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Copart Reports Third Quarter Fiscal 2019 Financial Results
[May 22, 2019]

Copart Reports Third Quarter Fiscal 2019 Financial Results


Copart, Inc. (NASDAQ: CPRT) today reported financial results for the quarter ended April 30, 2019.

For the three months ended April 30, 2019, revenue, gross profit, and net income were $553.1 million, $251.6 million, and $192.7 million, respectively. These represent an increase in revenue of $74.9 million, or 15.7%; an increase in gross profit of $32.5 million, or 14.8%; and an increase in net income of $65.4 million, or 51.3%, respectively, from the same period last year. Fully diluted earnings per share for the three months were $0.81 compared to $0.52 last year, an increase of 55.8%.

For the nine months ended April 30, 2019, revenue, gross profit, and net income were $1.5 billion, $655.7 million, and $438.2 million, respectively. These represent an increase in revenue of $142.9 million, or 10.5%; an increase in gross profit of $81.8 million, or 14.2%; and an increase in net income of $130.1 million, or 42.2%, respectively, from the same period last year. Fully diluted earnings per share for the nine months were $1.82 compared to $1.28 last year, an increase of 42.2%.

The operating results for the three and nine months ended April 30, 2018 were adversely affected by abnormal costs of $7.4 million and $79.7 million, respectively, incurred as a result of Hurricane Harvey. These costs included temporary storage facilities; abnormally high costs for subhaulers; increased labor costs due to overtime; travel and lodging due to the reassignment of employees to the affected region; and equipment lease expenses to handle the increased volume, as well as cost of vehicle sales. These costs, net of the associated revenues of $3.5 million and $66.9 million, respectively, generated pre-tax loss for the three months ended April 30, 2018 of $3.9 million and a pre-tax loss for the nine months ended April 30, 2018 of $12.8 million.

Excluding the impact of income taxes on the deemed repatriation of foreign earnings, net of deferred tax changes, discrete income tax items, disposals of non-operating assets, foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09, non-GAAP fully diluted earnings per share for the three months ended April 30, 2019 and 2018, were $0.66 and $0.52, respectively. Non-GAAP fully diluted earnings per share for the nine months ended April 30, 2019 and 2018, were $1.64 and $1.31, 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 23, 2019, at 9 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/copart052319. A replay of the call will be available through July 22, 2019 by calling (877) 919-4059. Use confirmation code # 77347431.

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 also sells vehicles sourced from individual owners. With operations at 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), Brazil (Copart.com.br), the Republic of Ireland (Copart.ie), Germany (Copart.de), Finland (avk.fi), the United Arab Emirates, Oman and Bahrain (Copartmea.com), 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 income taxes on the deemed repatriation of foreign earnings, net of deferred tax changes, discrete income tax items, disposals of non-operating assets, foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09. 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 income taxes on the deemed repatriation of foreign earnings, net of deferred tax changes, discrete income tax items, disposals of non-operating assets, foreign currency-related gains and losses, certain income tax benefits and payroll taxes related to accounting for stock option exercises, and the effect on common equivalent shares from ASU 2016-09.

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.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

   
Three Months Ended
April 30,
Nine Months Ended
April 30,
2019   2018 2019   2018
Service revenues and vehicle sales:
Service revenues $ 473,682 $ 410,762 $ 1,285,295 $ 1,186,841
Vehicle sales 79,434   67,436   214,087   169,631  
Total service revenues and vehicle sales 553,116 478,198 1,499,382 1,356,472
Operating expenses:
Yard operations 213,804 189,346 602,664 599,854
Cost of vehicle sales 70,984 57,538 189,952 146,148
Yard depreciation and amortization 15,398 11,188 47,422 33,617
Yard stock-based compensation 1,351   1,058   3,621   2,912  
Gross profit 251,579 219,068 655,723 573,941
General and administrative 34,072 34,181 102,113 93,377
General and administrative depreciation and amortization 5,714 5,385 15,958 16,729
General and administrative stock-based compensation 4,299   4,883   13,979   14,327  
Total operating expenses 345,622   303,579   975,709   906,964  
Operating income 207,494 174,619 523,673 449,508
Other (expense) income:
Interest expense, net (5,084 ) (4,134 ) (13,330 ) (15,093 )
Other income (expense), net 1,719   731   7,538   (4,633 )
Total other expense (3,365 ) (3,403 ) (5,792 ) (19,726 )
Income before income taxes 204,129 171,216 517,881 429,782
Income tax expense 11,388   43,811   79,684   121,516  
Net income 192,741 127,405 438,197 308,266
Net income attributable to noncontrolling interest -   57   -   147  
Net income attributable to Copart, Inc. $ 192,741   $ 127,348   $ 438,197   $ 308,119  
 
Basic net income per common share $ 0.85   $ 0.55   $ 1.90   $ 1.33  
Weighted average common shares outstanding 227,984   232,010   230,922   231,387  
 
Diluted net income per common share $ 0.81   $ 0.52   $ 1.82   $ 1.28  
Diluted weighted average common shares outstanding 237,892   242,960   241,158   241,030  

