What changed in this filing

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Item 1A. Risk Factors

2020-09-28 compared with 2019-09-30 · 87 added, 71 removed, 364 unchanged (30% of the section changed)

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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 SEC.

We expect the worldwide COVID-19 pandemic to have an adverse impact on our near-term revenues principally as a result of lower auction inventories.

The geographic extent, length, and economic impact of the pandemic is unknown, but we expect it will adversely affect our business and operating results.

We saw substantial declines in vehicle assignments, which we attribute principally to reduced accident volume as miles driven dramatically declined in response to shelter-in-place orders across the globe.

As we do not recognize the majority of our transactional revenues until the completion of our auctions, a substantial portion of the declines in assignments we experienced in the most recent quarter will be reflected in future quarters.

We cannot predict how the pandemic will continue to develop, whether and to what extent new shelter-in-place orders will be issued, or to what extent the pandemic may have longer term unanticipated impacts on our markets, including, for example, the risk of long-term reductions in miles driven.

To the extent that the pandemic results in temporary or longer-term declines in the number of vehicles we process, our business and operating results could be adversely affected.

Although we have been deemed an “essential business” in the jurisdictions in which we operate and have largely been able to continue our yard operations, we have been required to make adjustments in our business processes that may reduce efficiency or increase operating expenses, particularly if the pandemic continues over a long period of time.

To date, we have not made modifications that materially affect our operating expenses, and while we regularly monitor them, we may not be able to respond with sufficient speed to align revenues and operating expenses when necessary, which could result in a drop in our stock price as a result of our operating or net income for one or more fiscal periods being less than market expectations.

Additional, non-exclusive examples of pandemic-related factors that could adversely affect our future business or operating results include the potential adverse operational impacts from outbreaks of COVID-19 at any of our locations;

“second wave” outbreaks of COVID-19 in one or more of our geographic markets;

a reduction in miles driven due to one or more factors

relating to the COVID-19 pandemic;

any further government actions in response to COVID-19 outbreaks that restrict business activity or travel;

disruptions of governmental administrative operations due to COVID-19 outbreaks that adversely impact our core business activities, such as vehicle title processing;

and deteriorating economic conditions generally.

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 rates.

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

Historically, a limited number of vehicle sellers have collectively accounted for a substantial portion of our revenues.

Although no single customer accounted for more than 10% of our consolidated revenues for fiscal 2020, a limited number of vehicle sellers historically have collectively accounted for a substantial portion of our revenues.

Vehicle sellers have terminated agreements with us in the past in particular markets, which has affected revenues in those markets.

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in fiscal 2003 with an acquisition in Canada.

Subsequently, in fiscal 2008 we made a significant acquisition in the U.K., followed by acquisitions in the U.A.E., Brazil, Germany, and Spain in fiscal 2013, expansions into Bahrain and Oman in fiscal 2015, expansion into the Republic of Ireland and India in fiscal 2016, and an acquisition in Finland in fiscal 2018.

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

Subsequently, in fiscal 2007 and fiscal 2008 we made significant acquisitions in the U.K., followed by acquisitions in the U.A.E., Brazil, Germany, and Spain in fiscal 2013, expansions into Bahrain and Oman in fiscal 2015, expansion into the Republic of Ireland and India in fiscal 2016, and an acquisition in Finland in fiscal 2018.

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.

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laws and regulations that apply to our international operations;

tariffs and trade barriers and other regulatory or contractual limitations on our ability to operate in certain foreign markets;

• tariffs, trade barriers, trade disputes, and other regulatory or contractual limitations on our ability to operate in certain foreign markets;

• exposure to foreign currency exchange rate risk, which may have an adverse impact on our revenues and revenue growth rates;

adapting to different business cultures and market structures, particularly where we seek to implement our auction model in markets where insurers have historically not played a substantial role in the disposition of salvage vehicles;

• adapting to different business cultures, languages, and market structures, particularly where we seek to implement our auction model in markets where insurers have historically not played a substantial role in the disposition of salvage vehicles;

• repatriation of funds currently held in foreign jurisdictions to the U.S.

may result in higher effective tax rates;

• military actions;

• public health issues;

• environmental issues;

• natural and man-made disasters;

• political issues.

