Good day, ladies and gentlemen, and welcome to the KAR Auction Services Incorporated Second Quarter Earnings Conference Call. Today's call is being recorded. Today's host will be Jim Hallett, Chief Executive Officer of KAR Auction Services Incorporated; Eric Loughmiller, Executive Vice President and Chief Financial Officer of KAR Auction Services Incorporated; and Jonathan Peisner, Vice President and Treasurer of KAR Auction Services Incorporated. I would now like to turn the call over to Mr. Peisner. Please go ahead, sir. Jonathan Peisner – Vice President and Treasurer: Thanks, Michelle and thank you for joining us this morning for KAR Auction Services second quarter earnings call. Today, we will discuss the financial performance of KAR Auction Services for the quarter ended June 30, 2011. After concluding our commentary, we will take questions from participants. We will make every effort to accommodate all the questions within the hour we have scheduled today. 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 are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements and such risks are fully detailed in our SEC filings. I would now like to turn this call over to KAR Auction Services' Chief Executive Officer, Jim Hallett. Jim? Jim Hallett – Chief Executive Officer: Great. Thank you, Jon, and good morning, ladies and gentlemen and welcome. I will start with the performance of the consolidated entity, and despite flat car revenue, I would say that I am very pleased with the performance for the quarter. Adjusted EBITDA margin topped 28%; adjusted…

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions) And our first question we’ll hear from Gary Prestopino with Barrington Research. Gary Prestopino – Barrington Research: Good morning, everyone.

Good morning guys. Gary Prestopino – Barrington Research: Jim, the Las Vegas site that you opened up, did that come on stream in early in the quarter or later in the quarter? Was that in the mix this quarter?

Gary, that came out in June. We’d hope to get it open a little bit earlier, but as a result of some issues that we had there, it actually didn’t get opened up until June. Gary Prestopino – Barrington Research: But you did have the units from the Premier Auction Group in the mix this quarter, then?

Yes, that’s correct Gary. Gary Prestopino – Barrington Research: Okay. And then could you give us an idea what percentage were dealer cars this quarter versus last year at this time?

Yeah, dealer cars, I would say, without pointing an exact number are in excess of 40% of our total business. Gary Prestopino – Barrington Research: Okay. And then, Eric, could you give us an idea of what amount of capacity is left at AFC?

Yes, Gary. With the expansion on the securitizations, we feel we have a lot of capacity. We’re borrowed out now in the neighborhood of $550 million with a couple of $100 million of capacity. And again the advanced rates didn’t change. So, there is plenty of room to grow that portfolio through the term of the arrangement. Gary Prestopino – Barrington Research: Okay. And then lastly and I’ll jump off. You said the interest expense was going to be coming down because of the refi, could you give us an idea of what we can expect now or how much it would come down vis-à-vis the first half of the year?

Well, giving guidance isn’t my specialty, Gary, but I think you can look at it, it’s going to come down about 65 to 70 bps as the effective change in the rate because of the LIBOR floor at one and a quarter that puts that term loan B at 5%, and that will put us, I think, again about 65 to 70 bps of savings Gary Prestopino – Barrington Research: Okay, thank you.

Good. Thank you, Gary.

And next we move to Tony Cristello with BB&T Capital Markets. Tony Cristello – BB&T Capital Markets: Thank you. Good morning.

Good morning. Tony Cristello – BB&T Capital Markets: First question I have is maybe a bit more clarity on sort of the guidance and the outlook. I guess I sense a bit of optimism, but in the same breadth there is a bit of a cautionary tone. You talk about ADESA, and maybe the volumes, obviously, it sounds like sub 8 million from our industry standpoint, maybe a little worse than you might have expected them to be at the beginning of the year. And you’ve had also the benefit of IAA and AFC. The worst that ADESA gets is it a direct then opposite in terms of IAA and AFC should get that much better or I guess in your text you actually said you are not sure that those trends can continue. So, I am trying to understand the confidence that you have in the various segments to help each other offset or is the guidance you are giving just based on where we are today, and if things worsen, you may not have that same comfort level? I am sorry, that’s a longwinded question.

