What changed in this filing

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Item 9A. Controls and Procedures

2022-09-27 compared with 2021-09-27 · 192 added, 223 removed, 1025 unchanged (29% of the section changed)

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We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), or Disclosure Controls, as of the end of the period covered by this Annual Report on Form 10-K.

This evaluation, or Controls Evaluation, was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”).

This evaluation, or Controls Evaluation, was performed under the supervision and with the participation of management, including our Co-CEO and our Principal Financial Officer.

Disclosure Controls are controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure Controls include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Disclosure Controls include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Co-CEO and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our Disclosure Controls include some, but not all, components of our internal control over financial reporting.

Based upon the Controls Evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our Disclosure Controls were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is accumulated and communicated to management, including the CEO and CFO, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified by the SEC.

Based upon the Controls Evaluation, our Co-CEO and Principal Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our Disclosure Controls were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is accumulated and communicated to management, including the Co-CEO and Principal Financial Officer, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified by the SEC.

Management’s Report on Internal Control Over Financial Reporting

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Since we do not control or manage those affiliates, our controls and procedures with respect to those affiliates are substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Management assessed our internal control over financial reporting for the fiscal year ended July 31, 2021.

Management assessed our internal control over financial reporting as of July 31, 2022.

Management based its assessment on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

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Opinion on Internal Control Over Financial Reporting

We have audited the internal control over financial reporting of Copart, Inc.

(the Company) as of July 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Copart, Inc.’s internal control over financial reporting as of July 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Copart, Inc.

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Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud.

Our management, including our Co-CEO and Principal Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

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10.17 October 1, 2012

Incorporated by reference herein

Number Description Form Date

10.08 Note Purchase Agreement among the Registrant and each of the purchasers listed on Schedule B dated as of December 3, 2014

Current Report on Form 8-K (File No.

000-23255), Exhibit No.

10.3 December 4, 2014

10.8 * Copart, Inc.

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10.26 November 23, 2015

10.11 First Amendment to Credit Agreement, dated as of March 15, 2016, by and among Copart, Inc., the subsidiaries of Copart, Inc.

party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent.

Current Report on Form 8-K (File No.

000-23255), Exhibit No.

10.1 March 17, 2016

10.12 Second Amendment to Credit Agreement, dated as of July 21, 2016, by and among Copart, Inc., the subsidiaries of Copart, Inc.

party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent.

Current Report on Form 8-K (File No.

000-23255), Exhibit No.

10.1 July 27, 2016

10.13 First Amendment to Note Purchase Agreement, dated as of July 21, 2016, by and among Copart, Inc., the subsidiaries of Copart, Inc.

party thereto and the purchasers party thereto.

Current Report on Form 8-K (File No.

000-23255), Exhibit No.

10.2 July 27, 2016

10.14 First Amended and Restated Credit Agreement, dated as of July 21, 2020, by and among Copart, certain subsidiaries of Copart.

10.10 Second Amended and Restated Credit Agreement, dated as of December 21, 202 1 , by and among Copart, certain subsidiaries of Copart.

the lenders party thereto, and Bank of America,N.A., as administrative agent.

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000-23255), Exhibit No.

10.1 July 27, 2020

10.15 * Executive Officer Employment Agreement, effective October 5, 2020, between the Registrant and John North

Quarterly Report on Form 10-Q (File No.

000-23255), Exhibit No.

10.1 November 20, 2020

10.1 December 27, 2021

Incorporated by reference herein

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— Filed herewith

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

— Filed herewith

31.3 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

— Filed herewith

32.1 (1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

— Filed herewith

32.2 (1) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 (1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

— Filed herewith

32.3 (1) Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

— Filed herewith

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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C OPART, I NC.

J AYSON A DAIR

Chief Executive Officer

(Principal Executive Officer and Director)

Co-Chief Executive Officer

(Principal Executive Officer), Director

September 27, 2022

C OPART, I NC.

/s/ JOHN NORTH

John North, Chief Financial Officer (Principal Financial and Accounting Officer and duly Authorized Officer)

/s/ JEFFREY LIAW

Co-Chief Executive Officer

(Principal Executive Officer)

September 27, 2022

C OPART, I NC.

/s/ GAVIN RENFREW

Gavin Renfrew

Vice President of Global Accounting

(Principal Financial and Accounting Officer and duly Authorized Officer)

September 27, 2022

POWER OF ATTORNEY

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints A.

Jayson Adair and John North, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Jayson Adair, and Jeffrey Liaw and Gavin Renfrew, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Capacity in Which Signed Date

JAYSON ADAIR Chief Executive Officer (Principal Executive Officer and Director) September 27, 2021

/s/ JOHN NORTH Chief Financial Officer (Principal Financial and Accounting Officer) September 27, 2021

JAYSON ADAIR Co-Chief Executive Officer (Principal Executive Officer), Director September 27, 2022

/s/ JEFFREY LIAW Co-Chief Executive Officer (Principal Executive Officer) September 27, 2022

/s/ GAVIN RENFREW Vice President of Global Accounting (Principal Financial and Accounting Officer) September 27, 2022

Gavin Renfrew

/s/ WILLIS J.

JOHNSON Chairman of the Board September 27, 2021

/s/ MATT BLUNT Director September 27, 2021

Chairman of the Board September 27, 2022

/s/ MATT BLUNT

Director September 27, 2022

/s/ STEVEN D.

