LKQ Corporation (LKQ) Q4 2012 Earnings Report, Transcript and Summary

Greetings. Welcome to the LKQ Corporation Fourth Quarter and Full Year 2012 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, LKQ Corporation. Thank you, Mr. Boutross, you may now begin.

Thanks, Rob. Good morning, everyone, and thank you for joining us today. This morning, we released our fourth quarter and full year 2012 financial results and provided our full year 2013 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 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 with 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 statement 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-K 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 with both a solid fourth quarter and full year 2012. Diluted earnings per share in Q4 were $0.21, an increase of 10.5% as compared to $0.19 for the fourth quarter of 2011. Revenue reached a new quarterly high of $1.07 billion in the quarter, an increase of 13.7% as compared to Q4 2011. Organic revenue growth for parts and services was 8.2% for the quarter. Total organic revenue growth for the quarter was 7.4%. For the full year, our EPS was $0.87, representing an increase of 22.5% from the $0.71 reported in 2011. Please note that both full year 2012 and 2011 diluted earnings per share included a loss equal to $0.01 per share resulting from restructuring and acquisition-related expenses and the change in fair value of contingent consideration liabilities. Additionally, full year 2011 diluted earnings per share included a charge of $0.01 per share as a result of the loss of debt extinguishment. Revenue reached a record $4.1 billion in 2012, an increase of 26% as compared to 2011. Organic revenue growth for parts and services for 2012 was 6%. Total organic revenue growth for the year was 4.1%. I am also pleased with our organic growth considering the mild weather conditions we faced in the first and second quarter, increased fuel prices throughout the year, fluctuations in the scrap market, a reduction in claims volume and minimal relief from our relatively high vehicle procurement costs during the first half of the year. Despite those headwinds, we continue to grow our business and gain market share in the quarter and for the full year, which we believe it was a result of the broadening…

Thanks, Rob. Good morning, and thank you for joining us today. Hopefully, everyone's had a chance to review our press release this morning. We expect to file our 10-K with the SEC in the next few days. Please watch for that as well. Also as a reminder, we split the stock in September 2012, so any discussions regarding the number of shares, earnings per share, reflect that split. We are commenting today on Q4 and the full year of 2012, as well as giving 2013 guidance. So please note that my comments may switch between the quarter and the full year's. Rob's already given you a breakdown of the major year-over-year revenue changes, so I'll supplement what he said with a few other data points. In Q4 2012, our total organic revenue growth was 7.4%, and we delivered additional growth of 5.9% from acquisitions. Rob mentioned that the Q4 2012 organic growth for recycled and aftermarket parts and services was 8.2%. Other revenue, which is where we record our scrap and commodity sales, was higher by 19.2%. The majority of this growth was driven by acquisitions, which accounted for 17.3% of the change. We saw modest organic growth of 1.9% because higher volumes slightly more than offset the fall we saw in commodity prices. We saw the average price achieved for scrap steel fall about 14% year-over-year. In Q4 2012, revenue for our self-service business was $89.7 million or 8.4% of LKQ's total revenue. Approximately 35% of this revenue was part sales and included in recycled and related products and 65% scrap and car sales included in other revenue. Our acquisition revenue growth was driven by the 33 deals we completed since Q3 2011 and excludes ECP, which closed the first day of the quarter in Q4 2011. In Q4…

