Copart (CPRT) 10-Q 2002 Q3 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended April 30, 2002

OR

o 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
(State or other jurisdiction
of incorporation or organization) 94-2867490
(I.R.S. Employer
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 1934 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    ý    NO    o

        Number of shares of Common Stock outstanding as of June 7, 2002:90,993,946

Copart, Inc. and Subsidiaries

Index to the Quarterly Report

April 30, 2002

Description			Page
PART I—Financial Information
	Item 1—Financial Statements
		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	8
		Acquisitions and New Openings	9
		Critical Accounting Policies and Estimates	9
		Results of Operations	10
		Liquidity and Capital Resources	12
		Factors That May Affect Future Results	12
PART II—OTHER INFORMATION
	Item 6—Exhibits and Reports on Form 8-K		17
		Signatures	18

2

ITEM 1—FINANCIAL INFORMATION

Copart, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

			April 30, 2002		July 31, 2001
ASSETS
Current assets:
	Cash and cash equivalents		$	144,020,800	$	15,245,200
	Accounts receivable, net			64,033,100		64,907,300
	Vehicle pooling costs			19,825,600		19,845,400
	Prepaid expenses and other assets			10,877,500		7,866,200
		Total current assets		238,757,000		107,864,100
Deferred income taxes				1,084,400		1,084,400
Property and equipment, net				170,112,100		114,997,600
Intangibles and other assets, net				8,112,000		8,364,700
Goodwill, net				91,776,800		82,753,400
		Total assets	$	509,842,300	$	315,064,200
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt		$	319,000	$	302,900
	Accounts payable and accrued liabilities			33,988,800		26,769,800
	Deferred revenue			8,614,000		8,863,100
	Income taxes payable			8,475,000		4,975,500
	Deferred income taxes			3,976,400		2,982,500
	Other current liabilities			197,800		196,500
		Total current liabilities		55,571,000		44,090,300
Long-term debt, less current portion				167,900		409,200
Other liabilities				1,436,700		1,412,300
		Total liabilities		57,175,600		45,911,800
Shareholders' equity:
	Common stock, no par value—180,000,000 shares authorized; 90,993,946 and 83,000,445 shares issued and outstanding at April 30, 2002 and July 31, 2001, respectively			269,752,300		128,092,000
	Retained earnings			182,914,400		141,060,400
		Total shareholders' equity		452,666,700		269,152,400
Commitments and contingencies
		Total liabilities and shareholders' equity	$	509,842,300	$	315,064,200

See accompanying notes to consolidated financial statements.

3

Copart, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)

			Three months ended April 30,						Nine months ended April 30,
			2002			2001			2002			2001
Revenues			$	90,158,100		$	71,480,600		$	233,823,100		$	185,258,300
Operating costs and expenses:
	Yard and fleet			53,013,700			43,209,600			139,378,000			112,689,200
	General and administrative			6,892,300			5,587,600			17,409,600			14,287,400
	Depreciation and amortization			4,241,000			3,603,300			11,401,400			10,433,300
		Total operating expenses		64,147,000			52,400,500			168,189,000			137,409,900
		Operating income		26,011,100			19,080,100			65,634,100			47,848,400
Other income (expense):
	Interest expense			(9,300	)		(149,400	)		(31,800	)		(436,400	)
	Interest income			493,800			285,200			1,249,600			1,098,000
	Other income			496,900			54,500			1,301,400			836,600
		Total other income		981,400			190,300			2,519,200			1,498,200
		Income before income taxes		26,992,500			19,270,400			68,153,300			49,346,600
Income taxes				10,392,100			7,785,200			26,299,300			19,593,000
		Net income	$	16,600,400		$	11,485,200		$	41,854,000		$	29,753,600
Basic net income per share			$	.18		$	.14		$	.48		$	.36
Weighted average shares outstanding				90,830,500			82,609,700			87,660,800			82,166,000
Diluted net income per share			$	.18		$	.13		$	.46		$	.35
Weighted average shares and dilutive potential common shares outstanding				93,515,800			85,352,700			90,229,000			84,590,700

See accompanying notes to consolidated financial statements.

