konstskicklighet

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 • Porter’s Five Forces • Excel! • Sensitivity Analysis • Recommendation

3. RCMP’s Position • Bought 1000 shares on 2/28/03 at $7.82 per share • Currently (as of 3/16/06, 7:30PM) 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 RCMP’s 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 < FMV-Salvage: pay for repairs A Settle with the insured B Sell car to salvage vehicle sales company Cost of Repairs > 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 • Copart’s 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 vehicle’s 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. Porter’s 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 time…yay!

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?