Copart (CPRT) 10-K risk factor changes: FY2019 vs FY2018

[removed: Investing] [added: *Investing] in our common stock involves a high degree of risk.

In assessing the risks described below, you should also refer to the other information contained in this Form 10-K, including our consolidated financial statements and the related notes and schedules, and other filings with the [removed: SEC.][added: SEC.*]

[removed: We] [added: We] depend on a limited number of major vehicle sellers for a substantial portion of our revenues.

The loss of one or more of these major sellers could adversely affect our consolidated results of operations and financial position, and an inability to increase our sources of vehicle supply could adversely affect our growth [removed: rates.][added: rates.]

No single customer accounted for more than 10% of our consolidated [removed: revenue] [added: revenues] for fiscal [removed: 2018.][added: 2019.]

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

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

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

For example, although we continue to operate a technology and operations center in India for administrative support, we [removed: recently] decided to suspend our salvage operations in [removed: India,] [added: India in fiscal 2018,] which did not have a material effect on our consolidated results of operations and financial position, until the Indian market develops in a manner better suited to our business model.

Moreover, success in opening and operating facilities in [added: new] markets can be dependent upon establishing new relationships with buyers and sellers, and our failure to establish those relationships could have an adverse effect on our consolidated results of operations and future operating results.

[removed: Our] [added: Our] operations and acquisitions in certain foreign areas expose us to [removed: political,] regulatory, economic, and reputational [removed: risks.][added: risks.]

[added: 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 Act, India’s Prevention of Corruption Act, 1988 or similar local anti-bribery laws.

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

[removed: We] [added: We] have developed a [removed: new] proprietary enterprise operating system, and we may experience difficulties operating our business as we continue to design and develop this [removed: system.][added: system.]

We have developed a [removed: new] proprietary enterprise operating system to address our international expansion needs.

In addition, the transition to our [removed: new] internally developed proprietary system will [added: continue to] 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.

We began using our [removed: new] internally developed proprietary system with our expansion into Spain in fiscal 2016 and Germany in fiscal 2017.

[added: Any failure to maintain the integrity of our systems and infrastructure may result in loss of customers due to] among other things, slow delivery times, unreliable service levels or insufficient capacity, which could have a material adverse effect on our business, consolidated financial position and results of operations.

[removed: The] [added: The] impairment of internally developed capitalized software costs could adversely affect our consolidated results of operations and financial [removed: condition.][added: condition.]

[removed: Disruptions] [added: Disruptions] to our information technology systems, including failure to prevent outages, maintain security, prevent unauthorized access to our information technology systems and other confidential information, could disrupt our business and materially and adversely affect our reputation, consolidated results of operations and financial [removed: condition.][added: condition.]

[removed: In addition, human error or accidental technological failure could make us vulnerable to information] technology system disruptions and/or cyber-attacks, including the introduction of malicious computer viruses or code into our system, phishing attacks, or other information technology data security incidents.

In addition, as cyber-threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate [added: and remediate any information security vulnerabilities.]

[removed: Our] [added: Our] business is exposed to risks associated with online commerce security and credit card [removed: fraud.][added: fraud.]

[removed: Any such breach or unauthorized access could] result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services that could have an adverse effect on our consolidated financial position and results of operations.

[removed: Our] [added: Our] business is subject to a variety of domestic and international laws and other obligations regarding privacy and data [removed: protection.][added: protection.]

Complying with the [removed: GDPR] [added: GDPR, the CCPA,] and similar emerging and changing privacy and data protection requirements may cause us to incur substantial costs or require us to change our business practices.

[removed: Implementation] [added: 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 the U.S., Canada, and the [removed: U.K.][added: U.K.]

[removed: Failure] [added: Failure] to have sufficient capacity to accept additional cars at one or more of our storage facilities could adversely affect our relationships with insurance companies or other sellers of [removed: vehicles.][added: vehicles.]

[removed: Because] [added: Because] the growth of our business has been due in large part to acquisitions and development of new facilities, the rate of growth of our business and revenues may decline if we are not able to successfully complete acquisitions and develop new [removed: facilities.][added: facilities.]

For example, in fiscal [removed: 2016, we opened new operational facilities in Castledermot, Republic of Ireland; Algete, Spain (Madrid); and six new operational facilities in the U.S. In fiscal] 2017, we opened a new operational facility in [removed: Bad Fallingbostel, Germany (Hanover),] [added: Germany,] a new operational facility in [removed: Betim, Minas Gerais,] Brazil, nine new operational facilities in the U.S. and acquired Cycle Express, LLC, which conducts business primarily as National Powersport Auctions (NPA), a leading non-salvage auction platform for motorcycles, snowmobiles, watercraft and other powersports vehicles.

[added: NPA currently operates facilities in nine locations across the U.S.] In fiscal 2018, we opened [added: three] new operational facilities in [removed: Andrews, Texas (Midland), Exeter, Rhode Island, and Lumberton, North Carolina,] [added: the U.S.,] a new operational facility in [removed: Belfast, Northern Ireland,] [added: the U.K.,] a new operational facility in [removed: Nobitz, Germany (Leipzig),] [added: Germany,] and acquired locations in the municipalities of Espoo; Pirkkala; Oulu; and Turku, Finland.

[removed: As] [added: As] we continue to expand our operations, our failure to manage growth could harm our business and adversely affect our consolidated results of operations and financial [removed: position.][added: position.]

[removed: Our] [added: Our] annual and quarterly performance may fluctuate, causing the price of our stock to [removed: decline.][added: decline.]

[removed: Our] [added: Our] internet-based sales model has increased the relative importance of intellectual property assets to our business, and any inability to protect those rights could have a material adverse effect on our business, financial position, or results of [removed: operations.][added: operations.]

[removed: We] [added: We] have in the past been and may in the future be subject to intellectual property rights claims, which are costly to defend, could require us to pay damages, and could limit our ability to use certain technologies in the [removed: future.][added: future.]

[removed: If] [added: If] we experience problems with our subhaulers and trucking fleet operations, our business could be [removed: harmed.][added: harmed.]

[removed: We] [added: We] are partially self-insured for certain losses and if our estimates of the cost of future claims differ from actual trends, our results of operations could be [removed: harmed.][added: harmed.]

[removed: Our] [added: Our] executive officers, directors and their affiliates hold a large percentage of our stock and their interests may differ from other [removed: stockholders.][added: stockholders.]

Our executive officers, directors and their affiliates beneficially own, in the aggregate, [removed: 15.9%] [added: 15.3%] of our common stock as of July 31, [removed: 2018.][added: 2019.]

In addition, we continue to evaluate acquisitions and other opportunities outside of the

Our business activities and public policy interests expose us to political, regulatory, economic, and reputational risks.

Our business activities, facilities expansions, and civic and public policy interests may be unpopular in certain communities, exposing us to reputational and political risk.

For example, public opposition in some communities to different aspects of our business operations has impacted our ability to obtain required business use permits.

Additionally, our interests in legislative and regulatory processes at different levels of government in the geographies in which we operate have been opposed by competitors and other interest groups.

Although we believe we generally enjoy positive community relationships and political support in our range of operations, shifting public opinion sentiments and socio-political dynamics could have an adverse effect on our business and reputation.

In addition, human error or accidental technological failure could make us vulnerable to information

Any such breach or unauthorized access could

Similarly, the California Consumer Privacy Act, or AB375 (“CCPA”) and the Brazilian General Data Protection Law (“LGPD”), were also recently enacted and these laws create new data privacy rights for individuals, both of which become effective in 2020.

In fiscal 2019, we opened one new operational

facility in Brazil; seven new operational facilities in Germany; and eleven new operational facilities in the U.S., and acquired an operational facility in Greenville, Kentucky.

Among other laws and regulations, we are subject at the state level to land use ordinances, business licensure requirements and procedures, vehicle registration rules and procedures, and regulations relating to zoning and land use.

We are subject at the federal level to laws and regulations relating to the environment, anti-money laundering, anti-corruption, and reporting requirements to law enforcement relating to vehicle transfers.

In addition to conducting environmental diligence on new site acquisitions, we also take such actions as may be necessary under laws in the United States to avoid liability for activities of prior owners, and we have from time to time acquired insurance with respect to acquired facilities with known environmental risks.

There can be no assurances, however, that these efforts to mitigate environmental risk will prove sufficient if we were to face material liabilities.

We have incurred expenses for environmental remediation in the past, and environmental laws and regulations could become more stringent over time.

In addition to

The ultimate effects of Brexit on us will also depend on the terms of agreements, if any, that the U.K. and the European Union make to retain access to each other’s respective markets either during a transitional period or more permanently.

In many countries outside of the United States, particularly in those with developing

Any failure to maintain the integrity of our systems and infrastructure may result in loss of customers due to

and remediate any information security vulnerabilities.

NPA currently operates facilities in Atlanta, Georgia; Cincinnati, Ohio; Dallas, Texas; Philadelphia, Pennsylvania; and San Diego, California.

facilities is included in the PIP fee.

interpretation, application, and enforcement of laws, regulations, or treaties, any failure to comply with non-U.S. laws or regulatory interpretations, or any legal or regulatory interpretations or governmental actions that significantly increase our costs or the costs of our buyers could have a material adverse effect on our consolidated results of operations and financial position by reducing the demand for our products and services and our ability to compete in non-U.S. markets.

Should the value of our goodwill become impaired, it could

Income tax expense on accumulated foreign earnings recorded as a result of the Tax Act is a provisional amount and reflects our current best estimate, which may be adjusted over the course of the next year and could adversely affect our consolidated results of operations and financial position.

