Copart Reports Second Quarter Fiscal 2017 Financial Results

DALLAS--()--Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended January 31, 2017.

For the three months ended January 31, 2017, revenue, gross margin, and net income were $349.5 million, $146.8 million, and $66.1 million, respectively. These represent an increase in revenue of $49.8 million, or 16.6%; an increase in gross margin of $22.2 million, or 17.8%; and an increase in net income of $7.1 million, or 12.0%, respectively, from the same quarter last year. Fully diluted earnings per share for the three months were $0.56 compared to $0.47 last year, an increase of 19.1%.

For the six months ended January 31, 2017, revenue, gross margin, and net income were $695.5 million, $292.1 million, and $233.3 million, respectively. These represent an increase in revenue of $107.0 million, or 18.2%; an increase in gross margin of $46.6 million, or 19.0%; and an increase in net income of $121.7 million, or 109.1%, respectively, from the same period last year. Fully diluted earnings per share for the six months were $1.97 compared to $0.89 last year, an increase of 121.3%.

Excluding the impact of foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises, non-GAAP fully diluted earnings per share for the three months ended January 31, 2017 and 2016, were $0.58 and $0.45, respectively. Non-GAAP fully diluted earnings per share for the six months ended January 31, 2017 and 2016, were $1.14 and $0.86, respectively. A reconciliation of non-GAAP financial measures to the most directly comparable financial measures computed in accordance with U.S. generally accepted accounting principles (GAAP) can be found in the tables attached to this press release.

On Wednesday, February 22, 2017, at 3 p.m. Eastern time, Copart will conduct a conference call to discuss the results for the quarter. The call will be webcast live and can be accessed at http://stream.conferenceamerica.com/copart022217. A replay of the call will be available through April 22, 2017 by calling (877) 919-4059. Use confirmation code # 27485045.

About Copart

Copart, founded in 1982, provides vehicle sellers with a full range of remarketing services to process and sell salvage and clean title vehicles to dealers, dismantlers, rebuilders, exporters, and in some states, to end users. Copart remarkets the vehicles through Internet sales using its VB3 technology. Copart sells vehicles on behalf of insurance companies, banks, financial institutions, charities, car dealerships, fleet operators, vehicle rental companies, as well as vehicles sourced from the general public. The company currently operates in the United States (www.copart.com), Canada (www.copart.ca), the United Kingdom (www.copart.co.uk), Brazil (www.copart.com.br), Germany (www.copart.de), the United Arab Emirates, Oman and Bahrain (www.copartmea.com), Spain (www.copart.es), Ireland (www.copart.ie), and India (www.copart.in). Copart links sellers to more than 750,000 Members in more than 150 countries worldwide through its multi-channel platform. In 2015, Copart was ranked at the top of Deloitte’s “The Exceptional 100” list of companies, which reviewed U.S. publicly traded companies based upon a multidimensional approach to measuring financial performance. For more information, or to become a Member, visit www.copart.com.

Use of Non-GAAP Financial Measures

Included in this release are certain non-GAAP financial measures, including non-GAAP net income per diluted share, which reflect the impact of foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises. These non-GAAP financial measures do not represent alternative financial measures under GAAP. In addition, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Furthermore, these non-GAAP financial measures do not reflect a comprehensive view of Copart’s operations in accordance with GAAP and should only be read in conjunction with the corresponding GAAP financial measures. This information constitutes non-GAAP financial measures within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission. Accordingly, Copart has presented herein, and will present in other information it publishes that contains these non-GAAP financial measures, a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Copart believes the presentation of non-GAAP net income per diluted share included in this release in conjunction with the corresponding GAAP financial measures provides meaningful information for investors, analysts and management in assessing Copart’s business trends and financial performance. From a financial planning and analysis perspective, Copart management analyzes its operating results with and without the impact of foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises.

Cautionary Note About Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws, and these forward-looking statements are subject to substantial risks and uncertainties. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. For a more complete discussion of the risks that could affect our business, please review the “Management's Discussion and Analysis” and the other risks identified in Copart’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as filed with the Securities and Exchange Commission. We encourage investors to review these disclosures carefully. We do not undertake to update any forward-looking statement that may be made from time to time on our behalf.

   

Copart, Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

 
Three Months Ended
January 31,
Six Months Ended
January 31,
2017   2016 2017   2016
Service revenues and vehicle sales:
Service revenues $ 310,033 $ 260,417 $ 617,111 $ 511,384
Vehicle sales 39,499   39,289   78,412   77,160  
Total service revenues and vehicle sales 349,532 299,706 695,523 588,544
Operating expenses:
Yard operations 158,556 132,041 315,918 258,919
Cost of vehicle sales 33,686 34,127 66,773 66,195
Yard depreciation and amortization 9,717 8,248 19,165 16,593
Yard stock-based payment compensation 808   676   1,609   1,362  
Gross margin 146,765 124,614 292,058 245,475
General and administrative 27,675 24,376 58,599 51,087
General and administrative depreciation and amortization 5,498 3,443 10,759 6,619
General and administrative stock-based payment compensation 4,712   4,710   8,996   9,438  
Total operating expenses 240,652   207,621   481,819   410,213  
Operating income 108,880 92,085 213,704 178,331
Other (expense) income:
Interest expense, net (5,760 ) (4,968 ) (11,382 ) (10,481 )
Other (expense) income, net (3,021 ) 4,435   311   5,462  
Total other expenses (8,781 ) (533 ) (11,071 ) (5,019 )
Income before income taxes 100,099 91,552 202,633 173,312
Income tax expense (benefit) 34,033   32,548   (30,713 ) 61,698  
Net income $ 66,066   $ 59,004   $ 233,346   $ 111,614  
 
