Copart Reports Second Quarter Fiscal 2019 Financial Results

DALLAS–(BUSINESS WIRE)–Copart, Inc. (NASDAQ: CPRT) today reported financial results for the
quarter ended January 31, 2019.

For the three months ended January 31, 2019, revenue, gross profit, and
net income were $484.9 million, $208.2 million, and $131.4 million,
respectively. These represent an increase in revenue of $25.8 million,
or 5.6%; an increase in gross profit of $16.6 million, or 8.7%; and an
increase in net income of $28.1 million, or 27.2%, respectively, from
the same period last year. Fully diluted earnings per share for the
three months were $0.55 compared to $0.43 last year, an increase of
27.9%.

For the six months ended January 31, 2019, revenue, gross profit, and
net income were $946.3 million, $404.1 million, and $245.5 million,
respectively. These represent an increase in revenue of $68.0 million,
or 7.7%; an increase in gross profit of $49.3 million, or 13.9%; and an
increase in net income of $64.7 million, or 35.8%, respectively, from
the same period last year. Fully diluted earnings per share for the six
months were $1.01 compared to $0.75 last year, an increase of 34.7%.

The operating results for the three and six months ended January 31,
2018 were adversely affected by abnormal costs of $36.5 million and
$72.3 million, respectively, incurred as a result of Hurricane Harvey.
These costs included temporary storage facilities; premiums for
subhaulers; labor costs incurred from 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 $44.8
million and $63.4 million, respectively, generated pre-tax income for
the three months ended January 31, 2018 of $8.3 million and a pre-tax
loss for the six months ended January 31, 2018 of $8.9 million.

Excluding the impact of income taxes on the deemed repatriation of
foreign earnings, net of deferred tax changes, disposals of
non-operating assets, foreign currency-related gains and losses, and
certain income tax benefits related to accounting for stock option
exercises, non-GAAP fully diluted earnings per share for the three
months ended January 31, 2019 and 2018, were $0.52 and $0.47,
respectively. Non-GAAP fully diluted earnings per share for the six
months ended January 31, 2019 and 2018, were $0.99 and $0.79,
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, February 21, 2019, 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/copart022119.
A replay of the call will be available through April 22, 2019 by calling (877)
919-4059
. Use confirmation code # 33529287.

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, disposals of non-operating assets, foreign
currency-related gains and losses, and certain income tax benefits
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 income taxes on the deemed repatriation of foreign
earnings, net of deferred tax changes, disposals of non-operating
assets, foreign currency-related gains and losses, and certain income
tax benefits 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.
 
Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

   

Three Months Ended
January 31,

Six Months Ended
January 31,

2019   2018 2019   2018
Service revenues and vehicle sales:
Service revenues $ 416,807 $ 401,954 $ 811,613 $ 776,079
Vehicle sales 68,091   57,152   134,653   102,195  
Total service revenues and vehicle sales 484,898 459,106 946,266 878,274
Operating expenses:
Yard operations 199,383 204,289 388,860 410,508
Cost of vehicle sales 61,212 50,313 118,968 88,610
Yard depreciation and amortization 14,839 11,893 32,024 22,429
Yard stock-based compensation 1,238   1,002   2,270   1,854  
Gross profit 208,226 191,609 404,144 354,873
General and administrative 33,236 29,694 68,041 59,196
General and administrative depreciation and amortization 5,560 5,978 10,244 11,344
General and administrative stock-based compensation 4,691   4,990   9,680   9,444  
Total operating expenses 320,159   308,159   630,087   603,385  
Operating income 164,739 150,947 316,179 274,889
Other (expense) income:
Interest expense, net (4,555 ) (5,561 ) (8,246 ) (10,959 )
Other income (expense), net 4,782   (948 ) 5,819   (5,364 )
Total other income (expense) 227   (6,509 ) (2,427 ) (16,323 )
Income before income taxes 164,966 144,438 313,752 258,566
Income tax expense 33,593   41,137   68,296   77,705  
Net income 131,373 103,301 245,456 180,861
Net income attributable to noncontrolling interest   45     90  
Net income attributable to Copart, Inc. $ 131,373   $ 103,256   $ 245,456   $ 180,771  
 
Basic net income per common share $ 0.57   $ 0.45   $ 1.06   $ 0.78  
Weighted average common shares outstanding 230,798   231,478   232,343   231,086  
 
Diluted net income per common share $ 0.55   $ 0.43   $ 1.01   $ 0.75  
Diluted weighted average common shares outstanding 240,660   241,360   242,743   240,076  
 
Copart, Inc.
 
