<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended April 30, 1996
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
____________
Commission file number: 0-23255
COPART, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2867490
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5500 E. SECOND STREET, BENICIA, CA 94510
(Address of principal executive offices with zip code)
Registrant's telephone number, including area code: (707) 748-5003
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /X/ / /
Number of shares of Common Stock outstanding as of April 30, 1996: 12,540,300
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
April 30, July 31,
1996 1995
----------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 17,690,300 $ 13,779,200
Accounts receivable, net.............................. 28,909,500 23,901,600
Vehicle pooling costs................................. 8,416,200 6,721,400
Inventory............................................. 1,627,600 3,252,400
Deferred income taxes................................. 131,000 131,000
Prepaid expenses and other assets..................... 2,115,200 209,300
------------ ------------
Total current assets............................. 58,889,800 47,994,900
Property and equipment, net........................... 14,725,900 13,082,000
Intangibles and other assets, net..................... 75,504,800 74,081,100
------------ ------------
Total assets..................................... $149,120,500 $135,158,000
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..................... $ 577,300 $ 582,700
Accounts payable and accrued liabilities.............. 12,473,600 9,550,000
Deferred revenue...................................... 5,418,100 5,106,700
Income taxes payable.................................. 290,300 --
------------ ------------
Total current liabilities........................ 18,759,300 15,239,400
Deferred income taxes................................. 633,000 633,000
Long-term debt, less current portion.................. 2,738,700 3,151,000
Other liabilities..................................... 3,868,200 3,019,000
------------ ------------
Total liabilities................................ 25,999,200 22,042,400
------------ ------------
Shareholders' equity:
Common stock, no par value - 30,000,000 shares
authorized; 12,540,300 and 12,372,200 shares
issued and outstanding at April 30, 1996 and
July 31, 1995, respectively.................... 106,107,300 104,529,800
Retained earnings..................................... 17,014,000 8,585,800
------------ ------------
Total shareholders' equity....................... 123,121,300 113,115,600
------------ ------------
Commitments
Total liabilities and shareholders' equity....... $149,120,500 $135,158,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended April 30, Nine months ended April 30,
---------------------------- ---------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $ 34,330,100 $ 16,004,900 $86,817,600 $ 36,675,100
------------ ------------ ----------- ------------
Operating expenses:
Yard and fleet . . . . . . . . . . . . . . 25,457,800 10,687,600 60,900,600 23,664,000
General and administrative . . . . . . . . 2,799,800 1,481,400 7,832,800 3,344,900
Depreciation and amortization . . . . . . 1,534,900 723,300 4,382,200 2,011,500
------------ ------------ ----------- ------------
Total operating expenses . . . . . . 29,792,500 12,892,300 73,115,600 29,020,400
------------ ------------ ----------- ------------
Operating income . . . . . . . . . . 4,537,600 3,112,600 13,702,000 7,654,700
------------ ------------ ----------- ------------
Other income:
Interest income, net . . . . . . . . . . . 36,100 51,400 225,700 154,900
Other income . . . . . . . . . . . . . . . 76,200 3,800 119,900 35,400
------------ ------------ ----------- ------------
Total other income . . . . . . . . . 112,300 52,200 345,600 190,300
------------ ------------ ----------- ------------
Income before income
taxes . . . . . . . . . . . . . . . . 4,649,900 3,167,800 14,047,600 7,845,000
Income taxes . . . . . . . . . . . . . . . . . 1,860,800 1,267,100 5,619,300 3,096,000
------------ ------------ ----------- ------------
Net income . . . . . . . . . . . . . $ 2,789,100 $ 1,900,700 $ 8,428,300 $ 4,749,000
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Net income per share. . . . . . . . . . . . . . $ 0.21 $ 0.19 $ 0.63 $ 0.48
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Weighted average shares and equivalents
outstanding. . . . . . . . . . . . . . . . 13,396,900 10,128,000 13,282,800 9,904,900
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended April 30,
---------------------------
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,428,300 $ 4,749,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 4,382,200 2,011,500
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . (4,586,900) (3,681,100)
Vehicle pooling costs . . . . . . . . . . . . . . . . . . . . . (1,567,100) (640,200)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,624,800 --
