<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 January 31, 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 March 5, 1997: 12,979,467
1
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
January 31, July 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,339,500 $ 13,026,200
Accounts receivable, net 37,738,500 29,992,000
Income taxes receivable 613,200 742,200
Vehicle pooling costs 10,902,300 9,253,300
Inventory 1,596,300 1,456,400
Deferred income taxes 378,400 378,400
Prepaid expenses and other assets 2,503,200 2,450,800
------------ ------------
Total current assets 66,071,400 57,299,300
Property and equipment, net 27,222,800 26,204,200
Intangibles and other assets, net 75,015,600 74,562,300
------------ ------------
Total assets $168,309,800 $158,065,800
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,225,500 $ 772,800
Accounts payable and accrued liabilities 11,460,100 10,370,000
Deferred revenue 6,449,400 5,570,500
------------ ------------
Total current liabilities 20,135,000 16,713,300
Deferred income taxes 610,300 610,300
Long-term debt, less current portion 8,663,500 10,487,000
Other liabilities 4,298,200 4,010,200
------------ ------------
Total liabilities 33,707,000 31,820,800
------------ ------------
Shareholders' equity:
Common stock, no par value - 30,000,000 shares authorized;
12,973,267 and 12,641,213 shares issued and outstanding at
January 31, 1997 and July 31, 1996, respectively. 109,483,200 106,473,800
Retained earnings 25,119,600 19,771,200
------------ ------------
Total shareholders' equity 134,602,800 126,245,000
------------ ------------
Commitments and contingencies
Total liabilities and shareholders' equity $168,309,800 $158,065,800
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended January 31, Six months ended January 31,
------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $30,364,500 $26,071,100 $62,881,600 $52,487,500
---------- ---------- ---------- ----------
Operating expenses:
Yard and fleet 20,906,900 17,125,100 45,258,600 35,442,800
General and administrative 2,708,600 2,625,500 5,266,800 5,033,000
Depreciation and amortization 1,793,700 1,439,300 3,565,400 2,847,300
---------- ---------- ---------- ----------
Total operating expenses 25,409,200 21,189,900 54,090,800 43,323,100
---------- ---------- ---------- ----------
Operating income 4,955,300 4,881,200 8,790,800 9,164,400
---------- ---------- ---------- ----------
Other income:
Interest income, net 35,100 125,000 45,300 189,600
Other income 50,700 28,800 77,800 43,700
---------- ---------- ---------- ----------
Total other income 85,800 153,800 123,100 233,300
---------- ---------- ---------- ----------
Income before income taxes 5,041,100 5,035,000 8,913,900 9,397,700
Income taxes 2,029,500 2,013,500 3,565,500 3,758,500
---------- ---------- ---------- ----------
Net income $3,011,600 $3,021,500 $5,348,400 $5,639,200
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share $ .23 $ .23 $ .40 $.43
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares and
equivalents outstanding 13,310,875 13,291,400 13,222,070 13,256,200
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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>
Six months ended January 31,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,348,400 $5,639,200
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,565,400 2,847,300
Deferred rent 289,300 619,700
Gain on sale of assets (37,500) -
Changes in operating assets and liabilities:
Accounts receivable (7,566,300) (6,301,400)
Vehicle pooling costs (1,541,400) (1,971,900)
Inventory (139,900) 1,794,300
Prepaid expenses and other current assets (370,900) (785,000)
Income taxes receivable 699,000 -
Accounts payable and accrued liabilities 1,090,100 1,332,700
Deferred revenue 878,900 481,200
Income taxes payable - (452,400)
---------- ----------
Net cash provided by operating activities 2,215,100 3,203,700
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,462,400) (2,146,800)
Proceeds from sale of property and equipment 1,067,400 -
Other intangible asset additions (1,105,900) -
Other liabilities (1,400) 32,300
Purchase of net current assets in connection with acquisitions (287,900) (504,700)
Purchase of property and equipment in connection with acquisitions (466,600) (174,500)
Purchase of intangible assets in connection with acquisitions (686,000) (2,300,100)
---------- ----------
Net cash used in investing activities (4,942,800) (5,093,800)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 2,254,900 238,200
Proceeds from issuance of Employee Stock Purchase Plan shares 156,900 172,000
Principal payments on notes payable (370,800) (272,400)
Debt issuance costs - (40,200)
---------- ----------
Net cash provided by financing activities 2,041,000 97,600
---------- ----------
Net decrease in cash and cash equivalents (686,700) (1,792,500)
Cash and cash equivalents at beginning of period 13,026,200 13,779,200
---------- ----------
Cash and cash equivalents at end of period $12,339,500 $11,986,700
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $430,800 $190,600
---------- ----------
---------- ----------
Income taxes paid $2,874,550 $3,505,700
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 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
$123,585,500 and $100,155,900 for the three months ended January 31, 1997 and
1996, and $254,272,700 and $206,842,600 for the six months ended January 31,
1997 and 1996, respectively.