[removed: CAUTION] [added: CAUTION] REGARDING FORWARD-LOOKING [removed: STATEMENTS][added: STATEMENTS]

[removed: This] [added: *This] Annual Report on Form 10-K for the fiscal year [removed: ended July] [added: ended* *July] 31, [removed: 2018,] [added: 2019,] 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 do not undertake to update any forward-looking statement that may be made from time to time by or on behalf of [removed: us.][added: us.*]

[removed: All] [added: *All] references to numbered Notes are to specific Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K and which descriptions are incorporated into the applicable response by reference.

Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) have the same meanings as in such [removed: Notes.][added: Notes.*]

[removed: Overview][added: Overview]

Our goals are to generate sustainable profits for our stockholders, while also [removed: producing] [added: providing] environmental and social benefits for the [removed: world, by promoting vehicle restoration, repair, and recycling; parts refurbishment and re-use; and facilitating the recovery and resilience of communities affected by severe climate events.][added: world around us.]

The majority of the vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total [removed: loss or] [added: loss;] not economically repairable by the insurance [removed: companies,] [added: companies;] or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made.

We offer vehicle sellers a full range of services that help expedite each stage of the vehicle sales process, minimize administrative and processing costs, and maximize the ultimate sales [removed: price.][added: price through the online auction process.]

In the U.S., Canada, Brazil, the Republic of Ireland, [removed: Germany,] Finland, the U.A.E., Oman, Bahrain, and Spain, we sell vehicles primarily as an agent and derive revenue primarily from [removed: fees paid by vehicle buyers (“members”)] [added: auction] and [added: auction related sales transaction fees charged for] vehicle [removed: sellers] [added: remarketing services] as well as [removed: related] fees for [removed: services,] [added: services subsequent to the auction,] such as [removed: towing] [added: delivery] and storage.

[removed: Service] [added: *Service] and Vehicle Sales [removed: Revenue:] [added: Revenue:*] Our [added: service] revenue consists of [added: auction and auction related] sales transaction fees charged [removed: to vehicle sellers and vehicle buyers, transportation revenue, purchased] [added: for] vehicle [removed: revenue, and other] remarketing services.

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

Total loss frequency is the percentage of cars involved in accidents that insurance companies salvage rather than repair and is driven by the relationship between [removed: repairs] [added: repair] costs, used car values, and auction returns.

The average age of cars on the road continued to increase, growing from 9.6 years in 2002 to [removed: 12.1] [added: 11.8] years in [removed: 2018.][added: 2019.]

[removed: Operating] [added: *Operating] Costs and [removed: Expenses:] [added: Expenses:*] Yard operations expenses consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle [removed: towing,] [added: transportation,] insurance, fuel, equipment maintenance and repair, and costs of vehicles sold under the purchase contracts.

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.

[removed: Other] [added: *Other] Income and [removed: Expense:] [added: Expense:*] Other income primarily includes income from the rental of certain real property, foreign exchange rate gains and losses, and gains and losses from the disposal of assets, which will fluctuate based on the nature of these activities each period.

See Notes to Consolidated Financial Statements, [removed: Note 8] [added: *Note* *7] — Long-Term [removed: Debt.][added: Debt.*]

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

[removed: Acquisitions] [added: Acquisitions] and New [removed: Operations][added: Operations]

The following [removed: table sets] [added: tables set] forth operational facilities that we have [removed: acquired or] opened and began operations from August 1, [removed: 2015] [added: 2016] through July 31, [removed: 2018:][added: 2019:]

| [removed: Locations | | Acquisition or Greenfield] [added: Locations] | | [removed: Date] [added: Geographic Service Area] | | [removed: Geographic Service Area] [added: Date] |

| Brighton, Colorado (Denver) | | [removed: Greenfield | |] August 2016 | [removed: | United States |]

| Sun Valley, California (Los Angeles) | | [removed: Greenfield | |] November 2016 | [removed: | United States |]

| Casper, Wyoming | | [removed: Greenfield | |] January 2017 | [removed: | United States |]

| Littleton, Colorado (Denver) | | [removed: Greenfield | |] January 2017 | [removed: | United States |]

| Apopka, Florida (Orlando) | | [removed: Greenfield | |] January 2017 | [removed: | United States |]

| Alorton, Illinois (St. Louis) | | [removed: Greenfield | |] February 2017 | [removed: | United States |]

| Okeechobee, Florida | | [removed: Greenfield | |] March 2017 | [removed: | United States |]

| Ogden, Utah (Salt Lake City) | | [removed: Greenfield | |] March 2017 | [removed: | United States |]

| Wilmington, California (Long Beach) | | [removed: Greenfield | |] March 2017 | [removed: | United States |]

| Cycle Express, LLC (1) | | [removed: Acquisition] [added: United States] | | June 2017 | [removed: | United States |]

| Andrews, Texas (Midland) | | [removed: Greenfield | |] August 2017 | [removed: | United States |]

| Exeter, Rhode Island | | [removed: Greenfield | |] October 2017 | [removed: | United States |]

| Lumberton, North Carolina | | [removed: Greenfield | |] June 2018 | [removed: | United States |]

| Bad Fallingbostel, Germany (Hanover) | | [removed: Greenfield] [added: Germany] | | September 2016 | [removed: | Germany |]

| Nobitz, [removed: Germany] [added: Thuringia] (Leipzig) | | [removed: Greenfield] [added: Germany] | | April 2018 | [removed: | Germany |]

| Newbury, United Kingdom | | [removed: Greenfield] [added: United Kingdom] | | September 2016 | [removed: | United Kingdom |]

| Belfast, Northern Ireland | | [removed: Greenfield] [added: United Kingdom] | | April 2018 | [removed: | United Kingdom |]

| Betim, Minas Gerais | | [removed: Greenfield] [added: Brazil] | | April 2017 | [removed: | Brazil |]

With respect to our environmental stewardship, we believe our business is a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials.

Many of the cars we process and remarket are subsequently restored to drivable condition, reducing the new vehicle manufacturing burden the world would otherwise face.

Many of our cars are purchased by dismantlers, who recycle and refurbish parts for vehicle repairs, again reducing new and aftermarket parts manufacturing.

And finally, some of our vehicles are returned to their raw material inputs through scrapping, reducing the need for further de novo resource extraction.

In each case, our business has reduced the carbon and other environmental footprint of the global transportation industry.

Beyond our environmental stewardship, we also support the world’s communities in two important ways.

First, we believe that we contribute to economic development and well-being by enabling more affordable access to mobility around the world.

For example, many of the automobiles sold through our auction platform are purchased for use in developing countries where affordable transportation is a critical enabler of education, health care, and well-being more generally.

In addition, because of the special role we play in responding to catastrophic weather events, we believe we contribute to disaster recovery and resilience in the communities we serve.

For example, we mobilized our people, entered into emergency leases, and engaged with a multitude of service providers to timely retrieve, store, and remarket tens of thousands of flood-damaged vehicles in the Houston, Texas metropolitan area in the wake of Hurricane Harvey in the summer of 2017.

These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from our facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees.

These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

Purchased vehicle revenue includes the gross sales price of the vehicles which we have purchased or are otherwise considered to own.

| | | |

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

| | | |

| United States Locations | | Date |

| Spartanburg, South Carolina | | August 2018 |

| Madison, Wisconsin | | September 2018 |

| Harleyville, South Carolina | | January 2019 |

| Macon, Georgia | | January 2019 |

| Mocksville, North Carolina | | January 2019 |

| Antelope, California | | January 2019 |

| Sacramento, California | | March 2019 |

| Fredericksburg, Virginia | | April 2019 |

| West Mifflin, Pennsylvania | | May 2019 |

| Hartford, Connecticut | | July 2019 |

| Buffalo, New York | | July 2019 |

| | | | | |

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

| | | | | |

| International Locations | | Geographic Service Area | | Date |

| Curitiba, Paraná | | Brazil | | September 2018 |

| Mannheim, Rhineland-Palatinate | | Germany | | October 2018 |

| Stuttgart, Baden-Württemberg | | Germany | | November 2018 |

| Hessen, Frankfurt | | Germany | | November 2018 |

| Schleswig-Holstein (Hamburg) | | Germany | | November 2018 |

| Furth, Bavaria (Nuremberg) | | Germany | | November 2018 |

| Massen, Brandenburg (Berlin) | | Germany | | November 2018 |

| Friesack, Brandenburg (Berlin) | | Germany | | December 2018 |

Revenues from sellers are generally generated either on a fixed fee contract basis, where our fees are fixed based on the sale of each vehicle regardless of the selling price of the vehicle or under our Percentage Incentive Program, which we refer to as PIP, where our fees are generally based on a predetermined percentage of the vehicle sales price.

Under the consignment or fixed fee program, we generally charge an additional fee for title processing and special preparation.

We may also charge additional fees for the cost of transporting the vehicle to our facility, storage of the vehicle, and other incidental costs not included in the consignment fee.

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

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

Transportation revenue includes charges to sellers for towing vehicles under certain contracts and towing charges assessed to buyers for delivering vehicles.

| | | | | | | |

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

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

| Wilmer, Texas (Dallas) | | 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 |

| Castledermot, Republic of Ireland | | Greenfield | | April 2016 | | Republic of Ireland |

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

In particular, we have certain contracts inherited through our U.K. acquisitions that require us to act as a principal, purchasing vehicles from the insurance companies and reselling them for our own account.

It has been our practice and remains our intention, where possible, to migrate these

types of contracts to the agency model in future periods.

Changes in the amount of revenue derived in a period from principal transactions relative to total revenue will impact revenue growth and margin percentages.

| Income taxes | | 8 | % | | 3 | % | | 10 | % |

Service Revenues.

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

Vehicle Sales.

