Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-23255

COPART, INC.

(Exact name of registrant as specified in its charter)

Delaware						000-23255						94-2867490
(State or other jurisdiction of incorporation or organization)						(Commission File Number)						(I.R.S. Employer Identification No.)
14185 Dallas Parkway			Suite 300			Dallas			Texas			75254
(Address of principal executive offices) (zip code)

(972) 391-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value $0.0001			CPRT			The NASDAQ Global Select Market

Indicate by check mark whether the 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 reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 Exchange Act.

Large accelerated filer			☒						Accelerated filer			☐
Non-accelerated filer			☐						Smaller reporting company			☐
									Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 24, 2022, 237,672,576 shares of the registrant’s common stock were outstanding.

Copart, Inc.

Index to the Quarterly Report

April 30, 2022

Table of Contents						Page Number
PART I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets						3
Consolidated Statements of Income						4
Consolidated Statements of Comprehensive Income						5
Consolidated Statements of Stockholders’ Equity						6
Consolidated Statements of Cash Flows						8
Notes to Consolidated Financial Statements						9
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview						20
Acquisitions and New Operations						22
Results of Operations						23
Liquidity and Capital Resources						28
Critical Accounting Policies and Estimates						30
Recently Issued Accounting Standards						30
Contractual Obligations and Commitments						30
Off-Balance Sheet Arrangements						31
Item 3 - Quantitative and Qualitative Disclosures About Market Risk						31
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures						32
Changes in Internal Controls						32
PART II - Other Information
Item 1 - Legal Proceedings						33
Item 1A - Risk Factors						33
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds						46
Item 3 - Defaults Upon Senior Securities						46
Item 4 - Mine Safety Disclosures						46
Item 5 - Other Information						46
Item 6 - Exhibits						47
Signatures						48

Copart, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share amounts)						April 30, 2022						July 31, 2021
ASSETS
Current assets:
Cash, cash equivalents, and restricted cash						$	1,454,818					$	1,048,260
Investment in held to maturity securities						224,889						—
Accounts receivable, net						585,914						480,628
Vehicle pooling costs						114,028						94,449
Inventories						56,988						44,968
Income taxes receivable						1,581						20,012
Prepaid expenses and other assets						19,208						14,294
Total current assets						2,457,426						1,702,611
Property and equipment, net						2,402,809						2,296,624
Operating lease right-of-use assets						121,006						119,487
Intangibles, net						40,854						45,873
Goodwill						348,000						355,717
Other assets						73,779						41,831
Total assets						$	5,443,874					$	4,562,143
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities						$	398,414					$	369,826
Deferred revenue						21,087						20,973
Income taxes payable						6,907						7,760
Current portion of operating and finance lease liabilities						22,687						22,472
Total current liabilities						449,095						421,031
Deferred income taxes						78,023						63,969
Income taxes payable						61,359						52,345
Operating and finance lease liabilities, net of current portion						99,610						97,961
Long-term debt and other liabilities, net of discount						402,733						397,636
Total liabilities						1,090,820						1,032,942
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.0001 par value - 5,000,000 shares authorized; none issued						—						—
Common stock: $0.0001 par value - 400,000,000 shares authorized; 237,613,616 and 237,014,273 shares issued and outstanding, respectively.						24						24
Additional paid-in capital						811,900						761,834
Accumulated other comprehensive loss						(152,596)						(100,860)
Retained earnings						3,693,726						2,868,203
Total stockholders’ equity						4,353,054						3,529,201
Total liabilities and stockholders’ equity						$	5,443,874					$	4,562,143

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Consolidated Statements of Income

(Unaudited)

						Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands, except per share amounts)						2022						2021						2022						2021
Service revenues and vehicle sales:
Service revenues						$	766,316					$	623,846					$	2,145,224					$	1,671,819
Vehicle sales						173,625						110,064						472,309						272,062
Total service revenues and vehicle sales						939,941						733,910						2,617,533						1,943,881
Operating expenses:
Yard operations						346,428						258,071						968,936						725,786
Cost of vehicle sales						157,236						94,498						423,948						232,487
General and administrative						63,522						53,230						174,445						150,682
Total operating expenses						567,186						405,799						1,567,329						1,108,955
Operating income						372,755						328,111						1,050,204						834,926
Other expense:
Interest expense, net						(4,492)						(5,346)						(14,032)						(15,227)
Other income, net						1,342						770						1,314						3,103
Total other expense						(3,150)						(4,576)						(12,718)						(12,124)
Income before income taxes						369,605						323,535						1,037,486						822,802
Income tax expense						90,985						36,739						211,091						142,281
Net income						$	278,620					$	286,796					$	826,395					$	680,521
Basic net income per common share						$	1.17					$	1.21					$	3.48					$	2.88
Weighted average common shares outstanding						237,505						236,396						237,277						236,110
Diluted net income per common share						$	1.16					$	1.19					$	3.42					$	2.83
Diluted weighted average common shares outstanding						240,724						240,208						241,288						240,149