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations.

Our failure to manage any of these risks successfully could harm our international operations and have an adverse effect on our operating results.

On June 23, 2016, the U.K.

held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” In February 2017, the British Parliament voted in favor of allowing the British government to begin negotiating the terms of the U.K.’s withdrawal from the European Union and discussions with the European Union began in March 2017.

On January 29, 2020, the European Parliament approved the U.K.’s withdrawal from the European Union, commonly referred to as “Brexit.” The U.K.

officially left the European Union on January 31, 2020 and entered into a transition period that is scheduled to expire on December 31, 2020 during which the U.K.’s trading relationship with the European Union is expected to remain largely the same while the two parties negotiate a trade agreement as well as other aspects of the U.K.’s relationship with the European Union.

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

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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.

Our operations and acquisitions in certain foreign areas expose us to regulatory, economic, and reputational risks.

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

Our operations and acquisitions in certain foreign areas expose us to political, regulatory, economic, and reputational risks.

Although we have implemented policies, procedures, and training designed to ensure compliance with anti-bribery laws, trade controls and economic sanctions, and similar regulations, our employees or agents may take actions in violation of our policies.

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operate in a manner substantially different than our historic market in the U.S.

For example, new markets may operate either wholly or partially on the principal model, in which the vehicle is purchased then resold for our own account, rather than the agency model employed in the U.S., in which we generally act as a sales agent for the legal owner of vehicles.

For example, new markets may operate either wholly or partially on the principal model, in which the vehicle is purchased and then resold for our own account, rather than the agency model employed in the U.S., in which we generally act as a sales agent for the legal owner of vehicles.

Further, operating on a principal basis exposes us to inventory risks, including losses from theft, damage, and obsolescence.

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Hence, the conversion periods vary from weeks to years and cannot be predicted.

We have developed a proprietary enterprise operating system, and we may experience difficulties operating our business as we continue to design and develop this system.

We have developed a proprietary enterprise operating system to address our international expansion needs.

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

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

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

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

This type of interruption could prevent us from processing vehicles for our sellers and may prevent us from selling vehicles through our internet bidding platform, VB3, which would adversely affect our consolidated results of operations and financial position.

In addition, the transition to our internally developed proprietary system will 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.

that the volume of business will increase.

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

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As our operations continue to grow in both size and scope, domestically and internationally, we must continue to provide reliable, real-time access to our systems by our customers through improving and upgrading our systems and infrastructure for enhanced products, services, features and functionality.

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.

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

The impairment of internally developed capitalized software costs could adversely affect our consolidated results of operations and financial condition.

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If, at any time, it is determined that capitalized software provides a reduced economic benefit, the unamortized portion of the capitalized development costs will be expensed, in part or in full, as an impairment, which may have a material impact on our consolidated results of operations and financial position.

For example, during fiscal 2017, we recognized a $19.4 million charge primarily related to fully impairing costs previously capitalized in connection with the development of business operating software.

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 condition.

Disruptions to our information technology systems, including failure to prevent outages, maintain security, and 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 condition.

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

These threats may derive from fraud or malice on the part of third parties or current or former employees.

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, 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.

Our operations rely on the secure processing, transmission, and storage of confidential, proprietary and other information in our computer systems and networks.

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We immediately investigated, including the engagement of an external expert security firm, and made the required notifications to members whose information may have been accessed and to regulatory agencies.

We are constantly evaluating and implementing new technologies and processes to manage risks relating to cyber-attacks and system and network disruptions, including but not limited to usage errors by our employees, power outages and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.

We are regularly evaluating and implementing new technologies and processes to manage risks relating to cyber-attacks and system and network disruptions, including but not limited to usage errors by our employees, power outages, and catastrophic events such as fires, tornadoes, floods, hurricanes, and earthquakes.

We have further enhanced our security protocols based on the investigation we conducted in response to the security incident.