The decrease in vehicle sales for fiscal 2017 of $2.3 million, or 1.4% as compared to fiscal 2016 came from (i) a decrease in International of $9.1 million, partially offset by (ii) an increase in in the U.S. of $6.7 million.

Excluding a $13.9 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, the growth in International of $4.8 million was primarily the result of increased volume.

The increase in the U.S. was primarily the result of higher average auction selling prices, which we believe was due to higher commodity prices and a change in the mix of vehicles sold, partially offset by a shift in volume for certain sellers from principal to agency business.

Yard Operations Expenses.

Included in yard operations expenses were depreciation and amortization expenses.

The increase in yard operations expenses for fiscal 2017 of $95.5 million, or 16.4% as compared to fiscal 2016 resulted from (i) an increase in the U.S. of $91.4 million, primarily from growth in volume and a marginal increase in the cost to process each car; and (ii) an increase in International of $4.1 million related primarily to growth in volume; partially offset by the beneficial impact of $9.1 million due to changes in foreign currency exchange rates, primarily from changes in the British pound to U.S. dollar exchange rate.

The increase in yard operations depreciation and amortization expenses resulted primarily from depreciating new and expanded facilities and certain technology assets placed into service in the U.S.

The increase in cost of vehicle sales for fiscal 2018 of $58.9 million, or 42.8% as compared to fiscal 2017 was the result of (i) an increase in the U.S. of $39.6 million and (ii) an increase in International of $19.3 million.

Excluding the detrimental impact of $6.3 million due to changes in foreign currency exchange rates, primarily from changes in the British pound and European euro to U.S. dollar exchange rate, the increase in International of $13.0 million was primarily the result of increased volume.

The increase in the U.S. was primarily the result of increased volume partially driven by

acquisitions and higher average purchase prices, which we believe is due to higher commodity prices and a change in the mix of vehicles sold.

The decrease in cost of vehicle sales for fiscal 2017 of $3.4 million, or 2.4% as compared to fiscal 2016 was the result of (i) a decrease in International of $9.0 million; partially offset by and (ii) an increase in the U.S. of $5.6 million.

Excluding the beneficial impact of $10.4 million due to changes in foreign currency exchange rates, primarily from changes in the British pound to U.S. dollar exchange rate, the increase in International of $1.4 million was primarily the result of increased volume.

The increase in the U.S. was primarily the result of higher average purchase prices, which we believe is due to higher commodity prices and a change in the mix of vehicles sold; partially offset by a shift in volume for certain sellers from principal to agency business.

General and Administrative Expenses.

The increase in depreciation and amortization expenses for fiscal 2018 as compared to fiscal 2017 came primarily from depreciating certain technology assets placed into service in the U.S. See Notes to Consolidated Financial Statements, Note 2 — Acquisitions.

[removed: Interest] [added: Interest] Income [removed: Risk][added: Risk]

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: 2018.][added: 2019.]

As of July 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] a hypothetical 10% adverse change in our interest yield would not have materially affected our operating results.

[removed: Interest] [added: Interest] Expense [removed: Risk][added: Risk]

Our total borrowings under the Revolving Loan Facility under the Credit Agreement were zero as of July 31, [removed: 2018.][added: 2019.]

The Revolving Loan Facility under the Credit Agreement 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) [removed: an adjusted] [added: the] LIBOR rate [removed: determined on the basis of a one-month interest period] plus 1.0%, in each case plus an applicable margin ranging from 0.0% to 0.75% based on our consolidated total net leverage ratio during the preceding fiscal quarter; or (b) [removed: an adjusted] [added: the] LIBOR rate plus an applicable margin ranging from 1.00% to 1.75% depending on our consolidated total net leverage ratio during the preceding fiscal quarter.

[removed: Foreign] [added: Foreign] Currency and Translation [removed: Exposure][added: Exposure]

A hypothetical 10% adverse change in the value of the U.S. dollar relative to the Canadian dollar, British pound, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar would have resulted in a decrease in operating income of [removed: $7.6] [added: $7.9] million for fiscal [removed: 2018.][added: 2019.]

At July 31, [removed: 2018,] [added: 2019,] the cumulative effect of foreign exchange rate fluctuations on our consolidated financial position was a net translation loss of [removed: $107.9] [added: $132.5] million.

[removed: Corporate Information][added: Corporate Information]

We were incorporated in California in 1982, became a public company in 1994 and [added: were] reincorporated into Delaware in January 2012.

Our principal executive offices are located at 14185 Dallas Parkway, Suite 300, Dallas, Texas 75254 and our telephone number [removed: at that address] [added: there] is (972) 391-5000.

Our website is [removed: www.copart.com.][added: *www.copart.com*.]

We provide free of [removed: charge] [added: charge,] through a link on our [removed: website] [added: website,] access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as amendments to those reports, as soon as reasonably practical after the reports are electronically filed with, or furnished to, the SEC.

[removed: Overview][added: Overview]

Our goals are to generate sustainable profits for our stockholders, while also [removed: producing] [added: providing] environmental and social benefits for the [removed: world, by promoting vehicle restoration, repair, and recycling; parts refurbishment and re-use; and facilitating the recovery and resilience of communities affected by severe climate events.][added: world around us.]

The majority of the vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total [removed: loss or] [added: loss;] not economically repairable by the insurance [removed: companies,] [added: companies;] or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made.

We offer vehicle sellers a full range of services that help expedite each stage of the vehicle sales process, minimize administrative and processing costs, and maximize the ultimate sales [removed: price.][added: price through the online auction process.]

In the U.S., Canada, Brazil, the Republic of Ireland, [removed: Germany,] Finland, the U.A.E., Oman, Bahrain, and Spain, we sell vehicles primarily as an agent and derive revenue primarily from [removed: fees paid by vehicle sellers] [added: auction] and [added: auction related sales transaction fees charged for] vehicle [removed: buyers,] [added: remarketing services] as well as [removed: related] fees for [removed: services,] [added: services subsequent to the auction,] such as [removed: towing] [added: delivery] and storage.

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

Members enter the maximum price they are willing to pay for a vehicle and VB3’s BID4U feature [removed: will] incrementally [removed: bid] [added: bids] on the vehicle on their behalf during all phases of the auction.

We believe [removed: the introduction of] our virtual auction platform [removed: increased] [added: increases] the pool of available buyers for each sale, which [removed: resulted in] [added: brings] added competition and an increase in the amount buyers are willing to pay for vehicles.

We also believe that it [removed: improved] [added: improves] the efficiency of our operations by eliminating the expense and capital requirements [added: which would be] associated with [added: holding] live auctions.

For fiscal [removed: 2018,] [added: 2019,] sales of U.S. vehicles, on a unit basis, to members registered outside the state where the vehicle was located accounted for [removed: 52.3%] [added: 55.2%] of total vehicles sold; [removed: 30.9%] of [added: which 32.0% of] vehicles were sold to out of state members within the U.S. and [removed: 21.4%] [added: 23.2%] were sold to International members, based on the address submitted during registration.

| • | providing coverage that facilitates seller access to buyers around the world, reducing towing and third-party storage expenses, offering a local presence for vehicle inspection stations, and providing prompt response to catastrophes and natural disasters by [removed: specially-trained] [added: specially trained] teams; |

For fiscal [removed: 2018,] [added: 2019,] our revenues were [removed: $1.8] [added: $2.0] billion and our operating income was [removed: $584.3] [added: $716.5] million.

NPA [removed: currently operates] [added: has] facilities in [removed: Atlanta, Georgia; Cincinnati, Ohio; Dallas, Texas;] [added: San Diego, California;] Philadelphia, Pennsylvania; [added: Dallas, Texas; Cincinnati, Ohio; Atlanta, Georgia; Littleton, Colorado; Madison, Wisconsin; Portland, Oregon;] and [removed: San Diego,] [added: Sacramento,] California.

In fiscal 2018, we opened [added: three] new [added: operational] facilities [removed: and continue to operate] in [removed: Andrews, Texas (Midland); Exeter, Rhode Island; Lumberton, North Carolina; Belfast, Northern Ireland; Nobitz, Germany (Leipzig);] [added: the U.S., a new operational facility in the U.K., a new operational facility in Germany,] and acquired locations in the municipalities of Espoo; Pirkkala; Oulu; and Turku, Finland.

Our [removed: revenues consist] [added: service revenue consists] of [added: auction and auction related] sales transaction fees charged [removed: to vehicle sellers and vehicle buyers, transportation revenue, purchased] [added: for] vehicle [removed: revenues, and other] remarketing services.

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

Purchased vehicle revenue includes the gross sales price of the [removed: vehicle,] [added: vehicles] which we have purchased or are otherwise considered to [removed: own, and is primarily generated in the U.K.][added: own.]

Operating costs consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle [removed: towing,] [added: transportation,] insurance, fuel, equipment maintenance and repair, and costs of vehicles sold under [added: the] purchase contracts.

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

[removed: Industry Overview][added: Industry Overview]

[removed: On occasion,] [added: Occasionally,] companies in our industry [removed: will] purchase vehicles from the largest segment of sellers, insurance companies, and resell the vehicles for their own account.

While most companies in this industry remarket vehicles through a physical auction or a hybrid internet and physical auction, we sell virtually all [removed: 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.

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

[removed: The majority] [added: Most] of our vehicles are sold on behalf of insurance companies and are usually vehicles involved in an accident or to a lesser extent a natural disaster.

Generally, upon receipt of the pickup order (the assignment), we arrange for the [removed: transport] [added: transportation] of a vehicle to [removed: a] [added: our nearest] facility.

[removed: Operating] [added: Operating] and Growth [removed: Strategy][added: Strategy]

As part of our overall expansion strategy, our objective is to increase our revenues, operating profits, and market share in the vehicle [removed: sales] [added: remarketing] industry.

