CPRT

Copart, Inc. (CPRT)

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Industry: Consumer Durables
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Copart, Inc. (CPRT)

Q3 2008 Earnings Call

June 4, 2008 11:00 am ET

Executives

Jay Adair – President

Will Franklin - CFO

Analysts

Bob Labick – CJS Securities

Scott Stember – Sidoti & Company

Anthony Cristello – BB&T Capital Markets

Craig Kennison - Robert W. Baird & Co.

Scot Ciccarelli – RBC Capital Markets

William Armstrong – CL King & Associates

Justin Boisseau – Gates Capital Management

Edward Hemmelgarn – Shaker Investments

Presentation

Operator

Good day everyone and welcome to the Copart Inc. third quarter fiscal 2008 earnings call. For opening remarks and introductions I would like to turn the call over to Mr. Jay Adair, President of Copart. Please go ahead sir.

Jay Adair

Good morning everyone to the third quarter results and conference call for Copart. Before we start I’ll turn it over to Will Franklin for some brief remarks.

Will Franklin

Thank you, Jay. During this call we may make forward-looking statements within the meaning of Securities laws. These forward-looking statements may include comments about our future revenue and earnings growth which are subject to various risks, including weather conditions that are adverse to our business, our ability to increase market share in a competitive market, and our ability to secure beneficial supply agreements. We also face risk arising from our increased dependence on proprietary technologies to conduct our auctions.

Finally our recent acquisitions in the UK expose us to new risk relating to international operations. For more discussions of these and other risks that could affect our business, please review the management's discussion and analysis, and the factors affecting future results contained in our 10-Q, 10-K and other SEC filings.

With that Jay I will turn the call back to you to begin comments on the quarter.

Jay Adair

Thank you Will. Again good morning, as you saw from the press release we had revenue and net income of $221 million and $46.5 million and EPS for the quarter of $0.52 a share. Will will talk about the EPS and revenue and expense analysis and balance sheet, stock repurchase that we made in the quarter and a number of those items.

I want to talk to you this morning just about some of the things that are occurring within the company in the US, Canada and the UK. We had new stores in the US, three for the quarter; Alabama, Minnesota, and Missouri. In the UK we had two locations that we acquired in Scotland and three new locations in England. This brings our total for the company to 128 locations in the US, two locations in Canada and 15 in the UK, so 145 locations total.

We completed the integration of another site in Q3 and we will complete the integration of all the sites in Q4 with respect to the United Kingdom. That gives us a total of 15 locations currently that will be fully integrated by July. We are in a—I get a lot of questions with respect the UK. We’ve been there almost a year now. We are fully expecting a lot of change in the next year or two. It’s a very emerging market for us. We’re putting in a lot of new systems, new procedures, looking at new technologies like VB2 and the way that we’re selling cars. We have seen record results in the last two months both in April and in May in that market. So VB2 has continued to improve, continued to generate higher returns and that’s obviously very exciting for us.

It was expected. It is something that we fortunately had hindsight with respect to doing it in the US five years ago and seeing the same affect as returns have gone up year after year after year in the US. We’re seeing that same impact in the UK now. All I can say to you is that there will be a lot of change. I would expect the market to be in that change mode for the next couple of years. It’s not going to be mature for this time period while we’re in the midst of doing integrations and having non-recurring expenses and that kind of stuff. You will see a lot of change and I think it’s all good right now.

We will be opening new stores in the UK in the next 12 months as we complete our network of facilities. We said 15 to 20 locations in that market and I expect that that will be the thing. Looking at the US for a moment, to tell you that fuel is up I think as we were talking this morning in the group here is about as obvious as telling you the sun rose today. So yes fuel is up and its probably just as obvious to everyone on the call that scrap price is up for shredded autos and that while scrap is up, that is going to have some impact in our industry and while fuel is up, that’s going to have an impact.

The impact right out the gate is that towing expenses are up and I expect that towing expense will continue to rise. I can’t control fuel costs and thus am limited to what I can do with respect to the control in towing expense. However there are some things that we can do as a company. In the UK, we are picking up cars in just over a day. Our goal in that market is to be below a day. I think the proof that that can happen is that in the US we are picking up cars today in less then a day nationally across the US from Florida to Washington, from Connecticut to San Diego. Less then a day in pick up times means that some cities are seeing customers calling in a car at 8:00 in the morning and it’s picked up obviously the same day.

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