This Annual Report on Form 10-K, including the information incorporated by reference herein, contains forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "intend," "forecast," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this Form 10-K involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These factors include those listed in Part I, Item 1A.-"Risk Factors" of this Form 10-K and those discussed elsewhere in this Form 10-K. We encourage investors to review these factors carefully together with the other matters referred to herein, as well as in the other documents we file with the SEC. The Company may from time to time make additional written and oral forward-looking statements, including statements contained in the Company's filings with the SEC. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

Although we believe that, based on information currently available to the Company and its management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.

Overview

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the Internet through our Virtual Bidding Second Generation Internet auction-style sales technology, which we refer to as VB2. Sellers are primarily insurance companies but also include banks and financial institutions, charities, car dealerships, fleet operators, vehicle rental companies and the general public. We sell principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters; however at certain locations, we sell directly to the general public. The majority of the vehicles sold on behalf of the insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle sellers a full range of services that expedite each stage of the salvage vehicle sales process and minimize administrative and processing costs. In the United States and Canada, or North America, we sell vehicles primarily as an agent and derive revenue primarily from fees paid by vehicle sellers and vehicle buyers as well as related fees for services such as towing and storage. In the United Kingdom, or UK, we operate primarily on a principal basis, purchasing salvage vehicles outright from insurance companies and reselling the vehicles for our own account.

Our revenues consist of sales transaction fees charged to vehicle sellers and vehicle buyers, transportation revenue, purchased vehicle revenues, and other remarketing services. Revenues from sellers are generally generated either on a fixed fee contract basis where we collect a fixed amount for selling each vehicle regardless of the selling price of the vehicle or, under our Percentage Incentive Program, or PIP program, where our fees are generally based on a predetermined percentage of the vehicle sales price. Under the fixed fee program, we generally charge an

additional fee for title processing and special preparation. Although sometimes included in the consignment fee, we may also charge additional fees for the cost of transporting the vehicle to our facility, storage of the vehicle, and other incidental costs. Under the consignment programs, only the fees associated with vehicle processing are recorded in revenue, not the actual sales price (gross proceeds). Sales transaction fees also include fees charged to vehicle buyers for purchasing vehicles, storage, loading and annual registration. Transportation revenue includes charges to sellers for towing vehicles under certain contracts. Transportation revenue also includes towing charges assessed to buyers for delivering vehicles. Purchased vehicle revenue includes the gross sales price of the vehicle which we have purchased or are otherwise considered to own and is primarily generated in the UK.

Operating costs consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle towing, insurance, fuel, equipment maintenance and repair, and costs of vehicles we sold under purchase contracts. Costs associated with general and administrative expenses consist primarily of executive management, accounting, data processing, sales personnel, human resources, professional fees, research and development and marketing expenses.

During fiscal 2004 and fiscal 2008, we converted all of our North American and UK sales, respectively, to an Internet-based auction-style model using our VB2 Internet sales technology. This process employs a two-step bidding process. The first step, called the preliminary bid, allows buyers to submit bids up to one hour before a real time virtual auction begins. The second step allows buyers to bid against each other, and the high bidder from the preliminary bidding process, in a real-time process over the Internet.

Acquisitions and New Operations

We have experienced significant growth in facilities as we have acquired twenty three facilities and established thirteen new facilities since the beginning of fiscal 2006. All of these acquisitions have been accounted for using the purchase method of accounting.

As part of our overall expansion strategy of offering integrated services to vehicle sellers, we anticipate acquiring and developing facilities in new regions, as well as the regions currently served by our facilities. We believe that these acquisitions and openings strengthen our coverage as we have 147 facilities located in North America and the UK and are able to provide national coverage for our sellers.

