<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, 1997
/ / 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 NO
--- ---
Number of shares of Common Stock outstanding as of May 29, 1997: 12,992,967
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30, July 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,610,000 $ 13,026,200
Accounts receivable, net 35,833,800 29,992,000
Income taxes receivable - 742,200
Vehicle pooling costs 9,379,200 9,253,300
Inventory 854,300 1,456,400
Deferred income taxes 378,400 378,400
Prepaid expenses and other assets 3,134,100 2,450,800
-------------- -------------
Total current assets 69,189,800 57,299,300
Property and equipment, net 28,167,000 26,204,200
Intangibles and other assets, net 75,717,700 74,562,300
-------------- -------------
Total assets $ 173,074,500 $ 158,065,800
-------------- -------------
-------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,076,000 $ 772,800
Accounts payable and accrued liabilities 12,052,800 10,370,000
Deferred revenue 5,852,400 5,570,500
Income taxes payable 302,900 -
-------------- -------------
Total current liabilities 20,284,100 16,713,300
Deferred income taxes 901,900 610,300
Long-term debt, less current portion 8,503,500 10,487,000
Other liabilities 4,449,300 4,010,200
-------------- -------------
Total liabilities 34,138,800 31,820,800
-------------- -------------
Shareholders' equity:
Common stock, no par value - 30,000,000 shares
authorized; 12,991,967 and 12,641,213 shares
issued and outstanding at April 30, 1997 and
July 31, 1996, respectively 110,518,100 106,473,800
Retained earnings 28,417,600 19,771,200
-------------- -------------
Total shareholders' equity 138,935,700 126,245,000
-------------- -------------
Commitments and contingencies
Total liabilities and shareholders'
equity $ 173,074,500 $ 158,065,800
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended April 30, Nine months ended April 30,
---------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 33,806,800 $ 34,330,100 $ 96,688,400 $ 86,817,600
------------- ------------- ------------- -------------
Operating expenses:
Yard and fleet 23,976,000 25,457,800 69,234,600 60,900,600
General and administrative 2,584,600 2,799,800 7,851,400 7,832,800
Depreciation and amortization 1,941,300 1,534,900 5,506,700 4,382,200
------------- ------------- ------------- -------------
Total operating expenses 28,501,900 29,792,500 82,592,700 73,115,600
------------- ------------- ------------- -------------
Operating income 5,304,900 4,537,600 14,095,700 13,702,000
------------- ------------- ------------- -------------
Other income:
Interest income, net 23,000 36,100 68,300 225,700
Other income 169,500 76,200 247,300 119,900
------------- ------------- ------------- -------------
Total other income 192,500 112,300 315,600 345,600
------------- ------------- ------------- -------------
Income before income taxes 5,497,400 4,649,900 14,411,300 14,047,600
Income taxes 2,199,400 1,860,800 5,764,900 5,619,300
------------- ------------- ------------- -------------
Net income $ 3,298,000 $ 2,789,100 $ 8,646,400 $ 8,428,300
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per share $ .25 $ .21 $ .65 $ .63
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average shares and
equivalents outstanding 13,425,700 13,396,900 13,263,800 13,282,800
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended April 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,646,400 $ 8,428,300
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,506,700 4,382,200
Deferred rent 439,100 849,200
Deferred income taxes 291,600 -
Gain on sale of property and equipment (124,500) -
Employee stock purchase plan compensation 27,600 61,400
Changes in operating assets and liabilities:
Accounts receivable (5,324,200) (4,586,900)
Vehicle pooling costs 115,200 (1,567,100)
Inventory 602,100 1,624,800
Prepaid expenses and other current assets (655,900) (1,443,900)
Income taxes receivable 742,200 -
Accounts payable and accrued liabilities 1,672,800 2,923,600
Deferred revenue 281,900 135,000
Income taxes payable 1,857,900 (223,500)
------------ ------------
Net cash provided by operating activities 14,078,900 10,583,100
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,271,700) (3,833,800)
Proceeds from sale of property and equipment 1,362,600 -
Other intangible asset additions (1,930,200) -
Purchase of net current assets in connection with acquisitions (839,900) (504,700)
Purchase of property and equipment in connection with acquisitions (466,600) (174,500)
Purchase of intangible assets in connection with acquisitions (2,130,700) (2,300,100)
------------ ------------
Net cash used in investing activities (9,276,500) (6,813,100)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 2,304,800 427,000
Proceeds from issuance of Employee Stock Purchase Plan shares 156,900 172,000
Principal payments on long-term debt (680,300) (417,700)
Debt issuance costs - (40,200)
------------ ------------
Net cash provided by financing activities 1,781,400 141,100
------------ ------------
Net increase in cash and cash equivalents 6,583,800 3,911,100
Cash and cash equivalents at beginning of period 13,026,200 13,779,200
------------ ------------
Cash and cash equivalents at end of period $ 19,610,000 $ 17,690,300
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 634,300 $ 279,300
------------ ------------
------------ ------------
Income taxes paid $ 2,874,500 $ 4,944,600
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997
(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, 1996 filed with the Securities and Exchange
Commission.
