What changed in this filing

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Item 1. Business

2020-09-28 compared with 2019-09-30 · 89 added, 53 removed, 331 unchanged (30% of the section changed)

11 unchanged sentences

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.

We are not responsible for the carbon emissions resulting from new vehicle manufacturing, governmental fuel emissions standards or vehicle use by consumers.

Each vehicle that enters our business operations is an existing fact, with whatever fuel technology and efficiency it was designed and built to have, and the substantial carbon emissions associated with the vehicle’s manufacture are already sunk costs.

However, upon our receipt of an existing vehicle, we help decrease its total environmental impact by extending its useful life and thereby avoiding the carbon emissions associated with the alternative of new vehicle and auto parts manufacturing.

For example, 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 new resource extraction.

In each of these cases, our business reduces 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.

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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.

Secondly, 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.

We provide vehicle sellers with a full range of services to process and sell vehicles primarily over the internet through our Virtual Bidding Third Generation internet auction-style sales technology, which we refer to as VB3.

Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers and vehicles sourced directly from individual owners .

We sell the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters and, at certain locations, to the general public.

Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers and from individuals.

We sell the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and in some jurisdictions, to the general public.

The majority of the vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss;

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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 price through the online auction process.

In the U.S., Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, Bahrain, and Spain, we sell vehicles primarily as an agent and derive 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.

and Germany, we operate both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for our own account.

In the U.S., Canada, Brazil, the Republic of Ireland, Finland, the U.A.E., Oman, and Bahrain, we sell vehicles primarily as an agent and derive 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 U.K., Germany, and Spain, we operate both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for our own account.

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.

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of which 24.8% of vehicles were sold to out of state members within the U.S.

and 23.2% were sold to International members, based on the address submitted during registration.

and 35.7% were sold to International members, based on the IP address utilized during the auction process.

We believe that we offer the highest level of service in the auction and vehicle remarketing industry and have established our leading market position by:

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For fiscal 2020, our revenues were $2.2 billion and our operating income was $816.1 million.

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 2018, we opened three new operational facilities in 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;

and Turku, Finland.

In fiscal 2018, we opened three new operational facilities in the U.S., a new operational facility in the U.K., a new operational facility in Germany, and acquired four locations in Finland.

In fiscal 2019, we opened one new operational facility in Brazil;

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

In fiscal 2020, we opened two new operational facilities in Germany, one new operational facility in Brazil, and three new operational facilities in the U.S.

Our service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services.

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

Operating costs consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle 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, information technology, and marketing expenses.

Operating costs consist primarily of operating personnel (which includes yard management, clerical, and yard employees);

vehicle transportation;

property related taxes;

equipment maintenance and repair;

marketing costs directly related to the auction process;

and costs of vehicles sold under the purchase contracts.

General and administrative expenses consist primarily of executive management;

data processing;

sales personnel;

professional services;

marketing expenses;

and system maintenance and enhancements.

Industry Overview

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Occasionally, companies in our industry purchase vehicles from the largest segment of sellers, insurance companies, and resell the vehicles for their own account.

The vehicles are usually purchased at a price based on the vehicles’ estimated pre-accident cash value and the extent of damage.

Vehicle remarketers typically operate from multiple facilities where vehicles are processed, viewed, stored and delivered to the buyer.

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

Although there are other sellers of vehicles, such as banks, finance companies, charities, fleet operators, dealers and vehicles sourced directly from individual owners , our primary sellers of vehicles are insurance companies.

The primary buyers of vehicles at our auctions are vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and in some states, the general public.

The vehicles are usually purchased at a price based on the vehicles’ estimated pre-accident value (“PAV”) and the extent of damage.

Vehicle remarketers typically operate from multiple facilities where vehicles are processed, viewed, stored and released to the buyer.

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

Although there are other sellers of vehicles, such as banks, finance companies, charities, fleet operators, dealers and from individuals, our primary sellers of vehicles are insurance companies.

The primary buyers of vehicles at our auctions are vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and in some jurisdictions, the general public.

Vehicle dismantlers, which we believe are the largest group of vehicle buyers, based on volume of vehicles purchased, either dismantle a salvage vehicle and sell parts individually or sell the entire vehicle to rebuilders, used vehicle dealers, or the general public.

Vehicle rebuilders and vehicle repair licensees generally purchase

salvage vehicles to repair and resell.

Vehicle rebuilders and vehicle repair licensees generally purchase salvage vehicles to repair and resell.

Used vehicle dealers generally purchase recovered stolen or slightly damaged vehicles for resale.

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Typically, the damaged vehicle is towed to a storage facility or a vehicle repair facility for temporary storage pending insurance company examination.

The vehicle is inspected by the insurance company’s adjuster, who estimates the costs of repairing the vehicle and gathers information regarding the damaged vehicle’s mileage, options and condition in order to estimate its pre-accident value (PAV), otherwise known as actual cash value (ACV).

