Copart (CPRT) 10-K risk factor changes: FY2016 vs FY2015

No single customer accounted for more than 10% of our revenue for fiscal [removed: 2015.][added: 2016.]

Vehicle sellers have terminated agreements with us in the past in particular markets, which has affected [removed: the pricing for sales services] [added: revenues] in those markets.

Our expansion into markets outside [removed: North America,] [added: the U.S.,] including recent expansions in Europe, [removed: Brazil and] [added: Brazil,] the Middle [removed: East] [added: East, and India] expose us to risks arising from operating in international markets.

Any failure to successfully integrate businesses acquired outside [removed: of North America] [added: the U.S.] into our operations could have an adverse effect on our consolidated results of operations, financial position or cash flows.

[removed: We first expanded our operations outside North America] [added: Subsequently,] in fiscal 2008 [removed: with] [added: we made] a significant acquisition in the U.K., followed by acquisitions in the U.A.E., Brazil, Germany, and Spain in fiscal 2013, [removed: and] expansions into Bahrain and Oman in fiscal [removed: 2015.][added: 2015, and expansion into Ireland and India in fiscal 2016.]

[added: In addition, we continue to evaluate acquisitions and other opportunities outside of the U.S.] Acquisitions or other strategies to expand our operations outside [removed: North America] [added: of the U.S.] pose substantial risks and uncertainties that could have an adverse effect on our future operating results.

[added: We cannot provide any] assurance that we will achieve our business and financial objectives in connection with these acquisitions or our strategic decision to expand our operations internationally.

In many countries outside of the United States, particularly in those with developing economies, it may be common for persons to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act (FCPA), U.K. Bribery Act, Brazil Clean Companies [removed: Act] [added: Act, India's Prevention of Corruption Act, 1998] or similar local anti-bribery laws.

We face risks associated with the implementation of our salvage auction model in markets that may not operate on the same terms as the [removed: North American] [added: U.S.] market.

For example, certain markets operate on a principal rather than agent basis, which may have an adverse impact on our gross margin percentages and expose us to inventory risks that we do not experience in [removed: North America.][added: the U.S.]

[added: Some of our target markets outside the U.S. operate in a manner substantially different than our historic market in the U.S.] For example, new markets may operate either wholly or partially on the principal model, in which the vehicle is purchased then resold for our own account, rather than the agency model employed in [removed: North America,] [added: the U.S.,] in which we [added: generally] act as a sales agent for the legal owner of vehicles.

In addition, our business in [removed: North America] [added: the U.S., Canada,] and the U.K. has been established and grown based largely on our ability to build relationships with insurance carriers.

As we expand into markets outside [removed: North America] [added: the U.S., Canada,] and the U.K., we cannot predict whether markets will readily adapt to our strategy of online auctions of automobiles sourced principally through vehicle insurers.

We [removed: are transitioning] [added: have transitioned] various functionality of our [added: previously planned] third-party enterprise operating system to an internally developed proprietary system, and we may experience difficulties operating our business as we work to develop and design this system.

Following a review of KPIT’s work performed to date, and an assessment of the cost to complete, deployment risk, and other factors, we ceased development of KPIT’s software and [removed: are now pursuing an] internally developed [added: a] proprietary solution in its place.

The [removed: transition] [added: ongoing design, development, and implementation] of our enterprise operating [removed: system carries] [added: systems carry] certain risks, including the risk of significant design or deployment errors causing disruptions, delays or deficiencies, which may make our website and services unavailable.

In addition, the transition to our new [removed: internal] [added: internally developed] proprietary system will require us to commit substantial financial, operational and technical resources before the volume of business increases, without assurance that the volume of business will increase.

Information security risks for online commerce companies have significantly increased in recent years because of, in addition to other factors, the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, [removed: terrorists] [added: terrorists,] and other external parties.

These threats may derive from fraud or malice on the part of third [removed: parties,] [added: parties] or current or former employees.

We have further enhanced our security protocols based on the investigation we conducted in response to the [removed: recently discovered data breach.][added: security incident.]

Furthermore, our servers may also be vulnerable to viruses transmitted via the [removed: Internet.][added: Internet and other points of access.]

Under current credit card [removed: practices and the rules of the online auto auction industry,] [added: practices,] we may be held liable for fraudulent credit card transactions and other payment disputes with customers.

Implementation of our online auction model in new markets may not result in the same synergies and benefits that we achieved when we implemented the model in [removed: North America] [added: the U.S., Canada,] and the U.K.

We implemented our online system across all of our [removed: North American] [added: U.S., Canada,] and U.K. salvage yards beginning in fiscal 2004 and 2008, respectively, and experienced increases in revenues and average selling prices, as well as improved operating efficiencies in [removed: both] [added: those] markets.

In considering new markets, we consider the potential synergies from the implementation of our model based in large part on our experience in [removed: North America] [added: the U.S., Canada,] and the U.K. We cannot predict whether these synergies will also be realized in new markets.

[removed: In] [added: For example, in] fiscal 2014, we acquired a facility in Montreal, Canada.

[removed: Furthermore, promising] [added: In fiscal 2016, we opened new facilities in Castledermot, Ireland; Sonepat, India; Algete, Spain; and in the U.S. Promising] acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers, the availability of affordable financing in [added: the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms.]

In addition, we may enter into agreements with third parties regarding the license or other use of our intellectual [removed: property in foreign jurisdictions.][added: property.]

We rely solely upon independent subhaulers to pick up and deliver vehicles to and from our [removed: North American and Brazilian] storage [removed: facilities.][added: facilities in the U.S., Canada, Brazil, U.A.E., Oman, Bahrain, Ireland, and India.]

Our executive officers, directors and their affiliates beneficially own, in the aggregate, [removed: 19.2%] [added: 21.1%] of our common stock as of July 31, [removed: 2015.][added: 2016.]

Jayson Adair, our Chief Executive Officer; [added: and] Vincent W.

[removed: Franklin,] [added: Mitz,] our [removed: Executive Vice President and Chief Financial Officer,] [added: President,] or if one or more of these executives decide 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.

| • | develop and license new services and technologies that address the increasingly sophisticated and varied needs of our [added: current and] prospective customers; and |

Initiating programs that allow access to our online auctions to the general public [removed: may] [added: will] involve material expenditures and we cannot predict what future benefit, if any, will be derived.

A material reduction in accident rates, whether due to, among other things, [added: a reduction in miles driven per car,] vehicle-related technological advances such as accident avoidance systems and, to the extent widely adopted, the advent of driverless cars, could have a material impact on revenue growth.

Participants in the salvage vehicle sales industry are subject to, and may be required to expend funds to ensure compliance with a variety of governmental, regulatory and administrative rules, regulations, land use ordinances, licensure requirements and procedures, including [added: but not limited to] those governing vehicle registration, the environment, zoning and land use.

We may be subject to similar types of regulations by federal, national, international, provincial, [removed: state,] [added: state] and local governmental agencies in new markets.

Changes in laws [added: or the interpretation of laws, including foreign laws and regulations,] affecting the [removed: importation] [added: import and export] of [removed: salvage] vehicles may have an adverse effect on our business and financial condition.

As a result, foreign importers of [removed: salvage] vehicles now represent a significant part of our total buyer base.

Changes in laws and regulations that restrict the importation of [removed: salvage] vehicles into foreign countries may reduce the demand for [removed: salvage] vehicles and impact our ability to maintain or increase our international buyer base.

We first expanded our operations outside the U.S. in fiscal 2003 with an acquisition in Canada.

| • | the need to comply with complex foreign and U.S. laws and regulations that apply to our international operations; |

On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s withdrawal from the European Union and the U.K.’s future relationships with European Union member states.

Adverse consequences concerning Brexit or the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

In some cases, the enforcement practices of governmental regulators in certain foreign areas and the procedural and substantive rights and remedies available to us may vary significantly from those in the United States, which could have an adverse effect on our business.

We began using our new internally developed proprietary system with our expansion into Spain and India in fiscal 2016.

Our business is subject to a variety of domestic and international laws and other obligations regarding privacy and data protection.

We are subject to federal, state and international laws, directives, and regulations relating to the collection, use, retention, disclosure, security and transfer of personal data.

These laws, directives, and regulations, and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction.

Complying with emerging and changing privacy and data protection requirements may cause us to incur substantial costs or require us to change our business practices.

For example, in October 2015, a European court decision invalidated the U.S.-EU Safe Harbor framework which allowed us and other companies to meet certain European legal requirements for the transfer of personal data from the European Economic Area to the U.S. We may find it necessary or desirable to modify our data handling practices as a result of this court decision, and it may serve as a basis for our personal data handling practices to be challenged or otherwise adversely impact our business.

Noncompliance with our legal obligations relating to privacy and data protection could result in penalties, legal proceedings by governmental entities or others, and significant legal and financial exposure and could affect our ability to retain and attract customers.

Any of the risks described above could adversely affect our consolidated financial position and results of operations.

We also may not be able to acquire or maintain appropriate domain names in all countries in which we do business.

Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights.

We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights.

| | |

| --- | --- |

As a result our foreign buyers may be subject to a variety of foreign laws and regulations, including the imposition of import duties by foreign countries.

In addition, we and our vehicle buyers must work with foreign customs agencies and other non-U.S. governmental officials, who are responsible for the interpretation of these laws.

Any inability to obtain requisite approvals or agreements from such authorities could adversely impact the ability of our buyers to import vehicles into foreign countries.

In addition, any disputes or disagreements with foreign agencies or officials over import duties or similar matters, including disagreements over the value assigned to imported vehicles, could adversely affect our costs and the ability and costs of our buyers to import vehicles into foreign countries.

our operations will not be subject to significant costs in the future.

On August 5, 2016, the DOR filed a response in which it denied all allegations noted in our appeal of the notice of assessment.

We continue to substantiate our position that these transactions are nontaxable sales for resale by providing the DOR with documentation supporting the exempt nature of these sales.

On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s withdrawal from the European Union and the U.K.’s future relationships with European Union member states.

Adverse consequences concerning Brexit or the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

In addition, we continue to evaluate acquisitions and other opportunities outside North America.

We cannot provide any

Some of our target markets outside North America operate in a manner substantially different than our historic market in North America.

For example, in fiscal 2013, we acquired new facilities in Sao Paulo, Brazil; the U.A.E.; Ettlingen, Germany; Cordoba, Spain; and in North America.

the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms.

Mitz, our President; and William E.

In recent years, the amount of goodwill on our consolidated balance sheets has increased substantially, principally as a result of a series of acquisitions we have made in North America, the U.K., Brazil, Germany, the U.A.E., and Spain in fiscal 2013 and 2014.

determination is made.

If the interest rate swaps entered into in connection with our credit facility prove ineffective, it could result in volatility in our operating results, including potential losses, which could have a material adverse effect on our results of operations and cash flows.

We entered into two interest rate swaps to exchange our variable interest rate payment commitments for fixed interest rate payments on our variable interest rate debt through December 2015.

We recorded the swaps at fair value, and are currently designated as an effective cash flow hedge under ASC 815, Derivatives and Hedging.

Each quarter, we measure hedge effectiveness using the “hypothetical derivative method” and record in earnings any gains or losses resulting from hedge ineffectiveness.

The hedge provided by our swaps could prove to be ineffective for a number of reasons, including early retirement of the variable interest rate debt, as is allowed under the variable interest rate debt, or in the event the counterparty to the interest rate swaps are determined in the future to not be creditworthy.