Basic net income per common share $ 0.58   $ 0.50   $ 2.05   $ 0.94  
Weighted average common shares outstanding 114,571   117,306   113,644   118,731  
 
Diluted net income per common share $ 0.56   $ 0.47   $ 1.97   $ 0.89  
Diluted weighted average common shares outstanding 117,794   124,612   118,336   125,878  
   

Copart, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
January 31, 2017 July 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 174,952 $ 155,849
Accounts receivable, net 340,438 266,270
Vehicle pooling costs and inventories 43,579 38,987
Income taxes receivable 83,524 18,751
Deferred income taxes 1,444
Prepaid expenses and other assets 16,759   18,005  
Total current assets 659,252 499,306
Property and equipment, net 882,256 816,791
Intangibles, net 8,938 11,761
Goodwill 256,867 260,198
Deferred income taxes 1,236 23,506
Other assets 32,692   38,258  
Total assets $ 1,841,241   $ 1,649,820  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 184,968 $ 192,379
Deferred revenue 5,938 4,628
Income taxes payable 7,624 5,625
Deferred income taxes 1,266
Current portion of revolving credit facility, and capital lease obligations 146,151   76,151  
Total current liabilities 345,947 278,783
Deferred income taxes 3,446 3,816
Income taxes payable 27,470 25,641
Long-term debt and capital lease obligations, net of discount 565,926 564,341
Other liabilities 2,749   2,783  
Total liabilities 945,538 875,364
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 11 11
Additional paid-in capital 429,957 392,445
Accumulated other comprehensive loss (119,549 ) (109,194 )
Retained earnings 585,284   491,194  
Total stockholders' equity 895,703   774,456  
Total liabilities and stockholders' equity $ 1,841,241   $ 1,649,820  
 

Copart, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Six Months Ended January 31,
2017   2016
Cash flows from operating activities:
Net income $ 233,346 $ 111,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost 30,146 23,294
Allowance for doubtful accounts 26 1,270
Equity in losses of unconsolidated affiliates 408 483
Stock-based payment compensation 10,605 10,800
Gain on sale of property and equipment (79 ) (106 )
Deferred income taxes 23,466 (106 )
Changes in operating assets and liabilities:
Accounts receivable (74,789 ) (68,683 )
Vehicle pooling costs and inventories (4,944 ) (6,449 )
Prepaid expenses and other current assets 894 (216 )
Other assets (801 ) 448
Accounts payable and accrued liabilities (4,599 ) 3,702
Deferred revenue 1,350 1,810
Income taxes receivable (64,757 ) (1,648 )
Income taxes payable 5,934 7,897
Other liabilities (678 ) (789 )
Net cash provided by operating activities 155,528 83,321
 
Cash flows from investing activities:
Purchases of property and equipment (92,412 ) (77,763 )
Investment in unconsolidated affiliate (1,050 )
Proceeds from sale of property and equipment 386 396
Purchases of marketable securities   (21,119 )
Net cash used in investing activities (93,076 ) (98,486 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options 20,381 944
Proceeds from the issuance of Employee Stock Purchase Plan shares 1,908 1,640
Repurchases of common stock (325,000 )
Payments for employee stock-based tax withholdings (134,638 )
Proceeds from the issuance of long-term debt, net of discount 68,000
Proceeds from revolving loan facility, net of repayments 72,000
Principal payments on long-term debt   (37,500 )
Net cash used in financing activities (40,349 ) (291,916 )
Effect of foreign currency translation (3,000 ) (7,515 )
Net increase (decrease) in cash and cash equivalents 19,103 (314,596 )
Cash and cash equivalents at beginning of period 155,849   456,012  
Cash and cash equivalents at end of period $ 174,952   $ 141,416  
Supplemental disclosure of cash flow information:
Interest paid $ 11,810   $ 11,294  
Income taxes paid, net of refunds $ 4,616   $ 55,413  
   

Additional Financial Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

 
Three Months Ended
January 31,
Six Months Ended
January 31,
2017   2016 2017   2016
GAAP net income $ 66,066 $ 59,004 $ 233,346 $ 111,614
Effect of foreign currency-related losses (gains), net of tax 2,720 (3,491 ) (127 ) (4,051 )
Effect of income tax benefit of ASU 2016-09 adoption, net of tax (1) (1,347 ) (41 ) (102,742 ) (238 )
Effect of payroll taxes on certain executive stock compensation, net of tax     3,307   48  
Non-GAAP net income $ 67,439   $ 55,472   $ 133,784   $ 107,373  
 
GAAP diluted net income per common share $ 0.56   $ 0.47   $ 1.97   $ 0.89  
Non-GAAP diluted net income per common share $ 0.58   $ 0.45   $ 1.14   $ 0.86  
 
GAAP diluted weighted average common shares outstanding 117,794 124,612 118,336 125,878
Effect on common equivalent shares from ASU 2016-09 adoption(1) (702 ) (1,704 ) (1,125 ) (1,638 )
Non-GAAP diluted weighted average commons shares outstanding 117,092   122,908   117,211   124,240  

(1) In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, all excess tax benefits and tax deficiencies related to exercises of stock options are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits are classified as an operating activity on the consolidated statements of cash flows. The Company early adopted ASU 2016-09 during the fourth quarter of fiscal 2016 on a modified retrospective basis. For a more complete discussion, please review the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on September 28, 2016.

Contacts

Copart, Inc.
Melissa Perry, 972-391-5090
Executive Support Manager, Office of the Chief Financial Officer
melissa.perry@copart.com

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