Copart, Inc. (NASDAQ:CPRT) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
QCSA Cost Details
Robert Labick – CJS Securities: I wanted to just dig in a little bit more starting with yard and fleet. The increase in the quarter – you mentioned, obviously, the increased inventory, is that 20% including QCSA or is that – what’s the organic number on that?
William E. Franklin – SVP and CFO: No, that’s not including QCSA.
Robert Labick – CJS Securities: Are there any unusual Sandy expenses in there or anything else?
William E. Franklin – SVP and CFO: No, most of those have already flowed through, primarily the inefficiencies that are associated with the integration of QCSA and QCSA itself.
Robert Labick – CJS Securities: Can you give us a sense, or is it too soon to know, roughly a year from now how much can be pulled out once you fully integrate both companies?
A. Jayson Adair – CEO: I caution giving that kind of view on it. I would say this. Our expectation are that the margins will be similar to the margins of Copart, so that will convert that revenue to a historical Copart margin, not what you’re currently seeing.
Robert Labick – CJS Securities: Then just kind of stick on the margin side, just want to verify one thing which I think you’ve been saying. But, has there been any material change in the revenue model, the pricing – outside of commodities, of course – or the cost of processed cars, or is the near-term gross margin decline, the identifiable factors, we’ve seen the international and the integration and things like that?
William E. Franklin – SVP and CFO: No, there’s really been no change in the overall model. I mean, we’ve seen a little bit of cost creep up in the cost processed cars; tow costs have not come down after Sandy, and we had a little bit of increase in costs associated with the title processing. The State of Georgia is now charging a $75 per car to convert to title, from a clean title to a branded title. And so, we’re seeing a little bit of…
A. Jayson Adair – CEO: I would just mention, that is pass-through now.
William E. Franklin – SVP and CFO: That’s pass-through. It’s part of revenue, but it’s pass-through at cost, basically.
A. Jayson Adair – CEO: Right.
William E. Franklin – SVP and CFO: So, we’re seeing a little bit of creep up in the cost to process the car. Other than that, there really has not been a fundamental change in the model. Our ASPs tend to fluctuate with used car pricing, commodity pricing. We tend to look at the Manheim Index, and there’s a few indexes that we focus on for our commodity information. And that, as Jay said, that trend was trending down through July and it seems to have come up a little bit in August and that’s what we’re seeing in our auction results.
Robert Labick – CJS Securities: Then one last one and I’ll hop out. In terms of capital expenditures, sometimes you’ll talk about the opportunities in the next 12, 18 months out there. Are you seeing more international opportunities on the near-term horizon and what are the opportunities in the U.S. for CapEx?
A. Jayson Adair – CEO: Yeah, there are opportunities out there. I won’t talk specifically to them. And we will make some acquisitions in the year ahead. But our focus this year will be clearly on completing the integration of QCSA, completing the migration from California. That will be completely done this year, this fiscal year. So, we’ve got some technologists that will be moving (indiscernible) in the next couple quarters. And so really, fiscal ’14, if you will, will be very much focused on fully integrating and completing the move. I think we talked about project overdrive a couple of years ago and completing project overdrive which is the move to Texas and a number of moves in addition to that and then completing QCSA and implementing new technology, the website, the mobile platform, and then an internal system that we’re implementing as well. So, we want to get all those done and then we’ll get, I would say, more aggressive on the acquisition front.
William Armstrong – C.L. King & Associates: In G&A, Will, you pretty much outlined some of the major buckets of the increase year-over-year. Maybe could you tell us how much of that $9.4 million was non-recurring and how much you might be ongoing?
William E. Franklin – SVP and CFO: Yeah, I mentioned the cost associated with QCSA in the deals, and that was about $4 million. So, we would expect to rationalize most of that cost. Now, the timing on that, like Jay said, will be during the course of this year, and I wouldn’t be specific about when that will come down, but I would expect most of that to disappear.
A. Jayson Adair – CEO: I would also, Bill, just comment on technology. We are in the middle – we’ve talked about it before. We try not to keep bringing up the same points over and over, but we’re in the process of making some major technology changes. So we do have duplicate costs today with technology that won’t exist in years ahead.
William Armstrong – C.L. King & Associates: With QCSA, I think you acquired 39 locations in total. Did I hear you say, at the end of the day, you will end up keeping about half a dozen of them, somewhere in that neighborhood?
A. Jayson Adair – CEO: Well, half a dozen on the salvage front, and then there’s another six, seven, eight facilities on our DVAA side. So you have to both of those together. So, it would be somewhere around a dozen, 14, 15; somewhere in that range. We have not completed the integration plan yet. As I said, we’re not going to be implementing that plan until Q2. So, we haven’t completed it. We haven’t made a decision, but I would say somewhere between 12 and 15 stores, is where we will end up.
William Armstrong – C.L. King & Associates: At the end of last quarter, I think you still had about 10% of those Sandy – Hurricane Sandy vehicles still remaining. How much did those contribute to revenue and gross profit in the fourth quarter?
William E. Franklin – SVP and CFO: Very little terms of margin. Let me get that number for you. That’s about less than $10 million in revenue.
William Armstrong – C.L. King & Associates: Less than $10 million?
William E. Franklin – SVP and CFO: Yeah…
William Armstrong – C.L. King & Associates: Okay, great. Thanks.
William E. Franklin – SVP and CFO: Less than $1 million, which isn’t all, yeah. Less than $1 million in revenue and very less growth, but.
William Armstrong – C.L. King & Associates: So it’s lot less than $10 million. Okay.
A. Jayson Adair – CEO: Exactly. You’re making Will calculate on-the-fly here. He’s over here punching the calculator on the call.
William Armstrong – C.L. King & Associates: Sorry, I didn’t mean to cause any stress. Thank you very much.