[removed: Acquire] [added: Acquire] and Develop New Vehicle Storage Facilities in Key Markets Including Foreign [removed: Markets][added: Markets]

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

[removed: Expand] [added: Expand] Our Service Offerings to Sellers and [removed: Members][added: Members]

[removed: Our] [added: Our] Competitive [removed: Advantages][added: Advantages]

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

We [removed: are able to] offer integrated services to our vehicle sellers, which allow us to respond to the needs of our sellers and members with maximum efficiency.

| • | a reduction in overall vehicle [removed: towing] [added: transportation] costs; |

[removed: Value-Added Services][added: Value-Added Services]

With respect to our environmental stewardship, we believe our business is a critical enabler for the global re-use and recycling of vehicles, parts, and raw materials.

Many of the cars we process and remarket are subsequently restored to drivable condition, reducing the new vehicle manufacturing burden the world would otherwise face.

Many of our cars are purchased by dismantlers, who recycle and refurbish parts for vehicle repairs, again reducing new and aftermarket parts manufacturing.

And finally, some of our vehicles are returned to their raw material inputs through scrapping, reducing the need for further de novo resource extraction.

In each case, our business has reduced the carbon and other environmental footprint of the global transportation industry.

Beyond our environmental stewardship, we also support the world’s communities in two important ways.

First, we believe that we contribute to economic development and well-being by enabling more affordable access to mobility around the world.

For example, many of the automobiles sold through our auction platform are purchased for use in developing countries where affordable transportation is a critical enabler of education, health care, and well-being more generally.

In addition, because of the special role we play in responding to catastrophic weather events, we believe we contribute to disaster recovery and resilience in the communities we serve.

For example, we mobilized our people, entered into emergency leases, and engaged with a multitude of service providers to timely retrieve, store, and remarket tens of thousands of flood-damaged vehicles in the Houston, Texas metropolitan area in the wake of Hurricane Harvey in the summer of 2017.

In fiscal 2017, we opened a new operational facility in Germany, a new operational facility in Brazil, nine new operational facilities in the U.S. and acquired Cycle Express, LLC, which conducts business primarily as National Powersport Auctions (NPA), a leading non-salvage auction platform for motorcycles, snowmobiles, watercraft and other powersports vehicles.

NPA currently operates facilities in nine locations across the U.S.

In fiscal 2019, we opened one new operational facility in Brazil; seven new operational facilities in Germany; and eleven new operational facilities in the U.S., and acquired an operational facility in Greenville, Kentucky.

These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from our facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees.

These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

We have certain contracts with insurance companies, primarily in the U.K., 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 individuals, and resell them for our own account.

salvage vehicles to repair and resell.

In Germany and Spain, we also derive revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.

| • | Make An Offer, which provides an option to our members to submit an offer amount on certain selected vehicles and if the offer is accepted, purchase the vehicle before the live auction process; |

| | |

| --- | --- |

We also assign a special

IntelliSeller

We offer IntelliSeller, an automated tool leveraging our vast and detailed vehicle and sales data to assist our sellers in making vital auction decisions.

Using machine learning, IntelliSeller optimizes the utilization of our vehicle and sales data to determine when to establish minimum bid values and suggest when to re-auction a unit to ensure optimal returns while minimizing cycle time.

In Germany, we perform transportation services through our fleet of over 25 vehicles.

Title Processing and Procurement

We also facilitate the title transfer from the original owner or financial institutions on behalf of some of our sellers to streamline the documentation and vehicle auction process.

Loan Payoff

Through utilizing existing relationships, we can quickly and electronically obtain up-to-date loan payoff information from hundreds of automotive lenders, including the remaining balance due and per diem on a vehicle loan, to expedite the loan payoff and title transfer process.

Cash For Cars

We maintain a database of thousands of registered members (“buyers”) in the vehicle dismantling and recycling, rebuilding, used vehicle dealer and export industries, as well as members that are a part of the general public, where applicable.

| International | | 1,935 |

In some cases, we may acquire land with existing environmental issues, including landfills as an example.

In addition to conducting environmental diligence on new site acquisitions, we also take such actions as may be necessary under laws in the United States to avoid liability for activities of prior owners, and we have from time to time acquired insurance with respect to acquired facilities with known environmental risks.

There can be no assurances, however, that these efforts to mitigate environmental risk will prove sufficient if we were to face material liabilities.

We have incurred expenses for environmental remediation in the past, and environmental laws and regulations could become more stringent over time.

In fiscal 2016, we opened new facilities and continue to operate in Castledermot, Republic of Ireland; Algete, Spain (Madrid); Dallas, Wilmer and Temple, Texas; Colorado Springs and Denver, Colorado; and Cartersville, Georgia.

In fiscal 2017, we opened new facilities and continue to operate in Bad Fallingbostel, Germany (Hanover); Newbury, U.K.; Betim, Minas Gerais, Brazil; Brighton and Littleton, Colorado (Denver); Sun Valley (Los Angeles) and Wilmington (Long Beach), California; Apopka (Orlando) and Okeechobee, Florida; Casper, Wyoming; Alorton, Illinois (St. Louis); Ogden, Utah (Salt Lake City); acquired the assets of an excavation company, which engages in earthwork, soil stabilization, equipment hauling and erosion control commercial contractor services; and acquired Cycle Express, LLC, which conducts business primarily as National Powersport Auctions (“NPA”), a leading non-salvage auction platform for motorcycles, snowmobiles, watercraft and other powersports vehicles.

Revenues from sellers are generally generated either on a fixed fee contract basis, where we collect a fixed amount for selling each vehicle regardless of the selling price of the vehicle or under our Percentage Incentive Program, which we refer to as PIP, where our fees are generally based on a predetermined percentage of the vehicle sales price.

Under the consignment or fixed fee program, we generally charge an additional fee for title processing and special preparation.

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

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

Transportation revenue includes charges to sellers for towing vehicles under certain contracts and towing charges assessed to buyers for delivering vehicles.

In Germany and Spain, we also provide online vehicle remarketing services.

The segments continue to share similar business models, services and economic characteristics.

DMV Processing

Percentage Incentive Program.

Consignment Program.

Although sometimes included in the consignment fee, we may also charge additional fees for the cost of transporting the vehicle to our facility, storage of the vehicle, and other incidental costs.

Purchase Program.

CashForCars.com

NPA has facilities in San Diego, California; Philadelphia, Pennsylvania; Dallas, Texas; Cincinnati, Ohio; and Atlanta, Georgia.

A member may also bring guests to a facility for a fee to preview vehicles for sale.

| International | | 1,595 |

[removed: Legal Proceedings][added: Legal Proceedings]

[removed: The] [added: There are no] material pending legal proceedings to which we are party, or [removed: of] [added: with respect to] which our property is [removed: subject, include the following matters.][added: subject.]

We [removed: have provided] [added: will provide] for costs relating to [removed: these] matters when a loss is probable and the amount can be reasonably estimated.

The effect of the outcome of [removed: these] [added: any such] matters on our future consolidated results of operations and cash flows cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of such matters.

We believe that any ultimate liability [removed: will] [added: would] not have a material effect on our consolidated results of operations, financial position or cash flows.

However, the amount of the liabilities associated with [removed: these] claims, if any, cannot be determined with certainty.

On November 1, 2013, we filed suit against Sparta Consulting, Inc. (now known as KPIT).

The suit arose out of our September 17, 2013 decision to terminate the Implementation Services Agreement, under which KPIT was to design, implement, and deliver a customized replacement enterprise resource planning system for us.

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.

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.

The case was tried in April and May 2018.

On May 22, 2018, the jury returned a verdict for us on our fraud claim against KPIT for $4.7 million, and on our professional negligence claim against KPIT for $16.3 million, and the jury found for KPIT on its implied covenant counterclaim against us for $4.9 million.

In a September 10, 2018, post-trial order, the Court reduced our professional negligence award to $9.1 million, found KPIT liable under California’s Unfair Competition Law (UCL) for fraudulent and unfair conduct and held that we could recover restitution of $6.3 million if the we choose to forego our fraud and professional negligence damages, found that we were not entitled to restitution on our unjust enrichment claim, and awarded KPIT prejudgment interest on its implied covenant counterclaim starting from December 26, 2016.

Further post-trial proceedings are expected in this lawsuit, including the determination of our right to prejudgment interest on our successful claims.

Governmental Proceedings

The Georgia Department of Revenue, or DOR, conducted a sales and use tax audit of our operations in Georgia for the period from January 1, 2007 through June 30, 2011.

As a result of their initial audit, the DOR issued a notice of proposed assessment for uncollected sales taxes in which it asserted that we failed to collect and remit sales taxes totaling $73.8 million, including penalties and interest.

Subsequently, we engaged a Georgia law firm and outside tax advisors to review the conduct of our business operations in Georgia, the notice of proposed assessment, and the DOR’s policy position.

In particular, our outside legal counsel provided us with an opinion that the sales for resale to non-U.S. registered resellers should not be subject to Georgia sales and use tax.

In rendering its opinion, our counsel noted that non-U.S. registered resellers are unable to comply strictly with technical requirements for a Georgia certificate of exemption but concluded that our sales for resale to non-U.S. registered resellers should not be subject to Georgia sales and use tax notwithstanding this technical inability to comply.

Following our receipt of the notice of proposed assessment, we and our counsel engaged in active discussions with the DOR to resolve the matter.

During an extended remand period, it was determined that grounds exist for a substantial reduction in the Official Assessment, on the basis that (i) the transactions and resulting tax at issue were erroneously double-counted by the DOR in the audit sales transaction work papers on which the Assessment was based; and (ii) we were ultimately able to provide documentation showing that most of the remaining transactions were sales at wholesale, therefore qualifying for the sale for resale exemption from Georgia Sales and Use Tax.

