LKQ Corporation (LKQ) Q2 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the LKQ Corporation Second 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 for LKQ. Thank you, Mr. Boutross. You may begin.

Great. Thanks, Kevin. Good morning, everyone, and thank you for joining us today. This morning, we released our second quarter 2013 financial results. 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 audiocast via the LKQ website. A replay of the audiocast and conference call will be available shortly after the conclusion of the call. Before we begin with our discussion, I would 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 currently not 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 risks. 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'm happy to turn the call over to Mr. Rob Wagman.

Thanks, 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 $0.25 for the second quarter ended June 30, 2013 increased 19% from $0.21 for the second quarter of 2012. As noted in the press release, the second quarter of 2013 and 2012 diluted earnings per share included losses totaling $0.01 per share, resulting from restructuring and acquisition-related expenses, a change in fair value of contingent consideration liabilities, and in 2013 only, a loss of debt extinguishment. Earnings per share in the second quarter of 2012 also included a gain equal to $0.02 per share that resulted from a favorable legal settlement. Adjusting for these items in the quarter, diluted earnings per share would have been $0.26, which represents growth of 30% over the prior year quarter. I am also pleased with this growth, considering the decline in scrap prices we witnessed in the quarter impacted EPS by roughly $0.01. Revenue for the quarter was a record $1.25 billion, an increase of 24.4% as compared to $1.01 billion in the second quarter of 2012. Net income for the second quarter of 2013 was $76 million, an increase of 18.3% as compared to $64 million for the same period of 2012. During the second quarter of 2013, the company delivered strong organic revenue growth for parts and services of 13.1%. I am particularly pleased with our North American organic revenue growth for parts and services, which increased 7.3%. The solid growth in North American organic parts and service revenue for the quarter is primarily a result of a combination of increased use of alternative parts by insurers and the direct repair program networks to reduce claims costs, year-over-year increase in accident frequency related…

Thanks, Rob. Good morning, and thank you for joining us today. As this is our first quarterly call with our new bond investors participating, I'd like to welcome them to the call. We appreciate your support, along with our equity and banking partners. I will make a brief mention of the financing transactions we completed during the quarter. But since we had a conference call devoted to those transactions in the Sator acquisition, I'll limit my comments in that area, unless someone has specific questions later. Hopefully, everyone's had a chance to review our press release this morning. We expect to file our Form 10-Q with the SEC in the next few days, so please watch for that as well. Beginning with revenue, our Q2 2013 revenue of $1,252,000,000 was an increase of $245 million compared to Q2 last year or an increase of 24%. This is a bit of a milestone, as it's the first time our quarterly revenue annualized to more than $5 billion. Our total organic growth of 10.8% was supplemented by 14.1% acquisition growth, and we had about a 0.5% negative impact from foreign currency. Parts and services revenue grew organically 13.1%. And within that category, as Rob mentioned, our European operations continued to performed strongly with 37.8% organic growth. The North American parts and services organic growth was a strong 7.3%. We saw other revenue increase by $23 million, a 17% increase. We record scrap and core revenue in other revenue. Acquisitions increased other revenue by $28 million. Our organic growth in this line was $5 million negative. The main driver of the negative growth was similar to last quarter as our volume increases in our recycling and self-serve operations were largely offset by lower commodity prices and the discontinuance of operations at one of…

Thanks, John. To summarize, we are pleased with our second quarter performance. As we enter the back half of 2013, I am optimistic about the year. I am encouraged by the current tailwinds of lower fuel prices, the increase in miles driven, continued APU growth, the recent reduction in vehicle pricing we are witnessing and the breadth of development opportunities that exist in our key market segments. I am equally proud of how our group of over 23,000 valuable employees attacked the headwinds we faced in 2012, which subsequently positioned us well to capture and achieve the success we witnessed in the first half of 2013. We believe our unique competitive position both in North America and Europe continues to translate into consistent earnings growth for our shareholders, which has allowed us to increase our organic growth, net income and diluted EPS guidance for 2013. Kevin, we are now prepared to open the call for questions and answers.