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

						Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)						2022						2021						2022						2021
Comprehensive income, net of tax:
Net income						$	278,620					$	286,796					$	826,395					$	680,521
Other comprehensive income:
Foreign currency translation adjustments						(29,094)						5,056						(51,736)						19,424
Comprehensive income						$	249,526					$	291,852					$	774,659					$	699,945

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

						Common Stock																		Accumulated Other Comprehensive Income (Loss)
									Additional Paid-in Capital
(In thousands, except share amounts)						Outstanding Shares						Amount												Retained Earnings						Stockholders’ Equity
Balances at July 31, 2021						237,014,273						$	24					$	761,834					$	(100,860)					$	2,868,203					$	3,529,201
Net income						—						—						—						—						260,363						260,363
Currency translation adjustment						—						—						—						(10,518)						—						(10,518)
Exercise of stock options, net of repurchased shares						145,986						—						5,572						—						(249)						5,323
Stock-based compensation						21,091						—						9,452						—						—						9,452
Balances at October 31, 2021						237,181,350						24						776,858						(111,378)						3,128,317						3,793,821
Net income						—						—						—						—						287,412						287,412
Currency translation adjustment						—						—						—						(12,124)						—						(12,124)
Exercise of stock options, net of repurchased shares						246,451						—						6,413						—						(350)						6,063
Stock-based compensation						2,767						—						9,662						—						—						9,662
Shares issued for Employee Stock Purchase Plan						43,924						—						5,022						—						—						5,022
Balances at January 31, 2022						237,474,492						24						797,955						(123,502)						3,415,379						4,089,856
Net income						—						—						—						—						278,620						278,620
Currency translation adjustment						—						—						—						(29,094)						—						(29,094)
Exercise of stock options, net of repurchased shares						132,955						—						4,123						—						(273)						3,850
Stock-based compensation						6,136						—						9,818						—						—						9,818
Shares issued for Employee Stock Purchase Plan						33						—						4						—						—						4
Balances at April 30, 2022						237,613,616						$	24					$	811,900					$	(152,596)					$	3,693,726					$	4,353,054

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Consolidated Statements of Stockholders’ Equity (Continued)

(Unaudited)

						Common Stock																		Accumulated Other Comprehensive Income (Loss)
									Additional Paid-in Capital
(In thousands, except share amounts)						Outstanding Shares						Amount												Retained Earnings						Stockholders’ Equity
Balances at July 31, 2020						235,315,337						$	24					$	672,727					$	(121,088)					$	1,937,853					$	2,489,516
Net income						—						—						—						—						200,285						200,285
Currency translation adjustment						—						—						—						(7,406)						—						(7,406)
Exercise of stock options, net of repurchased shares						802,670						—						20,014						—						(489)						19,525
Stock-based compensation						—						—						8,913						—						—						8,913
Balances at October 31, 2020						236,118,007						24						701,654						(128,494)						2,137,649						2,710,833
Net income						—						—						—						—						193,440						193,440
Currency translation adjustment						—						—						—						21,774						—						21,774
Exercise of stock options, net of repurchased shares						121,158						—						3,098						—						(298)						2,800
Stock-based compensation						—						—						8,865						—						—						8,865
Shares issued for Employee Stock Purchase Plan						67,877						—						4,880						—						—						4,880
Balances at January 31, 2021						236,307,042						24						718,497						(106,720)						2,330,791						2,942,592
Net income						—						—						—						—						286,796						286,796
Currency translation adjustment						—						—						—						5,056						—						5,056
Exercise of stock options, net of repurchased shares						261,352						—						5,717						—						(151)						5,566
Stock-based compensation						—						—						9,367						—						—						9,367
Balances at April 30, 2021						236,568,394						$	24					$	733,581					$	(101,664)					$	2,617,436					$	3,249,377

