March 16, 2006

1

• March 16, 2006
• Jay Kutchins
• RCMP

2
Outline

• Position
• Company Overview
• Macroeconomic Factors
• Competition
• Financial Figures
• How Copart Makes Money
• VB 2
• Value-Added Services
• Porters Five Forces
• Excel!
• Sensitivity Analysis
• Recommendation

3
RCMPs Position

• Bought 1000 shares on 2/28/03 at 7.82 per share
• Currently (as of 3/16/06, 730PM) at 26.82
• Represents more than 9.2 of portfolio based on
  market value
• Up about 343 since purchase for a gain of about
  19,010
• Consistently one of RCMPs top performers

4
Company Overview

• Roll-up buys smaller companies that have the
  same or similar enough operations

Car accident
Temporary storage
Inspected by insurance company
Cost of Repairs lt FMV-Salvage pay for repairs
A
Settle with the insured
B
Sell car to salvage vehicle sales company
Cost of Repairs gt FMV-Salvage car deemed total
loss
Salvage vehicle sales company picks up the car
Storage until documents are passed from car
owner and car is cleared by the DMV
45-60 days later the DMV gives documentation to
salvage vehicle sales company and the car is
ready to be sold
5
Company Overview

• Factors the vehicle suppliers may consider when
  selecting a salvage vehicle sales company include
• anticipated percentage return on salvage
• the services provided by the salvage vehicle
  sales company and the degree to which such
  services reduce administrative costs and
  expenses
• the price the salvage vehicle sales company
  charges for its services
• national coverage and ability to respond on a
  national scale and
• the ability to generate custom seller reports

6
Macroeconomic Factors

• Weather
• Poor weather usually means more accidents, which
  can mean more vehicles for Copart to sell
• Fuel prices
• Higher fuel prices may lead to fewer miles being
  driven and thus fewer accidents
• Auto accidents
• If people get into fewer or less severe accidents
  Copart may have less inventory to auction
• International Environment
• More variables, less specific knowledge and
  experience

7
Competition

• Vehicle auctioneers
• Auction Broadcast Company Could not locate at
  all
• ADESA (KAR) 53 used vehicle and 36 salvage
  auction sites Automotive Finance Corporation
  (AFC), a wholly owned subsidiary by ADESA,
  provides financing, auctions done on site
• SADISCO Online and traditional auctions, 25
  locations only in the Southeast, incredibly
  confusing website
• Insurance Auto Auction (IAAI) Offers online and
  traditional auctions, 75 locations, US broken
  down into 5 geographic areas
• Manheim Auctions Private, 135 locations
  internationally, appears to be premier company in
  the industry worldwide
• Dismantlers
• Greenleaf 23 locations, odd distribution
  throughout US (NV, AZ, TX, IL, MI, OH, MA, VA,
  NC, GA, FL) recycling and environment
• LKQ Corporation (LKQX) 38 sales and processing
  and 12 distribution centers, primarily, but not
  exclusively, use auctions

8
Financial Figures
9
VB2

• Virtual Bidding Second Generation
• Coparts pride and joy of fiscal 2004
• Completely eliminated live auctions, which
  resulted in
• Higher returns on vehicles for sellers
• Growth in the out-of-state and out-of-country
  sales
• Increased net income -Copart Annual Report

10
VB2

• VB 2 BID4U
• You enter in the maximum amount you are willing
  to pay, and bidding will be done automatically by
  the minimum increment allowed until your maximum
  amount
• Maximum amount is completely confidential, Copart
  associates cannot even see it

11
VB2

• Technology has been in use for just over a year
• Transition was even smoother than expected
• No significant problems at all and only a few
  minor occurrences
• It has also improved the efficiency of our
  operations. For fiscal 2005, sales of vehicles to
  buyers outside the state where the vehicle is
  located accounted for 46 of total vehicles sold
  25 of salvage vehicles were sold to out of state
  buyers and 21 were sold to buyers out of
  country, based on registration. -2005 Annual
  Report

12
Value-Added Services

• Internet bidding, Internet proxy bidding and
  virtual sales powered by VB 2 , which enhance the
  competitive bidding process
• on-line payment capabilities via our ePay
  product
• e-mail notifications to potential buyers of
  salvage vehicles that match desired
  characteristics
• automatic outbid notification by phone through VB
  2  voice info
• sophisticated vehicle processing at storage
  sites, including ten-view digital imaging of each
  vehicle and the scanning of each vehicles title
  and other significant documents such as body shop
  invoices, all of which are available from us
  through the Internet
• CoPartfinder, our Internet-based used vehicle
  parts locator that provides vehicle dismantlers
  with greater resale opportunities for their
  salvage purchases and
• Offsite sales, which allow vehicle suppliers to
  sell any vehicle, boat, or heavy equipment
  without transporting it to one of our
  facilities. -2005 Annual Report

13
Porters Five Forces

• THREAT OF NEW ENTRANTS LOW entry difficult and
  costly and face veteran competition
• THREAT OF SUBSTITUTES LOW there are
  alternatives, but the industry exists because it
  is most often the best option
• BARGAINING POWER OF BUYERS LOW buyers compete
  among themselves
• BARGAINING POWER OF SUPPLIERS HIGH limited
  number of suppliers, limited amount of potential
  inventory
• INDUSTRY RIVARLY HIGH competition from vehicle
  sales and auction companies and dismantlers,
  local, regional, national supply agreements with
  vehicle suppliers, competition in acquisition of
  salvage vehicle sales facilities

14
Financial Analysis

• Excel timeyay!

15
Sensitivity Analysis
16
Recommendation

• Final recommendation HOLD the entire position
  of 1000 shares of Copart
• Great company in an industry it does very well
  in, despite it being unattractive and unglamorous
• Still have not fully realized the affects of VB
  2, which should be worth sticking around for
• Although analysis indicates the stock is still
  undervalued, the exposure to the company/industry
  is already considerable
• Questions?