Copart, Inc. (NASDAQ: CPRT) today reported financial results for
the quarter and year ended July 31, 2018.
For the three months ended July 31, 2018, revenue, gross profit,
and net income were $449.2 million, $188.4 million, and $109.7
million, respectively. These represent an increase in revenue of
$70.6 million, or 18.7%; an increase in gross profit of $21.0
million, or 12.5%; and an increase in net income of $39.4 million,
or 56.0%, respectively, from the same quarter last year. Fully
diluted earnings per share for the three months were $0.45 compared
to $0.30 last year, an increase of 50.0%.
For the year ended July 31, 2018, revenue, gross profit, and net
income were $1.8 billion, $762.4 million, and $417.9 million,
respectively. These represent an increase in revenue of $357.7
million, or 24.7%; an increase in gross profit of $130.3 million,
or 20.6%; and an increase in net income of $23.6 million, or 6.0%,
respectively, from the same period last year. Fully diluted
earnings per share for the year ended July 31, 2018 were $1.73
compared to $1.66 last year, an increase of 4.2%.
The operating results for the year ended July 31, 2018 were
adversely affected by abnormal costs of $79.7 million 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 $66.9 million generated a pre-tax
loss of $12.8 million for the year ended July 31, 2018. The
operating results for the year ended July 31, 2018 were also
adversely impacted by the recording of a provisional tax liability
for the Transition Tax of $13.8 million for the deemed repatriation
of foreign earnings and profits under the Tax Cuts and Jobs Act of
2017 and by non-recurring depreciation and amortization charges of
$10.5 million, in the fourth quarter. Certain foreign tax credits
of $1.4 million were made available by incurring the Transition Tax
of $13.8 million, resulting in a net expense of $12.4 million for
the year ended July 31, 2018. This expense was offset by the Act’s
reduction of the federal corporate income tax rate. Because
Copart’s fiscal year includes periods before and after December 22,
2017, the effective date of the Act, during which the U.S. federal
corporate tax rate was 35% and 21%, respectively, our U.S. federal
corporate tax rate for fiscal year 2018 was 26.9%. The operating
results for the year ended July 31, 2018, include the benefit of
this rate reduction. In addition, the non-recurring depreciation
and amortization charges of $10.5 million result from depreciation
related to a combination of construction in progress placed in
service in the fourth quarter of fiscal 2018 and a change in our
estimate of the useful lives for certain fixed assets. The effect
of the non-recurring depreciation, net of income tax benefit of
$11.4 million, is an increase to net income of $0.9 million, as a
result of bonus tax depreciation provided for in the Tax Cuts and
Jobs Act of 2017.
Excluding the impact of income taxes on the deemed repatriation
of foreign earnings, net of deferred tax changes, disposals of
non-operating assets, impairment of long-lived assets, acquisition
related fees and integration charges, reserve for legacy sales tax
liabilities; 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 July 31, 2018 and 2017, were $0.42
and $0.35, respectively. Non-GAAP fully diluted earnings per share
for the year ended July 31, 2018 and 2017, were $1.73 and
$1.29, 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 Wednesday, September 19, 2018, 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/copart091918. A replay of the
call will be available through November 18, 2018 by calling (877)
919-4059. Use confirmation code # 18189145.
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, impairment of long-lived assets, acquisition
related fees and integration charges, reserve for legacy sales tax
liabilities; 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
income taxes on the deemed repatriation of foreign earnings, net of
deferred tax changes, disposals of non-operating assets, impairment
of long-lived assets, acquisition related fees and integration
charges, reserve for legacy sales tax liabilities; 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.
