Good day, everyone, and welcome to the Copart, Inc. Q2 Fiscal 2013 Earnings Call. As a reminder, today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart, Inc. Please go ahead, sir.

Thank you, Melissa. Well, good morning, everyone, and welcome to the second quarter earnings call for Copart. I'm going to turn it over to Will Frank, our CFO, for opening remarks. He'll pass it back to me and then we'll open it up for questions. Will?

All right. Thank you, Jay, and good morning, everyone. Before we begin, I'd like to make the following comments. I'd 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 final results to differ substantially from those projected or implied by our statements and comments. The company expressly disclaims any obligation to update to revise these statement and comments. For a more complete discussion of the risks that could affect our business, please review the management discussion and analysis and the risk factors contained in our 10-K, 10-Q and other SEC filings. With that, I will now begin our comments on the quarter, and I'd like to go over some of the financial results, as well as make some comments on our recent acquisitions. During the quarter, we announced the expansion of our business into Brazil with the acquisition of Central de Leiloe. This includes 5 locations in the Sao Paulo area. The Brazilian salvage and insurance markets are structured very similar to the United States, in that the insurance companies settle with their policyholders, gain possession of the damaged asset and then have a need to monetize that asset. In Brazil, the settlement process between the insurance companies and the policyholders takes far longer than in the United States. Consequently, the ability to store cars is even more important. In addition to providing storage, we have found that the insurance companies in Brazil are looking for the same value from their salvage provider as those of the United States, namely: Quick pick up, cars left at the repair shop incur storage fees and tend to lose parts.…

Thanks, Will. Great update. There was a lot of information there. So what I've done on my portion of the call is I'm going to basically focus on Sandy, and I'll give you an update on mobile and just quickly comment on the REIT that you've heard about recently. So in the last call, I informed you that at the 21-day mark, the Sandy-affected yards had received over 50,000 assignments. That experience of handling Hurricane Sandy, which basically was all of November, December and January for us, so we had 3 full months of handling Sandy and cars affected from the hurricane, it was huge. We ended up with over 15 temporary locations to store vehicles, over 350 additional acres that we have to bring in, over 500 subhaulers, so I won't get into all the details because I think everyone's pretty familiar with just how much went on. The important part of this is that we did a great job in handling the capital. We also learned a lot about how to handle future catastrophes. This is very different than Katrina, because the storm waters came in and receded so quickly, as opposed to a cat that's either not of the scale or a catastrophe that takes much longer for the waters to clear and for the claims to come in. This is one of those catastrophes that happened so quickly. What we've seen so far in the vehicles that we've sold in the quarter and the vehicles that we've sold in February are a couple of things. One, we've got higher returns as Will talked about, but we're seeing higher returns on the Sandy-affected cars. The second thing that I think is a big deal is we've been first to market on those vehicles. So when you're setting…

[Operator Instructions] And our first question will come from Robert Labick with CJS Securities.

Thanks for that new color on the international sales, I wanted to stick with that, first. Is there any chance you can give us a sense of the total revenues from the 3 new international markets that you've put in there? And then just, also, I would like to know, can you outline your next steps? Are you going to be buying land in each of these? And how long might that take and what's the process to build up these markets over the next few years?

You want to comment on the financial?

Yes. I mean, it's not a meaningful amount at this point, Bob. I mean, Germany is Internet revenue. It's a -- compared to -- the amount per transaction is very small. And Brazil is still growing. So it's just not a meaningful amount. I don't know if we'll break that out at this point on a per country basis.

Yes, and I'll comment on the process. So we have acquired some land as Will stated on the call. And I think it's pretty clear to everybody, our preference is to own the facilities. We think that they are critical to the operation of the company because of the zoning, et cetera. But it doesn't mean that we'll only buy, there'll be opportunities when we may lease with an option to purchase down the road. So we will be doing that in these markets, continuing that. This is really, right now, a technology play for us. We've got to get -- and we talked a little bit about it in Will's opening remarks, we've got to get Overdrive completed. And Project Overdrive, as we talked about, we're at halftime for Overdrive. It's a 3-year process. We've got 18 months left basically for Overdrive to quit. And in the process of doing that, we've come out with a mobile app and we've upgraded a number of systems in the company. But one of them is the operating system that we've got for our locations. So we've got a great operating system but it's not localized. And so it -- key is that it speaks 3 languages: English, Canadian and American. And we need a system that will be localized for the different markets like Portuguese in Brazil. So when that system comes out, then we'll be integrating those facilities, and that will bring our auction technology, our reporting and everything else that Will talked about in his comments that our clients want. That will bring that tech and those needs to those markets. And that will speed up the process. So we've made those acquisitions, as Will said, it's really a similar play to the U.K. It took us about 1 year to integrate the U.K. when we first stepped into that market and so, now we're talking about new technology that has be installed, and then converting hearts and minds of customers over to seeing these benefits and basically making changes.