The vehicle is inspected by the insurance company’s adjuster, who estimates the costs of repairing the vehicle and gathers information regarding the damaged vehicle’s mileage, options and condition in order to estimate its PAV, otherwise known as actual cash value (“ACV”).

The adjuster determines whether to pay for repairs or to classify the vehicle as a total loss based upon the adjuster’s estimate of repair costs, vehicle’s salvage value, and the PAV, as well as customer service considerations.

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Operating and Growth Strategy

Our growth strategy is to increase our revenues and profitability by, among other things, (i) acquiring and developing new facilities in key markets including foreign markets;

(ii) pursuing national and regional vehicle supply agreements;

and (iii) expanding our online auctions and vehicle remarketing service offerings to sellers and members.

In addition, to maximize gross sales proceeds and cost efficiencies at each of our acquired facilities, we introduce our (i) pricing structure;

(ii) selling processes;

(iii) operational procedures;

(iv) management information systems;

and (v) when appropriate, redeploy existing personnel.

Our growth strategy is to increase revenues and profitability by, among other things, (i) acquiring and developing additional vehicle storage facilities in key markets, including foreign markets;

(ii) pursuing global, national and regional vehicle seller agreements;

(iii) increasing our service offerings;

and (iv) expanding the application of VB3 into new markets.

In addition, we implement our pricing structure and auction procedures, and attempt to introduce cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems, and redeploying personnel, when necessary.

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

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

We actively seek to establish national and regional supply agreements with insurance companies by promoting our ability to achieve high net returns and broader access to buyers through our national coverage and electronic commerce capabilities.

We actively seek to establish global, national, and regional supply agreements with insurance companies by promoting our ability to achieve high net returns and broader access to buyers through our national coverage and electronic commerce capabilities.

By utilizing our existing insurance company seller relationships, we are able to build new seller relationships and pursue additional supply agreements in existing and new markets.

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The primary focus of these new service offerings is to maximize returns to our sellers and maximize product value to our members.

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

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

We plan to continue to refine and expand our services, including offering software that can assist our sellers in expediting claims and salvage management tools that help sellers integrate their systems with ours.

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We believe that the following attributes and the services that we offer position us to take advantage of many opportunities in the online vehicle auction and services industry:

Geographic Coverage and Ability to Respond on a National Scale

Geographic Coverage and Ability to Respond on a Global Scale

Since our inception in 1982, we have expanded from a single facility in Vallejo, California to an integrated network of facilities located in the U.S., Canada, the U.K., Brazil, the Republic of Ireland, Germany, Finland, the U.A.E., Oman, Bahrain, and Spain.

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• interactive online counter-bidding, which allows sellers who have placed a minimum bid or a bid to be approved on a vehicle to directly counter-bid the current high bidder;

second chance bidding, which allows the second highest bidder the opportunity to purchase the vehicle for the seller’s current minimum bid after the high bidder fails to consummate the purchase;

• Night Cap sales, which provides an additional opportunity for bidding on vehicles that have not previously achieved their minimum bid.

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We typically retain existing employees at acquired facilities in order to retain knowledge about, and respond to, the local market.

We also assign a special

integration team to help convert newly acquired facilities to our own management information and proprietary software systems, helping enable us to ensure a smooth and consistent transition to our business operating and sales systems.

We also assign a special integration team to help convert newly acquired facilities to our own management information and proprietary software systems, helping enable us to ensure a smooth and consistent transition to our business operating and sales systems.

Technology to Enhance and Expand Our Business

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Title Processing and Procurement

We have extensive expertise in DMV document and title processing for salvage vehicles.

We have extensive expertise in DMV document and title processing.

We have developed a computer system which provides a direct link to the DMV computer systems of multiple states, allowing us to expedite the processing of vehicle title paperwork.

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.

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.

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.

Flexible Vehicle Processing Programs

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We provide the vehicle seller, at our expense, with transportation of the vehicle to our nearest facility, as well as DMV document and title processing.

In addition, we provide merchandising services such as covering or taping openings to protect vehicle interiors from weather, washing vehicle exteriors, vacuuming vehicle interiors, cleaning and polishing dashboards and tires, making keys for drivable vehicles, and identifying drivable vehicles.

vehicles, and identifying drivable vehicles.

We believe our merchandising efforts increase the sales prices of the vehicles, thereby increasing the return on salvage vehicles to both vehicle sellers and us.

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or CashForCars.de and arrange to obtain a valid offer to purchase their vehicle.

Upon acceptance of our offer to purchase their vehicle, we give them a check for their vehicle and then sell the vehicle on our own behalf.

Upon acceptance of our offer to purchase their vehicle, we provide them payment for their vehicle and then sell the vehicle on our own behalf.

National Powersport Auctions

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Portland, Oregon;

and Sacramento, California.

Sacramento, California;

and Orlando, Florida.

In the U.K., we have two facilities from which the public can purchase parts from salvaged and end-of-life vehicles.

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After the valuable parts have been removed by the buyer, the remaining parts and car body are sold for their scrap value.