Prepaid expenses and other current assets . . . . . . . . . . . (1,443,900) (547,000)
Accounts payable and accrued liabilities . . . . . . . . . . . . 2,923,600 1,805,700
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . 135,000 441,900
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . (162,100) 2,851,500
------------- ------------
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . . . . . . 9,733,900 6,991,300
------------- ------------
Cash flows from investing activities:
Payments received on notes receivable . . . . . . . . . . . . . . . . . . -- 138,200
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . (3,833,800) (2,333,800)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849,200 (12,300)
Purchase of net current assets in connection
with acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . (504,700) (1,270,100)
Purchase of property and equipment in connection with
acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (174,500) (457,000)
Purchase of intangible assets in connection
with acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,300,100) (7,239,400)
------------- ------------
Net cash used in investing
activities . . . . . . . . . . . . . . . . . . . . . . . (5,963,900) (11,174,400)
-------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of stock options . . . . . . . . . . . . . . . 427,000 257,100
Proceeds from issuance of Employee Stock
Purchase Plan shares . . . . . . . . . . . . . . . . . . . . . . . . . . 172,000 71,300
Proceeds from issuance of notes payable . . . . . . . . . . . . . . . . . -- 160,300
Principal payments on notes payable . . . . . . . . . . . . . . . . . . . (417,700) (770,900)
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,200) --
Capitalized offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . -- (546,300)
-------------- --------------
Net cash provided by financing activities . . . . . . . . .
141,100 (828,500)
-------------- --------------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . 3,911,100 (5,011,600)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 13,779,200 17,870,500
-------------- --------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 17,690,300 $ 12,858,900
-------------- --------------
-------------- --------------
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 279,300 $ 251,600
-------------- --------------
-------------- --------------
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,944,600 $ 1,932,000
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996
(UNAUDITED)
NOTE 1 - General:
In the opinion of the management of Copart, Inc. (the "Company"), the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting only of normal, recurring adjustments, necessary to
present fairly the financial information included therein. These financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1995 filed with the Securities and Exchange Commission.
Gross proceeds generated from auctioned salvage vehicles were approximately
$140,453,100 and $78,946,500 for the three months ended April 30, 1996 and 1995,
respectively, and $375,001,400 and $201,523,800 for the nine months ended April
30, 1996 and 1995, respectively.
NOTE 2 - Acquisitions:
In August, 1995, the Company purchased certain assets of a salvage vehicle
auction facility located in Jackson, Mississippi. In December, 1995, the
Company purchased certain assets of a salvage vehicle auction facility located
in El Paso, Texas.
During the first nine months of fiscal 1996, the Company opened salvage
vehicle auction facilities near Charlotte, North Carolina; Jacksonville,
Florida; Indianapolis, Indiana; Van Nuys, California; and Phoenix, Arizona.
The following unaudited pro forma financial information assumes the Kansas
City, Oklahoma City and Tulsa, St. Louis, Conway and West Memphis, NER, Jackson,
and El Paso acquisitions occurred at the beginning of fiscal 1995. These
results have been prepared for comparative purposes only and do not purport to
be indicative of what would have occurred had the acquisitions been made at the
beginning of fiscal 1995 or of the results which may occur in the future.
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
--------- ---------
($000's) ($000's)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . $34,330 $24,663 $86,818 $62,447
------- ------- ------- -------
------- ------- ------- -------
Operating income . . . . . . $ 4,538 $ 4,488 $13,702 $12,684
------- ------- ------- -------
------- ------- ------- -------
Net income . . . . . . . . . $ 2,789 $ 2,683 $ 8,428 $ 7,605
------- ------- ------- -------
------- ------- ------- -------
Net income per share . . . . $ 0.21 $ 0.20 $ 0.63 $ 0.57
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
<PAGE>
NOTE 3 - Noncash Financing and Investing Activities:
During the nine months ended April 30, 1996, 94,700 warrants were exercised
in a non-cash transaction which resulted in the issuance of 87,400 shares of
common stock. The issuance of these shares resulted in a tax benefit of
approximately $860,000 and has been reflected as an adjustment to shareholders'
equity.
