Good day, ladies and gentlemen, and welcome to the KAR Auction Services, Inc. First Quarter 2013 Earnings Conference Call. Today's call is being recorded. Today's hosts will be Mr. Jim Hallett, Chief Executive Officer of KAR Auction Services; Mr. Eric Loughmiller, Executive Vice President and Chief Financial Officer of KAR Auction Services; and Mr. Jonathan Peisner, Treasurer and Vice President, Investor Relations of KAR Auction Services. I would like to now turn the conference over to Mr. Peisner. Please go ahead, sir.

Thanks, Lexie. Good morning, and thank you for joining us today for the KAR Auction Services first quarter 2013 earnings conference call. Today, we will discuss the financial performance of KAR Auction Services for the quarter ended March 31, 2013. After concluding our commentary, we will take questions from participants. Before Jim kicks off our discussion, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect KAR's business, prospects and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Lastly, let me mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measures can be found in the press release that we issued yesterday, which is also available in the Investor Relations section of our website. Now I'd like to turn this call over to the KAR Auction Services' CEO, Jim Hallett. Jim?

Great. Thank you, John, and good morning, ladies and gentlemen, and welcome to our call. We've had a number of accomplishments since our last call, so just before I get into a review of the business, let me speak to those. We were able to complete a secondary offering on March 6. This now leaves the private equity ownership group with 56% of the outstanding stock. As well, we are able, or successful I should say, in amending our senior credit facility. This has reduced our interest cost by 125 basis points and will reflect an annual cash savings and cash interest of over $21 million. And finally, our board has approved our second quarter dividend. We will pay a dividend of $0.19 per share. This dividend will be payable on July 3 to shareholders of record as of June 24. So at the outset, as we look at the business, we continue to feel very good about our annual guidance. And we're looking forward to sharing some of the positive trends that we're seeing here as we head into the second quarter. Looking at KAR's overall performance in the first quarter, we were able to generate revenue of $557.6 million. This resulted in adjusted EBITDA of $136.2 million. And on a year-over-year basis, this represented a $1.3 million increase in adjusted EBITDA. Taking a look at ADESA. ADESA performed very much as I expect it going into the year. Our volume increased 3%, 34% of our vehicles were transacted online and our dealer consignment segment represented 47% of the cars sold at physical auctions. And our conversion rate came in at just a little over 61%. You know I've spent considerable time over the past year talking to you about the cyclical recovery that's going to take place at…

Thank you, Jim. I would like to start by commenting on our first quarter performance. Consolidated revenue of $557.6 million increased 10% over the prior year. About half of this increase is the revenue generated from the sale of Superstorm Sandy vehicles. If one were to stop the analysis there, it would be easy to conclude that our revenue growth related to our recurring business was more like 5%. Please note, however, with the number of Sandy cars being processed in the first quarter, this has pushed out some of our so-called normal total loss business. I believe this sets us up well for the second quarter because, as Jim mentioned, we are going into the second quarter with strong inventory levels carrying over from the first quarter activity at IAA, and we also have expectations for improved commercial volumes at ADESA. Moving on to our consolidated gross profit, which was 40.6% for the first quarter. I would also like to point out that the Superstorm Sandy vehicles sold in the first quarter cause our margin to be unusually low. When I eliminate the revenue and all of the related cost for the Superstorm Sandy vehicles, our consolidated gross profit was 44.6%. This is more representative of how the businesses are performing in Q1. Consolidated selling, general and administrative expenses declined to $100.8 million in the first quarter compared to $114.1 million the prior year. I will first note that there are no Superstorm Sandy costs included in SG&A in any period. The decrease in SG&A on a year-over-year basis is attributable to a decline in cash and stock-based compensation at ADESA, and a decrease in stock-based compensation expense in the holding company. The reduction in holding company SG&A is primarily related to the recording of expense related to our…

[Operator Instructions] And we'll take our first question from Matt Fassler with Goldman Sachs.