4

Copart, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

				Nine months ended April 30,
				2002			2001
Cash flows from operating activities:
	Net income			$	41,854,000		$	29,753,600
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			11,401,400			10,433,300
		Deferred rent			25,700			(66,300	)
		Gain on sale of property and equipment			(477,000	)		(57,800	)
		Deferred income taxes			993,900			—
		Changes in operating assets and liabilities:
			Accounts receivable		1,259,800			(9,431,200	)
			Vehicle pooling costs		437,700			(1,679,900	)
			Prepaid expenses and other current assets		(3,011,300	)		(3,033,900	)
			Accounts payable and accrued liabilities		7,219,000			6,145,400
			Deferred revenue		(249,100	)		1,189,400
			Income taxes		3,499,500			11,105,700
			Net cash provided by operating activities		62,953,600			44,358,300
Cash flows from investing activities:
	Purchase of property and equipment				(63,324,700	)		(36,623,600	)
	Proceeds from sale of property and equipment				1,085,800			1,242,900
	Purchase of net current assets in connection with acquisitions				(479,900	)		(1,122,800	)
	Purchase of property and equipment in connection with acquisitions				(135,000	)		(408,600	)
	Purchase of intangible assets in connection with acquisitions				(1,522,500	)		(4,233,300	)
	Other intangible asset additions				(300,000	)		(150,000	)
			Net cash used in investing activities		(64,676,300	)		(41,295,400	)
Cash flows from financing activities:
	Proceeds from the issuance of common stock, net of offering costs				126,068,600			—
	Proceeds from the exercise of stock options				3,860,000			3,145,100
	Proceeds from the issuance of Employee Stock Purchase Plan shares				794,900			—
	Principal payments on notes payable				(225,200	)		(269,800	)
			Net cash provided by financing activities		130,498,300			2,875,300
Net increase in cash and cash equivalents					128,775,600			5,938,200
Cash and cash equivalents at beginning of period					15,245,200			12,164,900
Cash and cash equivalents at end of period				$	144,020,800		$	18,103,100
Supplemental disclosure of cash flow information:
	Interest paid			$	31,800		$	436,400
	Income taxes paid			$	19,142,100		$	7,362,600
Noncash investing and financing activities:
	Value of common stock issued for acquisitions and land purchase			$	10,936,800		$	—

See accompanying notes to consolidated financial statements.

5

Copart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2002
(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, 2001 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. Certain prior period amounts have been reclassified in order to conform to the current year's presentation.

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 average shares outstanding to diluted weighted average shares outstanding:

	Three months ended April 30,		Nine months ended April 30,
	2002	2001	2002	2001
Basic weighted average shares outstanding	90,830,500	82,609,700	87,660,800	82,166,000
Stock options outstanding	2,685,300	2,743,000	2,568,200	2,424,700
Diluted weighted average shares outstanding	93,515,800	85,352,700	90,229,000	84,590,700

NOTE 3—Segment Reporting:

        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—Goodwill and Intangible Assets:

        On August 1, 2001, the Company adopted Financial Accounting Standards Board (FASB) Statement No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets." Statement No. 141 requires that the purchase method of accounting be used for all business combinations and that certain acquired intangible assets be recognized as assets apart from goodwill. Statement No. 142 provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level.

        In accordance with Statement No. 142, the Company completed the transitional impairment test of intangible assets during the second quarter of fiscal 2002. That effort, and preliminary assessments of identifiable intangible assets, indicate no adjustment was required upon adoption of this pronouncement. The impairment testing is performed in two steps: (i) the determination of impairment, based upon the fair value of a reporting unit as compared to its carrying value, and (ii) if there is an impairment, this step measures the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill.

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        The following table sets forth the intangible assets by major asset class as of April 30, 2002:

Amortized intangibles:
	Covenants not to compete	$	9,411,000
	Accumulated amortization		(4,757,900	)
Net intangibles		$	4,653,100

Aggregate amortization expense on intangible assets was approximately $1,202,600 for the nine months ended April 30, 2002. There was no impairment loss recorded during the nine months ended April 30, 2002.

