LKQ Corporation (LKQ) Q3 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the LKQ Corporation Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Boutross, Director of Investor Relations. Thank you. Sir, you may begin.

Thanks, Christine. Good morning, everyone, and thank you for joining us today. This morning, we released our third quarter 2012 financial results and updated our full year 2012 guidance. In the room with me today are Rob Wagman, President and Chief Executive Officer; and John Quinn, Executive Vice President and Chief Financial Officer. Rob and John have some prepared remarks, and then we will open the call up for questions. In addition to the telephone access for today's call, we are providing an audio cast via the LKQ website. A replay of the audio cast and conference call will be available shortly after the conclusion of this call. Before we begin our discussion, I'd like to remind everyone that the statements made in this call that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward-looking statements involve risk and uncertainties, some of which are not currently known to us. Actual events or results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors. We assume no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which it was made, except as required by law. Please refer to our Form 10-K and other subsequent documents filed with the SEC and the press release we issued this morning for more information on potential risk. Hopefully, everyone has had a chance to look at our 8-K which we filed with the SEC earlier today. As normal, we are planning to file our 10-Q in the next few days. And with that, I am happy to turn the call over to Mr. Rob Wagman.

Thank you, Joe. Good morning, and thank you for joining us on the call today. We are pleased with the results we reported this morning. Diluted earnings per share of $0.18 for the third quarter ended September 30, 2012 increased 5.9% from $0.17 for the third quarter of 2011. As noted in our press release, the third quarter 2012 diluted earnings per share included a charge equal to $0.01 for a change in fair value of contingent consideration liabilities and for restructuring and acquisition related expenses. Without this charge, our EPS would have been $0.19, an increase of 12% over the same period last year. Revenue for the quarter was $1.02 billion, an increase of 29.7%, as compared to $783.9 million in the third quarter of 2011. I am pleased to say that we achieved this year-over-year revenue growth with one less operating day compared to the third quarter of 2011, and that this revenue reflects the second highest quarterly revenue achieved by LKQ, second only to Q1 2012. During the quarter, we achieved 5.6% organic growth for parts and services and 1.6% total organic revenue growth. Revenue growth from acquisitions was 28.2% in the quarter. After adjusting our revenue results for one less selling day in the third quarter, organic revenue growth for parts and services would have been approximately 7%. I'd like to highlight that our positive total organic growth was accomplished during a period of continued deterioration in scrap prices. The organic growth in our other revenue category for the quarter was negative 18%, primarily driven by the pricing pressures we face in the scrap market. I am also pleased with the organic growth for parts and services in the quarter, given that during this period, net losses and loss adjustment expenses from catastrophes were down over…

Thanks, Rob. Good morning, and thank you for joining us today. One item of note, we did split the stock during the quarter, so references to earnings per share are on a split adjusted basis. Starting with revenue. This is our third consecutive quarter recording revenue in excess of $1 billion. Revenue in Q3 was $1,017,000,000, representing a 29.7% growth over the third quarter of last year. Acquisitions drove 28.2% of the growth representing $221 million. Our total organic growth was 1.6%, and parts and services organic growth was 5.6%. Parts and service growth number includes revenue associated with the new branches opened by ECP since our acquisition, and that added 230 basis points to the growth. Revenue for ECP was $181 million for the quarter, and while we didn't own ECP in Q3 of last year, we believe ECP grew 28% over the same quarter last year, when they achieved sales of $142 million. Partially offsetting the growth in parts and services was a negative organic revenue change in 17.8% in other revenue. This drop equates to a decline in other revenue of $24 million. Other revenues are where we record scrap and cores sales. This negative organic growth was primarily driven by a falling scrap prices, particularly scrap steel. We also had a delay in recognizing, approximately, $6 million of precious metals revenue, which I'll address in a moment. Total growth credit revenue was positive 1.8% due to acquisitions, slightly more than offsetting the falling scrap pricing. The impact to revenue from foreign exchange was de minimis, but I will remind listeners that beginning in Q4 2012, this number may be a little more volatile with the larger base of foreign revenue coming into play now that we've reached the anniversary of the acquisition of ECP. In Q3…

Thank you, John. As we enter the last quarter of 2012 and prepare for 2013, our outlook continues to be positive. I'm encouraged by the trends in miles driven, the continued growth in APU, the recent reduction in vehicle pricing at auctions, the strength of Euro Car Parts and the robust pipeline of acquisition opportunities we are witnessing. Every day, our group of over 19,000 team members endeavor to overcome the short-term variables that are out of our control by tackling opportunities to drive organic sales, continuously promoting the use of alternative parts, aggressively pursuing market share gains and implementing operational efficiencies to enhance the productivity of our organization and our customers that ultimately, will reward our stockholders now and over the long term. And with that, Christine, we are now prepared to open the call for Q&A.

