<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 October 31, 1998
OR
[ ] 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 Number)
5500 E. SECOND STREET, BENICIA, CA 94510
(Address of principal executive offices with zip code)
Registrant's telephone number, including area code: (707) 748-5000
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 December 1, 1998:
13,317,710
<PAGE>
COPART, INC. AND SUBSIDIARIES
INDEX TO THE QUARTERLY REPORT
OCTOBER 31, 1998
Description Page
----------- ----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to the Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Vehicle Processing Programs 7
Composition of Revenues 7
Composition of Costs and Expenses 8
Acquisitions and New Openings 8
Results of Operations
Revenues 8
Operating Costs and Expenses 9
Operating Income, Other Income
and Income Taxes 9
Liquidity and Capital Resources 9
Year 2000 Compliance 10
Factors Affecting Future Results 10
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 13
Signatures 14
2
<PAGE>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, July 31,
1998 1998
----------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,757,400 $ 15,733,500
Short-term investments 8,893,700 13,062,200
Accounts receivable, net 34,256,700 32,751,500
Vehicle pooling costs 10,033,600 9,399,700
Deferred income taxes 614,900 614,900
Prepaid expenses and other assets 3,324,000 3,426,600
------------ ------------
Total current assets 79,880,300 74,988,400
Property and equipment, net 40,521,700 37,562,300
Intangibles and other assets, net 77,602,400 78,391,400
------------ ------------
Total assets $198,004,400 $190,942,100
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 538,200 $ 621,300
Accounts payable and accrued liabilities 12,664,900 11,674,800
Deferred revenue 6,019,400 5,602,800
Income taxes payable 1,926,900 -
Other current liabilities 1,688,100 2,260,800
------------ ------------
Total current liabilities 22,837,500 20,159,700
Deferred income taxes 1,122,000 1,122,000
Long-term debt, less current portion 7,676,200 7,804,100
Other liabilities 1,700,100 1,673,700
------------ ------------
Total liabilities 33,335,800 30,759,500
------------ ------------
Shareholders' equity:
Common stock, no par value - 30,000,000 shares authorized;
13,316,160 and 13,275,060 shares issued and outstanding at
October 31, 1998 and July 31, 1998, respectively 113,497,900 113,202,600
Retained earnings 51,170,700 46,980,000
------------ ------------
Total shareholders' equity 164,668,600 160,182,600
------------ ------------
Commitments and contingencies
Total liabilities and shareholders' equity $198,004,400 $190,942,100
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31,
------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Revenues:
Salvage fees $25,223,700 $22,565,900
Transportation revenue 3,981,900 3,017,500
Purchased vehicle revenue 987,500 1,907,400
----------- -----------
Total revenues 30,193,100 27,490,800
----------- -----------
Operating costs and expenses:
Yard and fleet 18,580,400 18,037,400
General and administrative 2,976,000 2,708,300
Depreciation and amortization 2,289,800 1,930,500
----------- -----------
Total operating expenses 23,846,200 22,676,200
----------- -----------
Operating income 6,346,900 4,814,600
----------- -----------
Other income (expense):
Interest expense (149,500) (191,300)
Interest income 437,900 387,500
Other income 234,600 137,000
----------- -----------
Total other income 523,000 333,200
----------- -----------
Income before income taxes 6,869,900 5,147,800
Income taxes 2,679,200 2,007,700
----------- -----------
Net income $ 4,190,700 $ 3,140,100
----------- -----------
----------- -----------
Basic net income per share $ .32 $ .24
----------- -----------
----------- -----------
Weighted average shares
outstanding 13,290,300 13,088,600
----------- -----------
----------- -----------
Diluted net income per share $ .31 $ .23
----------- -----------
----------- -----------
Weighted average shares and dilutive
potential common shares outstanding 13,610,900 13,460,300
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,190,700 $ 3,140,100
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,289,800 1,930,500
Deferred rent 26,400 75,400
Gain on sale of assets (128,500) (16,100)
Changes in operating assets and liabilities:
Accounts receivable (1,505,200) (659,700)
Vehicle pooling costs (633,900) 232,500
Prepaid expenses and other current assets 67,400 164,700
Accounts payable and accrued liabilities 417,400 2,049,200
Deferred revenue 416,600 (401,800)
Income taxes 1,926,900 1,707,400
----------- ------------
Net cash provided by operating activities 7,067,600 8,222,200
