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Copart Reports Fourth Quarter Fiscal 2017 Financial Results

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Copart, Inc. (NASDAQ:CPRT) today reported financial results for the
quarter and year ended July 31, 2017.

For the three months ended July 31, 2017, revenue, gross margin, and net
income were $378.6 million, $167.5 million, and $70.3 million,
respectively. These represent an increase in revenue of $45.9 million,
or 13.8%; an increase in gross margin of $26.0 million, or 18.4%; and a
decrease in net income of $13.8 million, or 16.4%, respectively, from
the same quarter last year. Fully diluted earnings per share for the
three months were $0.30 compared to $0.35 last year, a decrease of
14.3%. Results for the three months ended July 31, 2017 include an
impairment charge of $19.4 million related primarily to costs previously
capitalized in connection with the development of business operating
software.

For the year ended July 31, 2017, revenue, gross margin, and net income
were $1.4 billion, $632.0 million, and $394.2 million, respectively.
These represent an increase in revenue of $179.5 million, or 14.2%; an
increase in gross margin of $87.4 million, or 16.1%; and an increase in
net income of $123.9 million, or 45.8%, respectively, from the same
period last year. Fully diluted earnings per share for the year ended
July 31, 2017 were $1.66 compared to $1.11 last year, an increase of
49.5%.

Excluding the impact of foreign currency-related gains; impairment of
long-lived assets; acquisition related fees; certain income tax
benefits, foreign income tax credit limitations, and payroll taxes
related to accounting for stock option exercises, non-GAAP fully diluted
earnings per share for the three months and year ended July 31, 2017,
were $0.35 and $1.29, respectively. These represent increases of 16.7%
and 22.9%, respectively, from the same periods last year. A
reconciliation of non-GAAP financial measures to the most directly
comparable financial measures computed in accordance with U.S. generally
accepted accounting principles (GAAP) can be found in the tables
attached to this press release.

On Wednesday, September 20, 2017, at 11 a.m. Eastern time, Copart will
conduct a conference call to discuss the results for the quarter. The
call will be webcast live at http://stream.conferenceamerica.com/copart092017.
A replay of the call will be available through November 19, 2017 by
calling (877) 919-4059. Use confirmation code # 87851080.

About Copart

Copart, Inc., founded in 1982, is a global leader in online vehicle
auctions. Copart's innovative technology and online auction platform
links sellers to more than 750,000 Members in over 170 countries. Copart
offers services to process and sell salvage and clean title vehicles to
dealers, dismantlers, rebuilders, exporters and in some cases, to end
users. Copart sells vehicles on behalf of insurance companies, banks,
finance companies, charities, fleet operators, dealers and also sells
vehicles sourced from individual owners. With operations at over 200
locations in 11 countries, Copart has more than 125,000 vehicles
available online every day. Copart currently operates in the United
States (Copart.com), Canada (Copart.ca), the United Kingdom
(Copart.co.uk), the Republic of Ireland (Copart.ie), Brazil
(Copart.com.br), Germany (Copart.de), the United Arab Emirates, Oman and
Bahrain (Copartmea.com), India (Copart.in), and Spain (Copart.es). For
more information, or to become a Member, visit Copart.com/Register.

Copart, Inc.

Use of Non-GAAP Financial Measures

Included in this release are certain non-GAAP financial measures,
including non-GAAP net income per diluted share, which exclude the
impact of foreign currency-related gains; impairment of long-lived
assets; acquisition related fees; certain income tax benefits, foreign
income tax credit limitations, and payroll taxes related to accounting
for stock option exercises. These non-GAAP financial measures do not
represent alternative financial measures under GAAP. In addition, these
non-GAAP financial measures may be different from non-GAAP financial
measures used by other companies. Furthermore, these non-GAAP financial
measures do not reflect a comprehensive view of Copart's operations in
accordance with GAAP and should only be read in conjunction with the
corresponding GAAP financial measures. This information constitutes
non-GAAP financial measures within the meaning of Regulation G adopted
by the U.S. Securities and Exchange Commission. Accordingly, Copart has
presented herein, and will present in other information it publishes
that contains these non-GAAP financial measures, a reconciliation of
these non-GAAP financial measures to the most directly comparable GAAP
financial measures.

Copart believes the presentation of non-GAAP net income per diluted
share included in this release in conjunction with the corresponding
GAAP financial measures provides meaningful information for investors,
analysts and management in assessing Copart's business trends and
financial performance. From a financial planning and analysis
perspective, Copart management analyzes its operating results with and
without the impact of foreign currency-related gains; impairment of
long-lived assets; acquisition related fees; certain income tax
benefits, foreign income tax credit limitations, and payroll taxes
related to accounting for stock option exercises.

