Uni-Select increases Segment EBITDA dollars but dilutes the Segment EBITDA percentage), primarily offset by lower aftermarket volumes, a decrease in salvage margins and lower metals pricing and continued inflationary pressures. We estimate that precious metals and scrap steel prices had a net unfavorable effect of $13 million, or 0.4%, on Segment EBITDA margin relative to the comparable prior year period.

Current wording

Segment EBITDA decreased $8 million, or 2.9%, for the three months ended September 30, 2024 compared to the prior year period, primarily due to the organic revenue decline, continued inflationary pressures, unfavorable commodities prices and a decrease in salvage margins, partially offset by cost savings initiatives, acquisition related synergies, lower incentive compensation for the three months ended September 30, 2024, and positive impacts from the acquisition of Uni-Select in the third quarter of 2023 (Uni-Select increases Segment EBITDA dollars but dilutes the Segment EBITDA percentage). We estimate that precious metals and scrap steel prices had a net unfavorable effect of $4 million, or 0.3%, on Segment EBITDA margin relative to the comparable prior year period.

Previous wording

(1) The decrease in gross margin of 5.9% was driven by the dilutive nature of the acquisition of Uni-Select, which changed the segment's product mix to reflect a greater percentage of paint, body and equipment and maintenance product lines. These product lines have a lower gross margin structure than our other wholesale product lines. The year over year effect will be noted through the third quarter, after which the impact will be annualized. Additionally, gross margin was negatively affected by the related mix effect resulting from lower aftermarket revenue, which has a higher margin than our other wholesale lines and decreases in salvage margins tied to softening salvage revenue. Reported gross margin also includes a 0.2% reduction primarily related to restructuring expenses incurred as part of the 2024 Global Restructuring Plan. These costs are excluded from the calculation of Segment EBITDA. See Note 8, "Restructuring and Transaction Related Expenses" and Note 17, "Segment and Geographic Information" for further information.

Current wording

(1) The decrease in gross margin of 1.8% was driven by decreases in salvage margins tied to softening salvage revenue, a decline in commodities prices and the related mix effect resulting from lower aftermarket revenue, which has a higher margin than our other wholesale lines. Additionally, gross margin was negatively affected by the dilutive nature of the acquisition of Uni-Select, which changed the segment's product mix to reflect a greater percentage of paint, body and equipment and maintenance product lines. These product lines have a lower gross margin structure than our other wholesale product lines. The year over year effect was noted through the third quarter, and the impact has now been annualized.

Previous wording

(1)Parts and services organic revenue for the three months ended June 30, 2024 increased by 0.3% (1.3% decrease on a per day basis), primarily driven by an increased number of selling days in the current quarter compared to the prior year period, partially offset by decreased volumes as a result of difficult economic conditions, and strike activity and heightened competition in certain markets.

Current wording

(1)Parts and services organic revenue for the three months ended September 30, 2024 increased by 1.8% (0.1% on a per day basis), primarily driven by an increased number of selling days in the current quarter compared to the prior year period. On a per day basis, organic revenue was roughly flat as the effects of pricing initiatives to offset increased costs resulting from inflationary pressures were mostly offset by decreased overall volumes, despite increases in several markets, as a result of difficult economic conditions and heightened competition in certain markets.

Previous wording

(3)Exchange rates decreased our revenue growth by $18 million, or 1.1%, primarily due to the stronger U.S. dollar against the euro and Czech koruna, partially offset by the weaker U.S. dollar against the pound sterling for the three months ended June 30, 2024 relative to the prior year period.

Current wording

(3)Exchange rates increased our revenue growth by $15 million, or 0.9%, primarily due to the weaker U.S. dollar against the pound sterling and euro, partially offset by the stronger U.S. dollar against the Czech koruna for the three months ended September 30, 2024 relative to the prior year period.

Previous wording

Segment EBITDA decreased $14 million, or 7.4%, for the three months ended June 30, 2024 compared to the prior year period. On a constant currency basis (i.e., excluding translation impact), Segment EBITDA decreased by $12 million, or 6.3%, compared to the prior year period. The decrease in dollar terms is mainly attributable to the negative impact of higher supplier costs and unfavorable customer mix, which more than offset the effects of lower operating expenses and organic revenue growth of $6 million. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the three months ended June 30, 2024.

Current wording

Segment EBITDA increased $18 million, or 12.1%, for the three months ended September 30, 2024 compared to the prior year period. On a constant currency basis (i.e., excluding translation impact), Segment EBITDA increased by $17 million, or 11.2%, compared to the prior year period. The increase in dollar terms is mainly attributable to organic revenue growth of $30 million and a decrease in segment operating expenses largely driven by an $11 million charge in the prior year to settle a value-added tax issue in Italy. Refer to the Foreign Currency Impact discussion within the Results of Operations–Consolidated section above for further detail regarding foreign currency impact on our results for the three months ended September 30, 2024.

Previous wording

(1)Parts and services organic revenue for the three months ended June 30, 2024 decreased by 2.1% primarily due to demand softness in the recreational vehicle ("RV") product line, as RV unit retail sales have declined year over year.

Current wording

(1)Parts and services organic revenue for the three months ended September 30, 2024 decreased by 8.5% (10.0% on a per day basis) primarily due to demand softness in the automotive and recreational vehicle ("RV") product lines, as automotive and RV unit retail sales have declined year over year.

