10-QPeriod: Q1 FY2011

COPART INC Quarterly Report for Q1 Ended Oct 31, 2010

Filed December 3, 2010For Securities:CPRT

Summary

Copart, Inc. reported solid financial performance for the three months ended October 31, 2010, with total service revenues and vehicle sales increasing to $212.7 million, up from $185.5 million in the prior year period. This growth was driven by a 16.8% increase in service revenues, bolstered by the adoption of new accounting standards (ASU 2009-13) which recognized previously deferred revenue, alongside organic growth from increased unit volume and rising average vehicle selling prices. The company demonstrated effective cost management, with operating costs increasing at a slightly lower rate than revenue, leading to an increase in operating income to $59.6 million from $56.5 million. Net income rose to $37.8 million, or $0.45 per diluted share, compared to $35.3 million, or $0.42 per diluted share, in the same period last year. Copart also actively managed its capital through a significant stock repurchase program, spending $75.7 million to buy back shares, while maintaining a strong liquidity position with over $260 million in cash and cash equivalents.

Financial Highlights

47 data points
Beta

Revenue

$212.67M

86.7% Gross Margin

Net Income

$37.82M

17.8% Net Margin

EPS (Diluted)

$0.03

Total Assets

$1.21B

Cash & Equivalents

$260.47M

Free Cash Flow

$62.76M

Financial Statements
Beta
Revenue$212.67M
Cost of Revenue$28.21M
Gross Profit$184.46M
Operating Expenses$153.07M
Operating Income$59.59M
Interest Expense$15K
Net Income$37.82M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)1.34B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Total revenues increased by 14.6% to $212.7 million for the three months ended October 31, 2010, compared to $185.5 million in the prior year period.
  • 2Service revenues grew by 16.8% to $179.6 million, benefiting from the adoption of ASU 2009-13 which accelerated revenue recognition, alongside increased unit volume and higher average vehicle selling prices.
  • 3Operating income increased by 5.5% to $59.6 million, indicating effective cost control relative to revenue growth.
  • 4Net income rose by 7.2% to $37.8 million ($0.45 per diluted share) from $35.3 million ($0.42 per diluted share) in the prior year quarter.
  • 5The company repurchased approximately $75.7 million of its common stock during the quarter, reflecting a commitment to returning capital to shareholders.
  • 6Cash and cash equivalents remained strong at $260.5 million as of October 31, 2010, providing ample liquidity.
  • 7The company's effective income tax rate decreased slightly to 37.1% from 38.2% due to geographical allocation of income.

Frequently Asked Questions

Service revenues increased by 16.8% to $179.6 million. This growth was driven by the adoption of ASU 2009-13, which allowed for the earlier recognition of certain revenues, an increase in unit volume, and higher average selling prices of vehicles. The company noted that over 50% of its service revenue is tied to the vehicle's selling price, which was influenced by rising commodity and used car prices.

Total operating costs and expenses increased by 18.7% to $153.1 million, which was a slightly higher percentage increase than revenue. Yard operations expenses saw a significant jump of 23.2% due to volume growth, the adoption of ASU 2009-13, and an impairment charge on an airplane. General and administrative expenses increased by 12.8%, primarily due to higher advertising and technology costs. Despite these increases, operating income still grew, suggesting some level of cost control or efficiencies gained in other areas.

The adoption of ASU 2009-13 on August 1, 2010, changed how Copart recognizes revenue for arrangements with multiple deliverables. Specifically, it allowed for the recognition of certain revenues, such as towing fees, titling fees, and seller storage fees, in the period earned rather than deferring them until the car was sold. This resulted in approximately $9.1 million in service revenue and $8.8 million in associated yard operation expenses being recognized in the current quarter that would have otherwise been deferred to future periods.

Copart repurchased approximately 2.25 million shares for $75.7 million during the three months ended October 31, 2010. This was a significant increase compared to no repurchases in the prior year's comparable period. This demonstrates a strong focus on returning capital to shareholders and managing the share count.