LKQ (LKQ) risk factors, FY2025 10-K

Risks Relating to Our Business

1. 01Our operating results and financial condition have been and could continue to be adversely affected by the economic, political and social conditions in North America, Europe, Taiwan and other countries, as well as the economic health of vehicle owners and numbers and types of vehicles sold
2. 02We have a presence in Ukraine and are monitoring the situation there carefully. In addition, a number of our suppliers are based in China and Taiwan and so increasing strains and any political repercussions may have implications upon our supply chain24% rewritten
3. 03We face competition from local, national, international, and internet-based vehicle products providers, and this competition could negatively affect our business
4. 04In North America and Europe, local companies have formed cooperative efforts to compete in our industry. As a result of these factors, our competitors may be able to provide products that we are unable to supply, provide their products at lower costs, or supply products to customers that we are unable to serve
5. 05We rely upon insurance companies and our customers to promote the usage of alternative parts
6. 06Intellectual property claims relating to aftermarket products could adversely affect our business
7. 07If the number of vehicles involved in accidents or being repaired declines, or the mix of the types of vehicles in the overall vehicle population changes, our business could suffer
8. 08Fluctuations in the prices of commodities could adversely affect our financial results
9. 09An adverse change in our relationships with our suppliers, disruption to our supply of inventory, or the misconduct, performance failures or negligence of our third party vendors or service providers could increase our expenses, impede our ability to serve our customers, or expose us to liability
10. 10We also acquire inventory directly from insurance companies, OEMs, and others. To the extent that these suppliers decide to discontinue these arrangements, our business could be adversely affected through higher costs or the resulting potential inability to service our customers
11. 11Future public health emergencies could have a material adverse impact on our business, results of operation, financial condition and liquidity, the nature and extent of which is highly uncertain41% rewritten
12. 12If we determine that our goodwill or other intangible assets have become impaired, we may incur significant charges to our pretax income58% rewritten
13. 13We could be subject to product liability claims and involved in product recalls
14. 14We may not be able to successfully acquire businesses or integrate acquisitions, and we may not be able to successfully divest certain businesses

Risks Relating to Our Financial Structure

1. 15We have a substantial amount of indebtedness, which could have a material adverse effect on our financial condition and our ability to obtain financing in the future and to react to changes in our business77% rewritten
2. 16Our senior notes do not impose any limitations on our ability to incur additional debt or protect against certain other types of transactions, and we may incur certain additional indebtedness under our credit agreement and CAD Note55% rewritten
3. 17Each of our credit agreement and CAD Note imposes operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities21% rewritten
4. 18We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
5. 19Our future capital needs may require that we seek to refinance our debt or obtain additional debt or equity financing, events that could have a negative effect on our business
6. 20Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly
7. 21Repayment of our indebtedness is dependent on cash flow generated by our subsidiaries
8. 22A downgrade in our credit rating would impact us
9. 23The amount and frequency of our share repurchases and dividend payments may fluctuate

Legal and Regulatory Risks

1. 24Existing or new laws and regulations, or changes to enforcement or interpretation of existing laws or regulations, may prohibit, restrict or burden the sale of aftermarket, recycled, refurbished or remanufactured products
2. 25We are subject to environmental regulations and incur costs relating to environmental matters
3. 26We may be adversely affected by legal, regulatory or market responses to global climate change
4. 27Our amended and restated bylaws provide that the courts in the State of Delaware are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees
5. 28The choice of forum provision in our bylaws does not apply to claims brought to enforce any duty or liability created by the Exchange Act or the Securities Act or any claim with respect to which the federal courts have exclusive jurisdiction72% rewritten
6. 29with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating resultsNew
7. 30The tax rates applicable in the jurisdictions within which we operate vary. Therefore, our effective tax rate may be adversely affected by changes in the mix of our earnings by jurisdiction
8. 31If significant tariffs or other restrictions are placed on products or materials we import or any related counter-measures are taken by countries to which we export products, our revenue and results of operations may be materially harmed44% rewritten
9. 32Governmental agencies may refuse to grant or renew our operating licenses and permits
10. 33The costs of complying with the requirements of laws pertaining to data privacy and cybersecurity of personal information and the potential liability associated with the failure to comply with such laws could materially adversely affect our business and results of operations
11. 34Our employees are important to successfully manage our business and achieve our objectives
12. 35We operate in foreign jurisdictions, which exposes us to foreign exchange and other risks
13. 36Our business may be adversely affected by union activities and labor and employment laws62% rewritten
14. 37new collective bargaining or similar agreements, and work stoppages could materially increase our costs and reduce revenue and could limit our flexibility in terms of work schedules, reductions in force and other operational mattersNew
15. 38We rely on information technology and communication systems in critical areas of our operations and a disruption relating to such technology and systems, including cybersecurity threats, could harm our business21% rewritten
16. 39Business interruptions in our distribution centers or other facilities may affect our operations, the function of our computer systems, and/or the availability and distribution of merchandise, which may affect our business
17. 40If we experience problems with our fleet of trucks and other vehicles, our business could be harmed
18. 41We may lose the right to operate at key locations
19. 42Activist investors could cause us to incur substantial costs, divert management’s attention, and have an adverse effect on our business
20. 43We cannot assure you that our previously announced review of strategic alternatives will result in any transaction being consummated or any particular outcome being achieved, and speculation and uncertainty regarding the outcome of this review may adversely impact our businessNew
21. 44as a result of regulatory reviews (which may include domestic and foreign antitrust, foreign direct investment, CFIUS or other regulatory agency reviews) and determinations or other factorsNew