Good day everyone, and welcome to the Copart Incorporated First Quarter Fiscal 2012 Earnings Call. As a reminder today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart Incorporated. Please go ahead, sir.

Thank you, Roxanne. Good morning, everyone. It’s great to have you on the call. Welcome to our first quarter conference call for fiscal 2012. We have got some updates this morning, I am going to turn it over to Will Franklin first for a brief outline and then we will go through our prepared remarks and open it up for questions

Thank you, Jay. I would like to remind everyone on the call that our remarks will contain forward-looking statements. These statements are neither promises nor guarantees and are subject to certain risk and uncertainties that could cause the final results to differ materially from those projected or implied by our statements and comments. For a more complete discussion of the risk that could affect our business, please review the management's discussion and analysis and the factors affecting future results contained in our 10-Q, 10-K and other SEC filings. With that, I’ll turn the call back over to Jay Adair, our CEO to begin the discussion of our first quarter results.

Thank you, Will. Well again, good morning, and as you can see we are happy to report the quarter. We are very pleased to see the growth in revenue to $225 million. Growth in operating income to $65 million and growth in net income to $41 million. EPS, very large growth year-over-year due to earnings improvement and due to the share buyback going from $0.45 to $0.62 in the quarter. Just looking at the statement of cash flows for a minute, I would want to point out the accounts receivable build that took place this quarter, compared to the quarter last year. We talked about that a little bit in the last call, in the Q4 call that we saw a lot of volume coming in. We continued to build inventories in this quarter and burn cash in the process and that inventory we will be selling off in the second quarter that we are in now. Will will also talk about our debt and the fact that we fixed our debt, so I won't go over that, he will elaborate on that. I did want to comment on the fact that we finished the quarter with over $200 million -- $212 million in cash on the balance sheet, and we bought back over 1 million shares in the quarter. So just some other points that I thought I would focus on operationally. In the quarter we did see some increase costs associated with fuel and sub-haul but in addition to new development and new development costs. New business that we are developing in the company. So the company has been very focused on increasing segments that are non-insurance. We have done a lot of investment in that process and we believe we are at that point now. We believe…

Thank you, Jay. Yesterday we reported our financial results for the first quarter of our 2012 fiscal year. Consolidated revenue was $225.6 million compared to $212.7 million for the same quarter of last year, an increase of 6.1%. In the first quarter of our fiscal 2011 year, we adopted new accounting rules regarding the recognition of certain revenues. Beginning in that quarter, revenue generated for recovering a car or converting a title with this date and for cleaning, washing and protecting a car are recognized when performed. Prior to that quarter, these revenues were recognized when the car was sold. We booked a one-time adjustment of approximately $9.1 million to accelerate that revenue in Q1 of fiscal 2011. Excluding the impact of that change in revenue recognition, revenue growth would have been $19.9 million or 9.8%. On a same-store sales basis, revenue grew 3.4%. Excluding the impact of the revenue recognition adjustment of first quarter last year, same-store sales grew 7%. Volume grew in both North America and the UK. Total volume increased over 4%. Purchased car revenue as a percentage of total revenue grew from 15.6% to 17.7% year-over-year. Due to increase in average selling price, purchased car volume declined from 5.8% to 5.3% of total volume, as we continue to migrate contracts in the UK from the principal model to the agency model. Yard and fleet expenses grew from $86.2 million to $88 million and reflect the higher volume in cars processed. The significant increase in the cost to recovery car due to the year-over-year increase in the cost of diesel, and the increase in costs associated with developing new markets, including the public and dealer markets. Our gross margin grew from $88.9 million to $95.2 million or 7.2%. General and administrative costs, excluding depreciation, were $26 million…

(Operator Instructions) Our first question is from Craig Kennison with Robert W. Baird.

Good morning. Thanks for taking my questions. Jay, you had mentioned the NHRA spending which will not be renewed. How much was the spend in calendar 2011?