Any determination that the hedge created by the swaps is ineffective could have a material adverse effect on our results of operations and cash flows and result in volatility in our operating results.

In addition, any changes in relevant accounting standards relating to the swaps, especially ASC 815, Derivatives and Hedging, could materially increase earnings volatility.

This Annual Report on Form 10-K for the fiscal year ended July 31, [removed: 2015,] [added: 2016,] or this Form 10-K, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

We are a leading provider of online auctions and vehicle remarketing services in the United States (U.S.), Canada, the United Kingdom (U.K.), Brazil, the United Arab Emirates (U.A.E.), Oman, [added: Bahrain, Ireland, Spain] and [removed: Bahrain.][added: India.]

In the [removed: U.S. and Canada (North America),] [added: U.S., Canada,] Brazil, the U.A.E., Oman, [removed: and] Bahrain, [added: Ireland, Spain and India,] we sell vehicles primarily as an agent and derive revenue primarily from fees paid by vehicle sellers and vehicle [removed: buyers,] [added: buyers] as well as related fees for [removed: services] [added: services,] such as towing and storage.

[removed: Under the consignment program,] only the fees associated with vehicle processing are recorded in revenue, not the actual sales price (gross proceeds).

[removed: Sales][added: | Vehicle sales | 13 | % | | 14 | % | | 18 | % |]

[added: Sales] transaction fees also include fees charged to vehicle buyers for purchasing vehicles, storage, loading, and annual registration.

Purchased vehicle revenue includes the gross sales price of the [removed: vehicle,] [added: vehicle] which we have purchased or are otherwise considered to own, and is primarily generated in the U.K. We have certain contracts with insurance companies in which we act as a principal, purchasing vehicles and reselling them for our own account.

We also purchase vehicles in the open market, primarily from [removed: individuals] [added: individuals,] and resell them for our own account.

Our revenue is impacted by several factors, including salvage frequency and the average vehicle auction selling price, as [removed: over 50%] [added: a significant amount] of our service revenue is associated in some manner to the ultimate selling price of the vehicle.

Vehicle auction selling prices are driven primarily by: (i) changes in commodity prices, particularly the per ton price for crushed car bodies, as [added: we believe] this has an impact on the ultimate selling price of vehicles sold for scrap and vehicles sold for dismantling; (ii) used car pricing, which we believe has an impact on salvage frequency; [removed: and] (iii) the mix of cars [removed: sold, as insurance company cars] [added: sold; and (iv) changes in the U.S. dollar exchange rate to foreign currencies, which we believe has an impact] on [removed: average command a lower average selling price than non-insurance cars.][added: auction participation by international buyers.]

[removed: Accordingly, we] [added: We] cannot [added: specifically] quantify the [removed: specific] [added: financial] impact that commodity pricing, used car pricing, and product sales mix has on the selling price of [removed: vehicles and ultimately on] [added: vehicles, our] service [removed: revenue.][added: revenues or financial results.]

The increase in salvage frequency may have been driven by the decline in used car values relative to repair [removed: costs.][added: costs, which we believe are generally trending upward.]

Conversely, increases in used car prices, such as occurred during the most recent [removed: recession] [added: recession,] may decrease salvage frequency and adversely affect our growth rate.

Used car values are determined by many factors, including [removed: the] used car supply, which is tied directly to new car sales, and the average age of cars on the road.

New car sales grew on a year over year [removed: basis] [added: basis,] increasing the supply of used cars.

Additionally, the average age of cars on the road continued to increase, growing from 9.6 years in 2002 to 11.5 years in [removed: 2014.][added: 2015.]

Liquidity and Cash Flows: Our primary source of working capital is cash operating [removed: results.][added: results and debt financing.]

The primary source of our liquidity is our cash and cash [removed: equivalents.][added: equivalents and Revolving Loan Facility.]

The primary factors affecting cash operating results are: (i) seasonality; (ii) market wins and losses; (iii) supplier mix; (iv) accident frequency; (v) salvage frequency; (vi) increased volume from our existing suppliers; (vii) commodity pricing; (viii) used car pricing; (ix) foreign currency exchange rates; (x) product mix; [removed: and] (xi) contract mix to the extent [removed: appropriate.][added: applicable; and (xii) our capital expenditures.]

We believe that these acquisitions and openings will strengthen our coverage, as we have facilities located in [removed: North America,] the [added: U.S., Canada, the] U.K., Brazil, the U.A.E., Oman, Bahrain, Germany, [added: Spain, Ireland] and [removed: Spain] [added: India] with the intention of providing national coverage for our sellers.

The following table sets forth facilities that we have acquired or opened from August 1, [removed: 2012] [added: 2013] through July 31, [removed: 2015:][added: 2016:]

| Itaquaquecetuba, Brazil [added: (São Paulo)] | | Greenfield | | January 2014 | | Brazil |

It [removed: is] [added: has been] our [added: practice and remains our] intention, where possible, to migrate these contracts to the agency model in future periods.

The following table shows certain data from our consolidated statements of income expressed as a percentage of total service revenues and vehicle sales for fiscal [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013:][added: 2014:]

| (In percentages) | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | |

| Service revenues | [removed: 86] [added: 87] | % | | [removed: 82] [added: 86] | % | | [removed: 81] [added: 82] | % |

| Vehicle sales | [removed: 14] | [removed: %] | | [removed: 18] | [removed: %] | | [removed: 19] | [removed: %] | [added: | | | | | | | | | | | | | | | | | |]

| Yard operations | 46 | % | | [removed: 45] [added: 46] | % | | [removed: 44] [added: 45] | % |

| Cost of vehicle sales | [removed: 12] [added: 11] | % | | [removed: 15] [added: 12] | % | | [removed: 16] [added: 15] | % |

| General and administrative | [removed: 12] [added: 11] | % | | [removed: 14] [added: 12] | % | | [removed: 13] [added: 14] | % |

| Impairment of long-lived assets | — | % | | [removed: 3] [added: —] | % | | [removed: —] [added: 3] | % |

| Total operating expenses | [removed: 70] [added: 68] | % | | [removed: 77] [added: 70] | % | | [removed: 73] [added: 77] | % |

| Operating income | [removed: 30] [added: 32] | % | | [removed: 23] [added: 30] | % | | [removed: 27] [added: 23] | % |

| Other (expense) income | (1 | )% | | [removed: —] [added: (1] | [removed: %] [added: )%] | | [removed: (1] [added: —] | [removed: )%] [added: %] |

| Income before income taxes | [removed: 29] [added: 31] | % | | [removed: 23] [added: 29] | % | | [removed: 26] [added: 23] | % |

| Income taxes | 10 | % | | [removed: 8] [added: 10] | % | | [removed: 9] [added: 8] | % |

| Net income | [removed: 19] [added: 21] | % | | [removed: 15] [added: 19] | % | | [removed: 17] [added: 15] | % |

Comparison of Fiscal Years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013][added: 2014]

The following table presents a comparison of service revenues [removed: and vehicle sales] for fiscal [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013:][added: 2014:]

| | [added: |] Year Ended July 31, | | | | | | | | | | | | [removed: 2015] [added: 2016] vs. [removed: 2014] [added: 2015] | | | | | | | [removed: 2014] [added: 2015] vs. [removed: 2013] [added: 2014] | | | | | |

All statements other than statements of historical facts are statements that could be deemed forward-looking statements.

Under the consignment program,

| Dallas, Texas | | Greenfield | | March 2016 | | United States |

| Wilmer, Texas | | Greenfield | | April 2016 | | United States |

| Temple, Texas | | Greenfield | | April 2016 | | United States |

| Colorado Springs, Colorado | | Greenfield | | May 2016 | | United States |

| Denver, Colorado | | Greenfield | | July 2016 | | United States |

| Cartersville, Georgia | | Greenfield | | July 2016 | | United States |

| Algete, Spain (Madrid) | | Greenfield | | July 2016 | | Spain |

| Sonepat, India (New Delhi) | | Greenfield | | October 2015 | | India |

| Castledermot, Ireland | | Greenfield | | April 2016 | | Ireland |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Service revenues | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | United States | $ | 958,558 | | | $ | 848,149 | | | $ | 830,561 | | | $ | 110,409 | | | 13.0 | % | | $ | 17,588 | | | 2.1 | % |

| | International | 145,821 | | | | 137,214 | | | | 127,852 | | | | 8,607 | | | | 6.3 | % | | 9,362 | | | | 7.3 | % |

The increase in service revenues for fiscal 2016 of $119.0 million, or 12.1% as compared to fiscal 2015 came from (i) growth in the U.S. of $110.4 million and (ii) growth in International of $8.6 million.

The growth in the U.S. was driven primarily by increased volume, partially offset by lower average auction selling prices, which we believe is due to lower commodity prices.

The increase in volume in the U.S. was derived from (i) growth from existing suppliers, driven by what we believe was an increase in salvage frequency, and (ii) growth in the number of units sold from new and expanded contracts with insurance companies.

Excluding a detrimental impact of $8.9 million due to changes in foreign currency exchange rates, primarily from changes in the British pound and the Brazilian real to U.S. dollar exchange rates, the growth in International of $18.3 million was driven primarily by increased volume in the U.K. as we increased our market share and a marginal increase in revenue per car.

The following table presents a comparison of vehicle sales for fiscal 2016, 2015 and 2014:

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | United States | $ | 57,478 | | | $ | 54,730 | | | $ | 63,098 | | | $ | 2,748 | | | 5.0 | % | | $ | (8,368 | ) | | (13.3 | )% |

| | International | 106,592 | | | | 105,986 | | | | 141,978 | | | | 606 | | | | 0.6 | % | | (35,992 | | ) | | (25.4 | )% |

The increase in vehicle sales for fiscal 2016 of $3.4 million, or 2.1% as compared to fiscal 2015 came from (i) an increase in the U.S. of $2.7 million and (ii) an increase in International of $0.6 million.

The growth in the U.S. was primarily the result of increased volume, partially offset by lower average auction selling prices, which we believe is due to lower commodity prices and a change in the mix of vehicles sold.

The growth in International was primarily the result of increased volume, partially offset by a $7.0 million detrimental impact due to changes in foreign currency exchange rates, primarily from the change in the British pound to U.S. dollar exchange rate, and lower average selling prices driven by increased open market purchase activity from the general public.

The following table presents a comparison of yard operations expense for fiscal 2016, 2015 and 2014:

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | Year Ended July 31, | | | | | | | | | | | | 2016 vs. 2015 | | | | | | | 2015 vs. 2014 | | | | | |

| (In thousands) | | 2016 | | | | 2015 | | | | 2014 | | | | Change | | | | % Change | | | Change | | | | % Change | |

| | United States | $ | 494,146 | | | $ | 440,517 | | | $ | 437,744 | | | $ | 53,629 | | | 12.2 | % | | $ | 2,773 | | | 0.6 | % |

| | International | 88,758 | | | | 85,774 | | | | 82,679 | | | | 2,984 | | | | 3.5 | % | | 3,095 | | | | 3.7 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Yard operations expenses, excluding depreciation and amortization | | | | | | | | | | | | | | | | | | | | | | | | | | |

We cannot determine the impact of the movement of these influences as we cannot determine which vehicles are sold to the end user or for scrap, dismantling, retailing or export.