Okay, great. That's very helpful. And then switching gears back to North America. Obviously, Sandy disrupted a lot in the quarter, but can you give us -- you still have very strong volumes even with disruptions, any sense of the kind of tailwinds this year, or from the lack of winter last year, or where you expect industry volumes to be going?

Yes, the volume seem higher. It seems it may be weather-related. Our experience, whether it's a major earthquake, whether it's a hurricane event, our experience is that it slows volumes down because it disrupts the marketplace, stops people from driving and doing what they normally do. And that's a catastrophe, I mean, they get into that mode. So our experience is that it negatively impacts markets typically. But we are seeing volumes up, I mean, across the country, so I'm not sure so much that its weather or isn't weather. I just know that 2 fundamental things are happening right now, return are up and volumes are up.

And now we'll go to John Lovallo with Bank of America Merrill Lynch.

First question is for you, Will. The $20 million of other items that you identified in yard ops that weren't specifically called out in the release, can you give a little bit more color on those? I mean, are those items that you do not expect to repeat?

Yes, absolutely. So I mean, the large element of those costs is the additional subhaul. So we brought in subhaulers, I think about 550 subhaulers from as far away as Washington State to help us address the additional Sandy volume. We moved 300 people from the other parts of our company, including the U.K., into that area to help address the volume. We opened up 17 temporary facilities, over 350 acres and that was expensive land. And all those are well above the normal cost that you'd expect with processing these cars. And the way the accounting rules work is you can't put those costs up on the balance sheet, you had to flush it through as a period cost, and therefore you have this choppiness in reporting the results of these types of storms. So that's what led to the $11.9 million loss, the processing of these incremental cars.

Got you. So -- but then above and beyond that $11.9 million, did I misunderstand that there were about $20 million of other charges that you're speaking of?

They were included in that $11.9 million.

Included in the $11 million. Okay, great. And then if we look at the $1.8 million in SG&A from the ERP systems and the $1.4 million from the international operations, I know you said there's going to be some lumpiness, but from a modeling standpoint, I mean is that a reasonable run rate to kind of think of these items?

Well, we look at the IT and we break it on different components. And internally, we look at it in what we call keep the lights on. Keep the lights on is just -- is to run, provide services internally to run the auctions at our current level with our current international footprint. And based on those assumptions, we're going to spend about $8 million more this year than we would expect to spend in 2015. And we'll have some incremental costs in 2014 as well. Now when those costs will present themselves in the quarter is the problem we have in predicting because it depends on the nature of the activity that's taking place. Some of it's capitalizable and some of it's not. So those capitalizable doesn't have as large impact during that quarter.

Okay, that's very helpful. And if I could just finish up one with Jay. Jay, are you seeing any kind of trend in the industry with these kind of national insurance companies starting to lean more towards multiple vendors?

Starting to lean towards multiple vendors? They're already with multiple vendors. I mean you don't see -- if I can rephrase the question, we don't see a trend where people that are doing business nationally are splitting that with multiple vendors. The industry tends to be split where customers are doing business with multiple vendors. And occasionally, you will see an insurance company choose one supplier for all their business. But it's pretty rare. I mean, it's not something that happens on a frequent basis. We talked about it in the past. We've got well over 100 national contracts for supply but then a lot of those are very, very small insurance companies that are not multistate. They may just be doing business or I should say, not national. They may be just doing business in 2 or 3 states. And then some are very large, like Allstate Insurance where we handle all their cars. So I wouldn't say there's a trend either direction right now. But clearly, there's not a trend to go from national to multi-vendor.

And we'll now go to Scott Stember from Sidoti & Company. Scott L. Stember - Sidoti & Company, LLC: Jay, you made comments about how the returns on the Sandy vehicles have been higher. Are you referring to traditional vehicles coming in? Or are you referring to versus Katrina?

No, no. I hadn't thought about it that way. It's a good question. Yes, I was referring to traditional salvaged vehicles that we process. These are -- most of these vehicles were not wrecked per se. They were flood-damaged and so they brought more money than traditional damaged vehicles. I was not referring to Katrina. Scott L. Stember - Sidoti & Company, LLC: And that even considers the saltwater damage to the drivetrain and so forth?

Pardon me? Scott L. Stember - Sidoti & Company, LLC: And that would even consider some of the water damage from saltwater?

How would I consider it? Scott L. Stember - Sidoti & Company, LLC: No, no, that is also those comments that you were saying also, factors that in there you're saying?