NOTE 4 - Subsequent Event:
On May 31, 1996 the Company acquired land in Van Nuys, California for a
purchase price of $10.5 million, for which the Company paid $3.0 million in cash
and issued the Seller a promissory note secured by the property in the principal
amount of $7.5 million, bearing interest at the rate of 7.2% per annum. The
land includes the location of the Company's existing Van Nuys facility, and
provides the Company with contiguous land for expansion of that facility.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET
FORTH BELOW. THE COMPANY HAS ATTEMPTED TO IDENTIFY FORWARD-LOOKING STATEMENTS
BY PLACING AN ASTERISK IMMEDIATELY FOLLOWING THE SENTENCE OR PHRASE THAT
CONTAINS THE FORWARD-LOOKING STATEMENT.
The Company processes salvage vehicles principally on a consignment method,
on either the Percentage Incentive Program (the "PIP") or on a fixed fee
consignment basis. Using either consignment method, only the fees associated
with vehicle processing are recorded as revenue. The Company also processes a
percentage of its salvage vehicles pursuant to purchase contracts (the "Purchase
Program") under which the Company records the gross proceeds of the vehicle sale
as revenue and the cost of the vehicle in yard and fleet expense. For the three
months ended April 30, 1996 and 1995, approximately 28% and 33% of the vehicles
sold by Copart, respectively, and for the nine months ended April 30, 1996 and
1995, approximately 24% and 33%, respectively were processed under the PIP. The
decrease in the percentage of vehicles sold under the PIP resulted from the
acquisition of various companies that conducted business on a fixed fee
consignment basis, which the Company believes is consistent with industry
practice. The Company attempts to convert acquired operations to PIP, which
typically results in higher net returns to vehicle suppliers and higher fees to
the Company than standard fixed fee consignment programs. For the three months
ended April 30, 1996 and 1995, approximately 8% and 3% of the vehicles sold by
Copart, respectively, and for the nine months ended April 30, 1996 and 1995
approximately 5% and 2% respectively were processed pursuant to the Purchase
Program. The increase in the percentage of vehicles sold under the Purchase
Program is related to competitive pressures and demand from vehicle supplies.
However, due to a number of factors, including the timing and size of new
acquisitions, market conditions, and acceptance of the PIP and/or Purchase
Program by vehicle suppliers, the percentage of vehicles processed under these
programs in future periods may vary.*
Costs attributable to yard and fleet expenses consist primarily of
operating personnel (which includes yard management, clerical and yard
employees), rent, contract vehicle towing, insurance, fleet maintenance and
repair, and acquisition costs of salvage vehicles under the Purchase Program.
Costs associated with general and administrative expenses consist primarily of
executive, accounting, data processing and sales personnel, professional fees
and marketing expenses.
The results of the Company's operations reflect the increase in the number
of vehicles processed in the eastern United States. The sale of these vehicles
generated lower margins than those in Copart's operations in the western and
southwestern United States. The results also reflect additional vehicles
processed under purchase programs as part of the company's marketing thrust to
secure new vehicle suppliers.
- --------------------------
* This statement is a forward-looking statement reflecting current expectations.
Actual future performance may differ materially from the Company's current
expectations. The reader is advised to review "Management's Discussion and
Analysis of Results of Operations and Financial Condition - Factors Affecting
Future Results" for a fuller discussion of factors that could affect future
performance.
<PAGE>
ACQUISITIONS AND NEW OPERATIONS
Copart has experienced significant growth as it acquired 28 salvage vehicle
auction facilities and established six new facilities since the beginning of
fiscal 1995. All of the acquisitions have been accounted for using the purchase
method. Accordingly, the excess of the purchase price over the net tangible
assets acquired (consisting principally of goodwill) is being amortized over
periods which do not exceed 40 years.