We also cannot predict the future movements of these influences.

These factors, among others, have led to a general decline in used car values while repair costs are generally trending upward.

| Webster, New Hampshire | | Greenfield | | September 2012 | | United States |

| Gainesville, Georgia | | Acquisition | | May 2013 | | United States |

| Davison, Michigan | | Acquisition | | May 2013 | | United States |

| Ionia, Michigan | | Acquisition | | May 2013 | | United States |

| Kincheloe, Michigan | | Acquisition | | May 2013 | | United States |

| Salvage Parent, Inc.* | | Acquisition | | May 2013 | | United States |

| Dubai, U.A.E. | | Acquisition | | August 2012 | | United Arab Emirates |

| Embu, Brazil | | Acquisition | | November 2012 | | Brazil |

| Pirapora, Brazil | | Acquisition | | November 2012 | | Brazil |

| Osasco, Brazil | | Acquisition | | November 2012 | | Brazil |

| Castelo Branco, Brazil | | Acquisition | | November 2012 | | Brazil |

| Vila Jaguara, Brazil | | Acquisition | | November 2012 | | Brazil |

| Ettlingen, Germany | | Acquisition | | November 2012 | | Germany |

| Cordoba, Spain | | Acquisition | | June 2013 | | Spain |

| * | Salvage Parent, Inc. conducted business primarily as Quad City Salvage Auction, CrashedToys, and Desert View Auto Auctions. |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total service revenues and vehicle sales | $ | 1,146,079 | | | $ | 1,163,489 | | | $ | 1,046,386 | | | $ | (17,410 | ) | | (1.5 | )% | | $ | 117,103 | | | 11.2 | % |

The increase in service revenues for fiscal 2014 of $108.7 million, or 12.8% as compared to fiscal 2013 came from (i) growth in North America of $76.7 million; (ii) growth in the U.K. of $23.7 million, driven by increased volume from our vehicle suppliers; and (iii) our international expansion during the prior fiscal year into Germany, Spain, the U.A.E., and Brazil, which represented $8.3 million.

Excluding the increase in revenues in fiscal 2013 associated with Hurricane Sandy of $31.2 million, North America service revenue grew by $107.9 million, or 14.7%.

The growth in North America was driven primarily by increased volume as revenue per car remained relatively flat.

The increase in volume came from the acquisition of Salvage Parent, Inc., which closed in the fourth quarter of fiscal 2013, and increases from existing suppliers as we believe there may have been an increase in the overall growth in the salvage market driven by increased salvage frequency.

The decline in our other international markets was driven primarily by reduced volume.

The increase in vehicle sales for fiscal 2014 of $8.4 million, or 4.2% as compared to fiscal 2013 primarily came from (i) our international expansion during the prior fiscal year into Germany, Spain, the U.A.E. and Brazil, which represented $4.8 million; (ii) growth in the U.K. of $2.3 million, driven primarily by increased open market purchase activity from the general public; and (iii) growth in North America of $1.3 million, driven primarily by the acquisition of Salvage Parent, Inc.

| Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | |

| General and administrative | 138,975 | | | | 164,535 | | | | 137,930 | | | | (25,560 | | ) | | (15.5 | )% | | 26,605 | | | | 19.3 | % |

| Total operating expenses | $ | 801,678 | | | $ | 888,555 | | | $ | 763,394 | | | $ | (86,877 | ) | | (9.8 | )% | | $ | 125,161 | | | 16.4 | % |

Included in yard operations cost was depreciation and amortization expenses, which were $34.9 million, $36.2 million, and $40.8 million for fiscal 2015, 2014, and 2013, respectively.

The decrease in yard operation depreciation and amortization expense in fiscal 2014 as compared to fiscal 2013 was due primarily to our data center assets being fully depreciated.

The increase in yard operations expense for fiscal 2014 of $62.2 million, or 13.6% as compared to fiscal 2013 primarily came from (i) growth in North America, driven by the acquisition of Salvage Parent, Inc., which closed in the fourth quarter of fiscal 2013, increased volume from what we believe to be an increase in the overall size of the salvage market due to increased salvage frequency, and increases in volume from non-insurance suppliers; (ii) growth in the U.K., driven by increased volumes from our new and existing suppliers; and (iii) growth in our international activity outside of the U.K. as these operations are in their developmental stages, without the benefit of scale.

Included in our yard operations expense in fiscal 2013 was $25.7 million of abnormal costs associated with Hurricane Sandy.

Excluding those costs, the average handling cost per car increased, driven primarily by growth in normal subhaul, labor, equipment and titling costs, as well as charges associated with severance and lease termination costs of $2.9 million, primarily associated with the integration of the Salvage Parent, Inc. acquisition.

The decline in North America was primarily the result of decreased open market purchase activity from the general public and lower average purchase prices.

The increase in cost of vehicle sales for fiscal 2014 of $7.3 million, or 4.3% as compared to fiscal 2013 came from (i) our international expansion during the prior fiscal year, which represented $4.8 million; (ii) growth in the U.K. of $2.1 million, driven primarily by increased open market purchase activity from the general public; and (iii) growth in North America of $0.3 million driven primarily by the acquisition of Salvage Parent, Inc.

Included in general and administrative costs were depreciation and amortization expenses which were $11.7 million, $17.5 million, and $16.0 million for fiscal 2015, 2014, and 2013, respectively.

The increase in general and administrative expenses for fiscal 2014 of $26.6 million, or 19.3% as compared to fiscal 2013 increased primarily from (i) our international expansion during the prior fiscal year into Germany, Spain, the U.A.E., and Brazil representing $3.7 million; and (ii) growth in North America of $19.6 million, driven primarily by the acquisition of Salvage Parent, Inc., which closed in the fourth quarter of fiscal 2013, increased expenditures on technology development, and the overall growth in labor costs, professional services and facilities costs associated with domestic and international expansion.

The decrease in total other expense for fiscal 2014 of $1.2 million, or 20.0% as compared to fiscal 2013 was primarily due to a decrease in interest expense as a result of principal payments on long-term debt.

To achieve this objective in the current uncertain global financial markets, all cash and cash equivalents were held in bank deposits and money market funds as of July 31, [removed: 2015.][added: 2016.]

As of July 31, [removed: 2015,] [added: 2016,] we held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or mortgaged-backed securities.

Based on the average cash balance held for fiscal [removed: 2015,] [added: 2016,] a hypothetical 10% adverse change in our interest yield would not have materially affected our operating results.

Our total borrowings under the [added: Revolving Loan Facility under the] Credit Agreement were [removed: $243.8] [added: $238.0] million as of July 31, [removed: 2015.][added: 2016.]

The [removed: revolving and term loans] [added: Revolving Loan Facility] under the Credit Agreement [removed: bear] [added: bears] interest, at our election, at either (a) the Base Rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the Prime Rate in effect on such day; (ii) the Federal Funds Rate in effect on such date plus 0.50%; or (iii) an adjusted LIBOR rate determined on the basis of a one-month interest period plus 1.0%, in each case plus an applicable margin ranging from [removed: 0.25%] [added: 0.0%] to [removed: 1.0%] [added: 0.75%] based on our consolidated total net leverage ratio during the preceding fiscal quarter; or (b) an adjusted LIBOR rate plus an applicable margin ranging from [removed: 1.25%] [added: 1.00%] to [removed: 2.0%] [added: 1.75%] depending on our consolidated total net leverage ratio during the preceding fiscal quarter.

If interest rates were to increase by 10%, our interest expense would increase [removed: but] by [removed: an insignificant amount due to the fixed interest rate swaps.][added: $2.4 million.]

International net revenues are typically denominated in the local currency of each country and result from transactions by our operations in Canada, the U.K., the U.A.E., Brazil, Spain, [added: Germany,] and [removed: Germany.][added: India.]

These operations also incur a majority of their expenses in the local currency, the Canadian dollar, British pound, U.A.E. dirham, Bahraini dinar, Omani rial, Brazilian real, [added: Euro] and [removed: Euro.][added: Indian rupee.]

A hypothetical 10% adverse change in the value of the U.S. dollar relative to the Canadian dollar, British pound, U.A.E. dirham, Bahraini dinar, Omani rial, Brazilian [removed: real and] [added: real,] Euro [added: and Indian rupee] would have resulted in a decrease in operating income of [removed: $5.6] [added: $6.6] million for fiscal [removed: 2015.][added: 2016.]

At July 31, [removed: 2015,] [added: 2016,] the cumulative effect of foreign exchange rate fluctuations on our consolidated financial position was a net translation loss of [removed: $68.5] [added: $109.2] million.

A hypothetical 10% adverse change in the value of the U.S. dollar relative to the Canadian dollar, British pound, U.A.E. dirham, Bahraini dinar, Omani rial, Brazilian [removed: real and] [added: real,] Euro [added: and Indian rupee] would not have materially affected our consolidated financial position.

On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s withdrawal from the European Union and the U.K.’s future relationships with European Union member states.

Adverse consequences concerning Brexit or the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

We have entered into two interest rate swaps to exchange our variable interest rate payments commitment for fixed interest rate payments through December 2015 to mitigate the interest expense risk.

Copart™, [removed: VB2TM, CopartDirect™,] [added: VB2™,] BID4U™, CI & Design™, Cars with Heart™, 1-800 CAR BUYER™, VB3™ and [removed: CrashedToys.com™,] [added: CrashedToys.com™] are trademarks of Copart, Inc. This Form 10-K also includes other trademarks of Copart and of other companies.

We are a leading provider of online auctions and vehicle remarketing services in the United States (U.S.), Canada, the United Kingdom (U.K.), the United Arab Emirates (U.A.E.), Oman, Bahrain, [added: Brazil, Ireland, Spain,] and [removed: Brazil.][added: India.]

We also provide vehicle remarketing services in [removed: Germany and Spain.][added: Germany.]

Vehicle sellers consist primarily of insurance companies, but also include banks and financial institutions, charities, car dealerships, [added: municipalities,] fleet operators and vehicle rental companies.

In the [removed: U.S. and Canada (North America),] [added: U.S., Canada,] Brazil, the U.A.E., Oman, [removed: and] Bahrain, [added: Ireland, Spain, and India,] we sell vehicles primarily as an agent and derive revenue primarily from fees paid by vehicle sellers and vehicle [removed: buyers,] [added: buyers] as well as related fees for [removed: services] [added: services,] such as towing and storage.

In Germany and Spain, we [added: also] derive revenue from sales listing fees for listing vehicles on behalf of many insurance companies.

We converted all of our [removed: North American] [added: U.S.] and [removed: U.K.] [added: Canada] sales to VB2 during fiscal 2004 and [added: we converted our U.K. sales to VB2 during] fiscal [removed: 2008, respectively.][added: 2008.]

VB2 opened our sales process to registered buyers (whom we refer to as [removed: members)] [added: "members")] anywhere in the world with access to the Internet.

The first step is an open preliminary bidding feature that allows a member to enter bids either at a bidding station at the storage facility or over the Internet during the [removed: preview.][added: preview period.]

Preliminary bidding ends [removed: one hour] [added: at a specified time] prior to the start of a second bidding step, an Internet-only virtual auction.

[added: To attract new members and grow our membership base,] VB3 allows non-registered members to view auctions via our website and our mobile [removed: applications, to attract non-members and grow our membership base.][added: applications.]