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

						Nine Months Ended April 30,
(In thousands)						2022						2021
Cash flows from operating activities:
Net income						$	826,395					$	680,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost						102,333						93,141
Allowance for credit loss						1,456						(1,429)
Equity in losses (earnings) of unconsolidated affiliates						794						(2,121)
Stock-based compensation						28,932						27,145
Gain on sale of property and equipment						(1,280)						(1,257)
Deferred income taxes						14,582						(14,130)
Changes in operating assets and liabilities:
Accounts receivable						(109,636)						(81,593)
Vehicle pooling costs						(20,029)						(12,777)
Inventories						(13,367)						(18,788)
Prepaid expenses, other current and non-current assets						(37,842)						6,879
Operating lease right-of-use assets and lease liabilities						436						389
Accounts payable and accrued liabilities						45,745						47,914
Deferred revenue						388						8,467
Income taxes receivable						18,416						16,152
Income taxes payable						6,531						13,692
Net cash provided by operating activities						863,854						762,205
Cash flows from investing activities:
Purchases of property and equipment						(234,810)						(364,395)
Purchase of assets in connection with acquisitions						(493)						—
Proceeds from sale of property and equipment						2,622						599
Purchase of held to maturity securities						(374,866)						—
Proceeds from the sale of held to maturity securities						149,977						—
Net cash used in investing activities						(457,570)						(363,796)
Cash flows from financing activities:
Proceeds from the exercise of stock options						16,108						28,829
Proceeds from the issuance of Employee Stock Purchase Plan shares						5,026						4,880
Payments for employee stock-based tax withholdings						(872)						(938)
Debt offering costs						(1,212)						—
Payments of finance lease obligations						(472)						(962)
Net cash provided by financing activities						18,578						31,809
Effect of foreign currency translation						(18,304)						3,954
Net increase in cash, cash equivalents, and restricted cash						406,558						434,172
Cash, cash equivalents, and restricted cash at beginning of period						1,048,260						477,718
Cash, cash equivalents, and restricted cash at end of period						$	1,454,818					$	911,890
Supplemental disclosure of cash flow information:
Interest paid						$	14,485					$	14,736
Income taxes paid, net of refunds						$	195,521					$	126,303

The accompanying notes are an integral part of these consolidated financial statements.

Copart, Inc.

Notes to Consolidated Financial Statements

April 30, 2022

(Unaudited)

NOTE 1 – Summary of Significant Accounting Policies

Basis of Presentation and Description of Business

Copart, Inc. (“the Company”) provides vehicle sellers with a full range of services to process and sell vehicles over the internet through the Company’s Virtual Bidding Third Generation (“VB3”) internet auction-style sales technology. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and directly to the general public. The majority of vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. The Company offers vehicle sellers a full range of services that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price through the online auction process. In the United States (“U.S.”), Canada, Brazil, the Republic of Ireland, Finland, the United Arab Emirates (“U.A.E.”), Oman, and Bahrain, the Company sells vehicles primarily as an agent and derives revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the United Kingdom (“U.K.”), Germany, and Spain, the Company operates both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for its own account. In Germany and Spain, the Company also derives 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.

Principles of Consolidation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature considered necessary for fair presentation of the Company’s financial position as of April 30, 2022 and July 31, 2021, its consolidated statements of income, comprehensive income and stockholders’ equity for the three and nine months ended April 30, 2022 and 2021, and its cash flows for the nine months ended April 30, 2022 and 2021. Interim results for the three and nine months ended April 30, 2022 are not necessarily indicative of the results that may be expected for any future period, or for the entire year ending July 31, 2022. These consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021. Certain prior year amounts have been reclassified to conform to current year presentation.

The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, vehicle pooling costs; income taxes; stock-based compensation; and contingencies. Actual results may differ from these estimates.

Revenue Recognition

The Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. Service revenue and vehicle sales revenue are recognized at the date the vehicles are sold at auction, excluding annual registration fees. Costs to prepare the vehicles for auction, including inbound transportation costs and titling fees, are deferred and recognized at the time of revenue recognition at auction.

The Company’s disaggregation between service revenues and vehicle sales at the segment level reflects how the nature, timing, amount and uncertainty of its revenues and cash flows are impacted by economic factors. The Company reports sales taxes on relevant transactions on a net basis in the Company’s consolidated results of operations, and therefore does not include sales taxes in revenues or costs.

Service revenues

The Company’s service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. Within this revenue category, the Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. 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 the Company’s facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These services are not distinct within the context of the contract. Accordingly, revenue for these services is recognized when the single performance obligation is satisfied at the completion of the auction process. The Company does not take ownership of these consigned vehicles, which are stored at the Company’s facilities located throughout the U.S. and at its international locations. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.

The Company has a separate performance obligation related to providing access to its online auction platform as the Company charges members an annual registration fee for the right to participate in its online auctions and access the Company’s bidding platform. This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

No provision for returns has been established, as all sales are final with no right of return or warranty, although the Company provides for credit loss expense in the case of non-performance by its buyers or sellers.

									Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)									2022						2021						2022						2021
Service revenues
			United States						$	678,865					$	550,338					$	1,900,330					$	1,465,996
			International						87,451						73,508						244,894						205,823
			Total service revenues						$	766,316					$	623,846					$	2,145,224					$	1,671,819

Vehicle sales

Certain vehicles are purchased and remarketed on the Company’s own behalf. The Company has a single performance obligation related to the sale of these vehicles, which is the completion of the online auction process. Vehicle sales revenue is recognized on the auction date. As the Company acts as a principal in vehicle sales transactions, the gross sales price at auction is recorded as revenue.

									Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)									2022						2021						2022						2021
Vehicle sales
			United States						$	111,385					$	71,615					$	295,767					$	171,135
			International						62,240						38,449						176,542						100,927
			Total vehicle sales						$	173,625					$	110,064					$	472,309					$	272,062

Contract assets

The Company capitalizes certain contract assets related to obtaining a contract, where the amortization period for the related asset is greater than one year. These assets are amortized over the expected life of the customer relationship. Contract assets are classified as current or long-term other assets, based on the timing of when the Company expects to recognize the related revenues and are amortized as an offset to the associated revenues on a straight-line basis. The Company assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.

The change in the carrying amount of contract assets was as follows (In thousands):

Balance as of July 31, 2021						$	7,485
Costs amortized during the period						(2,318)
Effect of foreign currency exchange rates						382
Balance as of April 30, 2022						$	5,549

Vehicle Pooling Costs

The Company defers costs that relate directly to the fulfillment of its contracts associated with vehicles consigned to and received by the Company, but not sold as of the end of the period. The Company quantifies the deferred costs using a calculation that includes the number of vehicles at its facilities at the beginning and end of the period, the number of vehicles sold during the period, and an allocation of certain yard operation costs of the period. The primary expenses allocated and deferred are inbound transportation costs, titling fees, certain facility costs, labor, and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed into yard operations expenses as vehicles are sold in subsequent periods on an average cost basis.

Foreign Currency Translation

The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiaries into the U.S. dollar reporting currency. The British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar are the functional currencies of the Company’s foreign subsidiaries as they are the primary currencies within the economic environment in which each subsidiary operates. The original equity investment in the respective subsidiaries is translated at historical rates. Assets and liabilities of the respective subsidiary’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation of each subsidiary’s financial statements are reported in other comprehensive income.

The cumulative effects of foreign currency exchange rate fluctuations were as follows (In thousands):

Cumulative loss on foreign currency translation as of July 31, 2020						$	(121,088)
Gain on foreign currency translation						20,228
Cumulative loss on foreign currency translation as of July 31, 2021						$	(100,860)
Loss on foreign currency translation						(51,736)
Cumulative loss on foreign currency translation as of April 30, 2022						$	(152,596)

Fair Value of Financial Instruments

The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in U.S. GAAP. In accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, the Company considers fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:

Level I Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level II Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.

Level III Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, and amounts outstanding under the Revolving Loan Facility (as defined in Note 6) approximated their fair values as of April 30, 2022 and July 31, 2021, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy. Cash equivalents are classified within Level II of the fair value hierarchy because they are valued using quoted market prices of the underlying investments. See Note 6 – Long-Term Debt and Note 7 – Fair Value Measurements.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash, cash equivalents, and restricted cash are placed with high credit quality financial institutions.

Capitalized Software Costs

The Company capitalizes system development costs and website development costs related to the enterprise computing services during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three to seven years. The Company evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that impact the recoverability of these assets.

Total gross capitalized software as of April 30, 2022 and July 31, 2021 was $74.8 million and $66.2 million, respectively. Accumulated amortization expense related to software as of April 30, 2022 and July 31, 2021 totaled $50.4 million and $43.4 million, respectively.

NOTE 2 — Accounts Receivable, Net

Accounts receivable, net consisted of:

(In thousands)						April 30, 2022						July 31, 2021
Advance charges receivable						$	452,103					$	385,002
Trade accounts receivable						136,563						97,249
Other receivables						3,959						4,013
						592,625						486,264
Less: Allowance for credit loss						(6,711)						(5,636)
Accounts receivable, net						$	585,914					$	480,628

Advance charges receivable represents amounts paid to third parties on behalf of insurance companies for which the Company will be reimbursed when the vehicle is sold. As advance charges are recovered within one year, the Company has not adjusted the amount of consideration received from the customer for a significant financing component. Trade accounts receivable includes fees and gross auction proceeds to be collected from insurance companies and buyers.