Thanks, John. To summarize, we are pleased with the fourth quarter and our 2012 performance. During 2012, we were challenged with multiple elements that were not in our control, including year-over-year accident frequency that was down roughly 2%, paid claims down on average over 3%. Our average price per ton of scrap was down 14% and, according to a recent collision repair shop survey, over 70% of all shops reported flat or negative sales compared to 2011. Despite all of those challenges, our company was able to deliver positive growth across many financial performance metrics. ECP continues to provide exciting growth opportunities for the company, and we are quite pleased with its performance and the value it has created for our shareholders. We plan to continue to expand our ECP branch comp in the U.K., while simultaneously leveraging their network to drive collision part sales by educating our U.K. customers on our value proposition of alternative parts and driving APU. In addition, given our success with ECP and our ability to identify growth opportunities outside of North America, the company continues to explore additional international acquisition targets. As witnessed by our fourth quarter acquisition and development efforts, we also believe there are opportunities to continue our North American growth. We see strategic tuck-in and greenfield markets available across all of our businesses. We will continue our efforts to add additional product lines as we execute our one-stop shop goal for our collision mechanical customers. All of these business units, supported by our 20,000 plus dedicated employees, allow us to project solid EPS gains for 2013. The low end of our guidance represents a 19% increase over 2012 results, and at the high end, we would increase our EPS 30% year-over-year. Keep in mind that our 2012 EPS exceeded 2011 EPS by over 23%. So you can see that we expect to continue the success we achieved in 2012. Rob, we are now prepared to open the call for Q&A.

[Operator Instructions] Our first question is from the line of Bret Jordan, BB&T Capital Markets. Bret David Jordan - BB&T Capital Markets, Research Division: Question on the precious metals recovery. If you look at its impact in the fourth quarter, I guess, its ramp rate, could you give us some more color and how that business is spooling up as you get some of the airbags processing?

The question -- was the revenue... Bret David Jordan - BB&T Capital Markets, Research Division: What was the impact, I guess, the margin impact on the precious metals recovery because that was expected to be margin dilutive, I guess, in the early stages?

Sorry, Bret. I thought [indiscernible] question.

It's about 30 bps net drag on margin. Bret David Jordan - BB&T Capital Markets, Research Division: Okay. And I guess what's the expected ramp rate on that? Is that something that as we get into the middle of 2013 and sort of anniversary its acquisition, it should be running fairly efficiently? Will that always be just running at a lower...

I think it will always be running at a lower, at a lower margin. Bret David Jordan - BB&T Capital Markets, Research Division: And then I guess, speaking about margin trends in North America, as you look more to the auto parts business and, you've certainly done some parts acquisitions in Canada in the recent quarter, where do you see that margin relative to your traditional North American collision margin?

Which -- the Canadian one? Is that what you're asking? Bret David Jordan - BB&T Capital Markets, Research Division: Canadian auto parts. As you're getting more into internal engine parts as opposed to collision panel parts, where did you see a much margin differential between those 2 business categories?

The businesses that we bought in Canada were primarily aftermarket collision part distributors.

And we see the margins being very similar to what we see in North -- in the United States, Bret. Bret David Jordan - BB&T Capital Markets, Research Division: So nothing changing on that mix? Okay. And then one last question, as you look at the shredding business and its 50% capacity and you get a volume, is it cost effective to distribute longer distances, or is it mostly Southeastern volume that's going to go into that shredder?

It's mainly going to be Southeastern volume. We figure about a 300 mile radius, Bret, to be able to cost effectively haul it in there. And because it's in Florida, we have such a concentration in Florida and Southern Georgia, we believe we can fully run the setup with our own volume and now have to buy anything on the street.

Our next question is from the line of Craig Kennison of Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: John, I know organic growth is a more complicated number today because of ECP. Could you help us deconstruct that, and let us know what North American organic growth looks like in 2013 based on your guidance? And then what the same-store sales growth rate and ECP is looking like?

Sure. The -- let me put it in a perspective for you. Last year, parking services in North America was 3.6% and the ECP on a full year basis was a little over 50% waiver part of the organic growth. And in Q4, ECP was around 34% organic, which of 19% was same store. So what we're thinking is, ECP has got the benefit of all the locations that we opened last year. We're going to take a little bit of a breather there, make sure those are integrated, all the new managers are firing on all cylinders. We understand the crash business, and that they're trained up on that and then we'll take a look at that in Q -- probably in Q2 we'll start looking at it again to see if we get some new locations open for 2014. Rob can speak to that in a second. In terms of the North American business, our expectation is that if we get to some kind of normalized weather -- and last year, we had very mild Q1 and very dry summer -- we think that those things probably would have been a big drag on our organic growth. If we see the miles driven continue to improve [indiscernible] driving a little bit more, we would expect the North American business to do a little bit better than it did last year on the organic side.