In addition, VB3 includes a [removed: complete,] [added: completely] redesigned auction interface, enabling members to fit multiple auction windows on their screen, while simultaneously viewing more vehicle photos and information at the time of live Internet bidding.

For fiscal [removed: 2015,] [added: 2016,] sales of [removed: North American] [added: U.S.] vehicles, on a unit basis, to members registered outside the state where the vehicle was located accounted for [removed: 48.7%] [added: 49.1%] of total vehicles sold; [removed: 28.8%] [added: 29.3%] of vehicles were sold to out of state members [added: within the U.S.] and [removed: 19.9%] [added: 19.8%] were sold to [removed: out of country] [added: International] members, based on registration.

| • | providing a comprehensive range of customer services that [removed: include] [added: includes] merchandising services, efficient title processing, timely pick-up and delivery of vehicles, and Internet sales; |

| • | providing the venue for insurance customers through our Virtual Insured Exchange (VIX) product to contingently sell a vehicle through the auction process to establish its true value, [removed: allowing] [added: enabling] the insurance customer to [removed: avoid dealing with estimated values] [added: access market value information] when negotiating with owners who wish to retain their damaged vehicles. |

For fiscal [removed: 2015,] [added: 2016,] our revenues were [removed: $1.1] [added: $1.3] billion and our operating income was [removed: $344.4] [added: $406.5] million.

We may also charge additional fees for the cost of transporting the vehicle to or from our facility, storage of the vehicle, and other incidental [removed: costs included in the consignment fee.][added: costs.]

Under the consignment [added: program or fixed fee] program, only the fees associated with vehicle processing are recorded in revenue, not the actual sales price (gross proceeds).

Costs associated with general and administrative expenses consist primarily of executive management, accounting, data processing, sales personnel, human resources, professional fees, [removed: research and development,] [added: information technology,] and marketing expenses.

The vehicles are usually purchased at a price based [removed: either] on [removed: a percentage of] the vehicles’ estimated pre-accident cash value [removed: and/or based on] [added: and] the extent of damage.

While most companies in this industry remarket vehicles through a physical auction, we sell [added: substantially] all of our vehicles on our Internet selling platform VB3, thus eliminating the requirement for buyers to travel to an auction location to participate in the sales process.

We believe that one effect of these additional features is that newer vehicles involved in accidents are [removed: more costly] [added: costlier] to repair and, accordingly, more likely to be deemed a total loss for insurance purposes.

Vehicle rebuilders and vehicle repair licensees generally [added: purchase salvage vehicles to repair and resell.]

| • | the services provided by the company and the degree to which such services reduce [added: their] administrative costs and expenses; |

| • | in the U.K., [added: in certain situations,] the actual amount paid for the vehicle. |

In the U.K., [added: some] insurance companies [removed: generally] tender periodic contracts for the purchase of salvaged vehicles.

[removed: The] [added: Under these circumstances,] insurance [removed: company] [added: companies] will generally award the contract to the company that is willing to pay the highest price for the vehicles.

Our growth strategy is to increase our revenues and profitability by, among other things, (i) acquiring and developing new facilities in key markets including foreign [removed: markets,] [added: markets;] (ii) pursuing national and regional vehicle supply [removed: agreements,] [added: agreements; and] (iii) expanding our online auctions and vehicle remarketing service offerings to sellers and [removed: members, and (iv) expanding the application of VB3 into new markets and to new sellers within the vehicle market.][added: members.]

In addition, to maximize gross sales proceeds and cost efficiencies at each of our acquired facilities, we introduce our (i) pricing [removed: structure,] [added: structure;] (ii) selling [removed: processes,] [added: processes;] (iii) operational [removed: procedures,] [added: procedures;] (iv) management information [removed: systems,] [added: systems;] and (v) when appropriate, redeploy existing personnel.

Our strategy is to offer integrated services to vehicle sellers on a [added: global,] national or regional basis by acquiring or developing facilities in new and existing markets.

Pursue [added: Global,] National and Regional Vehicle Supply Agreements

Our broad [removed: national] [added: global] presence enhances our ability to enter into local, [removed: regional or] [added: regional,] national [added: or global] supply agreements with vehicle sellers.

This includes, for our sellers, real-time access to sales data over the Internet, national coverage, the ability to respond on a national scale and, for our members, the implementation of VB3 real-time bidding at [added: substantially] all of our facilities, permitting members at any location worldwide to participate in the sales at [removed: all of] our yards.

[removed: National] [added: Geographic] Coverage and Ability to Respond on a National Scale

Since our inception in 1982, we have expanded from a single facility in Vallejo, California to an integrated network of facilities located in [removed: North America,] the [added: U.S., Canada, the] U.K., the U.A.E., Oman, Bahrain, [added: Brazil, Ireland, Spain] and [removed: Brazil.][added: India.]

In Germany and [removed: Spain,] [added: Spain] we [added: also] provide online vehicle remarketing services.

| • | second chance bidding, which allows the second highest bidder the opportunity to purchase the vehicle for the seller’s current minimum bid after the high bidder [removed: declines;] [added: fails to consummate the purchase;] and |

| • | Night Cap sales, which provides an additional opportunity for bidding on vehicles that [removed: did] [added: have] not [removed: achieve] [added: previously achieved] their minimum [removed: bid during the virtual sale, counter-bidding, or second chance bidding.] [added: bid.] |

We have a proven track record of successfully acquiring and integrating [removed: vehicle storage] facilities.

Since becoming a public company in 1994, we have completed acquisitions of facilities in [removed: North America,] the [added: U.S., Canada, the] U.K., the U.A.E., Brazil, [removed: Germany] [added: Germany,] and Spain.

In fiscal 2016, we opened facilities in Sonepat, India; Castledermot, Ireland; Algete, Spain; Dallas, Wilmer and Temple, Texas; Colorado Springs and Denver, Colorado; and Cartersville, Georgia.

| • | geographic coverage; |

Our Business Segments

Our U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments.

The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues, operating income and income before income taxes.

The segments continue to share similar business models, services and economic characteristics although recent changes in management structure and continued growth in our International region have resulted in the change in our reportable segments.

Our revenues for the year ended July 31, 2016 were distributed as follows: U.S. 80.1% and International 19.9%.

Geographic information as well as comparative segment revenues and related financial information pertaining to the U.S. and International segments for the years ended July 31, 2016, 2015 and 2014 are presented in the tables in Note 14 — Segments and Other Geographic Reporting, to the Notes to Consolidated Financial Statements, which are included under in Part II, Item 8 of this 10-K.

Preliminary bidding ends at a specified time prior to the start of a second bidding step, an Internet-only virtual auction.

CashForCars.com

To become a registered member a person must complete a basic application either online or through our mobile applications.

Before any member may purchase a vehicle, they must provide copies of current government issued photo identification.

Additionally, business members must provide current business information, including copies of licenses, which may include vehicle dismantler, dealer, resale, repair or export licenses, and as needed, completed sales tax exemption certificates.

We operate fully redundant infrastructure to ensure ongoing operations, even in the event of physical damage to one of our data centers.

We began using our new internally developed proprietary system with our expansion into Spain and India in fiscal 2016.

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| United States | | International | | Total Employees |

| 3,823 | | 1,021 | | 4,844 |

In the U.K., we provide vehicle de-pollution and crushing services for end-of-life program vehicles.

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 facilities which we may acquire in the future, 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 consolidated results of operations and financial position.

For fiscal 2015, sales of U.K. vehicles, on a unit basis, to members registered outside the country where the vehicle was located accounted for 18.4% of total vehicles sold.

In fiscal 2013, we acquired five new facilities in Sao Paulo, Brazil; one facility in Dubai, U.A.E.; one facility in Ettlingen, Germany; one facility in Cordoba, Spain; and 43 facilities in North America; and we opened a new facility in Webster, New Hampshire.

purchase salvage vehicles to repair and resell.

| • | national coverage; |

predetermined percentage of the vehicle sales price.

CopartDirect

Please see Note 13 — Segments and Other Geographic Reporting in our Notes to Consolidated Financial Statements for information regarding the geographic location of our sales and our long-lived assets.

To become a registered member and gain admission to one of our sales, prospective members must first pay an initial registration fee and an annual fee, provide requested personal and business information, and have, in most states, a vehicle dismantler’s, dealer’s, resale, repair or export license.

In certain venues, we may sell to the general public.

This system is integrated with

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| North America | | United Kingdom | | Other | | Total Employees |

| 3,291 | | 763 | | 213 | | 4,267 |

We have implemented procedures to reduce the amount of soil contamination that may occur at our facilities, and we have initiated safety programs and training of personnel on the safe storage and handling of hazardous materials.

We believe that we are in compliance, in all material respects, with all applicable environmental regulations and we do not anticipate any material capital expenditures to remain in environmental compliance.

If additional or more stringent requirements are imposed on us in the future, we could incur additional capital expenditures.

In fiscal 2004, we received a patent from Australia.

We are subject to threats of litigation and are involved in actual litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage, [added: contract disputes,] and handling or disposal of vehicles.

The material pending legal proceedings to which we are [removed: party to,] [added: party,] or of which our property is [removed: subject to] [added: subject,] include the following matters.

On November 1, 2013, we filed suit against Sparta Consulting, Inc. (now known as [removed: “KPIT”)] [added: KPIT)] in the 44th Judicial District Court of Dallas County, Texas, alleging fraud, fraudulent inducement, and/or promissory fraud, negligent misrepresentation, unfair business practices pursuant to California Business and Professions Code § 17200, breach of contract, declaratory judgment, and attorney’s fees.

[added: On January 8, 2014, KPIT filed suit against us in the] United States District Court for the Eastern District of California, alleging breach of contract, promissory estoppel, breach of the implied covenant of good faith and fair dealing, account stated, quantum meruit, unjust enrichment, and declaratory relief.

We are pursuing our claim for damages, and defending [added: against] KPIT’s claim for damages.

On June 5, 2015, following our [removed: most recent] discussions and after additional review of documentation, the DOR provided us with revised audit work papers computing a sales tax liability of $2.7 million before interest and any penalties.

On June 8, 2016, we amended our complaint to include claims that KPIT stole certain intellectual property owned by us and acted negligently in its provision of services.

On August 5, 2016, the DOR filed a response in which it denied all allegations noted in our appeal of the notice of assessment.

We continue to substantiate our position that these transactions are nontaxable sales for resale by providing the DOR with documentation supporting the exempt nature of these sales.

On January 8, 2014, KPIT filed suit against us in the

For the fiscal year ended July 31, [removed: 2015][added: 2016]

Commission file number: [removed: 0-23255][added: 000-23255]

| Large Accelerated Filer [removed: x] [added: ý] | | Accelerated Filer o | | Non-Accelerated Filer o | | Smaller Reporting Company o |

The aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the registrant as of January [removed: 31, 2015] [added: 29, 2016] (the last business day of the registrant’s most recently completed second fiscal quarter) was [removed: $3,646,539,300] [added: $3,337,942,326] based upon the closing sales price reported for such date on the NASDAQ Global Select Market.

As of September [removed: 24, 2015, 120,186,984] [added: 27, 2016, 114,161,199] shares of the registrant’s common stock were outstanding.