The change in the carrying amount of goodwill for the nine months ended April 30, 2002 is as follows:

Balance as of August 1, 2001	$	82,753,400
Goodwill acquired during the period		9,023,400
Balance as of April 30, 2002	$	91,776,800

The following table reflects the consolidated results adjusted as though the adoption of Statement No. 142 occurred at the beginning of fiscal 2001:

	Three months ended April 30,				Nine months ended April 30,
	2002		2001		2002		2001
Net income, as reported	$	16,600,400	$	11,485,200	$	41,854,000	$	29,753,600
Goodwill amortization, net of tax effect		—		359,300		—		1,061,500
Adjusted net income	$	16,600,400	$	11,844,500	$	41,854,000	$	30,815,100
Basic earnings per share, as reported	$	0.18	$	0.14	$	0.48	$	0.36
Goodwill amortization, net of tax effect		—		—		—		0.02
Adjusted basic net income per share	$	0.18	$	0.14	$	0.48	$	0.38
Diluted earnings per share, as reported	$	0.18	$	0.13	$	0.46	$	0.35
Goodwill amortization, net of tax effect		—		0.01		—		0.01
Adjusted diluted net income per share	$	0.18	$	0.14	$	0.46	$	0.36

NOTE 5—Acquisition and Openings:

        During June 2002, the Company purchased a 56-acre salvage auction facility located in Haslet, Texas. During May 2002, the Company opened two 15-acre salvage auction facilities located in Tucson, Arizona and Somerville, New Jersey. With the addition of these locations, the Company has 92 facilities in 40 states.

NOTE 6—Recent Accounting Pronouncements:

        In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to legal obligations associated with retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We are currently evaluating the impact of SFAS No. 143 on our financial statements and related disclosures.

        In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," it retains many of the fundamental provisions of that Statement. We will adopt the provisions of SFAS No. 144 commencing August 1, 2002. The effects of adopting SFAS No. 144 are currently being determined.

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ITEM 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 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

        We process salvage vehicles principally on a consignment method, on either the Percentage Incentive Program ("PIP") or on a fixed fee consignment basis. Under PIP, we agree to sell at auction all of the salvage vehicles of a vehicle supplier in a specified market for a predetermined percentage of the vehicle sales price. Under our fixed fee consignment program, we sell vehicles for a fixed consignment fee, generally $50 to $150 per vehicle. Using either consignment method, only the fees associated with vehicle processing are recorded in revenue.

        For the three months ended April 30, 2002 and 2001, approximately 68% and 61%, respectively, and for the nine months ended April 30, 2002 and 2001, approximately 67% and 60%, of the vehicles we sold, respectively, were processed under PIP. The increase in the percentage of vehicles sold under PIP is due to our successful marketing efforts. We attempt to convert vehicle supplier agreements at acquired operations to PIP, which typically results in higher net returns to vehicle suppliers and higher fees to us than standard fixed fee consignment programs.

        For the three months ended April 30, 2002 and 2001, approximately 32% and 39%, respectively, and for the nine months ended April 30, 2002 and 2001, approximately 33% and 40%, of the vehicles we sold, respectively, were processed under fixed fee agreements. The decline in the percentage of vehicles under fixed contracts is the direct result of our marketing efforts to convert contracts from fixed fee to PIP.

        Due to a number of factors, including the timing and size of new acquisitions, market conditions, and acceptance of PIP by vehicle suppliers, the percentage of vehicles processed under these consignment methods in future periods may vary.

        Our 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 fee programs where we charge 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 our auctions for vehicles processed that we own.

        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 that we own. Costs associated with general and administrative expenses consist primarily of executive, accounting and data processing, sales personnel, professional fees and marketing expenses.

        The period-to-period comparability of our operating results and financial condition is substantially affected by business acquisitions and new openings made by us during such periods.

