Copart Inc (CPRT) 2002 Q4 法說會逐字稿

Good morning, everyone, I'd like to welcome you to our Q4 and year-end conference call. Got some great things to talk about on the company for the quarter and what we achieved last year, as well as some of the great things we think will be happening in the coming year.

So, before I start, I'll turn it over to Wayne Hilty for some general comments, and then we'll get rolling.

Thanks. During this conference call we will be making forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933 and Section 21(e). Securities Exchange Act of 1934. These forward-looking statements include, among other statements, projections about our future revenue and earnings growth which are subject to numerous risks including weather conditions that are unfavorable to our business and our ability to increase market share and increasingly competitive market for more discussion of these and other risks that could affect our business I direct you to review managements discussion and analysis and factors affecting future results which are contained in the company's 10(k) and other SEC filings for full discussion of factors that could affect our performance. Our agenda this morning has three items. First up, Jay Adair [phonetic] will go over highlights of the quarter and recap some important accomplishments of the quarter in the year. And second, I will be discussing financial details of the year. And finally, we'll open up to your questions.

And now it's my privilege to turn you over to Jay Adair.

Thank you, Wayne.

Well, as you saw in the press release Q4 had a revenue increase of 20 percent which resulted in net income growth as well of 20 percent. We earned 15.5 million in net income for the quarter or 17 cents per share. That was on 82.6 million in revenues. I'd like to just go over some of the accomplishments last year with respect to growth. I'll start on the public side with motors option group. Our first acquisition of the year was made in Delaware and then most recently we made two acquisitions, one in green castle which services the area between Harrisburg and Baltimore, and in Pittsburgh, Pennsylvania. On the salvage side we made five salvage acquisitions since August 1, one in Savannah, and advertise ton, one in Savannah and one in Tipton, Georgia, another one in Charleston, West Virginia, Fort Worth, Texas and in Reno most recently. Also we had four salvage start ups, one in Lymon [phonetic], Maine, which services the Portland, Maine area, Tucson, Arizona, North Jersey, North Carolina which is Somerville and Amarillo, Texas.

Now I want to go over some of the Internet results for the quarter. We were very, very excited when we saw these results, and I'm going to be actually reporting to you some quantifiable improvements and the results of virtual bidding. In the last quarter I reported to you a 6.4 million sold on virtual bidding. That number has now jumped to 15.1 million. Also reported 8.8 million in products that was pushed, and that number has jumped to 14.9 million. So we basically have seen growth from Q3 of around 15 million sold and pushed on virtual bidding, growing to 30 million sold and pushed on virtual bidding. For those of you that may not recall, virtual bidding is our product that allows us to sell vehicles in real time over the Internet. We also have an Internet bidding product that we originally launched in '98. That product has continued to do well. We refer to it as the proxy bidding product. For the quarter that was $34 million worth of products sold over that product and 31.8 million worth of product pushed through our Internet proxy. If you take the virtual bidding and the proxy at those two sold, that's 49.1 million sold, or 16.1 percent of all gross proceeds actually sold over the Internet. That's key, because again for those of you that follow the company, you recall that our Internet product allows buyers to bid from anywhere in the world and so we increased competition and local marketplaces, and thus generate higher returns. If I take sold and pushed for the quarter, that's 95.8 million or 31.3. So roughly 31 percent of all Internet is being - of all product, rather, is being affected by the Internet, and we're very excited by that. If you go back to Q3, I announced that 27 yards were on virtual bidding for Q4 we finished with 49 locations on virtual bidding. Two last issues that I'll bring up that I think are very important. I want to quantify some of the improvement that we've seen with respect to virtual bidding. In July 2001, comparing that month with July of 2002, looking at yards that are not on virtual bidding versus yards that are on virtual bidding, virtual bidding yards have out performed the nonvirtual yards by $134 a car in gross proceeds. This is not at one yard versus another nonvirtual yard. This is 49 virtual yards versus the rest of the company that is not virtual yards. So we have a very large sample. I am very strong believer that in showing these types of results where we've got a quantifiable improvement in our virtual bidding product that we can utilize those types of quantifiable increases in return with the insurance industry and that will drive them to send more business our direction. Obviously out of the $134 a car the majority of that goes to the insurance industry as it should, and thus I'm a believer that if we're going to increase returns significantly, that that gives them the impetus to send more vehicles our way again. [inaudible] represents as much as 2 percent increase in overall returns on ACV. In addition to that, a lot of the vehicles that are selling on virtual bidding are ending up going to buyers in Europe, ice land, Canada, Mexico and many other countries. For the quarter we did [inaudible] review, and we are now selling just over 10 percent of our product out of country. So 10 percent of or just over 10 percent of the product that we are actually liquidating, through auction is going out of the U.S. truly, Internet has allowed Copart to expand the buyer base and make selling vehicles at Copart a global product versus just a statewide or as I said in the past, it's now a U.S.-wide product. It's truly becoming a globalized product. So these are very important facts that I raise. As you see in the press release, the company made public its estimates or estimates for the annual earnings growth rate. That range is between 10 and 15 percent. This is primarily due to weather factors we quoted in the press release some information that we got from NOAA on where we think weather is going to be. Now, this could change significantly if we were going to have a normalized winter. However, at this time, based on the research that we've done, we are anticipating that we might have a winter that is, again, soft as we went through last year, last year being an extremely soft winter and we're anticipating that could happen again. Now, things change, then obviously we'll report that to you at that time. I think even more importantly, some of the results I've given you today here on virtual bidding, the fact that we are rolling it out, that we will continue to roll this out and have a company wide and the fact that it is quantifiably generating higher returns, this is definitely going to have an effect on the decision that insurance companies make on which vendor to use. And I believe that there's a lot of positive feedback that we're going to get going forward with some of these results. So that pretty much sums up what I have.