[Operator Instructions] Our first question comes from the line of Nate Brochmann with William Blair. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Hey, I wanted to talk a couple of things. First on ECP, I mean, obviously that business continues to really put up solid and awesome growth. I was wondering is that kind of indicative -- just of some competitive weakness over there, still in terms of market share gains or is it really blocking and tackling and adding more products?

I think it's probably a combination of both, Nate, to be honest. There are some -- our competitors are seeing some struggling times for them, and we are capitalizing on that. But I really believe that the growth has a lot to do with our expansion of those stores. We've been able to go after national customers now, aggressively going after the collisions part side of the business too. So I think it's more operational, but clearly there is a component -- have to do with the struggling competitors. But I think our strategy and the extra 12 stores will further cement that and continue the growth into 2013 and beyond. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Okay, that's great. And maybe just hitting on that point too, obviously, looks like there's some acceptance just from the general marketplace on the collision repair, how are the discussions progressing with the insurance carriers, do you feel like sometime in the next 12 months that we could get some clarity on how they're going to look going forward?

I think that's the right time frame, 12 months. We've launched that. This is a marathon, not a sprint, and that's proven to be true. We are trying to create an industry over there, to be honest. So the meetings have been very productive -- very receptive, and our plan is that we can get a couple of carriers to jump on board. We believe there will be a snowball rolling down the hill. We'll gather some steam. So that's the plan and I think in 12 -- within 12 months, Nate, we should have a very good idea where we stand. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Okay, that's great. And then just one last question and I'll turn it over. But, obviously -- congratulations on getting the system tie-in there with Mitchell. How -- I mean, from a competitive standpoint, that seems to be a big differentiator for you and a really good tie-in to a lot of your end customers there. How are you guys viewing that, in terms of potential gains that you could ultimately get out of that?

It's a 2 stage process, Nate. This is Stage 1, Phase 1. Just a couple of key components to the program, I think are worth highlighting. It's real-time data now. Previously, our inventory was given to them on a disk, which was 30 days out. So real-time data is pretty powerful. We're getting both salvaging and aftermarket parts shown, and not just by plant but by region, so they'll see our entire regional database, that will allow the shop to take advantage of the distribution networks that we have in place. Of course, with the 1 keystroke to order a part, that's pretty powerful, but I believe the best part of it, it's 24/7. So the shop can go on, on Saturdays and Sundays and run this process. That's Phase 1 and that's completed. Phase 2, I think, is going to be the ultimate real test of the program, where it's actually fully integrated into the estimating system, where the shop won't have to move out of one screen at all. So it will be fully integrated. We're being told, probably at the earliest, it's 6 months to get that level of it done. I think at that point, that's when we're really going to be able to gauge the true power of what the potential uptick on this thing is. But clearly, we're moving in the right direction with the technology and initial feedback from the body shops is that they are more than willing to do this, if it's effective. So I think this will be the first test and in 6 months we'll have a really good idea of where this thing can go.

Our next question comes from the line of John Lawrence with Stephens.

Rob, would you take a -- if you look at ECP overall, and you just look out for the next 12 to 18 months as it -- obviously, the entrance has been very successful, how do you look at allocating CapEx dollars? Obviously, you're doing that with some more stores, but longer term, that marketplace -- the viability to spend more capital over there?

I'll start off and John, feel free to jump on it after. But, Nate -- John, when you said that we believe the total store count is going to be somewhere around 150 to 175. We believe that number is still to be true. And in fact, we may actually be able to go a little bit above 175, with those satellite stores to feed the more remote areas. So the CapEx's planning, we continue to grow and use the capital to expand in the U.K. We're also looking, obviously, at acquisitions over there as well, to help supplement what we've done in the U.K. already. So there's likely to be a little bit more CapEx coming down the road in 2013 and '14.

All right. And secondly, if you look at opportunities in the U.S -- coming into the tax year, are you seeing that pipeline continue to be as robust? And prices, what do you see with pricing and how badly people want to maybe move out?

