UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended OctoberJanuary 31, 20002001
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
____________
Commission file number: 0-23255
COPART, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2867490
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5500 E. SECOND STREET, BENICIA, CA 94510
(Address of principal executive offices with zip code)
Registrant's telephone number, including area code: (707) 748-5000
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
193491934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -------- ---
Number of shares of Common Stock outstanding as of November 29, 2000:
54,575,594March 13, 2001: 55,078,106
COPART, INC. AND SUBSIDIARIES
INDEX TO THE QUARTERLY REPORT
OCTOBERJANUARY 31, 20002001
DESCRIPTION PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL INFORMATIONSTATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to the Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview 7
Acquisitions and New Openings 8
Results of Operations Revenues 8
Operating Costs and Expenses 9
Operating Income, Other Income
and Income Taxes 9
Liquidity and Capital Resources 911
Factors Affecting Future Results 1011
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 1315
Signatures 1415
2
ITEM 1--FINANCIAL INFORMATION
Copart, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
OctoberJanuary 31, July 31,
2001 2000
2000----------------- --------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,676,8002,521,600 $ 12,164,900
Accounts receivable, net 55,621,40068,507,800 52,509,600
Vehicle pooling costs 16,042,10019,731,300 15,271,300
Deferred income taxes 1,708,200 1,708,200
Income tax receivable --- 3,317,200
Prepaid expenses and other assets 10,125,80011,484,500 6,443,300
------------------------------- ---------------
Total current assets 99,174,300103,953,400 91,414,500
Property and equipment, net 88,433,30098,436,900 80,514,200
Intangibles and other assets, net 89,431,90090,306,800 90,395,600
------------------------------- ---------------
Total assets $277,039,500 $262,324,300
===============$ 292,697,100 $ 262,324,300
================= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 7,895,0007,810,200 $ 7,842,300
Accounts payable and accrued liabilities 24,249,00024,633,200 19,984,500
Deferred revenue 8,200,2009,988,300 7,688,100
Income taxes payable 2,686,300 -4,336,600 --
Other current liabilities 193,600194,700 1,857,300
--------------- ------------------------------- --------------
Total current liabilities 43,224,10046,963,000 37,372,200
Deferred income taxes 2,834,300 2,834,300
Long-term debt, less current portion 638,400563,300 712,200
Other liabilities 1,489,2001,469,400 1,515,200
------------------------------- ---------------
Total liabilities 48,186,00051,830,000 42,433,900
------------------------------- ---------------
Shareholders' equity:
Common stock, no par value - 120,000,000 shares authorized;
54,562,09455,024,439 and 54,553,094 shares issued and outstanding at
OctoberJanuary 31, 20002001 and July 31, 2000, respectively 121,558,900124,223,300 121,515,000
Retained earnings 107,294,600116,643,800 98,375,400
------------------------------- ---------------
Total shareholders' equity 228,853,500240,867,100 219,890,400
------------------------------- ---------------
Commitments and contingenciescontingencies:
Total liabilities and shareholders' equity $277,039,500 $262,324,300$ 292,697,100 $ 262,324,300
================ ===============================
See accompanying notes to consolidated financial statements.