COHAN Director September 27, 2021

/s/ DANIEL ENGLANDER Director September 27, 2021

Director September 27, 2022

/s/ DANIEL ENGLANDER

Director September 27, 2022

Daniel Englander

/s/ STEPHEN FISHER Director September 27, 2021

/s/ STEPHEN FISHER

Director September 27, 2022

Stephen Fisher

/s/ CHERYLYN HARLEY LEBON Director September 27, 2021

/s/ CHERYLYN HARLEY LEBON

Director September 27, 2022

Cherylyn Harley LeBon

MEEKS Director September 27, 2021

MOREFIELD Director September 27, 2021

/s/ CARL SPARKS Director September 27, 2021

Director September 27, 2022

/s/ CARL SPARKS

Director September 27, 2022

/s/ THOMAS N.

TRYFOROS Director September 27, 2021

Director September 27, 2022

Index to Consolidated Financial Statements

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Consolidated Financial Statements Page Number

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of July 31, 2022 and 2021

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Consolidated Statements of Comprehensive Income for the years ended July 31, 202 2 , 202 1 and 20 20

Consolidated Statements of Stockholder’s Equity for the years ended July 31, 2021, 2020 and 2019

Consolidated Statements of Stockholders' Equity for the years ended July 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended July 31, 202 2 , 202 1 and 20 20

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$ 0.0001 par value— 5,000,000 shares authorized;

none issued — —

Common stock:

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Interest expense, net ( 16,688 ) ( 20,247 ) ( 18,871 )

Other income, net 5,667 3,611 6,061

Loss on extinguishment of debt ( 16,759 ) — —

Other (expense) income, net ( 596 ) 5,667 3,611

Total other expense ( 34,043 ) ( 14,580 ) ( 15,260 )

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Currency translation adjustment — — — 11,441 11,441

Cumulative effect of change in accounting standard — — — — ( 22,954 ) ( 22,954 )

Exercise of stock options, net of repurchased shares 5,364,166 1 68,570 — ( 100,382 ) ( 31,811 )

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Shares issued for Employee Stock Purchase Plan 123,106 — 8,276 — — 8,276

Shares repurchased ( 7,635,596 ) — ( 17,427 ) — ( 347,570 ) ( 364,997 )

Balances at July 31, 2020 235,315,337 24 672,727 ( 121,088 ) 1,937,853 2,489,516

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Gain on sale of property and equipment ( 939 ) ( 1,480 ) ( 1,913 )

Loss on extinguishment of debt 16,759 — —

Deferred income taxes 17,017 ( 7,951 ) 23,082

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Purchases of property and equipment ( 337,448 ) ( 462,996 ) ( 591,972 )

Purchases of assets and liabilities in connection with acquisitions, net of cash acquired ( 5,000 ) ( 11,702 ) ( 745 )

Purchases of assets and liabilities in connection with acquisitions ( 106,604 ) ( 5,000 ) ( 11,702 )

Proceeds from sale of property and equipment 4,333 2,530 2,466

Investment in unconsolidated affiliate ( 2,591 ) — —

Purchase of held to maturity securities ( 374,866 ) — —

Proceeds from the sale of held to maturity securities 374,866 — —

Net cash used in investing activities ( 442,310 ) ( 465,466 ) ( 601,208 )

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Proceeds from the issuance of Employee Stock Purchase Plan shares 9,625 9,136 8,276

Repurchases of common stock — — ( 364,997 )

Payments for employee stock-based tax withholdings ( 1,925 ) ( 6,145 ) ( 103,451 )

Debt offering costs ( 1,212 ) — ( 2,814 )

Principal payments on long-term debt ( 416,759 ) — —

Payments of finance lease obligations ( 530 ) ( 1,118 ) ( 1,065 )

Net cash provided by (used in) financing activities 40,922 ( 27,414 ) ( 370,304 )

Net cash (used in) provided by financing activities ( 382,693 ) 40,922 ( 27,414 )

Effect of foreign currency translation ( 15,704 ) 4,195 2,136

Net increase (decrease) in cash, cash equivalents, and restricted cash 570,542 291,399 ( 88,201 )

Net increase in cash, cash equivalents, and restricted cash 335,976 570,542 291,399

Cash, cash equivalents, and restricted cash at beginning of period 1,048,260 477,718 186,319

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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 the Company provides for credit loss expense in the case of non-performance by its buyers or sellers.

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

Year Ended July 31,

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Cumulative loss on foreign currency translation as of July 31, 2021 $ ( 100,860 )

Gain on foreign currency translation 20,228

Loss on foreign currency translation ( 68,505 )

Cumulative loss on foreign currency translation as of July 31, 2022 $ ( 169,365 )

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These inputs may be used with internally developed methodologies that result in management’s best estimate.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, and amounts outstanding under the Revolving Loan Facility approximated their fair values as of July 31, 2021 and 2020, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy.

The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their fair values as of July 31, 2022 and 2021, due to the short-term nature of those instruments and are classified within Level II of the fair value hierarchy.

Cash equivalents are classified within Level II of the fair value hierarchy because they are valued using quoted market prices of the underlying investments.

See Note 8 — Long-Term Debt and Note 9 – Fair Value Measures .

See Note 9 — Long-Term Debt and Note 10 – Fair Value Measurements .

Cost of Vehicle Sales

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No single customer accounted for more than 10 % of the Company’s consolidated revenues for the years ended July 31, 2022, 2021 and 2020.

As of July 31, 2021 and 2020, n o customer accounted for more than 10% of the Company’s consolidated accounts receivable.

Property and Equipment

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The Company evaluates goodwill for impairment annually as of the beginning of the fourth quarter, or when an indicator of impairment exists.