I know there's going to be a lot of questions on the coming years, so I'll turn it over to Wayne, we'll go through the financials, and then I can get to some of the questions that we have. Thank you.

Thanks, Jay.

Let me take you guys quickly through the number. [inaudible] financial performance was in line with expectations for the fourth quarter that ended July 31, net income grew by 20 percent to 15 and a half million. Compared to the fourth quarter of last year total revenues also increased by 20 percent to 82.6 million. That $14 million growth in revenue came from both new stores and same stores. I'll have a little bit more about that in just a moment. The mix of units shows a steady level of percentage incentive program volume for the quarter, 67 percent of volume was processed under PIP agreements compared to 66 percent a year ago. Now let's take a closer look at extensions in other income. Fleet expenses increased by 8.2 million or 21 percent this quarter compared to a year ago. New stores accounted for $4 million of the expense. The remainder of the increase, 4.2 million, is due to the cost of handling increased volume at existing stores. Same store revenues increased by 15 percent in the quarter and same store expenses increased by 11 percent this quarter. [11 percent] general and administrative expenses increased by $764,000 over last year due to the cost of handling more volume and the cost of exploring new business opportunities. For the quarter and Q4 one year ago G and A was 7 percent of our revenues. Depreciation and amortization expense reflects the adoption of FAS-B 142 at the start of the fiscal year. Effective this fiscal year we no longer amortize good will resulting from business acquisitions. The current effect of this accounting change is to eliminate about $2.6 million of annual good will amortization. The effect on the current quarter was the direct of amortization expense by approximately $768,000. On a pro forma basis, if Copart had applied FAS-B 142 during the corresponding quarter a year ago, amortization expense would have been reduced by approximately 6 $10,000 and earnings per diluted share would not have changed from the previously reported 15 cents. The operating profit was 24.3 million compared to 20.3 million one year ago. Our operating profit percentage is steady at 29.4 percent for the current quarter and 29 and a half percent one year ago. Our net other income decreased by approximately $229,000 compared to last year due principally to a $700,000 litigation settlement that we received last year in the fourth quarter offset by increased interest income in this year's fourth quarter. The company raised $227 million in November from the sale of 6.9 million split adjusted shares. Today that cash is invested in short term cash equivalents better yielding about 2 percent interest income. Attacks rate used for the quarter was 39.1 percent for fiscal 2002, and 40.4 percent for the fourth quarter a year ago. So compared to the same period in the prior year, net income for our fourth quarter increased to 15.5 million and diluted earnings per share increased to 17 cents based on 94 million and 46,000 weighted average shares. Now let's take a closer look at new store information. The 10 new facilities added $3.8 million of new revenue and as I noted earlier, their direct costs were about $4 million. Depreciation and amortization is an additional 187,000. The effect of new acquisitions and openings on the current quarter is an operating loss of approximately $307,000. Please keep in mind the new facilities are investment in the future and the first 12 to 18 months of some stores will show losses.

Finally, let's take a quick look at the balance sheet and cash flow. Started fiscal year in August cash and cash equivalents of 15.2 million. As of July 31st, 2002 that balance is now 132.7 million an increase of 117.5 million from the start of the year. Operating cash flow for the fiscal year is 78.6 million from net income of 57.4 million. Capital spending for the year to date was 85 million in cash and 28 million in stock for a total of 113 million [July 31st]. The 113 million includes the cost of acquisitions and start up facilities recently announced plus significant investments in land, facilities, computer systems and software. We continue to expand our capacity to handle our anticipated growth.

That concludes the prepared portion of the call. We now welcome your questions.

John, if you could rejoin us and explain how that will work.

Excuse me, ladies and gentlemen. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To remove your question from the queue, please press star 2. For those participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Our first question comes from Kevin Richard son with bloom capital. Please state your question.

I was wondering if you could give a little capex guidance for next year in both mix of - I know you can't break out cash and stock, about just what the environment looks like maybe on the acquisition front versus the capex that would go into internal development. Thanks.

Yeah, sure, Kevin. This is Jay. Hi. I would say at this time, I'm going to say no stock would probably be the mix. It's probably going to be all cash, and based on what we're currently at, and probably - again, it's an unknown because we don't know what opportunities come along, but probably somewhere in the $50,000,000 range.

And is that, if it were just internal i.e., there were no opportunities, what would that number - I guess what maintenance, yeah?

Yeah, probably 15 million.

Fifteen? Great. Thank you very much.

Sure.

Our next question comes from Scott Stember [phonetic] with Sadoni Company [phonetic]. Please state your question.

Good morning, gentlemen.

Good morning.

Regarding guidance for the '03 year talking about the weather and competitive pressures, could you maybe just quantify which is probably the leading cause for your downward expectations and on the competition side, could you just maybe talk about who and where you're experiencing some pressures?

Well, the number one cause right now is weather related. We always anticipate getting some weather volume in the summer months, meaning that last year we were handling floods in Houston and cars across the country in different marketplaces due to the weather. And we've just had an extremely light weather. I think everyone is aware of the fact that many parts of the country in a drought and that does impact our business. We've always had a competitive landscape and we felt that was something we should talk about as well since it is a risk. I couldn't tell you where the competition is fairly obvious. We have won national competitively and we have independents across the country that we compete with regularly, and that will continue to be what it is and we'll continue to compete with them. And that is definitely something that we have to look at. It's something that is a risk so we put it in there. I'm confident that going forward the results we're seeing with virtual bidding are so compelling, I think that the insurance companies in the next three to six to 12 months, in reviewing returns and where salvage returns are at nationwide and where Copart's returns are at, and the fact we have quantifiable data, if you recall with proxy bidding, it was very difficult to quantify the increase. We showed the percentage that went out of state and we showed the fact that if an out of state buyer bought the vehicle it generated a higher return but we didn't have a way of quantifying. With virtual bidding we have a way of quantifying. We know when the live auction quits and we know when virtual and proxy bidders step in and we can really quantify the increase now where we did not have that opportunity in the past because we have a bid log. So I'm confident that going forward, and that's why we threw out that capex number, 50. I'm confident that if the acquisition opportunities are out there that we'll continue to develop start up locations where we believe we can get additional business and where we have to expand locations for additional capacity.