Yes. John announced today was a 2 in the quarter and 2 we announced that actually happened in early Q4. We've announced 15 deals and just looking at the pipeline, I feel very confident that we're going to be able to beat 2011's 21 acquisitions. So the pipeline is as robust as we've ever seen it. And quite frankly, we believe it's going to carry into 2013. Pretty much across all of our product lines, we're seeing a lot of activity. I'll just touch on those quickly. For the aftermarket, with the Canadian acquisition that we announced today, we're pretty much done in Canada with aftermarket. So we'll look at strategic tuck ins, again, paint, cooling accessory businesses, now across the United States and Canada. For self service, we're still looking to fill in holes in geography. On previous calls, I announced that we were working on 3 greenfields, those have all become live, 1 in Milwaukee, 1 in Oklahoma City and 1 in Charlotte. And we have now approved 3 more greenfields in the process. So that's going to be the strategy going forward there. HD again, continue to search for strategic locations. The key there is looking for access to good distribution routes to be able to move the product. Europe, as I mentioned, we're still in exploratory mode and on the continent, but again looking for more opportunities in the U.K. as well. And finally full serve, greenfield in the Western Canada. We announced a greenfield up in Alberta. And, again, looking for strategic geography deals, much like the one I announced today in South Florida, that was a key market we were missing. So we believe there's still a lot of market opportunities here in the United States and Canada as well.

And just for housekeeping, John, what was the revenue run rate for those that you announced today?

Sure. The acquired revenue was about $15 million trailing, and a little bit under $2 million was actually booked in Q3 related to those acquisitions.

$2 million in Q3 and $15 million annual?

Yes, that was the start of the run rate. Obviously, we're going to try to grow that. John, that was just the Q3 acquisition, it does not include the Q4 items. Just 3Q.

Our next question comes from the line of Craig Kennison with Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: John, if I could just follow up then, what was the revenue contribution from the acquisitions acquired this quarter?

I don't think we're ready to call that out just yet, Craig. We're still working through a few of the things and they're not entirely on our system yet. We're going to be integrating that in the next 90 days. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's fair. And then to follow up on the Mitchell question. Rob, can you remind us where you're at with respect to other estimate service providers and sort of in the context of which phase you're at with respect to integration?

Sure, Greg. We are working with the other 2 estimating companies on similar products, to be able to do that and those are continuing. We, hopefully, will be launching something within the next quarter or Q1 at the latest, with the other -- with at least one of the other estimating companies. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's very helpful. And then, John, back to you. On ECP, tremendous growth. Is there any way to put it into buckets? I would imagine you've got new stores. You've got same-store sales growth. You've got the impact from adding collision, SKUs, trying to just get a feel for what the overall growth is based on those buckets?

Yes, collision is still very small dollars, it's growing though, probably 50% faster than the base business. In terms of the total, what you might think of as a same-store sales, we don't have a good number of that because we don't have the good data before we acquired them, and they have been opening stores prior to our acquisition. I did indicate that there's about 230 basis points contribution from the locations we've opened, since we've acquired them though, contributing to our total parts and services organic growth. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's a helpful metric. And as we go forward and try to model your overall organic growth, should we anticipate something like that, 230 basis point lift in future quarters, related to ECP?

We've been very aggressive to opening the locations. This is the second time, I think we've raised the target for 2012. I don't know where we're going to go yet in 2013. I guess we're not ready to announce that, but obviously these are going to -- they take about 3 years to come to full maturation. So obviously, opening stores in Q4 this year are going to give us a fairly good tailwind going into Q1 next year. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And lastly, sorry, if I missed this. Did you comment at all on the trends you're seeing so far on October?

We have not, Craig. Glad to give you an update on that. Really, with the exception of the scrap, as we mentioned, was likely to cause a $0.01, based on today's rates. Business is in range of our plan for October, so we're pleased with what we're seeing so far. Of course, ECP continues to be right on target where we slightly exceeding in many cases. But the most encouraging thing that we're seeing in October, again, is the maintaining of our cost improvements in terms of salvage and self-service acquisition costs. So the wild card for Q4 is scrap right now for us. But other than that, we're pretty pleased.