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,423,100) (2,873,800)
Proceeds from sale of property and equipment 238,400 36,700
Sale of short-term investments, net 4,168,500 -
Other intangible asset additions (4,500) -
Purchase of intangible assets in connection
with acquisitions - (537,600)
Deferred preopening costs (107,300) -
----------- ------------
Net cash used in investing activities (128,000) (3,374,700)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 295,300 95,700
Principal payments on notes payable (211,000) (1,680,600)
----------- ------------
Net cash provided by (used in) financing
activities 84,300 (1,584,900)
----------- ------------
Net increase in cash and cash equivalents 7,023,900 3,262,600
Cash and cash equivalents at beginning of period 15,733,500 27,684,500
----------- ------------
Cash and cash equivalents at end of period $22,757,400 $30,947,100
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 149,500 $ 191,300
----------- ------------
----------- ------------
Income taxes paid $ 713,700 $ 314,100
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998
(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
consolidated 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, 1998 filed with the
Securities and Exchange Commission.
Gross proceeds generated from auctioned salvage vehicles were
approximately $147,205,700 and $129,559,300 for the three months ended
October 31, 1998 and 1997, respectively.
NOTE 2 - Net Income Per Share:
There were no adjustments to net income in calculating diluted net
income per share. The table below reconciles basic weighted shares
outstanding to diluted weighted average shares outstanding:
<TABLE>
<CAPTION>
Three months ending October 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
Basic weighted shares outstanding 13,290,300 13,088,600
Stock options and warrants outstanding 320,600 371,700
---------- ----------
Diluted weighted average shares outstanding 13,610,900 13,460,300
---------- ----------
---------- ----------
</TABLE>
NOTE 3 - Recently Adopted Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," and
SFAS No. 131,"Disclosures About Segments of an Enterprise and Related
Information." The Company adopted both of these standards on August 1, 1998.
The adoption of SFAS No. 130 and SFAS No. 131 did not have a material effect
on the financial statements of the Company.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
VEHICLE PROCESSING PROGRAMS
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 revenue. The Company also
processes a small percentage of its salvage vehicles pursuant to purchase
contracts (the "Purchase Program") under which the Company records the gross
proceeds of the vehicle sale in purchased vehicle revenues and the cost of
the vehicle in yard and fleet expenses.
For the three months ended October 31, 1998 and 1997, approximately 47%
and 41%, of the vehicles sold by Copart, respectively, were processed under
the PIP. The increase in the percentage of vehicles sold under the PIP is
due to the Company's successful marketing efforts. The Company attempts to
convert acquired operations to the 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 October 31, 1998 and 1997, approximately 52%
and 57%, of the vehicles sold by Copart, respectively, were processed under
fixed fee agreements. The decline in the percentage of vehicles processed
under fixed contracts is the direct result of the Company's marketing efforts
to convert contracts from fixed fee to PIP.
For the three months ended October 31, 1998 and 1997, approximately 1%
and 2%, of the vehicles sold by Copart, respectively, were processed pursuant
to the Purchase Program. The decrease in the percentage of vehicles sold
under the Purchase Program is due to the Company's termination or
renegotiation to consignment contracts, of certain vehicle purchase contracts.
Due to a number of factors, including the timing and size of new
acquisitions, market conditions, and acceptance of the PIP program by vehicle
suppliers, the percentage of vehicles processed under these programs in
future periods may vary.*
COMPOSITION OF REVENUES
Revenues consist of salvage fees charged vehicle suppliers and vehicle
buyers, transportation revenue and purchased vehicle revenues. Salvage fees
from vehicle suppliers include fees under PIP agreements and fixed programs
where the Company charges for title processing, special preparation, storage
and auctioning. Salvage fees also include fees charged vehicle buyers for
purchasing vehicles, storage and annual registration. Transportation revenue
includes charges to suppliers for towing vehicles under fixed fee contracts.