Okay. So if I can just get this clear, if we were not seeing weather issues, if we were in a more normalized pattern we would probably still be talking 20, 20 plus percent growth?

That's our thinking, yes.

Okay. And Wayne, can you just give me the operating cash flow number for the year?

78 million, 78.6 million.

And what was the capex for the year?

Capex was 113 million, 85 million in cash, 28 million stock.

Okay. Thanks a lot, guys.

Thank you.

Our next question comes from David wee Dell with Salomon Smith Barney. Please state your question.

Yes, gentlemen. A couple questions if I could. First of all on your 10 to 15 percent EPS growth, what is your same store sales growth assumption, revenue assumption and market growth outlook that under pins that expectation?

[inaudible] first, David, it is' probably in a range 12 to 15 percent.

And market growth?

Market growth, this is the weather wild card. If the weather pattern repeats, then there will simply be less salvaged cars because there will be less adverse weather which causes less wrecks. Our assumption is growth of [inaudible] is nominal.

Are you assuming a worse winter than last year or consistent with last year?

I'm assuming worse. [inaudible] new folks on the call we should explain normally during the winter months our inventories increase by about 20 percent between the first of November and the end of February. This past year, due to very, very mild winter, they only increased by 12 percent. So when we model that growth rate, is it a 12 percent growth or a 20 percent growth is how we end up with the guidance we're giving you now. We're going going to use the lower growth rate assumption.

Just so I think you understand it David but just so everybody understands the effect winter has on us, when there is heavy, heavy winter, when you have a lot of rain and snow, etc., across the country, body shops who in the end of the day that's who we compete with for business let's face it they would like to see the vehicles get repaired, we like to see them get totaled. Body shops when there is a lot of winter you become full. When you become full you write your estimates heavy and that causes even more vehicles to become totaled. So you get kind of a doubling effect. Not only do you have more vehicles that are damaged because of the weather, shops get full, they can only handle so much can capacity. They write more aggressive estimates that causes even more vehicles to become totaled. When you have a very light winter, you get the reverse effect which is not only is there less units out there to pick up from our perspective, but body shops become more aggressive in how they write an evident malt. So they'll write the estimate and the insurance company will say that vehicle is going to become a total loss vehicle. What does it take to keep a vehicle from becoming totaled? If it was 2000 less we'll refair. We'll make it 2000 less, we want the work. So we end up, you know, inevitably competing with them for business in a real light winter and in a real aggressive winter they end up creating more business for us. It's just a reality of our business and the weather is definitely a factor.

That's useful. Thank you. Can you talk a little bit about what your mar margin expectations are for next year?

As a percentage?

Yes.

Probably 29 percent.

Okay. Moving on to the public auction side, can you give us a little bit of an update of what contribution the public auction the MAG operations made in the quarter and what your expectations are forth next fourth quarters are in the business?

I don't have a break^down as far as what they contribute to revenue as far as profits. We currently have five locations. We will continue to seek out opportunities in that business in this year and make additional acquisitions if the opportunity exists and grow that business. And we are happy with how we're doing in that business. They're all profitable. When it becomes a bigger portion of our revenues and overall runnings, we'll start to break it out.

Do you have an expectation or a goal of what, how many units you'd like to own at the end of your fiscal year?

For MAG?

Yes, MAG.

For Copart?

For MAG.

For MAG, I'd like to see us processing 40 to 50,000 units a year.

What are you doing now?

Probably well, yeah, we're probably - let me make sure I get my numbers right. We're probably at 40 to 50,000 unit right now, David, and the way we finished, and I'd like to see us finish up another 20 to 30,000 units on top of that.

But throughout the whole fiscal year?

I'd like to see us end next fiscal year 12 months from today and somewhere in the 70 to 80,000 range.

Okay. Thank you very much.

Our next question comes from Eric Wyman [phonetic] with Swerin Boyle Capital Management [phonetic]. Please state your question.

Hi. Could you discuss market share trends, pricing whether there's any new traditional competitors again in the marketplace? Thanks.

Sure. I don't think there is any new competitors that everyone is not aware of that has been out there for last year that we compete with. There's two other public companies that we compete with and there's a number of independents that we compete with in marketplaces. Pricing is something that we have competed with since I've been in the business. I've been in it 13 years and we've always had pricing has always been an issue. And basically at the end of the day it's return. And if I can show that I generated a higher return than somebody else, I'll get the business. If that return basically is decided by how much the vehicle brings, how much you charge and how much overall cost you can reduce, and those are really the three factors that the insurance company will look at. So if they can reduce overhead, if they can generate more money for the car or they can cut your cost, you're saving them money. And so what we charge versus what somebody else would charge is really a component of returns and streamline savings. If the belief is that we can streamline savings and generate higher returns, then we warrant a higher revenue for the services that we offer. If that's not the case, then we don't. It's definitely my belief today that we generate higher returns and that we streamline costs and that at this time warrant a higher fee for the services that we offer. I think that is becoming more so as we go forward with virtual bidding and virtual bidding is not an easy product to develop, nor is it easy product to allow as Copart came out with a product in January and here we are today in August with 49 out of 90 what do we have, 6? Forty-nine out of 96 locations converted to virtual bidding. It doesn't happen overnight and yet nobody else out there has a product like this where they can offer real time selling of vehicles. So I think we definitely have got the heads up on this one. I think we've got a great product and we know what we're doing and that it's going to allow us to generate even more business that comes our direction going forward.