Yeah. And hopefully I’ve got most of that. And let me start just by saying that most importantly, we look at this business on a consolidated basis and we have a plan in place to reach our goals for 2011 which I stated. And I think that’s most significant. The cloudiness that I spoke about at ADESA, there is no question there is a lot of things going on that’s causing unusual behavior as I would term it. I think dealers are – change their profile of the used cars that they sell. The dealer who typically hasn’t sold a five to seven-year-old car with a 120,000 miles on it is now holding on to that car and selling it. Dealers are going to greater lengths to acquire cars, whether they be from wholesalers or swapping between dealers or going to auctions completely across the country. I think there is just a lot of un-surety. And then you have factor into that what’s going to happen to the SAR. If that increases what impact that will have on tradings and vehicle prices and the number of vehicles that will eventually make it to the physical auction. I think with all the things that are going on, there is just uncertainty with respect to the ADESA level where as I mentioned we have much better visibility and a much better grip on how we think the other business units are going to perform, which again gets us to a comfort level of approximately $500 million on a consolidated basis and that’s really what we are focused on. Tony Cristello – BB&T Capital Markets: Maybe one other question if I can. When you talked about the changes you are seeing in the dealer side of the business and holding on to these longer cars, cars longer that are 120,000 miles or such, if you look at your dealer consignment mix at 42%, with the initiatives you have in place, is there a number that you wanted to get to? Do you want to be at 50%? And how does that ultimately help your business if the trends in the industry seem to be shifting a little bit and maybe they are not a permanent shift, but certainly near-term shift nonetheless?

Yeah. I think to answer your question I think that our goal would to be at the market in terms of mix. If I’ve got my numbers right, I think the mix was 55% dealer business and 45% commercial business. And if that’s where the market is, that’s where we’d like to lineup. Tony Cristello – BB&T Capital Markets: And I assume all the initiatives and infrastructure you have in place to get there is working, it’s there, and now it’s just a matter of time to finish sort of achieving to that path to get to the 50?

I think you said it well. We are very pleased, number one, with how we rolled out this initiative, very pleased with the focus that we have had and the success we have had. And the nice thing about it is we feel there is more run way. There is more opportunity on the dealer side of the business and we feel that with the team that we have in place, at ADESA, we feel that, that will continue to get better as we go forward. Tony Cristello – BB&T Capital Markets: Okay, thank you for the time.

You are very welcome.

And next I will move on to John Murphy with Bank of America/Merrill Lynch. John Murphy – Bank of America/Merrill Lynch: Good morning guys.

Good morning John. John Murphy – Bank of America/Merrill Lynch: I have a couple of questions here. Good morning. First question is just on the conversion rate at 60.8% at ADESA, I mean, obviously that was a pretty significant drop from where it’s been running for the past really five, five quarters. And I know you highlighted an increase in the dealer business that converts at a lower rate as part of the reason. I am just trying to understand with everything that’s going on in the used car market and dealers pushing that business even harder and used car prices up, I mean, is there anything else going on there, is it really just mix, because it seems like the conversion rate should be higher given the market dynamics right now?

John I think you answered it with your first statement, it’s really dealer consignment cars convert at lower rate. So, we have to get a lot more of these vehicles and we convert them at a lower rate and when you measure in the drop of the commercial vehicles, that’s the way the numbers work themselves out and there is nothing else that I could point to that is causing that change in conversion other than the impact of dealer cars converting lower. John Murphy – Bank of America/Merrill Lynch: And if that conversion rate is somehow the mix shifted back and you were converting in a 400 to 500 basis points higher, so 64%, 65% range. I mean, your margins in ADESA would just be significantly higher. Is that a fair assumption or were there be any cost creep if that conversion shifted?

No, I think it’s a direct drip to the bottom line. The – obviously I’ll let Eric do the math, but in terms of conversion rate, that’s a huge driver of our margins and a huge driver of our profitability. So, as that conversion rate jumps another 1%, 2%, 3%, 4%, that’s going to have a significant difference on our margins and our profitability.

Yeah, John, and the only caution I would add to that is when you start putting those commercial cars back in, there is a higher use of ancillary services, which can blend it down slightly. But again, the levels we're at now, we sustain those levels when we had high commercial sales and we're holding them in there with the dealer consignment. So, I don't know if there would be a big move, but that would be my only caution as if you saw them using more transportation or something that could have minor impact on it. John Murphy – Bank of America/Merrill Lynch: Okay. And then just a second question on volumes. And, Jim, you mentioned that used car sales as they're being reported by the industry are the highest that they have been since 2007, yet auction volume from the NAAA are actually own 11% in the second quarter. And I am just trying to understand if there is some shift going on away from auctions in the near term, or is this a trend we're seeing and the dealers are bypassing the auctions and retailing more vehicles? I am trying to understand what happened in the quarter, if I am just misunderstanding that, or something is changing here.

