10-QPeriod: Q3 FY2009

COPART INC Quarterly Report for Q3 Ended Apr 30, 2009

Filed June 9, 2009For Securities:CPRT

Summary

Copart, Inc. (CPRT) reported its financial results for the quarterly period ended April 30, 2009. The company experienced a decrease in total revenue for the three months ended April 30, 2009, compared to the same period in the prior year, largely driven by a significant decline in vehicle sales revenue. This decline was partially attributed to unfavorable foreign currency exchange rates (GBP to USD) and a strategic shift in the UK operations from a principal to an agency model. Remarketing service fee revenue saw a slight decrease, impacted by reduced average selling prices influenced by lower commodity and used car pricing, as well as a stronger U.S. dollar affecting international buyers. Despite the revenue dip, the company's liquidity position improved, with cash and cash equivalents increasing substantially from the prior fiscal year-end. Operating activities generated positive cash flow, and capital expenditures remained significant as Copart continued its expansion strategy through acquisitions and new facility openings. The company's balance sheet shows total assets increasing, primarily due to higher cash reserves and property and equipment, while total liabilities decreased. Management anticipates that current cash and cash generated from operations will be sufficient for at least the next twelve months.

Key Highlights

  • 1Total revenue for the three months ended April 30, 2009, decreased to $197.3 million from $221.2 million in the prior year's comparable period.
  • 2Remarketing service fee revenue declined slightly by 2.4% to $165.0 million, impacted by lower average selling prices and foreign currency exchange rates.
  • 3Vehicle sales revenue decreased significantly by 38.0% to $32.3 million, heavily influenced by a shift in UK operations from a principal to an agency model and unfavorable currency exchange rates.
  • 4Cash and cash equivalents increased significantly to $119.0 million as of April 30, 2009, from $39.0 million as of July 31, 2008, indicating improved liquidity.
  • 5Net income for the three months ended April 30, 2009, was $42.1 million, a decrease from $46.5 million in the same period last year.
  • 6The company continued its expansion strategy, with significant capital expenditures and the acquisition or opening of multiple facilities since the beginning of fiscal year 2008.
  • 7Goodwill decreased from $177.2 million to $160.7 million, primarily due to the effect of foreign currency exchange rates.

Frequently Asked Questions

The decline in revenue for the three months ended April 30, 2009, was primarily driven by a significant decrease in vehicle sales revenue, which was heavily impacted by the shift in UK operations from a principal basis to an agency model and unfavorable foreign currency exchange rates. Additionally, remarketing service fee revenue saw a slight decrease due to lower average selling prices influenced by commodity and used car markets, as well as a stronger U.S. dollar impacting international buyers.

Copart's liquidity position improved significantly. Cash and cash equivalents increased substantially to $119.0 million as of April 30, 2009, from $39.0 million at the end of the previous fiscal year (July 31, 2008). This increase was largely due to strong cash flow generated from operating activities.

Management believes that current cash and cash equivalents, along with cash generated from operations, will be sufficient to meet operating and working capital requirements for at least the next twelve months. However, the company acknowledges that significant future growth might necessitate raising additional capital through new debt or equity issuances.

Key risks include significant dependence on a limited number of major vehicle sellers, risks associated with international operations (particularly in the UK) including integration challenges and currency fluctuations, potential impairment of goodwill, operational risks associated with operating on a principal basis in the UK, technology risks related to its internet-based sales model, and general macroeconomic factors such as fuel prices and commodity prices.