And market share trends?

As far as?

How much market share we believe to have?

Yes.

I would say that it is 25 to 30.

Something north of 30.

Yeah. Say 25 to 35 percent. That would cover it.

Our next question comes from Alan Metrani [phonetic] with Cooper Beach Capital. Please state your question.

Hi, thanks. Alan Metrani, Cooper Beach Capital. When do you have option grants for this coming fiscal year?

When are we going to be issuing options?

Yes. What is the date your option grants for senior executives for this coming year?

We don't have a formalized plan in this company of when we issue options. That is something that the CEO, Louis Johnson, sits down with the compensation committee and makes the decision to do that. We don't have a formalized plan, though.

Okay. Have you discussed buying back stock, and can you give us your outlook on that?

Yeah, I will give you the actual economic of what we think makes sense or the number at which we would purchase. But definitely that is something that we have discussed. It's something that we look at and we weigh that as an opportunity risk, meaning very simply that if we go out and purchase back the stock, we're going to guarantee ourselves a return of X, but we have now lost the opportunity to make any acquisitions of a certain size or substantial acquisitions, if you want to call it that. So I mean that's basically what we're looking at, okay, if the opportunity is out there to make a large acquisition which at this time we still think it is, then we want to keep that cash there. If the time comes that the opportunities are not there, then it becomes even more attractive to buy the stock back. The other factor is the price of the stock, so at a certain point the price gets low enough when we ; is that right to look at that time it and say even though the opportunity is there, the opportunity gives us X return, and we can generate that by purchasing our own stock back, and that pushes us down the direction of purchasing stock. As a company we've been public since '94, we've never purchased our own stock back. We've never done that and we've seen our stock take dips in the past and yet we've made the decision not to do it. And at that time that was the right decision because going forward we needed that cash for growth. So that is - it's something we look at, to answer your question. It's not something we take lightly. It's a serious, serious decision for us to part with our cash and to purchase stock back and to possibly miss the future acquisition opportunities for the company.

I appreciate that. To be fair, I'm sure there are other shareholders on the call. In the past your stock has gotten as low as $2 and buying back stock at that point would have been absolutely the correct thing to do given it went up 10 fold afterwards and you could have issued it to other companies in terms of making acquisitions and much higher levels than giving your stocks down 60 percent this year I would suggest you take a hard look at it.

Thanks. Appreciate it.

Our next question comes from Matt Byrd with LaFer Management [phonetic]. Please state your question.

Hi, this is Matthew bird from wafer management. On the traditional salvage side, have there been any meaningful contracts with the insurance companies that you've lost over the past six months?

No.

Okay. That situation, there's been no changes with that.

With us losing any meaningful contracts?

Yes.

No, we are solid as a rock. Our company has terrific relationships with its existing customer base. We are doing terrific. And if there was something meaningful I would definitely disclose it.

So in in terms of competition, how do you feel the increased competition, how does that affect your business?

The competition that is out there is something that we face every day, and, you know, we don't take that lightly. That's something we have to compete with. And this is a capacity game. This is a business where, you know, even if I could take - even if all of a sudden tomorrow the competition didn't exist, I couldn't take all the business on, I don't have room. So there is really a decision that has to be made on bringing business on and doing it in terms that are favorable to this company.

How is it competition make inroads, is it through competitive pricing?

Yeah, there's really no way to differentiate Copart from other companies on service, on products and a lot of the other things that we offer. The number one way that you would differentiate yourself with Copart is price. That's something we faced for a long time, though. Don't think that that's something new. We have faced price pressure or price differential back in the mid '90s that was something that we faced back then. We faced it with purchase cars. You know, we wouldn't buy cars and competition would buy cars. So that kind of competition has always existed and we are net up, we are net up as a company as far as increased business. But again, we're being conservative looking in the next year because it's not just volume, it's a weather game. And last year was a really light weather and we really didn't think we'd see two light weathers in a row, but that's not what NOAA is saying. So looking at it from that perspective we think it's possible we could have another light winter.

Okay. I thank you.

Sure.

Our next question comes from Dan rudder with Copart. Please state your question.

Actually I'm with layered Norton trust company.

I'm glad to hear that.

If you guys want to hire me, I'm open.

I was wondering why someone from Copart would be asking me a question. I'm sure they won't ask me, Al.

Do you plan to break out the MAG results in the 10(k) separately?

Do I plan on doing that? Right now, no.

Okay. Okay. If you had to - you're talking about a deceleration in earnings per share growth in '03 from I presume 20 had been your prior plan, 10 to 15 which means you're going to be 5 to 7 cents light. Can you tell me kind of how you would break that down sequentially over the fourth quarters?

No, I can't do that. I don't really, not knowing where - I gave you the first quarter. We reported 16 cents for the first quarter. Not being where I'm at, not being in the future yet, it's just too difficult to predict. That's why we put a range in of 10 to 15 because we really don't know where it could end up. Now, come Q2 I'll have a better feel when I'm in Q2 of where Q3 will be, etc. So as we go forward, we're looking at reporting on a quarterly basis.

Yeah. You mentioned that it was sort of a summer issue and flooding as opposed to snow pack and ice.

It's both, it's both. I don't mean to interrupt you, but it's both. We get winter - I'm sorry. We get weather throughout the year and I mean this isn't just an issue of hey I don't have rain and snow in the wintertime. We didn't have a decent summer. This is a year where we didn't have a lot of weather throughout the summer. We didn't pick up, you know, business that we're accustomed to getting just from normal weather. It's not, you no, the fact we didn't have hurricanes or the fact we didn't have rain in California. It's across the country, it's weather across the country, all those factors that plays out in less inventories and less - we look at our inventories as a basis of where we think - I'm holding vehicles today, I'll be selling those vehicles next quarter. So we look at inventories today and where they're at and where assignments are at. That's war we come up with our predictions.