After these reductions, the remaining amount of principal Georgia Sales and Use Tax still in dispute between the parties is $2.6 million, plus applicable interest.

A Consent Order to this effect was entered by the Georgia Tax Tribunal on May 22, 2017.

Since the date of entry of the Consent Order, the DOR filed a Motion for Summary Judgment related to the remaining $2.6 million in dispute.

We opposed the DOR’s motion and are awaiting a decision by the Court regarding the DOR’s motion.

Based on the opinion from our outside law firm, advice from our outside tax advisors, and our best estimate of a probable outcome, we believe that we have adequately provided for the payment of any assessment in our consolidated financial statements.

We believe we have strong defenses to the remaining tax liability set forth above and intend to continue to defend this matter.

There can be no assurance that this matter will be resolved in our favor or that we will not ultimately be required to make a substantial payment to the DOR.

We understand that litigating and defending the matter in Georgia could be expensive and time-consuming and result in substantial management distraction.

If the matter were to be resolved in a manner adverse to us, it could have a material adverse effect on our consolidated results of operations and financial position.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: ý |] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended July] [added: ended July] 31, [removed: 2018][added: 2019]

| [removed: ¨ |] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: for] [added: For] the transition period [removed: from to][added: from to]

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

[removed: COPART, INC.][added: COPART, INC.]

| [removed: Delaware] [added: Delaware] | | [removed: 94-2867490] [added: 000-23255] | [added: | 94-2867490 | |]

| [removed: (State] [added: (State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)] | | [removed: (I.R.S.] [added: (Commission File Number) | | (I.R.S.] Employer Identification [removed: Number)] [added: No.)] | [added: |]

| [removed: 14185] [added: 14185] Dallas [removed: Parkway, Suite 300, Dallas, Texas (Address of principal executive offices)] [added: Parkway] | [added: Suite 300] | [removed: 75254 (Zip Code)] [added: Dallas] | [added: Texas | 75254 | |]

[removed: Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code][added: code)]

[removed: (972) 391-5000][added: (972) 391-5000]

[removed: Securities] [added: | Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act: | | |]

| [removed: Title] [added: Title] of [removed: Each Class] [added: each class] | [added: Trading Symbol(s)] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| Common Stock, [removed: $0.0001] par value [added: $0.0001] | [added: CPRT] | The NASDAQ Global Select Market |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act: None][added: Act: None]

Yes [removed: ý] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the [removed: registrant] [added: registrant:] (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such [removed: reports),] [added: reports);] and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T [added: (§232.405 of this chapter)] during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [added: a] smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the [removed: Act (check one):][added: Act:]

| Large accelerated filer | [removed: x] [added: ☒] | | Accelerated filer | [removed: ¨] [added: ☐] |

| Non-accelerated filer | [removed: ¨] [added: ☐] | | Smaller reporting company | [removed: ¨] [added: ☐] |

| | | | Emerging growth company | [removed: ¨] [added: ☐] |

The aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the registrant as of January 31, [removed: 2018] [added: 2019] (the last business day of the registrant’s most recently completed second fiscal quarter) was [removed: $8,903,622,911] [added: $9,985,566,607] based upon the closing sales price reported for such date on the NASDAQ Global Select Market.

As of September [removed: 28, 2018, 233,916,190] [added: 27, 2019, 232,250,144] shares of the registrant’s common stock were outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of our definitive Proxy Statement for the [removed: 2018] [added: 2019] 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: 2018,] [added: 2019,] have been incorporated by reference in Part III hereof.

[removed: Index] [added: Index] to the Annual Report on Form [removed: 10-K][added: 10-K]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | | [removed: Page Number] [added: Page Number] |

[removed: | [PART I](#sBF974C32CEA752E787BF683BAE73DD2A) | | | [1](#sBF974C32CEA752E787BF683BAE73DD2A) |][added: PART I]

| Item 1 | | [removed: [Business](#sF8D7366DE7AF5742925EE5CE3CE632B2)] [added: [Business](#sD06FA5EFCB9B52108453A26072D91CC7)] | [removed: [1](#sF8D7366DE7AF5742925EE5CE3CE632B2)] [added: [1](#sD06FA5EFCB9B52108453A26072D91CC7)] |

| | | [Industry [removed: Overview](#s1D2EA62E1AA4531C908F5E56E75B1B8F)] [added: Overview](#s1AA5132E3B285FDFAD084986D92AF4F1)] | [removed: [3](#s1D2EA62E1AA4531C908F5E56E75B1B8F)] [added: [3](#s1AA5132E3B285FDFAD084986D92AF4F1)] |

| | | [Operating and Growth [removed: Strategy](#s30C3A508CF3A54C693768E6C14089DF3)] [added: Strategy](#s382786425F325CCFAD854CB774E02E95)] | [removed: [5](#s30C3A508CF3A54C693768E6C14089DF3)] [added: [5](#s382786425F325CCFAD854CB774E02E95)] |

| | |

| --- | --- |

| | |

or

| | |

| --- | --- |

| | |

| | | | | | |

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

| | | | | | |

| | | | | | |

| (Address of principal executive offices, including zip code) | | | | | |

Yes ☒ No ☐

Yes ☒ No ☐

Yes ☐ No ☒

Copart, Inc.

For the Fiscal Year Ended July 31, 2019

| | | [Sales](#s26E497DA221258229C184ED71746C951) | [10](#s26E497DA221258229C184ED71746C951) |

| | | [Members](#sBF56C33EDF5655E7B825AA0BBDEADBA9) | [10](#sBF56C33EDF5655E7B825AA0BBDEADBA9) |

| | | [Competition](#s10A59D72629859C6B73F64ECD6881A9F) | [10](#s10A59D72629859C6B73F64ECD6881A9F) |

| | | [Employees](#s880020D41F525294994C24F55ABA5C3B) | [11](#s880020D41F525294994C24F55ABA5C3B) |

| | | [Seasonality](#s7E6999CB7B7F5C8BBCBBF435942188D9) | [12](#s7E6999CB7B7F5C8BBCBBF435942188D9) |

| [PART II](#s1A0B31EC26425CDABCFD49D01B7D4416) | | | [27](#s1A0B31EC26425CDABCFD49D01B7D4416) |

| [PART IV](#sF197EC0500DA59A6A827086975CB4239) | | | [54](#sF197EC0500DA59A6A827086975CB4239) |

| [Signatures](#s4F57338FE3635ABFABE2855592A0C694) | | | [55](#s4F57338FE3635ABFABE2855592A0C694) |

10-K 1 cprt07312018-10k.htm 10-K

| | | |

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

OR

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

| | | [Sales](#s68463425E0AD5CE58FF187EDEA666001) | [9](#s68463425E0AD5CE58FF187EDEA666001) |

| | | [Members](#s03AC4DC059595048B33C750485165934) | [10](#s03AC4DC059595048B33C750485165934) |

| | | [Competition](#s7294884CCE945C1ABFC92F5590D8722F) | [10](#s7294884CCE945C1ABFC92F5590D8722F) |

| | | [Employees](#sD1AFBE1A9326595CB6EE9226CC0419EE) | [11](#sD1AFBE1A9326595CB6EE9226CC0419EE) |

| | | [Seasonality](#s521533DE6E1B5BDD97E791209050021F) | [11](#s521533DE6E1B5BDD97E791209050021F) |

| [PART II](#s7F243CD3A2F656A7B08746591A1A1632) | | | [27](#s7F243CD3A2F656A7B08746591A1A1632) |

| [PART IV](#sCC874A3FB62A5F21B97C38538437914C) | | | [54](#sCC874A3FB62A5F21B97C38538437914C) |

| [Signatures](#s24132E396ECF5184B15AB57FB7940769) | | | [55](#s24132E396ECF5184B15AB57FB7940769) |

This facility consists of approximately [removed: 96,000] [added: 123,000] square feet of office space under a lease which expires in fiscal [removed: 2024.][added: 2029.]

In the U.S., we own or lease facilities in every state except North [removed: Dakota, South Dakota,] [added: Dakota] and Vermont.

In Canada, we own or lease facilities in the provinces of Ontario, Quebec, Alberta, Nova [removed: Scotia] [added: Scotia, British Columbia, Newfoundland] and New Brunswick.

In Brazil, we own or lease [removed: eight] [added: eleven] operating facilities.

In Germany we operate an online platform and own [removed: two] [added: or lease thirteen] operating facilities.

In Spain, we operate an online platform, own one operating facility and lease [removed: three] [added: five] additional storage locations.

[removed: PART II][added: PART II]

| [removed: Item 5.] [added: Item 5.] | [removed: Market] [added: Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities] [added: Securities] |

[removed: Market Information][added: Market Information]

As of September [removed: 28, 2018,] [added: 27, 2019,] we had [removed: 906] [added: 877] stockholders of record.

On July 31, [removed: 2018,] [added: 2019,] the last reported sale price of our common stock on the NASDAQ Global Select Market was [removed: $57.39] [added: $77.53] per share.

[removed: Dividend Policies][added: Dividend Policies]

For further detail see Notes to Consolidated Financial Statements, [removed: Note 8] [added: *Note* *7] — Long-Term [removed: Debt] [added: Debt*] and [removed: Note 11] [added: *Note* *9] — Stockholders’ [removed: Equity] [added: Equity*] and under the subheadings [removed: “Credit Agreement”] [added: “*Credit Agreement*”] and [removed: “Note] [added: “*Note] Purchase [removed: Agreement”] [added: Agreement*”] in the Liquidity and Capital Resources sections of this Annual Report on Form [removed: 10-K.][added: 10-K*.*]

[removed: Repurchase] [added: Repurchases] of Our Common [removed: Stock][added: Stock]

For fiscal [removed: 2016,] [added: 2019,] we repurchased [removed: 5,877,038] [added: 7,635,596] shares of our common stock [added: under the program] at a weighted average price of [removed: $20.065] [added: $47.81] per share totaling [removed: $117.9] [added: $365.0] million.