The Company’s annual goodwill impairment analysis, which was performed qualitatively during the fourth quarter of fiscal 2021 and 2020, did not result in an impairment charge.

This qualitative analysis, which is referred to as step zero under ASC 350, considered all relevant factors specific to the reporting units, including macroeconomic conditions;

industry and market considerations;

overall financial performance;

the impact of the COVID-19 pandemic;

and relevant entity-specific events.

Capitalized Software Costs

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The Company accounts for stock-based awards to employees and non-employees using the fair value method as required by ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, consultants and directors based on estimated fair value.

ASC 718 requires companies to estimate the fair value of stock-based awards on the measurement date using an option-pricing model.

ASC 718 requires companies to estimate the fair value of stock-based based awards on the measurement date.

The value of the portion of the award that is ultimately expected to vest is recognized in expense over the requisite service periods.

The fair value of each option, without a market-based condition was estimated on the measurement date using the Black-Scholes Merton (“BSM”) option-pricing model.

For options that included a market-based condition either the Monte Carlo simulation model or a lattice model was used.

The Black-Scholes Merton option-pricing model utilized the following assumptions:

2021 2020 2019

Expected life (in years) 5.2 — 6.3 5.4 — 5.7 5.3 — 6.6

Risk-free interest rate 0.42 % — 1.23 % 0.29 % — 1.67 % 1.80 % — 2.69 %

Estimated volatility 26.3 % — 28.7 % 21.7 % — 27.6 % 21.6 % — 22.1 %

Expected dividends — % — % — %

Weighted average fair value at measurement date $ 30.43 $ 21.54 $ 15.47

Expected life—The Company’s expected life represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.

Risk-free interest rate—The Company bases the risk-free interest rate used in the BSM option-pricing model on the implied yield currently available on U.S.

Treasury zero-coupon issues with the same or substantially equivalent expected life.

Estimated volatility—The Company uses the trading history of its common stock in determining an estimated volatility factor when using the BSM option-pricing model to determine the fair value of options granted.

Expected dividend—The Company has not declared dividends.

Therefore, the Company uses a zero value for the expected dividend value factor when using the BSM option-pricing model to determine the fair value of options granted.

Net cash proceeds from the exercise of stock options were $ 39.0 million, $ 71.6 million and $ 34.4 million for the years ended July 31, 2021, 2020 and 2019, respectively.

Comprehensive Income

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Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350).

ASU 2017-04 amends the requirement that entities compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test.

As a result, entities should perform their annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment if the carrying amount exceeds the reporting unit’s fair value.

ASU 2017-04 was effective for fiscal years beginning after December 15, 2019.

The Company’s adoption of ASU 2017-04 did not have a material impact on the Company’s consolidated results of operations and financial position.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).

ASU 2016-13 requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets.

Using this methodology will result in earlier recognition of losses than the previous incurred loss approach, which required waiting to recognize a loss until it was probable of having been incurred.

There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures.

This pronouncement was effective for fiscal years beginning after December 15, 2019, and was required to be applied on a modified retrospective basis.

The Company’s adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated results of operations, financial position, and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

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It also clarifies and simplifies other aspects of the accounting for income taxes.

This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The Company’s adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated results of operations and financial position.

The Company’s adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated results of operations and financial position.

Note 2 — Acquisitions

Fiscal Year 2022 Transactions.

On July 5, 2022, the Company acquired 100 % of the voting stock of ILT Project Limited which conducts business primarily as Hills Motors (“Hills”), a leading parts recycler in the United Kingdom.

Hills predominantly sells recycled parts to the public.

The purchase price paid for Hills was $ 106.6 million.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for Hills (in thousands).

Accounts receivable and prepaid expenses 5,348

Inventory 4,913

Property and equipment 22,259

Intangible assets 15,931

Goodwill 56,051

Liabilities assumed ( 6,858 )

Fair value of net assets and liabilities acquired $ 106,604

The Hills acquisition was undertaken for the strategic fit to the Company.

This acquisition has been accounted for using the purchase method in accordance with ASC 805, Business Combinations, which resulted in the recognition of goodwill in the Company’s consolidated financial statements.

Goodwill arose because the purchase price reflected a number of factors, including future earnings and cash flow potential;

the comparable multiples of earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers;

and the complementary strategic fit and resulting synergies brought to existing operations.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and is not amortized for financial reporting purposes.

The acquisition of Hills is currently undergoing review by the U.K.

Competition and Markets Authority.

Given the timing of the acquisition the Company has not completed its determination of the fair value of assets acquired and liabilities assumed and the amount shown in the table above are preliminary amounts.

The estimates and assumptions used in the preliminary purchase price allocation are subject to change if additional information, which existed as of the acquisition date, becomes known to the Company.

However, the Company believes any potential changes to the preliminary purchase price allocation will not have a material impact to the Company’s consolidated financial position and results of operations.

The Company obtained a third party independent valuation to assist in the determination of the fair value of the land and buildings acquired.

The valuation utilized the fair value, market value, and market rent to determine the fair value of the land and buildings acquired.

The Company performed a valuation of the customer relationships using the income approach to estimate the fair value.

The valuation of these assets was performed using Level III inputs, as the calculated fair values are based on valuation models that utilize unobservable inputs that are significant to the overall fair value measurement.

The unobservable inputs reflect the Company’s best estimate of what a market participant would use to determine the value of acquired assets based on the best information available in the circumstances.

Intangible assets acquired include customer and supplier relationships, with a useful life of three years .

See Note - 7 — Intangibles, Net.

