What changed in this filing

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Item 1A. Risk Factors

2022-09-27 compared with 2021-09-27 · 62 added, 98 removed, 359 unchanged (31% of the section changed)

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Risks Related to Our Business and Industry

The worldwide COVID-19 pandemic may 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 it has the potential to adversely affect our business and operating results.

After the initial onset of the COVID-19 pandemic in March 2020, 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.

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.

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.

Certain of the jurisdictions in which we operate, such as the U.K., have had more restrictive governmental actions than others, and subsequent shelter-in-place orders have occasionally stalled or regressed our assignment volumes commensurate with the severity and

duration of such orders.

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;

additional 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;

the relationship of supply and demand for newly manufactured vehicles, on the one hand, and used and salvage vehicles, on the other hand, due to reduced manufacturing capacity and broader supply chain disruptions during the COVID-19 pandemic and the effects of these supply and demand relationships on the average sale prices obtained at auction for the vehicles assigned to us for remarketing;

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.

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in fiscal 2003 with an acquisition in Canada.

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 fiscal 2022.

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

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Among other things, we plan to ultimately deploy our proprietary auction technologies at all of our foreign operations and we cannot predict whether this deployment will be successful or will result in increases in the revenues or operating efficiencies of any acquired companies relative to their historic operating performance.

Integration of our respective operations, including information technology and financial and administrative functions, may not proceed as anticipated and could result in unanticipated costs or expenses such as capital expenditures that could have an adverse effect on our future operating results.

adverse effect on our future operating results.

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

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• the increased travel, infrastructure, and legal compliance costs associated with multiple international locations;

• the need to localize our product offerings, particularly the need to implement our online auction platform in foreign countries;

• the need to localize our mix of product and service offerings in response to customer requirements, particularly the need to implement our online auction platform in foreign countries;

• the need to comply with complex foreign and U.S.

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• 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;

• repatriation of funds currently held in foreign jurisdictions to the U.S., which may result in higher effective tax rates;

• military conflicts, including the Russian invasion of Ukraine;

• public health issues, including but not limited to the COVID-19 pandemic;

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

We believe that the implementation of our proprietary auction technologies across our operations over the last decade had a favorable impact on our results of operations by increasing the size and geographic scope of our buyer base, increasing the average selling price for vehicles sold through our sales, and lowering expenses associated with vehicle sales.

We implemented our online system across all of our U.S., Canada, and U.K.

salvage yards between fiscal 2004 and fiscal 2008, and experienced increases in revenues and average selling prices, as well as improved operating efficiencies in those markets.

We believe that the implementation of our proprietary auction technologies across our operations had a favorable impact on our results of operations by increasing the size and geographic scope of our buyer base, increasing the average selling price for vehicles sold through our sales, and lowering expenses associated with vehicle sales.

For example, we implemented our online system across all of our U.S., Canada, and U.K.

salvage yards between in fiscal 2004 and fiscal 2008 and experienced increases in revenues and average selling prices, as well as improved operating efficiencies in those markets.

In considering new markets, we consider the potential synergies from the implementation of our model based in large part on our experience in the U.S., Canada, and the U.K.

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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 U.S.

For example, Hurricane Ida had, in certain quarters, an adverse effect on our operating results, in part because of yard capacity constraints in the impacted areas of the U.S.

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

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

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

For example, in fiscal 2019, we opened one new operational facility in Brazil, seven new operational facilities in Germany, 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.

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

For example, 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.

In fiscal 2021, we opened one new operational facility in Germany, one new operational facility in Spain, ten new operational facilities in the U.S., and acquired an operational facility in Des Moines, Iowa.

In fiscal 2022, we opened one new operational facility in Canada, one new operational facility in Spain, and five new operational facilities in the U.S.

As for strategic acquisitions of complementary businesses, we acquired National Powersport Auctions in fiscal 2017, and in fiscal 2022 we acquired Hills Motors (“Hills”) a used, or “green” parts recycler in the U.K.

that has four operating facilities.

The Hills acquisition is currently undergoing review by the CMA.

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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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.

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.