Well, we talked about this before the call, and there’s a number of costs that are associated with the spend. And there’s a couple of things. One, I can’t really talk about the spend due to confidentiality agreements that we’ve signed. The second piece is that some of the spend that we’ve got, Craig, is going to be moved over to other parts of marketing, and some of the spend, genuinely, won’t take place. So there’ll be some benefit associated in terms of not having to spend, but we will bring that money to the bottom line, but we’ll also be deploying that on other marketing efforts that we’re getting -- continuing to get a return and get additional cars on. The point I was trying to make on the call is, that we’ve done a lot of loading up to get cars in. A lot of marketing spend to bring vehicles in. And what we’re going to be seeing going forward is a trend of increased revenues without the expense increasing at quite the same pace, as we’re now getting the benefit of bringing those volumes in at a lower per car cost. And that was really the point I was trying to communicate on the opening remarks.

That’s helpful, Jay. Thank you. And then, Will, can you comment on volume trends in the salvage business as it might relate to market share? And then what kind of momentum are you seeing in the non-insurance business?

I am not seeing a significant change with respect to the salvage volumes. I think it’s relatively flat. We’ve increased our salvage numbers. When we look at our contracts, we’re happy with what is taking place in the market. On the non-salvage side, there’s probably six different segments that compose the non-insurance side of our business, and the one that continues to grow at the greatest rate would be the CDS business. We are continuing to add agents to that business and we are optimistic that the trend will continue. Other segments we are in the initial stages of developing, and we are likewise optimistic in the future of those as well.

And then finally with respect to the aggressive buyback plan you have underway. How much more appetite do you have for your stock here? Thank you.

Yeah, it’s always going to be an option for us, Craig. I mean, we generate more cash than we consume in CapEx. We just don’t talk to the timing of that. So, over the course of time, over the next ten years, we’ll continue to be a buyer of our own stock.

Thank you. Our next question comes from Jason Ursaner with CJS Securities.

Good morning. The marketing spend to bring vehicles in, is this primarily the domestic whole car that you’re talking about?

No. The marketing spend to bring in vehicles domestically tends to be non-insurance volume. We often talk about the cross pollination benefit, because when you market you bring in members and you also get the opportunity to bring in cars. So, you’re really getting a benefit on both sides of the equation. Obviously, the members will buy everything. They will be bidding on insurance volume to non-insurance volume. But when we focus on a marketing spend in terms of supply, it tends to be vehicles that have nothing to do with the insurance industry, simply because those are contracts that are set up. There are agreements that are made and then the volume that comes from the insurance industry is going to be based on a number of factors from accident frequency, to weather, to the economy.

Right. So if I look at the vehicle sales, can you help at least try and breakout the UK principal versus what the domestic whole car, the non-insurance piece is right now?

What portion of that volume on the purchased cars is domestic versus UK?

Yeah, the vast majority of the volume is UK, Jason.

Okay. And In the UK on the principal autos, are you still getting a similar gross profit, profit per vehicle even as price bounces around there?

Yeah, actually we saw a little increase. The margin stayed about the same but the ASP increased. So the absolute return on a per car basis actually grew a little bit this quarter.

Okay. So that on the sequential gross margin, in fiscal Q4 you had been building inventory and then you said you continued to build inventory this quarter --?

I don’t mean to interrupt you, but we’ll continue to build inventory in the quarter we’re in.

Okay.

And what typically happens is, as soon as daylight savings time changes and you lose that hour of daylight, you start to see volumes increase. And then that happens all the way through winter until about February, and then inventory starts to drop in February because you’re just selling more cars than your bringing in. What we saw this year was an increase in inventory in Q4 and in Q1, and in Q2. So it’s much earlier and I’m not going to talk to the accounting. Will, can talk to the accounting of it, but in the old way that we did accounting, we offset the costs associated with vehicle inventory builds. Today, as we build inventories, it tends to hurt our margins. When we sell those vehicles off, then obviously we’re going to see the upside of that. So that should be happening in Q2, Q3 of next year, or current year we’re in, but meaning when we report Qs 2 and 3 next year.

Okay, that makes more sense. I thought you had said you were going to reverse it even as you go into the winter. Okay, I think that’s it from me, I will jump back, thanks.

Our next question comes from Ryan Brinkman with Goldman Sachs.

Good morning, congratulation on the quarter. I was curious as to the cash build. Given the term loan draw, I thought perhaps you would have repurchased more stock. It was a strong free cash flow quarter. You said in the last call it would be a strong free cash flow quarter. So I’m not sure why you would have drawn $125 million. Have you since put this cash to work repurchasing shares subsequent to the quarter close or do you have plans to do so?