As of July 31, [removed: 2018,] [added: 2019,] the total number of shares repurchased under the program was [removed: 106,913,602,] [added: 114,549,198,] and [removed: 89,086,398] [added: 81,450,802] shares were available for repurchase under our program.

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

| [removed: Fiscal 2017] [added: *Fiscal 2017*] | | | | | | | | | | | | | |

| [removed: Fiscal 2018] [added: *Fiscal 2018*] | | | | | | | | | | | | | |

| (1) | [removed: The Company’s] [added: Our] stock repurchase program was announced on February 20, 2003. On September 22, 2011, [removed: the Company’s] [added: our] board of directors approved an 80 million share increase in [removed: the Company’s] [added: our] stock repurchase program, bringing the total current authorization to 196 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 [removed: the Company deems] [added: we deem] appropriate and may be discontinued at any time. |

During fiscal [removed: 2018, 2017] [added: 2018] and [removed: 2016,] [added: 2017,] certain executive [removed: officers,] [added: officers and] members of [removed: the Company’s Board] [added: our board] of [removed: Directors and other employees] [added: directors] exercised stock options through cashless exercises.

A portion of the options exercised were net settled in satisfaction of the exercise [removed: price and federal and state statutory tax withholding requirements.][added: price.]

[removed: The Company] [added: We] remitted [removed: $134.6 million] [added: $45.6 million, no amounts] and [removed: $15.0] [added: $134.6] million for the years ended July 31, [removed: 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively, to the proper taxing authorities in satisfaction of the employees’ statutory withholding requirements.

| [removed: Period] [added: Period] | | [removed: Options Exercised] [added: Options Exercised] | | | [removed: Weighted] [added: Weighted] Average Exercise [removed: Price] [added: Price] | | | | [removed: Shares] [added: Shares] Net Settled for [removed: Exercise] [added: Exercise] | | | [removed: Shares] [added: Shares] Withheld for [removed: Taxes (1)] [added: Taxes (1)] | | | [removed: Net] [added: Net] Shares to [removed: Employees] [added: Employees] | | | [removed: Weighted] [added: Weighted] Average Share Price for [removed: Withholding] [added: Withholding] | | | | [removed: Employee] [added: Employee] Stock Based Tax Withholding (in [removed: 000s)] [added: 000s)] | | |

| FY 2017—Q1 | | 18,000,000 | | | [removed: 7.70] [added: $] | [added: 7.70] | | | 5,408,972 | | | 5,255,322 | | | 7,335,706 | | | [added: $ |] 25.62 | | | [added: $] | 134,615 | | [removed: |]

[removed: Issuances] [added: Issuances] of Unregistered [removed: Securities][added: Securities]

There were no issuances of unregistered securities in the year ended July 31, [removed: 2018.][added: 2019.]

[removed: Performance Graph][added: Performance Graph]

[removed: Notwithstanding] [added: *Notwithstanding] any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “Soliciting Material” under the Exchange Act, or subject to Regulation 14A or 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting material or to the extent we specifically incorporate this information by [removed: reference.][added: reference.*]

The following is a line graph comparing the cumulative total return to stockholders of our common stock at July 31, [removed: 2018] [added: 2019] since July 31, [removed: 2013,] [added: 2014,] 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: COMPARISON] [added: COMPARISON] OF 5 YEAR CUMULATIVE TOTAL [removed: RETURN*][added: RETURN*]

[removed: Among] [added: Among] Copart, Inc., the NASDAQ Composite [removed: Index,][added: Index,]

[removed: the] [added: the] NASDAQ Industrial Index, [added: the S&P 500 Index,] and the NASDAQ Q-50 [removed: (NXTQ)][added: (NXTQ)]

[removed: ][added: ]

| | | [removed: Fiscal] [added: Fiscal] Year Ended July [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | |

| | | [removed: 2013] [added: 2014] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2018] [added: 2019] | | |

| * | Assumes that $100.00 was invested on July 31, [removed: 2013] [added: 2014] in our common stock, in the NASDAQ Composite Index, the NASDAQ Industrial [removed: Index and] [added: Index,] the NASDAQ Q-50 (NXTQ), and [added: the S&P 500 Index 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, 2019, there were 229,790,268 shares outstanding.

| *Fiscal 2019* | | | | | | | | | | | | | |

| First Quarter | | — | | | $ | — | | | — | | | 89,086,398 | |

| Second Quarter | | 7,635,596 | | | $ | 47.81 | | | 7,635,596 | | | 81,450,802 | |

| Third Quarter | | — | | | $ | — | | | — | | | 81,450,802 | |

| May 1, 2019 through May 31, 2019 | | — | | | $ | — | | | — | | | 81,450,802 | |

| June 1, 2019 through June 30, 2019 | | — | | | $ | — | | | — | | | 81,450,802 | |

| July 1, 2019 through July 31, 2019 | | — | | | $ | — | | | — | | | 81,450,802 | |

During fiscal 2019, our former President exercised all of his vested stock options through a cashless exercise.

| FY 2019—Q3 | | 3,000,000 | | | 17.81 | | | | 945,162 | | | 806,039 | | | 1,248,799 | | | 56.53 | | | | 45,565 | | |

| Copart, Inc. | | $ | 100.00 | | | $ | 107.94 | | | $ | 151.11 | | | $ | 188.68 | | | $ | 343.86 | | | $ | 464.53 | |

| NASDAQ Composite | | $ | 100.00 | | | $ | 118.71 | | | $ | 120.99 | | | $ | 150.53 | | | $ | 183.84 | | | $ | 198.07 | |

| NASDAQ Industrial | | $ | 100.00 | | | $ | 120.16 | | | $ | 128.41 | | | $ | 154.19 | | | $ | 182.45 | | | $ | 194.33 | |

| S&P 500 Index | | $ | 100.00 | | | $ | 111.21 | | | $ | 117.45 | | | $ | 136.29 | | | $ | 158.43 | | | $ | 171.08 | |

| NASDAQ Q-50 (NXTQ) | | $ | 100.00 | | | $ | 109.34 | | | $ | 100.69 | | | $ | 115.80 | | | $ | 141.13 | | | $ | 162.10 | |

Copyright© 2019 Standard & Poor's, a division of S&P Global.

All rights reserved.

| | |

| --- | --- |

The following table summarizes the high and low sales prices per share of our common stock for each quarter during the last two fiscal years.

As of July 31, 2018, there were 233,898,841 shares outstanding.

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

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

| | | 2018 | | | | | | | | 2017 | | | | | | |

| | | High | | | | Low | | | | High | | | | Low | | |

| Fourth Quarter | | $ | 60.43 | | | $ | 50.87 | | | $ | 31.95 | | | $ | 29.18 | |

| Third Quarter | | $ | 52.73 | | | $ | 39.21 | | | $ | 31.20 | | | $ | 27.83 | |

| Second Quarter | | $ | 46.09 | | | $ | 35.32 | | | $ | 28.81 | | | $ | 25.40 | |

| First Quarter | | $ | 36.65 | | | $ | 30.46 | | | $ | 27.23 | | | $ | 24.87 | |

On December 30, 2015, we completed a modified “Dutch Auction” tender offer, or tender offer, to purchase up to 14,634,146 shares of our common stock at a price not greater than $20.50 nor less than $19.00 per share.

In connection with the tender offer, we accepted for payment an aggregate of 16,666,666 shares of our common stock at a purchase price of $19.50 per share for a total value of $325.0 million.

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

The shares purchased as a result of the tender offers were not part of our stock repurchase program.

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

| First Quarter | | — | | | $ | — | | | — | | | 94,963,436 | |

| Second Quarter(2) | | 16,666,666 | | | $ | 19.50 | | | — | | | 94,963,436 | |

| Third Quarter | | 5,877,038 | | | $ | 20.07 | | | 5,877,038 | | | 89,086,398 | |

| May 1, 2018 through May 31, 2018 | | — | | | $ | — | | | — | | | 89,086,398 | |

| June 1, 2018 through June 30, 2018 | | — | | | $ | — | | | — | | | 89,086,398 | |

| July 1, 2018 through July 31, 2018 | | — | | | $ | — | | | — | | | 89,086,398 | |

| (2) | 16,666,666 shares were repurchased by the Company through its modified “Dutch Auction” tender offer under which the Company was to purchase up to 14,634,146 shares of its common stock at a price not greater than $20.50 nor less than $19.00 per share. The tender offer was announced on November 23, 2015 and was completed on December 30, 2015. |

| FY 2016—Q4 | | 2,260,000 | | | $ | 9.32 | | | 821,296 | | | 586,304 | | | 852,400 | | | $ | 25.65 | | | $ | 15,039 | |

| Copart, Inc. | | $ | 100.00 | | | $ | 102.68 | | | $ | 110.83 | | | $ | 155.15 | | | $ | 193.73 | | | $ | 353.06 | |

| NASDAQ Composite | | $ | 100.00 | | | $ | 123.49 | | | $ | 145.85 | | | $ | 148.64 | | | $ | 183.99 | | | $ | 223.06 | |

| NASDAQ Industrial | | $ | 100.00 | | | $ | 113.05 | | | $ | 134.93 | | | $ | 142.76 | | | $ | 171.09 | | | $ | 204.84 | |

