LKQ CORPLKQ
LKQ CORP Fair Value Disclosure
Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value
We use the market and income approaches to estimate the fair value of our financial assets and liabilities, and during the year ended December 31, 2025, there were no significant changes in valuation techniques or inputs related to the financial assets or liabilities that we have historically recorded at fair value.
The following table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs we utilized to determine such fair value as of December 31, 2025 and 2024 (in millions):
| December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments - debt securities | $ | 70 | $ | — | $ | — | $ | 70 | $ | 53 | $ | — | $ | — | $ | 53 | |||||||||||||||||||||||||||||||
| Investments - equity securities | 19 | — | — | 19 | 14 | — | — | 14 | |||||||||||||||||||||||||||||||||||||||
| Total Assets | $ | 89 | $ | — | $ | — | $ | 89 | $ | 67 | $ | — | $ | — | $ | 67 | |||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | |||||||||||||||||||||||||||||||
| Contingent consideration liabilities | — | — | 3 | 3 | — | — | 3 | 3 | |||||||||||||||||||||||||||||||||||||||
| Total Liabilities | $ | — | $ | — | $ | 3 | $ | 3 | $ | — | $ | 1 | $ | 3 | $ | 4 | |||||||||||||||||||||||||||||||
Investments in debt and equity securities relate to our captive insurance subsidiary and are included in Other noncurrent assets on the Consolidated Balance Sheets. The balance sheet classification of the interest rate swap agreements is presented in Note 19, "Derivative Instruments and Hedging Activities." For contingent consideration liabilities, the entire portion is current at December 31, 2025 and is included in Other current liabilities, while at December 31, 2024, the current portion was included in Other current liabilities and the noncurrent portion was included in Other noncurrent liabilities on the Consolidated Balance Sheets based on the expected timing of the related payments.
We value derivative instruments using a third party valuation model that performs discounted cash flow analysis based on the terms of the contracts and market observable inputs such as current and forward interest rates and current and forward foreign exchange rates.
Our contingent consideration liabilities are related to our business acquisitions. Under the terms of the contingent consideration agreements, payments may be made at specified future dates depending on the performance of the acquired business subsequent to the acquisition. The liabilities for these payments are classified as Level 3 liabilities because the related fair value measurement, which is determined using an income approach, includes significant inputs not observable in the market.
Financial Assets and Liabilities Not Measured at Fair Value
Our debt is reflected on the Consolidated Balance Sheets at cost. The fair value measurements of the borrowings under the credit agreement are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions with similar terms and maturities. We estimated the fair value by calculating the upfront cash payment a market participant would require at December 31, 2025 and 2024 to assume these obligations. The fair values of the U.S. Notes (2028), U.S. Notes (2033), Euro Notes (2028) and Euro Notes (2031) are determined based upon observable market inputs including quoted market prices in markets that are not active, and therefore are classified as Level 2 within the fair value hierarchy.
Based on market conditions as of December 31, 2025 and 2024, the fair value of the borrowings under the Senior Unsecured Credit Agreement reasonably approximated the carrying values of $501 million and $1,164 million, respectively. As of December 31, 2025 and 2024, the fair value of the borrowings under the CAD Note reasonably approximated the carrying values of $510 million and $487 million, respectively.
The following table provides the carrying and fair value for our other financial instruments as of December 31, 2025 and December 31, 2024 (in millions):
As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| U.S. Notes (2028) | $ | 800 | $ | 827 | $ | 800 | $ | 814 | |||||||||||||||
| U.S. Notes (2033) | 600 | 642 | 600 | 620 | |||||||||||||||||||
| Euro Notes (2028) | 294 | 295 | 259 | 261 | |||||||||||||||||||
| Euro Notes (2031) | 881 | 902 | 777 | 796 | |||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 25, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.