<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, 1999
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 7, 1999: 26,849,317
<PAGE>
COPART, INC. AND SUBSIDIARIES
INDEX TO THE QUARTERLY REPORT
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Description Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL INFORMATION
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 8
Composition of Revenues 8
Composition of Costs and Expenses 9
Acquisitions and New Openings 9
Results of Operations
Revenues 9
Operating Costs and Expenses 9
Operating Income, Other Income
and Income Taxes 10
Liquidity and Capital Resources 10
Year 2000 Compliance 11
Factors Affecting Future Results 12
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
Signatures 16
</TABLE>
2
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ITEM 1 - FINANCIAL INFORMATION
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $33,035,100 $37,047,800
Accounts receivable, net 41,852,200 37,531,300
Vehicle pooling costs 11,536,500 10,471,500
Deferred income taxes 988,800 988,800
Prepaid expenses and other assets 3,879,000 3,255,800
------------ -------------
Total current assets 91,291,600 89,295,200
Property and equipment, net 61,149,000 51,599,400
Intangibles and other assets, net 77,014,800 77,782,500
------------ -------------
Total assets $229,455,400 $218,677,100
------------ -------------
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $142,900 $260,100
Accounts payable and accrued liabilities 18,138,300 16,586,900
Deferred revenue 6,449,500 5,864,600
Income taxes payable 2,835,200 493,400
Other current liabilities 1,583,200 1,443,700
------------ -------------
Total current liabilities 29,149,100 24,648,700
Deferred income taxes 802,100 802,100
Long-term debt, less current portion 7,538,900 7,560,000
Other liabilities 1,640,000 1,683,900
------------ -------------
Total liabilities 39,130,100 34,694,700
------------ -------------
Shareholders' equity:
Common stock, no par value - 30,000,000 shares authorized; 26,848,315
and 26,845,115 shares issued and outstanding at
October 31, 1999 and July 31, 1999, respectively 115,066,400 115,036,100
Retained earnings 75,258,900 68,946,300
------------ -------------
Total shareholders' equity 190,325,300 183,982,400
------------ -------------
Commitments and contingencies
Total liabilities and shareholders' equity $229,455,400 $218,677,100
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31,
-----------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Revenues:
Salvage fees $33,430,800 $25,223,700
Transportation revenue 4,632,600 3,981,900
Purchased vehicle revenue 2,444,200 987,500
-------------- -------------
Total revenues 40,507,600 30,193,100
-------------- -------------
Operating costs and expenses:
Yard and fleet 24,636,700 18,580,400
General and administrative 3,305,500 2,976,000
Depreciation and amortization 2,753,000 2,289,800
-------------- -------------
Total operating expenses 30,695,200 23,846,200
-------------- -------------
Operating income 9,812,400 6,346,900
-------------- -------------
Other income (expense):
Interest expense (140,100) (149,500)
Interest income 407,900 437,900
Other income 184,200 234,600
-------------- -------------
Total other income 452,000 523,000
-------------- -------------
Income before income taxes 10,264,400 6,869,900
Income taxes 3,951,800 2,679,200
-------------- -------------
Net income $6,312,600 $4,190,700
-------------- -------------
-------------- -------------
Basic net income per share $.24 $.16
-------------- -------------
-------------- -------------
Weighted average shares
outstanding 26,848,000 26,580,600
-------------- -------------
-------------- -------------
Diluted net income per share $.23 $.15
-------------- -------------
-------------- -------------
Weighted average shares and dilutive
potential common shares outstanding 27,944,600 27,221,800
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31,
--------------------------------
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,312,600 $4,190,700
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,753,000 2,289,800
Deferred rent (43,900) 26,400
Gain on sale of assets (39,200) (128,500)
Changes in operating assets and liabilities:
Accounts receivable (4,320,900) (1,505,200)
Vehicle pooling costs (1,065,000) (633,900)
Prepaid expenses and other current assets (887,500) 67,400
Accounts payable and accrued liabilities 1,690,900 417,400
Deferred revenue 584,900 416,600
Income taxes 2,341,800 1,926,900
----------- ------------
Net cash provided by operating activities 7,326,700 7,067,600
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,311,200) (4,423,100)
Proceeds from sale of property and equipment 82,800 238,400
Sale of short-term investments, net - 4,168,500
Other intangible asset additions (3,000) (4,500)
Deferred preopening costs - (107,300)
----------- ------------
Net cash used in investing activities (11,231,400) (128,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 30,300 295,300
Principal payments on notes payable (138,300) (211,000)
----------- ------------
Net cash (used in) provided by financing activities (108,000) 84,300
----------- ------------
Net (decrease) increase in cash and cash equivalents (4,012,700) 7,023,900
Cash and cash equivalents at beginning of period 37,047,800 15,733,500
----------- ------------
Cash and cash equivalents at end of period $33,035,100 $22,757,400
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $140,100 $149,500
----------- ------------
----------- ------------
Income taxes paid $1,628,800 $713,700
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
(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, 1999 filed with the Securities
and Exchange Commission. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for
the full year.
