CPRT Copart Inc

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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Copart, Inc.Melissa Perry, 972-391-5090Executive Support Manager, Office of the Chief Financial Officermelissa.perry@copart.com