The following table sets forth facilities that we have acquired or opened from August 1, 2006 through July 31, 2009:

                        Acquisition                         Geographic Service
      Locations        or Greenfield         Date                  Area
      Baltimore        Greenfield        November 2006    Central Maryland
      Maryland
      Woodburn,        Greenfield        January 2007     Central Oregon
      Oregon
      Sandy, England   Acquisition       June 2007        East England and
                                                          Midlands
      Sandtoft,        Acquisition       June 2007        Northern England
      England
      Sandwich,        Acquisition       June 2007        London and South East
      England                                             England
      Westbury,        Acquisition       June 2007        South Wales and South
      England                                             West England
      Chester,         Acquisition       June 2007        North Wales and North
      England                                             West England
      Denny,           Acquisition      *June 2007        Scotland
      Scotland
      Wootton,         Acquisition       June 2007        Central England
      England
      Punta Gorda,     Greenfield        July 2007        Southwest Florida
      Florida
      Peterlee,        Acquisition       August 2007      Northern England
      England
      Wisbech,         Acquisition       August 2007      Eastern England
      England
      Rochford,        Acquisition       August 2007      Southeast England
      England
      London, Canada   Greenfield        September 2007   Southern Ontario
      Windsor, New     Greenfield        November 2007    Central New Jersey
      Jersey
      Walton,          Greenfield        January 2008     Northern Kentucky
      Kentucky
      Birmingham,      Greenfield        February 2008    Central Alabama
      Alabama
      Inverkeithing,   Acquisition       March 2008       Central Scotland
      Scotland
      Whitburn,        Acquisition       March 2008       Central Scotland
      Scotland
      Featherstone,    Acquisition      *March 2008       Northeast England
      England
      Doncaster,       Acquisition      *March 2008       Northeast England
      England
      Minneapolis,     Greenfield        March 2008       Central Minnesota and
      Minnesota                                           Wisconsin
      Sikeston,        Acquisition       March 2008       Southeast Missouri
      Missouri
      York, England    Acquisition       April 2008       Northern England
      Prairie Grove,   Greenfield        July 2008        Northwest Arkansas
      Arkansas
      Louisville,      Greenfield        September 2008   Northwest Kentucky and
      Kentucky                                            Southern Indiana
      Richmond,        Greenfield      **October 2008     Central Virginia
      Virginia
      Montgomery,      Greenfield        February 2009    Central Alabama
      Alabama
      Greer, South     Greenfield        February 2009    Northwest South
      Carolina                                            Carolina
      Warren,          Greenfield        June 2009        Central Massachusetts
      Massachusetts


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   º *

º **
º Former MAG facility

In April 2008, we completed the acquisition of Simpson Bros. (York) Holdings Limited, a UK limited liability company (Simpson), which operates one location in York, England. Simpson's primary business activity was the dismantling of automobiles and the sales of salvaged auto parts. In the same month, we also completed the acquisition of Bob Lowe Salvage Pool, Inc., which operates one location in Sikeston, Missouri. In February 2008, we completed the purchase of the assets and business of AG Watson Auto Salvage & Motors Spares (Scotland) Limited (AG Watson) which operates two salvage locations in Scotland and two salvage locations in northern England. In August 2007, we completed the acquisition of Century Salvage Sales Limited (Century), a vehicle salvage disposal company with three facilities located in the UK. The total consideration paid for these acquisitions consisted of approximately $38.2 million in cash, net of cash acquired.

On June 14, 2007, we acquired all the issued share capital of Universal Salvage plc, or Universal, for £2.00 per share (approximately $3.94 based on currency exchange rates on June 14, 2007). Universal, based in the UK and operating exclusively within the UK, is a service provider to the motor insurance and automotive industries. The aggregate acquisition consideration paid by us totaled approximately £60.7 million (approximately $120.0 million based on currency exchange rates on June 14, 2007) and was funded from our available cash resources. We also assumed outstanding indebtedness of Universal totaling approximately £2.3 million ($4.5 million as of June 14, 2007). The acquisition was our first acquisition outside North America and included the seven facilities discussed above.