The first question I'd like to ask. I wanted to dig a bit deeper into that impact of Sandy on the business above and beyond the losses that you excluded, just to make sure that we understand what the trajectory looks like from Q1 into Q2. So it sounds like there was some crowding out of more profitable traditional businesses. If there's any way we can quantify that and talk about what kind of catch up you might expect to see as we make our way into the second quarter?

Okay. Matt, thank you for the questions, it's a very good question. As you know, we don't give quarterly guidance or segment guidance. But what we've highlighted for you is the buildup of inventory at IAA reflects the fact that we've had a fairly severe winter throughout much of the United States. And these collision repair cars are sitting, waiting to be sold. And that will occur, as you know, it's typically 75 maybe up to 90 days from the time a car is assigned to us and on our lot to the time it's sold. So I would expect that inventory would move in the second quarter.

I'm just going to add on that. And I think you may have made the point is that a number of our customers were focused on clearing out these Sandy cars, and it's possibly delayed some of the sale of these collision cars.

Yes. It's safe to say. You can only sell so many cars in a day, in a week, in a location, Matt. So if you were selling Sandy cars, you could not possibly be selling the same number because there just isn't the physical capacity for the buyers to consume then move them and move them around their network all in the same day.

My second question relates to ADESA and sort of the contours of the model here in Q1 versus other quarters. So at least, relative to our expectations, you had a higher revenue number and a lower gross margin rate. And the gross margin rate was down pretty substantially, year-on-year, albeit from a pretty good quarter. You mentioned in the release more ownership vehicles. And I think I know what you're talking about, but can you talk about whether that was a factor behind the different revenue and gross margin dynamics for the quarter?

Yes, Matt. I would just point out that, without getting into the specifics of the different segments, which we don't do, I would just say, as you know, we have commercial volumes then we have the other consignment volumes. Within those commercial volumes, there are a number of different customers that we sell for. And some of these segments have lower economics. And we had, perhaps a low -- higher mix of those lower economic cars during the first quarter of the year.

Got it. And when you talk about ADESA, I don't have the text in front of me. When you talk about ownership vehicles, just make sure I understand what you mean.

Again, in all of our businesses, we will buy cars under certain circumstances. It is not significant, however, it reached the level where in our 10-Q that will be released later this week, we have to mention it because it was negative on margin by a little bit. And that's just the gross up of the revenue, it's not the economics of the transaction. That requires me to report the gross sale prices of revenue, offset by the cost to acquire.

We'll take our next question from John Lovallo with Bank of America Merrill Lynch.

First question would be related to your outlook. I'm just thinking about the $21 million in reduced interest expense. But the EPS or the adjusted EPS guidance only going up by $0.02. And I would think that the $21 million would equate to closer to $0.09. So I was wondering if there's any noncash costs hitting the P&L that's creating the differential there?

Yes. You have the write off of debt issuance cost that has occurred. And we have the retirement of the bonds that occurred in the second quarter, not the first quarter. So those items impacted our calculation. It's not a change in the underlying business, John. It's really the net economics on 2016. As you know, we paid a 1% premium as related to the one-on-one soft call that existed on Term Loan B, and there is some accounting for that.

Okay. That's helpful. And then I'm thinking about in the recovery in whole car volumes. What we're hearing from a lot of the new vehicle dealers is that they're really making a push into selling more of these off-lease vehicles themselves. I mean, how are you guys thinking about that and the potential effect on the business?

Well, John, I would say that we continue to see increased volumes. And one of the things that we've been doing now for well over the past year as we prepare for 2013 is we've met with all of our commercial sellers for the most part. We checked in with them and seeing what their anticipated volumes are. And there has been no significant changes with our commercial customers in terms of the way that they plan to resell their cars in 2013 and going forward.

Great. If I could just sneak one last one in here. One of the things I found pretty interesting about OPENLANE is the ability to sell vehicles in transit. How is that effort gaining traction?

It's not a huge number, but I think the thing that's important is once the vehicle has gone through the closed cycle and then it's gone through the open cycle, and it hasn't sold in either one of those venues, it then gets dispatched to a physical auction. We leave that vehicle for sale on the website, while the vehicle is traveling in transport. And there are number of those vehicles that do arrive at the physical location with a sold signed on them. And again, not a big number, but a number that continues to grow somewhat.