Gross proceeds generated from auctioned salvage vehicles were
approximately $180,785,400 and $147,205,700 for the three months ended
October 31, 1999 and 1998, respectively.
There is no difference between net income and comprehensive income
for the three months ended October 31, 1999 and October 31, 1998.
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,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Basic weighted shares outstanding 26,848,000 26,580,600
Stock options and warrants outstanding 1,096,600 641,200
------------- -------------
Diluted weighted average shares outstanding 27,944,600 27,221,800
------------- -------------
------------- -------------
</TABLE>
NOTE 3 - Recently Adopted Accounting Pronouncements
In 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" and SOP
No. 98-5, "Reporting on the Costs of Start-Up Activities." The Company
adopted both of these standards on August 1, 1999. The adoption of SOP No.
98-1 did not have a material impact on the Company's results of operations,
financial position or cash flows. The effect of adopting SOP No. 98-5 was
$160,000 net of taxes.
6
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NOTE 4 - New Openings and Acquisitions
During November 1999, the Company purchased certain assets of a
64-acre public auction facility located in Chesapeake, Virginia. In addition
during November 1999 the Company opened a new 18-acre facility in Graham,
Washington and opened a new 20-acre facility in Denver, Colorado. With the
addition of these locations, the Company has 68 facilities occupying
approximately 1,752 acres nationwide.
NOTE 5 - Segment Reporting
All of the Company's facilities are aggregated into one reportable
segment given the similarities of economic characteristics between the
operations represented by the facilities and the common nature of the
products, customers and methods of revenue generation.
7
<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, 1999 and 1998, approximately
54% and 47%, 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, 1999 and 1998, approximately
45% and 52%, 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, 1999 and 1998, approximately
1% and 1%, of the vehicles sold by Copart, respectively, were processed
pursuant to the Purchase Program.
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.
8
<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 eleven
vehicle auction facilities and established seven new salvage vehicle auction
facilities since the beginning of fiscal 1998. 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.
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 facilities in new regions, as well as
the regions currently served by Company facilities.* As part of this
strategy, during fiscal 2000, Copart acquired a facility in Chesapeake,
Virginia and opened new facilities in Graham, Washington and Denver,
Colorado. In fiscal 1999, Copart acquired facilities in or near McAllen,
Texas; Huntsville, Alabama and Wichita, Kansas and opened new facilities in
Nashville, Tennessee and Austin/San Antonio, Texas. In fiscal 1998, Copart
acquired facilities in or near Avon, Minnesota; Columbia, South Carolina;
Mobile, Alabama; San Diego, California; Des Moines, Iowa and Detroit,
Michigan and opened new facilities in Orlando, Florida; Raleigh, North
Carolina and Las Vegas, Nevada. The Company believes that these acquisitions
and openings help to 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, covenants not to compete and
other purchase-related adjustments. *
RESULTS OF OPERATIONS
Three Months Ended October 31, 1999 Compared to Three Months Ended October
31, 1998
REVENUES
Revenues were approximately $40.5 million during the three months
ended October 31, 1999, an increase of approximately $10.3 million, or 34%,
over the three months ended October 31, 1998. The change in revenues is due
primarily to a $8.2 million increase in salvage fees plus a $0.7 million
increase in transportation revenue and a $1.4 million increase in purchase
vehicle revenues. Under the Purchase Program, the Company records the gross
proceeds of the vehicle sale as revenue.