The Hills acquisition did not result in a significant change in the Company’s consolidated results of operations;

therefore, pro forma financial information has not been presented.

The operating results have been included in the Company’s consolidated financial position and results of operations since the acquisition date.

NOTE 3 — Accounts Receivable, Net

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Trade accounts receivable includes fees and gross auction proceeds to be collected from insurance companies and buyers.

The movements in the allowance for credit loss was as follows:

(In thousands) 2021 2020 2019

Balance at beginning of year $ 6,390 $ 4,942 $ 5,444

Charged to costs and expenses 3,454 5,591 2,409

Write-offs ( 4,208 ) ( 4,143 ) ( 2,911 )

Balance at end of year $ 5,636 $ 6,390 $ 4,942

NOTE 4 — Property and Equipment, Net

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Total lease expense $ 35,308 $ 35,037

Facilities rental expense for the year ended July 31, 2019 was $ 30.6 million under ASC 840, Operating Leases.

The components of right-of-use assets and lease liabilities on the consolidated balance sheet are as follows (In thousands):

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In accordance with the guidance in ASC 350, goodwill is tested for impairment on an annual basis or upon the occurrence of circumstances that indicate that goodwill may be impaired.

The Company’s annual impairment tests were performed during the fourth quarter of each period presented and goodwill was not impaired.

The Company’s annual goodwill impairment analysis, which was performed qualitatively during the fourth quarter of fiscal 2022 and 2021, did not result in an impairment charge.

This qualitative analysis, which is referred to as step zero under ASC 350, considered all relevant factors specific to the reporting units, including macroeconomic conditions;

industry and market considerations;

overall financial performance;

the impact of the COVID-19 pandemic;

and relevant entity-specific events.

NOTE 7 — Intangibles, Net

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Intangible amortization expense for the next five fiscal years based upon July 31, 2022 intangible assets is expected to be as follows (In thousands):

2023 $ 13,083

Thereafter 5,759

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Total accounts payable and accrued expenses $ 399,034 $ 369,826

The Company is required to charge for and to collect value added taxes ("VAT") on its sales on behalf of the various international taxing authorities.

The Company is required to charge for and collect value added taxes ("VAT") on its sales on behalf of various international taxing authorities.

The Company records VAT that the Company has billed to the buyers as VAT payable.

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Credit Agreement

On December 3, 2014, the Company entered into a Credit Agreement (as amended from time to time, the “Credit Amendment”) with Wells Fargo Bank, National Association, as administrative agent, and Bank of America, N.A., as syndication agent.

The Credit Agreement provided for (a) a secured revolving loan facility in an aggregate principal amount of up to $ 300.0 million (the “Revolving Loan Facility”), and (b) a secured term loan facility in an aggregate principal amount of $ 300.0 million (the “Term Loan”).

On March 15, 2016, the Company entered into a First Amendment to Credit Agreement (the “Amendment to Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and Bank of America, N.A.

The Amendment to Credit Agreement amended certain terms of the Credit Agreement, dated as of December 3, 2014.

The Amendment to Credit Agreement provided for (a) an increase in the secured revolving credit commitments by $ 50.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Credit Agreement to $ 350.0 million, (b) a new secured term loan (the “Incremental Term Loan”) in the aggregate principal amount of $ 93.8 million having a maturity date of March 15, 2021 , and (c) an extension of the termination date of the Revolving Loan Facility and the maturity date of the Term Loan from December 3, 2019 to March 15, 2021 .

On July 21, 2016, the Company entered into a Second Amendment to Credit Agreement (the “Second Amendment to Credit Agreement”) with Wells Fargo Bank, National Association, SunTrust Bank, and Bank of America, N.A., as administrative agent (as successor in interest to Wells Fargo Bank).

The Second Amendment to Credit Agreement amended certain terms of the Credit Agreement, dated as of December 3, 2014 as amended by the Amendment to Credit Agreement, dated as of March 15, 2016.

The Second Amendment to Credit Agreement provided for, among other things, (a) an increase in the secured revolving credit commitments by $ 500.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Credit Agreement to $ 850.0 million, (b) the repayment of existing term loans outstanding under the Credit Agreement, (c) an extension of the termination date of the revolving credit facility under the Credit Agreement from March 15, 2021 to July 21, 2021, and (d) increased covenant flexibility.

On July 21, 2020, the Company 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.

The First Amended and Restated Credit Agreement amended certain terms of the Credit Agreement, dated as of December 3, 2014 as amended by the Amendment to Credit Agreement, dated as of March 15, 2016, as amended by the Second Amendment to Credit Agreement, dated as July 21, 2016.

The First 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 Credit Agreement to $ 1,050.0 million, and (b) an extension of the termination date of the revolving credit facility under the Credit Agreement from July 21, 2021 to July 21, 2023 .

The First Amended and Restated Credit Agreement additionally increased the pricing levels under the Credit Agreement to a range of 0.25 % to 0.35 % in the case of the commitment fee, 1.50 % to 2.25 % in the case of the applicable margin for Eurodollar Rate Loans, and 0.50 % to 1.25 % in the case of the applicable margin for base rate loans, in each case depending on the Company’s consolidated total net leverage ratio during the preceding fiscal quarter.

The principal purposes of these financing transactions were to increase the size and availability under the Company’s Revolving Loan Facility and to provide additional long-term financing.

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

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

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

Dollar denominated borrowings with a SOFR-based interest rate, and (g) changing the pricing levels with respect to the revolving loans as further described below.

