What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-09-27 compared with 2021-09-27 · 66 added, 78 removed, 413 unchanged (26% of the section changed)

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

We are a leading provider of online auctions and vehicle remarketing services with operations in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Brazil, the Republic of Ireland, Germany, Finland, the United Arab Emirates (“U.A.E.”), Oman, Bahrain, and Spain.

We are a leading global provider of online auctions and vehicle remarketing services with operations in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Brazil, the Republic of Ireland, Germany, Finland, the United Arab Emirates (“U.A.E.”), Oman, Bahrain, and Spain.

Our goals are to generate sustainable profits for our stockholders, while also providing environmental and social benefits for the world around us.

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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.

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 New York metropolitan area in the wake of Hurricane Ida in the fall of 2021.

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.

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

Over the last several years, we believe there has been an increase in overall growth in the salvage market driven by an increase in total loss frequency.

The increase in total loss frequency may have been driven by the change in used car values and repair costs, which we believe are generally trending upward.

Changes in used car prices and repair costs, may impact total loss frequency and affect our growth rate.

Over the past 30 years we believe there has been an increase in overall growth in the salvage market driven by an increase in total loss frequency.

This increase in total loss frequency may have been driven by changes in used car values and repair costs over the same long-term horizon, which we believe are generally trending upward.

Recently we have noted fluctuations in total loss frequency.

Nonetheless, we believe the long-term trend of increases in total loss frequency will continue.

In the near term changes in used car prices and repair cost, may tend to reduce total loss frequency and thereby affect our growth rate.

Used car values are determined by many factors, including used car supply, which is tied directly to new car sales, and the average age of cars on the road.

The average age of cars on the road continued to increase, growing from 9.6 years in 2002 to 12.1 years in 2021.

The average age of cars on the road has continued to increase, growing from 9.6 years in 2002 to 12.2 years in 2022.

Repair costs are generally based on damage severity, vehicle complexity, repair parts availability, repair parts costs, labor costs, and repair shop lead times.

The factors that can influence repair costs, used car pricing, and auction returns are many and varied and we cannot predict their movements.

Accordingly, we cannot predict future trends in total loss frequency.

The factors that can influence repair costs, used car pricing, and auction returns are many and varied and we cannot predict their movements with precision.

Beginning in March 2020, our business and operations began to experience the impact of the worldwide COVID-19 pandemic.

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United States Locations Date

Spartanburg, South Carolina August 2018

Madison, Wisconsin September 2018

Harleyville, South Carolina January 2019

Macon, Georgia January 2019

Mocksville, North Carolina January 2019

Antelope, California January 2019

Sacramento, California March 2019

Fredericksburg, Virginia April 2019

West Mifflin, Pennsylvania May 2019

Hartford, Connecticut July 2019

Buffalo, New York July 2019

Fort Wayne, Indiana February 2020

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Dyer, Indiana July 2021

Mobile South, Alabama August 2021

Madison, Wisconsin October 2021

Augusta, Georgia April 2022

Milwaukee South, Wisconsin

Punta Gorda, Florida

International Locations Geographic Service Area Date

Curitiba, Paraná Brazil September 2018

Mannheim, Rhineland-Palatinate Germany October 2018

Stuttgart, Baden-Württemberg Germany November 2018

Frankfurt, Hessen Germany November 2018

Itzehoe, Schleswig-Holstein (Hamburg) Germany November 2018

Furth, Bavaria (Nuremberg) Germany November 2018

Massen, Brandenburg (Berlin) Germany November 2018

Friesack, Brandenburg (Berlin) Germany December 2018

Niederlehme, Brandenburg (Berlin) Germany November 2019

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Mallorca, Balearic Islands Spain April 2021

Halifax, Novia Scotia Canada April 2022

Barcelona, Spain Spain September 2021

The following table sets forth the operational facilities obtained through business acquisitions from August 1, 2019 through July 31, 2022:

Locations Geographic Service Area Date

Greenville, Kentucky United States March 2019

Des Moines, Iowa United States July 2021

Skelmersdale, England United Kingdom July 2022

Dumfries, England United Kingdom July 2022

The period-to-period comparability of our consolidated operating results and financial position is affected by business acquisitions, new openings, weather, and product introductions during such periods.

