Good day, everyone, and welcome to the Copart Incorporated 4th Quarter Fiscal 2016 Earnings Call. Just a reminder, today's conference is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jay Adair, Chief Executive Officer of Copart Incorporated. Please go ahead, sir.
Thank you, Samantha. Good morning, everyone, and welcome to the earnings call for the Q4 for Copart. With me in the room today is Jeff Liao, our CFO and Will Franklin, our Executive Vice President. I'm going to turn it over to Jeff, and he will give you an update on the financials and then Will will give you an update on the company and then we'll be happy to open it up for questions. With that, Jeff?
Thanks, Jay. Good morning, everyone. I'll start with the Safe Harbor. Our remarks today will contain forward looking statements within the meaning of federal securities laws, including without limitations, statements concerning management's assumptions of factors affecting anticipated growth in our markets and in the number of cars we expect to process. These assumptions include factors such as trends in accident frequency and severity, driver behavior and repair costs.
These statements are neither promises nor guarantees and are subject to substantial risks and uncertainties that could cause actual results to differ materially from those projected or implied by our statements and comments. For a discussion of the risks that could adversely affect the assumptions and trends we identify today or that otherwise affect our business generally, please review the risk factors contained in our quarterly report on Form 10 Q for the quarter ended April 30, 2016. Additional information will also be contained in our upcoming annual report on Form 10 ks and in other SEC filings. Copart expressly disclaims any obligation to update or revise these statements or comments. A brief note as well on non GAAP financial measures.
Included in today's discussion are certain non GAAP financial measures, including non GAAP net income per diluted share, which reflects the impact of changes in foreign currency exchange rates and certain tax benefits and foreign income tax credit limitations related to accounting for stock option exercises. These non GAAP financial measures do not represent alternative financial measures under GAAP. In addition, these non GAAP financial measures may be different from non GAAP financial measures used by other companies. Furthermore, these non GAAP financial measures do not reflect a comprehensive view of Copart's operations in accordance with GAAP and should only be read in conjunction with the corresponding GAAP financial measures. This information constitutes non GAAP financial measures within the meaning of Regulation G adopted by the U.
S. Securities and Exchange Commission. Accordingly, Copart has presented herein and will present in other information it publishes that contains these non GAAP financial measures. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures. We believe the presentation of non GAAP net income per diluted share included in this discussion in conjunction with the corresponding GAAP financial measures provides meaningful information for investors, analysts and management in assessing Copart's business trends and financial performance.
And now for our financial results. We are pleased with the results for our quarter and for the full year. I'll comment briefly on income statement trends for the quarter and for the full year and then a few share regarding our balance sheet and cash flow statements as well. As those who have followed us for some time know, we do not typically provide non GAAP measures. So this quarter's and this year's presentations of non GAAP net income and non GAAP EPS reflect unusual events this quarter and this year that were substantive enough to warrant this sort of communication.
For the best representative snapshot of our business, I'd recommend focusing on revenue, gross profit and operating income measures, though I will also walk you through the reconciliations as well. For the Q4, we experienced global revenue growth of 17.8% that includes a detrimental currency effect of approximately 1.8 percent of revenue or $6,000,000 largely due to the weakening of the British pound, most acutely following Brexit on June 23. We experienced global unit sales growth of 13.8%. This unit growth will elaborate upon further, largely driven by the same trends we've talked about in the past, including elevated driving activity, accident rates and total loss frequency. We observed service revenue growth of 18.8 percent outpacing purchase car revenue growth of 11.8%, largely due to our proactive shift from principal to agency cars, particularly for non insurance business.
Gross profit growth exceeded revenue growth. We grew from $118,800,000 in the Q4 of 2015 to 141.5 in the Q4 of 2016, which includes slight gross margin rate expansion. A few notes, just industry observations. Year over year scrap rates were now up 29% for the Q4. For the full year, I'll share the information in a few moments as well.
Scrap was down for the full year. Year over year used car values were plus or minus flat as well. Moving along down the income statement for the quarter, G and A expenditures increased by $2,000,000 ex D and A, up approximately $3,000,000 including D and A, as we placed more software assets into service from development and began depreciating them. As we've noted on prior calls, continue to grow on an absolute dollar basis going forward, though with reasonable top line growth rates, we should expect to achieve operating leverage. EBIT growth of 22.4 percent, yet again, leverage relative to the gross profit growth as well as revenue growth.