John, I believe as a temporary response to supply is just so difficult for dealers to get enough inventory to fulfill their inventory requirements that they are just hanging on to more cars and they're going more places to get cars, and perhaps in some cases they're getting to these cars before they make their way to the physical auction. John Murphy – Bank of America/Merrill Lynch: Okay. And then just lastly, if we look at Insurance Auto Auctions, it has been outperforming, as you mentioned, offsetting somewhat the pressure on ADESA, and you mentioned VRD and your focus on doing more business with rental car companies. Is there any cannibalization that's going on here, where some of the business is moving from the ADESA line item to the Insurance Auto Auctions segment? I know you mentioned there were a couple of site where is you're starting to combine the General Manager role. And I am trying to think if we should be looking at these business maybe as a whole of Insurance Auto Auctions and ADESA together as opposed to separately, because it seems like there is some fungibility in volumes beginning to develop.

I think that's a good point. There is no question that there has been business, there has been and I wouldn't use the word cannibalization, but I would say there has been business that has shifted as a result of the relationships with ADESA. ADESA has been able to introduce Insurance Auto Auctions to a myriad of customers, who previously did not do business with salvage auctions and this comes back to what we talk about in terms of channel optimization or best venues and now we're really able to provide our customers with the opportunity to look at both venues and recently as you've already said, but the risk of repeating we now have these rental car companies trying pilot projects with us and quite frankly some of these pilot projects are working out. In some cases, we didn't necessarily get all of those cars out of ADESA, but it did take some cars away from ADESA there is no question. So overall I would say there is a smidge of cannibalization here, but on the other hand I think there is a growth in this segment for car overall. John Murphy – Bank of America/Merrill Lynch: Okay, great. Thank you very much guys.

You are very welcome.

And next we will move on to Rick Nelson with Stephens Rick Nelson – Stephens: Good morning.

Good morning Rick.

Hi Rick. Rick Nelson – Stephens: Thank you. You mentioned ADESA volumes were down 14%, the industry down a 11%, can you talk to what’s you think is happening to market share both in the dealer consignment side as well as the institutional business.

Yes, Rick, if you take a look at our business, first of all, we've told you in the past that our business is historically 70-30, 70% commercial and 30% dealer, and so obviously the bigger segment of business is down is the commercial business. So, that's going to have more of an impact on the ADESA commercial numbers, but on the other side, the flip side of that coin is the dealer consignment business. We've been able to grow that business above the market. So, I think that speaks to the volume declines. We've lost it on the commercial side, but we've actually done quite well on the dealer side. Rick Nelson – Stephens: When do the off lease vehicles begin to grow up again? That's later around a 2012 that would positively impact the institutional business?

Yes, I'm sorry Rick. I just didn't get the first part of your question. I'm sorry, would you mind repeating that? Rick Nelson – Stephens: When do off lease vehicles begin to turn up again, that would have a positive impact on the institutional?

Right. Yes. I'd say for sure we're going to see those leased vehicles in 2013, but towards the end of 2012 we could see some of the early terminations coming back. So, we expect, especially as some of these leases were written in 2010, we could see some of those cars start to return late 2012 but I think the real impact will come in 2013. Rick Nelson – Stephens: Comparisons get more difficult as we move through the remainder of this year and into next year from an institutional side of the business?

Rick, we've been under pressure in this business. It really began in the latter part of last year and I would say, was heavily focused beginning in the fall and definitely in the fourth quarter, but to characterize the comparisons getting easier in today's environment is really difficult for us because it's things have changed in terms of the supply vehicles. But yes, volumes were down in the last part of last year more so than they were earlier in the year. So, I do think again the comps are a little easier if you want to call it that. Rick Nelson – Stephens: New vehicle inventories begin to improve. There is some talk that we're going to see some pickup in incentives from the JA3 and the other OEMs. How do you see that affecting used car values, and IAA's business as well as a pickup perhaps affecting the ADESA volume side?