| NASDAQ Q-50 (NXTQ) | | $ | 100.00 | | | $ | 114.47 | | | $ | 127.30 | | | $ | 127.71 | | | $ | 152.84 | | | $ | 198.33 | |

| | | [removed: Fiscal] [added: Fiscal] Year Ended July [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| [added: (In thousands, except per share)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Operating Data] [added: Operating Data] | | | | | | | | | | | | | | | | | | | | |

| Revenues | | $ | [removed: 1,805,695] [added: 2,041,957] | | | $ | [removed: 1,447,981] [added: 1,805,695] | | | $ | [removed: 1,268,449] [added: 1,447,981] | | | $ | [removed: 1,146,079] [added: 1,268,449] | | | $ | [removed: 1,163,489] [added: 1,146,079] | |

| Operating income | | [removed: 584,345] [added: 716,475] | | | | [removed: 461,299] [added: 584,345] | | | | [removed: 406,470] [added: 461,299] | | | | [removed: 344,401] [added: 406,470] | | | | [removed: 274,934] [added: 344,401] | | |

| Income before income taxes | | [removed: 562,511] [added: 704,951] | | | | [removed: 440,100] [added: 562,511] | | | | [removed: 395,865] [added: 440,100] | | | | [removed: 332,069] [added: 395,865] | | | | [removed: 270,035] [added: 332,069] | | |

| Income taxes | | [removed: 144,504] [added: 113,258] | | | | [removed: 45,839] [added: 144,504] | | | | [removed: 125,505] [added: 45,839] | | | | [removed: 112,286] [added: 125,505] | | | | [removed: 91,348] [added: 112,286] | | |

| Net income | | $ | [removed: 418,007] [added: 591,693] | | | $ | [removed: 394,261] [added: 418,007] | | | $ | [removed: 270,360] [added: 394,261] | | | $ | [removed: 219,783] [added: 270,360] | | | $ | [removed: 178,687] [added: 219,783] | |

| Basic net income per common share | | $ | [removed: 1.80] [added: 2.57] | | | $ | [removed: 1.72] [added: 1.80] | | | $ | [removed: 1.18] [added: 1.72] | | | $ | [removed: 0.87] [added: 1.18] | | | $ | [removed: 0.71] [added: 0.87] | |

| Weighted average common shares outstanding | | [removed: 231,793] [added: 230,489] | | | | [removed: 228,686] [added: 231,793] | | | | [removed: 228,846] [added: 228,686] | | | | [removed: 251,829] [added: 228,846] | | | | [removed: 251,387] [added: 251,829] | | |

| Diluted net income per common share | | $ | [removed: 1.73] [added: 2.46] | | | $ | [removed: 1.66] [added: 1.73] | | | $ | [removed: 1.11] [added: 1.66] | | | $ | [removed: 0.84] [added: 1.11] | | | $ | [removed: 0.68] [added: 0.84] | |

| Diluted weighted average common shares outstanding | | [removed: 241,877] [added: 240,453] | | | | [removed: 237,019] [added: 241,877] | | | | [removed: 244,295] [added: 237,019] | | | | [removed: 262,851] [added: 244,295] | | | | [removed: 262,459] [added: 262,851] | | |

| [removed: Balance] [added: Balance] Sheet [removed: Data] [added: Data] | | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents | | $ | [removed: 274,520] [added: 186,319] | | | $ | [removed: 210,100] [added: 274,520] | | | $ | [removed: 155,849] [added: 210,100] | | | $ | [removed: 456,012] [added: 155,849] | | | $ | [removed: 158,668] [added: 456,012] | |

| Working capital | | [removed: 431,860] [added: 405,163] | | | | [removed: 285,108] [added: 431,860] | | | | [removed: 220,523] [added: 285,108] | | | | [removed: 521,456] [added: 220,523] | | | | [removed: 168,007] [added: 521,456] | | |

| Total assets | | [removed: 2,307,698] [added: 2,547,617] | | | | [removed: 1,982,501] [added: 2,307,698] | | | | [removed: 1,649,820] [added: 1,982,501] | | | | [removed: 1,798,660] [added: 1,649,820] | | | | [removed: 1,506,121] [added: 1,798,660] | | |

| Total debt | | [removed: 399,898] [added: 401,229] | | | | [removed: 633,038] [added: 399,898] | | | | [removed: 640,492] [added: 633,038] | | | | [removed: 644,514] [added: 640,492] | | | | [removed: 302,218] [added: 644,514] | | |

| Stockholders’ equity | | [removed: 1,581,099] [added: 1,778,381] | | | | [removed: 1,098,600] [added: 1,581,099] | | | | [removed: 774,456] [added: 1,098,600] | | | | [removed: 964,464] [added: 774,456] | | | | [removed: 1,003,499] [added: 964,464] | | |

| (In thousands, except per share) | | | | | | | | | | | | | | | | | | | | |

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

[removed: Management’s] [added: Management’s] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Management assessed our internal control over financial reporting for the fiscal year ended July 31, [removed: 2018.][added: 2019.]

[removed: Based] [added: Further, based] on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles.

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: 2018.][added: 2019.]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Opinion] [added: Opinion] on Internal Control Over Financial [removed: Reporting][added: Reporting]

We have audited the internal control over financial reporting of Copart, Inc. (the Company) as of July 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (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: 2018,] [added: 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: 2018] [added: 2019] consolidated financial statements of the Company, and our report dated [removed: October 1, 2018] [added: September 30, 2019] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: Limitations] [added: Limitations] on the Effectiveness of [removed: Controls][added: Controls]

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent all [removed: error] [added: errors] and all fraud.

[removed: Changes] [added: Changes] in Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: There] [added: Except for the remediated material weakness discussed above, there] have not been any changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

During our most recent fiscal quarter, management identified and remediated a material weakness related to ineffective information technology general controls (ITGCs) in the area of change-management over certain information technology (IT) systems that support our financial reporting processes.

The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

September 30, 2019

October 1, 2018

[removed: PART III][added: PART III]

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: 2018] [added: 2019] 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.

[removed: Code] [added: Code] of [removed: Ethics][added: Ethics]

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: 2018] [added: 2019] 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: 2018] [added: 2019] 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: 2018] [added: 2019] 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 [removed: Four] [added: 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: 2018] [added: 2019] fiscal year end).

[removed: PART IV][added: PART IV]

| [removed: (a)] [added: *(a)*] | [removed: Financial statements:] [added: *Financial statements:*] |

Our consolidated financial statements at July 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] and for each of the three years in the period ended July 31, [removed: 2018] [added: 2019] 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.

| [removed: (b)] [added: *(b)*] | [removed: Financial] [added: *Financial] statement [removed: schedules:] [added: schedules:*] |

| [removed: (c)] [added: *(c)*] | [removed: Exhibits:] [added: *Exhibits:*] |

Refer to [removed: Exhibit Index] [added: [Exhibit Index](#s5959F362BCC459FBADDB7BF6674F8FB1)] included herein.

[removed: SIGNATURES][added: SIGNATURES]

| | | | Jeffrey Liaw, [added: President and] Chief Financial Officer (Principle Financial and Accounting Officer and duly Authorized Officer) |

[removed: POWER] [added: POWER] OF [removed: ATTORNEY][added: ATTORNEY]

Jayson Adair and Jeffrey Liaw, and each of them, as his [added: or her] true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him [added: or her] and in his [added: or her] 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.

| [removed: Signature] [added: Signature] | | [removed: Capacity] [added: Capacity] in Which [removed: Signed] [added: Signed] | | [removed: Date] [added: Date] |

| /s/ A. JAYSON ADAIR | | Chief Executive Officer (Principal Executive Officer and Director) | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ [removed: Jeffrey Liaw] [added: JEFFREY LIAW] | | [added: President and] Chief Financial Officer (Principal Financial and Accounting Officer) | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ WILLIS J. JOHNSON | | Chairman of the Board | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ JAMES E. MEEKS | | Director | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ STEVEN D. COHAN | | Director | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ DANIEL ENGLANDER | | Director | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ THOMAS N. TRYFOROS | | Director | | [removed: October 1, 2018] [added: September 30, 2019] |

| /s/ MATT BLUNT | | Director | | [removed: October 1, 2018] [added: September 30, 2019] |

[removed: Copart, Inc.][added: Copart, Inc.]