Consolidated Statements of
Income
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended July 31,
Twelve Months Ended July 31, 2018
2017 2018 2017 Service revenues and
vehicle sales: Service revenues $ 391,661 $ 336,795 $ 1,578,502 $
1,286,252 Vehicle sales 57,562 41,801 227,193
161,729 Total service revenues and vehicle sales 449,223
378,596 1,805,695 1,447,981 Operating expenses: Yard operations
185,914 163,449 785,768 635,160 Cost of vehicle sales 50,313 35,994
196,461 137,552 Yard depreciation and amortization 23,613 10,839
57,230 39,955 Yard stock-based payment compensation 958 849
3,870 3,286 Gross profit 188,425 167,465
762,366 632,028 General and administrative 42,794 29,818 136,171
116,697 General and administrative depreciation and amortization
4,639 3,029 21,368 17,045 General and administrative stock-based
payment compensation 5,024 4,446 19,351 17,622 Impairment of
long-lived assets 1,131 19,365 1,131 19,365
Total operating expenses 314,386 267,789
1,221,350 986,682 Operating income 134,837 110,807
584,345 461,299 Other (expense) income: Interest expense, net
(3,982 ) (5,485 ) (19,075 ) (22,373 ) Other income (expense), net
1,874 1,057 (2,759 ) 1,174 Total other expense
(2,108 ) (4,428 ) (21,834 ) (21,199 ) Income before income tax
expense 132,729 106,379 562,511 440,100 Income tax expense 22,988
36,010 144,504 45,839 Net income
109,741 70,369 418,007 394,261 Net (loss) income attributable to
noncontrolling interest (7 ) 34 140 34 Net
income attributable to Copart, Inc. $ 109,748 $ 70,335
$ 417,867 $ 394,227 Basic net income
per common share $ 0.47 $ 0.31 $ 1.80 $ 1.72
Weighted average common shares outstanding 232,995
230,286 231,793 228,686 Diluted net
income per common share $ 0.45 $ 0.30 $ 1.73 $
1.66 Diluted weighted average common shares outstanding
244,406 237,634 241,877 237,019
Copart, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
July 31, 2018 July 31, 2017
ASSETS
Current assets: Cash and cash equivalents $ 274,520 $ 210,100
Accounts receivable, net 351,601 311,846 Vehicle pooling costs and
inventories 51,018 41,281 Income taxes receivable 15,312 6,418
Prepaid expenses and other assets 16,665 17,616 Total
current assets 709,116 587,261 Property and equipment, net
1,163,425 944,056 Intangibles, net 64,892 75,938 Goodwill 337,235
340,243 Deferred income taxes 470 1,287 Other assets 32,560
33,716 Total assets $ 2,307,698 $ 1,982,501
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities: Accounts payable and accrued liabilities $
270,944 $ 208,415 Deferred revenue 4,488 5,019 Income taxes payable
673 6,472 Deferred income taxes — 92 Current portion of revolving
loan facility and capital lease obligations 1,151 82,155
Total current liabilities 277,256 302,153 Deferred income
taxes 19,733 3,192 Income taxes payable 27,277 24,573 Long-term
debt, revolving loan facility, and capital lease obligations, net
of discount 398,747 550,883 Other liabilities 3,586 3,100
Total liabilities 726,599 883,901 Commitments and
contingencies Stockholders’ equity: Preferred stock — — Common
stock 23 23 Additional paid-in capital 526,858 453,349 Accumulated
other comprehensive loss (107,928 ) (100,676 ) Retained earnings
1,162,146 745,370 Noncontrolling interest — 534 Total
stockholders’ equity 1,581,099 1,098,600 Total
liabilities and stockholders’ equity $ 2,307,698 $ 1,982,501
Copart, Inc.