Any failure to continue to successfully identify and complete acquisitions and develop new facilities could have a material adverse effect on our consolidated results of operations and financial position.

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We may not be able to pass these costs on to our sellers or buyers.

In addition to using independent subhaulers, in the U.K.

we utilize a fleet of company trucks to pick up and deliver vehicles from our U.K.

storage facilities.

In connection therewith, we are subject to the risks associated with providing trucking services, including inclement weather, disruptions in transportation infrastructure, accidents and related injury claims, availability and price of fuel, any of which could result in an increase in our operating expenses and reduction in our net income.

In addition to using independent subhaulers, in the U.S.

we utilize a fleet of company trucks to pick up and deliver vehicles from our storage facilities in those geographies.

In connection therewith, we are subject to the risks associated with providing trucking services, including but not limited to inclement weather, disruptions in transportation infrastructure, accidents and related injury claims, availability and price of fuel, any of which could result in an increase in our operating expenses and reduction in our net income.

New member programs could impact our operating results.

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Conversely, our salvage vehicle supply will tend to increase in poor weather such as a harsh winter or as a result of adverse weather-related conditions such as flooding.

During periods of mild weather

conditions, our ability to increase our revenues and improve our operating results and related growth will be increasingly dependent on our ability to obtain additional vehicle sellers and to compete more effectively in the market, each of which is subject to the other risks and uncertainties described in this Annual Report on Form 10-K.

During periods of mild weather conditions, our ability to increase our revenues and improve our operating results and related growth will be increasingly

dependent on our ability to obtain additional vehicle sellers and to compete more effectively in the market, each of which is subject to the other risks and uncertainties described in these sections.

In addition, extreme weather conditions, although they increase the available supply of salvage cars, can have an adverse effect on our operating results.

For example, during fiscal 2006, fiscal 2013 and fiscal 2018, we recognized substantial additional costs associated with Hurricanes Katrina, Rita, Sandy, and Harvey.

For example, during fiscal 2022, we recognized substantial additional costs associated with Hurricane Ida.

Weather events have had, in certain quarters, an adverse effect on our operating results, in part because of yard capacity constraints in the impacted areas of the U.S.

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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, A.

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

Johnson, our Chairman, and A.

Jayson Adair and Jeffrey Liaw, our Co-Chief Executive Officers, 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.

More generally, our future success also depends on our ability to attract and retain a talented workforce.

The labor market is highly competitive, and our business could be adversely affected if we are unable to attract and retain talented personnel in our organization at appropriate staffing levels.

In addition, because our core technology platform is internally developed, we face heightened risks relating to workforce recruitment and retention of key personnel with subject matter expertise relating to our technology platform.

The vehicle sales industry is highly competitive and we may not be able to compete successfully.

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Many of the insurance companies have established relationships with competitive remarketing companies and large dismantlers.

Certain of our competitors may have greater financial resources than we do currently or will have in the future.

Certain of our competitors may currently or in the future have greater financial resources than we do.

Due to the limited number of vehicle sellers, particularly in the U.K., and other foreign markets, the absence of long-term contractual commitments between us and our sellers and the increasingly competitive market environment, there can be no assurance that our competitors will not gain market share at our expense.

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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 sociopolitical dynamics could have an adverse effect on our business and reputation.

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 the U.S.

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In many countries outside of the United States, particularly in those with developing economies, it may be common for persons to engage in business practices prohibited by laws and regulations applicable to us, such as the U.S.

Foreign Corrupt Practices Act (“FCPA”);

Brazil Clean Companies Act;

India’s Prevention of Corruption Act, 1988;

or similar local anti-bribery laws.

Foreign Corrupt Practices Act (“FCPA”), U.K.

Bribery Act, Brazil Clean Companies Act, India’s Prevention of Corruption Act, 1988 or similar local anti-bribery laws.

These laws generally prohibit companies and their employees or agents from making improper payments for the purpose of obtaining or retaining business.

Failure by us and our subsidiaries to comply with these laws could subject us to civil and criminal penalties that could have a material adverse effect on our consolidated operating results and financial position.

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.