Cautionary Note About Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of federal securities laws, and these forward-looking statements
are subject to substantial risks and uncertainties. These
forward-looking statements are subject to certain risks, trends and
uncertainties that could cause actual results to differ materially from
those projected or implied by our statements and comments. For a more
complete discussion of the risks that could affect our business, please
review the "Management's Discussion and Analysis" and the other risks
identified in Copart's latest Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K, as filed with the
Securities and Exchange Commission. We encourage investors to review
these disclosures carefully. We do not undertake to update any
forward-looking statement that may be made from time to time on our
behalf.

 
Copart, Inc.
Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

   
Three Months Ended
July 31,
Twelve Months Ended
July 31,
2017   2016 2017   2016
Service revenues and vehicle sales:
Service revenues $ 336,795 $ 289,488 $ 1,286,252 $ 1,104,379
Vehicle sales 41,801   43,171   161,729   164,070  
Total service revenues and vehicle sales 378,596 332,659 1,447,981 1,268,449
Operating expenses:
Yard operations 163,449 144,859 635,160 546,576
Cost of vehicle sales 35,994 37,020 137,552 140,959
Yard depreciation and amortization 10,839 8,722 39,955 33,658
Yard stock-based payment compensation 849   594   3,286   2,670  
Gross margin 167,465 141,464 632,028 544,586
General and administrative 29,818 26,561 116,697 105,005
General and administrative depreciation and amortization 3,029 4,276 17,045 14,917
General and administrative stock-based payment compensation 4,446 4,436 17,622 18,194
Impairment of long-lived assets 19,365     19,365    
Total operating expenses 267,789   226,468   986,682   861,979  
Operating income 110,807 106,191 461,299 406,470
Other (expense) income:
Interest expense, net (5,485 ) (6,257 ) (22,373 ) (22,157 )
Other income, net 1,057   6,051   1,174   11,552  
Total other expenses (4,428 ) (206 ) (21,199 ) (10,605 )
Income before income tax expense 106,379 105,985 440,100 395,865
Income tax expense 36,010   21,863   45,839   125,505  
Net income 70,369 84,122 394,261 270,360
Net income attributable to noncontrolling interest 34     34    
Net income attributable to Copart, Inc. $ 70,335   $ 84,122   $ 394,227   $ 270,360  
 
Basic net income per common share $ 0.31   $ 0.38   $ 1.72   $ 1.18  
Weighted average common shares outstanding 230,286   219,156   228,686   228,846  
 
Diluted net income per common share $ 0.30   $ 0.35   $ 1.66   $ 1.11  
Diluted weighted average common shares outstanding 237,634   237,038   237,019   244,295  
 
Copart, Inc.
Consolidated Balance Sheets

(In thousands)

(Unaudited)

   
July 31, 2017 July 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 210,100 $ 155,849
Accounts receivable, net 311,846 266,270
Vehicle pooling costs and inventories 41,281 38,987
Income taxes receivable 6,418 18,751
Deferred income taxes 1,444
Prepaid expenses and other assets 17,616   18,005  
Total current assets 587,261 499,306
Property and equipment, net 944,056 816,791
Intangibles, net 75,938 11,761
Goodwill 340,243 260,198
Deferred income taxes 1,287 23,506
Other assets 33,716   38,258  
Total assets $ 1,982,501   $ 1,649,820  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 208,415 $ 192,379
Deferred revenue 5,019 4,628
Income taxes payable 6,472 5,625
Deferred income taxes 92
Current portion of revolving loan facility and capital lease
obligations
82,155   76,151  
Total current liabilities 302,153 278,783
Deferred income taxes 3,192 3,816
Income taxes payable 24,573 25,641
Long-term debt, revolving loan facility, and capital lease
obligations, net of discount
550,883 564,341
Other liabilities 3,100   2,783  
Total liabilities 883,901 875,364
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 23 22
Additional paid-in capital 453,349 392,434
Accumulated other comprehensive loss (100,676 ) (109,194 )
Retained earnings 745,370 491,194
Noncontrolling interest 534    
Total stockholders' equity 1,098,600   774,456  
Total liabilities and stockholders' equity $ 1,982,501   $ 1,649,820  
 
Copart, Inc.
Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Twelve Months Ended
July 31,