[Operator Instructions] Our first question today is coming from Bret Jordan from BB&T Capital Markets. Bret David Jordan - BB&T Capital Markets, Research Division: A couple of quick questions here. A lot of them is as we look at the impact from the precious metals recovery business, that seems to be getting better. I think we were running sort of a 50 basis point impact and it's now 20. Could you maybe give us a little color on the trajectory of that? And is that something that's sort of a diminishing impact going forward? And then I'll hit you with a second question to follow up.

Sure, Bret. It's John. I think we acquired that business partway through the year last year. So really, some of that step-down is just because it's only a partial quarter impact. And so that is basically built into our numbers, and we've anniversaried it. So I don't anticipate being the call [indiscernible] in the future quarters. We are still implementing the strategy there, which is to process more of our catalytic converters through that facility. We've implemented some cutting operations, particularly on the East Coast. So we're starting to gain a little bit of traction there. But I think the full rollout is probably in another year.

That's correct. Bret, this is Rob. We plan on eventually bringing all of our own catalytic converters into that process. And as John mentioned, that will happen over the next couple quarters. Bret David Jordan - BB&T Capital Markets, Research Division: Okay, great. And then a question on the CCC. John, just the -- I mean, is that a margin impact in addition to a volume impact? Is there anything that changes there as you go to electronic or reformat, either lower overhead on your side of the business from an order input standpoint? Or is any -- is there any impact you have with the obvious volume improvement?

Yes. Short term, no margin impact. But potentially long term, if this thing takes off, Bret., and the shops do most of the ordering themselves, we may be able to leverage that with a reduction in overhead costs. But short term, it's really just making it easy for the shops to do business with us.

Our next question is coming from Rod Lache from Deutsche Bank.

It's Dan Galves for Rod Lache. I just wanted to ask for maybe a little more color on the agreements you've signed or are intending to sign in U.K. with insurance carriers. You said they were exclusive agreements. So I guess, the first question is, so you'd be the only supplier of alternative parts to these body shop networks? And the second question is how aggressive are these particular insurance carriers planning to be in terms of driving alternative parts usage within their network? And how would they do that?

Your first question, yes, this is exclusive. Right now, we believe the usage in the U.K. is circa 3% to 7% depending on who you talk to, but it's a great opportunity here. We will be -- as I said, we will be the exclusive supplier on both of these contracts. The Northern Ireland market, we previously reported the entire U.K. market is about a $3 billion opportunity. Northern Ireland is over $100 million opportunity, and so we just started that. That dealership's recently signed. So we do expect some good potential work on that. But it's also important to watch that these carriers that we are talking with also do write on the continent. So we do plan on leveraging that in time with our Sator acquisition.

And how do they intend to drive the alternative parts usage in their body shops? Are they going to be auditing them? Or what's the plan there?

They actually own these body shops, so they will be doing auditing and controlling their process completely. So they will be very much definitely involved with that process with us.

Okay, great. And then just a follow-up on, I'm interested in how quickly you think that this could move. Maybe you could give us some color on the process of, over time, like how quickly can your suppliers in Asia develop the aftermarket parts for the cars that are sold in the U.K. Is there commonality between the parts in the U.S. and the U.K.? And I guess, just what's the process of going about expanding the offering of aftermarket parts in Europe?

Yes, Dan. There is very little overlap between the U.S. and the U.K. in the continent. So this is a separate group of cars that the -- our Taiwan vendors and Chinese vendors will work with us to develop the products. There is no sign that they will not support us completely. Just to give you some kind of idea in the U.S., we had -- just in our certified programs, the year-over-year increase in certified parts was 22.17%. So they've been very supportive of our needs to keep growing certified products here in the States, as well as in Europe. It's particularly the U.K. right now. So no issues there at all, very responsive to our needs.

Okay, great. And just one housekeeping just cognizant of the FX changes you're experiencing, John, how does that convert to EBITDA? What percentage of that convert kind of on a similar basis to your European EBITDA margin?

Well, we disclosed the segment EBITDA for Europe. It's a little bit complicated in so much as some of their product that they buy is -- for example, in the U.K., they buy some products in U.S. dollars and they buy some product in euro as well as sterling. So it's a little bit complicated, but essentially, it's the EBITDA of the European operations, that is vulnerable.

Our next question is coming from Gary Prestopino from Barrington Research.

Just a quick question on the tax rate and then some follow-ups. What tax rate should we use for modeling for the back half of the year? And what are you looking for, for a full-year tax rate, John?