Transportation revenue also includes towing charges assessed to buyers for
delivering vehicles. Purchased vehicle revenues are comprised of the price
that buyers paid at the Company's auctions for vehicles processed under the
Purchase Program.
7
<PAGE>
COMPOSITION OF COSTS AND EXPENSES
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, fuel, 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.
ACQUISITIONS AND NEW OPENINGS
Copart has experienced significant growth as it acquired ten salvage
vehicle auction facilities and established ten new facilities since the
beginning of fiscal 1996. All of the acquisitions have been accounted for
using the purchase method. Accordingly, the excess of the purchase price
over the fair value of net tangible assets acquired, consisting principally
of goodwill, is being amortized over periods not exceeding 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 nationwide service to vehicle suppliers, the Company anticipates
additional openings or acquisitions in new regions, as well as the regions
currently served by the Company. * During fiscal 1998, the Company acquired
facilities in or near Avon, Minnesota; Columbia, South Carolina; Mobile,
Alabama; San Diego, California; Des Moines, Iowa and Detroit, Michigan. In
addition, the Company opened new facilities in Orlando, Florida; Raleigh,
North Carolina and Las Vegas, Nevada. The Company believes that these
acquisitions and openings solidify the Company's nationwide service and
expand the Company's coverage of the United States. In the event of future
acquisitions, the Company expects to incur future amortization charges in
connection with such acquisitions attributable to goodwill and covenants not
to compete. *
RESULTS OF OPERATIONS
Three Months Ended October 31, 1998 Compared to Three Months Ended October
31, 1997
REVENUES
Revenues were approximately $30.2 million during the three months ended
October 31, 1998, an increase of approximately $2.7 million, or 10%, over the
three months ended October 31, 1997. The change in revenues is due primarily
to a $2.7 million increase in salvage fees plus a $1.0 million increase in
transportation revenue, offset by a $0.9 million decrease in purchase vehicle
revenues, due to terminated contracts. Under the Purchase Program, the
Company records the gross proceeds of the vehicle sale as revenue.
New facilities in Avon, Raleigh, Orlando, Columbia, Las Vegas, Mobile,
San Diego, Des Moines and Detroit contributed $2.7 million of new salvage fee
transportation revenues for the three months ended October 31, 1998.
Existing yard salvage fee and transportation revenues increased by $1.0
million, or 4.0%, and existing yard purchased vehicle revenues decreased by
$1.0 million, or 50% compared to the same period in the prior year.
8
<PAGE>
OPERATING COSTS AND EXPENSES
Yard and fleet expenses were approximately $18.6 million during the
three months ended October 31, 1998, an increase of approximately $0.5
million, or 3%, over the comparable period in fiscal 1998. Approximately
$2.1 million of yard and fleet expenses were the result of the addition of
Avon, Raleigh, Orlando, Columbia, Las Vegas, Mobile, San Diego, Des Moines
and Detroit 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 62% of revenues during the first quarter of
fiscal 1999, as compared to 66% of revenues during the same period of fiscal
1998.
General and administrative expenses were approximately $3.0 million
during the three months ended October 31, 1998, an increase of approximately
$0.3 million, or 10%, over the comparable period in fiscal 1998. This
increase is due primarily to increased payroll and other operating expenses.
General and administrative expenses remained unchanged at 10% of revenues
during the first quarter of fiscal 1999 and 1998.
Depreciation and amortization expense was approximately $2.3 million
during the three months ended October 31, 1998, an increase of approximately
$0.4 million, or 19%, over the comparable period in fiscal 1998. This
increase was primarily due to the amortization and depreciation of tangible
and intangible assets acquired in fiscal 1998.
