California-based Copart Inc. reported results for the quarter ended Oct. 31, 2005, the first quarter of its 2006 fiscal year.
In the quarter Copart earned net income of $22.8 million on revenues of $119.0 million. In the same period last year the Company earned $22.7 million on revenues of $104.1 million. During the quarter revenue increased 14% over the same period last year. Fully diluted earnings per share (EPS) for the current quarter was $.25 compared to $.24 last year.
Included in the quarter is virtually no revenue from the sale of vehicles assigned to the company as a result of hurricanes Katrina and Rita. The company has been assigned a substantial number of vehicles as a result of the hurricanes, and revenue from disposition of these vehicles will be realized in succeeding quarters.
The operating results for the current quarter were adversely affected by additional costs incurred as a result of hurricanes Katrina and Rita. These additional costs, characterized as “abnormal” in FAS 151: Inventory Costs, were recognized in the current quarter and resulted in an increase in yard expense. These costs include the additional subhauling, payroll, equipment and facilities expenses directly related to the operating conditions created by the hurricanes and will continue. These costs do not include the normal expenses associated with the increased unit volume created by the hurricanes, which are deferred until the sale of the unit and are reflected in vehicle pooling costs on the balance sheet.
At the end of the quarter, substantially all the vehicles received as a result of the hurricanes were unsold. The normal costs that have been capitalized will be recognized as yard expense as the vehicles are sold. Legislation currently pending in Louisiana, which the company expects to be enacted, would require that vehicles suffering water damage to the powertrain, computer, or electrical systems as a result of the hurricanes can only be dismantled or crushed. As a result, enactment of this legislation could have an adverse effect on selling prices for vehicles received from Louisiana as a result of the hurricanes, which could have an adverse effect on margins until the hurricane-damaged vehicles are sold.
Copart provides vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through a completely virtual auction-style trading platform, principally to licensed dismantlers, rebuilders and used vehicle dealers.
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