Our next question comes from the line of Bret Jordan with BB&T. Bret David Jordan - BB&T Capital Markets, Research Division: I have a quick questions on -- and one of the Rhode Island precious metals recovery business, do you have a feeling for what the -- sort of the rollout that going from a 40 bp by gross margin lag to becoming neutral than ultimately contributing, sort of how does that timeframe look?

The base business is processing commodities. So it -- in terms of that, the 40 basis points, until we anniversary, we're going to continue to see that being the drag, quite frankly. Well, the reason we bought that business was we were trying to get a little bit more out of each car and the precious metals, particularly the catalytic converters. We had been selling the catalytic converters to third parties who were removing the platinum, rhodium, et cetera. So we're going to internalize that, and I mentioned a little bit that the -- we had a delay because as we start processing them ourselves, there's a revenue recognition delay. It doesn't really impact the gross margin percentage per se, because you consider scrap just part of the overall gross margins. So in Q3, there's a slight delay, probably it rounds to $0.01 in terms of gross margin dollars that were missing because of the delay in terms of that processing. So that will come back. Ultimately, we're hoping to get a little bit of extra margin out of each car. And we're processing close to 160,000, 170,000 cars a quarter right now. So our thinking is, that even if we can get, $1 or $2 more per catalytic converter over time, that is accretive to the margins, but I don't know if you'll see it popping out, as I think it will call out per se. Does that make any sense, Bret? Bret David Jordan - BB&T Capital Markets, Research Division: Yes it does. Okay. And one question I guess relative the ECP, the pricing environment of the traditional auto parts over there, Unipart. Have they changed their strategy at all, as far as the pricing given some new management, I guess in the last -- in the not-too-distant past?

Yes, Bret. We've seen a little bit more aggressiveness from the pricing from our competitors, trying to get that market share. But quite frankly, we've been able to adjust pretty quickly and maintain -- keeping cash in that revenue and growing the revenue. So we expect to be a little bit more aggressive in the next coming quarters, for sure. Bret David Jordan - BB&T Capital Markets, Research Division: Okay, great. And then one last question, it's also on market share, but I think it's generally domestic market share. I think earlier in your prepared remarks you commented that you continue to gain share. Do you have an idea sort of about a year-over-year, what's your margins? What's your share increase was, domestically?

We do know this from insurance industry sources, Bret, that claim losses are down year-over-year, roughly about 2.4% is what we've been told, year-to-date. So, with us rolling at 5.6%, but it's hard to really quantify. But clearly we are taking market share from our competition. And of course the APU usage increase up 1% has helped as well.

Our next question comes from the line of John Lovallo with Bank of America Merrill Lynch.

First question is on the receivable securitization facility that was put in place. I'm just curious, is this something that you've had in the past? And is there any -- is the customer payment terms becoming less favorable that kind of made you decide to put this in place or were there other reasons?

We've not have in the past, when we put the credit facility in place last year, we added a provision in there to allow us to do this. So what we -- in our credit facility, we have a basket that we're allowed to securitize up to $100 million of accounts receivable. And it has nothing to do really with our payment terms, it's simply a way of getting some additional capacity and it trades at a little bit more than commercial paper rate. So on the $80 million facility that we have today, we're borrowing at just a little bit over 1% interest rate. So it's very attractive financing and just another source of capital.

Okay, that's helpful. Recently I read, and I think it was a piece put out by Mitchell, and they were saying that OEMs domestically are becoming a little bit more aggressive on pricing, in fact, instructing repair shops to actually lower prices to match alternative prices. I mean, are you guys seeing any of these?

Yes, we're seeing it regionally, John, where we see some aggressive dealerships. But on a national impact, we really haven't seen anything to really worry us. General Motors is probably the biggest one on those types of programs. But they require the dealers to fill out an awful a lot of paper work. We thought the dealers will complain about the paperwork they have to fill out. And they have to buy truckloads of products from what we understand to be in the program. So very few dealerships are actually participating, only the bigger ones. But we haven't seen a major impact at all, actually.

And those programs have been around since 2008, on and off. Their marketing programs would be, really, periodically put in place and then they pull back. It seems like it's just part of their marketing strategy.

Okay, great. If I could just sneak one last one in here. Also recently I heard that France is considering deregulating their repair part market. Now is this -- it's something that you think will go through, it's something that could be replicated in other countries and does this give an opportunity for LKQ in continental Europe?