NOTE 2 - New Acquisition and Openings:
In January 1997, the Company purchased certain assets of a salvage vehicle
auction facility located in Baton Rouge, Louisiana. In addition, during the
first six months of fiscal 1996, the company opened salvage auction facilities
in Hammond, Indiana and Woodinville, Washington.
NOTE 3- Subsequent Event:
In March, 1997, the Company amended its revolving credit agreement to
allow for borrowings of up to $50,000,000 through February, 2002 with
mandatory reductions of $10,000,000 of availability in March, 2000 and 2001,
respectively. Amounts outstanding under the facility accrue interest at a
rate based on LIBOR plus a spread of 0.50% subject to an increase to a
maximum spread of 1.25% based upon certain credit ratios. There are
currently no outstanding borrowings under this facility.
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 January 31, 1997 and 1996, approximately 31% and 24%,
respectively, and for the six months ended January 31, 1997 and 1996,
approximately 29% and 22% 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
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 January 31, 1997 and 1996, approximately 7% and 5%,
respectively and for the six months ended January 31, 1997 and 1996
approximately 8% and 4%, 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 first and second quarters of fiscal 1997 is attributable to the termination
of, or re-negotiation to, consignment contracts of certain vehicle purchase
contracts. Such terminated or re-negotiated purchase contracts accounted for
approximately 3% of the Company's volume of sales. 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, 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.
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
- -------------------------------
* 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.
6
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additional vehicles processed under purchase programs as part of the Company's
marketing thrust to secure new vehicle suppliers.
ACQUISITIONS AND NEW OPENINGS
Copart has experienced significant growth as it acquired 39 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 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 six months
of fiscal 1997, Copart opened facilities in Woodinville, Washington and Hammond,
Indiana and acquired a facility in Baton Rouge, Louisiana. During fiscal 1996,
the Company acquired facilities near 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 JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1996
Revenues were approximately $30.4 million during the three months ended
January 31, 1997, an increase of approximately $4.3 million, or 16%, over the
three months ended January 31, 1996 based on 99,000 vehicles processed.
Approximately $1.1 million of the increase in revenues was the result of the
acquisition of the El Paso and Baton Rouge operations and the opening of
Copart's Charlotte, Jacksonville, Indianapolis, Phoenix and Hammond facilities.
Existing yard revenues increased by approximately $3.2 million, or 13%, over the
three months ended January 31, 1996, of which increased revenues from Purchase
Program vehicles accounted for approximately $1.0 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 attributed to increased per-unit revenues of approximately 4% and
increased vehicle volume of approximately 8%.
Yard and fleet expenses were approximately $20.9 million during the three
months ended January 31, 1997, an increase of approximately $3.8 million, or
22%, over the comparable period in
- -----------------------------
* 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.
7
<PAGE>
fiscal 1996. Approximately $1.1 million of the increase was the result of the
acquisition of the El Paso and Baton Rouge 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
yard and fleet expenses from existing operations, including the cost of Purchase
Program vehicles. Yard and fleet expenses increased to 69% of revenues during
the second quarter of fiscal 1997, as compared to 66% 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 $2.7 million during
the three months ended January 31, 1997, an increase of approximately $0.1
million, or 3%, over the three months ended January 31, 1996, due primarily to
increased personnel expense to support acquisitions and new openings, increased
hiring in anticipation of additional growth and investment in MIS staff.
General and administrative expenses decreased to 9% of revenues during the three
months ended January 31, 1996, as compared to 10% of revenues during the three
months ended January 31, 1996 primarily as a result of the accounting impact of
the Purchase Program.
Depreciation and amortization expense was approximately $1.8 million during
the three months ended January 31, 1997, an increase of approximately $0.4
million, or 25%, over the three months ended January 31, 1996. Such increase
was due primarily to the amortization of start up costs associated with new
openings and capital expenditures associated with improvements at the Company's
facilities.
The effective income tax rate of 40% applicable to the three months ended
January 31, 1997 is consistent with the effective income tax rate for the three
months ended January 31, 1996.
Due to the foregoing factors, Copart realized net income of approximately
$3.0 million for the three months ended January 31, 1997 and January 31, 1996.
SIX MONTHS ENDED JANUARY 31, 1997 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1996
Revenues were approximately $62.9 million during the six months ended
January 31, 1997, an increase of approximately $10.4 million, or 20%, over
the six months ended January 31, 1996 based on 198,100 vehicles processed.
Approximately $2.4 million of the increase in revenues was the result of the
acquisition of the El Paso and Baton Rouge operations and the opening of
Copart's Charlotte, Jacksonville, Indianapolis, Phoenix and Hammond
facilities. Existing yard revenues increased by approximately $8.0 million,
or 15% over the six months ended January 31, 1996, of which increased
revenues from Purchase Program vehicles accounted for approximately $3.8
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 attributed to increased
per-unit revenues of approximately 5% and increased vehicle volume of
approximately 5%.
