Copart, Inc. (NASDAQ:CPRT)
Q1 2017 Earnings Conference Call
November 22, 2016 11:00 ET
Jay Adair - Chief Executive Officer
Jeffrey Liaw - Chief Financial Officer & SVP, Finance
William Franklin - EVP, US Operations and Shared Services
John Healy - Northcoast Research
Bret Jordan - Jefferies
Ben Bienvenu - Stephens, Inc.
Craig Kennison - Baird
Elizabeth Suzuki - Bank of America Merrill Lynch
Gary Prestopino - Barrington Research
Matthew Paige - Gabelli & Company
Bob Labick - CJS Securities
William Armstrong - C. L. King & Associates
Welcome to the Copart Incorporated first quarter fiscal 2017 earnings call. Just a reminder, today’s conference 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.
Welcome to the first quarter call for Copart. I’m going to turn it over to Jeffrey Liaw our CFO who will give you an update on the financial performance for the quarter and then he will pass it over to Will Franklin, our Executive Vice President who will talk about some of the operational affects that we had in the quarter.
With that, it’s my pleasure to introduce you all to Jeff.
I’ll start with the Safe Harbor. During today’s call we’ll discuss certain non-GAAP measures including non-GAAP net income per diluted share which excludes the impact of foreign currency related gains and the tax effect of recent executive stock option exercises. We’ve provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures on our website under the investor relations’ link and in our press release issued yesterday.
We believe the presentation of these non-GAAP measures together with their corresponding GAAP measures is relevant in assessing Copart’s business trends and financial performance. Copart’s management analyzes its results on both a GAAP and non-GAAP basis described above.
A cautionary note about our forward-looking statements. This call contains forward-looking statements within the meaning of federal securities laws which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. For a more complete discussion of the risks that could affect our business, please review the management’s discussion and analysis portions in our latest periodic reports filed with the SEC. We do not undertake to update any forward-looking statement that may be made from time-to-time on our behalf.
Per our custom, I’ll start with a brief review of our income statement and then progress through the balance sheet and cash flow statement as well. We’re pleased with the result of our first quarter in fiscal 2017. We’ve continued the basis of the presentation that was shared with you in the last quarter with a non-GAAP presentation to account for certain foreign currency related gains as well as stock option exercises. I’ll provide more color on both of those to come.
Starting with the headlines, we experienced global revenue growth of 19.8% and that’s after accounting for the detrimental currency effects on revenue of approximately $9 million, largely due to the depreciation of the pound relative to the dollar. We grew unit sales volume worldwide at approximately 19% with US unit growth of approximately 20% and international unit growth of approximately 14%. Global inventory growth was 25% of which 5% is attributable to catastrophic weather events.
Service revenue growth outpaced that of purchase car revenue growth with $56 million of our growth attributable to service revenue and $1 million attributable to purchase car revenue growth. This is largely due to a proactive shift on our part from purchase car volumes to agency arrangements instead.
We experienced gross profit growth from $120.9 million to $145.3 million. A couple of points of color, we did experience year-over-year scrap price improvement of approximately 26%. We continue to cite the same American Recycler Index averaging five different regions over the three months in the quarter. On an absolute dollar basis, of course, the scrap portion of the value in our auctions remains relatively small, but we did experience year-over-year improvement in that important index.
Year-over-year used car values are approximately flat or up 1% using the Manheim Index again, averaged over the three relevant months. Our G&A expenditures on a GAAP basis increased by $3.8 million ex depreciation and amortization. However, it’s worth noting that $5.2 million of the G&A expenses are attributable to payroll taxes due to stock options exercised, so we, of course, view these as non-recurring expenditures or episodic expenditures tied to stock option exercises not incurred in the ordinary course of running the business.
Our depreciation and amortization increased slightly as we placed more software assets into service. As always, we provide the general framework that G&A will continue to grow on an absolute dollar basis over time so with reasonable growth rates we should expect to achieve operating leverage.
I wanted to take a minute here to pause on the non-GAAP compensation related adjustments. This is again, due to exercises by certain Copart executives of outstanding vested options. In effect, what happens is this creates a tax deduction for Copart with an excess tax benefit to Copart of approximately $101 million. As a result, you’ll note that Copart’s GAAP tax provision for the quarter was actually a substantial tax benefit instead.
