Greetings, and welcome to the LKQ Corporation Second Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Boutross, Investor Relations for LKQ Corporation. Thank you. Mr. Boutross, you may begin.

Thank you, Devon. Good morning, everyone, and welcome to LKQ's Second Quarter 2016 Earnings Conference Call. With us today are Rob Wagman and Nick Zarcone. Please refer to the LKQ website at lkqcorp.com for our earnings release issued this morning as well as the accompanying slide presentation for this call. Now let me quickly cover the Safe Harbor. Some of the statements that we make today may be considered forward-looking. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. 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. For more information, please refer to the risk factor discussed in our Form 10-K and subsequent reports filed with the SEC. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and slide presentation. And with that, I'm happy to turn the call over to Rob Wagman, our CEO. Robert L. Wagman - President, Chief Executive Officer & Director: Thanks, Joe. Good morning and thank you for joining us on the call today. This morning, I will begin our review with a few high level financial metrics, followed by an update on our operating segments and some macro trends we witnessed in Q2. Nick will follow with a detailed overview of our financial performance. Turning to slide three. Q2 revenue reached a record $2.45 billion, an increase of 33.3% as compared to $1.84 billion in the second quarter of 2015. Net income for the second quarter of 2016 was $140.7 million, an increase of 17.6% as compared to $119.7 million for the same period of 2015. On an adjusted basis, net income…

Thank you. Our first question comes from the line of Craig Kennison with Robert W. Baird. Please proceed with your question. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Good morning. Thanks for taking my question. Rob, it looks like you mentioned collisions were soft. But are you seeing any impact from growth in the number of cars in your sweet spot that might offset some of the weakness in collision activity? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah, Craig, it was soft as I said in my prepared remarks. CCC reported 2.3% growth, and we came in at 4% for the first half. So we still are taking market share, but to answer your question about the cars hitting the sweet spot, we expect that at the end of this year, early 2017. So, as the cars start coming out of that – hitting that three-year spot, so it's pretty flat right now year-over-year. But at the end of 2016, early 2017, we start to see it expand. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): And then, Nick, to what extent can you quantify the impact of the efficiency projects you're undertaking in North America? I know you've made a number of changes there. I'm wondering what you think the full annualized impact might be down the road. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Again, Craig, as we mentioned on several calls here, we're going to report that as we go. We are thrilled that in Q2, the total impact was $0.01 per share to the positive. Just to put that in perspective, that's – $0.01 a share is $5 million of pre-tax. We would anticipate that we've got that locked in for the rest of the year. We do anticipate to be able to garner some improved efficiencies as we move through 2016 and 2017 because some of the programs take a little bit of time to ramp up. But, again, on a – if you want to annualize the second quarter, that'd be $0.04 a share or the better part of $20 million. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Thank you.

Thank you. Our next question comes from the line of Nate Brochmann with William Blair. Please proceed with your question. Nate J. Brochmann - William Blair & Co. LLC: Good morning, gentlemen. Robert L. Wagman - President, Chief Executive Officer & Director: Good morning, Nate. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Good morning. Nate J. Brochmann - William Blair & Co. LLC: So just to dig a little bit further on the organic growth, I mean clearly, weather is what it is. Normally, with some of the positive factors in terms of the miles driven, more parts to repair, all the things that we've talked about, particularly and again, with somewhat of the market share gains, I'd still normally expect the spread between the industry growth and you guys to be just a little bit wider, I mean still positive. Just wondering if there was anything going on there in terms of the mix of geographies? Again, you pointed out some were stronger, some were a little bit weaker. And then, also, whether may be the conversion to Roadnet had any bit of, at all, any disruption in terms of that organic growth at all? Robert L. Wagman - President, Chief Executive Officer & Director: Certainly, the geographic differences, Nate, were pretty stark actually. We were very strong in the South and the Central regions. And the Rust Belt or the Winter Belt was very, very light. it really matched up almost identical with what CCC gave us for claims. One other thing that CCC pointed out to us was pretty interesting, a later model car is being repaired now, which is a little bit of headwind at first because obviously newer cars will get new parts. There aren't a lot of used parts in…

Thank you. Our next question comes from the line of Ben Bienvenu with Stephens. Please proceed with your question.

Yeah. Thanks good morning, guys. Robert L. Wagman - President, Chief Executive Officer & Director: Good morning, Ben. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Good morning.