35 plus or minus a little bit, depending on -- because sometimes, there are some discrete items. And obviously, it's going to depend on how quickly the European operations grow relative to the U.S. one.

Okay. And then on the new agreement that you have in Northern Ireland and the one you're working with, I guess, that's in U.K. I mean, is that strictly just aftermarket on the alternative parts? Or are there recycled parts included in that agreement?

Strictly aftermarket at this time, Gary.

But the goal would be to also...

Absolutely. We continue to evaluate the prospects of entering the salvage market. We have challenged the insurance companies there to adopt our aftermarket parts first programs, and we're starting to see that effect. So we're still looking at the salvage opportunity as we speak.

Okay. And then lastly, with the CCC intelligent parts solution, you said there -- it's going to roll out to 4,000 shops. Is that their best high-end shops? Because I would assume CCC has a heck of a lot more shops under their estimating system than 4,000.

They definitely do. They have about 60% market share of the body shop business. But yes, they are targeting certain shops for this program, and they do tend to be their better shops.

Our next question is coming from Craig Kennison from Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: I wanted to follow up on the collision opportunity in Europe. Could you give us a sense for how broad your portfolio of SKUs is today relative to what you think it can be once you get your partners lined up?

Yes. Right now, we were carrying about 13,000 different SKUs in the marketplace, Craig. We're continually growing that, actually, as new products come on the market. We are replicating them in Taiwan and bringing them over to our warehouses in the U.K. We believe there's certainly substantial more growth to be done there, and we will continue to work in that respect. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And is every ECP store now turned on for collision parts? And are they all performing equally? Are you able to run some experiments to see whether some opportunities there may be better than others?

All the parts are stored in the national distribution center, pretty much in the central part of the U.K. So every one of the branches has access. Every one of the branches has a trained specialist in [ph] collision parts now, and I think that's why we're seeing this 80% year-over-year growth. More SKUs coming in every quarter, and just better penetration in the marketplace. We do have a way of measuring it, and we do benchmark them against their sister branches, and we do obviously push them to reach certain goals. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And with respect to the CCC opportunity, is there an opportunity for LKQ to invest dollars and training to accelerate adoption of that at all?

There certainly are. We are -- our Vice President of Insurance Operations meets with CCC regularly. We are actually going out into the marketplace with them to do joint training, so we are very involved in that process, and we have actually committed resources. substantial resources, to this program. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And lastly on gross margin, John, it fell a little bit year-over-year. I'm guessing that's largely mix and a little bit of the scrap issue. But what do you think the sustainable margin rate would be at the gross level?

Craig, I think we've talked in the past that our view is excluding the seasonality that unless something changes, things tend to stay the way they are in the short term. And we probably did get a little bit negative impact in Q2 because of falling scrap prices. We did see a little bit of benefit coming through in the car costs on the domestic side. As I had mentioned, the demand obviously went down. Rob mentioned we're buying a little bit better year-over-year, so we are starting to see that theory, if you will, evidence of it coming through in the financials. Then we do have a downtick coming with Sator in the short run because they'll be fully [indiscernible] for a full month next quarter -- full quarter -- next quarter. And we only had them for 2 months. So I would expect it to see a little sequential decline as a result of having them onboard to the full quarter. MST will, as I mentioned earlier, just anniversaried now, so I don't anticipate any impact from that. And you get a little bit sequential impact at having the absence of a decline in the scrap prices. It'll help us a little bit in the next quarter.

Your next question is coming from Scott Stember from Sidoti & Company. Scott L. Stember - Sidoti & Company, LLC: Just going back to the collision accounts that you have signed or the exclusives that you talked about in the U.K. and up in Northern Ireland. Were these 2 accounts at one time as part of your pilot program? And can you just tell us where the pilot program stands as far as the number of people in it?

Yes. They were both in the pilot program, Scott. So at the time, we had 8 pilots going on. These 2 will make -- go to full program status. So there are remaining 6 in pilot status. As we said on previous calls, we hope that once we started getting people over the wall, this will be a domino effect. So we'll see how that works out in the future, but full 6 left in pilot. Scott L. Stember - Sidoti & Company, LLC: And just maybe going back over to the continent with the torque. Could you talk about how the initial reaction has been with insurers on the continent? And just -- it sounds as if we could see a little bit quicker adoption over there since some of these carriers are already represented in the U.K.?