As part of the Company's overall expansion strategy of offering integrated
service to vehicle suppliers, the Company anticipates further attempts to
acquire or establish new salvage yards in new regions, as well as the regions
currently served by Company facilities. As part of this strategy, in the first
nine months of fiscal 1996, Copart acquired facilities in Jackson, Mississippi
and El Paso, Texas and opened facilities near Charlotte, North Carolina;
Jacksonville, Florida; Indianapolis, Indiana; Van Nuys, California; and Phoenix,
Arizona. During fiscal 1995, in addition to the acquisition of NER Auction
Systems (NER) which consisted of 20 locations in 11 states, Copart acquired six
facilities in Kansas City, Kansas; Tulsa and Oklahoma City, Oklahoma; St. Louis,
Missouri; and Conway and West Memphis, Arkansas; and opened an additional
facility in Sacramento, California. The Company believes that these
acquisitions and openings solidify the Company's coverage of the West Coast,
expand the Company's coverage of the Midwest and Southwest and give the Company
a substantial presence in the Northeast, the Great Lakes states and Florida.
The Company expects to incur future amortization charges in connection with
anticipated acquisitions attributable to goodwill, noncompetition covenants and
other purchase-related adjustments.
RESULTS OF OPERATIONS
Three Months Ended April 30, 1996 Compared to Three Months Ended April 30, 1995
Revenues were approximately $34.3 million during the three months ended
April 30, 1996, an increase of approximately $18.3 million, or 114%, over the
comparable period in fiscal 1995 based on 109,900 vehicles processed.
Approximately $16.6 million of the increase in revenues was the result of the
acquisition of the St. Louis, Conway, West Memphis, NER, Jackson and El Paso
operations and the opening of Copart's Charlotte, Jacksonville, Indianapolis,
and Phoenix facilities. At facilities that the Company has owned for at least
15 months, yard revenues increased by approximately $1.8 million, or 11%, over
fiscal 1995, of which increased revenues from Purchase Program vehicles
accounted for $0.7 million of the increase. Under the Purchase Program the
Company records the gross proceeds of the vehicle sale as revenue. At
facilities that Copart has owned for at least 15 months, per-unit revenues
increased approximately 8% while overall vehicle sales increased approximately
1%.
Yard and fleet expenses were approximately $25.5 million during the three
months ended April 30, 1996, an increase of approximately $14.8 million, or
138%, over the comparable period in fiscal 1995. Approximately $12.8 million of
the increase was the result of the acquisitions of the St. Louis, Conway, West
Memphis, NER, Jackson, and El Paso operations and the opening of Copart's
Charlotte, Jacksonville, Indianapolis, and Phoenix facilities. The remainder of
the increase in yard and fleet expense was attributable to yard and fleet
expenses from facilities owned by the Company for at least 15 months, including
the cost of Purchase Program vehicles. Yard and fleet expenses increased to 74%
of revenues during the third quarter of fiscal 1996, as compared to 67% of
<PAGE>
revenues during the same period in fiscal 1995 primarily as a result of the
Company processing additional vehicles under the Purchase Program. Under the
Purchase Program the Company records the cost of the vehicle in yard and fleet
expense.
General and administrative expenses were approximately $2.8 million during
the three months ended April 30, 1996, an increase of approximately $1.3
million, or 89%, over the comparable period in fiscal 1995, due primarily to
increased personnel expense resulting from acquisitions and increased hiring in
anticipation of additional growth. General and administrative expenses
decreased to 8.2% of revenues during the three months ended April 30, 1996, as
compared to 9.3% of revenues during the three months ended April 30, 1995
primarily as a result of the Company processing additional vehicles under the
Purchase Program.