The period-to-period comparability of our operating results and financial condition is substantially affected by business acquisitions, new openings, weather and product introductions during such periods. In particular, we have certain contracts inherited through our UK acquisitions that require us to act as a principal, purchasing vehicles from the insurance companies and reselling them for our own account. It is our intention, where possible, to migrate these contracts to the agency model in future periods. Changes in the amount of revenue derived in a period from principal transactions relative to total revenue will impact revenue growth and margin percentages.

In addition to growth through acquisitions, we seek to increase revenues and profitability by, among other things, (i) acquiring and developing additional vehicle storage facilities in key markets, (ii) pursuing national and regional vehicle seller agreements, (iii) expanding our service offerings to sellers and buyers, and (iv) expanding the application of VB2 into new markets. In addition, we implement our pricing structure and merchandising procedures and attempt to effect cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems and redeploying personnel, when necessary.

Results of Operations

The following table sets forth for the periods indicated below, certain information derived from our consolidated statements of income presented in absolute dollars and as a percentage of revenues. There can be no assurance that any trend in operating results will continue in the future.

     Fiscal 2009 Compared to Fiscal 2008

     Revenues

    The following sets forth information on revenue by class (in thousands,
except percentages):

                                       Percentage of                 Percentage of
                            2009          Revenue         2008          Revenue
       Service revenues   $ 615,352                83 % $ 619,728                79 %
       Vehicle sales        127,730                17 %   165,120                21 %

                          $ 743,082               100 % $ 784,848               100 %

Service Revenues. Service revenues were approximately $615.4 million during fiscal 2009 compared to $619.7 million for fiscal 2008, a decline of $4.4, million or 0.7%,below fiscal 2008. The decline in service revenue was due to the negative impact on recorded service revenues due to the change in the GBP to USD exchange rate and was offset by growth in unit volume and a marginal growth in revenue per transaction. The average dollar to pound exchange rate was 1.59 dollars to the pound and 2.00 dollars to the pound for fiscal 2009 and fiscal 2008, respectively, and lead to a reduction in service revenue of $9.5 million. Growth in unit volume was driven primarily by an increase in the units sold on behalf of insurance companies and units sold on behalf of franchise and independent car dealerships. The growth resulted from market wins and, with respect to insurance company cars, from what we believe to be an increase in salvage frequency.

Salvage frequency is the percentage of cars involved in accidents that are deemed total economic losses by the insurance company. We believe the increased availability of such cars was as a result of lower average used car pricing. The growth in unit volume generated $4.9 million in additional revenue relative to last year. Revenue yield per transaction was marginally higher as the decline in the average selling price was offset by higher yield on services provided and generated $0.2 million in additional revenue compared to last year. Over 50% of our service revenue is tied in some manner to the ultimate selling price of the vehicles. We believe the decline in the average selling price was primarily due to: (i) the recent declines in commodity and used car pricing as we believe that commodity pricing, particularly the per ton price for crushed car bodies, has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling; (ii) the decline in used car pricing because we believe used car pricing has an impact on the ultimate selling price of vehicles sold to rebuilders and retailers; and (iii) the strengthening of the dollar as we believe a stronger dollar increases the purchase price of US vehicles paid for in our international buyers' local currencies. However, we do not have sufficient information to determine which vehicles are sold for scrap, dismantling, retailing or export and, accordingly, cannot quantify the impact that commodity pricing, used car pricing and foreign currency exchange rates had on the selling price of vehicles.

