LKQ CORP

Previous wording

We continuously manage and assess the businesses and investments we own and the markets in which we operate. Our acquisition strategy is to target highly accretive tuck-in acquisitions with significant synergies or critical capabilities. Additionally, from time to time, we have sold or divested businesses that do not align with our strategic vision, financial objectives or have limited long-term value potential. In 2025, aligning with our ongoing strategy to simplify our portfolio and concentrate on our core segments, we completed the sale of our Self Service segment, and commenced a process to explore the potential sale of our Specialty segment. See Note 2, "Discontinued Operations" 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 divestitures.

Current wording

We continuously manage and assess the businesses and investments we own and the markets in which we operate. Our acquisition strategy is to target highly accretive tuck-in acquisitions with significant synergies or critical capabilities. Additionally, from time to time, we have sold or divested businesses that do not align with our strategic vision, financial objectives or have limited long-term value potential. In 2025, aligning with our ongoing strategy to simplify our portfolio and concentrate on our core segments, we completed the sale of our Self Service segment. See Note 2, "Business Combinations", Note 3, "Discontinued Operations" 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, divestitures and investments.

Previous wording

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

Current wording

In addition to the above, in December 2025, the Company announced that it had commenced a process to explore a potential sale of its Specialty segment. In January 2026, the Company announced that its Board of Directors (the "Board") had initiated a comprehensive review of strategic alternatives to enhance shareholder value. Our Specialty segment is currently being evaluated as part of the broader strategic review process. As part of the review, the Board is working with its advisors to evaluate our strategic alternatives, including a potential sale of the Company.

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 2025 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 three months ended March 31, 2026.

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 2025 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, 2026.

Previous wording

As we make progress on our previously announced plan to explore a potential sale of our Specialty segment, certain triggering events may occur which would require us to perform an interim goodwill impairment test. Depending on the facts and circumstances at the time we perform this interim impairment test, we may be required to recognize additional impairment to the goodwill in our Specialty segment. Furthermore, events that cause declines to Specialty's future cash flows such as underperformance relative to our forecasts, since actual results may differ from our estimates of future performance, or events that have a negative impact on the market value of the business, such as a deterioration in macroeconomic conditions, could also result in future impairment to the goodwill in our Specialty segment. See Note 4, "Intangible Assets" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related the interim impairment test performed for the Specialty segment as of March 31, 2026.

Current wording

We continue to monitor for certain triggering events which would require us to perform an interim goodwill impairment test. Depending on the facts and circumstances at the time we perform this interim impairment test, we may be required to recognize an impairment to goodwill in one of our segments. For the three months ended June 30, 2026, we did not identify any triggering events or other indicators of impairment that necessitated an interim test of goodwill impairment. See Note 5, "Intangible Assets" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related the interim impairment test performed for the Specialty segment as of March 31, 2026.

Previous wording

See "Strategic Restructuring and Transformation Initiatives" in Note 7, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our strategic transformation initiatives. In April 2026, in conjunction with our previously announced plan, we continued our phased rollout of a common Enterprise Resource Planning ("ERP") system across Europe by completing the implementation in one of our major European markets.

Current wording

See "Strategic Restructuring and Transformation Initiatives" in Note 8, "Restructuring and Transaction Related Expenses" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our strategic transformation initiatives. In April 2026, in conjunction with our previously announced plan, we continued our phased rollout of a common Enterprise Resource Planning ("ERP") system across Europe by completing the implementation in Germany. See Part I, Item 4 of this Quarterly Report on Form 10-Q for information related to the ERP system implementation in Germany.

Previous wording

The increase in parts and services revenue of $118 million, or 3.6%, represented increases in segment revenue of $98 million, or 6.5%, in Europe, $15 million, or 3.8%, in Specialty and $5 million, or 0.4%, in North America. This overall increase was driven by a $164 million, or 5.1%, increase due to fluctuations in foreign exchange rates, and a $6 million, or 0.2%, increase due to the net impact of acquisitions and divestitures, partially offset by an organic parts and services revenue decrease of $53 million, or 1.6%. 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 March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

The decrease in parts and services revenue of $122 million, or 3.6%, represented a decrease in segment revenue of $154 million, or 9.6%, in Europe, partially offset by increases of $23 million, or 5.0%, in Specialty and $9 million, or 0.5%, in North America. This overall decrease was driven by an organic parts and services revenue decrease of $174 million, or 5.1%, partially offset by a $34 million, or 1.0%, increase due to fluctuations in foreign exchange rates, and a $17 million, or 0.5%, increase due to the net impact of acquisitions and divestitures. 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, 2026 compared to the three months ended June 30, 2025.