3
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)2/10/2000
Copart, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three months ended OctoberJanuary 31, ---------------------------------Six months ended January 31,
---------------------------------- -------------------------------------
2001 2000 1999
----------- ---------2001 2000
--------------- --------------- ---------------- ---------------
Revenues $ 57,139,40056,638,200 $ 40,507,600
------------- -------------44,406,400 $ 113,777,600 $ 84,914,000
--------------- --------------- ---------------- ---------------
Operating costs and expenses:
Yard and fleet 35,356,200 24,636,70034,123,200 27,361,800 69,479,400 51,998,600
General and administrative 4,466,100 3,305,5004,234,100 4,003,200 8,700,200 7,308,700
Depreciation and amortization 3,370,100 2,753,000
------------- -------------3,459,900 2,738,100 6,830,000 5,491,100
--------------- -------------- ----------------- ---------------
Total operating expenses 43,192,400 30,695,200
------------- -------------41,817,200 34,103,100 85,009,600 64,798,400
--------------- -------------- ----------------- ---------------
Operating income 13,947,000 9,812,400
------------- -------------14,821,000 10,303,300 28,768,000 20,115,600
--------------- -------------- ----------------- ---------------
Other income (expense):
Interest expense (135,900) (140,100)(150,900) (138,000) (286,800) (278,100)
Interest income 350,800 407,900462,100 446,400 812,900 854,200
Other income 461,100 184,200
------------- -------------321,000 154,900 782,100 339,100
--------------- -------------- ---------------- ---------------
Total other income 676,000 452,000
------------- -------------632,200 463,300 1,308,200 915,200
--------------- -------------- ---------------- ---------------
Income before income taxes 14,623,000 10,264,40015,453,200 10,766,600 30,076,200 21,030,800
Income taxes 5,703,800 3,951,800
------------- -------------6,104,000 4,148,100 11,807,800 8,099,900
--------------- -------------- ---------------- ----------------
Net income $ 8,919,2009,349,200 $ 6,312,600
============= =============6,618,500 $ 18,268,400 $ 12,930,900
=============== ============== ================ ================
Basic net income per share $ .16.17 $ .12 ============= =============$ .33 $ .24
=============== ============== ================ ================
Weighted average shares
outstanding 54,555,000 53,696,000
============= =============54,713,300 53,728,500 54,634,200 53,712,200
=============== ============== ================ ================
Diluted net income per share $ .16.17 $ .11
============= =============.12 $ .32 $ .23
=============== ============== ================ ================
Weighted average shares and dilutive
potential common shares outstanding 56,453,200 55,889,200
============= =============56,427,000 56,245,200 56,258,100 56,081,000
=============== ============== ================ ================
4
See accoompanyingaccompanying notes to consolidated financial statements.
4
COPART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
ThreeCopart, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended OctoberJanuary 31,
---------------------------------------------------------------------
2001 2000
1999
------------ ------------------------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,919,20018,268,400 $ 6,312,60012,930,900
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,370,100 2,753,0006,830,000 5,491,100
Deferred rent (26,000) (43,900)(45,800) (87,900)
Gain on sale of assets (186,200) (39,200)(272,100) (94,600)
Changes in operating assets and liabilities:
Accounts receivable (3,111,800) (4,320,900)(15,726,700) (12,917,400)
Vehicle pooling costs (770,800) (1,065,000)(4,281,900) (3,318,000)
Prepaid expenses and other current assets (3,682,500) (887,500)(5,041,200) (2,093,700)
Accounts payable and accrued liabilities 2,600,700 1,690,9002,986,100 3,667,200
Deferred revenue 512,100 584,9002,300,200 1,616,400
Income taxes 6,003,600 2,341,800
------------ ------------8,340,400 352,700
---------------- ----------------
Net cash provided by operating activities 13,628,400 7,326,700
------------ ------------
Cash flows from investing activities:13,357,400 5,546,700
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (10,619,600) (11,311,200)(23,266,800) (17,550,900)
Proceeds from sale of property and equipment 480,300 82,800928,400 159,700
Purchase of net current assets in connection with acquisitions (449,700) (814,700)
Purchase of property and equipment
in connection with acquisition (246,600) (531,500)
Purchase of intangible assets in connection with acquisitions (1,656,800) (8,871,000)
Other intangible asset additions - (3,000)
------------ ------------(150,000) --
---------------- ----------------
Net cash used in investing activities (10,139,300) (11,231,400)
------------ ------------
Cash flows from financing activities:(24,841,500) (27,608,400)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and warrants 43,900 30,3001,382,200 141,000
Proceeds from the issuance of
Employee Stock Purchase Plan shares 639,600 406,900
Principal payments on notes payable (21,100) (138,300)
------------ ------------(181,000) (195,200)
---------------- ----------------
Net cash provided by (used in) financing activities 22,800 (108,000)
------------ ------------1,840,800 352,700
---------------- ----------------
Net increase (decrease)decrease in cash and cash equivalents 3,511,900 (4,012,700)(9,643,300) (21,709,000)
Cash and cash equivalents at beginning of period 12,164,900 37,047,800
------------ ---------------------------- ----------------
Cash and cash equivalents at end of period $ 15,676,8002,521,600 $ 33,035,100
============ ============
Supplemental disclosure of cash flow information15,338,800
================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 135,900286,800 $ 140,100
============ ============278,100
================ ================
Income taxes paid $ 299,7004,144,900 $ 1,628,800
============ ============7,712,000
================ ================
5
See accompanying notes to consolidated financial statements.