So, if I look at your organic parts and services guidance for the full year, and I try to infer second half North American organic growth, it looks like it's something mid single-digits. Is it fair – which that suggests a sequential acceleration in the two-year stack in North America, is it fair to think that the tail for this weather impact starts to dissipate here as we move into the back half? Robert L. Wagman - President, Chief Executive Officer & Director: That's our thoughts, Ben, that we should start to normalize here now. And we are anticipating mid single-digits back to where we projected earlier in the year.

Okay. Great. And then, Nick, if you could, and this is a little bit handholding, but are you able to quantify the embedded assumptions around the impact from FX scrap steel on an EPS basis for the balance of the year? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Yes. We believe that if the currency rates stay where they are, basically $1.30 on the pound and $1.10 on the euro, that will hit us as I indicated in my prepared remarks for about $0.01 a share a quarter, so $0.01 in the third quarter, $0.01 in the fourth quarter. On scrap, we got $0.02 to the positive in the second quarter. That was an unexpected surprise. If you look at the chart in the deck, you saw that the scrap prices during the month of May hit just north of $150 a ton. The average for the quarter was $1.38 which is up from $91 in Q1. And now we're back down to $115, right. And so, if you look at the change last year from Q2 to Q3, we went from $140 a ton, down to $123. And if you went to the Q3 script last year, that was $0.02 a share to the negative. So, if you just replay that this year, there could be as much as $0.02. We're hoping it will be a little bit less just because we were on a consistent downward trend in scrap pricing last year. This year, it's only the one quarter tick up and then it looks like back down. So there's a chance it won't be quite as significant, but figure $0.01 or $0.02 in the back of the year for scrap as well.

Thanks. That's helpful. And then I think, Nick, I heard you say that when everything shook out on Rhiag, gross margins in the quarter were 34.6%, which is materially higher than what was anticipated on a full year basis. How does that change your expectation for the full year basis for Rhiag's gross margin profile? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: So the total doesn't change when you think about the underlying profitability of the company. It's just – under IFR – International Reporting Standards, right, you have different costs get reported in cost of goods sold as opposed to operating expense. So, while the total doesn't change, it's just a shift, higher gross margins and the offset is in operating expenses. We anticipated that Rhiag would be at like an 11% EBITDA margin. When we announced the transaction back in December, they were north of that. For the second quarter, there is seasonality to their business. As an example, there is – in their Italian business, there's three less working days in the back half of the year than the front half of the year. In the Czech Republic, there's two less days. And so the fourth quarter which traditionally is a little bit softer in our European businesses, you're going to see that with Rhiag as well. So one key thing, and this is true with PGW as well, is there have been no changes to the annual plans for either Rhiag or PGW. We are very confident that the accretion expectations that we set forth when we announced those transactions will absolutely occur. Again, there's a little bit of shift between the quarters with Q2 being a really good quarter for both those entities. And so the benefits will be a little bit less in Q3 and Q4. But again, we're thrilled with how both the big acquisitions are performing under the first quarter or so of our ownership. Robert L. Wagman - President, Chief Executive Officer & Director: And, Ben, I just want to add one more thing to what Nick said on the Rhiag deal, we announced that we, in my prepared remarks, I said we did 11 branch openings. We're going to do an additional 20 to 25 in the back half of the year as well because we're so pleased with the way the acquisition's going. So it's going to mimic a lot of what we did at ECP, the year we bought that as well. So very pleased with that acquisition.

That's great. That helps. And then just last one for me, if I think about the implications of Brexit, obviously, it's pretty nebulous at this point, but how do you think that impacts your acquisition strategy abroad, if at all? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah, a couple comments on Brexit, we do see likely an increase in cost of goods coming into the UK. However, because of the devaluation of this pound sterling, we do expect all of our competitors to face that obviously. So we expect to pass that through. In terms of the acquisition strategy, as I mentioned and Nick mentioned as well, we're going to keep building out the Rhiag network through greenfields. And we will look for acquisitions as well. Likely, probably going to turn down a little bit, we expect some of the sellers might pull back and wait for the smoke to clear a little bit. But we are watching and we think it's an opportunity to continue and grow the business.

Okay. Thanks, guys. Good luck.

Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.

Hey, good morning, guys. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Good morning, Bret. Robert L. Wagman - President, Chief Executive Officer & Director: Good morning, Bret.