Well, there is no question as the new car sales increase, that should increase trades and that should increase volumes at the auctions and transactions, and you might see a decline on the proceed side at Insurance Auto Auctions. But I think given the choice, we would be pleased to see the SAAR rise and number of trade-ins increase, which would have a much greater impact than what we would see being eroded on proceeds at IAA.

Rick, I'll add to that. There just doesn't appear to be any relief on aftermarket parts pricing right now. I mean that's a driver of this. If people are repairing the cars, it probably is not as direct a relationship to a point in time measurement of new and used car pricing. I mean there is high demand at the salvage auctions and it's really to drive the aftermarket parts business, which is collision repair oriented. Rick Nelson – Stephens: Also Eric, I'd like to ask you about the SG&A expense ratio this quarter. With all the adjustments, it's a little difficult for us to look at that, but it appears as if it lightened on this quarter?

Yes, in fact if you take out the stock-based comp, which is the direct reflection of movements in our stock price. If you take that element out of that, we were actually down as a percent of revenue about 70 basis points. Rick Nelson – Stephens: Okay. Thank you and good luck.

Thank you.

The next we will move on to Bill Armstrong with C.L. King & Associates. Bill Armstrong – C.L. King & Associates: Good morning Jim and Eric.

Good morning, Bill. Bill Armstrong – C.L. King & Associates: Follow-up on one of those previous questions so it looks like ADESA in the second quarter lost the market share in the institutional side, are you seeing man higher or any other players getting more aggressive in that area?

I think to speak to your first point, yes. We've lost a little bit of share on the institutional side, just because of our high levels of institutional car. In terms of what's going on with the competition, I think I will stay away from commenting on that.

Bill, I'll add to that. I mean we don't like to make excuses about these metrics, but the interim data that NAAA puts out is based upon some estimation. Quarter-to-quarter there is some odd movements I would just highlight for you, that's why we really don't measure market share until we hit the annual numbers which is based on a survey of all of the auctions and is actual data. So when we compare our numbers of units sold, it's actual number of units sold and this is same data we submit, but not all of the data that they are using is as precise as that and we know that, so that's why we say generally in line. Next quarter, you may have somebody that reported this quarter that didn’t report in the first quarter and that affected it. And so we look at it more over a period of a year. Bill Armstrong – C.L. King & Associates: I see. On the SG&A line, for ADESA, you had more auctions in operation than a year ago, but your SG&A was actually down slightly in dollars, where did those declines come from?

Well, again, Project PRIDE is the biggest mover of that. We look at it. We’ve talked about dealer consignment where we have invested in the marketing spend there, but in other areas of our business we have had reductions. And we continually look at our headcount what support staff are needed to support the current levels of activities and I have to tell you I am proud of the ADESA team. They have been proactive in trying to keep as much of their costs in line with the current activity levels. So, that’s the primary driver in my view of what keeps it down. And it is built back to 2007 I would argue that a greater percentage of our cost structure even on the SG&A front was more of a fixed nature and that we’ve kind of made it a little more variable than we had previously. So, I think that’s helped us. Bill Armstrong – C.L. King & Associates: I see, okay. And then finally on interest expense, I know you don’t want to give forward-looking guidance on that, but the – was it $49.7 million in the second quarter. If you stripped out any one-time items, what would that number have been, if there were any one-time items?

Well, on interest expense? Bill Armstrong – C.L. King & Associates: Yes.

You can take out just a second I’ll give you the number. $14.5 million pre-tax was the cash paid on the interest rate swap termination, take that out. Bill Armstrong – C.L. King & Associates: Okay.

Everything else was interest expense. Bill Armstrong – C.L. King & Associates: Got it, okay. Thank you very much.

And that includes non-cash amortization of debt issuance costs, so – but you can go to our cash flow statement and then figure out most of it. Bill Armstrong – C.L. King & Associates: Right, right. Okay thanks.

You’re welcome.

Next we move to Scot Ciccarelli with RBC Capital Markets. Scot Ciccarelli – RBC Capital Markets: Quick housekeeping one item first, the IAA figures, is that all same-store sales?

