Good day, everyone. Welcome to the Copart Incorporated Fourth 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.

Good morning, everyone. Welcome to the fourth quarter call for Copart and a wrap up on our fiscal year 2012. Will and I are in two separate locations today. As we have done in the past, I'm going to turn it over to Will now for opening remarks and he will pass it back to me. Then we'll open it up for question-and-answer. With that, it's my pleasure to turn it over to Will Franklin, CFO.

Thank you, Jay, and good morning. Before we begin our comments, I would like to remind everyone on the call, that our remarks will contain forward-looking statements, including statements concerning our views of trends in our business. These statements are neither promises nor guarantees and are subject to certain risks and uncertainties that could cause the final results to differ substantially from those projected or implied by our comments. These risks include trends in average selling prices for cars and other factors that can affect our gross margins. For a more complete discussion of the risks that affect our business, the management's discussion and analysis, and the risk factors contained in our 10-K, 10-Q and other SEC filings. I will now provide a few brief comments about our financial performance in this, our fourth quarter of the fiscal year. Consolidated revenue was $226.6 million, compared to $215.4 million for the same quarter last year, an increase of 5.2%. The growth in revenue was driven primarily by increased unit volume in North America. Volume in U.K. remained flat and continued to be challenged by the lingering recession in the region. The growth in North America was broad based. We began to see the incremental volume associated with our exclusive contract with nationwide, which we entered into in our previous fiscal quarter. We expect incremental volume for this contract to reach full run rate by the end of our first quarter of fiscal 2013, and to be fully reflected in our second quarter's results. Volume from non-insurance cars grew by almost 5% over the same quarter last year, and represented 21% of all cars sold during the quarter. Same-store sales on a consolidated basis and expressed in units was up 6.6%. Excluding the impact of nationwide, it would have been up 4.4%.…

Thank you, Will. Good morning, everyone, and welcome to the call once more. We are really excited about the events and the things that took place for Copart in fiscal 2012. At the beginning of the year, I announced the Overdrive effort that we have undertaken. We are now one year into a three-year process to transform our company. Part of that Overdrive experience was moving out of California, and I'm happy to announce that we have exited the headquarters that was in Fairfield, California completely and given the building back to the owners. We now have moved into our brand new headquarters in Dallas, Texas, and are excited about that first part of the transition taking place. So, if you have time, come see us in Dallas. We will be furthering our work in the next two years as we implement new technologies as Will discussed in his call. We also, in the year, sold off both airplanes that we had. We've talked about that in previous calls, but by being based in that don't have the need now to have aviation. We can get everywhere we need to get from D-FW. In the year, we took an $8.7 million impairment associated with our move to Texas, and that included the planes. In this quarter, we recognized an additional $1.2 million loss, and that is reflected below the line and not in G&A, so I want to point that out, call that out for you because that is the last of that since the planes are officially sold off. In the year, we acquired four new locations, two of those locations were in Alberta, Canada, one location in Calgary, and one location in Edmonton, and then we had a new location in the South end of Atlanta and a new location in Mebane, North Carolina, which is between Greensboro and Raleigh. On the expansion side, we bought out existing leases or purchased new land so that we can expand existing locations at five facilities, and then finally I just wanted to mention that for the year, we purchased $203.3 million worth of stock, or approximately 9 million shares. With that, rather than going to any other points, we'll open up for questions and try to touch on any points that you may have on the call. Kasey, if you could please take questions at this time that would be great.

Thank you. (Operator Instructions) We'll take our first question from Bob Labick with CJS Securities.

Good morning. Congratulations on a nice quarter and year.

Thanks Bob.

First question, obviously international expansion has been a big theme for you guys recently, and then the move into the U.A.E looks like a nice location. Can you talk a little bit broadly about what Copart can bring to a new geography? Obviously, your advantage in North America is land, logistics, technology, supply base and buyers, but going into a new area what are the big advantages Copart brings?