The Second and Amended and Restated Credit Agreement provides for the Revolving Loan Facility of $ 1,250.0 million maturing on December 21, 2026 (including up to $ 550.0 million equivalent of borrowings in Pounds Sterling, Euro and Canadian Dollars) with a $ 150.0 million equivalent sub-facility available to CPRT GmbH, a $ 150.0 million equivalent sub-facility available to Copart Autos España, S.L.U.

and a $ 250.0 million equivalent sub-facility available to Copart UK Limited.

The proceeds may be used for general corporate purposes, including working capital and capital expenditures, potential share repurchases, acquisitions, or other investments relating to the Company’s expansion strategies in domestic and international markets.

The Revolving Loan Facility under the Credit Agreement bears interest, at the election of the Company, at either (a) the Base Rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the Prime Rate in effect on such day;

(ii) the Federal Funds Rate in effect on such date plus 0.50 %;

or (iii) the Eurodollar Rate plus 1.0 %, subject to an interest rate floor of 0.75 %, in each case plus an applicable margin ranging from 0.50 % to 1.25 % based on the Company’s consolidated total net leverage ratio during the preceding fiscal quarter;

or (b) the Eurodollar Rate plus an applicable margin ranging from 1.50 % to 2.25 % depending on the Company’s consolidated total net leverage ratio during the preceding fiscal quarter.

Interest is due and payable in arrears, at the end of each calendar quarter for loans bearing interest at the Base Rate, and at the end of an interest

period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of Eurodollar Rate Loans.

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

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.

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

The Company is obligated to pay a commitment fee on the unused portion of the Revolving Loan Facility.

The commitment fee rate ranges from 0.25 % to 0.35 %, depending on the Company’s consolidated total net leverage ratio during the preceding fiscal quarter, on the average daily unused portion of the revolving credit commitment under the Credit Agreement.

The Company had no outstanding borrowings under the Revolving Loan Facility as of July 31, 2021 or 2020.

The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Credit Agreement.

Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Agreement as part of the First Amended and Restated Credit Agreement, dated July 21, 2020, among the Company, the subsidiary guarantors from time to time party thereto, and Bank of America, N.A., as collateral agent.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions.

Borrowings under the Second Amended and Restated Credit Agreement bear interest based on, at our option, either (1) the applicable fixed rate plus 1.00 % to 1.75 % or (2) the daily rate plus 0 % to 0.75 %, in each case, depending on Copart’s consolidated total net leverage ratio.

Additionally, the unused revolving commitments under the Second Amended and Restated Credit Agreement are subject to the payment of a customary commitment fee at a range of 0.175 % to 0.275 %, depending on Copart’s consolidated total net leverage ratio.

The applicable fixed rates described above with respect to borrowings denominated in (1) U.S.

Dollars is SOFR plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (2) Pounds Sterling is SONIA plus certain “spread adjustments” described in the Second Amended and Restated Credit Agreement, (3) Euro is EURIBOR, and (4) Canadian Dollars is CDOR.

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

The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Second Amended and Restated Credit Agreement.

Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the assets of the subsidiary guarantors pursuant to a Security Documents Confirmation Agreement as part of the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions on and repurchase stock, in each case subject to certain exceptions.

The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio.

The Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25 :1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50 :1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million ;

The Second Amended and Restated Credit Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25 :1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50 :1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $ 50.0 million;

provided, that, minimum liquidity, as defined, shall be not less than $ 75.0 million both before and after giving effect to any such dividend or restricted payment.

As of July 31, 2022, the consolidated total net leverage ratio was ( 0.80 ):1.

Minimum liquidity as of July 31, 2021 was $ 2.1 billion.

Accordingly, the Company does not believe that the provisions of the Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business.

Minimum liquidity requirement as of July 31, 2022 was $ 2.6 billion.

Accordingly, the Company does not believe that the provisions of the Second Amended and Restated Credit Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business.

The Company has not paid a cash dividend since becoming a public company in 1994.

The Company was in compliance with all covenants related to the Credit Agreement as of July 31, 2021.

Related to the execution of the First Amended and Restated Credit Agreement, the Company incurred $ 2.8 million in costs, which was capitalized as debt issuance fees.

The Company was in compliance with all covenants related to the Second Amended and Restated Credit Agreement as of July 31, 2022.

Related to the execution of the second Amended and Restated Credit Agreement, the Company incurred $ 2.7 million in costs, which was capitalized as debt issuance fees.

The debt discount is amortized to interest expense over the term of the respective debt instruments and are classified as reductions of the outstanding liability.

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and (iv) $ 100.0 million aggregate principal amount of 4.35 % Senior Notes, Series D, due December 3, 2029.

Interest is due and payable quarterly, in arrears, on each of the Senior Notes.

Proceeds from the Note Purchase Agreement are being used for general corporate purposes.

On July 21, 2016, the Company entered into Amendment No.

1 to Note Purchase Agreement (the “First Amendment to Note Purchase Agreement”) which amended certain terms of the Note Purchase Agreement, including providing for increased flexibility substantially consistent with the changes included in the Second Amendment to Credit Agreement, including among other things increased covenant flexibility.

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

The Company’s obligations under the Note Purchase Agreement are guaranteed by certain of the Company’s domestic subsidiaries meeting materiality thresholds set forth in the Note Purchase Agreement.

Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and assets of the subsidiary guarantors.

The obligations of the Company and its subsidiary guarantors under the Note Purchase Agreement will be treated on a pari passu basis with the obligations of those entities under the Credit Agreement as well as any additional debt the Company may obtain.

The Note Purchase Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends, or make distributions and repurchase stock, in each case subject to certain exceptions.