NOTE 3 — Property and Equipment, Net

Property and equipment, net consisted of the following:

(In thousands)						April 30, 2022						July 31, 2021
Land						$	1,484,617					$	1,428,262
Buildings and improvements						1,186,649						1,126,414
Transportation and other equipment						388,179						326,622
Office furniture and equipment						82,723						79,928
Software						74,760						66,170
						3,216,928						3,027,396
Less: Accumulated depreciation and amortization						(814,119)						(730,772)
Property and equipment, net						$	2,402,809					$	2,296,624

Depreciation expense on property and equipment was $34.7 million and $30.2 million for the three months ended April 30, 2022 and 2021, respectively, and $96.0 million and $87.0 million for the nine months ended April 30, 2022 and 2021, respectively.

NOTE 4 – Leases

The Company has both lessee and lessor arrangements. The Company determines whether a contract is or contains a lease at the inception of the contract or at any subsequent modification. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment. Depending on the terms, leases are classified as either operating or finance leases if the Company is the lessee, or as operating, sales-type, or direct financing leases if the Company is the lessor. Certain of the Company’s lessee and lessor leases have renewal options to extend the leases for additional periods at the Company’s discretion.

Leases - Lessee

The Company leases certain facilities and certain equipment under non-cancelable finance and operating leases, which are recorded as right-of-use assets and lease liabilities. Certain leases provide the Company with either a right of first refusal to acquire or an option to purchase a facility at fair value. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the right-of-use asset and the lease liabilities. The effects of these escalation clauses or concessions have been reflected in lease expense on a straight-line basis over the expected lease term and any variable lease payments subsequent to establishing the lease liability are expensed as incurred. The lease term commences on the date when the Company has the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Certain of the Company’s leases have renewal periods up to 40 years, exercisable at the Company’s option, and generally require the Company to pay property taxes, insurance and maintenance costs, in addition to the lease payments. At lease inception, the Company includes all renewals or option periods that are reasonably certain to exercise when determining the expected lease term, as failure to renew the lease would impose an economic penalty.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in the Company’s leases.

Components of lease expense were as follows:

									Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)									2022						2021						2022						2021
Operating lease expense									$	6,825					$	7,040					$	20,835					$	21,321
Finance lease expense:
			Amortization of right-of-use assets						155						167						464						501
			Interest on finance lease liabilities						1						16						5						60
Short-term lease expense									897						1,037						4,387						3,305
Variable lease expense									427						278						981						1,212
Total lease expense									$	8,305					$	8,538					$	26,672					$	26,399

Supplemental cash flow information related to leases as of April 30, 2022 were as follows:

									Nine Months Ended April 30,
(In thousands)									2022						2021
Cash paid for amounts included in the measurement of lease liabilities
			Operating cash flows related to operating leases						$	19,934					$	21,855
			Operating cash flows related to finance leases						4						32
			Financing cash flows related to finance leases						472						962
Right-of-use assets obtained in exchange for new operating lease liabilities									14,461						37,120
Right-of-use assets obtained in exchange for new finance lease liabilities									—						6,251

Leases - Lessor

The Company’s lessor arrangements include certain facilities and various land locations, of which each qualifies as an operating lease. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the straight-line rental income. The effects of these escalation clauses or concessions have been reflected in lease payments receivable on a straight-line basis over the expected lease term and any variable lease income subsequent to establishing the receivable will be recognized as earned.

The cost of the leased space as of April 30, 2022 and July 31, 2021 was $56.8 million and $55.5 million, respectively. The accumulated depreciation associated with the leased assets as of April 30, 2022 and July 31, 2021 was $2.8 million and $1.9 million, respectively. Both the leased assets and accumulated depreciation are included in Property and equipment, net on the consolidated balance sheet. Rental income from these operating leases was $3.6 million and $3.5 million for the three months ended April 30, 2022 and 2021, respectively, and $10.9 million and $10.7 million for the nine months ended April 30, 2022 and 2021, respectively, and is included within Service revenues on the consolidated statements of income.

NOTE 5 – Goodwill and Intangible Assets

The following table sets forth amortizable intangible assets by major asset class:

(In thousands)						April 30, 2022						July 31, 2021
Amortized intangibles:
Supply contracts and customer relationships						$	56,158					$	55,598
Trade names						18,906						18,944
Licenses and databases						657						736
Accumulated amortization						(34,867)						(29,405)
Intangibles, net						$	40,854					$	45,873

Aggregate amortization expense on amortizable intangible assets was $1.9 million and $1.8 million for the three months ended April 30, 2022 and 2021, respectively, and $5.6 million and $5.3 million for the nine months ended April 30, 2022 and 2021, respectively.