I'll go ahead and respond to that. If you don't mind too for folks that are asking question, if you point them out to, whether the question is for Will or myself, that'd be great. But, I'd be happy to comment on that, Bob. Dubai is our second largest. The U.A.E is the second largest we sell to outside of the U.S. The number one market being Mexico, so for us to get a footprint, yes, we get to sell cars and we are holding, we had three auctions now in that market. So, that's great. That allows for growth. That allows for us to go out and reach out to all insurers there and process their vehicles, but it also allows for us to recruit buyers in that market to take payments in that market and to assist in the shipping process which is something today the logistics of that is being done through vendors to the buyer base, or by buyers directly. Now that we've got a facility, we've got storage, we can actually assist in not necessarily the actual shipping, but once it is shipped from a U.S. location to the Middle East, we can then take that vehicle and store it at our location for them and assist in that process. So, it just allows us now to expand throughout the Middle East, into those markets and its part of our strategy to deploy in a number of international markets, which I would bring up the last point which is really important. We're a unique company, and that we get a benefit by having a global footprint. Lot of companies get the analogy of, when Walmart opens up into U.K. and they've got Asda. Buyers at Asda probably aren't going online and buying products at Walmart in the U.S. For Copart, when we open up in a market like the U.K. we started selling motorcycles in the U.S., so there is an opportunity as we open up in multiple locations around the world to cross pollinate the buyer base between markets.

Okay. Great. Then I'll stick with you Jay. You've had a lot of success with the non-insurance market growth, volume growth. What are the key areas going forward in that market and how big can non-insurance be for Copart?

Well, we've talked about those key points in the past. We go after all facets of the non-insurance market whether it'd be TPA or charity or dealer business, and we are going to continue to go after that. We have been successful, and I really think the limit is quite high. It's an enormous market compared to the size of the total loss vehicles in the U.S. or the U.K. or Europe or any market, so it's one of those books of business. What excites me about it is one of the books of business, where we have had some really great growth in the last year on the insurance side, and yet that business has been able to maintain that 79-21 split, so they've been able to keep the growth going on even though the insurance side has been growing, so that's good stuff.

Okay. Great. I'll let others ask questions. Thanks very much.

Thanks Bob.

Thank you. We'll take our next question from John Lovallo, Merrill Lynch.

Hey, guys. Thanks for taking the call.

Hi, John.

Jay, I'll start with you. I think over the past quarters, you had mentioned potentially giving an outlook on CapEx. I was wondering if you guys are in a position to do that.

Yeah. John, it's funny, because we met this week talking about it, and we may give some CapEx guidance in the following quarter. It just felt way too difficult. The range was so wide for us, and really that boils down that you just don't know what dealers you are going to get done, and so the range was so wide that we just felt like it wasn't a good idea. I'll leave you with this. We spent a little over $200 million last year buying our shares back. We look at our cash position and the return on our cash as a factor on the return we can get from buying our own company back, and so we are not going to go out there and deploy capital on things that are not a good use of capital. We are not going after businesses that don't make sense and we are not going to go out and expand yards that don't need the expansion, so we've got great capacity today, but we are expanding some yards just to maintain that capacity and we are looking at targets out there. If we can get a better feel for it in the next quarter, the quarter after that, then we will give you guys some guidance on that, but otherwise for now we've decided to hold on, because the variance is so wide.

Okay. That's helpful. Jay, one more for you, G&A last quarter I think you had mentioned that kind of the $25 million, $26 million per quarter run rate. Is that still reasonable for 2013?

The fact that it will change in 2013 is, we are really transforming our company from a technology standpoint. We've got technology that will continue to run the company for the next year, or two, or three, but for us the [challenge] of the world we live in today, both on a sell level and on a cloud-based computing level. All the technology that's out there, we have got to really transform our company to that next point, so there is going to be G&A costs associated that are one-time, and so we expect G&A to be higher than that this year but candidly the good news is that is duplicative cost that's associated with running two systems at the same time. Once that one system is in and it's running and it's functioning, the other system will be shut down. Those costs will go away. I will just add to that. When that happens, and we got a feel for what that expense is going to be, Will is going to call that out, so that you know exactly what parts of G&A are considered non-recurring.

Very helpful. Will, I'll end with you. Just on the share repurchases in the quarter. I think it was 2.8 million shares, and the share count didn't drop by quite as much. I am just wondering if a large portion of this was offsetting dilution from stock comp.

No. It's just that you don't get credit for the entire quarter. When you purchase the share during the middle of the quarter, you'll portion the benefit throughout the quarter, so if it's purchased in the middle of the quarter, you don't get 45 days benefit that or half the benefit of the share purchased during the quarter.