Just add a little color in the U.K. We're still standing by our projections of 150 to 175 what we call, Tier 1 ECP locations and an additional 25 or so, Tier 2, the smaller or remote markets. With the 12 we did in Q4 originally scheduled for 2013 so we pushed them in 2012. So as John said, we're going to reevaluate this in Q2, but I would expect if we feel comfortable, we'll add another 10 in 2013 to fill up the 242, again, with still some growth for 2014 and '15 as well. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Do have a same-store sales metric for ECP?

Yes, it was around 19% in Q4. They're taking market share.

Absolutely. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And then just as a follow-up, the way we calculate organic growth, I think is similar exactly how you do it, we think ECP adds 3 to 4 percentage points to growth in 2013, which would imply that your North American business is growing at a slower pace. Any -- is that the right way to look at it? And if so, why would North America growth rates have slowed?

I'm not -- maybe we can get it on the call afterwards to see how your math is. I'm not sure. If you look at the top end of our guidance, it would be easier numbers. I think you still see an expansion of our growth for North America. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: We see expansion just to slow down. Maybe we'll take it offline. The next question I have is just in terms of the acquired revenue in Q4, can you quantify it? And then did you do any deals in Q1 that you could quantify as well?

I do have that, let me just grab it for a second. So the expected revenue as of Q4 acquisitions on an annualized basis is about $150 million, but we already recorded some of that in Q4. So if you're trying to model it, I would use somewhere between $20 million and $25 million order incremental revenue in Q1. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Does that mean you had over $50 million in Q4?

It would be about $16 million in Q4. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: 16, okay. And then Q1, did you do any deals that you haven't -- that you can quantify for us?

The other one, we've announced the [indiscernible]. It is 20 to 25 years [indiscernible], including that one.

Craig, if I could just go back to your question about the deceleration that we saw on 2012, I do want to comment on that. Obviously, I think it's a bad news, good news story. 2012, of course, we had no winter. We did talk about that. The Asian carpark in our collision business does work a little bit against us as these cars get older. We're now at 11 years old. People tend to carry less insurance. The cars are more likely to total as it gets older, of course. And quite frankly, the parts we sell for older cars tend to be a little bit lower priced. Miles driven in December were down 3%, just in December. Year-over-year, it was just up 0.3%, so we saw that as a little bit of a headwind as well. Fuel, obviously increasing, obviously, creates a little bit of drag. And unemployment remains stubbornly high. And I think those are the bad news for 2012. I think the good news for 2013 is that the SAR [ph] rate is increasing. In January, it was at 15.3 million. I just saw our report this morning projecting February to be 15.7 million. So that means a lot of late-model cars, which will reduce the aging carpark, and also those late-model cars all carry full insurance so we see that as a positive for 2013. The options are strong, obviously as a result of Sandy, I think, pumping in quite a few cars into the mix, but again allowing us to buy more cars. And finally, our certification programs really just incredible growth. Year-over-year increase in certified programs in 14%. So we see a lot of good tailwinds coming in 2013.

Our next question is from the line of John Lovallo of Bank of America.

First question would be on in the interest margin [indiscernible] you expect the amount [indiscernible].

John, you're -- sounds like you're on a cell. It's very faint. But I think your question was, do we expect any margin impact on the Q4 acquisitions? Once we get them fully integrated, we expect to be more or less in line with the corporate averages. When you look what they are, they're aftermarket businesses, salvage businesses, the truck, so forth, everything tends to run. It's a good mix of the businesses we currently have. So it'll take a quarter or two to get those integrated, but then we expect them to be more or less with our run rate.

And in terms of the cars coming in from Hurricane Sandy, do you anticipate most of that still ahead of us? And what are you thinking in terms of the quality of the reusable parts, and, potentially, the pricing of those vehicles?