Our interest expense for the quarter was elevated somewhat by upfront expenses incurred in connection with the recapitalization of our debt financing, which I'll describe in greater detail as well. GAAP net income then for the quarter was $84,100,000 compared to $57,400,000 a year ago. Now a few comments on our non GAAP adjusted net income and EPS. We experienced 2 distinct currency related changes this quarter and this year that we have excluded from our non GAAP net income. First, for the Q4 and approximate post tax effect of $4,800,000 of book gains on our currency balances.
So we maintain cash balances outside the U. S. To the extent the U. S. Dollar appreciates relative to the functional currencies in our non U.
S. Operations will realize gains. We also experienced approximately $1,300,000 of after tax losses due largely to the weakening of the British pound following the Brexit event. Taxes for the quarter, you'll note, were meaningfully lower than our sustained run rate due primarily to our implementation of FASB ASU 20 sixteen-nine, which is mandatory for all companies for fiscal years beginning after December 15 this year. This accounting standard affects how companies account for the tax benefits of options exercises.
In this case, our reduced tax expense was partially offset by the losses of certain foreign tax credits again in connection with executive stock option exercises. We have effectively normalized, so to speak, our earnings for the quarter and for the year for these handful of events, including the currency changes as well as the tax accounting for stock option exercises. Our medium term tax view has not changed, excluding distortions from stock options exercises of this sort, which are of course episodic in nature and therefore unpredictable, we do expect sustained tax rates consistent with our historical rates. Excluding these factors then, we observed net income growth of approximately 17% year over year and EPS growth of over 30%, benefiting of course from stock repurchases completed this year and last year. I'll ask you to note that for the uniformity of presentation, we also adjusted the prior year results, prior quarter results, so the comparable numbers are equivalent.
A few comments on the full year, systematically similar to the Q4. Global revenue growth of 10.7%, detrimental currency effect of 1.5%. Unit sales growth of 11.9%, again the same underlying growth factors that we talked about for the Q4. Service revenue growth of 12.1 percent again outpaced purchase car revenue growth of 2.1% due to a shift from principal cars to agency. Gross profit growth slightly in excess of revenue up 12.7% for the full year year over year, EBIT growth of 18%.
GAAP net income growth then of 23 percent to $270,400,000 And then on an adjusted net income basis, again, adjusting for those same events that I described a moment ago for the quarter, we experienced net income growth of 15% for the full year and EPS growth of 25% for the full year. Shifting gears to the balance sheet and cash flow statement. We issued an 8 ks in July to announce the results of our recent amendments to our credit agreement. We increased the total available liquidity to Copart by raising an $850,000,000 revolver effectively replacing our term loan and existing revolver with a larger all revolving credit facility. Given the somewhat seasonal nature of our cash flow, the all revolver structure enables us to minimize interest expense without compromising liquidity.
We can effectively pay down debt as we generate cash while knowing we still have access to it to fund growth and other seasonal needs. A few cash flow highlights. Our operating cash flow for the year of $332,500,000 included substantial growth in our accounts receivable. Those who have followed Copart for some time know that these accounts receivables are largely advanced charges that we pay on behalf of our sellers for which we are ultimately reimbursed. And therefore, accounts receivables growth generally reflects inventory growth, inventory not in the GAAP sense, but literally in the number of cars we maintain in our yards.
We also experienced growth in our accounts payable and other accrued liabilities largely in the Q4, due largely to tax withholdings for stock option exercises approximately $15,000,000 as well as a reclass of book overdrafts from cash. We are optimizing our cash position again with the benefit of the revolving credit facility. We seek to pay down debt when we can and therefore have book overdrafts in AP. Two final notes, CapEx of $30,000,000 for quarter and $173,000,000 for the full year. Of that full year number of $173,000,000 approximately 75% was for land lease buyouts and development.