Previous wording

Cost of goods sold increased by $124 million, or 6.2%, to $2,138 million for the three months ended March 31, 2026. Cost of goods sold includes a $107 million unfavorable impact from a weakening U.S. dollar. Cost of goods sold reflects increases of $70 million from Europe, $43 million from North America and $11 million from Specialty. Cost of goods sold as a percentage of revenue increased to 61.6% for the three months ended March 31, 2026 from 60.5% for the three months ended March 31, 2025. Cost of goods sold as a percentage of revenue primarily reflects increases of 0.8% from North America and 0.3% from Europe. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Cost of goods sold decreased by $70 million, or 3.3%, to $2,087 million for the three months ended June 30, 2026. Cost of goods sold includes a $22 million unfavorable impact from a weakening U.S. dollar. Cost of goods sold reflects a decrease of $107 million from Europe, partially offset by increases of $21 million from North America and $16 million from Specialty. Cost of goods sold as a percentage of revenue decreased to 61.2% for the three months ended June 30, 2026 from 61.4% for the three months ended June 30, 2025. Cost of goods sold as a percentage of revenue primarily reflects a decrease of 0.4% from Europe, partially offset by an increase of 0.2% from North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in cost of goods sold by segment for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Our Selling, general and administrative ("SG&A") expenses increased by $45 million, or 4.8%, to $994 million for the three months ended March 31, 2026. SG&A expenses includes a $49 million unfavorable impact from a weakening U.S. dollar. The year over year increase in SG&A expense primarily reflects increases of $41 million from Europe and $8 million from Specialty, partially offset by a decrease of $4 million from North America. SG&A expenses as a percentage of revenue increased slightly to 28.7% for the three months ended March 31, 2026 from 28.5% for the three months ended March 31, 2025. SG&A expenses as a percentage of revenue primarily reflects an increase of 0.4% from Europe and 0.2% from Specialty and mix, offset by a decrease of 0.4% from North America. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Our Selling, general and administrative ("SG&A") expenses increased by $32 million, or 3.3%, to $990 million for the three months ended June 30, 2026. SG&A expenses includes a $10 million unfavorable impact from a weakening U.S. dollar. The year over year increase in SG&A expense primarily reflects increases of $18 million from North America, $12 million from Specialty and $2 million from Europe. SG&A expenses as a percentage of revenue increased to 29.0% for the three months ended June 30, 2026 from 27.3% for the three months ended June 30, 2025. SG&A expenses as a percentage of revenue primarily reflects increases of 1.3% from Europe, 0.4% from North America, and 0.2% from Specialty, partially offset by a decrease of 0.2% attributable to mix. Refer to the discussion of our segment results of operations for factors contributing to the changes in SG&A expenses by segment for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Restructuring and transaction related expenses increased by $22 million, primarily due to a $20 million increase in restructuring expenses related to our Strategic Restructuring and Transformation Initiatives. See Note 7, "Restructuring and Transaction Related Expenses" for further information on the restructuring charges.

Current wording

Restructuring and transaction related expenses increased by $6 million, primarily due to a $3 million increase in restructuring expenses related to our Strategic Restructuring and Transformation Initiatives and a $3 million increase in transaction related expenses. See Note 8, "Restructuring and Transaction Related Expenses" for further information on the restructuring charges.

Previous wording

Our effective income tax rate for the three months ended March 31, 2026 was 26.4%, compared to 27.8% for the three months ended March 31, 2025. The decrease in the effective tax rate for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is primarily attributable to the 1.2% year over year favorable impact of discrete items, mostly related to a return to provision adjustment.

Current wording

Our effective income tax rate for the three months ended June 30, 2026 was 26.8%, compared to 26.4% for the three months ended June 30, 2025. The increase in the effective tax rate for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 is primarily attributable to an unfavorable impact of 1.2% for discrete items, mostly related to a nonrecurring benefit from the reversal of a tax assessment in the prior year, partially offset by a favorable impact from changes in the Company's geographic distribution of income.