Portions of our definitive Proxy Statement for the [removed: 2015] [added: 2016] Annual Meeting of Stockholders, also referred to in this Annual Report on Form 10-K as our Proxy Statement, which will be filed with the Securities and Exchange Commission, or SEC, pursuant to Regulation 14A within 120 days after the registrant’s fiscal year end of July 31, [removed: 2015,] [added: 2016,] have been incorporated by reference in Part III hereof.

| Item 1 | | [removed: [Business](#s9F79E7411FD6AD76AC678F28EE052399)] [added: [Business](#s27A9D7684274510E8685200B79B0CB6F)] | [removed: [1](#s9F79E7411FD6AD76AC678F28EE052399)] [added: [1](#s27A9D7684274510E8685200B79B0CB6F)] |

| | | [Industry [removed: Overview](#s32807E5A96B164E8AD148F28EE268EAF)] [added: Overview](#s8DDF7591CEF95F69AAA3D7CDC56A3C50)] | [removed: [3](#s32807E5A96B164E8AD148F28EE268EAF)] [added: [3](#s8DDF7591CEF95F69AAA3D7CDC56A3C50)] |

| | | [Operating and Growth [removed: Strategy](#s810F5FA7589990A2073E8F28EE58ABB8)] [added: Strategy](#s779247C679455023A18C57250408C100)] | [removed: [4](#s810F5FA7589990A2073E8F28EE58ABB8)] [added: [4](#s779247C679455023A18C57250408C100)] |

| | | [Our Competitive [removed: Advantages](#sC9999FA4F06FCAF7B5D48F28EE799E48)] [added: Advantages](#s8FA5DF6B1B1852E7A3D5A5FE0CBA75B4)] | [removed: [5](#sC9999FA4F06FCAF7B5D48F28EE799E48)] [added: [5](#s8FA5DF6B1B1852E7A3D5A5FE0CBA75B4)] |

| | | [Our Service [removed: Offerings](#sEEDB877F7756985244A88F28EEACBBB0)] [added: Offerings](#sD30D712C28945CDC8C82A3C4FB4723DD)] | [removed: [6](#sEEDB877F7756985244A88F28EEACBBB0)] [added: [7](#sD30D712C28945CDC8C82A3C4FB4723DD)] |

| | | [Management Information [removed: Systems](#s62F878B26E8403D3C4318F28EF5215C0)] [added: Systems](#s07BF7844226A5C1CA0D4BFBC84726C51)] | [removed: [9](#s62F878B26E8403D3C4318F28EF5215C0)] [added: [10](#s07BF7844226A5C1CA0D4BFBC84726C51)] |

| | | [Environmental [removed: Matters](#s0CB66388B47C08A065AA8F28EFA58412)] [added: Matters](#sCC20B8444A825118BBC60FDE47CEC658)] | [removed: [10](#s0CB66388B47C08A065AA8F28EFA58412)] [added: [11](#sCC20B8444A825118BBC60FDE47CEC658)] |

| | | [Governmental [removed: Regulations](#s914AF3821A214853619C8F28EFC7120B)] [added: Regulations](#s7458A8BF48E05C1CA68DF7F3B3CE4F80)] | [removed: [10](#s914AF3821A214853619C8F28EFC7120B)] [added: [11](#s7458A8BF48E05C1CA68DF7F3B3CE4F80)] |

| | | [Intellectual Property and Proprietary [removed: Rights](#s52C9B0B373A6220A29DA8F28EFF9C44A)] [added: Rights](#s33D347F217DF5DCEA456F6015CCCC0C6)] | [removed: [11](#s52C9B0B373A6220A29DA8F28EFF9C44A)] [added: [11](#s33D347F217DF5DCEA456F6015CCCC0C6)] |

| Item 1A. | | [Risk [removed: Factors](#s13CF9CBF94CC2EC8F82E8F28F04C8B1E)] [added: Factors](#s7F424E05EE2053DCA7995298DF0B83A5)] | [removed: [11](#s13CF9CBF94CC2EC8F82E8F28F04C8B1E)] [added: [12](#s7F424E05EE2053DCA7995298DF0B83A5)] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#s3A11E46D6B1F7279DBF68F28F06E636A)] [added: Comments](#s9AB2D3CBD05351B3818278739C745668)] | [removed: [23](#s3A11E46D6B1F7279DBF68F28F06E636A)] [added: [24](#s9AB2D3CBD05351B3818278739C745668)] |

| Item 2. | | [removed: [Properties](#s1560DA0C7B11957159DD8F28F0A0246B)] [added: [Properties](#s5EDFAB25D71750AB971EA43E84224EC0)] | [removed: [23](#s1560DA0C7B11957159DD8F28F0A0246B)] [added: [25](#s5EDFAB25D71750AB971EA43E84224EC0)] |

| Item 3. | | [Legal [removed: Proceedings](#s4E40C78F3F2D0DEA2D608F28F0C03345)] [added: Proceedings](#s05C332076BF858F7AFD856DB5E712354)] | [removed: [23](#s4E40C78F3F2D0DEA2D608F28F0C03345)] [added: [25](#s05C332076BF858F7AFD856DB5E712354)] |

| Item 4. | | [Mine Safety [removed: Disclosures](#sF35F5C604AED3E4770C78F28F0F312C1)] [added: Disclosures](#s3DF778FB970E5776BE3B95058FC513A3)] | [removed: [24](#sF35F5C604AED3E4770C78F28F0F312C1)] [added: [26](#s3DF778FB970E5776BE3B95058FC513A3)] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sAE93295E9FBE9F65085B8F28F146ECB4)] [added: Securities](#sD12F09266A9E52BC9DDEF3DF4EB575F0)] | [removed: [25](#sAE93295E9FBE9F65085B8F28F146ECB4)] [added: [27](#sD12F09266A9E52BC9DDEF3DF4EB575F0)] |

| Item 6. | | [Selected Financial [removed: Data](#sBEA00EAB9677CC72789F8F28F1677396)] [added: Data](#s7D971730C9145CEDAE3EDD76D595CBF8)] | [removed: [28](#sBEA00EAB9677CC72789F8F28F1677396)] [added: [30](#s7D971730C9145CEDAE3EDD76D595CBF8)] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sE241CA7C9EF05F481A748F28F1991910)] [added: Operations](#s76A6896DE7725C21B683284853108914)] | [removed: [29](#sE241CA7C9EF05F481A748F28F1991910)] [added: [31](#s76A6896DE7725C21B683284853108914)] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sC59AD5F6D9E0A2D9B2AD8F28F293F68F)] [added: Risk](#s2A6698138A635213B6E44D3CCF4FE187)] | [removed: [44](#sC59AD5F6D9E0A2D9B2AD8F28F293F68F)] [added: [48](#s2A6698138A635213B6E44D3CCF4FE187)] |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#s888D51EE29C3BEB1DEC88F28F2B5AE06)] [added: Data](#s756B0F9751B354A69D008DE8462A047D)] | [removed: [45](#s888D51EE29C3BEB1DEC88F28F2B5AE06)] [added: [49](#s756B0F9751B354A69D008DE8462A047D)] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s896C3FC13AA0B3EC68888F28F2E76EA3)] [added: Disclosure](#s74702A619350579D8F04B7DE0B65B8C4)] | [removed: [45](#s896C3FC13AA0B3EC68888F28F2E76EA3)] [added: [49](#s74702A619350579D8F04B7DE0B65B8C4)] |

| Item 9A. | | [Controls and [removed: Procedures](#sF44C0D911FDFE28E9D218F28F3087505)] [added: Procedures](#s67FCFFAEBB145DC0BED4E903DE8B62E7)] | [removed: [45](#sF44C0D911FDFE28E9D218F28F3087505)] [added: [50](#s67FCFFAEBB145DC0BED4E903DE8B62E7)] |

| Item 9B. | | [Other [removed: Information](#s1D3B64BD38555E4A89778F28F339530F)] [added: Information](#s92D231C2DC415162B768F18FF9DB9BD9)] | [removed: [49](#s1D3B64BD38555E4A89778F28F339530F)] [added: [52](#s92D231C2DC415162B768F18FF9DB9BD9)] |

| [PART [removed: III](#s0371B15677BF1BB234F08F28F35A9053)] [added: III](#sE62DD9AC81D4512CA89E8E3EEB07EF2D)] | | | [removed: [50](#s0371B15677BF1BB234F08F28F35A9053)] [added: [53](#sE62DD9AC81D4512CA89E8E3EEB07EF2D)] |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#s5DAEAFAD50BD34F68D588F28F38EF19D)] [added: Governance](#s44BF4357B3715B4994C3A7A2069E6290)] | [removed: [50](#s5DAEAFAD50BD34F68D588F28F38EF19D)] [added: [53](#s44BF4357B3715B4994C3A7A2069E6290)] |

| Item 11. | | [Executive [removed: Compensation](#sDF49A573CF82987DD53E8F28F3AFF298)] [added: Compensation](#s0AECFA5C46E55F5C8CCCA18A1F5A96B7)] | [removed: [50](#sDF49A573CF82987DD53E8F28F3AFF298)] [added: [53](#s0AECFA5C46E55F5C8CCCA18A1F5A96B7)] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s9FB783A9D9F779BB43B48F28F3E19A1C)] [added: Matters](#sE4351950A4A4566F89A4764DDC58889F)] | [removed: [50](#s9FB783A9D9F779BB43B48F28F3E19A1C)] [added: [54](#sE4351950A4A4566F89A4764DDC58889F)] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s4EF92F996490B0868FD28F28F402CE1D)] [added: Independence](#s6D9C1EF8B9D155339F763F30923D2EBB)] | [removed: [50](#s4EF92F996490B0868FD28F28F402CE1D)] [added: [54](#s6D9C1EF8B9D155339F763F30923D2EBB)] |

| Item 14. | | [Principal Accounting Fees and [removed: Services](#sCF0EAC638581C9C234CB8F28F434C62D)] [added: Services](#sAEE4BC4105DC593CB112B3931595B33F)] | [removed: [50](#sCF0EAC638581C9C234CB8F28F434C62D)] [added: [54](#sAEE4BC4105DC593CB112B3931595B33F)] |

| Item 15. | | [Exhibits, Financial Statement [removed: Schedules](#s2C36EED63C4749AC114F8F28F487F473)] [added: Schedules](#s5E33C1C855EE53D49306A08DEA7656A6)] | [removed: [51](#s2C36EED63C4749AC114F8F28F487F473)] [added: [55](#s5E33C1C855EE53D49306A08DEA7656A6)] |

This Annual Report on Form 10-K for the fiscal year ended July 31, [removed: 2015,] [added: 2016,] or this Form 10-K, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

10-K 1 cprt07312016-10k.htm 10-K

For the Fiscal Year Ended July 31, 2016

| [PART I](#s2DF5BB9FE5935B438D89CAF9F3B0CA35) | | | [1](#s2DF5BB9FE5935B438D89CAF9F3B0CA35) |

| | | [Business Segments](#sea40d6c1933b4047b34adc5d4db83b34) | [5](#s8FA5DF6B1B1852E7A3D5A5FE0CBA75B4) |

| | | [Sales](#s538E35AC6A345F9F860BB338FCFB78C9) | [9](#s538E35AC6A345F9F860BB338FCFB78C9) |

| | | [Members](#s595DEC7E75D951199D17ED0BFC4D4F5A) | [9](#s595DEC7E75D951199D17ED0BFC4D4F5A) |

| | | [Competition](#s73870276AB5D57EFBE8BFF7A5C937633) | [10](#s73870276AB5D57EFBE8BFF7A5C937633) |

| | | [Employees](#s203DDFE71CD95613887B56141B4DA313) | [10](#s203DDFE71CD95613887B56141B4DA313) |

| | | [Seasonality](#sCBC3402D729F5C61BDA8BD120650C102) | [11](#sCBC3402D729F5C61BDA8BD120650C102) |

| | | | |

| [PART II](#sE0AB470730C2589EAA32D14BA47A68F9) | | | [27](#sE0AB470730C2589EAA32D14BA47A68F9) |

| | | | |

| | | | |

| [PART IV](#s41D4B2698EE7587186E8406F2FE2CC06) | | | [55](#s41D4B2698EE7587186E8406F2FE2CC06) |

| [Signatures](#s1FC4EE6E7D2F5659B8ECFBA25FE5016F) | | | [56](#s1FC4EE6E7D2F5659B8ECFBA25FE5016F) |

All statements other than statements of historical facts are statements that could be deemed forward-looking statements.

