SecProbe.io

CORRESP
1
filename1.htm

February 15, 2007

VIA
OVERNIGHT COURIER

United States Securities and
Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W., MS 03-08

Washington, D.C.  20549

Attn:
                 William
Thompson, Branch Chief

  Re:

  Copart, Inc.

  Form 10-K for Fiscal Year Ended July 31, 2006

  Form 10-Q for Fiscal Quarter Ended October 31,
  2006

  Filed October 31, 2006 and December 11, 2006

  File No. 0-23254

Dear Mr. Thompson:

On
behalf of Copart, Inc. (the “Company”), I submit this letter in response to the
comment letter dated February 6, 2007 from the staff (the “Staff”) of the
Securities and Exchange Commission (the “Commission”) relating to the Company’s
Form 10-K for Fiscal Year Ended July 31, 2006 (the “Form 10-K”) and the Form
10-Q for Fiscal Quarter Ended October 31, 2006 (the “Form 10-Q”).

In
this letter, I have recited the comments from the Staff in italicized, bold
type and have followed the comment with the Company’s response.  Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Form 10-K or Form 10-Q, as
applicable.

Form
10-K for Fiscal Year Ended July 31, 2006

Item
7.  Management’s Discussion and Analysis
of Financial Condition and Results of Operation, page 28

Fiscal
2006 Compared to Fiscal 2005, page 32

1.                                      In
circumstances where you describe more than one reason for a significant change
between periods in financial data or indicators, please quantify the
incremental impact of each individual reason on the overall change.  For example, in your discussion of revenues
on page 32, you should quantify to the extent practicable the increase in
revenues attributable to vehicle sales volume and increased revenue per
transaction.  Please note that this is
just an example of where disclosure could be improved and is not a complete
list.  See Item 303(a) of Regulation S-K
and SEC Release No. 33-8350.

The Company acknowledges the Staff’s comment and in
future filings will, in situations in which a significant change in financial
data or indicators has occurred, quantify each material reason for such change.

Note
3 — Discontinued Operations and Goodwill Impairment, page 62

2.                                      In
light of the significant (almost 100%) seller-financing of the sale of your
Motors Auction Group business and related assets, please provide us your
analysis as to whether such seller-financing results in significant continuing
involvement by you in the operations of the component after the disposal
transaction.  Refer to paragraph 42 of
SFAS 144 and EITF 03-13.

The Company supplementally informs the Staff that the
Company retains no direct cash flows, whether through migration or continuation
(as defined in EITF 03-13) or by any other means, associated with the
revenue-producing or cost-generating activities of the disposed business.  Further, the Company has no continuing
involvement in the operations of the disposed business, other than that of a
mortgagee, and the Company (i) did not retain any equity interest or call
options in the disposed business, (ii) did not, through the terms of the seller
financing or by any other means, retain the ability to influence the operating
and/or financial policies of the disposed business, and (iii) is not a party to
any continuing contracts or agreements, other than the finance agreement
between the Company and the buyer, relative to the disposed business.

The Company’s analysis as to whether the
seller-financing results in significant continuing involvement by the Company
follows.

Paragraph
42 of SFAS 144 states the following:

The results of operations of a component of an entity
that either has been disposed of or is classified as held for sale shall be
reported in discontinued operations in accordance with paragraph 43 if both of
the following conditions are met: (a) the operations and cash flows of the
component have been (or will be) eliminated from the ongoing operations of the
entity as a result of the disposal transaction and (b) the entity will not
have any significant continuing involvement in the operations of the component
after the disposal transaction.

EITF 03-13 further
clarifies the following in paragraph 4 (emphasis added):

The Task Force reached a consensus on Issue 1 that the
evaluation of whether the operations and cash flows of a
disposed component have been or will be eliminated

 2

from the ongoing operations of the entity depends
on whether continuing cash flows have been or are expected to be generated and,
if so, whether those continuing cash flows are direct or indirect.  Continuing cash flows are cash inflows or
outflows that are generated by the ongoing entity and are associated with
activities involving a disposed component.
If continuing cash flows are generated, the determination as to whether
those continuing cash flows are direct or indirect should be based on their
nature and significance.  If any
continuing cash flows are direct, the cash flows have not been eliminated and
the operations of the component should not be presented as a discontinued
operation.  Conversely,
if all continuing cash flows are indirect (that is, not direct), the cash flows
are considered to be eliminated and the disposed component meets the paragraph
42(a) criterion to be considered a discontinued operation.  The assessment as to whether continuing cash
flows are direct cash flows should be based on management’s expectations using
the best information available.

The only continuing operating cash flows from the
disposed MAG operations will be the interest payments made on the
seller-provided financing.  These cash
flows are considered indirect and therefore the Company has concluded that the
operations and cash flows of the disposed MAG operations were eliminated from
the Company.