In practice, we withhold a portion of the shares the executives are exercising, retire those shares for cash and remit the payments to the IRS. In reality, we have effectively prepaid a majority of our US federal income tax liability for Fiscal ’17 already by remitting that cash to the IRS.
We experienced EBIT growth of 21.5% from $86 million to $104.8. However, please do note that $104.8 is burdened by $5.2 million of the payroll taxes I described a moment ago, which we believe are generally non-recurring and episodic expenditures. Interest expense for the quarter was approximately flat year-over-year due to higher revolver balance. Again, due to the cash tax payments on stock option exercises offset by lower drawn rates.
GAAP net income of course, increased substantially as a result of the negative tax provision. On a non-GAAP basis, the only other matter I haven’t already mentioned is the reversal in our adjustments of foreign currency related gains of $2.8 million post tax. We hold certain cash balances in our overseas businesses and when the US dollar appreciates we experience positive gains that shows up in other income. We have unwound that gain for the purposes of calculating our non-GAAP adjusted net income. The bottom line then is an adjusted non-GAAP EPS of $0.57.
Turning our attention then to the balance sheet and the cash flow statement. Cash flow is again, affected by that same cash tax payment we made on behalf of the stock option exercises. We nevertheless, experienced operating cash flow for the quarter of $74 million a reflection first of course, of increased earnings or increased EBIT.
We also experienced substantial accounts receivable growth of just shy of $30 million. As you know, these are primarily advanced charges paid out on behalf of our customers so that when we pick up the cars we can access them. The growth therefore in AR corresponds to the inventory growth we described previously.
The increase in deferred and current income tax assets net is approximately $70 million. That’s again, the same tax issue I described a moment ago. We had capital expenditures of $38 million for the quarter of which approximately three-quarters to 80% is attributable to land and development and lease buyouts.
With that, I’ll turn the call over to our EVP, Will Franklin.
As Jeff said, we are very pleased with the results of our first quarter fiscal 2017. The growth in revenue of 19.8% mirrors our growth in volume of 19.4%. This is the third successive quarter in which revenue has grown by 17% or more and the fourth successive quarter volume has grown by 13% or more. In fact, we have averaged growth in our inventory of over 15% over the last nine quarters.
I’ll start with a few comments on US operations where year-over-year volume increased by 20%. As we have discussed in our previous earnings calls, we believe the overall size of the US total loss market is increasing in size at an annual rate of between 8% and 10%. While the growth of the US salvage market is marginally attributed to growth in both car parts and accident frequency. The largest contributor is growth in total loss frequency.
Total loss frequency continues to rise as repair costs continue to grow due to consolidation in the collision repair industry, more severe accidents, greater complexity of newer cars, and longer average replacement car rental times.
On top of the organic growth we have layered on an increase in our share of the market and growth in our non-insurance volume. Non-insurance volume grew by 18.4% and in total represented 18.6% of our volume. The growth was led by increases in charity and donation cars and in broker cars. At the end of the quarter our US inventory was up 26.1% of which approximately 5.4% was attributed to CAT activity.
Now I’ll turn to revenue in the UK where we saw a growth in units sold of 12.4%. Insurance volume grew to increases in both the size and our share of the insurance salvage market. Non-insurance growth was 20% as the dealer and the direct purchase programs continued to expand in both volume and in profitability.
Measured in GBP, UK revenue grew by 16.4% and its EBIT grew by over 40%. However, after translation to USD, revenue was down marginally and the EBIT grew by only 18.1% due to the strengthening of the dollar to the pound. On a consolidated basis, we experienced an increase in average cost to process each car due primarily to operating in an environment of general growth, the extra expenses associated with operating in CAT environments, and due to the growth in inventory.
We remain focused on controlling G&A expenses. G&A spend for the quarter was $35.2 million. As Jeff mentioned, included in that total is $5.2 million for the company portion of payroll taxes associated with the exercise of stock options. We consider this to be an extraordinary and unique item due to its magnitude. This expense averaged less than $60,000 per quarter in fiscal 2016.
Excluding this item, G&A was $30 million, marginally lower than the same quarter last year. We expected G&A to grow as we continue to expand our international efforts and increase our IT resources.
Finally, our capacity expansion efforts continue. During the quarter, we added two yards and we expanded five existing yards, increasing our total capacity by approximately 140 acres. In our second fiscal quarter, we expect to add another five yards, five sub lots, and to expand nine existing yards, increasing capacity by another 529 acres.