Okay. Could you finally make some comments in terms of the off side product offering, how that's going?

Off side is doing very well. We're going to be testing it with a large insurance company going forward, and that will be very, very interesting to see how that turns out. It's doing very well in the sense that it's always got vehicles for sale and it's being utilized and cars are selling every month on the product. So it's working from that angle. The real question for off-site is going to be I think when we run that pilot and that test program. It's a major insurance company that is wanting to do a pretty large sampling and, you know, we'll see how successful it becomes at that time. How successful is it to sell cars in a pure Internet environment where they're not physically at a Copart location where they can't physically be inspected, etc., that's the unknown. Even through virtual bidding and proxy bidding today. At least you can have a rep go look at the vehicle. If you can't look at it yourself. With an off-site product there's real truly no way to look at the car. It's going to be pure description through the Internet, interaction back and forth through E-mail on the Internet, etc. that sets where the car is at. When we run that test I think we'll get a feel for just where the product is headed.

And what is the time frame for that pilot?

It will be at least six months.

From now?

No, it is it will be a six month test. It will be rolling out this quarter and it will be a six month run to see how it does.

And you've got I think 10 photographs of each vehicle on there ; is that correct?

Up to 10.

Up to 10. Okay.

They can do as few as one and up to ten.

Great. Thanks very much.

You bet.

Our next question comes from Ryan Randall with Kanell Capital [phonetic]. Please state your question.

Hi, it's actually Ken Haller [phonetic] here with Ryan.

Hi.

I was wondering if you could break out the maintenance capex for the fiscal year just ended. I think you gave us a total capex. I was wondering if you have the maintenance portion of that as well.

Maintenance cap was about 15 million.

About 15 million and I think that's what you're saying for next fiscal year as well?

Based - I think I just want to reiterate, based on what a prior caller had said regarding consideration of that buy back and based just on the cash flow, assuming that you have [This is an analyst] similar cash flow hopefully higher cash throw from operation next year and maintenance and acquisition capex you guys talk about for next year, you're going to be generating excess cash to both fund acquisition ands do a stock buy back, so we would be in the same cast as the previous caller as stock buy back is something you should consider as well.

Absolutely. I would agree with you. It is something we have considered and do consider. We do look at it I would say daily because where the stock price is at changes everything and where it was at yesterday and where it's at today are two different prices so it is something that we look at on a regular basis.

Okay. On the other front, acquisition front could you give us what kind of metrics you guys are looking at in terms of multiples for both sides of the business, what kind of threshold amounts you're willing to pay [You guys] are looking to pay in terms of multiples? Get a better sense of that. And also where you think thats' trending.

Sure. We typically have purchased and will continue to make acquisitions in the five to six times pretax range. That's been - you can say EBITDA but they don't really have much DA. So it's typically 5 to 6 times [DA] pretax and we'll continue to make acquisitions where they make sense not only from a financial perspective but we need to be in that marketplace. It does president really make a lot of sense when you're already large in one market and make a decision to do that, you're already in that marketplace. So we try to focus on areas where we're not at, hence Reno, North Jersey, these different areas that we've opened up into are typically markets where we're not at or markets like Texas where we're out of room and the city is so large you really knee need to cover both sides of it we opened up in for the worth and we opened up in Dallas and forth worth.

If there was a large enough acquisition, are you guys willing to have it not be accretive over some^time for a strategic reasons [inaudible] would it have to be accretive near the immediately or at the time of purchase?

We've always had acquisitions accretive day one. So I don't know that we would make a decision to do one that wasn't accretive day one, but, you know, who knows until I'm faced with that time - faced with that decision to make at that time. But we've always wanted to make acquisitions, you know, where they're accretive to the company day one.

Okay. Thank you.

Our next question comes from Gary Prestapino with Barrington Research [phonetic].

Hi Gary.

Good morning, Jay, hi Wayne. Jay, you've been in this business 13 years, I'm sure you've run into these situations where weather has impacted the business. Could you just kind of walk us through how and what changes on the insurance relationship and the sell through to the insurance company as well as what changes on the buyer relationship and the purchase end, when you have a reduction in these salvage vehicles in the market?

Well, I just want to make sure I understand your question. Specifically what are you looking for?

Well, I mean obviously you have a lower amount of cars out there I'm just trying to get an idea what really changes. Is there more discounting? I know you say it's a market share grab and if there is how do you combat something like that? How do you fight something like that?

Well, if you're faced with discounting, and that comes across the board in all sorts of different markets. You've got independents to public companies this year, competing with and some of the players are not willing to discount because of their brand and what they offer, other players are willing to discount substantially in some marketplaces. So we deal with that across the country in different markets. It's not a, you know, flat here it is across board. It depends on what city I'm in and where I'm competing with competition at that time. Where we deal with it is very simply we go in and we show a very full quiver. I mean, we walk in and say, look, we've got a lot of products, we've got a lot of service that we're offering here and we quantify it. We show our pick up times and we show the payment times and the total cycle time reductions and the returns that we generate. And then we show them how we achieve that through all the different methods that we have on the auditing side, to all the different methods we have on virtual bidding, proxy bidding, etc. the fact that we've got 96 locations gives us a very, very large buyer network. I mean when I started in the business we had three auctions. And I was working in Northern California seeing cars sell to L.A. and sometimes Oregon and Washington. I didn't see buyers in Hartford, Connecticut. I didn't see buyers in Chicago. And today it's just common. I mean it's just common practice for us to sell cars on the East Coast that end up on the West Coast every day and every day cars are on the West Coast that end up on the East Coast. So we've opened up the purchasing of salvage to a nationwide and global market now with many outside countries. I mean I had an example I looked at the other day of a vehicle that was in Minneapolis that was being bid on by a buyer from Maryland, a buyer from ice land, a buyer from the Netherlands. And three guys are bidding against this vehicle from very, very, you know, different locations and that's just - that's a common example of what we would show the insurance industry and say, look, when you deal with Copart, this is what you get. You get an extremely large buyer base. You get an he can extremely high quality of service. An extremely high return. We will reduce your cost through the different products. We're saying look at the end of the day it's what we charge. It's what the car brings and it's how we can reduce your costs. And if we can generate a higher return for you and if we can reduce your cost, then what we charge becomes less important. If you didn't have all those services, obviously you're going to focus more on what you charge. I guess that's the best way to put it. How we will continue to fight that is the methods I just gave. The last thing that we want to do is to give our services away. I guess that's the best way I could put it.