Although we have not experienced any material disruptions in our business as a result of Brexit to date, the ultimate effects of Brexit on us are still difficult to predict, and adverse consequences concerning Brexit or the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

In addition, certain acquisitions in the U.K.

may be reviewed by the Competition and Markets Authority (“U.K.

If an inquiry is made by the U.K.

Regulator, we may be required to demonstrate that our acquisitions will not result, or be expected to result, in a substantial lessening of competition in the U.K.

may be reviewed by the CMA.

If an inquiry is made by the CMA, we may be required to demonstrate that our acquisitions will not result, or be expected to result, in a substantial lessening of competition in the U.K.

Although we believe that there will not be a substantial lessening of competition in the U.K.

market, based on our analysis of the relevant U.K.

markets, there can be no assurance that the U.K.

Regulator will agree with us if it decides to make an inquiry.

Regulator determines that by our acquisitions of certain assets, there is or likely will be a substantial lessening of competition in the U.K.

markets, there can be no assurance that the CMA will agree with us if it decides to make an inquiry.

If the CMA determines that by our acquisitions of certain assets, there is or likely will be a substantial lessening of competition in the U.K.

market, we could be required to divest some portion of our U.K.

In the event of a divestiture order by the U.K.

Regulator, the assets disposed may be sold for substantially less than their carrying value.

In the event of a divestiture order by the CMA, the assets disposed may be sold for substantially less than their carrying value.

Accordingly, any divestiture could have a material adverse effect on our operating results in the period of the divestiture.

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

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

Some of our target markets outside the U.S.

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

For example, new markets may operate either wholly or partially on the principal model, in which the vehicle is purchased 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.

We face risks associated with transacting on a principal rather than agent basis, which may have an adverse impact on our gross margin percentages and expose us to inventory risks.

Certain of the vehicles that we remarket in the U.S.

and foreign markets may be transacted 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, 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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In other markets, including Germany, insurers have traditionally been less involved in the disposition of vehicles.

As we expand into markets outside the U.S., Canada, and the U.K., including Germany in particular, we cannot predict whether markets will readily adapt to our strategy of online auctions

of automobiles sourced principally through vehicle insurers.

As we expand into markets outside the U.S., Canada, and the U.K., including Germany in particular, we cannot predict whether markets will readily adapt to our strategy of online auctions of automobiles sourced principally through vehicle insurers.

Any failure of new markets to adopt our business model could adversely affect our consolidated results of operations and financial position.

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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, the LGPD, 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.

Similarly, the California Consumer Privacy Act, or AB375 (“CCPA”), the California Privacy Act

(“CPRA”), the Colorado Privacy Act (“CPA”), the Virginia Consumer Data Protection Act (“VCDPA”) 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, the CPRA, the CPA, the VCDPA, the LGPD, 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.

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

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

For example, in March 2008, a decree issued by the president of Mexico became effective that

placed restrictions on the types of vehicles that can be imported into Mexico from the U.S.

For example, in March 2008, a decree issued by the president of Mexico became effective that placed restrictions on the types of vehicles that can be imported into Mexico from the U.S.

The adoption of similar laws or regulations in other jurisdictions that have the effect of reducing or curtailing our activities abroad, changes in the interpretation, application, and enforcement of laws, regulations, or treaties, any failure to comply with non-U.S.

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

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

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

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.

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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, or IRS, 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.

Although we believe our tax positions are reasonable, we are subject to audit by the Internal Revenue Service, “IRS”, 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.

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

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federal, state and local, and foreign governments make substantive changes to tax rules and their application, which could result in materially higher taxes than would be incurred under existing tax law and which could adversely affect our financial condition or results of operations.

The Tax Cuts and Jobs Act (“Tax Reform” or “Tax Act”) was enacted on December 22, 2017.

The Tax Act significantly revamped U.S.

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.

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.

Some of the provisions of the Tax Act may be changed by a future Congress or challenged by the World

Trade Organization (“WTO”).

Although we cannot predict the nature or outcome of such future interpretive guidance, or actions by a future Congress or WTO, they could adversely impact our consolidated results of operations and financial position.

For example on August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 which includes changes to the U.S.

corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” for certain large corporations which will not be effective until fiscal year 2024 and a 1% excise tax on share repurchases after December 31, 2022.

