Copart Reports Third Quarter Fiscal 2017 Financial Results

DALLAS, Texas--()--Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended April 30, 2017.

For the three months ended April 30, 2017, revenue, gross margin, and net income were $373.9 million, $172.5 million, and $90.5 million, respectively. These represent an increase in revenue of $26.6 million, or 7.7%; an increase in gross margin of $14.9 million, or 9.4%; and an increase in net income of $15.9 million, or 21.3%, respectively, from the same quarter last year. Fully diluted earnings per share for the three months were $0.38 compared to $0.32 last year, an increase of 18.8%.

For the nine months ended April 30, 2017, revenue, gross margin, and net income were $1.1 billion, $464.6 million, and $323.9 million, respectively. These represent an increase in revenue of $133.6 million, or 14.3%; an increase in gross margin of $61.4 million, or 15.2%; and an increase in net income of $137.7 million, or 73.9%, respectively, from the same period last year. Fully diluted earnings per share for the nine months were $1.37 compared to $0.75 last year, an increase of 82.7%.

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 April 30, 2017 and 2016, were $0.37 and $0.32, respectively. Non-GAAP fully diluted earnings per share for the nine months ended April 30, 2017 and 2016, were $0.94 and $0.74, 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 Thursday, May 25, 2017, at 11 a.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/copart052517. A replay of the call will be available through July 24, 2017 by calling (877) 919-4059. Use confirmation code # 76132729.

About Copart

Copart, Inc., founded in 1982, is a global leader in online vehicle auctions. Copart's innovative technology and online auction platform links sellers to more than 750,000 Members in over 170 countries. Copart offers services to process and sell salvage and clean title vehicles to dealers, dismantlers, rebuilders, exporters, and in some cases, to end users. Copart sells vehicles on behalf of insurance companies, banks, finance companies, charities, fleet operators, dealers and vehicles sourced from individual owners. With operations in over 200 locations in 11 countries, Copart has more than 125,000 vehicles available online every day. Copart currently operates in the United States (Copart.com), Canada (Copart.ca), the United Kingdom (Copart.co.uk), the Republic of Ireland (Copart.ie), Brazil (Copart.com.br), Germany (Copart.de), the United Arab Emirates, Oman and Bahrain (Copartmea.com), India (Copart.in), and Spain (Copart.es). For more information, or to become a Member, visit Copart.com/Register.

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 exclude 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
April 30,

Nine Months Ended
April 30,
2017     2016 2017     2016
Service revenues and vehicle sales:
Service revenues $ 332,346 $ 303,507 $ 949,457 $ 814,891
Vehicle sales 41,516   43,739   119,928   120,899  
Total service revenues and vehicle sales 373,862 347,246 1,069,385 935,790
Operating expenses:
Yard operations 155,793 142,802 471,711 401,721
Cost of vehicle sales 34,785 37,744 101,558 103,939
Yard depreciation and amortization 9,951 8,339 29,116 24,932
Yard stock-based payment compensation 828   714   2,437   2,076  
Gross margin 172,505 157,647 464,563 403,122
General and administrative 28,280 27,360 86,879 78,447
General and administrative depreciation and amortization 3,257 4,019 14,016 10,638
General and administrative stock-based payment compensation 4,180   4,320   13,176   13,758  
Total operating expenses 237,074   225,298   718,893   635,511  
Operating income 136,788 121,948 350,492 300,279
Other (expense) income:
Interest expense, net (5,506 ) (5,419 ) (16,888 ) (15,900 )
Other (expense) income, net (194 ) 39   117   5,501  
Total other expenses (5,700 ) (5,380 ) (16,771 ) (10,399 )
Income before income taxes 131,088 116,568 333,721 289,880
Income tax expense 40,542   41,944   9,829   103,642  
Net income $ 90,546   $ 74,624   $ 323,892   $ 186,238  
 
Basic net income per common share $ 0.39   $ 0.34   $ 1.42   $ 0.80  
Weighted average common shares outstanding 229,920   221,088   228,146   234,142  
 
Diluted net income per common share $ 0.38   $ 0.32   $ 1.37   $ 0.75  
Diluted weighted average common shares outstanding 237,135   236,412   236,808   248,780  
 