Yeah, so let me just comment on that a little bit deep. The volume, if you look at the number of shares that trade on Copart and following all the rules that you have to follow in buying your own stock back, there’s just a limit to how much stock you can buy back in a quarter without tendering. The second point being the increase in cash on the balance sheet. We’ve kept, if you look historically, we’ve kept about a couple of hundred million dollars in cash on the balance sheet throughout the last fiscal year as we bought stock back. And we’ve talked about this on previous conference calls, and that’s simply that you just don’t know what’s going to happen in the market. You don’t know how Wall Street’s going to react to your stock price. And so we let the cash balance dip in the fourth quarter because Will had already lined up the additional financing and quite frankly by the time we reported the quarter it was days later that we secured the loans. So the point of that is that we want to have a large cash position to take advantage of opportunities. And that may be buying stock back, that may be buying companies. We do have plans for growth. We’ve got some systems that we’re working on right now that we’d like to install first. Obviously that’s not the only way we can grow. We’ve gone into Canada, we’ve gone into the UK with the existing systems we have. But at some point, you have to cut over and say, we’re going to move to new technology and new systems that will us out the next decade. And we’re in that mode right now. So if there is an opportunity that comes along on the acquisition front, we’re literally months away from deploying new technology, not years away from deploying that technology. And so if we see an opportunity to buy a company, we’re going to do that as well. So we need to have that cash on the balance sheet so that we have all our options in front of us.

I see. Is there a dollar amount, a minimum dollar amount that you’re comfortable with?

Not something I’d say it on a call.

Sure.

I mean that makes sense, right.

Okay. And then just what is your sense of how the overall salvage market is performing given the decline in miles driven out there? And how do you think you’re performing on a relative basis?

Yeah, I think that was asked in a different fashion earlier. We think the market is flat, salvage market. And the fact that we’re growing volume is because we’re performing well in the market. We’re competing well.

And if you analyze the market, Ryan, and think about the economy, miles driven, uninsured motorists. If the economy comes back, we’re all of the belief that we’ve gone through the last three years now through a period of, at least the lowest I’ve seen in the insurance market in my career. And so we’re of the mindset that as the economy comes back, that you’re going to see more people driving more insured vehicles and it will have a very positive effect on the overall market as a whole. In the meantime, we’re focused on obviously continuing to grow the company besides -- regardless of the fact that it’s a relatively flat market.

Okay. And then my last question is just a little housekeeping question. It seems that yard and fleet D&A tracked lower year-over-year whereas there was a spike in general and administrative D&A. I thought perhaps this might relate to your systems change, I didn’t think you’d be depreciating that until after it was fully implemented. Can you speak to the shift in D&A and how we should think about that going forward?

Sure. It’s very simple. We had a number of operating assets that had reached their end of their useful life and so they fell off the depreciation schedule. On the G&A side, we have other IT projects besides this SAP migration. And as we start to utilize those developed projects, we start to amortize them. And that’s exactly what happened.

Our next question comes from Tony Cristello with BB&T Capital Markets.

Thank you. Good morning, gentlemen. First question, I just want to ask a little bit about the UK and Universal. And when we look about, look at -- operationally, it seems like things are going extremely well. If you go back two or three years during the sort of financial crisis and the slowdown in the global markets, you certainly weren’t running on all cylinders, if you will, like you are today. Is there anything you see in that business that would be cause for concern should the UK and/or Europe slide back into some type of recessionary environment and what would be the impact to that business?

Well, that’s a pretty broad question, buddy. When we think about the UK, it’s very similar to the North American market, whether it be Canada or the U.S. It’s a market where they embrace trains and travels that is non-auto associated, but it’s still a market that functions on cars. I mean, if they are going to have an economy, and have people working, people have got to get their cars to drive. And the vast majority of our business in the UK, unlike the U.S. where a whole fifth of the business in the U.S. is non-insurance, the vast majority of the business in the UK is insurance related. So if the economy were to dodge down and spike down in a big way, what’s going to hurt us is people have to stop driving, and I have just not seen where that’s been the case. The vast majority of the autos, even as unemployment is over 10% like we see today, the vast majority of the people have jobs and they drive cars and there are accidents. It might flatten out the market and it might drop it a little bit, but it’s going to continue to be a market that exists. So, I don’t really see anything on that front that draws too much concern. But I guess that’s a pretty broad question. Who knows what’s going to happen globally to the markets and economies, and just we feel good about the UK markets the same way we feel good about the U.S. markets, or the Canadian markets. These are very strong economies in the global picture.