Depreciation and amortization expense was approximately $1.5 million during
the three months ended April 30, 1996, an increase of approximately $0.8
million, or 112%, over the comparable period in fiscal 1995. Such increase was
due primarily to the amortization of goodwill and covenants not to compete and
depreciation of acquired assets resulting from the acquisition of new salvage
auction facilities.
The effective income tax rate of 40% used for the three months ended April
30, 1996 is consistent with the effective income tax rate for the comparable
period in fiscal 1995.
Due to the foregoing factors, Copart realized net income of approximately
$2.8 million for the three months ended April 30, 1996, compared to net income
of approximately $1.9 million for the comparable period in fiscal 1995.
Nine Months Ended April 30, 1996 Compared to Nine Months Ended April 30, 1995
Revenues were approximately $86.8 million during the nine months ended
April 30, 1996, an increase of approximately $50.1 million, or 137%, over the
comparable period in fiscal 1995 based on 290,900 vehicles processed.
Approximately $40.8 million of the increase in revenues was the result of the
acquisition of the Kansas City, Oklahoma City, Tulsa, St. Louis, Conway, West
Memphis, NER, Jackson and El Paso operations and the opening of Copart's
Charlotte, Jacksonville, Indianapolis and Phoenix facilities. Revenues at
facilities which the Company has owned for at least 21 months increased by
approximately $9.4 million, or 28%, over fiscal 1995, of which increased
revenues from Purchase Program vehicles accounted for approximately $6.6 million
of the increase. Under the Purchase Program the Company records the gross
proceeds of the vehicle sale as revenue. The remainder of the increase in
revenues at these facilities was primarily attributable to increased per unit
revenues of approximately 9% and increased vehicle volume of approximately 1%.
Yard and fleet expenses were approximately $60.9 million during the nine
months ended April 30, 1996, an increase of approximately $37.2 million, or
157%, over the comparable period in fiscal 1995. Approximately $27.1 million of
the increase was the result of the acquisitions of the Kansas City, Oklahoma
City, Tulsa, St. Louis, Conway, West Memphis, NER, Jackson and El Paso
operations and the opening of Copart's Charlotte, Jacksonville, Indianapolis and
Phoenix facilities. The remainder of the increase in yard and fleet expense was
attributable to yard and fleet expenses from facilities owned by the Company for
at least 21 months, including the cost of Purchase Program
<PAGE>
vehicles. Yard and fleet expenses increased to 70% of revenues during the first
nine months of fiscal 1996, as compared to 65% of revenues during the same
period in fiscal 1995 primarily as result of the Company processing additional
vehicles under the Purchase Program. Under the Purchase Program the Company
records the cost of the vehicle in yard and fleet expense.
General and administrative expenses were approximately $7.8 million during
the nine months ended April 30, 1996, an increase of approximately $4.5 million,
or 134%, over the comparable period in fiscal 1995, due primarily to increased
personnel expense resulting from acquisitions and increased hiring in
anticipation of additional growth. General and administrative expenses
decreased to 9.0% of revenues during the nine months ended April 30, 1996, as
compared to 9.1% of revenues during the nine months ended April 30, 1995
primarily as a result of the Company processing additional vehicles under the
Purchase Program.
Depreciation and amortization expense was approximately $4.4 million during
the nine months ended April 30, 1996, an increase of approximately $2.4 million,
or 118%, over the comparable period in fiscal 1995. Such increase was due
primarily to the amortization of goodwill and covenants not to compete and
depreciation of acquired assets resulting from the acquisition of new salvage
auction facilities.
The effective income tax rate of 40% used for the nine months ended April
30, 1996 is consistent with the effective income tax rate for the comparable
period in fiscal 1995.
Due to the foregoing factors, Copart realized net income of approximately
$8.4 million for the nine months ended April 30, 1996, compared to net income of
approximately $4.7 million for the comparable period in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Copart has financed its growth principally through cash generated from
operations, the February 1993 debt financing, the issuance by Copart of
1,071,600 shares of Common Stock at $7.00 per share in a private placement to
certain of its existing shareholders in a November 1993 equity financing, the
March 1994 initial public offering of 2,300,000 shares of common stock at $12.00
per share, the May 1995 secondary offering of 1,897,500 shares of common stock
at $19.25 per share, the equity issued in conjunction with certain acquisitions
and borrowings under the bank credit facility in connection with the NER
acquisition.