The Company is also required to maintain compliance, measured at the end of each fiscal quarter, with a consolidated total net leverage ratio and a consolidated interest coverage ratio.

The Note Purchase Agreement contains no restrictions on the payment of dividends and other restricted payments, as defined, as long as (1) the consolidated total net leverage ratio, as defined, both before and after giving effect to any such dividend or restricted payment on a pro forma basis, is less than 3.25 :1, in an unlimited amount, (2) if clause (1) is not available, so long as the consolidated total net leverage ratio both before and after giving effect to any such dividend on a pro forma basis is less than 3.50 :1, in an aggregate amount not to exceed the available amount, as defined, and (3) if clauses (1) and (2) are not available, in an aggregate amount not to exceed $50.0 million ;

provided, that, minimum liquidity, as defined, shall be not less than $75.0 million both before and after giving effect to any such dividend or restricted payment on a pro forma basis.

As of July 31, 2021, the consolidated total net leverage ratio was ( 0.45 ):1.

Minimum liquidity as of July 31, 2021 was $ 2.1 billion.

Accordingly, the Company does not believe that the provisions of the Note Purchase Agreement represent a significant restriction to its ability to pay dividends or to the successful future operations of the business.

The Company has not paid a cash dividend since becoming a public company in 1994.

The Company was in compliance with all covenants related to the Note Purchase Agreement as of July 31, 2021.

As of July 31, 2021, future payments on the Revolving Loan Facility and Note Purchase Agreement were as follows for the fiscal years ending:

(In thousands) July 31, (1)

Thereafter 300,000

Total future payments $ 400,000

(1) Currently there are no outstanding balances on the Revolving Loan Facility.

NOTE 9 – Fair Value Measures

Interest on each of the Senior Notes was due and payable quarterly, in arrears.

The Company used proceeds from the Note Purchase Agreement for general corporate purposes.

Subsequently 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.

NOTE 10 – Fair Value Measurements

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

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For fiscal 2022 and 2021, the Company did not repurchase any shares of its common stock under the program.

For fiscal 2019, the Company repurchased 7,635,596 shares of its 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 the program.

In fiscal 2019, certain members of the Company’s Board of Directors exercised stock options through cashless exercises.

In fiscal 2020, the Company’s former President exercised all of his vested stock options through a cashless exercise.

In fiscal 2020, the Company’s 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 employee 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 the Company’s stock repurchase program.

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As of July 31, 2022, 6,388,684 shares were available for grant under the Plan and the number of options that were in-the-money was 7,005,578 at July 31, 2022.

In October 2013, the Compensation Committee of the Company’s Board of Directors, subject to stockholder approval (which was subsequently obtained at the December 16, 2013 annual meeting of stockholders), approved the grant to each of the Company’s former President, and A.

Jayson Adair, the Company’s Chief Executive Officer, of nonqualified stock options to purchase 3,000,000 and 4,000,000 shares of the Company’s common stock, respectively, at an exercise price of $ 17.81 per share, which equaled the closing price of the Company’s common stock on December 16, 2013, the effective date of grant.

Such grants were made in lieu of any cash salary or bonus compensation in excess of $1.00 per year or the grant of any additional equity incentives for a five year period.

Each option became exercisable over five years , subject to continued service by Mr.

Adair and the Company’s former President, with 20 % vesting on April 15, 2015 and December 16, 2014, respectively, and the balance vested monthly over the subsequent four years .

On December 16, 2018, the option held by the Company’s former President became fully vested and on April 15, 2019, the option held by Mr.

Adair became fully vested.

The fair value of each option at the date of grant using the Black-Scholes Merton option-pricing model was $ 5.72 .

The total compensation expense recognized by the Company over the five year service period for these options was $ 38.8 million.

The Company recognized no compensation expenses for these grants in the years ended July 31, 2021 and 2020, respectively, and $ 4.3 million in compensation expenses for these grants in the year ended July 31, 2019.

In June 2020, the Compensation Committee of the Company’s Board of Directors approved the grant to A.

Jayson Adair, the Company’s Chief Executive Officer, of nonqualified stock options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $ 85.04 per share, which equaled the closing price of the Company’s common stock on June 12, 2020, the effective date of grant.

The option will become exercisable over five years , subject to continued service by Mr.

with 20 % vested on June 12, 2021, and the balance vesting monthly over the subsequent four years.

Separate and apart from the time-based vesting schedule, the options are also subject to market based vesting, such that no options will be exercisable unless and until the average closing price in trading of Copart, Inc., common stock on the NASDAQ Global Select Market is greater than or equal to $ 106.30 per share (which is an amount equivalent to 125 % of the exercise price of the options) for a period of 20 consecutive trading days.

The market based vesting condition was satisfied in the first quarter of fiscal 2021.

The option held by Mr.

Adair will become fully vested, assuming continued service by Mr.

Adair on June 12, 2025.

The fair value of each option at the date of grant using the Monte Carlo simulation model was $ 25.47 , with an expected life of 7.64 years, a risk-free interest rate of 0.71 %, estimated volatility of 25.2 %, and no expected dividends.

The total estimated compensation expense to be recognized by the Company over the five year estimated service period for these options is $ 25.5 million and is recognized using the accelerated attribution method over each vesting tranche of the award.

The Company recognized $ 13.5 million in compensation expense for this grant in year ended July 31, 2021.

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

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The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the award.

A summary of the status of the Company’s non-vested shares from stock option awards and its activity during the year ended July 31, 2021 was as follows:

The fair value of each option, without a market-based condition was estimated on the measurement date using the Black-Scholes Merton (“BSM”) option-pricing model.