[removed: Index] [added: Index] to Consolidated Financial [removed: Statements][added: Statements]

[removed: and] [added: and] Financial Statement [removed: Schedule][added: Schedule]

| [removed: Consolidated] [added: Consolidated] Financial [removed: Statements] [added: Statements] | | [removed: Page Number] [added: Page Number] |

[removed: | [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#s690C062B387B51FDB40721E08FB4F831) | | [58](#s690C062B387B51FDB40721E08FB4F831) |][added: Firm]

| [Consolidated Balance Sheets as of July 31, [removed: 2018] [added: 2019] and [removed: 2017](#sE793E8E214595ADDA98A3451095087EC)] [added: 2018](#s4C166AFBE7035B9D802D80ABA22E48C8)] | | [removed: [59](#sE793E8E214595ADDA98A3451095087EC)] [added: [60](#s4C166AFBE7035B9D802D80ABA22E48C8)] |

| [Consolidated Statements of Income for the years ended July 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s67D41BD9F2565077A67A7D26F07AF8EA)] [added: 2017](#sD6C6A1CBDE6D596A8FD8C61F96D41360)] | | [removed: [60](#s67D41BD9F2565077A67A7D26F07AF8EA)] [added: [61](#sD6C6A1CBDE6D596A8FD8C61F96D41360)] |

| [Consolidated Statements of Comprehensive Income for the years ended July 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#sA3D3A80FBC525342A33B830859FDBE87)] [added: 2017](#s7992F21D4FD751D59681AF3B5997B6AB)] | | [removed: [61](#sA3D3A80FBC525342A33B830859FDBE87)] [added: [62](#s7992F21D4FD751D59681AF3B5997B6AB)] |

| [Consolidated Statements of Stockholder’s Equity for the years ended July 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#sB11ED38CFDE05131A34D11C4874ED401)] [added: 2017](#sB12F021718E651E19F2209804D993D8F)] | | [removed: [62](#sB11ED38CFDE05131A34D11C4874ED401)] [added: [63](#sB12F021718E651E19F2209804D993D8F)] |

| [Consolidated Statements of Cash Flows for the years ended July 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s127349671F385AD395EE22253DEC3154)] [added: 2017](#s81DF9828AE46560B85A440226B7B4EEB)] | | [removed: [63](#s127349671F385AD395EE22253DEC3154)] [added: [64](#s81DF9828AE46560B85A440226B7B4EEB)] |

[removed: | [Notes to Consolidated Financial Statements](#sB1399CAA2A7E57CEA5B64CB916AEB310) | | [64](#sB1399CAA2A7E57CEA5B64CB916AEB310) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: Report] [added: | [Report] of Independent Registered Public Accounting [removed: Firm][added: Firm](#sB8DBD1B525135FB99059F2FA7DF379AA) | | [58](#sB8DBD1B525135FB99059F2FA7DF379AA) |]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Copart, Inc. (the Company) as of July 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] 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: 2018,] [added: 2019,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at July 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended July 31, [removed: 2018,] [added: 2019,] 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) (PCAOB), the Company’s internal control over financial reporting as of July 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated [removed: October 1, 2018] [added: September 30, 2019] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

[removed: (in] [added: (in] thousands, except share [removed: amounts)][added: amounts)]

| | | [removed: July 31,] [added: July 31,] | | | | | | |

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| [removed: ASSETS] [added: ASSETS] | | | | | | | | |

Date: September 30, 2019

Date: September 30, 2019

| /s/ STEPHEN FISHER | | Director | | September 30, 2019 |

| Stephen Fisher | | | | |

| /s/ DIANE M. MOREFIELD | | Director | | September 30, 2019 |

| Diane M. Morefield | | | | |

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

| | Uncertain Tax Positions |

| *Description of* *the Matter* | As discussed in Note 10 to the consolidated financial statements, the Company has recorded a liability for unrecognized tax benefits resulting from uncertain tax positions, including accrued interest and penalties, of $35.1 million as of July 31, 2019. The Company’s uncertain tax positions are subject to audit by federal, state and local taxing authorities, and the resolution of such audits may span multiple years. The Company uses significant judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition. Tax law is complex and often subject to varied interpretations. Accordingly, the ultimate outcome with respect to taxes the Company may owe may differ from the amounts recognized. |

| | | |

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

| | | |

| | | Auditing management’s analysis and accounting for the Company’s uncertain tax positions involved significant auditor judgment and use of tax professionals with specialized skills and knowledge to evaluate the Company’s interpretation of, and compliance with, tax laws across its multiple subsidiaries located in multiple taxing jurisdictions. Each tax position involves unique facts and circumstances that must be evaluated, and there may be many uncertainties around initial recognition and de-recognition of tax positions, including regulatory changes, litigation and examination activity. In addition, a higher degree of auditor judgment was required in evaluating the Company’s measurement of the largest amount of benefit, considered on a cumulative probability basis, which is more likely than not to be realized upon settlement. |

| | | |

| | *How We* *Addressed the* *Matter in Our* *Audit* | We tested the Company’s controls that address the risks of material misstatement relating to uncertain tax positions. For example, we tested controls over management’s identification of uncertain tax positions and its application of the recognition and measurement principles, including management’s review of the inputs and calculations of unrecognized tax benefits resulting from uncertain tax positions. |

| | | |

| | | |

| | We involved our tax professionals to assess the technical merits of the Company’s tax positions. Our substantive audit procedures included, among others, evaluating changes in tax law that occurred during the year and assessing the Company’s interpretation of those changes under the relevant jurisdiction’s tax law. In addition, we inspected correspondence, assessments, and settlements from taxing authorities to assess the Company’s determination of the likelihood of its tax positions to be sustained upon examination. We also evaluated the Company’s income tax disclosures included in Note 10 in relation to these matters. | |

| | | |

COPART, INC.

| | | 2019 | | | | 2018 | | |

| Cash and cash equivalents | | $ | 186,319 | | | $ | 274,520 | |

| Goodwill | | 333,321 | | | | 337,235 | | |

COPART, INC.

COPART, INC.

COPART, INC.

| Net income | | — | | | — | | | | — | | | | — | | | | 591,693 | | | | — | | | | 591,693 | | |

| Cumulative effect of change in accounting standard | | — | | | — | | | | — | | | | — | | | | (22,954 | | ) | | — | | | | (22,954 | | ) |

| Exercise of stock options, net of repurchased shares | | 3,349,980 | | | — | | | | 32,500 | | | | — | | | | (44,987 | | ) | | — | | | | (12,487 | | ) |

| Shares repurchased | | (7,635,596 | ) | | — | | | | (17,427 | | ) | | — | | | | (347,570 | | ) | | — | | | | (364,997 | | ) |

| Balances at July 31, 2019 | | 229,790,268 | | | $ | 23 | | | $ | 572,559 | | | $ | (132,529 | ) | | $ | 1,338,328 | | | $ | — | | | $ | 1,778,381 | |

COPART, INC.

| Net income | | $ | 591,693 | | | $ | 418,007 | | | $ | 394,261 | |

COPART, INC.

JULY 31, 2019

ASU 2014-09 allows adoption with

This retained earnings adjustment related to adjustments to accounts receivable, vehicle pooling costs and deferred taxes upon adoption of the standard.

There were no contract liabilities on the consolidated balance sheets at July 31, 2019.

| --- | --- |

Date: October 1, 2018

| /s/ VINCENT W. MITZ | | President and Director | | October 1, 2018 |

| Vincent W. Mitz | | | | |

October 1, 2018

| Deferred income taxes | | 19,733 | | | | 3,192 | | |

| Unrealized gain on interest rate swaps, net (a) | | — | | | | — | | | | 603 | | |

| Reclassification adjustment of interest rate swaps, net (b) | | — | | | | — | | | | (320 | | ) |

| (a) | Net of tax effect of $(342) for the year ended July 31, 2016. |

| (b) | Net of tax effect of $178 for the year ended July 31, 2016. |

| Balances at July 31, 2015 | | 240,312,680 | | | $ | 24 | | | $ | 407,796 | | | $ | (68,793 | ) | | $ | 625,437 | | | $ | — | | | $ | 964,464 | |

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

| Interest rate swaps, net of tax effects | | — | | | — | | | | — | | | | 283 | | | | — | | | | — | | | | 283 | | |

| Exercise of stock options, net of repurchased shares | | 2,258,880 | | | — | | | | (372 | | ) | | — | | | | (742 | | ) | | — | | | | (1,114 | | ) |

| Shares repurchased | | (22,543,704 | ) | | (2 | | ) | | (38,990 | | ) | | — | | | | (403,861 | | ) | | — | | | | (442,853 | | ) |

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

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

| Proceeds from the issuance of long-term debt, net of discount | | — | | | | — | | | | 93,468 | | |

| Debt offering costs | | — | | | | — | | | | (1,179 | | ) |

| Principal payments on long-term debt | | — | | | | — | | | | (337,500 | | ) |

| Distributions to noncontrolling interest | | (235 | | ) | | — | | | | — | | |

| Cash and cash equivalents at beginning of period | | 210,100 | | | | 155,849 | | | | 456,012 | | |

The Company provides a portfolio of services to its sellers and buyers that facilitate the sale and delivery of a vehicle from seller to buyer.

These services include the ability to use the Company’s internet sales technology and vehicle delivery, loading, title processing, preparation and storage.

The Company evaluates multiple-element arrangements relative to its member and seller agreements.

The services provided to the seller of a vehicle involve disposing of a vehicle on the seller’s behalf and, under most of the Company’s current contracts, collecting the proceeds from the member.

The Company applies Accounting Standard Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13) for revenue

recognition.

Pre-sale services, including towing, title processing, preparation and storage, as well as sale fees and other enhancement services meet the criteria for separate units of accounting.

Revenue associated with each service is recognized upon completion of the respective service, net of applicable rebates or allowances.

For certain sellers who are charged a proportionate fee based on the high bid of the vehicle, the revenue associated with the pre-sale services is recognized upon completion of the sale when the total arrangement is fixed and determinable.

The estimated selling price of each service is determined based on management’s best estimate and allotted based on the relative selling price method.

Vehicle sales, where vehicles are purchased and remarketed on the Company’s own behalf, are recognized on the sale date, which is typically the point of high bid acceptance.

Upon high bid acceptance, a legally binding contract is formed with the member, and the gross sales price is recorded as revenue.

The Company also provides a number of services to the buyer of the vehicle, charging a separate fee for each service.

Each of these services has been assessed to determine whether the requirements have been met to separate them into units of accounting within a multiple-element arrangement.

The Company has concluded that the sale and the post-sale services are separate units of accounting.

The fees for sale services are recognized upon completion of the sale, and the fees for the post-sale services are recognized upon successful completion of those services using the relative selling price method.

The Company also charges members an annual registration fee for the right to participate in its vehicle sales program, which is recognized ratably over the term of the arrangement, and relist and late-payment fees, which are recognized upon receipt of payment by the member.

The Company allocates arrangement consideration based upon management’s best estimate of the selling price of the separate units of accounting contained within arrangements including multiple deliverables.