At April 30, 1996, Copart had working capital of approximately $40.1
million, including cash and cash equivalents of approximately $17.7 million.
The Company has historically been able to process, market, sell and receive
payment for processed vehicles quickly. Therefore, the Company generally does
not require substantial amounts of working capital, as it receives payment for
vehicles at approximately the same time as it remits payments to vehicle
suppliers. The Company's primary source of cash is from the collection of fees
and reimbursable advances from the proceeds of auctioned salvage vehicles and
from buyers' fees. Accounts Receivable, net, increased from July 31, 1995
primarily as a result of increased reimbursable advances on vehicles that have
not yet been sold.
<PAGE>
Copart has a bank credit facility which consists of a revolving line of
credit of $10 million which matures in November 1997 and a $20 million term loan
facility which matures in May 2002. The term loan amortizes on a straight-line
basis over its term and has a maximum available limit of $19.2 million as of
April 30, 1996. The Company may reborrow up to the unamortized principal amount
of the term loan. Amounts outstanding under the bank credit facility accrue
interest at either the prime rate or at a rate based on LIBOR plus a spread of
1.75% subject to reductions based on certain credit ratios. The current spread
has been reduced to 1.25%. As of April 30, 1996, there were no outstanding
borrowings under this facility.
Copart generated cash from operations of approximately $9.7 million, and
$7.0 million during the nine months ended April 30, 1996 and 1995, respectively.
The increase in cash from operations reflects Copart's increased profitability.
During the nine months ended April 30, 1996, a significant use of Copart's
cash was for the acquisition of two salvage vehicle auction facilities, which
had an aggregate cash cost of approximately $3.0 million.
Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $3.8 million and $2.3 million
for the nine months ended April 30, 1996, and 1995, respectively. Copart's
capital expenditures have related primarily to opening and operating facilities
and acquiring yard equipment. Historically, Copart has sub-contracted for a
significant portion of its vehicle transport services. Based in part on an
evaluation of the reduced level of outside towing services at NER and the
potential for increased revenues from Company-owned vehicle towing services, the
Company is acquiring a significant number of additional car carriers and
forklifts.*
Cash and cash equivalents increased by approximately $3.9 and decreased by
approximately $5.0 million for the nine months ended April 30, 1996 and 1995,
respectively. The Company's liquidity and capital resources have not been
materially affected by inflation and are not subject to significant seasonal
fluctuations.
The Company believes that its currently available cash, cash generated from
operations and borrowing availability under the bank credit facility will be
sufficient to satisfy the Company's working capital requirements and fund
acquisitions and openings of new facilities for the next 12 months.* The size
and timing of such acquisitions and openings may vary and the Company believes
that in the future it will open a greater number of new facilities than it has
in the past.* Management believes that facilities opened by the Company require
more time to reach revenue and profitability levels comparable to its existing
facilities and may have greater working capital requirements than those
facilities acquired by the Company. Therefore, to the extent that the Company
opens a greater number of facilities in the future than it has historically, the
Company's growth rate in revenues and profitability may be adversely affected.
There can be no assurance that the Company will not be required to seek
additional debt or equity financing.
- ------------------------
* This statement is a forward-looking statement reflecting current expectations.
Actual future performance may differ materially from the Company's current
expectations. The reader is advised to review "Management's Discussion and
Analysis of Results of Operations and Financial Condition - Factors Affecting
Future Results" for a fuller discussion of factors that could affect future
performance.
<PAGE>
MANAGEMENT CHANGE
Effective April 18, 1996, Richard A. Polidori resigned as a Director
and President of the Company in order to pursue other business interests. Mr.