Previous wording

Equity in losses of unconsolidated subsidiaries

Current wording

Equity in (earnings) losses of unconsolidated subsidiaries

Previous wording

Equity in losses of unconsolidated subsidiaries increased by $45 million, primarily related to our equity method investment in Mekonomen. During thethree months ended March 31, 2026, we recorded a$44 million other-than-temporary impairment related to our equity method investment in Mekonomen. See Note 5, "Equity Method Investments" for further information on the impairment charge.

Current wording

During thesix months ended June 30, 2026, we recorded a$44 million other-than-temporary impairment related to our equity method investment in Mekonomen. See Note 6, "Equity Method Investments" for further information on the impairment charge.

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 March 31, 2025, the Czech koruna, euro, pound sterling and Canadian dollar rates used to translate the three months ended March 31, 2026 statements of income increased by 14.5%, 11.2%, 7.0%, and 4.6%, respectively. Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net positive effect of $0.01 on diluted earnings per share from continuing operations relative to the prior year period.

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 six months ended June 30, 2025, the Czech koruna, euro, pound sterling, and Canadian dollar rates used to translate the six months ended June 30, 2026 statements of income increased by 9.6%, 6.7%, 3.6% and 2.2%, respectively. Realized and unrealized currency gains and losses combined with the translation effect of the change in foreign currencies against the U.S. dollar had a net positive effect of $0.01 on diluted earnings per share from continuing operations relative to the prior year period.

Previous wording

Discontinued operations for the three months ended March 31, 2026 and 2025 reflected the Self Service segment which was sold in September 2025. See Note 2, "Discontinued Operations" for further information.

Current wording

Discontinued operations for the six months ended June 30, 2026 and 2025 reflected the Self Service segment which was sold in September 2025. See Note 3, "Discontinued Operations" for further information.

Previous wording

The key measure of segment profit or loss reviewed by our CODM, our Chief Executive Officer, is Segment EBITDA. The CODM uses Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net Income excluding net income and loss attributable to noncontrolling interest; income and loss from discontinued operations; depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and transaction related expenses; change in fair value of contingent consideration liabilities; other gains and losses related to acquisitions, equity method investments, or divestitures; equity in losses and earnings of unconsolidated subsidiaries; equity investment fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict. See Note 16, "Segment and Geographic Information" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of total Segment EBITDA to net income.

Current wording

The key measure of segment profit or loss reviewed by our CODM, our Chief Executive Officer, is Segment EBITDA. The CODM uses Segment EBITDA to compare profitability among the segments and evaluate business strategies. Segment EBITDA includes revenue and expenses that are controllable by the segment. Corporate general and administrative expenses are allocated to the segments based on usage, with shared expenses apportioned based on the segment's percentage of consolidated revenue. We calculate Segment EBITDA as Net Income excluding net income and loss attributable to noncontrolling interest; income and loss from discontinued operations; depreciation; amortization; interest; gains and losses on debt extinguishment; income tax expense; restructuring and transaction related expenses; change in fair value of contingent consideration liabilities; other gains and losses related to acquisitions, equity method investments, or divestitures; equity in losses and earnings of unconsolidated subsidiaries; equity investment fair value adjustments; impairment charges; and direct impacts of the Ukraine/Russia conflict. See Note 18, "Segment and Geographic Information" to the Unaudited Condensed

Previous wording

(2)Other revenue increased by $23 million, or 30.0%, to $99 million for the three months ended March 31, 2026. This increase was due to (i) an $11 million increase in revenue from precious metals (platinum, palladium, and rhodium) primarily due to higher prices, (ii) an $8 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher volumes and prices, and (iii) a $4 million increase in revenue from scrap steel primarily due to higher volumes and, to a lesser extent, higher prices.

Current wording

(2)Other revenue increased by $15 million, or 20.5%, to $95 million for the three months ended June 30, 2026. This increase was due to (i) a $7 million increase in revenue from other scrap (e.g., aluminum) and cores due to higher prices, and to a lesser extent, volumes, (ii) a $6 million increase in revenue from precious metals (platinum, palladium, and rhodium) primarily due to higher prices, and (iii) a $2 million increase in revenue from scrap steel primarily due to higher prices and volumes.