         
Copart, Inc.
Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 
April 30, 2017 July 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 189,621 $ 155,849
Accounts receivable, net 302,071 266,270
Vehicle pooling costs and inventories 41,061 38,987
Income taxes receivable 42,663 18,751
Deferred income taxes 191 1,444
Prepaid expenses and other assets 18,002   18,005  
Total current assets 593,609 499,306
Property and equipment, net 913,303 816,791
Intangibles, net 7,624 11,761
Goodwill 258,634 260,198
Deferred income taxes 2,978 23,506
Other assets 35,538   38,258  
Total assets $ 1,811,686   $ 1,649,820  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 192,769 $ 192,379
Deferred revenue 6,147 4,628
Income taxes payable 6,421 5,625
Current portion of revolving credit facility and capital lease obligations 16,151   76,151  
Total current liabilities 221,488 278,783
Deferred income taxes 3,773 3,816
Income taxes payable 26,772 25,641
Long-term debt, revolving loan facility and capital lease obligations, net of discount 550,755 564,341
Other liabilities 2,569   2,783  
Total liabilities 805,357 875,364
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 22 22
Additional paid-in capital 444,745 392,434
Accumulated other comprehensive loss (114,268 ) (109,194 )
Retained earnings 675,830   491,194  
Total stockholders' equity 1,006,329   774,456  
Total liabilities and stockholders' equity $ 1,811,686   $ 1,649,820  
 
     
Copart, Inc.
Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Nine Months Ended April 30,
2017     2016
Cash flows from operating activities:
Net income $ 323,892 $ 186,238
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost 43,951 35,900
Allowance for doubtful accounts (542 ) 1,227
Equity in losses of unconsolidated affiliates 584 768
Stock-based payment compensation 15,613 15,834
Gain on sale of property and equipment (125 ) (188 )
Deferred income taxes 21,791 (325 )
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (35,668 ) (49,594 )
Vehicle pooling costs and inventories (2,262 ) (8,121 )
Prepaid expenses and other current assets 1,440 293
Other assets (1,185 ) 3,206
Accounts payable and accrued liabilities 1,140 5,024
Deferred revenue 1,532 2,038
Income taxes receivable (23,909 ) 3,326
Income taxes payable 2,619 13,858
Other liabilities (1,044 ) (1,138 )
Net cash provided by operating activities 347,827 208,346
 
Cash flows from investing activities:
Purchases of property and equipment, including acquisitions (134,710 ) (143,833 )
Investment in unconsolidated affiliate (3,566 )
Proceeds from sale of property and equipment 554 485
Purchases of marketable securities (21,119 )
Proceeds from sale of marketable securities   21,498  
Net cash used in investing activities (137,722 ) (142,969 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options 30,171 4,989
Proceeds from the issuance of Employee Stock Purchase Plan shares 1,908 1,640
Repurchases of common stock (442,855 )
Payments for employee stock-based tax withholdings (134,638 )
Proceeds from the issuance of long-term debt, net of discount 93,468
Repayments on revolving loan facility, net of proceeds (73,000 )
Debt offering costs (165 )
Principal payments on long-term debt   (37,500 )
Net cash used in financing activities (175,559 ) (380,423 )
Effect of foreign currency translation (774 ) (3,313 )
Net increase (decrease) in cash and cash equivalents 33,772 (318,359 )
Cash and cash equivalents at beginning of period 155,849   456,012  
Cash and cash equivalents at end of period $ 189,621   $ 137,653  
Supplemental disclosure of cash flow information:
Interest paid $ 17,681   $ 16,996  
Income taxes paid, net of refunds $ 9,452   $ 86,243  
 
         
Additional Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended
April 30,

Nine Months Ended
April 30,
2017     2016 2017     2016
GAAP net income $ 90,546 $ 74,624 $ 323,892 $ 186,238
Effect of foreign currency-related (gains) losses, net of tax (167 ) 467 (295 ) (3,584 )
Effect of income tax benefit of ASU 2016-09 adoption, net of tax (1) (4,007 ) (608 ) (106,749 ) (847 )
Effect of payroll taxes on certain executive stock compensation, net of tax     3,307   48  
Non-GAAP net income $ 86,372   $ 74,483   $ 220,155   $ 181,855  
 
GAAP diluted net income per common share $ 0.38   $ 0.32   $ 1.37   $ 0.75  
Non-GAAP diluted net income per common share $ 0.37   $ 0.32   $ 0.94   $ 0.74  
 
GAAP diluted weighted average common shares outstanding 237,135 236,412 236,808 248,780
Effect on common equivalent shares from ASU 2016-09 adoption(1) (1,692 ) (1,818 ) (2,065 ) (1,698 )
Non-GAAP diluted weighted average commons shares outstanding 235,443   234,594   234,743   247,082  
 
(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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