Polidori remains a consultant to the Company. Mr. Polidori is the former
President and principal shareholder of NER Auction Systems (NER) which the
Company acquired on May 2, 1995. Mr. Polidori served as President and a
Director of the Company from the date of the acquisition of NER. No replacement
has been named to fill the Director or President positions vacated by Mr.
Polidori's resignation.
FACTORS AFFECTING FUTURE RESULTS
The period-to-period comparability of Copart's operating results and
financial condition is substantially affected by certain business acquisitions
made by Copart during such periods. In addition, other factors that affect the
results of the Company include fluctuations in Actual Cash Values, the market
value and demand for salvage, changes in regulations governing the salvage
vehicle auction industry, delays or changes in state title processing and the
weather.
Historically, a limited number of vehicle suppliers have accounted for
a substantial portion of the Company's revenues. A loss or reduction in the
number of vehicles from a significant vehicle supplier or material changes in
the terms of an arrangement with a substantial vehicle supplier could have a
material adverse effect on the Company's financial condition and results of
operations.
The Company seeks to increase sales and profitability primarily through the
opening of new facilities and the increase of salvage vehicle volume at existing
facilities through the acquisition of other salvage vehicle auction facilities.
There can be no assurance that the Company will be able to continue to acquire
additional facilities on terms economical to the Company or that the Company
will be able to increase revenues at newly acquired facilities above levels
realized at such facilities prior to their acquisition by the Company.
Additionally, as the Company continues to grow, its acquisitions will have to be
more numerous or of a larger size in order to have a material impact on the
Company's operations. The ability of the Company to achieve its expansion
objectives and to manage its growth is also dependent on other factors,
including the integration of new facilities into existing operations, the
establishment of new relationships or expansion of existing relationships with
vehicle suppliers, the identification and lease of suitable premises on
competitive terms and the availability of capital.
While Copart has acquired a number of companies in recent years, the
Company's acquisition of NER Auction Systems in May 1995 was its largest
acquisition undertaken to date. The successful integration of NER has been more
difficult and required a greater period of time than prior acquisitions.
Currently, Willis J. Johnson, Chief Executive Officer of the Company,
together with certain other existing shareholders, beneficially own
approximately 36% of the issued and outstanding shares of Common Stock. This
controlling interest in the Company may also have the effect of making certain
transactions, such as mergers or tender offers involving the Company, more
difficult or impossible, absent the support of Mr. Johnson and such other
existing shareholders.
<PAGE>
The Company's operations are subject to regulation, supervision and
licensing under various federal, state and local statutes, ordinances and
regulations. The acquisition and sale of damaged and recovered stolen vehicles
is regulated by state motor vehicle departments. In addition to the regulation
of sales and acquisitions of vehicles, the Company is also subject to various
local zoning requirements with regard to the location of its auction and storage
facilities. These zoning requirements vary from location to location. The
Company is also subject to environmental regulations. The Company believes that
it is in compliance in all material respects with applicable regulatory
requirements. The Company may be subject to similar types of regulations by
federal, state, and local governmental agencies in new markets. Although the
Company believes that it has all permits necessary to conduct its business and
is in material compliance with applicable regulatory requirements, failure to
comply with present or future regulations or changes in interpretations of
existing regulations could result in impairment of the Company's operations and
the imposition of penalties and other liabilities.
The Company's operations are subject to federal, state and local laws and
regulations regarding the protection of the environment. In the salvage vehicle
auction industry, large numbers of wrecked vehicles are stored at auction
facilities for short periods of time. Minor spills of gasoline, motor oils and
other fluids may occur from time to time at the Company's facilities which may
result in localized soil, surface water or groundwater contamination. Petroleum
products and other hazardous materials are contained in aboveground or
underground storage tanks located at certain of the Company's facilities. Waste
materials such as waste solvents or used oils are generated at some of the
Company's facilities which are disposed of as nonhazardous or hazardous wastes.