OPERATING INCOME, OTHER INCOME AND INCOME TAXES
The Company's operating income was $6.3 million during the three months
ended October 31, 1998, an increase of approximately $1.5 million or 32% over
the comparable period in fiscal 1998. New facilities in Avon, Raleigh,
Orlando, Columbia, Las Vegas, Mobile, San Diego, Des Moines and Detroit
produced $0.5 million of this increase. Existing facilities produced $1.0
million of the increase due to improved PIP percentages, the reduction of
Purchase Program contracts, and the implementation of the Copart Auction
System.
Total other income was approximately $0.5 million during the three
months ended October 31, 1998, an increase of approximately $0.2 million,
over the three months ended October 31, 1997. This increase was due
primarily to additional interest income and rental income.
The effective income tax rate used for the three months ended October
31, 1998 and 1997 was 39%.
Due to the foregoing factors, Copart realized net income of
approximately $4.2 million for the three months ended October 31, 1998,
compared to net income of approximately $3.1 million for the three months
ended October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Copart has financed its growth principally through cash generated from
operations, debt financing, public offerings of Common Stock, and the equity
issued in conjunction with certain acquisitions.
9
<PAGE>
At October 31, 1998, Copart had working capital of approximately $57.0
million, including cash, cash equivalents and short-term investments of
approximately $31.7 million. The Company is able to process, market, sell
and receive payment for processed vehicles quickly. The Company's primary
source of cash is from the collection of sellers' fees and reimbursable
advances from the proceeds of auctioned salvage vehicles and from buyers'
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 $7.1 million and
$8.2 million, during the three months ended October 31, 1998 and 1997,
respectively.
Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $4.4 million and $2.9
million for the three months ended October 31, 1998, and 1997, respectively.
Copart's capital expenditures have related primarily to opening and improving
facilities and acquiring yard equipment.
Cash and cash equivalents increased by approximately $7.0 million
and $3.3 million for the three months ended October 31, 1998 and 1997,
respectively. The increase is due to the sale of approximately $4.2 million
of short-term investments. 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 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 at least 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, or if new financing is required, that it will be
available on reasonable terms if at all.
YEAR 2000 COMPLIANCE
The Company's critical business systems including Copart Auction Systems
(CAS) and general ledger applications are Year 2000 compliant. Copart has
relationships with vendors, customers and other third parties that rely on
software and systems that may not be Year 2000 compliant. With respect to
such third parties, Year 2000 compliance matters will not be within Copart's
direct control. There can be no assurance that Year 2000 compliance failures
by such third parties will not have a material adverse effect on the
Company's results of operations.
FACTORS AFFECTING FUTURE RESULTS
Historically, a limited number of vehicle suppliers have accounted for a
substantial portion of the Company's revenues. In the first quarter of
fiscal 1999 and 1998, vehicles supplied by Copart's largest vehicle supplier
accounted for approximately 15% and 16%, of Copart's revenues, respectively.
The Company's agreements with these 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
10
<PAGE>
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 fluctuated in the past and may
fluctuate significantly in the future 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. 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. 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 two other existing shareholders, beneficially owns
approximately 41% 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 shareholders.
11
<PAGE>
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 that 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 in many
markets. 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.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None
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/ Wayne R. Hilty
---------------------------------------------
Wayne R. Hilty, Senior Vice President and
Chief Financial Officer (duly authorized
officer and principal financial and
accounting officer)
Date: December 1, 1998
14
<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 OCTOBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 31,651,100
<SECURITIES> 0
<RECEIVABLES> 34,256,700
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,880,300
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 198,004,400
<CURRENT-LIABILITIES> 22,837,500
<BONDS> 0
0
0
<COMMON> 113,497,900
<OTHER-SE> 51,170,700
<TOTAL-LIABILITY-AND-EQUITY> 198,004,400
<SALES> 30,193,100
<TOTAL-REVENUES> 30,193,100
<CGS> 0
<TOTAL-COSTS> 23,846,200
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<INTEREST-EXPENSE> 149,500
<INCOME-PRETAX> 6,869,900
<INCOME-TAX> 2,679,200
<INCOME-CONTINUING> 4,190,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,190,700
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
</TABLE>
