11 — Stockholders’ Equity

General

The Company has authorized the issuance of 400 million shares of common stock, with a par value of $0.0001, of which 233,898,841 shares were issued and outstanding at July 31, 2018. As of July 31, 2018 and 2017, the Company had reserved 25,621,327 and 28,878,913 shares of common stock, respectively, for the issuance of options granted under the Company’s stock option plans and 1,603,741 and 1,788,909 shares of common stock, respectively, for the issuance of shares under the Copart, Inc. Employee Stock Purchase Plan (ESPP). The Company has authorized the issuance of five million shares of preferred stock, with a par value of $0.0001, none of which were issued or outstanding at July 31, 2018 or 2017, which have the rights and preferences as the Company’s Board of Directors shall determine, from time to time.

Stock Repurchases

On September 22, 2011, the Company’s Board of Directors approved an 80 million share increase in the stock repurchase program, bringing the total current authorization to 196 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the we deem appropriate and may be discontinued at any time. For fiscal 2018 and 2017, the Company did not repurchase any shares of its common stock under the program. For fiscal 2016, the Company repurchased 5,877,038 shares of its common stock at a weighted average price of $20.065 per share totaling $117.9 million. As of July 31, 2018, the total number of shares repurchased under the program was 106,913,602, and 89,086,398 shares were available for repurchase under the program.

On December 30, 2015, the Company completed a modified “Dutch Auction” tender offer, or tender offer, to purchase up to 14,634,146 shares of its common stock at a price not greater than $20.50 nor less than $19.00 per share. In connection with the tender offer, the Company accepted for payment an aggregate of 16,666,666 shares of its common stock at a purchase price of $19.50 per share for a total value of $325.0 million. The Company’s directors and executive officers did not participate in the tender offers. The shares purchased as a result of the tender offers were not part of the Company’s stock repurchase program.

During fiscal 2018, 2017 and 2016, certain executive officers, members of the Company’s Board of Directors and other employees exercised stock options through cashless exercises. A portion of the options exercised were net settled in satisfaction of the exercise price and federal and state statutory tax withholding requirements. The Company remitted $134.6 million and $15.0 million for the years ended July 31, 2017 and 2016, respectively, to the proper taxing authorities in satisfaction of the employees’ statutory withholding requirements.

The exercised stock options, utilizing a cashless exercise, are summarized in the following table:



Period	Options Exercised	Weighted Average Exercise Price		Shares Net Settled for Exercise	Shares Withheld for Taxes ⁽¹⁾	Net Shares to Employees	Weighted Average Share Price for Withholding		Employee Stock Based Tax Withholding (in 000s)
FY 2016—Q4	2,260,000	$	9.32	821,296	586,304	852,400	$	25.65	$	15,039
FY 2017—Q1	18,000,000	7.70		5,408,972	5,255,322	7,335,706	25.62		134,615
FY 2018—Q2	80,000	6.54		11,996	—	68,004	43.60		—


(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.

Employee Stock Purchase Plan

The ESPP provides for the purchase of up to an aggregate of 10 million shares of common stock of the Company by employees pursuant to the terms of the ESPP. The Company’s ESPP was adopted by the Board of Directors and approved by the stockholders in 1994. The ESPP was amended and restated in 2003 and again approved by the stockholders. In 2014, a new ESPP was approved by the Board of Directors and approved by the stockholders. Under the ESPP, employees of the Company who elect to participate have the right to purchase common stock at a 15% discount from the lower of the market value of the common stock at the beginning or the end of each six month offering period. The ESPP permits an enrolled employee to make contributions to purchase shares of common stock by having withheld from their salary an amount up to 10% of their compensation (which amount may be increased from time to time by the Company but may not exceed 15% of compensation). No employee may purchase more than $25,000 worth of common stock (calculated at the time the purchase right is granted) in any calendar year. The Compensation Committee of the Board of Directors administers the ESPP. The number of shares of common stock issued pursuant to the ESPP during the years ended July 31, 2018, 2017 and 2016 was 185,168; 190,713; and 216,264; respectively. As of July 31, 2018, there were 8,476,333 shares of common stock issued pursuant to the ESPP and 1,603,741 shares remain available for purchase under the ESPP.

Stock Options

In December 2007, the Company adopted the Copart, Inc. 2007 Equity Incentive Plan (Plan), presently covering an aggregate of 32.0 million shares of the Company’s common stock. The Plan provides for the grant of incentive stock options, restricted stock, restricted stock units and other equity-based awards to employees and non-qualified stock options, restricted stock, restricted stock units and other equity-based awards to employees, officers, directors and consultants at prices not less than 100% of the fair market value for incentive and non-qualified stock options, as determined by the Board of Directors at the grant date. Incentive and non-qualified stock options may have terms of up to ten years and vest over periods determined by the Board of Directors. Options generally vest ratably over a five-year period. The Plan replaced the Company’s 2001 Stock Option Plan. As of July 31, 2018, 7,823,728 shares were available for grant under the Plan.