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The growth in the U.S.

was driven primarily by an increase in revenue per car, partially offset by a decrease in volume.

The decrease in volume in the U.S.

was driven by the COVID-19 pandemic, which reduced accident volume as miles driven declined.

Excluding the beneficial impact of $12.0 million due to changes in foreign currency exchange rates, primarily from the change in the British pound and Brazilian real to U.S.

dollar exchange rates, the growth in International of $29.9 million was driven primarily by increased revenue per car, partially offset by decreased volume driven by the COVID-19 pandemic, which reduced accident volume as miles driven decreased.

was driven primarily by (i) an increase in revenue per car partially driven by the scarcity of vehicles due to global supply chain disruptions and (ii) an increase in volume resulting from higher miles driven due to the reopening of the United States economy.

Excluding the unfavorable impact of $8.3 million due to changes in foreign currency exchange rates, primarily from the change in the British pound and European Union euro to U.S.

dollar exchange rates net against favorable change in Brazilian real to U.S.

dollar exchange, the growth in International was driven primarily by an increase in revenue per car partially driven by the scarcity of vehicles due to global supply chain disruptions and an increase in volume resulting from higher miles driven due to the reopening of the International economies.

The following table presents a comparison of vehicle sales for fiscal 2022, 2021 and 2020:

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of $157.4 million and (ii) an increase in International of $89.8 million.

The growth in the U.S.

was primarily the result of (i) increased volume and (ii) higher average auction selling prices, which we believe was due to a change in the mix of vehicles sold;

increased demand;

and reduced supply.

Excluding a beneficial impact of $10.2 million due to changes in foreign currency exchange rates, primarily from the change in the British pound and European Union euro to U.S.

dollar exchange rates, the increase in International of $23.4 million was primarily the result of higher average auction selling prices partially offset by decreased volume driven by contractual shifts from purchase contracts to fee based service contracts and COVID-19’s impact on volume, which reduced accident volume as miles driven declined.

The increase in the U.S.

was primarily the result of increased volume and higher average auction selling prices, which we believe was due to a change in the mix of vehicles sold, increased demand and reduced supply.

Excluding an unfavorable impact of $13.9 million due to changes in foreign currency exchange rates, primarily from the unfavorable change in the British pound and European Union euro to the U.S.

dollar exchange rate, the increase in International was primarily the result of higher average auction selling prices and an increase in volume resulting from higher miles driven due to the reopening of the International economies and restrictions within the global supply chain for automobiles.

The following table presents a comparison of yard operations expense for fiscal 2022, 2021 and 2020:

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The increase in yard operations expenses for fiscal 2022 of $306.2 million, or 30.5% as compared to fiscal 2021 resulted from (i) an increase in the U.S.

of $21.0 million, primarily from a $20.0 million increase in depreciation and an increase in the cost to process each car partially offset by a decline in volume driven by the COVID-19 pandemic, which reduced accident volume as miles driven declined;

and (ii) an increase in International of $9.8 million related primarily from the detrimental impact of $7.6 million due to changes in foreign currency exchange rates, driven by changes in the British pound, Brazilian real, and European Union euro to U.S.

of $274.9 million, and (ii) increase in international of $31.3 million.

Excluding depreciation and amortization, the increase in the U.S.

compared to the same period last year relates to an increase in volume as a result of the reopening of the United States economy combined with an increase in the cost to process each car.

The increase in cost to process each car was driven by increased subhaul costs, and labor costs, combined with an increase in premiums for catastrophic event related to subhaul, labor costs incurred from overtime, and increased travel, lodging, and equipment lease cost associated with Hurricane Ida.