Previous wording

(1)Parts and services revenue increased by $15 million, or 3.8%, to $408 million for the three months ended March 31, 2026. This was primarily due to an organic revenue increase of $13 million, or 3.4% primarily driven by volume growth in our marine and recreational vehicle product lines, partially offset by decreases in our automotive product lines.

Current wording

(1)Parts and services revenue increased by $23 million, or 5.0%, to $487 million for the three months ended June 30, 2026. This was primarily due to an organic revenue increase of $21 million, or 4.5%, primarily driven by volume growth in our marine, recreational vehicle ("RV"), and automotive product lines.

Previous wording

(2)Gross margin increased by $4 million, or 3.9%, to $99 million for the three months ended March 31, 2026. This increase was primarily driven by an increase in parts and services revenue as described above.

Current wording

(2)Gross margin increased by $7 million, or 5.7%, to $125 million for the three months ended June 30, 2026. This increase was primarily driven by a favorable impact related to tariff refunds and an increase in parts and services revenue as described above, partially offset by an unfavorable impact in sales mix due to higher volumes on lower margin product lines.

Previous wording

(1)Parts and services revenue increased by $5 million, or 0.4%, to $1,341 million for the three months ended March 31, 2026. This increase was due to a positive exchange rate effect of $11 million, or 0.8%, primarily due to the stronger Canadian dollar against the U.S. dollar, partially offset by an organic revenue decrease of $5 million, or 0.4%. This organic revenue decrease was driven primarily by lower volumes in our paint, body and equipment business from lower repairable claims and increased competition, and weather related closures affecting all lines of business, partially offset by pricing initiatives to recoup tariff costs and offset inflationary pressures.

Current wording

(1)Parts and services revenue increased by $14 million, or 0.5%, to $2,712 million for the six months ended June 30, 2026. This increase was primarily due to a positive exchange rate effect of $11 million, or 0.4%, primarily due to the stronger Canadian dollar against the U.S. dollar, and to a lesser extent, an organic revenue increase of $2 million, or 0.1%, driven primarily by pricing initiatives to recoup tariff costs and offset inflationary pressures, partially offset by lower volumes in our PBE business from lower repairable claims and increased competition and lower volumes in our salvage operations.

Previous wording

(3)Gross margin decreased by $15 million, or 2.4%, to $612 million for the three months ended March 31, 2026. The decrease in gross margin dollars was driven by cost increases from tariffs and inflationary pressures, unfavorable customer mix, and lower vendor rebates from lower volumes, partially offset by pricing initiatives and higher other revenue. Gross margin percentage decreased by 2.0% which was driven by the dilutive effect of increasing prices to recoup tariff costs, lower vendor rebates and unfavorable customer mix.

Current wording

(3)Gross margin decreased by $12 million, or 0.9%, to $1,234 million for the six months ended June 30, 2026. The decrease in gross margin dollars was driven by cost increases from inflationary pressures, lower vendor rebates from lower volumes, and unfavorable customer mix, partially offset by pricing initiatives and higher other revenue as described above. Gross margin percentage decreased by 1.2% which was driven by the dilutive effect of increasing prices to recoup tariff costs, lower vendor rebates and unfavorable customer mix.

Previous wording

(4)SG&A expenses decreased by $4 million, or 1.0%, to $410 million for the three months ended March 31, 2026. The decrease in SG&A expense is primarily due to (i) $6 million from decreased professional fees, (ii) $4 million from decreased facility expenses, and (iii) other individually immaterial factors representing a $6 million favorable impact in the aggregate, partially offset by (iv) $12 million from increased personnel costs primarily due to increased health and other insurance costs.

Current wording

(4)SG&A expenses increased by $14 million, or 1.8%, to $830 million for the six months ended June 30, 2026. The increase in SG&A expense is primarily due to (i) an $8 million increase in personnel costs primarily due to increased health and other insurance costs and incentive compensation compared to the prior year, (ii) an $8 million increase due to higher self insurance reserves, and (iii) a $5 million increase in freight, vehicle and fuel costs, partially offset by (iv) other individually immaterial factors representing a $7 million favorable impact in the aggregate.