Yes. We have not added any auctions at IAA last year. Scot Ciccarelli – RBC Capital Markets: Okay, that’s helpful. And then I guess again not to I am sure the horse is glue at this point, but about ADESA volumes you mentioned that 2012 is also going to be challenging, but obviously the comparisons gets much easier following what’s going on in 2011. So, I guess what I am trying to figure out is 2012 is still just going to be under pressure, so it won’t show much of a rebound from 2011 or do you think year-over-year 2012 will actually be worse than 2011?

Given what we are experiencing Scot. I think we’ll wait till the economists come out and we look at all the activity, but Jim’s commentary was very specific. I mean, we don’t see any indicators that would say there will be a great change to the market conditions other than what he spoke to some of the behaviors and the dealers, if the SAR were to increase that might help bring some activity, but again pressure on supplies is the key. That’s what we are expecting. Scot Ciccarelli – RBC Capital Markets: But that doesn’t really makes sense mathematically. I mean, your 2008 was kind of where late ‘08 early ‘09 was kind of the peak of the decline I suppose in the new car sales run rate. If you use that typical three-year timeframe for leases etcetera, it means end of 2011 or kind of mid part or end of 2011 should really be the peak of the supply? Is there something else that is occurring that I am just not appreciating properly?

If I understand your question right, we refer back to 2008 and 2009 even though that was kind of at the peak of the recession or the meltdown and what was going on in the marketplace. We still had a lot of volume to run off these portfolios. So, we were still running off volume in ‘08 and ‘09 and into ‘10. And during that time, leasing came to a standstill and the credit market started to tighten up and repos kind of dropped off a little bit. And we used – so we really start to refill the pipe in 2010. And so…

And I will add to that Jim, the SAR was declining throughout 2009. So you are right, I mean there is a number of factors, Scot, you are on that, but lease originations return on a much lower number of new car sales. And we didn’t see the rebound and the SAR really come in until ’10. Scot Ciccarelli – RBC Capital Markets: Okay. I will follow-up the answer. Thank you.

All right, Scot.

Next we move to Craig Kennison with Robert W. Baird. Craig Kennison – Robert W. Baird: Good morning. Thanks for taking my question as well.

Good morning Craig. Craig Kennison – Robert W. Baird: Good morning. Eric, the 25% tax rate is that on a GAAP basis or adjusted pre-tax profit just want to confirm?

That’s our effective tax rate on a GAAP basis. Craig Kennison – Robert W. Baird: And is there any nuance I am not appreciating about the impact on pre-tax profit on an adjusted basis of that tax rate?

Well, the nuance Craig is the fact that most of those adjustments result in tax deductions. I mean, that so what I am doing is giving you the nuance of the rate goes down, because a lot of those adjustments are tax deductible, but I am not taking them out on my pre-tax GAAP income. Craig Kennison – Robert W. Baird: Okay, that’s helpful. Thank you. And then…..

And that’s why Craig just to be clear that’s why I gave you the guidance of $40 million to $50 million on cash taxes, because there I don’t think you can get to the number, that is where the nuance occurs that you are referring to. As your pre-tax on an adjusted basis is up, so I am giving you the cash tax number we expect rather than a percent. Craig Kennison – Robert W. Baird: Understood. That’s helpful. Thanks Eric. And Jim, I think one of your online competitors recently announced they would be offering a buyback guarantee, is that a disruptive new service and is that something you would consider?

Yeah. And something that we have actually that the industry is down and it’s been a practice of the industry over the years from time-to-time. I think it’s maybe something new for that particular entity. But there are insurance programs in place where insurers, you can buy insurance that will protect you to buy the vehicle back over the course of 60 or 90 days and refund 95% of your vehicle purchase or something of that nature, but it’s a program quite frankly that we used over the years as well for specific customers and specific promotions. Craig Kennison – Robert W. Baird: And just to confirm is that a service you currently offer either directly or through an insurance partner?

Yes, it’s a service that we could provide through an insurance affiliate. And different markets offer it based upon market conditions there, but again we aren’t retaining that risk generally. I mean, I am not aware of any right now, where we are retaining a risk we insure it all though a third-party. And they – and actually the customer pace for the insurance not us. Craig Kennison – Robert W. Baird: Got it. Thank you.

You’re welcome.

And Matthew Fassler with Goldman Sachs will have our next question. Matt Fassler – Goldman Sachs: Thanks a lot. Good morning. It’s Matt Fasler sitting in for Brinkman today.