The increase in International was primarily driven by the increase in volume following the reopening of economies and the increase in subhaul and fuel costs and combined with an favorable impact of $6.0 million due to a positive change in British pound and European Union euro to U.S.

dollar exchange rate net against the unfavorable changes in the Brazilian real to U.S.

dollar exchange rate.

and an increase in the cost to process each car, partially offset by a decrease in volume driven by the COVID-19 pandemic.

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

Included in yard operations expenses were depreciation and amortization expenses with increase year over year from depreciating new and expanded facilities placed into service in the U.S.

and International locations.

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The increase in the U.S.

was primarily the result of (i) increased volume and (ii) higher average purchase prices, which we believe was due to a change in the mix of vehicles sold;

increased demand;

was primarily the result of increased volume and higher average purchase prices, which we believe was due to a change in the mix of vehicles sold, increased demand;

and reduced supply.

Excluding the detrimental impact of $8.3 million due to changes in foreign currency exchange rates, driven by changes in the British pound and European euro to U.S.

dollar exchange rate, the increase in International of $20.3 million was primarily the result of higher average purchase prices partially offset by decreased volume driven by contractual shifts from purchase contracts to fee based service contracts and COVID-19’s impact on volume, which reduced accident volume as miles driven declined.

Excluding the favorable impact of $12.8 million due to changes in foreign currency exchange rates, primarily from the a positive change in the British pound and European Union euro to U.S.

dollar exchange rate, the increase in International was primarily the result of higher average purchase prices and an increase in volume, which we believe was due to a change in the mix of vehicles sold, increased demand;

and reduced supply.

The following table presents a comparison of general and administrative expenses for fiscal 2022, 2021 and 2020:

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The increase in general and administrative expenses for fiscal 2022 of $24.6 million, or 11.9% as compared to fiscal 2021 came primarily from (i) an increase in the U.S.

of $17.8 million, partially offset by (ii) a decrease in International of $2.8 million.

Excluding depreciation and amortization, the decrease in International of $2.5 million resulted primarily from the detrimental impact of $1.4 million due to changes in foreign currency exchange rates, primarily from the change in the British pound, Brazilian real, and European Union euro to U.S.

dollar exchange rate and lower current period costs including decreased travel costs and the nonrecurrence of certain legal costs incurred in fiscal 2020.

Excluding depreciation and amortization, the increase in the U.S.

of $20.8 million resulted primarily from increases in stock compensation and increased legal costs, partially offset by decreased payroll taxes from the exercise of employee stock options and travel costs.

of $20.6 million, and (ii) an increase in International of $4.0 million.

The increase in the U.S.

of $21.0 million resulted from increases in stock compensation, labor costs, legal costs, and travel costs.

The decrease in depreciation and amortization expenses resulted primarily from fully depreciating certain intangible and technology assets in the U.S.

and International locations.

Excluding depreciation and amortization, the increase in International resulted primarily higher labor costs and increased legal costs including a favorable impact of $1.5 million due to changes in foreign currency exchange rates, primarily from the change in the British pound, and European Union euro to U.S.

dollar exchange rate, net against unfavorable changes in the Brazilian real to U.S.

dollar exchange rate.

The following table summarizes total other expenses and income taxes for fiscal 2022, 2021 and 2020:

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Other Expenses.

The decrease in total other expenses for fiscal 2021 of $0.7 million, or 4.5% as compared to fiscal 2020 was primarily due to a decrease in currency losses, primarily due to the change in the British pound and Brazilian real to U.S.

dollar exchange rate, lower gains on the disposal of certain non-operating assets in the current year, and lower interest income earned in the current year, partially offset by higher earnings of unconsolidated affiliates.

The increase in total other expenses for fiscal 2022 of $19.5 million, or 133.5% as compared to fiscal 2021 was primarily due to costs associated with a one time extinguishment of debt of $16.7 million in the period and an increase in currency losses.