Yes. We've specifically, obviously, been trying to focus on the synergies and getting the cultures in line, but our Vice President of Operation -- excuse me, Vice President of Insurance Work -- is plainly going over this quarter to start initial conversations with those insurance companies. As I mentioned with the 2 that we have signed, 1 signed and 1 soon to be signed, they do write on the continent. So we do plan on obviously picking -- piggybacking those relationships, but we'll be sending a team over there this coming quarter. Scott L. Stember - Sidoti & Company, LLC: Okay. And just last -- just an obligatory question on State Farm. Could you just talk about anything that you've heard recently that would -- basically be off of what we've expected so far for 2013?

Yes. They're still moving forward. We talked about in earlier calls about a program that we're doing with OE parts. We still think that's a good sign that they are looking for alternatives. But unfortunately, nothing new to report on the aftermarket side.

Our next question is coming from Nate Brockmann from William Blair. Nathan Brochmann - William Blair & Company L.L.C., Research Division: I wanted -- just a bunch of little questions and a lot of the other topics that have been kind of bantered about. But in terms of the exclusive arrangements in Europe or up in the U.K. and Ireland, could you talk in terms of a little bit just the functionality of that market in terms of what percentage, if you have a rough number, of all the body shops over there are insurance company-owned?

It's pretty small, Nate. But they do push a lot of their volumes through those own networks. In Northern Ireland, this particular insurance company owns 16 repair shops, and they will push the majority of their business through that -- those shops whenever possible. Nathan Brochmann - William Blair & Company L.L.C., Research Division: So even -- so in terms of the insurance work like -- that, that particular carrier does up in that region, even though they don't push probably 100% through their own shops, they still can influence beyond that obviously, right?

Absolutely. They will have their estimators -- they call them engineers over there. They will have their engineers use these products, so they -- we've been approved now. Nathan Brochmann - William Blair & Company L.L.C., Research Division: So while that might not be exclusive to those noninsurance carrier-owned shops, there's still, obviously, a good opportunity to push more through there?

Absolutely. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Okay, great. And then on the CCC deal, I totally understand why that might not impact margins up front. But over time, do you think that, that could help part of the pricing initiative in terms of there being a little bit more static pricing, discounts being absolutely set? And if so, could you talk about how that might work on the recycled side, given the fact that there's a little bit more pushiness in terms of set pricing, given hours at work and whatnot?

I don't think we're anticipating any major impact on pricing at this time. I think Rob mentioned that, over time, it may allow us to lever some of the selling costs because people -- you may end up needing -- we're still paying the commission through our sales reps. But over time, you may need fewer sales reps to do -- making them just to be problem solvers as opposed to handling the plain vanilla transaction that's going electronically. So over time, you may see some impact on that. We don't -- we're not anticipating any real change in pricing at this juncture. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Okay, fair enough. And then in terms of coming back to North America, obviously, really nice to see the acceleration there. And I know a part of that was just helped by buying more cars and part of that was a little more normal weather patterns. But obviously, you guys continue to do a good job pushing out broader product availability. It sounds like you guys did some stuff on the radiators side. Could you talk about, like kind of just in terms of the full portfolio, whether it's radiators or getting more into transmissions, how much further you think there is to go still on handling the geographical build-out but also just broader product availability?

Nate, I think there's plenty of opportunity left, what we call ancillary product lines that touch our business and touch the body shop and mechanical repair. You mentioned transmissions. Absolutely. We manage transmissions as an opportunity. We still are the #2 provider of paint materials in the U.S., so we think there's a great opportunity there. You mentioned cooling. Heavy-duty truck cooling is another line that we -- we're going to look at some more. So there are plenty of businesses that touch the segment that we still have opportunities in for sure.

Our next question today is coming from John Lovallo from Merrill Lynch.

First question is on the strong growth in North America, on the organic side. Was part of that attributable to just the very hot summer we've had? I mean, are you guys seeing increased demand for some of the mechanical parts that may have come under pressure because of the heat?