Got you. Thanks very much, guys.

Thank you, John.

Thank you. We'll take our next question from Scott Stember with Sidoti & Company.

Hi, Scott.

Hi. How are you?

Good.

Jay, this question is for you. Going back when you got the exclusive Allstate contract, there was some margin compression right out of the gauge just given the reset on pricing on existing business. Can you maybe talk about the potential impact on that, on the nationwide contract in the quarters coming up?

Well, that should be passed us now. I mean that happened in Q3 and Q4 with nationwide, because adjust on price and then you start handling additional volume, you've got the cost of increased receivables as you're picking up vehicles and not selling them. As Will stated in the call, I didn't comment on it, because he covered it pretty clearly that Q1, we will achieve by the end of the quarter, full run rate. In Q2, we'll be at, what we believe a full run rate, for that nationwide agreement, but we're handling additional cars now. So, that should be passed as far as the compression. That's in Q3 and Q4.

All right. Great. Maybe just looking out, I know that there's couple of large players in the industry and large contracts have gone back and forth, but could you talk about the future of gaining additional business from a large contract again?

Buddy, it's a ball, I'd share it with you. Those are just things you just don't know and we're working really hard over on this end, and we fully believe in our team and our technology and our peoples' ability to deliver, and we are passionate about what we do. I think people that meet us figure that out pretty quickly. We're a company that's going to be around for a long time. We're not interested in doing something differently. This is what we do. This is what we love, and hopefully over time that will generate additional business, but that's just a big unknown. You never know.

Okay, and just the last question. Maybe just touch base on Copart Direct, trends that you're seeing there and the potential going forward?

Yes. It's trending up, and we've employed some new process on Copart Direct that is causing that to trend up and we believe that will trend up even further. That is part of the CDS business, that's part of the TPA business. That's part of the cherry business, so that is all considered non-insurance volume, but it is trending up and so it's helping us maintain that spread even though we're gaining insurance cars.

Got you. That's all I have for now. Thank you.

All right. Thanks, buddy.

Thank you. We'll take our next question from Craig Kennison with Robert W. Baird.

Good morning. Thanks for taking my questions as well. Will, I'll start with you. The nationwide ramp, I appreciate the color you provided. Can you give us a sense for what percentage of the volume you had this quarter and what percent you might have next quarter before you are fully ramped in Q2?

Percentage of what volume?

Percentage of your expected total nationwide volume?

No. I really can't. We are seeing the increase, like we've said, in the assignments. I think the only color that we'll provide is what we've already said is that by the exit of our first quarter, which is October, we expect the full run rate and so there will be some incremental benefit in our second quarter, but right now I'm not going to express in terms of percentage.

Okay. Fair enough, and then, Will, also if you, with Hurricane Isaac any material impact at all on volume or your cost structure?

Yes. There is a lot of things that affect our volume. Weather was not detrimental this quarter like it was last quarter, but remember we sell a lot of cars throughout the nation, so bad weather in one area doesn't necessarily indicate an expected increase in volume nationwide, so while we did have some benefit, it's not something we'd call out specifically.

Thank you, and then, Jay. As you think about some of the international market opportunities you have, to what extent do you need to rely on your insurance partners to pull you into a market versus you choosing to get there and pulling your partners in?

That's actually a great question, Craig. I mean you hit on a really important point there. If there is an opportunity to acquire an existing company in the market, then we'll do that. But if there isn't and we have to start up in that market, maybe convert the market over to our model and that relationship and relying on partners is paramount. The good news is, we've got really good relationships with our customers, we've got their interest sell is our number one priority, and so the only reason that we would invest in our market and spend capital in our market is because they believe and we believe that there is an opportunity to improve the returns in that market and go in and give it a shot, so we fully expect that in years ahead that will happen. There will be, so we're not going to be able to open up or to acquire existing locations. When that's the case, we'll go in and provide our services from a startup position, which by the way we've opened up well over 30 locations across the country as start ups and relied on existing customer relationships, So we know how to do that part of it.

Great. Thanks. I'll quit and move on ahead. Thanks.

Thanks, Craig.

Thank you. We'll go next Bret Jordan with BB&T Capital Markets.

Hi, good morning.

Good morning. How are you doing?