Previous wording

(2) The decrease in segment operating expenses as a percentage of revenue was due to individually immaterial factors representing a 0.5% favorable impact in the aggregate, partially offset by an unfavorable impact of 0.4% due to duplicate facility costs associated with consolidating distribution centers.

Current wording

(2) The increase in segment operating expenses as a percentage of revenue was primarily due to unfavorable impacts of (i) 0.8% related to higher credit loss reserves compared to the prior year period, (ii) 0.4% in personnel costs as a result of lower operating leverage, (iii) 0.3% due to duplicate facility costs associated with consolidating distribution centers, and (iv) other individually immaterial factors representing a 0.1% unfavorable impact in the aggregate.

Previous wording

(1)Parts and services organic revenue decreased 10.8% (11.3% on a per day basis) for the six months ended June 30, 2024 compared to the prior year period, primarily driven by lower parts volumes from a reduced number of customer admissions, which were impacted by adverse weather conditions (primarily in California).

Current wording

(1)Parts and services organic revenue decreased 10.5% for the three months ended September 30, 2024 compared to the prior year period, primarily driven by lower parts volumes from a reduced number of customer admissions.

Previous wording

(2)Other organic revenue decreased 25.4%, or $54 million, year over year due to a $31 million decrease in revenue from precious metals due to lower prices and lower volumes and a $23 million decrease in revenue from scrap steel primarily related to lower volumes and, to a lesser extent, lower prices.

Current wording

(2)Other organic revenue decreased 3.8%, or $4 million, year over year due to a $2 million decrease in revenue from scrap steel primarily related to lower volumes and a $2 million decrease in revenue from precious metals due to lower prices and lower volumes.

Previous wording

Segment EBITDA increased $6 million, or 93.1%, for the three months ended June 30, 2024 compared to the prior year period. The increase is driven by improved vehicle procurement costs and improvements in operational productivity, partially offset by the unfavorable movements in commodity prices and lower volumes compared to the prior year period. Decreases in precious metals prices contributed an estimated $5 million decline in Segment EBITDA relative to the three months ended June 30, 2023. During the three months ended June 30, 2024, scrap steel prices had a $5 million unfavorable impact on Segment EBITDA, compared to a $2 million unfavorable impact during the three months ended June 30, 2023. The unfavorable impacts for the three months ended June 30, 2024 resulted from the decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

Current wording

Segment EBITDA increased $11 million for the three months ended September 30, 2024 compared to the prior year period. The increase is driven by improved vehicle procurement costs, operational productivity initiatives and more favorable movements in scrap steel prices, partially offset by lower volumes compared to the prior year period. During the three months ended September 30, 2024, scrap steel prices had a $1 million unfavorable impact on Segment EBITDA, compared to a $6 million unfavorable impact during the three months ended September 30, 2023. The unfavorable impacts for the three months ended September 30, 2024 resulted from the decrease in scrap steel prices between the date we purchased a vehicle, which influences the price we pay for a vehicle, and the date we scrapped a vehicle, which influences the price we receive for scrapping a vehicle.

Previous wording

(2) The increase in segment operating expenses as a percentage of revenue reflects negative leverage effect of 6.0% from decreases in metals revenue, partially offset by other individually immaterial factors representing a 3.0% favorable impact in the aggregate.

Current wording

(2) The increase in segment operating expenses as a percentage of revenue reflects negative leverage effect of 0.8% from decreases in metals revenue, partially offset by other individually immaterial factors representing a 0.4% favorable impact in the aggregate.

Previous wording

(1)Parts and services organic revenue decreased 5.3% for the three months ended June 30, 2024 compared to the prior year period, primarily driven by decreased aftermarket collision volumes which were negatively impacted by lower repairable claims, which we believe are primarily attributable to difficult economic conditions, comparatively warmer weather in the first quarter of 2024 which reduced backlog at body shops going into the second quarter of 2024 and, to a lesser extent, inventory availability issues due to delays in inbound deliveries.

Current wording

(1)Parts and services organic revenue decreased 5.0% (5.4% on a per day basis) for the nine months ended September 30, 2024 compared to the prior year period. This decline was primarily driven by a reduction in aftermarket collision volumes, which were negatively impacted by a reduction in repairable claims. We believe this is mainly attributable to difficult economic conditions. Additionally, organic revenue was negatively impacted by a reduction in paint revenue related to increased competition, comparatively warmer weather in the first quarter of 2024 which reduced backlog at body shops going into the second quarter of 2024 and, to a lesser extent, inventory availability issues due to delays in inbound deliveries.

Previous wording

(2)Other organic revenue decreased 4.0%, or $3 million, year over year primarily related to (i) a $3 million decrease in revenue from precious metals due to lower prices, partially offset by higher volumes, (ii) a $1 million decrease in revenue from scrap steel due to lower prices, partially offset by (iii) a $1 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices.

Current wording

(2)Other organic revenue decreased 3.8%, or $9 million, year over year primarily related to (i) a $16 million decrease in revenue from precious metals due to lower prices and (ii) a $1 million decrease in revenue from scrap steel due to lower prices, partially offset by (iii) an $8 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices and higher volumes.