FAIRFIELD, Calif. -

Neither income growth nor rising revenue triggered investment analysts’ interest when Copart revealed its performance for the first quarter of its 2012 fiscal year. Seeing Copart’s cash on hand reading jump by more than $130 million is what turned Wall Street observers’ heads.

So is Copart planning to buy more than just its own stock with all of that cash? Copart chief executive officer Jay Adair tried to center his answer on how the salvage auction operation is boosting its technological foundation in light of an ongoing stock buyback initiative.

“If you look at the number of shares that trade on Copart and following all of the rules you have to follow in buying your own stock back, there’s just a limit on how much stock you can buy back in a quarter without tendering,” Adair explained on a conference call.

“If you look historically, we’ve kept about a couple hundred million dollars in cash on the balance sheet throughout the last fiscal year as we’ve bought stock back,” he continued.

“We’ve talked about this on previous conference calls. You just don’t know what’s going to happen in the market,” Adair went on to say. “You don’t know how Wall Street is going to react to your stock price. We let the cash balance dip in the fourth quarter because (chief financial officer Will Franklin) had already lined up the additional financing. By the time we reported the quarter, it was days later we secured the loan.”

Nonetheless, Copart indicated its cash position strengthened from a little more than $74 million on July 31 to more than $212.6 million on Oct. 31, the close of its first quarter.

“The point is we want to have a large cash position to take advantage of opportunities,” Adair stressed. “That may be buying stock back. That may be buying companies. We do have plans for growth. We’ve got some systems we’re working on right now that we’d like to install first. Obviously that’s not the only way we can grow. We’ve gone into Canada. We’ve gone into the U.K. with the existing systems we have. But at some point, we have to cut over and move to new technology and new systems that will take us out into the next decade. We’re in that mode right now.

“If there is an opportunity that comes along on the acquisition front, we’re literally months away from deploying new technology, not years away from deploying that technology,” he pointed out.

“If we see an opportunity to buy a company, we’re going to do that as well. We need to have that cash on the balance sheet so we have all of our options in front of us,” Adair went on to say.

The analyst then asked at how much cash Copart considers to be a comfortable level.

Adair responded with, “That’s not something I would state on a call. That makes sense right?”

First-Quarter Performance

Igniting the cash rise, Copart opened its 2012 fiscal year with gains in revenue, operating income and net income.

For the three months ended Oct. 31, the company determined its revenue, operating income and net income were $225.6 million, $65.4 million and $41.1 million, respectively. The figures represent increases in revenue of $13.0 million or 6.1 percent, in operating income of $5.8 million or 9.7 percent percent and in net income of $3.3 million or 8.8 percent from the same quarter last year.

“We’re happy to report the quarter. We’re very pleased to see the growth in revenue, operating income and net income,” Adair surmised.

Franklin noted fully diluted earnings per share for the first quarter were 62 cents, compared to 45 cents for the same period last year, an increase of 37.8 percent.

During the first quarter the company prospectively adopted accounting standards update 2009-13, Revenue Arrangements with Multiple Deliverables (ASU 2009-13).

"Consequently, effective Aug. 1, 2010, the company recognizes certain revenues, primarily towing fees, titling fees and vehicle preparation fees when the service is performed,” Franklin explained.

“Prior to our first quarter of fiscal 2011, these revenues were recognized when the car associated with those fees was sold,” he added.

As a result of this change, Copart recognized approximately $9.1 million in revenue and $8.8 million in expenses associated with that revenue which would have otherwise been recognized in future periods.

Excluding the impact of ASU 2009-13, growth in revenue would have been $19.9 million or 9.8 percent over the same quarter last year.

During the current quarter, the company incurred approximately $1.5 million in additional expenses, primarily stay pay, severance and relocation expenses, directly associated with moving its headquarters from Fairfield, Calif., to Dallas.

And as referenced when Adair talked about the company’s cash level, the company repurchased 1,069,898 shares of its common stock at a weighted average price of $40.73 per share under its share repurchase program during the first quarter.

At the end of the quarter, Copart had 27,477,065 shares available for repurchase under its share repurchase program.