The change in the carrying amount of goodwill was as follows:

(In thousands)
Balance as of July 31, 2021						$	355,717
Acquisitions during the period						180
Effect of foreign currency exchange rates						(7,897)
Balance as of April 30, 2022						$	348,000

NOTE 6 – Long-Term Debt

Credit Agreement

On December 21, 2021, the Company entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”). The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S. Dollar denominated borrowings with a SOFR-based interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

The Second and Amended and Restated Credit Agreement provides for the Revolving Loan Facility of $1,250.0 million maturing on December 21, 2026 (including up to $550.0 million equivalent of borrowings in Pounds Sterling, Euro and Canadian Dollars) with a $150.0 million equivalent sub-facility available to CPRT GmbH, a $150.0 million equivalent sub-facility available to Copart Autos España, S.L.U. and a $250.0 million equivalent sub-facility available to Copart UK Limited. The proceeds may be used for general corporate purposes, including working capital and capital expenditures, potential share repurchases, acquisitions, or other investments relating to the Company’s expansion strategies in domestic and international markets.

Borrowings under the Second Amended and Restated Credit Agreement bear interest based on, at our option, either (1) the applicable fixed rate plus 1.00% to 1.75% or (2) the daily rate plus 0.0% to 0.75%, in each case, depending on Copart’s consolidated total net leverage ratio. Additionally, the unused revolving commitments under the Second Amended and Restated Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.175% to 0.275%, depending on Copart’s consolidated total net leverage ratio. The applicable fixed rates described above with respect to borrowings denominated in (1) U.S. Dollars is SOFR plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (2) Pounds Sterling is SONIA plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (3) Euro is EURIBOR, and (4) Canadian Dollars is CDOR. The Company had no outstanding borrowings under the Revolving Loan Facility as of April 30, 2022 and July 31, 2021. Accordingly, the carrying value approximated fair value at April 30, 2022, and was classified within Level II of the fair value hierarchy.

The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Second Amended and Restated Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Documents Confirmation Agreement as part of the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions. The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio. The Second Amended and Restated Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25:1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50:1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million; provided, that, minimum liquidity, as defined, shall be not less than $75.0 million both before and after giving effect to any such dividend or restricted payment. As of April 30, 2022, the consolidated total net leverage ratio was (0.65):1. Minimum liquidity requirement as of April 30, 2022 was $2.7 billion. Accordingly, the Company does not believe that the provisions of the Second Amended and Restated Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business. The Company has not paid a cash dividend since becoming a public company in 1994. The Company was in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of April 30, 2022.

Related to execution of the Second Amended and Restated Credit Agreement, the Company incurred $2.7 million in costs, which were capitalized as debt issuance fees. The debt discount is amortized to interest expense over the term of the respective debt instruments and is classified as reductions of the outstanding liability.

Note Purchase Agreement

On December 3, 2014, the Company entered into a Note Purchase Agreement and sold to certain purchasers (collectively, the “Purchasers”) $400.0 million in aggregate principal amount of senior secured notes (the “Senior Notes”) consisting of (i) $100.0 million aggregate principal amount of 4.07% Senior Notes, Series A, due December 3, 2024; (ii) $100.0 million aggregate principal amount of 4.19% Senior Notes, Series B, due December 3, 2026; (iii) $100.0 million aggregate principal amount of 4.25% Senior Notes, Series C, due December 3, 2027; and (iv) $100.0 million aggregate principal amount of 4.35% Senior Notes, Series D, due December 3, 2029. Interest is due and payable quarterly, in arrears, on each of the Senior Notes. The Company may prepay the Senior Notes, in whole or in part, at any time, subject to certain conditions, including minimum amounts and payment of a make-whole amount equal to the discounted value of the remaining scheduled interest payments under the Senior Notes. The Note Purchase Agreement contains customary affirmative and negative covenants and the Company was in compliance with all covenants related to the Note Purchase Agreement as of April 30, 2022.

NOTE 7 – Fair Value Measurements

The following table summarizes the carrying values and fair values of the Company’s financial instruments that were not carried at fair value in the consolidated balance sheets:

						April 30, 2022												July 31, 2021
(In thousands)						Carrying Value Total						Fair Value Total						Carrying Value Total						Fair Value Total
Assets
Cash equivalents						$	1,181,844					$	1,181,987					$	754,300					$	754,304
Treasury Bills						224,889						224,898						—						—
Total Assets						$	1,406,733					$	1,406,885					$	754,300					$	754,304
Liabilities
Long-term fixed rate debt, including current portion						$	399,726					$	391,891					$	399,733					$	432,027
Total Liabilities						$	399,726					$	391,891					$	399,733					$	432,027

The Company has investments in Treasury Bills some of which mature over a period greater than 90 days and are classified as short-term investments. The Treasury Bills are carried at amortized cost and classified as held to maturity as the Company has the intent and the ability to hold them until they mature. The carrying value of the Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the Treasury Bills is recognized in interest income in the Company’s consolidated statement of income. The Treasury Bills classified within Level I of the fair value hierarchy.