5
COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBERJANUARY 31, 20002001
(UNAUDITED)
NOTE 1 - General:
In the opinion of the management of Copart, Inc. (the "Company" or
"Copart"), the accompanying unaudited consolidated financial statements contain
all adjustments, consisting only of normal, recurring adjustments, necessary to
present fairly the financial information included therein. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 2000 filed with the Securities and Exchange
Commission. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
NOTE 2 - Net Income Per Share:
There were no adjustments to net income in calculating diluted net income
per share. The table below reconciles basic weighted shares outstanding to
diluted weighted average shares outstanding:
Three Months Ending OctoberTHREE MONTHS ENDED JANUARY 31, -------------------------------SIX MONTHS ENDED JANUARY 31,
------------------------------ ----------------------------
2001 2000 1999
---- ----2001 2000
------------- ------------ -------------- -------------
Basic weighted shares outstanding 54,555,000 53,696,00054,713,300 53,728,500 54,634,200 53,712,200
Stock options and warrants outstanding 1,898,200 2,193,2001,713,700 2,516,700 1,623,900 2,368,800
----------- ----------- ----------- -----------
Diluted weighted average shares outstanding 56,453,200 55,889,200
=========== ===========56,427,000 56,245,200 56,258,100 56,081,000
========== ========== ========== ==========
NOTE 3 - Recently Adopted Accounting Pronouncements
In fiscal 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133") (as amended by SFAS Nos. 137 and 138) and in fiscal 2000, issued
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation - An Interpretation of Accounting Principles Board Opinion
("APB") No. 25." The Company adopted the above standards on August 1, 2000. The
adoption of these standards did not have a material impact on the Company's
results of operations, financial position or cash flows.
NOTE 4 - Segment ReportingReporting:
All of the Company's facilities are aggregated into one reportable segment
given the similarities of economic characteristics between the operations
represented by the facilities and the common nature of the products, customers
and methods of revenue generation.
NOTE 4 - Credit Agreement
On February 23, 2001, the Company executed a new credit facility with its
banking syndicate. The new facility provided by Wells Fargo Bank, Fleet National
Bank and U.S. Bank National Association consists of an unsecured revolving line
of credit in the amount of $100 million that matures in 2006. The new facility
replaces the Company's $30 million facility with the same bank group. Currently,
there are no outstanding borrowings under the facility.
6
ITEM 2 -2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET
FORTH BELOW.BELOW IN THIS REPORT. THE COMPANY HAS ATTEMPTED TO IDENTIFY
FORWARD-LOOKING STATEMENTS BY PLACING AN ASTERISK IMMEDIATELY FOLLOWING THE
SENTENCE OR PHRASE THAT CONTAINS THE FORWARD-LOOKING STATEMENT.
OVERVIEW
The Company processes salvage vehicles principally on a consignment method,
on either the Percentage Incentive Program (the "PIP") or on a fixed fee
consignment basis. Using either consignment method, only the fees associated
with vehicle processing are recorded in revenue. The Company also processes a
small percentage of its salvage vehicles pursuant to purchase contracts (the
"Purchase Program") under which the Company records the gross proceeds of the
vehicle sale in purchased vehicle revenues and the cost of the vehicle in yard
and fleet expenses.
For the three months ended OctoberJanuary 31, 2001 and 2000, approximately 60% and
1999,55%, respectively, and for the six months ended January 31, 2001 and 2000,
approximately 60% and 54%, of the vehicles sold by Copart, respectively, were
processed under the PIP. The increase in the percentage of vehicles sold under
the PIP is due to the Company's successful marketing efforts. The Company
attempts to convert acquired operations to the PIP, which typically results in
higher net returns to vehicle suppliers and higher fees to the Company than
standard fixed fee consignment programs.
For the three months ended OctoberJanuary 31, 2001 and 2000, approximately 40% and
1999,44%, respectively, and for the six months ended January 31, 2001 and 2000,
approximately 40% and 45%, of the vehicles sold by Copart, respectively, were
processed under fixed fee agreements. The decline in the percentage of vehicles
processed under fixed contracts is the direct result of the Company's marketing
efforts to convert contracts from fixed fee to PIP.
For the three and six months ended OctoberJanuary 31, 1999,2000, approximately 1%
of the vehicles sold by Copart were processed pursuant to the Purchase
Program.
Due to a number of factors, including the timing and size of new
acquisitions, market conditions, and acceptance of the PIP program by vehicle
suppliers, the percentage of vehicles processed under these programs in future
periods may vary.*
Revenues consist of salvage fees charged to vehicle suppliers and vehicle
buyers, transportation revenue and purchased vehicle revenues. Salvage fees from
vehicle suppliers include fees under PIP agreements and fixed programs where the
Company charges for title processing, special preparation, storage and
auctioning. Salvage fees also include fees charged to vehicle buyers for
purchasing vehicles, storage and annual registration. Transportation revenue
includes charges to suppliers for towing vehicles under fixed fee contracts.
