Keenan Johnston Shivam Khanna David Light September 25, 2008
Presentation Outline Macroeconomic Review n Current market conditions n Industry Overview n Copart Overview n Historical Performance n Recent Events/Performance n Portfolio Positioning n Financial Projections n
Macroeconomic review • High oil prices, credit market turmoil and weakness in financial sector has dragged markets down in the recent months • The market is down 17% this year • Copart’s revenues however, are not materially affected by economic slowdowns Source: Yahoo Finance, Company filings
Current market conditions n Non-cyclical companies trading at a premium ¨ Represents insulation for economic uncertainty n Volatility at a high (VIX below) Source: Yahoo Finance
Industry Overview n Industry benefits with increasing demand for cars, More cars = More accidents = More auctions = More revenue ¨ Current economic conditions are not conducive to car purchasing n Insurance companies are facing shrinking premium margins and in order to cuts costs are purchasing recycled parts from salvaged vehicles. More demand for Copart’s auctions n Rising global oil prices have driven people to find alternatives to driving, Less car accidents = fewer opportunities for revenue
Key Market Players Source: Wikiinvest
Copart Overview n Runs a proprietary online auction system for salvaged vehicles ¨ Damaged cars often termed by Insurance Companies as “Total Loss” n Provides vehicle suppliers a full range of re-marketing services to process and sell these vehicles n Earns Revenue from both buyers and sellers at the auction (not dissimilar to Stub. Hub or Ebay) Source: Company filings
Copart Business Model - US Accident totally destroys car Insurance Co. deems car too costly to repair Copart auctions car to buyers all around the globe and earns income from both parties Dismantlers Source: Company filings Exporters Rebuilders Used car dealers
Copart Business Model - UK Accident totally destroys car Insurance Co. deems car too costly to repair Risk of devaluation Copart purchases car from Insurance company and remarkets it to potential buyers Dismantlers Source: Company filings Exporters Rebuilders Used car dealers
North American Facilities n n n Source: R. W. Baird Copart Plans to add 10 -15 North American Facilities in the next year Management sees potential for 150 -200 facilities over time ~35% market share
U. K. Facilities n n n Source: R. W. Baird In 2008, increased facilities from 10 to 15 Projected to acquire 5 more facilities in the next year 30% market share by the end of next year in U. K.
Historical financial performance n Historically strong financial performance ¨ Driven Source: Company filings by outstanding margins
Shareholder Base Source: Yahoo Finance
Recent events n September 18, 2008 - Copart adds a new facility in Kentucky due to growing demand n April 14, 2008 - Copart acquires fourth facility in Missouri n March 7, 2008 - Revenues declined after company declared UK expansion had not gone according to plan n March 6, 2008 - Copart entered into a $200 million revolving line of credit with Bank of America. Source: Company filings, Reuters
Stock performance Source: Google Finance
Current Portfolio
Correlation Source: Yahoo Finance
Financial Projections
Base case In-line with management projections n Gross PP&E to remain at 95% of sales n ¨ historically n Net goodwill at 38% of net PP&E ¨ historically n 90 -104% 33 -45% Tax rate: 38%
Base case n With relatively optimistic assumptions our model yielded a value well below market
Base case- sensitivity
RCMP Historical Transactions Date Buy/Sell Price Shares Value Feb 28, 2003 Buy $7. 82 (1000) $7, 820 Nov 15, 2007 Sell $36. 20 (300) ($10, 860) Apr 30, 2008 Sell $41. 30 (300) ($12, 390) Current Holdings Date Shares Price Market Value Sep 22, 2008 400 $43. 34 $17, 336
Recommendation n Sell 200 shares with a $36 limit order n Gross proceeds of approximately $8, 200 ¨ Based n on market price of $41. 00 Will realize a gain of approximately $6, 630
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