So in some sense, capacity or land acquisition. We've talked previously about the 2020 program. We'll elaborate in greater detail. The last note on share buybacks for the year, we purchased 11,300,000 shares over the course of the full fiscal year at a weighted average price of $39.29 Including the Q4 of last year, we repurchased 17,800,000 shares at an average price of $38.09 With that, I'll turn it over to Will.
Thank you, Jeff. I'll just reiterate what Jeff and Jay have already said. We're very pleased with the results for this quarter. The 17.8% growth in consolidated revenue came primarily from increased volume as worldwide volume grew by 13.8%. I'll start with a few comments on the U.
S. Operations, where volume increased 14% on a year over year basis. The increase in volume has come from growth in the size and our share of the salvage market as well as growth in our non insurance volume. As we have discussed on previous calls, we are seeing growth in the overall size of the North America salvage market. The growth in this market can be estimated by the product of 3 factors: the increase in the cars on the road or park the growth in accident frequency or how often those cars are involved in accidents And the growth in the total loss frequency, how often those cars involved in accidents are deemed to total economic loss.
The math yields an estimated growth in total cars for 2014, 2015 of between 7% and 9% and suggest using the current rate of growth in park and AXA frequency and the actual mid year growth rate for total loss frequency, a similar growth in 2016. While we expect the growth in Park to remain in the 1.5% to 2% range, we do not see the drivers of the growth in accident frequency and total loss frequency abating. According to Independent Statistical Services, or ISS, asset frequency increased 1.22% 2015 and 0.85% for the Q1 of 2016. The increase in accident frequency is tied to the increase in miles driven, the increase in the rate of speed driven, higher levels of driver distraction and less safe drivers entering the driving population. The growth in miles driven of 3.1% is due primarily to lower fuel prices and higher employment trends.
We're also seeing an increase in the rate of speed driven as more than ancron miles are driven on rural roads and freeways and because speed limits in states are trending upwards. In 2015, 5 states passed legislation allowing for higher speed limits and similar legislation is pending in 6 other states. Driver distractions may also be contributing to the increase in accident frequency. In a recent survey conducted by AAA Foundation For Traffic Safety, over 42% of respondents admitted to reading emails or text and 31% indicated that they had actually typed text while driving during the last 30 days. Finally, a recent study done by Brookings Senior Fellow, Clifford Winston suggests lower unemployment not only leads to more miles driven, it leads to riskier drivers on the road.
While accident frequency is up, the greatest impact on the growth in total cars has come from growth in the total loss frequency, driven by increase in repair costs relative to used vehicle values and option recoveries. The total loss decision is primarily an economic one. The car is totaled if the repair cost exceeds the net between the pre accident value of the vehicle less the anticipated recovery at auction. Repair cost continued to grow primarily due to consolidation in the collision repair industry, more severe accidents, greater complexity of newer cars and longer average replacement car rental times. According to CCC Information Services, since the year 2000, the percentage of volume processed by MSOs, our multi shop operations, has more than tripled and now stands at almost 36%.
And perhaps more interesting, since 2010, the percentage of volume processed by dealerships has doubled, now standing at 4%, suggesting a trend of increasing dealer collision repairs due to the complexity of restoring newer cars. Accident severity also appears to be increasing due to the higher rates of speed traveled and evidenced by the disproportional increase in traffic fatalities of 8% to the increase in miles driven of 3.1% and by the disproportionate increase in claim losses paid of 9.9% to the increased accident frequency. Cars are becoming more complex as they incorporate exotic and lightweight materials, intricate construction processes, sensors, cameras and other electronics, all of which demand that shops employ new equipment, tools and training as well as requiring more replacement parts for repair. According to CCC Information Services, today's electronics are estimated to make up as much as 40 percent to 50 percent of the total cost of a vehicle. As a reference, a 2014 Mercedes S has 7 cameras and 16 sensors, a trend we see affecting the mid level cars in the future.
For most of these parts, non OEM alternatives are not available. Finally, total loss frequency is impacted by the increasing length of time policyholders must be without their cars during the repair process, whether as a result of longer repair time or a longer queue time waiting to get into the collision repair shop. This increase not only elevates the total cost to repair the car, but also leads to dissatisfied policyholder. These factors have led to recent increases in total loss frequency in 2014, 2015 and 2016 of 1.2%, 5.6% and 6.8%, respectively. It should be noted that the growth in these years came in an environment when used car pricing remained relatively stable.