Hey, is there a way to look at the North American growth, sort of breaking out traffic versus ticket maybe? Is there any trend either on inflation or deflation in pricing? And/or change in penetration of alternative parts? Just trying to get a feeling for that, the drivers of organic? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: So nothing that – none of the data that we analyzed on a daily, weekly, monthly basis, whether it's the number of calls we're receiving, the number of formal part request, the number of estimates, conversion rates, et cetera, et cetera, would suggest that there's any substantive changes in the market as a whole. The reality is, well in general, miles driven should correlate positively to collision activity, right, number of cars on the road. At the end of the day, the key metric is the number of accidents that actually occur. And it's been soft in the first half of the year. Robert L. Wagman - President, Chief Executive Officer & Director: I will add to what Nick said, Bret, that CCC did – we had a quarterly update from them on that chart that we have in our slide deck, our investor deck that shows the part penetration per estimate, another increase by the alternative parts industry for Q2. So continue to take market share from the OEs. I just think it's a – the result of just the lower claims volume right now. But when that returns to normal, I think we'll see the acceleration come back.

Okay. Great. And then your comment about a top 10 carrier that you've added, obviously, not State Farm. Are there other top 10s that are under-indexed to alternative parts? We've all focused on State Farm but is there other share to gain there? Robert L. Wagman - President, Chief Executive Officer & Director: That was the last one that had half of the – or actually about three quarters of their company not writing and a quarter writing. So that's it other than State Farm of course. Allstate, when you take a company like Allstate, they only write certified parts and that's why we always highlight the number of certified parts hitting the marketplace. So they have limited use, in other words they won't write all parts. But everyone else on the top 10 are writing some form of alternative parts now, other than State Farm, on aftermarket.

Okay. And a last question, you mentioned PGW picked up an MSO renewal. What percentage of PGW's replacement glass business is through MSOs? Robert L. Wagman - President, Chief Executive Officer & Director: It's pretty small actually, less than 2%.

Okay. Great. Thank you. Robert L. Wagman - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question comes from the line of James Albertine with Consumer Edge. Please proceed with your question.

Great. Thank you for taking the question and good morning, gentlemen. Robert L. Wagman - President, Chief Executive Officer & Director: Good morning, Jamie. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Good morning, Jamie.

I wanted to follow-up on sort of two key topics. So first you alluded to in your slides, and apologies if you went into more detail on the prepared remarks, I had to dial in a little bit late, apologies for that, you're buying fewer units for slightly higher dollars per unit, so higher quality vehicles and there's some expected follow through, I think, as we discussed in the past that you can maybe sell those parts for higher prices as well. Just wanted to get an update on that sort of theme and how it's playing out? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah, we are intentionally buying a better vehicle. It's slightly newer. Younger, I should say in age with that intent of – as that car part shifts to a newer car, Jamie, we want to have obviously newer model parts in the inventory. So it is going to plan. We are buying that younger vehicle and we are absolutely getting more gross margin dollars. We run a report here that it is showing that we are actually getting more dollars out of the same amount of cars.

And as the Houston (52:55) operation improves, are you starting to see benefits of an inventory turn perspective as well? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Not really. The inventory, historically, has turned about three times a year. There's no big changes there.

Got it. Okay and then... Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: On a consolidated basis, it'll begin to turn a bit faster just because of PGW has a much higher turn, because their OE business has basically direct delivery to the assembly lines.

And the PGW turns just from a housekeeping perspective, roughly you're saying that your core business is three times, what's PGW? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Order of six to seven times.

Got it. And then I mean there's clearly a lot on your plate with respect to Rhiag and PGW integration, the AlixPartners and Tamworth initiatives, so I don't want to sort of add more to your plate, but it does seem from some peer reports in the auto aftermarket that results have slowed or certainly decelerated on a comp store sales basis. And I'm wondering if that presents an opportunity for you, as you think about other North American verticals, whether that's wholesale channels or other sort of larger acquisition opportunities. And I know you discussed that, it was a later decade sort of endeavor but wondering if you're pulling forward that or thinking about pulling that forward, at all? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah, I think that's fair Jamie. It is opening up new opportunities for us, particularly in the accessories space. Those vertical moves – we have a lot of opportunities there to expand that size of the business. We are not in the reman transmission business today. We think that's a great opportunity for us. So we are looking at those opportunities very closely now.

Okay. I appreciate the additional color and best of luck in the next quarter. Robert L. Wagman - President, Chief Executive Officer & Director: Thanks, Jamie.

Thank you. Our next question comes from the line of John Healy with Northcoast Research. Please proceed with your question.