Okay. And I don’t know if you -- and I apologize if I didn’t hear the number-- did you break out sort of the agency base number. You’re sort of in the 20% to 30% principal over there? Or is that, maybe you haven’t disclosed that number?

We did. Within the UK, we’re in the high 20%.

Okay. And shifting gears then, if we look at -- you talked about marketing and you talk about putting more emphasis or dollars into the CDS or Copart Direct, Copart Dealers. Can you maybe discuss a little bit the pricing of used vehicles, the impact it has on those businesses as well as new vehicle sales recovery. And I’m just trying to understand the dynamics that we see today with sort of depressed new car sales but yet elevated used car prices, when those flip or they inverse what is the impact or is there any impact to those two initiatives and what should we expect as you continue to grow those?

Copart is very much built around supply and you have to think about the business in terms of relationships and having supplier agreements to get vehicles. That’s obvious in the insurance industry, but it is maybe less obvious on the dealer front but just as critical. Those relationships and those supply agreements are part and parcel to the volume coming in and volume being sold. Now if price goes up, one would argue that we have an easier time selling those cars, but it really doesn’t change it much because the demand curve goes up everywhere. So the ability for that dealer to go out and sell that vehicle somewhere else and get a higher price goes up as well. If price dips, their ability to sell it somewhere else goes down and their ability to generate the return through us goes down. So really whether the price is up or down on the dealer side, we don’t think it makes a whole lot of difference. On the insurance side it’s a whole different ballgame. Obviously, it effects how many vehicles have become total loss, and there’s a number of moving pieces to that model that we’ve talked about over the last five years on conference calls, so I won’t elaborate on all of them. But to your question on dealer, it really shouldn’t impact us much if those prices come down. Maybe the bigger question, Tony, is, are sale prices going to come down. And at this point we have seen the increase in the average vehicle we sell move significantly. In fact, we talked about it in the annual report this year. And as long as that tends to be the case and we watch the average vehicle that we process go up and get older, your probability of total loss is going to go up. And we’re having a hard time seeing how new car sales are going to rebound in the next two or three years. It’s just -- it’s not something that moves that quickly, it takes time for that to change. It’s a pretty big moving target when you talk about new car sales. And so used car sales, we think pricing is going to continue in the range that it’s in, going out for next year or two.

Okay. And maybe one last quick question, a follow-up for Will. On the accounting change, I’m assuming as we move into the next few quarters, we’re not going to see much movement one way or another, unless you have really big volume swings one way or another. Should we just -- I know you’ve called it out to give us sort of apples-to-apples this year, but is that the appropriate way to think about it, Will?

Yeah, I think that’s right. So when you look at it on a year over basis, you probably won’t see a lot of fluctuation. But when you look at it on a sequential quarterly basis, now you’ll see a tremendous fluctuation. So, if you look at our fiscal 2010 year, when we didn’t have this revenue recognition policy, our average cost to process a car on a quarter-to-quarter comparison didn’t vary more than $5. Last year you saw that average cost to process a car fluctuate as much as $25. So you’ll see margins suppressed in our first and second quarters as we grow inventory, you’ll see margins increase in our third quarter as we bleed that inventory off.

Our next question comes from John Lovallo with Merrill Lynch.

Hey, guys, thanks for taking the call. Couple of questions for you. The first one being, how do you kind of measure or gauge internally the progress of project overdrive, seeing that it’s kind of a softer customer experience type measure? I mean are there metrics in place that you guys use?