It certainly does. France was probably on the bottom of the list as an opportunity because of that and that the fact that they are not going to mandate potentially as it goes through, the use of OEM parts on their fair process, certainly it makes it much more attractive. And certainly, if it gains steam, obviously, other European countries may follow suit. Although, we don't see anyone as restrictive as France. So if France is probably the most restrictive in terms of alternative parts, if they do overturn that, that will be a real eye opener for us and an opportunity as well, John.

Our next question comes from the line of Sam Darkatsh with Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: 2 questions. If my math holds, I think year-to-date your wholesale vehicle purchases are up about 10%. I was surprised to see the recycled business on an organic basis only up 3% in the quarter, after being up 8% in the second quarter and your comparison was a little easier. Can you talk about why that number might not have been a little higher?

Sure, there's a couple of things there that affect that, Sam. First, one less day, it actually caused 150 basis point drop by that one day, year-over-year. Secondly, the reduction in our secure disposal and crush-only vehicles where we just destroy cars on behalf of certain customers, that caused a 50% -- 50 basis point decline as well. Here's one other thing I did want to mention, because of the mild winter, I think we saw a fewer total losses coming out of Q1 and Q2. And don't forget it does take 60 to 90 days before those cars hit the auction, so those were in the Q3. So a little bit tougher buying market, I think in Q3, which we believe has really rectified itself. Looking at the auction volumes now, we're seeing the cars that were totaled in Q2 and Q3 -- early Q3 are now hitting the auctions today. So we think it's a one quarter blip. But mainly that one day, and the fact that the crush-only car revenue was down, really cause of that.

Sam, I'll just add, you're right, we're up about 10% year-over-year, that includes the impact of the acquisitions, obviously. Because what we're reporting there is the total number of cars including acquisitions. If you look year-to-date on a similar statistic, recycled parts and services is up organically at 6.6%. So we pull out the acquisition, that's kind of indicates where organically volume sort of 5% to 8% more cars. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay, that's helpful. Second question, I noticed that North American EBITDA in dollars was down pretty sharply year-on-year despite sales being up. I know a lot of that explained away with the scrap and the difficult margin impact from that. But do you expect that specific relationship and dynamic to continue? EBITDA dollars being down, sales being up, how long does that last and what are your expectations for gross margins here in the fourth quarter?

Sure, it's John. I'll try to take that one and Rob, you can supplement. No, we don't expect that and due part of it is, as Rob mentioned, there's always one less day, but some of the other things we're seeing is, you're right, scrap was an impact. We don't expect Q4 to be as impacted by scrap as Q3 was. And we talked about the 100 basis points and roughly equivalent to $0.02 in Q3 and we said that's probably going to be $0.01. That's not going to be as big a drag in Q4. It's going to be a drag, but it won't be as big a drag. In terms of -- we did have a delay in terms of the precious metals revenue recognition that we talked about. We started to process about half the cats of that acquisition. So some of that will come back in Q4, but then we may have a delay on some of the other products. Depending on when we move the rest of the cats into the -- that facility will take another one quarter hiatus on some of that income at some point, it will ought to be Q4 this year or maybe we'll take it into early next year, depending on how quickly we can ramp up that facility. Secured disposal, which Rob mentioned that, hitting us about 30 basis points, those things tend to be a little bit lumpy in terms of -- think of these as being, for example, like the cars from a train wreck. So we can't predict those very well, when they're going to come. I can tell you in Q4, so thus far, we're expecting to be down year-over-year. And then the other things, warranty claims, that will get fixed. We think it is behind us now, but until we actually see how things transpire in this quarter, but I would just -- that is definitely a short-term phenomena. And then in terms of the cost of salvage, Rob mentioned that, we are buying better at the auction, some of that is beating up on the scrap. But on a net basis, we do think that ultimately we're going to see our late-model recycled business gross margins improve. So that may hit us and that may start to show up in Q4, we would expect it, if not Q4, we'll start to see it in Q1. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: So we should look at a Q4 gross margin closer to the 41-ish percent range, where we saw in Q2, excluding the settlement gains? Is that how to look at it? Or would it be even better than that perhaps?

I don't -- you know me, I don't like to give exact line item guidance, but it will be, -- at this point, we're anticipating to improve back.

Our next question comes from the line of Bill Armstrong with CL King. William R. Armstrong - CL King & Associates, Inc., Research Division: Just getting back to the precious metal processing, when will you be anniversary-ing that?