Transportation revenue also includes towing charges assessed to buyers for
delivering vehicles. Purchased vehicle revenues are comprised of the price that
buyers paid at the Company's auctions for vehicles processed under the Purchase
Program.
7
Costs attributable to yard and fleet expenses consist primarily of
operating personnel, (which includes yard management, clerical and yard
employees), rent, contract vehicle towing, insurance, fuel, fleet maintenance
and repair, and acquisition costs of salvage vehicles under the Purchase
Program. Costs associated with general and administrative expenses consist
primarily of executive, accounting, and data processing and sales personnel,
professional fees and marketing expenses.
The period-to-period comparability of Copart's operating results and
financial condition is substantially affected by business acquisitions and new
openings made by Copart during such periods.
ACQUISITIONS AND NEW OPENINGS
Copart has experienced significant growth as it acquired twelvethirteen vehicle
auction facilities and established sixseven new salvage vehicle auction facilities
since the beginning of fiscal 1999. All of the acquisitions have been accounted
for using the purchase method. Accordingly, the excess of the purchase price
over the fair value of net tangible assets acquired (consisting principally of
goodwill) is being amortized over periods not exceeding 40 years.
As part of the Company's overall expansion strategy of offering integrated
service to vehicle suppliers, the Company anticipates further attempts to open
or acquire new salvage facilities in new regions, as well as the regions
currently served by Company facilities.* As part of this strategy, during fiscal
2001, Copart acquired facilities in or near Chatham, Virginia and opened a new
facilityfacilities in Harrisburg, Pennsylvania.Pennsylvania and Chicago Heights, Illinois. In fiscal
2000, Copart acquired facilities in or near Chesapeake, Virginia; Peoria,
Illinois; North Boston, Massachusetts; Boise, Idaho; Pasco, Washington; Abilene,
Texas; San Antonio, Texas and Albuquerque, New Mexico and opened new facilities
in Graham, Washington; Denver, Colorado and West Palm Beach, Florida. In fiscal
1999, Copart acquired facilities in or near McAllen, Texas; Huntsville, Alabama
and Wichita, Kansas and opened new facilities in Nashville, Tennessee and
Austin/San Antonio, Texas. The Company believes that these acquisitions and
openings help to solidify the Company's nationwide service and expand the
Company's coverage of the United States. In the event of future acquisitions,
the Company expects to incur future amortization charges in connection with such
acquisitions attributable to goodwill, covenants not to compete and other
purchase-related adjustments.*
RESULTS OF OPERATIONS
Three Months Ended OctoberJanuary 31, 20002001 Compared to Three Months Ended OctoberJanuary 31,
19992000
REVENUES
Revenues were approximately $57.1$56.6 million during the three months ended
OctoberJanuary 31, 2000,2001, an increase of approximately $16.6$12.2 million, or 41%28%, over the
three months ended OctoberJanuary 31, 1999.2000. The change in revenues is driven primarily
by the increase in gross proceeds generated from auctioned salvage vehicles.
Gross proceeds were approximately $249.1$232.1 million during the three months ended
OctoberJanuary 31, 2000,2001, an increase of approximately $68.3$39.0 million, or 38%20%, over the
three months ended OctoberJanuary 31, 1999.2000.
New facilities in Chesapeake, Graham, Denver, Peoria, North Boston, Boise, Pasco, West Palm Beach, Abilene, San Antonio,
Albuquerque, Harrisburg, Chicago Heights, and AlbuquerqueDanville contributed $5.3$3.1 million
of new revenuesalvage fee and transportation revenues for the three months ended
OctoberJanuary 31, 2000.2001.
8
OPERATING COSTS AND EXPENSES
Yard and fleet expenses were approximately $35.4$34.1 million during the three
months ended OctoberJanuary 31, 2000,2001, an increase of approximately $10.7$6.8 million, or
44%25%, over the comparable period in fiscal 2000. The increase in yard and fleet
expenses is due primarilyprincipally to the cost of handling increased volume at existing
operations and the costs of new facilities. Approximately $4.1$2.6 million of the
change was the result of the acquisitions and openings of new facilities. Yard
and fleet expenses from existing facilities grew by approximately $6.6$4.2 million,
or 27%15%, compared to existing-facility revenue growth of 28%21%. Yard and fleet
expenses increaseddecreased to 62%60% of revenues during the firstsecond quarter of fiscal 2001,
as compared to 61%62% of revenues during the same period of fiscal 2000 due
to higher transportation and labor costs.2000.