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Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our data or our users’ or customers’ data.

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.

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.

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

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

Recent regulatory changes in Europe have created compliance uncertainty regarding certain transfers of personal data from Europe to the United States.

For example, the General Data Protection Regulation (“GDPR”), which went into effect in the European Union (“EU”) on May 25, 2018, applies to all of our activities conducted from an establishment in the EU and may also apply to related products and services that we offer to EU users.

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.

For example, the General Data Protection Regulation (“GDPR”), which went into effect in the European Union on May 25, 2018, applies to all of our activities conducted from an establishment in the European Union and may also apply to related products and services that we offer to European Union users.

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

Complying with the 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.

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For example, following adverse weather conditions in a particular area, our yards in that area may fill and limit our ability to accept additional salvage vehicles while we process existing inventories.

For example, Hurricanes Katrina, Rita, Sandy, and Harvey had, in certain quarters, an adverse effect on our operating results, in part because of yard capacity constraints in the impacted areas of the United States.

We regularly evaluate our capacity in all our markets and where appropriate, seek to increase capacity through the acquisition of additional land and yards.

We regularly evaluate our capacity in all our markets and where appropriate, and seek to increase capacity through the acquisition of additional land and yards.

We may not be able to reach agreements to purchase independent storage facilities in markets where we have limited excess capacity, and zoning restrictions or difficulties obtaining use permits may limit our ability to expand our capacity through acquisitions of new land.

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We seek to increase our sales and profitability through the acquisition of additional facilities and the development of new facilities.

For example, 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 2019, we opened one new operational

facility in Brazil;

For example, 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;

seven new operational facilities in Germany;

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.

Acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers, the availability of affordable financing in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms.

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• obtain necessary regulatory approvals under applicable antitrust and competition laws.

In addition, certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.

In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.

In addition, certain of the acquisition agreements under which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.

In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their

indemnification responsibilities.

We cannot assure that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements.

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• changes in laws affecting who may purchase the vehicles we sell;

our ability to integrate and manage our acquisitions successfully;

• the timing and size of our new facility openings;

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• the ability to obtain or maintain necessary permits to operate;

• military actions;

• natural and man-made disasters;

• public health issues, including COVID-19 and other pandemics;

• political issues.

Due to the foregoing factors, our operating results in one or more future periods can be expected to fluctuate.

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

Our executive officers, directors and their affiliates beneficially own, in the aggregate, 15.3% of our common stock as of July 31, 2019 .

Our executive officers, directors and their affiliates beneficially own, in the aggregate, more than 10% of our common stock as of July 31, 2020.

If they were to act together, these stockholders would have significant influence over most matters requiring approval by stockholders, including the election of directors, any amendments to our certificate of incorporation and certain significant corporate transactions, including potential merger or acquisition transactions.

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If we lose the service of one or more of our executive officers or key employees, in particular Willis J.

Johnson, our Chairman, or A.

Jayson Adair, our Chief Executive Officer, or if one or more of these executives decide to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

Johnson, our Chairman, A.

Jayson Adair, our Chief Executive Officer, and Jeffrey Liaw, our President and acting Chief Financial Officer, or if one or more of these executives decide to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

Cash investments are subject to risks.

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All securities are subject to risk, including fluctuations in interest rates, credit risk, market risk and systemic economic risk.

Changes or movements in any of these risk factors may result in a loss or impairment to our invested cash and may have a material effect on our consolidated results of operations and financial position.

Changes or movements in any of these investment-related risk items may result in a loss or impairment to our invested cash and may have a material effect on our consolidated results of operations and financial position.

Rapid technological changes may render our technology obsolete or decrease the competitiveness of our services.

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• enhance our existing services;

develop and license new services and technologies that address the increasingly sophisticated and varied needs of our current and prospective customers;

• develop, access, acquire, and license new services and technologies that address the increasingly sophisticated and varied needs of our current and prospective customers;

• respond to technological advances and emerging industry standards and practices in a cost-effective and timely basis.

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We have or will initiate programs to open our auctions to the general public.