Yard and fleet expenses were approximately $45.3 million during the six
months ended January 31, 1997, an increase of approximately $9.8 million, or
28%, over the comparable period in fiscal 1996. Approximately $2.5 million
of the increase was the result of the acquisition of the El Paso and Baton
Rouge 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 yard and fleet expenses from
existing operations, including the cost of Purchase
8
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Program vehicles. Yard and fleet expenses increased to 72% of revenues
during the first six months of fiscal 1997, as compared to 68% 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 $5.3 million
during the six months ended January 31, 1997, an increase of approximately
$0.2 million, or 5%, over the six months ended January 31, 1996, due
primarily to increased personnel expense to support acquisitions and new
openings, increased hiring in anticipation of additional growth and
investment in MIS staff. General and administrative expenses decreased to 8%
of revenues during the six months ended January 31, 1997, as compared to 10%
of revenues during the six months ended January 31, 1996 primarily as a
result of the accounting impact of the Purchase Program.
Depreciation and amortization expense was approximately $3.6 million
during the six months ended January 31, 1997, an increase of approximately
$0.7 million, or 25%, over the six months ended January 31, 1996. Such
increase was due primarily to the amortization of start up costs associated
with new openings and capital expenditures associated with improvements at
the Company's facilities.
The effective income tax rate of 40% applicable to the six months ended
January 31, 1997 is consistent with the effective income tax rate for the six
months ended January 31, 1996.
Due to the foregoing factors, Copart realized net income of
approximately $5.3 million for the six months ended January 31, 1997,
compared to net income of approximately $5.6 million for the six months ended
January 31, 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 January 31, 1997, Copart had working capital of approximately $45.9
million, including cash and cash equivalents of approximately $12.3 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
and 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 $2.2 million and
$3.2 million, during the six months ended January 31, 1997 and 1996,
respectively. This decrease is primarily due to the cost associated with the
increased number of vehicles held in the Company's facilities.
9
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Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $3.5 million and $2.1
million for the six months ended January 31, 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 certain older equipment.
Cash and cash equivalents decreased by approximately $0.7 million and
$1.8 million for the six months ended January 31, 1997 and 1996,
respectively. The Company's liquidity and capital 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 second quarter of
fiscal 1997, vehicles supplied by Copart's largest vehicle supplier accounted
for approximately 15% 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
- -----------------------------
* 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.
10
<PAGE>
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 of future
acquisitions 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 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
34% 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
11
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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 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Company was held on
December 5, 1996 (the "Meeting").
(b) The following directors were elected at the Meeting:
Willis J. Johnson
Marvin L. Schmidt
A. Jayson Adair
James Grosfeld
Jonathan Vannini
Harold Blumenstein
James E. Meeks
(c) The results of the vote on the matters voted upon at the meeting are:
(i) ELECTION OF DIRECTORS FOR WITHHELD
Willis J. Johnson 10,653,924 24,960
Marvin L. Schmidt 10,652,724 26,160
A. Jayson Adair 10,649,450 29,434
James Grosfeld 10,653,734 25,150
Jonathan Vannini 10,654,134 24,750
Harold Blumenstein 10,653,034 25,850
James E. Meeks 10,653,401 25,483
(ii) Ratification of KPMG Peat Marwick LLP as independent
auditors for the Company for fiscal year 1997:
FOR AGAINST ABSTAINED NO VOTE
10,666,051 8,821 4,012 -0-
The foregoing matters are described in more detail in the Company's
definitive proxy statement dated November 8, 1996 relating to the Meeting.
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
January 31, 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.
--------------------------------------
Joseph M. Whelan, Senior Vice President
and Chief Financial Officer (duly
authorized officer and principal financial
and accounting officer)
Date: March 10, 1997
14
<PAGE>
EXHIBIT 11.1
COPART, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31, SIX MONTHS ENDED JANUARY 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
issued and outstanding 12,825,209 12,417,000 12,736,404 12,398,900
Common stock equivalents:
Warrants and stock options 485,666 874,400 485,666 857,300
------------ ------------ ------------ ------------
13,310,875 13,291,400 13,222,070 13,256,200
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net Income $ 3,011,600 $ 3,021,500 $ 5,348,400 $ 5,639,200
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share $ .23 $ .23 $ .40 $ .43
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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.
15
<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 JANUARY 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 12339500
<SECURITIES> 0
<RECEIVABLES> 37738500
<ALLOWANCES> 0
<INVENTORY> 1596300
<CURRENT-ASSETS> 66071400
<PP&E> 27222800
<DEPRECIATION> 3565400
<TOTAL-ASSETS> 168309800
<CURRENT-LIABILITIES> 20135000
<BONDS> 0
0
0
<COMMON> 12973267
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 168309800
<SALES> 62881600
<TOTAL-REVENUES> 62881600
<CGS> 0
<TOTAL-COSTS> 54090800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8913900
<INCOME-TAX> 3565500
<INCOME-CONTINUING> 5348400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5348400
<EPS-PRIMARY> .40
<EPS-DILUTED> 0
</TABLE>
