March 16, 2006March 16, 2006

Jay KutchinsJay Kutchins

RCMPRCMP

OutlineOutline PositionPosition Company OverviewCompany Overview Macroeconomic FactorsMacroeconomic Factors CompetitionCompetition Financial FiguresFinancial Figures How Copart Makes MoneyHow Copart Makes Money

VB 2VB 2 Value-Added ServicesValue-Added Services Porter’s Five ForcesPorter’s Five Forces

Excel!Excel! Sensitivity AnalysisSensitivity Analysis RecommendationRecommendation

RCMP’s PositionRCMP’s Position

Bought 1000 shares on 2/28/03 at $7.82 Bought 1000 shares on 2/28/03 at $7.82 per shareper share

Currently (as of 3/16/06, 7:30PM) at Currently (as of 3/16/06, 7:30PM) at $26.82$26.82 Represents more than 9.2% of portfolio based Represents more than 9.2% of portfolio based

on market valueon market value Up about 343% since purchase for a gain of Up about 343% since purchase for a gain of

about $19,010about $19,010 Consistently one of RCMP’s top performersConsistently one of RCMP’s top performers

Company OverviewCompany Overview

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

Car accidentTemporary storageInspected by insurance company

Cost of Repairs <FMV-Salvage:pay for repairs

Cost of Repairs >FMV-Salvage:

car deemed total loss

Sell car to salvage vehicle sales company

Settle with the insured

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

AB

Company OverviewCompany Overview

Factors the vehicle suppliers may consider Factors the vehicle suppliers may consider when selecting a salvage vehicle sales when selecting a salvage vehicle sales company includecompany include anticipated percentage return on salvage; anticipated percentage return on salvage; the services provided by the salvage vehicle sales the services provided by the salvage vehicle sales

company and the degree to which such services company and the degree to which such services reduce administrative costs and expenses; reduce administrative costs and expenses;

the price the salvage vehicle sales company the price the salvage vehicle sales company charges for its services; charges for its services;

national coverage and ability to respond on a national coverage and ability to respond on a national scale; and national scale; and

the ability to generate custom seller reportsthe ability to generate custom seller reports

Macroeconomic Factors Macroeconomic Factors WeatherWeather

Poor weather usually means more accidents, Poor weather usually means more accidents, which can mean more vehicles for Copart to sellwhich can mean more vehicles for Copart to sell

Fuel pricesFuel prices Higher fuel prices may lead to fewer miles being Higher fuel prices may lead to fewer miles being

driven and thus fewer accidentsdriven and thus fewer accidents Auto accidentsAuto accidents

If people get into fewer or less severe accidents If people get into fewer or less severe accidents Copart may have less inventory to auctionCopart may have less inventory to auction

International EnvironmentInternational Environment More variables, less specific knowledge and More variables, less specific knowledge and

experienceexperience

CompetitionCompetition Vehicle auctioneers:Vehicle auctioneers:

Auction Broadcast Company: Could not locate at allAuction Broadcast Company: Could not locate at all ADESA (KAR):ADESA (KAR): 53 used vehicle and 36 salvage auction sites; 53 used vehicle and 36 salvage auction sites;

Automotive Finance Corporation (AFC), a wholly owned subsidiary Automotive Finance Corporation (AFC), a wholly owned subsidiary by ADESA, provides financing, auctions done on siteby ADESA, provides financing, auctions done on site

SADISCO:SADISCO: Online and traditional auctions, 25 locations only in Online and traditional auctions, 25 locations only in the Southeast, incredibly confusing websitethe Southeast, incredibly confusing website

Insurance Auto Auction (IAAI): Offers online and traditional auctions, Insurance Auto Auction (IAAI): Offers online and traditional auctions, 75 locations, US broken down into 5 geographic areas75 locations, US broken down into 5 geographic areas