Does what's going on in the market right now help to drive increased selling prices to the buyers if these buyers this is their livelihood, less cars out there should increase the price, shouldn't it.

You're looking at it from a supply and demand side. But in addition to that when there is - when you have decent weather, you have a lot of repairs that need to be made, those repairs, that's the dismantling industry's bread and butter. That's where they sell a lot of parts back to the insurance industry, through body shops that repair cars with LKQ parts. And so in essence, yeah, there's less supply out there for them to purchase, but then, you know, they don't have the sale of parts as well. So I just as soon see the weather. I've never seen it when we have a lot of product to sell that it doesn't get bought. It ends up being bought by did dismantlers and rebuilders and being put to work or parted out and the parts are sold back to the insurance industry through [inaudible].

Two other quick questions. Do you have total Internet sales pushed and sold for the year?

Sure. Oh, for the year, no, I don't.

I do.

You do, Wayne?

I do. Total Internet sold 140.3 million. That's proxy bidding. Total Internet pushed 130.4 million. Virtual sold 21.6 million, virtual push 23.6 million. Total Internet sales 292.$4 million.

292.4?

Yes.

Do you have those same figures for the total revenues contributed by new stores and total expenses?

I don't, Gary. That's not [inaudible].

Okay. Thanks.

Our next question comes from Greg Schultz with SAB Capital. Please state your question.

I'm trying to understand the weather impact a little more. When you look at total market for salvage vehicles, how much salvage - how much was salvaged last year how much is salvaged in a typical year, and how much do you expect to be salvaged this year?

Well, we believe that there are approximately 25 million vehicles that are damaged every year and we believe 10 percent of those vehicles become total loss salvage.

Normal weather pattern?

Yeah, that equates to - let's be honest about it, this is not data that's easy to get your hands on.

Right, right.

We look at a.m. best and a.m. best is an insurance guide that reports premiums and we can equate premiums to how many vehicles are out there, how many vehicles are out there to what we think would end up being totaled and how many cars we get in certain marketplaces, etc.

Right.

So we think that there's about two and a half, you know, million vehicles out there and out there and that equates to - let me just do the math - about $4 billion worth of product. Nationwide. So that's where we roughly figure out what our market share is.

Okay. And in a bad weather year -

I don't know. I mean those are rough numbers and I can tell you in a good weather year we see inventories up 20 percent, last year they were up 12 percent. Last few years they've been up over 20 percent.

This year worst weather - your forecast '03 going to be worse than this year or you're forecasting that weather to be constant?

I think that the weather, my visceral feel on it right now is kind of an unknown. I don't know what the weather is going to be. But based on the predictions I've seen, that's why we put the piece from NOAA in there, based on the predictions that I've seen I think it's going to be like it was last year.

Then why the last year [inaudible] 20 percent?

Twenty-six.

Why the change?

Well, we anticipate having - last year the weather would have been up and we would have grown earnings like we have the preprevious two, three years if the weather had been better than 26.

It seems to me something else is -

It's not all weather. We put that in the press release is what I'm saying. It's definitely not all weather. Weather and market share gains. Market share gains have slowed and weather has slowed so it's a combination of both.

Gotcha. And then the second question would be you've gotten pretty good leverage over the years you obviously had much higher growth. [inaudible] 12 year clip can you get leverage?

In a 12 percent revenue growth can I get leverage over my G and A?

Yes [inaudible].

We're going to be looking - I want to be very forthright with everyone. We anticipate that the products like virtual bidding will continue to propel this company forward with additional growth and that we continue, we'll continue to make acquisition growth. If for some reason that that didn't happen, then we would slow down our capital spending, obviously. And we would be able to pull in a lot of the departments that are geared around growth. We have integration departments and we have systems and other departments that are really, really large because they're geared up for the growth of the company. If the growth isn't going to be here, isn't going to be there at the rate that we think, obviously we're going to be able to even leverage that some more.

Okay.

I believe the growth is there. I think it's going to happen. I just think we're in a little cycle here.

Okay. Thank you.

Our next question comes from Evan McCormick with Fidelity Investment. Please state your question.

Hey guys. My phone cut off when you were giving your two or three assumptions for same store sales growth. I got the revenues and everything else, but my phone cut off on same store sales. Thanks.

[inaudible]. Revenue guidance was in the 12 percent range, 12 to 15 percent range for the entire year and same store sales growth -

I don't know that you answered it.

I didn't actually answer. We haven't given guidance on same store sales, but we gave a revenue number, revenue growth guidance.

Okay. So there will be no guidance on same store sales right now?

It was 15 percent for this fourth quarter. I would expect less than that going into Q1. We're going to do this one quarterly at a time.

Okay. Thanks. [one quarter]

Our next question comes from add hereby pant with Filene capital management. Please state your question.