General and administrative expenses were approximately $4.5$4.2 million during
the three months ended OctoberJanuary 31, 2000,2001, an increase of approximately $1.2$0.2
million, or 35%6%, over the comparable period in fiscal 2000. This increase is due
primarily to increased payroll and other administrativeoperating expenses. General and
administrative expenses were 8%decreased to 7% of revenues during the firstsecond quarter of
fiscal 2001 andas compared to 9% of revenues during the same period of fiscal 2000.
Depreciation and amortization expense was approximately $3.4$3.5 million during
the three months ended OctoberJanuary 31, 2000,2001, an increase of approximately $0.6$0.7
million, or 22%26%, over the comparable period in fiscal 2000. This increase was
primarily due to the amortization and depreciation of tangible and intangible
assets acquired in fiscal 2001 and fiscal 2000.
OPERATING INCOME, OTHER INCOME AND INCOME TAXES
The Company's operating income was $13.9$14.8 million during the three months
ended OctoberJanuary 31, 2000,2001, an increase of approximately $4.1$4.5 million, or 42%44%, over
the comparable period in fiscal 2000. Existing facilities produced $3.3$4.1 million
of the increase due to improved PIP percentages, market share gains, favorable
weather conditions and other factors. New facilities in Chesapeake, Graham, Denver, Peoria, North Boston, Boise, Pasco, West Palm
Beach, Abilene, San Antonio, Albuquerque, Harrisburg, Chicago Heights, and
HarrisburgDanville produced $0.8$0.4 million of the increase.
Total other income was approximately $0.7$0.6 million during the three months
ended OctoberJanuary 31, 2000,2001, an increase of approximately $0.2$0.1 million, over the
three months ended OctoberJanuary 31, 1999.2000.
The effective income tax rate usedof 40% applicable to the three months ended
January 31, 2001 is comparable to the effective income tax rate for the three
months ended OctoberJanuary 31, 2000 and 1999 was approximatelyof 39%.
Due to the foregoing factors, Copart realized net income of approximately
$8.9$9.3 million for the three months ended OctoberJanuary 31, 2000,2001, compared to net income
of approximately $6.3$6.6 million for the three months ended OctoberJanuary 31, 1999.2000.
9
Six Months Ended January 31, 2001 Compared to Six Months Ended January 31, 2000
REVENUES
Revenues were approximately $113.8 million during the six months ended
January 31, 2001, an increase of approximately $28.9 million, or 34%, over the
six months ended January 31, 2000. The change in revenues is driven primarily by
the increase in gross proceeds generated from auctioned salvage vehicles. Gross
proceeds were approximately $481.3 million during the six months ended January
31, 2001, an increase of approximately $107.3 million, or 29%, over the six
months ended January 31, 2000.
New facilities in Boise, Pasco, West Palm Beach, Abilene, San Antonio,
Albuquerque, Harrisburg, Chicago Heights, and Danville contributed $5.8 million
of new revenue for the six months ended January 31, 2001.
OPERATING COSTS AND EXPENSES
Yard and fleet expenses were approximately $69.5 million during the six
months ended January 31, 2001, an increase of approximately $17.5 million, or
34%, over the comparable period in fiscal 2000. The increase in yard and fleet
expenses is due principally to the cost of handling increased volume at existing
operations and the costs of new facilities. Approximately $4.5 million of the
change was the result of the acquisitions and openings of new facilities. Yard
and fleet expenses from existing facilities grew by approximately $13.0 million,
or 25%, compared to existing-facility revenue growth of 27%. Yard and fleet
expenses remained unchanged at 61% of revenues during the first six months of
fiscal 2001 and fiscal 2000.
General and administrative expenses were approximately $8.7 million during
the six months ended January 31, 2001, an increase of approximately $1.4
million, or 19%, over the comparable period in fiscal 2000. This increase is due
primarily to increased payroll and other operating expenses. General and
administrative expenses decreased to 8% of revenues during the first six months
of fiscal 2001, as compared to 9% of revenues during the same period of fiscal
2000.