Manheim Auctions:Manheim Auctions: Private, 135 locations internationally, Private, 135 locations internationally, appears to be premier company in the industry worldwideappears to be premier company in the industry worldwide

Dismantlers:Dismantlers: Greenleaf: 23 locations, odd distribution throughout US (NV, AZ, Greenleaf: 23 locations, odd distribution throughout US (NV, AZ,

TX, IL, MI, OH, MA, VA, NC, GA, FL); “recycling” and TX, IL, MI, OH, MA, VA, NC, GA, FL); “recycling” and “environment”“environment”

LKQ Corporation (LKQX): 38 sales and processing and 12 LKQ Corporation (LKQX): 38 sales and processing and 12 distribution centers, primarily, but not exclusively, use auctionsdistribution centers, primarily, but not exclusively, use auctions

Financial FiguresFinancial FiguresCPRTCPRT KARKAR IndustryIndustry

Current priceCurrent price $26.71$26.71 $25.37$25.37 --

52-week 52-week rangerange

$21-$21-27.2127.21

$20.68-$20.68-26.4326.43

--

Market CapMarket Cap $2.42B$2.42B $2.27B$2.27B $961.66$961.66MM

Trailing P/ETrailing P/E 28.6028.60 17.9517.95 13.4413.44

Forward P/EForward P/E 19.0819.08 15.0115.01 --

Profit marginProfit margin 17.68%17.68% 13.17%13.17% --

Operating Operating marginmargin

31.97%31.97% 23.47%23.47% 3.30%3.30%

Return on Return on AssetsAssets

12.47%12.47% 7.37%7.37% --

Return on Return on EquityEquity

15.10%15.10% 12.15%12.15% --

VBVB22

Virtual Bidding Second GenerationVirtual Bidding Second Generation Copart’s pride and joy of fiscal 2004Copart’s pride and joy of fiscal 2004 Completely eliminated live auctions, Completely eliminated live auctions,

which resulted in:which resulted in: ““Higher returns on vehicles for sellersHigher returns on vehicles for sellers ““Growth in the out-of-state and out-of-Growth in the out-of-state and out-of-

country salescountry sales ““Increased net income” -Copart Annual Increased net income” -Copart Annual

ReportReport

VBVB22

VB 2 BID4UVB 2 BID4U You enter in the maximum amount you You enter in the maximum amount you

are willing to pay, and bidding will be are willing to pay, and bidding will be done automatically by the minimum done automatically by the minimum increment allowed until your maximum increment allowed until your maximum amountamount

Maximum amount is completely Maximum amount is completely confidential, Copart associates cannot confidential, Copart associates cannot even see iteven see it

VBVB22

Technology has been in use for just over a Technology has been in use for just over a yearyear Transition was even smoother than expectedTransition was even smoother than expected

No significant problems at all and only a few minor No significant problems at all and only a few minor occurrencesoccurrences

““It has also improved the efficiency of our It has also improved the efficiency of our operations. For fiscal 2005, sales of vehicles to operations. For fiscal 2005, sales of vehicles to buyers outside the state where the vehicle is buyers outside the state where the vehicle is located accounted for 46% of total vehicles sold; located accounted for 46% of total vehicles sold; 25% of salvage vehicles were sold to out of state 25% of salvage vehicles were sold to out of state buyers and 21% were sold to buyers out of buyers and 21% were sold to buyers out of country, based on registration.” -2005 Annual country, based on registration.” -2005 Annual ReportReport

Value-Added ServicesValue-Added Services ““Internet bidding, Internet proxy bidding and virtual sales Internet bidding, Internet proxy bidding and virtual sales

powered by powered by VB 2VB 2 , which enhance the competitive bidding , which enhance the competitive bidding process; process;

on-line payment capabilities via our on-line payment capabilities via our ePayePay product; product; e-mail notificationse-mail notifications to potential buyers of salvage vehicles that to potential buyers of salvage vehicles that

match desired characteristics; match desired characteristics; automatic outbid notification by phone through automatic outbid notification by phone through VB 2VB 2  voice info;  voice info; sophisticated vehicle processingsophisticated vehicle processing at storage sites, including at storage sites, including

ten-view digital imaging of each vehicle and the scanning of ten-view digital imaging of each vehicle and the scanning of each vehicle’s title and other significant documents such as each vehicle’s title and other significant documents such as body shop invoices, all of which are available from us through body shop invoices, all of which are available from us through the Internet; the Internet;