2017   2016
Cash flows from operating activities:
Net income $ 394,261 $ 270,360
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization, including debt cost 57,441 49,643
Allowance for doubtful accounts 187 1,175
Impairment of long-lived assets 19,365
Equity in losses of unconsolidated affiliates 671 895
Stock-based payment compensation 20,840 20,864
Loss (gain) on sale of property and equipment 184 (54 )
Deferred income taxes 19,901 5,740
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable (38,542 ) (54,213 )
Vehicle pooling costs and inventories (621 ) (6,646 )
Prepaid expenses and other current assets 1,760 (738 )
Other assets 1,085 4,164
Accounts payable and accrued liabilities 4,269 48,347
Deferred revenue 392 983
Income taxes receivable 12,343 (12,649 )
Income taxes payable (333 ) 2,788
Other liabilities (1,145 ) 1,839  
Net cash provided by operating activities 492,058 332,498
Cash flows from investing activities:
Purchases of property and equipment (172,178 ) (173,917 )
Purchases of assets and liabilities in connection with acquisitions,
net of cash acquired
(160,812 )
Investment in unconsolidated affiliate (3,566 )
Proceeds from sale of property and equipment 765 662
Purchases of marketable securities (21,119 )
Proceeds from sale of marketable securities   21,498  
Net cash used in investing activities (335,791 ) (172,876 )
Cash flows from financing activities:
Proceeds from the exercise of stock options 31,188 13,240
Proceeds from the issuance of Employee Stock Purchase Plan shares 4,270 3,369
Repurchases of common stock (442,855 )
Payments for employee stock-based tax withholdings (135,433 ) (15,039 )
Proceeds from the issuance of long-term debt, net of discount 93,468
Net (repayments) proceeds on revolving loan facility (7,000 ) 238,000
Debt offering costs (1,179 )
Principal payments on long-term debt   (337,500 )
Net cash used in financing activities (106,975 ) (448,496 )
Effect of foreign currency translation 4,959   (11,289 )
Net increase (decrease) in cash and cash equivalents 54,251 (300,163 )
Cash and cash equivalents at beginning of period 155,849   456,012  
Cash and cash equivalents at end of period $ 210,100   $ 155,849  
Supplemental disclosure of cash flow information:
Interest paid $ 23,221   $ 23,606  
Income taxes paid, net of refunds $ 14,011   $ 127,981  
   
Copart, Inc.
Additional Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

 
Three Months Ended
July 31,
Twelve Months Ended
July 31,
2017   2016 2017   2016
GAAP net income attributable to Copart, Inc. $ 70,335 $ 84,122 $ 394,227 $ 270,360
Effect of foreign currency-related gains, net of tax (585 ) (3,521 ) (880 ) (4,860 )
Effect of impairment of long-lived assets, net of tax 12,339 12,339
Effect of acquisition related fees, net of tax 1,241 1,241
Effect of income tax benefit of ASU 2016-09 adoption and limitations
of foreign income tax credits(1)
(428 ) (11,594 ) (107,177 ) (12,440 )
Effect of payroll taxes on certain executive stock compensation, net
of tax
    3,307   48  
Non-GAAP net income attributable to Copart, Inc. $ 82,902   $ 69,007   $ 303,057   $ 253,108  
 
GAAP diluted net income per common share $ 0.30   $ 0.35   $ 1.66   $ 1.11  
Non-GAAP diluted net income per common share $ 0.35   $ 0.30   $ 1.29   $ 1.05  
 
GAAP diluted weighted average common shares outstanding 237,634 237,038 237,019 244,295
Effect on common equivalent shares from ASU 2016-09 adoption(1) (1,771 ) (4,572 ) (1,992 ) (3,728 )
Non-GAAP diluted weighted average common shares outstanding 235,863   232,466   235,027   240,567  
 
 

(1)

 

In March 2016, the FASB issued ASU No. 2016-09, Improvements to
Employee Share-Based Payment Accounting. Under this standard, all
excess tax benefits and tax deficiencies related to exercises of
stock options are recognized as income tax expense or benefit in
the income statement as discrete items in the reporting period in
which they occur. Additionally, excess tax benefits are classified
as an operating activity on the consolidated statements of cash
flows. The Company adopted ASU 2016-09 during the fourth quarter
of fiscal 2016 on a modified retrospective basis. For a more
complete discussion, please review the Company's Annual Report on
Form 10-K, to be filed with the Securities and Exchange Commission
on or before September 29, 2017.

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