Vehicle Sales. We have assumed certain contracts through our UK acquisitions that require us to act as a principal, purchasing vehicles from the insurance companies and reselling them for our own account. Vehicle sales revenues were approximately $127.7 million during fiscal 2009 compared to $165.1 million for fiscal 2008, a decline of $37.4 million, or 22.6%, below fiscal 2008. The decline in vehicle sales revenue was due to the negative impact on recorded vehicle sales revenue due to the change in the GBP to USD exchange rate, the decline in unit volume, and the decline in revenue per transaction. The decline in the average USD to GBP exchange rate lead to a reduction in vehicle sales revenue of $29.7 million. The decline in unit volume lead to a reduction in revenue of $5.3 million and was due primarily to the migration of certain contracts in the UK from a principal basis to a fee basis. The decline in the average revenue per transaction lead to a reduction of revenue of $2.3 million. We believe the decline in the average selling price was primarily due to: (i) the declines in commodity pricing as we believe that commodity pricing, particularly the price per ton for crushed car bodies, has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling; (ii) the decline in used car pricing because we believe used car pricing has an impact on the ultimate selling price of vehicles sold to rebuilders and retailers; and (iii) the strengthening of the dollar as we believe a stronger dollar increases the purchase price of US vehicles paid for in our international buyers' local currencies. However, we do not have sufficient information to determine which vehicles are sold for scrap, dismantling, retailing or export and, accordingly, cannot quantify the impact that commodity pricing, used car pricing and foreign currency exchange rates had on the selling price of vehicles.

Yard Operation Expenses. Yard operation expenses were approximately $324.8 million during fiscal 2009 compared to $328.9 million for fiscal 2008, a decline of approximately $4.1 million, or 1.3%, below fiscal 2008. The beneficial impact on yard operating expenses due to the change in GBP to USD exchange rate was $10.6 million and was offset by an increase in the cost to process each car which was driven primarily by an increase in subhauling costs in the US and the additional costs associated with five new facilities. Included in yard operation costs were depreciation and amortization expenses which were $32.8 million and $32.2 million for the fiscal years ended July 31, 2009 and 2008, respectively.

Cost of Vehicle Sales. The cost of vehicles sold was approximately $106.0 million during fiscal 2009 compared to $133.7 million for fiscal 2008, a decline of approximately $27.6 million, or 20.7%. The beneficial impact on the cost of sales due to the change in the GBP to USD exchange rate was $23.8 million. Unit volume decline was responsible for $4.3 million of the total decline and was due primarily to the migration of certain contracts in the UK from a principal basis to a fee

basis. Cost per unit sold was up marginally and represented a $0.4 million increase relative to last year.

General and Administrative Expenses. General and administrative expenses were approximately $86.9 million for fiscal 2009 compared to $84.3 million for fiscal 2008, an increase of approximately $2.6 million, or 3.1%. The beneficial impact on general and administrative expenses due to the change in GBP to USD exchange rate was approximately $3.0 million. The growth in general and administrative costs was due primarily to: i) increased IT payroll and technology costs as we expanded our development and network departments,
ii) increased advertising costs as we invested in events and media promotions to generate public awareness, and iii) the additional costs associated with the CEO and President's non cash compensation package approved by the shareholders in April 2009. Also included in general and administrative expenses were depreciation and amortization expenses which were $9.0 million and $10.6 million for the years ended July 31, 2009 and 2008, respectively.

Other Income (Expense). Total other income was approximately $2.4 million during fiscal 2009 compared to $11.7 million for fiscal 2008, a decline of approximately $9.3 million, or 79.5%. Net interest income declined $6.1 million due to reductions in both the average cash balances and the interest yield. Other income, net, declined $3.2 million primarily due to the impairment of a note receivable relating to the sale of assets of the public auction business which we exited in 2006 and the loss on the sale of an airplane in the UK, together totaling $2.2 million, currency exchange losses on certain intercompany obligations and losses on the disposition of other certain assets.

Income Taxes. Our effective income tax rates for fiscal 2009 and 2008 were approximately 38.7% and 37.1%, respectively. The increase was driven primarily by the decline in tax exempt interest income.

Discontinued Operations. During fiscal 2009 we received a $12 million payment for a note receivable resulting from the sale of certain MAG business assets and real estate. We exited the MAG business in our 2006 fiscal year. The gain on the sale of the real estate was deferred until payment on the note receivable was received. The $1.6 million of income from discontinued operations represents that gain, net of taxes.

Net Income. Due to the foregoing factors, we realized net income of approximately $141.1 million for fiscal 2009, compared to net income of approximately $156.9 million for fiscal 2008.