Yes, I don't. I mean, we've sold saltwater-damaged cars a lot of times, Katrina was. So that's nothing new per se for us to sell product like that. Scott L. Stember - Sidoti & Company, LLC: Okay. And on the share repurchases, obviously there was nothing that happened this quarter. Was that just a function of the acquisitions that you're -- been taking place and deciding to deploy the capital towards that and toward Sandy?

Yes, if you think about Will's comments, his opening remarks, without me getting to the details again, we've spent a lot of cash in the quarter. We finished the quarter with less than $50 million in cash. So we take a pretty conservative approach towards our balance sheet as most investors know at this point, so that was the reason.

And Bret Jordan with BB&T Capital Markets will have our next question. Bret David Jordan - BB&T Capital Markets, Research Division: What was the total volume of Sandy cars that you wound up recovering and are in the process of processing? I think you've said at 21 days you're over 50,000 and your commentary was you saw over 50,000 in total, but was it materially over 50,000?

The way that you break out a vehicle as a Sandy loss, you try to do it based on date of loss. But there are a lot of vehicles that come in later, and so it's hard to determine. So we're comfortable it's over 50,000 cars. But we don't want to get into trying to narrow it down tighter than that. Bret David Jordan - BB&T Capital Markets, Research Division: Okay. And I guess trying to read the commentary, the $0.06 negative impact from Sandy in the quarter with the expectation that the recovery in the current third quarter is going to offset the expenses, do you see Sandy net-net being a profitable experience? Or will the third quarter recovery still be less than the expenses attached to the second quarter?

We have historically said, and this hasn't changed, that we don't make money on these cats. And I think that's the case for everybody in the industry. When you end up having a cat, it's just not a -- it's not a pleasant experience. Bret David Jordan - BB&T Capital Markets, Research Division: Okay, great. And then one last question. What percentage in the quarter was buyer fee versus the seller side of the transaction?

We've only disclosed previously that the buyer fees in North America are more than half. And that's consistent this quarter.

And next we'll go to Bill Armstrong from CL King & Associates. William R. Armstrong - CL King & Associates, Inc., Research Division: I was wondering if you could break out the revenues that came from Brazil and Germany, since those are new markets for you for this quarter?

Yes, I don't know if we'll break them out by country going forward. It's [indiscernible] less than $5 million during the quarter. William R. Armstrong - CL King & Associates, Inc., Research Division: Less than $5 million combined. Combined?

Combined. All international, excluding Canada and the U.K. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. I think just maybe getting back to an earlier question as far as the kind of the returns of these Sandy cars bring. Earlier this morning, LKQ was saying that they weren't buying too many of them. They were basically saying they weren't worth very much because the mechanical and electronic parts gets fried in these saltwater catastrophes and basically, they don't have that much parts value. Now you guys and also Insurance Auto Auctions were saying that they're actually relatively high value. So I guess we're trying to reconcile those 2 perspectives?

Sure. I would say that they're, for the most part, you're going to have an older vehicles that gets flooded, you realize that, so it's not on every car, but for the most part, these cars are out of their price range. These are vehicles that are going to be highly desired by exporters. So the international community bid heavily on these vehicles. So yes, I mean I can't really comment on their statement, Bill, but I'd just tell you what we're seeing. This is stuff that is probably outside of -- the majority of them are outside of the demand for a dismantler/ buyer. There's going to be some vehicles there that dismantlers will buy. They're going to be older vehicles and they'll be in that range. But I would say the majority of these vehicles are outside of that range.

Yes, Bill, I just wanted to add, in addition to Jay's comments, that we did have an uplift in our international activity. So for the quarter, about 25% of the volume and over 30% of the value of everything we sold went to buyers registered outside the country. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. And is it your understanding then that maybe a higher-than-usual percentage of those cars that are going to the international buyers are -- they're maybe just being repaired and then put on the road in those other countries? And that's why they're...

My guess would be they'll definitely repair them. When you're talking late model. If you're talking older stuff, then it's probably going to get parted out. A lot of these vehicles are going to be repairable, there's no question about that. And I'll just add that they're going to have -- we're selling them on salvage titles. They will be branded, so there's no question that they've been damaged. But to think that they're not repairable would be wrong. They are -- many of them are repairable.

[Operator Instructions] And our next question will come from Gary Prestopino from Barrington Research.

Jay, could you possibly size the markets in Brazil in terms of units on an annual basis?