For options that included a market-based condition either the Monte Carlo simulation model or a lattice model was used.

The Black-Scholes Merton option-pricing model utilized the following assumptions:

2022 2021 2020

Expected life (in years) 5.1 — 6.8 5.2 — 6.3 5.4 — 5.7

Risk-free interest rate 0.82 % — 2.7 % 0.42 % — 1.23 % 0.29 % — 1.67 %

Estimated volatility 27.9 % — 30.0 % 26.3 % — 28.7 % 21.7 % — 27.6 %

Expected dividends — % — % — %

Weighted average fair value at measurement date $ 42.37 $ 30.43 $ 21.54

Risk-free interest rate—The Company bases the risk-free interest rate used in the BSM option-pricing model on the implied yield currently available on U.S.

Treasury zero-coupon issues with the same or substantially equivalent expected life.

Expected dividend—The Company does not expect to declared dividends.

Therefore, the Company uses a zero value for the expected dividend value factor when using the BSM option-pricing model to determine the fair value of options granted.

Net cash proceeds from the exercise of stock options were $ 28.1 million, $ 39.0 million and $ 71.6 million for the years ended July 31, 2022, 2021 and 2020, respectively.

A summary of the status of the Company’s unvested stock options awards and its activity during the year ended July 31, 2022 was as follows:

(In thousands, except per share amounts) Shares Weighted

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date Fair Value

Non-vested shares at July 31, 2020 3,303 $ 17.58

Unvested shares at July 31, 2021 3,261 $ 22.80

Grants of non-vested shares 665 44.94

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Forfeitures or expirations ( 201 ) 18.36

Non-vested shares at July 31, 2021 3,261 $ 22.80

Unvested shares at July 31, 2022 2,394 $ 29.71

The following is a summary of activity for the Company’s stock options for the year ended July 31, 2022:

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Vested and expected to vest as of July 31, 2022 5,637 $ 58.12 5.47 $ 396,947

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the year ended July 31, 2021 and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their options on July 31, 2021.

The Company grants option awards to certain executives that contain service and market conditions.

The options will become exercisable over five years , subject to continued service by the executive, with 20 % vesting on the first anniversary of the grant date and the balance vesting monthly over the subsequent four years.

Separate and apart from the time-based vesting schedule, the options are also subject to a market condition requiring the trading price of Copart, Inc.

common stock on the NASDAQ Global Select Market to be greater than or equal to 125 % of the exercise price of the options, determined both (i) at the time of any exercise, and (ii) based on the closing price on each of the twenty consecutive trading days preceding the date of any exercise.

The exercise price of the options is equivalent to the closing price of the Company’s common stock on the grant date.

The fair value of the awards is determined at the grant date using either the Lattice or Monte Carlo model, risk-free interest rates ranging from 0.71 % to 2.38 %, estimated volatility ranging from 25.2 % to 25.7 %, and no expected dividends.

The total estimated compensation expense to be recognized by the Company over the five-year service period for these options is $ 45.9 million and will be recognized using the accelerated attribution method over each vesting tranche of the award.

The Company recognized $ 9.8 million, $ 13.1 million and $ 1.6 million in compensation expense related to these awards for the year ended July 31, 2022, 2021 and 2020, respectively.

The following is a summary of activity for the Company’s stock option awards subject to market conditions for the year ended July 31, 2022:

(In thousands, except per share and term data) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (In years) Aggregate Intrinsic Value

Outstanding as of July 31, 2021 1,130 $ 87.49 8.96 $ 67,250

Grants of options 325 125.68

Exercises — —

Forfeitures or expirations ( 50 ) 106.31

Outstanding as of July 31, 2022 1,405 $ 95.65 8.33 $ 45,590

Exercisable as of July 31, 2022 438 $ 86.08 7.91 $ 18,406

Vested and expected to vest as of July 31, 2022 1,396 $ 95.59 8.33 $ 45,402

The aggregate intrinsic value in the tables above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the year ended July 31, 2022 and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their options on July 31, 2022.

The aggregate intrinsic value of options exercised was $ 30.5 million, $ 143.3 million and $ 476.3 million in the years ended July 31, 2022, 2021 and 2020, respectively, and represents the difference between the exercise price of the option and the estimated fair value of the Company’s common stock on the dates exercised.

As of July 31, 2021, the total compensation cost related to non-vested stock-based awards granted to employees under the Company’s stock option plans but not yet recognized

was $ 60.6 million.

As of July 31, 2022, the total compensation cost related to non-vested stock-based awards granted to employees under the Company’s stock option plans but not yet recognized was $ 68.1 million.

This cost will be amortized on a straight-line basis over a weighted average remaining term of 3.08 years.

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( 0.6 ) % ( 1.9 ) % ( 11.2 ) %

FDII, GILTI, and transition tax ( 3.1 ) % ( 0.3 ) % ( 0.7 ) %

FDII and/or GILTI ( 2.8 ) % ( 3.1 ) % ( 0.3 ) %

Federal return to provision adjustment 0.6 % ( 1.8 ) % — %

Federal amended return adjustment

( 1.3 ) % — % — %

Other differences 1.0 % 1.3 % 1.4 %

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On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted.

The Act included a one-time tax on accumulated unremitted earnings of the Company’s foreign subsidiaries (“Transition Tax”).

The Act contains Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impacted the Company in fiscal year 2019.

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The Company has elected to treat tax generated by GILTI provisions as a period expense.

The Company has no GILTI inclusion for the fiscal year ended July 31, 2022.