Income Taxes.

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federal statutory tax rate of 21.0%.

The effective tax rate for fiscal year ending July 31, 2022 was unfavorably impacted by $8.2 million of discrete tax adjustments made in connection with finalizing our fiscal year 2021 tax return.

The effective tax rate for fiscal year ending July 31, 2021 was favorably impacted by $17.0 million of discrete tax adjustments made in connection with finalizing our fiscal year 2020 tax return..

The effective tax rate for fiscal year ending July 31, 2020 was negatively impacted by $1.7 million of discrete tax items related to amending previously filed income tax returns.

The effective tax rates in the current and prior year were also impacted by the recognition of excess tax benefits from the exercise of employee stock options of $14.3 million and $29.8 million for fiscal years 2022 and 2021, respectively.

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Capital expenditures, excluding acquisitions $ (337,448) $ (462,996) $ (591,972) $ 125,548 27.1 % $ 128,976 21.8 %

Acquisitions, net of cash acquired (5,000) (11,702) (745) 6,702 57.3 % (10,957) (1,470.7) %

Acquisitions (106,604) (5,000) (11,702) (101,604) (2,032.1) % 6,702 57.3 %

Cash, cash equivalents, and restricted cash and working capital increased $336.0 million and $480.0 million at July 31, 2022, respectively, as compared to July 31, 2021.

Cash, cash equivalents, and restricted cash increased primarily due to cash generated from operations and proceeds from stock option exercises, partially offset by capital expenditures and payments for employee stock-based tax withholdings.

Cash, cash equivalents, and restricted cash increased primarily due to cash generated from operations and proceeds from stock option exercises, partially offset by capital expenditures the retirement of 100% of the Senior Notes under the Note Purchase Agreement.

Working capital increased primarily from cash generated from operations and timing of cash receipts and payments, partially offset by capital expenditures and certain income tax benefits related to stock option exercises.

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In addition to our stock repurchase program, we are considering a variety of alternative potential uses for our remaining cash balances and our cash flows from operations.

These alternative potential uses include additional stock repurchases, repayments of long-term debt, the payment of dividends, and acquisitions.

These alternative potential uses include additional stock repurchases, the payment of dividends, and acquisitions.

For further detail, see Notes to Consolidated Financial Statements, Note 9 — Long-Term Debt and Note 12 — Stockholders’ Equity and under the subheadings “ Credit Agreement ” and “ Note Purchase Agreement ” below.

Our business is seasonal as inclement weather during the winter months increases the frequency of accidents and consequently, the number of cars involved in accidents which the insurance companies salvage rather than repair.

During the winter months, most of our facilities process 5% to 20% more vehicles than at other times of the year.

winter months, most of our facilities process 5% to 20% more vehicles than at other times of the year.

Severe weather events, including but not limited to tornadoes, floods, hurricanes, and hailstorms, can also impact our volumes.

These increased volumes require the increased use of our cash to pay out advances and handling costs of the additional business.

The COVID-19 pandemic may also impact our liquidity, with the magnitude and timing of these effects dependent upon the extent and duration of suspended economic activity across our markets.

The COVID-19 pandemic may impact our processed vehicle volume and corresponding vehicle average selling prices.

We believe that our currently available cash and cash equivalents and cash generated from operations will be sufficient to satisfy our operating and working capital requirements for the next 12 months and for the foreseeable future.

We expect to acquire or develop additional locations and expand some of our current facilities in the foreseeable future.

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and (v) most importantly, has the appropriate zoning for our business.

Costs to develop a new yard can range from $3.0 to $50.0 million, depending on size, location and developmental infrastructure requirements.

As of July 31, 2022, $96.7 million of the $1.4 billion of cash, cash equivalents, and restricted cash was held by our foreign subsidiaries.

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Net cash provided by operating activities increased for fiscal 2022 as compared to fiscal 2021 due to improved cash operating results primarily from an increase in service and vehicle sales revenues, partially offset by an increase in yard operations and general and administrative expenses, and changes in operating assets and liabilities.