During the nine months ended April 30, 2022, no transfers were made between any levels within the fair value hierarchy. The fair value of the Senior Notes is based on the discounted value of each interest and principal payment calculated utilizing market interest rates of similar types of borrowing arrangements and was classified within Level II of the fair value hierarchy. See Note 1 – Summary of Significant Accounting Policies, and Note 6 – Long-Term Debt.

NOTE 8 – Net Income Per Share

The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:

						Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)						2022						2021						2022						2021
Weighted average common shares outstanding						237,505						236,396						237,277						236,110
Effect of dilutive securities						3,219						3,812						4,011						4,039
Weighted average common and dilutive potential common shares outstanding						240,724						240,208						241,288						240,149

There were no material adjustments to net income required in calculating diluted net income per share. Excluded from the dilutive earnings per share calculation were 1,758,631 and 1,280,000 options to purchase the Company’s common stock for the three months ended April 30, 2022 and 2021, respectively, and 1,964,131 and 3,180,000 options to purchase the Company’s common stock for the nine months ended April 30, 2022 and 2021, respectively, because their inclusion would have been anti-dilutive.

NOTE 9 – Stock-based Compensation

The Company recognizes compensation expense for stock option awards without a market condition on a straight-line basis over the requisite service period of the award. The following is a summary of activity for the Company’s stock options for the nine months ended April 30, 2022:

(In thousands, except per share and term data)						Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (In years)						Aggregate Intrinsic Value
Outstanding as of July 31, 2021						6,427						$	50.69					5.69						$	619,019
Grants of options						340						133.96
Exercises						(525)						30.67
Forfeitures or expirations						(165)						56.11
Outstanding as of April 30, 2022						6,077						$	56.93					5.48						$	351,978
Exercisable as of April 30, 2022						4,429						$	44.46					4.59						$	308,452

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The number of options that were in-the-money was 6,669,003 at April 30, 2022.

The Company grants option awards to certain executives that contain service and market conditions. The options will become exercisable over five years, subject to continued service by the executive, with 20% vesting on the first anniversary of the grant date and the balance vesting monthly over the subsequent four years. Separate and apart from the time-based vesting schedule, the options are also subject to a market condition requiring the trading price of Copart, Inc. common stock on the NASDAQ Global Select Market to be greater than or equal to 125% of the exercise price of the options, determined both (i) at the time of any exercise, and (ii) based on the closing price on each of the twenty consecutive trading days preceding the date of any exercise. The exercise price of the options is equivalent to the closing price of the Company’s common stock on the grant date. The fair value of the awards is determined at the grant date using either Lattice or Monte Carlo model, risk-free interest rates ranging from 0.71% to 2.38%, estimated volatility ranging from 25.2% to 25.7%, and no expected dividends. The total estimated compensation expense to be recognized by the Company over the five-year service period for these options is $45.9 million and will be recognized using the accelerated attribution method over each vesting tranche of the award. The Company recognized $7.1 million and $10.2 million in compensation expense related to these awards in the nine months ended April 30, 2022 and 2021, respectively.

The following is a summary of activity for the Company’s stock option awards subject to market conditions for the nine months ended April 30, 2022:

(In thousands, except per share and term data)						Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (In years)						Aggregate Intrinsic Value
Outstanding as of July 31, 2021						1,130						$	87.49					8.96						$	67,250
Grants of options						325						125.68
Exercises						—						—
Forfeitures or expirations						—						—
Outstanding as of April 30, 2022						1,455						$	96.02					8.59						$	29,564
Exercisable as of April 30, 2022						395						$	86.56					8.17						$	10,697

The table below sets forth the stock-based compensation recognized by the Company for stock options, restricted stock, and restricted unit awards:

						Three Months Ended April 30,												Nine Months Ended April 30,
(In thousands)						2022						2021						2022						2021
General and administrative						$	8,401					$	7,966					$	25,119					$	22,399
Yard operations						1,417						1,401						3,813						4,746
Total stock-based compensation						$	9,818					$	9,367					$	28,932					$	27,145

The Company’s restricted stock awards (“RSA”) and restricted stock unit awards (“RSU”) have generally been issued with vesting periods ranging from two years to five years and vest solely on service conditions. Accordingly, the Company recognizes compensation expense for RSA and RSU awards on a straight-line basis over the requisite service period of the award.