Gross proceeds generated from auctioned salvage vehicles were
approximately $148,866,400 and $140,453,100 for the three months ended April
30, 1997 and 1996, and $403,139,200 and $375,001,400 for the nine months
ended April 30, 1997 and 1996, respectively.
NOTE 2 - New Acquisitions and Openings:
In March, 1997, the Company purchased certain assets of a salvage
vehicle auction facility located in Salt Lake City, Utah. In January, 1997,
the Company purchased certain assets of a salvage vehicle auction facility
located in Baton Rouge, Louisiana. In addition, during the first nine months
of fiscal 1997, the company opened salvage vehicle auction facilities in
Hammond, Indiana and Woodinville, Washington.
NOTE 3 - New Accounting Pronouncement:
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." SFAS No. 128
requires the presentation of basic earnings per share ("EPS") and, for
companies with complex capital structures or potentially dilutive securities,
such as options and warrants, diluted EPS. SFAS No.128 is effective for
annual and interim periods ending after December 15, 1997. The Company
expects that basic EPS will be higher than primary earnings per share as
presented in the accompanying consolidated financial statements and that
diluted EPS will not differ materially from fully diluted earnings per share
as presented in the accompanying consolidated financial statements. No
calculation has been made since the effective date of implementation for the
Company is in fiscal 1998.
5
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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 in revenues. The Company
also processes certain of its salvage vehicles pursuant to purchase contracts
(the "Purchase Program") under which the Company records the gross proceeds
of the vehicle sale in revenues and the cost of the vehicle in yard and fleet
expense. For the three months ended April 30, 1997 and 1996, approximately
35% and 28%, respectively, and for the nine months ended April 30, 1997 and
1996, approximately 31% and 24% respectively of the vehicles sold by Copart
were processed under the PIP. The increase in the percentage of vehicles
sold under the PIP resulted from the conversion of vehicle suppliers from
fixed fee and purchase programs to the PIP. 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, 1997 and 1996,
approximately 5% and 8%, respectively, and for the nine months ended April
30, 1997 and 1996, approximately 7% and 5%, respectively, of the vehicles
sold by Copart were processed pursuant to the Purchase Program. The increase
in the percentage of vehicles sold between years under the Purchase Program
is related to competitive pressures and the requirements of certain vehicle
suppliers. The decrease in the percentage of vehicles sold under the Purchase
Program between the second and third quarters of fiscal 1997 is attributable
to the termination, or renegotiation to consignment contracts, of certain
vehicle purchase contracts. Such terminated or renegotiated purchase
contracts accounted for approximately 2% of the Company's volume of revenues.
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, vehicle lease payments, insurance,
fleet maintenance and repair, fuel 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.
ACQUISITIONS AND NEW OPENINGS
Copart has experienced significant growth as it acquired 40 salvage
vehicle auction facilities and established nine new facilities since the
beginning of fiscal 1992. All of the acquisitions have been accounted for
using the purchase method. Accordingly, the excess of the purchase price
over
- --------------------
* This statement is a looking forward 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.
6
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the net tangible assets acquired (consisting principally of goodwill) is
being amortized over periods which do not exceed 40 years. Costs related to
the opening of new auction facilities, such as preopening payroll and various
training expenses, are deferred until the auction facilities open and are
amortized over the subsequent 12 months.