Yeah, that’s a great question, actually. We think about project overdrive as really two fronts. We’ve got the user experience and then we’ve got a much more nimble, scrappier approach to how we do business. And there is so much I can elaborate on that. I mean that’s a big deal into itself, but we measure all of this. The easiest way to measure the customer service side is NPS. And so we are constantly doing that and seeing improvement on our NPS work. By the way, when we think of customers, that’s internal and external. So, it’s not just sellers and members, it’s also all the employees of Copart. So, we are looking at how fast we respond. It’s really about a fast and easy experience. It’s more comprehensive and extremely transparent. That is in the auction, that’s on the website, that’s whether you’re dealing with us at the facility, whether the facilities are dealing with the home office. It’s across the board. We think about project overdrive as really a three-year plan. It’s not something that will get done in the next year or two. It’s a three year plan, so it will be something fiscal ‘12, ‘13 and ’14. And then, a number of changes that we are working on today will be in place from the way we process data to systems across the board, and we’ll be obviously looking at the next step in our evolution.

Great. That’s very helpful. Thank you. If I could sneak one more in here. What has been your ability historically to pass on higher fuel prices to either the buyers or sellers?

Well, fuel fluctuates. And so, the bigger question is, the cost that gets passed onto us. And we obviously, when price of fuel goes up, it’s passed onto us through sub-haulers, and we work effectively to try to keep those costs down. But pricing really is a market driven thing. It’s not going to be, hey, we are raising our prices this month because fuel’s up, whereas sub-haulers, it’s obviously that’s the world they live in. Our pricing is much more what’s the market doing and what’s the market allowing us with respect to our members and our sellers.

We go next to Scott Stember with Sidoti & Company.

Good morning. Could you maybe talk about the system revamp that we have going on right now. How much has pretty much happened so far and the cadence of higher expenses that we could expect throughout the year?

Yeah, I’ll let Will talk to the expenses. I won’t go into too much detail. We’ve talked about it in subsequent calls. But if you sit back and you think internally about overdrive, the systems evolutions that are talking place internally, enterprise systems, that will run basically the back office, how we operate in our facilities. And again some of these things I look at as there’s some of the magic of the way that the company is run. We focus on everything from call management to payment processing. And we’re really fine tuning and taking the company to another level internally. Externally, when you’re dealing with us on the web, we’re going to be doing the same thing. So we’re going to be taking advantage of a lot of new technology that’s out there. The world’s a very different place. I think on one of the calls I talked about the iPhone didn’t exist five years ago, smartphones were kind of dumb phones and today you sit back and you think about what mobile technology has done, what web technology has done, and where are we going to be able to take the company in the next three years. And it’s a very different Copart as we look out into fiscal ‘13 and ‘14. So the best way to respond to, and I’ll pass it to Will for the cost analysis, but the best way to respond to is really, as these products come to market we’re going to actually do that on the call. During the call rather than talking about some of the stuff we’ve done in the past, we’ll be doing demos of the new technology that comes out so that you can all see what we’re doing on our web and some of the other platforms that we’ll be launching.

Scott, with respect to the impact it will have on the financial statements. We really don’t anticipate it to have much of an influence on our G&A line. Most of the cost will be capitalized. We expect those capitalized costs to be probably in excess of $30 million. But the expense side of the project is simply resources that we have anyway that are just directed towards this implementation as opposed to other projects.

So in the past, I think maybe a couple of calls ago, we talked about some of the total cost that could wind up in the next year or two. I think it was north of $25 million to $35 million, and so you’re saying most of that will be capitalized?

Yeah, and it will flow through the income statement probably to the end of our fiscal 2013 through amortization.

Okay, so you don’t expect much, if any, incremental expenditures from any of the stuff that’s going on -- with the headquarter moves within fiscal 2012?

Now that’s a different question. We’ll have some incremental costs associated with the transition to Dallas.

Okay.

We’ve probably incurred $2 million to $2.5 million so far, and I would expect to incur another $2.5 million or so going forward.

Okay. And with regards to the processing centers, same thing cost wise, in the same vicinity?

I thought your number included the processing centers. You’re talking total G&A move?

Yeah. Total G&A move. So the cost of processing centers will be reflected in our yard and fleet cost and it shouldn’t have much of an impact on a per car basis.

Got you. And can you maybe talk about the UK a little bit? I know that you don’t break out individual specifics about, between the North America and the UK, but how is the UK performing if you want on a profitability basis versus North America and the size of the UK versus the North America. Just give us a framework of how big that’s become?