We bought have businesses in June this year. So it'll be about a year. But just -- as we move the production from third parties over to that facility, it causes a little bit of a delay on the recognition -- when we can recognize the sale of the metals, so rather than selling the whole cats to, catalytic converters, to a third party, we actually have -- it takes a couple. I think about a month to process them and then some time for the smelters to process them. So we end up with about a quarter delay. So I would imagine it's probably going to be another 6 months before we're fully implemented in that. William R. Armstrong - CL King & Associates, Inc., Research Division: So that's the $6 million delay you referenced earlier?

Right. And so that will come back in Q4, favorably. But then we may have a delay, either this quarter or next, as we delay the other half of the business, as we start processing the other half of the cats. William R. Armstrong - CL King & Associates, Inc., Research Division: So then is that why the precious metal processing is a drag on gross margin because of this delay? Because I would think if you're basically getting more dollars out of each car, that should be better for gross margins?

Ultimately it will be better, the base business that we bought though, is just doesn't -- the existing revenue stream of that business is a low gross margin business, frankly. William R. Armstrong - CL King & Associates, Inc., Research Division: I see, okay. And then some housekeeping on your earnings per share guidance, just -- can you remind us what the year-to-date EPS was on a comparable basis, excluding the restructuring, the acquisition related expenses, the fair value of contingent liabilities? Just so we have apples to apples? It looks to me like it's about $0.66?

Let me just make sure I get the right one over here. Those 2 items are [indiscernible] those 2 items are a little over $0.01, combined. William R. Armstrong - CL King & Associates, Inc., Research Division: On a year-to-date basis?

Right. William R. Armstrong - CL King & Associates, Inc., Research Division: So Q4, if we just back into Q4, that seems like that would be $0.22 to $0.25, is that -- is my math correct on that?

Just a minute. Yes. We agree to that.

Our next question comes from the line of Scott Stember with Sidoti. Scott L. Stember - Sidoti & Company, LLC: I missed the comments on scrap metal, the impact to the gross margin as far as the basis points.

I'm sorry, what was the... Scott L. Stember - Sidoti & Company, LLC: The scrap metal impact on the third quarter, from a -- how many basis points?

About 100 basis points. Scott L. Stember - Sidoti & Company, LLC: Okay, got you. And just going back to the guidance question. You're excluding the -- all the extraneous costs, but you are including the legal settlement, which is, by my calculation, about $0.04, is that correct?

Correct. Scott L. Stember - Sidoti & Company, LLC: Okay. Great. And last, can you just talk about NSF program? How that's going along and progressing and what we can expect out of that in 2013?

Yes, sure, Scott, it's Rob. We're actually seeing some great progress from NSF year-over-year. They've added 462 certified parts into the program, a 60% growth. And also I'm talking about the certification programs, CAPA actually had 782 new parts entered into the system for a 19% growth. And our own internal program, AQRP, we added 888 new parts year-over-year for 8.5% growth. So all 3 of those programs are growing nicely. The insurance companies are demanding them to increase their usage and we're certainly working with the manufacturers to make sure we get more and more products in. So we do expect continued growth out of all 3 of those programs. Christine?

I just want to follow up on Bill's question. Bill, I just want to make sure that we're on an apples and apples basis, because you did not mention the light settlement and so, Scott, has pointed out that we're including the light settlement, it was in Q1. If you include the light settlement, we then excluded the restructuring and -- into the purchase price adjustments, Q4, on our guidance basis will be $0.21 to $0.24. So I just want to make sure that everybody on the call understand that.

And Christine, I think we have time for one more call -- one more question.

Our final question comes from the line of Gary Prestopino with Barrington Research.

Rob, could you maybe -- with what you're doing right now, early-stage of alternative parts in the U.K., have you -- are you -- you're obviously targeting multiple insurance companies, I will assume. But is right now, are you piloting with 1 or 2, and would that one you're working with, be one of the leading insurance companies in the U.K?

We have, Gary, we've several small pilots going on, probably number 5 to -- to the number 5 different pilots going on, mainly with small carriers. The big guys are watching and waiting with good interest level, but these are with the smaller carriers at this point.

Mr. Wagman, we've reached the end of the question-and-answer session. I'd not like to turn the floor back over to you for closing comments.

We just want to thank everybody for joining in the call today. We look forward to reporting our year-end and Q4 report at the end of February, and look forward to hearing from you then. Thanks everybody. Have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.