Depreciation and amortization expense was approximately $6.8 million during
the six months ended January 31, 2001, an increase of approximately $1.3
million, or 24%, over the comparable period in fiscal 2000. This increase was
primarily due to the amortization and depreciation of tangible and intangible
assets acquired in fiscal 2001 and fiscal 2000.
OPERATING INCOME, OTHER INCOME AND INCOME TAXES
The Company's operating income was $28.8 million during the six months
ended January 31, 2001, an increase of approximately $8.7 million or 43% over
the comparable period in fiscal 2000. Existing facilities produced $7.6 million
of the increase due to improved PIP percentages, market share gains, favorable
weather conditions and other factors. New facilities in Boise, Pasco, West Palm
Beach, Abilene, San Antonio, Albuquerque, Harrisburg, Chicago Heights, and
Danville produced $1.1 million of the increase.
Total other income was approximately $1.3 million during the six months
ended January 31, 2001, an increase of approximately $0.4 million over the six
months ended January 31, 2000.
The effective income tax rate for both of the six months ended January 31,
2001 and 2000 was approximately 39%.
10
Due to the foregoing factors, Copart realized net income of approximately
$18.3 million for the six months ended January 31, 2001, compared to net income
of approximately $12.9 million for the six months ended January 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Copart has financed its growth principally through cash generated from
operations, debt financing, public offerings of Common Stock, and the equity
issued in conjunction with certain acquisitions.
At OctoberJanuary 31, 2000,2001, Copart had working capital of approximately $56.0$57.0
million, including cash and cash equivalents of approximately $15.7$2.5 million. The
Company is able to process, market, sell and receive payment for processed
vehicles quickly. The Company's primary source of cash is from the collection of
sellers' fees and reimbursable advances from the proceeds of auctioned salvage
vehicles and from buyers' fees.
9
Copart generated cash from operations of approximately $13.6$13.4 million and
$7.3$5.5 million, during the threesix months ended OctoberJanuary 31, 20002001 and 1999,2000,
respectively.
Capital expenditures (excluding those associated with fixed assets
attributable to acquisitions) were approximately $10.6$23.3 million and $11.3$17.6 million
for the threesix months ended OctoberJanuary 31, 2000,2001, and 1999,2000, respectively. Copart's
capital expenditures have related primarily to opening and improving facilities
and acquiring yard equipment.
Cash and cash equivalents increaseddecreased by approximately $3.5 million and
decreased by $4.0$9.6 million for the
threesix months ended OctoberJanuary 31, 20002001. The decrease is due primarily to
acquisitions, additions to property and 1999,
respectively.equipment, increases in accounts
receivable, and other working capital changes. The Company's liquidity and
capital resources have not been materially affected by inflation and are not
subject to significant seasonal fluctuations.
On February 23, 2001, the Company executed a new credit facility with
its banking syndicate. The new facility provided by Wells Fargo Bank, Fleet
National Bank and U.S. Bank National Association consists of an unsecured
revolving line of credit in the amount of $100 million that matures in 2006.
The new facility replaces the Company's $30 million facility with the same
bank group. Currently, there are no outstanding borrowings under the facility.
The Company believes that its currently available cash, cash generated from
operations and borrowing availability under its bank credit facilities and
existing equipment operating lease agreements will be sufficient to satisfy the
Company's working capital requirements and fund acquisitions and openings of new
facilities for at least 12 months. However, there can be no assurance that the
Company will not be required to seek additional debt or equity financing prior
to such time, or if new financing is required, that it will be available on
reasonable terms if at all.
FACTORS AFFECTING FUTURE RESULTS
Historically, a limited number of vehicle suppliers have accounted for a
substantial portion of the Company's revenues. In the firstsecond quarter of fiscal
2001 and 2000, vehicles supplied by Copart's two largest vehicle suppliers
accounted for approximately 13% and 10%9%, of Copart's revenues, respectively. The
Company's agreements with these and other vehicle suppliers are either oral or
written agreements that typically are subject to cancellation by either party
upon 30 days'days notice. There can be no assurance that existing agreements will not
be canceled or that the terms of any new agreements will be comparable to those
of existing agreements. The Company believes that, as the salvage vehicle
auction industry becomes more consolidated, the likelihood of large vehicle
suppliers entering into agreements with single companies to dispose of all of
their salvage vehicles on a statewide, regional or national basis increases.*
There can be no assurance that the Company will be able to enter into such
11
agreements or that it will be able to retain its existing supply of salvage
vehicles in the event vehicle suppliers begin disposing of their salvage
vehicles pursuant to state, regional or national agreements with other operators
of salvage vehicle auction facilities. A loss or reduction in the number of
vehicles from a significant vehicle supplier or material changes in the terms of
an arrangement with a substantial vehicle supplier could have a material adverse
effect on the Company's financial condition and results of operations.
