Restructuring and Transaction Related Expenses

6 Months Ended

Jun. 30, 2024

Restructuring and Acquisition Related Expenses [Abstract]

Restructuring and Transaction Related Expenses

Restructuring and Transaction Related Expenses

From time to time, we initiate restructuring plans to integrate acquired businesses, to align our workforce with strategic business activities, or to improve efficiencies in our operations. Below is a summary of our current restructuring plans:

2024 Global Restructuring Plan

In the first quarter of 2024, we began a global restructuring initiative focused on enhancing profitability. This initiative includes exiting businesses and markets that do not align with our strategic objectives and executing on opportunities to reduce costs, streamline operations and consolidate facilities. As we move forward with our plan, we will incur impairments and other charges related to the disposal of long-lived assets, inventory, and other assets; costs for employee severance; lease termination charges and facility closure costs; and other contract termination charges. We expect that the largest portion of the activity will come from the Europe segment. In the second quarter of 2024, we entered into agreements to divest our operations in Slovenia, which closed in April 2024; Bosnia, which we expect to close in the second half of 2024 subject to customary closing conditions and regulatory approval; and Poland, which we expect to close in the third quarter of 2024 subject to customary closing conditions. Our operations in Poland will be sold to Mekonomen, an equity method investment of which we own 26.6%. In connection with entering into the Bosnia and Poland agreements, we concluded that these disposal groups met the held for sale criteria and classified their assets and liabilities as held for sale. As of June 30, 2024, total assets and liabilities of the combined disposal groups held for sale were $46 million and $46 million, recorded to Prepaid expenses and other current assets and Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets, respectively. Our decision to exit these and other markets constituted a triggering event to evaluate certain long-lived assets for impairment, and as a result, we incurred and expect to incur impairment charges with the divestiture of Slovenia and as we move forward with plans to exit Bosnia, Poland and any other identified markets. This plan is scheduled to be substantially complete by the end of 2025 with an estimated total incurred cost of between $80 million and $100 million. In the future, we may identify additional initiatives under the plan that may result in additional expenditures, although we are currently unable to estimate the range of charges for such potential future initiatives.

2022 Global Restructuring Plan

In the fourth quarter of 2022, we began a restructuring initiative covering all of our reportable segments designed to reduce costs, streamline operations, consolidate facilities and implement other strategic changes to the overall organization. We have incurred and expect to incur costs primarily for employee severance, inventory or other asset write-downs, and exiting facilities. This plan is scheduled to be substantially complete by the end of 2024 with an estimated total incurred cost of between $28 million and $32 million.

1 LKQ Europe Plan

In 2019, we announced a multi-year plan 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 plan, we are reorganizing our non-customer-facing teams and support systems through various projects including the implementation of a common Enterprise Resource Planning 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 2027 with a total incurred cost of between $30 million and $40 million.

Acquisition Integration Plans

As we complete the acquisition of a business, we may incur costs related to integrating the acquired business into our current business structure and systems. These costs are typically incurred within a year from the acquisition date and vary in magnitude depending on the size and complexity of the related integration activities. We expect to incur additional expenses of approximately $5 million by the end of 2024 to substantially complete the integration plan related to the Uni-Select Acquisition in our Wholesale - North America segment.

The following table sets forth the expenses incurred related to our restructuring plans (in millions):

		Three Months Ended June 30,				Six Months Ended June 30,
Plan	Expense Type	2024		2023		2024		2023
2024 Global Plan	Employee related costs	$	3	$	—	$	3	$	—
	Inventory related costs (1)	6		—		14		—
	Asset impairments (2)	29		—		46		—
	Other costs	5		—		7		—
	Total	$	43	$	—	$	70	$	—
2022 Global Plan	Employee related costs	$	1	$	—	$	1	$	2
	Facility exit costs	—		1		1		3
	Other costs	—		1		—		2
	Total	$	1	$	2	$	2	$	7
1 LKQ Europe Plan	Employee related costs	$	1	$	—	$	2	$	1
	Facility exit costs	—		—		1		—
	Total	$	1	$	—	$	3	$	1
Acquisition Integration Plans	Employee related costs	$	3	$	—	$	4	$	—
	Facility exit costs	5		—		9		2
	Other costs	2		—		3		—
	Total	$	10	$	—	$	16	$	2
Total restructuring expenses		$	55	$	2	$	91	$	10

(1)    Recorded to Cost of goods sold in the Unaudited Condensed Consolidated Statements of Income.

(2)    Related to impairment of assets in Property, plant and equipment, net and Prepaid expenses and other current assets on the Unaudited Condensed Consolidated Balance Sheets.

The following table sets forth the cumulative plan costs by segment related to our restructuring plans (in millions):

	Cumulative Program Costs
	Wholesale - North America		Europe		Specialty		Self Service		Total
2024 Global Plan	$	10	$	60	$	—	$	—	$	70
2022 Global Plan	2		18		4		3		27
1 LKQ Europe Plan	—		13		—		—		13

Transaction Related Expenses

During the three months ended June 30, 2024 and 2023, we incurred expenses totaling an insignificant amount and $6 million, respectively, and during the six months ended June 30, 2024 and 2023 we incurred expenses totaling $2 million and $16 million, respectively, for legal, accounting and advisory services related to completed and potential transactions.