We'll take our next question from Bret Jordan with BB&T Capital Markets. Bret David Jordan - BB&T Capital Markets, Research Division: Just a quick question. I think, in the prepared remarks, you mentioned sort of some softening of the proceeds at IAA. And maybe if you could talk about the trajectory in sort of the major drivers to what's changing at IAA right now?

I just think as these volumes come back, I think that there's more supply. And as there's more supply, the proceeds we've seen somewhat of a softening. But as I mentioned in my remarks and I'll restate, the increased utilization, the increased use of alternative parts continues to be very strong for collision repairs. And again, that international buyer demand continues to grow. And with those 2 things -- will, it soften, yes, but not significantly that we would say it's going to have a material impact.

And Brett, I'll remind you, in the first half of last year, the salvage industry hit the all-time peak of auction proceeds in the industry. I mean, the entire industry knew that, right? So we're also -- when we say softening, it's against a number that was the highest in the history of the industry in the first quarter of last year, and that extended into the second quarter and then started to ease off. Bret David Jordan - BB&T Capital Markets, Research Division: Okay. Great. And then one question as it relates to the whole car side. And as the dealers are talking about trying to retain used cars for resale, are you seeing any change in the profile in the whole car that you're seeing? Are they putting cars to auction that might have been a higher mileage or the older cars and trying to retain the more of the trade-ins or really no change to what you're seeing?

Well, as we look at the first quarter, during the first quarter, 46% of our business was dealer consigned cars. This year, 47% of our business was dealer consigned cars. I don't have any data, but I would tell you that my general thoughts are, as there are more supply become available, and more and more of these leased cars and repossessed vehicles come into the marketplace and the dealers have more to choose from, I believe that they will send more of their higher mileage older trades to auction. And I think that will serve well for the whole car industry.

We'll take our next question from Gary Prestopino from Barrington Research.

Could you maybe tell us what -- I think you said the Insurance Auto revenue -- inventories were up about 10%, right? How much of that x Sandy? How much is it up x Sandy?

It's over 10% and that would be x. There's only a few -- Jim mentioned a few thousand Sandy cars left.

So most of that -- okay, x Sandy, that's good news. Do you have any industry statistics as to what the units coming into the auction were for Q1 as of yet?

Just make sure I understand your question, Gary. Statistics, you mean as an industry?

Yes, for the industry.

No. We don't have any numbers from the industry that would be anywhere close -- I mean, there would be no numbers that we could point to. Factually, I don't think, Eric...

Well, Auction, that does give us some more real-time information, but it's not a full survey, Gary. And we quit quoting the Auction net numbers a couple of years ago because they tend not to be as accurate, they move around. But you know what, Jim, I think we feel we're doing very well relative to the industry because of our strong representation in commercial, especially with OPENLANE and what we're doing online.

Okay. And then lastly, we talked a little bit about channel optimization last quarter. And just with OPENLANE and your ability to retain these vehicles going into the physical auctions, could you maybe comment on what you saw as the trends throughout the quarters with having OPENLANE now integrated on the website?

Yes. I think, again, I just pointed out at the outside, Gary, our outlook -- our stance has always been get car, sell car. And whether it sells online or whether it sells in the physical auction, we don't really feel, it's up to us to determine that or to push it to one market or the other. And we think that as the car works its way through the cycle, the economics take care of itself to support the guidance that we've given you. Currently, I mentioned the 34% of the transactions were online in the first quarter. Keep in mind that half of those online transactions are through our LiveBlock at the physical auctions. And the other half are actually on OPENLANE, so those are the numbers that we're seeing. Well, those numbers move around a little bit, we didn't see any significant change in the first quarter in terms of percentages.