These programs include the Registered Broker program through which the public can purchase vehicles through a registered member and the Market Maker program through which registered members can open Copart storefronts with internet kiosks enabling the general public to search our inventory and purchase vehicles.

These programs include the Registered Broker program through which the public can purchase vehicles through a registered member and the Market Maker and Copart Lounge programs through which registered members can open Copart storefronts in foreign markets with internet kiosks enabling the general public to search our inventory and purchase vehicles.

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

These programs could also create additional risks including heightened regulation and litigation risk related to vehicle sales to the general public, and heightened branding, reputational, and intellectual property risk associated with allowing Copart registered members to establish Copart-branded storefronts in foreign jurisdictions.

Factors such as mild weather conditions can have an adverse effect on our revenues and operating results, as well as our revenue and earnings growth rates, by reducing the available supply of salvage vehicles.

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These additional costs were characterized as “abnormal” under ASC 330, Inventory, and included premiums for subhaulers, payroll, equipment, and facilities expenses directly related to the operating conditions created by the hurricanes.

In the event that we were to again experience extremely adverse weather or other anomalous conditions that result in an abnormally high number of salvage vehicles in one or more of our markets, those conditions could have an adverse effect on our future operating results.

In the event that we were to again experience extremely adverse weather or other

anomalous conditions that result in an abnormally high number of salvage vehicles in one or more of our markets, those conditions could have an adverse effect on our future operating results.

Macroeconomic factors such as high fuel prices, declines in commodity prices, declines in used car prices, and vehicle-related technological advances may have an adverse effect on our revenues and operating results, as well as our earnings growth rates.

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therefore, there can be no assurance that we will be able to compete successfully in the future.

Federal, state, and local government regulation of the vehicle sales industry may impair our operations, increase our costs of doing business and create potential liability.

Participants in the vehicle sales industry are subject to and may be required to expend funds to ensure compliance with, a variety of governmental, regulatory and administrative rules, regulations.

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.

Many of these laws and regulations are frequently complex and subject to interpretation, and failure to comply with present or future regulations or changes in interpretations of existing regulations may result in impairment of our operations and the imposition of penalties and other liabilities.

Regulation of the vehicle sales industry may impair our operations, increase our costs of doing business, and create potential liability.

Participants in the vehicle sales industry are subject to, and may be required to expend funds to ensure compliance with a variety of laws, regulations, and ordinances.

These include, without limitation, land use ordinances, business and occupational licensure requirements and procedures, vehicle titling, sales, and registration rules and procedures, and laws and regulations relating to the environment, anti-money laundering, anti-corruption, exporting, and reporting and notification requirements to agencies and law enforcement relating to vehicle transfers.

Many of these laws and regulations are frequently complex and subject to interpretation, and failure to comply with present or future regulations or changes in interpretations of existing laws or regulations may result in impairment or suspension of our operations and the imposition of penalties and other liabilities.

At various times, we may be involved in disputes with local governmental officials regarding the development and/or operation of our business facilities.

We believe that we are in compliance in all material respects with applicable regulatory requirements.

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

In addition, new regulatory requirements or changes in existing requirements may delay or increase the cost of opening new facilities, may limit our base of vehicle buyers and may decrease demand for our vehicles.

We may be subject to similar types of regulations by governmental agencies in new markets.

In addition, new legal or regulatory requirements or changes in existing requirements may delay or increase the cost of opening new facilities, may limit our base of vehicle buyers, may decrease demand for our vehicles, and may adversely impact our ability to conduct business.

Changes in laws or the interpretation of laws, including foreign laws and regulations, affecting the import and export of vehicles may have an adverse effect on our business and financial condition.

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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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There can be no assurance that we or our operations will not be subject to significant costs in the future or that environmental enforcement agencies at the state and federal level will not pursue enforcement actions against us.

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.

and international economic conditions may negatively affect our business, operating results, or financial condition.

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, financial position, or cash flows.

and international economic conditions may negatively affect our business, operating results, and financial condition.