During this period, the Manheim used index rarely fluctuated more than 2% on a year over year basis. With the expected growth in supply of used cars due to increased off lease volume, we expect used car pricing to trend downward, putting additional upward pressure on total loss frequency. In addition to the growth in the size of the overall salvage market in the U. S, we saw growth in our market share. And finally, we saw growth in volume from our non insurance suppliers of 14.5% and now represents 18.2% of our total volume.
At the end of the quarter, our U. S. Inventory was up 20%, of which approximately 2.5% was attributable to cat activity. In our Q2, we announced an initiative to add 20 new yards to our North America network. However, based on our revised expectations for volume growth, we have expanded our objective for land acquisitions.
Further, we understand one of the key values we provide to our insurance customers is the ability to mitigate the risk of dissatisfied policyholders and of operational disruption during a catastrophe. To provide that value, we maintain excess capacity in both land and equipment. Our operations and our property acquisition teams performed remarkably in the recent series of cat events in Louisiana, Texas and Colorado. Nevertheless, we are increasing our excess land and equipment capacity in these and other high risk areas. Now I'll turn to the U.
K, in which we also saw growth in units sold increasing by 12.6%. In the U. K, insurance volume grew due to increases in both size and share of the insurance salvage market. Further, almost a third of the total volume growth came from non insurance sellers. Non insurance volume grew by 24.9% and now represents almost 17% of the total volume.
At the end of the quarter, our UK inventory was up over 20%. On a consolidated basis, we experienced an increase in the average cost to process each car due to operating environments of general growth and the extra expense associated with operating in cat environments and also due to growth in inventory. We remain focused on controlling G and A expenses. G and A spend for the current quarter of $31,000,000 was up on a year over year basis, primarily due to increased spend on support for international operations and for brand and IT development. For fiscal for the full fiscal year, our G and A spend was below the spends for 20152014 by 3% 16%, respectively.
The stronger dollar on a year over year basis had a negative impact on consolidated revenue and EBIT of $6,100,000 $1,600,000 respectively. While we grew our consolidated revenue by 17.8%, we grew our gross margin and our operating margin by 19.1% and 22 point 4%, respectively, once again demonstrating the operational leverage inherent in our business model. That concludes my comments. Samantha, now we'll turn the call back over to you to coordinate the Q and A session.
Thank you. At this time, we will open the floor for Our first question will come from Bob Labick with CJS Securities.
Hi. This is actually Lee Jagoda for Bob Labick. Good morning.
Good morning.
So just want to start on Germany. Can you discuss the difference between having the demo auctions and now the live auctions and what the opportunity is there and whether the insurance customers are the same as you have in the UK or are they new customers for you?
Well, first, we really won't address the international operations outside of the UK. That they're not meaningful to our financial results. But we will talk about our increased confidence in our international strategy and our view of the opportunity in Germany as well as all of Western Europe. So it's important to understand that Europe operates on different model in terms of the total loss settlement process. In Mainland Europe, the insurance company simply gives the policyholder a check to diminish value of their car.
And then it's up to the policyholder to dispose of that car. We think that the Copart model provides value not only to policyholder because obviously under the Copart model, they're getting a full reimbursement for that car upfront, providing them the ability to go replace that car immediately as opposed to waiting until they ultimately dispose of a wrecked asset. We also think it provides value to the other constituents of this transaction, including the buyer. So in the German model, a buyer will submit a bid for a wrecked car and then wait as long as 21 days before he knows if he'll receive that car. And in fact, statistics show that ultimately the buyer gets that car less than 10% of the time.
It's important to know that these buyers are buying raw material for their business. They take these to create value and they need access to these cars at a specific time and carve a specific type. And so for them to wait 21 days means that they're willing to bid less for those cars because of the uncertainty. So in this model, they're actually bidding less for the cars, which means the insurance companies are paying too much in their settlement because of the recoveries are less than what they would be under the efficient model that Copart provides. So we're very comfortable that we can come into this market and provide value.