10-K 1 cprt07312015-10k.htm 10-K

| [PART I](#sA5258E8D99526F8A9B318F28EDB2D6B6) | | | [1](#sA5258E8D99526F8A9B318F28EDB2D6B6) |

| | | [Sales](#sA26197A4001D8C8D2F3D8F28EECDA4C6) | [9](#sA26197A4001D8C8D2F3D8F28EECDA4C6) |

| | | [Members](#sB142D0E721739BD976B48F28EEFF853A) | [9](#sB142D0E721739BD976B48F28EEFF853A) |

| | | [Competition](#sBC09F35000675BCE44B88F28EF20F12A) | [9](#sBC09F35000675BCE44B88F28EF20F12A) |

| | | [Employees](#s1E550D1E5A23F777789A8F28EF72D1D5) | [10](#s1E550D1E5A23F777789A8F28EF72D1D5) |

| | | [Seasonality](#s4A7A866C4461F41E69698F28F01AF005) | [11](#s4A7A866C4461F41E69698F28F01AF005) |

| [PART II](#sA6D1B6D61F944A9A34568F28F1147C6C) | | | [25](#sA6D1B6D61F944A9A34568F28F1147C6C) |

| [PART IV](#s4B2FC20073DC0286BF4C8F28F455982F) | | | [51](#s4B2FC20073DC0286BF4C8F28F455982F) |

| [Signatures](#sEF64B624379F1B1370D08F28F4A86381) | | | [52](#sEF64B624379F1B1370D08F28F4A86381) |

In the U.K., we own or lease [removed: 15] [added: 16] operating facilities.

In the U.A.E., [removed: Oman and] [added: Oman,] Bahrain, [added: and India,] we lease one operating facility in each country.

In Ireland and Spain we own one operating facility.

On July 31, [removed: 2015,] [added: 2016,] the last reported sale price of our common stock on the NASDAQ Global Select Market was [removed: $36.03] [added: $50.44] per share.

| Fourth Quarter | $ | [removed: 36.80] [added: 51.31] | | | $ | [removed: 33.36] [added: 42.49] | | | $ | [removed: 37.15] [added: 36.80] | | | $ | [removed: 33.37] [added: 33.36] | |

| Third Quarter | $ | [removed: 38.50] [added: 42.84] | | | $ | [removed: 35.48] [added: 33.11] | | | $ | [removed: 37.54] [added: 38.50] | | | $ | [removed: 32.59] [added: 35.48] | |

| Second Quarter | $ | [removed: 37.81] [added: 39.67] | | | $ | [removed: 33.14] [added: 33.01] | | | $ | [removed: 36.93] [added: 37.81] | | | $ | [removed: 31.08] [added: 33.14] | |

| First Quarter | $ | [removed: 34.92] [added: 36.74] | | | $ | [removed: 29.93] [added: 32.90] | | | $ | [removed: 34.71] [added: 34.92] | | | $ | [removed: 30.38] [added: 29.93] | |

For fiscal 2015, we repurchased 231,500 shares of our common stock at a weighted average price of [removed: $36.02.][added: $36.02 per share totaling $8.3 million.]

For fiscal [removed: 2013,] [added: 2016,] we repurchased [removed: 500,000] [added: 2,938,519] shares of our common stock at a weighted average price of [removed: $27.77.][added: $40.13 per share totaling $117.9 million.]

As of July 31, [removed: 2015,] [added: 2016,] the total number of shares repurchased under the program was [removed: 50,518,282] [added: 53,456,801] and [removed: 47,481,718] [added: 44,543,199] shares were available for repurchase under our program.

[removed: Additionally, on] [added: On] July 9, 2015, we completed a modified "Dutch Auction" tender offer, or tender offer, to purchase up to 13,888,888 shares of our common stock at a purchase price not greater than $36.00 nor less than $34.75 per share.

The shares purchased as a result of the tender [removed: offer] [added: offers] were not part of our [added: stock] repurchase program.

| Period | Total Number of Shares | | | Average Price Paid Per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Program | | | Maximum Number of Shares That May Yet be Purchased Under the [removed: Program] [added: Program(1)] | |

| [removed: July 1, 2015 through July 31, 2015 (1)] [added: Fourth Quarter(2)] | 6,485,561 | | | $ | 36.00 | | | 231,500 | | | 47,481,718 | |

| [removed: (1)] [added: (2)] | Consists of 6,254,061 shares repurchased in connection with the tender offer at a purchase price of $36.00 per share and 231,500 shares repurchased through our publicly announced stock repurchase program. |

During fiscal [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013,] [added: 2014,] certain executive officers and employees exercised stock options through cashless exercises.

The Company remitted [removed: $3.8] [added: $15.0] million, [removed: $0.1] [added: $3.8] million and [removed: $0.6] [added: $0.1] million for the years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013,] [added: 2014,] respectively, to the proper taxing authorities in satisfaction of the employees’ minimum statutory withholding requirements.

The exercised stock [removed: options] [added: options, utilizing a cashless exercise,] are summarized in the following table:

| FY 2014—Q1 | 14,000 | | | [removed: 16.43] [added: $] | [added: 16.43] | | | 7,241 | | | 2,519 | | | 4,240 | | | [added: $ |] 31.77 | | | [added: $] | 80 | | [removed: |]

There were no issuances of unregistered securities in the year ended July 31, [removed: 2015.][added: 2016.]

The following is a line graph comparing the cumulative total return to stockholders of our common stock at July 31, [removed: 2015] [added: 2016] since July 31, [removed: 2010,] [added: 2011,] to the cumulative total return over such period of (i) the NASDAQ Composite Index, (ii) the NASDAQ Industrial Index, and (iii) the NASDAQ Q-50 (NXTQ).

[removed: ][added: ]

| | [removed: 2010 | | | |] 2011 | | | | 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | [added: | 2016 | | |]

| * | Assumes that $100.00 was invested on July 31, [removed: 2010] [added: 2011] in our common stock, in the NASDAQ Composite Index, the NASDAQ Industrial Index and the NASDAQ Q-50 (NXTQ), and that all dividends were reinvested. No dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. |

As of July 31, 2016, there were 110,122,060 shares outstanding.

As of September 27, 2016, we had 1,044 stockholders of record.

| | 2016 | | | | | | | | 2015 | | | | | | |

The Credit Agreement to which we are a party contains customary affirmative and negative covenants, including covenants that limit or restrict us and our subsidiaries’ ability to, among other things, pay dividends, subject to certain exceptions.

For further detail see Notes to Consolidated Financial Statements, Note 8 — Long-Term Debt and Note 11 — Stockholders’ Equity and under the subheadings "Credit Agreement" and "Note Purchase Agreement".

Additionally, on December 30, 2015, the Company completed a modified "Dutch Auction" tender offer, or tender offer, to purchase up to 7,317,073 shares of its common stock at a price not greater than $41.00 nor less than $38.00 per share.

In connection with the tender offer, the Company accepted for payment an aggregate of 8,333,333 shares of its common stock at a purchase price of $39.00 per share for a total value of $325.0 million.

Our directors and executive officers did not participate in the tender offers.

| Fiscal 2016 | | | | | | | | | | | | |

| First Quarter | — | | | $ | — | | | — | | | 47,481,718 | |

| Second Quarter(3) | 8,333,333 | | | $ | 39.00 | | | — | | | 47,481,718 | |

| Third Quarter | 2,938,519 | | | $ | 40.13 | | | 2,938,519 | | | 44,543,199 | |

| May 1, 2016 through May 31, 2016 | — | | | $ | — | | | — | | | 44,543,199 | |

| June 1, 2016 through June 30, 2016 | — | | | $ | — | | | — | | | 44,543,199 | |

| July 1, 2016 through July 31, 2016 | — | | | $ | — | | | — | | | 44,543,199 | |

| (1) | The Company's stock repurchase program was announced on February 20, 2003. On September 22, 2011, the Company's board of directors approved a 40 million share increase in the Company's stock repurchase program, bringing the total current authorization to 98 million shares. The repurchase may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. |

| (3) | 8,333,333 shares were repurchased by the Company through its modified "Dutch Auction" tender offer under which the Company was to purchase up to 7,317,073 shares of its common stock at a price not greater than $41.00 nor less than $38.00 per share. The tender offer was announced on November 23, 2015 and was completed on December 30, 2015. |

| FY 2016—Q4 | 1,130,000 | | | 18.64 | | | | 410,648 | | | 293,152 | | | 426,200 | | | 51.30 | | | | 15,039 | | |

| | |

| --- | --- |

| Copart, Inc. | $ | 100.00 | | | $ | 109.37 | | | $ | 149.64 | | | $ | 153.65 | | | $ | 165.85 | | | $ | 232.17 | |

| NASDAQ Composite | $ | 100.00 | | | $ | 109.35 | | | $ | 137.07 | | | $ | 167.99 | | | $ | 197.62 | | | $ | 200.22 | |

| NASDAQ Industrial | $ | 100.00 | | | $ | 105.11 | | | $ | 145.01 | | | $ | 162.89 | | | $ | 192.89 | | | $ | 199.91 | |

| NASDAQ Q-50 (NXTQ) | $ | 100.00 | | | $ | 94.53 | | | $ | 127.70 | | | $ | 159.62 | | | $ | 183.66 | | | $ | 182.06 | |

| | |

| --- | --- |

As of July 31, 2015, there were 120,156,340 shares outstanding.

As of July 31, 2015, we had 1,130 stockholders of record.

| | 2015 | | | | | | | | 2014 | | | | | | |

Our directors and executive officers were expressly prohibited from participating in the tender offer by our board of directors under our Insider Trading Policy.