Previous wording

(1)Parts and services revenue increased by $98 million, or 6.5%, to $1,613 million for the three months ended March 31, 2026. This increase was due to the effect of an exchange rate increase of $152 million, or 10.1%, primarily due to the strengthening of the euro, and to a lesser extent, the pound sterling and Czech koruna against the U.S. dollar, partially offset by an organic revenue decrease of $61 million, or 4.0%, primarily driven by decreased volumes due to heightened competition in certain markets and difficult economic conditions.

Current wording

(1)Parts and services revenue decreased by $56 million, or 1.8%, to $3,060 million for the six months ended June 30, 2026. This decrease was primarily due to an organic revenue decrease of $262 million, or 8.4%, primarily driven by lower volumes due to temporary operational challenges resulting from an ERP implementation in Germany, and heightened competition in certain markets and difficult economic conditions, partially offset by the effect of an exchange rate increase of $186 million, or 6.0%, primarily due to the strengthening of the euro, and to a lesser extent, the pound sterling and Czech koruna against the U.S. dollar and an increase in acquisition and divestiture revenue of $20 million, or 0.6%, primarily due to our acquisition of six wholesale businesses from the beginning of 2025 through the one-year anniversary of their respective acquisition dates.

Previous wording

(2)Gross margin increased by $29 million, or 5.0%, to $620 million for the three months ended March 31, 2026. The increase in gross margin dollars was driven by an exchange rate increase of $59 million, partially offset by lower organic revenue and lower vendor rebates. Gross margin percentage decreased by 0.5% which was driven by lower vendor rebates and lower margins from a competitive pricing environment in certain markets.

Current wording

(2)Gross margin decreased by $16 million, or 1.4%, to $1,194 million for the six months ended June 30, 2026. The decrease in gross margin dollars was driven by lower organic revenue, partially offset by an exchange rate increase of $71 million.

Previous wording

(3)SG&A expenses increased by $41 million, or 9.3%, to $500 million for the three months ended March 31, 2026. The increase in SG&A expense includes a $46 million unfavorable foreign exchange impact from a weakening U.S. dollar. The remaining $5 million favorable impact primarily relates to decreased personnel costs driven by productivity initiatives and restructuring activities which more than offset inflationary pressures.

Current wording

(3)SG&A expenses increased by $43 million, or 4.6%, to $976 million for the six months ended June 30, 2026. The increase in SG&A expense includes a $56 million unfavorable foreign exchange impact from a weakening U.S. dollar, and a $4 million unfavorable impact primarily related to increased freight, vehicle and fuel costs. This was partially offset by a $17 million favorable impact primarily related to decreased personnel costs driven by productivity, restructuring and other cost savings initiatives which more than offset inflationary pressures.

Previous wording

We had$1,677 million available under our revolving credit facilities as of March 31, 2026. Combined with $335 million of cash and cash equivalents at March 31, 2026, we had $2,012 million in available liquidity, a decrease of $192 million from our available liquidity as of December 31, 2025, primarily as a result of increasing our revolving credit facilities borrowings by$211 million.

Current wording

We had$1,629 million available under our revolving credit facilities as of June 30, 2026. Combined with $301 million of cash and cash equivalents at June 30, 2026, we had $1,930 million in available liquidity, a decrease of $274 million from our available liquidity as of December 31, 2025, primarily as a result of increasing our revolving credit facilities borrowings by$289 million.

Previous wording

A summary of the dividend activity for our common stock for thethree months ended March 31, 2026 is as follows:

Current wording

A summary of the dividend activity for our common stock for thesix months ended June 30, 2026 is as follows:

Previous wording

With $2,012 million of total liquidity as of March 31, 2026 and $532 million of current maturities, we have access to funds to meet our near term commitments. Our current maturities include the $500 million term loan payable under our Senior Unsecured Credit Agreement due January 2027, which we intend to extend or refinance on or before the scheduled maturity. We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.

Current wording

With $1,930 million of total liquidity as of June 30, 2026 and $545 million of current maturities, we have access to funds to meet our near term commitments. Our current maturities include the $500 million term loan payable under our Senior Unsecured Credit Agreement due January 2027. On July 29, 2026, we prepaid the term loan payable under our Senior Unsecured Credit Agreement with borrowings from our revolving credit facilities. We have a surplus of current assets over current liabilities, which further reduces the risk of short-term cash shortfalls.