As part of the Company's overall expansion strategy of offering
integrated service to vehicle suppliers, the Company anticipates further
attempts to open or acquire 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 1997, Copart opened facilities in
Woodinville, Washington and Hammond, Indiana and acquired facilities in Baton
Rouge, Louisiana and Salt Lake City, Utah. During fiscal 1996, the Company
acquired facilities in Jackson, Mississippi and El Paso, Texas and opened
facilities in or near Charlotte, North Carolina; Jacksonville, Florida;
Indianapolis, Indiana; Van Nuys, California; and Phoenix, Arizona. The
Company believes these acquisitions and openings solidify the Company's
coverage of the West Coast and expand the Company's coverage of the South and
the Great Lakes states. In the event of future acquisitions, the Company
expects to incur future amortization charges in connection with such
acquisitions attributable to goodwill, covenants not to compete and other
purchase-related adjustments.*
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997 COMPARED TO THREE MONTHS ENDED APRIL 30, 1996
Revenues were approximately $33.8 million during the three months ended
April 30, 1997, a decrease of approximately $0.5 million, or 2%, over the
three months ended April 30, 1996 based on 113,000 vehicles processed.
Approximately $1.4 million of revenues was the result of the acquisition of
the Baton Rouge and Salt Lake City operations and the opening of Copart's
Phoenix and Hammond facilities. Existing yard revenues decreased by
approximately $1.9 million, or 6% over the three months ended April 30, 1996.
This decrease consisted of reduced revenues from the purchase program of
approximately $4.5 million due to terminated or renegotiated purchase
contracts, offset by additional revenues primarily from consignment vehicles
at existing facilities. Under the Purchase Program the Company records the
gross proceeds of the vehicle sale as revenue. After eliminating the
accounting impact of the purchase program, revenues increased at existing
facilities primarily due to increased per-unit revenues of approximately 11%
and equivalent vehicle volume.
Yard and fleet expenses were approximately $24.0 million during the
three months ended April 30, 1997, a decrease of approximately $1.5 million,
or 6%, over the comparable period in fiscal 1996. Approximately $0.8 million
of yard and fleet expenses were the result of the acquisition of the Baton
Rouge and Salt Lake City operations and the opening of Copart's Phoenix and
Hammond facilities. The decrease in existing facilities yard and fleet
expense was primarily the result of the decrease in the cost of Purchase
Program vehicles due to terminated or renegotiated purchase contracts. Yard
and fleet expenses decreased to 71% of revenues during the third quarter of
fiscal 1997, as compared to 74% of revenues during the same period of fiscal
1996, primarily as a result of the Company processing fewer vehicles under
the Purchase Program. Under the Purchase Program the Company records the
cost of the vehicle in yard and fleet expense.
- --------------------
*This statement is a looking forward 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.
7
<PAGE>
General and administrative expenses were approximately $2.6 million
during the three months ended April 30, 1997, a decrease of approximately
$0.2 million, or 8%, over the three months ended April 30, 1996, primarily
due to closure of the eastern division corporate office. General and
administrative expenses were 8% of revenues during the three months ended
April 30, 1997, as compared to 8% of revenues during the three months ended
April 30, 1996.
Depreciation and amortization expense was approximately $1.9 million
during the three months ended April 30, 1997, an increase of approximately
$0.4 million, or 26%, over the three months ended April 30, 1996. Such
increase was due primarily to the amortization of start up costs associated
with new openings and depreciation of capital expenditures associated with
improvements at the Company's facilities.
The effective income tax rate of 40% applicable to the three months
ended April 30, 1997 is consistent with the effective income tax rate for the
three months ended April 30, 1996.
Due to the foregoing factors, Copart realized net income of
approximately $3.3 million and $2.8 million for the three months ended April
30, 1997 and April 30, 1996, respectively.
NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO NINE MONTHS ENDED APRIL 30, 1996
Revenues were approximately $96.7 million during the nine months ended
April 30, 1997, an increase of approximately $9.9 million, or 11%, over the
nine months ended April 30, 1996 based on 311,100 vehicles processed.
Approximately $3.6 million of the increase in revenues was the result of the
acquisition of the El Paso, Baton Rouge and Salt Lake City operations and the
opening of Copart's Charlotte, Jacksonville, Indianapolis, Phoenix and
Hammond facilities. Existing yard revenues increased by approximately $6.3
million, or 7% over the nine months ended April 30, 1996, while decreased
revenues from Purchase Program vehicles were approximately $0.7 million due
to terminated or renegotiated purchase contracts. Under the Purchase Program
the Company records the gross proceeds of the vehicle sale as revenue. After
eliminating the accounting impact of the purchase program, the increase in
revenues at existing facilities was primarily due to increased per-unit
revenues of approximately 8% and increased vehicle volume of approximately 3%.