8

Acquisitions and New Openings

        Since the beginning of fiscal 2000, we have experienced significant growth due in part to the acquisition of sixteen vehicle auction facilities and the establishment of eleven new facilities. All of these acquisitions have been accounted for using the purchase method of accounting.

        As part of our overall expansion strategy of offering integrated service to vehicle suppliers, we anticipate acquiring and developing additional facilities in new regions, as well as the regions currently served by our facilities.* As part of this strategy, to date in fiscal 2002, we have acquired new facilities located in or near Haslet, Texas; New Castle, Delaware; Savannah, Georgia; Tifton, Georgia and Charleston, West Virginia and opened new facilities in or near Lyman, Maine; Somerville, New Jersey and Tucson, Arizona. In fiscal 2001, we acquired facilities in or near Chatham, Virginia; Shreveport, Louisiana and Mount Morris, Pennsylvania and opened new facilities in or near Harrisburg, Pennsylvania; Chicago Heights, Illinois; Martinez, California; Lawrenceburg, Kentucky and New Orleans, Louisiana. In fiscal 2000, we 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 or near Graham, Washington; Denver, Colorado and West Palm Beach, Florida. We believe that these acquisitions and openings strengthen our national coverage.

        We seek to increase revenues and profitability by, among other things, (i) acquiring and developing new salvage vehicle auction facilities in key markets, (ii) pursuing national and regional vehicle supply agreements, (iii) expanding our service offerings to suppliers and buyers and (iv) developing and expanding public automobile auction facilities. In addition, we implement our pricing structure and merchandising procedures and attempt to effect cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems and redeploying personnel when necessary.

Critical Accounting Policies and Estimates

        The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, vehicle pooling costs, bad debts, investments, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

        We maintain allowances for doubtful accounts for estimated losses resulting from disputed amounts billed to suppliers or buyers and the inability of our suppliers or buyers to make required payments. If billing disputes exceed expectations and/or if the financial condition of our suppliers or buyers were to deteriorate, additional allowances may be required.

        We defer, in vehicle pooling costs, certain yard and fleet expenses of vehicles consigned to and received by us but not sold as of the balance sheet date. We quantify the deferred costs using a calculation that includes the number of vehicles at our facilities at the beginning and end of the period, the number of vehicles sold during the period and certain yard and fleet expenses of the period. The primary expenses capitalized are labor, transportation, and vehicle processing. If our estimates are

9

incorrect then yard and fleet expenses of the current period would be over- or under-stated and the opposite under- or over-statement would occur in the future.

        We evaluate the impairment of goodwill annually at a facility level by comparing the fair value of the reporting unit to its carrying value. Under this accounting policy the company has not recognized any charges for the impairment of goodwill. Future adverse changes in market conditions or poor operating results of a facility could result in losses or an inability to recover the carrying value of the investment that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

Results of Operations

Three Months Ended April 30, 2002 Compared to Three Months Ended April 30, 2001

        Revenues were approximately $90.2 million during the three months ended April 30, 2002, an increase of approximately $18.7 million, or 26%, over the three months ended April 30, 2001. The increase in revenues was due primarily to the increase in gross proceeds generated from auctioned salvage vehicles and increased buyer fees. Gross proceeds were approximately $337.3 million during the three months ended April 30, 2002, an increase of approximately $43.6 million, or 15%, over the three months ended April 30, 2001.

        New facilities in or near Martinez, California; Lawrenceburg, Kentucky; New Orleans, Louisiana; New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Lyman, Maine contributed approximately $6.4 million of new revenue for the three months ended April 30, 2002.

        Yard and fleet expenses were approximately $53.0 million during the three months ended April 30, 2002, an increase of approximately $9.8 million, or 23%, over the three month period ended April 30, 2001. The increase in yard and fleet expenses was due principally to the cost of handling increased volume of vehicles at existing operations and the costs of new facilities. Approximately $4.5 million of the change was the result of the acquisition and opening of new facilities. Yard and fleet expenses from existing facilities grew by approximately $5.3 million, or 12%, compared to existing facility revenue growth of approximately $12.3 million, or 17%. Yard and fleet expenses decreased to 59% of revenues during the third quarter of fiscal 2002, as compared to 60% of revenues during the same period of fiscal 2001.

