Restructuring and Acquisition Related Expenses (Notes)

12 Months Ended

Dec. 31, 2021

Restructuring and Related Activities [Abstract]

Restructuring and Acquisition Related Expenses

Restructuring and Acquisition Related Expenses

Acquisition Related Expenses

We incurred $3 million of acquisition related expenses for the year ended December 31, 2021. These expenses included external costs such as legal, accounting and advisory fees related to completed and potential transactions.

We incurred $8 million of acquisition related expenses for the year ended December 31, 2020. The expenses primarily resulted from the resolution of a purchase price matter related to the Stahlgruber transaction for an amount above our prior estimate.

We incurred $2 million of acquisition related expenses for the year ended December 31, 2019. These expenses included external costs such as legal, accounting and advisory fees related to our acquisitions.

2019 Global Restructuring Program

In the second quarter of 2019, we commenced 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 earlier than the end of the previously estimated useful lives.

During the year ended December 31, 2020, we incurred $7 million of restructuring expenses primarily related to facility exit costs and employee-related costs. These costs were recorded within Restructuring and acquisition related expenses in the Consolidated Statements of Income. Of the program costs incurred during 2020, $4 million and $3 million related to the Europe and North America segments, respectively. During the year ended December 31, 2019, we incurred $37 million primarily related to inventory write-downs, facility exit costs, and employee-related costs. Of these expenses, $17 million, primarily related to Andrew Page Limited ("Andrew Page") branch consolidation and brand rationalization, was recorded within Cost of goods sold in the Consolidated Statement of Income during the year ended December 31, 2019, and $20 million was recorded within Restructuring and acquisition related expenses. Of the program costs incurred during 2019, $25 million, $11 million and $1 million related to the Europe, North America and Specialty segments, respectively.

The actions under this program are substantially complete, and the expenses incurred during the year ended December 31, 2021 were $2 million. The total cumulative program costs incurred to date were $47 million, of which $31 million, $14 million and $1 million were in the Europe, North America and Specialty segments, respectively. As of December 31, 2021, restructuring liabilities related to this program were immaterial.

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 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 expanded this program during the second and third quarters of 2020 as we identified additional opportunities to eliminate inefficiencies, including actions in response to impacts to the business from COVID-19.

During the year ended December 31, 2021, we recognized net restructuring expenses totaling $9 million 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 as part of the restructuring plan. During the year ended December 31, 2020, we recognized restructuring expenses totaling $50 million for employee-related costs, facility exit costs and inventory write-downs. Of these expenses, $7 million resulted from inventory impairment charges related to facility consolidation actions and brand rationalizations and were recorded in Cost of goods sold in the Consolidated Statement of Income. Of the cumulative program costs incurred to date, $30 million, $27 million, and $1 million related to our North America, Europe and Specialty segments, respectively. We estimate total costs under the program through the program's expected completion date in 2023 will be between $60 million and $70 million, of

which approximately $32 million, $32 million, and $1 million will be incurred by our Europe, North America and Specialty segments, respectively; these segment amounts represent the midpoints of the expected ranges of costs to be incurred by each segment.

As of December 31, 2021 and December 31, 2020, restructuring liabilities related to this program totaled $11 million and $21 million, respectively, including $9 million and $17 million, respectively, related to leases we 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 Consolidated Balance Sheets), and $2 million and $4 million, respectively, for employee termination costs (reported in Accrued payroll-related liabilities on our Consolidated Balance Sheets). Our lease-related restructuring liabilities are estimated based on the remaining rent payments after the actual exit date for facilities closed as of December 31, 2021 and after the planned exit date for facilities expected 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

During the year ended December 31, 2021, we incurred immaterial restructuring expenses for our acquisition plans. We expect to incur future expenses of up to $5 million to complete an integration plan related to acquisitions completed in the Specialty segment during the year ended December 31, 2021.

During the year ended December 31, 2020, we incurred $9 million of restructuring expenses for our acquisition integration plans. These expenses were primarily related to the integration of operations in Belgium.

During the year ended December 31, 2019, we incurred $18 million of restructuring expenses primarily related to the acquisition integration efforts in our Europe segment. These expenses included $14 million related to the integration of the acquisition of Andrew Page, including $4 million within Cost of goods sold in the Consolidated Statement of Income.

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. While certain projects were delayed in 2020 as a result of the COVID-19 pandemic, such as the procurement initiatives and the new headquarters in Switzerland, we also accelerated certain projects, such as the integration of previously acquired networks and sharing resources across LKQ Europe. We completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by 2024.

During the year ended December 31, 2021, we incurred $6 million of employee-related restructuring charges under the 1 LKQ Europe program. We estimate that we will incur between $40 million and $50 million in total personnel and inventory related restructuring charges through 2024 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 December 31, 2021, the restructuring liabilities related to this program were immaterial.