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Year Ended July 31, 2018
2017
Cash flows from operating
activities:
Net income $ 418,007 $ 394,261 Adjustments to reconcile net income
to net cash provided by operating activities: Depreciation and
amortization, including debt cost 79,040 57,441 Allowance for
doubtful accounts 1,142 187 Impairment of long-lived assets 1,157
19,365 Equity in losses of unconsolidated affiliates 750 671
Stock-based payment compensation 23,221 20,840 Loss on sale of
property and equipment 3,240 184 Deferred income taxes 16,717
19,901 Changes in operating assets and liabilities, net of effects
from acquisitions: Accounts receivable (40,335 ) (38,542 ) Vehicle
pooling costs and inventories (7,312 ) (621 ) Prepaid expenses and
other current assets (776 ) 1,760 Other assets 70 1,085 Accounts
payable and accrued liabilities 53,320 4,269 Deferred revenue (520
) 392 Income taxes receivable (8,916 ) 12,343 Income taxes payable
(3,149 ) (333 ) Other liabilities (587 ) (1,145 ) Net cash provided
by operating activities 535,069 492,058
Cash flows from
investing activities: Purchases of property and equipment,
including acquisitions (296,697 ) (332,990 ) Proceeds from sale of
property and equipment 6,425 765 Proceeds from sale of
majority-owned subsidiary 1,796 — Investment in unconsolidated
affiliate — (3,566 ) Net cash used in investing activities
(288,476 ) (335,791 )
Cash flows from financing
activities: Proceeds from the exercise of stock options 44,459
31,188 Proceeds from the issuance of Employee Stock Purchase Plan
shares 5,853 4,270 Payments for employee stock-based tax
withholdings (1,115 ) (135,433 ) Net (repayments) proceeds on
revolving loan facility (231,000 ) (7,000 ) Distributions to
noncontrolling interest (235 ) — Net cash used in financing
activities (182,038 ) (106,975 ) Effect of foreign currency
translation (135 ) 4,959 Net increase in cash and cash
equivalents 64,420 54,251 Cash and cash equivalents at beginning of
period 210,100 155,849 Cash and cash equivalents at
end of period $ 274,520 $ 210,100
Supplemental
disclosure of cash flow information: Interest paid $ 20,343
$ 23,221 Income taxes paid, net of refunds $ 142,161
$ 14,011
Copart, Inc.
Additional Financial
Information
Reconciliation of GAAP to Non-GAAP
Financial Measures
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended July 31,
Twelve Months Ended July 31, 2018
2017 2018 2017 GAAP net income
attributable to Copart, Inc. $ 109,748 $ 70,335 $ 417,867 $ 394,227
Effect of deemed repatriation of foreign earnings, net of deferred
tax changes (2,870 ) — 8,131 — Effect of disposal of non-operating
assets, net of tax — — 2,994 — Effect of impairment of long-lived
assets, net of tax 916 12,339 916 12,339 Effect of acquisition
related fees and integration charges, net of tax 1,521 1,241 1,521
1,241 Effect of reserve for legacy sales tax liabilities, net of
tax 1,017 — 1,017 — Effect of foreign currency-related (gains)
losses, net of tax (415 ) (585 ) 452 (880 ) Effect of income tax
benefit of ASU 2016-09 adoption, net of tax (1) (11,821 ) (898 )
(21,269 ) (107,647 ) Effect of payroll taxes on certain executive
stock compensation, net of tax 4,514 — 4,514
3,307 Non-GAAP net income attributable to Copart, Inc. $
102,610 $ 82,432 $ 416,143 $ 302,587
GAAP diluted net income per common share $ 0.45 $
0.30 $ 1.73 $ 1.66 Non-GAAP diluted net income
per common share $ 0.42 $ 0.35 $ 1.73 $ 1.29
GAAP diluted weighted average common shares
outstanding 244,406 237,634 241,877 237,019 Effect on common
equivalent shares from ASU 2016-09 adoption(1) (2,586 ) (1,771 )
(646 ) (1,992 ) Non-GAAP diluted weighted average common shares
outstanding 241,820 235,863 241,231 235,027
(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. For a
more complete discussion, please review the Company’s Annual Report
on Form 10-K, filed with the Securities and Exchange Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180919005430/en/
Copart, Inc.Melissa Perry, 972-391-5090Executive Support
Manager, Office of the Chief Financial
Officermelissa.perry@copart.com
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