The purchases of the shares of common stock were funded by the proceeds relating to the issuance of long-term debt.

| Fiscal 2013 | | | | | | | | | | | | |

| First Quarter | 500,000 | | | $ | 27.77 | | | 500,000 | | | 47,713,218 | |

| Second Quarter | — | | | $ | — | | | — | | | 47,713,218 | |

| Third Quarter | — | | | $ | — | | | — | | | 47,713,218 | |

| Fourth Quarter | — | | | $ | — | | | — | | | 47,713,218 | |

| May 1, 2015 through May 31, 2015 | — | | | $ | — | | | — | | | 47,713,218 | |

| June 1, 2015 through June 30, 2015 | — | | | $ | — | | | — | | | 47,713,218 | |

| FY 2013—Q2 | 73,228 | | | $ | 8.89 | | | 18,127 | | | 17,461 | | | 37,640 | | | $ | 35.91 | | | $ | 627 | |

| Copart, Inc. | $ | 100.00 | | | $ | 119.24 | | | $ | 130.41 | | | $ | 178.43 | | | $ | 183.21 | | | $ | 197.75 | |

| NASDAQ Composite | $ | 100.00 | | | $ | 123.11 | | | $ | 134.00 | | | $ | 168.35 | | | $ | 206.23 | | | $ | 242.43 | |

| NASDAQ Industrial | $ | 100.00 | | | $ | 134.48 | | | $ | 139.45 | | | $ | 191.96 | | | $ | 216.64 | | | $ | 252.97 | |

| NASDAQ Q-50 (NXTQ) | $ | 100.00 | | | $ | 126.05 | | | $ | 136.37 | | | $ | 189.24 | | | $ | 234.86 | | | $ | 300.13 | |

| | [removed: 2015] [added: 2016 (1)] | | | | [removed: 2014] [added: 2015 (2)] | | | | [removed: 2013] [added: 2014 (2)] | | | | [removed: 2012] [added: 2013 (2)] | | | | [removed: 2011*] [added: 2012 (2)] | | |

| Revenues | $ | [removed: 1,146,079] [added: 1,268,449] | | | $ | [removed: 1,163,489] [added: 1,146,079] | | | $ | [removed: 1,046,386] [added: 1,163,489] | | | $ | [removed: 924,191] [added: 1,046,386] | | | $ | [removed: 872,246] [added: 924,191] | |

| Operating income | [removed: 344,401] [added: 406,470] | | | | [removed: 274,934] [added: 344,401] | | | | [removed: 282,992] [added: 274,934] | | | | [removed: 286,353] [added: 282,992] | | | | [removed: 265,290] [added: 286,353] | | |

| Income before income taxes | [removed: 332,069] [added: 395,865] | | | | [removed: 270,035] [added: 332,069] | | | | [removed: 276,872] [added: 270,035] | | | | [removed: 278,056] [added: 276,872] | | | | [removed: 263,877] [added: 278,056] | | |

| Income taxes | [removed: 112,286] [added: 125,505] | | | | [removed: 91,348] [added: 112,286] | | | | [removed: 96,847] [added: 91,348] | | | | [removed: 95,937] [added: 96,847] | | | | [removed: 97,502] [added: 95,937] | | |

| Net income | $ | [removed: 219,783] [added: 270,360] | | | $ | [removed: 178,687] [added: 219,783] | | | $ | [removed: 180,025] [added: 178,687] | | | $ | [removed: 182,119] [added: 180,025] | | | $ | [removed: 166,375] [added: 182,119] | |

| Basic net income per common share | $ | [removed: 1.75] [added: 2.36] | | | $ | [removed: 1.42] [added: 1.75] | | | $ | [removed: 1.44] [added: 1.42] | | | $ | [removed: 1.42] [added: 1.44] | | | $ | [removed: 1.10] [added: 1.42] | |

| Weighted average common shares outstanding | [removed: 125,914] [added: 114,423] | | | | [removed: 125,693] [added: 125,914] | | | | [removed: 124,912] [added: 125,693] | | | | [removed: 128,120] [added: 124,912] | | | | [removed: 151,298] [added: 128,120] | | |

| Diluted net income per common share | $ | [removed: 1.67] [added: 2.21] | | | $ | [removed: 1.36] [added: 1.67] | | | $ | [removed: 1.39] [added: 1.36] | | | $ | 1.39 | | | $ | [removed: 1.08] [added: 1.39] | |

| Diluted weighted average common shares outstanding | [removed: 131,425] [added: 122,147] | | | | [removed: 131,230] [added: 131,425] | | | | [removed: 129,781] [added: 131,230] | | | | [removed: 131,428] [added: 129,781] | | | | [removed: 153,352] [added: 131,428] | | |

| Cash and cash equivalents | $ | [removed: 456,012] [added: 155,849] | | | $ | [removed: 158,668] [added: 456,012] | | | $ | [removed: 63,631] [added: 158,668] | | | $ | [removed: 140,112] [added: 63,631] | | | $ | [removed: 74,009] [added: 140,112] | |

| Working capital | [removed: 521,456] [added: 220,523] | | | | [removed: 168,007] [added: 521,456] | | | | [removed: 67,893] [added: 168,007] | | | | [removed: 134,908] [added: 67,893] | | | | [removed: 75,242] [added: 134,908] | | |

| Stockholders’ equity | [removed: 964,464] [added: 774,456] | | | | [removed: 1,003,499] [added: 964,464] | | | | [removed: 762,401] [added: 1,003,499] | | | | [removed: 561,117] [added: 762,401] | | | | [removed: 555,172] [added: 561,117] | | |

| Total assets | 1,649,820 | | | | 1,798,660 | | | | 1,506,121 | | | | 1,333,316 | | | | 1,155,648 | | |

| Total debt | 640,492 | | | | 644,514 | | | | 302,218 | | | | 371,292 | | | | 442,472 | | |

| (1) | In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, all excess tax benefits and tax deficiencies related to exercises of stock options are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits are classified as an operating activity on the consolidated statements of cash flows. We early adopted ASU 2016-09 during the fourth quarter of fiscal 2016 on a modified retrospective basis. |

| | |

| --- | --- |

| (2) | In connection with our adoption of ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, as of July 31, 2016, prior year debt balances have been retrospectively adjusted to include a direct deduction of unamortized debt issuance costs, resulting in a reclassification of $1.3 million, $0.7 million, $1.2 million, and $1.6 million of debt issuance costs as of July 31, 2015, 2014, 2013, and 2012, respectively, to long-term debt for the respective periods. Prior to the adoption of ASU 2015-03, the unamortized debt issuance costs were included in other assets on our consolidated balance sheets. |

| Total assets | 1,799,952 | | | | 1,506,804 | | | | 1,334,481 | | | | 1,154,000 | | | | 1,084,436 | | |

| Total debt | 645,806 | | | | 302,901 | | | | 372,457 | | | | 444,120 | | | | 375,756 | | |

| * | As a result of the adoption of Accounting Standards Update 2009–13, Revenue Arrangements with Multiple Deliverables, for fiscal 2011, we accelerated recognition of $14.4 million in service revenue and $13.5 million in related yard operation expenses. |

Our management is responsible for establishing and maintaining [added: adequate] internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records [removed: that] [added: that,] in reasonable [removed: detail] [added: detail,] accurately and fairly reflect the transactions and dispositions of our assets; (2) provide [added: reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.]

Management assessed our internal control over financial reporting for the fiscal year ended July 31, [removed: 2015.][added: 2016.]

Management based its assessment on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (1992] [added: (2013] Framework).

Our independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of our internal control over financial reporting as of July 31, [removed: 2015.][added: 2016.]

We have audited Copart, Inc.’s internal control over financial reporting as of July 31, [removed: 2015,] [added: 2016,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (1992] [added: (2013] Framework) (the COSO criteria).

In our opinion, Copart, Inc. maintained, in all material respects, effective internal control over financial reporting as of July 31, [removed: 2015,] [added: 2016,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Copart, Inc. as of July 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended July 31, [removed: 2015] [added: 2016] of Copart, Inc. and our report dated September [removed: 25, 2015] [added: 28, 2016] expressed an unqualified opinion thereon.

September 28, 2016

reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

September 25, 2015

Certain information required by Part III is omitted from this Annual Report on Form 10-K because we intend to file a definitive proxy statement for our [removed: 2015] [added: 2016] Annual Meeting of Stockholders (the Proxy Statement) not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information to be included therein is incorporated herein by reference.

The information required by this item is incorporated herein by reference from the Proxy Statement (to be filed with the Securities and Exchange Commission within 120 days of our July 31, [removed: 2015] [added: 2016] fiscal year end) under the heading “Executive Compensation,” “Compensation of Directors,” and “Corporate Governance and Board of Directors.”

The information required by this item is incorporated herein by reference from the Proxy Statement (to be filed with the Securities and Exchange Commission within 120 days of our July 31, [removed: 2015] [added: 2016] fiscal year end) under the headings “Security Ownership” and “Executive Compensation,” subheading “Equity Compensation Plan Information.”

The information required by this item is incorporated herein by reference from the Proxy Statement (to be filed with the Securities and Exchange Commission within 120 days of our July 31, [removed: 2015] [added: 2016] fiscal year end) under the heading “Related Person Transactions and Section 16(a) Beneficial Ownership Compliance,” “Corporate Governance and Board of Directors,” and “Proposal Number One Election of Directors.”

The information required by this item is incorporated herein by reference from the section captioned “Proposal Number Three — Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement (to be filed with the Securities and Exchange Commission within 120 days of our July 31, [removed: 2015] [added: 2016] fiscal year end).

Our consolidated financial statements at July 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] and for each of the three years in the period ended July 31, [removed: 2015] [added: 2016] and the notes thereto, together with the report of the independent registered public accounting firm on those consolidated financial statements are hereby filed as part of this annual report on Form 10-K.

Date: September [removed: 25, 2015][added: 28, 2016]

| [removed: |] [added: /s/ Jeffrey Liaw] | | [removed: William E. Franklin, Executive Vice President and] Chief Financial Officer (Principal Financial and Accounting Officer) | [added: | September 28, 2016 |]

[removed: Franklin,] [added: Jayson Adair] and [added: Jeffrey Liaw, and] each of them, as his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

| /s/ A. JAYSON ADAIR | | Chief Executive Officer (Principal Executive Officer and Director) | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ WILLIS J. JOHNSON | | Chairman of the Board | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ VINCENT W. MITZ | | President and Director | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ JAMES E. MEEKS | | Director | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ STEVEN D. COHAN | | Director | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ DANIEL ENGLANDER | | Director | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ THOMAS N. TRYFOROS | | Director | | September [removed: 25, 2015] [added: 28, 2016] |

| /s/ MATT BLUNT | | Director | | September [removed: 25, 2015] [added: 28, 2016] |

| [Report of Independent Registered Public Accounting [removed: Firm](#s01935067460DD2B2703C8F28F4FBADB2)] [added: Firm](#s019FEA280D6454569CD6D6D9FC5F4A3F)] | [removed: [55](#s01935067460DD2B2703C8F28F4FBADB2)] [added: [59](#s019FEA280D6454569CD6D6D9FC5F4A3F)] |

| [Consolidated Balance Sheets as of July 31, [removed: 2015] [added: 2016] and [removed: 2014](#s6289931CCB5FC82BEC108F28D9E157C0)] [added: 2015](#sC92FF61D2F6B55D18CEA704E36B03E58)] | [removed: [56](#s6289931CCB5FC82BEC108F28D9E157C0)] [added: [60](#sC92FF61D2F6B55D18CEA704E36B03E58)] |

| [Consolidated Statements of Income for the years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013](#sD0A4EBE29F8294EA12418F28D9694748)] [added: 2014](#s5BA195F9027C5C52B89BE1D5DA1EBDDA)] | [removed: [57](#sD0A4EBE29F8294EA12418F28D9694748)] [added: [61](#s5BA195F9027C5C52B89BE1D5DA1EBDDA)] |

| [Consolidated Statements of Comprehensive Income for the years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013](#s92EE46C9D5F4A00529E58F28D8DC8068)] [added: 2014](#s97E97CEB8E1D5D43AE07C59CE559A942)] | [removed: [58](#s92EE46C9D5F4A00529E58F28D8DC8068)] [added: [62](#s97E97CEB8E1D5D43AE07C59CE559A942)] |

| [Consolidated Statement of Stockholder’s Equity for the years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013](#sF941EF11A99F131A77E18F28D97E08B7)] [added: 2014](#s17BA06312CDD5E54BDB5BCD6CFE841D4)] | [removed: [59](#sF941EF11A99F131A77E18F28D97E08B7)] [added: [63](#s17BA06312CDD5E54BDB5BCD6CFE841D4)] |

| [Consolidated Statements of Cash Flows for the years ended July 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013](#s7501C3653E41D16D335A8F28DA024778)] [added: 2014](#s7FDDE29284F655F6B77A22FBE612CA21)] | [removed: [60](#s7501C3653E41D16D335A8F28DA024778)] [added: [64](#s7FDDE29284F655F6B77A22FBE612CA21)] |

| [Notes to Consolidated Financial [removed: Statements](#s8EC1921A6B00AE5A11E68F28F627123F)] [added: Statements](#sC4C45EE07B4A552EAC3A506D3395B828)] | [removed: [61](#s8EC1921A6B00AE5A11E68F28F627123F)] [added: [65](#sC4C45EE07B4A552EAC3A506D3395B828)] |