Yard and fleet expenses were approximately $69.2 million during the nine
months ended April 30, 1997, an increase of approximately $8.3 million, or
14%, over the comparable period in fiscal 1996. Approximately $3.7 million
of the increase was the result of the acquisition of the El Paso, Baton Rouge
and Salt Lake City operations and the opening of Copart's Charlotte,
Jacksonville, Indianapolis, Phoenix and Hammond facilities. The remainder of
the increase in yard and fleet expenses were attributable to existing
operations. Yard and fleet expenses increased to 72% of revenues during the
first nine months of fiscal 1997, as compared to 70% of revenues during the
same period of fiscal 1996, 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 $7.9 million
during the nine months ended April 30, 1997, which is consistent with the
nine months ended April 30, 1996. General and administrative expenses
decreased to 8% of revenues during the nine months ended April 30, 1997, as
compared to 9% of revenues during the nine months ended April 30, 1996
primarily as a result of the accounting impact of the Purchase Program.
8
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Depreciation and amortization expense was approximately $5.5 million
during the nine months ended April 30, 1997, an increase of approximately
$1.1 million, or 26%, over the nine months ended April 30, 1996. Such
increase was due primarily to the amortization of start up costs associated
with new openings and depreciation of capital expenditures associated with
improvements at the Company's facilities.
The effective income tax rate of 40% applicable to the nine months ended
April 30, 1997 is consistent with the effective income tax rate for the nine
months ended April 30, 1996.
Due to the foregoing factors, Copart realized net income of
approximately $8.6 million for the nine months ended April 30, 1997, compared
to net income of approximately $8.4 million for the nine months ended April
30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Copart has financed its growth principally through cash generated from
operations, debt and equity financing, initial and secondary public offerings
of Common Stock, the equity issued in conjunction with certain acquisitions
and borrowings under the bank credit facility.
At April 30, 1997, Copart had working capital of approximately $48.9
million, including cash and cash equivalents of approximately $19.6 million.
The Company is able to process, market, sell and receive payment for
processed vehicles quickly. Therefore, the Company 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 seller's fees,
reimbursable advances from the proceeds of auctioned salvage vehicles and
from buyer's fees.
The Company has entered into various operating lease lines for the
purpose of leasing yard and fleet equipment.
Copart generated cash from operations of approximately $14.1 million and
$10.6 million, during the nine months ended April 30, 1997 and 1996,
respectively. This increase is primarily due to decreased costs associated
with processing vehicles held in the Company's facilities and an increase in
income taxes payable.
Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $5.3 million and $3.8
million for the nine months ended April 30, 1997, and 1996, respectively.
Copart's capital expenditures have related primarily to opening and operating
facilities and acquiring yard equipment. Historically, while Copart has
sub-contracted for a significant portion of its vehicle transport services,
the Company has implemented a program for converting long haul transports to
its own fleet of vehicle carriers at each facility. Based upon the potential
for increased revenues from Company-owned vehicle towing services, the
Company has entered into agreements to acquire additional multi-vehicle
transport trucks and forklifts and is disposing of certain older equipment.
Cash and cash equivalents increased by approximately $6.6 million and
$3.9 million for the nine months ended April 30, 1997 and 1996, respectively.
The Company's liquidity and capital
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resources have not been materially affected by inflation; however, they are
subject to seasonal fluctuations.
The Company believes that its currently available cash, cash generated
from operations and borrowing availability under its bank credit facilities
and equipment leasing lines will be sufficient to satisfy the Company's
working capital requirements and fund acquisitions and openings of new
facilities for the next 12 months.* However, there can be no assurance that
the Company will not be required to seek additional debt or equity financing
prior to such time.
FACTORS AFFECTING FUTURE RESULTS
Historically, a limited number of vehicle suppliers have accounted for a
substantial portion of the Company's revenues. In the third quarter of
fiscal 1997, vehicles supplied by Copart's largest vehicle supplier accounted
for approximately 16% of Copart's revenues. The Company's agreements with
this and other vehicle suppliers are either oral or written agreements that
typically are subject to cancellation by either party upon 30 days' notice.