Consolidated Balance Sheets
(In thousands)
(Unaudited)
   
January 31, 2019

   July 31, 2018   

ASSETS
Current assets:
Cash and cash equivalents $ 108,174 $ 274,520
Accounts receivable, net 393,561 351,601
Vehicle pooling costs and inventories 108,925 51,018
Income taxes receivable 25 15,312
Prepaid expenses and other assets 17,781   16,665  
Total current assets 628,466 709,116
Property and equipment, net 1,237,117 1,163,425
Intangibles, net 60,265 64,892
Goodwill 338,045 337,235
Deferred income taxes 348 470
Other assets 32,664   32,560  
Total assets $ 2,296,905   $ 2,307,698  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 266,126 $ 270,944
Deferred revenue 7,344 4,488
Income taxes payable 4,441 673

Current portion of revolving loan facility and capital lease
obligations

94,122   1,151  
Total current liabilities 372,033 277,256
Deferred income taxes 32,314 19,733
Income taxes payable 30,390 27,277
Long-term debt, revolving loan facility and capital lease
obligations, net of discount
398,740 398,747
Other liabilities 3,475   3,586  
Total liabilities 836,952 726,599
Commitments and contingencies
Stockholders’ equity:
Preferred stock
Common stock 23 23
Additional paid-in capital 530,102 526,858
Accumulated other comprehensive loss (107,223 ) (107,928 )
Retained earnings 1,037,051 1,162,146
Total stockholders’ equity 1,459,953   1,581,099  
Total liabilities and stockholders’ equity $ 2,296,905   $ 2,307,698  
 
Copart, Inc.
 
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended January 31,
2019   2018
Cash flows from operating activities:
Net income $ 245,456 $ 180,861
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization, including debt cost 42,487 33,994
Allowance for doubtful accounts 96 1,013
Equity in (earnings) losses of unconsolidated affiliates (514 ) 251
Stock-based compensation 11,950 11,298
(Gain) loss on sale of property and equipment (3,890 ) 4,639
Deferred income taxes 6,632 2,666
Changes in operating assets and liabilities:
Accounts receivable (86,125 ) (86,147 )
Vehicle pooling costs and inventories (31,858 ) (9,073 )
Prepaid expenses and other current assets (1,220 ) (1,437 )
Other assets 495 (4,320 )
Accounts payable and accrued liabilities 7,338 38,919
Deferred revenue 2,843 1,705
Income taxes receivable 15,286 2,575
Income taxes payable 6,890 9,365
Other liabilities (662 ) 84  
Net cash provided by operating activities 215,204 186,393
 
Cash flows from investing activities:
Purchases of property and equipment (136,727 ) (110,782 )
Proceeds from sale of property and equipment 17,488   2,812  
Net cash used in investing activities (119,239 ) (107,970 )
 
Cash flows from financing activities:
Proceeds from the exercise of stock options 5,220 16,603
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 (27 ) (3 )
Net proceeds (repayments) on revolving loan facility 93,300 (120,300 )
Distributions to noncontrolling interest   (55 )
Net cash used in financing activities (263,003 ) (101,032 )
Effect of foreign currency translation 692   7,809  
Net decrease in cash and cash equivalents (166,346 ) (14,800 )
Cash and cash equivalents at beginning of period 274,520   210,100  
Cash and cash equivalents at end of period $ 108,174   $ 195,300  
Supplemental disclosure of cash flow information:
Interest paid $ 9,018   $ 11,010  
Income taxes paid, net of refunds $ 39,327   $ 64,104  
 
Copart, Inc.
 
Additional Financial Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
   

Three Months Ended
January 31,

Six Months Ended
January 31,

2019   2018 2019   2018
GAAP net income attributable to Copart, Inc. $ 131,373 $ 103,256 $ 245,456 $ 180,771
Effect of deemed repatriation of foreign earnings, net of deferred
tax changes
10,000 10,000
Effect of disposal of non-operating assets, net of tax (1,598 ) (1,598 ) 2,994
Effect of foreign currency-related (gains) losses, net of tax (56 ) 768 (399 ) 1,076
Effect of recognizing tax benefit on exercise of employee stock
options
(4,847 ) (2,596 ) (5,022 ) (6,363 )
Non-GAAP net income attributable to Copart, Inc. $ 124,872   $ 111,428   $ 238,437   $ 188,478  
 
GAAP diluted net income per common share $ 0.55   $ 0.43   $ 1.01   $ 0.75  
Non-GAAP diluted net income per common share $ 0.52   $ 0.47   $ 0.99   $ 0.79  
 
GAAP diluted weighted average common shares outstanding 240,660 241,360 242,743 240,076
Effect on common equivalent shares from ASU 2016-09 (1,675 ) (2,703 ) (2,058 ) (1,352 )
Non-GAAP diluted weighted average common shares outstanding 238,985   238,657   240,685   238,724  
 

Contacts

Melissa Hunter, Executive Support Manager, Office of the Chief Financial
Officer
972-391-5090 or [email protected]

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