Now, that concludes my comments. I’ll turn the call back over for the Q&A session.
[Operator Instructions] Our first question comes John Healy with Northcoast Research.
I wanted to ask kind of a big picture question about your buyer base. I was wondering if you could give us some color in terms of the number of vehicles that are probably leaving the US and maybe the amount that are headed to Latin America, maybe the amount that are headed to Europe, and the Middle East? I’m just trying to conceptualize with some of the volatile movements in the global currency markets what those could mean to ASPs and buying behavior by your customers.
I can tell you that the trend is down. We were at one time up to 23%, 24% of cars [and you sold to] [ph] international buyers. That currently is below 20%. Like I said, expressed in units and expressed in values it’s about the same, it’s slightly less than 20% of our volume and about the same amount of value of cars sold to buyers that are registered internationally.
I will say this though, that understates the number of cars that are leaving the country because there’s a number of buyers that are registered domestically that do nothing but export. Obviously, because of the strength in the dollar is having a detrimental impact on their activity.
Is there a way to think about just Mexico or Latin America, what percentage of the buyer base is represented by them?
In terms of activity about 7% of our volume goes to Mexico currently and that’s down from about 9% nine quarters ago so you’re seeing a slight decline in their participation in our auctions. They are by far the largest international buyer.
You mentioned the acreage in addition to the number of yards in the expansion, is there a way to think about kind of acreage in the business today and maybe what an acre of land translates into the amount of capacity in terms of vehicles you could store and kind of marshal for the insurance folks?
Generally, it’s 125 cars per acre. But, that changes depending on the nature of the situation we find ourselves in. That’s the most efficient layout for the operations of a yard. In times of CAT we can squeeze far more cars onto a yard, but we operate far less efficiently. In fact, you’ll see part of that expressed in our margins this quarter.
Your next question comes from Bret Jordan with Jefferies.
Of the inventory growth, could you carve out what might have been a market share contribution to that as well?
If you’re talking about just the insurance, you can kind of back into that. Of the growth, in terms of volumes sold, about a little less than 3% is from CAT. Like I said, we think it’s 10% of that just because of organic market growth, so that leaves you about 7% in market share gains.
Is that a trend that’s accelerating? Is there anything changing or any changes as far as insurance RFP activity going on now or maybe going on in the near future?
There’s always activity and we’re always out there competing aggressively to get new business. I can’t say that what’s going on now is any different than what was going on a year ago.
Can you give us an update on Germany as far as the international business goes?
As we announced we had our first auction in September. Since then we’ve had two more auctions. I should distinguish or clarify the nature of these auctions. These are test auctions so the insurance companies are not participating in these auctions. We have another one scheduled December 14th. We’re taking a very measured approach to rolling this out to the insurance companies. We want to ensure we have it right when we do introduce our product.
We’re very confident that that will happen in this fiscal year and we’re very optimistic and pleased with the interest that we’ve seen from the insurance companies. But, like I said, we’re going to be measured in our rollout and that may mean it will be a few months from now before we do introduce it to the insurance companies.
I’m going to add to that. I was in Germany two weeks ago meeting with our team. We currently have a location that is north of Hanover and we’re going to be opening up additional locations across Germany in the next 18 months. We’re very, very committed to the market. When we’re done it’s going to take about a half a dozen locations to service the market. From a logistical standpoint, if we’re mature in the market it’ll take more like the UK, about 15 locations but in the interim you just want to be in a position where you’ve got coverage and you can logistically pick the car up anywhere in the country. So, as Will stated we expect to go live this year and then we’ll be expanding in fiscal ’18.
Your next question comes from Ben Bienvenu with Stephens, Inc.
Really nice unit growth in the quarter. It looks like from the inventory growth numbers that should continue going forward. You called out 5.4% of the inventory growth was CAT volume. I’m curious, are you able to quantify the amount of cost you may have incurred in the most recent quarter for units you’ve yet to sell that are sitting in inventory? Is that an easy number to carve out?
It’s in the millions. In some of the CAT situations we’re spending as much as $500 a car to repair the car and millions of dollars to locate new land, and to bring people in from different parts of the country to man these operations. Very little of that gets put on the balance sheet so that’s flushed through at the time we recover the cars and as I mentioned earlier, that suppresses our gross margin percentage.