Thank you. Just wanted to ask you guys just a clarification question. I know you're a little downbeat the weather trends curtailed some of the U.S. growth in the first half. But it seems like you're excited about and pleased how PGW performed in the last two months of the quarter since the end of April when you took it in your operations. Is it reasonable to assume, by that, that you're seeing parts and service business kind of the traditional parts ex-glass perform well in May and June, maybe better than what you saw in the first, call it, four months of the year? And, if anything, it's hard to believe that the glass business could be doing really well and then the component part of the business not doing so well? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Yeah. I mean, John, PGW was – had a really good contribution to the quarter. Again, they haven't changed their overall projections for the year, their budgets or their plans. So they're right on target. That's a combination of both the aftermarket business and the OE business. Obviously, the OE business plays to different dynamics than our historical businesses if you will. The reality is they're very – they're different, right. And the drivers of our core North American business are different than the core drivers of the PGW business. Again, we think our core North American business had a great quarter. I mean the margins were up. Gross margins were up. Operating margins were up. Profitability was up nicely. Yeah, the organic growth was a little bit lower than I think was expected. But given what was happening with total, the frequency of collisions, I mean all put together, we think we had a terrific first quarter in North America. Robert L. Wagman - President, Chief Executive Officer & Director: John, I'll just add to what Nick said with the PGW acquisition. We are starting to sell glass in our LKQ facilities. So those reps have access to that. So, yeah, we are – we do like that the – certainly, the distribution side of the business, to be able to cross-sell in our different entities. We're looking at opportunities in Europe as well. So we're very pleased with that acquisition.

Great. And then I just wanted to ask, you gave the statistic about the benefit you're getting out of the sales force productivity, I think you said 17 calls or 17.2 calls going to 18 calls maybe. Where do you ultimately see that going to over time? And how much productivity do you think that you can really drive from an external sales standpoint amongst the sales force? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah, the biggest benefit we think we can get is just training. By consolidating our call centers and getting our people better trained and better monitored is the ultimate goal here. We talked about the CCC initiative where more and more is going online as an opportunity as well. So we just see just more effectiveness with our sales reps and just being able to better handle called line (58:19) as well. The way we're situated now with sales reps spread out all over, we now have the ability to move our phones. If the phones go down, we can move it to a different call center. We do plan on going to extended hours so that at 5 in the morning if someone on the West Coast wanted to order a part, if they're up early, those will ring on the East Coast. And when we close down at 5 o'clock in the East Coast, those calls will be ringing on the West Coast. So we expect expanded service because of the way we're going to be routing the calls and handling the sales force. So we do expect some good efficiencies to come out of this.

Thank you.

Thank you. Our final question comes from the line of Jason Rodgers with Great Lakes Review. Please proceed with your question.

Yes. Thanks for squeezing me in. Robert L. Wagman - President, Chief Executive Officer & Director: Sure.

Just back to the North American market again, is it possible to separate the percent of revenue generated from collision versus mechanical repair? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah. Collision today is roughly 30% of our total revenue.

And how about the performance of that 30% for North America in the quarter? Robert L. Wagman - President, Chief Executive Officer & Director: Yeah. The – again, I think the question you're asking is collision, kind of performance of collision versus mechanical?

Just the North American, I'm just trying to flesh out the collision performance versus the rest of the business there? Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Yeah. The collision side actually performed a little bit better than mechanical. I mean the two biggest parts we take off of a salvage vehicle is obviously the engine and the transmission. On the aftermarket side, we saw no mechanical. So mechanical strictly relates to the salvage side of the business. The reality is those parts start selling kind of year seven or so. If you take a look at the request that we get for engines and transmissions, about 15% of the total request relate to model years that are one to six years old. 65% of the requests come from model years that are seven to 15 years old. And so the kind of the sweet spot for the mechanical side, yeah, are older vehicles, and as – the strong SAAR rate over the last several years, it's going to take some time before those cars come in to the sweet spot on the mechanical side. So a little bit stronger performance on the collision versus the mechanical. But nothing – not significant.

And what is the approximate annual revenue generated from the UK collision market? Robert L. Wagman - President, Chief Executive Officer & Director: It's annualizing roughly about $80 million now.

Thanks very much. Robert L. Wagman - President, Chief Executive Officer & Director: Thanks, Jason.

There are no further questions at this time. I'd like to turn the floor back over to Mr. Wagman for closing comments. Robert L. Wagman - President, Chief Executive Officer & Director: Thank you everyone for your time today, and we look forward to speaking with you in October when we report Q3 2016 results. Have a great day. Dominick P. Zarcone - Chief Financial Officer & Executive Vice President: Thanks, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.