10-QPeriod: Q1 FY2008

COPART INC Quarterly Report for Q1 Ended Oct 31, 2007

Filed December 10, 2007For Securities:CPRT

Summary

Copart, Inc. reported strong revenue growth of 39.2% to $184.0 million for the third quarter ended October 31, 2007, compared to the same period in 2006. This significant increase was primarily driven by the recent acquisitions of Universal Salvage plc and Century Salvage Sales Limited in the UK, which contributed $43.8 million in revenue. While North American same-store sales also showed growth, the UK acquisitions significantly altered the company's revenue mix, with the UK now accounting for 24% of total revenue. However, the company notes that operating in the UK on a principal basis (purchasing vehicles outright) rather than an agency basis (earning fees) will impact future gross margin percentages negatively. Despite increased operating costs, particularly in yard operations, Copart's net income rose by 23.9% to $37.6 million, or $0.41 per diluted share, indicating effective cost management and revenue generation capabilities. The company also strengthened its liquidity, with cash and cash equivalents increasing to $249.9 million at quarter-end.

Key Highlights

  • 1Revenue increased by 39.2% to $184.0 million, driven by substantial contributions from UK acquisitions (Universal Salvage and Century Salvage).
  • 2Net income grew by 23.9% to $37.6 million, translating to diluted EPS of $0.41.
  • 3Yard operation expenses increased by 45.5%, largely due to the UK acquisitions and the principal operating model in the UK.
  • 4General and administrative expenses rose by 67.5%, impacted by UK acquisitions, stock option modifications for retiring directors, and UK employee separation costs.
  • 5Cash and cash equivalents significantly increased to $249.9 million as of October 31, 2007.
  • 6The company expanded its stock repurchase program authorization by 20 million shares.
  • 7Long-lived assets grew to $670.2 million, with significant increases in the UK due to acquisitions.

Frequently Asked Questions

The primary driver of revenue growth was the recent acquisition of Universal Salvage plc and Century Salvage Sales Limited in the United Kingdom, which contributed significantly to the revenue increase.

The UK acquisitions led to an increase in yard operation expenses and a shift in revenue recognition as Copart operates primarily on a principal basis (purchasing vehicles) in the UK, rather than an agency basis. This is expected to negatively impact future gross margin percentages.

Copart's liquidity position is strong, with cash and cash equivalents totaling $249.9 million as of October 31, 2007. The company believes its current cash and cash generated from operations are sufficient for at least the next 12 months.

Yes, in October 2007, the company's board of directors approved a 20 million share increase in its stock repurchase program, bringing the total authorization to 29 million shares. No shares were repurchased during the reported quarter.