The capital and credit markets have historically experienced extreme volatility and disruption, which has in the past and may in the future lead to economic downturns in the U.S.

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Additionally, interim reviews must be performed whenever events or changes in circumstances indicate that impairment may have occurred.

If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill in the period the determination is made.

If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge in the period the determination is made.

The annual goodwill impairment analysis, which was performed qualitatively in the fourth quarter of fiscal 2020, considered all relevant factors specific to our reporting units, including macroeconomic conditions;

industry and market considerations;

overall financial performance and relevant entity-specific events.

overall financial performance;

the impact of the COVID-19 pandemic;

and relevant entity-specific events.

Changes in these factors, or changes in actual performance could affect the fair value of goodwill, which may result in an impairment charge.

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We considered the above factors noting none involved significant uncertainty.

In addition, the industry in which we operate improved over the observable period, and our calculated fair value exceeded carrying value for each reporting unit by a substantial amount in our previous quantitative analysis, indicating no material risk as of July 31, 2019 , with respect to potential goodwill impairments.

Our calculated fair value exceeded carrying value for each reporting unit by a substantial amount in our previous quantitative analysis, indicating no material risk as of July 31, 2020, with respect to potential goodwill impairments.

Should the value of our goodwill become impaired, it could have a material adverse effect on our consolidated results of operations and could result in our incurring net losses in future periods.

Changes in federal, state and local, or foreign tax laws, changing interpretations of existing tax laws, or adverse determinations by tax authorities could increase our tax burden or otherwise adversely affect our financial condition or results of operations.

We are subject to taxation at the federal, state, provincial, and local levels in the United States, the United Kingdom, and various other countries and jurisdictions in which we operate, including income taxes, sales taxes, value-added (VAT) taxes, and similar taxes and assessments.

We are subject to taxation at the federal, state, provincial, and local levels in the U.S., the U.K., and various other countries and jurisdictions in which we operate, including income taxes, sales taxes, value-added (“VAT”) taxes, and similar taxes and assessments.

The laws and regulations related to tax matters are extremely complex and subject to varying interpretations.

Although we believe our tax positions are reasonable, we are subject to audit by the Internal Revenue Service in the United States, HM Revenue and Customs in the United Kingdom, state tax authorities in the states in which we operate, and other similar tax authorities in international jurisdictions.

As previously disclosed, we have been subject to challenge by the Georgia Department of Revenue with respect to sales taxes and could face similar audits or challenges from applicable federal, state, or foreign tax authorities in the future.

We have been subject to audits and challenges from applicable federal, state, or foreign tax authorities in past, and may be subject to similar audits and challenges in the future.

While we believe we comply with all applicable tax laws, rules, and regulations in the relevant jurisdictions, tax authorities may elect to audit us and determine that we owe additional taxes, which could result in a significant increase in our liabilities for taxes, interest, and penalties in excess of our accrued liabilities.

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taxation of corporations, including a reduction of the federal income tax rate from 35% to 21%, a repeal of the exceptions to the $1.0 million deduction limitation for performance-based compensation to covered employees, and a new tax regime for foreign earnings.

The repeal of the $1.0 million deduction limit for performance-based compensation, the new U.S.

taxes on accumulated and future foreign earnings and other adverse changes resulting from the Tax Act, or a change in the mix of domestic and foreign earnings, might offset the benefit from the reduced tax rate, and our future effective tax rates and/or cash taxes may increase, even significantly, or not decrease much, compared to recent or historical trends.

Any subsequent repeal of the Tax Act could adversely affect our financial condition or results of operations.

Many of the provisions of the Tax Act are highly complex and may be subject to further interpretive guidance from the IRS or others.

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dirham, Omani rial, and Bahraini dinar could adversely affect our consolidated results of operations and financial position.

On June 23, 2016, the U.K.

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

On January 29, 2020, the European Parliament approved the U.K.’s withdrawal from the European Union, commonly referred to as “Brexit.” The U.K.

The ultimate effects of Brexit on us will also depend on the terms of agreements, if any, that the U.K.

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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 1A. Risk Factors