From [inaudible]. Hey hi Wayne.

Hello there.

Just one question. When you look at the industry, the salvage industry and you and I know you guys [inaudible] gave some sense of how many cars in total every year. In terms of number of sites that are out there, what's your sort of best estimate of sort of the total site including independents that are out there and in that context, what is the sort of acquisition opportunity that is sort of still available to you in the salvage business? That's my first question. The second question quickly related to that, when you look at green field sites now, could you give us a sense of sort of the bad years to entry which of course benefited companies like yourself in getting new sites entitled to carry out your business? Because there is another company that's trying it get aggressive in this business, I understand and I want to get from your sense it seems to me it's not that ease toy get new sites entitled in certain areas. Could you give us a sense of those two [inaudible]?

I want to make sure we are understanding you correctly. The first question is how many other locations are out there that are not Copart?

UNKNOWN SPEAKER:

That's right. Your best estimate of that and the acquisition opportunity.

Yeah, I would guess that the - my best guess on that would be 300 locations that are out there that are not Copart. That would be including our two public competitors and all the independents, etc.

And in terms of could you talk a bit about the sort of regulatory approvals that you require to get a green field site and how difficult it is to provision one?

Sure. Those are pretty easy to understand. I guess the first one would be who wants to salvage pool next to them. The number one problem we face is zoning. You can go into a marketplace where you find a piece of land, you can afford the piece of land and then you can't get it zoned through the city. That's something we face on a regular basis. It depends, really, on the city, meaning that there are some areas of the country that are very rural and small and it's much easier to get a push through. New York City took us, gees, over five years to finally get the zoning for the facility that we've got today. So zoning would be the number one barrier to entry that you face in opening up a new location. The other P barriers to entry are obvious, economics and you open up but you don't have relationships with the insurance industry, that you don't have an auction and it's the catch 22, give me cars while as soon as you get an auction I'll give you cars. I don't have an auction until you give me cars. Those are the kind of things you face as a small Operator trying to open up. Copart has had the - has been fortunate enough to build leverage national relationships so when we open up in new cities that we have cars day one going forward.

Thanks a lot.

Our next question comes from David wee Dell with Salomon Smith Barney. Please state your question.

Yes. Just a follow-up if I could. Sorry to keep focusing back on this. But if we could focus back on the weather versus competitor kind of balance in the slow down, if the weather is the same as expected to be the same as the mild winter that we had last year, the weakness is coming from competitive threats; is that right?

Well, competitive threats I guess the answer to that would be yes. The difference between our growth is acquisition, how many acquisitions we make, market share gains and weather. I don't think I missed one there. And so to answer your question, David, we don't - can't really tell what our acquisitions are going to be till they're made. And we're anticipating this kind of weather so that has an impact on how well we think we'll do looking at market share gains and where our current inventory levels are at, that's how we reported the year we the way we think it's going to be. That could all change. A lot of companies make - a lot of our business comes in January 1 because insurance companies make decisions to review salvage and to review the business and where are they at and what is what else is out there, how can we increase our returns and we will aggressively be out there educating people on the products that we have and trying to get them to see the opportunity that Copart offers and that could change. That's an unknown.

Thank you for that. Could you talk a little bit about the number of acres that you ended the year with? I didn't hear a same market growth number for the quarter, and I have one other quick question on title processing and cycle times.

Total acres was about 27, 70, up from is it last year at about 2370. So 400 acres added in the year, rough number.

Same market growth for the fourth quarter?

No, we don't do market growth.

Same market growth was something you talked about in recent quarters?

Oh, the organic sales.

Right.

Organic sales did not apply in this quarter because the stores that - the largest one was Martinez here in Northern California. That was one year old on the first day of the quarter. So the 15 percent same store number I gave would have also been an organic number.

On title processing and cycle times can you talk about what initiatives you guys have to shorten the cycle times?

Sure. I can make this conference call go on another hour, David.

I'll be here.

You get me on my sales pitch. You don't want to do that. We've got a lot of great things that we do to minimize cycle times. Just so everyone understands, cycle time starts the day we get the assignment and ends the day we pay for the car. So we work with insurance companies to put in early toe programs where they can do a total loss to terminator on the vehicle and say this is a probable total loss let's assign to Copart revenue look at it, go online look at the vehicle through the Internet at the pictures online. That can knock as much as 10 days right out of the cycle time at the first step which is a big deal. And we go all the way through the process of educating or doing training classes on title and showing them more effective ways to fill out the title so they don't send the title to us with the lienholder not being satisfied or they don't send it to us with the lien satisfied but it's Joe an Mary and they have those signatures, we get into those kind of details and we utilize our technology so they can see, you know, document images online to see this is the issue we need, this is what we need from the insured. Like I said, in the total loss comparison they can go online and look at the pictures of the vehicles and they can make decisions throughout the process by accessing information online. So we go through a number of steps to try to knock considerable time out of the total, you know, history of the car. Our goal is to have someone - our goal is to have somebody go from their current vendor to Copart and see a 20 or 30-day reduction in cycle time. I mean at the end we'll do online DMV so that we can process the vehicle on our end which has really nothing to do with them, but it has everything to do with what we offer as a service and we'll do online processing it it's available to us and that again minimizes time and how we move the vehicle. We'll move sales to weekly instead of bye weekly. So we do everything we can to reduce cycle time which [Biweekly] benefits them in many, many ways.

Thank you very much.

Our next question comes from Brian Randall from Kanell Capital [phonetic]. Please state your question.

Hi. It's actually Ken Haller again.

Hey, Ken.

Is there any way you can give us some contribution to the growth rates that you're talking to whether - how much potentially could come from same store assumptions versus market share gains and acquisitions? Real if I we're expecting less than 15 percent same store sales growth and which is what you guys just did. And you talk about 12 to 15 percent revenue growth, those numbers kind of jibe. So what kind of assumptions are underlying this so we can get a better handle on whether you guys are progressing forward with your plans?