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 A. Jayson Adair, the Company’s Chief Executive Officer, and Vincent W. Mitz, the Company’s President, of nonqualified stock options to purchase 4,000,000 and 3,000,000 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 will become exercisable over five years, subject to continued service by Mr. Adair and Mr. Mitz, with 20% vesting on April 15, 2015 and December 16, 2014, respectively, and the balance vesting monthly over the subsequent four years. Each option will become fully vested, assuming continued service, on April 15, 2019 and December 16, 2018, respectively. If, prior to a change in control, either executive’s employment is terminated without cause, then 100% of the shares subject to that executive’s stock option will immediately vest. If, upon or following a change in control, either the Company or a successor entity terminates the executive’s service without cause, or the executive resigns for good reason (as defined in the option agreement), then 100% of the shares subject to his stock option will immediately vest. On June 2, 2015, the Compensation Committee of the Company’s Board of Directors approved the amendment of each of the stand-alone stock option agreements, by and between the Company and A. Jayson Adair and Vincent W. Mitz, respectively, to remove the provision providing at times prior to a “change in control” for the immediate vesting in full of the underlying option upon an involuntary termination of Mr. Adair or Mr. Mitz, as applicable, without “cause.” The fair value of each option at the date of grant using the Black-Scholes Merton option-pricing model was $5.72. The total estimated compensation expense to be recognized by the Company over the five year estimated service period for these options is $40.0 million. The Company recognized $7.2 million in compensation expenses for these grants in the year ended July 31, 2018 and $7.5 million for the years ended July 31, 2017 and 2016, respectively.

The following table details stock-based payment compensation expense included in the company’s consolidated statements of income:



	Year Ended July 31,
(In thousands)	2018		2017		2016
General and administrative	$	19,351	$	17,622	$	18,194
Yard operations	3,870		3,286		2,670
Total stock-based payment compensation	$	23,221	$	20,908	$	20,864

There were no material compensation costs capitalized as part of the cost of an asset as of July 31, 2018 and 2017.

A summary of the status of the Company’s non-vested shares and its activity during the year ended July 31, 2018 was as follows:



(In thousands, except per share amounts)	Number of Shares		Weighted Average Grant- date Fair Value
Non-vested shares at July 31, 2017	6,667		$	5.57
Grants of non-vested shares	2,383		8.88
Vested	(3,376	)	5.67
Forfeitures or expirations	(158	)	4.89
Non-vested shares at July 31, 2018	5,516		$	6.96

Stock option activity for the year ended July 31, 2018 was as follows:



(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, 2017	18,774		$	17.14	6.48	$	269,449
Grants of options	2,383		36.78
Exercises	(3,202	)	14.05
Forfeitures or expirations	(158	)	20.93
Outstanding as of July 31, 2018	17,797		$	20.29	6.19	$	660,268

Exercisable as of July 31, 2018	12,281		$	17.41	5.51	$	490,951

Vested and expected to vest as of July 31, 2018	17,232		$	20.06	6.13	$	643,206

As required by ASC 718, Compensation — Stock Compensation, the Company made an estimate of expected forfeitures and recognized compensation cost only for those equity awards expected to vest.

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, 2018 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, 2018. The aggregate intrinsic value of options exercised was $111.5 million, $366.7 million and $53.6 million in the years ended July 31, 2018, 2017 and 2016, 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, 2018, the total compensation cost related to non-vested stock-based payment awards granted to employees under the Company’s stock option plans but not yet recognized was $30.1 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average remaining term of 2.51 years and will be adjusted for subsequent changes in estimated forfeitures. The fair value of options vested for the years ended July 31, 2018, 2017 and 2016 was $19.1 million, $18.6 million and $21.0 million, respectively.

The following table summarizes stock options outstanding and exercisable as of July 31, 2018:



(In thousands, except per share amounts)	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number	Weighted Average Exercise Price
$8.19–$17.64	1,789	3.30	$	11.44	1,726	$	11.25
$17.73–$17.81	9,451	5.75	17.79		7,526	17.80
$18.06–$18.61	2,770	6.06	18.33		2,088	18.29
$18.84–$50.30	3,787	8.74	32.14		941	23.73
Outstanding and exercisable as of July 31, 2018	17,797	6.19	$	20.29	12,281	$	17.41