Copart Reports First Quarter Fiscal 2017 Financial Results

Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended October 31, 2016.

For the three months ended October 31, 2016, revenue, gross margin, and net income were $346.0 million, $145.3 million, and $167.3 million, respectively. These represent an increase in revenue of $57.2 million, or 19.8%; an increase in gross margin of $24.4 million, or 20.2%; and an increase in net income of $114.7 million, or 218.0%, respectively, from the same quarter last year. Fully diluted earnings per share for the three months were $1.41 compared to $0.41 last year, an increase of 243.9%.

Excluding the impact of foreign currency-related gains, 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 October 31, 2016 and 2015, were $0.57 and $0.41, 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 Tuesday, November 22, 2016, 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/copart112216. A replay of the call will be available through January 20, 2017 by calling (877) 919-4059. Use confirmation code # 16477400.

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, 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, 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 October 31,
2016   2015
Service revenues and vehicle sales:  
Service revenues $ 307,078 $ 250,967
Vehicle sales 38,913   37,871  
Total service revenues and vehicle sales 345,991 288,838
Operating expenses:
Yard operations 157,362 126,878
Cost of vehicle sales 33,087 32,068
Yard depreciation and amortization 9,448 8,345
Yard stock-based payment compensation 801   686  
Gross margin 145,293 120,861
General and administrative 30,924 26,711
General and administrative depreciation and amortization 5,261 3,176
General and administrative stock-based payment compensation 4,284   4,728  
Total operating expenses 241,167   202,592  
Operating income 104,824 86,246
Other (expense) income:
Interest expense, net (5,622 ) (5,513 )
Other income, net 3,332   1,027  
Total other expenses (2,290 ) (4,486 )
Income before income taxes 102,534 81,760
Income tax (benefit) expense (64,746 ) 29,150  
Net income $ 167,280   $ 52,610  
 
Basic net income per common share $ 1.48   $ 0.44  
Weighted average common shares outstanding 112,718   120,155  
 
Diluted net income per common share $ 1.41   $ 0.41  
Diluted weighted average common shares outstanding 118,879   127,144  
   

Copart, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)
 
October 31, 2016 July 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 168,421 $ 155,849
Accounts receivable, net 294,358 266,270
Vehicle pooling costs and inventories 40,202 38,987
Income taxes receivable 110,923 18,751
Deferred income taxes 711 1,444
Prepaid expenses and other assets 16,096   18,005  
Total current assets 630,711 499,306
Property and equipment, net 840,587 816,791
Intangibles, net 10,241 11,761
Goodwill 255,093 260,198
Deferred income taxes 1,912 23,506
Other assets 31,852   38,258  
Total assets $ 1,770,396   $ 1,649,820  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 175,969 $ 192,379
Deferred revenue 3,975 4,628
Income taxes payable 6,583 5,625
Current portion of long-term debt, revolving credit facility, and capital lease obligations 171,151   76,151  
Total current liabilities 357,678 278,783
Deferred income taxes 3,380 3,816
Income taxes payable 26,867 25,641
Long-term debt and capital lease obligations, net of discount 573,030 564,341
Other liabilities 2,034   2,783  
Total liabilities 962,989 875,364
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 11 11
Additional paid-in capital 416,125 392,445
Accumulated other comprehensive loss (127,969 ) (109,194 )
Retained earnings 519,240   491,194  
Total stockholders' equity 807,407   774,456  
Total liabilities and stockholders' equity $ 1,770,396   $ 1,649,820  
 

Copart, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
 
Three Months Ended October 31,
2016   2015
Cash flows from operating activities:
Net income $ 167,280 $ 52,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost 14,820 11,562
Allowance for doubtful accounts 22 1,032
Equity in losses of unconsolidated affiliates 349 158
Stock-based payment compensation 5,085 5,414
Loss (gain) on sale of property and equipment 38 (60 )
Deferred income taxes 22,088 (870 )
Changes in operating assets and liabilities:
Accounts receivable (29,472 ) (16,910 )
Vehicle pooling costs and inventories (1,783 ) (2,252 )
Prepaid expenses and other current assets 1,392 (1,115 )
Other assets (202 ) (1,036 )
Accounts payable and accrued liabilities (14,828 ) 77
Deferred revenue (602 ) (5 )
Income taxes receivable (92,172 ) 5,136
Income taxes payable 2,615 23,483
Other liabilities (337 ) (433 )
Net cash provided by operating activities 74,293 76,791
 
Cash flows from investing activities:
Purchases of property and equipment (38,209 ) (20,167 )
Investment in unconsolidated affiliate (1,050 )
Proceeds from sale of property and equipment 190 443
Purchases of marketable securities   (21,119 )
Net cash used in investing activities (39,069 ) (40,843 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options 13,977 368
Payments for employee stock-based tax withholdings (134,615 )
Proceeds from revolving loan facility, net of repayments 103,900
Principal payments on long-term debt   (18,750 )
Net cash used in financing activities (16,738 ) (18,382 )
Effect of foreign currency translation (5,914 ) (662 )
Net increase in cash and cash equivalents 12,572 16,904
Cash and cash equivalents at beginning of period 155,849   456,012  
Cash and cash equivalents at end of period $ 168,421   $ 472,916  
Supplemental disclosure of cash flow information:
Interest paid $ 4,333   $ 5,723  
Income taxes paid, net of refunds $ 2,677   $ 1,292  
 

Additional Financial Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)
 
Three Months Ended October 31,
  2016   2015
GAAP net income $ 167,280   $ 52,610
Effect of foreign currency-related gains, net of tax (2,847 ) (560 )
Effect of income tax benefit of ASU 2016-09 adoption, net of tax (1) (101,395 ) (197 )
Effect of payroll taxes on executive stock compensation, net of tax 3,307   48  
Non-GAAP net income $ 66,345   $ 51,901  
 
GAAP diluted net income per common share $ 1.41   $ 0.41  
Non-GAAP diluted net income per common share $ 0.57   $ 0.41  
 
GAAP diluted weighted average common shares outstanding 118,879 127,144
Effect on common equivalent shares from ASU 2016-09 adoption (1) (1,549 ) (1,572 )
Non-GAAP diluted weighted average commons shares outstanding 117,330   125,572  

(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.

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