There can be no assurance that existing agreements will not be canceled or
that the terms of any new agreements will be comparable to those of existing
agreements. The Company believes that, as the salvage vehicle auction
industry becomes more consolidated, the likelihood of large vehicle suppliers
entering into agreements with single companies to dispose of all of their
salvage vehicles on a statewide, regional or national basis increases. There
can be no assurance that the Company will be able to enter into such
agreements or that it will be able to retain its existing supply of salvage
vehicles in the event vehicle suppliers begin disposing of their salvage
vehicles pursuant to state, regional or national agreements with other
operators of salvage vehicle auction facilities. 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's operating results have in the past and may in the future
fluctuate significantly depending on a number of factors. These factors
include changes in the market value of salvage vehicles, buyer attendance at
salvage auctions, fluctuations in vehicle transportation costs, delays or
changes in state title processing and/or changes in state or federal laws or
regulations affecting salvage vehicles, fluctuations in Actual Cash Values
("ACV's") of salvage vehicles, the availability of vehicles and weather
conditions. In addition, all of the Company's acquisitions have been
accounted for under the purchase method pursuant to which the Company incurs
amortization charges for the excess of the purchase price paid over the net
tangible assets acquired. In the event future acquisitions are accounted for
using the purchase method, the Company's earnings will be affected by
amortization charges in connection with such acquisitions. As a result, the
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
any indication of future performance. There can be no assurance, therefore,
that the Company's operating results in some future quarter will not be below
the expectations of public market analysts and/or investors.
The market price of the Company's Common Stock could be subject to
significant fluctuations in response to various factors and events, including
variations in the Company's operating results, the
- --------------------
*This statement is a looking forward 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.
10
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inability to continue to increase service fees, the timing and size of
acquisitions and facility openings, the loss of vehicle suppliers or buyers,
the announcement of new vehicle supply agreements by the Company or its
competitors, changes in regulations governing the Company's operations or its
vehicle suppliers, environmental problems or litigation. In addition, the
stock market in recent years has experienced broad price and volume
fluctuations that often have been unrelated to the operating performance of
companies.
The Company seeks to increase sales and profitability primarily through
the increase of salvage vehicle volume and revenue at existing facilities,
the opening of new facilities and 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 openings and 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. 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.
Currently, Willis J. Johnson, Chief Executive Officer of the Company,
together with one other existing shareholder, beneficially own approximately
32% of the issued and outstanding shares of Common Stock. This 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 shareholder.
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
11
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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 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.
12
<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,
1997.
13
<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.
/s/ Joseph M. Whelan
-------------------------------------------------
Joseph M. Whelan, Senior Vice President and Chief
Financial Officer (duly authorized officer and
principal financial and accounting officer)
Date: June 2, 1997
14
<PAGE>
EXHIBIT 11.1
COPART, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended April 30, Nine months ended April 30,
---------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
issued and outstanding 12,983,200 12,519,000 12,816,900 12,438,400
Common stock equivalents:
Warrants and stock options 442,500 877,900 446,900 844,400
------------ ------------ ------------ ------------
13,425,700 13,396,900 13,263,800 13,282,800
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income $ 3,298,000 $ 2,789,100 $ 8,646,400 $ 8,428,300
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share $ .25 $ .21 $ .65 $ .63
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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.
See accompanying notes to consolidated financial statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COPART, INC.
QUARTERLY REPORT ON FORM 10Q FOR THE PERIOD ENDING APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 19610000
<SECURITIES> 0
<RECEIVABLES> 35833800
<ALLOWANCES> 0
<INVENTORY> 854300
<CURRENT-ASSETS> 69189800
<PP&E> 37380300
<DEPRECIATION> 9213300
<TOTAL-ASSETS> 173074500
<CURRENT-LIABILITIES> 20284100
<BONDS> 0
0
0
<COMMON> 12991967
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 138935700
<SALES> 96688400
<TOTAL-REVENUES> 96688400
<CGS> 0
<TOTAL-COSTS> 82592700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14411300
<INCOME-TAX> 5764900
<INCOME-CONTINUING> 8646400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8646400
<EPS-PRIMARY> .65
<EPS-DILUTED> 0
</TABLE>