CoPartfinderCoPartfinder, our Internet-based used vehicle parts locator , our Internet-based used vehicle parts locator that provides vehicle dismantlers with greater resale that provides vehicle dismantlers with greater resale opportunities for their salvage purchases; and opportunities for their salvage purchases; and

Offsite salesOffsite sales, which allow vehicle suppliers to sell any vehicle, , which allow vehicle suppliers to sell any vehicle, boat, or heavy equipment without transporting it to one of our boat, or heavy equipment without transporting it to one of our facilities.” -2005 Annual Reportfacilities.” -2005 Annual Report

Porter’s Five Forces Porter’s Five Forces THREAT OF NEW ENTRANTS: THREAT OF NEW ENTRANTS: LOWLOW; entry difficult and ; entry difficult and

costly and face veteran competitioncostly and face veteran competition

THREAT OF SUBSTITUTES: LOW; there are alternatives, THREAT OF SUBSTITUTES: LOW; there are alternatives, but the industry exists because it is most often the best but the industry exists because it is most often the best optionoption

BARGAINING POWER OF BUYERS: BARGAINING POWER OF BUYERS: LOWLOW; buyers compete ; buyers compete among themselvesamong themselves

BARGAINING POWER OF SUPPLIERS: BARGAINING POWER OF SUPPLIERS: HIGHHIGH; limited ; limited number of suppliers, limited amount of potential inventorynumber of suppliers, limited amount of potential inventory

INDUSTRY RIVARLY: INDUSTRY RIVARLY: HIGHHIGH; competition from vehicle sales ; competition from vehicle sales and auction companies and dismantlers, local, regional, and auction companies and dismantlers, local, regional, national supply agreements with vehicle suppliers, national supply agreements with vehicle suppliers, competition in acquisition of salvage vehicle sales facilitiescompetition in acquisition of salvage vehicle sales facilities

Financial AnalysisFinancial Analysis

Excel time…yay!Excel time…yay!

Sensitivity AnalysisSensitivity Analysis

    Terminal Growth Rate

    2% 3% 4% 5% 6% 7% 8%

WACC

11% $30.06 $32.88 $36.49 $41.32 $48.08 $58.21 $75.11

12% $26.91 $29.08 $31.80 $35.29 $39.95 $46.47 $56.24

13% $24.33 $26.05 $28.15 $30.77 $34.14 $38.63 $44.92

13.9% $22.62 $23.79 $25.49 $27.56 $30.16 $33.52 $39.01

14% $22.19 $23.57 $25.22 $27.47 $29.78 $33.03 $37.37

15% $20.37 $21.50 $22.83 $24.43 $26.38 $28.83 $31.97

16% $18.82 $19.75 $20.84 $22.13 $23.67 $25.56 $27.92

RecommendationRecommendation

Final recommendation: HOLD the entire Final recommendation: HOLD the entire position of 1000 shares of Copartposition of 1000 shares of Copart Great company in an industry it does very well in, Great company in an industry it does very well in,

despite it being unattractive and unglamorousdespite it being unattractive and unglamorous Still have not fully realized the affects of VB 2, Still have not fully realized the affects of VB 2,

which should be worth sticking around forwhich should be worth sticking around for Although analysis indicates the stock is still Although analysis indicates the stock is still

undervalued, the exposure to the undervalued, the exposure to the company/industry is already considerablecompany/industry is already considerable

Questions?Questions?