John, they are starting to really start to flow through now. There's a general lag of about 60 days before the title starts coming in. This was a little bit slower because people's houses were destroyed, and I think that became a priority. We really see no real impact to our business model. These are flood damaged cars. Saltwater is the worst for parts because it gets in the electrical systems, so they really don't make good parts cars. They actually do a lot of rebuilders on that, which is unfortunate for the buyers, perhaps, but the eventual buyer of that car. But the volume is projected to be around 250,000 cars. We did purchase about 5,000 cars direct from insurance companies and from other sources, so we did bring some cars in direct. Most of those cars will be stripped down for certain parts and stay away from the -- obviously, the motor and transmission because the saltwater does a lot of damage. The benefit to us, though, the availability in that particular market, basically that New England corridor down into the Mid-Atlantic, there was such a high availability of salvage. A lot of our competitors are focusing on the builder side of it, which is opening up some really great opportunities from the collision cars, that are of course, still happening since Sandy impacted us. So we actually see this as a slight uptick for us, but the flood cars themselves, we generally stay away from, on a saltwater flood.

And if I can sneak one more in here. With the delay in tax refunds this year, have you seen any incremental volume at the self-service lots, potentially customers trading down?

Interesting. Our admissions -- we track our admissions [indiscernible] and they're pretty steady, so really no major impact there at all.

Our next question is from the line of Nate Brochmann with William Blair. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Wanted to -- sorry to go back to this on your North American organic growth rate a little bit. And I know that there's maybe more math to do, and we can take it offline. Just in terms of conceptually, Rob, you gave some of the puts and takes in terms of the positives in mind and negatives. But I mean, again, with the easy comps, and, obviously, the APU rate going up and all the positives that you do have, and I get there's still a headwind, unemployment, miles driven, but with that I would think that you would have been kind of in the North American side still within your historical, I don't know, maybe the mid single-digit growth range. Is there just a little bit of conservatism, do you think, in that North American range being -- again, if you assumed just roughly 3% for ECP that would imply maybe 2.5 to 4.5 for the North American side, which again still feels a little bit low, but is that kind of a little bit of embedded conservatism? If you could just talk about that a little bit, I'd appreciate it.

Nate, we are working off of a much bigger base now, and, quite frankly, [indiscernible] log large numbers. Let me talk a little bit about the weather that we faced this year versus last year. It really is a story of extremes. Last year, we had no winter, as we all know, but this year it's just been -- I use the New England as an example. Prior to the blizzard that hit in New England, they were well below year-over-year comps for normal snowfall, and in 24 hours, they got 30 inches of snow which put them over-the-top. The problem of that is it shut down New England for about 4 days. Nobody was driving. In fact, I believe, the governor ordered people off the roads before the storm actually hit. Kansas is another example. Blizzard hit there last week, and, again, everyone was off the road. They were told to stay home. We certainly believe that the weather has been better this year than last year. We'll take certainly, what we are today versus last year. Really it's a story of large numbers now. We hope that the normalized winter will provide an opportunity to increase the same-store sales growth in North America. But the reason why we went with 5.5 to 7.5 was just because of a bigger number. Nathan Brochmann - William Blair & Company L.L.C., Research Division: And then in terms of, obviously, the facility costs were up a little bit, and part of that is the expansion from ECP. And I know part of that is building out some of the larger facilities here in North America. Could you talk about a little bit just where you are? I mean you talk about adding 10 more for ECP, but where you are in terms of the expansion in North America in that category, and whether maybe we'd see a little bit of leverage this year, whether there's still investment going on?

I'll start, then maybe Rob [indiscernible]. Basically, the infrastructure is built. As we grow, though, we do find that, as leases come up, we tend to try to buy these larger locations [indiscernible] so growth or higher, highest footprint. And so we've budgeted to add a number of the locations, add additional wares and capacity. But you're right, we would hope that with -- if the volumes come up, rebounding off of last year that we should leverage in that area.

I think John covered it. But certainly, in terms of the acquisitions and the pipeline where we sit today, we think there's plenty of opportunity still here in North America to keep growing the business and in the U.K, as well. So mentioned in our scripts, Nate, that the continent, we are still doing our research on the continent. And we expect to look for possible expansions there as well. Nathan Brochmann - William Blair & Company L.L.C., Research Division: And just final question. Rob, you talked about signing up, I think you said maybe 8 carriers in the U.K. on the collision side. Is that kind of brand new in terms of those relationships? And I assume that you're referring to insurance carriers. That was obviously one of the things, as you talked about, you continue to work through and could be one of the big potential upsides over the next couple of years if they really aggressively adapt that. Can you just explain that a little bit further in terms of where you're at and maybe in terms of those 8 carriers, whether they're just small guys are just starting or whether there were any of the big guys. If you could give us a little more color?

