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Copart, Inc.

Copart, Inc. Brandon Honey Matt Byford Rob Main Presented April 16, 2009. Presentation Overview. Recommendation Company Overview Industry Overview Macroeconomic Overview Management’s Strategy for the Future Recent Company News and Financial Results. Recommendation.

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Copart, Inc.

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  1. Copart, Inc. Brandon Honey Matt Byford Rob Main Presented April 16, 2009

  2. Presentation Overview Recommendation Company Overview Industry Overview Macroeconomic Overview Management’s Strategy for the Future Recent Company News and Financial Results

  3. Recommendation • Sell 200 shares at the market • Keep on watch list • Reconsider if the company issues debt in the future • Decreases overall cost of capital

  4. Copart Overview Founded in 1982 and headquartered in Fairfield, California Operates in more than 140 facilities across the US, Canada, and the UK with 2500 employees Provides remarketing services to process and sell vehicles over the Internet through its online auctions to vehicle suppliers - (similar to StubHub or eBay) Services include online supplier access, salvage estimation services, end-of-life vehicle processing, virtual insured exchange, transportation services, vehicle inspection stations, on-demand reporting, and DMV processing Offers CoPartfinder, an Internet-based used vehicle parts locator that provides vehicle dismantlers with resale opportunities for their salvage purchases

  5. Copart Business Model 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 Exporters Rebuilders Used car dealers

  6. SWOT Analysis

  7. Industry Overview • Auto remarketing industry is relatively non-cyclical • Slightly correlated with auto sales and with the driving season • Increased car purchases leads to an increase in accidents • Increase drivers on the road leads to an increase in accidents • Copart customers have increased purchases of recycled parts to cut costs • Potential of fuel prices rising back to summer 2008 highs • Fewer drivers on the road will limit accidents, which limit suppies for Copart

  8. Market Share

  9. Macroeconomic Conditions Some domestic macroeconomic indicators seeming to near a bottom Unemployment rate continues to rise towards 10% Commodity prices (fuel) remain depressed but stable Equity markets experiencing a bear market rally Credit markets beginning to thaw as LIBOR creeps lower

  10. Management’s Strategy for the Future • Continue growth by acquisition • Facilities • Software • Further expansion throughout Canada and UK, and into continental Europe • Considering issuing long-term debt to finance continued growth and/or repurchase shares • Planning to continue share buyback program • Repurchased 6.5 million shares in 2008 • Repurchased 3 million shares in 2007

  11. Recent Company News 12/5/08 - Former Governor of Missouri Matt Blunt joins Board of Directors 2/17/09 - Reaches settlement with Auto Auction Services concerning an anti-trust suit 2/09 - Adds facilities in Alabama and South Carolina 2/09 - Signed an agreement with uShip to feature uShip as a preferred transport solution for Copart's buyers 3/5/09 - Announced $.32/share earnings on a 2.1% decrease in revenue, predominately in the UK, and an asset impairment charge

  12. Recent Financial Results • 2009 Q2 • Net Income – $65.5 million • Net Profit Margin – 18% • EBIT Margin – 29% • 2008 • Net Income – $156.9 million • Net Profit Margin – 18.1% • EBIT Margin – 30.3%

  13. Stock Performance

  14. Correlation

  15. Competitors • Auto Dealers Exchange Services of America • Offers used- and salvage-vehicle redistribution services to automakers, lessors, and dealers in the US, Canada, and Mexico. ADESA operates about 60 used-vehicle auctions and more than 40 salvage auctions • Insurance Auto Auctions, Inc. • Leading US auto salvage company that auctions off cars declared a total loss for insurance purposes; it auctions either whole vehicles or, if they can't be fixed, just the parts. IAA has about 150 auction sites throughout North America • Manheim • remarkets vehicles for wholesale consignors, including car dealers and makers, rental-car and fleet companies, and financial institutions.The company offers auction-related services, as well, such as reconditioning, wholesale inspections and certifications, and used car valuation

  16. Comparables

  17. Projections • Valuation is extremely dependent on growth rate • Copart will see higher volume • Revenues will depend on the price of steel • 50% of UK revenues have been related to the value of the selling price • Selling price is dependent on the price of steel • Margins will decline due to a higher % of business in the UK • Copart, Inc. acts as a principal in the UK

  18. Projections • Growth depends on: • Acquisitions • Entered UK market in June 2007 • Volume changes in the salvage car market • Growth in market share • Fees dependent car selling prices • Growth in non-insurance company sellers

  19. Projections • Higher Volume = More Fee Revenue • More cars are declared totaled because difference between value before accident and value after accident widens • Lower used-car pricing • Auto manufacturers providing more features in cars

  20. Assumptions

  21. Valuation CAPM DCF Valuation: $26.87 ROE DCF Valuation: $15.56 “Goal Post Valuation”: $19.70 Comparables Valuation: Current Price: 30.18

  22. RCMP Historical Transactions FEB 2003: Bought 1000 shares at $7.82 NOV 2007: Sold 300 shares at $36.20 APR 2008: Sold 300 shares at $41.30 SEP 2008: Sold 200 shares at $41.05 Current Holdings: 200 shares at $30.18

  23. Recommendation • Sell 200 shares at the market • Keep on watch list • Reconsider if the company issues debt in the future • Decreases overall cost of capital

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