Ben, to give you just a sliver more color on that, I think broadly speaking even EX catastrophic events, when Copart grows inventory, in particular, sequentially as we have done this quarter we incur a meaningful proportion of the cost in the period in which we grow it even before we sell it. We also recognize a portion of the revenue due to certain revenue recognition requirements, but the net effect of growing inventory is a depressive effective on gross margins. I think to Will’s point, that is further enhanced by catastrophic events in which the costs you incur in a current period are still higher.
Maybe shifting gears a little bit to the yard expansions. Obviously, it underscores your confidence for the structural step up in volume you expect to experience over the long term in the business. I’m curious, how far along are you there? Have your goals around 20/20/20 changed from the last time you communicated them? Then, as you’re building out the yard, expansions and adding new acreage, is there any material cost delivers that result from that activity or is it negligible?
Let me address a few of those. On the 20/20/20 program, it has changed. It’s expanded significantly. The 20/20/20 referred to buying 20 new yards, opening 20 new yards, expanding 20 existing yards in the next 20 months and we’ll exceed that significantly which underscores our confidence not only in the growth of the market but perhaps a chance in the way we approach how we operate.
We look at land not only through an operational lens but also through a strategic lens and we intend to be able to offer excess capacity to our suppliers, our partners, in times of catastrophic needs and in order to do that you have to have a significant amount of excess capacity particularly in the high-risk areas.
A couple of thoughts in response to your question. I would say your point about reflecting our confidence in the business is true. Some of these land acquisitions and developments projects are not speculative, their responsive to existing cars on the ground, their responsive to existing volumes that we’re facing. So, they’re not all just perspective bets on growth to come. I think that addresses your second question which was the leveraging or deleveraging effects of these new yards.
I think there’s a few offsetting considerations. One is that our sub haul expense per car typically goes down with the addition of new real estate. By definition a yard is closer to sum accidents than your old yard network was, so your sub haul expenses should come down per car. There also is a cost of congestion. This is Will’s point a moment ago, particularly in catastrophic events when you have cars packed too tightly in yards, you have higher labor costs and higher handling costs that you otherwise might which new yards helps to relieve.
The third point I think, is the one you were getting at, which is when we do add new real estate, there is potentially some deleveraging of people costs as you staff a new yard with a general manager, with yard and office staff, forklifts and the like so there is some offsetting effects. On balance, I think the effects aren’t huge. It obviously varies by yard and by circumstance.
Just one last very quick one. Your normalized tax rate, it’s been a little bit lower the last couple quarters than we’ve seen in the past. I’m curious what’s your expectation for tax rate might be on a normalized basis going forward?
I think we’ve previously said, or Will has said, our tax rate is in the 35% to 36% normalized level. I think if you exclude the noise that we experienced this quarter we’re about in line with that so our forward expectations haven’t changed barring obviously a major policy shift by one or more of our major countries.
Your next question comes from Craig Kennison with Baird.
I wonder if you’d simply review your IT priorities for the next 12 months or so.
We’ve got great systems domestically. Across the board we’re extremely happy with our web services, our mobile services and the systems that we operate in our company. Without a doubt, the majority of the focus right now is on Germany. We always have some maintenance that will exist on existing operations both UK and US and other countries that we’re doing business in. But, right now if you’re thinking from the standpoint of resource, energy, effort, dollars, time, we are putting the majority of that right now into Germany and our ability to get into that market and succeed.
A second question on the election, just wondering what the broad implication of the election results might be on your business especially as it relates to repatriation? I’m wondering how much you have funds tied up over seas and whether you’re be interested in repatriating them if tax policy were to change?
A substantial portion of our cash is in fact kept overseas. If there is a policy change I think we evaluate it at that moment and time whether the investments overseas justify keeping the cash there or bringing them back here for general corporate purposes here. At the moment, I think there are growth opportunities, Germany included, as you heard from Will that could consume some of that cash.
Any concern about regulatory changes NAFTA, things like that?
No. I think the question earlier was about international export and off the top of my head will said it was just under 8% Mexico. Off the top of my head it’s just a little over 10% total Latin American countries. I don’t, at this point, these aren’t new products, so why the export of used vehicles would be an issue. We are constantly interacting with Mexico and have relationships with Mexico on shipping vehicles south of the border so I don’t anticipate anything negative at this time.
Your next question comes from Elizabeth Suzuki with Bank of America Merrill Lynch.
Can you guys give an update on your expected CAPEX 2017 given the investment that you’re making in capacity growth?
