Copart Inc. Reports Operating Results (10-Q)

10.12.09

Copart, Inc. provides vehicle suppliers, especially insurance companies, with a full range of services to process and sell redemption vehicles through auctions, principally to licensed dismantlers, rebuilders and hardened vehicle dealers. Salvage vehicles are either damaged vehicles deemed a complete loss for insurance or business purposes or are recovered stolen vehicles for which an insurance elimination with the vehicle owner has already been made. Copart Inc. has a market cap of $2.95 billion; its shares were traded at around $35.13 with a P/E relationship of 21.1 and P/S ratio of 4. Copart Inc. had an annual typical earning growth of 19.7% over the past 10 years. GuruFocus rated Copart Inc. the province predictability rank of 4-star .

Highlight of Business Operations:

We are entirely self-insured for certain losses related to medical, unrestricted liability, workers’ compensation and auto susceptibility. Our insurance policies are generally subject to a $250,000 deductible per request, with the exception of our medical policy which is $150,000 per claim. In appendage, each of our policies contains an aggregate stop loss which limits our extreme exposure. Our liability represents an estimate of the ultimate outlay of claims incurred as of the balance sheet date. The estimated indebtedness is not discounted and is established based upon analysis of historical facts and actuarial estimates. The primary estimates used in the actuarial critique include total payroll and revenue. Our estimates have not essentially fluctuated from actual results. While we believe these estimates are arguable based on the information currently available, if actual trends, including the mercilessness of claims and medical cost inflation, differ from our estimates, our consolidated fiscal position, results of operations or cash flows could be impacted. The system of determining our insurance reserves requires estimates with various assumptions, each of which can unquestionably or negatively impact those balances. The total amount reserved for all policies is around $6.4 million as of October 31, 2009. If the total host of participants in the medical plan changed by 10% we guesstimate that our medical expense would change by approximately $1.0 million and our medical accrual would alter by approximately $200,000. If our total payroll changed by 10% we work out that our workers’ compensation expense would change by take $100,000 and our accrual for workers’ compensation expenses would interchange by $100,000. A 10% change in revenue would change our insurance goad for the general liability and umbrella policy by less than $20,000.

Source: GuruFocus.com