        General and administrative expenses were approximately $6.9 million during the three months ended April 30, 2002, an increase of approximately $1.3 million, or 23%, over the comparable period in fiscal 2001. This increase is due primarily to increased payroll and other operating expenses. General and administrative expenses remained unchanged at 8% of revenues during the third quarter of fiscal 2002 and fiscal 2001.

        Depreciation and amortization expense was approximately $4.2 million during the three months ended April 30, 2002, an increase of approximately $0.6 million, or 18%, over the comparable period in fiscal 2001. This increase was due primarily to depreciation and amortization of capital expenditures and covenants not to compete and depreciation of acquired assets resulting from the acquisition of new salvage auction facilities. The adoption of Financial Accounting Standards Board Statement No. 142 reduced goodwill amortization expense by approximately $0.7 million for the three months ended April 30, 2002. On a pro forma basis, if the Company had applied Statement No. 142 during the corresponding quarter in the prior year, goodwill amortization expense would be reduced by approximately $0.6 million.

        Operating income was $26.0 million during the three months ended April 30, 2002, an increase of approximately $6.9 million, or 36%, over the comparable period in fiscal 2001. Existing facilities produced $5.2 million of the increase due to improved PIP percentages, market share gains, and other

10

factors. New facilities in or near Martinez, California; Lawrenceburg, Kentucky; New Orleans, Louisiana; New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Lyman, Maine produced $1.7 million of the increase.

        Total other income was approximately $1.0 million during the three months ended April 30, 2002, an increase of approximately $0.8 million, over the three months ended April 30, 2001. The increase is due to interest income earned on the $126 million raised in our November 2001 follow-on offering, disposal proceeds from certain fixed assets and a decrease in total debt.

        Our effective combined federal, state and local income tax rate of 38.5% for the three months ended April 30, 2002 was lower than the combined rate of 40% for the three months ended April 30, 2001, due to changes in estimated state income tax rates.

        Due to the foregoing factors, we realized net income of approximately $16.6 million for the three months ended April 30, 2002, compared to net income of approximately $11.5 million for the three months ended April 30, 2001.

Nine Months Ended April 30, 2002 Compared to Nine Months Ended April 30, 2001

        Revenues were approximately $233.8 million during the nine months ended April 30, 2002, an increase of approximately $48.6 million, or 26%, over the nine months ended April 30, 2001. The increase in revenues was due primarily to the increase in gross proceeds generated from auctioned salvage vehicles and increased buyer fees. Gross proceeds were approximately $903.1 million during the nine months ended April 30, 2002, an increase of approximately $128.2 million, or 17%, over the nine months ended April 30, 2001.

        New facilities in or near Martinez, California; Lawrenceburg, Kentucky; New Orleans, Louisiana; New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Lyman, Maine contributed approximately $14.4 million of new revenue for the nine months ended April 30, 2002.

        Yard and fleet expenses were approximately $139.4 million during the nine months ended April 30, 2002, an increase of approximately $26.7 million, or 24%, over the nine-month period ended April 30, 2001. The increase in yard and fleet expenses was due principally to the cost of handling increased volume at existing operations and the costs of new facilities. Approximately $11.6 million of the change was the result of the acquisition and opening of new facilities. Yard and fleet expenses from existing facilities grew by approximately $15.1 million, or 13%, compared to existing-facility revenue growth of $34.2 million, or 18%. Yard and fleet expenses decreased to 60% of revenues during the first nine months of fiscal 2002, as compared to 61% of revenues during the same period of fiscal 2001.

        General and administrative expenses were approximately $17.4 million during the nine months ended April 30, 2002, an increase of approximately $3.1 million, or 22%, over the comparable period in fiscal 2001. This increase is due primarily to increased payroll and other operating expenses. General and administrative expenses decreased to 7% of revenues during the first nine months of fiscal 2002, as compared to 8% of revenues during the same period of fiscal 2001.

