10-QPeriod: Q3 FY2010

COPART INC Quarterly Report for Q3 Ended Apr 30, 2010

Filed June 9, 2010For Securities:CPRT

Summary

Copart, Inc. reported solid financial performance for the nine months ended April 30, 2010, with net income increasing to $115.4 million from $106.5 million in the prior year period. This growth was driven by an increase in both service revenues and vehicle sales, reflecting higher average selling prices for vehicles, partly influenced by rising commodity and used car prices, as well as the beneficial impact of their VB2 internet auction platform. The company also saw improved operational efficiencies leading to a decrease in yard operation expenses on a year-over-year basis for the nine-month period. The company's liquidity remains strong, with cash and cash equivalents increasing significantly to $264.3 million as of April 30, 2010. Copart continues to expand its physical footprint, adding new facilities in North America and the UK, and remains committed to its strategic growth initiatives. While international expansion, particularly in the UK, presents certain risks and has led to operational shifts (e.g., from principal to agency model), the overall financial health appears robust, supported by healthy operating cash flow and an undrawn credit facility.

Financial Highlights

30 data points
Beta

Revenue

$220.35M

85.7% Gross Margin

Net Income

$44.39M

20.1% Net Margin

EPS (Diluted)

$0.03

Cash & Equivalents

$264.25M

Free Cash Flow

$71.52M

Financial Statements
Beta
Revenue$220.35M
Cost of Revenue$31.44M
Gross Profit$188.91M
Operating Expenses$148.22M
Operating Income$72.13M
Interest Expense$38K
Net Income$44.39M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.36B

Key Highlights

  • 1Net income increased to $115.4 million for the nine months ended April 30, 2010, up from $106.5 million in the prior year period.
  • 2Total revenues grew to $582.4 million for the nine months ended April 30, 2010, compared to $558.8 million in the prior year.
  • 3Service revenues saw a 4.3% increase year-over-year for the nine-month period, driven by higher average revenue per unit and favorable exchange rates.
  • 4Cash and cash equivalents surged to $264.3 million as of April 30, 2010, indicating strong liquidity.
  • 5The company continued its expansion by opening or acquiring eleven new facilities since the beginning of fiscal year 2009.
  • 6Yard operation expenses decreased by 2.1% for the nine months ended April 30, 2010, due to operational efficiencies.
  • 7Copart's effective income tax rate decreased slightly to 36.5% for the nine-month period, benefiting from a UK tax agreement.

Frequently Asked Questions

Copart's total revenues increased to $582.4 million for the nine months ended April 30, 2010, up from $558.8 million in the same period last year. This growth was primarily driven by an increase in service revenues (4.3% growth) and vehicle sales (4.1% growth). Key factors contributing to this performance included higher average selling prices for vehicles due to increased commodity and used car pricing, the positive impact of their VB2 internet auction platform, and a beneficial foreign currency exchange rate.

Copart's liquidity position is strong. Cash and cash equivalents significantly increased from $162.7 million at July 31, 2009, to $264.3 million as of April 30, 2010. This substantial increase in cash and cash equivalents, coupled with positive operating cash flows, indicates the company is well-positioned to meet its financial obligations and fund its ongoing operations and growth strategies.

Copart's growth strategy involves expanding its physical footprint and service offerings. They have opened or acquired eleven new facilities since the beginning of fiscal year 2009, including several in the United Kingdom. The company aims to increase revenues and profitability by acquiring and developing new vehicle storage facilities, pursuing national and regional seller agreements, expanding service offerings, and leveraging their VB2 internet sales technology into new markets. They are also working to migrate UK contracts from a principal to an agency model where possible.

Key risks highlighted in the filing include dependence on a limited number of major vehicle sellers, risks associated with international expansion (particularly in the UK) and integration of acquisitions, potential negative impacts from operating on a principal basis in the UK, technology risks related to their internet-based sales model, and competition within the salvage vehicle sales industry. Macroeconomic factors like fuel prices, commodity prices, and used car prices also pose potential risks to revenue and profitability.