We'll take our next question from Ryan Brinkman with JPMorgan. Ryan Brinkman - JP Morgan Chase & Co, Research Division: I know that there was a question earlier and -- whether we might, in fact, be seeing some early emerging evidence of the long anticipated turn in whole car auction volumes, and I know you said that we don't have official figures as of yet. But you might remind us that, I think, it was 4Q '11 was the first quarter that your volumes fully reflected OPENLANE. And that, your volumes appear to have improved, as on a year-over-year basis, as we move from the fourth quarter of 2012 minus 1% to plus 3% in the first quarter of '13. And then also, I'm looking at the average sequential increase from 4Q to 1Q at ADESA auctions in terms of unit volumes, it seems to have been about 9% over the past 3 years, where it was plus 17.5% sequentially, at least according to our math. Any comment on that and whether you might at least be privately encouraged that we could be starting to see that long anticipated turn?

That's a lot of numbers. I think I'm going to let Eric answer that.

Yes, Ryan. Without commenting on your specific math, the trends that you identified are the trends we're seeing, and things are improving. And we are actually quite pleased with the 3% volume growth at ADESA over the prior year, both periods including OPENLANE transactions, et cetera. And yes, you are correct. While again, we aren't giving specific details, the sequential growth in Q1 over Q4 was also encouraging to us as well. Ryan Brinkman - JP Morgan Chase & Co, Research Division: Okay. I appreciate that. And then just last question. On the average revenue per unit at ADESA, I know that this can oscillate with changing amounts of ancillary services. Although, I wouldn't think that would necessarily be the case that it'd be supported by ancillary services just because of the higher mix of dealer cars. But your average revenue per unit was up and it was down in each of the 4 quarters of 2012. And we were looking at, as a modeling item, the Manheim Index, which averaged minus 3% year-over-year in the first quarter of '13. So why allow your average revenue per unit to increase at ADESA?

Okay. Ryan, thanks for the question. Again, Jim mentioned the mix. So this is pluses and minuses adding up, and I'm not going to go through all the details. But the bottom line is, it demonstrates the pricing power and within the commercial vehicles, getting ancillary services, partially offset though by the fact that some of these cars have a lower revenue profile, if they're sold in a closed sale, whether that be online or physical. So you've actually pointed out a very nice trend, which we are highlighting in the 10-Q that will be filed. We are -- and it's also in the supplement, that we're up 2% of revenue per vehicle. And again, we're pleased with that. Part of it though is pricing, where we have increased buyer fees that we can pass on throughout last year and into this year at individual auctions.

We'll take our next question from Bob Labick with from CJS Securities.

Just want to go back on IAA gross margins for a second. I think you, just to make sure I understand what you said, it was partially due to mix of higher purchased cars in this quarter. And then, I guess, partially due to proceeds that the gross margin x Sandy was down year-over-year. Where do you see it stabilizing with the new mix of purchased cars? I understand that you think it'll be roughly equal to last year's mix. So should we expect a stabilization on a go-forward basis in IAA margins or where do you see that going?

Yes, Bob. What I pointed out in my comments was x Sandy were at 38%. However, I think we're still, if you take it the way we look at it and you deemphasize purchased cars, which is our expectation for the year where there's not growth in that number, it stays in line with the last couple of years where our margins were over 40%, 40% or more. I'm not guiding you to specific numbers, it's just too hard to do. But we're not seeing -- but you pointed out a good point, Jim mentioned the softening proceeds. That, of course, has an impact on what they're paying, which affects the buy fee. But that can still generate very strong margins for that salvage business.

We'll take our next question from John Healy with Northcoast Research.

I wanted to go back on the question on the IAA volumes and the inventory being up over 10%. I was curious your thoughts, it sounded like that there was some insurance companies that held back kind of the normal collision activity. If you were to kind of remove that anomaly, I'd be interested in knowing what the inventory might look like? And would you attribute it to more of the accident frequency picking up or you are you starting to see a turn in the salvage frequency in terms of the percentage of vehicles that are in the collisions?

John, good question, very complicated. First, let me correct the perception. The insurance industry isn't holding back cars, they're selling them as fast as they can. But there's a reality, they had Sandy cars and they had collision cars. And there was clearly an emphasis on moving the Sandy cars as fast as they could. And the reason being is you really want people to understand that's a flood car. And it's from a saltwater flood, right? And if you mix them up with everything else, it really might confuse the buyer base because they might value the cars differently. But it's not they're holding up, it's just the market only has so much capacity each day in each location. Now looking at it, we're not going to comment on what the inventory growth means, other than it's a very positive sign. But you are correct. In fact, I saw an insurance industry statistic where the number of total losses year-over-year is up. I know it's well over 2%, but I can't quote the precise number. That's total losses as a percent of total claims. So that's a positive sign, frequency with the accidents. Jim, you have more to add?