Certainly, [indiscernible], John. Obviously, any extreme weather would tend to do well for us. Obviously, snow makes it good for us, but extreme heat will cause a lot of engine failure over time, so really hard to gauge, specifically if it's tied to heat or it's tied to the fact that these -- there's an older model of your car in the United States. The average model of your car is well over 11 years now, so that may have some impact on it, too. But certainly, extreme weather conditions are never a bad thing for our business.

That's helpful. And then in terms of the outlook, you guys brought the revenue and net income outlook up. You kept the cash flow unchanged. Is there any reasoning for that? I mean, is there any working capital headwinds that you're expecting in addition to what you were thinking about before?

Just perhaps in -- a little bit more inventory build in the back half of the year, we had some lower tax payments earlier in the year, and those come out for the balance of the year. And it's mainly just working capital swings, nothing -- which I wouldn't take anything out away from that.

Okay, great. And then final question is on the 6 acquisitions outside of Sator. Do you have a trailing 12-month revenue number for us?

We do. In the quarter, the total acquisitions revenue trailing was about $400 million, and just [indiscernible] modeling a little bit, so that will be about $100 million a quarter. Within the Q2, we reported $72 million of that $100 million. So in Q3, we'd expect the carryover impact from Q2 acquisitions to be about an incremental $28 million in Q3.

Our next question today is coming from Bill Armstrong from CL King & Associates. William R. Armstrong - CL King & Associates, Inc., Research Division: I want to drill down a little bit on the big organic growth in the U.K., 37.8%. Did I hear you say earlier that 25% of that was same store?

Yes, that's correct. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. And there were 2 extra business days?

2 extra selling days in the quarter, yes. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. So if we adjust for that, what would the same-store sales have been?

We're doing the math now, roughly 20%. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. So that -- so even if you make those adjustments, you still had a really strong quarter. I mean, is that -- from the supply range [indiscernible] was talking about? Or were there other things going on that helped that number?

It's a combination of the things, Bill. One is that you do get -- it takes about 3 years for the new location to build up. So some of this is what you're seeing in locations that they open prior to our acquisition and then the aggressive opening program that we instituted once we opened them. You're also seeing an impact a little bit of some of the new product lines that we've added in terms of for collision [ph] , for example, it's just growing faster. And it's still very small, but it's growing faster than the business as a whole. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. And then my other question regarded interest expense. That $12.5 million, was there any -- were there any nonrecurring items within that $12.5 million?

No. Against modeling, keep in mind, we only had that facility in place and ventured for 2 months. So you should anticipate the interest expense for the -- the bond in particular for an extra month, it's probably going to increase. The interest in Q3, my guess, we estimate somewhere between $2 million and $3 million. William R. Armstrong - CL King & Associates, Inc., Research Division: So maybe about a $15 million quarterly run rate for modeling?

That's in line with what we're thinking. It's obviously barring any major acquisition there. William R. Armstrong - CL King & Associates, Inc., Research Division: Right, right, based on what we've got right now.

Exactly.

Our next question is coming from John Lawrence from Stephens.

Yes, Rob, would you comment just a little bit on North America a little bit and put it in the context of fuel rates? When you talk about depth of coverage and regional, what did the -- I guess, the pilot tell you about fuel rates on an electronic basis going forward.

Fuel rates remain strong, John. Salvage is in the mid 70s. Aftermarket is in the mid-90s, and just maintaining very good. As far as the connection to the CCC pilot, I think what you're referring to is live real-time inventory. So these shops are seeing the inventory. It's updated constantly, so they can get a real accurate picture of the inventory. It's 24/7 as well. So if they happen to be open on Saturdays or Sundays or late at night because of a hailstorm perhaps, they can see the inventories. So it really, certainly, has helped to make them more comfortable. [ph]

It's a major change. Yes.

And as you know, we have regional distribution. So we certainly -- they're seeing all that inventory in that entire region within 24 hours. So it's very live, and it is -- aftermarket is really providing that opportunity for us today.

So we can certainly move that rate up a little bit over time?

Which rate? The fuel rate?

The fuel rates, yes, overall.

I think they'll remain pretty steady with the inventory we have in place now.