The Act also includes a favorable tax treatment for certain Foreign Derived Intangible Income (“FDII”), effective for the Company starting August 1, 2018.

The Company’s estimate for FDII did have a material impact to the effective income tax rate and income tax expense for the fiscal year ended July 31, 2021.

As of July 31, 2021 and 2020, the Company had foreign operating losses and a U.S.

federal tax credit carryforward of $ 24.4 million and $ 15.1 million, respectively.

The foreign operating losses, subject to certain limitations, usually can be carried forward indefinitely.

federal related tax credit, if not used, would start to expire after 2026.

The Company’s estimate for FDII had a material impact to the effective income tax rate and income tax expense for the fiscal year ended July 31, 2022.

The Company’s effective income tax rates were 18.7 %, 16.5 %, and 12.6 % for fiscal 2022, 2021 and 2020, respectively.

The Company’s U.S.

federal statutory tax rate for fiscal years 2022, 2021 and 2020 was 21.0 %.

The effective tax rate for the fiscal year ending July 31, 2022 was unfavorably impacted by $ 8.2 million of discrete tax adjustments made in connection with finalizing the Company’s fiscal year 2021 tax return, favorably impacted by $ 17.0 million of discrete tax items related to amending previously filed income tax returns, and favorably impacted by a $ 37.2 million FDII deduction in the current year.

The effective tax rate for the fiscal year ending July 31, 2021 was favorably impacted by $ 19.8 million of discrete tax adjustments made in connection with finalizing the Company’s fiscal year 2020 tax return.

The effective tax rate for the 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 were also impacted by the recognition of excess tax benefits from the exercise of employee stock-based compensation of $ 14.4 million, $ 29.8 million, and $ 92.5 million, for fiscal years ended July 31, 2022, 2021 and 2020, respectively.

The Company invested in renewable energy which is expected to generate investment tax credits of approximately $ 10 million the Company can utilize to reduce its tax liability on its fiscal year 2022 tax return.

The Company’s ability to realize deferred tax assets is dependent on its ability to generate future taxable income.

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Additional timing differences or future tax losses may occur which could warrant a need for establishing additional valuation allowances against certain deferred tax assets.

The valuation allowance for the years ended July 31, 2021 and 2020 was $ 25.0 million and $ 15.4 million, respectively.

The valuation allowance for deferred tax assets primarily related to operating losses in certain international jurisdictions and certain tax credits that are unlikely to be realized.

During fiscal year 2022, the Company recorded a $ 4.2 million increase in valuation allowances primarily due to additional operating losses generated in foreign jurisdictions unlikely to be realized.

As of July 31, 2022 and 2021, the Company had foreign operating losses of $ 29.9 million and $ 24.4 million, respectively.

The foreign operating losses, subject to certain limitations, usually can be carried forward indefinitely.

However, these losses are subject to valuation allowance based on realizability.

The valuation allowance for the fiscal year ended July 31, 2022 and 2021 was $ 29.2 million and $ 25.0 million, respectively, which are primarily related to operating losses in certain foreign jurisdictions.

The following table summarizes the activities related to the Company’s unrecognized tax benefits resulting from uncertain tax positions.

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As the Company determined these undistributed foreign earnings along with any additional outside basis differences were indefinitely reinvested as of July 31, 2022, no deferred tax was therefore provided.

Although the Company would not anticipate any significant tax liability associated with the repatriation of the undistributed earnings, which were $ 234.7 million as of July 31, 2021, nevertheless, it is not practical to estimate the amount of deferred tax liability related to the entire outside basis differences due to the complexity of the calculation and the uncertainty regarding assumptions necessary to compute the tax.

The Company’s effective income tax rates were 16.5 %, 12.6 %, and 16.1 % for fiscal 2021, 2020 and 2019, respectively.

The Company’s U.S.

federal statutory tax rate for fiscal years 2021, 2020 and 2019 was 21.0 %.

The effective tax rate for fiscal year ending July 31, 2021 was favorably impacted by $ 19.8 million of discrete tax adjustments made in connection with finalizing the Company’s 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 rate for the fiscal year ending July 31, 2019, was favorably impacted by $ 10.2 million of discrete tax items related to amending previously filed income tax returns.

The effective tax rates were also impacted by the recognition of excess tax benefits from the exercise of employee stock-based compensation of $ 29.8 million, $ 92.5 million, and $ 46.1 million, for fiscal years ended July 31, 2021, 2020 and 2019, respectively.

The undistributed earnings, as of July 31, 2022, were estimated to be approximately $ 300.0 million.

The Company believes it is not practicable to estimate the amount of deferred tax liability related to the entire outside basis differences due to the complexity of the calculation and the uncertainty regarding assumptions necessary to compute the tax.

However, the Company would not anticipate any significant tax liability associated with the repatriation of the undistributed earnings.

NOTE 14 — Segments and Other Geographic Reporting

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Capital expenditures, including acquisitions 568,773 34,901 603,674

Total assets 2,096,549 451,068 2,547,617

Goodwill 256,998 76,323 333,321

NOTE 15 — Commitments and Contingencies

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The Company matches 20 % of employee contributions up to 15 % of employee salary deferral.

The Company recognized expenses of $ 1.9 million, for the years ended July 31, 2021, and 2020 and $ 1.7 million, for the year ended July 31, 2019, related to this plan.

The Company recognized expenses of $ 1.9 million, for the years ended July 31, 2022, and $ 1.9 million, for the year ended July 31, 2021and 2020, related to this plan.

The Company also sponsors an additional defined contribution plan for its 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 9A. Controls and Procedures