The change in operating assets and liabilities was primarily the result of a decrease in funds received in accounts receivable of $143.5 million and a decrease in cash generated from the sale of inventory of $49.0 million, partially offset by net income taxes receivable of $12.9 million primarily related to excess tax benefits from stock option exercises, decreases in funds primarily used to pay land acquisition deposits of of $6.9 million, and decreases in funds used to pay accounts payable of $2.9 million.

Net cash used in investing activities decreased for fiscal 2021 as compared to fiscal 2020 due primarily to decreases in capital expenditures and acquisitions and proceeds from the sale of assets.

The change in operating assets and liabilities was primarily the result of an increase in funds received in accounts receivable of $29.8 million and a increase in cash generated from the sale of inventory of $13.8 million, partially offset by net income taxes receivable of $36.6 million primarily related to excess tax benefits from stock option exercises and an investment in solar investment tax credit, and decreases in funds used to pay accounts payable of $8.3 million.

Net cash used in investing activities decreased for fiscal 2022 as compared to fiscal 2021 due primarily to decreases in capital expenditures net against an increase in acquisitions and proceeds from the sale of assets.

Our capital expenditures are primarily related to acquiring land, opening and improving facilities, capitalized software development costs for new software for internal use and major software enhancements, acquiring yard equipment, and lease buyouts of certain facilities.

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See Notes to Consolidated Financial Statements, Capitalized Software Costs in Note 1 — Summary of Significant Accounting Policies.

Net cash provided by (used in) financing activities changed from a use of cash to providing cash in fiscal 2021 as compared to fiscal 2020 due primarily to lower payments for employee stock-based tax withholdings as discussed in further detail under the subheading “Stock Repurchases”and the Notes to Consolidated Financial Statements, Note 11 — Stockholders’ Equity and lower debt issuance costs for the restructuring of our revolving loan facility as discussed in further detail in Notes to Consolidated Financial Statements, Note 8 — Long-Term Debt , partially offset by a decrease in proceeds from the exercise of stock options .

Net cash used in financing activities increased in fiscal 2022 as compared to fiscal 2021 due primarily to lower payments for employee stock-based tax withholdings as discussed in further detail under the subheading “Stock Repurchases” and the Notes to Consolidated Financial Statements, Note 12 — Stockholders’ Equity and the retirement of 100% of the Senior Notes under the Note Purchase Agreement as discussed in, Note 9 — Long-Term Debt , partially offset by a decrease in proceeds from the exercise of stock options .

For a discussion of fiscal 2021 as compared to fiscal 2020, please refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended July 31, 2021, filed with the SEC on September 27, 2021 .

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For fiscal 2022, 2021 and 2020, we did not repurchase any shares of our common stock under the program.

For fiscal 2019, we repurchased 7,635,596 shares of our common stock under the program at a weighted average price of $47.81 per share totaling $365.0 million.

As of July 31, 2022, the total number of shares repurchased under the program was 114,549,198 and 81,450,802 shares were available for repurchase under our program.

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

In fiscal 2020, our Chief Executive Officer exercised all of his vested stock options through a cashless exercise.

In fiscal 2020, our Chief Executive Officer (now Co-CEO) exercised all of his vested stock options through a cashless exercise.

In fiscal 2021, certain employees exercised stock options through a cashless exercise.

In fiscal 2022, no employees exercised stock options through a cashless exercise.

A portion of the options exercised were net settled in satisfaction of the exercise price.

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FY 2021—Q4 90,000 17.73 12,366 29,349 48,285 129.01 3,786

FY 2022 — — — — — — —

(1) Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against our stock repurchase program.