Well, the UK is doing great. I mean they are operating as planned. They are utilizing most of the products and services that we have in the U.S. Some things are just different, and then some things haven’t rolled out yet. So we don’t have obviously neared the non-insurance segment growth over there that we have in the U.S. But that’s been going on now for a few years here. And the U.S. has been geared towards developing these segments. The UK has been geared towards putting all of the existing products and services that Copart has into that marketplace and not necessarily thinking outside of insurance right now. So, that will eventually evolve. The team has done a fantastic job. This is a market where we’ve only been, literally only been in the market now roughly four, five years at the most. And yet we’ve seen this monumental transformation in the way that vehicles are processed in that marketplace. When we got there, average pickup times in the UK were near four days and today we’re picking up vehicles in less than a day. We’ve got, what, 15 locations across the country to do that. So we’re closer to the cars, we’ve reduced the costs associated with towing. Some cars were towed from Scotland and brought all the way down to Bristol. Today, vehicles in Scotland stay in Scotland, vehicles in the west country stay in the west country. So, it’s a much more efficient process, lower cost to handling vehicles, lower cycle times to handling vehicles, and they’ve really just done a fantastic job. The next step will be as we deploy some of the overdrive technologies that we’ve talked about in the next year. That will be going into the UK, as well as North America.

And just with respect to the overall size of your UK business versus North America. 15%, 20% in that vicinity?

To express in volume it’s closer to 15%.

Okay. Got you. And just last question. In North America, what is your PIP versus fixed percentage these days?

It’s about a 50-50 split.

We go next to Gary Prestopino with Barrington Research.

Good morning. Will, your current capacity to borrow right now based on your revolver and term, I’ve got it at about $175 million. Is that correct or is there some accordion on either of those two pieces of debt that could take it higher?

Under our current facility agreement we have just $100 million left on the revolver. Now we can go outside and get third-party debt. We are limited to $50 million in excess of that. So, roughly $150 million under the current agreement.

Okay. That’s fine. And then did you say volumes were up about 4% overall unit volumes?

That’s correct. Worldwide.

Okay. And then I think Craig asked this question, I don’t know if you answered. I may have missed it, but your percentage insurance, non-insurance, are you giving that out anymore?

Well, he hasn’t even asked, but it’s about the same. It’s about 80% insurance and about 20% non-insurance.

Okay. Thanks. And then could you, possibly in terms of milestones, kind of lay out -- I know you talked about the Dallas move being completed. When the process centers are going to be completed, when the IT system is going to be out and be able to be fully utilized? Could you kind of give us some milestones as to when you think those will all occur?

The process centers should be done this fiscal year. Move to Dallas should take place this fiscal year. If not this fiscal year, the move to Dallas should be the first quarter next fiscal year. Technologies will be in the next fiscal year. So we’ve got over five of the top of my head that I can think of. Five major projects that we’ll be rolling with. And the majority, if not all, those will come in the next fiscal year that maybe something we get done a little sooner than we plan. But like as I said, as we launch these, I’ll be talking to them on the call so that you’re all very clear on what we’re developing and what we’re deploying.

When you said next fiscal year, so we’re talking about fiscal ‘13 or fiscal ‘12 when you’re saying…?

No, fiscal 13. Next fiscal year, fiscal ‘13.

Fiscal ‘13, okay. Thanks. And then just a question on the marketing spend, Jay. Your driver retired on the Hot Rod side and you’re going to look at other areas to spend to grow. But do you feel, was that a very effective way of spending money to attract buyers and sellers and what other areas would you be looking at to spend? Are you going to possibly go out and work with another driver or just other -- what are you going to do there?

Sure. No, it was great. I mean it was a fantastic move because, quite frankly, the name Copart was unknown in the auto segment. And when you get into NASCAR and you get into NHRA, NASCAR is very much auto enthusiasts and auto fans, but NHRA is gearheads. I mean that’s just hardcore gearhead heaven. And so we were able to get into that marketplace, make people aware of who we are and seen tremendous improvement there. The opportunity that took place over the last three years, ‘09, ‘10, ’11, was to make a segment of the population that is heavy auto related aware of Copart. We’ve done that, and we could continue to invest dollars in that marketplace but the return goes down significantly because they’re aware of who you are now in that marketplace. So from a marketing standpoint, we’re focused on deploying in other areas that are going to be different than racing going forward.