In fact, we think that the insurance companies that adopt us have an opportunity to be somewhat disruptive in that market. We've done 3 test auctions. And in all three of those test auctions, the returns that we achieved were substantially greater than the returns achieved under the current model of disposing of those cars. I'm not sure if that answered all your questions, Lee, but I think it gives kind of a good overview of that market and our view of how it will affect it.
That was very helpful. Thank you. And one more for me and I'll hop back in the queue. You mentioned several greenfield openings and it sounds like you're going to be expanding those greenfields over time. Can you just discuss a little bit about the upfront costs and how long it typically takes for you to get more normalized margins at those greenfields?
Yes. It can everyone first off, everyone's different. So we can open up some greenfields and we'll have volume immediately. And obviously in that situation, the upfront detriment to our margins is much shorter. I would say that it was typically about a year before they're up and fully operational and functional in general.
Great. Thank you very much.
Thank you. And our next question will come from John Healy with Northcoast Research.
Thank you. Jay, I just wanted to talk a little bit about the commentary you guys provided about kind of total loss. I thought it was helpful how you talked about the cars on the road, the frequency and just the total loss relationship. Is there a way you could kind of size for us kind of your conversations you might have with some of the consulting companies or the insurance companies about ultimately where they think total loss can go to as a percentage of accidents. And over the last 10 or 15 years, it's been an expanding number.
But kind of ultimately maybe over the next 5 years or so, where you think that can go as a percentage of accidents?
Well, I just talked about all the elements that influence that number. And so you'd have kind of come to your own decision about how those will be affected by the introduction of new technologies and new laws. We don't think that in the short term and in the short term I'm rushing probably 3 or 4 or 5 years that anything is going to change with the current trends.
And I might add to that, some insurance companies run as high as 20% in total loss. And the average for the industry today quoted by CCC is 17% right now? Okay. So an average of 2019, somewhere as high as 20%. And yes, the shift 25 years ago is closer to 10%.
So it's continued to we used to give the analogy of the throwaway television. You had TV repairmen 50 years ago and now it's pretty rare. So it's the same thing with vehicles. As the complexity of vehicles increases, it makes them much more likely to total loss.
Hey, John, this is Joe. So I'd just add this color. I'd say that for the past 10 years, I think a big contributor to salvage frequency has been the increasing age of the fleet. So as cars went age 7.5 to 11.5 years, that I think is a good part of the story for the salvage increase you heard Will and Jay talk about historically. Prospectively from here, I think the age will likely stabilize.
I think most of the projections I've seen indicate that to be true, but these other forces I think will increasingly contribute to vehicle complexity, rear cameras, side view blind spot detection systems and so forth. Those have really penetrated vehicles or starting to penetrate vehicles now. I think the severity part of the equation is likely a forward looking phenomenon as much as it is backwards.
Sure, sure. I guess the reason I asked
the question, I was just trying to hoping that maybe try to get a little bit more of a forecast though. You talked about how some insurance companies are 20% now. I mean, is there a way of thinking where you think that number has a ceiling to go to or potentially kind of the ultimate end game there?
So I don't think we're in a better position to give you a point forecast than you are to develop your own. The contributors to this are many fold, as you know, right, used car values, repair costs, repair time, body shop utilization. There are just too many contributing factors to give you a point estimate. We do believe the trend is generally favorable.
Got you. And then I want
to ask about the purchase car business. I know there's a tendency to jump around a little bit. With scrap values kind of maybe picking up a little bit and maybe you're having some freed up capacity as you put some of these yards on. Is it reasonable to think that you'll be more active on purchased car in fiscal 2017 than 2016? Or is there any kind of parameters you can put around that?
No, I don't think the activity is going to change in a meaningful manner. It's just not a big enough part of our business to move the needle.
Okay. Thank you.
Thanks, John.
Thank you. Our next question will come from Elizabeth Suzuki with Bank of America.
Good morning. In the 3 months ended in August, there was an almost 30% increase in the crushed auto body pricing. According to American Recycler, it looks like September, the pricing was up almost 50% year over year, which seems like it bodes well for the Q1. Do you think it's fair to say that salvage value should keep trending upward?
