CPRT Copart Inc

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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Melissa Hunter, Executive Support Manager, Office of the Chief Financial Officer972-391-5090 or melissa.hunter@copart.com