The following is a summary of activity for the Company’s RSA’s and RSU’s for the nine months ended April 30, 2022:

(In thousands, except per share data)						Restricted Shares						Weighted Average Grant Date Fair Value
Outstanding as of July 31, 2021						102						$	90.46
Grants						141						133.60
Vested						(22)						74.24
Forfeitures or expirations						(13)						107.05
Outstanding as of April 30, 2022						208						$	120.50

NOTE 10 – Stock Repurchases

On September 22, 2011, the Company’s Board of Directors approved an 80 million share increase in the stock repurchase program, bringing the total current authorization to 196 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. The Company did not repurchase any shares of its common stock under the program during the nine months ended April 30, 2022 or 2021. As of April 30, 2022, the total number of shares repurchased under the program was 114,549,198, and 81,450,802 shares were available for repurchase under the program.

NOTE 11 – Recent Accounting Pronouncements

Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company’s adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated results of operations and financial position.

NOTE 12 – Legal Proceedings

The Company is subject to threats of litigation and is involved in actual litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage, contract disputes, and handling or disposal of vehicles. There are no material pending legal proceedings to which the Company is a party, or with respect to which any of the Company’s property is subject.

The Company provides for costs relating to matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of any such matters on the Company’s 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 any such matters. The Company believes that any ultimate liability regarding existing litigation and claims would not have a material effect on its consolidated results of operations, financial position, or cash flows. However, the amount of the liabilities associated with claims, if any, cannot be determined with certainty. The Company maintains insurance which may or may not provide coverage for claims made against the Company. There is no assurance that there will be insurance coverage available when and if needed. Additionally, the insurance that the Company carries requires that the Company pay for costs and/or claims exposure up to the amount of the insurance deductibles.

NOTE 13 – Segments and Other Geographic Reporting

The Company’s U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments. The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues and operating income.

The following table presents financial information by segment:

						Three Months Ended April 30, 2022																		Three Months Ended April 30, 2021
(In thousands)						United States						International						Total						United States						International						Total
Service revenues						$	678,865					$	87,451					$	766,316					$	550,338					$	73,508					$	623,846
Vehicle sales						111,385						62,240						173,625						71,615						38,449						110,064
Total service revenues and vehicle sales						790,250						149,691						939,941						621,953						111,957						733,910
Yard operations						295,326						51,102						346,428						218,672						39,399						258,071
Cost of vehicle sales						101,781						55,455						157,236						63,012						31,486						94,498
General and administrative						52,706						10,816						63,522						43,543						9,687						53,230
Operating income						$	340,437					$	32,318					$	372,755					$	296,726					$	31,385					$	328,111
Depreciation and amortization						$	31,609					$	4,970					$	36,579					$	28,161					$	3,805					$	31,966
Capital expenditures and acquisitions						64,397						14,237						78,634						59,006						22,175						81,181

						Nine Months Ended April 30, 2022																		Nine Months Ended April 30, 2021
(In thousands)						United States						International						Total						United States						International						Total
Service revenues						$	1,900,330					$	244,894					$	2,145,224					$	1,465,996					$	205,823					$	1,671,819
Vehicle sales						295,767						176,542						472,309						171,135						100,927						272,062
Total service revenues and vehicle sales						2,196,097						421,436						2,617,533						1,637,131						306,750						1,943,881
Yard operations						830,040						138,896						968,936						612,198						113,588						725,786
Cost of vehicle sales						272,387						151,561						423,948						153,119						79,368						232,487
General and administrative						145,638						28,807						174,445						124,044						26,638						150,682
Operating income						$	948,032					$	102,172					$	1,050,204					$	747,770					$	87,156					$	834,926
Depreciation and amortization						$	88,655					$	12,997					$	101,652					$	82,068					$	10,239					$	92,307
Capital expenditures and acquisitions						205,457						29,846						235,303						303,060						61,335						364,395

						April 30, 2022																		July 31, 2021
(In thousands)						United States						International						Total						United States						International						Total
Total assets						$	4,751,379					$	692,495					$	5,443,874					$	3,900,712					$	661,431					$	4,562,143
Goodwill						270,358						77,642						348,000						270,305						85,412						355,717

NOTE 14 – Subsequent Events

On May 24, 2022, the Company retired 100% of the Senior Notes referenced in Note 6 Long-Term Debt. The Company paid $420.6 million to retire the Senior Notes which included an additional $16.8 million make-whole payment, to the holders of the Senior Notes, and $3.8 million in accrued interest.