The Company has put into place procedures to reduce the amounts of soil
contamination that may occur at its facilities, and has initiated safety
programs and training of personnel on safe storage and handling of hazardous
materials. The Company believes that it is in compliance in all material
respects with applicable environmental regulations and does not anticipate any
material capital expenditures for environmental compliance or remediation that
are not currently reserved for. Environmental laws and regulations, however,
could become more stringent over time and there can be no assurance that the
Company or its operations will not be subject to significant compliance costs in
the future. To date, the Company has not incurred expenditures for preventive
or remedial action with respect to soil contamination or the use of hazardous
materials which have had a material adverse effect on the Company's financial
condition or results of operations. The soil contamination which may occur at
the Company's facilities and the potential contamination by previous users of
certain acquired facilities create the risk, however, that the Company could
incur substantial expenditures for preventive or remedial action, as well as
potential liability arising as a consequence of hazardous material
contamination, which could have a material adverse effect on the Company.
The salvage vehicle auction industry is highly fragmented. As a result,
the Company faces intense competition for the supply of salvage vehicles from
vehicle suppliers, as well as competition for buyers of vehicles from other
salvage vehicle auction companies. The Company believes its principal
competitor is Insurance Auto Auctions, Inc. ("IAA"). Over the last three years,
IAA acquired and opened a number of salvage vehicle auction facilities. IAA is a
significant competitor in certain regions in which the Company operates or may
expand in the future. In other regions of the United States, the Company faces
substantial competition from salvage vehicle auction facilities with established
relationships with vehicle suppliers and buyers and financial resources which
may be greater than the Company's. Due to the limited number of vehicle
suppliers and the absence of long-term contractual
<PAGE>
commitments between the Company and such salvage vehicle suppliers, competition
for salvage vehicles from such suppliers is intense. The Company may also
encounter significant competition for state, regional and national supply
agreements with vehicle suppliers. For example, IAA has entered into an
exclusive supply agreement with Allstate, an approximately 15% shareholder of
IAA, under which, subject to certain exceptions, IAA will process all of
Allstate's salvage vehicles at those locations where IAA conducts operations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
11.1 Computation of Net Income per Share.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
No Reports on Form 8-K were filed during the quarter ended April 30,
1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COPART, INC.
-----------------------------
Joseph M. Whelan, Senior Vice
President and Chief Financial
Officer (duly authorized officer
and principal financial and
accounting officer)
Date: June 3, 1996
<PAGE>
EXHIBIT 11.1
COPART, INC.
COMPUTATION OF NET INCOME PER SHARE
(unaudited)
<TABLE>
<CAPTION>
Three months ended April 30, Nine months ended April 30,
---------------------------- ---------------------------
1996 1995 1996 1995
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Weighted average common shares
issued and outstanding . . . . . . . . . . . . . 12,519,000 9,213,300 12,438,400 9,029,400
Common stock equivalents:
Warrants and stock options . . . . . . . . . . . 877,900 914,700 844,400 875,500
------------ ------------ ------------ ------------
13,396,900 10,128,000 13,282,800 9,904,900
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . . . . $ 2,789,100 $ 1,900,700 $ 8,428,300 $ 4,749,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share . . . . . . . . . . . . . . $ 0.21 $ 0.19 $ 0.63 $ 0.48
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Net income per share is computed by using the weighted average number of common
shares and equivalents assumed to be outstanding during the periods.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
COPART, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDING APRIL
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> APR-30-1996
<CASH> 17,690,300
<SECURITIES> 0
<RECEIVABLES> 28,909,500
<ALLOWANCES> 0
<INVENTORY> 1,627,600
<CURRENT-ASSETS> 58,889,800
<PP&E> 14,725,900
<DEPRECIATION> 1,534,900
<TOTAL-ASSETS> 149,120,500
<CURRENT-LIABILITIES> 18,759,300
<BONDS> 0
0
0
<COMMON> 12,540,300
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 149,120,500
<SALES> 0
<TOTAL-REVENUES> 34,330,100
<CGS> 0
<TOTAL-COSTS> 29,792,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,649,900
<INCOME-TAX> 1,860,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,789,100
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