The Company also
considered the guidance in paragraph 9 of EITF 03-13, which states (emphasis added):

If the operations and
cash flows of a disposed component have been (or will be) eliminated from the
ongoing operations of an entity as a result of a disposal transaction (see
paragraphs 4-8 for guidance on making that determination), an entity should
evaluate whether the ongoing entity will have significant continuing
involvement in the operations of the component after the disposal
transaction.  The Task
Force reached a consensus on Issue 2 that continuing involvement in the
operations of the disposed component provides the ongoing entity with the
ability to influence the operating and (or) financial policies of the disposed
component.  The retention of risk or the
ability to obtain benefits should be considered in the overall evaluation of
whether the ongoing entity has the ability to influence the operating and (or)
financial policies of the disposed component.
However, the retention of risk or the ability to obtain benefits
associated with the ongoing operations of the disposed component does not
indicate by itself that the ongoing entity has the ability to influence the
operating and (or) financial policies of the disposed component resulting in
continuing involvement.  An
interest in the disposed component or the existence of a contractual
arrangement or other type of arrangement with the disposed component should be
evaluated to determine whether the ongoing entity has continuing involvement
with the disposed component.

 3

As described more fully above in the opening paragraph
to the Company’s response to this comment, there is no continuing involvement
that provides the Company the ability to influence the operating or financial
policies of the disposed MAG operations.

Based on the above analysis, the Company concluded the
requirements of paragraph 42 of SFAS 144 and EITF 03-13 were met and
presentation of the disposed MAG operations as discontinued operations is
appropriate.

Note
11 — Shareholders’ Equity, page 66

3.                                      Please
disclose the nature and terms of the Preferred Stock Rights Agreement that is
associated with your common stock outstanding. Refer to paragraph 4 of SFAS
129.

In response to the Staff’s comment, the Company
proposes  to include the following
footnote disclosure in future year-end financial statements filed with its
Annual Report on Form 10-K:

Preferred Stock Rights
Agreement

On March 6, 2003, the Company’s Board of Directors
declared a dividend of one right (a “Right”) to purchase one one-thousandth
share of the Company’s Series A Participating Preferred Stock  for each outstanding share of Common Stock of
the Company.  Each Right entitles the registered holder to purchase from
the Company one one-thousandth of a share of Series A Preferred Stock at
an exercise price of $120.48.

In general, subject to
certain limited exceptions, the Rights become exercisable when a person or
group acquires 15% or more of the Company’s common stock or a tender offer or
exchange offer for 15% or more of the Company’s common stock is announced or
commenced.  After any such event, the
Company’s other stockholders may purchase an additional $120.48 worth of
additional shares of the Company’s common stock at 50% of the then-current
market price.  The Rights will cause
substantial dilution to a person or group that attempts to acquire us on terms
not approved by the Company’s board of directors.  The Rights may be redeemed by the Company at
$0.001 per Right at any time before any person or group acquires 15% or more of
our outstanding common stock.

 4

Note
15 — Commitments and Contingencies, page 72

4.                                      With
respect to the various contingencies you discuss, if there is at least a
reasonable possibility that a loss exceeding amounts already recognized has
been incurred, please revise your disclosure to either state an amount or range
of reasonable possible losses, or state that no such estimate can be made.  Please refer to SFAS 5 and SAB Topic 5:Y for
guidance.

The Company acknowledges the Staff’s comment.  In the case of contingencies for which there
is at least a reasonable possibility that a loss may occur exceeding amounts
already recognized in the financial statements, the Company will, in its future
filings, disclose either an amount or a range of reasonable possible losses, or
state that no such estimate can be made.
The Company supplementally advises the Staff that at the end of fiscal
year 2006 and the end of the first quarter of fiscal year 2007, there were, in
the opinion of the Company’s management, no contingencies for which the
additional disclosure would have been required because the Company considered
the likelihood of losses arising from the contingencies disclosed to be remote.

Exhibits
31.1 and 31.2

5.                                      In
future filings, please revise your certifications to read exactly as set forth
in Item 601(b)(31) of Regulation S-K. In particular, eliminate reference to the
Chief Executive Officer and Chief Financial Officer’s titles in the
introductory paragraph and also revise paragraphs 2 and 3 to say “report”
rather than “annual report”. Confirm that the inclusion of your Chief Executive
Officer and Chief Financial Officer’s titles was not intended to limit the
capacity in which such individuals provided the certifications.

The Company acknowledges the Staff’s comment and in
future filings will revise its certifications to read exactly as set forth in
Item 601(b)(31) of Regulation S-K.  The
Company supplementally advises the Staff that the inclusion of the titles “Chief
Executive Officer” and “Chief Financial Officer” in the certifications required
under Item 601(b)(31) of Regulation S-K was not intended to limit the capacity
in which such individuals provided the certifications.

Acknowledgement

On behalf
of the Company, I hereby acknowledge that:

·                  the Company is responsible
for the adequacy and accuracy of the disclosure in the filing;

 5

·                  Staff comments or changes
to disclosure in response to Staff comments do not foreclose the Commission
from taking any action with respect to the filing; and

·                  the Company may not assert
Staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

*   *
*   *   *

Please direct any
questions or comments you may have to my attention at (707) 639-5000.  Thank you for your assistance.

  Sincerely,

  COPART, INC.

  /s/ William E. Franklin

  William E. Franklin

  Senior Vice President and

  Chief Financial Officer

  cc:

  Anthony Watson

  Robyn Manuel

  U.S. SECURITIES
  AND EXCHANGE COMMISSION

  Willis J. Johnson,
  Chief Executive Officer

  COPART, INC

  .

 6