We generally don’t provide forward guidance on either our income statement or cash flow statement. What I’ll reiterate is this is when we talked about 20/20/20 the program initially, and that was in March of this year, we talked about spending an extra $100 million in the first calendar year and it being approximately a two year program, the 20 months representing the two years.
We believe, if anything, that our expectations have increased relative to the total investments that we will make over the relevant multiple horizon. At this moment, with real estate being episodic and as lumpy as it is, it’s difficult for us to pinpoint precisely how much we expect to invest over the course of this fiscal year. But the elevated capital expenditures you’ve observed in the last five quarters we believe will continue.
Just one other quick one. What are your internal forecasts, if you can share them, for movement in the dollar commodity prices, etcetera that could potentially change your strategy over the next couple of years?
I don’t think we have any differential insight relative to what you or your colleagues at Bank of America might. We don’t perform meaningful bottoms up currency forecasts at Copart.
Your next question comes from Gary Prestopino with Barrington Research.
In terms of the catastrophic events with the hurricanes and the floods, have you taken in the majority of the cars that you’re going to get from both of those issues?
Yes, we have. When we look back, and they’re all different in nature. We’ve had seven events, and we’ve characterized three of those as significant CAT events. Mathew, the flooding in Baton Rouge, and the flooding in Houston which exerted an extraordinary burden on our operations and our cost structure. But, of those three CATs plus the hail storms in Dallas and Colorado Springs, we received most of those cars already and most of those are in inventory.
In terms of your share gains in the US, are there many independents left since you’ve been taking share? I know you’ve got one big competitor, but what’s that landscape look like? Are these smaller independents gradually just going out of business?
At this point I would just say we’ve got one major competitor, as you referred to. There is a secondary competitor out there that we compete with. As Will has commented in previous calls, the market has been growing and we foresee the market is going to continue to grow so market share is an important part of our growth and we’re always, as I think Jeff or Will referred to earlier, we’re always competitive and eager to win new business. But, right now we have our hands full, if you will, with the fact that total loss frequency is up.
When you’ve got a company the size of Copart and you’re growing 10% a year just in the industry, there’s a lot of work we have to do in making sure we have capacity, and people, and the logistics in place to pick the vehicles up, store them, and then sell them.
Lastly, the majority of what you process or sell in the UK, is that kept within the UK or is some of that exported into the European Continent?
No. It’s very similar to the US, about 80% of it stays in the UK and about 20% leaves the country.
Your next question comes from Matthew Paige with Gabelli & Company.
My first question, how do you view your non-insurance revenue growth potential looking forward given the population of used cars coming back? Along those lines, how do you prioritize taking in insurance cars from those cars?
We’re focused on insurance company cars. We’re focused on insurance companies period. That’s our life. That’s all we live and breathe around here. To the extent we can, without distracting from our ability to perform for the insurance companies, add these non-insurance cars, then we do so. But our focus is not on the non-insurance cars.
That’s similar to your acreage growth strategy in terms of that is focused for the insurance companies, it’s not on building capacity to be able to take on more non-insurance volume?
It absolutely is to take on more non-insurance volume as well as insurance. Will was being very clear that we’re focused on handling insurance companies but Copart’s not in the business of saying no. We take business in whether it comes from a dealer, a charity, or an insurance company. Our goal is to say yes and take those cars in, so we’re building out that capacity for the whole organization not just one component of the organization.
Your next question comes from Bob Labick with CJS Securities.
I just wanted to dig a little deeper on some of the answers you’ve given particularly in the yard expense. You’ve obviously been investing a lot and the yard costs was up a lot year-over-year. I know you won’t give us specific numbers, but could you maybe rank the four, or if there’s more tell me more, causes for that growth? New fixed domestic yard costs, new fixed international yard costs, increased sequential inventory growth, and then CAT expenses, can you just rank those in terms of the year-over-year costs in the yard costs?
In this quarter, it would be the CAT expenses had the highest impact.
I’d almost view it as you kind of asked on two different plains. On the domestic versus international, must more domestic. On the question of what’s causing growth within the domestic realm, I think it is volume growth broadly with CATs, as Will pointed out, being a meaningful contributor this past quarter.
The CAT theoretically, excluding another CAT next quarter, goes away and the rest of the stuff, obviously depending on inventory and volume growth, will stay?