        Depreciation and amortization expense was approximately $11.4 million during the nine months ended April 30, 2002, an increase of approximately $1.0 million, or 9%, over the comparable period in fiscal 2001. This increase was due primarily to depreciation and amortization of capital expenditures and covenants not to compete and depreciation of acquired assets resulting from the acquisition of new salvage auction facilities. The adoption of Financial Accounting Standards Board Statement No. 142 reduced goodwill amortization expense by approximately $2.0 million for the nine months ended April 30, 2002. On a pro forma basis, if the Company had applied Statement No. 142 during the corresponding nine months in the prior year, goodwill amortization expense would be reduced by approximately $1.8 million.

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        Operating income was $65.6 million during the nine months ended April 30, 2002, an increase of approximately $17.8 million, or 37% over the comparable period in fiscal 2001. Existing facilities produced $15.4 million of the increase due to improved PIP percentages, market share gains, and other factors. New facilities in or near Martinez, California; Lawrenceburg, Kentucky; New Orleans, Louisiana; New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Lyman, Maine produced $2.4 million of the increase.

        Total other income was approximately $2.5 million during the nine months ended April 30, 2002, an increase of approximately $1.0 million over the nine months ended April 30, 2001. The increase is due to interest income earned on the $126 million raised in our November 2001 follow-on offering, disposal proceeds from certain fixed assets and a decrease in total debt.

        Our effective combined federal, state and local income tax rate of 38.6% for the nine months ended April 30, 2002 was lower than the combined rate of 40% for the nine months ended April 30, 2001, due to changes in estimated state income tax rates.

        Due to the foregoing factors, we realized net income of approximately $41.9 million for the nine months ended April 30, 2002, compared to net income of approximately $29.8 million for the nine months ended April 30, 2001.

Liquidity and Capital Resources

        We have financed our growth through cash generated from operations, debt financing, public offerings of common stock and the equity issued in conjunction with certain acquisitions.

        As of April 30, 2002, we had working capital of approximately $183.2 million, including cash and cash equivalents of approximately $144.0 million. Our 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.

        Net cash provided by operating activities increased by approximately $18.6 million from the nine months ended April 30, 2001 to $63.0 million from the nine months ended April 30, 2002.

        During November 2001, we completed a follow-on public offering of 6.9 million shares of our common stock at a price to the public of $19.33 per share, split adjusted. All of the shares were sold by us and the offering raised $126.1 million after underwriting discounts and offering costs.

        Capital expenditures (excluding those associated with fixed assets attributable to acquisitions) were approximately $63.3 million and $36.6 million for the nine months ended April 30, 2002, and 2001, respectively. Our capital expenditures have related primarily to opening and improving facilities and acquiring yard equipment.

        Cash and cash equivalents increased by approximately $128.8 million and $5.9 million for the nine months ended April 30, 2002 and 2001, respectively. To date, our liquidity and capital resources have not been materially affected by inflation. During the winter months, most of our facilities process 10% to 30% more vehicles than at other times of the year. This increased seasonal volume requires the increased use of our cash to pay out advances and handling costs of the additional business.

        We believe that our currently available cash, cash generated from operations and borrowing availability under our bank credit facilities and equipment leasing lines will be sufficient to satisfy our operating and working capital requirements for at least the next 12 months.

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Factors That May Affect Future Results

We depend on a limited number of major suppliers of salvage vehicles, and the loss of one or more of these major suppliers could adversely affect our results of operations and financial condition.

        Historically, a limited number of vehicle suppliers have accounted for a substantial portion of our revenues. In the third quarter of fiscal 2002, vehicles supplied by our two largest suppliers accounted for approximately 13% and 9% of our revenues, respectively. Supplier arrangements are either written or oral agreements typically subject to cancellation by either party upon 30 to 90 days notice. Vehicle suppliers have terminated agreements with us in the past in particular markets, which has adversely affected the pricing for auction services in those markets. There can be no assurance that our existing agreements will not be canceled. Furthermore, there can be no assurance that we will be able to enter into future agreements with vehicle suppliers or that we will be able to retain our existing supply of salvage vehicles. A reduction in vehicles from a significant vehicle supplier or any material changes in the terms of an arrangement with a substantial vehicle supplier could have a material adverse effect on our results of operations and financial condition.