No. I would just add, when you draw the comparison between the winter that we experienced last year versus the winter that we experienced this year, it's completely a 180 in terms of the weather. And as a result, the number of accidents that occur and the number of total losses that take place.

Yes. I think we had snow in Colorado and Kansas just last night, and it's May. I mean, it's been a spring as well that's been a little bit volatile and not just Sandy, hail damage, all kinds of floods. I mean, it's been quite a year already. And here we are only in the early part of May.

I appreciate that. And I want to ask just about your strategy. And if you think about the average age of a vehicle that's on the road today, as these cars become refreshed, are you seeing any change in that maybe because the vehicles are older that maybe, historically, they would have been sold at ADESA? Are you seeing people try to maybe sell those to the IAA business, just because it might attract a different type of buyer and maybe their proceeds are better? I'm just kind of wondering if you're seeing any kind of mix back and forth in terms of vehicles being sold due to age, where they might sell the best for?

That's a good point. There's no question the average age of the car is currently over 10 years, and back 3 or 4 or 5 years ago, that number was 8 years old, so there is an aging car park out there that we've spoken to many times. And we have had some of our customers sell some of their low end, what I would call, push, pull, drag sleds. We've had some of our customers sell those cars in the salvage venue versus selling them in the whole car venue. And I think that's one of the things that I would point out, is KAR is really the only company that's in the position to do that because we do have such a strong whole car offering and a strong salvage offering that we can really give the customer the choice of selling in either venue. And we do have some customers that do take advantage of that on some of their lower end vehicles. And certainly -- and then also, in the rental car business as well. Some of these rental cars that are damaged, the rental cars are mostly self-insured and some of the rental companies have chosen now where they maybe try to sell some of these cars in a whole car auctions in the past. They're now sending more and more of these cars to the IAA auctions. And again, this is based on the whole relationship with KAR owning both ADESA and IAA.

And with all that said, John, in the first quarter, we had an increase in the number of our vehicles sold that were insurance-related over noninsurance, compared to, probably, most of last year. In fact, it's back, it's above 80%. And if you took out Sandy, it's still quite a bit above 80%. So part of that is, there's a lot of insurance-related vehicles in the market right now and that's a majority of all of this volume that you're seeing.

We'll take our next question from John Lawrence of Stephens.

Just to go over the mix issue again. I mean, you talked about the whole idea of some of those mixed cars. I guess, what I was thinking, as the volumes improve as we get to second and third quarter, second half of the year, does any dynamic change where more of those cars because of volume get to the bottom end of the funnel, if you will?

Yes. I think what you're going to see is you're going to see more of these off-lease cars, and more of these repossessions. And if you think of all of the various segments, those are 2 of our most profitable segments. Number one, they're very desirable cars, cars the dealers are very much in search of. And secondly, to what we've talked about earlier, these are also heavy users of the ancillary services, which bodes very well for our business as well. So I think, again, as we think about mix going forward, we spoke about how that mix may have shifted a little bit in the first quarter. As we look at the mix going forward, it'll be a positive thing that will be more off-lease cars and more repossessed vehicles.

And I'll add to that. You talked about the bottom -- at the top of the funnel when there's more choice, they're going to be picky. And some of these cars needs some reconditioning. As Jim mentioned, the reason they're going to go to physical auction is they're going to yield more for the consignor if we do a little bit of work on the vehicle, John. So I think that's very positive for our business that, again, with more opportunity to buy different cars, they're going to look for a higher grade on that car.

Yes. I think when in your market where there's very tight supply, some of these sellers aren't as focused on doing the reconditioning and providing the repairs. They're just interested in getting it to the market and getting it turned quickly for the highest dollar that they can. As more volume comes into the market and more volume comes into the physical lanes, and things become a little bit more competitive as to which cars are the prettiest and most attractive, as they say, the prettiest girls advance. These customers will tend to spend a little bit more money trying to differentiate their vehicles in the lane to try and attract more bidders and obviously, drive prices higher.