Credit Agreement

On July 21, 2020, we entered into a First Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, Truist Bank (as successor by merger to Suntrust Bank), BMO Harris Bank N.A., Santander Bank, N.A., and Bank of America, N.A., as administrative agent (as amended from time to time, the “Credit Amendment”), bringing the aggregate principal amount of the revolving credit commitments under the Credit Agreement ( the “Revolving Loan Facility”) to $1,050.0 million.

The carrying amount of the Credit Agreement is comprised of borrowings under which interest accrues under a fluctuating interest rate structure.

Accordingly, the carrying value approximated fair value at July 31, 2021, and was classified within Level II of the fair value hierarchy.

The interest rate as of July 31, 2021 on our Revolving Loan Facility was the Eurodollar Rate of 0.75% plus an applicable margin of 1.50%.

Amounts borrowed under the Revolving Loan Facility may be repaid and reborrowed until the maturity date of July 21, 2023.

On July 21, 2020, we entered into a First Amended and Restated Credit Agreement with Wells Fargo Bank, National Association, Truist Bank (as successor by merger to Suntrust Bank), BMO Harris Bank N.A., Santander Bank, N.A., and Bank of America, N.A., as administrative agent (as amended from time to time, the “Credit Agreement”), bringing the aggregate principal amount of the revolving credit commitments under the Credit Agreement ( the “Revolving Loan Facility”) to $1,050.0 million.

On December 21, 2021, we entered into a Second Amended and Restated Credit Agreement by and among Copart, certain subsidiaries of Copart party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement amends and restates certain terms of the First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, the lenders party thereto, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank, National Association) (the “Existing Credit Agreement”).

The Second Amended and Restated Credit Agreement provides for, among other things, (a) an increase in the secured revolving credit commitments by $200.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Second Amended and Restated Credit Agreement (the “Revolving Loan Facility”) to $1,250.0 million, (b) an increase in the letter of credit sublimit from $60.0 million to $100.0 million, (c) addition of Copart UK Limited, CPRT GmbH and Copart Autos España, S.L.U., each a wholly-owned direct or indirect foreign subsidiary of Copart, as borrowers, (d) addition of the ability to borrow under the Second and Amended and Restated Credit Agreement in certain foreign currencies including Pounds Sterling, Euro and Canadian Dollars, (e) extension of the maturity date of the revolving credit facility under the Existing Credit Agreement from July 21, 2023 to December 21, 2026, (f) replacing the LIBOR interest rate applicable to U.S.

Dollar denominated borrowings with a Secured Overnight Financing Rate (”SOFR”) interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

We had no outstanding borrowings under the Revolving Loan Facility as of July 31, 2022 or 2021.

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We may prepay the Senior Notes, in whole or in part, at any time, subject to certain conditions, including minimum amounts and payment of a make-whole amount equal to the discounted value of the remaining scheduled interest payments under the Senior Notes.

The Note Purchase Agreement contains customary affirmative and negative covenants and we were in compliance with all covenants related to the Note Purchase Agreement as of July 31, 2021.

On May 24, 2022, the Company retired 100% of the Senior Notes .

The Company paid $420.6 million to retire the Senior Notes which included an additional $16.8 million make-whole payment, to the holders of the Senior Notes, and $3.8 million in accrued interest.

For further detail on both the Credit Agreement and Note Purchase Agreement, see Notes to Consolidated Financial Statements, Note 9 — Long-Term Debt .

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This fee is recognized ratably over the term of the arrangement, generally one year, as each day of access to the online auction platform represents the best depiction of the transfer of the service.

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

No provision for returns has been established, as all sales are final with no right of return or warranty, although we provide for expected credit losses in the case of non-performance by our buyers or sellers.

Year Ended July 31,

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and other tax jurisdictions based on an estimate of the ultimate resolution of whether, and the extent to which, additional taxes will be due.

Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different from what is reflected in the historical income tax provisions and accruals.

Although we believe the estimates are reasonable, no assurance can be given

that the final outcome of these matters will not be different from what is reflected in the historical income tax provisions and accruals.

We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

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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 7. Management’s Discussion and Analysis