Previous wording

Theweighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was 5.2% at March 31, 2026. Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was 5.0% at March 31, 2026. Under the Senior Unsecured Credit Agreement, our borrowings bear interest at the Secured Overnight Financing Rate ("SOFR") plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread. Under the CAD Note, the interest rate may be (i) a forward-looking term rate based on the Canadian Overnight Repo Rate Average for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread. See Note 11, "Long-Term Obligations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our borrowings and related interest.

Current wording

Theweighted average interest rate on borrowings outstanding under our Senior Unsecured Credit Agreement was 5.1% at June 30, 2026. Including our senior notes and CAD Note, our overall weighted average interest rate on borrowings was 5.0% at June 30, 2026. Under the Senior Unsecured Credit Agreement, our borrowings bear interest at the Secured Overnight Financing Rate plus the applicable spread or other risk-free interest rates that are applicable for the specified currency plus a spread. Under the CAD Note, the interest rate may be (i) a forward-looking term rate based on the Canadian Overnight Repo Rate Average for an interest period chosen by the Company of one or three months or (ii) the Canadian Prime Rate (as defined in the CAD Note), plus in each case a spread. See Note 12, "Long-Term Obligations" to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to our borrowings and related interest.

Previous wording

We had outstanding borrowings under our revolving credit facilities and term loans payable of $1,215 millionand$1,011 millionat March 31, 2026 and December 31, 2025, respectively. Of these amounts, there were current maturities of$500 million at March 31, 2026 related to the term loan payable under our Senior Unsecured Credit Agreement due January 2027. There were no current maturities at December 31, 2025.

Current wording

We had outstanding borrowings under our revolving credit facilities and term loans payable of $1,283 millionand$1,011 millionat June 30, 2026 and December 31, 2025, respectively. Of these amounts, there were current maturities of$500 million at June 30, 2026 related to the term loan payable under our Senior Unsecured Credit Agreement due January 2027. On July 29, 2026, we prepaid the term loan payable under our Senior Unsecured Credit Agreement with borrowings from our revolving credit facilities. There were no current maturities at December 31, 2025.

Previous wording

(1)Includes$500 million related to the term loan payable under our Senior Unsecured Credit Agreement due January 2027, which we intend to extend or refinance on or before the scheduled maturity.

Current wording

(1)Includes$500 million related to the term loan payable under our Senior Unsecured Credit Agreement due January 2027. On July 29, 2026, we prepaid the term loan payable under our Senior Unsecured Credit Agreement with borrowings from our revolving credit facilities.

Previous wording

(2)The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $30 million as of March 31, 2026).

Current wording

(2)The total debt amounts presented above reflect the gross values to be repaid (excluding debt issuance costs and unamortized bond discounts of $28 million as of June 30, 2026).

Previous wording

As of March 31, 2026, the Company had cash and cash equivalents of $335 million, of which $309 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives. Distributions of dividends from our foreign subsidiaries, if any, would be generally exempt from further U.S. taxation, either as a result of the 100% participation exemption under the Tax Cuts and Jobs Act enacted in 2017, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income regime.

Current wording

As of June 30, 2026, the Company had cash and cash equivalents of $301 million, of which $260 million was held by foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the undistributed earnings of our foreign subsidiaries. We believe that we have sufficient cash flow and liquidity to meet our financial obligations in the U.S. without repatriating our foreign earnings. We may, from time to time, choose to selectively repatriate foreign earnings if doing so supports our financing or liquidity objectives. Distributions of dividends from our foreign subsidiaries, if any, would be generally exempt from further U.S. taxation, either as a result of the 100% participation exemption under the Tax Cuts and Jobs Act enacted in 2017, or due to the previous taxation of foreign earnings under the transition tax and the Global Intangible Low-Taxed Income regime.

Previous wording

For the three months ended March 31, 2026, net cash used in operating activities totaled $56 million compared to $3 million for the same period of 2025. Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and collections can be timed differently from period to period. Receivables represented $15 million in higher cash outflows for the three months ended March 31, 2026 compared to the same period of 2025. Inventories represented $128 million in incremental cash inflows for the three months ended March 31, 2026 compared to the same period of 2025. Accounts payable produced $150 million in incremental cash outflows for the three months ended March 31, 2026 compared to the same period of 2025. Other operating activities primarily reflects the net effect of lower cash earnings and movements in various accruals during the three months ended March 31, 2026 compared to the same period of 2025.

