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COPART INC Annual Report, Year Ended Jul 31, 1996

Filing Date
Filed October 28, 1996
Period End
July 31, 1996
Security
CPRT
In the record · 2016–202610-K1110-Q328-K93

CPRT filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 93 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jul ’16Jul ’16
  2. Leadership change8-K · Sep ’19Sep ’19
  3. Leadership change8-K · Sep ’21Sep ’21
  4. FY2025 annual report10-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed October 28, 1996. Cited figures are marked; the original filing is the authoritative source.

Copart, Inc. (Nasdaq: CPRT) reported fiscal 1996 (year ended July 31, 1996) results that showed strong top-line and earnings growth driven largely by acquisitions.

Revenues rose 103% to $118.2 milliona from $58.1 million, and net income climbed 62% to $11.2 million, or $0.85 per share, on 391,100 salvage vehicles processed (up from 223,300). Growth came from the May 1995 NER Auction Group acquisition and a series of facility acquisitions and openings, which brought the network to 49 auction facilities in 24 states. Operating margin, however, compressed to 15.1% from 19.4% as yard and fleet expenses rose to 70.6% of revenue, driven by the shift toward lower-margin eastern operations and purchase-program vehicles where gross proceeds are booked as revenue.

The balance sheet strengthened, with shareholders' equity of $126.2 millionb and total assets of $158.1 million, but the company took on more debt during the year. Total debt rose to $11.3 million, mainly from a $7.5 million note issued for the Van Nuys land purchase, and goodwill and intangibles ($74.6 million) make up nearly half of total assets. Cash from operations was $11.3 million, while capital expenditures of $8.4 million and acquisitions consumed additional cash.

Management says existing liquidity, the undrawn $18.5 millionc term loan and revolver, and equipment leasing lines are sufficient for the next 12 months. Investors should weigh several risks: a single insurance supplier provided 16% of revenue, most supplier contracts are cancellable on 30 to 90 days' notice, and the company's growth depends on continued acquisitions that management concedes are harder to integrate at larger scale. Willis J.

Johnson and one other shareholder control about 30%d of the stock, and a pending lawsuit by a former consultant (Woltz) seeks unspecified damages. Environmental exposure at the Dallas facility is capped by a cost-sharing arrangement but could still be material. The company has not paid a cash dividend since 1984.

02—Key points

Key Highlights

  1. Revenue up 103% to $118.2M in FY1996 from $58.1M, driven by the NER acquisition and new facilities; vehicles processed rose 75% to 391,100.
  2. Net income up 62% to $11.2M ($0.85 per share), though operating margin fell to 15.1% from 19.4% as yard and fleet costs rose to 70.6% of revenue.
  3. Network expanded to 49 facilities in 24 states, with five new openings and two acquisitions during fiscal 1996.
  4. Balance sheet: total assets $158.1M, shareholders' equity $126.2M, total debt $11.3M, cash $13.0M; goodwill and intangibles are about 47% of assets.
  5. Customer concentration: largest insurance supplier accounted for about 16% of revenue, and supplier agreements are cancellable on 30 to 90 days' notice.
  6. Insider control: CEO Willis J. Johnson and one other shareholder hold about 30% of common stock, which may deter takeovers.
  7. Legal and environmental: a Woltz software lawsuit is ongoing, and Dallas lead contamination costs are estimated at $1M to $2.9M, with cost-sharing caps.

03—Questions

Frequently Asked Questions

  1. What drove Copart's revenue growth in fiscal 1996?

    Most of the 103% increase came from acquisitions, especially the May 1995 NER Auction Group deal and the Kansas City, Oklahoma City, Tulsa, St. Louis, and Arkansas operations, which added about $45.8M. Existing yards also grew about $14.3M, partly from Purchase Program vehicles, where the gross sale price is booked as revenue.

  2. Why did operating margins decline even though profits grew?

    Yard and fleet expenses rose to 70.6% of revenue from 65.0%. Management attributes this to the lower-margin eastern operations acquired through NER and to a larger share of vehicles processed under the Purchase Program, where gross proceeds are recorded as revenue, lifting both sales and costs.

  3. How much debt does Copart carry and is liquidity adequate?

    Total debt was $11.3M at July 31, 1996, up from $3.7M, largely a $7.5M note from the Van Nuys land purchase. The company had no borrowings under its $10M revolver and $18.5M term loan facility, had about $13.0M in cash, and says its resources are sufficient for the next 12 months.

  4. What are the key risks for investors?

    Key risks include dependence on a few large insurance suppliers (one provides 16% of revenue), short-notice contract cancellation, reliance on acquisitions and integration success, concentration of ownership by insiders (about 30%), the Woltz software lawsuit, possible Texas and California inspection regulations affecting operations, and environmental remediation costs at certain facilities.

04—Continue

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