And just to follow that, not to get too granular. But any type of particular services that you're doing once it gets to the bottom of the funnel that's changed any service offerings are stronger than others?

I would say, primarily, anything that does with the appearance of the vehicle. Anything you can see with the naked eye in terms of taking out dents and doing paint work and doing the bumper scrapes and putting the wheel covers on and the things that people see when they first walk up to the car in terms of overall appearance. Now that doesn't mean we overlook mechanical and major mechanical and things of that nature, but I would say the primary focus is on doing those appearance items.

We'll take our next question from Don with CL King & Associates. William R. Armstrong - CL King & Associates, Inc., Research Division: It's Bill Armstrong at CL King. Getting back to the guidance. So with the lower interest and taxes, I would have expected a bigger earnings per share increase in the guidance. And just to be clear, the guidance does include the cost of the debt amendment, which I think is about $0.02?

It does include the savings net of the cost. And again, without getting too granular as well, I will just tell you, there are some non-cash increases in cost related to the transaction that are capitalized and then amortized over the remaining term of the loan that are offsetting it. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay.

And that -- but on the cash interest, you -- everybody has correctly analyzed this. The cash interest savings is quite significant. And then you have that non-cash portion, which will be amortization expense over the next 4 years. William R. Armstrong - CL King & Associates, Inc., Research Division: Got it. Okay. Moving on to ADESA purchased vehicles. Could you just give us how many purchased vehicles or maybe what percentage of your vehicles were purchased versus a year ago? Any kind of metrics on that?

No. It's still insignificant. It's just, again, complying with the regulations of the SEC. It hit a level that we had to point out on the gross profit. But it's still an insignificant part of our business, a very insignificant part of our business. Not even -- not near what we have to talk about at IAA in terms of what percent of volume. It's very low single digit percent of the volume. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. So we're not looking at any kind of shift in your strategy in terms of intentionally getting more exposure to purchased vehicles?

No. We definitely not. William R. Armstrong - CL King & Associates, Inc., Research Division: Okay. And then finally, on IAA. You mentioned that proceeds per vehicle are softening, although it looks like in the first quarter, it was up about 4%. If we look at the 13% increase in units and a 17% increase in revenue. Is that mix related or was there something else?

That is mix related. We actually are able to dissect it into like-for-like vehicles. And the Sandy cars, on average, because of the level of damage, it tends not to have not a lot of physical damage other than the flood, do pull up the average price paid per car. But within these different sectors, if you do like-for-like, you will see some softening, very modest, but some softening. So I would call that -- they're allowed to call that mix.

We'll take our next question from Colin Daddino with Gabelli & Company. Colin Daddino - Gabelli & Company, Inc.: I'm curious on how the return of some of these off-lease vehicles will affect pricing at ADESA, maybe more segment pricing. But if the leased vehicles are supposed to be in higher demand, is there a portion of maybe the rental or OE vehicles, which haven't been sold, that could be disproportionately impacted either on price or volume if buyers are kind of gravitating towards these leasing unit?

Good question. And I would say to you that these leased cars are now going to get to dealers that haven't been able to get to them before. And many of these vehicles were being sold in maybe a closed environment or they're being sold in an online environment, where many of the many independent dealers didn't have access to this kind of inventory. So now as these dealers -- as more dealers get more access to inventory, I think it will drive the prices of those cars up a little bit higher and be a little bit more competitive. Could that have an impact on some of the other vehicles in the lanes? Possibly. But I don't believe it would be significant.

Yes. And keep in mind, over the past 4 years, Jim, there's been a significant shortage of 1- to 4-year old used cars in the entire market because of the low-SAAR, low-lease returns we've experienced the last couple of years. So this is a situation where that age vehicle is in a shortage going to a more regular supply, right?

Right.

[Operator Instructions] And we'll take our next question from Melinda Newman with First Pacific Advisors.