Elizabeth, this is Jeff. On this one dimension alone, it's certainly the case that scrap values improved year over year. I think it's worth noting a couple of things. 1, scrap value most acutely affects our lowest end cars. So a car that's likely to be rebuilt, likely to be returned to service for some number of years, export or otherwise, is affected much less by scrap.
So it's the lowest end vehicles that are affected not literally not necessarily the high end cars, part 1. Part 2 is there are other contributing forces. So the strength of the U. S. Dollar being an important consideration given the number of cars we export out of the U.
S. The dollar has clearly strengthened against a lot of our reference currencies, a lot of our export currencies. So that's an offsetting consideration. But yes, all else equal, scrap improvement year over year would be helpful, yes.
Got you. Okay, that's helpful. Second, a lot of people are looking at the federal automated vehicles policy as an endorsement by the federal government of autonomous tech, which they're saying is going to significantly enhance vehicle safety. And what do you think is a realistic timeline of how quickly autonomous tech could really be adopted to the point where it actually impacts the accident rate of the overall fleet? And is it just too far down the line to be considered relevant?
Well, we've done a fair bit of homework on this question as you can imagine ourselves. And when I look, I'd say we have seen the historical analog in the sense that we have seen accident rates decline for a very long period of time. So from the mid-1970s to 2011, accident rates declined very steadily as the last generation of safety avoidance of accident avoidance technologies spread through the market. It took decades for it to do so, which is also going to be true today. But if the U.
S, for example, will see 15,000,000 or 17,000,000 of new car shipments in a given year, we have a car park of 250,000,000 or 260,000,000 cars. It is just decades, but the math is fairly straightforward. It will take decades before all cars have these technologies. The second note is that over that same period of time, from the 1970s, 1980s to 2011, the salvage industry grew well because the decline in accidents was more than offset by the total loss frequency, which is again a function of repair costs, vehicle age and so forth. So we've seen this movie before.
I think a lot of that will be true going forward as well. A lot of the technology that make automobiles safer also make them much more expensive to repair. You heard Will talk about computers and sensors and so forth. The typical car is much more complex today than it was 10 years ago. So the math is decades.
I think it's an open question as to precisely how many, but I think it's decades away.
Yes, makes sense. All right, thanks very much.
Thank you. Our next question will come from Ryan Brinkman with JPMorgan.
Hi, good morning. Thanks for taking my question. I know that you don't give traditionally you don't traditionally give very detailed guidance, but you did speak to many of the revenue drivers continuing into next year. What will you say are some of the other big drivers of performance in fiscal 2017 versus 2016 that investors should keep in mind? So for example, the trend in yard and fleet costs or G and A or capital investments?
Ryan, that's an understatement. I think we do not historically provide detailed guidance or general guidance. But I think your inquiry is fair. The most important driver you did hear Will talk about, which is the unit growth and therefore revenue growth assumptions. I'd say just looking backwards, say 4 to 8 quarters, big drivers are currency, scrap values, catastrophic events, which can cause higher than normalized cost incurrence.
G and A is largely predictable for us. We don't provide forward guidance except to say that it will continue to increase on an absolute dollar basis given the increased size and complexity of our business. So there are no other discontinuities. I think the general trends should be similar. As for capital investments, I think you noted at the end of your question about capital investments that won't per se affect the P and L that substantially.
As you know, we have deployed meaningful capital in land assets. So if you went to some other measures of operating performance returns on invested capital and so forth, our investments in our infrastructure could of course affect those numbers.
Okay, great. Thanks. And then just last question is on the international markets outside the U. K. I'm just curious if your performance in any of these different regions has caused you to want to invest more.
So for example, in India, I don't know if the experience there has caused you want to keep investing there? Or is it conversely possible too that your experience after having entered the market may not have been what you imagine the market may be different and you could potentially look to be also exiting some opportunities too? Thanks.
Yes. I would say that all of our recent experiences have done nothing but make us feel more optimistic about these markets. And the timing is somewhat uncertain, but we will be pursuing with systems and resources and anticipate real estate as well.
Great. Thanks.
Thank you. Our next question will come from Ben Bienvenu with Stephens Incorporated.
Hi, good morning. This is Daniel Immera on for Ben.
Good morning.