I think the way we'd like to do it, Ryan, is just quarter to quarter because - I'm sorry, Ken. In this business, we have great visibility with the inventories we have on hand so the guidance we're going to give you will be specific for the coming quarter. And then general for the rest of the year.

Okay.

What we've just said for same store sales, we expect something less than 15 percent for the coming quarter and total revenue growth for an entire year is in the 12 to 15 percent range. It's just too early to tell.

An

An earlier caller had talked about having lower growth rate and ability to get additional leverage from the operating model, and I guess you guys are making an assumption on the fiscal year 12 to 15 percent revenue growth and 10 to 15 percent EPS growth, kind of talks about not significant additional leverage.

Correct.

Does that make sense?

Yeah, that does. I don't plan to get leverage out of G and A. I don't plan to leverage it more because I still got the company geared for growth. That means we've still got all of the departments in place to bring in additional market share. Willis goes out and buys up a bunch of auctions this year, we're geared up to integrate them and get them on board with Copart. So things change. My part was things change, then obviously there is more leverage available to us in G and A. But I'm of the mind-set that we're going to continue it grow the business we're going to continue to get additional cars through virtual bidding.

Okay. Thank you.

Our next question comes from Alan Metrani with Cooper Beach Capital. Please state your question.

Thanks. I'll let this call end. I just have one question. Your expectations of lower market share gains, is that something that has changed over the last few months or is it more of a realization that the competitors are facing now aren't as much the mom and pops that they were and has better infrastructure in place to handle being a national company? What's changed over the last few months from that perception or was it just a change in your perception in terms of being able to take market share?

Well, I think we had quite a run with our Internet bidding product that we had over the last, what is this, three, four years. I think virtual bidding was rolling out in January. Was something we had to show as being the next greatest product. And it's not something we can roll out to all 96 locations day one. It takes time to roll it out. And whereas Internet bidding was boom it was at all of our locations. [inaudible] you face some huge technological hurdles with trying to bring buyers in from all over the world to the sale in real time, up to the second information on where the car is currently at and you're clicking on a button and bidding on that car against the virtual proxy and the live auction community. So I think we just based - we faced a bit of a hurdle there and getting it rolled out and getting people or getting insurance companies to see the benefits and I think now we've got some real quantifiable data that's coming out of it. I think that's going to cycle forward. I think we're going to show companies what we've got and that's going to be, you know, the next push for them to give us additional business.

I realize the insurance companies like the virtual bidding. I've heard a lot of grumbling from buyers it extends the time of the auction and [inaudible] there's a limited amount of money they're losing cars that they thought they won. Are you measuring buying - buyers traffic? Because after a while if buyers do get upset with this, I don't know if that's the case at least right now on a large scale, but if they do get upset with that the insurance companies will follow where with the buyers go. Are you able to measure buyer traffic?

Yes, buyer traffic is up. The time that the auction is slowed down is very, very small. It comes out to about, I'm doing it off the top of my head but it comes out to about 20 cars over the whole auction. Meaning if I have 350 car auction, you'll be done about 20 minutes faster with a live auction process than you will on a 350 car auction that's virtual. So it's a very, very small difference in time. We are selling some yards as fast as 80 cars an hour virtual. And we don't want to go over that. If you sell too quickly, you no know, there's a question of whether or not you leave the money on the table. So it's important to us that we liquidate the cars quickly to save everyone's time but also make sure we generate the highest return. I think a lot of buyers like the rod. I've talked to many, many buyers and there are those - there's always going to be two views on any product that you release to buyers. One buyer group is going to say this is great, you know, on proxy bidding I utilized it. But we see this every day where a guy proxy bids a car 35100 then 36, 37, 38, ought of sudden 4,000 [inaudible]. So now we're in the past a proxy bid maybe he got it may be he didn't. He can now come in virtually a second time and start clicking on that car. And that generates higher returns. I mean we've seen a quantifiable increase on 49 locations of $134 a car and I believe insurance companies are going to go where the money is at. They're going to go where the returns are at. So we've seen very, very little time impact in some locations were faster virtual than we are live. And my belief is because that can be done , we can achieve that company wide. I think virtual bidding can get to the speed that it needs to be or the speed that the live auctions can be. We're seeing an increase in returns and in some marketplaces we are seeing over $200 per car increase in returns. That 134 is an average overall 49 locations and all the on virtual auctions as well. So we're seeing some markets it's well over $200 increase on a per car basis. So the product to me is no doubt solid. It's proven and it's generating higher returns, and that we do have more buyers attending now because of our ability to allow them to come in whereas some proxy, they submit their bids they were done they couldn't show up now they can be 1500 miles away, go in and click on that sale as well. So you can show up, got a lot of buyers now showing up live looking at cars, previewing cars the day before and then bidding from their office and they're able to stay at their business and focus on the issues they've got there and yet bid the auction without having to stand tout there all day. If you think about the live bidding process, it's, you know, five, six hours standing out to bid on 20 cars. Doesn't make a lot of sense. I think long term it could, you know, you could see long term where the Internet just continues to improve that model where if a buyer wants to come out, go through that process, great. If at the doesn't they can do it all online.

Okay. Thank you very much. Appreciate the answer.

Gentlemen, there are no further questions at this time.

Okay. As always, as Wayne said, we will continue to report from quarter to quarter as we see how the company is doing and how the winter and weather affects us and market share gains improve. We'll continue to report that to you as we do the earnings as well.

The last week of November.

On our next report?

Yes.

Great. And with that, I'd like to thank everyone for attending the call, and thank you.

This concludes today's teleconference. Thank you for your participation.