The salvage vehicle auction industry is highly competitive and we may not be able to compete successfully.

        We face significant competition for the supply of salvage vehicles and for the buyers of those vehicles. We believe our principal competitors include vehicle auction companies and vehicle dismantlers, many of whom may have established relationships with vehicle suppliers and buyers and may have greater financial resources than us. Due to the limited number of vehicle suppliers and the absence of long-term contractual commitments between us and our suppliers, there can be no assurance that our competitors will not gain market share at our expense.

        We may also encounter significant competition for local, regional and national supply agreements with vehicle suppliers. There can be no assurance that the existence of other local, regional or national contracts entered into by our competitors will not have a material adverse effect on our business or our expansion plans. Furthermore, we are 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 our expansion objectives or have a material adverse effect on our results of operations. These potential new competitors may include consolidators of automobile dismantling businesses, organized salvage vehicle buying groups, automobile manufacturers, automobile auctioneers and software companies. While most vehicle suppliers have abandoned or reduced efforts to sell salvage vehicles directly without the use of service providers such as us, there can be no assurance that this trend will continue, which could adversely affect our market share, results of operations and financial condition. Additionally, existing or new competitors may be significantly larger and have greater financial and marketing resources than us; therefore, there can be no assurance that we will be able to compete successfully in the future.

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Because the growth of our business has been due in large part to the acquisition and development of salvage vehicle auction facilities, the rate of growth of our business and revenues may decline if we are not able to successfully complete the acquisition and development of facilities in the future.

        We seek to increase our sales and profitability through the acquisition and development of salvage vehicle auction facilities. There can be no assurance that we will be able to:

•

continue to acquire additional facilities on favorable terms; or



•

increase revenues and profitability at newly acquired facilities.

        Our acquisitions and facility openings in the future may not allow us to sustain our historic rate of growth, which may adversely affect our results of operations and financial condition. There can be no assurance that our future growth and expansion, if any, will result in increasing profitability.

As we continue to expand our operations, our failure to manage growth could harm our business and adversely affect our results of operations and financial condition.

        Our ability to manage growth is not only dependent on our ability to successfully integrate new facilities, but also on our ability to:

•

hire, train and manage additional qualified personnel;



•

establish new relationships or expand existing relationships with vehicle suppliers;



•

identify and acquire or lease suitable premises on competitive terms;



•

secure adequate capital;



•

maintain the supply of vehicles from vehicle suppliers; and



•

compete successfully in the public automobile auction sector.

        Our inability to control or manage these growth factors effectively could have a material adverse effect on our results of operations and financial condition.

We have limited experience in the public automobile auction business and may not be successful in our efforts to compete in this market, which may adversely affect our current growth strategy.

        We have historically focused on the operation, acquisition and development of salvage vehicle auction facilities and only have limited experience in operating public automobile auction facilities. The public automobile auction market differs from the salvage vehicle auction market in that used vehicles in general working order are sold to the public. We intend to expand our public automobile auction facilities through the acquisition of public auction sites and cannot know whether our existing salvage auction business model will translate successfully into the public automobile auction market. To the extent that we are unable to successfully compete in the public automobile auction market, our growth strategy could be harmed.

Our annual and quarterly performance may fluctuate, causing the price of our stock to decline.

        Our revenues and operating results have fluctuated in the past and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Factors that may affect our operating results include, but are not limited to, the following:

•

fluctuations in the market value of salvage and used vehicles;



•

the availability of salvage vehicles;

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•

variations in vehicle accident rates;



•

buyer attendance at salvage vehicle auctions;



•

delays or changes in state title processing;



•

changes in state or federal laws or regulations affecting salvage vehicles;



•

our ability to integrate and manage our acquisitions successfully;



•

the timing and size of our new facility openings;



•

the announcement of new vehicle supply agreements by us or our competitors;



•

severity of weather and seasonality of weather patterns;



•

the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure; and



•

the availability and cost of general business insurance.