New facilities in Austin/San Antonio, Nashville, McAllen,
Huntsville and Wichita contributed $0.7 million of new salvage fee and
transportation revenues for the three months ended October 31, 1999. Existing
yard salvage fee and transportation revenues increased by $8.2 million, or
27%, and existing yard purchased vehicle revenues increased by $1.4 million,
compared to the same period in the prior year.
OPERATING COSTS AND EXPENSES
Yard and fleet expenses were approximately $24.6 million during the
three months ended October 31, 1999, an increase of approximately $6.1 million,
or 33%, over the comparable period in fiscal 1999. Approximately $0.9 million of
yard and fleet expenses were the result of the addition of Austin/San Antonio,
9
<PAGE>
Nashville, McAllen, Huntsville and Wichita. The remainder of the increase in
yard and fleet was attributable to yard and fleet expenses from existing
operations. Yard and fleet expenses decreased to 61% of revenues during the
first quarter of fiscal 2000, as compared to 62% of revenues during the same
period of fiscal 1999.
General and administrative expenses were approximately $3.3 million
during the three months ended October 31, 1999, an increase of approximately
$0.3 million, or 11%, over the comparable period in fiscal 1999. This
increase is due primarily to increased payroll and other operating expenses.
General and administrative expenses decreased to 8% of revenues during the
first quarter of fiscal 2000 as compared to 10% of revenues in the same
period of fiscal 1999.
Depreciation and amortization expense was approximately $2.8 million
during the three months ended October 31, 1999, an increase of approximately
$0.5 million, or 20%, over the comparable period in fiscal 1999. This
increase was primarily due to the amortization and depreciation of tangible
and intangible assets acquired in fiscal 1999.
OPERATING INCOME, OTHER INCOME AND INCOME TAXES
The Company's operating income was $9.8 million during the three
months ended October 31, 1999, an increase of approximately $3.5 million or
54.6% over the comparable period in fiscal 1999. Existing facilities produced
$3.7 million of the increase due to improved PIP percentages, market share
gains, favorable weather conditions and other factors. New facilities in
Austin/San Antonio, Nashville, McAllen, Huntsville and Wichita lost $0.2
million.
Total other income for the three months ended October 31, 1999 and
1998 was approximately $0.5 million.
The effective income tax rate used for the three months ended
October 31, 1999 and 1998 was approximately 39%.
Due to the foregoing factors, Copart realized net income of
approximately $6.3 million for the three months ended October 31, 1999,
compared to net income of approximately $4.2 million for the three months
ended October 31, 1998.
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.
At October 31, 1999, Copart had working capital of approximately
$62.1 million, including cash and cash equivalents of approximately $33.0
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 $7.3 million
and $7.1 million, during the three months ended October 31, 1999 and 1998,
respectively.
10
<PAGE>
Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $11.3 million and $4.4
million for the three months ended October 31, 1999, and 1998, respectively.
Capital expenditures for land and buildings totaled approximately $6.4
million, the remaining balance of $5.9 million related primarily to improving
and expanding facilities, acquiring yard and computer equipment and software.
Cash and cash equivalents decreased by approximately $4.0 million
and increased by $7.0 million for the three months ended October 31, 1999 and
1998, respectively. The Company's liquidity and capital resources have not
been materially affected by inflation and are not subject to significant
seasonal fluctuations.
The Company believes that its currently available cash, cash
generated from operations and borrowing availability under the Bank Credit
Facility and existing equipment leasing lines of credit will be sufficient to
satisfy the Company's working capital requirements and fund openings and
acquisitions of new facilities for at least 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, depending upon
certain factors, including the rate at which the Company opens or acquires
new facilities.
YEAR 2000 COMPLIANCE
GENERAL
Various Year 2000 issues result from computer programs written using
a two-digit date field rather than four to define the applicable year.