We are currently assessing the potential impact of these legislative changes.

Risks Related to Our Intellectual Property and Technology

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Our reliance on intellectual property rights has increased significantly in recent years as we have implemented our auction-style sales technologies across our business and ceased conducting live auctions.

Supreme Court precedent potentially restricts patentability of software inventions by affirming that patent claims merely requiring application of an abstract idea on standard computers utilizing generic computer functions are patent ineligible, which may impact our ability to enforce our issued patent and obtain new patents.

functions are patent ineligible, which may impact our ability to enforce our issued patent and obtain new patents.

As we face increasing competition, the possibility of intellectual property rights claims against us increases.

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The implementation of new systems and enhancements is frequently disruptive to the underlying business of an enterprise and can be time-consuming and expensive, increase management responsibilities and divert management attention.

Any disruptions relating to our system enhancements or any problems with the implementation, particularly any disruptions impacting our operations or our ability to accurately report our financial performance on a timely

basis during the implementation period, could materially and adversely affect our business.

Even if we do not encounter these material and adverse effects, the implementation of these enhancements may be much more costly than we anticipated.

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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 results of operations, and financial position.

Decreased utility of internally developed capitalized software could adversely affect our consolidated results of operations and financial condition.

We capitalize certain costs associated with the development of new software products, new software for internal use and major software enhancements to existing software.

These costs are amortized over the estimated useful life of the software beginning with its introduction or roll-out.

As of July 31, 2021, the net amount of capitalized software development costs shown on our consolidated balance sheet is $22.8 million.

If, at any time, it is determined that capitalized software provides a reduced economic benefit, the unamortized portion of the capitalized development costs could be expensed, in part or in full.

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.

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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.

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

Nevertheless, we cannot provide assurances that our efforts to address prior data security incidents and mitigate against the risk of future data security incidents or system failures will be successful.

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• our ability to successfully integrate our newly acquired operations in international markets and any additional markets we may enter;

• forthcoming cessation of the LIBOR interest rate standard;

• the availability of salvage vehicles or other vehicles we sell including the supply of used and salvage vehicles in relation to the supply of new vehicle alternatives;

• variations in vehicle accident rates;

• variations in total loss frequency rates;

• supply chain disruptions;

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• goodwill impairment;

• military actions;

• crimes committed against us, including theft, forgery, and counterfeit payments;

• military conflicts, including the Russian invasion of Ukraine;

• bank failures;

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Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of our securities shall be deemed to have notice of and consented to the foregoing provisions.

Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees, stockholders, or others which may discourage lawsuits with respect to such claims.

Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the exclusive forum provision may (i) increase the costs for a stockholder, and/or (ii) limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees, stockholders, or others which may discourage lawsuits with respect to such claims.

Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provision.

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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.

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.

Macroeconomic factors such as high fuel prices, declines in commodity prices, fluctuations 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.

Macroeconomic factors that affect oil prices and the automobile and commodity markets can have adverse effects on our revenues, revenue growth rates (if any), and operating results.

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

Similarly, a reduction in total loss frequency rates, due to among other things, sharp increases in used car prices that make it less economical for insurance company sellers to declare a vehicle involved in an accident a total loss, could also have a material impact on revenue growth.

In addition, under our Percentage Incentive Program contracts, which we refer to as PIP, the cost of transporting the vehicle to one of our facilities is included in the PIP fee.

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These adverse economic conditions and events may have a negative effect on our business, consolidated results of operations, and financial position.

New accounting pronouncements or new interpretations of existing standards could require us to make adjustments to accounting policies that could adversely affect the consolidated financial statements.

The Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and the SEC, from time to time issue new pronouncements or new interpretations of existing accounting standards that require changes to our accounting policies and procedures.

To date, we do not believe any new pronouncements or interpretations have had a material adverse effect on our consolidated results of operations and financial position, but future pronouncements or interpretations could require a change or changes in our policies or procedures.

Fluctuations in foreign currency exchange rates could result in declines in our reported revenues and earnings.

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

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.

Unresolved Staff Comments

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