10-QPeriod: Q3 FY2007

COPART INC Quarterly Report for Q3 Ended Apr 30, 2007

Filed June 11, 2007For Securities:CPRT

Summary

Copart, Inc. reported its quarterly results for the period ending April 30, 2007. The company experienced a slight decrease in revenue for the three months ended April 30, 2007, compared to the prior year period, primarily due to the absence of incremental costs associated with Hurricanes Katrina and Rita, which had previously boosted volumes. Despite the revenue dip, operating income saw an increase, driven by lower yard operation expenses, notably the absence of "abnormal" hurricane-related costs. Looking at the nine-month period, revenues showed growth, and operating income significantly improved, largely benefiting from the prior year's significant "abnormal" costs related to the hurricanes that are no longer present. The company also highlighted its pending acquisition of Universal Salvage plc, a UK-based company, which would mark Copart's first international expansion. This acquisition, expected to close around June 15, 2007, is a key strategic move for future growth.

Key Highlights

  • 1Revenue for the three months ended April 30, 2007, decreased by 2.6% to $145.7 million, primarily due to the absence of hurricane-related incremental volumes compared to the prior year.
  • 2Yard operation expenses decreased by 9.2% for the quarter, largely due to the elimination of approximately $2.6 million in abnormal hurricane-related costs seen in the prior year's period.
  • 3Net income for the three months ended April 30, 2007, increased to $38.9 million from $34.7 million in the same period last year, driven by improved operational efficiencies.
  • 4For the nine months ended April 30, 2007, revenue increased by 3.9% to $406.7 million, and net income rose significantly to $99.6 million from $65.4 million, benefiting from the absence of prior year hurricane costs.
  • 5The company announced a pending acquisition of Universal Salvage plc, a UK-based company, for approximately £57.0 million ($113.8 million), marking its first international expansion.
  • 6As of April 30, 2007, Copart had $120.8 million in cash and cash equivalents and $128.3 million in short-term investments.
  • 7The company continued its expansion strategy with the opening of new facilities and maintained a strong share repurchase authorization, although no shares were repurchased in the nine months ended April 30, 2007.

Frequently Asked Questions

The primary driver for the revenue decrease in the three months ended April 30, 2007, was the absence of incremental revenue from salvage vehicles generated by Hurricanes Katrina and Rita, which had positively impacted the prior year's comparable period.

Yard operation expenses decreased significantly due to the absence of 'abnormal' costs related to the Hurricanes Katrina and Rita, which were incurred in the prior year's period. This reduction, along with ongoing efficiency efforts, led to yard operation expenses representing a lower percentage of revenue.

The acquisition of Universal Salvage plc is significant as it represents Copart's first expansion outside of North America. It aims to broaden the company's geographic reach and market presence within the UK's automotive and insurance industries.

Copart continues to invest its cash in AAA-rated auction rate securities and enhanced cash funds. A substantial portion of these funds, $127.8 million, was placed in escrow as part of the Universal Salvage plc acquisition agreement.