Restructuring and Acquisition Related Expenses (Notes)

9 Months Ended

Sep. 30, 2022

Restructuring and Acquisition Related Expenses [Abstract]

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

Restructuring and Transaction Related Expenses

Global Restructuring Programs

In 2019, we commenced a cost reduction initiative, covering all of our reportable segments, designed to eliminate underperforming assets and cost inefficiencies. This program was expanded in 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19. 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 and nine months ended September 30, 2022, we incurred restructuring expenses totaling $1 million and $2 million, respectively, primarily related to employee-related costs and facility exit costs under these programs. During the three and nine months ended September 30, 2021, we recognized net restructuring expenses totaling $2 million and $9 million, respectively, which included employee-related costs, facility exit costs, and a $3 million gain in the first quarter from the sale of a building to be closed. Of the cumulative program costs incurred to date, $59 million, $43 million, $2 million and $2 million related to our Europe, Wholesale - North America, Specialty and Self Service segments, respectively. The actions under the 2019 Global Restructuring Program are substantially complete and the 2020 Global Restructuring Program is expected to be completed in 2023. We estimate total costs under the programs through their expected completion dates will be between $108 million and $115 million, of which approximately $63 million, $44 million, $2 million and $2 million will be incurred by our Europe, Wholesale - North America, Specialty and Self Service segments, respectively; these segment amounts represent the approximate midpoints of the expected ranges of costs to be incurred by each segment.

As of September 30, 2022 and December 31, 2021, restructuring liabilities incurred related to these programs totaled $10 million and $14 million, respectively, including $6 million and $9 million, respectively, related to leases we have exited or expect to exit prior to the end of the lease term (reported in Current portion of operating lease liabilities and Long-term operating lease liabilities, excluding current portion on our Unaudited Condensed Consolidated Balance Sheets). Our lease-related restructuring liabilities are estimated based on remaining rent payments after our actual exit date for facilities closed as of September 30, 2022 and after our planned exit date for facilities we expect to close in future periods; these liabilities do not reflect any estimated proceeds we may be able to achieve through subleasing the facilities.

Acquisition Integration Plans

We incurred $2 million of restructuring expenses for the nine months ended September 30, 2022, primarily related to the integration of acquisitions completed in our Europe segment. We did not incur a significant amount of expenses for the three months ended September 30, 2022. We expect to incur future expenses of up to $5 million to complete an integration plan related to 2021 acquisitions completed in our Specialty segment.

During the three and nine months ended September 30, 2021, we did not incur a significant amount of restructuring expenses for our acquisition integration plans.

1 LKQ Europe Program

In 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 are reorganizing 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 completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2025.

During the three and nine months ended September 30, 2022, we incurred $1 million of employee-related charges under our 1 LKQ Europe program. During the nine months ended September 30, 2021, we incurred $6 million of employee-related restructuring charges. We did not incur a significant amount of expenses for the three months ended September 30, 2021. We estimate that we will incur between $40 million and $50 million in total personnel and inventory-related restructuring charges through 2025 under the program. We may 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. As of September 30, 2022, the restructuring liabilities related to this program were insignificant.

Transaction Related Expenses

During the three and nine months ended September 30, 2022, we incurred $1 million and $5 million of transaction related expenses, respectively. During the three and nine months ended September 30, 2021, we incurred $1 million of transaction related expenses. These expenses included external costs such as legal, accounting and advisory fees related to completed and potential transactions.