Restructuring and Acquisition Related Expenses (Notes)

3 Months Ended

Mar. 31, 2020

Restructuring and Acquisition Related Expenses [Abstract]

Business Acquisition, Integration, Restructuring and Other Related Costs [Text Block]

Restructuring and Acquisition Related Expenses

2019 Global Restructuring Program

In the second quarter of 2019, we began implementing a cost reduction initiative, covering all three of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. We have incurred and expect to incur costs for inventory write-downs, employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed of earlier than the end of the previously estimated useful lives.

During the three months ended March 31, 2020, we incurred $3 million of restructuring expenses under this program, primarily related to facility exit costs and employee-related costs. These costs were recorded within Restructuring and acquisition related expenses in the Unaudited Condensed Consolidated Statement of Income during the three months ended March 31, 2020. We expect to incur up to an additional $5 million of expense during the remainder of 2020 to complete the program, for total program costs of $45 million ($37 million was incurred during the year ended December 31, 2019).

2020 Global Restructuring Program

Beginning in the first quarter of 2020, we initiated a further restructuring program aimed at cost reductions across all our reportable segments through the elimination of underperforming assets and cost inefficiencies. These actions are incremental to those initiated as part of the 2019 Global Restructuring Program, and will include costs for inventory write-downs, employee severance and other expenditures related to employee terminations; lease exit costs, such as lease termination fees, accelerated amortization of operating lease assets and impairment of operating lease assets; other costs related to facility exits, such as moving expenses to relocate inventory and equipment; and accelerated depreciation of fixed assets to be disposed of earlier than the end of the previously estimated useful lives. We currently estimate we will incur between $50 million and $60 million under this program, and we recognized $2 million during the three months ended March 31, 2020. We may expand this program during the remainder of 2020 as we continue to analyze our cost structure for additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19. These actions may include additional facility closures and severance for employee terminations based on an assessment of projected demand and strategic priorities.

Acquisition Integration Plans

During the three months ended March 31, 2020 and 2019, we incurred $2 million and $3 million of restructuring expenses, respectively, for our acquisition integration plans. These expenses included $1 million and $2 million during the three months ended March 31, 2020 and 2019, respectively, related to the integration of our acquisition of Andrew Page Limited ("Andrew Page"). Future expenses to complete these integration plans are expected to be less than $5 million.

1 LKQ Europe Program

In September 2019, we announced a multi-year program called "1 LKQ Europe" which is intended to create structural centralization and standardization of key functions to facilitate the operation of the Europe segment as a single business. Under the 1 LKQ Europe program, we will reorganize our non-customer-facing teams and support systems through various projects including the implementation of a common ERP platform, rationalization of our product portfolio, and creation of a Europe headquarters office and central back office. We continue to expect to incur between $45 million and $55 million in personnel and inventory related restructuring charges through 2024 as a result of executing the 1 LKQ Europe program. While certain projects are currently delayed in response to the COVID-19 pandemic, we expect to continue the program once the impacts on our business from COVID-19 have stabilized, although the initiatives and projects included in the program, and our estimates

of the related expenditures and timelines, may change in the future depending on the duration and severity of COVID-19 impacts on our business. We may also identify additional initiatives and projects under the 1 LKQ Europe program in future periods that may result in additional restructuring expense, although we are currently unable to estimate the range of charges for such potential future initiatives and projects.