Certain computer programs utilizing a two-digit date field may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
potentially result in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to
process transactions, send invoices, or engage in other similar normal
business activities.
The Company's internal information technology (IT) systems include
all hardware and software used in its computer systems. The Company's non-IT
systems include telephone and alarm systems, office equipment, and motor
vehicle electronic components.
COMPANY'S STATE OF READINESS
The Company has completed an assessment of its internal information
systems relative to the Year 2000 issue. The assessment has determined that
the hardware and software the Company currently uses is Year 2000 compliant.
In addition, the Company has surveyed non-IT systems and concluded that they
are also Year 2000 compliant.
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
The Company has not had any specific Year 2000 costs. All
of the internal systems used by the Company are relatively new and Year 2000
compliance was built into these new systems.
RISKS TO THE COMPANY
The Company has initiated informal communications with many
of its significant third parties and suppliers (insurance companies, banks
and state motor vehicle departments) to determine the extent to which the
Company is vulnerable to those third parties' failure to remedy their own
Year 2000 issues. The Company has received some assurances regarding these
issues from these third parties, but there are no guarantees these third
party systems will be compliant. In addition, the event of non-compliance may
have a material effect on the operations of the Company. For example, if some
of the Company's suppliers are not Year 2000 compliant it could impact the
Company's ability to obtain orders from those suppliers.
11
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The Company believes its exposure to the Year 2000 issue
will come mainly from third parties, either as the result of these parties
not being prepared, or other parties these third parties rely upon not being
prepared. Although there can be no assurance that unforeseen problems will
not occur, the Company expects that all critical internal Year 2000 issues
will be resolved as encountered.
CONTINGENCY PLANS
The Company currently has no formal Year 2000 contingency
plans.
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 2000 and 1999, vehicles supplied by Copart's largest vehicle supplier
accounted for approximately 16% and 15%, 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 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
12
<PAGE>
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 39% 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.
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. 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"). 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.* Vehicle suppliers may enter into state,
regional or national supply agreements with competitors of the Company.
13
<PAGE>
The Company has a number of regional and national contracts with
various suppliers. There can be no assurance that the existence of other
state, regional or national contracts entered into by the Company's
competitors will not have a material adverse effect on the Company or the
Company's expansion plans. Furthermore, the Company is likely to face
competition from major competitors in the acquisition of salvage vehicle
auction facilities, which could significantly increase the cost of such
acquisitions and thereby materially impede the Company's expansion objectives
or have a material adverse effect on the Company's results of operations.*
These potential new competitors may include consolidators of automobile
dismantling businesses, organized salvage buying groups, automobile
manufacturers, automobile auctioneers and software companies. While most
vehicle suppliers have abandoned or reduced efforts to sell salvage vehicles
without the use of service providers such as the Company, there can be no
assurance that they may not in the future decide to dispose of their salvage
vehicles directly to buyers. Existing or new competitors may be significantly
larger and have greater financial and marketing resources than the Company.
There can be no assurance that the Company will be able to compete
successfully in the future.
14
<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
15
<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 7, 1999
16
<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, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 33,035,100
<SECURITIES> 0
<RECEIVABLES> 42,352,200
<ALLOWANCES> 500,000
<INVENTORY> 0
<CURRENT-ASSETS> 91,291,600
<PP&E> 81,419,100
<DEPRECIATION> 20,270,100
<TOTAL-ASSETS> 229,455,400
<CURRENT-LIABILITIES> 29,149,100
<BONDS> 0
0
0
<COMMON> 115,066,400
<OTHER-SE> 75,258,900
<TOTAL-LIABILITY-AND-EQUITY> 229,455,400
<SALES> 40,507,600
<TOTAL-REVENUES> 40,507,600
<CGS> 0
<TOTAL-COSTS> 24,636,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,100
<INCOME-PRETAX> 10,264,400
<INCOME-TAX> 3,951,800
<INCOME-CONTINUING> 6,312,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,312,600
<EPS-BASIC> .24
<EPS-DILUTED> .23
</TABLE>