So first, you talked about expanding the land acquisition plans. Can you talk about maybe trends you're seeing in those markets? Or what makes you confident in building out that type of capacity?
Simply growth in volume. And it's kind of funny, I used to be on the finance side, and I was always arguing that you need to operate yards at 100% capacity. And for the 6 weeks during the time of the year where you have peak, you just operate it efficiently. That doesn't work. On the upside, you have to have a certain amount of excess capacity.
And now as we enter an environment where we're having cat situations more frequently for whatever reason, it amplifies the need to have excess capacity in terms of land to adequately serve our insurance customers. And so because of that, we're because of the increase in volume, because of the increase in cats and because of the growth in our market share, we find ourselves in a position where we really need to expand our network of facilities.
Daniel, let me quantify it a little bit for you. Copart from an inventory perspective grew 20% in the quarter. We have over 400,000 cars on the ground. So if you do that math and you then calculate that you can only store about 100 cars per acre And you sit back and you think about the fact that Copart added over 60,000 units to inventory year over year, you've got to add 600 acres of land to the company. And that's the kind of growth that we've been seeing in the last year.
And that's as Will said, we anticipate that growth going forward. So we are when we talk about our 2020 program, that was where we started 6 months ago. We will anticipate opening more than 20 locations at this point and expanding more than 20 locations at this point because of the growth in units and the corresponding growth in inventory because we have to store those vehicles.
All right. Thanks, Jed. Very, very helpful. And then kind of on the same lines about volumes. We've been hearing reports of a significant number of flood damaged vehicles out of Louisiana.
How does that compare, I guess, to maybe a Katrina or Sandy or what are you guys hearing out of those markets?
Yes. That market, I went in with a team during that event. That market is
about
a quarter of the size of Hurricane Katrina off the top of my head. So big event. We picked up a lot of cars, but still relatively small compared to a Katrina. In terms of a hurricane Sandy, Sandy was less than Katrina, probably a third off the top of my head of the size of Hurricane Sandy.
All right, great. Well, congratulations on a good quarter.
Thank you.
Thank you. Our next question will come from Bret Jordan with Jefferies.
Hey, good morning.
Hey, Bret. Good morning.
I guess thinking about acreage and that maybe we could look at the acreage that the $173,000,000 in CapEx last year, you said maybe 75% of that was land lease and development. And then maybe do you have an expectation for how much acreage you might add in 2017?
I'll tell you, it's just extremely difficult to give you a response because of the uncertainties of acquiring this land. Not only is it difficult to locate it, it's extremely difficult to get it properly zoned and the timing of that creates the uncertainty that I'm talking about. I would in total, if you look at the total schedule of properties that we're targeting, it's in the many hundreds of acres. And so over the course of probably 2 years, we'll be expending a significant amount of capital to obtain those acres. And the math is right.
I mean, if we talked about volume growth, if you've got 3 years of volume growth at 8%, you're at a 27% growth in the overall market. And if you assume that your market's 4,000,000 cars or well over 1,000,000 cars, additional cars. And so it's becoming a real issue and that's why we're so extremely focused on it. We have a lot of resources focused on obtaining this land because without this land, you can't properly satisfy and service your insurance customers.
Hey, Brett, just a sliver of color here. The reason I think you hear us reluctant to provide more specific forward looking guidance on this is because real estate is by its nature so episodic and unpredictable. We were pursuing land in Southern California for 20 plus years until we found a yard that made sense for us at the location, the permitting and the value available to us. The business is somewhat elastic. If you look at an aerial photo of our nearby yards in Southern California until we opened the new one, they were clearly fuller than other yards within Copart.
We want to be disciplined about how we buy land. We expect to be aggressive about buying and developing land, but that's also somewhat dependent on availability, permitting, timing and so forth. So it's a big part of our forward looking strategy. It's just very hard to narrow it down to say next quarter it's precisely this many yards or precisely this many 1,000,000 of dollars. Okay.
And I think when you talked about the 14% U. S. Unit growth or volume growth, you mentioned market share gain. And could you give us a feeling maybe what contribution market share was to that 14% I guess you'll see drilling down towards farmers?
