10-QPeriod: Q2 FY2006

COPART INC Quarterly Report for Q2 Ended Jan 31, 2006

Filed March 13, 2006For Securities:CPRT

Summary

Copart, Inc.'s (CPRT) March 13, 2006, 10-Q filing highlights the company's effective disclosure controls and procedures, with no material changes to internal controls reported. The company faces several ongoing legal proceedings, including class action lawsuits related to vehicle disposal practices and a patent infringement claim from Manheim Services Corp. While Copart believes the ultimate liability from these matters will not be material to its financial position, the exact impact and timing remain uncertain. Financially, the company is managing its interest rate and foreign currency risks, with a focus on its investment portfolio. Investments are primarily in variable-rate money market accounts and auction rate securities, which management believes are not highly sensitive to sudden interest rate changes. Foreign currency exposure from Canadian operations is deemed insignificant, and Copart does not engage in hedging or speculative use of derivatives. The company also disclosed recent share repurchases in the second quarter of fiscal 2006.

Key Highlights

  • 1Disclosure controls and procedures were deemed effective by management, with no material changes in internal controls over financial reporting during the period.
  • 2Copart is involved in multiple significant legal proceedings, including class action lawsuits and a patent infringement case filed by Manheim Services Corp.
  • 3The company believes that the ultimate liability from ongoing litigation will not materially affect its financial position, results of operations, or cash flows, though the exact impact is uncertain.
  • 4Interest rate risk is considered low due to the investment portfolio's composition of variable-rate money market accounts and auction rate securities with short maturities.
  • 5Foreign currency risk related to Canadian operations is considered insignificant, and the company does not hedge this exposure.
  • 6Copart repurchased 366,000 shares for approximately $24.24 per share in the second quarter of fiscal 2006.
  • 7KPMG LLP was dismissed as the independent auditor, and Ernst & Young LLP was engaged as the new independent registered accounting firm.

Frequently Asked Questions

Copart is facing several legal challenges, including class action lawsuits concerning the disposal of vehicles and a patent infringement lawsuit filed by Manheim Services Corp. There are also claims related to storage liens and governmental/administrative proceedings concerning licensing and operations.

Copart's primary market risks are interest rate and foreign currency. Interest rate risk is managed through its investment portfolio, which is mainly in variable-rate money market accounts and auction rate securities, believed to be not materially affected by sudden interest rate changes. Foreign currency risk from its Canadian operations is considered insignificant, and the company does not hedge this exposure or use derivatives for speculation.

Copart dismissed KPMG LLP as its independent registered accounting firm on February 2, 2006, and engaged Ernst & Young LLP as its new independent registered accounting firm.

Yes, in the second quarter of fiscal 2006, Copart repurchased 366,000 shares at an average price of $24.24 per share.