Copart, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

   
April 30, 2019 July 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 102,826 $ 274,520
Accounts receivable, net 376,564 351,601
Vehicle pooling costs 75,289 34,284
Inventories 22,309 16,734
Income taxes receivable 18,902 15,312
Prepaid expenses and other assets 17,695   16,665  
Total current assets 613,585 709,116
Property and equipment, net 1,340,692 1,163,425
Intangibles, net 57,627 64,892
Goodwill 337,725 337,235
Deferred income taxes 333 470
Other assets 41,801   32,560  
Total assets $ 2,391,763   $ 2,307,698  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 279,779 $ 270,944
Deferred revenue 7,988 4,488
Income taxes payable 1,583 673
Current portion of revolving loan facility and capital lease obligations 7,556   1,151  
Total current liabilities 296,906 277,256
Deferred income taxes 40,165 19,733
Income taxes payable 33,634 27,277
Long-term debt, revolving loan facility and capital lease obligations, net of discount 398,835 398,747
Other liabilities 3,371   3,586  
Total liabilities 772,911 726,599
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 23 23
Additional paid-in capital 545,895 526,858
Accumulated other comprehensive loss (113,191 ) (107,928 )
Retained earnings 1,186,125   1,162,146  
Total stockholders' equity 1,618,852   1,581,099  
Total liabilities and stockholders' equity $ 2,391,763   $ 2,307,698  

Copart, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Nine Months Ended April 30,
2019   2018
Cash flows from operating activities:
Net income $ 438,197 $ 308,266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost 63,709 50,678
Allowance for doubtful accounts 341 1,096
Equity in (earnings) losses of unconsolidated affiliates (1,852 ) 679
Stock-based compensation 17,600 17,239
(Gain) loss on sale of property and equipment (3,753 ) 4,044
Deferred income taxes 14,583 (17 )
Changes in operating assets and liabilities:
Accounts receivable (69,920 ) (43,361 )
Vehicle pooling costs (15,026 ) (1,590 )
Inventories (5,721 ) (6,700 )
Prepaid expenses and other current assets (1,436 ) (371 )
Other assets (7,169 ) (413 )
Accounts payable and accrued liabilities 17,747 27,981
Deferred revenue 3,512 849
Income taxes receivable (3,578 ) 5,043
Income taxes payable 7,304 14,025
Other liabilities (1,042 ) (251 )
Net cash provided by operating activities 453,496 377,197
 
Cash flows from investing activities:
Purchases of property and equipment, including acquisitions (260,081 ) (188,482 )
Proceeds from sale of property and equipment 17,928   3,368  
Net cash used in investing activities (242,153 ) (185,114 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options 17,261 23,816
Proceeds from the issuance of Employee Stock Purchase Plan shares 3,501 2,723
Repurchases of common stock (364,997 ) -
Payments for employee stock-based tax withholdings (45,594 ) (3 )
Net proceeds (repayments) on revolving loan facility 7,000 (231,000 )
Distributions to noncontrolling interest -   (55 )
Net cash used in financing activities (382,829 ) (204,519 )
Effect of foreign currency translation (208 ) 6,611  
Net decrease in cash and cash equivalents (171,694 ) (5,825 )
Cash and cash equivalents at beginning of period 274,520   210,100  
Cash and cash equivalents at end of period $ 102,826   $ 204,275  
Supplemental disclosure of cash flow information:
Interest paid $ 14,700   $ 15,406  
Income taxes paid, net of refunds $ 60,926   $ 102,762  

Copart, Inc.

Additional Financial Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

   
Three Months Ended
April 30,
Nine Months Ended
April 30,
2019   2018 2019   2018
GAAP net income attributable to Copart, Inc. $ 192,741 $ 127,348 $ 438,197 $ 308,119
Effect of deemed repatriation of foreign earnings, net of deferred tax changes - 1,000 - 11,000
Effect of discrete income tax items (10,170 ) - (10,170 ) -
Effect of disposal of non-operating assets, net of tax - - (1,598 ) 2,994
Effect of foreign currency-related losses (gains), net of tax 94 (261 ) (304 ) 777
Effect of recognizing tax benefit on exercise of employee stock options (29,074 ) (3,085 ) (34,096 ) (9,448 )
Effect of payroll taxes on certain executive stock compensation, net of tax 1,295   -   1,295   -  
Non-GAAP net income attributable to Copart, Inc. $ 154,886   $ 125,002   $ 393,324   $ 313,442  
 
GAAP net income per diluted common share $ 0.81   $ 0.52   $ 1.82   $ 1.28  
Non-GAAP net income per diluted common share $ 0.66   $ 0.52   $ 1.64   $ 1.31  
 
GAAP diluted weighted average common shares outstanding 237,892 242,960 241,158 241,030
Effect on common equivalent shares from ASU 2016-09 (1,731 ) (3,090 ) (1,949 ) (1,030 )
Non-GAAP diluted weighted average common shares outstanding 236,161   239,870   239,209   240,000  


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