We started this a year ago, as you know. It'll be a year ago next month. We're been very pleased with what we've been able to do. The APU usage in the U.K. is circa 5% versus 37%, 38% here in the United States. So we certainly believe there's a great growth opportunity. Those 8 carriers are small, medium and large carriers. They are all in pilot stage, Nate. We haven't got a full rollout yet. They've got to walk before we run. We knew this was going to be a marathon, not a sprint. But we're very encouraged, great relationships with the carriers. And those MSOs are working with the carriers -- insurance carriers to be clear. Those are insurance companies, starting to push our product types into the system. The Autoclimate was done exactly for that purpose. They already had those relationships with insurance companies on the cooling products so the Autoclimate will leverage those relationships even deeper. So we're very encouraged with what we have. As I mentioned, we had seen double-digit growth and we don't see that ending anytime soon, quite frankly.

Our next question is coming from the line of Scott Stember of Sidoti & Company. Scott L. Stember - Sidoti & Company, LLC: I understand you guys do not give detailed line-by-line guidance for '13, but just looking at the bottom line range and assuming pretty nice ramp up in margin recovery, could you maybe just talk about on a high level what some of the buckets will be that will be driving that now, particularly with the lower margin ECP business being fully integrated?

There are a couple of things. And we have seen some improvement in the cost of sold associated with the salvage business. That takes a while to come through the income statement. We talked a little bit about the fact that, sequentially, in Q4 we saw the margins go up and that was primarily driven by the late-model business in North America. That's one aspect. We talked a minute ago on -- it was Nate's call question with respect to the leverage. We would hope to get some leverage at this -- the bond steps back in North America again, putting more products through the same pipeline. We hope to get some leverage out of there, as well. We are continuing to look at our pricing programs. And I know we've been talking about this for some time. And we're starting to see a little bit of traction on that in the aftermarket. And we made some fairly decent progress on the salvage business over the last couple of years and starting to a little bit of traction on the aftermarket and potentially that could improve some things as well. And we did a lot of acquisitions last year when Nate asked about facilities. As we bring those facilities, where there's duplicate locations in, we should be able to get a little bit of leverage out of the portfolio on those as well. Scott L. Stember - Sidoti & Company, LLC: And then just last question. Just following up, Rob, about the trends that you've seen up like in with weather up in the Northeast, outside of that with some of the other snowfall that we've seen throughout the country, can you talk about how that's trending to your business right now?

Obviously, Scott, our guidance includes what we've seen in January and February thus far. We expect, hopefully, we have another month of inclement weather coming our way. We obviously prefer smaller storms and businesses that shutdown, kind of shutdown the entire motoring public. But we expect certainly to see hopefully normalized condition rather than these extreme storms. If we get that, we expect to be obviously in our guidance.

Our next question is from the line of Gary Prestopino with Barrington.

Most of the questions have been answered. But, Rob, with these pilots that you're having in the U.K., is that for collision and mechanical and aftermarket and salvage parts?

Mainly just coalition aftermarket. As you know, Gary, we don't have salvage products yet in the U.K. This would just be aftermarket collision parts. Insurance carriers do write some hard parts, so that is falling into that line of business. And that's where the Autoclimate actually comes in with the cooling product, so mainly focused on collision aftermarket today.

So there's no salvage parts right now in the U.K. but that would be, obviously, an obvious step in the future if this gets adopted?

Absolutely on our radar and 100% correct.

Okay. And then in terms of your accelerated 10 of these branch openings for Euro Car Q4, you pulled them from this year, back in the last year, was that contemplated at the end of Q3 in the guidance that you gave for Q4 and year end?

Yes, we announced that on the Q3 call. That was our intention. It was in the guidance, yes.