A couple of questions, more mechanical and housekeeping. Just on the stock comp, you mentioned the decline in the first quarter. Can you give guidance for the year on whether you expect stock comp to decline from last year or this just a timing issue?

Well, in terms of our guidance, we've expected to increase in it. I do not have it in front of me, but in our call where we announced our guidance, with the year-end call, I quantified it. And we're not expecting that to change from what we expect for the year, so I would view that as timing, Melinda. And it was modestly negative this year so we're all expecting the stock price to perform as we see our business perform.

Okay. In terms of working capital, maybe I'm sure when you filed the Q this will be out there, but there's a pretty large increase in current liability. Can you just comment more on whether that was in AP or what area drove up the current liability?

Good question, Melinda. What happens, as you know, is our balance sheet includes receivables and payables related to the transaction of the vehicle. And our revenue only includes the fees of the net revenue associated with our part of the transaction. So the increase in liabilities just reflects the timing of payments to the consignors. Similarly, the receivables can be elevated the same way. It really -- it's most pronounced in the March and June quarters for us because the day of the week that the quarter ends actually matters, relative to the flow of payments.

So that will normalize in the second half?

That normalizes by year end because the holidays always occur the last week of the year. And there tends to be less last business, so it tends to be less volatile around year end.

Okay. Great. And then you commented on an increase on the funding for AFC, for that funding line. What is the increase? Have you talked about that before?

We have not talked about that. And again, in our next call, we would expect to give you an update on that. But it's consistent with where -- what we think we need over the next year or 2, 3, whatever it turns out to be. It goes with term, the size will be matched up to the term.

Okay. Perfect. And then, last question...

Most discussions are going quite well by the way.

Okay. Do you expect the cost of that to decrease?

You know what, we haven't provided any guidance. But I have said, we haven't expected much -- any change in the cost. The markets have been pretty receptive. And we think we're priced to market already, so we don't see a big change in that.

Okay. Final question, you commented on Canada being definitely behind the U.S. in terms of the trends. I know AFC, if I look at non-guarantor and sort of foreign versus U.S. and the filings, AFC is included in the foreign, correct? I'm just trying -- I guess, I'm just trying to ask, it seems even though market share in Canada is very strong, that it's still not -- it's not going to overwhelm the trends in the U.S. Can you quantify, maybe just on for ADESA and IAA, what percent Canada is? Because I know you have stronger market share there.

Yes. I mean, you've seen this historically. First off to give everyone a heads up with the repayment of the bonds, there will no longer be 12 pages of guarantor, non-guarantor footnotes. But it will also be that information is not out there. And again, the Canadian business, in all of them, is very similar, both -- all 3, IAA, ADESA and AFC, operate quite substantially in Canada. But again, it tends to be mid- to upper-teens as a percent of our revenue and performance for the year. Not something that will require to disclose separately in our footnotes, other than the guarantor, non-guarantor notes, which are going away and will not be in the 10-Q filed later this week.

Melinda, I was just going to add. And maybe most people are aware of it. But in Canada, we have a little bit of a different situation where banks aren't really permitted to lease vehicles. And that's really the reason for the slowdown. More and more of these vehicles are being sold in Canada that are going to a retail finance contract. And through the meltdown over the last couple of years, we lost 2 of our capital finance companies up there. GMAC turned into Allied Bank and Chrysler credit, I guess, merged with TD Bank. And so as a result, they don't have those entities leasing cars anymore, and that was a big part of the market. So now I know that there's been a new player come into the market in Canada. And we're seeing the existing captive finance company write more leases, so we think 18, 24 months will get us back on track.

And it appears there are no further questions at this time. Mr. Peisner, Mr. Hallett, Mr. Loughmiller, I'd like to turn the conference back to you for any additional or closing remarks.

Great. Thank you, Lexie. And I would just like to thank everybody for being on the call today. We continue to appreciate your interest in our company. We feel very, very good about getting through the 2012 time period. And we look forward to the trends that we're seeing in 2013. And I'm looking forward to being able to report our second quarter results to you here in another 90 days. So with that, thank you and we'll sign off for now.

This concludes today's conference. We thank you for your participation.