Yes, well, first of all, I'd say it's where between 100,000 and 200,000 vehicles. Second, I would say the majority of the Brazilian market is Sao Paulo. And then third, I would say, it's a monster market in terms of growth. That's the -- that was the reason for us going down there, it's a high-growth market. You're seeing an emerging middle-class that are buying vehicles. And the average selling price of vehicles down in Brazil is very, very high. They have some pretty aggressive import duty laws that are in effect. So the vehicles that are in Sao Paulo or in Brazil are vehicles that when they do get into an accident and sold, they're selling for a lot more than they would in the U.S. So really, for those 3 factors, there's some others, but those are really the 3 factors that got us excited. And as Will said, it takes us a few years to get into a market, to get our process in place, just like it did in the U.K. And so it's not the largest market right now but it's a high-growth market and it will become a very large market in the future.

What about Germany?

Germany is a very mature markets. So it's kind of the opposite. It's not a high-growth market, but it's got 600,000, 700,000, somewhere in that range, total loss vehicles in that market, which is -- that gets our attention, I'll put it that way.

Is most of Germany done on -- what -- did it -- first of all, my understanding is they don't pool the cars in Germany, so that's why you have this -- you have a couple of online auctioneers that are working this market. Is that correct?

Yes, and we're one of them. That's -- our WOM model does that. What we will be doing in that -- we'll continue to use our product and innovate in that market with that product. But what we'll be doing is testing the market to see if there's a desire to not leave the vehicle with the insured, like we do in Australia, the U.S., Canada, the U.K., South Africa and Brazil. These are all markets where they're not pushing the vehicle to the insured. And in Germany as Will stated earlier, you end up being told this is the value of your car now. This is the value of the car before the wreck, and they pay the difference and let you keep the car. And assist you through that bidding platform in disposing of it. So the question is, is there a desire to strip that away completely and allow us to liquidate the vehicle and just pay the insured directly and then they don't have to deal with the buyer of the vehicle and disposing of it, et cetera?

And then in terms of the mobile app that you've got out there and you're talking about some of the uptake on that. Is there any way to delineate between existing members or auction users versus new? I guess the question is, are you bringing in a new participants through the mobile app, or is it just a shift between using a laptop or a desktop to do the auction versus the mobile application?

Yes, let me -- I'm just writing a note because -- let me gather that data for the next quarterly call. And when we have our next earnings release, I'll comment on a full quarter of mobile activity and talk about the impact of new members and give you some color on that. Because I don't have that in front of me. And I think that there'd be some good points to bring up on the new call.

Our next question will come from Craig Kennison from Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Jay, with respect to Brazil and Germany, what sort of insurance relationships did you inherit when you moved there? And to what extent are you able to add to those relationships as you grow?

Well, with respect to Germany and Brazil, those acquisitions obviously got us into the marketplace and got us in with different -- different from each market. So in Brazil, I would say, we know everybody, because we ended up making such a large acquisition into the market. So we know all the insurance players in that market. In Germany, that's not the case but we're working to make that the case. So we got into that market through the acquisition of WOM. We got a number of clients and contacts and then we're working further to get to know everybody in that marketplace. And in one, we're just introducing our platform. In Brazil, we're just introducing our platform, our technology, our auction, everything Will mentioned. All those points that they want. In Brazil, we're talking about a real change in the way the marketplace would operate. And so we'll be introducing that at some point to see if there is a demand for our services in that market. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's helpful. And then as a follow-up, would you prioritize on your international growth plans, getting more density in Brazil and in Germany or opening up new footholds in other countries?

Well, what I'd like to see first is our technology implemented. And so before Overdrive comes to an end in 18 months, we'll be implementing our operating systems and our ERP and all the things that we've talked about. I'd like to get that done. I'd like to get the countries that we're doing business in, converted and then we can look at further expansion. We may make a little bit of further expansion internationally, so I don't want to make you think that we wouldn't do that. But we don't want to get really spread out and into another 10 countries, as an example, until we've got our existing company implemented with our tech. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And finally, Will, could you comment on your expectations for CapEx this year?

No, I mean there's so much uncertainty that surrounds our CapEx spend, Craig. I mean, like we've looked at yards in Los Angeles or Southern California for years and years, haven't been able to find one. But if we did find one, we would be spending $25 million to obtain that. But there's no way we can predict that. So it's difficult for us because of the uncertainty and the nature of these negotiations to determine when we'll be actually spending money.

And that does conclude our question-and-answer session at this time. I'd like to turn the conference back over for Mr. Adair for any additional or closing remarks.

That's great. Thanks, Melissa. Yes, we appreciate it guys. Great questions. I appreciate you coming to the call. We look forward to reporting the following quarter. And as we said, we'll get some information on mobile bidding for that call and vehicles sold and new members, et cetera. So again, thank you for attending the call, and we appreciate it.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.