Good morning. Matt Fassler – Goldman Sachs: So two questions, first of all, thanks for you candor unless going on into ADESA. And you spoke to some of the cyclical drags and the turning points we might see. Is there anything of a structural nature that you have see having gained or lost momentum in terms of impediments to the whole car auction business model this quarter, whether it’s what the rental car companies are doing or online on the auctions in the whole car space anything like that?

No, Matt. I would say things are nothing out of the ordinary things that are pretty consistent than it’s much of what we stated already. Matt Fassler – Goldman Sachs: Fair enough. And then I am sorry go ahead Eric.

And Matt I was going to add Jim did comment maybe the only thing you are seeing grounding dealers or buying more off-lease vehicles because of the residual value that were set three years compared to the used car values of today. It’s very attractive for them to do that. I mean, that’s not structural. I think that’s temporary, but that is an impact we are monitoring. Matt Fassler – Goldman Sachs: Got it. And then you spoke about IAA and AFC sort of holding their ground and essentially acting as hedges. Not to take the decision in this action, but if there were an item to watch for in IAA and the salvage business in particular, that will be potentially concerning what would it be what should the watch fronts on the horizon be here?

I am sorry Matt. Would you mind just repeating that for me? Matt Fassler – Goldman Sachs: Yeah, sure, of course. Just real briefly, it sounds like IAA and AFC are doing well, you sort of said, I guess almost the pro forma statement, there are no guarantees that, that continues. Is there anything that could possibly, what would we look for that might not move in the right direction in the salvage business that would be offset by an offset in the whole care business?

I think that the thing I would point to I guess would be there is a job and proceeds the salvage business is obviously there is a number of factors that affect product prices including used car values, including currency, including miles driven scrap prices. If there was a significant change in those areas, it could possibly bring down the proceed prices at IAAI, which would not allow them to perform it at the same level. Matt Fassler – Goldman Sachs: Got it, fair enough. Thank you so much.

Okay. You are welcome.

The next question we will hear from Tom Shandell with Goldentree Asset Management. Tom Shandell – Goldentree Asset Managemnet: Hi thank you. Good morning.

Good morning Tom. Tom Shandell – Goldentree Asset Managemnet: Some of my questions were already answered. Question -- sort of a housekeeping question on the supplement. If I look at page three, which has the quarterly breakdown of all of your EBITDA calculations, you show nonrecurring charges in this quarter of 16.2, and non-cash charges of 46.2. And I was hoping you could help me understand which of those -- your EBITDA calculation is from net income going up, and I usually look at the other direction, so I am just trying to understand what I should and shouldn't include in my add-backs. So I was wondering if you can help me understand which of these items are below the operating income line and which are above. I mean, I presume the non-cash charges has a lot of the loss on debt retirement in there because of the size.

Yes, but it does not include the 14.5% from termination of the swap because that was an interest expense which is up above. Tom Shandell – Goldentree Asset Managemnet: Sure.

But everything else is above if you look at it the differentiation is above the operating income line. It’s an add back. It was below that line or then the exception will be depreciation and amortization, there is operating cost we show separately. Tom Shandell – Goldentree Asset Managemnet: Okay, but the adjustment to contingent acquisition cost that didn’t include other income?

That rest of the SG&A. Tom Shandell – Goldentree Asset Managemnet: That rest of the SG&A?

Yes. Tom Shandell – Goldentree Asset Managemnet: Interesting okay. I appreciate that.

Yes, its an operating cost it’s the new actually Tom it’s the new accounting for business acquisitions its not how we used to do it. Tom Shandell – Goldentree Asset Managemnet: Okay. That’s helpful. Switching to IAAI could you help understand what percentage of the business this quarter was sort of your traditional business and what percentage it was rental and charity and things of that sort?

We still continue to be about 85% insurance. It did fall just slight below at this quarter, but for the year it was still running right around 85%. There is not a big change there. And I don’t think that surprising because when the summer months whether its fewer insurance claims so I think it’s probably more seasonal than anything that it probably dropped a little bit. Tom Shandell – Goldentree Asset Managemnet: How many natural disaster can we seem to be experiencing weather related, do they have meaningful change in the volume of business?