Current wording

For the six months ended June 30, 2026, net cash provided by operating activities totaled $55 million compared to $293 million for the same period of 2025. Cash flows related to our primary working capital accounts can be volatile as the purchases, payments and collections can be timed differently from period to period. Receivables represented $44 million in higher cash outflows for the six months ended June 30, 2026 compared to the same period of 2025. Inventories represented $87 million in higher cash inflows for the six months ended June 30, 2026 compared to the same period of 2025. Accounts payable produced $223 million in higher cash outflows for the six months ended June 30, 2026 compared to the same period of 2025. Other operating activities primarily reflects the net effect of lower cash earnings and movements in various accruals during the six months ended June 30, 2026 compared to the same period of 2025.

Previous wording

For the three months ended March 31, 2026, net cash used in investing activities totaled $42 million compared to $50 million for the same period of 2025. Property, plant and equipment purchases were $40 million in the three months ended March 31, 2026 compared to $54 million in the prior year period.

Current wording

For the six months ended June 30, 2026, net cash used in investing activities totaled $120 million compared to $99 million for the same period of 2025. Property, plant and equipment purchases were $91 million in the six months ended June 30, 2026 compared to $107 million in the prior year period. We invested $30 million of cash in business acquisitions during the six months ended June 30, 2026. There were no significant business acquisitions during the six months ended June 30, 2025.

Previous wording

The following table reconciles Net Cash Used in Operating Activities to Free Cash Flow (in millions):

Current wording

The following table reconciles Net Cash Provided by Operating Activities to Free Cash Flow (in millions):

Previous wording

(1)For the three months ended March 31, 2025, Self Service contributed approximately $15 million of free cash flow.

Current wording

(1)For the six months ended June 30, 2025, Self Service contributed approximately $30 million of free cash flow.

Previous wording

For the three months ended March 31, 2026, net cash provided by financing activities totaled $111 million compared to $40 million for the same period in 2025. Cash outflows for dividends paid were $77 million and share repurchases were $1 million for the three months ended March 31, 2026 compared to $78 million for dividends paid and $40 million for share repurchases for the same period of 2025. Net debt borrowings were $202 million for the three months ended March 31, 2026 compared to $170 million for the same period of 2025.

Current wording

For the six months ended June 30, 2026, net cash provided by financing activities totaled $51 million compared to net cash used in financing activities of $169 million for the same period in 2025. Cash outflows for dividends paid were $154 million and share repurchases were $53 million for the six months ended June 30, 2026 compared to $156 million for dividends paid and $79 million for share repurchases for the same period of 2025. Net debt borrowings were $278 million for the six months ended June 30, 2026 compared to $59 million for the same period of 2025.

Previous wording

(1)Guarantor subsidiaries recorded $11 million and $51 million of net sales to and $48 million and $259 million of purchases from non-guarantor subsidiaries for the three months ended March 31, 2026 and fiscal year ended December 31, 2025, respectively.

Current wording

(1)Guarantor subsidiaries recorded $23 million and $51 million of net sales to and $95 million and $259 million of purchases from non-guarantor subsidiaries for the six months ended June 30, 2026 and fiscal year ended December 31, 2025, respectively.

Previous wording

(1)Noncurrent assets for guarantor subsidiaries included $503 million and $510 million of long-term notes receivable from non-guarantor subsidiaries as of March 31, 2026 and December 31, 2025, respectively.

Current wording

(1)Noncurrent assets for guarantor subsidiaries included $502 million and $510 million of long-term notes receivable from non-guarantor subsidiaries as of June 30, 2026 and December 31, 2025, respectively.

Previous wording

(2)Current liabilities for guarantor subsidiaries included $489 million and $621 million of short-term notes payable to non-guarantor subsidiaries as of March 31, 2026 and December 31, 2025, respectively.

Current wording

(2)Current liabilities for guarantor subsidiaries included $474 million and $621 million of short-term notes payable to non-guarantor subsidiaries as of June 30, 2026 and December 31, 2025, respectively.