     Fiscal 2008 Compared to Fiscal 2007

     Revenues

    The following sets forth information on customer revenue by geographic
region based on the location of the selling entity (in thousands, except
percentages):

                                       Percentage of                 Percentage of
                            2008          Revenue         2007          Revenue
       Service revenues   $ 619,728                79 % $ 535,794                96 %
       Vehicle sales        165,120                21 %    24,886                 4 %

                          $ 784,848               100 % $ 560,680               100 %

Service Revenues. Service revenues were approximately $619.7 million during fiscal 2008 compared to $535.8 million for fiscal 2007, an increase of $83.9 million, or 15.7%, over fiscal 2007. The growth in revenue came from an increase in units sold and an increase in revenue per transaction. The growth in units sold came from acquisitions, primarily in the UK, market share wins and the development of non-insurance markets and represented $59.7 million of the increase and

service revenue yield represented $24.2 million of the total increase. Growth in revenue yield per transaction was primarily due to an increase in the average selling price of the vehicles. Over 50% of our service revenue is tied in some manner to the ultimate selling price of the vehicles. We believe the increase in the average selling price was due primarily to: (i) the increases in commodity pricing, as we believe that commodity pricing, particularly the per ton price for crushed car bodies, has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling; (ii) the increase in used car pricing, as we believe used car pricing has an impact on the ultimate selling price of vehicles sold to rebuilders and retailers; (iii) the weakening of the dollar, as we believe a weaker dollar decreases the purchase price of US vehicles paid for in our international buyers' local currencies; and (iv) the decline in salvaged cars sold as a percentage of total cars sold as salvaged cars generally sell for less than non-salvaged cars. However, we do not have sufficient information to determine which vehicles are sold for scrap, dismantling, retailing or export and, accordingly, cannot quantify the impact that commodity pricing, used car pricing and foreign currency exchange rates had on the selling price of vehicles.

Vehicle Sales. Vehicle sales revenues were approximately $165.1 million during fiscal 2008 compared to $24.9 million for fiscal 2007, an increase of $140.2 million, or 563.5% over fiscal 2007. The increase was due almost entirely to the UK acquisitions in which we assumed certain contracts that required us to act as a principal, purchasing vehicles from the insurance companies and reselling them for our own account. In North America we have no contracts in which we are required to purchase the vehicle from the seller.

Yard Operation Expenses. Yard operation expenses from continuing operations were approximately $328.9 million during fiscal 2008 compared to $271.5 million for fiscal 2007, an increase of $57.4 million, or 21.1%, over fiscal 2007. Yard operating expenses in the UK, excluding depreciation, increased by $49.6 million as we made our first acquisition in our fourth quarter of fiscal 2007 and, accordingly, had a full year of expenses in fiscal 2008. In North America, excluding depreciation, yard operating expenses grew by $6.3 million due primarily to increased volume. Included in yard operation costs were depreciation and amortization expenses which grew by $1.5 million to $32.2 million due primarily to increased amortization associated with intangible assets acquired in the UK.

Cost of Vehicles Sales. The cost of vehicles sold was approximately $133.7 million during fiscal 2008 compared to $22.4 million for fiscal 2007, an increase of $111.3 million, or 497.4%, over fiscal 2007. The increase was due primarily to the UK acquisitions in which we assume certain contracts that require us to act as a principal, purchasing vehicles from the insurance companies and reselling them for our own account.

General and Administrative. General and administrative expenses from continuing operations were approximately $84.3 million for fiscal 2008, compared to $63.6 million for fiscal 2007, an increase of approximately $20.7 million, or 32.5%, over fiscal 2007. The increase came primarily from the additional management, finance, technology, systems and administrative resources required to support international operations, increased resources required to accelerate the development and deployment of the enhancements to VB2 and to our seller support software and interfaces, and the incremental costs associated with the UK integration. Included in general and administrative expenses is depreciation . . .