We have audited the accompanying consolidated balance sheets of Copart, Inc. as of July 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended July 31, [removed: 2015.][added: 2016.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Copart, Inc. at July 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, [removed: 2015,] [added: 2016,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Copart, Inc.’s internal control over financial reporting as of July 31, [removed: 2015,] [added: 2016,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (1992] [added: (2013] Framework) and our report dated September [removed: 25, 2015] [added: 28, 2016] expressed an unqualified opinion thereon.

| | [added: 2016 | | | |] 2015 | | | | 2014 | | |

| Cash and cash equivalents [removed: | $] [added: at beginning of period] | 456,012 | | | [removed: $] | 158,668 | | [added: | | 63,631 | | |]

| Accounts receivable, net | [removed: 215,696] [added: 266,270] | | | | [removed: 196,985] [added: 215,696] | | |

| Vehicle pooling costs | [removed: 24,949] [added: 28,599] | | | | [removed: 24,438] [added: 24,949] | | |

| Inventories | [removed: 8,613] [added: 10,388] | | | | [removed: 7,259] [added: 8,613] | | |

| Income taxes receivable | [removed: 6,092] [added: 18,751] | | | | [removed: 2,288] [added: 6,092] | | |

| Deferred income taxes | [removed: 3,396] [added: 1,444] | | | | [removed: 1,803] [added: 3,396] | | |

| Prepaid expenses and other assets | [removed: 19,824] [added: 18,005] | | | | [removed: 20,850] [added: 19,824] | | |

| Total current assets | [removed: 734,582] [added: 499,306] | | | | [removed: 412,291] [added: 734,582] | | |

| Property and equipment, net | [removed: 700,402] [added: 816,791] | | | | [removed: 692,383] [added: 700,402] | | |

| Intangibles, net | [removed: 17,857] [added: 11,761] | | | | [removed: 25,242] [added: 17,857] | | |

| [removed: Goodwill] [added: Beginning balance] | [added: $ |] 271,850 | | | [added: $] | 283,780 | | [removed: |]

| Deferred income taxes | [removed: 28,840] [added: 23,506] | | | | [removed: 36,721] [added: 28,840] | | |

| Accounts payable and accrued liabilities | $ | [removed: 147,452] [added: 192,379] | | | $ | [removed: 152,156] [added: 147,452] | |

| Deferred revenue | [removed: 3,724] [added: 4,628] | | | | [removed: 4,170] [added: 3,724] | | |

| Income taxes payable | [removed: 8,279] [added: 5,625] | | | | [removed: 8,284] [added: 8,279] | | |

| Current portion of long-term [removed: debt] [added: debt, revolving loan facility,] and capital lease obligations | [removed: 53,671] [added: 76,151] | | | | [removed: 79,674] [added: 53,671] | | |

| Total current liabilities | [removed: 213,126] [added: 278,783] | | | | [removed: 244,284] [added: 213,126] | | |

| | By: | | /s/ JEFFREY LIAW |

| | | | Jeffrey Liaw, Chief Financial Officer (Principle Financial and Accounting Officer and duly Authorized Officer) |

Date: September 28, 2016

| Jeffrey Liaw | | | | |

| | | | | |

As discussed in Note 1 — Summary of Significant Accounting Policies to the consolidated financial statements, the Company changed its method for certain aspects of share-based payments to employees as a result of the early adoption of the FASB Accounting Standards Update No. 2016-09, “Improvements to Employee Share-based Payment Accounting,” effective August 1, 2015.

September 28, 2016

| | 2016 | | | | 2015 | | |

| Goodwill | 260,198 | | | | 271,850 | | |

| Other assets | 38,258 | | | | 45,129 | | |

| Total assets | $ | 1,649,820 | | | $ | 1,798,660 | |

| Long-term debt, revolving loan facility, and capital lease obligations | 564,341 | | | | 590,843 | | |

| Total liabilities | 875,364 | | | | 834,196 | | |

| Total liabilities and stockholders’ equity | $ | 1,649,820 | | | $ | 1,798,660 | |

| Net income | $ | 270,360 | | | $ | 219,783 | | | $ | 178,687 | |

| | Common Stock | | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | |

| | | Additional Paid in Capital | | | | | | | | | | | | | | | | | | | | |

| Net income | — | | | — | | | | — | | | | — | | | | 270,360 | | | | 270,360 | | |

| Exercise of stock options, net of repurchased shares | 1,129,440 | | | — | | | | (372 | | ) | | — | | | | (742 | | ) | | (1,114 | | ) |

| Shares repurchased | (11,271,852 | ) | | (1 | | ) | | (38,991 | | ) | | — | | | | (403,861 | | ) | | (442,853 | | ) |

| Balances at July 31, 2016 | 110,122,060 | | | $ | 11 | | | $ | 392,445 | | | $ | (109,194 | ) | | $ | 491,194 | | | $ | 774,456 | |

| | 2016 | | | | 2015 | | | | 2014 | | |

| Net income | $ | 270,360 | | | $ | 219,783 | | | $ | 178,687 | |

| Impairment of long-lived assets | — | | | | — | | | | 29,104 | | |

| Equity in losses of unconsolidated affiliates | 895 | | | | — | | | | — | | |

| Purchases of marketable securities | (21,119 | | ) | | — | | | | — | | |

| Proceeds from sale of marketable securities | 21,498 | | | | — | | | | — | | |

| Proceeds from revolving loan facility, net of repayments | 238,000 | | | | — | | | | — | | |

During the year ended July 31, 2016, the Company early adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which caused an impact on dilutive potential common shares outstanding, as the Company excluded the excess tax benefits and deficiencies from the proceeds portion of the diluted earnings per share calculations as they are no longer recorded in equity, which caused dilutive potential common shares outstanding to increase for all periods in fiscal 2016.

Marketable Securities

Marketable securities consist of marketable equity securities and are classified as available-for-sale and stated at fair value.

The cost basis of the marketable securities is based on the specific identification method.

Unrealized gains or losses relating to available-for-sale securities are recorded in accumulated other comprehensive income, net of income taxes.

Reclassification adjustments out of accumulated other comprehensive income resulting from realized gains or losses from the sale of available-for-sale securities are included in other income.

During the year ended July 31, 2016 the Company sold all of its marketable securities.

The cost basis of the marketable securities was $21.1 million and proceeds from the sale of the marketable securities was $21.5 million resulting in a realized gain of $0.4 million recorded in other income.

During the year ended July 31, 2016, the Company retired fully amortized capitalized software of $29.8 million, which were no longer being utilized.

| | 2016 | | | | 2015 | | | | 2014 | | |

During the year ended July 31, 2016, the Company early adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which impacts the accounting for share-based payments, including income tax consequences, classification of awards and the classification on the consolidated statements of cash flows.

As a result of the adoption, the Company recognized excess tax benefits of $14.7 million as a reduction to tax expense in the consolidated statements of income, as though ASU 2016-09 had been in effect since the beginning of fiscal 2016, instead of reflected in stockholders' equity.

| | | | |

| --- | --- | --- | --- |

| | By: | | /s/ WILLIAM E. FRANKLIN |

Jayson Adair and William E.

| /s/ WILLIAM E. FRANKLIN | | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | | September 25, 2015 |

| William E. Franklin | | | | |

Copart, Inc.

September 25, 2015

| Other assets | 46,421 | | | | 56,387 | | |

| Total assets | $ | 1,799,952 | | | $ | 1,506,804 | |

| Long-term debt and capital lease obligations | 592,135 | | | | 223,227 | | |

| Total liabilities | 835,488 | | | | 503,305 | | |

| Total liabilities and stockholders’ equity | $ | 1,799,952 | | | $ | 1,506,804 | |

| | Common Stock | | | | | | | | | | | | | | | | | | | | | |

| Balances at July 31, 2012 | 124,393,700 | | | $ | 12 | | | $ | 326,187 | | | $ | (38,043 | ) | | $ | 272,961 | | | $ | 561,117 | |

| Net income | — | | | — | | | | — | | | | — | | | | 180,025 | | | | 180,025 | | |

| Exercise of stock options, net of repurchased shares | 1,516,534 | | | 1 | | | | 21,370 | | | | — | | | | (943 | | ) | | 20,428 | | |

| Shares repurchased | (500,000 | ) | | — | | | | (2,622 | | ) | | — | | | | (11,263 | | ) | | (13,885 | | ) |

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In early November 2012, Hurricane Sandy hit the northeastern coast of the United States.

As a result of the extensive flooding that it caused, the Company expended additional costs for (i) temporary storage facilities; (ii) premiums for subhaulers as they were reassigned from other regions; and (iii) labor costs incurred for overtime, travel and lodging due to the reassignment of employees to the affected region.

These costs, which are characterized as “abnormal” under ASC 330, Inventory, were expensed as incurred and not included in inventory.

At July 31, 2013, the incremental salvage vehicles received as a result of Hurricane Sandy were sold.

Derivatives and Hedging

See Note 9 — Derivatives and Hedging.

Bank Overdraft

As a result of maintaining a consolidated cash management system, the Company utilizes controlled disbursement bank accounts.

These accounts are funded as checks are presented for payment, not when checks are issued.

The resulting bank overdraft position was included in current liabilities as of July 31, 2013.

activities are expensed as incurred.

In addition, each of the Company’s policies contains an aggregate stop loss which limits its ultimate exposure.

contractual terms of the stock-based payment awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based payment awards.

Reclassifications

Certain reclassifications have been made to prior years' consolidated financial statements to conform to the classifications used in fiscal 2015.

The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance.

On July 9, 2015, the FASB issued a proposed ASU to defer the effective date for one year for annual and interim periods beginning after December 15, 2017.

The Company’s North American and U.K. regions are considered two separate operating segments, which have been aggregated into one reportable segment because they share similar economic characteristics.

In accordance with ASC 805, any adjustments to the fair value of acquired assets and liabilities that occur subsequent to the measurement period will be reflected in the Company’s results of operations.

The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed for these acquisitions (in thousands):

| Allocation of the acquisition: | | | |