01—Abstract
Summary
Summary of the 10-K filed October 28, 1997. Cited figures are marked; the original filing is the authoritative source.
Copart, Inc. (CPRT) reported fiscal 1997 (year ended July 31, 1997) results that show a company growing steadily through acquisitions and new facility openings.
Revenues rose 7% to $126.3 milliona from $118.2 million, driven by 410,000 vehicles processed (up from 391,100). Operating income grew 6% to $18.9 million, and net income increased 7% to $12.0 million, or $0.90 per share. Operating margin was relatively stable at about 14.9%, though yard and fleet expenses rose slightly as a share of revenue, and growth in revenue per unit (about 10%) was offset by a decline in Purchase Program volume.
The balance sheet strengthened meaningfully. Cash rose to $27.7 millionb, with no borrowings under the $50 million unsecured credit facility, and shareholders' equity increased to $142.8 million. Operating cash flow more than doubled to $24.6 million.
Management states that current resources are sufficient for working capital and facility openings over the next 12 months. However, growth pace slowed: only four facilities were opened or acquired in fiscal 1997, versus an average of eight per year from 1992 to 1996, and the company's largest supplier accounted for about 16%c of revenue. Investors should weigh several risks.
The company's Chief Financial Officer, Joseph Whelan, resigned on October 6, 1997, and no successor had been named at filing. The company also faces environmental remediation obligations, including a $3.0 milliond Dallas commitment, and a lawsuit by Bill Woltz was dismissed after trial in favor of Copart.
The company's principal competitor, Insurance Auto Auctions, Inc., is significant in certain regions. Share price trading ranged from about $10 to $21 during fiscal 1997, and the company does not pay cash dividends.
02—Key points
Key Highlights
- Revenue grew 7% to $126.3 million in fiscal 1997, with 410,000 salvage vehicles processed.
- Net income rose 7% to $12.0 million, or $0.90 per diluted-equivalent share, versus $0.85 in fiscal 1996.
- Operating cash flow more than doubled to $24.6 million, up from $11.3 million.
- Cash of $27.7 million and no borrowings under the $50 million credit line strengthen liquidity.
- Facility growth slowed to four openings or acquisitions in fiscal 1997, compared with an average of eight per year previously.
- CFO Joseph Whelan resigned October 6, 1997, with no successor named at filing.
- Largest supplier accounts for about 16% of revenue, and 90%+ of vehicles come from insurance companies.
03—Questions
Frequently Asked Questions
How profitable was Copart in fiscal 1997?
Copart generated revenue of $126.3 million and net income of $12.0 million, or $0.90 per share, up from $11.2 million and $0.85 in fiscal 1996. Operating margin was about 14.9%, roughly flat year over year.
What is driving Copart's growth?
Growth comes from acquiring and opening auction facilities, increasing vehicle volume, and rising revenue per vehicle of about 10%, which is supported by the Percentage Incentive Program and buyer fees. The Purchase Program declined, reducing revenue by about $5.8 million.
Is Copart financially secure?
Yes, the balance sheet is relatively strong. Cash is $27.7 million, shareholders' equity is $142.8 million, total debt is $9.8 million, and the $50 million bank credit facility is undrawn. Management believes these resources cover working capital and expansion for the next 12 months.
What are the main risks for investors?
Key risks include dependence on a few large insurance-company suppliers, the slowdown in facility openings, leadership change after the CFO's resignation, environmental remediation exposure (including the Dallas site), intense competition from IAA, and quarterly earnings volatility and stock price fluctuations.
Does Copart pay dividends?
No. Copart has not paid a cash dividend since 1984 and does not expect to pay dividends in the foreseeable future, so returns depend on share price appreciation.
04—Continue