Yes. A lot of the volume that we had in market share was a year ago in the Farmers account. There's some new business that's come on in the most recent quarter. So you'll be seeing that trend extending in the year. So just as I think Will or Jeff are about to give you a number, I want to make sure that you understand that number will increase as we go into the New Year from additional market share gains.
Yes. It is somewhat difficult to arrive at a specific number with much certainty. I mean, if we look at the growth in the market and we assume it's 8% and that's 20% of our business, 6.5% to 7% came from market growth. And so the balance came from either new business or cats and the cat level is probably 2% of that.
Okay, great.
And then one last sort
of follow-up, when you talked about what drives the salvage, the toll rates and you said MSO market share gains. Are MSO average checks higher than independent average checks? Most of my understanding that insurance companies allocate direct repair programs based on low cost repair and seem to be focusing towards MSOs. Is that incorrect?
I won't comment on that other than to say that industry research suggests that one of the drivers of the increase in the cost to repair these cars is the consolidation that's occurring. So you'd have to imply that by that statement. Okay.
All right.
Thank you.
Thank you. Our next question will come from Bill Armstrong with C. L. King and Associates.
Good morning, gentlemen. So it looks like your average revenue per vehicle is directionally increasing. You talked about scrap prices at the low end of your vehicles. So what other drivers might there be driving higher revenue per vehicle?
Miks, every country has its own profile of car that we sell. Every insurance company has its own profile of car that they provide to us. Some insurance salvage at a higher damage rate, some at a lower damage rate. Overall trends in used car pricing, FX, scrap metal pricing, things like proximity to port have an impact on the selling price of a vehicle. I mean, there's a lot of inputs and drivers in this ASP movement.
Got it. And on the foreign exchange front, over the last couple of years, I guess, with the stronger dollar that has sort of suppressed bidding from international buyers. And now with the dollar kind of leveling off a little bit, are you seeing those buyers coming back or getting more aggressive in their bidding?
We have. We've seen just a marginal increase in international activity, but not anywhere near what it was 2 years ago.
Okay. But it sounds like the deterioration of that is sort of kind of reached an end. Is that fair?
That's fair.
Yes. It is actually up as Will said.
Okay. Okay, great. Thank you.
Thank you. Our next question will come from Matthew Page with Gabelli and Company.
Hey, good morning. To follow-up on your age commentary before with lower new car sales in the 2,009 to 2011 timeframe, do you see any potential impact or air pocket as these units move into the latter stages of their life cycle?
What do you mean by air pocket, Matthew?
It just has you have some high sales going into 'eight and then you have lower sales coming out of the recession and before they start to recover in 'twelve. So you have a couple of years there where the lower sales are starting to get into their prime age for salvage parts or to be totaled?
Clearly, it has caused the average age of vehicles to move up, as Jeff stated earlier. In terms of a bucket of cars that are missing in that particular year, I think if you if we can just take an extreme, if we didn't sell any cars 1 year and the next year we sold twice as many cars, I think it would just move the average down. I don't think it would be indicative of some kind of air pocket or other impact. So it definitely had an impact in the average age of vehicles. And as Jeff stated, that is starting to reverse now as we're seeing 17,000,000 new car sales a year.
Okay, great. Thanks. And then second question for me is, could you remind us the penetration of transportation and storage fees and sales you make on the units sold at auction?
I'm sorry. I didn't understand the question. What was the question?
Yes. Of the units you sell at auction, what is the penetration of them that you can take ancillary revenue from transport and storage fees?
Thanks for the question, Matthew. I think we I think you're asking about the attachment rates for other ancillary services that Copart provides its buyers or sellers and we don't customer the comment on those kinds of things.
Okay. Well, thank you and good luck.
Thank you. All right. Thank you.
Thank you. Speakers, at this time, I'm showing there are no further questions in the queue. I'd like to turn it back over to you for closing remarks.
Thanks, Samantha. Again, thank you everyone for attending the Q4 call. We will be reporting on the Q1 and the New Year fiscal 2017.
On the next
call, we look forward to chatting with everyone then. Thanks so much. Bye.
Thank you, ladies and gentlemen. Thank you for your participation. This does conclude today's conference. Have a great rest of your day.