We measure fill rate by -- if the customer calls, do we -- are we able to get them the product within 24 hours? So this is not necessarily going to change that percentage. So I think what -- some of the benefits you see is that the customer saves time making it easier for them because they're ordering it, and not going through one of our people is maybe one less area for error, so we anticipate a little bit of an improvement in sort of our return rates, for example. So we may see some efficiencies overall. But the pilot was also good from our perspective, and we're very happy to get all of this done.

It is possible that shops may realize some overhead savings, too, because they may be able to have the estimator also do the ordering as well at the same time. So there may be some benefits for them on top of the fact that they're more efficient.

Right. And the second question is, if you look at the overall distribution network both in the U.K. and the continent, how does all that flow together? And what's the plans, aside from Wembley and some of those other facilities and leverage points going forward?

Yes, we're going to continue to build it. In fact, when we talked earlier about additional branch openings in the U.K. We've targeted 15 for the balance of this year. That will take us up to circa 147. We think the right number is probably somewhere in 175 to 200 for what we consider a full branch, and then there will be some satellite opportunities in addition to that. Over time, as we grow that, we're going to have to look at the infrastructure associated with that regional hubs and the 2 main central hubs. Because, obviously, we've been growing that business so quickly. You may end up at borrowing capacity there. We're looking at projects right now just to understand exactly if there's any opportunities to rationalize any of the warehousing and the distribution logistics between the U.K. operations and some of the continental operations. Obviously, it carries a lot some of our product. You can get a product across the channel on a ferry within a couple of hours, so it's almost like they're in one remote location in terms of that. So we're examining some of that -- much too early days to make any predictions and objectives where that's going to come out.

And John, I just want to add that we are already having daily delivery back-and-forth from the U.K. to Schiedam, the Netherlands.

Our next question today is coming from James Albertine from Stifel. James J. Albertine - Stifel, Nicolaus & Co., Inc., Research Division: I wanted to focus on 2 sort of M&A-related questions. First, you gave a great color intra-quarter on the Sator acquisition, and you had an outlook as of the beginning of May as to when you thought that -- how that business would mature over time. Just wanted to get a sense -- obviously, we only got 2 months behind us now since that conversation. But any learnings that you picked up incrementally that makes you feel better or worse about that trajectory that you laid out in May? And then a quick follow-up on the U.S. deal.

Yes, Jamie. The -- we're very pleased with the acquisition, as we've mentioned on previous calls, but the primary focus has been on synergies and purchasing synergies. The teams are in lockstep on that. The other goal is to get the distribution between the 2 facilities up and running. We've accomplished that as well. So we're very pleased with the targets that we were hitting already, and well on pace to hit the timeline that we originally set out a couple of months ago. So really no surprises at all as far as what we wanted to get done and where we're headed. James J. Albertine - Stifel, Nicolaus & Co., Inc., Research Division: Great. And then very quickly on the U.S. side. You guys majored in M&A and minored in meteorology, I guess. Buying radiator companies in front of a hot summer like this is nothing short of being a prophet. So I wanted to get a sense. As the market's recovering, though, what you're seeing in terms of the quality and quantity of deals out there, but perhaps more importantly, are you seeing any difference from a valuation perspective as the market's sort of recovering overall?

Yes. We honestly did expect a little bit of a lighter year this year because of the tax implications that ended in 2012 capital gains. It has not slowed down. Our M&A team has been busy as they've ever been. We've announced 11 deals to-date now, so we knew 30 going to -- actually, we did 30 deals. We didn't expect to do 30 deals this year. If you just extrapolate, we're heading on a pace of 22. So really in line -- slightly ahead of where we expected. I didn't expect it to be as robust as it is, but it's across all of our divisions, too, heavy truck. As you saw, it was quite a mix, and those 7 acquisitions we announced today of cooling aftermarket -- into the aftermarket division, self-service and full-service. So all of our product lines still remain active with acquisition candidates, and I expect to that to continue for the balance of the year.

And in terms of valuation, in many cases, there are other companies that we're buying are family-owned businesses that are coming to some kind of a family event, and we have really not changed our valuation metrics. Many of these companies, we're the only one buying them. And so it's really -- we're competing against somebody who continue to run the business until they retire. And so we haven't really had to change our valuation metrics on many of these smaller deals that we do.

We would like to be respectful of everyone's time. So calling off the call. Thank you, all, for joining the call. We look forward to updating you on our Q3 performance in October. Thanks, everybody.

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