I just want to jump in there because Will mentioned three major CATs, but we had something like nine CAT events that he mentioned. I would say two things to that. One is we are building out capacity along a number of the coastal states for future CAT situations. The second point is, we don’t think CATs are going away. There’s enough weather and we’re national enough in our footprint that there is something happening, whether it’s in Colorado Springs there’s a hailstorm or it’s a flood in Houston, or it’s tornados in Oklahoma, there’s always something going to be out there.
We think the CATs are a regular part of the business and obviously, the smaller the catastrophe the better it is on our margins. The larger the CAT the more negative it is in terms of profitability because of the sheer logistics of moving people in, picking all the vehicles up, the additional costs you have, etcetera. But just so you understand we are thinking about CATs as being a more ongoing part of the company.
Thank you for your commentary on Germany earlier. I also noticed you had some new auctions in Spain, can you talk about that market and then just what you’ve learned in each of those and if there’s other opportunities in continental Europe?
I think they’re very similar. I went to Spain a couple of months ago and as I said, I went to Germany couple of weeks ago and I think they’re very similar in that you have the same problems in Europe that you have in the US. If you’re selling a vehicle and it’s not going into an auction where it’s being stored, you have to deal with the owner of the vehicle, which is the insured, having someone come to their home typically, pick the vehicle up. That experience can be a pretty bad experience.
There could be anywhere from showing up late at night to pick the vehicle up, to wanting to renegotiate the purchase price on the auction platform. We think from that standpoint, less friction. We think from the standpoint of logistically allowing a buyer to buy vehicles and swing in with a nine-car hauler and pick those vehicles up, and all the other benefits that we have provided in the US and the UK, as examples, we think that opportunity welcomes itself in Germany and Spain as well.
Obviously, Germany is a much bigger market than Spain. I suppose I’d say it this way, culturally the German market is very willing to test the model and if that model ends up proving to be better, which we believe it will, then they’re committed to moving forward. That’s why at this time we’re doing business in Spain as well as Germany, but there’s more focus right now, on our part, to focus on Germany.
You don’t want to be spread out and trying to do multiple countries on something like this. It’s a large market, it’s over half a million vehicles, and we want to make sure that as we test and then move forward with growth plans in Germany that we succeed and so that’s where our efforts are at right now.
One last one. On the last call or the one before that, you talked about a new retail location in Dallas for crash toys, maybe if there’s any update from what you’ve learned from that experience so far?
We’ve [inaudible] a new brand and a new facility, it’s called Crash Toys and it’s targeted to raising the returns on non-car assets. It’s basically motorcycles, it’s jet skis, it’s boats, it can be recreational vehicles. By giving it a new brand and new emphasis we’re targeting more retail buyers and we’re doing more marketing behind it. Once again, it’s all in the effort to getting better returns for our insurance customers.
We’re happy with the results in Dallas. We’re opening another location in Los Angeles and then we’ll evaluate that and determine what the next steps are afterwards.
[Operator Instructions] Your next question comes from William Armstrong with C. L. King & Associates.
In terms of the CAT cars, the processing costs, could you remind us, are those costs recognized as incurred or as those cars get sold in your auctions?
As incurred. We put very little of the costs on the balance sheet and the reality is, as Jeff has said, that principle holds true even to non-CAT cars. We recognize a portion of our revenue at the time we pick up the car, but that revenue has almost no margin. The majority of our costs associated with the car is at that time we pick it up, we receive it, and we store it. There’s a disproportional recognition of the profitability of that transaction at the time that car is sold versus the time it’s picked up.
Looking at those cars from the Louisiana floods and Hurricane Mathew in particular, are most of those cars already been sold or will you get some of that volume benefit in the current quarter?
We have many cars yet to sell from those CAT events.
In terms of pricing trends, excluding scrap which you addressed earlier, what sort of average selling pricing trends are we seeing across the board?
Within the US I’d characterize them as stable. The offsetting considerations are that scrap has improved, used car prices are flat or up slightly. I think folks had asked about the currency effects, the Peso was certainly down year-over-year which affect the selling prices of cars in the US so we’re approximately flat.
At this time, we have no other questions.
We’re very pleased with the results of the first quarter. Thank you all for attending the call. We look forward to reporting the second quarter in the new year. We wish you all a Happy Thanksgiving. That concludes our call. Thank you.
Ladies and gentlemen, thank you for your participation. This does conclude today’s conference. Have a great rest of your day.
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