It is one of the more meaningful things that occurs throughout the year as weather related claims and it has been a very interesting cycle as you probably know with the numbers of tornados, floods and the heat all the things have go with heat have really created some situation whether it would be the tornados or the floods or the severe storms.

Thus hardly goes snow and ice.

Snow and ice earlier, but I’m talking that’s probably been something that’s been a trend in our favor that is have normal for the summer months. Tom Shandell – Goldentree Asset Managemnet: But in the quarter what were the tornado activity etcetera was that a meaningful benefit to your volume?

No, its not meaningful so far because there is a lot of that is occurred in taking average term of 75 days form the time that the cars are assigned to us that the time we sell it. But again meaningful over the course of the year weather related as an impact and again that’s what’s keeping the insurance volumes probably at the normal levels, but remember there are natural disasters every year there is just each year there is some place else its weather it’s a hurricane or tornado its kind of a recurring thing that these weather events occur. Tom Shandell – Goldentree Asset Managemnet: Okay. So, the quarter had some pretty good cash flow and I know money is fungible, but the way I line up the numbers, it would appear that your good cash flow was invested in these receivables held for investment, which apparently have good return. Can we think about when we model the company that, that will be a reasonable use of free cash flow going forward?

There will be an impact of us growing. As we grow the AFC portfolio, you will see us utilize some of our cash, because we retain $0.225 on the dollar and securitize the remainder. In periods where we were running that portfolio off, it was a significant generator of cash. So Tom yes, that’s part of our model. Although I don’t think you will see the moves as drastic as they occurred in ‘08/09 and the growth is more steady now. Tom Shandell – Goldentree Asset Managemnet: All right. But we could probably think about this quarter being more normal?

Yes. This quarter is fairly normal, yes. I mean, again there is a bit of seasonality in that business. You build up and then it kind of lags into this – their portfolio will lag a little bit into the fall where it will start to see some more activity generally as they get near your end and people start buying inventory and flooring it as they prepare for the next season. Tom Shandell – Goldentree Asset Managemnet: I see. Finally, the whole car business, as you mentioned is supply constrained, but yet in AFC you're picking up share. So I guess the question is are you making whole car floor plan loans, or are you expanding the type of loans to include just general floor plan loans to used car dealers who may not be buying cars at auctions?

Tom, right now, it’s being driven by used cars that are being floored. With our recent improvement, we have been able to expand, but that’s still there are limitations on the ability going to these other baskets. There is a limit to the securitization, but right now the number of units floored which is actually vehicles, cars has increased substantially. So, we’ve got a number of things going in our favor, but it’s primarily cars. We are moving in a little bit more into the specialty area that Jim mentioned. We have that capacity, but again it can’t grow substantially because there are limits as to how much of the securitization can be used in those areas. Tom Shandell – Goldentree Asset Managemnet: Right. But I mean, are you flooring cars that are from auction or are you replacing incumbent lenders and just capturing more customers?

We are flooring cars purchased at auction. There is a little bit with the activity of the retailers buying cars from consumers. We will floor those vehicles up to black book prices and things like that, but we still are predominantly flooring cars acquired at auction. That’s our focus and that’s where they are getting their growth. Tom Shandell – Goldentree Asset Managemnet: Okay, thanks Jim and Eric.

Thank you. Rochelle, we put time for one more question, what was next.

Okay, we’ll move on to Gary Prestopino with Barrington Research.

Hey Gary. Gary Prestopino – Barrington Research: Yes, I am fine. Thanks.

All right. I think we may have one more person we could their question.

Okay. Mr. Prestopino, your line is open. Gary Prestopino – Barrington Research: I am done.

He is done.

Okay, there are no further questions. Jim Hallett – Chief Executive Officer: All right, Rochelle. Maybe just before we close out here, I would just close in saying thank you for being on, and thank you for your interest. We're definitely going through some challenging times here. And this certainly isn’t the first challenge that we have dealt with as you think of what we have been through over the cars, actually what we have been through in the first half of this year and then as we take a look at what we have been through over the last three or four years is the management team. And I would just remind you that this is very, very talented management team, very passionate about this business. And we are a scrappy bunch and we find a way to get things done. And I can tell you that we will fight to the better into deliver on our goals and our expectations and with that, hopefully we will continue to see things move in a positive direction here. So, I will wind up with that and thank you very much for your time and interest today.

And that will conclude today’s call. We thank you for your participation.