Copart, Inc. (CPRT)

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Copart Inc. (CPRT)

F4Q08 Earnings Call

September 25, 2008 11:00 am ET


Jay Adair - President

Will Franklin – Chief Financial Officer


Robert Labick – CJS Securities

Scott Stember – Sidoti & Company

Scot Ciccarelli – RBC Capital Markets

Matt Nemer – Thomas Weisel Partners

Craig Kennison – Robert W. Baird & Co. Inc.

William Armstrong – C.L. King & Associates Inc.

[Unidentified Analyst] – BB & T Capital Markets



Welcome to the Copart Inc. fourth quarter fiscal 2008 earnings call. (Operator Instructions) For opening remarks and introductions I would like to turn the call over to Jay Adair, President of Copart Inc.

Jay Adair – President

Welcome to the fourth quarter earnings call for Copart Inc. for fiscal 2008 and the fiscal year. Before we start, I’d like to turn it over to Will Franklin for a brief update and then we’ll go ahead and do our introductory remarks and then open it up for Q&A. At this time, Will.

Will Franklin - CFO

Before we begin our discussion of our fourth quarter results, I would like to remind you that during this call we may make forward-looking statements within the meaning of securities law. These forward-looking statements are subject to risks, demands and uncertainties that may cause actual results to differ materially from those projected or implied by our statements and comments.

For a more complete discussion of the risks that could affect our business, please review the management’s discussion and analysis and the factors affecting future results contained in our most recent 10-Q, 10-K and other SEC filings. With that Jay I’ll turn the call back over to you to begin discussion of our fourth quarter performance.

Jay Adair

We have a lot of information that we want to go over this morning, but I think what I wanted to start with was the catastrophe update with respect to Hurricane Ike and the Houston area. The hurricane hit on roughly Friday the 12th through the weekend and we did have a sale that Friday through VB2 at the existing Houston location.

And then come Monday we had our catastrophe team hit the ground. We were up and running on Monday. We had to operate on generator power. We sent in our chief Operations Officer with the cat team. He was able to hook the facility up vise-vie satellite link to the home office so that we had access to phones and internet and our operating system, etc. So we had full office up and running and everything completed by the end of business on Monday the 15th. So that was really the good news.

Since then we have shipped in fuel for trucks. We’re currently operating about 100 trucks in that market. We’ve shipped in additional generators in case we have failure there. As I think everyone’s aware we’re very knowledgeable on how to operate in a cat situation. We’re doing a great job. The team there is offering the traditional Copart legendary service and making sure that we have office space for all of our clients. We’re taking about 500 assignments a day, but we have plenty of space. We have 150 acre location in that market.

Actually we’ll start selling off about 1,000 cars a week and I’m sure I’ll get asked on how many units we think we’ll pick up in this market. I really don’t know the answer. We’re doing about 500 assignments a day as I said. Galveston’s not open yet. So we can expect a few weeks of this I would think. This is a much more normalized cat situation than what we saw with respect to Hurricane Katrina in ’05. And the primary reasons for that are a sample.

We’ve got a cat that obviously hit, but we’ve got people that are living at home. They’re showing up for work. The town is coming back. It’s not the kind of catastrophe that we saw in 2005 with so many people being homeless and utterly so many vehicles that were flooded. So this is probably going to carry on for a few weeks maybe a month as we talked about. At a run rate that we’ve discussed 500. Maybe it’s 10,000 cars, maybe it’s more. We really don’t know.

The key is not so much that. The key is that we are there. We’ve got the right people on the ground. We’ve got the top senior executives from the company that are there working this cat every single day. They’ve been doing that for the last two weeks now. And we would expect Galveston to open up very soon. It is not open yet. And when Galveston opens up, then my guess is we’ll be picking up quite a few more vehicles out of that as well. We’ll probably end up processing a lot of boats as well in this cat.

So that’s kind of the update as to what’s going on there. I can answer any other questions that we have in respect to Hurricane Ike. Looking at the company, we had a great year. Will will comment on some of the financial results for the quarter and for the year. I can just tell you a couple of highlight points that I think are worth talking about.

Models driven are obviously down. Looking at May and June we saw this decrease of about 4% nationally. I think this is clearly from the increase in fuel costs. We’ve looked at fuel now, it’s nearly doubled in a period of about three years. And so increase in fuel causes a decrease in miles driven, causes a decrease in some frequency. At the end of the day I think it’s relatively small numbers.

As we’ve said before, the nature of Copart’s business is such insureds have to drive, people have to get to work. So there’s probably a little less of that happening. I think that’s beginning to stabilize now because we have seen fuel kind of come back. It’s pulled back a little bit. Towing costs were up quarter after quarter. In the last year we’ve seen towing costs start to stabilize. Again the pull back in fuel, so I think that’s really the good news there. Again we’ll report quarter to quarter on those trends as we go forward.

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