        Due to the foregoing factors, our operating results in one or more future periods can be expected to fluctuate. As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance. In the event such fluctuations result in our financial performance being below the expectations of public market analysts and investors, the price of our common stock could decline substantially.

Government regulation of the salvage vehicle auction industry may impair our operations, increase our costs of doing business and create potential liability.

        Participants in the salvage vehicle auction industry are subject to, and may be required to expend funds to ensure compliance with, a variety of federal, state and local governmental, regulatory and administrative rules, regulations, licensure requirements and procedures, including those governing vehicle registration, the environment, zoning and land use. Failure to comply with present or future regulations or changes in interpretations of existing regulations may result in impairment of our operations and the imposition of penalties and other liabilities. In addition, new regulatory requirements or changes in existing requirements may delay or increase the cost of opening new facilities, may limit our base of salvage vehicle buyers and may decrease demand for our vehicles.

The operation of salvage vehicle auction facilities poses certain environmental risks which could adversely affect our results of operations and financial condition.

        Our 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 and, during that time, spills of fuel, motor oils and other fluids may occur, resulting in soil, surface water or groundwater contamination. In addition, certain of our facilities generate and/or store petroleum products and other hazardous materials, including waste solvents and used oils. We could incur substantial expenditures for preventative, investigative or remedial action and could be exposed to liability arising from our operations, contamination by previous users of certain of our acquired facilities, or the disposal of our waste at off-site locations. Environmental laws and regulations could become more stringent over time and there can be no assurance that we or our operations will not be subject to significant costs in the future. Although we have obtained indemnification for pre-existing environmental liabilities from many of the persons and entities from whom we have acquired facilities, there can be no assurance that such indemnifications will be adequate. Any such expenditures or liabilities could have a material adverse effect on our results of operations and financial condition.

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If we experience problems with our trucking fleet operations, our business could be harmed.

        We use a fleet of trucks to pick up and deliver vehicles to and from our auction facilities. We are subject to the risks associated with providing trucking services, including inclement weather, disruptions in the transportation infrastructure, availability and price of fuel and other liabilities arising from accidents to the extent we are not covered by insurance. In addition, our failure to pick up and deliver vehicles in a timely and accurate manner could harm our reputation and brand, which could have a material adverse effect on our business.

Our executive officers, directors and their affiliates hold a large percentage of our stock and their interests may differ from other shareholders.

        Our executive officers, directors and their affiliates beneficially own, in the aggregate, in excess of 20% of our common stock. If they were to act together, these shareholders would have significant influence over most matters requiring approval by shareholders, including the election of directors, any amendments to our articles of incorporation and certain significant corporate transactions. In addition, without the consent of these shareholders, we could be delayed or prevented from entering into transactions that could be beneficial to us or our other investors. These shareholders may take these actions even if they are opposed by our other investors.

If we lose key management or are unable to attract and retain the talent required for our business, we may not be able to successfully manage our business or achieve our objectives.

        Our future success depends in large part upon the leadership and performance of our executive management team, all of whom are employed on an at-will basis and none of whom are subject to any agreements not to compete. If we lose the service of one or more of our executive officers or key employees, in particular Willis J. Johnson, our Chief Executive Officer, and A. Jayson Adair, our President, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

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PART II—OTHER INFORMATION

ITEM 6—EXHIBITS AND REPORTS ON FORM 8-K

(a)

Reports on Form 8-K.

        None

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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. HILTYWayne R. Hilty, Senior Vice President and Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

Date: June 7, 2002

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QuickLinks

Copart, Inc. and Subsidiaries Index to the Quarterly Report April 30, 2002

ITEM 1—FINANCIAL INFORMATION

Copart, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited)
Copart, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited)
Copart, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Copart, Inc. and Subsidiaries Notes to Consolidated Financial Statements April 30, 2002 (Unaudited)

ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II—OTHER INFORMATION

ITEM 6—EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES