<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, 2000
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 November 29, 2000:
54,575,594
<PAGE>
COPART, INC. AND SUBSIDIARIES
INDEX TO THE QUARTERLY REPORT
OCTOBER 31, 2000
<TABLE>
<CAPTION>
DESCRIPTION PAGE
<S> <C> <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
Overview 7
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
Factors Affecting Future Results 10
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 13
Signatures 14
</TABLE>
2
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<TABLE>
<CAPTION>
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
October 31, July 31,
2000 2000
--------------- ------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,676,800 $ 12,164,900
Accounts receivable, net 55,621,400 52,509,600
Vehicle pooling costs 16,042,100 15,271,300
Deferred income taxes 1,708,200 1,708,200
Income tax receivable - 3,317,200
Prepaid expenses and other assets 10,125,800 6,443,300
--------------- ---------------
Total current assets 99,174,300 91,414,500
Property and equipment, net 88,433,300 80,514,200
Intangibles and other assets, net 89,431,900 90,395,600
--------------- ---------------
Total assets $277,039,500 $262,324,300
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 7,895,000 $ 7,842,300
Accounts payable and accrued liabilities 24,249,000 19,984,500
Deferred revenue 8,200,200 7,688,100
Income taxes payable 2,686,300 -
Other current liabilities 193,600 1,857,300
--------------- ---------------
Total current liabilities 43,224,100 37,372,200
Deferred income taxes 2,834,300 2,834,300
Long-term debt, less current portion 638,400 712,200
Other liabilities 1,489,200 1,515,200
--------------- ---------------
Total liabilities 48,186,000 42,433,900
--------------- ---------------
Shareholders' equity:
Common stock, no par value -
120,000,000 shares authorized;
54,562,094 and 54,553,094 shares
issued and outstanding at
October 31, 2000 and July 31, 2000,
respectively 121,558,900 121,515,000
Retained earnings 107,294,600 98,375,400
--------------- ---------------
Total shareholders' equity 228,853,500 219,890,400
--------------- ---------------
Commitments and contingencies
Total liabilities and
shareholders' equity $277,039,500 $262,324,300
================ ================
</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,
---------------------------------
2000 1999
----------- ---------
<S> <C> <C>
Revenues $ 57,139,400 $ 40,507,600
------------- -------------
Operating costs and expenses:
Yard and fleet 35,356,200 24,636,700
General and administrative 4,466,100 3,305,500
Depreciation and amortization 3,370,100 2,753,000
------------- -------------
Total operating expenses 43,192,400 30,695,200
------------- -------------
Operating income 13,947,000 9,812,400
------------- -------------
Other income (expense):
Interest expense (135,900) (140,100)
Interest income 350,800 407,900
Other income 461,100 184,200
------------- -------------
Total other income 676,000 452,000
------------- -------------
Income before income taxes 14,623,000 10,264,400
Income taxes 5,703,800 3,951,800
------------- -------------
Net income $ 8,919,200 $ 6,312,600
============= =============
Basic net income per share $ .16 $ .12
============= =============
Weighted average shares
outstanding 54,555,000 53,696,000
============= =============
Diluted net income per share $ .16 $ .11
============= =============
Weighted average shares and dilutive
potential common shares outstanding 56,453,200 55,889,200
============= =============
</TABLE>
See accoompanying 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,
-------------------------------
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,919,200 $ 6,312,600
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,370,100 2,753,000
Deferred rent (26,000) (43,900)
Gain on sale of assets (186,200) (39,200)
Changes in operating assets and liabilities:
Accounts receivable (3,111,800) (4,320,900)
Vehicle pooling costs (770,800) (1,065,000)
Prepaid expenses and other current assets (3,682,500) (887,500)
Accounts payable and accrued liabilities 2,600,700 1,690,900
Deferred revenue 512,100 584,900
Income taxes 6,003,600 2,341,800
------------ ------------
Net cash provided by operating activities 13,628,400 7,326,700
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (10,619,600) (11,311,200)
Proceeds from sale of property and equipment 480,300 82,800
Other intangible asset additions - (3,000)
------------ ------------
Net cash used in investing activities (10,139,300) (11,231,400)
------------ ------------
Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 43,900 30,300
Principal payments on notes payable (21,100) (138,300)
------------ ------------
Net cash provided by (used in) financing activities 22,800 (108,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,511,900 (4,012,700)
Cash and cash equivalents at beginning of period 12,164,900 37,047,800
------------ ------------
Cash and cash equivalents at end of period $ 15,676,800 $ 33,035,100
============ ============
Supplemental disclosure of cash flow information
Interest paid $ 135,900 $ 140,100
============ ============
Income taxes paid $ 299,700 $ 1,628,800
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(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, 2000 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.
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,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Basic weighted shares outstanding 54,555,000 53,696,000
Stock options and warrants outstanding 1,898,200 2,193,200
----------- -----------
Diluted weighted average shares outstanding 56,453,200 55,889,200
=========== ===========
</TABLE>
NOTE 3 - Recently Adopted Accounting Pronouncements
In fiscal 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133") (as amended by SFAS Nos. 137 and 138) and in fiscal 2000, issued
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation - An Interpretation of Accounting Principles Board Opinion
("APB") No. 25." The Company adopted the above standards on August 1, 2000. The
adoption of these standards did not have a material impact on the Company's
results of operations, financial position or cash flows.
NOTE 4 - 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.
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.
OVERVIEW
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, 2000 and 1999, approximately
60% and 54%, 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, 2000 and 1999, approximately
40% and 45%, 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, approximately 1% of the
vehicles sold by Copart 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.*
Revenues consist of salvage fees charged to 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>
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 and data processing, sales personnel,
professional fees and marketing expenses.
The period-to-period comparability of Copart's operating results and
financial condition is substantially affected by business acquisitions and new
openings made by Copart during such periods.
ACQUISITIONS AND NEW OPENINGS
Copart has experienced significant growth as it acquired twelve vehicle
auction facilities and established six new salvage vehicle auction facilities
since the beginning of fiscal 1999. 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 2001, Copart opened a new facility in Harrisburg, Pennsylvania. In
fiscal 2000, Copart acquired facilities in or near Chesapeake, Virginia; Peoria,
Illinois; North Boston, Massachusetts; Boise, Idaho; Pasco, Washington; Abilene,
Texas; San Antonio, Texas and Albuquerque, New Mexico and opened new facilities
in Graham, Washington; Denver, Colorado and West Palm Beach, Florida. 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. 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, 2000 Compared to Three Months Ended October 31,
1999
REVENUES
Revenues were approximately $57.1 million during the three months ended
October 31, 2000, an increase of approximately $16.6 million, or 41%, over the
three months ended October 31, 1999. The change in revenues is driven primarily
by the increase in gross proceeds generated from auctioned salvage vehicles.
Gross proceeds were approximately $249.1 million during the three months ended
October 31, 2000, an increase of approximately $68.3 million, or 38%, over the
three months ended October 31, 1999.
New facilities in Chesapeake, Graham, Denver, Peoria, North Boston,
Boise, Pasco, West Palm Beach, Abilene, San Antonio and Albuquerque contributed
$5.3 million of new revenue for the three months ended October 31, 2000.
8
<PAGE>
OPERATING COSTS AND EXPENSES
Yard and fleet expenses were approximately $35.4 million during the
three months ended October 31, 2000, an increase of approximately $10.7 million,
or 44%, over the comparable period in fiscal 2000. The increase in yard and
fleet expenses is due primarily to the cost of handling increased volume at
existing operations and the costs of new facilities. Approximately $4.1 million
of the change was the result of the acquisitions and openings of new facilities.
Yard and fleet expenses from existing facilities grew by approximately $6.6
million, or 27%, compared to existing-facility revenue growth of 28%. Yard and
fleet expenses increased to 62% of revenues during the first quarter of fiscal
2001, as compared to 61% of revenues during the same period of fiscal 2000 due
to higher transportation and labor costs.
General and administrative expenses were approximately $4.5 million
during the three months ended October 31, 2000, an increase of approximately
$1.2 million, or 35%, over the comparable period in fiscal 2000. This increase
is due primarily to increased payroll and other administrative expenses. General
and administrative expenses were 8% of revenues during the first quarter of
fiscal 2001 and fiscal 2000.
Depreciation and amortization expense was approximately $3.4 million
during the three months ended October 31, 2000, an increase of approximately
$0.6 million, or 22%, over the comparable period in fiscal 2000. This increase
was primarily due to the amortization and depreciation of tangible and
intangible assets acquired in fiscal 2000.
OPERATING INCOME, OTHER INCOME AND INCOME TAXES
The Company's operating income was $13.9 million during the three
months ended October 31, 2000, an increase of approximately $4.1 million, or
42%, over the comparable period in fiscal 2000. Existing facilities produced
$3.3 million of the increase due to improved PIP percentages, market share
gains, favorable weather conditions and other factors. New facilities in
Chesapeake, Graham, Denver, Peoria, North Boston, Boise, Pasco, West Palm
Beach, Abilene, San Antonio, Albuquerque and Harrisburg produced $0.8 million
of the increase.
Total other income was approximately $0.7 million during the three
months ended October 31, 2000, an increase of approximately $0.2 million over
the three months ended October 31, 1999.
The effective income tax rate used for the three months ended October
31, 2000 and 1999 was approximately 39%.
Due to the foregoing factors, Copart realized net income of
approximately $8.9 million for the three months ended October 31, 2000, compared
to net income of approximately $6.3 million for the three months ended October
31, 1999.
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, 2000, Copart had working capital of approximately $56.0
million, including cash and cash equivalents of approximately $15.7 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.
9
<PAGE>
Copart generated cash from operations of approximately $13.6 million
and $7.3 million, during the three months ended October 31, 2000 and 1999,
respectively.
Capital expenditures were approximately $10.6 million and $11.3 million
for the three months ended October 31, 2000, and 1999, respectively. Copart's
capital expenditures have related primarily to opening and improving facilities
and acquiring yard equipment.
Cash and cash equivalents increased by approximately $3.5 million and
decreased by $4.0 million for the three months ended October 31, 2000 and 1999,
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 its bank credit facilities and
existing equipment operating lease agreements 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.
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
2001, vehicles supplied by Copart's two largest suppliers accounted for
approximately 13% and 10%, 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
10
<PAGE>
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
36% 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
11
<PAGE>
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.
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.
12
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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
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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: November 29, 2000
14
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