Can you elaborate on that, or is that something you don’t want to share with us right now?

Well, I could elaborate a little bit. Obviously, some of the decisions aren’t made yet. It’s not so much that it’s a secret or a super secret, but we’re going to be focusing, continuing to focus on web-related. A lot of our traffic comes into us through the web and through Google searches and that kind of thing. So, how we do that, the affiliated marketing that we do there can have enormous returns. And more so than the fact that they are big numbers in terms of returns, the measurable numbers, you can see exactly based on each deployment. That becomes much tougher when you go radio, TV, sponsorship. Those are things that you can ask, you can query, you can try and measure. But the web is pretty doggone measurable at this point. So we’ll be focusing as an example more towards web space, economics, where we’re going to get customers coming in through those avenues. And then there’ll be some other areas that we’ll focus on too that are auto related. I mean the key for us is that we’re not a business that’s trying to attract Oprah Winfrey’s audience as an example. I mean there’s a demographic that buys at Copart, and that demographic is very auto related, loves cars, is passionate about cars, and our goal from a marketing perspective is to focus more on that area.

Next we go to Bill Armstrong with C.L. King & Associates.

Good morning, Jay and Will. Just to get back to a previous topic, the systems rollout. I think in previous calls you talked about a $30 million to $50 million total cost when all is said and done. Are we still on track to be in that range?

I think we are. I think it’s a lower end of that range.

Lowe end, okay. On your expenses, you mentioned an increased fuel and sub-hauling cost. Your expense ratio as a percentage of fee revenue did go down year-over-year during the first quarter. Was there just some leveraging of some fixed components there or were there any fee increases?

No. Probably the one that had the biggest impact on that is we talked about the adjustment in our first quarter of revenue associated with the change in the revenue recognition policies. There was also an adjustment in yard and fleet. Yeah, In Q1 of our fiscal 2011 that amount was about $8.8 million.

Right, okay. Got it. And how about the yield per vehicle. What were the trends there during the quarter?

On a purchased car side I talked about that. The ASPs were up. The margins were constant. So, the yield was slightly higher. We really never have discussed our average selling price or our revenue per vehicle, specifically on the calls and we’ll continue to hold to that policy.

Understood. Just directionally I was wondering if it’s been increasing, flat, decreasing?

Well, we point to the used car index and we point to scrap metal pricing. And if you look at how that moved in our fiscal quarters, it’s down slightly this quarter. And I think that’s a fair indicator of what pricing is doing with us.

Thank you. At this time we have one question remaining in the queue. (Operator Instructions) We will take our next question from Scott Ciccarelli with RBC Capital Markets.

Hi, guys. This is Patrick Palfrey sitting in for Scott. I guess just touching on scrap prices again, we’ve seen scrap pricing come down a fair amount over the last couple weeks. And we’re just sort of wondering what your assumptions were for scrap pricing going forward and just could you remind us how it could potentially impact your business?

Right. In terms of assumptions, we don’t really -- we don’t have any assumptions. In terms of the impact it has obviously, I called out the two major drivers in our average selling prices, scrap metal pricing on the low end of the cars we sell, used-car pricing on the higher end. In terms of the two, the used car pricing has more influence on our ASP than scrap metal does.

Okay. Thanks. And I guess one final question, if I may, just a quick housekeeping. Looking at the Allstate contract, would it be safe to assume that you fully cycled the Allstate volume or was there still incremental volume from that contract in the current quarter?

No, we are fully anniversaried. In our first quarter of last year we were probably 90% volume. Though there might be a slight benefit on a year-over comparison but we certainly exited our first quarter of last year full run rate.

It appears we have no further questions at this time. Mr. Adair, I would like to turn the conference back to you for any additional or closing remarks.

All right. Thank you, Roxanne. Again, we appreciate everyone coming on the call and we are excited by the results of the quarter. We look forward to talking to you about the Q2 in three months. Merry Christmas, Happy New Year. Bye.

Thank you. That does conclude today’s conference.