Our next question is from the line of Bill Armstrong with CL King. William R. Armstrong - CL King & Associates, Inc., Research Division: Could you tell us what your average price that you paid for the wholesale cars in Q4, and what that was a year ago?

In Q4 2012, it was around 1800, and a year ago, Q4, it was about 1890. William R. Armstrong - CL King & Associates, Inc., Research Division: 1800 versus 1890?

Right. It dropped about 5%. William R. Armstrong - CL King & Associates, Inc., Research Division: Anything to call out in terms of price trends of the parts that you're selling? Any actions by the OEMs, perhaps, the competitive actions, that might either squeeze or expand margins going forward?

Not really. They tend to increase prices by 1% to 2% a year. Some product, older product equipment, they might actually drop it, some of it increase. But on average on our product mix, we look at our product mix, it seems to be 1% or 2% per year and obviously we try to match that. William R. Armstrong - CL King & Associates, Inc., Research Division: And then finally, you mentioned you're closing an aluminum smelter and that's going to reduce revenues by about $10 million per quarter. I was wondering if you could just kind of flesh out why you're closing that smelter, what's the thought process behind that and what are you going to do now with those aluminum wheels that are no longer being smelted in that facility?

They were buying some product on the open market. [indiscernible] We've gotten -- we made some systems changes. We've made [indiscernible] cores a little bit better, the higher value cores, and identified them little bit better. We have two of these facilities. We just added another shift to the other one to handle the volume. The other one is actually more efficient anyway. And so we think we'll still have sufficient cores for our own business. This is really -- we're going to try to avoid buying cores that we don't need that we were just melting down [indiscernible] low margin. We don't really anticipate much of a margin in error, operating impact.

It's more of a playbill just to get out of the open market of having to buy on the market. Now we can supply it internally and not have to worry about fluctuations in the price that cause us that margin erosion. Scott L. Stember - Sidoti & Company, LLC: So in other words, with 2 smelters -- your basically had more capacity than your system needed and so you're just buying open market parts to, basically, to utilize the capacity?

That's correct. The volume we needed to feed our remand operations is being satisfied by the one operation.

Our next question comes from the line John Lawrence from Stevens.

Rob, would you talk about the environment itself to mild winters? You look at acquisition candidates, what's the profile, anything changed there as you look at that group of companies to buy?

The pipeline, John, it's surprisingly still active. We know we had a little bit of a rush in Q4 because of the pending tax consequences, but our pipeline is as active as it's ever been still, in North America. And now, we're starting to see opportunities over in the continent of Europe. Our strategy is going to be the same here. We'll continue to do the aftermarket tuck-ins. For self-serve, really just filling geographic holes with both acquisitions and greenfields. HD, I announced that we did some strategic tuck-ins already in terms of cooling. We'll continue that. We still have plenty of growth opportunity in the HD. European, the landscape I said, we've been spending a year over there just learning the landscape, learning the laws. We now feel comfortable that with ECP firmly under our belt we're pretty -- we're more receptive actually to looking at opportunities now in Europe. And I'll just point to one full-service like Miami. A year ago, in South Florida, we had nothing, and now we've really filled out that market very nicely. So we'll continue to look on the full serve, just really strategic tuck-ins. Los Angeles is still one that really bothers me when I look at our map. We have 1 location, Southern California. I think we can do a lot more there, so plenty of opportunities still in North America as well.

Lastly, on that, as you look at those, the pro formas don't change, it's still the same returns that we saw 2 or 3 years ago as we look at those potential acquisitions.

I think that right, John. I think some of the yards that we're seeing are possibly a little bit stressed, but we pay less for them.

And you get that same return based on facility closures and combinations in that?

Exactly.

Ladies and gentlemen, we have reached the end of our allotted time for question-and-answer session today. I will now turn the floor back to management for closing comments.

Thanks, Rob. I just want to thank everyone for joining the call today, and we look forward to speaking to you in a couple of months to report our Q1 earnings. Thanks, everybody. Have a great day.

This concludes today's teleconference. You may disconnect your lines this time, and we thank you for your participation.