The Company's operating results have fluctuated in the past and may
fluctuate significantly in the future depending on a number of factors. These
factors include changes in the market value of salvage vehicles, buyer
attendance at salvage auctions, fluctuations in vehicle transportation costs,
delays or changes in state title processing and/or changes in state or federal
laws or regulations affecting salvage vehicles, fluctuations in Actual Cash
Values ("ACV's")(ACV's) of salvage vehicles, the availability of vehicles and weather
conditions. As a result, the Company believes that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as any indication of future performance. There can be no assurance,
therefore, that the Company's operating results in some future quarter will not
be below the expectations of public market analysts and/or investors.
The market price of the Company's Common Stock could be subject to
significant fluctuations in response to various factors and events, including
variations in the Company's operating results, the inability to continue to
increase service fees, the timing and size of acquisitions and facility
openings, the loss of vehicle suppliers or buyers, the announcement of new
vehicle supply agreements by the Company or its competitors, changes in
10
regulations governing the Company's operations or its vehicle suppliers,
environmental problems or litigation. In addition, the stock market in recent
years has experienced broad price and volume fluctuations that often have been
unrelated to the operating performance of companies.
The Company seeks to increase sales and profitability primarily through the
increase of salvage vehicle volume and revenue at existing facilities, the
opening of new facilities and the acquisition of other salvage vehicle auction
facilities. There can be no assurance that the Company will be able to continue
to acquire additional facilities on terms economical to the Company or that the
Company will be able to increase revenues at newly acquired facilities above
levels realized at such facilities prior to their acquisition by the Company.
Additionally, as the Company continues to grow, its openings and acquisitions
will have to be more numerous or of a larger size in order to have a material
impact on the Company's operations. The ability of the Company to achieve its
expansion objectives and to manage its growth is also dependent on other
factors, including the integration of new facilities into existing operations,
the establishment of new relationships or expansion of existing relationships
with vehicle suppliers, the identification and lease of suitable premises on
competitive terms and the availability of capital. The size and timing of such
acquisitions and openings may vary. Management believes that facilities opened
by the Company require more time to reach revenue and profitability levels
comparable to its existing facilities and may have greater working capital
requirements than those facilities acquired by the Company. Therefore, to the
extent that the Company opens a greater number of facilities in the future than
it has historically, the Company's growth rate in revenues and profitability may
be adversely affected.
Currently, Willis J. Johnson, Chief Executive Officer of the Company,
together with two other existing shareholders, beneficially owns approximately
36%34% of the issued and outstanding shares of Common Stock. This interest in the
Company may also have the effect of making certain transactions, such as mergers
or tender offers involving the Company, more difficult or impossible, absent the
support of Mr. Johnson, and such other existing shareholders.
The Company's operations are subject to federal, state and local laws and
regulations regarding the protection of the environment. In the salvage vehicle
auction industry, large numbers of wrecked vehicles are stored at auction
facilities for short periods of time. Minor spills of gasoline, motor oils and
other fluids may occur from time to time at the Company's facilities which may
result in localized soil, surface water or groundwater contamination. Petroleum
products and other hazardous materials are contained in aboveground or
underground storage tanks located at certain of the Company's facilities. Waste
materials such as waste solvents or used oils are
12
generated at some of the Company's facilities that are disposed of as
nonhazardous or hazardous wastes. The Company has put into place procedures to
reduce the amounts of soil contamination that may occur at its facilities, and
has initiated safety programs and training of personnel on safe storage and
handling of hazardous materials. The Company believes that it is in compliance
in all material respects with applicable environmental regulations and does not
anticipate any material capital expenditures for environmental compliance or
remediation that are not currently reserved for.* Environmental laws and
regulations, however, could become more stringent over time and there can be no
assurance that the Company or its operations will not be subject to significant
compliance costs in the future. To date, the Company has not incurred
expenditures for preventive or remedial action with respect to soil
contamination or the use of hazardous materials which have had a material
adverse effect on the Company's financial condition or results of operations.
The soil contamination which may occur at the Company's facilities and the
potential contamination by previous users of certain acquired facilities create
the risk, however, that the Company could incur substantial expenditures for
preventive or remedial action, as well as potential liability arising as a
consequence of hazardous material contamination, which could have a material
adverse effect on the Company.