Couple of quick questions, and I guess to put the U.A.E in perspective, it was the second largest foreign market, but what kind of volume was being done in the UAE? And, I guess to some extent as we look at the incremental SG&A contribution this quarter, is that inflated because of transaction costs getting into that market and does it moderate going forward into 2013?

Well, it's not just that market. We've got costs right now associated with international expansion in a number of markets that we've been carrying now for over the year, so part of it is U.A.E in the quarter, but it's not all U.A.E, and we've never made it a habit, Bret, breaking out units on a per market basis, so we won't start doing something different than we've done in the past, but as we said, it's the number two market internationally for us so it's a big deal to be in that market.

Okay. I guess, if you look at U.A.E sort of shovel the ground outside North America. Does that preclude you from moving to other non-North American markets in the near-term? I mean, is Brazil sort of still on the concept stage or do we sit back and work on the U.A.E for a while before doing anything else?

No. I won't speak specifically to any other particular market, but they are all open right now. It doesn't preclude us from going into other markets.

Okay. And, I guess on scrap pricing outlook into the early winter months here, just sort of big picture stuff maybe that Will?

Was that for Will? Sorry.

Just either one of you. Who has got the better crystal ball?

Go ahead, Will.

Yes. Now I don't have any information other than the market, so you can look at commodity futures and I agree with whatever they say.

Okay.

Bret, I speak to the smartest buyers out there and I know nothing right now about commodity pricing. It is absolutely impossible to figure out where it's headed. I mean, we talk to our friends out there and they like I have no idea.

Okay. I guess one last question and this is on the project Overdrive. You talked about $1.2 million of costs below the line. Was there anything still left in the quarter on SG&A related to that conversion that rolls off? I mean, is there anything above the line that was extraordinary this quarter?

No. I think we called out the ones that we consider incremental that will go away in the future.

Okay. Great. Thanks.

Welcome.

Thank you. We'll take our next question from Bill Armstrong with C.L. King & Associates.

Good morning Jay and Will. I guess most of my questions would be for Will. On the SG&A, you had $2.4 million of international and the ERP system costs. Were there any costs from the headquarters move during the quarter?

No meaningful, and we have stopped calling those out. I mean it's in the low hundreds of thousands dollars. The $2.4 million specifically for the ERP system does not include anything form international, because those costs will continue.

Okay. You might have said this in your opening comments and I might have missed it, but what were the average selling price trends for insurance during the quarter compared with the, up, down or flat?

Yes. They were down moderately.

Okay.

You can look at used car pricing, commodity pricing and that will be a fairly good indicator where our ASPs are heading on a segment-by-segment basis. That ignores the impact of mix, so as we enter into more of the used car redistribution market, our overall ASPs are enhanced.

Great. Okay. Then finally, it looks like you have done somewhat of a restatement in your breakout between service revenues and vehicle sales. Wondered if you could just walk us through that?

Sure. There is certain revenue and it's not a big number. It's $2 million or $3 million a quarter of revenue. As we reviewed it, we thought it was more appropriate to be reflected as purchased car sale. It has to do with scrapped cars and dismantled cars and parts sales in the U.K.

Okay, so the U.K. vehicles?

Yes.

Okay.

It's not the whole cars. It's the parts and the crushed cars in the U.K.

Got it. Okay. All right. That's all I had. Thank you.

Thank you, Bill.

Thanks, Will.

Thank you. (Operator Instructions). We'll go next to Edward Hemmelgarn with Shaker Investments.

Yes. Will, this is a question for you. Do you expect any beneficial impact in terms of over the next year or two of reduced tax rate from the move of the corporate headquarters to Texas from California?

No. I don't. I think we are about as efficient as you can be on the state tax side. I think there are some benefits as we expand internationally and develop more of the revenue outside of United States, but I'm certainly not at a position to quantify that going forward. I think using a 34.5% rate is probably appropriate for modeling purposes at this point.

Okay. Great. Thanks.

Thank you, and at this time we have no further questions.

All right. Thanks, Kasey. Appreciate everyone coming on the call and we look forward to reporting the first quarter to your very soon. And, again, thanks of being on the call. Will, I'm going to give you a ring at the end of this call, okay?

All right, Jay.

Thanks guys. Bye.

Thank you. Good bye.

Thank you. Ladies and gentlemen, this does conclude today's.