We pioneered posting vehicle images online for buyers in 2001, and, we have been improving the technology to provide top quality photos since then.

In July 2020, we enhanced online images and videos by launching Copart 360 (“C360”), our proprietary technology that captures clear 360-degree views of interiors and exteriors of cars, trucks, and vans across U.S.

Copart locations.

Interested buyers can view everything from the backseat to the dashboard to the tires.

Buyers can also zoom in and out or expand to full screen on computers or mobile devices.

Buyers can access this feature by clicking the 360° icon under vehicle images on select lot details pages on Copart.com.

Membership Tiers

We now offer three tiers of membership in the U.S.

- Guest, Basic and Premier - for those registering to buy vehicles through Copart.com.

Guest Member Benefits

Guest members can sign up for free to add their favorite vehicles to their Watchlist, set up Vehicle Alerts to get notified when we add specific vehicles they’re looking for and view our inventory from their desktop or mobile device via our Mobile App.

Basic Member Benefits

Basic member benefits include:

• view multiple online auctions in real-time (live);

• bid on one vehicle at a time without a deposit, or up to five with a deposit;

• save favorite searches;

• get access to member appreciation events.

Premier Member Benefits

Premier member benefits include all basic member benefits, as well as, the following:

• bid on multiple vehicles at the same time;

• get priority placement in phone and chat support;

• access the Virtual Queue which provides expedited service at our locations;

• get a complimentary safety vest (one per membership year) and water bottle at our locations.

Virtual Queue

We always strive to maintain the highest safety guidelines to protect the health and well-being of our members and employees.

As soon as COVID-19 began impacting businesses globally, we rolled out the Virtual Queue at all locations to reinforce safety measures.

The Virtual Queue, available in multiple languages, is a safe way to secure a place in line while visiting one of our locations.

Whether a visitor is at a location to make a payment or preview a vehicle, the Virtual Queue lets them conveniently maintain social distancing practices.

Rather than wait in line inside a location, our visitors can save their place and receive an estimated wait time, using our mobile app, in the comfort of their own vehicle.

We notify them via text message when it is their turn to speak to a customer service agent.

We process vehicles from hundreds of different vehicle sellers.

No single customer accounted for more than 10% of our consolidated revenues for fiscal 2020, 2019 and 2018.

We obtained 80% of the total number of vehicles processed during fiscal 2019 from insurance company sellers.

We obtained 81%, 80%, and 78% of the total number of vehicles processed during fiscal 2020, 2019 and 2018, respectively, from insurance company sellers.

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Registration entitles a member to transact business at any of our sales, subject to local licensing and permitting requirements.

In certain venues, we may sell to the general public either directly or members may purchase a vehicle offered at Copart through a registered broker who meets local licensing and permitting requirements.

In certain jurisdictions, we may sell to the general public either directly or members may purchase a vehicle offered at Copart through a registered broker who meets local licensing and permitting requirements.

Strict admission procedures are intended to prevent frivolous bids that will not result in a completed sale.

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The largest national or regional vehicle auctioneers in the U.S.

include Insurance Auto Auctions, Inc.;

include Insurance Auto Auctions, Inc (“IAA”).;

KAR Auction Services, Inc.

(including its subsidiary ADESA, Inc.);

(“KAR”) (including its subsidiary ADESA, Inc.);

Auction Broadcasting Company, LLC;

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We began using our internally developed proprietary system with our expansion into Spain in fiscal 2016 and Germany in fiscal 2017.

We intend to continue development of this system and implement it in certain additional international locations in the future.

We intend to continue development of this system and implement it in certain additional locations in the future.

As of July 31, 2020, we had 7,600 full-time employees, of whom 1,388 were engaged in general and administrative functions and 6,212 were engaged in yard operations.

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

In the salvage vehicle remarketing industry, large numbers of wrecked vehicles are stored at storage facilities and during that time, spills of fuel, motor oil and other fluids may occur, resulting in soil, surface water or groundwater contamination.

In addition, certain of our facilities generate and/or store petroleum products and other hazardous materials, including waste solvents and used oil.

In the salvage vehicle remarketing industry, large numbers of wrecked vehicles are stored at storage facilities, requiring us to actively monitor and manage potential environmental impacts.

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

We could incur substantial expenditures for preventative, investigative, or remedial action and could be exposed to liability arising from our operations, contamination by previous users of certain of our acquired facilities or facilities which we may acquire in the future, or the disposal of our waste at off-site locations.

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.

In addition to conducting environmental diligence on new site acquisitions, we also take such actions as may be necessary under laws in the U.S.

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.

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In addition to acquiring insurance in connection with certain acquisitions, we have also obtained indemnification for pre-existing environmental liabilities from many of the persons and entities from whom we have acquired facilities, but there can be no assurance that such indemnifications will be available or sufficient.

Any such expenditures or liabilities could have a material adverse effect on our consolidated results of operations and financial position.

Any such expenditures or liabilities could have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

Governmental Regulations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business