The salvage vehicle auction industry is highly fragmented. As a result, the Company
faces intense competition for the supply of salvage vehicles obtained from
vehicle suppliers, as well as intense competition for buyers of vehicles from other
salvage vehicle auction companies.buyers. The Company
believes its principal competitor
is Insurance Auto
11
Auctions, Inc. ("IAA"). IAA is a significant competitor in certain regions in
which the Company operates or may expand in the future. In other regions of the
United States, the Company faces substantial competition from salvagecompetitors include vehicle auction facilities withcompanies and vehicle
dismantlers. These national, regional, and local competitors may have
established relationships with vehicle suppliers and buyers and financial
resources which may bethat are greater than that of the Company's.Company. The largest national or
regional vehicle auctioneers include Manheim Auctions, the ADESA Corporation,
Insurance Auto Auctions, SADISCO and Auction Broadcasting Co. In addition, the
Company competes with locally owned vehicle auctions in most markets. National,
regional, and local dismantlers also compete with Copart for the supply of
salvage vehicles. The largest national dismantlers include Greenleaf, a
subsidiary of Ford Motor Company, and LKQ Corporation. These national
dismantlers, in addition to buying groups of dismantlers such as the American
Recycling Association (ARA) and the United Recyclers Group (URG), purchase
salvage vehicles directly from the insurance companies, and in doing so
completely bypass the auction companies, including the Company. Due to the
limited number of vehicle suppliers and the absence of long-term contractual
commitments between the Company and such salvage vehicle suppliers, competition for
salvage vehicles from such suppliers is intense. The Company may also encounter significant competition for
state, regional and national supply agreements with vehicle suppliers.* Vehicle
suppliers may enterhave entered into state, regional, or national supply agreements with
competitors of the Company.
The Company has a number of regional and national contracts with various
suppliers. There can be no assurance that the existence of other state, regional
or national contracts entered into by the Company's competitors will not have a
material adverse effect on the Company or the Company's expansion plans.
Furthermore, the Company is likely to face competition from major competitors in
the acquisition of salvage vehicle auction facilities, which could significantly
increase the cost of such acquisitions and thereby materially impede the
Company's expansion objectives or have a material adverse effect on the
Company's results of operations.* These potential new competitors may include
consolidators of automobile dismantling businesses, organized salvage buying
groups, automobile manufacturers, automobile auctioneers and software companies.
While most vehicle suppliers have abandoned or reduced efforts to sell salvage
vehicles without the use of service providers such as the Company, there can be
no assurance that they may not in the future decide to dispose of their salvage
vehicles directly to buyers. Existing or new competitors may be significantly
larger and have greater financial and marketing resources than the Company.
There can be no assurance that the Company will be able to compete successfully
in the future.
1213
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Company was held on December
5, 2000 (the "Meeting").
(b) The following directors were elected at the Meeting:
Willis J. Johnson
Marvin L. Schmidt
A. Jayson Adair
James Grosfeld
James E. Meeks
Jonathan Vannini
Harold Blumenstein
(c) The results of the vote on the matters voted upon at the meeting are:
(i) ELECTION OF DIRECTORS FOR WITHHELD
--------------------- --- --------
Willis J. Johnson 42,520,726 4,462,504
Marvin L. Schmidt 46,288,718 694,512
A. Jayson Adair 46,216,388 766,842
James Grosfeld 46,304,225 679,005
James E. Meeks 46,217,018 766,212
Jonathan Vannini 46,305,777 677,453
Harold Blumenstein 46,318,193 665,037
(ii) Ratification of KPMG LLP as independent auditors for
the Company for fiscal year 2001:
FOR AGAINST ABSTAINED NO VOTE
46,964,734 11,470 7,026 -0-
The foregoing matters are described in more detail in the Company's
definitive proxy statement dated October 31, 2000 relating to the
Meeting.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
27.1 Financial Data Schedule10.17 Credit Agreement among Copart, Inc. and Wells Fargo Bank,
National Association, U.S. Bank National Association and
Fleet National Bank and Wells Fargo Bank National
Association, as Agent dated February 23, 2001.
(b) REPORTS ON FORM 8-K.
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COPART, INC.
/s/ Wayne R. Hilty
------------------------------------------------------------
Wayne R. Hilty, Senior Vice President
and Chief Financial Officer
(duly authorized officer and principal
financial and accounting officer)
Date: November 29, 2000
14
March 13, 2001
15